American Express 2009 Annual Report Download - page 85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
securities. For December 31, 2008, these amounts include
reclassification of waived fee reserves to contra-cardmember
loans. This amount, for all periods, includes foreign currency
translation adjustments.
PLEDGED LOANS AND RECEIVABLES
Certain cardmember loans and receivables totaling
approximately $16.3 billion are pledged by the Company to
its securitization Trusts (refer to Note 7). Upon adoption of
new GAAP governing transfers of financial assets as of
January 1, 2010, and the resulting consolidation of the
Lending Trust (refer to Note 1), approximately $29.0 billion
of additional cardmember loans will be recognized on the
balance sheet of the Company. While the $29.0 billion of
additional cardmember loans were sold by the Company’s
bank subsidiaries to the Lending Trust, such loans are deemed
to be pledged by the Company to the Company’s Lending
Trust.
IMPAIRED LOANS AND RECEIVABLES
Individually “impaired” loans and receivables are defined by
GAAP as larger balance or smaller balance homogeneous
restructured loans and receivables for which it is probable that
the lender will be unable to collect all amounts due according
to the original contractual terms of the loan and receivable
agreement. The Company may modify cardmember loans and
receivables and such modifications may include reducing the
interest rate/delinquency fees on the loans and receivables
and/or placing the cardmember on a fixed payment plan not
exceeding 60 months. If the cardmember does not comply
with the modified terms, then the loan or receivable
agreement reverts back to its original terms. Impaired loans
and receivables include long-term modification programs or
Troubled Debt Restructurings (TDR), wherein the terms of a
loan or receivable have been modified for cardmembers that
are experiencing financial difficulties and a long-term
concession (more than 12 months) has been granted to the
borrower. TDRs totaled $114 million and $71 million of
cardmember loans and receivables outstanding as of
December 31, 2009 and 2008, respectively. Reserves for losses
for TDRs is determined by the difference between cash flows
expected to be received from the cardmember discounted at
the original contractual interest rates and the carrying value of
the cardmember balance.
The Company’s policy is generally to accrue interest
through the date of charge-off (i.e. 180 days past due). Loans
amounting to $299 million and $927 million at December 31,
2009 and 2008, respectively, were past due 90 days or more
and still accruing interest. These amounts include $46 million
and $69 million of cardmember loans that are also included in
the Short Term Modification Programs discussed above. In
addition, as of December 31, 2009 and 2008, loans of $494
million and $14 million, respectively, were not accruing
interest. These amounts primarily include certain
cardmember loans placed with outside collection agencies.
OTHER LOANS AND RECEIVABLES WITH SHORT-TERM
MODIFICATIONS
In addition to the TDRs discussed above, the Company has
instituted other modification programs that include short-
term (12 months or less) interest rate and fee reductions to
cardmembers experiencing financial difficulty (“Short Term
Modification Programs”). As of December 31, 2009 and 2008,
approximately $701 million and $497 million, respectively, in
cardmember loans and receivables have been modified under
these Short Term Modification Programs. These amounts
include $46 million and $69 million, respectively, of
cardmember loans that are also included in loans past due 90
days or more still accruing interest discussed above. The
short-term modifications to these cardmember loans and
receivables had no incremental impact on the Company’s
reserve for losses.
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