Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


Three Months Ended March 31 (Millions, except per share amounts)	2023		2022
Revenues
Non-interest revenues
Discount revenue	$	7,947	$	6,835
Net card fees	1,713		1,423
Service fees and other revenue	1,218		906
Processed revenue	420		372
Total non-interest revenues	11,298		9,536
Interest income
Interest on loans	3,939		2,473
Interest and dividends on investment securities	30		13
Deposits with banks and other	447		34
Total interest income	4,416		2,520
Interest expense
Deposits	994		122
Long-term debt and other	439		199
Total interest expense	1,433		321
Net interest income	2,983		2,199
Total revenues net of interest expense	14,281		11,735
Provisions for credit losses
Card Member receivables	222		80
Card Member loans	786		(111)
Other	47		(2)
Total provisions for credit losses	1,055		(33)
Total revenues net of interest expense after provisions for credit losses	13,226		11,768
Expenses
Card Member rewards	3,766		3,111
Business development	1,393		1,043
Card Member services	983		626
Marketing	1,341		1,224
Salaries and employee benefits	2,014		1,654
Other, net	1,562		1,398
Total expenses	11,059		9,056
Pretax income	2,167		2,712
Income tax provision	351		613
Net income	$	1,816	$	2,099
Earnings per Common Share (Note 14)(a)
Basic	$	2.41	$	2.73
Diluted	$	2.40	$	2.73
Average common shares outstanding for earnings per common share:
Basic	743		757
Diluted	744		758

(a)Represents net income less (i) earnings allocated to participating share awards of $14 million and $16 million for the three months ended March 31, 2023 and 2022, respectively, and (ii) dividends on preferred shares of $14 million for both the three months ended March 31, 2023 and 2022.

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
(Millions)	2023		2022
Net income	$	1,816	$	2,099
Other comprehensive income (loss):
Net unrealized debt securities gains (losses), net of tax	19		(28)
Foreign currency translation adjustments, net of hedges and tax	28		(20)
Net unrealized pension and other postretirement benefits, net of tax	57		20
Other comprehensive income (loss)	104		(28)
Comprehensive income	$	1,920	$	2,071

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Millions, except share data)	March 31, 2023		December 31, 2022
Assets
Cash and cash equivalents
Cash and due from banks (includes restricted cash of consolidated variable interest entities: 2023, $3; 2022, $5)	$	3,105	$	5,510
Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2023, $307; 2022, $318)	37,524		28,097
Short-term investment securities (includes restricted investments of consolidated variable interest entities: 2023, $54; 2022, $54)	207		307
Total cash and cash equivalents	40,836		33,914
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2023, $5,336; 2022, $5,193), less reserves for credit losses: 2023, $223; 2022, $229	57,271		57,384
Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2023, $27,098; 2022, $28,461), less reserves for credit losses: 2023, $4,053; 2022, $3,747	104,997		104,217
Other loans, less reserves for credit losses: 2023, $83; 2022, $59	5,818		5,357
Investment securities	3,964		4,578
Premises and equipment, less accumulated depreciation and amortization: 2023, $10,233; 2022, $9,850	5,204		5,215
Other assets, less reserves for credit losses: 2023, $25; 2022, $22	17,752		17,689
Total assets	$	235,842	$	228,354
Liabilities and Shareholders’ Equity
Liabilities
Customer deposits	$	120,806	$	110,239
Accounts payable	12,526		12,133
Short-term borrowings	1,724		1,348
Long-term debt (includes debt issued by consolidated variable interest entities: 2023, $11,665; 2022, $12,662)	41,138		42,573
Other liabilities	33,656		37,350
Total liabilities	$	209,850	$	203,643
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, 2023 and December 31, 2022	—		—
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 743 million shares as of March 31, 2023 and December 31, 2022	149		149
Additional paid-in capital	11,522		11,493
Retained earnings	17,427		16,279
Accumulated other comprehensive income (loss)	(3,106)		(3,210)




Total shareholders’ equity	25,992		24,711
Total liabilities and shareholders’ equity	$	235,842	$	228,354

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three Months Ended March 31 (Millions)	2023		2022
Cash Flows from Operating Activities
Net income	$	1,816	$	2,099
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provisions for credit losses	1,055		(33)
Depreciation and amortization	400		398
Stock-based compensation	140		122
Deferred taxes	(334)		(69)
Other items (a)	152		(47)
Originations of loans held-for-sale	(54)		—
Proceeds from sales of loans held-for-sale	59		—
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Other assets	(52)		323
Accounts payable & other liabilities	(3,559)		1,087
Net cash (used in) provided by operating activities	(377)		3,880
Cash Flows from Investing Activities
Sale of investment securities	—		16
Maturities and redemptions of investment securities	900		767
Purchase of investments	(277)		(2,328)
Net increase in Card Member loans and receivables, and other loans (b)	(1,603)		(785)
Purchase of premises and equipment, net of sales: 2023, $1; 2022, nil	(360)		(447)
Acquisitions/dispositions, net of cash acquired	(64)		—

Net cash used in investing activities	(1,404)		(2,777)
Cash Flows from Financing Activities
Net increase in customer deposits	10,566		6,541
Net increase (decrease) in short-term borrowings (b)	239		(59)
Proceeds from long-term debt	1,498		6,231
Payments of long-term debt	(3,003)		(6,314)


Issuance of American Express common shares	18		49
Repurchase of American Express common shares and other	(316)		(1,570)
Dividends paid	(405)		(345)
Net cash provided by financing activities	8,597		4,533
Effect of foreign currency exchange rates on cash and cash equivalents	106		14
Net increase in cash and cash equivalents	6,922		5,650
Cash and cash equivalents at beginning of period	33,914		22,028
Cash and cash equivalents at end of period	$	40,836	$	27,678










Cash and cash equivalents reconciliation	Mar-23		Dec-22		Mar-22		Dec-21
Cash and cash equivalents per Consolidated Balance Sheets	$	40,836	$	33,914	$	27,678	$	22,028
Restricted balances included in Cash and cash equivalents	549		544		2,207		525
Total Cash and cash equivalents, excluding restricted balances	$	40,287	$	33,370	$	25,471	$	21,503

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

(b)Excludes an increase of $117 million related to non-cash activity during the three months ended March 31, 2023.

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


Three months ended March 31, 2023 (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, 2022	$	24,711	$	—	$	149	$	11,493	$	(3,210)	$	16,279

Net income	1,816		—		—		—		—		1,816
Other comprehensive income	104		—		—		—		104		—
Repurchase of common shares	(195)		—		—		(17)		—		(178)
Other changes, primarily employee plans	20		—		—		46		—		(26)
Cash dividends declared preferred Series D, $8,875.00 per share	(14)		—		—		—		—		(14)
Cash dividends declared common, $0.60 per share	(450)		—		—		—		—		(450)
Balances as of March 31, 2023	$	25,992	$	—	$	149	$	11,522	$	(3,106)	$	17,427


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

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, providing 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 offered globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are offered 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, 2022 (the 2022 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.

Recently Issued and Adopted Accounting Standards

Effective January 1, 2023, we adopted new accounting guidance on troubled debt restructurings (TDR) and vintage disclosures (Update 2022-02) on a prospective basis. The new guidance eliminated the existing TDR guidance for those entities that have adopted Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, created a single loan modification accounting model and enhanced disclosure requirements for loan modifications and write-offs. The implementation did not have a material impact on our Consolidated Financial Statements, and we do not expect it to have a material impact to our Consolidated Financial Statements prospectively. Refer to Note 2 for further information, including the enhanced disclosures.

In March 2023, the Financial Accounting Standards Board issued updated accounting guidance to allow the proportional amortization method (PAM) to be applied to tax credit structures beyond low-income housing tax credit (LIHTC) investments. Having implemented PAM in relation to LIHTC investments in January 2021, we are currently evaluating the updated guidance with respect to other qualifying investments, which we do not expect to have a material impact to our Consolidated Financial Statements if adopted.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Loans and Card Member Receivables

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

Card Member and Other loans as of March 31, 2023 and December 31, 2022 consisted of:


(Millions)	2023		2022
Consumer (a)	$	84,248	$	84,964
Small Business	24,717		22,947
Corporate	85		53
Card Member loans	109,050		107,964
Less: Reserves for credit losses	4,053		3,747
Card Member loans, net	$	104,997	$	104,217
Other loans, net (b)	$	5,818	$	5,357

(a)Includes approximately $27.1 billion and $28.5 billion of gross Card Member loans available to settle obligations of a consolidated variable interest entity (VIE) as of March 31, 2023 and December 31, 2022, respectively.

(b)Other loans are presented net of reserves for credit losses of $83 million and $59 million as of March 31, 2023 and December 31, 2022, respectively.

Card Member receivables as of March 31, 2023 and December 31, 2022 consisted of:


(Millions)	2023		2022
Consumer	$	21,725	$	22,885
Small Business	19,546		19,629
Corporate (a)	16,223		15,099
Card Member receivables	57,494		57,613
Less: Reserves for credit losses	223		229
Card Member receivables, net	$	57,271	$	57,384

(a)Includes $5.3 billion and $5.2 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of March 31, 2023 and December 31, 2022, 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, 2023 and December 31, 2022:


2023 (Millions)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total		90+ Days Past Due and Still Accruing Interest (c)		Non-Accruals(d)
Card Member Loans:
Consumer	$	83,292	$	287	$	206	$	463	$	84,248	$	354	$	187
Small Business	24,445		93		63		116		24,717		86		52
Corporate (a)	(b)		(b)		(b)		—		85		—		—
Card Member Receivables:
Consumer	21,482		76		51		116		21,725		—		—
Small Business	$	19,222	$	121	$	75	128		19,546		—		—
Corporate (a)	(b)		(b)		(b)		$	73	$	16,223	$	—	$	—


2022 (Millions)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
Consumer	$	84,102	$	281	$	198	$	383	$	84,964
Small Business	22,731		81		49		86		22,947
Corporate (a)	(b)		(b)		(b)		—		53
Card Member Receivables:
Consumer	22,634		83		56		112		22,885
Small Business	$	19,330	$	120	$	69	110		19,629
Corporate (a)	(b)		(b)		(b)		$	85	$	15,099

(a)For 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.

(c)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.

(d)Non-accrual loans primarily include certain loans placed with outside collection agencies for which we have ceased accruing interest.

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:


		2023									2022
	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:
Consumer		1.5	%		1.9	%		1.1	%		0.8	%		1.1	%		0.8	%
Small Business		1.2	%		1.4	%		1.1	%		0.6	%		0.7	%		0.6	%
Card Member Receivables:
Consumer		1.7	%		1.8	%		1.1	%		0.5	%		0.5	%		0.7	%
Small Business		2.1	%		2.3	%		1.7	%		0.7	%		0.8	%		0.9	%
Corporate		(b)			0.6	%		(c)			(b)			0.2	%		(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 corporate 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 0.5% and 0.3% as of March 31, 2023 and 2022, respectively.

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

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Loans and Receivables Restructurings for Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, we prospectively adopted Accounting Standards Update 2022-02 guidance that eliminated the recognition and measurement of TDRs. Following the adoption of this guidance, we evaluate all loans and receivables restructurings according to the accounting guidance for loan refinancing and restructuring to determine whether such loan modification should be accounted for as a new loan or a continuation of the existing loan. Our loans and receivables restructurings for borrowers experiencing financial difficulty are generally accounted for as a continuation of the existing loan, which reflects the ongoing effort to support our customer and recover our investment in the existing loan.

We offer several types of loans and receivables modification programs to customers experiencing financial difficulty. In such instances, we may modify loans and receivables with the intention to minimize losses and improve collectability, while providing customers with temporary or permanent financial relief.

Such modifications to the loans and receivables primarily include (i) temporary interest rate reductions (reducing interest rates to as low as zero percent, in which case the loan is characterized as non-accrual), and/or (ii) placing the customer on a fixed payment plan not to exceed 60 months. Upon entering the modification program, the customer’s ability to make future purchases is limited, canceled or, in certain cases, suspended until the customer successfully exits from the modification program. As of March 31, 2023, we had $14 million of unused credit available to customers with loans modified during the three months ended March 31, 2023. In accordance with the modification agreement with the customer, loans and/or receivables may revert to the original contractual terms (including the contractual interest rate where applicable) when the customer exits the modification program, which is either (i) when all payments have been made in accordance with the modification agreement or (ii) when the customer defaults out of the modification program.

The following table provides information relating to loans and receivables modifications for borrowers experiencing financial difficulty during the three months ended March 31, 2023:


	Three Months Ended March 31, 2023
	Account Balances (Millions) (a)		% of Total Class of Financing Receivables		Weighted Average Interest Rate Reduction (% points)		Average Payment Term Extensions (# of months)
Interest Rate Reduction
Card Member Loans
Consumer	$	329	0.4	%	15.3	%	(b)
Small Business	144		0.6	%	15.1	%	(b)
Corporate	—		—		—		(b)
Term Extension
Card Member Receivables
Consumer	117		0.5	%	(c)		23
Small Business	199		1.0	%	(c)		24
Corporate	7		0.04	%	(c)		10
Other Loans	6		0.1	%	—		18
Interest Rate Reduction and Term Extension
Other Loans	5		0.1	%	1.9	%	18
Total	$	807

(a)Represents the outstanding balances as of March 31, 2023, of all modifications undertaken on or after January 1, 2023 for loans that remain in modification programs as of, or that defaulted on or before, March 31, 2023. The outstanding balances include 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.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A customer can miss up to three payments before being considered in default, depending on the terms of the modification program. For loans and receivables modified on or after January 1, 2023, the amount of defaulted balances was immaterial for the three months ended March 31, 2023.

The following table provides information relating to the performance of loans and receivables that were modified on or after January 1, 2023.


	As of March 31, 2023
Account Balances (Millions) (a)	Current		30-89 Days Past Due		90+ Days Past Due
Card Member Loans
Consumer	$	273	$	43	$	13
Small Business	119		20		5
Corporate	—		—		—
Card Member Receivables:
Consumer	100		14		3
Small Business	157		36		6
Corporate	7		—		—
Other Loans	11		—		—
Total	$	667	$	113	$	27

(a)Represents the outstanding balances as of March 31, 2023 of all modifications undertaken on or after January 1, 2023 for loans that remain in modification programs as of, or that defaulted on or before, March 31, 2023.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Troubled Debt Restructuring Disclosures Prior to Our Adoption of ASU 2022-02

Prior to our adoption of ASU 2022-02, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. Loans that were classified as a TDR prior to the adoption of ASU 2022-02 will continue to be accounted for under the historical TDR accounting until the loan is entirely paid off or written off.

The following table provides additional information with respect to our impaired loans and receivables as of December 31, 2022:


	As of December 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
Consumer	$	252	$	155	$	781	$	1,098	$	2,286	$	335
Small Business	54		34		267		380		735		108
Corporate	—		—		—		—		—		—
Card Member Receivables
Consumer	—		—		257		179		436		20
Small Business	—		—		403		402		805		40
Corporate	—		—		6		7		13		1
Other Loans	3		2		19		2		26		—
Total	$	309	$	191	$	1,733	$	2,068	$	4,301	$	504

(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 $48 million that were over 90 days past due and accruing interest as of December 31, 2022 and $17 million that were non-accruals as of December 31, 2022.

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

(e)Out of Program TDRs include $1,922 million of accounts that have successfully completed a modification program and $146 million of accounts that were not in compliance with the terms of the modification programs as of December 31, 2022.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Loans and Receivables modified as TDRs Prior to Our Adoption of ASU 2022-02

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


	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	1	1		2	15
Total	34	$	349

(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.

Loans and Receivables Modified and Subsequently Defaulted Prior to Our Adoption of ASU 2022-02

The following table provides 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	—	—
Total	5	$	39

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

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. This history includes the performance of loans and receivables modifications for borrowers experiencing financial difficulty, including their subsequent defaults.

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 assigns probability weights to each scenario, generally with a consistent initial distribution. At times, due to macroeconomic uncertainty and volatility, management may apply judgment and assign different probability weights to 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, 2023	December 31, 2022	March 31, 2023	December 31, 2022
First quarter of 2023	3%	3% - 6%	(0.4)%	5% - (1)%
Fourth quarter of 2023	3% - 7%	3% - 8%	4% - (3)%	6% - 0.2%
Fourth quarter of 2024	3% - 7%	3% - 7%	3% - 2%	3% - 2%
Fourth quarter of 2025	3% - 6%	3% - 6%	3%	4% - 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 increased for the three months ended March 31, 2023, driven by higher delinquencies and an increase in loans outstanding.

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.

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)	2023		2022
Beginning Balance	$	3,747	$	3,305
Provisions (a)	786		(111)
Net write-offs (b)
Principal	(397)		(165)
Interest and fees	(89)		(50)
Other (c)	6		2
Ending Balance	$	4,053	$	2,981

(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 $128 million and $144 million for the three months ended March 31, 2023 and 2022, respectively. Recoveries of interest and fees were not significant.

(c)Primarily includes foreign currency translation adjustments of $6 million and $2 million for the three months ended March 31, 2023 and 2022, 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 decreased for the three months ended March 31, 2023, primarily driven by a sequential decrease in receivables outstanding, partially offset by higher delinquencies.

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

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)	2023		2022
Beginning Balance	$	229	$	64
Provisions (a)	222		80
Net write-offs (b)	(230)		(67)
Other (c)	2		(1)
Ending Balance	$	223	$	76

(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 $69 million and $67 million for the three months ended March 31, 2023 and 2022, respectively.

(c)Primarily includes foreign currency translation adjustments of $2 million and nil for the three months ended March 31, 2023 and 2022, 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 $12 million as of both March 31, 2023 and December 31, 2022 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, 2023 and December 31, 2022:


	2023								2022
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	$	63	$	—	$	(8)	$	55	$	64	$	—	$	(10)	$	54
U.S. Government agency obligations	4		—		—		4		5		—		—		5
U.S. Government treasury obligations	3,180		—		(50)		3,130		3,859		—		(73)		3,786
Mortgage-backed securities (a)	13		—		—		13		13		—		—		13
Foreign government bonds and obligations	669		—		(1)		668		633		—		(1)		632
Other (b)	52		—		—		52		47		—		—		47
Equity securities (c)	50		—		(8)		42		50		—		(9)		41
Total	$	4,031	$	—	$	(67)	$	3,964	$	4,671	$	—	$	(93)	$	4,578

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

(b)Represents investments in 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, 2023 and December 31, 2022:


	2023								2022
	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	$	—	$	—	$	31	$	(8)	$	52	$	(10)	$	—	$	—
U.S. Government treasury obligations	982		(13)		2,122		(37)		3,710		(72)		52		(1)
Foreign government bonds and obligations	521		(1)		—		—		549		(1)		—		—
Total	$	1,503	$	(14)	$	2,153	$	(45)	$	4,311	$	(83)	$	52	$	(1)

The gross unrealized losses on our available-for-sale debt securities are primarily attributable to an increase in the current benchmark interest rate. 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. We concluded that there was no credit loss attributable to the securities in an unrealized loss position for the periods presented.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes the gross unrealized losses for available-for-sale debt securities by ratio of fair value to amortized cost as of March 31, 2023 and December 31, 2022:


	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
2023:
90–100%	61	$	1,503	$	(14)	19	$	2,137	$	(39)	80	$	3,640	$	(53)
Less than 90%	—	$	—	$	—	3	$	16	$	(6)	3	$	16	$	(6)
Total as of March 31, 2023	61	$	1,503	$	(14)	22	$	2,153	$	(45)	83	$	3,656	$	(59)
2022:
90–100%	74	$	4,287	$	(74)	3	$	52	$	(1)	77	$	4,339	$	(75)
Less than 90%	14	$	24	$	(9)	—	$	—	$	—	14	$	24	$	(9)
Total as of December 31, 2022	88	$	4,311	$	(83)	3	$	52	$	(1)	91	$	4,363	$	(84)

Contractual maturities for available-for-sale debt securities with stated maturities as of March 31, 2023 were as follows:


(Millions)	Cost		Estimated Fair Value
Due within 1 year	$	2,727	$	2,694
Due after 1 year but within 5 years	1,155		1,137
Due after 5 years but within 10 years	41		41
Due after 10 years	58		50
Total	$	3,981	$	3,922

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. Our ownership of variable interests for the Lending Trust was $15.6 billion and $16.0 billion as of March 31, 2023 and December 31, 2022, respectively, and for the Charge Trust was $5.3 billion and $5.2 billion as of March 31, 2023 and December 31, 2022, respectively. 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 was $57 million and $59 million as of March 31, 2023 and December 31, 2022, respectively, and for the Charge Trust was nil as of both March 31, 2023 and December 31, 2022. 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, 2023 and the year ended December 31, 2022, no such triggering events occurred.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Customer Deposits

As of March 31, 2023 and December 31, 2022, customer deposits were categorized as interest-bearing or non-interest-bearing as follows:


(Millions)	2023		2022
U.S.:
Interest-bearing	$	119,832	$	109,119
Non-interest-bearing (includes Card Member credit balances of: 2023, $472; 2022, $605)	522		663
Non-U.S.:
Interest-bearing	15		15
Non-interest-bearing (includes Card Member credit balances of: 2023, $434; 2022, $439)	437		442
Total customer deposits	$	120,806	$	110,239

Customer deposits by deposit type as of March 31, 2023 and December 31, 2022 were as follows:


(Millions)	2023		2022
Savings and transaction accounts	$	84,200	$	76,731
Certificates of deposit:
Direct	4,102		2,765
Third-party (brokered)	15,736		13,331
Sweep accounts – Third-party (brokered)	15,799		16,297
Other deposits	63		71
Card Member credit balances	906		1,044
Total customer deposits	$	120,806	$	110,239

The scheduled maturities of certificates of deposit as of March 31, 2023 were as follows:


(Millions)						2023						2024						2025						2026						2027						After 5 Years						Total
Certificates of deposit						$	5,550					$	8,934					$	3,610					$	554					$	782					$	408					$	19,838

As of March 31, 2023 and December 31, 2022, certificates of deposit in denominations of $250,000 or more, in the aggregate, were as follows:


(Millions)	2023		2022
U.S.	$	1,432	$	998
Non-U.S.	—		1
Total	$	1,432	$	999

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. In May 2022, the tribunal further clarified the 2021 partial award and the discount rate that should apply to transactions through non-physical channels. A final award is expected in 2023.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In May 2020, we began responding to a review by the Office of the Comptroller of the Currency (OCC) and the Department of Justice (DOJ) Civil Division regarding historical sales practices relating to sales to small business customers in the United States. In January 2021, we received a grand jury subpoena from the United States Attorney’s Office for the Eastern District of New York (EDNY) regarding these sales practices issues, as well as a Civil Investigative Demand from the Consumer Financial Protection Bureau (CFPB) pertaining to its investigation into sales practices related to consumers. In January 2023, the CFPB notified us that its investigation was completed and that it does not intend to recommend an enforcement action be taken against us at this time. The OCC, DOJ and EDNY reviews and investigations are ongoing and we have been made aware of a related investigation by the New York Department of Financial Services. We are cooperating with all inquiries. Any negotiated resolution or litigated proceedings arising from these matters could result in fines or other remedial actions.

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 $320 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, 2023 and December 31, 2022 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 relevant 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, 2023, 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, 2023 and December 31, 2022, 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, 2023 and December 31, 2022:


	Other Assets Fair Value				Other Liabilities Fair Value
(Millions)	2023		2022		2023		2022
Derivatives designated as hedging instruments:
Fair value hedges - Interest rate contracts (a)	$	—	$	—	$	163	$	211
Net investment hedges - Foreign exchange contracts	145		350		218		251
Total derivatives designated as hedging instruments	145		350		381		462
Derivatives not designated as hedging instruments:
Foreign exchange contracts and other	162		171		179		339

Total derivatives, gross	307		521		560		801
Derivative asset and derivative liability netting (b)	(179)		(257)		(179)		(257)
Cash collateral netting (c)	—		(11)		(170)		(212)
Total derivatives, net	$	128	$	253	$	211	$	332

(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 $8 million as of both March 31, 2023 and December 31, 2022, 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 $6.5 billion and $8.1 billion of fixed-rate debt obligations designated in fair value hedging relationships as of March 31, 2023 and December 31, 2022, 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)	2023		2022
Fixed-rate long-term debt	$	(53)	$	258
Derivatives designated as hedging instruments	53		(261)
Total	$	—	$	(3)

The carrying values of the hedged liabilities, recorded within Long-term debt on the Consolidated Balance Sheets, were $6.3 billion and $7.8 billion as of March 31, 2023 and December 31, 2022, respectively, including the cumulative amount of fair value hedging adjustments of $(183) million and $(236) million for the respective periods.

We recognized in Interest expense on Long-term debt a net increase of $39 million and a net decrease of $57 million for the three months ended March 31, 2023 and 2022, 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 $12.6 billion and $12.5 billion of foreign currency derivatives designated as net investment hedges as of March 31, 2023 and December 31, 2022, 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 $198 million and $85 million for the three months ended March 31, 2023 and 2022, 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, 2023 and 2022.

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 $21.9 billion and $21.7 billion as of March 31, 2023 and December 31, 2022, respectively. The changes in the fair value of the derivatives and the related underlying foreign currency exposures resulted in a net gain of $5 million and a net loss of $12 million for the three months ended March 31, 2023 and 2022, respectively, that are recognized in Other, net expenses in the Consolidated Statements of Income.

We recorded an embedded derivative in the second quarter of 2022, related to seller earnout shares granted to us upon the completion of a business combination between our equity method investee, American Express Global Business Travel, and Apollo Strategic Growth Capital. This embedded derivative had a notional amount of $78 million as of both March 31, 2023 and December 31, 2022. The changes in the fair value of the embedded derivative resulted in losses of $4 million for the three months ended March 31, 2023, which were recognized in Service fees and other revenue 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, 2023 and December 31, 2022:


	2023								2022
(Millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Investment securities: (a)
Equity securities	$	42	$	41	$	1	$	—	$	41	$	40	$	1	$	—
Debt securities	3,922		—		3,870		52		4,537		—		4,490		47
Derivatives, gross (a)(b)	307		—		284		23		521		—		494		27
Total Assets	4,271		41		4,155		75		5,099		40		4,985		74
Liabilities:
Derivatives, gross (a)	560		—		560		—		801		—		801		—
Total Liabilities	$	560	$	—	$	560	$	—	$	801	$	—	$	801	$	—

(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.

(b)Level 3 fair value reflects an embedded derivative. Management reviews and applies judgment to the valuation of the embedded derivative that is performed by an independent third party using a Monte Carlo simulation that models a range of probable future stock prices based on implied volatility in a risk neutral framework. Refer to Note 8 for additional information about this embedded derivative.

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, 2023 and December 31, 2022. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of March 31, 2023 and December 31, 2022, 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
2023 (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)	$	41		$	41		$	39		$	2		$	—
Other financial assets (b)	60			60			—			60			—
Financial assets carried at other than fair value
Card Member and Other loans, less reserves (c)	111			115			—			—			115

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value	127			127			—			127			—
Financial liabilities carried at other than fair value
Certificates of deposit (d)	20			20			—			20			—
Long-term debt (c)	$	41		$	41		$	—		$	41		$	—


	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)	$	34		$	34		$	32		$	2		$	—
Other financial assets (b)	60			60			—			60			—
Financial assets carried at other than fair value
Card Member and Other loans, less reserves (c)	110			113			—			—			113

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value	123			123			—			123			—
Financial liabilities carried at other than fair value
Certificates of deposit (d)	16			16			—			16			—
Long-term debt (c)	$	43		$	42		$	—		$	42		$	—

(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 $5.3 billion and $5.2 billion held by a consolidated VIE as of March 31, 2023 and December 31, 2022, 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 $27.1 billion and $28.4 billion as of March 31, 2023 and December 31, 2022, respectively, and the fair values of Long-term debt were $11.4 billion and $12.3 billion as of March 31, 2023 and December 31, 2022, 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.

We estimate the Level 3 fair value of equity investments without readily determinable fair values, which include investments in our Amex Ventures portfolio, based on price changes as of the date of new similar equity financing transactions completed by the companies in the portfolio. In addition, impairments on such investments are recorded to account for the difference between the estimated fair value and carrying value of an investment based on a qualitative assessment of impairment indicators such as business performance, general market conditions and the economic and regulatory environment. When an impairment triggering event occurs, the fair value measurement is generally derived by taking into account all available information, such as share prices of publicly traded peer companies, internal valuations performed by our investees, and other third-party fair value data. The fair value of impaired investments represents a Level 3 fair value measurement.

The carrying value of equity investments without readily determinable fair values totaled $0.9 billion and $1.0 billion as of March 31, 2023 and December 31, 2022, respectively, of which approximately $0.2 billion and $0.6 billion as of March 31, 2023 and December 31, 2022, respectively, represented a nonrecurring Level 3 fair value measurement for certain of our equity investments. These amounts are included within Other assets on the Consolidated Balance Sheets.

We recorded unrealized gains of nil and $12 million for the three months ended March 31, 2023 and 2022, respectively. Unrealized losses representing impairments were $95 million and $18 million for the three months ended March 31, 2023 and 2022, respectively. Unrealized gains and losses are recorded in Other, net on the Consolidated Statements of Income. 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 $1.2 billion as of both March 31, 2023 and December 31, 2022, and cumulative unrealized losses representing impairments were $489 million and $394 million as of March 31, 2023 and December 31, 2022, 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, 2023 and December 31, 2022.

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 $21 million, respectively, as of both March 31, 2023 and December 31, 2022, all of which were primarily related to our real estate arrangements 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, 2023 and 2022 were as follows:


Three Months Ended March 31, 2023 (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, 2022	$	(64)	$	(2,622)	$	(524)	$	(3,210)




Net change	19		28		57		104
Balances as of March 31, 2023	$	(45)	$	(2,594)	$	(467)	$	(3,106)


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)

(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)	2023		2022
Net unrealized gains (losses) on debt securities	$	6	$	(9)
Foreign currency translation adjustment, net of hedges	(45)		(30)

Pension and other postretirement benefits	5		7
Total tax impact	$	(34)	$	(32)

Reclassifications out of AOCI into the Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 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)	2023		2022
Service fees	$	366	$	349
Foreign currency-related revenue	338		225
Delinquency fees	233		179
Travel commissions and fees	135		88
Other fees and revenues	146		65
Total Service fees and other revenue	$	1,218	$	906

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


	Three Months Ended March 31,
(Millions)	2023		2022
Data processing and equipment	$	660	$	600
Professional services	440		472
Net unrealized and realized losses on Amex Ventures investments (a)	95		11
Other	367		315
Total Other expenses	$	1,562	$	1,398

(a)Refer to Note 9 for further information regarding Amex Ventures investments accounted for as equity investments without readily determinable fair values.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. Income Taxes

The effective tax rate was 16.2 percent and 22.6 percent for the three months ended March 31, 2023 and 2022, respectively. The decrease in the effective tax rate primarily reflected discrete tax benefits in the current period related to the resolution of certain prior-year tax items.

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 $112 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 $112 million of unrecognized tax benefits, approximately $88 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)	2023		2022
Numerator:
Basic and diluted:
Net income	$	1,816	$	2,099
Preferred dividends	(14)		(14)

Net income available to common shareholders	$	1,802	$	2,085
Earnings allocated to participating share awards (a)	(14)		(16)
Net income attributable to common shareholders	$	1,788	$	2,069
Denominator:(a)
Basic: Weighted-average common stock	743		757
Add: Weighted-average stock options (b)	1		1
Diluted	744		758

Basic EPS	$	2.41	$	2.73
Diluted EPS	$	2.40	$	2.73

(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 1.3 million and 0.1 million of options for the three months ended March 31, 2023 and 2022, respectively, because inclusion of the options would have been anti-dilutive.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

15. Reportable Operating Segments

As disclosed in the 2022 Form 10-K, we realigned our reportable operating segments to reflect organizational changes effective for the third quarter of 2022. Prior periods have been recast to conform to the new reportable operating segments.

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, 2023 (Millions, except where indicated)	USCS		CS		ICS		GMNS		Corporate & Other (a)		Consolidated
Total non-interest revenues	$	4,359	$	3,107	$	2,267	$	1,596	$	(31)	$	11,298
Revenue from contracts with customers (b)	3,239		2,731		1,441		1,448		(13)		8,846
Interest income	2,775		706		467		14		454		4,416
Interest expense	551		321		224		(131)		468		1,433
Total revenues net of interest expense	6,583		3,492		2,510		1,741		(45)		14,281
Pretax income (loss)	$	1,130	$	630	$	189	$	885	$	(667)	$	2,167
Total assets (billions)	$	91	$	54	$	36	$	17	$	38	$	236


Three Months Ended March 31, 2022 (Millions, except where indicated)	USCS		CS		ICS		GMNS		Corporate & Other (a)		Consolidated
Total non-interest revenues	$	3,637	$	2,719	$	1,859	$	1,372	$	(51)	$	9,536
Revenue from contracts with customers (b)	2,742		2,421		1,199		1,274		4		7,640
Interest income	1,736		415		324		2		43		2,520
Interest expense	103		87		123		(44)		52		321
Total revenues net of interest expense	5,270		3,047		2,060		1,418		(60)		11,735
Pretax income (loss)	$	1,532	$	781	$	244	$	669	$	(514)	$	2,712
Total assets (billions)	$	77	$	47	$	32	$	16	$	24	$	196

(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.

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