Business Context and Reporting Period
This Form 8-K, filed on January 15, 2016, by American Express Company, provides Regulation FD disclosure regarding delinquency and write-off statistics for the U.S. Card Services (USCS) operating segment. The data covers the months ended October 31, November 30, and December 31, 2015, as well as the three-month period ended December 31, 2015.
Key Financial Metrics
The filing focuses on credit performance metrics for Card Member loans held for investment, excluding loans held for sale. Key statistics for the USCS segment include:
- Total Loans Held for Investment: $51.4 billion as of December 31, 2015 (down from $63.9 billion in November 2015).
- 30 Days Past Due Loans: 1.0% of total loans for October, November, and December 2015.
- Net Write-off Rate (Principal Only): 1.4% for November and December 2015; 1.3% for October 2015 and the three-month period ended December 31, 2015.
- Average Loans Held for Investment: $49.6 billion for December 2015.
Separate data for the American Express Credit Account Master Trust (Lending Trust) shows an ending total principal balance of $27.8 billion and an annualized default rate of 1.1% for December 2015.
Material Changes Versus Prior Period
A significant change occurred effective December 1, 2015, when the Company reclassified Card Member loans related to co-brand partnerships with Costco Wholesale Corporation and JetBlue Airways Corporation from "held for investment" to "held for sale."
- Costco Portfolio: $14.0 billion outstanding as of December 31, 2015.
- JetBlue Portfolio: $1.1 billion outstanding as of December 31, 2015.
These reclassified loans are not reflected in the December 2015 statistics for loans held for investment, resulting in a decrease in the reported total loan balance from $63.9 billion in November to $51.4 billion in December.
Guidance, Outlook, and Risks
Management provided the following expectations regarding the portfolio sales:
- Costco Portfolio Sale: Subject to ongoing discussions; expected to close mid-year 2016.
- JetBlue Portfolio Sale: Subject to customary closing conditions; expected to finalize in the first quarter of 2016.
Risks and Contingencies: The filing includes forward-looking statements subject to risks such as the negotiation and execution of definitive documentation, operational issues related to the transfer of loans, and the ability to satisfy closing conditions. The Company notes that actual results may differ materially from expectations.
Important Facts for Investor Verification
- Verify the final closing dates and terms for the Costco and JetBlue portfolio sales, as these are currently subject to negotiation and closing conditions.
- Confirm the impact of the reclassification on future quarterly credit performance metrics, as the "held for investment" pool has been significantly reduced.
- Monitor the distinction between credit performance in the USCS loans held for investment versus the securitized Lending Trust, as the filing notes these pools have different characteristics and may perform differently.
- Review subsequent filings for updates on the $15.1 billion in loans reclassified to "held for sale" status.