American Express 2009 Annual Report Download - page 44

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2009 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
DEPOSIT PROGRAMS
The Company offers deposits within its Centurion Bank and
FSB subsidiaries (together, the “Banks”). These funds are
currently insured up to $250,000 through the Federal Deposit
Insurance Corporation (FDIC). During the second quarter of
2009, the Company, through FSB, launched a direct deposit-
taking program, Personal Savings from American Express, to
supplement its distribution of deposit products through
third-party distribution channels. This program, which
currently represents a small portion of the Company’s deposit
program, makes FDIC-insured CDs and high-yield savings
account products available directly to consumers.
As of December 31, 2009, the Company held the following
deposits:
(Billions) 2009 2008
U.S. retail deposits:
Cash sweep and savings accounts $10.5 $ 7.2
Certificates of deposit (a) 15.1 6.3
Institutional and other deposits 0.7 2.0
Total customer deposits $26.3 $15.5
(a) The average original maturity and annual interest rate on
outstanding U.S. retail CDs were 29 months and 2.3 percent,
respectively.
LONG-TERM DEBT PROGRAMS
In 2009, the Company and its subsidiaries issued debt and
asset securitizations with maturities ranging from 2 to 10
years. These amounts included approximately $2.25 billion of
AAA-rated lending securitization certificates and $6.7 billion
of unsecured debt across a variety of maturities and markets.
During the year, the Company retained approximately $2.0
billion of subordinated securities, as the pricing and yields for
these securities were not attractive for the Company due to
market conditions. The subordinated securities issued in the
year included $1.5 billion of the new Class D securities,
created as part of the actions to add further credit
enhancement to the Lending Trust.
The Company’s 2009 offerings, which include those made
by the Parent Company, Credco, American Express Canada
Credit Corporation and the Lending Trust, are presented in
the following table on both a GAAP and managed basis:
(Billions) Amount
American Express Company (Parent Company only):
Fixed Rate Senior Notes at an average coupon of 7.76% $ 3.0
American Express Credit Corporation:
Fixed Rate Senior Notes at an average coupon of
5.17% (a) 2.8
American Express Canada Credit Corporation:
Fixed Rate Senior Notes at a coupon of 4.85% 0.8
Floating Rate Senior Notes at a spread of 170 basis
points to 3 month CDOR(b) 0.1
GAAP Basis 6.7
American Express Credit Account Master Trust:
Trust Investor Certificates at an average spread of 129
basis points to 1 month LIBOR (c) (d) 4.3
Managed Basis $11.0
(a) Credco’s issuance includes $79 million of unsecured debt issued
within the retail note market.
(b) Canadian Dealer Offered Rate.
(c) Issuances from the Lending Trust, an off-balance sheet entity,
include $2.0 billion of subordinated securities retained by
American Express during the year.
(d) The average coupon relates to those securities issued into the
market and does not include the rates on retained securities.
ASSET SECURITIZATION PROGRAMS
The Company periodically securitizes cardmember
receivables and loans arising from its card business, as the
securitization market provides the Company with cost-
effective funding. Securitization of cardmember receivables
and loans is accomplished through the transfer of those assets
to a Trust, which in turn issues certificates or notes
(securities) to third-party investors collateralized by the
transferred assets. The proceeds from issuance are distributed
to the Company, through its wholly-owned subsidiaries, as
consideration for the transferred assets. Securitization
transactions are accounted for as either a sale or secured
borrowing, based upon the structure of the transaction and
GAAP requirements applicable prior to January 1, 2010. Refer
to Note 1 to the Consolidated Financial Statements for a
description of the changes in GAAP requirements related to
Accounting for Transfers of Financial Assets, effective
January 1, 2010.
Securitization of cardmember receivables generated under
designated consumer charge card, small business charge card
and corporate charge card accounts is accomplished through
the transfer of cardmember receivables to the American
Express Issuance Trust (the Charge Trust).
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