Business Context and Reporting Period
This Form 8-K, filed on March 16, 2015, 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 December 31, 2014, January 31, 2015, and February 28, 2015.
Key Financial Metrics
U.S. Card Services (USCS) Portfolio
| Metric | Dec 31, 2014 | Jan 31, 2015 | Feb 28, 2015 |
|---|---|---|---|
| Total Loans ($ Billions) | $62.6 | $60.4 | $58.5 |
| Average Loans ($ Billions) | $61.2 | $61.5 | $59.5 |
| 30+ Days Past Due (%) | 1.0% | 1.0% | 1.0% |
| Net Write-off Rate (Principal Only) | 1.3% | 1.4% | 1.5% |
Note: Net write-off rates for January and February reflect a change in charge-off timing for certain modification programs.
American Express Credit Account Master Trust (Lending Trust)
| Metric | Nov 25 - Dec 25, 2014 | Dec 26 - Jan 25, 2015 | Jan 26 - Feb 22, 2015 |
|---|---|---|---|
| Ending Principal Balance ($ Billions) | $29.5 | $28.1 | $27.0 |
| Defaulted Amount ($ Billions) | $0.05 | $0.05 | $0.05 |
| Annualized Default Rate (Net of Recoveries) | 1.3% | 1.4% | 1.7% |
| Total 30+ Days Delinquent ($ Billions) | $0.3 | $0.3 | $0.3 |
Material Changes and Unusual Items
- Accounting Policy Change: Beginning January 16, 2015, the Company changed the timing of charge-offs for loans in certain modification programs from 180 days past due to 120 days past due.
- Impact on Metrics: This change increased the reported net write-off rate for USCS to 1.4% in January and 1.5% in February. Excluding this impact, the rates would have been 1.3% and 1.5%, respectively. Similarly, the Lending Trust's annualized default rate was impacted, with adjusted rates of 1.3% and 1.6% for the respective periods.
- Portfolio Trends: Total loans in the USCS segment declined from $62.6 billion to $58.5 billion over the three-month period. The Lending Trust principal balance also decreased from $29.5 billion to $27.0 billion.
Guidance, Outlook, and Risks
The filing does not contain forward-looking guidance, management commentary on future outlook, or specific risk factors beyond the disclosure of the accounting change. The text notes that credit performance reported by the Lending Trust may differ from the total USCS portfolio due to differences in loan mix, vintage, and calculation mechanics.
Investor Verification Checklist
- Verify the impact of the charge-off timing change (180 to 120 days) on the reported write-off rates for January and February 2015.
- Compare the adjusted write-off rates (excluding the timing change) against historical trends to assess underlying credit quality.
- Review the discrepancy between the Lending Trust performance and the total USCS portfolio performance, noting the larger proportion of small business loans in the non-securitized portion.
- Confirm the continued decline in total loan balances for both the USCS segment and the Lending Trust.