Why did American Express reclassify certain card member loans?

American Express reclassified card member loans related to its cobrand partnerships with Costco and JetBlue from 'held for investment' to 'held for sale' effective December 1, 2015. This change impacts how these specific loan balances are reported on the company's consolidated balance sheets and is a significant factor in the reported decrease in 'total loans held for investment'.

How did the reclassification affect the reported loan balances?

The reclassification led to a substantial decrease in the 'total loans held for investment' for the U.S. Card Services segment. The balance dropped from $63.9 billion as of November 30, 2015, to $51.4 billion as of December 31, 2015, and further to $50.5 billion as of January 31, 2016.

What does the stable delinquency and write-off rate indicate for the remaining loan portfolio?

The consistent 30-day delinquency rate of 1.0% and a net write-off rate of 1.4% suggest that the credit quality of the loans remaining in the 'held for investment' portfolio for U.S. Card Services remained stable during the reporting period, despite the significant portfolio shift.

Are the credit metrics for the Lending Trust the same as for the USCS segment?

No, the filing explicitly states that the credit performance of the American Express Credit Account Master Trust (Lending Trust) may differ from the U.S. Card Services 'loans held for investment'. This is due to differences in the mix and vintage of loans, the inclusion of 'loans held for sale' in the Lending Trust's securitization, and variations in calculation methodologies for write-off rates.

AXP 8-K: Regulation FD — Feb 16, 2016

Summary

This 8-K filing from American Express provides an update on key credit performance metrics for its U.S. Card Services (USCS) segment for the months ending November 30, 2015, December 31, 2015, and January 31, 2016. A significant operational change disclosed is the reclassification of Card Member loans related to the Costco and JetBlue cobrand partnerships from "held for investment" to "held for sale" effective December 1, 2015. This reclassification impacts the reported "total loans held for investment" figure, causing a notable decrease in the balance from November to December 2015. Despite the reclassification and the subsequent reduction in the reported loan portfolio, the core credit quality metrics for the remaining USCS "held for investment" loans remained stable. The 30-day delinquency rate held steady at 1.0%, and the net write-off rate (principal only) remained at 1.4% throughout the period. The filing also includes separate data for the American Express Credit Account Master Trust (the "Lending Trust"), which shows its own credit performance, noting that these statistics may differ from the USCS segment due to variations in loan mix, vintage, and calculation methodologies.

Key Highlights

1Reclassification of Costco and JetBlue cobrand loans from 'held for investment' to 'held for sale' effective December 1, 2015.
2Significant reduction in 'total loans held for investment' for USCS segment from $63.9 billion (Nov 2015) to $51.4 billion (Dec 2015) and $50.5 billion (Jan 2016) due to the reclassification.
3Stable 30-day delinquency rate for USCS 'held for investment' loans at 1.0% across the reported periods.
4Consistent net write-off rate (principal only) of 1.4% for USCS 'held for investment' loans throughout the period.
5Separate credit performance data provided for the American Express Credit Account Master Trust (Lending Trust).
6Disclosure that Lending Trust credit performance may differ from USCS 'held for investment' due to variations in loan characteristics and reporting methods.

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Feb 16, 2016)

Summary

Key Highlights

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