HSBC USA (HUSI+G)

Management Discussion

• 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."
• (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 increased during the three months ended June 30, 2022 due primarily to higher interest income from short-term investments, commercial loans and securities driven by higher yields and higher commercial loan average balances. The increase in the three-month period was partially offset by higher interest expense from interest bearing liabilities driven by higher rates paid as well as lower interest income from consumer loans driven by lower average balances and lower yields. In the year-to-date period, net interest income decreased due primarily to higher interest expense from deposits and short-term borrowings driven by higher rates paid as well as lower interest income from consumer loans and securities driven by lower average balances and lower consumer loan yields. The decrease in the year-to-date period was partially offset by higher interest income from short-term investments and trading securities driven by higher yields on these investments.