Item 1. FINANCIAL STATEMENTS

127K characters. Original on sec.gov · Markdown

Item 1. FINANCIAL STATEMENTS

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


Three Months Ended March 31 (Millions, except per share amounts)	2022		2021
Revenues
Non-interest revenues
Discount revenue	$	6,835	$	5,001
Net card fees	1,423		1,253
Service fees and other revenue	906		638
Processed revenue	372		342
Total non-interest revenues	9,536		7,234
Interest income
Interest on loans	2,473		2,144
Interest and dividends on investment securities	13		24
Deposits with banks and other	34		24
Total interest income	2,520		2,192
Interest expense
Deposits	122		134
Long-term debt and other	199		228
Total interest expense	321		362
Net interest income	2,199		1,830
Total revenues net of interest expense	11,735		9,064
Provisions for credit losses
Card Member receivables	80		(10)
Card Member loans	(111)		(573)
Other	(2)		(92)
Total provisions for credit losses	(33)		(675)
Total revenues net of interest expense after provisions for credit losses	11,768		9,739
Expenses
Card Member rewards	3,111		2,243
Business development	1,043		802
Card Member services	626		317
Marketing	1,224		964
Salaries and employee benefits	1,654		1,550
Other, net	1,398		870
Total expenses	9,056		6,746
Pretax income	2,712		2,993
Income tax provision	613		758
Net income	$	2,099	$	2,235
Earnings per Common Share (Note 14)(a)
Basic	$	2.73	$	2.74
Diluted	$	2.73	$	2.74
Average common shares outstanding for earnings per common share:
Basic	757		804
Diluted	758		805

(a)Represents net income less (i) earnings allocated to participating share awards of $16 million and $15 million for the three months ended March 31, 2022 and 2021, respectively, and (ii) dividends on preferred shares of $14 million for both the three months ended March 31, 2022 and 2021.

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
(Millions)	2022		2021
Net income	$	2,099	$	2,235
Other comprehensive income (loss):
Net unrealized debt securities (losses) gains, net of tax	(28)		(12)
Foreign currency translation adjustments, net of hedges and tax	(20)		(17)
Net unrealized pension and other postretirement benefits, net of tax	20		26
Other comprehensive income (loss)	(28)		(3)
Comprehensive income	$	2,071	$	2,232

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Millions, except share data)	March 31, 2022		December 31, 2021
Assets
Cash and cash equivalents
Cash and due from banks (includes restricted cash of consolidated variable interest entities: 2022, $8; 2021, $11)	$	3,011	$	1,292
Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2022, $476; 2021, $463)	22,896		20,548
Short-term investment securities (includes restricted investments of consolidated variable interest entities: 2022, $1,745; 2021, $32)	1,771		188
Total cash and cash equivalents	27,678		22,028
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2022, $5,640; 2021, $5,175), less reserves for credit losses: 2022, $76; 2021, $64	53,088		53,581
Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2022, $26,017; 2021, $26,587), less reserves for credit losses: 2022, $2,981; 2021, $3,305	85,851		85,257
Other loans, less reserves for credit losses: 2022, $48; 2021, $52	3,264		2,859
Investment securities	4,058		2,591
Premises and equipment, less accumulated depreciation and amortization: 2022, $8,907; 2021, $8,602	5,046		4,988
Other assets, less reserves for credit losses: 2022, $22; 2021, $25	16,877		17,244
Total assets	$	195,862	$	188,548
Liabilities and Shareholders’ Equity
Liabilities
Customer deposits	$	90,917	$	84,382
Accounts payable	11,196		10,574
Short-term borrowings	2,122		2,243
Long-term debt (includes debt issued by consolidated variable interest entities: 2022, $11,788; 2021, $13,803)	38,337		38,675
Other liabilities	30,907		30,497
Total liabilities	$	173,479	$	166,371
Contingencies (Note 7)
Shareholders’ Equity
Preferred shares, $1.662/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares as of March 31, 2022 and December 31, 2021	—		—
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 755 million shares as of March 31, 2022 and 761 million shares as of December 31, 2021	151		153
Additional paid-in capital	11,451		11,495
Retained earnings	13,754		13,474
Accumulated other comprehensive income (loss)	(2,973)		(2,945)




Total shareholders’ equity	22,383		22,177
Total liabilities and shareholders’ equity	$	195,862	$	188,548

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three Months Ended March 31 (Millions)	2022		2021
Cash Flows from Operating Activities
Net income	$	2,099	$	2,235
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for credit losses	(33)		(675)
Depreciation and amortization	398		422
Stock-based compensation	122		98
Deferred taxes	(69)		194
Other non-cash items (a)	(47)		(275)
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Other assets	323		477
Accounts payable & other liabilities	1,087		(196)
Net cash provided by operating activities	3,880		2,280
Cash Flows from Investing Activities
Sale of investment securities	16		37
Maturities and redemptions of investment securities	767		553
Purchase of investments	(2,328)		(366)
Net (increase) decrease in Card Member loans and receivables, and other loans	(785)		4,869
Purchase of premises and equipment, net of sales: 2022, nil; 2021, $3	(447)		(319)


Net cash (used in) provided by investing activities	(2,777)		4,774
Cash Flows from Financing Activities
Net increase in customer deposits	6,541		2,327
Net decrease in short-term borrowings	(59)		(271)
Proceeds from long-term debt	6,231		—
Payments of long-term debt	(6,314)		(750)


Issuance of American Express common shares	49		31
Repurchase of American Express common shares and other	(1,570)		(513)
Dividends paid	(345)		(363)
Net cash provided by financing activities	4,533		461
Effect of foreign currency exchange rates on cash and cash equivalents	14		(200)
Net increase in cash and cash equivalents	5,650		7,315
Cash and cash equivalents at beginning of period	22,028		32,965
Cash and cash equivalents at end of period	$	27,678	$	40,280


Supplemental cash flow information
Cash and cash equivalents reconciliation	Mar-22		Dec-21		Mar-21		Dec-20
Cash and cash equivalents per Consolidated Balance Sheets	$	27,678	$	22,028	$	40,280	$	32,965
Restricted balances included in Cash and cash equivalents	2,207		525		527		606
Total Cash and cash equivalents, excluding restricted balances	$	25,471	$	21,503	$	39,753	$	32,359

(a)Includes net gains and losses on fair value hedges, changes in equity method investments and net gains and losses on Amex Ventures equity investments.

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


Three months ended March 31, 2022 (Millions, except per share amounts)	Total		Preferred Shares		Common Shares		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings
Balances as of December 31, 2021	$	22,177	$	—	$	153	$	11,495	$	(2,945)	$	13,474

Net income	2,099		—		—		—		—		2,099
Other comprehensive loss	(28)		—		—		—		(28)		—
Repurchase of common shares	(1,483)		—		(2)		(126)		—		(1,355)
Other changes, primarily employee plans	26		—		—		82		—		(56)
Cash dividends declared preferred Series D, $8,875.00 per share	(14)		—		—		—		—		(14)
Cash dividends declared common, $0.52 per share	(394)		—		—		—		—		(394)
Balances as of March 31, 2022	$	22,383	$	—	$	151	$	11,451	$	(2,973)	$	13,754


Three months ended March 31, 2021 (Millions, except per share amounts)	Total		Preferred Shares		Common Shares		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings
Balances as of December 31, 2020	$	22,984	$	—	$	161	$	11,881	$	(2,895)	$	13,837

Net income	2,235		—		—		—		—		2,235
Other comprehensive loss	(3)		—		—		—		(3)		—
Repurchase of common shares	(438)		—		(1)		(49)		—		(388)
Other changes, primarily employee plans	32		—		1		46		—		(15)
Cash dividends declared preferred Series B, $9,325.22 per share	(7)		—		—		—		—		(7)
Cash dividends declared preferred Series C, $8,753.75 per share	(7)		—		—		—		—		(7)

Cash dividends declared common, $0.43 per share	(347)		—		—		—		—		(347)
Balances as of March 31, 2021	$	24,449	$	—	$	161	$	11,878	$	(2,898)	$	15,308

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The Company

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. 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 service providers and business partners, direct mail, telephone, in-house sales teams, and direct response advertising.

The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the 2021 Form 10-K). If not materially different, certain note disclosures included therein have been omitted from these Consolidated Financial Statements.

The interim Consolidated Financial Statements included in this report have not been audited. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim Consolidated Financial Statements, have been made. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates reflect the best judgment of management, but actual results could differ.

Effective for the first quarter of 2022, we made the following reporting presentation changes to our Consolidated Statements of Income:

Within Non-interest revenues:

Processed revenue represents revenues earned from processed volumes, previously reported in Discount revenue, Other fees and commissions and Other revenue.
Service fees and other revenue combines the remaining balances from Other fees and commissions and Other revenue.

Within Total expenses:

Disaggregated Marketing and business development expense into Business Development expense and Marketing expense.

Prior period amounts have been recast to conform with current period presentation; there was no impact to Total non-interest revenues or Total expenses.

The significant Consolidated Statements of Income accounting policies below provides updates to the significant accounting policy disclosures as presented in the 2021 Form 10-K to reflect the reporting presentation changes.

Discount Revenue

Discount revenue represents the amount we earn and retain from the merchant payable for facilitating transactions on payment products issued by American Express. The amount of fees charged for accepting our cards as payment, 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. Discount revenue is generally recorded at the time the Card Member transaction occurs.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 network 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.

Service Fees and Other Revenue

Service fees and other revenue includes service fees earned from merchants and other customers and travel commissions and fees, which are generally recognized in the period when the service is performed, and delinquency and foreign currency-related fees, which are primarily recognized in the period when they are charged to the Card Member. In addition, Service fees and other revenue includes income (losses) from our investments in which we have significant influence and therefore account for under the equity method.

Processed Revenue

Processed revenue primarily represents amounts earned for facilitating transactions on cards issued by network partners. In our role as the operator of the American Express network, we settle with merchants on behalf of our network card issuing partners. The amount of fees charged for accepting American Express-branded cards are generally deducted from the payment to the merchant and recorded as Processed revenue at the time the Card Member transaction occurs. Our network card issuing partners receive an issuer rate that is individually negotiated between that issuer and us and is recorded as contra-revenue within Processed revenue to the extent that there is revenue from the same customer, after which any additional issuer rate is recorded as expense in Business development. Processed revenue also includes other fees related to network partnership agreements and fees earned on alternative payment solutions, all of which are generally recognized when the service is performed.

Business Development

Business development expense includes payments to our cobrand partners, corporate client incentive payments earned on achievement of pre-set targets and certain payments to network partners. These costs are generally expensed as incurred.

Marketing

Marketing includes costs incurred in the development and initial placement of advertising, which are expensed in the period in which the advertising first takes place. All other marketing expenses are generally expensed as incurred.

Recently Issued Accounting Standards

In March 2022, the Financial Accounting Standards Board issued new accounting guidance on troubled debt restructuring (TDR) and write-offs, effective January 1, 2023, with early adoption permitted, The amendments eliminate the TDR accounting guidance for Current Expected Credit Loss (CECL) adopters, create a single loan modification accounting model and clarify disclosure requirements for loan modifications and write-offs. We are currently evaluating the impact of the updated guidance on our Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Loans and Card Member Receivables

Our lending and charge payment card products result in the generation of Card Member loans and Card Member receivables. We also extend credit to consumer and commercial customers through non-card financing products, resulting in Other loans.

Card Member loans by segment and Other loans as of March 31, 2022 and December 31, 2021 consisted of:


(Millions)	2022		2021
Global Consumer Services Group (a)	$	69,480	$	70,467
Global Commercial Services	19,352		18,095
Card Member loans	88,832		88,562
Less: Reserves for credit losses	2,981		3,305
Card Member loans, net	$	85,851	$	85,257
Other loans, net (b)	$	3,264	$	2,859

(a)Includes approximately $26.0 billion and $26.6 billion of gross Card Member loans available to settle obligations of a consolidated variable interest entity (VIE) as of March 31, 2022 and December 31, 2021, respectively.

(b)Other loans are presented net of reserves for credit losses of $48 million and $52 million as of March 31, 2022 and December 31, 2021, respectively.

Card Member receivables by segment as of March 31, 2022 and December 31, 2021 consisted of:


(Millions)	2022		2021
Global Consumer Services Group	$	20,644	$	22,392
Global Commercial Services (a)	32,520		31,253
Card Member receivables	53,164		53,645
Less: Reserves for credit losses	76		64
Card Member receivables, net	$	53,088	$	53,581

(a)Includes $5.6 billion and $5.2 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of March 31, 2022 and December 31, 2021, respectively.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Card Member Loans and Receivables Aging

Generally, a Card Member account is considered past due if payment due 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 March 31, 2022 and December 31, 2021:


2022 (Millions)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
Global Consumer Services Group	$	68,933	$	170	$	121	$	256	$	69,480
Global Commercial Services
Global Small Business Services	19,161		40		26		43		19,270
Global Corporate Payments (a)	(b)		(b)		(b)		—		82
Card Member Receivables:
Global Consumer Services Group	20,499		53		33		59		20,644
Global Commercial Services
Global Small Business Services	$	17,844	$	65	$	40	$	56	$	18,005
Global Corporate Payments (a)	(b)		(b)		(b)		$	50	$	14,515


2021 (Millions)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
Global Consumer Services Group	$	69,960	$	158	$	112	$	237	$	70,467
Global Commercial Services
Global Small Business Services	17,950		34		19		37		18,040
Global Corporate Payments (a)	(b)		(b)		(b)		—		55
Card Member Receivables:
Global Consumer Services Group	22,279		41		24		48		22,392
Global Commercial Services
Global Small Business Services	$	17,846	$	59	$	28	$	44	$	17,977
Global Corporate Payments (a)	(b)		(b)		(b)		$	42	$	13,276

(a)Global Corporate Payments (GCP) reflects global, large and middle market corporate accounts. 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.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Credit Quality Indicators for Card Member Loans and Receivables

The following tables present the key credit quality indicators as of or for the three months ended March 31:


		2022									2021
	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		0.8	%		1.1	%		0.8	%		1.4	%		1.8	%		1.0	%
Global Small Business Services		0.6	%		0.7	%		0.6	%		1.0	%		1.2	%		0.6	%
Card Member Receivables:
Global Consumer Services Group		0.5	%		0.5	%		0.7	%		0.5	%		0.6	%		0.6	%
Global Small Business Services		0.7	%		0.8	%		0.9	%		0.5	%		0.5	%		0.6	%
Global Corporate Payments		(b)			0.2	%		(c)			(b)			0.4	%		(c)

(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, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.

(b)Net write-off rate based on principal losses only is not available due to system constraints.

(c)For GCP Card Member receivables, delinquency data is tracked based on days past billing status rather than days past due. Delinquency data for periods other than 90+ days past billing is not available due to system constraints. 90+ days past billing as a % of total was 0.3% and 0.4% as of March 31, 2022 and 2021, respectively.

Refer to Note 3 for additional indicators, including external environmental qualitative factors, management considers in its evaluation process for reserves for credit losses.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Impaired Loans and Receivables

Impaired 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 customer agreement. We consider impaired loans and receivables to include (i) loans over 90 days past due still accruing interest, (ii) non-accrual loans and (iii) loans and receivables modified as troubled debt restructurings (TDRs).

In instances where the customer is experiencing financial difficulty, we may modify, through various financial relief programs, loans and receivables with the intention to minimize losses and improve collectability, while providing customers with temporary or permanent financial relief. We have classified loans and receivables in these modification programs as TDRs and continue to classify customer accounts that have exited a modification program as a TDR, with such accounts identified as “Out of Program TDRs.”

The following tables provide additional information with respect to our impaired loans and receivables as of March 31, 2022 and December 31, 2021:


	As of March 31, 2022
					Accounts Classified as a TDR (c)
2022 (Millions)	Over 90 days Past Due & Accruing Interest(a)		Non- Accruals(b)		In Program(d)		Out of Program(e)		Total Impaired Balance		Reserve for Credit Losses - TDRs
Card Member Loans:
Global Consumer Services Group	$	170	$	84	$	644	$	1,015	$	1,913	$	315
Global Commercial Services	24		17		175		352		568		88
Card Member Receivables:
Global Consumer Services Group	—		—		144		144		288		8
Global Commercial Services	—		—		276		359		635		26
Other Loans (f)	1		1		48		1		51		—
Total	$	195	$	102	$	1,287	$	1,871	$	3,455	$	437


	As of December 31, 2021
					Accounts Classified as a TDR (c)
2021 (Millions)	Over 90 days Past Due & Accruing Interest(a)		Non- Accruals(b)		In Program(d)		Out of Program(e)		Total Impaired Balance		Reserve for Credit Losses - TDRs
Card Member Loans:
Global Consumer Services Group	$	149	$	82	$	708	$	997	$	1,936	$	415
Global Commercial Services	19		14		176		332		541		132
Card Member Receivables:
Global Consumer Services Group	—		—		133		130		263		9
Global Commercial Services	—		—		248		303		551		39
Other Loans (f)	1		—		67		2		70		1
Total	$	169	$	96	$	1,332	$	1,764	$	3,361	$	596

(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 loans classified as a TDR.

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

(c)Accounts classified as a TDR include $46 million and $41 million that are over 90 days past due and accruing interest as of March 31, 2022 and December 31, 2021, respectively, and $15 million and $19 million that are non-accruals as of March 31, 2022 and December 31, 2021, respectively.

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

(e)Out of Program TDRs include $1,719 million and $1,621 million of accounts that have successfully completed a modification program and $152 million and $143 million of accounts that were not in compliance with the terms of the modification programs as of March 31, 2022 and December 31, 2021, respectively.

(f)Other loans primarily represent consumer and commercial non-card financing products.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Loans and Receivables Modified as TDRs

The following tables provide additional information with respect to loans and receivables that were modified as TDRs during the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31, 2022
	Number of Accounts (thousands)	Account Balances (millions)(a)		Average Interest Rate Reduction (% points)	Average Payment Term Extensions (# of months)
Troubled Debt Restructurings:
Card Member Loans	27	$	177	14	(b)
Card Member Receivables	6	171		(c)	17
Other Loans (d)	1	1		2	15
Total	34	$	349


	Three Months Ended March 31, 2021
	Number of Accounts (thousands)	Account Balances (millions)(a)		Average Interest Rate Reduction (% points)	Average Payment Term Extensions (# of months)
Troubled Debt Restructurings:
Card Member Loans	38	$	287	13	(b)
Card Member Receivables	7	117		(c)	18
Other Loans (d)	1	$	8	3	15
Total	46	$	412

(a)Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and accrued interest on loans and principal and fees on 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.

(d)Other loans primarily represent consumer and commercial non-card financing products.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables provide information with respect to loans and receivables modified as TDRs that subsequently defaulted within twelve months of modification. A customer can miss up to three payments before being considered in default, depending on the terms of the modification program.


		Three Months Ended March 31, 2022
	Number of Accounts (thousands)		Aggregated Outstanding Balances Upon Default (millions)(a)
Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans		4		$	29
Card Member Receivables		1		10
Other Loans (b)		—		—
Total		5		$	39


		Three Months Ended March 31, 2021
	Number of Accounts (thousands)		Aggregated Outstanding Balances Upon Default (millions)(a)
Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans		7		$	47
Card Member Receivables		1		19
Other Loans (b)		1		5
Total		9		$	71

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

(b)Other loans primarily represent consumer and commercial non-card financing products.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Reserves for Credit Losses

Reserves for credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The CECL methodology requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period), which is approximately three years, beyond the balance sheet date. We make various judgments combined with historical loss experience to determine a reserve rate that is applied to the outstanding loan or receivable balance to produce a reserve for expected credit losses.

We use a combination of statistically-based models that incorporate current and future economic conditions throughout the R&S Period. The process of estimating expected credit losses is based on several key models: Probability of Default (PD), Exposure at Default (EAD), and future recoveries for each month of the R&S Period. Beyond the R&S Period, we estimate expected credit losses by immediately reverting to long-term average loss rates.

PD models are used to estimate the likelihood an account will be written-off.
EAD models are used to estimate the balance of an account at the time of write-off. This includes balances less expected repayments based on historical payment and revolve behavior, which vary by customer. Due to the nature of revolving loan portfolios, the EAD models are complex and involve assumptions regarding the relationship between future spend and payment behaviors.
Recovery models are used to estimate amounts that are expected to be received from Card Members after default occurs, typically as a result of collection efforts. Future recoveries are estimated taking into consideration the time of default, time elapsed since default and macroeconomic conditions.

We also estimate the likelihood and magnitude of recovery of previously written off accounts considering how long ago the account was written off and future economic conditions, even if such expected recoveries exceed expected losses. Our models are developed using historical loss experience covering the economic cycle and consider the impact of account characteristics on expected losses.

Future economic conditions that are incorporated over the R&S Period include multiple macroeconomic scenarios provided to us by an independent third party. Management reviews these economic scenarios each period and applies judgment to weight them in order to reflect the uncertainty surrounding these scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real gross domestic product (GDP), that are significant to our models.

We also evaluate whether to include qualitative reserves to cover losses that are expected but, in our assessment, may not be adequately represented in the quantitative methods or the economic assumptions. We consider whether to adjust the quantitative reserves (higher or lower) to address possible limitations within the models or factors not included within the models, such as external conditions, emerging portfolio trends, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due accounts, or management risk actions.

Lifetime losses for most of our loans and receivables are evaluated at an appropriate level of granularity, including assessment on a pooled basis where financial assets share similar risk characteristics, such as past spend and remittance behaviors, credit bureau scores where available, delinquency status, tenure of balance outstanding, amongst others. Credit losses on accrued interest are measured and presented as part of Reserves for credit losses on the Consolidated Balance Sheets and within the Provisions for credit losses in the Consolidated Statements of Income, rather than reversing interest income. Separate models are used for accounts deemed a troubled debt restructuring, which are measured individually and incorporate a discounted cash flow model.

Loans and receivable balances are written off when we consider 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 for pay in full or revolving loans and 120 days past due for term loans. Loans and receivables in bankruptcy or owed by deceased individuals are generally written off upon notification.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table reflects the range of macroeconomic scenario key variables used, in conjunction with other inputs, to calculate reserves for credit losses:


	U.S. Unemployment Rate	U.S. GDP Growth (Contraction) (a)
	March 31, 2022	December 31, 2021	March 31, 2022	December 31, 2021
First quarter of 2022	4%	4% - 7%	0.5%	6% - (4)%
Fourth quarter of 2022	3% - 7%	4% - 9%	4% - (2)%	2% - 1%
Fourth quarter of 2023	3% - 7%	3% - 7%	4% - 2%	4% - 3%
Fourth quarter of 2024	3% - 6%	4% -6%	4% - 2%	3%

(a)Real GDP quarter over quarter percentage change seasonally adjusted to annualized rates.

Changes in Card Member Loans Reserve for Credit Losses

Card Member loans reserve for credit losses decreased for the three months ended March 31, 2022, primarily driven by a reduction in pandemic-driven reserves reflecting sustained recovery from the macroeconomic impact of the COVID-19 pandemic.

Card Member loans reserve for credit losses decreased for the three months ended March 31, 2021, driven by improving macroeconomic indicators including unemployment and GDP, as well as improved credit performance.

The following table presents changes in the Card Member loans reserve for credit losses for the three months ended March 31:


	Three Months Ended March 31,
(Millions)	2022		2021
Beginning Balance	$	3,305	$	5,344
Provisions (a)	(111)		(573)
Net write-offs (b)
Principal	(165)		(241)
Interest and fees	(50)		(63)
Other (c)	2		—
Ending Balance	$	2,981	$	4,467

(a)Provisions for principal, interest and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs.

(b)Principal write-offs are presented less recoveries of $144 million and $168 million for the three months ended March 31, 2022 and 2021, respectively. Recoveries of interest and fees were not significant. Amounts include net (write-offs) recoveries from TDRs of $(55) million and $(45) million for the three months ended March 31, 2022 and 2021, respectively.

(c)Primarily includes foreign currency translation adjustments of $2 million and $(1) million for the three months ended March 31, 2022 and 2021, respectively.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Changes in Card Member Receivables Reserve for Credit Losses

Card Member receivables reserve for credit losses increased for the three months ended March 31, 2022, primarily driven by higher delinquencies.

Card Member receivables reserve for credit losses decreased for the three months ended March 31, 2021, driven by improving macroeconomic indicators including unemployment and GDP, as well as improved credit performance.

The following table presents changes in the Card Member receivables reserve for credit losses for the three months ended March 31:


	Three Months Ended March 31,
(Millions)	2022		2021
Beginning Balance	$	64	$	267
Provisions (a)	80		(10)
Net write-offs (b)	(67)		(53)
Other (c)	(1)		(2)
Ending Balance	$	76	$	202

(a)Provisions for principal and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs.

(b)Net write-offs are presented less recoveries of $67 million and $97 million for the three months ended March 31, 2022 and 2021, respectively. Amounts include net (write-offs) recoveries from TDRs of $(12) million and $(20) million for the three months ended March 31, 2022 and 2021, respectively.

(c)Primarily includes foreign currency translation adjustments of nil and $(1) million for the three months ended March 31, 2022 and 2021, respectively.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Investment Securities

Investment securities principally include available-for-sale debt securities carried at fair value on the Consolidated Balance Sheets. Unrealized losses attributable to credit deterioration are recorded in the Consolidated Statements of Income in Other loans Provision for credit losses. Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax. We had accrued interest on our available-for-sale debt securities totaling $7 million and $12 million as of March 31, 2022 and December 31, 2021, respectively, presented as Other assets on the Consolidated Balance Sheets.

Investment securities also include equity securities carried at fair value on the Consolidated Balance Sheets with unrealized gains and losses recorded in the Consolidated Statements of Income as Other, net expense.

Realized gains and losses are recognized upon disposition of the securities using the specific identification method and recorded in the Consolidated Statements of Income as Other, net expense.

The following is a summary of investment securities as of March 31, 2022 and December 31, 2021:


	2022								2021
Description of Securities (Millions)	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	$	74	$	2	$	(4)	$	72	$	106	$	5	$	—	$	111
U.S. Government agency obligations	6		—		—		6		6		—		—		6
U.S. Government treasury obligations	3,240		7		(12)		3,235		1,680		25		(1)		1,704
Mortgage-backed securities (a)	15		1		—		16		17		1		—		18
Foreign government bonds and obligations	636		—		(1)		635		630		—		—		630
Other (b)	39		—		—		39		43		—		—		43
Equity securities (c)	61		1		(7)		55		66		17		(4)		79
Total	$	4,071	$	11	$	(24)	$	4,058	$	2,548	$	48	$	(5)	$	2,591

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

(b)Represents investments in Corporate debt securities and debt securities issued by Community Development Financial Institutions.

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

The following table provides information about our available-for-sale debt securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2022 and December 31, 2021. There were no securities in a gross unrealized loss position for 12 months or more as of both March 31, 2022 and December 31, 2021.


	2022				2021
	Less than 12 months					Less than 12 months
Description of Securities (Millions)	Estimated Fair Value		Gross Unrealized Losses				Estimated Fair Value		Gross Unrealized Losses
State and municipal obligations	$	44	$	(4)			$	—	$	—
U.S. Government treasury obligations	2,554		(12)				477		(1)
Foreign government bonds and obligations	440		(1)				—		—
Total	$	3,038	$	(17)			$	477	$	(1)

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes the gross unrealized losses by ratio of fair value to amortized cost as of March 31, 2022 and December 31, 2021:


	Less than 12 months
Ratio of Fair Value to Amortized Cost (Dollars in millions)	Number of Securities	Estimated Fair Value		Gross Unrealized Losses
2022:
90–100%	44	$	3,032	$	(16)
Less than 90%	4	6		(1)
Total as of March 31, 2022	48	$	3,038	$	(17)
2021:
90–100%	5	$	477	$	(1)

Total as of December 31, 2021	5	$	477	$	(1)

Contractual maturities for available-for-sale debt securities with stated maturities as of March 31, 2022 were as follows:


(Millions)	Cost		Estimated Fair Value
Due within 1 year	$	1,740	$	1,745
Due after 1 year but within 5 years	2,167		2,155
Due after 5 years but within 10 years	35		38
Due after 10 years	68		65
Total	$	4,010	$	4,003

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.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. 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 March 31, 2022 and December 31, 2021, our ownership of variable interests was $15.4 billion and $15.0 billion, respectively, for the Lending Trust and $4.6 billion and $3.2 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.

Restricted cash and cash equivalents held by the Lending Trust and Charge Trust was $1.8 billion and $1 million, respectively, as of March 31, 2022 and $42 million and $1 million, respectively, as of December 31, 2021. 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 three months ended March 31, 2022 and the year ended December 31, 2021, no such triggering events occurred.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Customer Deposits

As of March 31, 2022 and December 31, 2021, customer deposits were categorized as interest-bearing or non-interest-bearing as follows:


(Millions)	2022		2021
U.S.:
Interest-bearing	$	89,899	$	83,304
Non-interest-bearing (includes Card Member credit balances of: 2022, $481; 2021, $527)	508		553
Non-U.S.:
Interest-bearing	17		18
Non-interest-bearing (includes Card Member credit balances of: 2022, $489; 2021, $503)	493		507
Total customer deposits	$	90,917	$	84,382

Customer deposits by deposit type as of March 31, 2022 and December 31, 2021 were as follows:


(Millions)	2022		2021

Savings and transaction accounts	$	71,512	$	66,142
Certificates of deposit:
Direct	1,229		1,415
Third-party (brokered)	4,018		3,095
Sweep accounts – Third-party (brokered)	13,146		12,658
Other deposits	42		42


Card Member credit balances	970		1,030
Total customer deposits	$	90,917	$	84,382

The scheduled maturities of certificates of deposit as of March 31, 2022 were as follows:


(Millions)						2022						2023						2024						2025						2026						After 5 Years						Total
Certificates of deposit						$	2,804					$	794					$	991					$	500					$	20					$	138					5,247

As of March 31, 2022 and December 31, 2021, certificates of deposit in denominations of $250,000 or more, in the aggregate, were as follows:


(Millions)	2022		2021
U.S.	$	449	$	521
Non-U.S.	1		1
Total	$	450	$	522

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. 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, regulatory proceedings, 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.

On February 25, 2020, we were named as a defendant in a case filed in the Superior Court of California, Los Angeles County, captioned Laurelwood Cleaners LLC v. American Express Co., et al., in which the plaintiff seeks a public injunction in California prohibiting American Express from enforcing its anti-steering and non-discrimination provisions and from requiring merchants “to offer the service of Amex-card acceptance for free.” The case has been stayed pending the outcome of arbitration proceedings.

On January 29, 2019, we were named in a putative class action brought in the United States District Court for the Eastern District of New York, captioned Anthony Oliver, et al. v. American Express Company and American Express Travel Related Services Company Inc., in which the plaintiffs are holders of MasterCard, Visa and/or Discover credit cards (but not American Express cards) and allege they paid higher prices as a result of our anti-steering and non-discrimination provisions in violation of federal antitrust law and the antitrust and consumer laws of various states. Plaintiffs seek unspecified damages and other forms of relief. The court dismissed plaintiffs’ federal antitrust claim, numerous state antitrust and consumer protection claims and their unjust enrichment claim. The remaining claims in plaintiffs’ complaint arise under the antitrust laws of 11 states and the consumer protection laws of six states.

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. On August 28, 2020, the court granted plaintiffs' motion for class certification.

In July 2004, we were named as a defendant in a 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.

In 2006, Mawarid Investments Limited filed a request for confidential arbitration under the 1998 London Court of International Arbitration Rules in connection with certain claims arising under a shareholders agreement between Mawarid and American Express Travel Related Services Company, Inc. relating to a joint venture between the parties, Amex (Middle East) BSC(c) (AEME). In 2008, the tribunal rendered a partial award, including a direction that an audit should take place to verify whether acquirer discount revenue related to transactions occurring with airlines located in the Middle East region had been properly allocated to AEME since its inception in 1992. In September 2021, the tribunal rendered a further partial award regarding the location of transactions through non-physical channels. The consequences of the tribunal’s 2008 and 2021 partial awards on the allocation of airline acquirer revenues will be determined in the remaining phase of the arbitration.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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 $170 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 and results of operations.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. 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 and foreign exchange rates, 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.

A majority of our derivative assets and liabilities as of March 31, 2022 and December 31, 2021 are subject to master netting agreements with our derivative counterparties. Accordingly, where appropriate, we have elected to present derivative assets and liabilities with the same counterparty on a net basis in the Consolidated Balance Sheets.

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 March 31, 2022, these derivatives were not in a material net liability position. Based on our assessment of the credit risk of our derivative counterparties and our own credit risk as of March 31, 2022 and December 31, 2021, no credit risk adjustment to the derivative portfolio was required.

The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of March 31, 2022 and December 31, 2021:


	Other Assets Fair Value				Other Liabilities Fair Value
(Millions)	2022		2021		2022		2021
Derivatives designated as hedging instruments:
Fair value hedges - Interest rate contracts (a)	$	34	$	204	$	55	$	—
Net investment hedges - Foreign exchange contracts	165		219		182		54
Total derivatives designated as hedging instruments	199		423		237		54
Derivatives not designated as hedging instruments:
Foreign exchange contracts	224		167		104		85
Total derivatives, gross	423		590		341		139
Derivative asset and derivative liability netting (b)	(173)		(93)		(173)		(93)
Cash collateral netting (c)	(12)		(204)		(30)		(4)
Total derivatives, net	$	238	$	293	$	138	$	42

(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.

We posted $13 million and $11 million as of March 31, 2022 and December 31, 2021, 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.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair Value Hedges

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 had $11.1 billion and $12.9 billion of fixed-rate debt obligations designated in fair value hedging relationships as of March 31, 2022 and December 31, 2021, respectively.

The following table presents the gains and losses recognized in Interest expense on the Consolidated Statements of Income associated with the fair value hedges of our fixed-rate long-term debt for the three months ended March 31:


	Gains (losses)
	Three Months Ended March 31,
(Millions)	2022		2021
Fixed-rate long-term debt	$	258	$	143
Derivatives designated as hedging instruments	(261)		(145)
Total	$	(3)	$	(2)

The carrying values of the hedged liabilities, recorded within Long-term debt on the Consolidated Balance Sheets, were $11.1 billion and $13.1 billion as of March 31, 2022 and December 31, 2021, respectively, including the cumulative amount of fair value hedging adjustments of $(21) million and $237 million for the respective periods.

We recognized in Interest expense on Long-term debt net decreases of $57 million and $73 million for the three months ended March 31, 2022 and 2021, respectively, primarily related to the net settlements including interest accruals on our interest rate derivatives designated as fair value hedges.

Net Investment Hedges

We primarily designate foreign currency derivatives as net investment hedges to reduce our exposure to changes in currency exchange rates on our investments in non-U.S. subsidiaries. We had notional amounts of approximately $12.2 billion and $12.6 billion of foreign currency derivatives designated as net investment hedges as of March 31, 2022 and December 31, 2021, respectively. The gain or loss on net investment hedges, net of taxes, recorded in Accumulated other comprehensive income (loss) (AOCI) as part of the cumulative translation adjustment, were losses of $85 million and gains of $6 million for the three months ended March 31, 2022 and 2021, respectively. Net investment hedge reclassifications out of AOCI into the Consolidated Statements of Income were not significant for both the three months ended March 31, 2022 and 2021.

Derivatives Not Designated as Hedges

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. We had notional amounts of approximately $15.6 billion and $19.0 billion as of March 31, 2022 and December 31, 2021, respectively. The changes in the fair value of the derivatives and the related underlying foreign currency exposures resulted in net losses of $12 million and $5 million for the three months ended March 31, 2022 and 2021, respectively, that are recognized in Other, net expenses in the Consolidated Statements of Income.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Fair Values

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 of March 31, 2022 and December 31, 2021:


	2022								2021
(Millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Investment securities: (a)
Equity securities	$	55	$	54	$	1	$	—	$	79	$	78	$	1	$	—
Debt securities	4,003		—		3,971		32		2,512		—		2,480		32
Derivatives, gross (a)	423		—		423		—		590		—		590		—
Total Assets	4,481		54		4,395		32		3,181		78		3,071		32
Liabilities:
Derivatives, gross (a)	341		—		341		—		139		—		139		—
Total Liabilities	$	341	$	—	$	341	$	—	$	139	$	—	$	139	$	—

(a)Refer to Note 4 for the fair values of investment securities and to Note 8 for the fair values of derivative assets and liabilities on a further disaggregated basis.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 March 31, 2022 and December 31, 2021. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of March 31, 2022 and December 31, 2021, 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.


	Carrying Value			Corresponding Fair Value Amount
2022 (Billions)			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)	$	28		$	28		$	25		$	3		$	—
Other financial assets (b)	56			56						56			—
Financial assets carried at other than fair value
Card Member and Other loans, less reserves (c)	89			92			—			—			92

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value	110			110			—			110			—
Financial liabilities carried at other than fair value
Certificates of deposit (d)	5			5			—			5			—
Long-term debt (c)	$	38		$	39		$	—		$	39		$	—


	Carrying Value			Corresponding Fair Value Amount
2021 (Billions)			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)	$	22		$	22		$	20		$	2		$	—
Other financial assets (b)	56			56			—			56			—
Financial assets carried at other than fair value
Card Member and Other loans, less reserves (c)	88			91			—			—			91

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value	105			105			—			105			—
Financial liabilities carried at other than fair value
Certificates of deposit (d)	5			5			—			5			—
Long-term debt (c)	$	39		$	40		$	—		$	40		$	—

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

(b)Balances include Card Member receivables (including fair values of Card Member receivables of $5.6 billion and $5.2 billion held by a consolidated VIE as of March 31, 2022 and December 31, 2021, respectively), other receivables and other miscellaneous assets.

(c)Balances include amounts held by a consolidated VIE for which the fair values of Card Member loans were $26.1 billion and $26.7 billion as of March 31, 2022 and December 31, 2021, respectively, and the fair values of Long-term debt were $11.7 billion and $13.9 billion as of March 31, 2022 and December 31, 2021, respectively.

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

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 three months ended March 31, 2022 and the year ended December 31, 2021, we did not have any material assets that were measured at fair value due to impairment.

We estimate the Level 3 fair value of equity investments without readily determinable fair values based on price changes as of the date of new similar equity financing transactions completed by the companies in our portfolio. The carrying value of equity investments without readily determinable fair values totaled $1.3 billion as of both March 31, 2022 and December 31, 2021. These amounts are included within Other assets on the Consolidated Balance Sheets. We recorded unrealized gains of $12 million and $378 million for the three months ended March 31, 2022 and 2021, respectively. Unrealized losses including any impairments were $18 million and $1 million for the three months ended March 31, 2022 and 2021, respectively. Since the adoption of new accounting guidance on the recognition and measurement of financial assets and financial liabilities on January 1, 2018, cumulative unrealized gains for equity investments without readily determinable fair values totaled $1.1 billion as of both March 31, 2022 and December 31, 2021, and cumulative unrealized losses including any impairments were $29 million and $10 million as of March 31, 2022 and December 31, 2021, respectively.

In addition, we also have certain equity investments measured at fair value using the net asset value practical expedient. Such investments were immaterial as of both March 31, 2022 and December 31, 2021.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. 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 $30 million, respectively, as of March 31, 2022, and $1 billion and $24 million, respectively, as of December 31, 2021, 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.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Changes In Accumulated Other Comprehensive Income (Loss)

AOCI 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 months ended March 31, 2022 and 2021 were as follows:


Three Months Ended March 31, 2022 (Millions), net of tax	Net Unrealized Gains (Losses) on Debt Securities		Foreign Currency Translation Adjustment Gains (Losses), net of hedges (a)		Net Unrealized Pension and Other Postretirement Benefit Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Balances as of December 31, 2021	$	23	$	(2,392)	$	(576)	$	(2,945)




Net change	(28)		(20)		20		(28)
Balances as of March 31, 2022	$	(5)	$	(2,412)	$	(556)	$	(2,973)


Three Months Ended March 31, 2021 (Millions), net of tax	Net Unrealized Gains (Losses) on Debt Securities		Foreign Currency Translation Adjustment Gains (Losses),net of hedges (a)		Net Unrealized Pension and Other Postretirement Benefit Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Balances as of December 31, 2020	$	65	$	(2,229)	$	(731)	$	(2,895)




Net change	(12)		(17)		26		(3)
Balances as of March 31, 2021	$	53	$	(2,246)	$	(705)	$	(2,898)

(a)Refer to Note 8 for additional information on hedging activity.

The following table shows the tax impact for the three months ended March 31 for the changes in each component of AOCI presented above:


	Tax expense (benefit)
	Three Months Ended March 31,
(Millions)	2022		2021
Net unrealized (losses) gains on debt securities	$	(9)	$	(3)
Foreign currency translation adjustment, net of hedges	(30)		8

Pension and other postretirement benefits	7		11
Total tax impact	$	(32)	$	16

Reclassifications out of AOCI into the Consolidated Statements of Income for the three months ended March 31, 2022 and 2021 were not significant.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12. Service Fees and Other Revenue and Other Expenses

The following is a detail of Service fees and other revenue for the three months ended March 31:


	Three Months Ended March 31,
(Millions)	2022		2021
Service fees	$	349	$	340
Foreign currency-related revenue	225		114
Delinquency fees	179		148
Travel commissions and fees	88		33
Other fees and revenues	65		3
Total Service fees and other revenue	$	906	$	638

The following is a detail of Other expenses for the three months ended March 31:


	Three Months Ended March 31,
(Millions)	2022		2021
Data processing and equipment	$	600	$	582
Professional services	472		403
Net unrealized and realized losses (gains) on Amex Ventures equity investments	11		(384)
Other (a)	315		269
Total Other expenses	$	1,398	$	870

(a)Other primarily includes general operating expenses, non-income taxes, communication expenses, Card Member and merchant-related fraud losses and foreign currency-related gains and losses.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. Income Taxes

The effective tax rate was 22.6 percent and 25.3 percent for the three months ended March 31, 2022 and 2021, respectively. The decrease primarily reflected discrete tax benefits in the current period related to the resolution of certain prior years’ tax items and stock-based compensation. The prior period effective tax rate also reflected the prospective implementation of the Proportional Amortization Method to account for investments in qualified affordable housing projects.

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. We are currently under examination by the IRS for the 2017 and 2018 tax years.

We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next twelve months by as much as $168 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 $168 million of unrecognized tax benefits, approximately $132 million relates to amounts that, if recognized, would impact the effective tax rate in a future period.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

14. Earnings Per Common Share (EPS)

The computations of basic and diluted EPS for the three months ended March 31 were as follows:


	Three Months Ended March 31,
(Millions, except per share amounts)	2022		2021
Numerator:
Basic and diluted:
Net income	$	2,099	$	2,235
Preferred dividends	(14)		(14)
Net income available to common shareholders	$	2,085	$	2,221
Earnings allocated to participating share awards (a)	(16)		(15)
Net income attributable to common shareholders	$	2,069	$	2,206
Denominator:(a)
Basic: Weighted-average common stock	757		804
Add: Weighted-average stock options (b)	1		1
Diluted	758		805

Basic EPS	$	2.73	$	2.74
Diluted EPS	$	2.73	$	2.74

(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 0.1 million and 0.3 million of options for the three months ended March 31, 2022 and 2021, respectively, because inclusion of the options would have been anti-dilutive.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

15. Reportable Operating Segments

Effective for the first quarter of 2022, we updated the methodology used to allocate certain revenues across reportable operating segments. Prior period amounts have been recast to conform with current period presentation.

The following table presents certain selected financial information for our reportable operating segments and Corporate & Other as of or for the three months ended March 31:


Three Months Ended March 31, 2022 (Millions, except where indicated)	GCSG		GCS		GMNS		Corporate & Other (a)		Consolidated
Total non-interest revenues	$	5,049	$	3,180	$	1,356	$	(49)	$	9,536
Revenue from contracts with customers (b)	3,619		2,759		1,258		4		7,640
Interest income	2,040		436		2		42		2,520
Interest expense	192		122		(44)		51		321
Total revenues net of interest expense	6,897		3,494		1,402		(58)		11,735
Pretax segment income (loss)	$	1,735	$	804	$	687	$	(514)	$	2,712
Total assets (billions)	$	101	$	56	$	16	$	23	$	196


Three Months Ended March 31, 2021 (Millions, except where indicated)	GCSG		GCS		GMNS		Corporate & Other (a)		Consolidated
Total non-interest revenues	$	3,809	$	2,442	$	1,061	$	(78)	$	7,234
Revenue from contracts with customers (b)	2,604		2,062		994		(6)		5,654
Interest income	1,808		336		4		44		2,192
Interest expense	188		116		(17)		75		362
Total revenues net of interest expense	5,429		2,662		1,082		(109)		9,064
Pretax segment income (loss)	$	2,145	$	675	$	385	$	(212)	$	2,993
Total assets (billions)	$	82	$	42	$	14	$	55	$	193

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

(b)Includes discount revenue, certain service fees and other revenue and processed revenue from customers.

Previous: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK