Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP), and includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —Integrated Framework (2013).

Based on management’s assessment and those criteria, we conclude that, as of December 31, 2019, our internal control over financial reporting is effective.

PricewaterhouseCoopers LLP, our independent registered public accounting firm, has issued an audit report appearing on the following page on the effectiveness of our internal control over financial reporting as of December 31, 2019.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF AMERICAN EXPRESS COMPANY

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of American Express Company and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income, of comprehensive income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated

financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Membership Rewards Liability - Ultimate Redemption Rate

As described in Note 9 to the consolidated financial statements, the Membership Rewards liability represents management’s estimate of the cost of Membership Rewards points earned that are expected to be redeemed in the future. The Membership Rewards liability was $8.9 billion as of December 31, 2019. The weighted average cost per point and the ultimate redemption rate (URR) are key assumptions used to estimate the liability. The URR assumption is used by management to estimate the number of points earned that will ultimately be redeemed in future periods. Management uses statistical and actuarial models to estimate the URR based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes.

The principal considerations for our determination that performing procedures relating to the URR for the Membership Rewards liability is a critical audit matter are (i) the estimate of the URR involved significant judgment by management, which in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating results relating to the models, significant inputs and assumptions used by management; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the estimate of the Membership Rewards liability, including the URR assumption. These procedures also included, among others, (i) testing the completeness and accuracy of certain inputs to the statistical and actuarial models used to estimate the URR assumption, including redemption trends, card product type, enrollment tenure, and card spend levels, (ii) the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate of the URR assumption and comparing the independent estimate to management’s assumption to evaluate its reasonableness, and (iii) comparing the independent estimate of the Membership Rewards liability to management’s estimate.

Reserves for Losses on Card Member Loans - Qualitative Reserve Component

As described in Note 3 to the consolidated financial statements, reserves for losses on Card Member loans represent management’s estimate of the probable inherent losses in the Company’s outstanding portfolio of loans, as of the balance sheet date. Reserves for losses are primarily based upon statistical and analytical models that analyze portfolio performance and reflect management’s judgments regarding the quantitative components of the reserve. These models take into account several factors, including delinquency-based loss migration rates, loss emergence periods and average losses and recoveries over an appropriate historical period. Management considers whether to adjust the quantitative reserves for certain external and internal qualitative factors, which may increase or decrease the reserves for losses on Card Member loans (the “qualitative reserve component”). These external factors include employment, spend, sentiment, housing and credit, and changes in the legal and regulatory environment, while the internal factors include increased risk in certain portfolios, impact of risk management initiatives, changes in underwriting requirements and overall process stability. The qualitative reserve component represents a portion of the total reserves for losses on Card Member loans of $2.4 billion as of December 31, 2019.

The principal considerations for our determination that performing procedures relating to the qualitative reserve component of the reserves for losses on Card Member loans is a critical audit matter are (i) there was significant judgment required by management in estimating the qualitative reserve component, including determination of underlying factors, which led to a high degree of auditor judgment and subjectivity in performing procedures relating to the methodology and the underlying factors; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the reserves for losses on Card Member loans, including the qualitative reserve component. These procedures also included, among others, testing management’s process for determining the qualitative reserve component of the reserves for losses on Card Member loans through (i) the involvement of professionals with specialized skill and knowledge to evaluate the appropriateness of management’s methodology for estimating the qualitative reserve component, including evaluating whether certain factors are reasonable given the current macroeconomic conditions and portfolio characteristics and (ii) testing the completeness and accuracy of specific data inputs and evaluating the reasonableness of specific assumptions related to certain external factors applied by management in estimating the qualitative reserve component.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 13, 2020

We have served as the Company’s auditor since 2005.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATED FINANCIAL STATEMENTS			PAGE
Consolidated Statements of Income – For the Years Ended December 31, 201 9 , 201 8 and 2017			78
Consolidated Statements of Comprehensive Income – For the Years Ended December 31, 201 9 , 201 8 and 2017			79
Consolidated Balance Sheets – December 31, 201 9 and 2018			80
Consolidated Statements of Cash Flows – For the Years Ended December 31, 201 9 , 201 8 and 2017			81
Consolidated Statements of Shareholders’ Equity – For the Years Ended December 31, 201 9 , 201 8 and 2017			82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			83
Note 1 – Summary of Significant Accounting Policies			83
Note 2 – Loans and Accounts Receivable			87
Note 3 – Reserves for Losses			94
Note 4 – Investment Securities			96
Note 5 – Asset Securitizations			98
Note 6 – Other Assets			98
Note 7 – Customer Deposits			100
Note 8 – Debt			101
Note 9 – Other Liabilities			103
Note 1 0 – Stock Plans			104
Note 1 1 – Retirement Plans			106
Note 1 2 – Contingencies and Commitments			106
Note 1 3 – Derivatives and Hedging Activities			108
Note 1 4 – Fair Values			112
Note 1 5 – Guarantees			116
Note 1 6 – Common and Preferred Shares			116
Note 1 7 – Changes in Accumulated Other Comprehensive Income			117
Note 18 – Other Fees and Commissions and Other Expenses			119
Note 19 – Restructuring			119
Note 2 0 – Income Taxes			120
Note 2 1 – Earnings Per Common Share			123
Note 2 2 – Regulatory Matters and Capital Adequacy			123
Note 2 3 – Significant Credit Concentrations			125
Note 2 4 – Reportable Operating Segments and Geographic Operations			126
Note 2 5 – Parent Company			130
Note 2 6 – Quarterly Financial Data (Unaudited)			131

CONSOLIDATED STATEMENTS OF INCOME


Year Ended December 31 (Millions, except per share amounts)	2019		2018		2017
Revenues
Non-interest revenues
Discount revenue	$	26,167	$	24,721	$	22,890
Net card fees	4,042		3,441		3,090
Other fees and commissions	3,297		3,153		2,990
Other	1,430		1,360		1,457
Total non-interest revenues	34,936		32,675		30,427
Interest income
Interest on loans	11,308		9,941		8,148
Interest and dividends on investment securities	188		118		89
Deposits with banks and other	588		547		326
Total interest income	12,084		10,606		8,563
Interest expense
Deposits	1,559		1,287		779
Long-term debt and other	1,905		1,656		1,333
Total interest expense	3,464		2,943		2,112
Net interest income	8,620		7,663		6,451
Total revenues net of interest expense	43,556		40,338		36,878
Provisions for losses
Charge card	963		937		795
Card Member loans	2,462		2,266		1,868
Other	148		149		97
Total provisions for losses	3,573		3,352		2,760
Total revenues net of interest expense after provisions for losses	39,983		36,986		34,118
Expenses
Marketing and business development	7,114		6,470		5,722
Card Member rewards	10,439		9,696		8,687
Card Member services	2,222		1,777		1,392
Salaries and employee benefits	5,911		5,250		5,258
Other, net	5,868		5,671		5,634
Total expenses	31,554		28,864		26,693
Pretax income	8,429		8,122		7,425
Income tax provision	1,670		1,201		4,677
Net income	$	6,759	$	6,921	$	2,748
Earnings per Common Share — (Note 21)(a)
Basic	$	8.00	$	7.93	$	3.00
Diluted	$	7.99	$	7.91	$	2.99
Average common shares outstanding for earnings per common share:
Basic	828		856		883
Diluted	830		859		886

(a)Represents net income less (i) earnings allocated to participating share awards of $47 million, $54 million and $21 million for the years ended December 31, 2019, 2018 and 2017, respectively, and (ii) dividends on preferred shares of $81 million, $80 million and $81 million for the years ended December 31, 2019, 2018 and 2017, respectively.

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


Year Ended December 31 (Millions)	2019		2018		2017
Net income	$	6,759	$	6,921	$	2,748
Other comprehensive (loss) income:
Net unrealized securities gains (losses), net of tax	41		(8)		(7)
Foreign currency translation adjustments, net of tax	(56)		(172)		301
Net unrealized pension and other postretirement benefits, net of tax	(125)		11		62
Other comprehensive (loss) income	(140)		(169)		356
Comprehensive income	$	6,619	$	6,752	$	3,104

See Notes to Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEETS


December 31 (Millions, except share data)	2019		2018
Assets
Cash and cash equivalents
Cash and due from banks	$	3,402	$	3,253
Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2019, $87; 2018, $64)	20,392		24,026
Short-term investment securities	138		166
Total cash and cash equivalents	23,932		27,445
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2019, $8,284; 2018, $8,539), less reserves: 2019, $619; 2018, $573	56,794		55,320

Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2019, $32,230; 2018, $33,194), less reserves: 2019, $2,383; 2018, $2,134	84,998		79,720
Other loans, less reserves: 2019, $152; 2018, $124	4,626		3,676
Investment securities	8,406		4,647
Premises and equipment, less accumulated depreciation and amortization: 2019, $6,562; 2018, $6,015	4,834		4,416
Other assets (includes restricted cash of consolidated variable interest entities: 2019, $85; 2018, $70)	14,731		13,378
Total assets	$	198,321	$	188,602
Liabilities and Shareholders’ Equity
Liabilities
Customer deposits	$	73,287	$	69,960
Accounts payable	12,738		12,255
Short-term borrowings	6,442		3,100
Long-term debt (includes debt issued by consolidated variable interest entities: 2019, $19,668; 2018, $19,509)	57,835		58,423
Other liabilities	24,948		22,574
Total liabilities	$	175,250	$	166,312
Contingencies and Commitments (Note 12)
Shareholders’ Equity
Preferred shares, $1.662/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares as of December 31, 2019 and 2018 (Note 16)	—		—
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 810 million shares as of December 31, 2019 and 847 million shares as of December 31, 2018	163		170
Additional paid-in capital	11,774		12,218
Retained earnings	13,871		12,499
Accumulated other comprehensive loss
Net unrealized debt securities gains (losses), net of tax of: 2019, $11; 2018, $(1)	33		(8)
Foreign currency translation adjustments, net of tax of: 2019, $(319); 2018, $(300)	(2,189)		(2,133)
Net unrealized pension and other postretirement benefits, net of tax of: 2019, $(208); 2018, $(170)	(581)		(456)
Total accumulated other comprehensive loss	(2,737)		(2,597)
Total shareholders’ equity	23,071		22,290
Total liabilities and shareholders’ equity	$	198,321	$	188,602

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS


Years Ended December 31 (Millions)	2019		2018		2017
Cash Flows from Operating Activities
Net income	$	6,759	$	6,921	$	2,748
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for losses	3,573		3,352		2,760
Depreciation and amortization	1,188		1,293		1,321
Deferred taxes and other	426		455		782
Stock-based compensation	283		283		282
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Other assets	(368)		991		398
Accounts payable & other liabilities	1,771		(4,365)		5,249
Net cash provided by operating activities	13,632		8,930		13,540
Cash Flows from Investing Activities
Sale of available-for-sale investment securities	22		4		2
Maturities and redemptions of investment securities	7,329		3,499		2,494
Purchase of investments	(11,166)		(5,434)		(2,612)
Net increase in Card Member loans and receivables, and other loans	(11,047)		(15,854)		(16,853)
Purchase of premises and equipment, net of sales: 2019, $43; 2018, $1; 2017, $1	(1,645)		(1,310)		(1,062)
Acquisitions/dispositions, net of cash acquired	(352)		(520)		(211)
Other investing activities	152		—		—
Net cash used in investing activities	(16,707)		(19,615)		(18,242)
Cash Flows from Financing Activities
Net increase in customer deposits	3,330		5,542		11,385
Net increase (decrease) in short-term borrowings	3,316		(148)		(2,300)
Proceeds from long-term debt	12,706		21,524		32,764
Payments of long-term debt	(13,850)		(18,895)		(24,082)
Issuance of American Express common shares	86		87		129
Repurchase of American Express common shares and other	(4,685)		(1,685)		(4,400)
Dividends paid	(1,422)		(1,324)		(1,251)
Net cash (used in) provided by financing activities	(519)		5,101		12,245
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash	232		129		226
Net (decrease) increase in cash, cash equivalents and restricted cash	(3,362)		(5,455)		7,769
Cash, cash equivalents and restricted cash at beginning of year	27,808		33,263		25,494
Cash, cash equivalents and restricted cash at end of year	$	24,446	$	27,808	$	33,263

Supplemental cash flow information


Cash, cash equivalents and restricted cash reconciliation	Dec-19		Dec-18		Dec-17
Cash and cash equivalents per Consolidated Balance Sheets	$	23,932	$	27,445	$	32,927
Restricted cash included in Other assets per Consolidated Balance Sheets	514		363		336
Total cash, cash equivalents and restricted cash	$	24,446	$	27,808	$	33,263

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


(Millions, except per share amounts)	Total		Preferred Shares		Common Shares		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings
Balances as of December 31, 2016	$	20,523	$	—	$	181	$	12,733	$	(2,784)	$	10,393
Net income	2,748		—		—		—		—		2,748
Other comprehensive income	356		—		—		—		356		—
Repurchase of common shares	(4,314)		—		(10)		(742)		—		(3,562)
Other changes, primarily employee plans	212		—		1		219		—		(8)
Cash dividends declared preferred Series B, $52.00 per share	(39)		—		—		—		—		(39)
Cash dividends declared preferred Series C, $49.00 per share	(42)		—		—		—		—		(42)
Cash dividends declared common, $1.34 per share	(1,183)		—		—		—		—		(1,183)
Balances as of December 31, 2017	18,261		—		172		12,210		(2,428)		8,307
Net income	6,921		—		—		—		—		6,921
Other comprehensive loss	(169)		—		—		—		(169)		—
Repurchase of common shares	(1,570)		—		(3)		(216)		—		(1,351)
Other changes, primarily employee plans	200		—		1		224		—		(25)
Cash dividends declared preferred Series B, $52.00 per share	(39)		—		—		—		—		(39)
Cash dividends declared preferred Series C, $49.00 per share	(41)		—		—		—		—		(41)
Cash dividends declared common, $1.48 per share	(1,273)		—		—		—		—		(1,273)
Balances as of December 31, 2018	22,290		—		170		12,218		(2,597)		12,499
Net income	6,759		—		—		—		—		6,759
Other comprehensive loss	(140)		—		—		—		(140)		—
Repurchase of common shares	(4,585)		—		(8)		(671)		—		(3,906)
Other changes, primarily employee plans	186		—		1		227		—		(42)
Cash dividends declared preferred Series B, $52.00 per share	(39)		—		—		—		—		(39)
Cash dividends declared preferred Series C, $49.00 per share	(42)		—		—		—		—		(42)
Cash dividends declared common, $1.64 per share	(1,358)		—		—		—		—		(1,358)
Balances as of December 31, 2019	$	23,071	$	—	$	163	$	11,774	$	(2,737)	$	13,871

See Notes to Consolidated Financial Statements.

NOTES TO CONSOLID****ATED FINANCIAL STATEMENTS

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE C****OMPANY

We are a globally integrated payments company that provides our customers with access to products, insights and experiences that enrich lives and build business success. Our principal products and services are credit and charge card products, along with travel and lifestyle related services, offered to consumers and businesses around the world. Business travel-related services are offered through the non-consolidated joint venture, American Express Global Business Travel. Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct mail, telephone, in-house sales teams, and direct response advertising.

Effective for the first quarter of 2019, we moved intercompany assets and liabilities, previously recorded in the operating segments, to Corporate & Other. Prior period amounts have been revised to conform to the current period presentation.

Refer to Note 24 for additional discussion of the products and services that comprise each segment. Corporate functions and certain other businesses and operations are included in Corporate & Other.

PRINCIPLES OF CONSOLIDATION

The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Significant intercompany transactions are eliminated.

We consolidate entities in which we hold a “controlling financial interest.” For voting interest entities, we are considered to hold a controlling financial interest when we are able to exercise control over the investees’ operating and financial decisions. For variable interest entities (VIEs), the determination of which is based on the amount and characteristics of the entity’s equity, we are considered to hold a controlling financial interest when we are determined to be the primary beneficiary. A primary beneficiary is the party that has both: (1) the power to direct the activities that most significantly impact that VIE’s economic performance, and (2) the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that could potentially be significant to that VIE.

Entities in which our voting interest in common equity does not provide it with control, but allows us to exert significant influence over operating and financial decisions, are accounted for under the equity method. We also have investments in equity securities where our voting interest is below the level of significant influence, including investments that we make in non-public companies in the ordinary course of business. Such investments are initially recorded at cost and adjusted to fair value through earnings for observable price changes in orderly transactions for identical or similar transactions of the same company or if they are determined to be impaired. See Note 4 for the accounting policy for our marketable equity securities.

FOREIGN CURRENCY

Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of the reporting period; non-monetary assets and liabilities are translated at the historic exchange rate at the date of the transaction; revenues and expenses are translated at the average month-end exchange rates during the year. Resulting translation adjustments, along with any related qualifying hedge and tax effects, are included in accumulated other comprehensive income (loss) (AOCI), a component of shareholders’ equity. Translation adjustments, including qualifying hedge and tax effects, are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Gains and losses related to transactions in a currency other than the functional currency are reported in Other, net expenses in the Consolidated Statements of Income.

AMOUNTS BASED ON ESTIMATES AND ASSUMPTIONS

Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part, on management’s assumptions concerning future events. Among the more significant assumptions are those that relate to reserves for Card Member losses on loans and receivables, Membership Rewards liability, goodwill and income taxes. These accounting estimates reflect the best judgment of management, but actual results could differ.

INCOME STATEMENT

Discount Revenue

Discount revenue primarily represents the amount we earn on transactions occurring at merchants that have entered into a card acceptance agreement with us, or a Global Network Services (GNS) partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members. The amount of fees charged for accepting our cards as payment for goods or services, or merchant discount, varies with, among other factors, the industry in which the merchant conducts business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope of the card acceptance agreement between the merchant and us (e.g., local or global) and the transaction amount. The merchant discount is generally deducted from the payment to the merchant and recorded as discount revenue at the time the Card Member transaction occurs.

The card acceptance agreements, which include the agreed-upon terms for charging the merchant discount fee, vary in duration. Our contracts with small- and medium-sized merchants generally have no fixed contractual duration, while those with large merchants are generally for fixed periods, which typically range from three to seven years in duration. Our fixed-period agreements may include auto-renewal features, which may allow the existing terms to continue beyond the stated expiration date until a new agreement is reached. We satisfy our obligations under these agreements over the contract term, often on a daily basis, including through the processing of Card Member transactions and the availability of our payment network.

In cases where the merchant acquirer is a third party (which is the case, for example, under our OptBlue program, or with certain of our GNS partners), we receive a network rate fee in our settlement with the merchant acquirer, which is individually negotiated between us and that merchant acquirer and is recorded as discount revenue at the time the Card Member transaction occurs. In our role as the operator of the American Express network, we also settle with merchants on behalf of our GNS card issuing partners, who in turn receive an issuer rate that is individually negotiated between that issuer and us and is recorded as expense in Marketing and business development (see below) or as contra-revenue in Other revenue.

Revenue expected to be recognized in future periods related to contracts that have an original expected duration of one year or less and contracts with variable consideration (e.g. discount revenue) is not required to be disclosed. Non-interest revenue expected to be recognized in future periods through remaining contracts with customers is not material.

Net Card Fees

Net card fees represent revenue earned from annual card membership fees, which vary based on the type of card and the number of cards for each account. These fees, net of acquisition costs and a reserve for projected refunds for Card Member cancellations, are deferred and recognized on a straight-line basis over the twelve-month card membership period as Net card fees in the Consolidated Statements of Income. The unamortized net card fee balance is reported in Other liabilities on the Consolidated Balance Sheets (refer to Note 9).

Other Fees and Commissions

Other fees and commissions includes certain fees charged to Card Members, including delinquency fees and foreign currency conversion fees, which are primarily recognized in the period in which they are charged to the Card Member. Other fees and commissions also includes Membership Rewards program fees, which are deferred and recognized over the period covered by the fee, typically one year, the unamortized portion of which is included in Other liabilities on the Consolidated Balance Sheets. In addition, Other fees and commissions includes loyalty coalition-related fees, travel commissions and fees and service fees earned from merchants, that are recognized when the service is performed, which is generally in the period the fee is charged. Refer to Note 18 for additional information.

Contra-revenue

Payments made pursuant to contractual arrangements with our merchants, GNS partners, and other customers are classified as contra-revenue, except where we receive goods, services or other benefits for which the fair value is determinable and measurable, in which case they are recorded as expense.

Interest Income

Interest on Card Member loans is assessed using the average daily balance method. Unless the loan is classified as non-accrual, interest is recognized based upon the principal amount outstanding, in accordance with the terms of the applicable account agreement, until the outstanding balance is paid, or written off.

Interest and dividends on investment securities primarily relate to our performing fixed-income securities. Interest income is recognized as earned using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so that a constant rate of return is recognized on the investment security’s outstanding balance. Amounts are recognized until securities are in default or when it becomes likely that future interest payments will not be made as scheduled.

Interest on deposits with banks and other is recognized as earned, and primarily relates to the placement of cash, in excess of near-term funding requirements, in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call accounts.

Interest Expense

Interest expense includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes and liquidity needs, and is recognized as incurred. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to interest expense on our long-term debt and short-term borrowings, as well as the realized impact of derivatives used to hedge interest rate risk on our long-term debt.

Marketing and Business Development

Marketing and business development expense includes costs incurred in the development and initial placement of advertising, which are expensed in the year in which the advertising first takes place. Also included in Marketing and business development expense are payments to our cobrand partners, Card Member statement credits for qualifying charges on eligible card accounts, corporate incentive payments earned on achievement of pre-set targets, and certain payments to GNS card issuing partners. These costs are generally expensed as incurred.

Card Member Rewards

We issue charge and credit cards that allow Card Members to participate in various rewards programs (e.g., Membership Rewards, cobrand and cash back). Rewards expense is recognized in the period Card Members earn rewards, generally by spending on their enrolled card products. We record a Card Member rewards liability that represents the estimated cost of points earned that are expected to be redeemed. Pursuant to cobrand agreements, we make payments to our cobrand partners based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program. Card Member rewards liabilities are impacted over time by enrollment levels, attrition, the volume of points earned and redeemed, and the associated redemption costs. Changes in the Card Member rewards liabilities during the period are taken as an increase or decrease to the Card Member rewards expense in the Consolidated Statement of Income.

BALANCE SHEET

Cash and Cash Equivalents

Cash and cash equivalents include cash and amounts due from banks, interest-bearing bank balances, including securities purchased under resale agreements, and other highly liquid investments with original maturities of 90 days or less.

Goodwill

Goodwill represents the excess of the acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. We allocate goodwill to our reporting units for the purpose of impairment testing. A reporting unit is defined as an operating segment, or a business that is one level below an operating segment, for which discrete financial information is regularly reviewed by the operating segment manager.

We evaluate goodwill for impairment annually as of June 30, or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of one or more of our reporting units below its carrying value. Prior to completing the assessment of goodwill for impairment, we also perform a recoverability test of certain long-lived assets. We have the option to perform a qualitative assessment of goodwill impairment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Alternatively, we can perform a more detailed quantitative assessment of goodwill impairment.

This qualitative assessment entails the evaluation of factors such as economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-specific events. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then perform the impairment evaluation using the quantitative assessment.

Under the quantitative assessment, the first step identifies whether there is a potential impairment by comparing the fair value of a reporting unit to the carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds the fair value, then a test is performed to determine the implied fair value of goodwill. An impairment loss is recognized based on the amount that the carrying amount of goodwill exceeds the implied fair value.

When measuring the fair value of our reporting units in the quantitative assessment, we use widely accepted valuation techniques, applying a combination of the income approach (discounted cash flows) and market approach (market multiples). When preparing discounted cash flow models under the income approach, we use internal forecasts to estimate future cash flows expected to be generated by the reporting units. To discount these cash flows, we use the expected cost of equity, determined by using a capital asset pricing model. We believe the discount rates used appropriately reflect the risks and uncertainties in the financial markets generally and specifically in our internally-developed forecasts. When using market multiples under the market approach, we apply comparable publicly traded companies’ multiples (e.g., earnings or revenues) to our reporting units’ actual results.

For the years ended December 31, 2019 and 2018, we performed a qualitative assessment in connection with our annual goodwill impairment evaluation and determined that it was more likely than not that the fair values of each of our reporting units exceeded their carrying values.

Premises and Equipment

Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation. Costs incurred during construction are capitalized and are depreciated once an asset is placed in service. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 10 years for equipment, furniture and building improvements, and from 40 to 50 years for premises, which are depreciated based upon their estimated useful life at the acquisition date.

Certain costs associated with the acquisition or development of internal-use software are also capitalized and recorded in Premises and equipment. Once the software is ready for its intended use, these costs are amortized on a straight-line basis over the software’s estimated useful life, generally 5 years. We review these assets for impairment using the same impairment methodology used for our intangible assets.

Leasehold improvements are depreciated using the straight-line method over the lesser of the remaining term of the leased facility, or the economic life of the improvement, and range from 5 to 10 years. We recognize lease restoration obligations at the fair value of the restoration liabilities when incurred and amortize the restoration assets over the lease term.

Leases

On January 1, 2019, we adopted the new accounting guidance on leases using the modified retrospective method. We elected the package of practical expedients and transition provisions allowing us to bring our existing operating leases onto the Consolidated Balance Sheet on January 1, 2019 without adjusting comparative periods. The adoption of the new lease guidance did not have a material impact on our financial position, results of operations and cash flows.

We have operating leases worldwide for facilities and equipment, which, for those leases with terms greater than 12 months, are recorded as lease-related assets and liabilities. We do not separate lease and non-lease components. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities, adjusted for prepaid lease payments, initial direct costs and lease incentives. Lease liabilities are recognized at the present value of the contractual fixed lease payments, discounted using our incremental borrowing rate as of the lease commencement date or upon modification of the lease. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.

OTHER SIGNIFICANT ACCOUNTING POLICIES

The following table identifies our other significant accounting policies, along with the related Note.


Significant Accounting Policy	Note Number	Note Title
Loans and Accounts Receivable	Note 2	Loans and Accounts Receivable
Reserves for Losses	Note 3	Reserves for Losses
Investment Securities	Note 4	Investment Securities
Asset Securitizations	Note 5	Asset Securitizations
Legal Contingencies	Note 12	Contingencies and Commitments
Derivative Financial Instruments and Hedging Activities	Note 13	Derivatives and Hedging Activities
Fair Value Measurements	Note 14	Fair Values
Guarantees	Note 15	Guarantees
Income Taxes	Note 20	Income Taxes

CLASSIFICATION OF VARIOUS ITEMS

Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance for the recognition of credit losses on certain financial instruments. The guidance, as amended and effective January 1, 2020, introduces a new credit reserving methodology known as the Current Expected Credit Loss (CECL) approach, which differs significantly from the incurred loss approach used through December 31, 2019 and alters the estimation process, inputs and assumptions used in estimating credit losses. The CECL methodology requires measurement of expected credit losses for the estimated life of the financial instrument, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. Our approach incorporates separate reasonable and supportable periods for loans and receivables and uses a weighted average of multiple future economic scenarios. Additionally, the guidance requires a modified retrospective transition, which records the difference between the reserves measured using the CECL methodology and the reserves using the incurred loss approach, tax effected, as a cumulative effect adjustment upon adoption through retained earnings. As a result, our financial position, results of operations and regulatory risk-based capital for periods prior to January 1, 2020 will not be restated.

We currently estimate an increase to total loan reserves of approximately $1.7 billion and a decrease to total receivable reserves of approximately $0.5 billion, along with the associated current and deferred tax impact of approximately $0.3 billion, and an offset to the opening balance of retained earnings, net of tax, of approximately $0.9 billion as of January 1, 2020. Our cross-functional implementation team is finalizing our operational processes, controls and governance.

In addition, for available-for-sale debt securities, the new guidance replaces the other-than-temporary impairment model and requires the recognition of an allowance for reductions in a security’s fair value attributable to declines in credit quality, instead of a direct write-down of the security, when a valuation decline is determined to be other-than-temporary. We have completed our evaluation of the new guidance for our available-for-sale debt securities and, while there was no impact of the new guidance on adoption, we have updated our processes to evaluate and measure potential future credit losses.

NOTE 2

LOANS AND ACCOUNTS RECEIVABLE

Our lending and charge payment card products result in the generation of Card Member loans and Card Member receivables.

CARD MEMBER AND OTHER LOANS

Card Member loans are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and represent revolving amounts due on lending card products, as well as amounts due from charge Card Members who utilize the Pay Over Time features on their account and revolve a portion of the outstanding balance by entering into a revolving payment arrangement with us. These loans have a range of terms such as credit limits, interest rates, fees and payment structures, which can be revised over time based on new information about Card Members, and in accordance with applicable regulations and the respective product’s terms and conditions. Card Members holding revolving loans are typically required to make monthly payments based on pre-established amounts and the amounts that Card Members choose to revolve are subject to finance charges.

Card Member loans are presented on the Consolidated Balance Sheets net of reserves for losses (refer to Note 3), and include principal and any related accrued interest and fees. Our policy generally is to cease accruing interest on a Card Member loan at the time the account is written off, and establish reserves for interest that we believe will not be collected.

Other loans are recorded at the time any extension of credit is provided to consumer and commercial customers for non-card financing products. These loans have a range of fixed terms such as interest rates, fees and repayment periods. Borrowers are typically required to make pre-established monthly payments over the term of the loan. Non-card financing products are not associated with a Card Member agreement, and instead are governed by a separate borrowing relationship. Other loans are presented on the Consolidated Balance Sheets net of reserves for losses, and include principal and any related accrued interest and fees.

Card Member loans by segment and Other loans as of December 31, 2019 and 2018 consisted of:


(Millions)	2019		2018
Global Consumer Services Group(a)	$	73,266	$	69,458
Global Commercial Services	14,115		12,396
Card Member loans	87,381		81,854
Less: Reserve for losses	2,383		2,134
Card Member loans, net	$	84,998	$	79,720
Other loans, net(b)	$	4,626	$	3,676

(a)Includes approximately $32.2 billion and $33.2 billion of gross Card Member loans available to settle obligations of a consolidated VIE as of December 31, 2019 and 2018, respectively.

(b)Other loans primarily represent consumer and commercial non-card financing products. Other loans are presented net of reserves for losses of $152 million and $124 million as of December 31, 2019 and 2018, respectively.

CARD MEMBER RECEIVABLES

Card Member receivables are also recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and represent amounts due on charge card products. Each charge card transaction is authorized based on its likely economics, a Card Member’s most recent credit information and spend patterns.

Charge Card Members generally must pay the full amount billed each month. Card Member receivable balances are presented on the Consolidated Balance Sheets net of reserves for losses (refer to Note 3), and include principal and any related accrued fees.

Card Member receivables by segment as of December 31, 2019 and 2018 consisted of:


(Millions)	2019		2018
Global Consumer Services Group (a)	$	22,844	$	21,455
Global Commercial Services	34,569		34,438
Card Member receivables	57,413		55,893
Less: Reserve for losses	619		573
Card Member receivables, net	$	56,794	$	55,320

(a)Includes $8.3 billion and $8.5 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of December 31, 2019 and 2018, respectively.

CARD MEMBER LOANS AND CARD MEMBER RECEIVABLES AGING

Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing statement date. The following table presents the aging of Card Member loans and receivables as of December 31, 2019 and 2018:


2019 (millions)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
Global Consumer Services Group	$	72,101	$	322	$	253	$	590	$	73,266
Global Commercial Services
Global Small Business Services	13,898		56		40		85		14,079
Global Corporate Payments(a)	(b)		(b)		(b)		—		36
Card Member Receivables:
Global Consumer Services Group	22,560		86		58		140		22,844
Global Commercial Services
Global Small Business Services	$	17,113	$	99	$	58	$	134	$	17,404
Global Corporate Payments(a)	(b)		(b)		(b)		$	136	$	17,165


2018 (millions)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
Global Consumer Services Group	$	68,442	$	290	$	220	$	506	$	69,458
Global Commercial Services
Global Small Business Services	12,195		51		32		73		12,351
Global Corporate Payments(a)	(b)		(b)		(b)		—		45
Card Member Receivables:
Global Consumer Services Group	21,207		80		50		118		21,455
Global Commercial Services
Global Small Business Services	$	16,460	$	101	$	53	$	114	$	16,728
Global Corporate Payments(a)	(b)		(b)		(b)		$	129	$	17,710

(a)Delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member loan or receivable balance is classified as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes. See also (b).

(b)Delinquency data for periods other than 90+ days past billing is not available due to system constraints. Therefore, such data has not been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference between the Total and the 90+ Days Past Due balances.

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:


	2019										2018
	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:
Global Consumer Services Group	2.3	%	2.8	%	1.6	%	2.1	%	2.5	%	1.5	%
Global Small Business Services	1.9	%	2.2	%	1.3	%	1.7	%	2.0	%	1.3	%
Card Member Receivables:
Global Consumer Services Group	1.7	%	1.9	%	1.2	%	1.6	%	1.8	%	1.2	%
Global Small Business Services	1.9	%	2.1	%	1.7	%	1.7	%	2.0	%	1.6	%


	2019						2018
	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:
Global Corporate Payments	0.08	%	0.8	%	0.11	%	0.7	%

(a)We present 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 we consider uncollectible interest and/or fees in estimating our reserves for credit losses, a net write-off rate including principal, interest and/or fees is also presented.

Refer to Note 3 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 Card Member loans and receivables are individual larger balance or homogeneous pools of smaller balance loans and receivables for which it is probable that we will be unable to collect all amounts due according to the original contractual terms of the Card Member agreement. We consider impaired loans and receivables to include: (i) loans over 90 days past due still accruing interest, (ii) nonaccrual loans and (iii) loans and receivables modified as troubled debt restructurings (TDRs).

In instances where the Card Member is experiencing financial difficulty, we may modify, through various programs, Card Member loans and receivables in order to minimize losses and improve collectability, while providing Card Members with temporary or permanent financial relief. We have classified Card Member loans and receivables in these modification programs as TDRs and continue to classify Card Member accounts that have exited a modification program as a TDR, with such accounts identified as “Out of Program 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 our 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 canceled, 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 may revert back to the original contractual terms (including the contractual interest rate) when the Card Member exits the modification program, which is (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. We establish 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 related Card Member loan or receivables balance. We determine 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 Provisions for losses in the Consolidated Statements of Income.

The following tables provide additional information with respect to our impaired Card Member loans and receivables as of December 31, 2019, 2018 and 2017. Impaired Card Member loans and receivables outside the U.S. are not significant as of December 31, 2019, 2018 and 2017; therefore, such loans and receivables are not included in the following tables unless otherwise noted.


	As of December 31, 2019
					Accounts Classified as a TDR (c)
(Millions)	Over 90 days Past Due & Accruing Interest(a)		Non-Accruals(b)		In Program(d)		Out of Program(e)		Total Impaired Balance		Unpaid Principal Balance		Allowance for TDRs
Card Member Loans:
Global Consumer Services Group(f)	$	384	$	284	$	500	$	175	$	1,343	$	1,199	$	137
Global Commercial Services	44		54		97		38		233		220		22
Card Member Receivables:
Global Consumer Services Group	—		—		56		16		72		72		3
Global Commercial Services	—		—		109		30		139		138		6
Total	$	428	$	338	$	762	$	259	$	1,787	$	1,629	$	168


	As of December 31, 2018
					Accounts Classified as a TDR (c)
(Millions)	Over 90 days Past Due & Accruing Interest(a)		Non-Accruals(b)		In Program(d)		Out of Program(e)		Total Impaired Balance		Unpaid Principal Balance		Allowance for TDRs
Card Member Loans:
Global Consumer Services Group(f)	$	344	$	236	$	313	$	131	$	1,024	$	923	$	80
Global Commercial Services	43		43		59		29		174		161		14
Card Member Receivables:
Global Consumer Services Group	—		—		29		13		42		42		2
Global Commercial Services	—		—		61		25		86		86		5
Total	$	387	$	279	$	462	$	198	$	1,326	$	1,212	$	101


	As of December 31, 2017
					Accounts Classified as a TDR (c)
(Millions)	Over 90 days Past Due & Accruing Interest(a)		Non-Accruals(b)		In Program(d)		Out of Program(e)		Total Impaired Balance		Unpaid Principal Balance		Allowance for TDRs
Card Member Loans:
Global Consumer Services Group(f)	$	289	$	168	$	178	$	131	$	766	$	694	$	49
Global Commercial Services	38		31		31		27		127		118		8
Card Member Receivables:
Global Consumer Services Group	—		—		15		9		24		24		1
Global Commercial Services	—		—		37		19		56		56		2
Total	$	327	$	199	$	261	$	186	$	973	$	892	$	60

(a)Our policy is generally to accrue interest through the date of write-off (typically 180 days past due). We establish reserves for interest that we believe will not be collected. Amounts presented exclude Card Member loans classified as a TDR.

(b)Non-accrual loans not in modification programs primarily include certain Card Member loans placed with outside collection agencies for which we have ceased accruing interest. Amounts presented exclude Card Member loans classified as a TDR.

(c)Accounts classified as a TDR include $26 million, $17 million and $15 million that are over 90 days past due and accruing interest and $10 million, $6 million and $5 million that are non-accruals as of December 31, 2019, 2018 and 2017, respectively.

(d)In Program TDRs include Card Member accounts that are currently enrolled in a modification program.

(e)Out of Program TDRs include $188 million, $148 million and $141 million of Card Member accounts that have successfully completed a modification program and $72 million, $50 million and $45 million of Card Member accounts that were not in compliance with the terms of the modification programs as of December 31, 2019, 2018 and 2017, respectively.

(f)GCSG includes balances outside the U.S. of $93 million, $69 million and $56 million that are over 90 days and accruing interest and $77 million, $68 million and $55 million in unpaid principal as of December 31, 2019, 2018 and 2017, respectively.

The following table provides information with respect to our average balances and interest income recognized from impaired Card Member loans and the average balances of impaired Card Member receivables for the years ended December 31:


2019 (Millions)	Average Balance		Interest Income Recognized
Card Member Loans:
Global Consumer Services Group	$	1,159	$	136
Global Commercial Services	203		25
Card Member Receivables:
Global Consumer Services Group	56		—
Global Commercial Services	112		—
Total	$	1,530	$	161


2018 (Millions)	Average Balance		Interest Income Recognized
Card Member Loans:
Global Consumer Services Group	$	878	$	109
Global Commercial Services	150		21
Card Member Receivables:
Global Consumer Services Group	33		—
Global Commercial Services	73		—
Total	$	1,134	$	130


2017 (Millions)	Average Balance		Interest Income Recognized
Card Member Loans:
Global Consumer Services Group	$	699	$	85
Global Commercial Services	120		17
Card Member Receivables:
Global Consumer Services Group	20		—
Global Commercial Services	45		—
Total	$	884	$	102

CARD MEMBER LOANS AND RECEIVABLES MODIFIED AS TDRs

The following table provides additional information with respect to Card Member loans and receivables modified as TDRs for the years ended December 31:


2019	Number of Accounts (in thousands)	Outstanding Balances ($ in millions) (a)		Average Interest Rate Reduction (% points)	Average Payment Term Extensions (# of months)
Troubled Debt Restructurings:
Card Member Loans	78	$	602	13	(b)
Card Member Receivables	9	210		(c)	26
Total	87	$	812


2018	Number of Accounts (in thousands)	Outstanding Balances ($ in millions) (a)		Average Interest Rate Reduction (% points)	Average Payment Term Extensions (# of months)
Troubled Debt Restructurings:
Card Member Loans	51	$	377	12	(b)
Card Member Receivables	6	110		(c)	28
Total	57	$	487


2017	Number of Accounts (in thousands)	Outstanding Balances ($ in millions) (a)		Average Interest Rate Reduction (% points)	Average Payment Term Extensions (# of months)
Troubled Debt Restructurings:
Card Member Loans	33	$	224	10	(b)
Card Member Receivables	6	83		(c)	28
Total	39	$	307

(a)Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and accrued interest on Card Member loans and principal and fees on Card Member receivables. Modifications did not reduce the principal balance.

(b)For Card Member loans, there have been no payment term extensions.

(c)We do not offer interest rate reduction programs for Card Member receivables as the receivables are non-interest bearing.

The following table provides information with respect to Card Member loans and receivables modified as TDRs that subsequently defaulted within 12 months of modification for the years ended December 31, 2019, 2018 and 2017. A Card Member is considered in default of a modification program after one and up to two missed payments, depending on the terms of the modification program. For all Card Members that defaulted from a modification program, the probability of default is factored into the reserves for Card Member loans and receivables.


2019	Number of Accounts (thousands)	Aggregated Outstanding Balances Upon Default(a) (millions)
Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans	12	$	86
Card Member Receivables	4	20
Total	16	$	106


	Number of Accounts	Aggregated Outstanding Balances Upon Default(a)
2018	(thousands)	(millions)
Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans	8	$	46
Card Member Receivables	4	11
Total	12	$	57


	Number of Accounts	Aggregated Outstanding Balances Upon Default(a)
2017	(thousands)	(millions)
Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans	6	$	39
Card Member Receivables	3	7
Total	9	$	46

(a)The outstanding balances upon default include principal, fees and accrued interest on Card Member loans, and principal and fees on Card Member receivables.

NOTE 3

RESERVES FOR LOSSES

Reserves for losses relating to Card Member loans and receivables represent management’s best estimate of the probable inherent losses in our outstanding portfolio of loans and receivables, as of the balance sheet date. Management’s evaluation process requires certain estimates and judgments.

Reserves for losses are primarily based upon statistical and analytical models that analyze portfolio performance and reflect management’s judgments regarding the quantitative components of the reserve. The models take into account several factors, including delinquency-based loss migration rates, loss emergence periods and average losses and recoveries over an appropriate historical period. Management considers whether to adjust the quantitative reserves for certain external and internal qualitative factors, which may increase or decrease the reserves for losses on Card Member loans and receivables. These external factors include employment, spend, sentiment, housing and credit, and changes in the legal and regulatory environment, while the internal factors include increased risk in certain portfolios, impact of risk management initiatives, changes in underwriting requirements and overall process stability. As part of this evaluation process, management also considers various reserve coverage metrics, such as reserves as a percentage of past due amounts, reserves as a percentage of Card Member loans or receivables, and net write-off coverage ratios.

Card Member loans and receivables balances are written off when management considers amounts to be uncollectible, which is generally determined by the number of days past due and is typically no later than 180 days past due, or 120 days past due for closed-end loans categorized as Other loans. Card Member loans and receivables and Other loans in bankruptcy or owed by deceased individuals are generally written off upon notification.

CHANGES IN CARD MEMBER LOANS RESERVE FOR LOSSES

The following table presents changes in the Card Member loans reserve for losses for the years ended December 31:


(Millions)	2019		2018		2017
Balance, January 1	$	2,134	$	1,706	$	1,223
Provisions(a)	2,462		2,266		1,868
Net write-offs (b)
Principal	(1,860)		(1,539)		(1,181)
Interest and fees	(375)		(304)		(227)
Other(c)	22		5		23
Balance, December 31	$	2,383	$	2,134	$	1,706

(a)Provisions for principal, interest and fee reserve components.

(b)Principal write-offs are presented less recoveries of $525 million, $444 million and $409 million for the years ended December 31, 2019, 2018 and 2017, respectively. Recoveries of interest and fees were not significant. Amounts include net (write-offs) recoveries from TDRs of $(79) million, $(33) million and $(30) million for the years ended December 31, 2019, 2018 and 2017, respectively.

(c)Includes foreign currency translation adjustments of $4 million, $(11) million and $8 million, and other adjustments of $18 million, $16 million and $15 million for the years ended December 31, 2019, 2018 and 2017, respectively.

CARD MEMBER LOANS EVALUATED INDIVIDUALLY AND COLLECTIVELY FOR IMPAIRMENT

The following table presents Card Member loans evaluated individually and collectively for impairment and related reserves as of December 31:


(Millions)	2019		2018		2017
Card Member loans evaluated individually for impairment (a)	$	810	$	532	$	367
Related reserves(a)	$	159	$	94	$	57
Card Member loans evaluated collectively for impairment (b)	$	86,571	$	81,322	$	73,032
Related reserves(b)	$	2,224	$	2,040	$	1,649

(a)Represents loans modified as a TDR and related reserves.

(b)Represents current loans and loans less than 90 days past due, loans over 90 days past due and accruing interest, and non-accrual loans. The reserves include the quantitative results of analytical models that are specific to individual pools of loans, and reserves for internal and external qualitative risk factors that apply to loans that are collectively evaluated for impairment.

CHANGES IN CARD MEMBER RECEIVABLES RESERVE FOR LOSSES

The following table presents changes in the Card Member receivables reserve for losses for the years ended December 31:


(Millions)	2019		2018		2017
Balance, January 1	$	573	$	521	$	467
Provisions(a)	963		937		795
Net write-offs(b)	(900)		(859)		(736)
Other(c)	(17)		(26)		(5)
Balance, December 31	$	619	$	573	$	521

(a)Provisions for principal and fee reserve components.

(b)Net write-offs are presented less recoveries of $374 million, $367 million and $366 million for the years ended December 31, 2019, 2018 and 2017, respectively. Amounts include net recoveries (write-offs) from TDRs of $(16) million, nil and $2 million, for the years ended December 31, 2019, 2018 and 2017, respectively.

(c)Includes foreign currency translation adjustments of nil, $(6) million and $12 million, and other adjustments of $(17) million, $(20) million and $(17) million for the years ended December 31, 2019, 2018 and 2017, respectively.

CARD MEMBER RECEIVABLES EVALUATED INDIVIDUALLY AND COLLECTIVELY FOR IMPAIRMENT

The following table presents Card Member receivables evaluated individually and collectively for impairment and related reserves as of December 31:


(Millions)	2019		2018		2017
Card Member receivables evaluated individually for impairment(a)	$	211	$	128	$	80
Related reserves(a)	$	9	$	7	$	3
Card Member receivables evaluated collectively for impairment	$	57,202	$	55,765	$	53,967
Related reserves(b)	$	610	$	566	$	518

(a)Represents receivables modified as a TDR and related reserves.

(b)The reserves include the quantitative results of analytical models that are specific to individual pools of receivables, and reserves for internal and external qualitative risk factors that apply to receivables that are collectively evaluated for impairment.

NOTE 4

INVESTMENT SECURITIES

Investment securities principally include available-for-sale debt securities carried at fair value on the Consolidated Balance Sheets, with unrealized gains and losses recorded in AOCI, net of income taxes. Investment securities also include equity securities carried at fair value on the Consolidated Balance Sheets. Effective January 1, 2018, the unrealized gains and losses on equity securities are recorded in the Consolidated Statements of Income; prior to January 1, 2018, the unrealized gains and losses on equity securities were recorded in AOCI, net of income taxes.

Realized gains and losses are recognized upon disposition of available-for-sale securities using the specific identification method.

Refer to Note 14 for a description of our methodology for determining the fair value of investment securities.

The following is a summary of investment securities as of December 31:


	2019															2018										2017
Description of Securities (Millions)	Cost		Gross Unrealized Gains			Gross Unrealized Losses		Estimated Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale debt securities:
State and municipal obligations	$	236	$	8		$	(1)	$	243	$	594	$	4	$	(2)	$	596	$	1,369	$	11	$	(3)	$	1,377
U.S. Government agency obligations	9		—			—		9		10		—		—		10		11		—		—		11
U.S. Government treasury obligations	7,395		35			(1)		7,429		3,452		5		(17)		3,440		1,051		3		(9)		1,045
Corporate debt securities	27		—			—		27		28		—		—		28		28		—		—		28
Mortgage-backed securities (a)	39		2			—		41		50		1		—		51		67		2		—		69
Foreign government bonds and obligations	578		1			—		579		474		—		—		474		581		—		—		581
Equity securities (b)	55		25		(c)	(2)		78		51		—		(3)		48		51		—		(3)		48
Total	$	8,339	$	71		$	(4)	$	8,406	$	4,659	$	10	$	(22)	$	4,647	$	3,158	$	16	$	(15)	$	3,159

(a)Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

(b)Equity securities comprise investments in common stock, exchange-traded funds and mutual funds.

(c)During 2019, an equity investment transferred from Other assets to Investment securities following the completion of an initial public offering by the issuer of the securities. The investment had a fair value of $28 million with an associated cost of $3 million as of December 31, 2019. The gross unrealized gains include $9 million that were recognized during 2018.

The following table provides information about our investment securities with gross unrealized losses and the length of time that individual securities have been in an unrealized loss position as of December 31:


	2019														2018
	Less than 12 months						12 months or more						Less than 12 months				12 months or more
Description of Securities (Millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
State and municipal obligations	$	18	$	(1)	$	—	$	—	$	—	$	—	$	82	$	(1)
U.S. Government treasury obligations	—		—		324		(1)		224		(2)		791		(15)
Total	$	18	$	(1)	$	324	$	(1)	$	224	$	(2)	$	873	$	(16)

The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to amortized cost as of December 31:


	Less than 12 months								12 months or more							Total
Ratio of Fair Value to Amortized Cost (Dollars in millions)	Number of Securities	Estimated Fair Value		Gross Unrealized Losses		Number of Securities	Estimated Fair Value		Gross Unrealized Losses		Number of Securities	Estimated Fair Value		Gross Unrealized Losses
2019:
90%–100%	2	$	18	$	(1)	3	$	324	$	(1)	5	$	342	$	(2)
Total as of December 31, 2019	2	$	18	$	(1)	3	$	324	$	(1)	5	$	342	$	(2)
2018:
90%–100%	2	$	224	$	(2)	29	$	873	$	(16)	31	$	1,097	$	(18)
Total as of December 31, 2018	2	$	224	$	(2)	29	$	873	$	(16)	31	$	1,097	$	(18)

The gross unrealized losses for available-for-sale debt securities are attributed to wider credit spreads for specific issuers, adverse changes in benchmark interest rates, or a combination thereof, all compared to those prevailing when the investment securities were purchased.

Overall, for the available-for-sale debt securities in gross unrealized loss positions, (i) we do not intend to sell the securities, (ii) it is more likely than not that we will not be required to sell the securities before recovery of the unrealized losses, and (iii) we expect that the contractual principal and interest will be received on the securities. As a result, we recognized no other-than-temporary impairment during the periods presented.

Weighted average yields and contractual maturities for investment securities with stated maturities as of December 31, 2019 were as follows:


(Millions)	Due within 1 year			Due after 1 year but within 5 years			Due after 5 years but within 10 years			Due after 10 years			Total
State and municipal obligations(a)	$	6		$	39		$	30		$	168		$	243
U.S. Government agency obligations(a)	—			—			—			9			9
U.S. Government treasury obligations	6,019			1,270			140			—			7,429
Corporate debt securities	5			22			—			—			27
Mortgage-backed securities(a)	—			—			—			41			41
Foreign government bonds and obligations	577			1			1			—			579
Total Estimated Fair Value	$	6,607		$	1,332		$	171		$	218		$	8,328

Total Cost	$	6,602		$	1,307		$	166		$	209		$	8,284
Weighted average yields(b)	2.17		%	2.27		%	3.01		%	3.99		%	2.25		%

(a)The expected payments on state and municipal obligations, U.S. government agency obligations and mortgage-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.

(b)Average yields for investment securities have been calculated using the effective yield on the date of purchase. Yields on tax-exempt investment securities have been computed on a tax-equivalent basis using the U.S. federal statutory tax rate of 21 percent.

NOTE 5

ASSET SECURITIZATIONS

We periodically securitize Card Member loans and receivables arising from our card businesses through the transfer of those assets to securitization trusts, American Express Credit Account Master Trust (the Lending Trust) and American Express Issuance Trust II (the Charge Trust and together with the Lending Trust, the Trusts). The Trusts then issue debt securities collateralized by the transferred assets to third-party investors.

The Trusts are considered VIEs as they have insufficient equity at risk to finance their activities, which are to issue debt securities that are collateralized by the underlying Card Member loans and receivables. Refer to Note 1 for further details on the principles of consolidation. We perform the servicing and key decision making for the Trusts, and therefore have the power to direct the activities that most significantly impact the Trusts’ economic performance, which are the collection of the underlying Card Member loans and receivables. In addition, we hold all of the variable interests in both Trusts, with the exception of the debt securities issued to third-party investors. As of December 31, 2019 and 2018, our ownership of variable interests was $12.9 billion and $15.5 billion, respectively, for the Lending Trust and $8.3 billion and $7.0 billion, respectively, for the Charge Trust. These variable interests held by us provide us with the right to receive benefits and the obligation to absorb losses, which could be significant to both the Lending Trust and the Charge Trust. Based on these considerations, we are the primary beneficiary of the Trusts and therefore consolidate the Trusts.

The debt securities issued by the Trusts are non-recourse to us. The securitized Card Member loans and receivables held by the Lending Trust and the Charge Trust, respectively, are available only for payment of the debt securities or other obligations issued or arising in the securitization transactions (refer to Note 2). The long-term debt of each Trust is payable only out of collections on their respective underlying securitized assets (refer to Note 8).

The following table provides information on the restricted cash held by the Trusts as of December 31, 2019 and 2018, included in Other assets on the Consolidated Balance Sheets:


(Millions)	2019		2018
Lending Trust	$	85	$	67
Charge Trust	—		3
Total	$	85	$	70

These amounts relate to collections of Card Member loans and receivables to be used by the Trusts to fund future expenses and obligations, including interest on debt securities, credit losses and upcoming debt maturities.

Under the respective terms of the Lending Trust and the Charge Trust agreements, the occurrence of certain triggering events associated with the performance of the assets of each Trust could result in payment of trust expenses, establishment of reserve funds, or, in a worst-case scenario, early amortization of debt securities. During the year ended December 31, 2019, no such triggering events occurred.

NOTE 6

OTHER ASSETS

The following is a summary of Other assets as of December 31:


(Millions)	2019		2018
Goodwill	$	3,315	$	3,072
Other intangible assets, at amortized cost	267		275
Other(a)	11,149		10,031
Total	$	14,731	$	13,378

(a)Primarily includes other receivables net of reserves, investments in non-consolidated entities, prepaid expenses, net deferred tax assets, tax credit investments, right-of-use lease assets and restricted cash. Restricted cash represents amounts available to settle obligations related to certain Card Member credit balances and customer deposits, as well as coupon and maturity obligations of consolidated VIEs.

GOODWILL

The changes in the carrying amount of goodwill reported in our reportable operating segments were as follows:


(Millions)	GCSG		GCS		GMNS		Total
Balance as of December 31, 2017	$	637	$	1,724	$	648	$	3,009
Acquisitions	90		—		—		90
Dispositions	—		—		—		—
Other(a)	(20)		(6)		(1)		(27)
Balance as of December 31, 2018	$	707	$	1,718	$	647	$	3,072
Acquisitions	189		66		—		255
Dispositions	—		—		—		—
Other(a)	(7)		(3)		(2)		(12)
Balance as of December 31, 2019	$	889	$	1,781	$	645	$	3,315

(a)Primarily includes foreign currency translation.

Accumulated impairment losses were $221 million as of both December 31, 2019 and 2018.

OTHER INTANGIBLE ASSETS

Intangible assets are amortized on a straight-line basis over their estimated useful lives of 1 to 22 years. We review long-lived assets and asset groups, including intangible assets, for impairment whenever events and circumstances indicate their carrying amounts may not be recoverable. An impairment is recognized if the carrying amount is not recoverable and exceeds the asset or asset group’s fair value.

The gross carrying amount for other intangible assets as of December 31, 2019 and 2018 was $704 million and $702 million, respectively, with accumulated amortization of $437 million and $427 million, respectively.

Amortization expense, which is recorded within Other expense in the Consolidated Statements of Income, was $49 million, $212 million and $207 million for the years ended December 31, 2019, 2018 and 2017, respectively.

TAX CREDIT INVESTMENTS

We account for our tax credit investments, including Qualified Affordable Housing (QAH) investments, using the equity method of accounting. As of December 31, 2019 and 2018, we had $1,154 million and $1,043 million in tax credit investments, respectively, included in Other assets on the Consolidated Balance Sheets, of which $1,109 million and $1,006 million, respectively, related to QAH investments. Included in QAH investments as of December 31, 2019 and 2018, we had $1,032 million and $936 million, respectively, related to investments in unconsolidated VIEs for which we do not have a controlling financial interest.

As of December 31, 2019, we committed to provide funding related to certain of these QAH investments, which is expected to be paid between 2020 and 2043, resulting in $211 million in unfunded commitments reported in Other liabilities, of which $187 million specifically related to unconsolidated VIEs.

In addition, as of December 31, 2019 we had contractual off-balance sheet obligations, which were not deemed probable of being drawn, to provide additional funding up to $78 million for these QAH investments, fully related to unconsolidated VIEs.

During the years ended December 31, 2019 and 2018, we recognized equity method losses related to our QAH investments of $101 million and $126 million, respectively, which were recognized in Other, net expenses; and associated tax credits of $119 million and $97 million, respectively, recognized in Income tax provision.

NOTE 7

CUSTOMER DEPOSITS

As of December 31, customer deposits were categorized as interest-bearing or non-interest-bearing as follows:


(Millions)	2019		2018
U.S.:
Interest-bearing	$	72,445	$	69,144
Non-interest-bearing (includes Card Member credit balances of: 2019, $389 million; 2018, $376 million)	415		412
Non-U.S.:
Interest-bearing	23		28
Non-interest-bearing (includes Card Member credit balances of: 2019, $401 million; 2018, $367 million)	404		376
Total customer deposits	$	73,287	$	69,960

Customer deposits by deposit type as of December 31 were as follows:


(Millions)	2019		2018
U.S. retail deposits:
Savings accounts ― Direct	$	46,394	$	39,491
Certificates of deposit:(a)
Direct	1,854		817
Third-party (brokered)	8,076		12,667
Sweep accounts ―Third-party (brokered)	16,121		16,169
Other deposits:
U.S. non-interest-bearing deposits	26		36
Non-U.S. deposits	26		37
Card Member credit balances ― U.S. and non-U.S.	790		743
Total customer deposits	$	73,287	$	69,960

(a)The weighted average remaining maturity and weighted average interest rate at issuance on the total portfolio of U.S. retail certificates of deposit issued through direct and third-party programs were 48 months and 2.53 percent, respectively, as of December 31, 2019.

The scheduled maturities of certificates of deposit as of December 31, 2019 were as follows:


(Millions)	U.S.		Non-U.S.		Total
2020	$	4,618	$	14	$	4,632
2021	2,302		—		2,302
2022	2,385		—		2,385
2023	374		—		374
2024	251		—		251
After 5 years	—		—		—
Total	$	9,930	$	14	$	9,944

As of December 31, certificates of deposit in denominations of $250,000 or more, in the aggregate, were as follows:


(Millions)	2019		2018
U.S.	$	622	$	276
Non-U.S.	4		9
Total	$	626	$	285

NOTE 8

DEBT

SHORT-TERM BORROWINGS

Our short-term borrowings outstanding, defined as borrowings with original contractual maturity dates of less than one year, as of December 31 were as follows:


	2019						2018
(Millions, except percentages)	Outstanding Balance		Year-End Stated Interest Rate on Debt(a)		Outstanding Balance		Year-End Stated Interest Rate on Debt(a)
Commercial paper(b)	$	3,001	1.94	%	$	752	2.71	%
Other short-term borrowings(c)	3,441		1.28		2,348		1.94
Total	$	6,442	1.59	%	$	3,100	2.13	%

(a)For floating-rate issuances, the stated interest rates are weighted based on the outstanding principal balances and interest rates in effect as of December 31, 2019 and 2018.

(b)Average commercial paper outstanding was $299 million and $228 million in 2019 and 2018, respectively.

(c)Primarily includes book overdrafts with banks due to timing differences arising in the ordinary course of business.

We maintained a three-year committed, revolving, secured borrowing facility that gives us the right to sell up to $2.0 billion face amount of eligible certificates issued from the Lending Trust at any time through September 15, 2022. The facility was undrawn as of both December 31, 2019 and 2018.

We paid $7.7 million and $7.8 million in fees to maintain the secured borrowing facility in 2019 and 2018, respectively. The committed facility does not contain a material adverse change clause, which might otherwise preclude borrowing under the facility, nor is it dependent on our credit rating.

LONG-TERM DEBT

Our long-term debt outstanding, defined as debt with original contractual maturity dates of one year or greater, as of December 31 was as follows:


	2019													2018
(Millions, except percentages)	Original Contractual Maturity Dates	Outstanding Balance(a)		Year-End Interest Rate on Debt(b)		Year-End Interest Rate with Swaps(b)(c)		Outstanding Balance(a)		Year-End Interest Rate on Debt(b)		Year-End Interest Rate with Swaps(b)(c)
American Express Company (Parent Company only)
Fixed Rate Senior Notes	2020 - 2042	$	19,326	3.17	%	2.86	%	$	14,043	3.48	%	3.64	%
Floating Rate Senior Notes	2020 - 2023	4,500		3.16		—		3,600		3.17		—
Fixed Rate Subordinated Notes	2024	598		3.63		2.99		598		3.63		3.66
American Express Credit Corporation
Fixed Rate Senior Notes	2020 - 2027	11,839		2.40		2.56		16,677		2.28		3.06
Floating Rate Senior Notes	2020 - 2022	1,650		3.36		—		3,800		3.31		—
American Express Lending Trust
Fixed Rate Senior Notes	2020 - 2023	15,074		2.42		2.43		12,474		2.28		—
Floating Rate Senior Notes	2021 - 2023	4,125		2.74		—		5,125		2.80		—
Fixed Rate Subordinated Notes	2020 - 2022	420		2.53		—		240		2.37		—
Floating Rate Subordinated Notes	2022 - 2023	79		2.45		—		167		2.96		—
American Express Charge Trust II
Floating Rate Conduit Borrowings		—		—		—		1,535		2.89		—

Other
Finance Leases	2024 - 2033	25		5.65		—		19		5.54		—
Floating Rate Borrowings	2020 - 2022	311		0.40		—	%	262		0.42		—	%
Unamortized Underwriting Fees		(112)						(117)
Total Long-Term Debt		$	57,835	2.78	%			$	58,423	2.77	%

(a)The outstanding balances include (i) unamortized discount, (ii) the impact of movements in exchange rates on foreign currency denominated debt and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate through the use of interest rate swaps. Refer to Note 13 for more details on our treatment of fair value hedges.

(b)For floating-rate issuances, the stated interest rate on debt is weighted based on the outstanding principal balances and interest rates in effect as of December 31, 2019 and 2018.

(c)Interest rates with swaps are only presented when swaps are in place to hedge the underlying debt. The interest rates with swaps are weighted based on the outstanding principal balances and the interest rates on the floating leg of the swaps in effect as of December 31, 2019 and 2018.

Aggregate annual maturities on long-term debt obligations (based on contractual maturity or anticipated redemption dates) as of December 31, 2019 were as follows:


(Millions)	2020		2021		2022		2023		2024		Thereafter		Total
American Express Company (Parent Company only)	$	2,000	$	5,000	$	5,675	$	4,350	$	5,000	$	2,872	$	24,897
American Express Credit Corporation	6,600		2,864		2,050		—		—		2,000		13,514
American Express Lending Trust	6,924		3,709		6,381		2,685		—		—		19,699

Other	91		137		82		—		15		11		336
	$	15,615	$	11,710	$	14,188	$	7,035	$	5,015	$	4,883	$	58,446
Unamortized Underwriting Fees													(112)
Unamortized Discount and Premium													(716)
Impacts due to Fair Value Hedge Accounting													217
Total Long-Term Debt													$	57,835

We maintained a bank line of credit of $3.5 billion as of December 31, 2019 and 2018, all of which was undrawn as of the respective dates. The availability of the credit line is subject to our compliance with certain financial covenants, principally the maintenance by American Express Credit Corporation (Credco) of a 1.25 ratio of combined earnings and fixed charges, to fixed charges. As of December 31, 2019 and 2018, we were not in violation of any of our debt covenants.

Additionally, we maintained a three-year committed, revolving, secured borrowing facility that gives us the right to sell up to $3.0 billion face amount of eligible notes issued from the Charge Trust at any time through July 15, 2022. As of December 31, 2019 and 2018, nil and $1.5 billion, respectively, were drawn on this facility.

We paid $16.5 million and $14.2 million in fees to maintain these lines in 2019 and 2018, respectively. These committed facilities do not contain material adverse change clauses, which might otherwise preclude borrowing under the credit facilities, nor are they dependent on our credit rating.

We paid total interest, primarily related to short- and long-term debt, corresponding interest rate swaps and customer deposits, of $3.4 billion, $2.7 billion and $2.0 billion in 2019, 2018 and 2017, respectively.

NOTE 9

OTHER LIABILITIES

The following is a summary of Other liabilities as of December 31:


(Millions)	2019		2018
Membership Rewards liability	$	8,892	$	8,414
Employee-related liabilities(a)	2,429		2,164
Card Member rebate and reward accruals(b)	1,790		1,596
Income tax liability(c)	1,122		1,079
Other(d)	10,715		9,321
Total	$	24,948	$	22,574

(a)Employee-related liabilities include employee benefit plan obligations and incentive compensation.

(b)Card Member rebate and reward accruals include payments to third-party reward partners and cash-back rewards.

(c)Includes repatriation tax liability of $1,012 million and $1,689 million as of December 31, 2019 and 2018, respectively, which represents our remaining obligation under the Tax Cuts and Jobs Act enacted on December 22, 2017 (Tax Act) to pay a one-time transition tax on unrepatriated earnings and profits of certain foreign subsidiaries.

(d)Primarily includes Travelers Cheques and other prepaid products, net deferred card and other fees, book overdraft balances, lease liabilities, client incentives, restructuring and reengineering reserves, dividends payable, and derivative and hedge liabilities.

MEMBERSHIP REWARDS

The Membership Rewards program allows enrolled Card Members to earn points that can be redeemed for a broad range of rewards including travel, shopping, gift cards, and covering eligible charges. We record a balance sheet liability that represents management’s best estimate of the cost of points earned that are expected to be redeemed in the future. The weighted average cost (WAC) per point and the Ultimate Redemption Rate (URR) are key assumptions used to estimate the Membership Rewards liability. We use statistical and actuarial models to estimate the URR based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes.

The expense for Membership Rewards points is included in Card Member rewards expense. We periodically evaluate our liability estimation process and assumptions based on developments in redemption patterns, cost per point redeemed, partner contract changes and other factors.

DEFERRED CARD AND OTHER FEES, NET

The carrying amount of deferred card and other fees, net of deferred direct acquisition costs and reserves for membership cancellations as of December 31, was as follows:


(Millions)	2019		2018
Deferred card and other fees(a)	$	2,532	$	2,208
Deferred direct acquisition costs	(270)		(282)
Reserves for membership cancellations	(200)		(167)
Deferred card and other fees, net	$	2,062	$	1,759

(a)Includes deferred fees for Membership Rewards program participants.

NOTE 10

STOCK PLANS

STOCK OPTION AND AWARD PROGRAMS

Under our 2016 Incentive Compensation Plan and previously under our 2007 Incentive Compensation Plan (collectively, Incentive Compensation Plans), awards may be granted to employees and other key individuals who perform services for us and our participating subsidiaries. These awards may be in the form of stock options, restricted stock units or awards (collectively referred to as RSUs), portfolio grants (PGs) or other incentives or similar awards designed to meet the requirements of non-U.S. jurisdictions.

For our Incentive Compensation Plans, there were a total of 9 million, 12 million and 14 million common shares unissued and available for grant as of December 31, 2019, 2018, and 2017, respectively, as authorized by our Board of Directors and shareholders. We generally issue new common shares upon exercise of options and vesting of RSUs.

Stock-based compensation expense recognized in Salaries and employee benefits in the Consolidated Statements of Income was $280 million, $288 million and $283 million in 2019, 2018, and 2017, respectively, with corresponding income tax benefits of $67 million, $69 million, and $102 million in those respective periods.

A summary of stock option and RSU activity as of December 31, 2019, and corresponding changes during the year, are as follows:


	Stock Options				Service-Based RSUs					Service and Performance-Based RSUs
(Shares in thousands)	Shares	Weighted-Average Exercise Price		Shares	Weighted- Average Grant Price		Shares	Weighted- Average Grant Price
Outstanding as of December 31, 2018	5,484	$	64.73	2,544	$	80.15	4,022	$	74.22
Granted	408	101.43		1,041	103.93		1,358	90.34
Exercised/vested	(1,626)	51.92		(1,001)	76.07		(1,819)	58.28
Forfeited	(94)	92.19		(172)	89.79		(169)	93.74
Expired	—	—		—	—		—	—
Outstanding as of December 31, 2019	4,172	72.70		2,412	$	91.42	3,392	$	88.25
Options vested and expected to vest as of December 31, 2019	4,171	72.70
Options exercisable as of December 31, 2019	2,357	$	61.15

The cost of employee stock awards granted in exchange for employee services is generally recognized ratably based on the grant-date fair value of the award, net of expected forfeitures, over the vesting period. The vesting period is the shorter of the vesting schedule as defined in each award agreement or the date an individual will become eligible to retire. Retirement eligibility is dependent upon age and/or years of service.

STOCK OPTIONS

Each stock option has an exercise price equal to the market price of our common stock on the date of grant. Stock options generally vest on the third anniversary of the grant date and have a contractual term of 10 years from the date of grant.

The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of our stock price exceeds the exercise price of the option) of the stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2019, were as follows:


	Outstanding		Exercisable		Vested and Expected to Vest
Weighted-average remaining contractual life (in years)	5.3		4.0		5.3
Aggregate intrinsic value (millions)	$	216	$	149	$	216

As of December 31, 2019, there was $7 million of total unrecognized compensation cost related to unvested options, which will be recognized ratably over the weighted-average remaining vesting period of 1.2 years.

The fair value of each option is estimated on the date of grant using a Black-Scholes-Merton option-pricing model. The following weighted-average assumptions were used for options granted in 2019, 2018 and 2017:


	2019			2018			2017
Dividend yield	1.5		%	1.4		%	1.8		%
Expected volatility(a)	24		%	22		%	24		%
Risk-free interest rate	2.6		%	2.7		%	2.3		%
Expected life of stock option (in years)(b)	7.1			7.1			6.9
Weighted-average fair value per option	$	23.38		$	23.17		$	18.18

(a)The expected volatility is based on both weighted historical and implied volatilities of our common stock price.

(b)The expected life of stock options was determined using both historical data and expectations of option exercise behavior.

On October 31, 2017, certain senior executives were granted stock options with a term of seven years, and include a three-year service condition, as well as performance and market conditions. Therefore, the fair values of these options were estimated at the grant date using a Monte Carlo valuation model with the following assumptions:


	October 31, 2017
Dividend yield	1.58		%
Expected volatility(a)	21.41		%
Risk-free interest rate	2.26		%
Expected life of stock option (in years)	7
Fair value per option	$	19.18

(a)The expected volatility is based on both weighted historical and implied volatilities of our common stock price.

For stock options that were exercised during 2019, 2018 and 2017, the intrinsic value, based upon the fair value of our stock price at the date the options were exercised, was $104 million, $104 million and $197 million, respectively; cash received from the exercise of stock options was $84 million, $87 million and $130 million during those respective periods. The income tax benefit recognized in the Consolidated Statements of Income related to stock option exercises was $18 million, $18 million and $59 million in 2019, 2018 and 2017, respectively.

RESTRICTED STOCK UNITS/AWARDS

We grant RSUs that contain either a) service conditions or b) both service and performance conditions. RSUs containing only service conditions generally vest 25 percent per year beginning with the first anniversary of the grant date. RSUs containing both service and performance conditions generally vest on the third anniversary of the grant date, and the number of shares earned depends on the achievement of predetermined Company metrics. All RSU holders receive non-forfeitable dividends or dividend equivalents.

We added a relative total shareholder return (r-TSR) modifier to the performance-based RSUs that were granted in 2019, so that our actual shareholder return relative to a competitive peer group is one of the performance conditions that determines the number of shares ultimately granted upon vesting.

The fair value of RSUs that do not include the r-TSR modifier, including those that contain only service conditions, is measured using our stock price on the grant date. The fair value of service and performance-based RSUs that include the r-TSR modifier is determined using a Monte Carlo valuation model with the following weighted-average assumptions:


	2019
Expected volatility(a)	20	%
Risk-free interest rate	2.5	%
Remaining performance period (in years)	2.9

(a)The expected volatility is based on historical volatility of our common stock price.

As of December 31, 2019, there was $195 million of total unrecognized compensation cost related to non-vested RSUs, which will be recognized ratably over the weighted-average remaining vesting period of 2.1 years.

The weighted-average grant date fair value of RSUs granted in 2019, 2018 and 2017 was $96.24, $98.20 and $77.80, respectively.

For RSUs vested during 2019, 2018 and 2017, the total fair value, based upon our stock price at the date the RSUs vested, was $286 million, $239 million and $180 million, respectively.

LIABILITY-BASED AWARDS

In 2018 and 2017, certain employees were awarded PGs and other incentive awards that can be settled with cash or equity shares at our discretion, and final Compensation and Benefits Committee payout approval; beginning in 2019, we discontinued granting PGs. These awards earn value based on performance, market and/or service conditions, and vest over periods of one to three years.

PGs and other incentive awards are generally settled with cash and thus are classified as liabilities; therefore, the fair value is determined at the date of grant and remeasured quarterly as part of compensation expense over the vesting period. Cash paid upon vesting of these awards in 2019, 2018 and 2017 was $81 million, $56 million and $48 million, respectively.

NOTE 11

RETIREMENT PLANS

DEFINED CONTRIBUTION RETIREMENT PLANS

We sponsor defined contribution retirement plans, the principal plan being the Retirement Savings Plan (RSP), a 401(k) savings plan with a profit-sharing component. The RSP is a tax-qualified retirement plan subject to the Employee Retirement Income Security Act of 1974 and covers most employees in the United States. The total expense for all defined contribution retirement plans globally was $278 million, $272 million and $349 million in 2019, 2018 and 2017, respectively.

DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Our primary defined benefit pension plans that cover certain employees in the United States and United Kingdom are closed to new entrants and existing participants do not accrue any additional benefits. Most employees outside the United States and United Kingdom are covered by local retirement plans, some of which are funded, while other employees receive payments at the time of retirement or termination under applicable labor laws or agreements. We comply with minimum funding requirements in all countries. We also sponsor unfunded other postretirement benefit plans that provide health care and life insurance to certain retired U.S. employees. For these plans, the total net benefit was $8 million and $0.4 million in 2019 and 2018, respectively, and the total net expense was $25 million in 2017.

We recognize the funded status of our defined benefit pension plans and other postretirement benefit plans, measured as the difference between the fair value of the plan assets and the projected benefit obligation, on the Consolidated Balance Sheets. As of December 31, 2019 and 2018, the unfunded status related to the defined benefit pension plans and other postretirement benefit plans was $640 million and $563 million, respectively, and is recorded in Other liabilities.

NOTE 12

CONTINGENCIES AND COMMITMENTS

CONTINGENCIES

In the ordinary course of business, we and our subsidiaries are subject to various pending and potential legal actions, arbitration proceedings, claims, investigations, examinations, information gathering requests, subpoenas, inquiries and matters relating to compliance with laws and regulations (collectively, legal proceedings).

Based on our current knowledge, and taking into consideration our litigation-related liabilities, we do not believe we are a party to, nor are any of our properties the subject of, any legal proceeding that would have a material adverse effect on our consolidated financial condition or liquidity. However, in light of the uncertainties involved in such matters, including the fact that some pending legal proceedings are at preliminary stages or seek an indeterminate amount of damages, it is possible that the outcome of legal proceedings could have a material impact on our results of operations. Certain legal proceedings involving us or our subsidiaries are described below.

A putative merchant class action in the Eastern District of New York, consolidated in 2011 and collectively captioned In re: American Express Anti-Steering Rules Antitrust Litigation (II), alleged that provisions in our merchant agreements prohibiting merchants from differentially surcharging our cards or steering a customer to use another network’s card or another type of general-purpose card (“anti-steering” and “non-discrimination” contractual provisions) violate U.S. antitrust laws. On January 15, 2020, our motion to compel arbitration of claims brought by merchants who accept American Express and to dismiss claims of merchants who do not was granted.

In July 2004, we were named as a defendant in another putative class action filed in the Southern District of New York and subsequently transferred to the Eastern District of New York, captioned The Marcus Corporation v. American Express Co., et al., in which the plaintiffs allege an unlawful antitrust tying arrangement between certain of our charge cards and credit cards in violation of various state and federal laws. The plaintiffs in this action seek injunctive relief and an unspecified amount of damages.

On March 8, 2016, plaintiffs B&R Supermarket, Inc. d/b/a Milam’s Market and Grove Liquors LLC, on behalf of themselves and others, filed a suit, captioned B&R Supermarket, Inc. d/b/a Milam’s Market, et al. v. Visa Inc., et al., for violations of the Sherman Antitrust Act, the Clayton Antitrust Act, California’s Cartwright Act and unjust enrichment in the United States District Court for the Northern District of California, against American Express Company, other credit and charge card networks, other issuing banks and EMVCo, LLC. Plaintiffs allege that the defendants, through EMVCo, conspired to shift liability for fraudulent, faulty and otherwise rejected consumer credit card transactions from themselves to merchants after the implementation of EMV chip payment terminals. Plaintiffs seek damages and injunctive relief. An amended complaint was filed on July 15, 2016. On September 30, 2016, the court denied our motion to dismiss as to claims brought by merchants who do not accept American Express cards, and on May 4, 2017, the California court transferred the case to the United States District Court for the Eastern District of New York.

We are being challenged in a number of countries regarding our application of value-added taxes (VAT) to certain of our international transactions, which are in various stages of audit, or are being contested in legal actions. While we believe we have complied with all applicable tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional VAT. In certain jurisdictions where we are contesting the assessments, we were required to pay the VAT assessments prior to contesting.

Our legal proceedings range from cases brought by a single plaintiff to class actions with millions of putative class members to governmental proceedings. These legal proceedings involve various lines of business and a variety of claims (including, but not limited to, common law tort, contract, application of tax laws, antitrust and consumer protection claims), some of which present novel factual allegations and/or unique legal theories. While some matters pending against us specify the damages sought, many seek an unspecified amount of damages or are at very early stages of the legal process. Even when the amount of damages claimed against us are stated, the claimed amount may be exaggerated and/or unsupported. As a result, some matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to estimate an amount of loss or a range of possible loss, while other matters have progressed sufficiently such that we are able to estimate an amount of loss or a range of possible loss.

We have accrued for certain of our outstanding legal proceedings. An accrual is recorded when it is both (a) probable that a loss has occurred and (b) the amount of loss can be reasonably estimated. There may be instances in which an exposure to loss exceeds the accrual. We evaluate, on a quarterly basis, developments in legal proceedings that could cause an increase or decrease in the amount of the accrual that has been previously recorded, or a revision to the disclosed estimated range of possible losses, as applicable.

For those disclosed material legal proceedings where a loss is reasonably possible in future periods, whether in excess of a recorded accrual for legal or tax contingencies, or where there is no such accrual, and for which we are able to estimate a range of possible loss, the current estimated range is zero to $190 million in excess of any accruals related to those matters. This range represents management’s estimate based on currently available information and does not represent our maximum loss exposure; actual results may vary significantly. As such legal proceedings evolve, we may need to increase our range of possible loss or recorded accruals. In addition, it is possible that significantly increased merchant steering or other actions impairing the Card Member experience as a result of an adverse resolution in one or any combination of the disclosed merchant cases could have a material adverse effect on our business.

COMMITMENTS

Total lease expense includes rent expenses, adjustments for rent concessions, rent escalations and leasehold improvement allowances and is recognized on a straight-line basis over the lease term. Total lease expense for the years ended December 31, 2019, 2018 and 2017 was $151 million, $142 million and $151 million, respectively.

Effective January 1, 2019, we adopted the new accounting guidance on leases (refer to Note 1 for additional details). Lease liabilities are recognized at the present value of the contractual fixed lease payments, discounted using our incremental borrowing rate as of the lease commencement date or upon modification of the lease. For lease liabilities outstanding as of December 31, 2019, the weighted average remaining lease term was 22 years and the weighted average rate used to discount lease commitments was 4 percent.

The following represents the maturities of our outstanding lease commitments as of December 31, 2019:


(Millions)
2020	$	134
2021	114
2022	100
2023	89
2024	77
Thereafter	842
Total Outstanding Fixed Lease Payments	$	1,356
Less: Amount representing interest	$	(573)
Lease Liabilities	$	783

As of December 31, 2019, we had $5 billion in commitments outstanding related to agreements with certain cobrand arrangements under which we make payments based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of cobrand accounts acquired and retained. As of December 31, 2019, we also had certain cobrand arrangements that include commitments based on variables, the values of which are not yet determinable and thus the amount is not quantifiable.

NOTE 13

DERIVATIVES AND HEDGING ACTIVITIES

We use derivative financial instruments to manage exposures to various market risks. These instruments derive their value from an underlying variable or multiple variables, including interest rates, foreign exchange rates, and an equity index or price, and are carried at fair value on the Consolidated Balance Sheets. These instruments enable end users to increase, reduce or alter exposure to various market risks and, for that reason, are an integral component of our market risk management. We do not transact in derivatives for trading purposes.

Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk exposures include:

Interest rate risk due to changes in the relationship between interest rates on our assets (such as loans, receivables and investment securities) and interest rates on our liabilities (such as debt and deposits); and
Foreign exchange risk related to earnings, funding, transactions and investments in currencies other than the U.S. dollar.

We centrally monitor market risks using market risk limits and escalation triggers as defined in our Asset/Liability Management Policy. Our market exposures are in large part by-products of the delivery of our products and services.

Interest rate risk primarily arises through the funding of Card Member receivables and fixed-rate loans with variable-rate borrowings, as well as through the risk to net interest margin from changes in the relationship between benchmark rates such as Prime, LIBOR and the overnight indexed swap rate. Interest rate exposure within our charge card and fixed-rate lending products is managed by varying the proportion of total funding provided by short-term and variable-rate debt and deposits compared to fixed-rate debt and deposits. In addition, interest rate swaps are used from time to time to economically convert fixed-rate debt obligations to variable-rate obligations, or to convert variable-rate debt obligations to fixed-rate obligations. We may change the mix between variable-rate and fixed-rate funding based on changes in business volumes and mix, among other factors.

Foreign exchange risk is generated by Card Member cross-currency spend, foreign currency balance sheet exposures, foreign subsidiary equity and foreign currency earnings in entities outside the United States. Our foreign exchange risk is managed primarily by entering into agreements to buy and sell currencies on a spot basis or by hedging this market exposure, to the extent it is economical, through various means, including the use of derivatives such as foreign exchange forwards and cross-currency swap contracts.

Derivatives may give rise to counterparty credit risk, which is the risk that a derivative counterparty will default on, or otherwise be unable to perform pursuant to, an uncollateralized derivative exposure. We manage this risk by considering the current exposure, which is the replacement cost of contracts on the measurement date, as well as estimating the maximum potential value of the contracts over the next 12 months, considering such factors as the volatility of the underlying or reference index. To mitigate derivative credit risk, counterparties are required to be pre-approved by us and rated as investment grade, and counterparty risk exposures are centrally monitored.

Additionally, in order to mitigate the bilateral counterparty credit risk associated with derivatives, we have in certain instances entered into master netting agreements with our derivative counterparties, which provide a right of offset for certain exposures between the parties. A majority of our derivative assets and liabilities as of December 31, 2019 and 2018 are subject to such master netting agreements with our derivative counterparties, and there are no instances in which management makes an accounting policy election to not net assets and liabilities subject to an enforceable master netting agreement on the Consolidated Balance Sheets. To further mitigate counterparty credit risk, we exercise our rights under executed credit support agreements with the respective derivative counterparties for most of our bilateral interest rate swaps and select foreign exchange contracts. These agreements require that, in the event the fair value change in the net derivatives position between the two parties exceeds certain dollar thresholds, the party in the net liability position posts collateral to its counterparty. All derivative contracts cleared through a central clearinghouse are collateralized to the full amount of the fair value of the contracts.

In relation to our credit risk, certain of our bilateral derivative agreements include provisions that allow our counterparties to terminate the agreement in the event of a downgrade of our debt credit rating below investment grade and settle the outstanding net liability position. As of December 31, 2019, these derivatives were not in a significant net liability position. We have no individually significant derivative counterparties and therefore, no significant risk exposure to any single derivative counterparty. Based on our assessment of the credit risk of our derivative counterparties and our own credit risk as of December 31, 2019 and 2018, no credit risk adjustment to the derivative portfolio was required.

Our derivatives are carried at fair value on the Consolidated Balance Sheets. The accounting for changes in fair value depends on the instruments’ intended use and the resulting hedge designation, if any, as discussed below. Refer to Note 14 for a description of our methodology for determining the fair value of derivatives.

The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of December 31:


	Other Assets Fair Value						Other Liabilities Fair Value
(Millions)	2019		2018		2019		2018
Derivatives designated as hedging instruments:
Fair value hedges - Interest rate contracts(a)	$	185	$	34	$	—	$	74
Net investment hedges - Foreign exchange contracts	24		222		186		61
Total derivatives designated as hedging instruments	209		256		186		135
Derivatives not designated as hedging instruments:
Foreign exchange contracts, including certain embedded derivatives	134		258		254		79
Total derivatives, gross	343		514		440		214
Derivative asset and derivative liability netting(b)	(90)		(90)		(90)		(90)
Cash collateral netting(c) (d)	(185)		(28)		(9)		(78)
Total derivatives, net	$	68	$	396	$	341	$	46

(a)For our centrally cleared derivatives, variation margin payments are legally characterized as settlement payments as opposed to collateral.

(b)Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an enforceable master netting arrangement.

(c)Represents the offsetting of the fair value of bilateral interest rate contracts and certain foreign exchange contracts with the right to cash collateral held from the counterparty or cash collateral posted with the counterparty.

(d)We posted $47 million and $84 million as of December 31, 2019 and 2018, respectively, as initial margin on our centrally cleared interest rate swaps; such amounts are recorded within Other assets on the Consolidated Balance Sheets and are not netted against the derivative balances.

DERIVATIVE FINANCIAL INSTRUMENTS THAT QUALIFY FOR HEDGE ACCOUNTING

Derivatives executed for hedge accounting purposes are documented and designated as such when we enter into the contracts. In accordance with our risk management policies, we structure our hedges with terms similar to those of the item being hedged. We formally assess, at inception of the hedge accounting relationship and on a quarterly basis, whether derivatives designated as hedges are highly effective in offsetting the fair value or cash flows of the hedged items. These assessments usually are made through the application of a regression analysis method. If it is determined that a derivative is not highly effective as a hedge, we will discontinue the application of hedge accounting.

FAIR VALUE HEDGES

A fair value hedge involves a derivative designated to hedge our exposure to future changes in the fair value of an asset or a liability, or an identified portion thereof, that is attributable to a particular risk.

Interest Rate Contracts

We are exposed to interest rate risk associated with our fixed-rate debt obligations. At the time of issuance, certain fixed-rate long-term debt obligations are designated in fair value hedging relationships, using interest rate swaps, to economically convert the fixed interest rate to a floating interest rate. We have $22.6 billion and $24.0 billion of fixed-rate debt obligations designated in fair value hedging relationships as of December 31, 2019 and 2018, respectively.

Gains or losses on the fair value hedging instrument principally offset the losses or gains on the hedged item attributable to the hedged risk. The changes in the fair value of the derivative and the changes in the hedged item may not fully offset due to differences between a debt obligation’s interest rate and the benchmark rate, primarily due to credit spreads at inception of the hedging relationship that are not reflected in the fair value of the interest rate swap. Furthermore, the difference may be caused by changes in 1-month LIBOR, 3-month LIBOR and the overnight indexed swap rate, as spreads between these rates impact the fair value of the interest rate swap without an exact offsetting impact to the fair value of the hedged debt.

The following table presents the gains and losses associated with the fair value hedges of our fixed-rate long-term debt for the years ended December 31:


	Gains (losses)
(Millions)	2019		2018		2017
	Interest expense (a)		Interest expense (a)		Other, net expenses
Fixed-rate long-term debt	$	(458)	$	59	$	206
Derivatives designated as hedging instruments	462		(43)		(246)
Total	$	4	$	16	$	(40)

(a) We adopted a new accounting guidance providing targeted improvements to the accounting for hedging activities effective January 1, 2018. In compliance with the standard, amounts previously recorded in Other expenses have been prospectively recorded in Total interest expense.

The carrying values of the hedged liabilities, recorded within Long-term debt on the Consolidated Balance Sheets, were $22.7 billion and $23.7 billion as of December 31, 2019 and 2018, respectively, including the cumulative amount of fair value hedging adjustments of $217 million and $(241) million for the respective periods.

We recognized net increases of $102 million and $51 million in Interest expense on Long-term debt for the years ended December 31, 2019 and 2018, respectively, and a net reduction of $133 million for the year ended December 31, 2017, primarily related to the net settlements (interest accruals) on our interest rate derivatives designated as fair value hedges.

NET INVESTMENT HEDGES

A net investment hedge is used to hedge future changes in currency exposure of a net investment in a foreign operation. We primarily designate foreign currency derivatives, typically foreign exchange forwards, and on occasion foreign currency denominated debt, as hedges of net investments in certain foreign operations. These instruments reduce exposure to changes in currency exchange rates on our investments in non-U.S. subsidiaries. We had notional amounts of approximately $9.8 billion and $9.6 billion of foreign currency derivatives designated as net investment hedges as of December 31, 2019 and 2018, respectively. The gain or loss on net investment hedges, net of taxes, recorded in AOCI as part of the cumulative translation adjustment, were a loss of $140 million, a gain of $328 million and a loss of $370 million for the years ended December 31, 2019, 2018 and 2017, respectively.

DERIVATIVES NOT DESIGNATED AS HEDGES

We have derivatives that act as economic hedges, but are not designated as such for hedge accounting purposes. Foreign currency transactions from time to time may be partially or fully economically hedged through foreign currency contracts, primarily foreign exchange forwards. These hedges generally mature within one year. Foreign currency contracts involve the purchase and sale of designated currencies at an agreed upon rate for settlement on a specified date.

We also have certain operating agreements containing payments that may be linked to a market rate or price, primarily foreign currency rates. The payment components of these agreements may meet the definition of an embedded derivative, in which case the embedded derivative is accounted for separately and is classified as a foreign exchange contract based on its primary risk exposure.

The changes in the fair value of derivatives that are not designated as hedges are intended to offset the related foreign exchange gains or losses of the underlying foreign currency exposures. The changes in the fair value of the derivatives and the related underlying foreign currency exposures resulted in a net gain of $64 million, a net gain of $60 million, and a net loss of $29 million for the years ended December 31, 2019, 2018, and 2017, respectively, that are recognized in Other, net expenses in the Consolidated Statements of Income. Included in the net gain of $64 million for the year ended December 31, 2019, is a gain of $3 million, specifically related to a change in the fair value of an embedded derivative. The changes in the fair value of embedded derivatives for the years ended December 31, 2018 and 2017 resulted in losses of $11 million and nil, respectively, that are recognized in Card Member services expense in the Consolidated Statements of Income.

NOTE 14

FAIR VALUES

Fair value is defined as the price that would be required to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the principal or, in the absence of a principal, most advantageous market for the specific asset or liability.

GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:

Level 1 ― Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.
Level 2 ― Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:

– Quoted prices for similar assets or liabilities in active markets;

– Quoted prices for identical or similar assets or liabilities in markets that are not active;

– Inputs other than quoted prices that are observable for the asset or liability; and

– Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 ― Inputs that are unobservable and reflect our own estimates about the estimates market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows). We did not measure any financial instruments presented on the Consolidated Balance Sheets at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2019 and 2018, although the disclosed fair value of certain assets that are not carried at fair value, as presented later in this Note, are classified within Level 3.

We monitor the market conditions and evaluate the fair value hierarchy levels at least quarterly. For the years ended December 31, 2019 and 2018, there were no Level 3 transfers.

FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT FAIR VALUE

The following table summarizes our financial assets and financial liabilities measured at fair value on a recurring basis, categorized by GAAP’s fair value hierarchy (as described in the preceding paragraphs), as of December 31:


	2019														2018
(Millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Investment securities:(a)
Equity securities	$	78	$	77	$	1	$	—	$	48	$	1	$	47	$	—
Debt securities	8,328		—		8,328		—		4,599		—		4,599		—
Derivatives, gross(a)	343		—		343		—		514		—		514		—
Total Assets	8,749		77		8,672		—		5,161		1		5,160		—
Liabilities:
Derivatives, gross(a)	440		—		440		—		214		—		214		—
Total Liabilities	$	440	$	—	$	440	$	—	$	214	$	—	$	214	$	—

(a)Refer to Note 4 for the fair values of investment securities and to Note 13 for the fair values of derivative assets and liabilities, on a further disaggregated basis.

VALUATION TECHNIQUES USED IN THE FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT FAIR VALUE

For the financial assets and liabilities measured at fair value on a recurring basis (categorized in the valuation hierarchy table above), we apply the following valuation techniques:

Investment Securities

When available, quoted prices of identical investment securities in active markets are used to estimate fair value. Such investment securities are classified within Level 1 of the fair value hierarchy.

When quoted prices of identical investment securities in active markets are not available, the fair values for our investment securities are obtained primarily from pricing services engaged by us, and we receive one price for each security. The fair values provided by the pricing services are estimated using pricing models, where the inputs to those models are based on observable market inputs or recent trades of similar securities. Such investment securities are classified within Level 2 of the fair value hierarchy. The inputs to the valuation techniques applied by the pricing services vary depending on the type of security being priced but are typically benchmark yields, benchmark security prices, credit spreads, prepayment speeds, reported trades and broker-dealer quotes, all with reasonable levels of transparency. The pricing services did not apply any adjustments to the pricing models used. In addition, we did not apply any adjustments to prices received from the pricing services.

We reaffirm our understanding of the valuation techniques used by our pricing services at least annually. In addition, we corroborate the prices provided by our pricing services by comparing them to alternative pricing sources. In instances where price discrepancies are identified between different pricing sources, we evaluate such discrepancies to ensure that the prices used for our valuation represent the fair value of the underlying investment securities. Refer to Note 4 for additional fair value information.

Derivative Financial Instruments

The fair value of our derivative financial instruments is estimated internally by using third-party pricing models, where the inputs to those models are readily observable from active markets. The pricing models used are consistently applied and reflect the contractual terms of the derivatives as described below. We reaffirm our understanding of the valuation techniques at least annually and validate the valuation output on a quarterly basis. Our derivative instruments are classified within Level 2 of the fair value hierarchy.

The fair value of our interest rate swaps is determined based on a discounted cash flow method using the following significant inputs: the contractual terms of the swap such as the notional amount, fixed coupon rate, floating coupon rate and tenor, as well as discount rates consistent with the underlying economic factors of the currency in which the cash flows are denominated.

The fair value of foreign exchange forward contracts is determined based on a discounted cash flow method using the following significant inputs: the contractual terms of the forward contracts such as the notional amount, maturity dates and contract rate, as well as relevant foreign currency forward curves, and discount rates consistent with the underlying economic factors of the currency in which the cash flows are denominated.

Credit valuation adjustments are necessary when the market parameters, such as a benchmark curve, used to value derivatives are not indicative of our credit quality or that of our counterparties. We consider the counterparty credit risk by applying an observable forecasted default rate to the current exposure. Refer to Note 13 for additional fair value information.

FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT OTHER THAN FAIR VALUE

The following table summarizes the estimated fair values of our financial assets and financial liabilities that are measured at amortized cost, and not required to be carried at fair value on a recurring basis, as of December 31, 2019 and 2018. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of December 31, 2019 and 2018, and require management’s judgment. These figures may not be indicative of future fair values, nor can the fair value of American Express be estimated by aggregating the amounts presented.


2019 (Billions)	Carrying Value		Corresponding Fair Value Amount
			Total		Level 1		Level 2		Level 3
Financial Assets:
Financial assets for which carrying values equal or approximate fair value
Cash and cash equivalents(a)	$	24	$	24	$	23	$	1	$	—
Other financial assets(b)	60		60		—		60		—
Financial assets carried at other than fair value
Loans, net(c)	90		91		—		—		91

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value	92		92		—		92		—
Financial liabilities carried at other than fair value
Certificates of deposit(d)	10		10		—		10		—
Long-term debt(c)	$	58	$	60	$	—	$	60	$	—


2018 (Billions)	Carrying Value		Corresponding Fair Value Amount
			Total		Level 1		Level 2		Level 3
Financial Assets:
Financial assets for which carrying values equal or approximate fair value
Cash and cash equivalents(a)	$	27	$	27	$	26	$	1	$	—
Other financial assets(b)	58		58		—		58		—
Financial assets carried at other than fair value
Loans, net(c)	83		84		—		—		84

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value	81		81		—		81		—
Financial liabilities carried at other than fair value
Certificates of deposit(d)	13		13		—		13		—
Long-term debt(c)	$	58	$	59	$	—	$	59	$	—

(a)Level 2 amounts reflect time deposits and short-term investments.

(b)Includes Card Member receivables (including fair values of Card Member receivables of $8.2 billion and $8.5 billion held by a consolidated VIE as of December 31, 2019 and 2018, respectively), other receivables, restricted cash and other miscellaneous assets.

(c)Balances include amounts held by a consolidated VIE for which the fair values of Card Member loans were $32.0 billion and $33.0 billion as of December 31, 2019 and 2018, respectively, and the fair values of Long-term debt were $19.8 billion and $19.4 billion as of December 31, 2019 and 2018, respectively.

(d)Presented as a component of Customer deposits on the Consolidated Balance Sheets.

VALUATION TECHNIQUES USED IN THE FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT OTHER THAN FAIR VALUE

For the financial assets and liabilities that are not required to be carried at fair value on a recurring basis (categorized in the valuation hierarchy table), we apply the following valuation techniques to measure fair value:

Financial Assets For Which Carrying Values Equal Or Approximate Fair Value

Financial assets for which carrying values equal or approximate fair value include cash and cash equivalents, Card Member receivables, accrued interest and certain other assets. For these assets, the carrying values approximate fair value because they are short term in duration, have no defined maturity or have a market-based interest rate.

Financial Assets Carried At Other Than Fair Value

Loans, net

Loans are recorded at historical cost, less reserves, on the Consolidated Balance Sheets. In estimating the fair value for our loans, we use a discounted cash flow model. Due to the lack of a comparable whole loan sales market for similar loans and the lack of observable pricing inputs thereof, we use various inputs to estimate fair value. Such inputs include projected income, discount rates and relevant credit losses. The valuation does not include economic value attributable to future receivables generated by the accounts associated with the loans.

Financial Liabilities For Which Carrying Values Equal Or Approximate Fair Value

Financial liabilities for which carrying values equal or approximate fair value include accrued interest, customer deposits (excluding certificates of deposit, which are described further below), Travelers Cheques and other prepaid products outstanding, accounts payable, short-term borrowings and certain other liabilities for which the carrying values approximate fair value because they are short term in duration, have no defined maturity or have a market-based interest rate.

Financial Liabilities Carried At Other Than Fair Value

Certificates of Deposit

Certificates of deposit (CDs) are recorded at their historical issuance cost on the Consolidated Balance Sheets. Fair value is estimated using a discounted cash flow methodology based on the future cash flows and the discount rate that reflects the current market rates for similar types of CDs within similar markets.

Long-term Debt

Long-term debt is recorded at historical issuance cost on the Consolidated Balance Sheets adjusted for (i) unamortized discount and unamortized fees, (ii) the impact of movements in exchange rates on foreign currency denominated debt and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate through the use of interest rate swaps. The fair value of our long-term debt is measured using quoted offer prices when quoted market prices are available. If quoted market prices are not available, the fair value is determined by discounting the future cash flows of each instrument at rates currently observed in publicly-traded debt markets for debt of similar terms and credit risk. For long-term debt, where there are no rates currently observable in publicly traded debt markets of similar terms and comparable credit risk, we use market interest rates and adjust those rates for necessary risks, including our own credit risk. In determining an appropriate spread to reflect our credit standing, we consider credit default swap spreads, bond yields of other long-term debt offered by us, and interest rates currently offered to us for similar debt instruments of comparable maturities.

NONRECURRING FAIR VALUE MEASUREMENTS

We have certain assets that are subject to measurement at fair value on a nonrecurring basis. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if they are determined to be impaired or where there are observable price changes for equity investments without readily determinable fair values. During the years ended December 31, 2019 and 2018, we did not have any material assets that were measured at fair value due to impairment and there were no material fair value adjustments for equity investments without readily determinable fair values.

NOTE 15

GUARANTEES

The maximum potential undiscounted future payments and related liability resulting from guarantees and indemnifications provided by us in the ordinary course of business were $1 billion and $29 million, respectively, as of December 31, 2019, and $1 billion and $46 million, respectively, as of December 31, 2018, all of which were primarily related to our real estate and business dispositions.

To date, we have not experienced any significant losses related to guarantees or indemnifications. Our recognition of these instruments is at fair value. In addition, we establish reserves when a loss is probable and the amount can be reasonably estimated.

NOTE 16

COMMON AND PREFERRED SHARES

The following table shows authorized shares and provides a reconciliation of common shares issued and outstanding for the years ended December 31:


(Millions, except where indicated)	2019	2018	2017
Common shares authorized (billions)(a)	3.6	3.6	3.6
Shares issued and outstanding at beginning of year	847	859	904
Repurchases of common shares	(40)	(15)	(50)
Other, primarily stock option exercises and restricted stock awards granted	3	3	5
Shares issued and outstanding as of December 31	810	847	859

(a)Of the common shares authorized but unissued as of December 31, 2019, approximately 19 million shares are reserved for issuance under employee stock and employee benefit plans.

On September 23, 2019, the Board of Directors authorized the repurchase of up to 120 million common shares from time to time, subject to market conditions and in accordance with our capital plans. This authorization replaced the prior repurchase authorization and does not have an expiration date. During 2019, 2018 and 2017, we repurchased 40 million common shares with a cost basis of $4.6 billion, 15 million common shares with a cost basis of $1.6 billion, and 50 million common shares with a cost basis of $4.3 billion, respectively. The cost basis includes commissions paid of $6.2 million, $2.2 million and $2.9 million in 2019, 2018 and 2017, respectively. As of December 31, 2019, we had approximately 109 million common shares remaining under the Board share repurchase authorization.

Common shares are generally retired by us upon repurchase (except for 2.6 million, 2.7 million and 2.9 million shares held as treasury shares as of December 31, 2019, 2018 and 2017, respectively); retired common shares and treasury shares are excluded from the shares outstanding in the table above. The treasury shares, with a cost basis of $292 million, $207 million and $217 million as of December 31, 2019, 2018 and 2017, respectively, are included as a reduction to Additional paid-in capital in Shareholders’ equity on the Consolidated Balance Sheets.

PREFERRED SHARES

The Board of Directors is authorized to permit us to issue up to 20 million Preferred Shares at a par value of $1.662/3 without further shareholder approval. We have the following perpetual Fixed Rate/Floating Rate Noncumulative Preferred Share series issued and outstanding as of December 31, 2019:


	Series B	Series C
Issuance date	November 10, 2014	March 2, 2015
Securities issued	750 Preferred Shares; represented by 750,000 depositary shares	850 Preferred Shares; represented by 850,000 depositary shares
Aggregate liquidation preference	$750 million	$850 million
Fixed dividend rate per annum	5.20%	4.90%
Semi-annual fixed dividend payment dates	Beginning May 15, 2015	Beginning September 15, 2015
Floating dividend rate per annum	3 month LIBOR+ 3.428%	3 month LIBOR+ 3.285%
Quarterly floating dividend payment dates	Beginning February 15, 2020	Beginning June 15, 2020
Fixed to floating rate conversion date(a)	November 15, 2019	March 15, 2020

(a)The date on which dividends convert from a fixed-rate calculation to a floating rate calculation.

In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Company, the preferred stock then outstanding takes precedence over our common stock for the payment of dividends and the distribution of assets out of funds legally available for distribution to shareholders. Each outstanding series of Preferred Shares has a liquidation price of $1 million per Preferred Share, plus any accrued but unpaid dividends. We may redeem these Preferred Shares at $1 million per Preferred Share (equivalent to $1,000 per depositary share) plus any declared but unpaid dividends in whole or in part, from time to time, on any dividend payment date on or after the respective fixed to floating rate conversion date, or in whole, but not in part, within 90 days of certain bank regulatory changes.

There were no warrants issued and outstanding as of December 31, 2019, 2018 and 2017.

NOTE 17

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME

AOCI is a balance sheet item in Shareholders’ equity on the Consolidated Balance Sheets. It is comprised of items that have not been recognized in earnings but may be recognized in earnings in the future when certain events occur. Changes in each component for the three years ended December 31 were as follows:


(Millions), net of tax	Net Unrealized Gains (Losses) on Investment Securities		Foreign Currency Translation Adjustment Gains (Losses)		Net Unrealized Pension and Other Postretirement Benefit Gains (Losses)		Accumulated Other Comprehensive (Loss) Income
Balance as of December 31, 2016	$	7	$	(2,262)	$	(529)	$	(2,784)
Net unrealized losses	(7)		—		—		(7)
Decrease due to amounts reclassified into earnings	—		(7)		—		(7)
Net translation gains on investments in foreign operations (a)	—		678		—		678
Net losses related to hedges of investments in foreign operations	—		(370)		—		(370)
Pension and other postretirement benefits	—		—		62		62
Net change in accumulated other comprehensive (loss) income	(7)		301		62		356
Balance as of December 31, 2017	—		(1,961)		(467)		(2,428)
Net unrealized losses	(10)		—		—		(10)
Net translation losses on investments in foreign operations	—		(500)		—		(500)
Net gain related to hedges of investments in foreign operations	—		328		—		328
Pension and other postretirement benefits	—		—		11		11
Other	2		—		—		2
Net change in accumulated other comprehensive (loss) income	(8)		(172)		11		(169)
Balance as of December 31, 2018	(8)		(2,133)		(456)		(2,597)
Net unrealized gains	41		—		—		41
Net translation gains on investments in foreign operations	—		84		—		84
Net losses related to hedges of investments in foreign operations	—		(140)		—		(140)
Pension and other postretirement benefits	—		—		(125)		(125)
Net change in accumulated other comprehensive (loss) income	41		(56)		(125)		(140)
Balance as of December 31, 2019	$	33	$	(2,189)	$	(581)	$	(2,737)

(a)Includes $289 million of recognized tax benefits in the year ended December 31, 2017 (refer to Note 20).

The following table shows the tax impact for the years ended December 31 for the changes in each component of AOCI presented above:


	Tax expense (benefit)
(Millions)	2019		2018		2017
Net unrealized investment securities	$	12	$	(2)	$	(4)
Net translation on investments in foreign operations(a)	24		(44)		(172)
Net hedges of investments in foreign operations	(43)		107		(215)
Pension and other postretirement benefits	(38)		9		7
Total tax impact	$	(45)	$	70	$	(384)

(a)Includes $289 million of recognized tax benefits in the year ended December 31, 2017 (refer to Note 20).

The following table presents the effects of reclassifications out of AOCI and into the Consolidated Statements of Income for the years ended December 31:


		Gains (losses) recognized in earnings
Description (Millions)	Income Statement Line Item	2019		2018		2017
Foreign currency translation adjustments
Reclassification of translation adjustments and related hedges	Other expenses	$	—	$	1	$	(7)
Related income tax	Income tax provision	—		(1)		14
Reclassification of foreign currency translation adjustments		$	—	$	—	$	7

NOTE 18

OTHER FEES AND COMMISSIONS AND OTHER EXPENSES

The following is a detail of Other fees and commissions for the years ended December 31:


(Millions)	2019		2018		2017
Fees charged to Card Members:
Delinquency fees	$	1,028	$	959	$	888
Foreign currency conversion fee revenue	982		921		851
Other customer fees:
Loyalty coalition-related fees	456		461		452
Travel commissions and fees	424		395		364
Service fees and other(a)	407		417		435
Total Other fees and commissions	$	3,297	$	3,153	$	2,990

(a)Other includes Membership Rewards program fees that are not related to contracts with customers.

The following is a detail of Other expenses for the years ended December 31:


(Millions)	2019		2018		2017
Professional services	$	2,091	$	2,125	$	2,040
Occupancy and equipment	2,168		2,033		2,018
Other(a)	1,609		1,513		1,576
Total Other expenses	$	5,868	$	5,671	$	5,634

(a)Other expense primarily includes general operating expenses, communication expenses, Card Member and merchant-related fraud losses, litigation expenses, other non-income taxes and unrealized gains and losses on certain equity investments. For the year ended December 31, 2018, Other expense also includes the loss on a transaction involving the operations of our prepaid reloadable and gift card business. For the year ended December 31, 2017, Other expense also includes charges related to our U.S. loyalty coalition and prepaid businesses.

NOTE 19

RESTRUCTURING

We periodically initiate restructuring programs to support new business strategies and to enhance our overall effectiveness and efficiency. In connection with these programs, we will typically incur severance and other exit costs.

We had $135 million, $69 million and $199 million accrued in total restructuring reserves as of December 31, 2019, 2018 and 2017, respectively. New charges, including net revisions to existing restructuring reserves, which primarily relate to the redeployment of displaced colleagues to other positions, were $125 million, $(23) million and $42 million, for the years ended December 31, 2019, 2018 and 2017, respectively. Cumulatively, we recognized $424 million relating to the restructuring programs that were in progress during 2019 and initiated at various dates between 2014 and 2019, the majority of which has been reflected within Corporate & Other.

NOTE 20

INCOME TAXES

The Tax Act, enacted on December 22, 2017, made broad and complex changes to the U.S. federal corporate income tax rules. Most notably, effective January 1, 2018, the Tax Act reduced the U.S. federal statutory corporate income tax rate from 35 percent to 21 percent, introduced a territorial tax system in which future dividends paid from earnings outside the United States to a U.S. corporation are not subject to U.S. federal taxation and imposed new U.S. federal corporate income taxes on certain foreign operations.

The components of income tax expense for the years ended December 31 included in the Consolidated Statements of Income were as follows:


(Millions)	2019		2018		2017
Current income tax expense:
U.S. federal	$	1,108	$	70	$	3,408
U.S. state and local	276		150		259
Non-U.S.	437		681		387
Total current income tax expense	1,821		901		4,054
Deferred income tax (benefit) expense:
U.S. federal	(58)		276		544
U.S. state and local	(31)		78		(12)
Non-U.S.	(62)		(54)		91
Total deferred income tax (benefit) expense	(151)		300		623
Total income tax expense	$	1,670	$	1,201	$	4,677

A reconciliation of the U.S. federal statutory rate of 21 percent as of both December 31, 2019 and 2018, and 35 percent as of December 31, 2017, to our actual income tax rate was as follows:


	2019		2018		2017
U.S. statutory federal income tax rate	21.0	%	21.0	%	35.0	%
(Decrease) increase in taxes resulting from:
Tax-exempt income	(1.9)		(1.7)		(1.7)
State and local income taxes, net of federal benefit	2.8		2.8		2.3
Non-U.S. subsidiaries' earnings(a)	(0.7)		(0.5)		(5.7)
Tax settlements(b)	(0.3)		(1.9)		(0.7)
U.S. Tax Act(c)	—		(1.1)		34.8
U.S. Tax Act - related adjustments(d)	—		(3.2)		—
Other	(1.1)		(0.6)		(1.0)
Actual tax rates	19.8	%	14.8	%	63.0	%

(a)2017 primarily included tax benefits associated with the undistributed earnings of certain non-U.S. subsidiaries that were previously deemed to be reinvested indefinitely. In addition, 2017 included tax benefits of $156 million, which decreased the actual tax rate by 2.1 percent, related to the realization of certain foreign tax credits.

(b)2018 primarily included a settlement of the IRS examination for tax years 2008-2014, as well as the resolution of certain tax matters in various jurisdictions.

(d)Related to changes to the tax method of accounting for certain expenses.

We record a deferred income tax (benefit) provision when there are differences between assets and liabilities measured for financial reporting and for income tax return purposes. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are expected to reverse.

The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:


(Millions)	2019		2018
Deferred tax assets:
Reserves not yet deducted for tax purposes	$	2,633	$	2,612
Employee compensation and benefits	365		360
Other	536		431
Gross deferred tax assets	3,534		3,403
Valuation allowance	(66)		(61)
Deferred tax assets after valuation allowance	3,468		3,342
Deferred tax liabilities:
Intangibles and fixed assets	1,279		1,083
Deferred revenue	315		435
Deferred interest	162		171
Investment in joint ventures	122		137
Other	129		210
Gross deferred tax liabilities	2,007		2,036
Net deferred tax assets	$	1,461	$	1,306

A valuation allowance is established when management determines that it is more likely than not that all or some portion of the benefit of the deferred tax assets will not be realized. The valuation allowances as of December 31, 2019 and 2018 are associated with net operating losses and other deferred tax assets in certain non-U.S. operations.

Accumulated earnings of certain non-U.S. subsidiaries, which totaled approximately $0.7 billion as of December 31, 2019, are intended to be permanently reinvested outside the U.S. We do not provide for state income and foreign withholding taxes on foreign earnings intended to be permanently reinvested outside the U.S. Accordingly, state income and foreign withholding taxes, which would have aggregated to approximately $0.1 billion as of December 31, 2019, have not been provided on those earnings.

Net income taxes paid by us during 2019, 2018 and 2017, were approximately $1.7 billion, $2.0 billion and $1.4 billion, respectively. These amounts include estimated tax payments and cash settlements relating to prior tax years.

We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. Given these inherent complexities, we must make judgments in assessing the likelihood that a tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position. A tax position is recognized only when, based on management’s judgment regarding the application of income tax laws, it is more likely than not that the tax position will be sustained upon examination. The amount of benefit recognized for financial reporting purposes is based on management’s best judgment of the largest amount of benefit that is more likely than not to be realized on ultimate settlement with the taxing authority given the facts, circumstances and information available at the reporting date. We adjust the level of unrecognized tax benefits when there is new information available to assess the likelihood of the outcome.

We are under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which we have significant business operations. The tax years under examination and open for examination vary by jurisdiction. Tax years from 2016 onwards are open for examination by the IRS.

The following table presents changes in unrecognized tax benefits:


(Millions)	2019		2018		2017
Balance, January 1	$	701	$	821	$	974
Increases:
Current year tax positions	66		152		200
Tax positions related to prior years	78		47		39
Effects of foreign currency translations	10		—		—
Decreases:
Tax positions related to prior years(a)	(14)		(74)		(289)
Settlements with tax authorities(b)	(40)		(192)		(77)
Lapse of statute of limitations	(75)		(44)		(26)
Effects of foreign currency translations	—		(9)		—
Balance, December 31	$	726	$	701	$	821

(a)Decrease in 2017 due to the resolution with the IRS of an uncertain tax position in January 2017, which resulted in the recognition of $289 million in AOCI.

(b) 2018 included a settlement of the IRS examination for tax years 2008-2014 and the resolution of certain tax matters in various jurisdictions.

Included in the unrecognized tax benefits of $0.7 billion, $0.7 billion and $0.8 billion for December 31, 2019, 2018 and 2017, respectively, are approximately $623 million, $599 million and $723 million, respectively, that, if recognized, would favorably affect the effective tax rate in a future period.

We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next 12 months by as much as $113 million, principally as a result of potential resolutions of prior years’ tax items with various taxing authorities. The prior years’ tax items include unrecognized tax benefits relating to the deductibility of certain expenses or losses and the attribution of taxable income to a particular jurisdiction or jurisdictions. Of the $113 million of unrecognized tax benefits, approximately $96 million relates to amounts that, if recognized, would impact the effective tax rate in a future period.

Interest and penalties relating to unrecognized tax benefits are reported in the income tax provision. For the year ended December 31, 2019, we recognized approximately $5 million in expenses for interest and penalties. For the years ended December 31, 2018 and 2017, we recognized benefits of approximately $18 million and $90 million, respectively, for interest and penalties. The interest expense benefit in 2017 includes approximately $56 million related to the resolution of an uncertain tax position with the IRS in January 2017, which had no net impact on the income tax provision.

We had approximately $70 million and $65 million accrued for the payment of interest and penalties as of December 31, 2019 and 2018, respectively.

NOTE 21

EARNINGS PER COMMON SHARE (EPS)

The computations of basic and diluted EPS for the years ended December 31 were as follows:


(Millions, except per share amounts)	2019		2018		2017
Numerator:
Basic and diluted:
Net income	$	6,759	$	6,921	$	2,748
Preferred dividends	(81)		(80)		(81)
Net income available to common shareholders	6,678		6,841		2,667
Earnings allocated to participating share awards(a)	(47)		(54)		(21)
Net income attributable to common shareholders	$	6,631	$	6,787	$	2,646
Denominator:(a)
Basic: Weighted-average common stock	828		856		883
Add: Weighted-average stock options(b)	2		3		3
Diluted	830		859		886
Basic EPS	$	8.00	$	7.93	$	3.00
Diluted EPS	$	7.99	$	7.91	$	2.99

(a)Our unvested restricted stock awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered participating securities. Calculations of EPS under the two-class method exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities. The related participating securities are similarly excluded from the denominator.

(b)The dilutive effect of unexercised stock options excludes from the computation of EPS 0.2 million, 0.7 million and 0.6 million of options for the years ended December 31, 2019, 2018 and 2017, respectively, because inclusion of the options would have been anti-dilutive.

NOTE 22

REGULATORY MATTERS AND CAPITAL ADEQUACY

We are supervised and regulated by the Board of Governors of the Federal Reserve System (the Federal Reserve) and are subject to the Federal Reserve’s requirements for risk-based capital and leverage ratios. Our U.S. bank subsidiary, American Express National Bank (AENB), is subject to supervision and regulation, including regulatory capital and leverage requirements, by the Office of the Comptroller of the Currency (OCC).

Under the risk-based capital guidelines of the Federal Reserve, we are required to maintain minimum ratios of CET1, Tier 1 and Total (Tier 1 plus Tier 2) capital to risk-weighted assets, as well as a minimum Tier 1 leverage ratio (Tier 1 capital to average adjusted on-balance sheet assets).

Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary actions by regulators, that, if undertaken, could have a direct material effect on our operating activities.

As of December 31, 2019 and 2018, we met all capital requirements to which we were subject and maintained regulatory capital ratios in excess of those required to qualify as well capitalized.

The following table presents the regulatory capital ratios:


(Millions, except percentages)	CET 1 capital		Tier 1 capital		Total capital		CET 1 Capital ratio		Tier 1 capital ratio		Total capital ratio		Tier 1 leverage ratio		Supplementary Leverage Ratio
December 31, 2019: (a)
American Express Company	$	18,056	$	19,628	$	22,213	10.7	%	11.6	%	13.2	%	10.2	%	8.8	%
American Express National Bank	$	13,600	$	13,600	$	15,688	13.4	%	13.4	%	15.4	%	11.1	%	9.3	%
December 31, 2018:(a)
American Express Company	$	17,498	$	19,070	$	21,653	11.0	%	12.0	%	13.6	%	10.4	%	8.9	%
American Express National Bank	$	11,564	$	11,564	$	13,574	12.1	%	12.1	%	14.2	%	9.9	%	8.2	%
Well-capitalized ratios(b)							6.5	%	8.0	%	10.0	%	5.0	%	N/A
Basel III Standards 2019(c)							7.0	%	8.5	%	10.5	%	4.0	%	3.0	%
Minimum capital ratios(d)							4.5	%	6.0	%	8.0	%	4.0	%	3.0	%

(a)Capital ratios are reported using Basel III capital definitions, inclusive of transition provisions for the capital ratios and risk-weighted assets using the Basel III standardized approach.

(b)Represents requirements for banking subsidiaries to be considered “well capitalized” pursuant to regulations issued under the Federal Deposit Insurance Corporation Improvement Act. There is no CET1 capital ratio, Tier 1 leverage ratio or supplementary leverage ratio (SLR) requirement for a bank holding company to be considered “well capitalized.”

(c)Basel III minimum capital requirement and additional capital conservation buffer as defined by the Federal Reserve and OCC for calendar year 2019. The additional capital conservation buffer does not apply to Tier 1 leverage ratio or SLR.

(d)As defined by the regulations issued by the Federal Reserve and OCC.

RESTRICTED NET ASSETS OF SUBSIDIARIES

Certain of our subsidiaries are subject to restrictions on the transfer of net assets under debt agreements and regulatory requirements. These restrictions have not had any effect on our shareholder dividend policy and management does not anticipate any impact in the future. Procedures exist to transfer net assets between the Company and its subsidiaries, while ensuring compliance with the various contractual and regulatory constraints. As of December 31, 2019, the aggregate amount of net assets of subsidiaries that are restricted to be transferred was approximately $10.0 billion.

BANK HOLDING COMPANY DIVIDEND RESTRICTIONS

We are limited in our ability to pay dividends by the Federal Reserve, which could prohibit a dividend that would be considered an unsafe or unsound banking practice. It is the policy of the Federal Reserve that bank holding companies generally should pay dividends on preferred and common stock only out of net income available to common shareholders generated over the past year, and only if prospective earnings retention is consistent with the organization’s current and expected future capital needs, asset quality and overall financial condition. Moreover, bank holding companies are required by statute to be a source of strength to their insured depository institution subsidiaries and should not maintain dividend levels that undermine their ability to do so. On an annual basis, we are required to develop and maintain a capital plan, which includes planned dividends over a two-year horizon. We may be limited in our ability to pay dividends if the Federal Reserve objects to our capital plan.

In addition, the Capital Rules include a capital conservation buffer of 2.5 percent as of December 31, 2019, which can be satisfied only with CET1 capital. If our risk-based capital ratios were to fall below the applicable buffer levels, we would be subject to certain restrictions on dividends, stock repurchases and other capital distributions, as well as discretionary bonus payments to executive officers.

BANK DIVIDEND RESTRICTIONS

In the year ended December 31, 2019, AENB paid dividends from retained earnings to its parent of $3.9 billion.

AENB is limited in its ability to pay dividends by banking statutes, regulations and supervisory policy. In general, applicable federal and state banking laws prohibit, without first obtaining regulatory approval, insured depository institutions, such as AENB, from making dividend distributions if such distributions are not paid out of available retained earnings or would cause the institution to fail to meet capital adequacy standards. AENB must maintain a capital conservation buffer. If AENB's risk-based capital ratios do not satisfy minimum requirements plus the combined capital conservation buffer, it will face graduated constraints on dividends and other capital distributions based on the amount of the shortfall. As of December 31, 2019, AENB's retained earnings available for the payment of dividends was $4.9 billion. In determining the dividends to pay its parent, AENB must also consider the effects on applicable risk-based capital and leverage ratio requirements, as well as policy statements of the federal regulatory agencies. In addition, AENB's banking regulators have authority to limit or prohibit the payment of a dividend by AENB under a number of circumstances, including if, in the banking regulator’s opinion, payment of a dividend would constitute an unsafe or unsound banking practice in light of the financial condition of the banking organization.

NOTE 23

SIGNIFICANT CREDIT CONCENTRATIONS

Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to American Express’ total credit exposure. Our customers operate in diverse industries, economic sectors and geographic regions.

The following table details our maximum credit exposure of the on-balance sheet assets by category as of December 31:


(Billions)	2019		2018
Individuals(a)	$	131	$	123
Financial Services(b)	26		30
Institutions(c)	20		20
U.S. Government and agencies(d)	8		4
Total on-balance sheet	$	185	$	177

(a)Primarily reflects loans and receivables from global consumer and small business Card Members, which are governed by individual credit risk management.

(b)Represents banks, broker-dealers, insurance companies and savings and loan associations.

(c)Primarily reflects loans and receivables from global corporate Card Members, which are governed by institutional credit risk management.

(d)Represent debt obligations of the U.S. Government and its agencies, states and municipalities and government-sponsored entities.

As of December 31, 2019 and 2018, our most significant concentration of credit risk was with individuals, including Card Member loans and receivables. These amounts are generally advanced on an unsecured basis. However, we review each potential customer’s credit application and evaluate the applicant’s financial history and ability and willingness to repay. We also consider credit performance by customer tenure, industry and geographic location in managing credit exposure.

The following table details our Card Member loans and receivables exposure (including unused lines-of-credit available to Card Members as part of established lending product agreements) in the United States and outside the United States as of December 31:


(Billions)	2019		2018
On-balance sheet:
U.S.	$	115	$	111
Non-U.S.	30		27
On-balance sheet	145		138
Unused lines-of-credit:(a)
U.S.	245		249
Non-U.S.	61		53
Total unused lines-of-credit	$	306	$	302

(a)Total unused credit available to Card Members does not represent potential future cash requirements, as a significant portion of this unused credit will likely not be drawn. Our charge card products generally have no pre-set spending limit, and therefore are not reflected in unused credit available to Card Members.

NOTE 24

REPORTABLE OPERATING SEGMENTS AND GEOGRAPHIC OPERATIONS

REPORTABLE OPERATING SEGMENTS

We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution channels, geographic considerations (primarily United States versus outside the United States), and regulatory environment considerations.

The following is a brief description of the primary business activities of our three reportable operating segments:

Global Consumer Services Group (GCSG) primarily issues a wide range of proprietary consumer cards globally. GCSG also provides services to consumers, including travel and lifestyle services and non-card financing products, and manages certain international joint ventures and our partnership agreements in China.
Global Commercial Services (GCS) primarily issues a wide range of proprietary corporate and small business cards and provides payment and expense management services globally. In addition, GCS provides commercial financing products.
Global Merchant and Network Services (GMNS) operates a global payments network that processes and settles card transactions, acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics, leveraging our global integrated network. GMNS manages our partnership relationships with third-party card issuers, merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global network. GMNS also manages loyalty coalition businesses in certain countries.

Corporate functions and certain other businesses and operations are included in Corporate & Other.

During 2019, we moved intercompany assets and liabilities, previously recorded in the operating segments, to Corporate & Other. Prior period amounts have been revised to conform to the current period presentation.

The following table presents certain selected financial information for our reportable operating segments and Corporate & Other as of or for the years ended December 31, 2019, 2018 and 2017:


(Millions, except where indicated)	GCSG		GCS		GMNS		Corporate & Other(a)		Consolidated
2019
Non-interest revenues	$	15,972	$	12,623	$	6,252	$	89	$	34,936
Revenue from contracts with customers(b)	11,041		10,891		6,215		12		28,159
Interest income	9,413		1,900		28		743		12,084
Interest expense	1,806		995		(365)		1,028		3,464
Total revenues net of interest expense	23,579		13,528		6,645		(196)		43,556
Total provisions	2,636		917		20		—		3,573
Pretax income (loss) from continuing operations	4,024		3,066		3,148		(1,809)		8,429
Income tax provision (benefit)	762		590		736		(418)		1,670
Net income (loss)	3,262		2,476		2,412		(1,391)		6,759
Total assets (billions)	$	106	$	53	$	18	$	21	$	198
2018
Non-interest revenues	$	14,675	$	11,882	$	6,069	$	49	$	32,675
Revenue from contracts with customers(b)	10,294		10,309		5,988		16		26,607
Interest income	8,323		1,621		30		632		10,606
Interest expense	1,542		827		(294)		868		2,943
Total revenues net of interest expense	21,456		12,676		6,393		(187)		40,338
Total provisions	2,430		899		22		1		3,352
Pretax income (loss) from continuing operations	3,714		2,895		2,844		(1,331)		8,122
Income tax provision (benefit)	637		555		704		(695)		1,201
Net income (loss)	3,077		2,340		2,140		(636)		6,921
Total assets (billions)	$	102	$	51	$	16	$	20	$	189
2017
Non-interest revenues	$	13,378	$	10,942	$	6,025	$	82	$	30,427
Revenue from contracts with customers(b)	9,448		9,471		5,846		15		24,780
Interest income	6,789		1,361		42		371		8,563
Interest expense	1,047		595		(188)		658		2,112
Total revenues net of interest expense	19,120		11,708		6,255		(205)		36,878
Total provisions	1,996		743		16		5		2,760
Pretax income (loss) from continuing operations	3,645		2,843		2,645		(1,708)		7,425
Income tax provision	1,053		914		857		1,853		4,677
Net income (loss)	2,592		1,929		1,788		(3,561)		2,748
Total assets (billions)	$	95	$	49	$	20	$	17	$	181

(a)Corporate & Other includes adjustments and eliminations for intersegment activity.

(b)Includes discount revenue, certain other fees and commissions and other revenues from customers.

Total Revenues Net of Interest Expense

We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the GCSG and GCS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue.

Net card fees and other fees and commissions are directly attributable to the segment in which they are reported.

Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.

Provisions for Losses

The provisions for losses are directly attributable to the segment in which they are reported.

Expenses

Marketing and business development expense is included in each segment based on the actual expenses incurred. Global brand advertising is primarily reflected in Corporate & Other and may be allocated to the segments based on the actual expense incurred. Rewards and Card Member services expenses are included in each segment based on the actual expenses incurred within the segment.

Salaries and employee benefits and other operating expenses reflect expenses such as professional services, occupancy and equipment and communications incurred directly within each segment. In addition, expenses related to support services, such as technology costs, are allocated to each segment primarily based on support service activities directly attributable to the segment. Certain other overhead expenses are allocated from Corporate & Other to the segments based on the relative levels of revenue and Card Member loans and receivables.

Income Taxes

An income tax provision (benefit) is allocated to each reportable operating segment based on the effective tax rates applicable to various businesses that comprise the segment. The charge of $2.6 billion related to the Tax Act in the fourth quarter of 2017 was allocated in full to Corporate & Other.

GEOGRAPHIC OPERATIONS

The following table presents our total revenues net of interest expense and pretax income (loss) from continuing operations in different geographic regions based, in part, upon internal allocations, which necessarily involve management’s judgment:


(Millions)	United States		EMEA(a)		JAPA(a)		LACC(a)		Other Unallocated(b)		Consolidated
2019
Total revenues net of interest expense	$	32,557	$	4,465	$	3,915	$	2,816	$	(197)	$	43,556
Pretax income (loss) from continuing operations	7,262		1,243		833		903		(1,812)		8,429
2018
Total revenues net of interest expense	$	29,864	$	4,419	$	3,656	$	2,584	$	(185)	$	40,338
Pretax income (loss) from continuing operations	6,696		1,212		764		782		(1,332)		8,122
2017
Total revenues net of interest expense	$	27,187	$	3,927	$	3,464	$	2,505	$	(205)	$	36,878
Pretax income (loss) from continuing operations	6,412		1,150		763		806		(1,706)		7,425

(a)EMEA represents Europe, the Middle East and Africa; JAPA represents Japan, Asia/Pacific and Australia; and LACC represents Latin America, Canada and the Caribbean.

(b)Other Unallocated includes net costs which are not directly allocated to specific geographic regions, including costs related to the net negative interest spread on excess liquidity funding and executive office operations expenses.

NOTE 25

PARENT COMPANY

PARENT COMPANY – CONDENSED STATEMENTS OF INCOME


Years Ended December 31 (Millions)	2019		2018		2017
Revenues
Non-interest revenues
Other	$	598	$	426	$	358
Total non-interest revenues	598		426		358
Interest income	692		422		258
Interest expense	902		615		493
Total revenues net of interest expense	388		233		123
Expenses
Salaries and employee benefits	366		336		362
Other	816		607		553
Total expenses	1,182		943		915
Pretax loss	(794)		(710)		(792)
Income tax benefit	(282)		(179)		(354)
Net loss before equity in net income of subsidiaries and affiliates	(512)		(531)		(438)
Equity in net income of subsidiaries and affiliates	7,271		7,452		3,186
Net income	$	6,759	$	6,921	$	2,748

PARENT COMPANY – CONDENSED BALANCE SHEETS


As of December 31 (Millions)	2019		2018
Assets
Cash and cash equivalents	$	4,430	$	3,287
Equity in net assets of subsidiaries and affiliates	23,165		22,298
Loans to subsidiaries and affiliates	22,350		17,945
Due from subsidiaries and affiliates	1,168		1,783
Other assets	223		297
Total assets	51,336		45,610
Liabilities and Shareholders’ Equity
Liabilities
Accounts payable and other liabilities	2,197		1,961
Due to subsidiaries and affiliates	609		577
Debt with subsidiaries and affiliates	1,091		2,591
Long-term debt	24,368		18,191
Total liabilities	28,265		23,320
Shareholders’ Equity
Total shareholders’ equity	23,071		22,290
Total liabilities and shareholders’ equity	$	51,336	$	45,610

PARENT COMPANY – CONDENSED STATEMENTS OF CASH FLOWS


Years Ended December 31 (Millions)	2019		2018		2017
Cash Flows from Operating Activities
Net income	$	6,759	$	6,921	$	2,748
Adjustments to reconcile net income to cash provided by operating activities:
Equity in net income of subsidiaries and affiliates	(7,271)		(7,452)		(3,186)
Dividends received from subsidiaries and affiliates	6,370		3,222		5,755
Other operating activities, primarily with subsidiaries and affiliates	1,315		(257)		659
Net cash provided by operating activities	7,173		2,434		5,976
Cash Flows from Investing Activities
Maturities and redemptions of investment securities	1		—		—
Loans to subsidiaries and affiliates	(4,405)		(6,281)		(4,044)
Investments in subsidiaries and affiliates	(15)		(30)		—
Other investing activities	82		—		—
Net cash used in investing activities	(4,337)		(6,311)		(4,044)
Cash Flows from Financing Activities
Proceeds from long-term debt	6,469		9,350		5,900
Payments of long-term debt	(641)		(3,850)		(1,500)
Short-term debt of subsidiaries and affiliates	(1,500)		(140)		(1,313)
Issuance of American Express common shares	86		87		129
Repurchase of American Express common shares and other	(4,685)		(1,685)		(4,400)
Dividends paid	(1,422)		(1,324)		(1,251)
Net cash (used in) provided by financing activities	(1,693)		2,438		(2,435)
Net increase (decrease) in cash and cash equivalents	1,143		(1,439)		(503)
Cash and cash equivalents at beginning of year	3,287		4,726		5,229
Cash and cash equivalents at end of year	$	4,430	$	3,287	$	4,726

NOTE 26

QUARTERLY FINANCIAL DATA (UNAUDITED)


(Millions, except per share amounts)	2019														2018
Quarters Ended	12/31		9/30		6/30		3/31		12/31		9/30		6/30		3/31
Total revenues net of interest expense	$	11,365	$	10,989	$	10,838	$	10,364	$	10,474	$	10,144	$	10,002	$	9,718
Pretax income	1,986		2,266		2,219		1,958		1,831		2,118		2,091		2,082
Net income	1,693		1,755		1,761		1,550		2,010		1,654		1,623		1,634
Earnings Per Common Share — Basic:
Net income attributable to common shareholders(a)	2.04		2.09		2.07		1.81		2.33		1.89		1.85		1.86
Earnings Per Common Share — Diluted:
Net income attributable to common shareholders(a)	2.03		2.08		2.07		1.80		2.32		1.88		1.84		1.86
Cash dividends declared per common share	$	0.43	$	0.43	$	0.39	$	0.39	$	0.39	$	0.39	$	0.35	$	0.35

(a)Represents net income, less (i) earnings allocated to participating share awards of $12 million, $11 million, $13 million and $11 million for the quarters ended December 31, September 30, June 30 and March 31, 2019, respectively, and $16 million, $13 million, $12 million and $13 million for the quarters ended December 31, September 30, June 30 and March 31, 2018, respectively, and (ii) dividends on preferred shares of $20 million, $21 million, $19 million and $21 million for the quarters ended December 31, September 30, June 30 and March 31, 2019, respectively, and $19 million, $20 million, $20 million and $21 million for the quarters ended December 31, September 30, June 30 and March 31, 2018, respectively.

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