Business Context and Reporting Period
This Form 8-K Current Report, filed on July 15, 2016, by American Express Company, provides Regulation FD disclosure regarding delinquency and write-off statistics. The data covers the U.S. Consumer Services (USCS) and U.S. Small Business operating segments for the months ended April 30, May 31, and June 30, 2016, as well as the three-month period ended June 30, 2016.
Key Financial Metrics
The filing details credit performance metrics for Card Member loans held for investment. It does not report revenue, profit, cash flow, or overall corporate debt levels.
| Metric | USCS (June 30, 2016) | U.S. Small Business (June 30, 2016) | Combined Total (June 30, 2016) |
|---|---|---|---|
| Total Loans Held for Investment ($ Billions) | $44.6 | $8.6 | $53.2 |
| 30 Days Past Due (% of Total) | 1.1% | 1.1% | N/A |
| Net Write-off Rate (Principal Only, 3 Months) | 1.5% | 1.3% | N/A |
American Express Credit Account Master Trust (Lending Trust) Metrics (June 2016):
- Ending Total Principal Balance: $24.7 billion
- Annualized Default Rate (Net of Recoveries): 1.0%
- Total 30+ Days Delinquent: $0.2 billion
Material Changes and Unusual Items
Delinquency rates for both USCS and U.S. Small Business segments increased slightly from 0.9% in April and May to 1.1% in June 2016. The filing notes a significant reclassification of $246 million in loans from "held for sale" to "held for investment" as of June 30, 2016. Excluding these reclassified loans, the adjusted 30 days past due rate was 1.0% for both segments.
The Lending Trust experienced portfolio shifts in June 2016, including the acquisition of $3.0 billion in Card Member loans on June 1 and the removal of $3.6 billion in loans on June 17 related to the sale of the Costco portfolio.
Management Commentary and Risks
Management highlights that credit performance statistics for the Lending Trust may differ from the USCS and U.S. Small Business held-for-investment statistics due to differences in loan mix, vintage, aging, and calculation mechanics (e.g., end-of-period balances vs. average balances). The filing explicitly states that the Lending Trust's performance may vary month-to-month based on these factors.
Investor Verification Checklist
- Verify the impact of the $246 million loan reclassification on the reported 1.1% delinquency rate versus the adjusted 1.0% non-GAAP rate.
- Review the sale of the Costco portfolio ($3.6 billion removal from Lending Trust) and its effect on future securitization metrics.
- Compare the Lending Trust's 1.0% annualized default rate against the 1.5% and 1.3% net write-off rates of the held-for-investment portfolios to understand portfolio quality differences.
- Confirm the preliminary nature of the June 30, 2016 data as noted in the filing.