American Express 2010 Annual Report Download - page 84

Changes in Cardmember Receivables Reserve for Losses
The following table presents changes in the cardmember
receivables reserve for losses for the years ended December 31:
(Millions) 2010 2009 2008
Balance, January 1 $ 546 $ 810 $ 1,149
Additions:
Cardmember receivables provisions
(a)
439 773 1,186
Cardmember receivables provisions —
other
(b)
156 84 177
Total provision 595 857 1,363
Deductions:
Cardmember receivables net write-
offs
(c)(d)(e)
(598) (1,131) (1,552)
Cardmember receivables — other
(f)
(157) 10 (150)
Balance, December 31 $ 386 $ 546 $ 810
(Millions) 2010 2009 2008
Cardmember receivables evaluated
separately for impairment
(g)
$ 114 $ 94 $ 141
Reserves on cardmember receivables
evaluated separately for impairment
(g)
$63$ 64 (h)
Cardmember receivables evaluated
collectively for impairment $37,152 $33,649 $32,847
Reserves on cardmember receivables
evaluated collectively for impairment $ 323 $ 482 (h)
(a) Represents loss provisions for cardmember receivables consisting of principal
(resulting from authorized transactions) and fee reserve components.
(b) Primarily represents loss provisions for cardmember receivables resulting
from unauthorized transactions.
(c) Represents write-offs consisting of principal (resulting from authorized
transactions) and fee components, less recoveries of $357 million,
$349 million and $187 million for 2010, 2009 and 2008, respectively. For the
years ended December 31, 2010 and 2009, these amounts also include net write-
offs for cardmember receivables resulting from unauthorized transactions.
(d) Through December 31, 2009, cardmember receivables in the International
Card Services (ICS) and Global Commercial Services (GCS) segments were
written off when 360 days past billing or earlier. During the first quarter of
2010, consistent with applicable bank regulatory guidance, the Company
modified its methodology to write off cardmember receivables in the ICS and
GCS segments when 180 days past due or earlier. Therefore, net write-offs
for cardmember receivables for the first quarter of 2010 included
approximately $108 million resulting from this change in write-off
methodology. The impact of this change to the provision for charge card
losses was not material.
(e) In the fourth quarter of 2008, the Company revised the time period in which
past due cardmember receivables in U.S. Card Services are written off to
when 180 days past due, consistent with applicable regulatory guidance.
Previously, receivables were written off when 360 days past due. The net
write-offs for 2008 include approximately $341 million resulting from this
write-off methodology change.
(f) For the year ended December 31, 2010, these amounts include net write-offs
of cardmember receivables resulting from unauthorized transactions. For all
periods these amounts include foreign currency translation adjustments.
(g) Represents receivables modified in a TDR and related reserves. Refer to the
Impaired Loans and Receivables discussion in Note 4 for
further information.
(h) Amounts were not available for disclosure.
Changes in Cardmember Loans Reserve for Losses
The following table presents changes in the cardmember loans
reserve for losses for the years ended December 31:
(Millions) 2010 2009 2008
Balance, January 1 $ 3,268 $ 2,570 $ 1,831
Reserves established for consolidation of
a variable interest entity 2,531 ——
Total adjusted balance, January 1 5,799 2,570 1,831
Additions:
Cardmember loans provisions
(a)
1,445 4,209 4,106
Cardmember loans — other
(b)
82 57 125
Total provision 1,527 4,266 4,231
Deductions:
Cardmember loans net write-offs —
principal
(c)
(3,260) (2,949) (2,643)
Cardmember loans net write-offs —
interest and fees
(c)
(359) (448) (580)
Cardmember loans — other
(d)
(61) (171) (269)
Balance, December 31 $ 3,646 $ 3,268 $ 2,570
(Millions) 2010 2009 2008
Cardmember loans evaluated
separately for impairment
(e)
$ 1,087 $ 721 $ 427
Reserves on cardmember loans
evaluated separately for
impairment
(e)
$ 279 $ 187 (f)
Cardmember loans evaluated
collectively for impairment $ 59,763 $ 32,051 $ 41,784
Reserves on cardmember loans
evaluated collectively for
impairment $ 3,367 $ 3,081 (f)
(a) Represents loss provisions for cardmember loans consisting of principal
(resulting from authorized transactions), interest and fee reserves components.
(b) Primarily represents loss provisions for cardmember loans resulting from
unauthorized transactions.
(c) Cardmember loans net write-offs — principal for 2010, 2009 and 2008
include recoveries of $568 million, $327 million and $301 million,
respectively. Recoveries of interest and fees were de minimis.
(d) These amounts include net write-offs related to unauthorized transactions
and foreign currency translation adjustments.
(e) Represents loans modified in a TDR and related reserves. Refer to the
Impaired Loans and Receivables discussion in Note 4 for
further information.
(f) Amounts were not available for disclosure.
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AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS