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AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CREDIT QUALITY INDICATORS FOR CARD MEMBER LOANS AND RECEIVABLES
The following tables present the key credit quality indicators as of or for the years ended December 31:
2013 2012
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
Card Member Loans:
U.S. Card Services 1.8% 2.0% 1.1% 2.1% 2.3% 1.2%
International Card Services 1.9% 2.3% 1.4% 1.9% 2.4% 1.5%
Card Member Receivables:
U.S. Card Services 1.7% 1.9% 1.6% 1.9% 2.1% 1.8%
2013 2012
Net Loss
Ratio as a
% of
Charge
Volume
90 Days
Past Billing
as a % of
Receivables
Net Loss
Ratio as a
% of
Charge
Volume
90 Days
Past Billing
as a % of
Receivables
Card Member Receivables:
International Card Services 0.20% 1.1% 0.16% 0.9%
Global Commercial Services 0.08% 0.9% 0.06% 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.
Refer to Note 5 for additional indicators, including external
environmental qualitative factors, management considers in its
monthly evaluation process for reserves for losses.
IMPAIRED CARD MEMBER LOANS AND RECEIVABLES
Impaired loans and receivables are defined by GAAP as individual
larger balance or homogeneous pools of smaller balance loans and
receivables for which it is probable that the Company will be unable to
collect all amounts due according to the original contractual terms of
the Card Member 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, Card Member loans and receivables in instances where the
Card Member is experiencing financial difficulty in order to minimize
losses and improve collectability while providing Card Members with
temporary or permanent financial relief. The Company has classified
Card Member loans and receivables in these modification programs as
TDRs. Such modifications to the loans and receivables primarily
include (i) temporary interest rate reductions (possibly as low as zero
percent, in which case the loan is characterized as non-accrual in the
Company’s TDR disclosures), (ii) placing the Card Member on a fixed
payment plan not to exceed 60 months and (iii) suspending
delinquency fees until the Card Member exits the modification
program. Upon entering the modification program, the Card
Member’s ability to make future purchases is either cancelled or in
certain cases suspended until the Card Member successfully exits the
modification program. In accordance with the modification agreement
with the Card Member, loans revert back to the original contractual
terms (including the contractual interest rate) when the Card Member
exits the modification program, which is either (i) when all payments
have been made in accordance with the modification agreement or
(ii) when the Card Member defaults out of the modification program.
In either case, the Company establishes a reserve for Card Member
interest charges and fees considered to be uncollectible.
Reserves for Card Member loans and receivables modified as TDRs
are determined as the difference between the cash flows expected to be
received from the Card Member (taking into consideration the
probability of subsequent defaults), discounted at the original effective
interest rates, and the carrying value of the Card Member loan or
receivable balance. The Company determines the original effective
interest rate as the interest rate in effect prior to the imposition of any
penalty interest rate. All changes in the impairment measurement are
included in the provision for losses in the Consolidated Statements of
Income.
74