American Express 2011 Annual Report Download - page 69

AMERICAN EXPRESS COMPANY
2011 FINANCIAL REVIEW
CREDIT QUALITY INDICATORS FOR LOANS AND RECEIVABLES
The following tables present the key credit quality indicators as of or for the years ended December 31:
2011 2010
Net Write-Off Rate Net Write-Off Rate
Principal
Only(a)
Principal,
Interest, &
Fees(a)
30 Days
Past Due
as a % of
Total
Principal
Only(a)
Principal,
Interest, &
Fees(a)
30 Days
Past Due
as a % of
Total
U.S. Card Services – Cardmember Loans 2.9% 3.2% 1.4% 5.8% 6.3% 2.1%
International Card Services – Cardmember Loans 2.7% 3.3% 1.7% 4.6% 5.5% 2.3%
U.S. Card Services – Cardmember Receivables 1.7% 1.9% 1.9% 1.6% 1.8% 1.5%
2011 2010
Net Loss
Ratio
as a % of
Charge
Volume
90 Days
Past Billing
as a % of
Receivables
Net Loss
Ratio as
a%of
Charge
Volume(b)
90 Days
Past Billing
as a % of
Receivables
International Card Services – Cardmember Receivables 0.15% 0.9% 0.24% 1.0%
Global Commercial Services – Cardmember Receivables 0.06% 0.8% 0.11% 0.8%
(a) The Company presents a net write-off rate based on principal losses only (i.e. excluding interest and/or fees) to be consistent with industry convention. In addition,
because the Company’s practice is to include uncollectible interest and/or fees as part of its total provision for losses, a net write-off rate including principal, interest
and/or fees is also presented.
(b) In the first quarter of 2010, the Company modified its reporting in the ICS and GCS segments to write off past due cardmember receivables when 180 dayspastdueor
earlier, versus its prior methodology of writing them off when 360 days past billing or earlier. This change is consistent with bank regulatory guidance and the
write-off methodology for the cardmember receivables portfolio in the U.S. Card Services (USCS) segment. This change resulted in approximately $60 million and
$48 million of net write-offs for ICS and GCS, respectively, being included in the first quarter of 2010, which increased the net loss ratios and decreased the 90 days
past billing metrics for these segments, but did not have a substantial impact on provisions for losses.
Refer to Note 5 for other factors, including external environmental factors, that management considers as part of its evaluation process
for reserves for losses.
PLEDGED LOANS AND RECEIVABLES
Certain cardmember loans and receivables totaling
approximately $41.9 billion as of December 31, 2011 are pledged
by the Company to its Lending and Charge Trusts (including
certain loans sold to the Trusts by the Company’s bank
subsidiaries; refer to Note 7).
IMPAIRED LOANS AND RECEIVABLES
Impaired loans and receivables are defined by GAAP as individual
larger balance or homogeneous pools of smaller balance
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 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, cardmember loans and receivables in
instances where the cardmember is experiencing financial
difficulty to minimize losses to the Company while providing
cardmembers with temporary or permanent financial relief. The
Company has classified cardmember loans and receivables in
these modification programs as TDRs. Such modifications to the
loans and receivables may include (i) reducing the interest rate
(as low as zero percent, in which case the loan is characterized as
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