Business Context and Reporting Period
This Form 8-K, filed on March 15, 2016, by American Express Company, provides Regulation FD disclosure regarding delinquency and write-off statistics for the U.S. Consumer Services (USCS) operating segment. The data covers the months ended February 28 and December 31, 2015, and January 31 and February 29, 2016. The filing also includes credit performance data for the American Express Credit Account Master Trust (Lending Trust) for December 2015 through February 2016.
Key Financial Metrics
U.S. Consumer Services (USCS) Card Member Loans Held for Investment
| Metric | Feb 28, 2015 | Dec 31, 2015 | Jan 31, 2016 | Feb 29, 2016 |
|---|---|---|---|---|
| Total loans held for investment ($ Billions) | 49.2 | 43.5 | 42.5 | 41.7 |
| 30 days past due loans (% of total) | 1.0% | 1.0% | 1.0% | 1.0% |
| Average loans held for investment ($ Billions) | 50.0 | 42.5 | 43.0 | 42.1 |
| Net write-off rate – principal only (%) | 1.6% | 1.4% | 1.4% | 1.4% |
American Express Credit Account Master Trust (Lending Trust)
| Metric | Dec 2015 | Jan 2016 | Feb 2016 |
|---|---|---|---|
| Ending total principal balance ($ Billions) | 27.8 | 26.6 | 25.6 |
| Defaulted amount ($ Billions) | 0.04 | 0.04 | 0.04 |
| Annualized default rate, net of recoveries (%) | 1.1% | 1.2% | 1.4% |
| Total 30+ days delinquent ($ Billions) | 0.2 | 0.2 | 0.2 |
Material Changes and Reclassifications
- Reclassification of Cobrand Loans: Effective December 1, 2015, Card Member loans related to cobrand partnerships with Costco Wholesale Corporation and JetBlue Airways Corporation were reclassified from "held for investment" to "held for sale" (HFS). Consequently, these loans are excluded from the USCS statistics for periods after December 2015. As of February 28, 2015, these excluded loans totaled $11.0 billion (Costco) and $0.9 billion (JetBlue).
- Segment Realignment: The Company moved its OPEN small business services business from the U.S. Card Services segment to Global Commercial Services. Prior period data has been conformed to reflect this change, meaning OPEN loans are no longer reported within the USCS segment.
- Loan Balance Trend: Total USCS loans held for investment decreased from $49.2 billion in February 2015 to $41.7 billion in February 2016, reflecting both the reclassifications and organic changes.
Outlook, Risks, and Commentary
The filing notes that credit performance statistics for the Lending Trust may differ from USCS loans held for investment due to differences in loan mix, vintage, and calculation mechanics (e.g., end-of-period balances vs. average balances). The Lending Trust data is reported separately in Form 10-D filings. No specific forward-looking guidance or management commentary regarding future performance was included in this specific 8-K disclosure.
Key Facts for Investor Verification
- Verify the impact of the $11.9 billion in Costco and JetBlue loans reclassified to "held for sale" on the reported USCS loan portfolio size.
- Confirm the stability of the 1.0% delinquency rate (30 days past due) across all reported periods despite the portfolio reduction.
- Monitor the trend in the Lending Trust's annualized default rate, which increased from 1.1% in December 2015 to 1.4% in February 2016.
- Review the separate Form 10-D filings for the Lending Trust to understand the specific mechanics driving differences between Trust performance and USCS held-for-investment performance.