American Express 2003 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2003 American Express annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

The following table presents these components of other comprehensive income (loss) net of tax:
(Millions, net of tax) 2003 2002 2001
Holding (losses) gains $(142) $769 $ 16
Reclassification for realized (gains) losses (31) 1463
Increase in net unrealized securities (losses) gains
recognized in other comprehensive income $(173) $770 $ 479
(Note 3) LOANS
Loans at December 31 consisted of:
(Millions) 2003 2002
Cardmember and consumer loans $30,672 $26,509
Commercial loans:
Commercial and industrial 108 308
Loans to banks and other institutions 1,863 1,428
Mortgage and real estate 65 61
Other, principally policyholders’ loans 713 742
33,421 29,048
Less: Reserves for credit losses 1,121 1,226
Total $32,300 $27,822
Note: AEFA’s investment loans of $3.8 billion and $4.0 billion in 2003 and 2002, respectively, are included in Investment loans and are presented in Note 2.
The following table presents changes in Reserves for Credit Losses related to loans:
(Millions) 2003 2002
Balance, January 1 $1,226 $993
Provision for credit losses 1,336 1,526
Write-offs (1,463) (1,361)
Recoveries of amounts previously written-off 22 68
Balance, December 31 $1,121 $1,226
(Note 4) SECURITIZED LOANS
The Company, through TRS, securitizes U.S. cardmember loan balances and, in large part, subsequently transfers the inter-
ests in those assets’ cash flows to third-party investors. These loan balances are comprised of existing balances as of the date
of the initial securitization, as well as all future charges on these accounts. The Company accounts for these transactions as
sales under SFAS No. 140. The Company continues to service the accounts and receives a fee for doing so; the fair value and
carrying amounts of these future servicing fees, net of related costs, are not material. Each new sale of securitized loans
results in the removal of the sold assets from the balance sheet, a reduction in a previously established reserve for credit
losses and the recognition of the present value of the future net cash flows (i.e., finance charge income less interest paid to
investors, credit losses and servicing fees) related to the sold assets. This present value amount represents a retained inter-
est known as an interest-only strip (I/O strip). Cash flows from I/O strips as well as servicing revenue, which is 2 percent
of principal, are recorded in net securitization income. For the securitized assets whose interests are not sold, the Company
retains the rights to all their related cash flows. Those assets, therefore, are not taken off the balance sheet and are known
as seller’s interests which are included as loans in the Consolidated Balance Sheets with related income in finance charge
revenue. In some instances, the Company, through affiliates, invests in subordinated security interests issued by the secu-
ritization trust; these are recorded as Investments classified as Available-for-Sale with related interest income included in
net investment income.
(p.88_axp_ notes to consolidated financial statements)