AMERICAN EXPRESS CO | 2013 | FY | 3


NOTE 4

Accounts Receivable and Loans

As described below, the Company's charge and lending payment card products result in the generation of Card Member receivables and Card Member loans, respectively.

 

Card Member and Other Receivables

Card Member receivables, representing amounts due on charge card products, are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant. Each charge card transaction is authorized based on its likely economics reflecting a Card Member's most recent credit information and spend patterns. Additionally, global spend limits are established to limit the maximum exposure for the Company.

Charge Card Members generally must pay the full amount billed each month. Card Member receivable balances are presented on the Consolidated Balance Sheets net of reserves for losses (refer to Note 5), and include principal and any related accrued fees.

 

Accounts receivable as of December 31, 2013 and 2012 consisted of:

(Millions) 2013 2012
U.S. Card Services(a) $21,842 $21,124
International Card Services  7,771  7,778
Global Commercial Services(b)  14,391  13,671
Global Network & Merchant Services(c)  159  193
Card Member receivables(d)  44,163  42,766
Less: Reserve for losses  386  428
Card Member receivables, net  43,777  42,338
Other receivables, net(e) $3,408 $3,576

 

Card Member and Other Loans

Card Member loans, representing revolving amounts due on lending card products, are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant, as well as amounts due from charge Card Members who elect to revolve a portion of the outstanding balance by entering into a revolving payment arrangement with the Company. These loans have a range of terms such as credit limits, interest rates, fees and payment structures, which can be revised over time based on new information about Card Members and in accordance with applicable regulations and the respective product's terms and conditions. Card Members holding revolving loans are typically required to make monthly payments based on pre-established amounts. The amounts that Card Members choose to revolve are subject to finance charges.

Card Member loans are presented on the Consolidated Balance Sheets net of reserves for losses (refer to Note 5), and include principal, accrued interest and fees receivable. The Company's policy generally is to cease accruing interest on a Card Member loan at the time the account is written off, and establish reserves for interest that the Company believes will not be collected.

 

Loans as of December 31, 2013 and 2012 consisted of:

(Millions)  2013  2012
U.S. Card Services(a) $58,395 $55,953
International Card Services  8,790  9,236
Global Commercial Services  53  40
Card Member loans  67,238  65,229
Less: Reserve for losses  1,261  1,471
Card Member loans, net  65,977  63,758
Other loans, net(b) $608 $551

 

Card Member Loans and Card Member Receivables Aging

Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing statement date. The following table represents the aging of Card Member loans and receivables as of December 31, 2013 and 2012:

       30-59  60-89  90+   
       Days  Days  Days   
       Past  Past  Past   
2013 (Millions)  Current  Due  Due  Due  Total
Card Member               
 Loans:               
U.S. Card Services $57,772 $183 $134 $306 $58,395
International Card                
 Services  8,664  43  28  55  8,790
Card Member                
 Receivables:               
U.S. Card Services $21,488 $125 $69 $160 $21,842
International Card                
 Services(a)  (b)  (b)  (b)  83  7,771
Global Commercial                
 Services(a)  (b)  (b)  (b)  132  14,391
                 
       30-59  60-89  90+   
       Days  Days  Days   
       Past  Past  Past   
2012 (Millions)  Current  Due  Due  Due  Total
Card Member               
 Loans:               
U.S. Card Services $ 55,281 $200 $147 $325 $ 55,953
International Card                
 Services   9,099  47  30  60   9,236
Card Member                
 Receivables:               
U.S. Card Services $ 20,748 $116 $76 $184 $ 21,124
International Card                
 Services(a)  (b)  (b)  (b)  74   7,778
Global Commercial                
 Services(a)  (b)  (b)  (b)  112   13,671

Credit Quality Indicators for Card Member Loans and Receivables

The following tables present the key credit quality indicators as of or for the years ended December 31:

  2013 2012 
  Net Write-Off Rate   Net Write-Off Rate   
      30 Days     30 Days 
    Principal, Past Due   Principal, Past Due 
  Principal Interest, & as a % of Principal Interest, &  as a % of 
  Only (a)Fees (a)Total Only (a)Fees (a)Total 
Card Member Loans:             
U.S. Card Services 1.8%2.0%1.1%2.1%2.3%1.2%
International Card Services  1.9%2.3%1.4%1.9%2.4%1.5%
Card Member Receivables:             
U.S. Card Services  1.7%1.9%1.6%1.9%2.1%1.8%
              
      2013 2012 
      Net Loss   Net Loss   
      Ratio as 90 Days Ratio as 90 Days 
      a % of Past Billing a % of Past Billing 
      Charge as a % of Charge as a % of 
      Volume Receivables Volume Receivables 
Card Member Receivables:             
International Card Services      0.20%1.1%0.16%0.9%
Global Commercial Services      0.08%0.9%0.06%0.8%

 

Refer to Note 5 for additional indicators, including external environmental qualitative factors, management considers in its monthly evaluation process for reserves for losses.

Impaired Card Member Loans and Receivables

Impaired loans and receivables are defined by GAAP as individual larger balance or homogeneous pools of smaller balance loans and receivables for which it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the Card Member agreement. The Company considers impaired loans and receivables to include: (i) loans over 90 days past due still accruing interest, (ii) non-accrual loans and (iii) loans and receivables modified as troubled debt restructurings (TDRs).

The Company may modify, through various company sponsored programs, Card Member loans and receivables in instances where the Card Member is experiencing financial difficulty in order to minimize losses and improve collectability while providing Card Members with temporary or permanent financial relief. The Company has classified Card Member loans and receivables in these modification programs as TDRs. Such modifications to the loans and receivables primarily include (i) temporary interest rate reductions (possibly as low as zero percent, in which case the loan is characterized as non-accrual in the Company's TDR disclosures), (ii) placing the Card Member on a fixed payment plan not to exceed 60 months and (iii) suspending delinquency fees until the Card Member exits the modification program. Upon entering the modification program, the Card Member's ability to make future purchases is either cancelled or in certain cases suspended until the Card Member successfully exits the modification program. In accordance with the modification agreement with the Card Member, loans revert back to the original contractual terms (including the contractual interest rate) when the Card Member exits the modification program, which is either (i) when all payments have been made in accordance with the modification agreement or (ii) when the Card Member defaults out of the modification program. In either case, the Company establishes a reserve for Card Member interest charges and fees considered to be uncollectible.

Reserves for Card Member loans and receivables modified as TDRs are determined as the difference between the cash flows expected to be received from the Card Member (taking into consideration the probability of subsequent defaults), discounted at the original effective interest rates, and the carrying value of the Card Member loan or receivable balance. The Company determines the original effective interest rate as the interest rate in effect prior to the imposition of any penalty interest rate. All changes in the impairment measurement are included in the provision for losses in the Consolidated Statements of Income.

 

The following table provides additional information with respect to the Company's impaired Card Member loans, which are not significant for GCS, and Card Member receivables, which are not significant for ICS and GCS, as of or for the years ended December 31:

   As of December 31, 2013 For the Year Ended December 31, 2013 
   Loans over                 
   90 Days     Loans &  Total    Average   
   Past Due  Non-  Receivables  Impaired  Unpaid     Balance of Interest  
  & Accruing  Accrual  Modified  Loans &  Principal  Allowance  Impaired Income 
2013 (Millions)  Interest (a) Loans (b) as a TDR (c) Receivables  Balance (d) for TDRs (e) Loans Recognized 
Card Member Loans:                        
U.S. Card Services  $ 170 $ 244 $ 373 $ 787 $ 731 $ 84 $ 943$ 46 
International Card Services    54   4   5   63   62     67  16 
Card Member Receivables:                        
U.S. Card Services        50   50   49   38   81  
Total $ 224 $ 248 $ 428 $ 900 $ 842 $ 122 $ 1,091$ 62 
                         
   As of December 31, 2012 For the Year Ended December 31, 2012 
   Loans over                 
   90 Days     Loans &  Total    Average   
   Past Due  Non-  Receivables  Impaired  Unpaid     Balance of Interest  
  & Accruing  Accrual  Modified  Loans &  Principal  Allowance  Impaired Income 
2012 (Millions)  Interest (a) Loans (b) as a TDR (c) Receivables  Balance (d)for TDRs (e) Loans Recognized 
Card Member Loans:                        
U.S. Card Services  $ 73 $ 426 $ 627 $ 1,126 $ 1,073 $ 152 $ 1,221$ 47 
International Card Services    59   5   6   70   69   1   75  16 
Card Member Receivables:                        
U.S. Card Services        117   117   111   91   135  
Total $ 132 $ 431 $ 750 $ 1,313 $ 1,253 $ 244 $ 1,431$ 63 
                         
   As of December 31, 2011 For the Year Ended December 31, 2011 
   Loans over                 
   90 Days     Loans &  Total    Average   
   Past Due  Non-  Receivables  Impaired  Unpaid     Balance of Interest  
  & Accruing  Accrual  Modified  Loans &  Principal  Allowance  Impaired Income 
2011 (Millions)  Interest (a) Loans (b) as a TDR (c) Receivables  Balance (d)for TDRs (e) Loans Recognized 
Card Member Loans:                        
U.S. Card Services  $ 64 $ 529 $ 736 $ 1,329 $ 1,268 $ 174 $ 1,498$ 52 
International Card Services    67   6   8   81   80   2   98  26 
Card Member Receivables:                        
U.S. Card Services        174   174   165   118   145  
Total $ 131 $ 535 $ 918 $ 1,584 $ 1,513 $ 294 $ 1,741$ 78 

Card Member Loans and Receivables Modified as TDRs

The following table provides additional information with respect to the Card Member loans and receivables modified as TDRs, which are not significant for ICS and GCS, during the years ended December 31:

2013   Aggregated
(Accounts in thousands,  Number of Outstanding
Dollars in millions) Accounts  Balances(a,b)
Troubled Debt Restructurings:     
U.S. Card Services ―      
 Card Member Loans  60 $ 448
U.S. Card Services ―      
 Card Member Receivables  20   247
Total  80 $ 695
       
2012   Aggregated
(Accounts in thousands,  Number of Outstanding
Dollars in millions) Accounts  Balances(a,b)
Troubled Debt Restructurings:     
U.S. Card Services ―      
 Card Member Loans  106 $ 779
U.S. Card Services ―      
 Card Member Receivables  37   425
Total  143 $ 1,204
       
2011   Aggregated
(Accounts in thousands,  Number of Outstanding
Dollars in millions) Accounts  Balances(a,b)
Troubled Debt Restructurings:     
U.S. Card Services ―      
 Card Member Loans  147 $ 1,110
U.S. Card Services ―      
 Card Member Receivables  50   402
Total  197 $ 1,512

 

The Company has evaluated the primary financial effects of the impact of the changes to an account upon modification as follows:

 

The following table provides information for the years ended December 31, 2013, 2012, and 2011, with respect to the Card Member loans and receivables modified as TDRs that subsequently defaulted within 12 months of modification. A Card Member will default from a modification program after one and up to two consecutive missed payments, depending on the terms of the modification program. For all Card Members that defaulted from a modification program, the probability of default is factored into the reserves for Card Member loans and receivables. The defaulted ICS Card Member loan and receivable modifications were not significant.

      Aggregated
2013    Outstanding
(Accounts in thousands,   Number of  Balances
Dollars in millions)  Accounts Upon Default(a)
Troubled Debt Restructurings       
That Subsequently Defaulted:      
U.S. Card Services ―       
 Card Member Loans   18 $ 159
U.S. Card Services ―       
 Card Member Receivables   3   38
Total   21 $ 197
        
      Aggregated
2012    Outstanding
(Accounts in thousands,   Number of  Balances
Dollars in millions)  Accounts Upon Default(a)
Troubled Debt Restructurings       
That Subsequently Defaulted:      
U.S. Card Services ―       
 Card Member Loans   23 $ 182
U.S. Card Services ―       
 Card Member Receivables   1   37
Total   24 $ 219
        
      Aggregated
2011    Outstanding
(Accounts in thousands,   Number of  Balances
Dollars in millions)  Accounts Upon Default(a)
Troubled Debt Restructurings       
That Subsequently Defaulted:      
U.S. Card Services ―       
 Card Member Loans   46 $ 343
U.S. Card Services ―       
 Card Member Receivables   6   45
Total   52 $ 388

 


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