UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

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 001-07436

HSBC USA Inc.

(Exact name of registrant as specified in its charter) 

Maryland	13-2764867
(State of incorporation)	(I.R.S. Employer Identification No.)
66 Hudson Boulevard, New York, New York	10001
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code (212) 525-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
$100,000,000 Zero Coupon Callable Accreting Notes due January 15, 2043	HUSI/43	New York Stock Exchange
$50,000,000 Zero Coupon Callable Accreting Notes due January 29, 2043	HUSI/43A	New York Stock Exchange

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  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐  No  ☒

As of April 26, 2024, there were 714 shares of the registrant's common stock outstanding, all of which are owned by HSBC North America Holdings Inc.

HSBC USA Inc.

TABLE OF CONTENTS

Part/Item No.
Part I		Page
Item 1.	Financial Statements (Unaudited):
	Consolidated Statement of Income	3
	Consolidated Statement of Comprehensive Income	4
	Consolidated Balance Sheet	5
	Consolidated Statement of Changes in Equity	7
	Consolidated Statement of Cash Flows	8
	Notes to the Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations:
	Forward-Looking Statements	72
	Executive Overview	74
	Basis of Reporting	76
	Balance Sheet Review	77
	Results of Operations	81
	Segment Results - Group Reporting Basis	86
	Credit Quality	92
	Liquidity and Capital Resources	99
	Fair Value	103
	Risk Management	104
	Consolidated Average Balances and Interest Rates	110
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	111
Item 4.	Controls and Procedures	111
Part II
Item 1.	Legal Proceedings	111
Item 5.	Other Information	111
Item 6.	Exhibits	113
Signatures		114

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HSBC USA Inc.

PART I

Item 1. Financial Statements

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

Three Months Ended March 31,	2024		2023
	(in millions)
Interest income:
Loans	$	899	$	803
Securities	445		323
Trading securities	85		49
Short-term investments	448		410
Other	16		19
Total interest income	1,893		1,604
Interest expense:
Deposits	1,012		756
Short-term borrowings	154		100
Long-term debt	285		256
Other	16		9
Total interest expense	1,467		1,121
Net interest income	426		483
Provision for credit losses	2		20
Net interest income after provision for credit losses	424		463
Other revenues:
Credit card fees, net	15		11
Trust and investment management fees	36		31
Other fees and commissions	176		148
Trading revenue	276		225
Other securities gains, net	2		3
Servicing and other fees from HSBC affiliates	88		74
Gain (loss) on instruments designated at fair value and related derivatives	(20)		(22)
Other income (loss)	(34)		(17)
Total other revenues	539		453
Operating expenses:
Salaries and employee benefits	135		121
Support services from HSBC affiliates	399		384
Occupancy expense, net	18		30
Other expenses	133		94
Total operating expenses	685		629
Income before income tax	278		287
Income tax expense	53		70
Net income	$	225	$	217

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC USA Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended March 31,	2024		2023
	(in millions)
Net income	$	225	$	217
Net change in unrealized gains (losses), net of tax:
Investment securities	(107)		204
Fair value option liabilities attributable to our own credit spread	(37)		63
Derivatives designated as cash flow hedges	36		98
Total other comprehensive income (loss)	(108)		365
Comprehensive income	$	117	$	582

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC USA Inc.

CONSOLIDATED BALANCE SHEET (UNAUDITED)

	March 31, 2024		December 31, 2023
	(in millions)
Assets(1)
Cash and due from banks	$	695	$	704
Interest bearing deposits with banks	30,687		25,015
Federal funds sold and securities purchased under agreements to resell	8,306		13,878
Trading assets (includes $2.5 billion and $3.0 billion pledged to creditors at March 31, 2024 and December 31, 2023, respectively)	18,900		22,115
Securities available-for-sale (includes amortized cost of $28.0 billion at both March 31, 2024 and December 31, 2023, an allowance for credit losses of nil at both March 31, 2024 and December 31, 2023, and $863 million and $161 million pledged to creditors at March 31, 2024 and December 31, 2023, respectively)	25,550		25,696
Securities held-to-maturity, net of allowance for credit losses of nil at both March 31, 2024 and December 31, 2023 (fair value of $14.7 billion at both March 31, 2024 and December 31, 2023)	15,294		15,076
Loans (includes $14 million and $15 million designated under fair value option at March 31, 2024 and December 31, 2023, respectively)	59,797		58,987
Less – allowance for credit losses	581		591
Loans, net	59,216		58,396
Loans held for sale (includes $264 million and $250 million designated under fair value option at March 31, 2024 and December 31, 2023, respectively)	453		339
Properties and equipment, net	75		71
Goodwill	458		458
Other assets, net of allowance for credit losses of nil at both March 31, 2024 and December 31, 2023 (includes $661 million and $10 million designated under fair value option at March 31, 2024 and December 31, 2023, respectively)	7,332		6,490
Total assets	$	166,966	$	168,238
Liabilities(1)
Debt:
Domestic deposits:
Noninterest bearing	$	24,606	$	23,421
Interest bearing (includes $2.1 billion and $1.8 billion designated under fair value option at March 31, 2024 and December 31, 2023, respectively)	90,413		92,604
Foreign deposits - interest bearing	7,034		5,258
Total deposits	122,053		121,283
Short-term borrowings	7,033		9,914
Long-term debt (includes $6.9 billion and $7.5 billion designated under fair value option at March 31, 2024 and December 31, 2023, respectively)	19,439		18,661
Total debt	148,525		149,858
Trading liabilities	2,546		3,485
Interest, taxes and other liabilities (includes $661 million and $10 million designated under fair value option at March 31, 2024 and December 31, 2023, respectively)	4,139		3,256
Total liabilities	155,210		156,599
Equity
Preferred stock (no par value; 40,999,000 shares authorized; 265 shares issued and outstanding at both March 31, 2024 and December 31, 2023)	265		265
Common equity:
Common stock ($5 par value; 150,000,000 shares authorized; 714 shares issued and outstanding at both March 31, 2024 and December 31, 2023)	—		—
Additional paid-in capital	12,740		12,740
Retained earnings	785		560
Accumulated other comprehensive loss	(2,034)		(1,926)
Total common equity	11,491		11,374
Total equity	11,756		11,639
Total liabilities and equity	$	166,966	$	168,238

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HSBC USA Inc.

(1)The following table summarizes assets and liabilities related to our consolidated variable interest entities ("VIEs") at March 31, 2024 and December 31, 2023. Assets and liabilities exclude intercompany balances that eliminate in consolidation. See Note 15, "Variable Interest Entities," for additional information.

	March 31, 2024		December 31, 2023
	(in millions)
Assets
Other assets	$	21	$	23
Total assets	$	21	$	23
Liabilities
Interest, taxes and other liabilities	$	28	$	17
Total liabilities	$	28	$	17

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC USA Inc.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Three Months Ended March 31,	2024		2023
	(in millions)
Preferred stock
Balance at beginning and end of period	$	265	$	265
Common stock
Balance at beginning and end of period	—		—
Additional paid-in capital
Balance at beginning of period	12,740		12,740
Employee benefit plans	—		(4)
Balance at end of period	12,740		12,736
Retained earnings
Balance at beginning of period	560		1,683
Net income	225		217
Balance at end of period	785		1,900
Accumulated other comprehensive loss
Balance at beginning of period	(1,926)		(2,575)
Other comprehensive income (loss), net of tax	(108)		365
Balance at end of period	(2,034)		(2,210)
Total common equity	11,491		12,426
Total equity	$	11,756	$	12,691

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC USA Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31,	2024		2023
	(in millions)
Cash flows from operating activities
Net income	$	225	$	217
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	(16)		3
Provision for credit losses	2		20
Net realized gains on securities available-for-sale	(2)		(3)
Net change in other assets and liabilities	305		1,039
Net change in loans held for sale:
Originations and purchases of loans held for sale	(87)		(192)
Sales and collections of loans held for sale	74		73
Net change in trading assets and liabilities	2,276		3,611
Lower of amortized cost or fair value adjustments on loans held for sale	(2)		—
Loss on instruments designated at fair value and related derivatives	20		22
Net cash provided by operating activities	2,795		4,790
Cash flows from investing activities
Net change in federal funds sold and securities purchased under agreements to resell	5,572		1,364
Securities available-for-sale:
Purchases of securities available-for-sale	(2,320)		(1,077)
Proceeds from sales of securities available-for-sale	1,075		681
Proceeds from paydowns and maturities of securities available-for-sale	970		1,618
Securities held-to-maturity:
Purchases of securities held-to-maturity	(464)		(3,388)
Proceeds from paydowns and maturities of securities held-to-maturity	259		162
Change in loans:
Originations, net of collections	(1,745)		(278)
Loans sold to third parties	861		200
Net cash used for acquisitions of properties and equipment	(8)		(8)
Other, net	(25)		36
Net cash provided by (used in) investing activities	4,175		(690)
Cash flows from financing activities
Net change in deposits	766		(1,062)
Debt:
Net change in short-term borrowings	(2,881)		877
Issuance of long-term debt	2,331		2,033
Repayment of long-term debt	(1,523)		(603)
Other decreases in capital surplus	—		(4)
Net cash provided by (used in) financing activities	(1,307)		1,241
Net change in cash and due from banks and interest bearing deposits with banks	5,663		5,341
Cash and due from banks and interest bearing deposits with banks at beginning of period	25,719		18,748
Cash and due from banks and interest bearing deposits with banks at end of period	$	31,382	$	24,089

The accompanying notes are an integral part of the consolidated financial statements.

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HSBC USA Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note		Page	Note		Page
1	Organization and Presentation	9	11	Fee Income from Contracts with Customers	42
2	Trading Assets and Liabilities	10	12	Related Party Transactions	43
3	Securities	11	13	Business Segments	46
4	Loans	15	14	Retained Earnings and Regulatory Capital Requirements	48
5	Allowance for Credit Losses	29	15	Variable Interest Entities	49
6	Loans Held for Sale	32	16	Guarantee Arrangements, Pledged Assets and Repurchase Agreements	51
7	Goodwill	32	17	Fair Value Measurements	56
8	Derivative Financial Instruments	33	18	Litigation and Regulatory Matters	70
9	Fair Value Option	39	19	New Accounting Pronouncements	71
10	Accumulated Other Comprehensive Loss	41

1. Organization and Presentation

HSBC USA Inc. ("HSBC USA"), incorporated under the laws of Maryland, is a New York State based bank holding company and a wholly-owned subsidiary of HSBC North America Holdings Inc. ("HSBC North America"), which is an indirect wholly-owned subsidiary of HSBC Holdings plc ("HSBC" and, together with its subsidiaries, "HSBC Group"). The accompanying unaudited interim consolidated financial statements of HSBC USA 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. HSBC USA's principal U.S. banking subsidiary is HSBC Bank USA, National Association (together with its subsidiaries, "HSBC Bank USA"). In the opinion of management, all normal and recurring adjustments considered necessary for a fair statement of financial position, results of operations and cash flows for the interim periods have been made. HUSI may also be referred to in these notes to the consolidated financial statements 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, 2023 (the "2023 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.

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2.    Trading Assets and Liabilities

Trading assets and liabilities consisted of the following:

	March 31, 2024		December 31, 2023
	(in millions)
Trading assets:
U.S. Treasury	$	3,462	$	3,564
U.S. Government agency issued or guaranteed	—		1
U.S. Government sponsored enterprises	962		1,207
Foreign bonds	1,053		4,019
Equity securities	12,273		11,702
Precious metals	329		346
Derivatives, net	821		1,276
Total trading assets	$	18,900	$	22,115
Trading liabilities:
Securities sold, not yet purchased	$	1,210	$	1,688
Payables for precious metals	38		301
Derivatives, net	1,298		1,496
Total trading liabilities	$	2,546	$	3,485

At March 31, 2024 and December 31, 2023, the fair value of derivatives included in trading assets is net of $1,399 million and $1,416 million, respectively, relating to amounts recognized for the obligation to return cash collateral received under master netting agreements with derivative counterparties.

At March 31, 2024 and December 31, 2023, the fair value of derivatives included in trading liabilities is net of $1,079 million and $1,321 million, respectively, relating to amounts recognized for the right to reclaim cash collateral paid under master netting agreements with derivative counterparties.

See Note 8, "Derivative Financial Instruments," for further information on our trading derivatives and related collateral.

Dividend income on equity securities held for trading, which is recorded in interest income in the consolidated statement of income, totaled $42 million and $34 million during the three months ended March 31, 2024 and 2023, respectively. Trading security positions are primarily held as economic hedges of derivative products issued to our clients.

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3. Securities

Our securities available-for-sale and securities held-to-maturity portfolios consisted of the following:

March 31, 2024	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	7,217	$	—	$	30	$	(175)	$	7,072
U.S. Government sponsored enterprises:
Mortgage-backed securities	5,786		—		—		(930)		4,856
Collateralized mortgage obligations	1,414		—		—		(314)		1,100
Direct agency obligations	1,582		—		1		(25)		1,558
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	5,649		—		—		(458)		5,191
Collateralized mortgage obligations	2,807		—		—		(544)		2,263
Direct agency obligations	208		—		5		(1)		212
Asset-backed securities collateralized by:
Home equity	12		—		—		(1)		11
Other	103		—		—		(12)		91
Foreign debt securities(1)	3,194		—		3		(1)		3,196
Total available-for-sale securities	$	27,972	$	—	$	39	$	(2,461)	$	25,550
Securities held-to-maturity:
U.S. Treasury	$	1,927	$	—	$	—	$	(49)	$	1,878
U.S. Government sponsored enterprises:
Mortgage-backed securities	1,052		—		—		(79)		973
Collateralized mortgage obligations	285		—		2		(16)		271
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	10,344		—		18		(287)		10,075
Collateralized mortgage obligations	1,682		—		—		(166)		1,516
Obligations of U.S. states and political subdivisions	3		—		—		—		3
Asset-backed securities collateralized by residential mortgages	1		—		—		—		1
Total held-to-maturity securities	$	15,294	$	—	$	20	$	(597)	$	14,717

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December 31, 2023	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	7,489	$	—	$	22	$	(225)	$	7,286
U.S. Government sponsored enterprises:
Mortgage-backed securities	5,864		—		—		(845)		5,019
Collateralized mortgage obligations	1,436		—		—		(300)		1,136
Direct agency obligations	1,719		—		—		(38)		1,681
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	5,804		—		1		(378)		5,427
Collateralized mortgage obligations	2,865		—		—		(506)		2,359
Direct agency obligations	215		—		3		(3)		215
Asset-backed securities collateralized by:
Home equity	13		—		—		(1)		12
Other	103		—		—		(11)		92
Foreign debt securities(1)	2,472		—		—		(3)		2,469
Total available-for-sale securities	$	27,980	$	—	$	26	$	(2,310)	$	25,696
Securities held-to-maturity:
U.S. Treasury	$	1,917	$	—	$	1	$	(18)	$	1,900
U.S. Government sponsored enterprises:
Mortgage-backed securities	1,069		—		—		(68)		1,001
Collateralized mortgage obligations	297		—		3		(16)		284
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	10,043		—		43		(180)		9,906
Collateralized mortgage obligations	1,745		—		—		(152)		1,593
Obligations of U.S. states and political subdivisions	4		—		—		—		4
Asset-backed securities collateralized by residential mortgages	1		—		—		—		1
Total held-to-maturity securities	$	15,076	$	—	$	47	$	(434)	$	14,689

(1)Foreign debt securities represent public sector entity, bank or corporate debt.

Securities Available-for-Sale The following provides additional information about our portfolio of securities available-for-sale:

Allowance for credit losses On a quarterly basis, we perform an assessment to determine whether there have been any events or economic circumstances to indicate that a debt security available-for-sale in an unrealized loss position has suffered impairment due to credit factors. A debt security available-for-sale is considered impaired if its fair value is less than its amortized cost basis at the reporting date. If impaired, we assess whether the impairment is due to credit factors.

If we intend to sell the debt security or if it is more-likely-than-not that we will be required to sell the debt security before the recovery of its amortized cost basis, the impairment is recognized and the unrealized loss is recorded as a direct write-down of the security's amortized cost basis with an offsetting charge to earnings. If we do not intend to sell the debt security or believe we will not be required to sell the debt security before the recovery of its amortized cost basis, the impairment is assessed to determine if a credit loss component exists. We use a discounted cash flow method to determine the credit loss component. In the event a credit loss exists, an allowance for credit losses is recorded in earnings for the credit loss component of the impairment while the remaining portion of the impairment attributable to factors other than credit loss is recognized, net of tax, in other comprehensive income (loss). The amount of impairment recognized due to credit factors is limited to the excess of the amortized cost basis over the fair value of the security available-for-sale.

In determining whether a credit loss component exists, we consider a series of factors which include:

•The extent to which the fair value is less than the amortized cost basis;

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•The credit protection features embedded within the instrument, which include but are not limited to credit subordination positions, payment structure, overcollateralization, protective triggers and financial guarantees provided by third parties;

•Changes in the near term prospects of the issuer or the 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 external rating agencies or changes to internal ratings.

At both March 31, 2024 and December 31, 2023, the allowance for credit losses on securities available-for-sale was nil.

Securities in an unrealized loss position for which no allowance for credit losses has been recognized The following table summarizes gross unrealized losses and related fair values for securities available-for-sale by major security type at March 31, 2024 and December 31, 2023 classified as to the length of time the losses have existed:

	One Year or Less					Greater Than One Year
	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)
At March 31, 2024
U.S. Treasury	—	$	—	$	—	40	$	(175)	$	4,636
U.S. Government sponsored enterprises	—	—		—		290	(1,269)		7,336
U.S. Government agency issued or guaranteed	2	(2)		118		142	(1,001)		7,353
Asset-backed securities	—	—		—		6	(13)		102
Foreign debt securities	7	—		1,221		3	(1)		161
Securities available-for-sale	9	$	(2)	$	1,339	481	$	(2,459)	$	19,588
At December 31, 2023
U.S. Treasury	3	$	(1)	$	1,008	41	$	(224)	$	4,906
U.S. Government sponsored enterprises	2	—		80		293	(1,183)		7,701
U.S. Government agency issued or guaranteed	—	—		—		151	(887)		7,765
Asset-backed securities	—	—		—		6	(12)		104
Foreign debt securities	17	(1)		1,801		4	(2)		183
Securities available-for-sale	22	$	(2)	$	2,889	495	$	(2,308)	$	20,659

Gross unrealized losses increased as compared with December 31, 2023 due primarily to increasing yields on U.S. Government agency mortgage-backed and U.S. Government sponsored mortgage-backed securities.

Although the fair value of a particular security may be below its amortized cost, it does not necessarily result in a credit loss and hence an allowance for credit losses. The decline in fair value may be caused by, among other things, higher market rates or the illiquidity of the market. We have reviewed the securities in an unrealized loss position for which no allowance for credit losses has been recognized in accordance with our accounting policies, discussed further above. At March 31, 2024, we do not consider any of these securities to be impaired due to credit factors as we expect to recover their amortized cost basis and we neither intend nor expect to be required to sell these securities prior to recovery, even if that equates to holding them until their individual maturities. However, impairments due to credit factors may occur in future periods if the credit quality of the securities deteriorates.

Securities Held-to-Maturity The following provides additional information about our portfolio of securities held-to-maturity:

Allowance for credit losses We exclude from our calculation of lifetime expected credit losses ("ECL") securities for which we expect that non-payment of the amortized cost basis will be zero ("Zero Expected Credit Loss Exception"). Due to the composition of our portfolio of securities held-to-maturity, substantially all of our portfolio qualifies for the Zero Expected Credit Loss Exception and has been excluded from our lifetime ECL calculation. At both March 31, 2024 and December 31, 2023, the allowance for credit losses on securities held-to-maturity was nil.

At March 31, 2024 and December 31, 2023, none of our securities held-to-maturity were past due or in nonaccrual status.

Credit risk profile Securities are assigned a credit rating based on the estimated probability of default. The credit ratings are used as a credit quality indicator to monitor our securities held-to-maturity portfolio. We utilize Standard and Poor's ("S&P") as

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the primary source of our credit ratings. If S&P ratings are not available, ratings by Moody's and Fitch are used in that order. Investment grade includes securities with credit ratings of at least BBB- or above. At March 31, 2024 and December 31, 2023, all of our securities held-to-maturity were investment grade.

Other securities gains, net  The following table summarizes realized gains and losses on investment securities transactions attributable to available-for-sale securities:

Three Months Ended March 31,	2024		2023
	(in millions)
Gross realized gains	$	2	$	3
Gross realized losses	—		—
Net realized gains	$	2	$	3

Contractual Maturities and Yields  The following table summarizes the amortized cost and fair values of securities available-for-sale and securities held-to-maturity at March 31, 2024 by contractual maturity. Expected maturities differ from contractual maturities because borrowers have the right to prepay obligations without prepayment penalties in certain cases. The table below also reflects the distribution of maturities of debt securities held at March 31, 2024, together with the approximate yield of the portfolio. The yields shown are calculated by dividing annualized interest income, including the accretion of discounts and the amortization of premiums, by the amortized cost of securities outstanding at March 31, 2024.

	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(dollars are in millions)
Available-for-sale:
U.S. Treasury	$	237	1.00	%	$	3,406	1.98	%	$	833	2.46	%	$	2,741	2.82	%
U.S. Government sponsored enterprises	820		1.03		979		2.73		1,276		2.16		5,707		1.84
U.S. Government agency issued or guaranteed	—		—		68		3.21		2		5.52		8,594		2.99
Asset-backed securities	—		—		55		4.36		48		3.88		12		5.78
Foreign debt securities	1,383		.39		1,811		4.54		—		—		—		—
Total amortized cost	$	2,440	.67	%	$	6,319	2.87	%	$	2,159	2.32	%	$	17,054	2.58	%
Total fair value	$	2,419			$	6,236			$	2,068			$	14,827
Held-to-maturity:
U.S. Treasury	$	—	—	%	$	1,185	3.74	%	$	742	3.71	%	$	—	—	%
U.S. Government sponsored enterprises	85		2.32		81		3.61		780		3.45		391		2.84
U.S. Government agency issued or guaranteed	—		—		1		5.39		14		5.74		12,011		4.50
Obligations of U.S. states and political subdivisions	1		3.97		2		4.11		—		—		—		—
Asset-backed securities	—		—		—		—		1		4.19		—		—
Total amortized cost	$	86	2.34	%	$	1,269	3.74	%	$	1,537	3.60	%	$	12,402	4.45	%
Total fair value	$	85			$	1,240			$	1,458			$	11,934

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HSBC USA Inc.

Equity Securities Equity securities that are not classified as trading and are included in other assets consisted of the following:

	March 31, 2024		December 31, 2023
	(in millions)
Equity securities carried at fair value	$	267	$	270
Equity securities without readily determinable fair values	13		13

On a quarterly basis, we perform an assessment to determine whether any equity securities without readily determinable fair values are impaired. In the event an equity security is deemed impaired, the security is written down to fair value with impairment recorded in earnings. During the first quarter of 2024 and the first quarter of 2023, we determined that certain equity securities without readily determinable fair values were impaired and, as a result, we recorded an impairment loss of $4 million in both periods as a component of other income (loss) in the consolidated statement of income.

Also included in other assets were investments in Federal Home Loan Bank ("FHLB") stock and Federal Reserve Bank stock of $95 million and $438 million, respectively, at both March 31, 2024 and December 31, 2023. Our investment in Federal Reserve Bank stock represents approximately half of the total subscription price for our subscribed shares. The remaining half is unpaid and remains subject to call by the Federal Reserve Board ("FRB").

4. Loans

Loans consisted of the following:

	March 31, 2024		December 31, 2023
	(in millions)
Commercial loans:
Real estate, including construction	$	7,071	$	7,087
Business and corporate banking	16,047		15,724
Global banking(1)	10,522		10,725
Other commercial:
Affiliates(2)	3,442		2,618
Other	3,223		3,803
Total other commercial	6,665		6,421
Total commercial	40,305		39,957
Consumer loans:
Residential mortgages	18,825		18,341
Home equity mortgages	382		389
Credit cards	189		199
Other consumer(3)	96		101
Total consumer	19,492		19,030
Total loans	$	59,797	$	58,987

(1)Represents large multinational firms including globally focused U.S. corporate and financial institutions, U.S. dollar lending to multinational banking clients managed by HSBC on a global basis and complex large business clients supported by Global Banking and Markets relationship managers.

(2)See Note 12, "Related Party Transactions," for additional information regarding loans to HSBC affiliates.

(3)Includes certain student loans that we have elected to designate under the fair value option and are therefore carried at fair value, which totaled $14 million and $15 million at March 31, 2024 and December 31, 2023, respectively. See Note 9, "Fair Value Option," for further details.

Net deferred origination costs totaled $22 million and $17 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023, we had a net unamortized discount on our loans of $11 million and $13 million, respectively.

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HSBC USA Inc.

Aging Analysis of Past Due Loans  The following table summarizes the past due status of our loans at March 31, 2024 and December 31, 2023. 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
	30 - 89 Days		90+ Days				Current(1)		Total Loans
	(in millions)
At March 31, 2024
Commercial loans:
Real estate, including construction	$	7	$	205	$	212	$	6,859	$	7,071
Business and corporate banking	1		3		4		16,043		16,047
Global banking	23		4		27		10,495		10,522
Other commercial	36		—		36		6,629		6,665
Total commercial	67		212		279		40,026		40,305
Consumer loans:
Residential mortgages	163		91		254		18,571		18,825
Home equity mortgages	3		3		6		376		382
Credit cards	2		3		5		184		189
Other consumer	8		2		10		86		96
Total consumer	176		99		275		19,217		19,492
Total loans	$	243	$	311	$	554	$	59,243	$	59,797
At December 31, 2023
Commercial loans:
Real estate, including construction	$	—	$	206	$	206	$	6,881	$	7,087
Business and corporate banking	1		3		4		15,720		15,724
Global banking	—		1		1		10,724		10,725
Other commercial	350		—		350		6,071		6,421
Total commercial	351		210		561		39,396		39,957
Consumer loans:
Residential mortgages	174		91		265		18,076		18,341
Home equity mortgages	12		3		15		374		389
Credit cards	3		3		6		193		199
Other consumer	3		2		5		96		101
Total consumer	192		99		291		18,739		19,030
Total loans	$	543	$	309	$	852	$	58,135	$	58,987

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

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HSBC USA Inc.

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

	Nonaccrual Loans		Accruing Loans Contractually Past Due 90 Days or More		Nonaccrual Loans With No Allowance For Credit Losses
	(in millions)
At March 31, 2024
Commercial loans:
Real estate, including construction	$	228	$	—	$	41
Business and corporate banking	170		—		34
Global banking	246		—		44
Total commercial	644		—		119
Consumer loans:
Residential mortgages(1)(2)(3)	167		—		77
Home equity mortgages(1)(2)	6		—		5
Credit cards	—		3		—
Other consumer	—		1		—
Total consumer	173		4		82
Total nonperforming loans	$	817	$	4	$	201
At December 31, 2023
Commercial loans:
Real estate, including construction	$	229	$	—	$	40
Business and corporate banking	143		1		29
Global banking	49		—		48
Other commercial	3		—		2
Total commercial	424		1		119
Consumer loans:
Residential mortgages(1)(2)(3)	172		—		81
Home equity mortgages(1)(2)	6		—		5
Credit cards	—		3		—
Other consumer	—		2		—
Total consumer	178		5		86
Total nonperforming loans	$	602	$	6	$	205

(1)At March 31, 2024 and December 31, 2023, nonaccrual consumer mortgage loans include $103 million and $108 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 loans which are 90 or more days contractually delinquent as well as loans discharged under Chapter 7 bankruptcy and not re-affirmed and second lien loans where the first lien loan that we own or service is 90 or more days contractually delinquent.

(3)Nonaccrual consumer mortgage loans for all periods does not include guaranteed loans purchased from the Government National Mortgage Association. Repayment of these loans is predominantly insured by the Federal Housing Administration and as such, these loans have different risk characteristics from the rest of our consumer loan portfolio.

Interest income that was recorded on nonaccrual loans and included in interest income totaled nil during the three months ended March 31, 2024 compared with $1 million during the three months ended March 31, 2023.

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HSBC USA Inc.

Collateral-Dependent Loans Loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty are considered to be collateral-dependent loans. Collateral can have a significant financial effect in mitigating our exposure to credit risk.

Collateral-dependent residential mortgage loans are carried at the lower of amortized cost or fair value of the collateral less costs to sell, with any excess in the carrying amount of the loan generally charged off at the time foreclosure is initiated or when settlement is reached with the borrower, but not to exceed the end of the month in which the account becomes six months contractually delinquent. Collateral values are based on broker price opinions or appraisals which are updated at least every 180 days less estimated costs to sell. During the quarterly period between updates, real estate price trends are reviewed on a geographic basis and incorporated as necessary. At March 31, 2024 and December 31, 2023, we had collateral-dependent residential mortgage loans totaling $280 million and $278 million, respectively.

For collateral-dependent commercial loans, the allowance for expected credit losses is individually assessed based on the fair value of the collateral. Various types of collateral are used, including real estate, inventory, equipment, accounts receivable, securities and cash, among others. For commercial real estate loans, collateral values are generally based on appraisals which are updated based on management judgment under the specific circumstances on a case-by-case basis. In situations where an appraisal is not used, borrower-specific factors such as operating results, cash flows and debt service ratios are reviewed along with relevant market data of comparable properties in order to create a 10-year cash flow model to be discounted at appropriate rates to present value. The collateral value for securities is based on their quoted market prices or broker quotes. The collateral value for other financial assets is generally based on appraisals or is estimated using a discounted cash flow analysis. Commercial loan balances are charged off at the time all or a portion of the balance is deemed uncollectible. At March 31, 2024 and December 31, 2023, we had collateral-dependent commercial loans totaling $637 million and $618 million, respectively.

Loan Modifications In conjunction with our loss mitigation activities, we modify certain loans to borrowers experiencing financial difficulty. Modifications may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, extension of the term, reduction in payment amount and partial forgiveness or deferment of principal, accrued interest or other loan covenants.

The following disclosures provide information about loan payment modifications made to borrowers experiencing financial difficulty in the form of an interest rate reduction, principal forgiveness, a term extension or significant payment deferral, or a combination thereof. Not included are loans with short-term payment modifications (e.g., deferrals of three months or less) and other insignificant modifications, such as covenant waivers and amendments, and deferrals of financial statement and covenant compliance reporting requirements. Commercial loan payment modifications typically involve term extensions. In certain cases, the term extension is coupled with an interest rate increase which is intended to reduce the financial effect of extending the life of the loan. The effects of these interest rate increases are not included in the following disclosures. For consumer loans, payment modifications typically involve payment deferrals or interest rate reductions which lower the amount of interest income we are contractually entitled to receive in future periods. Through lowering the interest rate, 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.

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HSBC USA Inc.

The following table presents information about loan payment modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023 by type of modification, including the period-end carrying value and as a percentage of total loans. During the three months ended March 31, 2024, loan payment modifications made to consumer borrowers experiencing financial difficulty were nil.

	Interest Rate Reduction		Principal Forgiveness		Term Extension / Significant Payment Deferral		Combination(1)		Total		% of Total Loans
	(dollars are in millions)
Three Months Ended March 31, 2024
Commercial loans:
Business and corporate banking	$	—	$	—	$	65	$	—	$	65	.4	%
Total commercial	$	—	$	—	$	65	$	—	$	65	.2
Three Months Ended March 31, 2023
Commercial loans:
Real estate, including construction	$	—	$	—	$	96	$	—	$	96	1.2	%
Business and corporate banking	—		—		49		12		61		.4
Total commercial	—		—		145		12		157		.4
Consumer loans:
Residential mortgages(2)	—		—		—		1		1		.0
Credit cards	—		—		1		—		1		.5
Total consumer	—		—		1		1		2		.0
Total	$	—	$	—	$	146	$	13	$	159	.3

(1)Represents loans with more than one type of payment modification during the period.

(2)During the three months ended March 31, 2023, the carrying value of consumer mortgage loans with a payment modification included loans that were carried at the lower of amortized cost or fair value of the collateral less cost to sell.

At March 31, 2024 and December 31, 2023, additional commitments to lend to commercial borrowers who were provided with a loan payment modification during the respective year-to-date periods totaled $59 million and $85 million, respectively.

The following table summarizes the financial effect of loan payment modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023 by type of modification:

	Weighted-Average Interest Rate Reduction		Principal Forgiven (in millions)		Weighted-Average Term Extension / Payment Deferral (in years)
Three Months Ended March 31, 2024
Commercial loans:
Business and corporate banking	—	%	$	—	1.8
Three Months Ended March 31, 2023
Commercial loans:
Real estate, including construction	—	%	$	—	0.4
Business and corporate banking	—		2		2.3
Consumer loans:
Residential mortgages	3.0		—		7.6
Credit cards	—		—		0.5

The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the methodology used to estimate lifetime ECL, which considers historical loss information including losses from modifications of loans to borrowers experiencing financial difficulty. As a result, a material change to the allowance for credit losses is generally not recorded upon modification. In instances when a loan is modified in the form of principal forgiveness, the amount of principal forgiven is deemed uncollectible and that portion of the loan balance is charged off with a corresponding reduction to the allowance for credit losses.

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HSBC USA Inc.

We closely monitor the performance of modified loans to understand the effectiveness of our loss mitigation efforts. Upon determination that a modified loan or a portion of a modified loan has subsequently been deemed uncollectible, the loan or a portion of the loan is charged off in accordance with our accounting policies with a corresponding reduction to the allowance for credit losses.

The following table presents loans to borrowers experiencing financial difficulty with a payment modification during the previous 12 months which subsequently became 90 days or greater contractually delinquent during the three months ended March 31, 2024 by type of modification:

	Interest Rate Reduction		Principal Forgiveness		Term Extension / Significant Payment Deferral		Combination(1)		Total
	(in millions)
Three Months Ended March 31, 2024
Commercial loans:
Global banking	$	—	$	—	$	1	$	—	$	1
Total commercial	$	—	$	—	$	1	$	—	$	1

(1)Represents loans with more than one type of payment modification during the period.

During the three months ended March 31, 2024, there were no consumer loans to borrowers experiencing financial difficulty with a payment modification during the previous 12 months which subsequently became 90 days or greater contractually delinquent. During the three months ended March 31, 2023, there were no loans to borrowers experiencing financial difficulty with a payment modification during the previous three months which subsequently became 90 days or greater contractually delinquent.

The following table presents the past due status of loans to borrowers experiencing financial difficulty with a payment modification during the previous 12 months at March 31, 2024 and December 31, 2023:

	Past Due
	30 - 89 Days		90+ Days		Current(1)		Total
	(in millions)
At March 31, 2024
Commercial loans:
Real estate, including construction	$	—	$	166	$	3	$	169
Business and corporate banking	—		—		409		409
Global banking	—		1		42		43
Total commercial	—		167		454		621
Consumer loans:
Residential mortgages	—		—		12		12
Total consumer	—		—		12		12
Total loans	$	—	$	167	$	466	$	633
At December 31, 2023
Commercial loans:
Real estate, including construction	$	—	$	166	$	2	$	168
Business and corporate banking	—		—		398		398
Global banking	—		—		50		50
Total commercial	—		166		450		616
Consumer loans:
Residential mortgages	—		—		12		12
Total consumer	—		—		12		12
Total loans	$	—	$	166	$	462	$	628

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

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HSBC USA Inc.

Commercial Loan Credit Quality Indicators and Gross Charge-offs by Year of Origination

The following credit quality indicators are utilized to monitor our commercial loan portfolio:

Criticized loans  Criticized loan classifications presented in the table below are determined by the assignment of various criticized facility risk ratings based on the risk rating standards of our regulator. The following facility risk ratings are deemed to be criticized:

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

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

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

The following table summarizes our criticized commercial loans, including a disaggregation of the loans by year of origination as of March 31, 2024 and December 31, 2023:

	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Mar. 31, 2024
	(in millions)
Real estate, including construction:
Special mention	$	32	$	—	$	39	$	—	$	35	$	42	$	3	$	3	$	154
Substandard	4		11		—		—		—		872		—		—		887
Doubtful	—		—		—		—		—		166		17		—		183
Total real estate, including construction	36		11		39		—		35		1,080		20		3		1,224
Business and corporate banking:
Special mention	34		22		114		34		3		148		221		8		584
Substandard	24		64		21		—		27		149		767		9		1,061
Doubtful	—		—		—		34		—		14		82		—		130
Total business and corporate banking	58		86		135		68		30		311		1,070		17		1,775
Global banking:
Special mention	—		—		—		—		—		45		41		99		185
Substandard	—		—		2		—		20		107		131		—		260
Doubtful	—		—		—		—		—		194		9		—		203
Total global banking	—		—		2		—		20		346		181		99		648
Total commercial	$	94	$	97	$	176	$	68	$	85	$	1,737	$	1,271	$	119	$	3,647
Total commercial:
Special mention	$	66	$	22	$	153	$	34	$	38	$	235	$	265	$	110	$	923
Substandard	28		75		23		—		47		1,128		898		9		2,208
Doubtful	—		—		—		34		—		374		108		—		516
Total commercial	$	94	$	97	$	176	$	68	$	85	$	1,737	$	1,271	$	119	$	3,647

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HSBC USA Inc.

	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Dec. 31, 2023
	(in millions)
Real estate, including construction:
Special mention	$	—	$	40	$	—	$	104	$	92	$	42	$	3	$	3	$	284
Substandard	2		—		—		1		—		821		—		—		824
Doubtful	—		—		—		—		—		166		18		—		184
Total real estate, including construction	2		40		—		105		92		1,029		21		3		1,292
Business and corporate banking:
Special mention	38		103		12		4		20		126		296		8		607
Substandard	31		22		—		27		—		156		746		1		983
Doubtful	—		—		36		—		—		9		71		—		116
Total business and corporate banking	69		125		48		31		20		291		1,113		9		1,706
Global banking:
Special mention	—		—		—		—		—		45		62		—		107
Substandard	—		14		—		—		—		114		73		—		201
Doubtful	—		187		—		—		14		—		1		—		202
Total global banking	—		201		—		—		14		159		136		—		510
Other commercial:
Special mention	6		—		—		—		—		—		—		—		6
Substandard	38		—		—		—		—		—		—		—		38
Doubtful	—		—		—		—		—		—		3		—		3
Total other commercial	44		—		—		—		—		—		3		—		47
Total commercial	$	115	$	366	$	48	$	136	$	126	$	1,479	$	1,273	$	12	$	3,555
Total commercial:
Special mention	$	44	$	143	$	12	$	108	$	112	$	213	$	361	$	11	$	1,004
Substandard	71		36		—		28		—		1,091		819		1		2,046
Doubtful	—		187		36		—		14		175		93		—		505
Total commercial	$	115	$	366	$	48	$	136	$	126	$	1,479	$	1,273	$	12	$	3,555

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HSBC USA Inc.

Nonperforming  The following table summarizes the nonperforming status of our commercial loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2024 and December 31, 2023:

	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Mar. 31, 2024
	(in millions)
Real estate, including construction:
Performing loans	$	164	$	982	$	1,286	$	1,040	$	319	$	3,030	$	19	$	3	$	6,843
Nonaccrual loans	—		—		—		—		—		207		21		—		228
Total real estate, including construction	164		982		1,286		1,040		319		3,237		40		3		7,071
Business and corporate banking:
Performing loans	237		1,284		1,028		1,273		224		4,438		7,120		273		15,877
Nonaccrual loans	—		—		—		34		—		54		82		—		170
Total business and corporate banking	237		1,284		1,028		1,307		224		4,492		7,202		273		16,047
Global banking:
Performing loans	82		2,162		1,128		761		204		3,563		2,326		50		10,276
Nonaccrual loans	—		—		—		—		—		233		13		—		246
Total global banking	82		2,162		1,128		761		204		3,796		2,339		50		10,522
Other commercial:
Performing loans	15		164		278		209		633		1,163		4,203		—		6,665
Total other commercial	15		164		278		209		633		1,163		4,203		—		6,665
Total commercial	$	498	$	4,592	$	3,720	$	3,317	$	1,380	$	12,688	$	13,784	$	326	$	40,305
Total commercial:
Performing loans	$	498	$	4,592	$	3,720	$	3,283	$	1,380	$	12,194	$	13,668	$	326	$	39,661
Nonaccrual loans	—		—		—		34		—		494		116		—		644
Total commercial	$	498	$	4,592	$	3,720	$	3,317	$	1,380	$	12,688	$	13,784	$	326	$	40,305

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HSBC USA Inc.

	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Dec. 31, 2023
	(in millions)
Real estate, including construction:
Performing loans	$	920	$	1,286	$	1,019	$	355	$	1,014	$	2,242	$	19	$	3	$	6,858
Nonaccrual loans	—		—		—		—		40		167		22		—		229
Total real estate, including construction	920		1,286		1,019		355		1,054		2,409		41		3		7,087
Business and corporate banking:
Performing loans	1,270		1,113		1,074		231		561		4,215		6,851		265		15,580
Nonaccrual loans	—		35		—		—		—		38		70		—		143
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		1		—		1
Total business and corporate banking	1,270		1,148		1,074		231		561		4,253		6,922		265		15,724
Global banking:
Performing loans	2,255		1,153		844		151		321		3,561		2,341		50		10,676
Nonaccrual loans	—		—		—		—		—		39		10		—		49
Total global banking	2,255		1,153		844		151		321		3,600		2,351		50		10,725
Other commercial:
Performing loans	211		281		313		651		418		804		3,740		—		6,418
Nonaccrual loans	—		—		—		—		—		3		—		—		3
Total other commercial	211		281		313		651		418		807		3,740		—		6,421
Total commercial	$	4,656	$	3,868	$	3,250	$	1,388	$	2,354	$	11,069	$	13,054	$	318	$	39,957
Total commercial:
Performing loans	$	4,656	$	3,833	$	3,250	$	1,388	$	2,314	$	10,822	$	12,951	$	318	$	39,532
Nonaccrual loans	—		35		—		—		40		247		102		—		424
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		1		—		1
Total commercial	$	4,656	$	3,868	$	3,250	$	1,388	$	2,354	$	11,069	$	13,054	$	318	$	39,957

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HSBC USA Inc.

Credit risk profile  Commercial loans are assigned a credit rating based on the estimated probability of default. Investment grade includes loans with credit ratings of at least BBB- or above or the equivalent based on our internal credit rating system. The following table summarizes the credit risk profile of our commercial loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2024 and December 31, 2023:

	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Mar. 31, 2024
	(in millions)
Real estate, including construction:
Investment grade	$	—	$	324	$	99	$	23	$	172	$	1,094	$	1	$	—	$	1,713
Non-investment grade	164		658		1,187		1,017		147		2,143		39		3		5,358
Total real estate, including construction	164		982		1,286		1,040		319		3,237		40		3		7,071
Business and corporate banking:
Investment grade	73		533		333		562		93		2,086		3,287		63		7,030
Non-investment grade	164		751		695		745		131		2,406		3,915		210		9,017
Total business and corporate banking	237		1,284		1,028		1,307		224		4,492		7,202		273		16,047
Global banking:
Investment grade	82		1,868		973		651		173		2,970		1,963		—		8,680
Non-investment grade	—		294		155		110		31		826		376		50		1,842
Total global banking	82		2,162		1,128		761		204		3,796		2,339		50		10,522
Other commercial:
Investment grade	15		162		150		43		403		832		3,955		—		5,560
Non-investment grade	—		2		128		166		230		331		248		—		1,105
Total other commercial	15		164		278		209		633		1,163		4,203		—		6,665
Total commercial	$	498	$	4,592	$	3,720	$	3,317	$	1,380	$	12,688	$	13,784	$	326	$	40,305
Total commercial:
Investment grade	$	170	$	2,887	$	1,555	$	1,279	$	841	$	6,982	$	9,206	$	63	$	22,983
Non-investment grade	328		1,705		2,165		2,038		539		5,706		4,578		263		17,322
Total commercial	$	498	$	4,592	$	3,720	$	3,317	$	1,380	$	12,688	$	13,784	$	326	$	40,305

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HSBC USA Inc.

	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total at Dec. 31, 2023
	(in millions)
Real estate, including construction:
Investment grade	$	327	$	100	$	24	$	187	$	162	$	939	$	1	$	—	$	1,740
Non-investment grade	593		1,186		995		168		892		1,470		40		3		5,347
Total real estate, including construction	920		1,286		1,019		355		1,054		2,409		41		3		7,087
Business and corporate banking:
Investment grade	732		304		543		95		261		1,977		3,311		54		7,277
Non-investment grade	538		844		531		136		300		2,276		3,611		211		8,447
Total business and corporate banking	1,270		1,148		1,074		231		561		4,253		6,922		265		15,724
Global banking:
Investment grade	1,947		1,109		651		149		307		2,842		2,140		—		9,145
Non-investment grade	308		44		193		2		14		758		211		50		1,580
Total global banking	2,255		1,153		844		151		321		3,600		2,351		50		10,725
Other commercial:
Investment grade	211		192		43		376		298		564		3,143		—		4,827
Non-investment grade	—		89		270		275		120		243		597		—		1,594
Total other commercial	211		281		313		651		418		807		3,740		—		6,421
Total commercial	$	4,656	$	3,868	$	3,250	$	1,388	$	2,354	$	11,069	$	13,054	$	318	$	39,957
Total commercial:
Investment grade	$	3,217	$	1,705	$	1,261	$	807	$	1,028	$	6,322	$	8,595	$	54	$	22,989
Non-investment grade	1,439		2,163		1,989		581		1,326		4,747		4,459		264		16,968
Total commercial	$	4,656	$	3,868	$	3,250	$	1,388	$	2,354	$	11,069	$	13,054	$	318	$	39,957

Gross Charge-offs  The following table summarizes gross charge-off dollars in our commercial loan portfolio, disaggregated by year of origination, during the three months ended March 31, 2024 and 2023:

	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(in millions)
Three Months Ended March 31, 2024
Business and corporate banking	$	—	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	1
Total commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	1
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(in millions)
Three Months Ended March 31, 2023
Business and corporate banking	$	—	$	—	$	—	$	—	$	—	$	2	$	3	$	—	$	5
Total commercial	$	—	$	—	$	—	$	—	$	—	$	2	$	3	$	—	$	5

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Consumer Loan Credit Quality Indicators and Gross Charge-offs by Year of Origination

The following credit quality indicators are utilized to monitor our consumer loan portfolio:

Delinquency  The following table summarizes dollars of two-months-and-over contractual delinquency for our consumer loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2024 and December 31, 2023:

	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total at Mar. 31, 2024
	(in millions)
Residential mortgages(1)(2)	$	—	$	—	$	7	$	6	$	7	$	96	$	—	$	116
Home equity mortgages(1)(2)	—		—		—		—		—		4		—		4
Credit cards	—		—		—		—		—		—		4		4
Other consumer	—		—		—		—		1		1		—		2
Total consumer	$	—	$	—	$	7	$	6	$	8	$	101	$	4	$	126

	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total at Dec. 31, 2023
	(in millions)
Residential mortgages(1)(2)	$	—	$	2	$	6	$	6	$	1	$	100	$	—	$	115
Home equity mortgages(1)(2)	—		—		—		—		—		4		—		4
Credit cards	—		—		—		—		—		—		4		4
Other consumer	—		—		—		—		—		2		—		2
Total consumer	$	—	$	2	$	6	$	6	$	1	$	106	$	4	$	125

(1)At March 31, 2024 and December 31, 2023, consumer mortgage loan delinquency includes $58 million and $61 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

(2)At March 31, 2024 and December 31, 2023, consumer mortgage loans include $28 million and $21 million, respectively, of loans that were in the process of foreclosure.

Nonperforming  The following table summarizes the nonperforming status of our consumer loan portfolio, including a disaggregation of the loans by year of origination as of March 31, 2024 and December 31, 2023:

	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total at Mar. 31, 2024
	(in millions)
Residential mortgages:
Performing loans	$	799	$	2,569	$	2,732	$	4,061	$	2,727	$	5,770	$	—	$	18,658
Nonaccrual loans	—		—		10		10		10		137		—		167
Total residential mortgages	799		2,569		2,742		4,071		2,737		5,907		—		18,825
Home equity mortgages:
Performing loans	10		80		69		10		20		187		—		376
Nonaccrual loans	—		—		—		—		—		6		—		6
Total home equity mortgages	10		80		69		10		20		193		—		382
Credit cards:
Performing loans	—		—		—		—		—		—		186		186
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		3		3
Total credit cards	—		—		—		—		—		—		189		189
Other consumer:
Performing loans	—		—		7		9		6		65		8		95
Accruing loans contractually past due 90 days or more	—		—		—		—		—		1		—		1
Total other consumer	—		—		7		9		6		66		8		96
Total consumer	$	809	$	2,649	$	2,818	$	4,090	$	2,763	$	6,166	$	197	$	19,492
Total consumer:
Performing loans	$	809	$	2,649	$	2,808	$	4,080	$	2,753	$	6,022	$	194	$	19,315
Nonaccrual loans	—		—		10		10		10		143		—		173
Accruing loans contractually past due 90 days or more	—		—		—		—		—		1		3		4
Total consumer	$	809	$	2,649	$	2,818	$	4,090	$	2,763	$	6,166	$	197	$	19,492

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HSBC USA Inc.

	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total at Dec. 31, 2023
	(in millions)
Residential mortgages:
Performing loans	$	2,646	$	2,753	$	4,096	$	2,761	$	1,236	$	4,677	$	—	$	18,169
Nonaccrual loans	—		11		11		9		8		133		—		172
Total residential mortgages	2,646		2,764		4,107		2,770		1,244		4,810		—		18,341
Home equity mortgages:
Performing loans	80		69		11		22		25		176		—		383
Nonaccrual loans	—		—		—		—		—		6		—		6
Total home equity mortgages	80		69		11		22		25		182		—		389
Credit cards:
Performing loans	—		—		—		—		—		—		196		196
Accruing loans contractually past due 90 days or more	—		—		—		—		—		—		3		3
Total credit cards	—		—		—		—		—		—		199		199
Other consumer:
Performing loans	—		8		7		7		3		67		7		99
Accruing loans contractually past due 90 days or more	—		—		—		—		—		2		—		2
Total other consumer	—		8		7		7		3		69		7		101
Total consumer	$	2,726	$	2,841	$	4,125	$	2,799	$	1,272	$	5,061	$	206	$	19,030
Total consumer:
Performing loans	$	2,726	$	2,830	$	4,114	$	2,790	$	1,264	$	4,920	$	203	$	18,847
Nonaccrual loans	—		11		11		9		8		139		—		178
Accruing loans contractually past due 90 days or more	—		—		—		—		—		2		3		5
Total consumer	$	2,726	$	2,841	$	4,125	$	2,799	$	1,272	$	5,061	$	206	$	19,030

Gross Charge-offs  The following table summarizes gross charge-off dollars in our consumer loan portfolio, disaggregated by year of origination, during the three months ended March 31, 2024 and 2023:

	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total
	(in millions)
Three Months Ended March 31, 2024
Credit cards	$	—	$	—	$	—	$	—	$	—	$	—	$	2	$	2
Total consumer	$	—	$	—	$	—	$	—	$	—	$	—	$	2	$	2
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
	(in millions)
Three Months Ended March 31, 2023
Residential mortgages	$	—	$	—	$	—	$	—	$	—	$	3	$	—	$	3
Home equity mortgages	—		—		—		—		—		1		—		1
Credit cards	—		—		—		—		—		—		2		2
Total consumer	$	—	$	—	$	—	$	—	$	—	$	4	$	2	$	6

Concentration of Credit Risk  At March 31, 2024 and December 31, 2023, our loan portfolios included interest-only residential mortgage and home equity mortgage loans totaling $4,453 million and $4,392 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.

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HSBC USA Inc.

5.    Allowance for Credit Losses

We utilize a minimum of four forward-looking economic scenarios to calculate lifetime ECL when estimating the allowance for credit losses for in scope financial assets and the liability for off-balance sheet credit exposures. Three of the scenarios are termed the "Consensus Economic Scenarios" which include a 'most likely outcome' (the "Central scenario") and two less likely 'outer' scenarios, referred to as the "Upside scenario" and the "Downside scenario." The fourth scenario, referred to as the "Alternative Downside scenario," is designed to consider severe downside risks with more extreme economic outcomes. Each scenario is assigned a weighting deemed appropriate for the estimation of lifetime ECL, with the majority of the weighting typically placed on the Central scenario. At management's discretion, changes may be made to the weighting assigned to the four scenarios or additional scenarios may be included in order to consider current economic conditions.

Updates to Economic Scenarios and Other Changes During the Three Months Ended March 31, 2024 Although the economic outlook improved during the first quarter of 2024, economic uncertainty remained due to elevated interest rates, inflation levels and the expectation for slowing economic growth. We updated our Consensus Economic Scenarios and our Alternative Downside Scenario to reflect management's current view of forecasted economic conditions and utilized the four updated scenarios for estimating lifetime ECL at March 31, 2024. Each of the four scenarios were assigned weightings with the majority of the weighting placed on the Central scenario, lower equal weights placed on the Upside and Downside scenarios and the lowest weighting placed on the Alternative Downside scenario. This weighting was deemed appropriate for the estimation of lifetime ECL under current conditions. The following discussion summarizes the Central, Upside, Downside and Alternative Downside scenarios at March 31, 2024. The economic assumptions described in this section have been formed specifically for the purpose of calculating ECL.

In the Central scenario, U.S. Gross Domestic Product ("GDP") growth moderates in 2024 under the assumption that diminishing excess household savings, a softened labor market, and the lagged effects of higher interest rates constrain expenditure. With a more balanced labor market, the unemployment rate increases slightly, but remains near historic lows, while residential housing prices grow modestly driven by a low inventory of existing homes for sale. In the financial markets, growth in financial asset prices remains modest while the FRB starts to reduce its policy rate in mid-2024 followed by further reductions in the second half of 2024 and 2025 as inflation continues a gradual decline over the forecast horizon.

In the Upside scenario, the economy is assumed to grow at a faster pace than in the Central scenario as inflation wanes. As a result, the unemployment rate falls and remains lower than in the Central scenario, while both residential housing and commercial real estate prices are higher than in the Central scenario. In this scenario, the equity price index climbs with strong momentum and overall optimism fueled by easing inflation allows the FRB to normalize its policy rate slightly faster than currently anticipated, which, combined with lower inflation expectations, drive the 10-year U.S. Treasury yield lower than in the Central scenario.

In the Downside scenario, inflation re-accelerates and the economy enters into a mild recession, with the unemployment rate increasing and remaining at a higher level, while residential housing and commercial real estate prices undergo sharp correction due to weakness in the labor market and rising inflation. In this scenario, the FRB raises its policy rate initially to tackle inflation and the equity price index goes through a substantial correction by mid-2025 driven by an overall erosion of consumer and business sentiments, which eventually results in lower interest rates than in the Central scenario.

In the Alternative Downside scenario, geopolitical tensions escalate significantly and more severe inflationary pressures accompanied by tighter monetary policy lead the U.S. economy into a deep recession in 2024 and 2025, followed by a very anemic recovery starting in the second half of 2026. An extended period of economic contraction keeps the unemployment rate at an elevated level, which pressures residential housing prices to depreciate substantially, while at the same time, contracting corporate activities and rising unemployment pushes the commercial real estate market into a downturn. In this scenario, financial markets experience a major sell-off and volatility in the financial markets remains extremely high over the next year, widening corporate credit spreads substantially, and flight to safe haven assets pushes the 10-year U.S. Treasury yield lower.

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HSBC USA Inc.

The following table presents the forecasted key macroeconomic variables in our Central scenarios used for estimating lifetime ECL at March 31, 2024 and December 31, 2023:

	For the Quarter Ended
	June 30, 2024		December 31, 2024		June 30, 2025		December 31, 2025
Unemployment rate (quarterly average):
Forecast at March 31, 2024	4.1	%	4.3	%	4.3	%	4.1	%
Forecast at December 31, 2023	4.3		4.3		4.2		4.1
GDP growth rate (year-over-year):
Forecast at March 31, 2024	2.5		1.2		1.6		1.8
Forecast at December 31, 2023	1.2		1.1		1.8		2.1

While we believe that the assumptions used in our credit loss models are reasonable within the parameters for which the models have been built and calibrated to operate, inflation and elevated interest rates have resulted in a macroeconomic environment that is outside the parameters for which the models have been built. As a result, adjustments to model outputs to reflect consideration of management judgment are used with stringent governance in place to ensure an appropriate lifetime ECL estimate.

The impacts of elevated interest rates, inflation levels and the expectation for slowing economic growth will continue to impact our business and our allowance for credit losses in future periods, the extent of which remains uncertain. We will continue to monitor these situations closely and will continue to adapt our approach as necessary to reflect management's current view of forecasted economic conditions.

Allowance for Credit Losses / Liability for Off-Balance Sheet Credit Exposures The following table summarizes our allowance for credit losses and the liability for off-balance sheet credit exposures:

	March 31, 2024		December 31, 2023
	(in millions)
Allowance for credit losses:
Loans	$	581	$	591
Securities held-to-maturity(1)	—		—
Other financial assets measured at amortized cost(2)	—		—
Securities available-for-sale(1)	—		—
Total allowance for credit losses	$	581	$	591
Liability for off-balance sheet credit exposures	$	123	$	111

(1)See Note 3, "Securities," for additional information regarding the allowance for credit losses associated with our security portfolios.

(2)Primarily includes accrued interest receivables and customer acceptances.

The following table summarizes the changes in the allowance for credit losses on loans by product or line of business during the three months ended March 31, 2024 and 2023:

	Commercial Loans								Consumer Loans
	Real Estate, including Construction		Business and Corporate Banking		Global Banking		Other Comm'l		Residential Mortgages		Home Equity Mortgages		Credit Cards		Other Consumer		Total Loans
	(in millions)
Three Months Ended March 31, 2024
Allowance for credit losses – beginning of period	$	144	$	302	$	127	$	1	$	(9)	$	7	$	16	$	3	$	591
Provision charged (credited) to income	(10)		7		(8)		—		1		1		—		(1)		(10)
Charge-offs	—		(1)		—		—		—		—		(2)		—		(3)
Recoveries	—		1		—		—		1		—		1		—		3
Net (charge-offs) recoveries	—		—		—		—		1		—		(1)		—		—
Allowance for credit losses – end of period	$	134	$	309	$	119	$	1	$	(7)	$	8	$	15	$	2	$	581

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	Commercial Loans								Consumer Loans
	Real Estate, including Construction		Business and Corporate Banking		Global Banking		Other Comm'l		Residential Mortgages		Home Equity Mortgages		Credit Cards		Other Consumer		Total Loans
	(in millions)
Three Months Ended March 31, 2023
Allowance for credit losses – beginning of period	$	200	$	230	$	120	$	1	$	11	$	2	$	16	$	4	$	584
Provision charged (credited) to income	(28)		38		12		—		(10)		1		—		(1)		12
Charge-offs	—		(5)		—		—		(3)		(1)		(2)		—		(11)
Recoveries	—		1		—		—		—		1		1		—		3
Net (charge-offs) recoveries	—		(4)		—		—		(3)		—		(1)		—		(8)
Allowance for credit losses – end of period	$	172	$	264	$	132	$	1	$	(2)	$	3	$	15	$	3	$	588

The following table summarizes the changes in the liability for off-balance sheet credit exposures during the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,	2024		2023
	(in millions)
Balance at beginning of period	$	111	$	117
Provision charged to income	12		8
Balance at end of period	$	123	$	125

Accrued Interest Receivables The following table summarizes accrued interest receivables associated with financial assets carried at amortized cost and securities available-for-sale along with the related allowance for credit losses, which are reported net in other assets on the consolidated balance sheet. These accrued interest receivables are excluded from the amortized cost basis disclosures presented elsewhere in these financial statements, including Note 3, "Securities," and Note 4, "Loans."

	March 31, 2024		December 31, 2023
	(in millions)
Accrued interest receivables:
Loans	$	264	$	259
Securities held-to-maturity	56		57
Other financial assets measured at amortized cost	58		19
Securities available-for-sale	97		87
Total accrued interest receivables	475		422
Allowance for credit losses	—		—
Accrued interest receivables, net	$	475	$	422

During both the three months ended March 31, 2024 and 2023, charged-off accrued interest receivables were immaterial.

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6. Loans Held for Sale

Loans held for sale consisted of the following:

	March 31, 2024		December 31, 2023
	(in millions)
Commercial loans:
Global banking	$	453	$	339
Total commercial	453		339
Consumer loans:
Residential mortgages	—		—
Total consumer	—		—
Total loans held for sale	$	453	$	339

Commercial Loans Included in commercial loans held for sale are certain loans that we have elected to designate under the fair value option which consists of loans that we originate in connection with our participation in a number of syndicated credit facilities with the intent of selling them to unaffiliated third parties as well as loans that we purchase from the secondary market and hold as hedges against our exposure to certain total return swaps or intend to sell. The fair value of these loans totaled $264 million and $250 million at March 31, 2024 and December 31, 2023, respectively. See Note 9, "Fair Value Option," for additional information.

Commercial loans held for sale also includes certain loans that we no longer intend to hold for investment and were transferred to held for sale which totaled $189 million and $89 million at March 31, 2024 and December 31, 2023, respectively. During both the three months ended March 31, 2024 and 2023, lower of amortized cost or fair value adjustments on these commercial loans held for sale were immaterial.

Consumer Loans Included in residential mortgage loans held for sale are agency-eligible conforming residential mortgage loans which are originated and held for sale to third parties, currently on a servicing retained basis. Gains and losses from the sale of these residential mortgage loans are reflected as a component of other income (loss) in the consolidated statement of income.

Loans held for sale are subject to market risk, liquidity risk and interest rate risk, in that their value will fluctuate as a result of changes in market conditions, as well as the credit environment. Interest rate risk for residential mortgage loans which are originated and held for sale is partially mitigated through an economic hedging program to offset changes in the fair value of these mortgage loans held for sale, from the time of commitment to sale, attributable to changes in market interest rates. Revenue associated with this economic hedging program, which is reflected as a component of other income (loss) in the consolidated statement of income, was nil during both the three months ended March 31, 2024 and 2023.

Valuation Allowances Excluding the loans designated under the fair value option discussed above, loans held for sale are recorded at the lower of amortized cost or fair value, with adjustments to fair value being recorded as a valuation allowance through other revenues. The valuation allowance on commercial loans held for sale was nil and $2 million at March 31, 2024 and December 31, 2023, respectively. The valuation allowance on consumer loans held for sale was nil at both March 31, 2024 and December 31, 2023.

7. Goodwill

Goodwill was $458 million at both March 31, 2024 and December 31, 2023. Goodwill for these periods reflects accumulated impairment losses of $1,819 million, which were recognized in prior periods. During the first quarter of 2024, there were no events or changes in circumstances to indicate that it is more likely than not the fair value of our Commercial Banking reporting unit has been reduced below its carrying amount.

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8. Derivative Financial Instruments

In the normal course of business, the derivative instruments we enter into are for trading, market making and risk management purposes. For financial reporting purposes, derivative instruments are designated in one of the following categories: (a) hedging instruments designated as qualifying hedges under derivative and hedge accounting principles, (b) financial instruments held for trading or (c) non-qualifying economic hedges. The derivative instruments held are predominantly swaps, futures, options and forward contracts. All derivatives are stated at fair value. Where we enter into enforceable master netting agreements with counterparties, the master netting agreements permit us to net those derivative asset and liability positions and to offset cash collateral held and posted with the same counterparty.

The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting as well as collateral, and therefore are not representative of our exposure. The table below also presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet, as well as cash and securities collateral posted and received under enforceable master netting agreements that do not meet the criteria for netting. Derivative assets and liabilities which are not subject to an enforceable master netting agreement, or are subject to a netting agreement where an appropriate legal opinion to determine such agreements are enforceable has not been either sought or obtained, have not been netted in the following table. Where we have received or posted collateral under netting agreements where an appropriate legal opinion to determine such agreements are enforceable has not been either sought or obtained, the related collateral also has not been netted in the following table.

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	March 31, 2024				December 31, 2023
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
	(in millions)
Derivatives accounted for as fair value hedges(1)
Interest rate contracts - bilateral OTC(2)	$	—	$	13	$	—	$	83
Derivatives accounted for as cash flow hedges(1)
Foreign exchange contracts - bilateral OTC(2)	31		—		—		56
Interest rate contracts - bilateral OTC(2)	1		—		—		1
Total derivatives accounted for as hedges	32		13		—		140
Trading derivatives not accounted for as hedges(3)
Exchange-traded(2)	5		4		7		16
OTC-cleared(2)	36		—		70		—
Bilateral OTC(2)	1,289		905		1,178		946
Interest rate contracts	1,330		909		1,255		962
OTC-cleared (2)	56		—		—		—
Bilateral OTC(2)	10,420		10,570		13,606		13,479
Foreign exchange contracts	10,476		10,570		13,606		13,479
Exchange-traded(2)	—		—		7		—
Bilateral OTC(2)	435		1,097		413		1,080
Equity contracts	435		1,097		420		1,080
Exchange-traded(2)	—		—		3		—
Bilateral OTC(2)	1,222		1,136		1,150		1,033
Precious metals contracts	1,222		1,136		1,153		1,033
OTC-cleared(2)	7		—		14		—
Bilateral OTC(2)	131		98		81		137
Credit contracts	138		98		95		137
Other non-qualifying derivatives not accounted for as hedges(1)
Interest rate contracts - bilateral OTC(2)	—		101		—		76
Equity contracts - bilateral OTC(2)	613		164		621		193
OTC-cleared(2)	—		—		1		1
Bilateral OTC(2)	9		131		13		122
Credit contracts	9		131		14		123
Other contracts - bilateral OTC(2)(4)	4		34		5		40
Total derivatives	14,259		14,253		17,169		17,263
Less: Gross amounts of receivable / payable subject to enforceable master netting agreements(5)(7)	11,660		11,660		14,110		14,110
Less: Gross amounts of cash collateral received / posted subject to enforceable master netting agreements(6)(7)	1,711		1,080		1,760		1,321
Net amounts of derivative assets / liabilities presented in the balance sheet	888		1,513		1,299		1,832
Less: Gross amounts of financial instrument collateral received / posted subject to enforceable master netting agreements but not offset in the consolidated balance sheet	88		35		63		273
Net amounts of derivative assets / liabilities	$	800	$	1,478	$	1,236	$	1,559

(1)Derivative assets / liabilities related to cash flow hedges, fair value hedges and derivative instruments held for purposes other than for trading are recorded in other assets / interest, taxes and other liabilities on the consolidated balance sheet.

(2)Over-the-counter ("OTC") derivatives include derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. The credit risk associated with bilateral OTC derivatives is managed through obtaining collateral and enforceable master netting agreements. OTC-cleared derivatives are executed bilaterally in the OTC market but then novated to a central clearing counterparty, whereby the central clearing counterparty becomes the counterparty to each of the original counterparties. Exchange traded derivatives are executed directly on an organized exchange. Credit risk is minimized for OTC-cleared derivatives and exchange traded derivatives through daily margining requirements. In addition, OTC-cleared interest rate and credit derivatives with certain central clearing counterparties are settled daily.

(3)Trading related derivative assets / liabilities are recorded in trading assets / trading liabilities on the consolidated balance sheet.

(4)Consists of swap agreements entered into in conjunction with the sales of Visa Inc. ("Visa") Class B common shares ("Class B Shares").

(5)Represents the netting of derivative receivable and payable balances for the same counterparty under enforceable netting agreements.

(6)Represents the netting of cash collateral posted and received by counterparty under enforceable netting agreements.

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HSBC USA Inc.

(7)Netting is performed at a counterparty level in cases where enforceable master netting agreements are in place, regardless of the type of derivative instrument. Therefore, we have not allocated netting to the different types of derivative instruments shown in the table above.

See Note 16, "Guarantee Arrangements, Pledged Assets and Repurchase Agreements," for further information on offsetting related to resale and repurchase agreements.

Derivatives Held for Risk Management Purposes  Our risk management policy requires us to identify, analyze and manage risks arising from the activities conducted during the normal course of business. We use derivative instruments as an asset and liability management tool to manage our exposures in interest rate, foreign currency and credit risks in existing assets and liabilities, commitments and forecasted transactions. The accounting for changes in fair value of a derivative instrument will depend on whether the derivative has been designated and qualifies for hedge accounting.

We designate derivative instruments to offset the fair value risk and cash flow risk arising from fixed-rate and floating-rate assets and liabilities as well as forecasted transactions. We assess the hedging relationships, both at the inception of the hedge and on an ongoing basis, using a regression approach to determine whether the designated hedging instrument is highly effective in offsetting changes in the fair value or the cash flows attributable to the hedged risk. Accounting principles for qualifying hedges require us to prepare detailed documentation describing the relationship between the hedging instrument and the hedged item, including, but not limited to, the risk management objective, the hedging strategy and the methods to assess and measure the ineffectiveness of the hedging relationship. We discontinue hedge accounting when we determine that the hedge is no longer highly effective, the hedging instrument is terminated, sold or expired, the designated forecasted transaction is not probable of occurring, or when the designation is removed by us.

Fair Value Hedges  In the normal course of business, we hold fixed-rate loans and securities, and issue fixed-rate deposits and senior and subordinated debt obligations. The fair value of fixed-rate assets and liabilities fluctuates in response to changes in interest rates. We utilize interest rate swaps, forward and futures contracts to minimize our exposure to changes in fair value caused by interest rate volatility. The changes in the fair value of the hedged item designated in a qualifying hedge are captured as an adjustment to the carrying amount of the hedged item (basis adjustment). If the hedging relationship is discontinued and the hedged item continues to exist, the basis adjustment is amortized over the remaining life of the hedged item.

The following table presents the carrying amount of hedged items in fair value hedges recognized in the consolidated balance sheet at March 31, 2024 and December 31, 2023, along with the cumulative amount of fair value hedging adjustments included in the carrying amount of those hedged items:

	Carrying Amount of Hedged Items(1)		Cumulative Amount of Fair Value Hedging Adjustments Increasing (Decreasing) the Carrying Amount of Hedged Items
			Active		Discontinued		Total
	(in millions)
At March 31, 2024
Securities available-for-sale ("AFS")	$	10,325	$	(1,552)	$	(63)	$	(1,615)
Deposits	1,451		(108)		59		(49)
Long-term debt	8,864		(448)		63		(385)
At December 31, 2023
Securities AFS	11,112		(1,320)		(70)		(1,390)
Deposits	1,463		(104)		67		(37)
Long-term debt	7,913		(407)		72		(335)

(1)The carrying amount of securities AFS represents the amortized cost basis.

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HSBC USA Inc.

The following table presents information on gains and losses on derivative instruments designated and qualifying as hedging instruments and the hedged items in fair value hedges and their location on the consolidated statement of income:

	Location of Gain (Loss) Recognized in Income	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items
		(in millions)
Three Months Ended March 31, 2024
Interest rate contracts / Securities AFS	Net interest income	$	368	$	(194)
Interest rate contracts / Deposits	Net interest income	(23)		(12)
Interest rate contracts / Long-term debt	Net interest income	(100)		(40)
Total		$	245	$	(246)
Three Months Ended March 31, 2023
Interest rate contracts / Securities AFS	Net interest income	$	(207)	$	386
Interest rate contracts / Deposits	Net interest income	6		(37)
Interest rate contracts / Long-term debt	Net interest income	76		(174)
Total		$	(125)	$	175

Cash Flow Hedges  We own or issue floating rate financial instruments and enter into forecasted transactions that give rise to variability in future cash flows. As a part of our risk management strategy, we use interest rate swaps, currency swaps and futures contracts to mitigate risk associated with variability in the cash flows. Changes in fair value of a derivative instrument associated with a qualifying cash flow hedge are recognized in other comprehensive income (loss). When the cash flows being hedged materialize and are recorded in income or expense, the associated gain or loss from the hedging derivative previously recorded in accumulated other comprehensive loss ("AOCI") is reclassified into earnings in the same accounting period in which the designated forecasted transaction or hedged item affects earnings. If a cash flow hedge of a forecasted transaction is discontinued because it is no longer highly effective, or if the hedge relationship is terminated, the cumulative gain or loss on the hedging derivative to that date will continue to be reported in AOCI unless it is probable that the hedged forecasted transaction will not occur by the end of the originally specified time period as documented at the inception of the hedge, at which time the cumulative gain or loss is released into earnings.

At March 31, 2024, active cash flow hedge relationships extend or mature through July 2036. During the three months ended March 31, 2024, $7 million of losses related to discontinued cash flow hedge relationships were amortized to earnings from AOCI compared with losses of $45 million during the three months ended March 31, 2023. During the next twelve months, we expect to amortize $44 million of remaining losses to earnings resulting from these discontinued cash flow hedges. The interest accrual related to the hedging instruments is recognized in net interest income.

The following table presents information on gains and losses on derivative instruments designated and qualifying as hedging instruments in cash flow hedges (including amounts recognized in AOCI from discontinued cash flow hedges) and their location on the consolidated statement of income:

	Gain (Loss) Recognized in AOCI on Derivatives				Location of Gain (Loss) Reclassified from AOCI into Income	Gain (Loss) Reclassified From AOCI into Income
	2024		2023			2024		2023
	(in millions)
Three Months Ended March 31,
Foreign exchange contracts	$	(1)	$	—	Net interest income	$	—	$	—
Interest rate contracts	42		85		Net interest income	(7)		(45)
Total	$	41	$	85		$	(7)	$	(45)

Trading Derivatives and Non-Qualifying Hedging Activities  In addition to risk management, we also enter into derivative contracts, including buy- and sell-protection credit derivatives, for the purposes of trading and market making, or repackaging risks to form structured trades to meet clients' risk taking objectives. Additionally, we buy or sell securities and use derivatives to mitigate the market risks arising from our trading activities with our clients that exceed our risk appetite. We also use buy-protection credit derivatives to manage our counterparty credit risk exposure. Where we enter into derivatives for trading purposes, realized and unrealized gains and losses are recognized in trading revenue. Counterparty credit risk associated with

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HSBC USA Inc.

OTC derivatives, including risk-mitigating buy-protection credit derivatives, are recognized as an adjustment to the fair value of the derivatives and are recorded in trading revenue.

Our non-qualifying hedging and other activities include:

•Derivative contracts related to the fixed-rate long-term debt issuances and hybrid instruments, including all structured notes and deposits, for which we have elected fair value option accounting. These derivative contracts are non-qualifying hedges but are considered economic hedges.

•Credit default swaps which are designated as economic hedges against the credit risks within our loan portfolio. In the event of an impairment loss occurring in a loan that is economically hedged, the impairment loss is recognized as provision for credit losses while the gain on the credit default swap is recorded as other income (loss).

•Swap agreements entered into in conjunction with the sales of Visa Class B Shares to a third party to retain the litigation risk associated with the Class B Shares sold until the related litigation is settled and the Class B Shares can be converted into Class A common shares ("Class A Shares"). See Note 16, "Guarantee Arrangements, Pledged Assets and Repurchase Agreements," for additional information.

•Forward purchases or sales of to-be-announced ("TBA") securities used to economically hedge changes in the fair value of residential mortgage loans which are originated and held for sale attributable to changes in market interest rates. Changes in the fair value of TBA positions, which are considered derivatives, are recorded in other income (loss). See Note 6, "Loans Held for Sale," for additional information.

Derivative instruments designated as economic hedges that do not qualify for hedge accounting are recorded at fair value through profit and loss. Realized and unrealized gains and losses on economic hedges are recognized in gain (loss) on instruments designated at fair value and related derivatives or other income (loss) while the derivative asset or liability positions are reflected as other assets or other liabilities.

The following table presents information on gains and losses on derivative instruments held for trading purposes and their location on the consolidated statement of income:

	Location of Gain (Loss) Recognized in Income on Derivatives	Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended March 31,
		2024		2023
		(in millions)
Interest rate contracts	Trading revenue	$	71	$	(29)
Foreign exchange contracts	Trading revenue	117		29
Equity contracts	Trading revenue	(1,048)		(476)
Precious metals contracts	Trading revenue	(22)		136
Credit contracts	Trading revenue	79		(26)
Total		$	(803)	$	(366)

The following table presents information on gains and losses on derivative instruments held for non-qualifying hedging and other activities and their location on the consolidated statement of income:

	Location of Gain (Loss) Recognized in Income on Derivatives	Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended March 31,
		2024		2023
		(in millions)
Interest rate contracts	Gain (loss) on instruments designated at fair value and related derivatives	$	(54)	$	43
Equity contracts	Gain (loss) on instruments designated at fair value and related derivatives	151		412
Credit contracts	Other income (loss)	(25)		(15)
Other contracts(1)	Other income (loss)	(2)		(2)
Total		$	70	$	438

(1)Consists of swap agreements entered into in conjunction with the sales of Visa Class B Shares.

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HSBC USA Inc.

Credit-Risk Related Contingent Features  The majority of our derivative contracts contain provisions that require us to maintain a specific credit rating from each of the major credit rating agencies. Sometimes the derivative instrument transactions are a part of broader structured product transactions. If our credit ratings were to fall below the current ratings, the counterparties to our derivative instruments could demand us to post additional collateral. The amount of additional collateral required to be posted will depend on whether we are downgraded by one or more notches. The aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a net liability position at March 31, 2024 was $168 million, for which we had posted collateral of $57 million. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position at December 31, 2023 was $169 million, for which we had posted collateral of $90 million. Substantially all of the collateral posted is in the form of cash or securities available-for-sale. See Note 16, "Guarantee Arrangements, Pledged Assets and Repurchase Agreements," for further details.

The following table presents the amount of additional collateral that we would be required to post (from the current collateral level) related to derivative instruments with credit-risk related contingent features if our long-term ratings were downgraded by one or two notches. A downgrade by a single rating agency that does not result in a rating lower than a preexisting corresponding rating provided by another rating agency will generally not result in additional collateral.

	One-notch downgrade		Two-notch downgrade
	(in millions)
Amount of additional collateral to be posted upon downgrade	$	5	$	52

Notional Value of Derivative Contracts  The following table summarizes the notional values of derivative contracts:

	March 31, 2024		December 31, 2023
	(in millions)
Interest rate:
Futures and forwards	$	9,741	$	5,143
Swaps	109,096		114,947
Options written	3,452		1,260
Options purchased	3,384		1,352
Total interest rate	125,673		122,702
Foreign exchange:
Swaps, futures and forwards	1,004,747		1,005,683
Options written	29,926		30,755
Options purchased	30,642		30,898
Spot	46,209		29,631
Total foreign exchange	1,111,524		1,096,967
Commodities, equities and precious metals:
Swaps, futures and forwards	39,555		53,110
Options written	1,339		1,713
Options purchased	7,716		8,464
Total commodities, equities and precious metals	48,610		63,287
Credit derivatives	15,937		16,710
Other contracts(1)	1,517		1,416
Total	$	1,303,261	$	1,301,082

(1)Consists of swap agreements entered into in conjunction with the sales of Visa Class B Shares.

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9. Fair Value Option

We report our results to HSBC in accordance with HSBC Group accounting and reporting policies ("Group Reporting Basis"), which apply International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB"). We typically have elected to apply fair value option ("FVO") accounting to selected financial instruments to align the measurement attributes of those instruments under U.S. GAAP and the Group Reporting Basis and to simplify the accounting model applied to those financial instruments. We elected to apply FVO accounting to certain commercial loans held for sale, certain student loans held for investment, certain fixed-rate long-term debt issuances, all of our hybrid instruments, including structured notes and deposits, and certain client share repurchase transactions. Excluding the fair value movement on fair value option liabilities attributable to our own credit spread, which is recorded in other comprehensive income (loss), changes in the fair value of fair value option assets and liabilities as well as the mark-to-market adjustment on the related derivatives and the net realized gains or losses on these derivatives are reported in gain (loss) on instruments designated at fair value and related derivatives in the consolidated statement of income.

Loans and Loans Held For Sale We elected to apply FVO accounting to certain commercial syndicated loans which are originated with the intent to sell and certain commercial loans that we purchased from the secondary market and hold as hedges against our exposure to certain total return swaps or intend to sell and include these loans as loans held for sale in the consolidated balance sheet. We also elected to apply FVO accounting to certain student loans held for investment. These elections allow us to account for these loans at fair value which is consistent with the manner in which the instruments are managed. Where available, fair value is based on observable market pricing obtained from independent sources, relevant broker quotes or observed market prices of instruments with similar characteristics. Where observable market parameters are not available, fair value is determined based on contractual cash flows adjusted for estimates of prepayment rates, expected default rates and loss severity discounted at management's estimate of the expected rate of return required by market participants. We also consider loan-specific risk mitigating factors such as collateral arrangements in determining the fair value estimate. Interest from these loans is recorded as interest income in the consolidated statement of income. Because a substantial majority of the loans elected for the fair value option are floating-rate commercial loans, changes in their fair value are primarily attributable to changes in loan-specific credit risk factors. The components of gain (loss) related to loans designated at fair value are summarized in the table below. At March 31, 2024 and December 31, 2023, no loans for which the fair value option has been elected were 90 days or more past due or in nonaccrual status.

Long-Term Debt (Own Debt Issuances)  We elected to apply FVO accounting for certain fixed-rate long-term debt for which we had applied or otherwise would elect to apply fair value hedge accounting. The election allows us to achieve a similar accounting effect without having to meet the hedge accounting requirements. The own debt issuances elected under FVO are traded in secondary markets and, as such, the fair value is determined based on observed prices for the specific instruments. The observed market price of these instruments reflects the effect of changes to our own credit spreads and interest rates. Interest on the fixed-rate debt accounted for under FVO is recorded as interest expense in the consolidated statement of income. Excluding the fair value movement attributable to our own credit spread, the components of gain (loss) in the consolidated statement of income related to long-term debt designated at fair value are summarized in the table below.

Hybrid Instruments  We elected to apply FVO accounting to all of our hybrid instruments issued, including structured notes and deposits. The valuation of the hybrid instruments is predominantly driven by the derivative features embedded within the instruments and our own credit risk. Cash flows of the hybrid instruments in their entirety, including the embedded derivatives, are discounted at an appropriate rate for the applicable duration of the instrument adjusted for our own credit spreads. The credit spreads applied to structured notes are determined with reference to our own debt issuance rates observed in the primary and secondary markets, internal funding rates, and structured note rates in recent executions while the credit spreads applied to structured deposits are determined using market rates currently offered on comparable deposits with similar characteristics and maturities. Interest on this debt is recorded as interest expense in the consolidated statement of income. Excluding the fair value movement attributable to our own credit spread, the components of gain (loss) in the consolidated statement of income related to hybrid instruments designated at fair value are summarized in the table below.

Client Share Repurchase Transactions From time to time, we enter into agreements with clients to facilitate share repurchase transactions under which the clients make a substantial up-front cash payment in exchange for the delivery of shares. Simultaneously, we enter into corresponding agreements with HSBC Bank plc to execute the share repurchases. We elected to apply FVO accounting to these transactions, which are recorded in other assets and interest, taxes and other liabilities on the consolidated balance sheet.

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HSBC USA Inc.

The following table summarizes the fair value and unpaid principal balance for items we account for under FVO:

	Fair Value		Unpaid Principal Balance		Fair Value Over (Under) Unpaid Principal Balance
	(in millions)
At March 31, 2024
Student loans held for investment	$	14	$	16	$	(2)
Commercial loans held for sale	264		272		(8)
Client share repurchase asset	661		661		—
Fixed rate long-term debt	756		741		15
Hybrid instruments:
Structured deposits	2,084		2,057		27
Structured notes	6,114		5,741		373
Client share repurchase liability	661		661		—
At December 31, 2023
Student loans held for investment	$	15	$	17	$	(2)
Commercial loans held for sale	250		256		(6)
Client share repurchase asset	10		10		—
Fixed rate long-term debt	749		741		8
Hybrid instruments:
Structured deposits	1,821		1,816		5
Structured notes	6,790		6,418		372
Client share repurchase liability	10		10		—

Components of Gain (Loss) on Instruments Designated at Fair Value and Related Derivatives  The following table summarizes the components of gain (loss) on instruments designated at fair value and related derivatives reflected in the consolidated statement of income for the three months ended March 31, 2024 and 2023:

	Loans and Loans Held for Sale		Long-Term Debt		Hybrid Instruments		Total
	(in millions)
Three Months Ended March 31, 2024
Interest rate and other components(1)	$	—	$	23	$	(141)	$	(118)
Credit risk component(2)	1		—		—		1
Total mark-to-market on financial instruments designated at fair value	1		23		(141)		(117)
Mark-to-market on related derivatives	—		(27)		125		98
Net realized gain (loss) on related long-term debt derivatives	—		(1)		—		(1)
Gain (loss) on instruments designated at fair value and related derivatives	$	1	$	(5)	$	(16)	$	(20)
Three Months Ended March 31, 2023
Interest rate and other components(1)	$	—	$	(21)	$	(450)	$	(471)
Credit risk component(2)	(6)		—		—		(6)
Total mark-to-market on financial instruments designated at fair value	(6)		(21)		(450)		(477)
Mark-to-market on related derivatives	—		23		431		454
Net realized gain on related long-term debt derivatives	—		1		—		1
Gain (loss) on instruments designated at fair value and related derivatives	$	(6)	$	3	$	(19)	$	(22)

(1)As it relates to hybrid instruments, interest rate and other components primarily includes interest rate and equity contract risks.

(2)The fair value movement on fair value option liabilities attributable to our own credit spread is recorded in other comprehensive income (loss).

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10. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss includes certain items that are reported directly within a separate component of equity. The following table presents changes in accumulated other comprehensive loss balances:

Three Months Ended March 31,	2024		2023
	(in millions)
Unrealized gains (losses) on investment securities:
Balance at beginning of period	$	(1,734)	$	(2,270)
Other comprehensive income (loss) for period:
Net unrealized gains (losses) arising during period, net of tax of $(36) million and $68 million, respectively	(106)		207
Reclassification adjustment for gains realized in net income, net of tax of less than $(1) million and $(1) million, respectively(1)	(2)		(2)
Amortization of net unrealized (gains) losses on securities transferred from available-for-sale to held-to-maturity realized in net income, net of tax of less than $1 million and less than $(1) million, respectively(2)	1		(1)
Total other comprehensive income (loss) for period	(107)		204
Balance at end of period	(1,841)		(2,066)
Unrealized gains (losses) on fair value option liabilities attributable to our own credit spread:
Balance at beginning of period	61		86
Other comprehensive income (loss) for period:
Net unrealized gains (losses) arising during period, net of tax of $(12) million and $21 million, respectively	(37)		63
Total other comprehensive income (loss) for period	(37)		63
Balance at end of period	24		149
Unrealized gains (losses) on derivatives designated as cash flow hedges:
Balance at beginning of period	(260)		(396)
Other comprehensive income (loss) for period:
Net unrealized gains arising during period, net of tax of $10 million and $21 million, respectively	31		64
Reclassification adjustment for losses realized in net income, net of tax of $2 million and $11 million, respectively(3)	5		34
Total other comprehensive income for period	36		98
Balance at end of period	(224)		(298)
Pension and postretirement benefit liability:
Balance at beginning and end of period	7		5
Total accumulated other comprehensive loss at end of period	$	(2,034)	$	(2,210)

(1)Amount reclassified to net income is included in other securities gains, net in our consolidated statement of income.

(2)Amount amortized to net income is included in interest income in our consolidated statement of income. During 2014, we transferred securities from available-for-sale to held-to-maturity. At the date of transfer, AOCI included net pretax unrealized losses related to the transferred securities which are being amortized over the remaining contractual life of each security as an adjustment of yield in a manner consistent with the amortization of any premium or discount.

(3)Amount reclassified to net income is included in net interest income in our consolidated statement of income.

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HSBC USA Inc.

11. Fee Income from Contracts with Customers

The following table summarizes fee income from contracts with customers disaggregated by type of activity, as well as a reconciliation to total other revenues, during the three months ended March 31, 2024 and 2023. See Note 23, "Fee Income from Contracts with Customers," in our 2023 Form 10-K for a description of the various types of fee-based activities and how revenue associated with these activities is recognized. There have been no significant changes in these activities since December 31, 2023.

Three Months Ended March 31,	2024		2023
	(in millions)
Credit card fees, net	$	15	$	11
Trust and investment management fees	36		31
Other fees and commissions:
Account services	75		66
Credit facilities	91		73
Other fees	10		9
Total other fees and commissions	176		148
Servicing and other fees from HSBC affiliates	88		74
Insurance(1)	1		1
Total fee income from contracts with customers	316		265
Other non-fee revenue	223		188
Total other revenues(2)	$	539	$	453

(1)Included within other income (loss) in the consolidated statement of income.

(2)See Note 13, "Business Segments," for a reconciliation of total other revenues on a U.S. GAAP basis to other operating income for each business segment under the Group Reporting Basis.

Credit card fees, net We recognized interchange fees of $27 million and $26 million during the three months ended March 31, 2024 and 2023, respectively. Credit card rewards program costs totaled $15 million and $16 million during the three months ended March 31, 2024 and 2023, respectively.

Deferred Fee Income

Information related to deferred fee income on loan commitments, revolving credit facilities and standby letters of credit is included in Note 16, "Guarantee Arrangements, Pledged Assets and Repurchase Agreements," and Note 17, "Fair Value Measurements." Excluding these items, we had deferred fee income related to certain account service fees that are paid upfront and recognized over the service period and annual fees on credit cards which collectively was $3 million at both March 31, 2024 and December 31, 2023. We expect to recognize this revenue over a remaining period of one year or less.

We do not use significant judgments in the determination of the amount and timing of fee income from contracts with customers. Additionally, costs to obtain or fulfill contracts with customers were immaterial.

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HSBC USA Inc.

12. Related Party Transactions

In the normal course of business, we conduct transactions with HSBC and its subsidiaries. HSBC policy requires that these transactions occur at prevailing market rates and terms and, where applicable, these transactions are compliant with United States banking regulations. All extensions of credit by (and certain credit exposures of) HSBC Bank USA to other HSBC affiliates (other than Federal Deposit Insurance Corporation insured banks) are legally required to be secured by eligible collateral. The following tables present related party balances and the income (expense) generated by related party transactions:

	March 31, 2024		December 31, 2023
	(in millions)
Assets:
Cash and due from banks	$	166	$	133
Interest bearing deposits with banks	14		90
Securities purchased under agreements to resell(1)	11		406
Trading assets	80		57
Loans	3,442		2,618
Other(2)	1,141		491
Total assets	$	4,854	$	3,795
Liabilities:
Deposits	$	14,915	$	9,110
Trading liabilities	78		321
Short-term borrowings	608		1,014
Long-term debt	6,508		6,511
Other(2)	267		331
Total liabilities	$	22,376	$	17,287

(1)Reflects purchases of securities under which other HSBC affiliates have agreed to repurchase.

(2)Other assets and other liabilities primarily consist of derivative balances associated with hedging activities and other miscellaneous account receivables and payables. Other assets also includes receivables from HSBC Bank plc associated with certain client share repurchase transactions.

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HSBC USA Inc.

Three Months Ended March 31,	2024		2023
	(in millions)
Income (Expense):
Interest income	$	54	$	57
Interest expense	(130)		(119)
Net interest expense	(76)		(62)
Trading revenue (expense)	(2,020)		(778)
Servicing and other fees from HSBC affiliates:
HSBC Bank plc	48		41
HSBC Markets (USA) Inc. ("HMUS")	23		18
Other HSBC affiliates	17		15
Total servicing and other fees from HSBC affiliates	88		74
Gain on instruments designated at fair value and related derivatives	125		432
Support services from HSBC affiliates:
HSBC Technology & Services (USA) Inc. ("HTSU")	(235)		(220)
HMUS	(56)		(53)
Other HSBC affiliates	(108)		(111)
Total support services from HSBC affiliates	(399)		(384)
Rental income from HSBC affiliates(1)	14		9
Stock based compensation expense(2)	(9)		(5)

(1)We receive rental income from our affiliates for certain office space, which is recorded as a component of occupancy expense, net in our consolidated statement of income.

(2)Employees may participate in one or more stock compensation plans sponsored by HSBC. These expenses are included in salaries and employee benefits in our consolidated statement of income. Certain employees are also eligible to participate in a defined benefit pension plan and other postretirement plans sponsored by HSBC North America which are discussed in Note 22, "Pension and Other Postretirement Benefits," in our 2023 Form 10-K.

Funding Arrangements with HSBC Affiliates:

We use HSBC affiliates to fund a portion of our borrowing and liquidity needs. At both March 31, 2024 and December 31, 2023, long-term debt with affiliates reflected $6.5 billion of borrowings from HSBC North America. The outstanding balances include $2.0 billion of fixed-rate senior debt which matures in June 2025, $2.0 billion of fixed-rate senior debt which matures in September 2025, $0.5 billion of fixed-rate senior debt which matures in December 2027, $0.5 billion of fixed-rate senior debt which matures in December 2028 and $1.5 billion of fixed-rate senior debt which matures in June 2030.

We have a $4.0 billion uncommitted line of credit with HSBC North America. The available borrowing capacity under this facility is fungible between HSBC USA, HSBC Securities (USA) Inc. ("HSI") and HSBC North America, but total borrowings cannot collectively exceed $4.0 billion at any time. We had no outstanding borrowing under this credit facility at either March 31, 2024 or December 31, 2023.

We also incur short-term borrowings with certain affiliates. In addition, certain affiliates have placed deposits with us.

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HSBC USA Inc.

Lending and Derivative Related Arrangements Extended to HSBC Affiliates:

At March 31, 2024 and December 31, 2023, we had the following loan balances outstanding with HSBC affiliates:

	March 31, 2024		December 31, 2023
	(in millions)
HMUS and subsidiaries	$	2,140	$	1,318
HSBC North America	1,300		1,300
Other short-term affiliate lending	2		—
Total loans	$	3,442	$	2,618

HMUS and subsidiaries We have extended loans and lines of credit, some of them uncommitted, to HMUS and its subsidiaries in the amount of $13.3 billion at both March 31, 2024 and December 31, 2023, of which $2.1 billion and $1.3 billion, respectively, was outstanding. The maturities of the outstanding balances range from overnight to one month. Each borrowing is re-evaluated prior to its maturity date and either extended or allowed to mature.

HSBC North America Under the $4.0 billion uncommitted fungible line of credit with HSBC North America as discussed above, there was $1.3 billion outstanding at both March 31, 2024 and December 31, 2023. The outstanding balance includes $1.0 billion that matures in May 2024 and $300 million that matures in July 2024.

We have extended lines of credit to various other HSBC affiliates totaling $3.4 billion which did not have any outstanding balances at either March 31, 2024 or December 31, 2023

Other short-term affiliate lending In addition to loans and lines extended to affiliates discussed above, from time to time we may extend loans to affiliates which are generally short term in nature. At March 31, 2024 and December 31, 2023, there were $2 million and nil, respectively, of these loans outstanding.

Derivative contracts As part of a global HSBC strategy to offset interest rate or other market risks associated with certain securities, debt issues and derivative contracts with unaffiliated third parties, we routinely enter into derivative transactions with HSBC Bank plc and other HSBC affiliates. The notional value of derivative contracts related to these transactions was approximately $717.9 billion and $719.6 billion at March 31, 2024 and December 31, 2023, respectively. The net credit exposure (defined as the net fair value of derivative assets and liabilities, including any collateral received) related to the contracts was approximately $67 million and $29 million at March 31, 2024 and December 31, 2023, respectively. We account for these transactions on a mark to market basis, with the change in value of contracts with HSBC affiliates substantially offset by the change in value of related contracts entered into with unaffiliated third parties.

Services Provided Between HSBC Affiliates:

Under multiple service level agreements, we provide services to and receive services from various HSBC affiliates. These activities are summarized in Note 24, "Related Party Transactions," in our 2023 Form 10-K. There have been no significant changes in these activities since December 31, 2023.

Other Transactions with HSBC Affiliates:

At both March 31, 2024 and December 31, 2023, we had $265 million of non-cumulative preferred stock issued and outstanding to HSBC North America. See Note 19, "Preferred Stock," in our 2023 Form 10-K for additional details.

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HSBC USA Inc.

13. Business Segments

We have distinct businesses, which are aligned with HSBC's global business strategy: Wealth and Personal Banking ("WPB"), Commercial Banking ("CMB") and Global Banking and Markets ("GBM"). These businesses and a Corporate Center ("CC") serve as our reportable segments with the exception of GBM. Our GBM business is comprised of three distinct operating segments: Global Banking ("GB"), Markets and Securities Services ("MSS"), and Global Banking and Markets Other ("GBM Other"), which are separately reported. There have been no changes in the basis of our segmentation as compared with the presentation in our 2023 Form 10-K.

Net interest income of each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for a funding charge or credit that includes both interest rate and liquidity components. Segments are charged a cost to fund assets (e.g., customer loans) and receive a funding credit for funds provided (e.g., customer deposits) based on equivalent market rates that incorporate both repricing (interest rate risk) and tenor (liquidity) characteristics. The objective of these charges/credits is to transfer interest rate risk to one centralized unit in Markets Treasury. Markets Treasury income statement and balance sheet results are allocated to each of the global businesses based upon tangible equity levels and levels of any surplus liabilities.

Certain other revenue and operating expense amounts are also apportioned among the business segments based upon the benefits derived from this activity or the relationship of this activity to other segment activity. These inter-segment transactions have not been eliminated, and we generally account for them as if they were with third parties.

Our segment results are presented in accordance with HSBC Group accounting and reporting policies, which apply IFRSs as issued by the IASB. As a result, our segment results are prepared and presented using financial information prepared on the Group Reporting Basis as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources, such as employees, are primarily made on this basis. We continue, however, to monitor capital adequacy and report to regulatory agencies on a U.S. GAAP basis.

During the second quarter of 2023, we implemented a change to our internal management reporting to report net funding charges associated with MSS trading activities within other operating income to better align with the trading revenue generated by such activities. Historically, these funding charges were reported within net interest income (expense). There was no impact to consolidated net interest income (expense) or other operating income as these net funding charges are reversed back into net interest income (expense) in the CC. As a result, we have aligned our segment reporting for MSS and CC to reflect this change for all periods presented. The following table summarizes the impact of this change on reported segment net interest income (expense) and other operating income for the three months ended March 31, 2023:

	Three Months Ended March 31, 2023
	As Previously Reported		After Reporting Changes
	(in millions)
Segment net interest income (expense):
MSS	$	(68)	$	13
CC	(26)		(107)
Total HUSI Consolidated	543		543
Segment other operating income:
MSS	$	177	$	96
CC	10		91
Total HUSI Consolidated	386		386

There have been no changes in the measurement of segment profit as compared with the presentation in our 2023 Form 10-K.

A summary of significant differences between U.S. GAAP and the Group Reporting Basis as they impact our results are summarized in Note 25, "Business Segments," in our 2023 Form 10-K. There have been no significant changes since December 31, 2023 in the differences between U.S. GAAP and the Group Reporting Basis impacting our results.

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HSBC USA Inc.

The following table summarizes the results for each segment on a Group Reporting Basis, as well as provides a reconciliation of total results under the Group Reporting Basis to U.S. GAAP consolidated totals:

	Group Reporting Basis Consolidated Amounts
					GBM
	WPB		CMB		GB		MSS		GBM Other		CC		Total		Group Reporting Basis Adjust- ments(1)		Group Reporting Basis Reclassi- fications(2)		U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended March 31, 2024
Net interest income (expense)	$	179	$	292	$	117	$	9	$	18	$	(168)	$	447	$	7	$	(28)	$	426
Other operating income	67		78		84		81		22		173		505		(3)		37		539
Total operating income	246		370		201		90		40		5		952		4		9		965
Expected credit losses / provision for credit losses	—		(2)		(5)		—		—		—		(7)		9		—		2
	246		372		206		90		40		5		959		(5)		9		963
Operating expenses	187		179		131		79		22		75		673		3		9		685
Profit (loss) before income tax	$	59	$	193	$	75	$	11	$	18	$	(70)	$	286	$	(8)	$	—	$	278
Balances at end of period:
Total assets	$	37,255	$	56,195	$	10,165	$	33,767	$	40,290	$	3,889	$	181,561	$	(14,595)	$	—	$	166,966
Total loans, net	23,955		23,880		9,717		73		367		—		57,992		(561)		1,785		59,216
Goodwill	—		358		—		—		—		—		358		100		—		458
Total deposits	29,936		40,214		41,137		1,157		1,839		—		114,283		(1,750)		9,520		122,053
Three Months Ended March 31, 2023
Net interest income (expense)	$	213	$	285	$	139	$	13	$	—	$	(107)	$	543	$	1	$	(61)	$	483
Other operating income	52		72		54		96		21		91		386		(7)		74		453
Total operating income (expense)	265		357		193		109		21		(16)		929		(6)		13		936
Expected credit losses / provision for credit losses	10		16		3		—		—		—		29		(9)		—		20
	255		341		190		109		21		(16)		900		3		13		916
Operating expenses	175		150		135		69		18		32		579		37		13		629
Profit (loss) before income tax	$	80	$	191	$	55	$	40	$	3	$	(48)	$	321	$	(34)	$	—	$	287
Balances at end of period:
Total assets	$	42,518	$	54,607	$	10,506	$	34,692	$	37,546	$	2,496	$	182,365	$	(15,815)	$	—	$	166,550
Total loans, net	22,429		24,793		9,812		507		273		—		57,814		(747)		1,807		58,874
Goodwill	—		358		—		—		—		—		358		100		—		458
Total deposits	31,166		43,229		40,422		1,260		1,378		—		117,455		(2,022)		6,735		122,168

(1)Represents adjustments associated with differences between U.S. GAAP and the Group Reporting Basis.

(2)Represents differences in financial statement presentation between U.S. GAAP and the Group Reporting Basis.

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HSBC USA Inc.

14. Retained Earnings and Regulatory Capital Requirements

Bank dividends are one of the sources of funds used for payment of shareholder dividends and other HSBC USA cash needs. Approval from the Office of the Comptroller of the Currency ("OCC") is required if the total of all dividends HSBC Bank USA declares in any year exceeds the cumulative net income for that year, combined with the net income for the two preceding years reduced by dividends attributable to those years. OCC approval also is required for a reduction of permanent capital of HSBC Bank USA. Under a separate restriction, payment of dividends is prohibited in amounts greater than undivided profits then on hand, after deducting actual losses and bad debts. Bad debts are debts due and unpaid for a period of six months unless well secured, as defined, and in the process of collection.

We are subject to regulatory capital rules issued by U.S. banking regulators including Basel III (the "Basel III rule"). A bank or bank holding company's failure to meet minimum capital requirements can result in certain mandatory actions and possibly additional discretionary actions by its regulators. The following table summarizes the capital amounts and ratios of HSBC USA and HSBC Bank USA, calculated in accordance with the Basel III rule at March 31, 2024 and December 31, 2023:

	March 31, 2024							December 31, 2023
	Capital Amount		Well-Capitalized  Ratio(1)			Actual Ratio		Capital Amount		Well-Capitalized Ratio(1)			Actual Ratio
	(dollars are in millions)
Common equity Tier 1 ratio:
HSBC USA	$	13,036	4.5	%	(2)	13.1	%	$	12,822	4.5	%	(2)	13.0	%
HSBC Bank USA	15,694		6.5			16.4		15,407		6.5			16.1
Tier 1 capital ratio:
HSBC USA	13,301		6.0			13.4		13,087		6.0			13.3
HSBC Bank USA	17,194		8.0			18.0		16,907		8.0			17.7
Total capital ratio:
HSBC USA	15,650		10.0			15.7		15,452		10.0			15.7
HSBC Bank USA	19,298		10.0			20.1		19,024		10.0			19.9
Tier 1 leverage ratio:
HSBC USA	13,301		4.0		(2)	8.0		13,087		4.0		(2)	7.7
HSBC Bank USA	17,194		5.0			10.5		16,907		5.0			10.2
Risk-weighted assets:(3)
HSBC USA	99,563							98,450
HSBC Bank USA	95,788							95,455
Adjusted quarterly average assets:(4)
HSBC USA	167,189							170,527
HSBC Bank USA	163,099							166,526

(1)HSBC USA and HSBC Bank USA are categorized as "well-capitalized," as defined by their principal regulators. To be categorized as well-capitalized under regulatory guidelines, a banking institution must maintain capital equal to or in excess of the ratios reflected in the above table, and must not be subject to a directive, order, or written agreement to meet and maintain specific capital levels.

(2)There are no common equity Tier 1 or Tier 1 leverage ratio components in the definition of a well-capitalized bank holding company. The ratios shown are the regulatory minimums.

(3)Calculated using the Standardized Approach.

(4)Represents the Tier 1 leverage ratio denominator which reflects quarterly average assets adjusted for amounts permitted to be deducted from Tier 1 capital.

48

HSBC USA Inc.

15. Variable Interest Entities

In the ordinary course of business, we have organized special purpose entities ("SPEs") primarily to structure financial products to meet our clients' investment needs, to facilitate clients to access and raise financing from capital markets and to securitize financial assets held to meet our own funding needs. For disclosure purposes, we aggregate SPEs based on the purpose, risk characteristics and business activities of the SPEs. An SPE is a VIE if it lacks sufficient equity investment at risk to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack either a) the power through voting or similar rights to direct the activities of the entity that most significantly impacts the entity's economic performance; or b) the obligation to absorb the entity's expected losses, the right to receive the expected residual returns, or both.

Variable Interest Entities  We consolidate VIEs in which we hold a controlling financial interest as evidenced by the power to direct the activities of a VIE that most significantly impact its economic performance and the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE and therefore are deemed to be the primary beneficiary. We take into account our entire involvement in a VIE (explicit or implicit) in identifying variable interests that individually or in the aggregate could be significant enough to warrant our designation as the primary beneficiary and hence require us to consolidate the VIE or otherwise require us to make appropriate disclosures. We consider our involvement to be potentially significant where we, among other things, (i) enter into derivative contracts to absorb the risks and benefits from the VIE or from the assets held by the VIE; (ii) provide a financial guarantee that covers assets held or liabilities issued by a VIE; (iii) sponsor the VIE in that we design, organize and structure the transaction; and (iv) retain a financial or servicing interest in the VIE.

We are required to evaluate whether to consolidate a VIE when we first become involved and on an ongoing basis. In almost all cases, a qualitative analysis of our involvement in the entity provides sufficient evidence to determine whether we are the primary beneficiary. In rare cases, a more detailed analysis to quantify the extent of variability to be absorbed by each variable interest holder is required to determine the primary beneficiary.

Consolidated VIEs  The following table summarizes assets and liabilities related to our consolidated VIEs at March 31, 2024 and December 31, 2023 which are consolidated on our balance sheet. Assets and liabilities exclude intercompany balances that eliminate in consolidation.

	March 31, 2024				December 31, 2023
	Consolidated Assets		Consolidated Liabilities		Consolidated Assets		Consolidated Liabilities
	(in millions)
Low income housing limited liability partnership:
Other assets	$	21	$	—	$	23	$	—
Interest, taxes and other liabilities	—		28		—		17
Total	$	21	$	28	$	23	$	17

Low income housing limited liability partnership  In 2009, all low income housing investments held by us at the time were transferred to a Limited Liability Partnership ("LLP"). The LLP was created in order to ensure the utilization of future tax benefits from these low income housing tax projects. The LLP was deemed to be a VIE because it does not have sufficient equity investment at risk to finance its activities. Upon entering into this transaction, we concluded that we were the primary beneficiary of the LLP due to the nature of our continuing involvement and, as a result, we consolidate the LLP and report the assets of the LLP in other assets on our consolidated balance sheet. The investments held by the LLP represent equity investments in the underlying low income housing partnerships. The LLP does not consolidate the underlying partnerships because it does not have the power to direct the activities of the partnerships that most significantly impact the economic performance of the partnerships.

We amortize our low income housing investments in proportion to the allocated tax benefits under the proportional amortization method and present the associated tax benefits net of investment amortization in income tax expense.

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HSBC USA Inc.

Unconsolidated VIEs  We also have variable interests in other VIEs that are not consolidated because we are not the primary beneficiary. The following table provides additional information on these unconsolidated VIEs, including the variable interests held by us and our maximum exposure to loss arising from our involvement in these VIEs, at March 31, 2024 and December 31, 2023:

	Total Assets Held by Unconsolidated VIEs		Carrying Value of Variable Interests Held Reported as				Maximum Exposure to Loss
			Assets		Liabilities
	(in millions)
At March 31, 2024
Limited partnership investments	$	6,537	$	799	$	312	$	799
Asset-backed financing SPEs	1,107		928		—		928
Total	$	7,644	$	1,727	$	312	$	1,727
At December 31, 2023
Limited partnership investments	$	6,718	$	793	$	327	$	793
Asset-backed financing SPEs	1,107		938		—		938
Total	$	7,825	$	1,731	$	327	$	1,731

Information on the types of VIEs with which we are involved, the nature of our involvement and the variable interests held in those entities is presented below.

Limited partnership investments We invest as a limited partner in partnerships that operate qualified affordable housing, renewable energy and community development projects. The returns of these investments are generated primarily from the tax benefits, including Federal tax credits and tax deductions from operating losses in the project companies. In addition, some of the investments help us comply with the Community Reinvestment Act. Certain limited partnership structures are considered to be VIEs because either (a) they do not have sufficient equity investment at risk or (b) the limited partners with equity at risk do not have substantive kick-out rights through voting rights or substantive participating rights over the general partner. As a limited partner, we are not the primary beneficiary of the VIEs and do not consolidate them. Our investments in these partnerships are recorded in other assets on the consolidated balance sheet. The maximum exposure to loss shown in the table above represents our recorded investments as well as any outstanding funding commitments extended to the partnerships.

Asset-backed financing SPEs In 2023 and 2021, we sold portfolios of commercial real estate loans and provided loans to the third-party buyer sponsored SPEs for portions of the purchase prices. The SPEs are asset-backed financing entities that issued residual beneficial interests to third-party investors. The loans we provided to the SPEs are senior to the residual beneficial interests and are secured by the commercial real estate loans held by the SPEs. Cash flows from the commercial real estate loans will be used first to settle the interest and principal payments of the loans, with any excess cash flows attributable to the residual interest holders. The SPEs are VIEs in which we have variable interests through our ownership of the loans, which are arm's-length transactions. We do not have the power to direct the activities that most significantly impact the VIEs' economic performance. In addition, the VIEs are designed such that the residual interest holders absorb any expected loss and/or benefit that could be potentially significant to the VIEs and, therefore, we are not the primary beneficiaries. The maximum exposure to loss shown in the table above represents our recorded investments in the loans without consideration of any recovery benefits from the value of the commercial real estate loans.

Third-party sponsored securitization entities  We invest in asset-backed securities issued by third-party sponsored securitization entities which may be considered VIEs. The investments are transacted at arm's-length and decisions to invest are based on a credit analysis of the underlying collateral assets or the issuer. We are a passive investor in these issuers and do not have the power to direct the activities of these issuers. As such, we do not consolidate these securitization entities. Additionally, we do not have other involvements in servicing or managing the collateral assets or provide financial or liquidity support to these issuers which potentially give rise to risk of loss exposure. These investments are an integral part of the disclosure in Note 2, "Trading Assets and Liabilities," Note 3, "Securities," and Note 17, "Fair Value Measurements," and, therefore, are not disclosed in this note to avoid redundancy.

In addition to the above, we have established and manage money market funds and non-money market mutual funds to provide customers with investment opportunities. As fund manager, we may be entitled to receive management fees based on the assets under management. We do not consolidate the funds because we do not absorb the majority of the expected future risk associated with the fund's assets, including interest rate, liquidity, credit and other relevant risks that are expected to affect the value of the assets.

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HSBC USA Inc.

16. Guarantee Arrangements, Pledged Assets and Repurchase Agreements

Guarantee Arrangements As part of our normal operations, we enter into credit derivatives and various off-balance sheet guarantee arrangements with affiliates and third parties. These arrangements arise principally in connection with our lending and client intermediation activities and include standby letters of credit and certain credit derivative transactions. The contractual amounts of these arrangements represent our maximum possible credit exposure in the event that we are required to fulfill the maximum obligation under the contractual terms of the guarantee.

The following table presents total carrying value and contractual amounts of our sell protection credit derivatives and major off-balance sheet guarantee arrangements at March 31, 2024 and December 31, 2023. Following the table is a description of the various arrangements.

	March 31, 2024				December 31, 2023
	Carrying Value		Notional / Maximum Exposure to Loss		Carrying Value		Notional / Maximum Exposure to Loss
	(in millions)
Credit derivatives(1)(2)	$	86	$	3,900	$	54	$	2,992
Financial standby letters of credit, net of participations(3)(4)	—		5,482		—		5,785
Performance standby letters of credit, net of participations(3)(4)	—		3,045		—		3,320
Total	$	86	$	12,427	$	54	$	12,097

(1)Includes $2,194 million and $1,483 million of notional issued for the benefit of HSBC affiliates at March 31, 2024 and December 31, 2023, respectively.

(2)For credit derivatives, the maximum loss is represented by the notional amounts without consideration of mitigating effects from collateral or recourse arrangements.

(3)Includes $1,660 million and $2,080 million of both financial and performance standby letters of credit issued for the benefit of HSBC affiliates at March 31, 2024 and December 31, 2023, respectively.

(4)For standby letters of credit, maximum loss represents losses to be recognized assuming the letters of credit have been fully drawn and the obligors have defaulted with zero recovery.

Credit-Risk Related Guarantees

Credit derivatives  Credit derivatives are financial instruments that transfer the credit risk of a reference obligation from the credit protection buyer to the credit protection seller who is exposed to the credit risk without buying the reference obligation. We sell credit protection on underlying reference obligations (such as loans or securities) by entering into credit derivatives, primarily in the form of credit default swaps, with various institutions. We account for all credit derivatives at fair value. Where we sell credit protection to a counterparty that holds the reference obligation, the arrangement is effectively a financial guarantee on the reference obligation. Under a credit derivative contract, the credit protection seller will reimburse the credit protection buyer upon occurrence of a credit event (such as bankruptcy, insolvency, restructuring or failure to meet payment obligations when due) as defined in the derivative contract, in return for a periodic premium. Upon occurrence of a credit event, we will pay the counterparty the stated notional amount of the derivative contract and receive the underlying reference obligation. The recovery value of the reference obligation received could be significantly lower than its notional principal amount when a credit event occurs.

Certain derivative contracts are subject to master netting arrangements and related collateral agreements. A party to a derivative contract may demand that the counterparty post additional collateral in the event its net exposure exceeds certain predetermined limits and when the credit rating falls below a certain grade. We set the collateral requirements by counterparty such that the collateral covers various transactions and products, and is not allocated to specific individual contracts.

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We manage our exposure to credit derivatives using a variety of risk mitigation strategies where we enter into offsetting hedge positions or transfer the economic risks, in part or in entirety, to investors through the issuance of structured credit products. We actively manage the credit and market risk exposure in the credit derivative portfolios on a net basis and, as such, retain no or a limited net position at any time. The following table summarizes our net credit derivative positions at March 31, 2024 and December 31, 2023:

	March 31, 2024				December 31, 2023
	Carrying / Fair Value		Notional		Carrying / Fair Value		Notional
	(in millions)
Sell-protection credit derivative positions	$	86	$	3,900	$	54	$	2,992
Buy-protection credit derivative positions	(161)		12,037		(196)		13,718
Net position(1)	$	(75)	$	8,137	$	(142)	$	10,726

(1)Positions are presented net in the table above to provide a complete analysis of our risk exposure and depict the way we manage our credit derivative portfolio. The offset of the sell-protection credit derivatives against the buy-protection credit derivatives may not be legally binding in the absence of master netting agreements with the same counterparty. Furthermore, the credit loss triggering events for individual sell-protection credit derivatives may not be the same or occur in the same period as those of the buy-protection credit derivatives thereby not providing an exact offset.

Standby letters of credit  A standby letter of credit is issued to a third party for the benefit of a client and is a guarantee that the client will perform or satisfy certain obligations under a contract. It irrevocably obligates us to pay a specified amount to the third-party beneficiary if the client fails to perform the contractual obligation. We issue two types of standby letters of credit: performance and financial. A performance standby letter of credit is issued where the client is required to perform some non-financial contractual obligation, such as the performance of a specific act, whereas a financial standby letter of credit is issued where the client's contractual obligation is of a financial nature, such as the repayment of a loan or debt instrument.

The issuance of a standby letter of credit is subject to our credit approval process and collateral requirements. We charge fees for issuing letters of credit commensurate with the client's credit evaluation and the nature of any collateral. Included in other liabilities are deferred fees on standby letters of credit amounting to $51 million and $49 million at March 31, 2024 and December 31, 2023, respectively. Also included in other liabilities is an allowance for credit losses on unfunded standby letters of credit of $20 million and $17 million at March 31, 2024 and December 31, 2023, respectively.

The following table summarizes the credit ratings related to guarantees including the ratings of counterparties against which we sold credit protection and financial standby letters of credit at March 31, 2024 as an indicative proxy of payment risk:

	Average Life (in years)	Credit Ratings of the Obligors
Notional/Contractual Amounts		Investment Grade		Non-Investment Grade		Total
		(dollars are in millions)
Sell-protection Credit Derivatives(1)
Single name credit default swaps	1.2	$	873	$	488	$	1,361
Index credit derivatives	4.5	1,824		715		2,539
Subtotal		2,697		1,203		3,900
Standby Letters of Credit(2)	0.9	6,402		2,125		8,527
Total		$	9,099	$	3,328	$	12,427

(1)The credit ratings in the table represent external credit ratings for classification as investment grade and non-investment grade.

(2)External ratings for most of the obligors are not available. Presented above are the internal credit ratings which are developed using similar methodologies and rating scale equivalent to external credit ratings for purposes of classification as investment grade and non-investment grade.

Our internal credit ratings are determined based on HSBC's risk rating systems and processes which assign a credit grade based on a scale which ranks the risk of default of a client. The credit grades are assigned and used for managing risk and determining level of credit exposure appetite based on the client's operating performance, liquidity, capital structure and debt service ability. In addition, we also incorporate subjective judgments into the risk rating process concerning such things as industry trends, comparison of performance to industry peers and perceived quality of management. We compare our internal risk ratings to outside external rating agency benchmarks, where possible, at the time of formal review and regularly monitor whether our risk ratings are comparable to the external ratings benchmark data.

A non-investment grade rating of a referenced obligor has a negative impact to the fair value of the credit derivative and increases the likelihood that we will be required to perform under the credit derivative contract. We employ market-based parameters and, where possible, use the observable credit spreads of the referenced obligors as measurement inputs in

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determining the fair value of the credit derivatives. We believe that such market parameters are more indicative of the current status of payment/performance risk than external ratings by the rating agencies which may not be forward-looking in nature and, as a result, lag behind those market-based indicators.

Non Credit-Risk Related Guarantees and Other Arrangements

Visa covered litigation  In 2008, we received Class B Shares as part of Visa's initial public offering ("IPO"). Pursuant to the IPO, we, along with all the other Class B shareholders, agreed to indemnify Visa for the claims and obligations arising from certain specific covered litigation. The Class B Shares are not eligible to be converted into publicly traded Class A Shares until settlement of the covered litigation described in Note 30, "Litigation and Regulatory Matters" in our 2023 Form 10-K. Accordingly, the Class B Shares are considered restricted and are only transferable under limited circumstances, which include transfers to other Class B shareholders.

In 2016 and 2017, we sold substantially all of our Visa Class B Shares to a third party. Under the terms of the sale agreements, we entered into swap agreements with the purchaser to retain the litigation risk associated with the Class B Shares sold until the related litigation is settled and the Class B Shares can be converted into Class A Shares. These swaps had a carrying value of $34 million and $40 million at March 31, 2024 and December 31, 2023, respectively. The swap agreements we entered into with the purchaser require us to (a) make periodic payments, calculated by reference to the market price of Class A Shares and (b) make or receive payments based on subsequent changes in the conversion rate of Class B Shares into Class A Shares. We have entered into a total return swap position to economically hedge the periodic payments made under these swap agreements. The payments under the derivative will continue until the Class B Shares are able to be converted into Class A Shares. The fair value of the swap agreements is estimated using a discounted cash flow methodology and is dependent upon the final resolution of the related litigation. Changes in fair value between periods are recognized in other income (loss). See Note 8, "Derivative Financial Instruments," for further information.

Clearing houses and exchanges  We are a member of various exchanges and clearing houses that trade and clear securities and/or derivatives contracts. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, members of a clearing house may be required to contribute to a guaranty fund to backstop members' obligations to the clearing house. As a member, we may be required to pay a proportionate share of the financial obligations of another member who defaults on its obligations to the exchange or the clearing house. Our guarantee obligations would arise only if the exchange or clearing house had exhausted its resources. Any potential contingent liability under these membership agreements cannot be estimated.

Lease Obligations We are obligated under a number of noncancellable operating leases for premises and equipment. See Note 12, "Leases," in our 2023 Form 10-K for a full discussion of our leases, including a maturity analysis of our operating lease liabilities.

Mortgage Loan Repurchase Obligations  We originate and sell mortgage loans to third parties and provide various representations and warranties related to, among other things, the ownership of the loans, the validity of the liens, the loan selection and origination process, and the compliance to the origination criteria established by the government agencies. In the event of a breach of our representations and warranties, we may be obligated to repurchase the loans with identified defects or to indemnify the buyers. Our contractual obligation arises only when the breach of representations and warranties are discovered and repurchase is demanded.

In estimating our repurchase liability arising from breaches of representations and warranties, we consider historical losses on residual risks not covered by settlement agreements adjusted for any risk factors not captured in the historical losses as well as the level of outstanding repurchase demands received. Outstanding repurchase demands received were immaterial at March 31, 2024 and December 31, 2023.

Our estimated repurchase liability for obligations arising from the breach of representations and warranties associated with mortgage loans sold was $23 million at both March 31, 2024 and December 31, 2023. Our repurchase liability represents our best estimate of the loss that has been incurred, including interest, arising from breaches of representations and warranties associated with mortgage loans sold. Because the level of mortgage loan repurchase losses is dependent upon economic factors, investor demand strategies and other external risk factors such as housing market trends that may change, the level of the liability for mortgage loan repurchase losses requires significant judgment. We continue to evaluate our methods of determining the best estimate of loss based on recent trends. As these estimates are influenced by factors outside our control, there is uncertainty inherent in these estimates making it reasonably possible that they could change. The range of reasonably possible losses in excess of our recorded repurchase liability is between zero and $30 million at March 31, 2024. This estimated range of reasonably possible losses was determined primarily based upon modifying the assumptions utilized in our best estimate of probable losses to reflect what we believe to be reasonably possible adverse assumptions.

Securitization Activity  In addition to the repurchase risk described above, we have also been involved as a sponsor/seller of loans used to facilitate whole loan securitizations underwritten by our affiliate, HSI. In this regard, we began acquiring residential mortgage loans in 2005 which were warehoused on our balance sheet with the intent of selling them to HSI to

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facilitate HSI's whole loan securitization program which was discontinued in 2007. During 2005-2007, we purchased and sold $24 billion of such loans to HSI which were subsequently securitized and sold by HSI to third parties. See "Mortgage Securitization Matters" in Note 30, "Litigation and Regulatory Matters," in our 2023 Form 10-K for additional discussion of related exposure. The outstanding principal balance on these loans was approximately $2.4 billion at both March 31, 2024 and December 31, 2023.

Pledged Assets

Pledged assets included in the consolidated balance sheet consisted of the following:

	March 31, 2024		December 31, 2023
	(in millions)
Interest bearing deposits with banks(1)	$	407	$	998
Trading assets(2)	2,472		3,046
Securities available-for-sale(3)	9,829		9,773
Securities held-to-maturity(3)	5,197		5,387
Loans(4)	20,778		18,810
Other assets(5)	908		934
Total	$	39,591	$	38,948

(1)Represents gross amount of cash on deposit with banks primarily related to derivative collateral-support agreements, of which a majority has been netted against derivative liabilities on the consolidated balance sheet.

(2)Trading assets are primarily pledged against liabilities associated with repurchase agreements.

(3)Securities are primarily pledged against derivatives, public fund deposits, trust deposits and various short-term and long term borrowings, as well as providing capacity for potential secured borrowings from the FHLB and the Federal Reserve Bank of New York.

(4)Loans are primarily residential mortgage loans pledged against current and potential borrowings from the FHLB and the Federal Reserve Bank of New York.

(5)Represents gross amount of cash on deposit with non-banks primarily related to derivative collateral support agreements, of which a majority has been netted against derivative liabilities on the consolidated balance sheet.

Debt securities pledged as collateral under repurchase agreements that can be sold or repledged by the secured party continue to be reported on the consolidated balance sheet. The fair value of securities available-for-sale that could be sold or repledged was $863 million and $161 million at March 31, 2024 and December 31, 2023, respectively. The fair value of trading assets that could be sold or repledged was $2,472 million and $3,046 million at March 31, 2024 and December 31, 2023, respectively.

The fair value of collateral we accepted under security resale agreements but was not reported on the consolidated balance sheet was $12,474 million and $19,278 million at March 31, 2024 and December 31, 2023, respectively. Of this collateral, $11,824 million and $19,278 million could be sold or repledged at March 31, 2024 and December 31, 2023, respectively, of which $1,288 million and $2,696 million, respectively, had been sold or repledged as collateral under repurchase agreements or to cover short sales.

Repurchase Agreements

We enter into purchases of securities under agreements to resell (resale agreements) and sales of securities under agreements to repurchase (repurchase agreements) identical or substantially the same securities. Resale and repurchase agreements are accounted for as secured lending and secured borrowing transactions, respectively.

Repurchase agreements may require us to deposit cash or other collateral with the lender. In connection with resale agreements, it is our policy to obtain possession of collateral, which may include the securities purchased, with market value in excess of the principal amount loaned. The market value of the collateral subject to the resale and repurchase agreements is regularly monitored, and additional collateral is obtained or provided when appropriate, to ensure appropriate collateral coverage of these secured financing transactions.

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The following table provides information about resale and repurchase agreements that are subject to offset at March 31, 2024 and December 31, 2023:

							Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet(1)		Net Amounts Presented in the Balance Sheet		Financial Instruments(2)		Cash Collateral Received / Pledged		Net Amount(3)
	(in millions)
At March 31, 2024
Assets:
Securities purchased under resale agreements	$	12,557	$	4,251	$	8,306	$	8,281	$	16	$	9
Liabilities:
Securities sold under repurchase agreements	$	4,631	$	4,251	$	380	$	380	$	—	$	—
At December 31, 2023
Assets:
Securities purchased under resale agreements	$	19,382	$	5,504	$	13,878	$	13,677	$	7	$	194
Liabilities:
Securities sold under repurchase agreements	$	5,771	$	5,504	$	267	$	266	$	—	$	1

(1)Represents recognized amount of resale and repurchase agreements with counterparties subject to legally enforceable netting agreements that meet the applicable netting criteria as permitted by generally accepted accounting principles.

(2)Represents securities received or pledged to cover financing transaction exposures.

(3)Represents the amount of our exposure that is not collateralized / covered by pledged collateral.

The following table provides the class of collateral pledged and remaining contractual maturity of repurchase agreements accounted for as secured borrowings at March 31, 2024 and December 31, 2023:

	Overnight and Continuous		Up to 30 Days		31 to 90 Days		91 Days to One Year		Greater Than One Year		Total
	(in millions)
At March 31, 2024
U.S. Treasury, U.S. Government sponsored and U.S. Government agency securities	$	1,563	$	822	$	1,136	$	1,110	$	—	$	4,631
At December 31, 2023
U.S. Treasury, U.S. Government sponsored and U.S. Government agency securities	$	3,107	$	288	$	918	$	1,458	$	—	$	5,771

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17. Fair Value Measurements

Accounting principles related to fair value measurements provide a framework for measuring fair value that focuses on the exit price that would be received to sell an asset or paid to transfer a liability in the principal market (or in the absence of the principal market, the most advantageous market) accessible in an orderly transaction between willing market participants (the "Fair Value Framework"). Where required by the applicable accounting standards, assets and liabilities are measured at fair value using the "highest and best use" valuation premise. Fair value measurement guidance clarifies that financial instruments do not have alternative use and, as such, the fair value of financial instruments should be determined using an "in-exchange" valuation premise. However, the fair value measurement guidance provides a valuation exception and permits an entity to measure the fair value of a group of financial assets and financial liabilities with offsetting credit risks and/or market risks based on the exit price it would receive or pay to transfer the net risk exposure of a group of assets or liabilities if certain conditions are met. We elected to apply the measurement exception to a group of derivative instruments with offsetting credit risks and market risks, which primarily relate to interest rate, foreign currency, debt and equity price risk, and commodity price risk as of the reporting date.

Fair Value Adjustments  The best evidence of fair value is quoted market price in an actively traded market, where available. In the event listed price or market quotes are not available, valuation techniques that incorporate relevant transaction data and market parameters reflecting the attributes of the asset or liability under consideration are applied. Where applicable, fair value adjustments are made to ensure the financial instruments are appropriately recorded at fair value. The fair value adjustments reflect the risks associated with the products, contractual terms of the transactions, and the liquidity of the markets in which the transactions occur. The fair value adjustments are broadly categorized by the following major types:

Credit valuation adjustment - The credit valuation adjustment is an adjustment to a group of financial assets and financial liabilities, predominantly derivative assets and derivative liabilities, to reflect the credit quality of the parties to the transaction in arriving at fair value. A credit valuation adjustment to a financial asset is required to reflect the default risk of the counterparty. A debit valuation adjustment to a financial liability is recorded to reflect the default risk of HUSI. See "Valuation Techniques - Derivatives" below for additional details.

Liquidity risk adjustment - The liquidity risk adjustment (primarily in the form of bid-offer adjustment) reflects the cost that would be incurred to close out the market risks by hedging, disposing or unwinding the position. Valuation models generally produce mid-market values. The bid-offer adjustment is made in such a way that results in a measure that reflects the exit price that most represents the fair value of the financial asset or financial liability under consideration or, where applicable, the fair value of the net market risk exposure of a group of financial assets or financial liabilities. These adjustments relate primarily to Level 2 assets.

Model valuation adjustment - Where fair value measurements are determined using an internal valuation model based on observable and unobservable inputs, certain valuation inputs may be less readily determinable. There may be a range of possible valuation inputs that market participants may assume in determining the fair value measurement. The resultant fair value measurement has inherent measurement risk if one or more parameters are unobservable and must be estimated. An input valuation adjustment is necessary to reflect the likelihood that market participants may use different input parameters, and to mitigate the possibility of measurement error. In addition, the values derived from valuation techniques are affected by the choice of valuation model and model limitation. When different valuation techniques are available, the choice of valuation model can be subjective. Furthermore, the valuation model applied may have measurement limitations. In those cases, an additional valuation adjustment is also applied to mitigate the measurement risk. Model valuation adjustments are not material and relate primarily to Level 2 instruments.

We apply stress scenarios in determining appropriate liquidity risk and model risk adjustments for Level 3 fair values by reviewing the historical data for unobservable inputs (e.g., correlation, volatility). Some stress scenarios involve at least a 95 percent confidence interval (i.e., two standard deviations). We also utilize unobservable parameter adjustments when instruments are valued using internally developed models which reflects the uncertainty in the value estimates provided by the model.

Funding Fair Value Adjustment ("FFVA") - The FFVA reflects the estimated present value of the future market funding cost or benefit associated with funding uncollateralized derivative exposure at unsecured funding spreads. See "Valuation Techniques - Derivatives" below for additional details.

Fair Value Hierarchy  The Fair Value Framework establishes a three-tiered fair value hierarchy as follows:

Level 1 quoted market price - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 valuation technique using observable inputs - Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are inactive, and measurements

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determined using valuation models where all significant inputs are observable, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 valuation technique with significant unobservable inputs - Level 3 inputs are unobservable inputs for the asset or liability and include situations where fair values are measured using valuation techniques based on one or more significant unobservable inputs.

Classification within the fair value hierarchy is based on whether the lowest hierarchical level input that is significant to the fair value measurement is observable. As such, the classification within the fair value hierarchy is dynamic and can be transferred to other hierarchy levels in each reporting period.

Where fair value measurements are determined based on information obtained from independent pricing services or brokers, we apply appropriate validation procedures to substantiate fair value. For price validation purposes, quotations from at least two independent pricing sources are obtained for each financial instrument, where possible.

The following factors are considered in determining fair values:

•similarities between the asset or the liability under consideration and the asset or liability for which quotation is received;

•collaboration of pricing by referencing to other independent market data such as market transactions and relevant benchmark indices;

•consistency among different pricing sources;

•the valuation approach and the methodologies used by the independent pricing sources in determining fair value;

•the elapsed time between the date to which the market data relates and the measurement date;

•the source of the fair value information; and

•whether the security is traded in an active or inactive market.

Greater weight is given to quotations of instruments with recent market transactions, pricing quotes from dealers who stand ready to transact, quotations provided by market-makers who structured such instrument and market consensus pricing based on inputs from a large number of survey participants. Any significant discrepancies among the external quotations are reviewed and adjustments to fair values are recorded where appropriate. Where the transaction volume of a specific instrument has been reduced and the fair value measurement becomes less transparent, we will apply more detailed procedures to understand and challenge the appropriateness of the unobservable inputs and the valuation techniques used by the independent pricing service. Where applicable, we will develop a fair value estimate using our own pricing model inputs to test reasonableness. Where fair value measurements are determined using internal valuation models, we will validate the fair value measurement by either developing unobservable inputs based on the industry consensus pricing surveys in which we participate or back testing by observing the actual settlements occurring soon after the measurement date.

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Assets and Liabilities Recorded at Fair Value on a Recurring Basis  The following table presents information about our assets and liabilities measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Unless otherwise noted below, assets and liabilities in the following table are recorded at fair value through net income.

	Fair Value Measurements on a Recurring Basis
March 31, 2024	Level 1		Level 2		Level 3		Gross Balance		Netting(1)		Net Balance
	(in millions)
Assets:
Trading assets, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	$	3,462	$	962	$	—	$	4,424	$	—	$	4,424
Debt securities issued by foreign entities	1,045		8		—		1,053		—		1,053
Equity securities	12,273		—		—		12,273		—		12,273
Precious metals trading	—		329		—		329		—		329
Derivatives:(2)
Interest rate contracts	5		1,321		5		1,331		—		1,331
Foreign exchange contracts	—		10,496		11		10,507		—		10,507
Equity contracts	—		838		210		1,048		—		1,048
Precious metals contracts	—		1,222		—		1,222		—		1,222
Credit contracts	—		147		—		147		—		147
Other contracts(3)	—		—		4		4		—		4
Derivatives netting	—		—		—		—		(13,371)		(13,371)
Total derivatives	5		14,024		230		14,259		(13,371)		888
Securities available-for-sale:(4)
U.S. Treasury, U.S. Government agencies and sponsored enterprises	8,018		14,234		—		22,252		—		22,252
Asset-backed securities:
Home equity	—		—		11		11		—		11
Other	—		—		91		91		—		91
Debt securities issued by foreign entities	3,085		111		—		3,196		—		3,196
Loans(5)	—		14		—		14		—		14
Loans held for sale(5)	—		239		25		264		—		264
Other assets:
Mortgage servicing rights	—		—		19		19		—		19
Equity securities	—		125		—		125		—		125
Equity securities measured at net asset value(6)	—		—		—		142		—		142
Other(5)(7)	—		661		—		661		—		661
Total assets	$	27,888	$	30,707	$	376	$	59,113	$	(13,371)	$	45,742
Liabilities:
Domestic deposits(5)	$	—	$	1,753	$	331	$	2,084	$	—	$	2,084
Trading liabilities, excluding derivatives	1,210		38		—		1,248		—		1,248
Derivatives:(2)
Interest rate contracts	4		1,011		8		1,023		—		1,023
Foreign exchange contracts	—		10,559		11		10,570		—		10,570
Equity contracts	—		1,118		143		1,261		—		1,261
Precious metals contracts	—		1,136		—		1,136		—		1,136
Credit contracts			229		—		229		—		229
Other contracts(3)			—		34		34		—		34
Derivatives netting	—		—		—		—		(12,740)		(12,740)
Total derivatives	4		14,053		196		14,253		(12,740)		1,513
Long-term debt(5)	—		4,911		1,959		6,870		—		6,870
Other liabilities(5)(7)	—		661		—		661		—		661
Total liabilities	$	1,214	$	21,416	$	2,486	$	25,116	$	(12,740)	$	12,376

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	Fair Value Measurements on a Recurring Basis
December 31, 2023	Level 1		Level 2		Level 3		Gross Balance		Netting(1)		Net Balance
	(in millions)
Assets:
Trading assets, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	$	3,564	$	1,208	$	—	$	4,772	$	—	$	4,772
Debt securities issued by foreign entities	4,019		—		—		4,019		—		4,019
Equity securities	11,702		—		—		11,702		—		11,702
Precious metals trading	—		346		—		346		—		346
Derivatives:(2)
Interest rate contracts	7		1,246		2		1,255		—		1,255
Foreign exchange contracts	—		13,605		1		13,606		—		13,606
Equity contracts	7		844		190		1,041		—		1,041
Precious metals contracts	3		1,150		—		1,153		—		1,153
Credit contracts	—		107		2		109		—		109
Other contracts(3)	—		—		5		5		—		5
Derivatives netting	—		—		—		—		(15,870)		(15,870)
Total derivatives	17		16,952		200		17,169		(15,870)		1,299
Securities available-for-sale:(4)
U.S. Treasury, U.S. Government agencies and sponsored enterprises	7,799		15,324		—		23,123		—		23,123
Asset-backed securities:
Home equity	—		—		12		12		—		12
Other	—		—		92		92		—		92
Debt securities issued by foreign entities	2,359		110		—		2,469		—		2,469
Loans(5)	—		15		—		15		—		15
Loans held for sale(5)	—		218		32		250		—		250
Other assets:
Mortgage servicing rights	—		—		19		19		—		19
Equity securities	—		127		—		127		—		127
Equity securities measured at net asset value(6)	—		—		—		143		—		143
Other(5)(7)	—		10		—		10		—		10
Total assets	$	29,460	$	34,310	$	355	$	64,268	$	(15,870)	$	48,398
Liabilities:
Domestic deposits(5)	$	—	$	1,528	$	293	$	1,821	$	—	$	1,821
Trading liabilities, excluding derivatives	1,688		301		—		1,989		—		1,989
Derivatives:(2)
Interest rate contracts	16		1,100		6		1,122		—		1,122
Foreign exchange contracts	—		13,534		1		13,535		—		13,535
Equity contracts	—		1,104		169		1,273		—		1,273
Precious metals contracts	—		1,033		—		1,033		—		1,033
Credit contracts	—		259		1		260		—		260
Other contracts(3)	—		—		40		40		—		40
Derivatives netting	—		—		—		—		(15,431)		(15,431)
Total derivatives	16		17,030		217		17,263		(15,431)		1,832
Long-term debt(5)	—		5,620		1,919		7,539		—		7,539
Other liabilities(5)(7)	—		10		—		10		—		10
Total liabilities	$	1,704	$	24,489	$	2,429	$	28,622	$	(15,431)	$	13,191

(1)Represents counterparty and cash collateral netting which allow the offsetting of amounts relating to certain contracts if certain conditions are met.

(2)Includes trading derivative assets of $821 million and $1,276 million and trading derivative liabilities of $1,298 million and $1,496 million at March 31, 2024 and December 31, 2023, respectively, as well as derivatives held for hedging and other non-qualifying economic hedging activities. See Note 8, "Derivative Financial Instruments," for additional information. Excluding changes in fair value of a derivative instrument associated with a qualifying cash flow hedge, which are recognized initially in other comprehensive income (loss), derivative assets and liabilities are recorded at fair value through net income.

(3)Consists of swap agreements entered into in conjunction with the sales of Visa Class B Shares.

(4)Securities available-for-sale are recorded at fair value through other comprehensive income (loss). Changes in the allowance for credit losses on securities available-for-sale are recorded through net income.

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(5)See Note 9, "Fair Value Option," for additional information. Excluding the fair value movement on fair value option liabilities attributable to our own credit spread, which is recorded in other comprehensive income (loss), fair value option assets and liabilities are recorded at fair value through net income.

(6)Investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy.

(7)Consists of assets and liabilities associated with certain client share repurchase transactions.

Information on Level 3 assets and liabilities  The following table summarizes additional information about changes in the fair value of Level 3 assets and liabilities during the three months ended March 31, 2024 and 2023. As a risk management practice, we may risk manage the Level 3 assets and liabilities, in whole or in part, using securities and derivative positions that are classified as Level 1 or Level 2 measurements within the fair value hierarchy. Since those Level 1 and Level 2 risk management positions are not included in the table below, the information provided does not reflect the effect of such risk management activities related to the Level 3 assets and liabilities.

	Jan. 1, 2024		Total Realized / Unrealized Gains (Losses) Included in				Purch- ases		Issu- ances		Settle- ments		Transfers Into Level 3		Transfers Out of Level 3		Mar. 31, 2024		Current Period Unrealized Gains (Losses) Still Held Included in
			Earnings		Other Compre- hensive Income (Loss)														Earnings		Other Compre- hensive Income (Loss)
	(in millions)
Assets:
Derivatives, net:(1)
Interest rate contracts	$	(4)	$	(1)	$	—	$	—	$	—	$	—	$	2	$	—	$	(3)	$	(1)	$	—
Foreign exchange contracts	—		—		—		—		—		—		—		—		—		—		—
Equity contracts	21		59		—		—		—		3		(7)		(9)		67		50		—
Credit contracts	1		(3)		—		—		—		(1)		—		3		—		—		—
Other contracts(2)	(35)		(2)		—		—		—		7		—		—		(30)		—		—
Asset-backed securities available-for-sale(3)	104		—		(1)		—		—		(1)		—		—		102		—		(1)
Loans held for sale(4)	32		1		—		17		—		(24)		3		(4)		25		1		—
Mortgage servicing rights(5)	19		—		—		—		—		—		—		—		19		—		—
Total assets	$	138	$	54	$	(1)	$	17	$	—	$	(16)	$	(2)	$	(10)	$	180	$	50	$	(1)
Liabilities:
Domestic deposits(4)	$	(293)	$	(4)	$	(2)	$	—	$	(74)	$	35	$	—	$	7	$	(331)	$	(3)	$	(2)
Long-term debt(4)	(1,919)		(107)		(2)		—		(327)		281		(13)		128		(1,959)		(69)		(2)
Total liabilities	$	(2,212)	$	(111)	$	(4)	$	—	$	(401)	$	316	$	(13)	$	135	$	(2,290)	$	(72)	$	(4)

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	Jan. 1, 2023		Total Realized / Unrealized Gains (Losses) Included in				Purch- ases		Issu- ances		Settle- ments		Transfers Into Level 3		Transfers Out of Level 3		Mar. 31, 2023		Current Period Unrealized Gains (Losses) Still Held Included in
			Earnings		Other Compre- hensive Income (Loss)														Earnings		Other Compre- hensive Income (Loss)
	(in millions)
Assets:
Derivatives, net:(1)
Interest rate contracts	$	(5)	$	1	$	—	$	—	$	—	$	—	$	—	$	—	$	(4)	$	1	$	—
Foreign exchange contracts	—		—		—		—		—		—		—		—		—		—		—
Equity contracts	(226)		128		—		—		—		12		—		2		(84)		112		—
Credit contracts	2		—		—		—		—		—		—		—		2		—		—
Other contracts(2)	(33)		(2)		—		—		—		11		—		—		(24)		—		—
Asset-backed securities available-for-sale(3)	108		—		1		—		—		(2)		—		—		107		—		1
Loans held for sale(4)	49		—		—		1		—		—		—		—		50		—		—
Mortgage servicing rights(5)	22		(1)		—		—		—		—		—		—		21		(1)		—
Total assets	$	(83)	$	126	$	1	$	1	$	—	$	21	$	—	$	2	$	68	$	112	$	1
Liabilities:
Domestic deposits(4)	$	(373)	$	(6)	$	4	$	—	$	—	$	80	$	—	$	25	$	(270)	$	(2)	$	4
Long-term debt(4)	(2,639)		(166)		22		—		(189)		175		(1)		403		(2,395)		(119)		22
Total liabilities	$	(3,012)	$	(172)	$	26	$	—	$	(189)	$	255	$	(1)	$	428	$	(2,665)	$	(121)	$	26

(1)Level 3 net derivatives included derivative assets of $230 million and derivative liabilities of $196 million at March 31, 2024 and derivative assets of $113 million and derivative liabilities of $223 million at March 31, 2023. Gains (losses) on derivatives, net are predominantly included in trading revenue and gain (loss) on instruments designated at fair value and related derivatives in the consolidated statement of income.

(2)Consists of swap agreements entered into in conjunction with the sales of Visa Class B Shares. Gains (losses) on these swap agreements are included in other income (loss) in the consolidated statement of income.

(3)Realized gains (losses) on securities available-for-sale are included in other securities gains, net in the consolidated statement of income. Changes in the allowance for credit losses on securities available-for-sale are included in the provision for credit losses in the consolidated statement of income. Unrealized gains (losses) on securities available-for-sale are included in other comprehensive income (loss).

(4)Excluding unrealized gains (losses) on fair value option liabilities attributable to our own credit spread, which are recorded in other comprehensive income (loss), gains (losses) on fair value option assets and liabilities are included in gain (loss) on instruments designated at fair value and related derivatives in the consolidated statement of income.

(5)Gains (losses) on mortgage servicing rights are included in other income (loss) in the consolidated statement of income.

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Significant Unobservable Inputs for Recurring Fair Value Measurements

The following table presents quantitative information about the unobservable inputs used to determine the recurring fair value measurement of assets and liabilities classified as Level 3 fair value measurements at March 31, 2024 and December 31, 2023:

March 31, 2024
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs	Weighted Average(1)
Interest rate derivative contracts	$	(3)	Market comparable adjusted for probability to fund and, where applicable, option pricing model	Probability to fund for rate lock commitments	51% - 100%	84%
				Interest rate yield curve	9%	N/A
Foreign exchange derivative contracts	$	—	Option pricing model	Cross-currency basis	(18)bps	N/A
Equity derivative contracts(2)	$	67	Option pricing model	Equity / Equity Index volatility	6% - 130%	40%
				Equity / Equity and Equity / Index correlation	35% - 97%	82%
				Equity forward price	$42 - $6,897	$1,798
Other derivative contracts	$	(30)	Discounted cash flows	Conversion rate	1.6 times	N/A
				Expected duration	0.8 years	N/A
Asset-backed securities available-for-sale	$	102	Discounted cash flows	Market assumptions related to yields for comparable instruments	2% - 3%	2%
Loans held for sale	$	25	Market comparables and internal assumptions	Adjusted market price	48% - 101%	91%
Mortgage servicing rights	$	19	Discounted cash flows	Constant prepayment rates	6% - 16%	6%
				Discount rate	10% - 14%	10%
				Estimated annualized costs to service	$72 - $75 per account	$74 per account
Domestic deposits (structured deposits)(2)(3)	$	(331)	Option adjusted discounted cash flows	Equity / Equity Index volatility	6% - 29%	13%
				Equity / Equity and Equity / Index correlation	43% - 88%	66%
Long-term debt (structured notes)(2)(3)	$	(1,959)	Option adjusted discounted cash flows	Equity / Equity Index volatility	7% - 95%	23%
				Equity / Equity and Equity / Index correlation	35% - 97%	84%
				Credit default swap spreads	795bps	NA

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December 31, 2023
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs	Weighted Average(1)
Interest rate derivative contracts	$	(4)	Market comparable adjusted for probability to fund and, where applicable, option pricing model	Probability to fund for rate lock commitments	71% - 92%	84%
				Interest rate yield curve	9%	N/A
Foreign exchange derivative contracts	$	—	Option pricing model	Cross-currency basis	8bps	N/A
Equity derivative contracts(2)	$	21	Option pricing model	Equity / Equity Index volatility	6% - 111%	41%
				Equity / Equity and Equity / Index correlation	45% - 97%	84%
				Equity forward price	$41 - $6,245	$643
Credit derivative contracts	$	1	Option pricing model and, where applicable, discounted cash flows	Credit default swap spreads	59bps - 1,558bps	160bps
Other derivative contracts	$	(35)	Discounted cash flows	Conversion rate	1.6 times	N/A
				Expected duration	1.0 year	N/A
Asset-backed securities available-for-sale	$	104	Discounted cash flows	Market assumptions related to yields for comparable instruments	2% - 3%	2%
Loans held for sale	$	32	Market comparables and internal assumptions	Adjusted market price	78% - 100%	90%
Mortgage servicing rights	$	19	Discounted cash flows	Constant prepayment rates	6% - 17%	6%
				Discount rate	10% - 14%	10%
				Estimated annualized costs to service	$72 - $77 per account	$74 per account
Domestic deposits (structured deposits)(2)(3)	$	(293)	Option adjusted discounted cash flows	Equity / Equity Index volatility	7% - 29%	13%
				Equity / Equity and Equity / Index correlation	51% - 93%	71%
Long-term debt (structured notes)(2)(3)	$	(1,919)	Option adjusted discounted cash flows	Equity / Equity Index volatility	7% - 95%	22%
				Equity / Equity and Equity / Index correlation	45% - 97%	84%
				Credit default swap spreads	948bps	NA

(1)For equity derivatives, credit derivatives, structured deposits and structured notes, weighted averages are calculated based on the fair value of the instruments. For all remaining instrument types, weighted averages are calculated based on the notional value of the instruments.

(2)We are the client-facing entity and, except for structured notes and deposits with embedded credit derivative features, we enter into identical but opposite derivatives to transfer the resultant risks to our affiliates. With the exception of counterparty credit risks, we are market risk neutral in substantially all of the structured notes and deposits. The corresponding intra-group derivatives are presented as equity derivatives in the table.

(3)Structured deposits and structured notes contain embedded derivative features whose fair value measurements contain significant Level 3 inputs. See equity derivatives and credit derivatives below for a discussion of the uncertainty of Level 3 inputs related to structured deposits and structured notes.

N/A Not Applicable

Uncertainty of Level 3 Inputs to Fair Value Measurements

Interest rate derivatives - For mortgage rate lock commitments, the fair value measurement is affected by the probability of executing and funding the mortgage. An increase (decrease) in the likelihood of a mortgage being executed would have resulted in a lower (higher) fair value measurement of the interest rate derivative. For certain other interest rate derivatives, the interest rates for longer dated tenors were not observable. An increase (decrease) in the interest rate would have resulted in a higher (lower) fair value measurement of the derivative depending on if we receive or pay the floating rate.

Foreign exchange derivatives - For certain foreign exchange derivatives, the cross-currency basis for longer dated tenors were not observable. An increase (decrease) in the cross-currency basis would have resulted in a higher (lower) fair value measurement of the derivative depending on if we receive or pay the floating rate plus the basis spread.

Equity derivatives - The fair value measurement of a structured equity derivative is primarily affected by the implied volatility of the underlying equity price. The level of volatility is a function of the nature of the underlying risk, the level of strike price and the years to maturity of the option. Depending on the underlying risk and tenure, we determine the implied volatility based on observable input where information is available. However, substantially all of the implied volatilities are derived based on historical information and are not observable. A significant increase (decrease) in the implied volatility would have resulted in a higher (lower) fair value of a long position in the derivative contract. For a derivative referenced to a basket of equities, the fair value measurement is also affected by the correlation of the referenced equities. Correlation measures the relative change in

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values among two or more variables (i.e., equity pair), which can be positively or negatively correlated. A majority of the correlations are not observable, but are derived based on historical data. A significant increase (decrease) in the correlation of the referenced variables would have resulted in a higher (lower) fair value of a long position in the derivative contract.

Credit derivatives - The fair value measurement of certain credit derivatives is primarily affected by the credit spreads of credit default swap contracts. A significant increase (decrease) in the credit spreads would have resulted in a lower (higher) fair value measurement of the credit derivative.

Other derivatives - The fair value of the swap agreements we entered into in conjunction with the sales of Visa Class B Shares is dependent upon the final resolution of the related litigation. Significant unobservable inputs used in the fair value measurement include estimated changes in the conversion rate of Visa Class B Shares into Visa Class A Shares and the expected timing of the final resolution. An increase (decrease) in the loss estimate or in the timing of the resolution of the related litigation would have resulted in a higher (lower) fair value measurement of the derivative.

Asset-backed securities available-for-sale - The fair value measurement of certain asset-backed securities is primarily affected by estimated yields which are determined based on current market yields of comparable instruments adjusted for market liquidity. An increase (decrease) in the yields would have resulted in a lower (higher) fair value measurement of the securities.

Loans held for sale - The fair value measurement of certain commercial loans held for sale is affected by estimated market prices which are unobservable. An increase (decrease) in the estimated prices would have resulted in a higher (lower) fair value measurement of the loans.

Mortgage servicing rights - The fair value measurement of mortgage servicing rights is primarily affected by the estimated prepayment rates of the mortgage loans and the discount rates. An increase (decrease) in either of these inputs would have resulted in a lower (higher) fair value measurement of the mortgage servicing rights.

Significant Transfers Into and Out of Level 3 Measurements During the three months ended March 31, 2024, we transferred $128 million of long-term debt, which we have elected to carry at fair value, from Level 3 to Level 2 as a result of the embedded derivative no longer being unobservable as the derivative option is closer to maturity and there is more observability in short term volatility. During the three months ended March 31, 2024, we transferred $13 million of long-term debt, which we elected to carry at fair value, from Level 2 to Level 3 as a result of a change in the observability of underlying inputs that resulted in the embedded derivative being unobservable.

During the three months ended March 31, 2023, we transferred $25 million of domestic deposits and $403 million of long-term debt, which we have elected to carry at fair value, from Level 3 to Level 2 as a result of the embedded derivative no longer being unobservable as the derivative option is closer to maturity and there is more observability in short term volatility.

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Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis  Certain financial and non-financial assets are measured at fair value on a non-recurring basis and therefore, are not included in the tables above. These assets include (a) loans classified as held for sale reported at the lower of amortized cost or fair value, (b) impaired loans or assets that are written down to fair value based on the valuation of underlying collateral during the period and (c) lease right-of-use ("ROU") assets or leasehold improvement assets that were written down during the period. These instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustment in certain circumstances (e.g., impairment). The following table presents the fair value hierarchy level within which the fair value of the financial and non-financial assets has been recorded at March 31, 2024 and December 31, 2023. The gains (losses) during the three months ended March 31, 2024 and 2023 are also included.

	Non-Recurring Fair Value Measurements at March 31, 2024								Total Gains (Losses) For the Three Months Ended March 31, 2024
	Level 1		Level 2		Level 3		Total
	(in millions)
Consumer loans(1)	$	—	$	103	$	—	$	103	$	1
Commercial loans held for sale	—		—		—		—		2
Commercial loans(2)	—		—		382		382		(2)
Leases(3)	—		—		—		—		(3)
Total assets at fair value on a non-recurring basis	$	—	$	103	$	382	$	485	$	(2)

	Non-Recurring Fair Value Measurements at December 31, 2023								Total Gains (Losses) For the Three Months Ended March 31, 2023
	Level 1		Level 2		Level 3		Total
	(in millions)
Consumer loans(1)	$	—	$	106	$	—	$	106	$	(1)
Commercial loans held for sale	—		—		—		—		(1)
Commercial loans(2)	—		—		374		374		3
Leases(3)	—		—		—		—		(15)
Total assets at fair value on a non-recurring basis	$	—	$	106	$	374	$	480	$	(14)

(1)Represents residential mortgage loans held for investment whose carrying amount was adjusted during the period based on the fair value of the underlying collateral.

(2)Certain commercial loans are individually assessed for impairment. We measure the credit impairment of a collateral-dependent loan based on the fair value of the collateral asset. The collateral often involves real estate properties that are illiquid due to market conditions. As a result, these loans are classified as a Level 3 fair value measurement within the fair value hierarchy.

(3)During the first quarters of 2024 and 2023, we wrote down lease ROU assets and leasehold improvement assets associated with the exit of certain office space, including the partial exit of our previous U.S. headquarters during the first quarter of 2024.

Significant Unobservable Inputs for Non-Recurring Fair Value Measurements

The following tables present quantitative information about non-recurring fair value measurements of assets and liabilities classified with Level 3 of the fair value hierarchy at March 31, 2024 and December 31, 2023:

At March 31, 2024
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs	Weighted Average(1)
Commercial loans	$	382	Valuation of third-party appraisal on underlying collateral	Loss severity rates	2% - 100%	25%

At December 31, 2023
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs	Weighted Average(1)
Commercial loans	$	374	Valuation of third-party appraisal on underlying collateral	Loss severity rates	1% - 93%	25%

(1)Weighted average is calculated based on the carrying value of the loans.

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Valuation Techniques

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Consumer loans designated under FVO – We elected to apply FVO accounting to certain student loans held for investment. The fair value of these loans is based on observed market prices of instruments with similar characteristics.

Consumer loans held for sale – Consumer loans held for sale are recorded at the lower of amortized cost or fair value. The fair value of consumer loans held for sale is estimated using observed market prices of instruments with similar characteristics. Adjustments are made to reflect differences in collateral location, loan-to-value ratio, FICO scores, vintage year, default rates, the completeness of the loan documentation and other risk characteristics. Where observable market parameters are not available, fair value is estimated using the discounted cash flow method using assumptions consistent with those which would be used by market participants in valuing such loans, including estimates of prepayment rates, default rates, loss severities and market rates of return. We also may hold discussions on value directly with potential investors.

Commercial loans held for sale – Commercial loans held for sale (that are not designated under FVO as discussed below) are recorded at the lower of amortized cost or fair value. The fair value of commercial loans held for sale is estimated using observable market pricing obtained from independent sources, relevant broker quotes or observed market prices of instruments with similar characteristics. We also may hold discussions on value directly with potential investors or take into account underlying collateral values.

Commercial loans held for sale designated under FVO – We elected to apply FVO accounting to certain commercial loans held for sale. Where available, fair value is based on observable market pricing obtained from independent sources, relevant broker quotes or observed market prices of instruments with similar characteristics. Where observable market parameters are not available, fair value is determined based on contractual cash flows adjusted for estimates of prepayment rates, expected default rates and loss severity discounted at management's estimate of the expected rate of return required by market participants. We also consider loan-specific risk mitigating factors such as collateral arrangements in determining the fair value estimate. For certain commercial loans held for sale, the fair value measurement process uses significant unobservable inputs to adjust market prices which are specific to the characteristics of the loans.

Commercial loans individually assessed for impairment – Generally represents collateral-dependent commercial loans with fair value determined based on pricing quotes obtained from an independent third-party appraisal.

Precious metals trading – Precious metals trading primarily includes physical inventory which is valued using spot prices.

 Securities - Where available, debt and equity securities are valued based on quoted market prices. If a quoted market price for the identical security is not available, the security is valued based on quotes from similar securities, where possible. For certain securities, internally developed valuation models are used to determine fair values or validate quotes obtained from pricing services. The following summarizes the valuation methodology used for our major security classes:

•U.S. Treasury, U.S. Government agency issued or guaranteed and obligations of U.S. state and political subdivisions – As these securities transact in an active market, fair value measurements are based on quoted prices for the identical security or quoted prices for similar securities with adjustments as necessary made using observable inputs which are market corroborated.

•U.S. Government sponsored enterprises – For government sponsored mortgage-backed securities which transact in an active market, fair value measurements are based on quoted prices for the identical security or quoted prices for similar securities with adjustments as necessary made using observable inputs which are market corroborated. For government sponsored mortgage-backed securities which do not transact in an active market, fair value is determined primarily based on pricing information obtained from pricing services and is verified by internal review processes.

•Asset-backed securities – Fair value is primarily determined based on pricing information obtained from independent pricing services adjusted for the characteristics and the performance of the underlying collateral.

•Foreign debt securities (government and corporate) - Government securities transact in an active market and therefore fair value measurements are based on quoted prices for the identical security or quoted prices for similar securities with adjustments as necessary made using observable inputs which are market corroborated. For non-callable corporate securities, a credit spread scale is created for each issuer. These spreads are then added to the equivalent maturity U.S. Treasury yield to determine current pricing. Credit spreads are obtained from the primary market, secondary trading levels and dealer quotes. For securities with early redemption features, an option adjusted spread model is incorporated to adjust the spreads determined above. Additionally, we survey the broker/dealer community to obtain relevant trade data including benchmark quotes and updated spreads.

•Equity securities – Fair value measurements are determined based on quoted prices for the identical security. Certain equity securities represent investments in private equity funds that help us comply with the Community Reinvestment Act. The fair value of these investments are estimated using the net asset value per share as calculated by the fund

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managers. Distributions will be received from the funds as the underlying assets are liquidated. While the funds do not allow us to redeem our investments, we are permitted to sell or transfer our investments subject to the approval of the fund manager. Unfunded commitments associated with these investments totaled $21 million at both March 31, 2024 and December 31, 2023.

The following tables provide additional information relating to our available-for-sale asset-backed securities at March 31, 2024:

Rating of Securities:(1)	Collateral Type:	Level 3
		(in millions)
AAA - A	Home equity - Alt A	$	11
BBB - B	Other	91
		$	102

(1)We utilize S&P as the primary source of credit ratings in the tables above. If S&P ratings are not available, ratings by Moody's and Fitch are used in that order.

Derivatives – Derivatives are recorded at fair value. Asset and liability positions in individual derivatives that are covered by legally enforceable master netting agreements, including receivables (payables) for cash collateral posted (received), are offset and presented net in accordance with accounting principles which allow the offsetting of amounts.

Derivatives traded on an exchange are valued using quoted prices. OTC derivatives, which comprise a majority of derivative contract positions, are valued using valuation techniques. The fair value for the majority of our derivative instruments are determined based on internally developed models that utilize independently corroborated market parameters, including interest rate yield curves, option volatilities, and currency rates. For complex or long-dated derivative products where market data is not available, fair value may be affected by the underlying assumptions about, among other things, the timing of cash flows, expected exposure, probability of default and recovery rates. The fair values of certain structured derivative products are sensitive to unobservable inputs such as correlations of the referenced variables and volatilities of embedded options. These estimates are susceptible to significant change in future periods as market conditions change.

We typically use the risk-free rate/overnight indexed swap curves as the base discounting curve for measuring the fair value of all derivatives, both collateralized and uncollateralized, and apply a FFVA to reflect the estimated present value of the future market funding cost or benefit associated with funding uncollateralized derivative exposure at an unsecured market funding rate. The FFVA is calculated by applying future market funding spreads to the expected future funding exposure of any uncollateralized component of the OTC derivative portfolio. The expected future funding exposure is calculated by a simulation methodology, where available, and is adjusted for events that may terminate the exposure, such as the default of HUSI or the counterparty.

Significant inputs related to derivative classes are broken down as follows:

•Credit Derivatives – Use credit default curves and recovery rates which are generally provided by broker quotes and various pricing services. Certain credit derivatives may also use correlation inputs in their model valuation.

•Interest Rate Derivatives – Swaps use interest rate curves based on currency that are actively quoted by brokers and other pricing services. Options will also use volatility inputs which are also quoted in the broker market.

•Foreign Exchange ("FX") Derivatives – FX transactions, to the extent possible, use spot and forward FX rates which are quoted in the broker market. Where applicable, we also use implied volatility of currency pairs as inputs.

•Equity Derivatives – Use listed equity security pricing and implied volatilities from equity traded options position.

•Precious Metal Derivatives – Use spot and forward metal rates which are quoted in the broker market.

As discussed earlier, we make fair value adjustments to model valuations in order to ensure that those values represent appropriate estimates of fair value. These adjustments, which are applied consistently over time, are generally required to reflect factors such as bid-ask spreads and counterparty credit risk that can affect prices in arms-length transactions with unrelated third parties. Such adjustments are based on management judgment and may not be observable.

We estimate the counterparty credit risk for financial assets and our own credit standing for financial liabilities (the "credit valuation adjustments") in determining the fair value measurement. For derivative instruments, we calculate the credit valuation adjustment by applying the probability of default of the counterparty to the expected exposure, and multiplying the result by the expected loss given default. We also take into consideration the risk mitigating factors including collateral agreements and master netting agreements in determining credit valuation adjustments. We estimate the implied probability of default based on the credit spread of the specific counterparty observed in the credit default swap market. Where credit default spread of the counterparty is not available, we use the credit default spread of a specific proxy (e.g., the credit default swap spread of the counterparty's parent) or a proxy based on credit default swaps referencing to credit names of similar credit standing.

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Real estate owned - Fair value is determined based on third-party appraisals obtained at the time we take title to the property and, if less than the carrying amount of the loan, the carrying amount of the loan is adjusted to the fair value. The carrying amount of the property is further reduced, if necessary, at least every 90 days to reflect observable local market data, including local area sales data.

Mortgage servicing rights - Mortgage servicing rights are recorded at fair value. The fair value for the mortgage servicing rights is determined based on a single rate path cash flow analysis approach which involves discounting servicing cash flows under static interest rate projections at risk-adjusted rates. The valuation model also incorporates our best estimates of the prepayment speed of the mortgage loans, current cost to service and discount rates which are unobservable.

Client share repurchase transactions designated under FVO - We elected to apply FVO accounting to certain client share repurchase transactions. The fair value of the assets and liabilities associated with these transactions is determined based on the value of the remaining shares to be delivered.

Structured notes and deposits designated under FVO – Structured notes and deposits are hybrid instruments containing embedded derivatives and are elected to be measured at fair value in their entirety under FVO accounting principles. The valuation of hybrid instruments is predominantly driven by the derivative features embedded within the instruments and our own credit risk. The valuation of embedded derivatives may include significant unobservable inputs such as correlation of the referenced credit names or volatility of the embedded option. Cash flows of the funded notes and deposits in their entirety, including the embedded derivatives, are discounted at the relevant interest rates for the duration of the instrument adjusted for our own credit spreads. The credit spreads so applied are determined with reference to our own debt issuance rates observed in primary and secondary markets, internal funding rates, and the structured note rates in recent executions.

Long-term debt designated under FVO – We elected to apply FVO accounting to certain of our own debt issuances for which fair value hedge accounting otherwise would have been applied. These own debt issuances elected under FVO are traded in secondary markets and, as such, the fair value is determined based on observed prices for the specific instrument. The observed market price of these instruments reflects the effect of our own credit spreads. The credit spreads applied to these instruments were derived from the spreads at the measurement date.

Additional Disclosures About the Fair Value of Financial Instruments that are Not Carried at Fair Value on the Consolidated Balance Sheet The fair value estimates set forth below are made solely to comply with disclosures required by generally accepted accounting principles in the United States and should be read in conjunction with the financial statements and notes included in this report.

The carrying amount of certain financial instruments recorded at cost on the consolidated balance sheet is considered to approximate fair value because they are short-term in nature, bear interest rates that approximate market rates, and generally have negligible credit risk. These items include cash and due from banks, interest bearing deposits with banks, customer acceptance assets and liabilities, federal funds sold and purchased, securities purchased and sold under resale and repurchase agreements, deposits with no stated maturity (e.g., demand, savings and certain money market deposits), short-term borrowings and dividends payable.

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The following table summarizes the carrying value and estimated fair value of our financial instruments, excluding financial instruments that are carried at fair value on a recurring basis, at March 31, 2024 and December 31, 2023, and their classification within the fair value hierarchy:

March 31, 2024	Carrying Value		Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Short-term financial assets, net of allowance for credit losses	$	31,400	$	31,400	$	695	$	30,687	$	18
Federal funds sold and securities purchased under agreements to resell	8,306		8,306		—		8,306		—
Securities held-to-maturity, net of allowance for credit losses	15,294		14,717		1,878		12,839		—
Commercial loans, net of allowance for credit losses	39,742		40,744		—		—		40,744
Commercial loans held for sale	189		189		—		189		—
Consumer loans, net of allowance for credit losses	19,460		17,237		—		—		17,237
Financial liabilities:
Short-term financial liabilities	$	7,051	$	7,051	$	—	$	7,033	$	18
Deposits	119,969		119,959		—		119,959		—
Long-term debt	12,569		13,157		—		13,157		—

December 31, 2023	Carrying Value		Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Short-term financial assets, net of allowance for credit losses	$	25,732	$	25,732	$	704	$	25,015	$	13
Federal funds sold and securities purchased under agreements to resell	13,878		13,878		—		13,878		—
Securities held-to-maturity, net of allowance for credit losses	15,076		14,689		—		14,689		—
Commercial loans, net of allowance for credit losses	39,383		40,557		—		—		40,557
Commercial loans held for sale	89		89		—		89		—
Consumer loans, net of allowance for credit losses	18,998		17,043		—		—		17,043
Financial liabilities:
Short-term financial liabilities	$	9,927	$	9,927	$	—	$	9,914	$	13
Deposits	119,462		119,465		—		119,465		—
Long-term debt	11,122		11,645		—		11,645		—

Lending-related commitments - The fair value of loan commitments, revolving credit facilities and standby letters of credit are not included in the above table. The majority of the lending-related commitments are not carried at fair value on a recurring basis nor are they actively traded. These instruments generate fees, which approximate those currently charged to originate similar commitments, which are recognized over the term of the commitment period. Deferred fees on loan commitments, revolving credit facilities and standby letters of credit totaled $165 million and $162 million at March 31, 2024 and December 31, 2023, respectively.

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18. Litigation and Regulatory Matters

The following supplements, and should be read together with, the disclosure in Note 30, "Litigation and Regulatory Matters," in our 2023 Form 10-K. Only those matters with significant updates and new matters since our disclosure in our 2023 Form 10-K are reported herein.

In addition to the matters described below and in our 2023 Form 10-K, in the ordinary course of business, we are routinely named as defendants in, or as parties to, various legal actions and proceedings relating to activities of our current and/or former operations. These legal actions and proceedings may include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief. In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of our regulated activities.

Due to the inherent unpredictability of legal matters, including litigation, governmental and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of such matters or the eventual loss, fines, penalties or business impact, if any, that may result. We establish reserves for litigation, governmental and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. Once established, reserves are adjusted from time to time, as appropriate, in light of additional information. The actual costs of resolving litigation and regulatory matters, however, may be substantially higher than the amounts reserved for those matters. Some of our exposure may be offset by applicable insurance coverage. We do not consider the possible availability of insurance coverage in determining the amounts of any accruals (although we record the amount of related insurance recoveries that are deemed probable up to the amount of the accrual).

For the legal matters disclosed below, including litigation and governmental and regulatory matters, as well as for the legal matters disclosed in Note 30, "Litigation and Regulatory Matters," in our 2023 Form 10-K, as to which a loss in excess of accrued liability is reasonably possible in future periods and for which there is sufficient currently available information on the basis of which management believes it can make a reliable estimate, we believe a reasonable estimate could be as much as $100 million for HUSI. The legal matters underlying this estimate of possible loss will change from time to time and actual results may differ significantly from this current estimate.

Given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in any particular quarterly or annual period.

Precious Metals Fix Matters

Platinum and Palladium Fix Litigation In April 2024, a settlement in principle was reached with the plaintiffs to resolve the Platinum and Palladium Fix Litigation. The settlement in principle remains subject to finalization of the documentation and court approval. The financial impact of the settlement is not material.

Mortgage Securitization Trust Litigation

The First Department affirmed dismissal of the Zittman case, and Zittman has filed a motion seeking reconsideration or, in the alternative, leave to appeal to the New York State Court of Appeals.

First Citizens Litigation

Defendants filed a motion to dismiss in August 2023. In January 2024, the court denied defendants' motion in part and granted it in part and directed plaintiff to amend its complaint to specify its allegations as to each defendant. In February 2024, First Citizens filed its amended complaint. In March 2024, defendants filed a motion to dismiss portions of the amended complaint.

Anti-Terrorism Act Cases

Charlotte Freeman, et al. v. HSBC Holdings plc, et al.

Plaintiffs filed a motion to vacate the judgment against them in February 2024.

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19. New Accounting Pronouncements

The following are new accounting pronouncements issued by the Financial Accounting Standards Board which will be adopted in future periods:

Accounting Standards Update	Summary of Guidance	Financial Statement Impact
Improvements to Reportable Segment Disclosures Issued November 2023	•Amends and adds certain disclosure requirements for reportable segments. •In particular, requires disclosure of a) significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within the reported measure of segment profit or loss; b) the title and position of the CODM; and c) an explanation of how the CODM uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources.	•Effective for annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025, with early adoption permitted. •The new guidance is required to be applied retrospectively. •While the adoption of this guidance will result in changes to existing disclosures, it will not have any impact on our financial position or results of operations.
Improvements to Income Tax Disclosures Issued December 2023	•Eliminates, amends and adds certain disclosure requirements for income taxes. •In particular, requires the disaggregation of certain existing disclosures, including a) the effective tax rate reconciliation to be broken out into specific categories; b) income taxes paid and income tax expense to be broken out between federal, state and foreign; and c) income before income tax to be broken out between domestic and foreign.	•Effective for annual periods beginning January 1, 2025, with early adoption permitted. •The new guidance should be applied prospectively, with a retrospective option. •While the adoption of this guidance will result in changes to existing disclosures, it will not have any impact on our financial position or results of operations.

There have been no additional accounting pronouncements issued that are expected to have a material impact on our consolidated financial statements.

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain matters discussed throughout this Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make or approve certain statements in future filings with the United States Securities and Exchange Commission ("SEC"), in press releases, or oral or written presentations by representatives of HSBC USA Inc. ("HSBC USA" and, together with its subsidiaries, "HUSI") that are not statements of historical fact and may also constitute forward-looking statements. Words such as "may," "will," "should," "would," "could," "appears," "believe," "intends," "expects," "estimates," "targeted," "plans," "anticipates," "goal," and similar expressions are intended to identify forward-looking statements but should not be considered as the only means through which these statements may be made. These matters or statements will relate to our future operations, strategy, financial condition, economic forecast, results of operations, plans, objectives, performance or business developments and will involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from that which was expressed or implied by such forward-looking statements.

All forward-looking statements are, by their nature, subject to risks and uncertainties, many of which are beyond our control. Our actual future results may differ materially from those set forth in our forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those in the forward-looking statements:

•our ability to effectively implement and deliver on our business strategies, and the effect implementation of our business strategy may have on our financial results, operations and relationships with our customers, regulators, employees and other stakeholders;

•uncertainty concerning the future market and economic conditions in the United States and abroad, including but not limited to, changes in interest rates, energy prices, inflation, supply chain issues, a decline in housing prices, the availability of credit and liquidity, unemployment levels, turmoil in the financial markets and related efforts of government agencies to stabilize the financial system, changes in consumer confidence and consumer spending and behavior, consumer perception as to the continuing availability of credit and price competition in the market segments we serve and the consequences of unexpected geopolitical events, such as trade disputes;

•compliance with the Chinese National Security Law and the Hong Kong Autonomy Act, which may impact, among other things, individuals or entities with which we are able to conduct business;

•changes in laws and regulatory requirements;

•the potential impact of any legal, regulatory or policy changes affecting financial institutions and the global economy as a result of changes by the current or future administrations;

•the ability to deliver on our regulatory priorities;

•capital and liquidity requirements under Basel guidance, the Federal Reserve Board's ("FRB") Comprehensive Capital Analysis and Review ("CCAR") program, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank Act" or "Dodd-Frank") stress testing ("DFAST"), including the U.S. FRB requirements for U.S. global systemically important banks ("G-SIBs") and U.S. intermediate holding companies ("IHCs") owned by non-U.S. G-SIBs to issue total loss-absorbing capacity ("TLAC") instruments;

•regulatory requirements in the U.S. and in non-U.S. jurisdictions to facilitate the future orderly resolution of large financial institutions;

•changes in central banks' policies with respect to the provision or removal of liquidity support to financial markets;

•the ability of HSBC Holdings plc ("HSBC" and, together with its subsidiaries, "HSBC Group") and HSBC Bank USA, National Association (together with its subsidiaries, "HSBC Bank USA") to fulfill the requirements imposed by a consent order or guidance from regulators generally;

•the use of us, or our affiliates, as a conduit for illegal activities without our knowledge by third parties;

•the ability to successfully manage our risks;

•the financial condition of our clients and counterparties and our ability to manage counterparty risk;

•concentrations of credit and market risk;

•increases in our allowance for credit losses and changes in our assessment of our loan portfolios;

•the ability to successfully implement changes to our operational practices as needed and/or required from time to time;

•damage to our reputation;

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•the ability to attract or retain key employees, including foreign workers, and customers;

•the effects of competition in the markets where we operate including increased competition from non-bank financial services companies, including securities firms;

•the effects of operational risks that are inherent in banking operations, including fraudulent and other criminal activities, breakdowns in processes or procedures and systems failure or non-availability;

•disruption in our and our third-party providers' and partners' operations resulting from technology failures, cyberattacks, and inadequate data management and consumer privacy protections;

•the ability of third-party service providers and partners to provide adequate services;

•risks associated with Environmental, Social and Governance ("ESG") matters such as climate change and human rights issues;

•losses suffered due to the negligence, fraud or misconduct of our employees or the negligence, fraud or misconduct on the part of third parties;

•a failure in our internal controls;

•our ability to meet our funding requirements;

•adverse changes to our credit ratings;

•financial difficulties or credit downgrades of mortgage bond insurers;

•changes in Financial Accounting Standards Board and International Accounting Standards Board ("IASB") accounting standards and their interpretation;

•heightened regulatory and government enforcement scrutiny of financial institutions, including in connection with product governance and sales practices, account opening and closing procedures, customer and employee complaints and sales compensation structures related to such practices;

•possible negative impact of regulatory investigations and legal proceedings related to alleged foreign exchange manipulation;

•heightened regulatory and government enforcement scrutiny of financial markets, with a particular focus on traded asset classes, including foreign exchange;

•the possibility of incorrect assumptions or estimates in our financial statements, including reserves related to litigation, deferred tax assets and the fair value of certain assets and liabilities;

•model limitations or failure;

•the possibility of incorrect interpretations, application of or changes in tax laws to which we and our clients are subject;

•unexpected and/or increased expenses relating to, among other things, litigation and regulatory matters, remediation efforts, penalties and fines; and

•the other risk factors and uncertainties described under Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K").

Forward-looking statements are based on our current views and assumptions and speak only as of the date they are made. We undertake no obligation to update any forward-looking statement to reflect subsequent circumstances or events. You should, however, consider any additional disclosures of a forward-looking nature that arise after the date hereof as may be discussed in any of our subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

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Executive Overview

HSBC USA is a wholly-owned subsidiary of HSBC North America Holdings Inc. ("HSBC North America"), which is an indirect wholly-owned subsidiary of HSBC. HUSI may also be referred to in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") as "we," "us" or "our."

Economic Environment  The U.S. economy continued to grow during the first quarter of 2024 despite continued pressures from inflation and elevated interest rates, which are expected to lead to a slowdown of future economic growth. U.S. Gross Domestic Product ("GDP") grew at an estimated annual rate of 1.6 percent in the first quarter of 2024, while the personal consumption expenditures price index of 2.7 percent in March 2024 remained slightly above the FRB's target inflation rate. In March 2024, the FRB decided to hold short-term interest rates steady and, while interest rates are expected to remain elevated for some time, the FRB is expected to start decreasing short-term interest rates in 2024, the timing of which is dependent upon future economic conditions.

Although the U.S. economy continued to grow during the first quarter of 2024, economic uncertainty remains due to elevated interest rates, inflation levels and the expectation for slowing economic growth, all of which will continue to impact our business in future periods. Concerns over domestic and global policy issues, trade policy in the U.S. and geopolitical events, including the turmoil in the Middle East, as well as the implications of those events on the markets in general, further add to the global uncertainty. Interest rate levels, inflation and economic growth, in combination with global economic conditions, fiscal and monetary policy and the level of regulatory and government scrutiny of financial institutions will continue to impact our results in 2024 and beyond.

Performance, Developments and Trends As previously disclosed, in November 2023, the Federal Deposit Insurance Corporation ("FDIC") issued a final rule that imposes a special assessment on certain FDIC-insured banks, including HSBC Bank USA, to recover the loss to the Deposit Insurance Fund ("DIF") arising from the protection of uninsured depositors following a determination of systemic risk in connection with the failures of Silicon Valley Bank and Signature Bank. This resulted in additional deposit insurance assessment fees of $243 million being accrued in 2023. Because the estimated loss to the DIF will be periodically adjusted as actual losses are incurred, the FDIC retains the ability to cease collection early, extend the special assessment collection period beyond the initial eight-quarter collection period, or impose a final shortfall special assessment after the receiverships for the two banks are terminated. During the first quarter of 2024, we became aware that the estimated loss to the DIF has increased and, as a result, we accrued $36 million of additional deposit insurance assessment fees to reflect our best estimate of the updated special assessment amount. The FDIC is expected to inform banks who are required to fund the shortfall in the DIF of the amount of the updated special assessment in June 2024.

The following tables set forth selected financial metrics of HUSI for the three months ended March 31, 2024 and 2023 and at March 31, 2024 and December 31, 2023:

Three Months Ended March 31,	2024			2023
	(dollars are in millions)
Income before income tax	$	278		$	287
Net income	225			217
Rate of return on average:
Total assets	.5		%	.5		%
Common equity	7.9			7.3
Tangible common equity(1)	8.2			7.6
Total equity	7.7			7.1
Net interest margin	1.10			1.28
Efficiency ratio	71.0			67.2
Commercial net charge-off ratio(2)	—			.04
Consumer net charge-off ratio(2)	—			.09

(1)The following table provides a reconciliation of average common equity to average tangible common equity:

Three Months Ended March 31,	2024		2023
	(in millions)
Common equity	$	11,449	$	12,091
Less: Goodwill	458		458
Tangible common equity	$	10,991	$	11,633

(2)Excludes loans held for sale.

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	March 31, 2024		December 31, 2023
Additional Select Ratios:
Allowance as a percent of loans(1)	.97	%	1.00	%
Commercial allowance as a percent of loans(1)	1.40		1.44
Consumer allowance as a percent of loans(1)	.09		.09
Loans to deposits ratio(2)	48.89		48.43
Common equity Tier 1 capital to risk-weighted assets	13.1		13.0
Tier 1 capital to risk-weighted assets	13.4		13.3
Total capital to risk-weighted assets	15.7		15.7
Tier 1 leverage ratio	8.0		7.7
Total equity to total assets	7.0		6.9

(1)Excludes loans held for sale.

(2)Represents period end loans, net of allowance for loan losses, as a percentage of total deposits.

Net income was $225 million during the three months ended March 31, 2024 compared with $217 million during the three months ended March 31, 2023. Income before income tax was $278 million during the three months ended March 31, 2024 compared with $287 million during the three months ended March 31, 2023. The decrease in income before income tax during the three months ended March 31, 2024 was due to lower net interest income as interest expense on deposits and interest bearing liabilities grew faster than interest income on interest earning assets as well as higher operating expenses driven by the additional deposit insurance special assessment fees which were accrued in the first quarter of 2024 as discussed above. These decreases were largely offset by higher other revenues driven by higher trading revenue and a lower provision for credit losses.

See "Results of Operations" for a more detailed discussion of our operating trends. In addition, see "Balance Sheet Review" for further discussion on our asset and liability trends, "Liquidity and Capital Resources" for further discussion on funding and capital and "Credit Quality" for additional discussion on our credit trends.

In March 2024, the SEC adopted final rules that will require registrants to disclose climate-related information in registration statements and annual reports, including material climate-related risks, descriptions of board oversight and risk management activities, the material impacts of these risks on a registrant's strategy, business model and outlook, and any material climate-related targets or goals. Non-accelerated filers such as HSBC USA will be exempt from the requirements to disclose Scope 1 and Scope 2 emissions. Registrants will also have to disclose, among other things, certain effects of severe weather events and other natural conditions (e.g., hurricanes, tornadoes, flooding) relating to capitalized costs and charges, expenditures and losses in their audited financial statements. HSBC USA will be required to comply with the rules for fiscal years beginning January 1, 2027, with certain additional disclosure requirements becoming applicable for fiscal years beginning January 1, 2028. Following adoption of the rules, several lawsuits were filed challenging them and subsequently consolidated into the Eighth Circuit Court of Appeals. The SEC issued an order in April 2024 to stay the rules pending the judicial review by the Eighth Circuit of the consolidated challenges.

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Basis of Reporting

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").

Group Reporting Basis We report financial information to HSBC in accordance with HSBC Group accounting and reporting policies, which apply International Financial Reporting Standards ("IFRSs") as issued by the IASB. As a result, our segment results are prepared and presented using financial information prepared on the basis of HSBC Group's accounting and reporting policies ("Group Reporting Basis"). Because operating results on the Group Reporting Basis are used in managing our businesses and rewarding performance of employees, our management also separately monitors profit before tax under this basis of reporting. The following table reconciles our U.S. GAAP versus Group Reporting Basis profit before tax:

Three Months Ended March 31,	2024		2023
	(in millions)
Profit before tax – U.S. GAAP basis	$	278	$	287
Adjustments:
Expected credit losses	10		(8)
Renewable energy tax credit investments	4		4
Other long-lived assets	(1)		33
Other	(5)		5
Profit before tax – Group Reporting Basis	$	286	$	321

The significant differences between U.S. GAAP and the Group Reporting Basis as they impact our results are summarized in Note 25, "Business Segments," in our 2023 Form 10-K. There have been no significant changes since December 31, 2023 in the differences between U.S. GAAP and the Group Reporting Basis impacting our results. Differences in reported profit before tax in the table above that were individually significant for the periods presented are explained below.

During the first quarter of 2024, expected credit losses were higher under U.S. GAAP than under the Group Reporting Basis. Under the Group Reporting Basis, a majority of our loans are considered to be in "stage 1" (which requires a 12-month expected credit losses ("ECL") estimate), while under U.S. GAAP such loans require a lifetime ECL estimate. Primarily as a result of the different requirements, loss provisions associated with growth in innovation banking were more pronounced under U.S. GAAP.

During the first quarter of 2023, expected credit losses were lower under U.S. GAAP than under the Group Reporting Basis. Primarily as a result of the different requirements related to stage 1 loans discussed above, the favorable impact of improved housing price forecasts on residential mortgages was more pronounced under U.S. GAAP.

During the first quarter of 2023, other long-lived assets in the table above reflects $19 million of lease related impairment charges under U.S. GAAP associated with the exit of certain office space, while under the Group Reporting Basis, impairment was recognized when we committed to vacate the space in the fourth quarter of 2022. In addition, amortization expense for long-lived assets was higher under U.S. GAAP due primarily to the impact of an impairment charge recorded under the Group Reporting Basis in 2020 related to the write-off of all the capitalized software and a portion of the leasehold improvements associated with our Wealth and Personal Banking business segment, while under U.S. GAAP no impairment charge was required. Subsequent to recognition of the impairment charge in 2020, expenditures for software development and newly completed leasehold improvements in our Wealth and Personal Banking business segment were capitalized and amortized over their useful lives under U.S. GAAP, but not under the Group Reporting Basis. Consequently, the carrying amounts of capitalized software and leasehold improvements were higher under U.S. GAAP than under the Group Reporting Basis and, as a result, corresponding amortization expense was higher under U.S. GAAP. As previously disclosed, during the second quarter of 2023, we determined that the cash generating unit was no longer impaired under the Group Reporting Basis and that its estimated fair value exceeded its carrying value, which resulted in the re-establishment of these assets at their recoverable amount net of amortization that would have been recorded had no impairment loss been recognized and excluding any assets that had since been sold.

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Balance Sheet Review

The following table provides balance sheet totals at March 31, 2024 and increases (decreases) since December 31, 2023:

			Increase (Decrease) From December 31, 2023
	March 31, 2024		Amount		%
	(dollars are in millions)
Period end assets:
Short-term investments	$	39,688	$	91	.2	%
Loans, net	59,216		820		1.4
Loans held for sale	453		114		33.6
Trading assets	18,900		(3,215)		(14.5)
Securities	40,844		72		.2
All other assets	7,865		846		12.1
	$	166,966	$	(1,272)	(.8)	%
Period end liabilities and equity:
Total deposits	$	122,053	$	770	.6	%
Trading liabilities	2,546		(939)		(26.9)
Short-term borrowings	7,033		(2,881)		(29.1)
Long-term debt	19,439		778		4.2
Interest, taxes and other liabilities	4,139		883		27.1
Total equity	11,756		117		1.0
	$	166,966	$	(1,272)	(.8)	%

Short-Term Investments  Short-term investments include cash and due from banks, interest bearing deposits with banks and federal funds sold and securities purchased under agreements to resell. Balances may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity. Short-term investments were relatively flat compared with December 31, 2023 as an increase in funds driven primarily by lower trading asset positions as discussed in detail below was largely offset by lower short-term borrowings.

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Loans, Net  The following table summarizes our loan balances at March 31, 2024, excluding loans held for sale, and increases (decreases) since December 31, 2023:

			Increase (Decrease) From December 31, 2023
	March 31, 2024		Amount		%
	(dollars are in millions)
Commercial loans:
Real estate, including construction	$	7,071	$	(16)	(.2)	%
Business and corporate banking	16,047		323		2.1
Global banking(1)	10,522		(203)		(1.9)
Other commercial(2)	6,665		244		3.8
Total commercial	40,305		348		.9
Consumer loans:
Residential mortgages	18,825		484		2.6
Home equity mortgages	382		(7)		(1.8)
Credit cards	189		(10)		(5.0)
Other consumer	96		(5)		(5.0)
Total consumer	19,492		462		2.4
Total loans	59,797		810		1.4
Allowance for credit losses(3)	581		(10)		(1.7)
Loans, net	$	59,216	$	820	1.4	%

(1)Represents large multinational firms including globally focused U.S. corporate and financial institutions, U.S. dollar lending to multinational banking clients managed by HSBC on a global basis and complex large business clients supported by Global Banking and Markets relationship managers.

(2)Includes loans to HSBC affiliates which totaled $3,442 million and $2,618 million at March 31, 2024 and December 31, 2023, respectively.

(3)See "Credit Quality" in this MD&A for a discussion of trends in our allowance for credit losses on loans.

Commercial loans increased compared with December 31, 2023 driven by higher loans to affiliates, partially offset by paydowns and maturities exceeding new business activity as we continued to apply a disciplined lending approach. The decline in commercial non-affiliate loans was primarily in the diversified financials, consumer services, banking and technology industries, partially offset by increases in the utilities and real estate industries.

Consumer loans increased compared with December 31, 2023 due to continued growth in residential mortgages.

The following table presents loan-to-value ("LTV") ratios for our residential mortgage loan portfolio, excluding mortgage loans held for sale:

	LTV Ratios(1)(2)
	March 31, 2024				December 31, 2023
	First Lien		Second Lien		First Lien		Second Lien
LTV < 80%	98.7	%	98.2	%	99.1	%	98.9	%
80% < LTV < 90%	1.3		1.8		.9		1.1
90% < LTV < 100%	—		—		—		—
LTV > 100%	—		—		—		—
Average LTV for portfolio	49.8		46.8		49.5		46.3

(1)LTVs for first liens are calculated using the loan balance as of the reporting date. LTVs for second liens are calculated using the loan balance as of the reporting date plus the senior lien amount at origination. Current estimated property values are derived from the property's appraised value at the time of loan origination updated by the change in the Federal Housing Finance Agency's House Price Index ("HPI") at either a core-based statistical area or state level. The estimated value of the homes could differ from actual fair values due to changes in condition of the underlying property, variations in housing price changes within metropolitan statistical areas and other factors. As a result, actual property values associated with loans that end in foreclosure may be significantly lower than the estimates used for purposes of this disclosure.

(2)Current estimated property values are calculated using the most current HPIs available and applied on an individual loan basis, which results in an approximate three month delay in the production of reportable statistics. Therefore, the information in the table above reflects current estimated property values using HPIs at December 31, 2023 and September 30, 2023, respectively.

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Loans Held for Sale  The following table summarizes loans held for sale at March 31, 2024 and increases (decreases) since December 31, 2023:

			Increase (Decrease) From December 31, 2023
	March 31, 2024		Amount		%
	(dollars are in millions)
Commercial loans:
Global banking	$	453	$	114	33.6	%
Total commercial	453		114		33.6
Consumer loans:
Residential mortgages	—		—		—
Total consumer	—		—		—
Total loans held for sale	$	453	$	114	33.6	%

Commercial loans held for sale increased compared with December 31, 2023. Included in commercial loans held for sale are certain loans that we no longer intend to hold for investment and were transferred to held for sale which totaled $189 million and $89 million at March 31, 2024 and December 31, 2023, respectively.

Commercial loans held for sale also includes certain loans that we have elected to designate under the fair value option which consists of loans that we originate in connection with our participation in a number of syndicated credit facilities with the intent of selling them to unaffiliated third parties as well as loans that we purchase from the secondary market and hold as hedges against our exposure to certain total return swaps or intend to sell. The fair value of these loans totaled $264 million and $250 million at March 31, 2024 and December 31, 2023, respectively. Balances will fluctuate from period to period depending on the volume and level of activity.

Consumer loans held for sale were nil at both March 31, 2024 and December 31, 2023. Included in residential mortgage loans held for sale are agency-eligible conforming residential mortgage loans which are originated and held for sale to third parties, currently on a servicing retained basis. Balances will fluctuate from period to period depending on the volume and level of activity. Gains and losses from the sale of these residential mortgage loans are reflected as a component of other income (loss) in the accompanying consolidated statement of income.

Excluding the loans designated under the fair value option discussed above, loans held for sale are recorded at the lower of amortized cost or fair value, with adjustments to fair value being recorded as a valuation allowance through other revenues. The valuation allowance on commercial loans held for sale was nil and $2 million at March 31, 2024 and December 31, 2023, respectively. The valuation allowance on consumer loans held for sale was nil at both March 31, 2024 and December 31, 2023.

Trading Assets and Liabilities  The following table summarizes trading assets and liabilities at March 31, 2024 and increases (decreases) since December 31, 2023:

			Increase (Decrease) From December 31, 2023
	March 31, 2024		Amount		%
	(dollars are in millions)
Trading assets:
Securities(1)	$	17,750	$	(2,743)	(13.4)	%
Precious metals	329		(17)		(4.9)
Derivatives, net	821		(455)		(35.7)
	$	18,900	$	(3,215)	(14.5)	%
Trading liabilities:
Securities sold, not yet purchased	$	1,210	$	(478)	(28.3)	%
Payables for precious metals	38		(263)		(87.4)
Derivatives, net	1,298		(198)		(13.2)
	$	2,546	$	(939)	(26.9)	%

(1)See Note 2, "Trading Assets and Liabilities," in the accompanying consolidated financial statements for a breakout of trading securities by category.

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Trading securities balances were lower compared with December 31, 2023 due primarily to a decrease in foreign sovereign positions, partially offset by an increase in equity positions. Trading security positions are primarily held as economic hedges of interest rate, credit and equity derivative products issued to clients of domestic and emerging markets. Balances of securities sold, not yet purchased were also lower compared with December 31, 2023 due to a decrease in short U.S. Treasury positions related to economic hedges of trading security positions held for Community Reinvestment Act purposes.

Precious metals trading assets were relatively flat compared with December 31, 2023 as a decrease in our own silver inventory position was largely offset by an increase in our own platinum inventory position. Payables for precious metals were lower compared with December 31, 2023 reflecting a decline in borrowing of gold inventory to support client activity levels. Precious metal positions may not represent our net underlying exposure as we may use derivatives contracts to reduce our risk associated with these positions, the fair value of which would appear in derivatives in the table above.

Derivative asset and liability balances both decreased compared with December 31, 2023 mainly from market movements which resulted in lower valuations of foreign exchange derivatives.

Securities  Securities include securities available-for-sale and securities held-to-maturity, net. Securities balances were relatively flat compared with December 31, 2023 as net purchases of foreign sovereign securities was offset by net sales, paydowns and maturities of U.S. Treasury, U.S. Government sponsored mortgage-backed and U.S. Government agency mortgage-backed securities as part of our continuing strategy to maximize returns while balancing the securities portfolio for risk management purposes.

All Other Assets  All other assets include, among other items, properties and equipment, net, and goodwill. All other assets were higher compared with December 31, 2023 due primarily to increases in assets associated with client share repurchase transactions and outstanding settlement balances related to security sales. These increases were partially offset by lower margin requirements related to futures trading and lower cash collateral posted.

Deposits  The following table summarizes deposit balances by major depositor categories at March 31, 2024 and increases (decreases) since December 31, 2023:

			Increase (Decrease) From December 31, 2023
	March 31, 2024		Amount		%
	(dollars are in millions)
Individuals, partnerships and corporations	$	104,613	$	(4,824)	(4.4)	%
Domestic and foreign banks	14,842		5,491		58.7
U.S. government and states and political subdivisions	112		(14)		(11.1)
Foreign governments and official institutions	2,486		117		4.9
Total deposits	$	122,053	$	770	.6	%

Total deposits increased compared with December 31, 2023 due primarily to higher deposits from affiliates, partially offset by lower commercial deposits reflecting the impacts of deposit repricing in the current rate environment and seasonality as clients managed their cash needs at year-end. Also contributing to the increase, to a lesser extent, were higher retail time deposits.

Short-Term Borrowings  Short-term borrowings were lower compared with December 31, 2023 due primarily to a decrease in federal funds purchased resulting from the management of our short-term funding positions. We continue to actively manage our balance sheet to maximize returns while maintaining adequate liquidity.

Long-Term Debt  Long-term debt increased compared with December 31, 2023 due to debt issuances, partially offset by debt retirements. Debt issuances during the three months ended March 31, 2024 totaled $2,335 million, of which nil was issued by HSBC Bank USA.

Incremental issuances from our shelf registration statement with the SEC totaled $2,335 million of senior debt during the three months ended March 31, 2024, which included $1,500 million of senior notes that were issued by HSBC USA in March as well as $835 million of structured notes. Total long-term debt outstanding under this shelf was $10,065 million and $9,227 million at March 31, 2024 and December 31, 2023, respectively.

Incremental issuances from the HSBC Bank USA Global Bank Note Program totaled nil during the three months ended March 31, 2024. Total debt outstanding under this program was $1,904 million and $1,918 million at March 31, 2024 and December 31, 2023, respectively.

Borrowings from the Federal Home Loan Bank ("FHLB") totaled $1,000 million at both March 31, 2024 and December 31, 2023.

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Interest, Taxes and Other Liabilities  Interest, taxes and other liabilities increased compared with December 31, 2023 due primarily to increases in liabilities associated with client share repurchase transactions and outstanding settlement balances related to security purchases. These increases were partially offset by lower derivative balances associated with hedging activities.

Results of Operations

Net Interest Income  Net interest income is the total interest income on earning assets less the total interest expense on deposits and borrowed funds. An analysis of consolidated average balances and interest rates is presented in this MD&A under the caption "Consolidated Average Balances and Interest Rates."

The significant components of net interest margin are summarized in the following table:

				2024 Compared with 2023 Increase (Decrease)
Three Months Ended March 31,	2024			Volume		Rate		2023
	(dollars are in millions)
Interest income:
Short-term investments	$	448		$	(84)	$	122	$	410
Trading securities	85			26		10		49
Securities	445			54		68		323
Commercial loans	711			(33)		87		657
Consumer loans	188			14		28		146
Other	16			(5)		2		19
Total interest income	1,893			(28)		317		1,604
Interest expense:
Deposits	1,012			44		212		756
Short-term borrowings	154			21		33		100
Long-term debt	285			4		25		256
Tax liabilities and other	16			5		2		9
Total interest expense	1,467			74		272		1,121
Net interest income	$	426		$	(102)	$	45	$	483
Yield on total interest earning assets	4.88		%					4.23		%
Cost of total interest bearing liabilities	4.75							3.87
Interest rate spread	.13							.36
Benefit from net non-interest paying funds(1)	.97							.92
Net interest margin on average earning assets	1.10		%					1.28		%

(1)Represents the benefit associated with interest earning assets in excess of interest bearing liabilities. Increased percentages reflect growth in this excess or a higher cost of interest bearing liabilities, while decreased percentages reflect a reduction in this excess or a lower cost of interest bearing liabilities.

Net interest income decreased during the three months ended March 31, 2024 due to higher interest expense from interest bearing liabilities driven by higher rates paid and higher average balances, primarily in deposits and short-term borrowings, partially offset by higher interest income from interest earning assets driven by higher yields and higher average balances in securities and trading securities. Also contributing to the decrease was the unfavorable impact of lower average balances in short-term investments and commercial loans.

Higher yields on interest earning assets and higher rates paid on interest bearing liabilities reflect the impact of higher market rates.

Short-term investments Interest income increased during the three months ended March 31, 2024 due to higher yields, partially offset by lower average balances.

Trading securities Interest income increased during the three months ended March 31, 2024 due to higher average balances and higher yields. Higher average balances were driven by increases in equity, U.S. Treasury and U.S. Government sponsored

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mortgage-backed positions, partially offset by a decline in foreign sovereign positions. Interest income associated with trading securities was partially offset within trading revenue by the performance of the associated derivatives as discussed further below.

Securities Interest income was higher during the three months ended March 31, 2024 due to higher yields and higher average balances. Higher average balances were driven by increases in U.S. Government agency mortgage-backed, foreign sovereign and U.S. Treasury securities, partially offset by a decline in U.S. Government sponsored mortgage-backed securities.

Commercial loans Interest income increased during the three months ended March 31, 2024 due to higher yields on variable rate loans and newly originated loans, partially offset by lower average balances.

Consumer loans Interest income was higher during the three months ended March 31, 2024 due to higher yields on variable rate loans and newly originated loans as well as higher average balances driven by growth in residential mortgages.

Other Lower interest income during the three months ended March 31, 2024 was due to lower average balances in cash collateral posted.

Deposits Interest expense increased during the three months ended March 31, 2024 due primarily to higher rates paid and a shift in mix to higher cost time deposits. Also contributing to the increase, to a lesser extent, were higher average balances driven by growth in commercial demand deposits and higher time deposits, partially offset by the attrition of retail savings and demand deposits.

Short-term borrowings Higher interest expense during the three months ended March 31, 2024 was due to higher rates paid and higher average balances. Higher average balances were driven by increases in federal funds purchased and commercial paper outstanding.

Long-term debt Interest expense increased during the three months ended March 31, 2024 due primarily to higher rates paid on variable rate borrowings and newly issued debt.

Tax liabilities and other Interest expense increased during the three months ended March 31, 2024 due primarily to higher average balances in securities sold, not yet repurchased.

Provision for Credit Losses The following table summarizes the components of the provision for credit losses:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Loans:
Commercial loans:
Real estate, including construction	$	(10)	$	(28)	$	18	64.3	%
Business and corporate banking	7		38		(31)		(81.6)
Global banking	(8)		12		(20)		*
Other commercial	—		—		—		—
Total commercial loans	(11)		22		(33)		*
Consumer loans:
Residential mortgages	1		(10)		11		*
Home equity mortgages	1		1		—		—
Credit cards	—		—		—		—
Other consumer	(1)		(1)		—		—
Total consumer loans	1		(10)		11		*
Total loans	(10)		12		(22)		*
Off-balance sheet credit exposures	12		8		4		50.0
Total provision for credit losses	$	2	$	20	$	(18)	(90.0)	%

*Percentage change is greater than 100 percent.

Our provision for credit losses decreased $18 million during the three months ended March 31, 2024 due to a lower provision for credit losses on our commercial loan portfolio, partially offset by a higher provision for credit losses on our consumer loan portfolio and a higher provision for credit losses on off-balance sheet credit exposures.

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The provision for credit losses on our commercial loan portfolio decreased $33 million during the three months ended March 31, 2024 reflecting a release in credit loss reserves compared with a loss provision in the prior year period. The release in credit reserves in the current year period was driven by improved economic forecasts and improvements in the credit condition of certain clients, partially offset by downgrades reflecting weakness in the financial condition of certain clients and higher provisions associated with growth in innovation banking. In the prior year period, the loss provision was driven by increases in credit reserves for risk factors associated with higher risk industry exposures and large loan exposures as well as downgrades reflecting weakness in the financial condition of certain clients.

The provision for credit losses on our consumer loan portfolio increased $11 million during the three months ended March 31, 2024 due to a release in credit loss reserves in the prior year period driven by improved housing price forecasts, partially offset by an increase in credit reserves for risk factors associated with a change in New York State foreclosure law.

The provision for credit losses on off-balance sheet credit exposures increased $4 million during the three months ended March 31, 2024. The loss provision in the current year period resulted from downgrades reflecting weakness in the financial condition of certain clients and higher provisions associated with growth in innovation banking, while the loss provision in the prior year period resulted from an increase in credit reserves for risk factors associated with large loan exposures and downgrades reflecting weakness in the financial condition of certain clients.

See "Credit Quality" in this MD&A for additional discussion on the allowance for credit losses associated with our various loan portfolios.

Other Revenues  The following table summarizes the components of other revenues:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Credit card fees, net	$	15	$	11	$	4	36.4	%
Trust and investment management fees	36		31		5		16.1
Other fees and commissions	176		148		28		18.9
Trading revenue	276		225		51		22.7
Other securities gains, net	2		3		(1)		(33.3)
Servicing and other fees from HSBC affiliates	88		74		14		18.9
Gain (loss) on instruments designated at fair value and related derivatives	(20)		(22)		2		9.1
Other income (loss):
Valuation of loans held for sale	2		—		2		*
Residential mortgage banking revenue	1		1		—		—
Insurance	1		1		—		—
Miscellaneous income (loss)	(38)		(19)		(19)		(100.0)
Total other income (loss)	(34)		(17)		(17)		(100.0)
Total other revenues	$	539	$	453	$	86	19.0	%

*Percentage change is greater than 100 percent.

Credit card fees, net  Credit card fees, net were higher during the three months ended March 31, 2024 reflecting increases in interchange fees, late fees and other miscellaneous fees.

Trust and investment management fees  Trust and investment management fees increased during the three months ended March 31, 2024 due primarily to higher fees from liquidity funds driven by higher average assets under management and lower fee waivers reflecting the impact of higher market interest rates.

Other fees and commissions Other fees and commissions increased during the three months ended March 31, 2024 due primarily to higher fees from loan syndication and account services reflecting higher business activity compared with the prior year period. See Note 11, "Fee Income from Contracts with Customers," in the accompanying consolidated financial statements for additional information including a summary of the components of other fees and commissions.

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Trading revenue  Trading revenue is generated by participation in the foreign exchange, precious metals, rates, credit and equities markets. The following table presents trading revenue by business activity. Not included in the table below is the impact of net interest income associated with trading securities which is an integral part of trading activities' overall performance. Net interest income related to trading activities is recorded in net interest income in the consolidated statement of income. Certain derivatives, such as total return swaps, are economically hedged by holding the underlying interest bearing referenced assets. Trading revenue related to the mortgage banking business is included as a component of other income (loss).

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Business Activities:
Foreign Exchange	$	84	$	102	$	(18)	(17.6)	%
Metals	14		57		(43)		(75.4)
Debt Markets	5		1		4		*
Securities Financing	145		71		74		*
Markets Treasury	7		(2)		9		*
Other trading(1)	21		(4)		25		*
Total trading revenue	$	276	$	225	$	51	22.7	%

*Percentage change is greater than 100 percent.

(1)Includes trading revenue related to Global Banking and Equities.

Trading revenue increased during the three months ended March 31, 2024 due primarily to higher revenue in Securities Financing driven by the impact of higher market rates which impacts fair value. Also contributing to the increase was higher Other trading revenue due primarily to favorable fair value adjustments on certain investments held for Community Reinvestment Act purposes as well as higher Markets Treasury revenue due to the improved performance of economic hedge positions used to manage interest rate risk. These increases were partially offset by lower revenue in Metals reflecting the impact of our agreement to refer transactions related to all future precious metals trading and financing activities associated with our Global Banking clients to HSBC Bank plc beginning in September 2023 as well as lower revenue in Foreign Exchange driven by lower market volatility compared with the prior year period.

Other securities gains, net  We maintain securities portfolios as part of our balance sheet diversification and risk management strategies. During the three months ended March 31, 2024 and 2023, we sold $1,075 million and $681 million, respectively, of primarily U.S. Treasury securities as part of our continuing strategy to maximize returns while balancing the securities portfolio for risk management purposes. Other securities gains, net was relatively flat during the three months ended March 31, 2024. The gross realized gains and losses from sales of securities, which are included as a component of other securities gains, net above, are summarized in Note 3, "Securities," in the accompanying consolidated financial statements.

Servicing and other fees from HSBC affiliates Servicing and other fees from HSBC affiliates increased during the three months ended March 31, 2024 due primarily to higher cost reimbursements associated with shared services performed on behalf of other HSBC affiliates, higher loan servicing fees from HSBC Markets (USA) Inc. ("HMUS") and higher performance fees associated with trading activity booked on the balance sheet of HSBC Bank plc.

Gain (loss) on instruments designated at fair value and related derivatives  We have elected to apply fair value option accounting to certain commercial loans held for sale, certain student loans held for investment, certain of our own fixed-rate debt issuances, all of our hybrid instruments issued, including structured notes and deposits, and certain client share repurchase transactions. We also use derivatives to economically hedge the interest rate and other risks associated with certain financial assets and liabilities for which fair value option accounting has been elected. Gain (loss) on instruments designated at fair value and related derivatives was relatively flat during the three months ended March 31, 2024 as favorable fair value adjustments on commercial loans held for sale driven by a loss recorded in the prior year period and favorable movements related to the economic hedging of interest rate risk and other risks within our hybrid instruments was largely offset by unfavorable movements related to the economic hedging of interest rate risk within our own debt. See Note 9, "Fair Value Option," in the accompanying consolidated financial statements for additional information including a breakout of these amounts by individual component.

Other income (loss)  Other income (loss) decreased during the three months ended March 31, 2024 due primarily to higher valuation losses associated with credit default swap protection which largely reflects the hedging of a few client relationships and lower gains associated with bank owned life insurance.

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Operating Expenses  The following table summarizes the components of operating expenses:

							Increase (Decrease)
Three Months Ended March 31,	2024			2023			Amount		%
	(dollars are in millions)
Salaries and employee benefits	$	135		$	121		$	14	11.6	%
Support services from HSBC affiliates:
Fees paid to HSBC Technology & Services (USA) Inc. ("HTSU")	235			220			15		6.8
Fees paid to HMUS	56			53			3		5.7
Fees paid to other HSBC affiliates	108			111			(3)		(2.7)
Total support services from HSBC affiliates	399			384			15		3.9
Occupancy expense, net	18			30			(12)		(40.0)
Other expenses:
Equipment and software	27			27			—		—
Marketing	6			3			3		100.0
Outside services	12			12			—		—
Professional fees	13			12			1		8.3
FDIC assessment fees(1)	57			22			35		*
Miscellaneous	18			18			—		—
Total other expenses	133			94			39		41.5
Total operating expenses	$	685		$	629		$	56	8.9	%
Personnel - average number	2,021			2,045
Efficiency ratio	71.0		%	67.2		%

*Percentage change is greater than 100 percent.

(1)Includes $36 million of additional special assessment fees which were accrued in the first quarter of 2024 associated with a final rule issued by the FDIC in November 2023 as discussed further below.

Salaries and employee benefits  Salaries and employee benefits expense increased during the three months ended March 31, 2024 due primarily to higher salaries and incentive compensation expenses driven by the addition of personnel associated with growth initiatives in innovation banking. Incentive compensation expense was also higher due to improved business performance.

Support services from HSBC affiliates  Servicing and other fees from HSBC affiliates increased during the three months ended March 31, 2024 due primarily to higher cost allocations from our technology, operations and other support service functions. A summary of the services received from various HSBC affiliates is included in Note 12, "Related Party Transactions," in the accompanying consolidated financial statements.

Occupancy expense, net  Occupancy expense, net decreased during the three months ended March 31, 2024 due primarily to lower lease impairment and other related costs related to the exit of certain office space, partially offset by higher rent expense.

Other expenses  Other expenses increased during the three months ended March 31, 2024 due primarily to higher deposit insurance assessment fees driven by $36 million of additional special assessment fees which were accrued in the first quarter of 2024 associated with a final rule issued by the FDIC in November 2023. During the first quarter of 2024, we became aware that the estimated loss to the DIF has increased and, as a result, we accrued additional fees to reflect our best estimate of the updated special assessment amount. Also contributing to the increase was higher marketing expense.

Efficiency ratio  Our efficiency ratio increased during the three months ended March 31, 2024 due to lower net interest income as discussed in detail above and higher operating expenses driven by higher deposit insurance assessment fees, partially offset by higher other revenues driven by higher trading revenue.

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Income tax expense The following table summarizes our effective tax rate based on the provision for income taxes attributable to pretax income:

Three Months Ended March 31,	2024			2023
	(dollars are in millions)
Income before income tax	$	278		$	287
Income tax expense	53			70
Effective tax rate	19.1		%	24.4		%

During the three months ended March 31, 2024, income tax expense and the effective tax rate decreased due primarily to an immaterial out of period adjustment to our deferred tax asset balance which decreased tax expense by $12 million.

Management evaluated the need for a valuation allowance against deferred tax assets at March 31, 2024 and December 31, 2023 and it was determined that a valuation allowance was not required.

Segment Results – Group Reporting Basis

We have distinct businesses, which are aligned with HSBC's global business strategy: Wealth and Personal Banking ("WPB"), Commercial Banking ("CMB"), and Global Banking and Markets ("GBM"). These businesses and a Corporate Center ("CC") serve as our reportable segments with the exception of GBM. Our GBM business is comprised of three distinct operating segments: Global Banking ("GB"), Markets and Securities Services ("MSS"), and Global Banking and Markets Other ("GBM Other"), which are separately reported. See Item 1, "Business," in our 2023 Form 10-K for a description of our segments, including a discussion of the main business activities of the segments and a summary of their products and services. There have been no changes in the basis of our segmentation as compared with the presentation in our 2023 Form 10-K.

Net interest income of each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for a funding charge or credit that includes both interest rate and liquidity components. Segments are charged a cost to fund assets (e.g., customer loans) and receive a funding credit for funds provided (e.g., customer deposits) based on equivalent market rates that incorporate both repricing (interest rate risk) and tenor (liquidity) characteristics. The objective of these charges/credits is to transfer interest rate risk to one centralized unit in Markets Treasury. Markets Treasury income statement and balance sheet results are allocated to each of the global businesses based upon tangible equity levels and levels of any surplus liabilities.

Certain other revenue and operating expense amounts are also apportioned among the business segments based upon the benefits derived from this activity or the relationship of this activity to other segment activity. These inter-segment transactions have not been eliminated, and we generally account for them as if they were with third parties.

We report financial information to our parent, HSBC, in accordance with HSBC Group accounting and reporting policies, which apply IFRSs as issued by the IASB. As a result, our segment results are prepared and presented using financial information prepared on the Group Reporting Basis as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources, such as employees, are primarily made on this basis. We continue, however, to monitor capital adequacy and report to regulatory agencies on a U.S. GAAP basis.

During the second quarter of 2023, we implemented a change to our internal management reporting to report net funding charges associated with MSS trading activities within other operating income to better align with the trading revenue generated by such activities. Historically, these funding charges were reported within net interest income (expense). There was no impact to consolidated net interest income (expense) or other operating income as these net funding charges are reversed back into net interest income (expense) in the CC. As a result, we have aligned our segment reporting for MSS and CC to reflect this change for all periods presented. See Note 13, "Business Segments," in the accompanying consolidated financial statements for a table that summarizes the impact of this change on reported segment net interest income (expense) and other operating income for the three months ended March 31, 2023.

There have been no changes in the measurement of segment profit as compared with the presentation in our 2023 Form 10-K.

The significant differences between U.S. GAAP and the Group Reporting Basis as they impact our results are summarized in Note 25, "Business Segments," in our 2023 Form 10-K. There have been no significant changes since December 31, 2023 in the differences between U.S. GAAP and the Group Reporting Basis impacting our results.

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Wealth and Personal Banking  The following table summarizes the Group Reporting Basis results for our WPB segment:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Net interest income	$	179	$	213	$	(34)	(16.0)	%
Other operating income	67		52		15		28.8
Total operating income(1)	246		265		(19)		(7.2)
Expected credit losses	—		10		(10)		(100.0)
Net operating income	246		255		(9)		(3.5)
Operating expenses	187		175		12		6.9
Profit before tax	$	59	$	80	$	(21)	(26.3)	%

(1)The following table summarizes the impact of key activities on the total operating income of our WPB segment:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Retail banking current accounts, savings and deposits	$	101	$	126	$	(25)	(19.8)	%
Retail banking mortgages, credit cards and other personal lending	43		35		8		22.9
Wealth and asset management products	27		21		6		28.6
Private banking	48		56		(8)		(14.3)
Retail business banking and other(2)	27		27		—		—
Total operating income	$	246	$	265	$	(19)	(7.2)	%

(2)Includes cost reimbursements associated with activities performed on behalf of other HSBC affiliates and allocated Markets Treasury revenue.

Our WPB segment reported a lower profit before tax during the three months ended March 31, 2024 due to lower net interest income and higher operating expenses, partially offset by higher other operating income and lower expected credit losses.

Net interest income decreased during the three months ended March 31, 2024 due primarily to the unfavorable impact of lower deposit balances driven by the attrition of savings and demand deposits, partially offset by the favorable impact of higher market rates and higher loan balances driven by growth in residential mortgages.

Other operating income increased during the three months ended March 31, 2024 due primarily to higher investment management fees driven by higher average assets under management and lower liquidity fee waivers reflecting the impact of higher market interest rates as well as the improved performance of economic hedge positions used to manage interest rate risk.

Expected credit losses decreased during the three months ended March 31, 2024 due to a loss provision in the prior year period driven by a higher loss estimate for risk factors associated with a change in New York State foreclosure law.

Operating expenses increased during the three months ended March 31, 2024 due primarily to higher incentive compensation expense and higher marketing expense.

Client Assets The following table provides information regarding private banking client assets during the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,	2024		2023
	(in millions)
Client assets at beginning of period	$	55,754	$	49,549
Net new money (outflows)	(992)		(581)
Value change	1,040		5,408
Client assets at end of period	$	55,802	$	54,376

87

HSBC USA Inc.

Commercial Banking  The following table summarizes the Group Reporting Basis results for our CMB segment:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Net interest income	$	292	$	285	$	7	2.5	%
Other operating income	78		72		6		8.3
Total operating income(1)	370		357		13		3.6
Expected credit losses	(2)		16		(18)		*
Net operating income	372		341		31		9.1
Operating expenses	179		150		29		19.3
Profit before tax	$	193	$	191	$	2	1.0	%

*Percentage change is greater than 100 percent.

(1)The following table summarizes the impact of key activities on the total operating income of our CMB segment:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Lending and Transaction Management	$	107	$	109	$	(2)	(1.8)	%
Global Payments Solutions ("GPS")	174		173		1		.6
Global Trade and Receivables Finance ("GTRF")	19		18		1		5.6
Investment banking products and other(2)	70		57		13		22.8
Total operating income	$	370	$	357	$	13	3.6	%

(2)Includes allocated Markets Treasury revenue.

Our CMB segment reported a relatively flat profit before tax during the three months ended March 31, 2024 as lower expected credit losses, higher net interest income and higher other operating income were largely offset by higher operating expenses.

Net interest income increased during the three months ended March 31, 2024 due to higher allocated Markets Treasury net interest income, partially offset by lower loan and deposit balances.

Other operating income increased during the three months ended March 31, 2024 due primarily to higher fees from account services and commitments.

Expected credit losses improved during the three months ended March 31, 2024 reflecting a modest release in credit loss reserves compared with a loss provision in the prior year period. The modest release in credit reserves in the current year period was driven by improvements in the credit condition of certain clients, largely offset by downgrades reflecting weakness in the financial condition of certain clients and a higher loss estimate for risk factors associated with higher risk industry exposures. In the prior year period, the loss provision was driven by a higher loss estimate for risk factors associated with higher risk industry exposures as well as downgrades reflecting weakness in the financial condition of certain clients.

Operating expenses increased during the three months ended March 31, 2024 due primarily to higher salaries and incentive compensation expenses driven by the addition of personnel associated with growth initiatives in innovation banking as well as higher cost allocations from our technology and support service functions.

88

HSBC USA Inc.

Global Banking and Markets Our GBM business is comprised of three reportable operating segments:

Global Banking  The following table summarizes the Group Reporting Basis results for our GB segment:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Net interest income	$	117	$	139	$	(22)	(15.8)	%
Other operating income	84		54		30		55.6
Total operating income(1)	201		193		8		4.1
Expected credit losses	(5)		3		(8)		*
Net operating income	206		190		16		8.4
Operating expenses	131		135		(4)		(3.0)
Profit before tax	$	75	$	55	$	20	36.4	%

*Percentage change is greater than 100 percent.

(1)The following table summarizes the impact of key activities on the total operating income of our GB segment. For purposes of the discussion below the table, total operating income is referred to as revenue.

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
GPS	$	121	$	123	$	(2)	(1.6)	%
Investment Banking	68		60		8		13.3
Credit and Lending	22		20		2		10.0
GTRF	14		13		1		7.7
GB Other(2)	(24)		(23)		(1)		(4.3)
Total operating income	$	201	$	193	$	8	4.1	%

(2)Includes net interest income on capital held in the business and not assigned to products as well as revenue associated with credit default swap protection, certain credit-linked structured notes and loan sales.

Our GB segment reported a higher profit before tax during the three months ended March 31, 2024 due to higher other operating income, lower expected credit losses and lower operating expenses, partially offset by lower net interest income.

Revenue increased during the three months ended March 31, 2024 due primarily to higher revenue in Investment Banking driven by higher fees from loan syndication, partially offset by lower net interest income from decreased loan spreads and balances.

Expected credit losses improved during the three months ended March 31, 2024 reflecting a release in credit loss reserves compared with a loss provision in the prior year period. The release in credit reserves in the current year period was due primarily to improvement in the credit condition of a single client relationship. In the prior year period, the loss provision was driven by downgrades reflecting weakness in the financial condition of certain clients as well as a higher loss estimate for risk factors associated with higher risk industry exposures.

Operating expenses decreased during the three months ended March 31, 2024 due primarily to lower cost allocations from our support service functions.

89

HSBC USA Inc.

Markets and Securities Services  The following table summarizes the Group Reporting Basis results for our MSS segment:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Net interest income	$	9	$	13	$	(4)	(30.8)	%
Other operating income	81		96		(15)		(15.6)
Total operating income(1)	90		109		(19)		(17.4)
Expected credit losses	—		—		—		—
Net operating income	90		109		(19)		(17.4)
Operating expenses	79		69		10		14.5
Profit before tax	$	11	$	40	$	(29)	(72.5)	%

*Percentage change is greater than 100 percent.

(1)The following table summarizes the impact of key activities on the total operating income of our MSS segment. For purposes of the discussion below the table, total operating income is referred to as revenue.

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Foreign Exchange and Metals	$	49	$	83	$	(34)	(41.0)	%
Debt Markets	6		5		1		20.0
Securities Financing	11		5		6		*
Equities	12		2		10		*
Securities Services	7		9		(2)		(22.2)
MSS Other	—		—		—		—
Credit and funding valuation adjustments	5		5		—		—
Total MSS	$	90	$	109	$	(19)	(17.4)	%

Our MSS segment reported a lower profit before tax during the three months ended March 31, 2024 due to lower other operating income, higher operating expenses and lower net interest income.

Revenue decreased during the three months ended March 31, 2024 due primarily to lower revenue in Foreign Exchange and Metals driven by lower market volatility in Foreign Exchange compared with the prior year period as well as the impact of our agreement to refer transactions related to all future precious metals trading and financing activities associated with our Global Banking clients to HSBC Bank plc beginning in September 2023. This decrease was partially offset by higher revenue in Equities driven by higher performance fees associated with trading activity booked on the balance sheet of HSBC Bank plc as well as higher revenue in Securities Financing due to higher market rates and increased balance sheet deployment.

Operating expenses increased during the three months ended March 31, 2024 due primarily to higher cost allocations from our technology and support service functions.

90

HSBC USA Inc.

Global Banking and Markets Other  The following table summarizes the Group Reporting Basis results for our GBM Other segment. For purposes of the discussion below the table, total operating income is referred to as revenue.

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(in millions)
Net interest income	$	18	$	—	$	18	*
Other operating income	22		21		1		4.8
Total operating income	40		21		19		90.5
Expected credit losses	—		—		—		—
Net operating income	40		21		19		90.5
Operating expenses	22		18		4		22.2
Profit before tax	$	18	$	3	$	15	*

*Percentage change is greater than 100 percent.

Our GBM Other segment reported a higher profit before tax during the three months ended March 31, 2024 due to higher revenue driven by higher allocated Markets Treasury net interest income, partially offset by higher operating expenses driven by higher cost allocations from support service functions.

Corporate Center  The following table summarizes the Group Reporting Basis results for our CC segment:

					Increase (Decrease)
Three Months Ended March 31,	2024		2023		Amount		%
	(dollars are in millions)
Net interest expense	$	(168)	$	(107)	$	(61)	(57.0)	%
Other operating income	173		91		82		90.1
Total operating income (expense)	5		(16)		21		*
Expected credit losses	—		—		—		—
Net operating income (expense)	5		(16)		21		*
Operating expenses	75		32		43		*
Loss before tax	$	(70)	$	(48)	$	(22)	(45.8)	%

*Percentage change is greater than 100 percent.

Our CC segment reported a higher loss before tax during the three months ended March 31, 2024 due to higher net interest expense and higher operating expenses, partially offset by higher other operating income.

Net interest expense increased during the three months ended March 31, 2024 driven by a higher cost of funds reflecting the impact of higher market rates.

Other operating income increased during the three months ended March 31, 2024 due primarily to higher net funding credits associated with MSS trading activities which increased by $67 million. Also contributing to the increase were favorable fair value adjustments on certain investments held for Community Reinvestment Act purposes.

Operating expenses increased during the three months ended March 31, 2024 due primarily to $36 million of additional deposit insurance special assessment fees which were accrued in the first quarter of 2024 associated with a final rule issued by the FDIC in November 2023. During the first quarter of 2024, we became aware that the estimated loss to the DIF has increased and, as a result, we accrued additional fees to reflect our best estimate of the updated special assessment amount.

Reconciliation of Segment Results  As previously discussed, segment results are reported on a Group Reporting Basis. See Note 13, "Business Segments," in the accompanying consolidated financial statements for a reconciliation of our Group Reporting Basis segment results to U.S. GAAP consolidated totals.

91

HSBC USA Inc.

Credit Quality

In the normal course of business, we enter into a variety of transactions that involve both on and off-balance sheet credit risk. Principal among these activities is lending to various commercial, institutional, governmental and individual customers. We participate in lending activity throughout the United States and, on a limited basis, internationally.

Allowance for Credit Losses / Liability for Off-Balance Sheet Credit Exposures  Our accounting policies and methodologies related to the allowance for credit losses and liability for off-balance sheet credit exposures are presented under the caption "Critical Accounting Estimates" in MD&A and in Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," in our 2023 Form 10-K. Our approach toward credit risk management is summarized under the caption "Risk Management" in MD&A in our 2023 Form 10-K. There have been no significant revisions to our policies or methodologies during the first quarter of 2024.

The following table summarizes our allowance for credit losses and the liability for off-balance sheet credit exposures:

	March 31, 2024		December 31, 2023
	(in millions)
Allowance for credit losses:
Loans:
Commercial loans	$	563	$	574
Consumer loans	18		17
Total loans	581		591
Securities held-to-maturity	—		—
Other financial assets measured at amortized cost(1)	—		—
Securities available-for-sale	—		—
Total allowance for credit losses	$	581	$	591
Liability for off-balance sheet credit exposures	$	123	$	111

(1)Primarily includes accrued interest receivables and customer acceptances.

The total allowance for credit losses at March 31, 2024 decreased $10 million or 2 percent as compared with December 31, 2023 due to a lower loss estimate on our commercial loan portfolio, while our consumer allowance for credit losses was relatively flat.

Our commercial allowance for credit losses at March 31, 2024 decreased $11 million or 2 percent as compared with December 31, 2023 driven by improved economic forecasts and improvements in the credit condition of certain clients, partially offset by downgrades reflecting weakness in the financial condition of certain clients and higher loss estimates associated with growth in innovation banking.

The liability for off-balance sheet credit exposures at March 31, 2024 increased $12 million or 11 percent as compared with December 31, 2023 resulting from downgrades reflecting weakness in the financial condition of certain clients and higher loss estimates associated with growth in innovation banking.

92

HSBC USA Inc.

Analysis of the Allowance for Credit Losses on Loans

The following table presents the allowance for credit losses on loans by major loan categories:

	Amount		% of Loans to Total Loans		Amount		% of Loans to Total Loans
	March 31, 2024				December 31, 2023
	(dollars are in millions)
Commercial:
Real estate, including construction	$	134	11.8	%	$	144	12.0	%
Business and corporate banking	309		26.8		302		26.7
Global banking	119		17.7		127		18.1
Other commercial	1		11.1		1		10.9
Total commercial	563		67.4		574		67.7
Consumer:
Residential mortgages	(7)		31.5		(9)		31.1
Home equity mortgages	8		.6		7		.7
Credit cards	15		.3		16		.3
Other consumer	2		.2		3		.2
Total consumer	18		32.6		17		32.3
Total	$	581	100.0	%	$	591	100.0	%

The following table sets forth key ratios for the allowance for credit losses on loans:

	March 31, 2024		December 31, 2023
Ratio of Allowance for credit losses to:
Loans:(1)
Commercial:
Non-affiliates	1.53	%	1.54	%
Affiliates	—		—
Total commercial	1.40		1.44
Consumer:
Residential mortgages	(.04)		(.05)
Home equity mortgages	2.09		1.80
Credit cards	7.94		8.04
Other consumer	2.08		2.97
Total consumer	.09		.09
Total loans	.97		1.00
Nonperforming loans:(1)(2)
Commercial	87	%	135	%
Consumer	10		9
Total nonperforming loans	71		97

(1)Ratios exclude loans held for sale as these loans are carried at the lower of amortized cost or fair value.

(2)Represents our commercial and consumer allowance for credit losses, as appropriate, divided by the corresponding outstanding balance of total nonperforming loans held for investment. Nonperforming loans include accruing loans contractually past due 90 days or more.

See Note 5, "Allowance for Credit Losses," in the accompanying consolidated financial statements for a rollforward of credit losses by loan categories for the three months ended March 31, 2024 and 2023.

The allowance for credit losses on loans as a percentage of total loans held for investment at March 31, 2024 decreased modestly as compared with December 31, 2023 due primarily to the decrease in our commercial allowance for credit losses for the reasons discussed above.

93

HSBC USA Inc.

The allowance for credit losses on loans as a percentage of nonperforming loans held for investment at March 31, 2024 decreased as compared with December 31, 2023 due primarily to an increase in nonperforming loans as discussed further below in our commercial loan portfolio.

Delinquency  The following table summarizes dollars of two-months-and-over contractual delinquency and two-months-and-over contractual delinquency as a percentage of total loans, excluding loans held for sale ("delinquency ratio").

	March 31, 2024				December 31, 2023
	Delinquent Loans		Delinquency Ratio		Delinquent Loans		Delinquency Ratio
	(dollars are in millions)
Commercial	$	224	.56	%	$	416	1.04	%
Consumer:
Residential mortgages(1)(2)	116		.62		115		.63
Home equity mortgages(1)(2)	4		1.05		4		1.03
Credit cards	4		2.12		4		2.01
Other consumer	2		2.08		2		1.98
Total consumer	126		.65		125		.66
Total	$	350	.59		$	541	.92

(1)At March 31, 2024 and December 31, 2023, consumer mortgage loan delinquency includes $58 million and $61 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less costs to sell.

(2)The following table reflects dollars of contractual delinquency and delinquency ratios for interest-only loans and adjustable rate mortgage ("ARM") loans:

	March 31, 2024				December 31, 2023
	Delinquent Loans		Delinquency Ratio		Delinquent Loans		Delinquency Ratio
	(dollars are in millions)
Interest-only loans	$	1	.02	%	$	4	.09	%
ARM loans	71		.52		69		.51

Our two-months-and-over contractual delinquency ratio decreased 33 basis points compared with December 31, 2023 due to lower dollars of delinquency in our commercial loan portfolio, while dollars of delinquency in our consumer loan portfolio were relatively flat.

Our commercial loan two-months-and-over contractual delinquency ratio decreased 48 basis points compared with December 31, 2023 due to lower dollars of delinquency driven by the collections of a few large private banking loans.

94

HSBC USA Inc.

Net Charge-offs of Loans  The following table summarizes net charge-off (recovery) dollars as well as net charge-off (recovery) of loans for the period as a percentage of average loans, excluding loans held for sale ("net charge-off ratio"):

	Three Months Ended March 31,
	2024						2023
	Net Charge-off Dollars		Average Loans		Net Charge-off Ratio		Net Charge-off Dollars		Average Loans		Net Charge-off Ratio
	(dollars are in millions)
Commercial:
Real estate, including construction	$	—	$	7,093	—	%	$	—	$	7,998	—	%
Business and corporate banking	—		16,054		—		4		16,504		.10
Global banking	—		10,489		—		—		10,328		—
Other commercial	—		6,444		—		—		7,258		—
Total commercial	—		40,080		—		4		42,088		.04
Consumer:
Residential mortgages	(1)		18,561		(.02)		3		16,886		.07
Home equity mortgages	—		384		—		—		365		—
Credit cards	1		188		2.13		1		199		2.01
Other consumer	—		89		—		—		136		—
Total consumer	—		19,222		—		4		17,586		.09
Total	$	—	$	59,302	—		$	8	$	59,674	.05

Our net charge-off ratio decreased 5 basis points during the three months ended March 31, 2024 due to a lower level of net charge-offs in our commercial loan portfolio driven by the deterioration of a corporate banking loan in the prior year period as well as a lower level of net charge-offs in our consumer loan portfolio driven by improved net charge-offs in residential mortgages reflecting a modest level of net recoveries in the current year period compared with a modest level of net charge-offs in the prior year period.

95

HSBC USA Inc.

Nonperforming Loans  The following table summarizes nonperforming loans, including nonaccrual loans and accruing loans contractually 90 days or more past due, as well as nonperforming loans as a percentage of total loans, excluding loans held for sale ("nonperforming ratio"):

	March 31, 2024				December 31, 2023
	Nonperforming Loans(1)		Nonperforming Ratio		Nonperforming Loans(1)		Nonperforming Ratio
	(dollars are in millions)
Commercial	$	644	1.60	%	$	425	1.06	%
Consumer:
Residential mortgages(2)(3)(4)	167		.89		172		.94
Home equity mortgages(2)(3)	6		1.57		6		1.54
Credit cards	3		1.59		3		1.51
Other consumer	1		1.04		2		1.98
Total consumer	177		.91		183		.96
Total	$	821	1.37		$	608	1.03
Other real estate owned(5)	$	3			$	2

(1)See Note 4, "Loans," in the accompanying consolidated financial statements for a breakout of nonaccrual loans and accruing loans contractually 90 days or more past due. At March 31, 2024 and December 31, 2023, total nonperforming loans include $4 million and $6 million, respectively, of accruing loans contractually 90 days or more past due.

(2)At March 31, 2024 and December 31, 2023, nonperforming consumer mortgage loans include $103 million and $108 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

(3)Nonperforming consumer mortgage loans held for investment include all loans which are 90 or more days contractually delinquent as well as loans discharged under Chapter 7 bankruptcy and not re-affirmed and second lien loans where the first lien loan that we own or service is 90 or more days contractually delinquent.

(4)Nonperforming consumer mortgage loans for all periods does not include guaranteed loans purchased from the Government National Mortgage Association. Repayment of these loans is predominantly insured by the Federal Housing Administration and as such, these loans have different risk characteristics from the rest of our customer loan portfolio.

(5)Includes $1 million or less of commercial other real estate owned at both March 31, 2024 and December 31, 2023.

Our nonperforming loans ratio increased 34 basis points compared with December 31, 2023 due to higher nonperforming loans in our commercial loan portfolio, partially offset by lower nonperforming loans in our consumer loan portfolio.

Our commercial nonperforming loans ratio increased 54 basis points compared with December 31, 2023 due to higher nonperforming loans driven by downgrades, including the downgrade of a global banking loan.

Our consumer nonperforming loans ratio decreased 5 basis points compared with December 31, 2023 due primarily to lower nonperforming loans in residential mortgages driven by the collections of a few large private banking loans. Also contributing to the decrease in the ratio, to a lesser extent, were higher outstanding loan balances.

Our policies and practices for problem loan management and placing loans on nonaccrual status are summarized in Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," in our 2023 Form 10-K.

96

HSBC USA Inc.

Concentration of Credit Risk  A concentration of credit risk is defined as a significant credit exposure with an individual or group engaged in similar activities or affected similarly by economic conditions. We enter into a variety of transactions in the normal course of business that involve both on and off-balance sheet credit risk. Principal among these activities is lending to various commercial, institutional, governmental and individual customers. We manage the varying degrees of credit risk associated with on and off-balance sheet transactions through specific credit policies and procedures which provide for a strict approval, monitoring and reporting process. It is our policy to require collateral when it is deemed appropriate. Varying degrees and types of collateral are secured depending upon management's credit evaluation.

Commercial Credit Exposure Our commercial credit exposure is diversified across a broad range of industries. Commercial loans outstanding, excluding loans held for sale, and unused commercial commitments by industry are presented in the table below:

	March 31, 2024				December 31, 2023
	Commercial Utilized		Unused Commercial Commitments		Commercial Utilized		Unused Commercial Commitments
	(in millions)
Diversified financials	$	8,249	$	9,903	$	8,753	$	9,702
Real estate	4,911		1,516		4,702		1,695
Commercial and professional services	3,400		6,353		3,385		5,915
Consumer services	2,264		3,019		2,445		3,116
Capital goods	2,081		6,613		2,062		6,736
Semiconductors and semiconductor equipment	2,018		1,357		2,116		1,165
Retailing	1,789		5,185		1,752		4,790
Consumer durables and apparel	1,644		3,418		1,599		3,351
Utilities	1,551		1,440		1,334		1,421
Technology hardware and equipment	1,116		7,599		1,271		6,290
Health care equipment and services	1,014		2,690		966		2,910
Software and services	1,005		7,188		983		4,401
Chemicals	890		4,419		977		4,165
Energy	755		5,056		774		5,476
Food, beverage and tobacco	749		2,457		760		2,482
Metals and mining	671		568		678		589
Food and staples retailing	596		1,636		588		1,600
Banks	465		270		642		570
Media and entertainment	406		761		331		769
Pharmaceuticals, biotechnology and life science	377		4,216		396		4,926
Total commercial credit exposure in top 20 industries(1)	35,951		75,664		36,514		72,069
All other industries	912		8,914		825		8,138
Total commercial credit exposure(2)	$	36,863	$	84,578	$	37,339	$	80,207

(1)Based on utilization at March 31, 2024.

(2)Excludes commercial credit exposures with affiliates.

At March 31, 2024 and December 31, 2023, our commercial real estate secured loan portfolio reflects the following borrower types:

	March 31, 2024		December 31, 2023
Multifamily	45.0	%	43.7	%
Office	24.8		24.7
Hotels	14.6		16.6
All other types	15.6		15.0
Total	100.0	%	100.0	%

97

HSBC USA Inc.

Geographic Concentrations The following table reflects regional exposure at March 31, 2024 and December 31, 2023 for our real estate secured loan portfolios, excluding loans held for sale:

	Commercial Real Estate, including Construction Loans		Residential Mortgages and Home Equity Mortgages
March 31, 2024
New York State	25.1	%	29.7	%
California	8.5		45.6
North Central United States	13.3		1.0
North Eastern United States, excluding New York State	6.3		7.6
Southern United States	40.4		10.0
Western United States, excluding California	6.4		6.1
Total	100.0	%	100.0	%
December 31, 2023
New York State	23.8	%	30.2	%
California	10.2		44.9
North Central United States	12.7		1.0
North Eastern United States, excluding New York State	6.0		7.7
Southern United States	41.2		10.1
Western United States, excluding California	6.1		6.1
Total	100.0	%	100.0	%

Residential Mortgage Loans Our consumer loan portfolio includes the following types of loans:

•Interest-only loans – A loan which 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.

•ARM loans – A loan which allows us to adjust pricing on the loan in line with market movements.

The following table summarizes the balances of interest-only and ARM loans in our loan portfolios, excluding mortgages held for sale, at March 31, 2024 and December 31, 2023. Each category is not mutually exclusive and loans may appear in more than one category below.

	March 31, 2024		December 31, 2023
	(in millions)
Interest-only residential mortgage and home equity mortgage loans	$	4,453	$	4,392
ARM loans(1)	13,689		13,363

(1)During the remainder of 2024 and during 2025, approximately $349 million and $515 million, respectively, of the ARM loans will experience their first interest rate reset.

The following table summarizes the concentrations of first and second liens within the outstanding residential mortgage and home equity mortgage portfolios, excluding mortgages held for sale, at March 31, 2024 and December 31, 2023:

	March 31, 2024		December 31, 2023
	(in millions)
Closed end:
First lien	$	18,825	$	18,341
Second lien	14		15
Revolving(1)	368		374
Total	$	19,207	$	18,730

(1)A majority of revolving are second lien mortgages.

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Credit Risks Associated with Derivative Contracts  Credit risk associated with derivatives is measured as the net replacement cost of derivative contracts in a receivable position in the event the counterparties of such contracts fail to perform under the terms of those contracts. In managing derivative credit risk, both the current exposure, which is the replacement cost of contracts on the measurement date, as well as an estimate of the potential change in value of contracts over their remaining lives are considered. Counterparties to our derivative activities include financial institutions, central clearing parties, foreign and domestic government agencies, corporations, funds (mutual funds, hedge funds, etc.), insurance companies and private clients as well as other HSBC entities. These counterparties are subject to regular credit review by the credit risk management department. To minimize credit risk, we may enter into legally enforceable master netting agreements which reduce risk by permitting the closeout and netting of transactions with the same counterparty upon occurrence of certain events. In addition, we reduce credit risk by obtaining collateral from counterparties. The determination of the need for and the levels of collateral will differ based on an assessment of the credit risk of the counterparty and/or regulatory requirements.

The total risk in a derivative contract is a function of a number of variables, such as:

•volatility of interest rates, currencies, equity or corporate reference entity used as the basis for determining contract payments;

•current market events or trends;

•country risk;

•maturity and liquidity of contracts;

•creditworthiness of the counterparties in the transaction;

•the existence of a master netting agreement among the counterparties; and

•existence and value of collateral received from counterparties to secure exposures.

The table below presents total credit risk exposure calculated using the general risk-based capital rules of the Basel III Standardized Approach which includes the net positive mark-to-market of the derivative contracts plus any adjusted potential future exposure as measured in reference to the notional amount. The regulatory capital rules recognize that bilateral netting agreements reduce credit risk and, therefore, allow for reductions of risk-weighted assets when netting requirements have been met and collateral exists. As a result, risk-weighted amounts for regulatory capital purposes are a portion of the original gross exposures. Furthermore, many contracts contain provisions that allow us to close out the transaction if the counterparty fails to post required collateral. In addition, many contracts give us the right to break the transactions earlier than the final maturity date. As a result, these contracts have potential future exposures that are often much smaller than the future exposures derived from the regulatory capital rules.

	March 31, 2024		December 31, 2023
	(in millions)
Risk associated with derivative contracts:
Total credit risk exposure	$	8,961	$	9,716
Less: collateral held against exposure	2,696		2,459
Net credit risk exposure	$	6,265	$	7,257

Liquidity and Capital Resources

Effective liquidity management is defined as ensuring we can meet customer loan requests, customer deposit maturities/withdrawals and other cash commitments efficiently under both normal operating conditions and under unpredictable circumstances of industry or market stress. To achieve this objective, we have guidelines that require sufficient liquidity to cover potential funding requirements in both the short- and long-term and to avoid over-dependence on volatile, less reliable funding markets. Guidelines are set for the consolidated balance sheet of HSBC USA to ensure that it is a source of strength for our regulated, deposit-taking banking subsidiary, as well as to address the more limited sources of liquidity available to it as a holding company. Similar guidelines are set for HSBC Bank USA to ensure that it can meet its liquidity needs in various stress scenarios. Cash flow analysis, including stress testing scenarios, forms the basis for liquidity management and contingency funding plans. See "Risk Management" in this MD&A for further discussion of our approach towards liquidity and funding risk management, including information regarding the key measures employed to define, monitor and control our liquidity and funding risk.

Interest Bearing Deposits with Banks totaled $30,687 million and $25,015 million at March 31, 2024 and December 31, 2023, respectively, of which $30,593 million and $24,830 million, respectively, were held with the Federal Reserve Bank. Balances may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity.

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Surplus interest bearing deposits with the Federal Reserve Bank may be deployed into securities purchased under agreements to resell or other investments depending on market conditions and the opportunity to maximize returns.

Federal Funds Sold and Securities Purchased under Agreements to Resell totaled $8,306 million and $13,878 million at March 31, 2024 and December 31, 2023, respectively. Balances may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity.

Trading Assets includes securities totaling $17,750 million and $20,493 million at March 31, 2024 and December 31, 2023, respectively. See "Balance Sheet Review" in this MD&A for further analysis and discussion on trends.

Securities includes securities available-for-sale and securities held-to-maturity totaling $40,844 million and $40,772 million at March 31, 2024 and December 31, 2023, respectively. See "Balance Sheet Review" in this MD&A for further analysis and discussion on trends.

Short-Term Borrowings totaled $7,033 million and $9,914 million at March 31, 2024 and December 31, 2023, respectively. See "Balance Sheet Review" in this MD&A for further analysis and discussion on short-term borrowing trends.

Deposits totaled $122,053 million and $121,283 million at March 31, 2024 and December 31, 2023, respectively. See "Balance Sheet Review" in this MD&A for further analysis and discussion on deposit trends.

Long-Term Debt increased to $19,439 million at March 31, 2024 from $18,661 million at December 31, 2023. The following table presents the maturities of long-term debt at March 31, 2024:

	(in millions)
2024	$	3,633
2025	6,455
2026	1,138
2027	2,502
2028	1,139
Thereafter	4,572
Total	$	19,439

The following table summarizes issuances and retirements of long-term debt during the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,	2024		2023
	(in millions)
Long-term debt issued	$	2,335	$	2,037
Long-term debt repaid	(1,523)		(603)
Net long-term debt issued	$	812	$	1,434

See "Balance Sheet Review" in this MD&A for further analysis and discussion on long-term debt trends, including additional information on debt issued and repaid during the three months ended March 31, 2024.

Under our shelf registration statement on file with the SEC, we may issue certain securities including debt securities and preferred stock. We satisfy the eligibility requirements for designation as a "well-known seasoned issuer," which allows us to file a registration statement that does not have a limit on issuance capacity. The ability to issue under the registration statement is limited by the authority granted by the Board of Directors. At March 31, 2024, we were authorized to issue up to $15,000 million, of which $4,935 million was available. HSBC Bank USA has a $40,000 million Global Bank Note Program that provides for the issuance of subordinated and senior notes, of which $11,968 million was available at March 31, 2024.

As a member of the FHLB and the Federal Reserve Bank of New York, we have secured borrowing facilities which are collateralized by loans and investment securities. At March 31, 2024, long-term debt included $1,000 million of borrowings from the FHLB facility. Based upon the amounts pledged as collateral under these facilities, we have additional borrowing capacity of up to $25,654 million.

Preferred Equity  See Note 19, "Preferred Stock," in our 2023 Form 10-K for information regarding all outstanding HSBC USA preferred share issues.

Common Equity  During the first quarter of 2024, HSBC USA did not receive any cash capital contributions from its parent, HSBC North America, and did not make any capital contributions to its subsidiary, HSBC Bank USA.

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Capital Ratios  In managing capital, we develop targets for common equity Tier 1 capital to risk-weighted assets, Tier 1 capital to risk-weighted assets, total capital to risk-weighted assets and Tier 1 capital to adjusted quarterly average assets (i.e., the "Tier 1 leverage ratio"). Capital targets are reviewed at least semi-annually to ensure they reflect our business mix and risk profile, as well as real-time conditions and circumstances. The following table summarizes HSBC USA's Basel III capital ratios calculated as of March 31, 2024 and December 31, 2023:

	March 31, 2024		December 31, 2023
Common equity Tier 1 capital to risk-weighted assets	13.1	%	13.0	%
Tier 1 capital to risk-weighted assets	13.4		13.3
Total capital to risk-weighted assets	15.7		15.7
Tier 1 leverage ratio(1)	8.0		7.7

(1)Adjusted quarterly average assets, the Tier 1 leverage ratio denominator, reflects quarterly average assets adjusted for amounts permitted to be deducted from Tier 1 capital.

We manage capital in accordance with HSBC Group policy. The HSBC North America Internal Capital Adequacy Assessment Process ("ICAAP") works in conjunction with the HSBC Group's ICAAP. The HSBC North America ICAAP applies to HSBC USA and HSBC Bank USA and evaluates regulatory capital adequacy and capital adequacy under various stress scenarios. Our approach is to meet our capital needs for these stress scenarios locally through activities which reduce risk. To the extent that local alternatives are insufficient, as a wholly-owned subsidiary of HSBC, we would seek support from our ultimate parent. Regulatory capital requirements are based on the amount of capital required to be held, plus applicable capital buffers, as defined by regulations, and the amount of risk-weighted assets and leverage exposure, also calculated based on regulatory definitions.

We are subject to regulatory capital rules issued by U.S. banking regulators including Basel III (the "Basel III rule"). The Basel III rule establishes minimum capital ratios and overall capital adequacy standards for banks and bank holding companies ("BHCs"). HSBC North America, HSBC USA and HSBC Bank USA each calculate their risk-based capital requirements for credit risk under the Standardized Approach in the Basel III rule. In 2019, the FRB and the other federal banking agencies jointly finalized rules to implement the Economic Growth, Regulatory Relief and Consumer Protection Act that tailor the application of the enhanced prudential standards for large BHC and foreign banking organizations (the "Tailoring Rules"). The Tailoring Rules assign each BHC and IHC with $50 billion or more in total U.S. assets into one of five classifications (Categories I through IV, and 'other firms') based on its size and four risk-based indicators. Under the Tailoring Rules, HSBC North America and HSBC Bank USA are subject to Category IV standards. For additional discussion of the Basel III rule requirements, including required minimum capital ratios, as well as further discussion of the Tailoring Rules, Category IV standards and other related regulatory developments and their expected impact see Part I, "Regulation and Competition - Regulatory Capital and Liquidity Requirements," in our 2023 Form 10-K. We continue to review the composition of our capital structure.

Regulatory Developments In July 2023, U.S. banking regulators proposed changes to the regulatory capital rules applicable to U.S. banks, BHCs and IHCs with total consolidated assets of $100 billion or more. These changes are intended to be broadly consistent with revisions to Basel III finalized by the Basel Committee on Banking Supervision in 2017. The U.S. proposal would end the use of internal models for credit risk, credit valuation adjustments, and operational risk, eliminate the accumulated other comprehensive income opt-out for Category IV banking organizations, create an expanded risk-based credit capital approach in addition to retaining a modified version of the current standardized approach, and make changes to the modeling requirements for market risk. These proposals would not be effective until July 1, 2025 at the earliest. Certain aspects of the proposal would be subject to a three-year phase-in period. We are analyzing the proposed changes, including the timing of implementation, to determine the potential effects on capital requirements. Based on the foregoing, if adopted as proposed, we expect an increase in the capital requirements of HSBC North America, HSBC USA and HSBC Bank USA during the phase-in period and thereafter.

Capital Planning and Stress Testing The FRB requires certain U.S. top-tier BHCs and IHCs, including HSBC North America, to comply with the FRB's capital plan rule and CCAR program, as well as the supervisory stress tests conducted by the FRB. The stress tests are forward looking exercises to assess the impact of hypothetical macroeconomic baseline and severely adverse scenarios provided by the FRB on the financial condition and capital adequacy of a CCAR firm over a nine quarter planning horizon. As a Category IV firm, HSBC North America is subject to supervisory stress testing on a biennial basis, and it may opt-in to such testing in an "off year" in order to recalibrate its stress capital buffer based on its most recent supervisory stress test. The FRB continues to supervise Category IV firms on an ongoing basis, including evaluation of the capital adequacy and capital planning processes during off-cycle years. For further discussion of capital planning and stress testing, including detail regarding the FRB's supervisory assessment as part of the CCAR process, see Part I, "Regulation and Competition - Regulatory Capital and Liquidity Requirements," in our 2023 Form 10-K.

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HSBC North America submitted its 2024 CCAR capital plan in April 2024. The FRB will publicly disclose its supervisory stress test results on or before June 30, 2024. Stress testing results are based solely on hypothetical adverse stress scenarios and should not be viewed or interpreted as forecasts of expected outcomes or capital adequacy or of the actual financial condition of HSBC North America. Capital planning and stress testing for HSBC North America may impact our future capital and liquidity.

While BHC regulatory capital compliance is generally performed at the HSBC North America level, and also separately for HSBC Bank USA, as a BHC we are required to meet minimum capital requirements imposed by the FRB. We present our capital ratios, together with HSBC Bank USA's in Note 14, "Retained Earnings and Regulatory Capital Requirements," in the accompanying consolidated financial statements.

2024 Funding Strategy  Our current estimate for funding needs and sources for 2024 are summarized in the following table:

	Actual January 1 through March 31, 2024		Estimated April 1 through December 31, 2024		Estimated Full Year 2024
	(in billions)
Increase (decrease) in funding needs:
Net change in loans	$	1	$	4	$	5
Net change in short-term investments and securities	—		(6)		(6)
Net change in trading and other assets	(2)		6		4
Total funding needs	$	(1)	$	4	$	3
Increase (decrease) in funding sources:
Net change in deposits	$	1	$	(1)	$	—
Net change in trading and other short-term liabilities	(3)		6		3
Net change in long-term debt	1		(1)		—
Total funding sources	$	(1)	$	4	$	3

The above table reflects a long-term funding strategy. Daily balances fluctuate as we accommodate customer needs, while ensuring that we have liquidity in place to support the balance sheet maturity funding profile. Should market conditions deteriorate, we have contingency plans to generate additional liquidity through the sales of assets or financing transactions. We remain confident in our ability to access the market for long-term debt funding needs in the current market environment. We continue to seek well-priced and stable customer deposits. We also continue to sell new agency-eligible conforming residential mortgage loans to third parties.

HSBC Bank USA is subject to significant restrictions imposed by federal law on extensions of credit to, and certain other 'covered transactions' with HSBC USA and other affiliates. For further discussion, see Part I, "Regulation and Competition - Affiliate Transaction Restrictions," in our 2023 Form 10-K.

See "Risk Management" in this MD&A for further discussion relating to our liquidity contingency plans and our approach to liquidity and funding risk management.

Off-Balance Sheet Arrangements As part of our normal operations, we enter into credit derivatives and various off-balance sheet arrangements with affiliates and third parties. These arrangements arise principally in connection with our lending and client intermediation activities and involve primarily commitments to extend credit and, in certain cases, guarantees.

Commitments to extend credit include arrangements whereby we are contractually obligated to extend credit in the form of loans, participations in loans or similar transactions. At March 31, 2024 and December 31, 2023, we had commitments to extend credit totaling $91.1 billion and $87.4 billion, respectively, comprised primarily of commercial commitments and, to a lesser extent, consumer commitments. Commercial commitments comprise primarily those related to secured and unsecured loans and lines of credit. Consumer commitments comprise unused MasterCard/Visa credit card lines, where we have the right to change terms or conditions upon notification to the customer, and commitments to extend credit secured by residential properties, where we have the right to change terms or conditions, for cause, upon notification to the customer. For a summary of guarantees, including standby letters of credit and certain credit derivative transactions, as well as the contractual amounts outstanding at March 31, 2024 and December 31, 2023, see Note 16, "Guarantee Arrangements, Pledged Asset and Repurchase Agreements," in the accompanying consolidated financial statements.

The contractual amounts of these financial instruments represent our maximum possible credit exposure in the event that a counterparty draws down the full commitment amount or we are required to fulfill our maximum obligation under a guarantee. Many of these commitments and guarantees expire unused or without default. As a result, we believe that the contractual amount is not representative of the actual future credit exposure or funding requirements.

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In addition, we had commitments to purchase securities under agreements to resell on a forward starting basis totaling $0.7 billion and $4.8 billion at March 31, 2024 and December 31, 2023, respectively. These contracts typically expire in less than one month and are secured by collateral primarily from U.S. Treasury securities.

Our off-balance sheet arrangements also include transactions with unconsolidated variable interest entities ("VIEs"). See Note 15, "Variable Interest Entities," in the accompanying consolidated financial statements for a summary of these unconsolidated VIEs.

Fair Value

Fair Value Hierarchy  Fair value measurement accounting principles establish a fair value hierarchy structure that prioritizes the inputs to determine the fair value of an asset or liability (the "Fair Value Framework"). The Fair Value Framework distinguishes between inputs that are based on observed market data and unobservable inputs that reflect market participants' assumptions. It emphasizes the use of valuation methodologies that maximize observable market inputs. For financial instruments carried at fair value, the best evidence of fair value is a quoted price in an actively traded market (Level 1). Where the market for a financial instrument is not active, valuation techniques are used. The majority of our valuation techniques use market inputs that are either observable or indirectly derived from and corroborated by observable market data for substantially the full term of the financial instrument (Level 2). Because Level 1 and Level 2 instruments are determined by observable inputs, less judgment is applied in determining their fair values. In the absence of observable market inputs, the financial instrument is valued based on valuation techniques that feature one or more significant unobservable inputs (Level 3). The determination of the level of fair value hierarchy within which the fair value measurement of an asset or a liability is classified often requires judgment and may change over time as market conditions evolve. We consider the following factors in developing the fair value hierarchy:

•whether the asset or liability is transacted in an active market with a quoted market price;

•the level of bid-ask spreads;

•a lack of pricing transparency due to, among other things, complexity of the product and market liquidity;

•whether only a few transactions are observed over a significant period of time;

•whether the pricing quotations differ substantially among independent pricing services;

•whether inputs to the valuation techniques can be derived from or corroborated with market data; and

•whether significant adjustments are made to the observed pricing information or model output to determine the fair value.

Level 1 inputs are unadjusted quoted prices in active markets that the reporting entity has the ability to access for identical assets or liabilities. A financial instrument is classified as a Level 1 measurement if it is listed on an exchange or is an instrument actively traded in the over-the-counter ("OTC") market where transactions occur with sufficient frequency and volume. We regard financial instruments such as debt securities, equity securities and derivative contracts listed on the primary exchanges of a country to be actively traded. Non-exchange-traded instruments classified as Level 1 assets include securities issued by the U.S. Treasury, to-be-announced securities, non-callable securities issued by U.S. Government sponsored enterprises and certain foreign government-backed debt.

Level 2 inputs are those that are observable either directly or indirectly but do not qualify as Level 1 inputs. We classify mortgage pass-through securities, agency and certain non-agency mortgage collateralized obligations, non-exchange-traded derivative contracts, asset-backed securities, obligations of U.S. states and political subdivisions, corporate debt securities, certain foreign government-backed debt, preferred securities, securities purchased and sold under resale and repurchase agreements, precious metals, certain loans held for sale, certain student loans held for investment, residential mortgage loans whose carrying amount was reduced based on the fair value of the underlying collateral, real estate owned and certain client share repurchase transactions as Level 2 measurements. Where possible, at least two quotations from independent sources are obtained based on transactions involving comparable assets and liabilities to validate the fair value of these instruments. We have established a process to understand the methodologies and inputs used by the third-party pricing services to ensure that pricing information meets the fair value objective and, where appropriate, this pricing data is back-tested to market trade executions. Where significant differences arise among the independent pricing quotes and the internally determined fair value, we investigate and reconcile the differences. If the investigation results in a significant adjustment to the fair value, the instrument will be classified as Level 3 within the fair value hierarchy. In general, we have observed that there is a correlation between the credit standing and the market liquidity of a non-derivative instrument.

Level 2 derivative instruments are generally valued based on discounted future cash flows or an option pricing model adjusted for counterparty credit risk and market liquidity. The fair value of certain derivative products is determined using valuation techniques based on inputs derived from observable indices traded in the OTC market. Appropriate control processes and

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procedures have been applied to ensure that the derived inputs are applied to value only those instruments that share similar risks to the relevant benchmark indices and therefore demonstrate a similar response to market factors.

Level 3 inputs are unobservable estimates that management expects market participants would use to determine the fair value of the asset or liability. That is, Level 3 inputs incorporate market participants' assumptions about risk and the risk premium required by market participants in order to bear that risk. We develop Level 3 inputs based on the best information available in the circumstances. At March 31, 2024 and December 31, 2023, our Level 3 assets and liabilities measured at fair value included the following: certain structured deposits and structured notes for which the embedded derivatives have significant unobservable inputs (e.g., volatility or default correlations), certain asset-backed securities, individually assessed commercial loans, mortgage servicing rights, derivatives with certain inputs which are unobservable, certain credit default swaps, certain loans held for sale and swap agreements entered into in conjunction with the sales of Visa Class B Shares for which the fair value is dependent upon the final resolution of the related litigation. See Note 17, "Fair Value Measurements," in the accompanying consolidated financial statements for additional information on Level 3 inputs.

Level 3 Measurements  The following table provides information about Level 3 assets/liabilities in relation to total assets/liabilities measured at fair value at March 31, 2024 and December 31, 2023:

	March 31, 2024			December 31, 2023
	(dollars are in millions)
Level 3 assets(1)(2)	$	758		$	729
Total assets measured at fair value(1)(3)	59,598			64,748
Level 3 liabilities(1)	2,486			2,429
Total liabilities measured at fair value(1)	25,116			28,622
Level 3 assets as a percent of total assets measured at fair value	1.3		%	1.1		%
Level 3 liabilities as a percent of total liabilities measured at fair value	9.9		%	8.5		%

(1)Presented without netting which allows the offsetting of amounts relating to certain contracts if certain conditions are met.

(2)Includes $376 million of recurring Level 3 assets and $382 million of non-recurring Level 3 assets at March 31, 2024. Includes $355 million of recurring Level 3 assets and $374 million of non-recurring Level 3 assets at December 31, 2023.

(3)Includes $59,113 million of assets measured on a recurring basis and $485 million of assets measured on a non-recurring basis at March 31, 2024. Includes $64,268 million of assets measured on a recurring basis and $480 million of assets measured on a non-recurring basis at December 31, 2023.

Significant Changes in Fair Value for Level 3 Assets and Liabilities See Note 17, "Fair Value Measurements," in the accompanying consolidated financial statements for information on additions to and transfers into (out of) Level 3 measurements during the three months ended March 31, 2024 and 2023 as well as for further details including the classification hierarchy associated with assets and liabilities measured at fair value.

Effect of Changes in Significant Unobservable Inputs  The fair value of certain financial instruments is measured using valuation techniques that incorporate pricing assumptions not supported by, derived from or corroborated by observable market data. The resultant fair value measurements are dependent on unobservable input parameters which can be selected from a range of estimates and may be interdependent. Changes in one or more of the significant unobservable input parameters may change the fair value measurements of these financial instruments. For the purpose of preparing the financial statements, the final valuation inputs selected are based on management's best judgment that reflect the assumptions market participants would use in pricing similar assets or liabilities.

The unobservable input parameters selected are subject to the internal valuation control processes and procedures. When we perform a test of all the significant input parameters to the extreme values within the range at the same time, it could result in an increase of the overall fair value measurement of approximately $20 million or a decrease of the overall fair value measurement of approximately $70 million at March 31, 2024. The effect of changes in significant unobservable input parameters are primarily driven by the uncertainty in determining the fair value of certain credit-linked structured notes and swap agreements entered into in conjunction with the sales of Visa Class B Shares.

Risk Management

Overview  The primary role of risk management is to protect our customers, business, colleagues and the communities that we serve, while ensuring we are able to support our strategy and provide sustainable growth.

We aim to use a comprehensive risk management approach across the organization and across all risk types underpinned by our culture and values. This is outlined in our risk management framework, including the key principles and practices that we employ in managing material risks, both financial and non-financial. This framework fosters continuous monitoring, promotes

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risk awareness, and encourages sound operational and strategic decision-making and escalation processes. It also supports a consistent approach to identifying, assessing, managing, and reporting the risks we accept and incur in our activities, with clear accountabilities.

Our Board of Directors has the ultimate responsibility for the effective oversight of risk management and approves our risk appetite. It is advised on risk matters by the Risk Committee of the Board of Directors, notably risk appetite and its alignment with our strategy, risk governance and internal controls, as well as high-level risk related matters. We use a defined executive risk governance structure to help ensure there is appropriate oversight and accountability embedded throughout our business for the effective management of risk.

Our material risks The principal risks associated with our operations include the following:

•Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract;

•Treasury risk is the risk of having insufficient capital, liquidity or funding resources to meet financial obligations and satisfy regulatory requirements, including the risk of an adverse impact on earnings or capital due to changes in market interest rates, together with pension risk;

•Market risk is the risk of an adverse financial impact on trading activities arising from changes in market parameters such as interest rates, foreign exchange rates, asset prices, volatilities, correlations and credit spreads;

•Climate risk relates to the financial and non-financial impacts that may arise as a consequence of climate change and the move to a net zero economy;

•Resilience risk is the risk of sustained and significant business disruption from execution, delivery, physical security or safety events, causing the inability to provide critical services to our customers, affiliates and counterparties;

•Regulatory compliance risk is the risk associated with breaching our duty to clients and other counterparties, inappropriate market conduct and breaching related financial services regulatory standards;

•Financial crime risk is the risk that our products and services will be exploited for criminal activity, including fraud, bribery and corruption, tax evasion, sanctions and export control violations, money laundering, terrorist financing and proliferation financing;

•Strategic risk is the risk that the business will fail to identify, execute and react appropriately to opportunities and/or threats arising from changes in the market, some of which may emerge over a number of years such as changing economic and political circumstances, customer requirements, demographic trends, regulatory developments or competitor action; and

•Model risk is the risk of inappropriate or incorrect business decisions arising from the use of models that have been inadequately designed, implemented or used, or from models that do not perform in line with expectations and predictions.

In the course of our regular risk management activities, we use models to help quantify the risk we are taking. We believe that the assumptions used in these models are reasonable within the parameters for which the models have been built and calibrated to operate, but events may unfold differently than what is assumed in the models. Adjustments to model outputs to reflect consideration of management judgment are used with stringent governance in place to ensure appropriate results. Models are also monitored to confirm they are performing as intended.

See "Risk Management" in MD&A in our 2023 Form 10-K for a more complete discussion of the objectives of our risk management system as well as our risk management policies and practices. Other than the change to treasury risk management discussed below, there have been no material changes to our approach to risk management since December 31, 2023.

Credit Risk Management Credit risk is managed through a robust risk identification and control framework which outlines clear and consistent policies, principles and guidance for risk managers. Credit risk is monitored using various internal risk management measures and within limits approved by individuals within a framework of delegated authorities. Our credit risk management procedures are designed for all stages of economic and financial cycles, including challenging periods of market volatility and economic uncertainty. During the first quarter of 2024, economic uncertainty remained due to elevated interest rates, inflation levels and the expectation for slowing economic growth. We continue to monitor the performance of our material commercial loans as conditions evolve and take necessary credit actions where warranted. See "Risk Management" in MD&A in our 2023 Form 10-K for a more complete discussion of our approach to credit risk.

Treasury Risk Management We continuously monitor our capital ratios and the impact of market events on our liquidity positions and will continue to adapt our frameworks as necessary to reflect market events and the evolving regulatory landscape and view as to best practices. In the first quarter of 2024, we began managing our non-trading value at risk ("VaR") exposure to a 10-day holding period as compared with the previous approach which was based on a one-day holding period. As a result, we have revised prior year amounts in the non-trading VaR table below in order to conform to the current year presentation. There

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have been no other material changes to our approach towards treasury risk management since December 31, 2023. See "Risk Management" in MD&A in our 2023 Form 10-K for a more complete discussion of our approach to treasury risk

Capital risk See "Liquidity and Capital Resources" in this MD&A for a discussion of our approach to capital risk management, including our capital ratios and regulatory capital requirements.

Liquidity and funding risk As part of our approach towards liquidity and funding risk management, we employ the measures discussed below to define, monitor and control our liquidity and funding risk in accordance with HSBC policy.

HSBC North America is subject to the U.S. liquidity coverage ratio ("LCR") rule, which is designed to be a short-term liquidity measure to ensure banks have sufficient High Quality Liquid Assets ("HQLA") to cover net stressed cash outflows over the next 30 days, and both HSBC North America and HSBC Bank USA calculate and report their LCR to U.S. regulators on a daily basis. During the three months ended March 31, 2024, HSBC Bank USA's LCR remained above 100 percent. Under the Tailoring Rules, a 70 percent LCR requirement applies to Category IV firms with weighted short-term wholesale funding that equals or exceeds $50 billion. As a result, a LCR of 100 percent or higher reflects an unencumbered HQLA balance that is equal to or exceeds 70 percent of a Category IV firm's liquidity needs for a 30 calendar day liquidity stress scenario. HQLA consists of cash or assets that can be converted into cash at little or no loss of value in private markets.

HSBC North America is also subject to the U.S. net stable funding ratio ("NSFR") rule, which is a longer term liquidity measure with a 12-month time horizon to ensure a sustainable maturity structure of assets and liabilities, and both HSBC North America and HSBC Bank USA calculate and report their NSFR to U.S. regulators. At both March 31, 2024 and December 31, 2023, HSBC Bank USA's NSFR exceeded 100 percent. Under the Tailoring Rules, a 70 percent NSFR requirement applies to Category IV firms with weighted short-term wholesale funding that equals or exceeds $50 billion. As a result, a NSFR of 100 percent or more reflects an available stable funding balance from liabilities and capital over the next 12 months that is equal to or exceeds 70 percent of a Category IV firm's required amount of funding for assets and off-balance sheet exposures. In addition, under the United Kingdom ("U.K.") Prudential Regulatory Authority ("PRA") based NSFR rule, HSBC USA's NSFR exceeded 100 percent at both March 31, 2024 and December 31, 2023. Under the U.K. PRA NSFR rule, a NSFR of 100 percent or more reflects an available stable funding balance from liabilities and capital over the next 12 months that is equal to or exceeds the required amount of funding for assets and off-balance sheet exposures.

As a Category IV firm, HSBC North America is subject to liquidity stress testing and related liquidity buffer and liquidity risk management requirements. HSBC North America and HSBC Bank USA have liquidity profiles to support compliance with these rules and may need to make changes to their liquidity profiles to support compliance with any future rules.

Our liquidity and funding risk management approach includes deposits, supplemented by wholesale borrowing to fund our balance sheet, and using security sales or secured borrowings for liquidity stress situations in our liquidity contingency plans. In addition, regulations require banks to retain a portfolio of HQLA. As such, we are maintaining a large portfolio of high quality sovereign and sovereign guaranteed securities.

Our ability to regularly attract wholesale funds at a competitive cost is enhanced by strong ratings from the major credit rating agencies. The following table reflects the short and long-term credit ratings of HSBC USA and HSBC Bank USA at March 31, 2024:

	Moody's	S&P	Fitch
HSBC USA:
Short-term borrowings	P-1	A-2	F1+
Long-term/senior debt	A2	A-	A+
HSBC Bank USA:
Short-term borrowings	P-1	A-1	F1+
Long-term/senior debt	Aa3	A+	AA-

Rating agencies continue to evaluate economic and geopolitical trends, regulatory developments, future profitability, risk management practices and legal matters, all of which could lead to adverse ratings actions.

Although we closely monitor and strive to manage factors influencing our credit ratings, there is no assurance that our credit ratings will not change in the future. At March 31, 2024, none of the ratings on the debt of HSBC USA or HSBC Bank USA from any of the rating agencies were under review for potential downgrade.

See "Liquidity and Capital Resources" in this MD&A for further discussion of our liquidity position, including additional information regarding our outstanding borrowings, the remaining availability of our debt issuance programs and our funding strategy.

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Interest rate risk Various techniques are utilized to quantify and monitor risks associated with the repricing characteristics of our assets, liabilities and derivative contracts. See "Risk Management" in MD&A in our 2023 Form 10-K for a more complete discussion of our approach to interest rate risk.

Economic value of equity ("EVE") EVE represents the present value of the banking book cash flows that could be provided to our equity holder under a managed run-off scenario. An EVE sensitivity represents the change in EVE due to a defined movement in interest rates. We manage to an immediate parallel upward shock of 200 basis points and an immediate parallel downward shock of 200 basis points to the market implied interest rates. At both March 31, 2024 and December 31, 2023, our EVE remained within risk limits for the up 200 and down 200 basis point interest rate shock scenarios.

Earnings-at-risk Earnings-at-risk is a measure of interest rate risk in the banking book generated by our non-trading assets and liabilities that primarily includes loans, deposits with banks, investment securities, deposits, long-term debt and any associated interest rate hedges that are not held for trading intent or in order to hedge positions held with trading intent. Earnings-at-risk utilizes a number of interest rate scenarios to estimate the impact on projected banking book net interest income over a twelve month period, such as rate shock scenarios which assume immediate market rate movements by 100 basis points, as well as scenarios in which rates gradually rise or fall by 100 basis points. In the gradual scenarios, 25 percent of the interest rate movement occurs at the beginning of each quarter. The following table reflects the estimated impact of the earnings-at-risk scenarios on projected banking book net interest income:

	March 31, 2024				December 31, 2023
	Amount		%		Amount		%
	(dollars are in millions)
Estimated increase (decrease) in projected banking book net interest income (reflects projected rate movements on April 1, 2024 and January 1, 2024, respectively):
Resulting from a gradual 100 basis point increase in the yield curve	$	(7)	—	%	$	(17)	(1)	%
Resulting from a gradual 100 basis point decrease in the yield curve	(10)		—		(33)		(1)
Other significant scenarios monitored (reflects projected rate movements on April 1, 2024 and January 1, 2024, respectively):
Resulting from an immediate 100 basis point increase in the yield curve	(13)		—		(37)		(1)
Resulting from an immediate 100 basis point decrease in the yield curve	12		—		(16)		(1)

The projections do not take into consideration possible complicating factors such as the effect of changes in interest rates on the credit quality, size and composition of the balance sheet. Therefore, although this provides a reasonable estimate of interest rate sensitivity, actual results will differ from these estimates, possibly by significant amounts.

Non-trading VaR Non-trading VaR predominantly relates to Markets Treasury and represents the potential negative changes in the investment portfolio market value (which includes available-for-sale and held-to-maturity assets) and associated hedges. Our investment portfolio holdings comprise mainly U.S. Treasury, U.S. Government agency mortgage-backed and U.S. Government sponsored mortgage-backed securities. Our non-trading VaR exposure is driven by interest rates and agency mortgage-backed security spread volatility. Refer to "Market Risk Management" below for further discussion regarding VaR and the management of market risk in our non-trading portfolios.

The following table summarizes our non-trading VaR for the three months ended March 31, 2024 and at December 31, 2023:

	Credit Spread		Interest Rate		Portfolio Diversification(1)		Total(1)
	(in millions)
At March 31, 2024	$	297	$	258	$	(188)	$	367
Three Months Ended March 31, 2024
Average	297		259		(171)		385
Maximum	305		290				415
Minimum	293		232				354
At December 31, 2023	$	326	$	226	$	(197)	$	355

(1)    Refer to the Trading VaR table in "Market Risk Management" below for additional information.

Non-trading VaR also includes the interest rate risk of non-trading financial assets and liabilities held by the global businesses and transfer priced into Markets Treasury which has the mandate to centrally manage and hedge it.

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Market Risk Management  Exposure to market risk is separated into two portfolios:

•Trading portfolios comprise positions held for client servicing and market-making, with the intention of short-term resale and/or to hedge risks resulting from such positions.

•Non-trading portfolios comprise positions that primarily arise from the interest rate management of our retail and commercial banking assets and liabilities as well as financial investments classified as available-for-sale and held-to-maturity.

We apply similar risk management policies and measurement techniques to both trading and non-trading portfolios. Our objective is to manage and control market risk exposures to optimize return on risk while maintaining a market profile consistent with our established risk appetite. See "Risk Management" in MD&A in our 2023 Form 10-K for a more complete discussion of our approach to market risk.

Value at risk ("VaR") VaR is a technique for estimating potential losses on risk positions as a result of movements in market rates and prices over a specified time horizon and to a given level of confidence. The use of VaR is integrated into market risk management and calculated for all trading positions regardless of how we capitalize them. In addition, we calculate VaR for non-trading portfolios to have a complete picture of risk. VaR measures are calculated to a 99 percent confidence level and use a one-day holding period for trading VaR and a 10-day holding period for non-trading VaR.

Trading VaR Trading VaR is generated principally from trading activities within the MSS segment of GBM. These primarily include positions in various products across rates, foreign exchange and credit asset classes.

The following graph summarizes daily VaR for our trading portfolios at a 99 percent confidence level (in millions):

The following table summarizes our trading VaR for the three months ended March 31, 2024 and at December 31, 2023:

	Credit Spread		Foreign Exchange and Commodity		Interest Rate		Portfolio Diversification(1)		Total(2)
	(in millions)
At March 31, 2024	$	1	$	2	$	4	$	(2)	$	5
Three Months Ended March 31, 2024
Average	1		1		3		(1)		4
Maximum	1		4		6				6
Minimum	—		—		1				2
At December 31, 2023	$	—	$	1	$	1	$	—	$	2

(1)Portfolio diversification is the market risk dispersion effect of holding a portfolio containing different risk types. It represents the reduction in unsystematic market risk that occurs when combining a number of different risk types, for example, foreign exchange, interest rate and credit spread, together in one portfolio. It is measured as the difference between the sum of the VaR by individual risk type and the combined total VaR. A negative number represents the benefit of portfolio diversification. As the maximum and minimum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit for these measures.

(2)The total VaR is non-additive across risk types due to diversification effects. For presentation purposes, portfolio diversification of the VaR for trading portfolios includes VaR-based risk-not-in-VaR.

Refer to "Treasury Risk Management" above for disclosure of our non-trading VaR.

Back-testing We routinely validate the accuracy of our VaR models by back-testing them against hypothetical profit and loss that excludes non-modeled items such as fees, commissions and revenues of intra-day transactions from the actual reported profit and loss. We would expect, under stable market conditions, to experience two or three losses in excess of VaR at the 99

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percent confidence level over a one-year period. However, in periods of unstable market conditions, we could see an increase in the number of back-testing exceptions.

During the first quarter of 2024, we experienced no loss back-testing exception.

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CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES

The following table summarizes the quarter-to-date average daily balances of the principal components of assets, liabilities and equity together with their respective interest amounts and rates earned or paid. Net interest margin is calculated by dividing net interest income by the average interest earning assets from which interest income is earned. Loan interest for the three months ended March 31, 2024 and 2023 included fees of $6 million and $7 million, respectively.

Three Months Ended March 31,	2024						2023
	Average Balance		Interest		Rate		Average Balance		Interest		Rate
	(dollars are in millions)
Assets:
Interest bearing deposits with banks	$	30,112	$	321	4.29	%	$	34,325	$	269	3.18	%
Federal funds sold and securities purchased under resale agreements(1)	5,502		127		9.28		9,326		141		6.13
Trading securities	18,688		85		1.83		12,752		49		1.56
Securities	40,553		445		4.41		35,153		323		3.73
Loans:
Commercial	40,421		711		7.07		42,494		657		6.27
Consumer:
Residential mortgages	18,562		174		3.77		16,889		134		3.22
Home equity mortgages	384		7		7.33		365		6		6.67
Credit cards	188		5		10.70		199		4		8.15
Other consumer	89		2		9.04		136		2		5.96
Total consumer	19,223		188		3.93		17,589		146		3.37
Total loans	59,644		899		6.06		60,083		803		5.42
Other	1,456		16		4.42		1,968		19		3.92
Total interest earning assets	$	155,955	$	1,893	4.88	%	$	153,607	$	1,604	4.23	%
Allowance for credit losses	(584)						(588)
Cash and due from banks	767						942
Other assets	9,158						12,288
Total assets	$	165,296					$	166,249
Liabilities and Equity:
Domestic deposits:
Savings deposits	$	43,889	$	329	3.01	%	$	49,307	$	262	2.15	%
Time deposits	21,316		311		5.87		16,185		215		5.39
Other interest bearing deposits	26,275		317		4.85		20,411		233		4.63
Foreign deposits	5,609		55		3.94		6,082		46		3.07
Total interest bearing deposits	97,089		1,012		4.19		91,985		756		3.33
Short-term borrowings:
Securities sold under repurchase agreements(1)	721		59		32.91		425		38		36.26
Commercial paper	5,540		84		6.10		5,304		61		4.66
Other short-term borrowings	1,009		11		4.38		391		1		1.04
Total short-term borrowings	7,270		154		8.52		6,120		100		6.63
Long-term debt	18,561		285		6.18		18,301		256		5.67
Total interest bearing debt	122,920		1,451		4.75		116,406		1,112		3.87
Tax liabilities and other	1,342		16		4.80		930		9		3.92
Total interest bearing liabilities	$	124,262	$	1,467	4.75	%	$	117,336	$	1,121	3.87	%
Net interest income/Interest rate spread			$	426	.13	%			$	483	.36	%
Noninterest bearing deposits	22,956						30,254
Other liabilities	6,365						6,303
Total equity	11,713						12,356
Total liabilities and equity	$	165,296					$	166,249
Net interest margin on average earning assets					1.10	%					1.28	%

(1)The denominators used in the calculation of the rates on federal funds sold and securities purchased under resale agreements and securities sold under repurchase agreements reflect the net amounts presented in the balance sheet.

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Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Information required by this Item is included within Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in the Risk Management section under the captions "Treasury Risk Management - Interest Rate Risk" and "Market Risk Management."

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures We maintain a system of disclosure controls and procedures designed to ensure that information required to be disclosed by HSBC USA in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported on a timely basis. Our Board of Directors, operating through its Audit Committee, which is composed entirely of independent non-executive directors, provides oversight to our financial reporting process.

We conducted an evaluation, with the participation of the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report so as to alert them in a timely fashion to material information required to be disclosed in reports we file under the Exchange Act.

Changes in Internal Control over Financial Reporting There has been no change in HSBC USA's internal control over financial reporting that occurred during the quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

See Note 18, "Litigation and Regulatory Matters," in the accompanying consolidated financial statements for our legal proceedings disclosure, which is incorporated herein by reference.

Item 5.    Other Information

Disclosures pursuant to Section 13(r) of the Securities Exchange Act Section 13(r) of the Securities Exchange Act requires each issuer registered with the SEC to disclose in its annual or quarterly reports whether it or any of its affiliates have knowingly engaged in specified activities or transactions with persons or entities targeted by U.S. sanctions programs relating to Iran, terrorism, or the proliferation of weapons of mass destruction, even if those activities are not prohibited by U.S. law and are conducted outside the U.S. by non-U.S. affiliates in compliance with local laws and regulations.

To comply with this requirement, HSBC has requested relevant information from its affiliates globally. During the period covered by this Form 10-Q, HUSI did not engage in activities or transactions requiring disclosure pursuant to Section 13(r) other than those activities related to frozen accounts and transactions permitted under relevant U.S. sanctions programs described under "Frozen Accounts and Transactions" below. The following activities conducted by our affiliates are disclosed in response to Section 13(r):

Legacy contractual obligations related to guarantees Between 1996 and 2007, the HSBC Group provided guarantees to a number of its non-Iranian customers in Europe and the Middle East for various business activities in Iran. In a number of cases, the HSBC Group issued counter indemnities involving Iranian banks as the Iranian beneficiaries of the guarantees required that they be backed directly by Iranian banks. The Iranian banks to which the HSBC Group provided counter indemnities included Bank Tejarat, Bank Melli, and the Bank of Industry and Mine.

There was no measurable gross revenue in the first quarter of 2024 under those guarantees and counter indemnities. The HSBC Group does not allocate direct costs to fees and commissions and, therefore, has not disclosed a separate net profit measure. The HSBC Group is seeking to cancel all relevant guarantees and counter indemnities, and does not currently intend to provide any new guarantees or counter indemnities involving Iran. No guarantees were cancelled in the first quarter of 2024, and approximately 14 remain outstanding.

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Other relationships with Iranian banks Activity related to U.S.-sanctioned Iranian banks not covered elsewhere in this disclosure includes the following:

The HSBC Group acts as the trustee and administrator for a pension scheme involving employees of a U.S.-sanctioned Iranian bank in Asia. Under the rules of this scheme, the HSBC Group accepts contributions from the Iranian bank each month and allocates the funds into the pension accounts of the Iranian bank’s employees. The HSBC Group runs and operates this pension scheme in accordance with applicable laws and regulations. Estimated gross revenue, which includes fees and/or commissions, generated by this pension scheme during the first quarter of 2024, was approximately $535.

For the Iranian bank-related activity discussed above, the HSBC Group does not allocate direct costs to fees and commissions and, therefore, has not disclosed a separate net profit measure.

The HSBC Group currently intends to continue to wind down the above activities, to the extent legally permissible, and not enter into any new such activity.

Activity related to U.S. Executive Order 13224 The HSBC Group has an individual customer in the Middle East that was designated under Executive Order 13224 in 2023. The customer's accounts were restricted at the time of designation and the relationship was exited in the first quarter of 2024. As part of the exit process, the HSBC Group returned the customer's funds to the customer.

For this activity, there was no measurable gross revenue or net profit to the HSBC Group during the first quarter of 2024.

Activity related to U.S. Executive Order 13382 The HSBC Group had an individual customer in Asia that was designated under Executive Order 13382 in 2023. The customer's accounts were restricted at the time of designation and the relationship was exited in the first quarter of 2024. As part of the exit process, the HSBC Group returned the customer's funds to the customer.

The HSBC Group administers a pension scheme for a corporate entity in Asia in accordance with applicable laws and regulations. An individual participant in this pension scheme was designated under Executive Order 13382 in 2023. The HSBC Group has restricted the individual's pension scheme account. During the first quarter of 2024, prior to the imposition of the account restriction, the HSBC Group allocated two mandatory contributions into the individual's pension scheme account.

For these activities, there was no measurable gross revenue or net profit to the HSBC Group during the first quarter of 2024.

Other activity The HSBC Group has one non-Iranian insurance company customer in the Middle East that, during the first quarter of 2024, made local currency domestic payments for the reimbursement of medical treatment to a hospital located outside Iran that is owned by the Government of Iran. The HSBC Group processed these payments from its customer to the hospital.

The HSBC Group has individual and corporate customers in Europe that, during the first quarter of 2024, made small local currency domestic payments to, or received such payments from, an Iranian embassy. These customers are engaged in activities that require consular services provided by the embassies or provide goods and services that support the conduct of the official business of the embassies. The HSBC Group processed these payments from its customers to and from the Iranian embassy.

The HSBC Group has individual customers in Europe that are employed by a bank located outside Iran that is owned by the Government of Iran. During the first quarter of 2024, the HSBC Group processed local currency salary payments received via banks that are not owned by the Government of Iran to its customers.

For these activities, there was no measurable gross revenue or net profit to the HSBC Group during the first quarter of 2024.

Frozen accounts and transactions The HSBC Group and HSBC Bank USA (a subsidiary of HUSI) maintain several accounts that are frozen as a result of relevant sanctions programs, and safekeeping boxes and other similar custodial relationships, for which no activity, except as licensed or authorized, or otherwise related to the maintenance of such accounts as consistent with applicable law, took place during the first quarter of 2024. There was no measurable gross revenue or net profit to the HSBC Group during the first quarter of 2024 relating to these frozen accounts.

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Item 6. Exhibits

3(i)	Articles of Incorporation and amendments and supplements thereto (incorporated by reference to Exhibit 3(a) to HSBC USA Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999, Exhibit 3 to HSBC USA Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, Exhibit 3.2 to HSBC USA Inc.'s Current Report on Form 8-K filed April 4, 2005, Exhibit 3.3 to HSBC USA Inc.'s Current Report on Form 8-K filed April 4, 2005, Exhibit 3.2 to HSBC USA Inc.'s Current Report on Form 8-K filed October 14, 2005, Exhibit 3.2 to HSBC USA Inc.'s Current Report on Form 8-K filed May 22, 2006 and Exhibit 3.2 to HSBC USA Inc.'s Current Report on Form 8-K filed on May 31, 2016).
3(ii)	Bylaws of HSBC USA Inc., as Amended and Restated effective July 20, 2022 (incorporated by reference to Exhibit 3.2 to HSBC USA Inc.'s Current Report on Form 8-K filed July 21, 2022).
31	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document(1)
101.SCH	Inline XBRL Taxonomy Extension Schema Document(1)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document(1)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document(1)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document(1)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document(1)
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline eXtensible Business Reporting Language ("Inline XBRL"): (i) the Consolidated Statement of Income for the three months ended March 31, 2024 and 2023, (ii) the Consolidated Statement of Comprehensive Income for the three months ended March 31, 2024 and 2023, (iii) the Consolidated Balance Sheet at March 31, 2024 and December 31, 2023, (iv) the Consolidated Statement of Changes in Equity for the three months ended March 31, 2024 and 2023, (v) the Consolidated Statement of Cash Flows for the three months ended March 31, 2024 and 2023, and (vi) the Notes to Consolidated Financial Statements.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, HSBC USA Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 30, 2024

HSBC USA INC.
By:	/s/ ANDREW FULLAM
	Andrew Fullam
	Chief Financial Officer

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