Business Context and Reporting Period
This Form 8-K Current Report, filed on August 15, 2016, by American Express Company, discloses Regulation FD information regarding credit performance statistics. The report covers the months ended May 31, June 30, and July 31, 2016, focusing on U.S. Consumer Services (USCS) and U.S. Small Business Card Member loans held for investment.
Key Financial Metrics
Loans Held for Investment (USCS and U.S. Small Business)
| Metric | May 31, 2016 | June 30, 2016 | July 31, 2016 |
|---|---|---|---|
| Total Loans (Billions) | $52.7 | $53.2 | $53.5 |
| USCS 30+ Days Past Due % | 0.9% | 1.1% | 1.1% |
| USCS Net Write-off Rate % | 1.6% | 1.3% | 1.6% |
| Small Business 30+ Days Past Due % | 1.0% | 1.1% | 1.1% |
| Small Business Net Write-off Rate % | 1.3% | 1.2% | 1.5% |
American Express Credit Account Master Trust (Securitized Loans)
| Metric | May 2016 | June 2016 | July 2016 |
|---|---|---|---|
| Ending Principal Balance (Billions) | $25.7 | $24.7 | $24.5 |
| Defaulted Amount (Billions) | $0.04 | $0.04 | $0.03 |
| Annualized Default Rate % | 1.3% | 1.0% | 1.0% |
| Total 30+ Days Delinquent (Billions) | $0.2 | $0.2 | $0.2 |
Material Changes and Adjustments
- Loan Reclassification: June and July 2016 figures reflect the reclassification of loans from "held for sale" to "held for investment," totaling $245 million and $214 million, respectively.
- Non-GAAP Adjustments: Excluding reclassified loans, the adjusted 30+ days past due rate for both USCS and Small Business was 1.0% as of July 31, 2016. Adjusted net write-off rates were 1.4% (USCS) and 1.2% (Small Business).
- Portfolio Movements: The Lending Trust acquired $3.0 billion in loans on June 1, 2016, and removed $3.6 billion related to the Costco portfolio sale on June 17, 2016.
Management Commentary and Risks
Management notes that credit performance statistics for loans held for investment differ from those of the securitized Lending Trust 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 and recent portfolio acquisitions or sales.
Investor Verification Checklist
- Verify the impact of the $245 million and $214 million loan reclassifications on the reported delinquency and write-off rates.
- Compare the reported GAAP metrics against the provided non-GAAP adjusted metrics to understand the underlying credit quality trends.
- Review the separate Form 10-D filings for the American Express Credit Account Master Trust to analyze the performance of securitized assets distinct from loans held for investment.
- Confirm the details of the Costco portfolio sale and its specific impact on the Lending Trust's balance sheet.