Business Context and Reporting Period
This Form 8-K, filed on February 16, 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 November 30, 2015, December 31, 2015, and January 31, 2016.
Key Financial Metrics
USCS Card Member Loans Held for Investment
| Metric | Nov 30, 2015 | Dec 31, 2015 | Jan 31, 2016 |
|---|---|---|---|
| Total loans held for investment ($ Billions) | $63.9 | $51.4 | $50.5 |
| 30 days past due loans (% of total) | 1.0% | 1.0% | 1.0% |
| Average loans held for investment ($ Billions) | $63.3 | $49.6 | $51.0 |
| Net write-off rate – principal only | 1.4% | 1.4% | 1.4% |
American Express Credit Account Master Trust (Lending Trust)
| Metric | Nov 2015 | Dec 2015 | Jan 2016 |
|---|---|---|---|
| Ending total principal balance ($ Billions) | $26.8 | $27.8 | $26.6 |
| Defaulted amount ($ Billions) | $0.04 | $0.04 | $0.04 |
| Annualized default rate, net of recoveries | 1.2% | 1.1% | 1.2% |
| Total 30+ days delinquent ($ Billions) | $0.2 | $0.2 | $0.2 |
Material Changes
Effective December 1, 2015, the Company reclassified Card Member loans related to cobrand partnerships with Costco Wholesale Corporation and JetBlue Airways Corporation from "held for investment" to "held for sale" (HFS). Consequently, these loans are excluded from the USCS held-for-investment statistics for December 2015 and January 2016. This reclassification accounts for the significant decrease in total loans held for investment from $63.9 billion in November 2015 to $51.4 billion in December 2015.
Management Commentary and Risks
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 filing does not provide specific guidance, outlook, or discussion of unusual items beyond the accounting reclassification.
Investor Verification Checklist
- Verify the impact of the December 1, 2015 reclassification of Costco and JetBlue loans on the reported loan portfolio size.
- Confirm the consistency of the 1.0% delinquency rate and 1.4% net write-off rate across the three-month period despite the portfolio reduction.
- Review the separate Form 10-D filings for the American Express Credit Account Master Trust to compare securitized loan performance against the USCS held-for-investment metrics.
- Assess the volume of loans moved to "held for sale" status ($13.9 billion for Costco and $1.0 billion for JetBlue as of Jan 31, 2015) to understand the scale of the balance sheet adjustment.