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Section 1: 10-Q (FORM 10-Q OF AMERICAN EXPRESS COMPANY)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2017

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Transition Period from ____ to ____

Commission file number 1-7657

AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)

New York
 
13-4922250
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
200 Vesey Street, New York, New York
 
10285
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code                                         (212) 640-2000        

None
Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes       No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes       No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
         Large accelerated filer
                         Accelerated filer
         Non-accelerated filer (Do not check if a smaller reporting company)
                         Smaller reporting company
                         Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes       No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
   
Outstanding at October 18, 2017
Common Shares (par value $0.20 per share)
   
867,996,250 Shares
 
 

 
AMERICAN EXPRESS COMPANY
FORM 10-Q
INDEX
 
Part I.
 
Page No.
 
Item 1.
     
       
1
       
2
       
3
       
4
       
5
       
6
 
Item 2.
   
30
 
Item 3.
   
61
 
Item 4.
   
61
Part II.
   
 
Item 1.
   
64
 
Item 1A.
   
65
 
Item 2.
   
66
 
Item 5.
   
67
 
Item 6.
   
67
       
68
       
E-1
 
 



PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Three Months Ended September 30 (Millions, except per share amounts)
 
2017
   
2016
 
Revenues
           
Non-interest revenues
           
Discount revenue
 
$
4,772
   
$
4,516
 
Net card fees
   
786
     
747
 
Other fees and commissions
   
767
     
694
 
Other
   
436
     
483
 
Total non-interest revenues
   
6,761
     
6,440
 
Interest income
               
Interest on loans
   
2,129
     
1,690
 
Interest and dividends on investment securities
   
22
     
34
 
Deposits with banks and other
   
91
     
40
 
Total interest income
   
2,242
     
1,764
 
Interest expense
               
Deposits
   
213
     
150
 
Long-term debt and other
   
354
     
280
 
Total interest expense
   
567
     
430
 
Net interest income
   
1,675
     
1,334
 
Total revenues net of interest expense
   
8,436
     
7,774
 
Provisions for losses
               
Charge card
   
214
     
174
 
Card Member loans
   
531
     
319
 
Other
   
24
     
11
 
Total provisions for losses
   
769
     
504
 
Total revenues net of interest expense after provisions for losses
   
7,667
     
7,270
 
Expenses
               
Marketing and promotion
   
814
     
930
 
Card Member rewards
   
1,900
     
1,566
 
Card Member services and other
   
363
     
278
 
Salaries and employee benefits
   
1,265
     
1,263
 
Other, net
   
1,498
     
1,498
 
Total expenses
   
5,840
     
5,535
 
Pretax income
   
1,827
     
1,735
 
Income tax provision
   
471
     
593
 
Net income
 
$
1,356
   
$
1,142
 
Earnings per Common Share (Note 15): (a)
               
Basic
 
$
1.51
   
$
1.21
 
Diluted
 
$
1.50
   
$
1.20
 
Average common shares outstanding for earnings per common share:
               
Basic
   
878
     
920
 
Diluted
   
881
     
923
 
Cash dividends declared per common share
 
$
0.35
   
$
0.32
 
(a)
Represents net income less (i) earnings allocated to participating share awards of $11 million and $9 million for the three months ended September 30, 2017 and 2016, respectively, and (ii) dividends on preferred shares of $21 million for both the three months ended September 30, 2017 and 2016.


 
See Notes to Consolidated Financial Statements.
1

AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended September 30 (Millions, except per share amounts)
 
2017
   
2016
 
Revenues
           
Non-interest revenues
           
Discount revenue
 
$
14,106
   
$
13,983
 
Net card fees
   
2,305
     
2,161
 
Other fees and commissions
   
2,232
     
2,076
 
Other
   
1,284
     
1,514
 
Total non-interest revenues
   
19,927
     
19,734
 
Interest income
               
Interest on loans
   
5,936
     
5,446
 
Interest and dividends on investment securities
   
68
     
104
 
Deposits with banks and other
   
233
     
104
 
Total interest income
   
6,237
     
5,654
 
Interest expense
               
Deposits
   
538
     
450
 
Long-term debt and other
   
994
     
841
 
Total interest expense
   
1,532
     
1,291
 
Net interest income
   
4,705
     
4,363
 
Total revenues net of interest expense
   
24,632
     
24,097
 
Provisions for losses
               
Charge card
   
590
     
496
 
Card Member loans
   
1,272
     
831
 
Other
   
64
     
74
 
Total provisions for losses
   
1,926
     
1,401
 
Total revenues net of interest expense after provisions for losses
   
22,706
     
22,696
 
Expenses
               
Marketing and promotion
   
2,344
     
2,445
 
Card Member rewards
   
5,633
     
5,035
 
Card Member services and other
   
1,033
     
841
 
Salaries and employee benefits
   
3,822
     
4,052
 
Other, net
   
4,281
     
3,388
 
Total expenses
   
17,113
     
15,761
 
Pretax income
   
5,593
     
6,935
 
Income tax provision
   
1,660
     
2,352
 
Net income
 
$
3,933
   
$
4,583
 
Earnings per Common Share (Note 15): (a)
               
Basic
 
$
4.32
   
$
4.77
 
Diluted
 
$
4.30
   
$
4.76
 
Average common shares outstanding for earnings per common share:
               
Basic
   
889
     
940
 
Diluted
   
892
     
943
 
Cash dividends declared per common share
 
$
0.99
   
$
0.90
 
(a)
Represents net income less (i) earnings allocated to participating share awards of $32 million and $37 million for the nine months ended September 30, 2017 and 2016, respectively, and (ii) dividends on preferred shares of $61 million for both the nine months ended September 30, 2017 and 2016.
 
See Notes to Consolidated Financial Statements.
2



AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
(Millions)
 
2017
   
2016
   
2017
   
2016
 
Net income
 
$
1,356
   
$
1,142
   
$
3,933
   
$
4,583
 
Other comprehensive income (loss):
                               
Net unrealized securities (losses) gains, net of tax
   
(2
)
   
(15
)
   
4
     
(8
)
Foreign currency translation adjustments, net of tax
   
107
     
11
     
456
     
(115
)
Net unrealized pension and other postretirement benefits, net of tax
   
7
     
7
     
8
     
39
 
Other comprehensive income (loss)
   
112
     
3
     
468
     
(84
)
Comprehensive income
 
$
1,468
   
$
1,145
   
$
4,401
   
$
4,499
 
 
See Notes to Consolidated Financial Statements.
3

AMERICAN EXPRESS COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited) 
   
September 30,
   
December 31,
 
 (Millions, except share data)
 
2017
   
2016
 
Assets
           
Cash and cash equivalents
           
Cash and due from banks
 
$
2,820
   
$
3,278
 
Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2017, $86; 2016, $115)
   
22,059
     
20,779
 
Short-term investment securities
   
1,289
     
1,151
 
Total cash and cash equivalents
   
26,168
     
25,208
 
Accounts receivable
               
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2017, $7,825; 2016, $8,874), less reserves: 2017, $512; 2016, $467
   
51,002
     
46,841
 
Other receivables, less reserves: 2017, $32; 2016, $45
   
2,701
     
3,232
 
Loans
               
Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2017, $24,249; 2016, $26,129), less reserves: 2017, $1,502; 2016, $1,223
   
66,376
     
64,042
 
Other loans, less reserves: 2017, $64; 2016, $42
   
2,268
     
1,419
 
Investment securities
   
3,250
     
3,157
 
Premises and equipment, less accumulated depreciation and amortization: 2017, $5,797; 2016, $5,145
   
4,367
     
4,433
 
Other assets (includes restricted cash of consolidated variable interest entities: 2017, $1,816; 2016, $38)
   
12,445
     
10,561
 
Total assets
 
$
168,577
   
$
158,893
 
Liabilities and Shareholders’ Equity
               
Liabilities
               
Customer deposits
 
$
61,290
   
$
53,042
 
Travelers Cheques and other prepaid products
   
2,366
     
2,812
 
Accounts payable
   
12,240
     
11,190
 
Short-term borrowings
   
2,352
     
5,581
 
Long-term debt (includes debt issued by consolidated variable interest entities: 2017, $15,026; 2016, $15,113)
   
48,762
     
46,990
 
Other liabilities
   
20,482
     
18,777
 
Total liabilities
   
147,492
     
138,392
 
Contingencies (Note 8)
               
Shareholders’ Equity
               
Preferred shares, $1.662/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares as of September 30, 2017 and December 31, 2016
   
     
 
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 871 million shares as of September 30, 2017 and 904 million shares as of December 31, 2016
   
175
     
181
 
Additional paid-in capital
   
12,318
     
12,733
 
Retained earnings
   
10,908
     
10,371
 
Accumulated other comprehensive loss
               
Net unrealized securities gains, net of tax of: 2017, $7; 2016, $5
   
11
     
7
 
Foreign currency translation adjustments, net of tax of: 2017, $(486); 2016, $24
   
(1,806
)
   
(2,262
)
Net unrealized pension and other postretirement benefits, net of tax of: 2017, $(196); 2016, $(186)
   
(521
)
   
(529
)
Total accumulated other comprehensive loss
   
(2,316
)
   
(2,784
)
Total shareholders’ equity
   
21,085
     
20,501
 
Total liabilities and shareholders’ equity
 
$
168,577
   
$
158,893
 
 
See Notes to Consolidated Financial Statements.
4

AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30 (Millions)
 
2017
   
2016
 
Cash Flows from Operating Activities
           
Net income
 
$
3,933
   
$
4,583
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Provisions for losses
   
1,926
     
1,401
 
Depreciation and amortization
   
953
     
810
 
Deferred taxes and other
   
(61
)
   
(1,076
)
Stock-based compensation
   
212
     
190
 
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
               
Other receivables
   
1,043
     
485
 
Other assets
   
(137
)
   
115
 
Accounts payable and other liabilities
   
1,197
     
(963
)
Travelers Cheques and other prepaid products
   
(485
)
   
(594
)
Net cash provided by operating activities
   
8,581
     
4,951
 
Cash Flows from Investing Activities
               
Sales of available-for-sale investment securities
   
1
     
51
 
Maturities and redemptions of available-for-sale investment securities
   
2,198
     
1,209
 
Purchases of investments
   
(2,339
)
   
(1,355
)
Net (increase) decrease in Card Member receivables and loans, including held for sale(a)
   
(7,535
)
   
11,818
 
Purchase of premises and equipment, net of sales: 2017, $1; 2016, $2
   
(812
)
   
(975
)
Acquisitions/dispositions, net of cash acquired
   
(210
)
   
(191
)
Net increase in restricted cash
   
(1,773
)
   
(427
)
Net cash (used in) provided by investing activities
   
(10,470
)
   
10,130
 
Cash Flows from Financing Activities
               
Net increase (decrease)  in customer deposits
   
8,219
     
(1,499
)
Net decrease in short-term borrowings
   
(3,232
)
   
(2,040
)
Issuance of long-term debt
   
19,875
     
5,926
 
Principal payments on long-term debt
   
(18,349
)
   
(9,349
)
Issuance of American Express common shares
   
82
     
78
 
Repurchase of American Express common shares
   
(3,087
)
   
(3,542
)
Dividends paid
   
(925
)
   
(892
)
Net cash provided by (used in) financing activities
   
2,583
     
(11,318
)
Effect of foreign currency exchange rates on cash and cash equivalents
   
266
     
(5
)
Net increase in cash and cash equivalents
   
960
     
3,758
 
Cash and cash equivalents at beginning of period
   
25,208
     
22,762
 
Cash and cash equivalents at end of period
 
$
26,168
   
$
26,520
 
(a)
Refer to Note 2 for additional information.
 
See Notes to Consolidated Financial Statements.
5

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.  Basis of Presentation

The Company

American Express Company (the Company) is a global services company that provides customers with access to products, insights and experiences that enrich lives and build business success. The Company’s principal products and services are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. Business travel-related services are offered through the non-consolidated joint venture, American Express Global Business Travel (the GBT JV). The Company’s 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 direct mail, online applications, in-house and third-party sales forces and direct response advertising.

The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the Annual Report). If not materially different, certain footnote disclosures included therein have been omitted from this Quarterly Report on Form 10-Q.

The interim consolidated financial information in this report has not been audited. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim period consolidated financial information, 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.
Certain reclassifications of prior period amounts have been made to conform to the current period presentation.


Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued new accounting guidance on revenue recognition. The accounting standard establishes the principles to apply to determine the amount and timing of revenue recognition, specifying the accounting for certain costs related to revenue, and requiring additional disclosures about the nature, amount, timing and uncertainty of revenues and related cash flows. The guidance, as amended, supersedes most of the current revenue recognition requirements, and is effective January 1, 2018.
Upon adoption of the new revenue recognition guidance, the Company will use the full retrospective method, which applies the new standard to each prior reporting period presented. The Company has made significant progress in determining the impact on its Consolidated Financial Statements and underlying operational processes. The most significant changes will be reclassifications from discount revenue to expenses related to Card Member cash-back reward costs and statement credits, as well as corporate incentive payments and net payments to third-party card issuing partners. These reclassifications will have a significant impact on the affected line items of the Consolidated Statements of Income, but will have no impact to net income. There will also be changes to the recognition timing of certain revenues; however, the impact of these changes to net income upon adoption will not be material. Similarly, upon adoption of the new standard, the impact on the Consolidated Balance Sheets and Consolidated Statements of Cash Flows will not be material. The Company is in the process of implementing changes to its accounting policies, business processes, systems and internal controls to support the recognition, measurement and disclosure requirements under the new standard.
In January 2016, the FASB issued new accounting guidance on the recognition and measurement of financial assets and financial liabilities. The guidance, which is effective January 1, 2018, makes targeted changes to current GAAP, specifically to the classification and measurement of equity securities, and to certain disclosure requirements associated with the fair value of financial instruments. In the ordinary course of business, the Company makes investments in non-public companies currently recognized under the cost method of accounting. Under the new guidance, these investments will be prospectively adjusted for observable price changes upon the identification of identical or similar transactions of the same issuer. The Company expects that adopting this guidance will have an immaterial impact on its financial position, results of operations and cash flows, as well as on its accounting policies, business processes, systems and internal controls.
 
 
AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In February 2016, the FASB issued new accounting guidance on leases. The guidance, which is effective January 1, 2019, with early adoption permitted, requires virtually all leases to be recognized on the Consolidated Balance Sheets. The Company will adopt the standard effective January 1, 2019, using the modified retrospective approach, which requires recording existing operating leases on the Consolidated Balance Sheets upon adoption and in the comparative period. The Company is in the process of upgrading its existing lease administration software for new lease accounting functionality, business processes and internal controls in preparation for the adoption. Specifically, the Company is currently reviewing its lease portfolio and is evaluating and interpreting the requirements under the guidance, including the available accounting policy elections, in order to determine the impacts to the Company’s financial position, results of operations and cash flows upon adoption.
In June 2016, the FASB issued new accounting guidance for recognition of credit losses on financial instruments, which is effective January 1, 2020, with early adoption permitted on January 1, 2019. The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (CECL) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The guidance requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. The Company does not intend to adopt the new standard early and is currently evaluating the impact the new guidance will have on its financial position, results of operations and cash flows; however, it is expected that the CECL model will alter the assumptions used in estimating credit losses on Card Member loans and receivables, among other financial instruments (e.g., investments in available-for-sale debt securities), and may result in material increases to the Company’s credit reserves as the new guidance involves earlier recognition of expected losses for the life of the assets.  The Company has established an enterprise-wide, cross-discipline governance structure to implement the new standard. The Company is currently identifying key interpretive issues, and is evaluating existing credit loss forecasting models and processes in relation to the new guidance to determine what modifications may be required.
In August 2017, the FASB issued new accounting guidance providing targeted improvements to the accounting for hedging activities, which is effective January 1, 2019, with early adoption permitted in any interim period or fiscal year before the effective date. The guidance introduces a number of amendments, several of which are optional, that are designed to simplify the application of hedge accounting, improve financial statement transparency and more closely align hedge accounting with an entity’s risk management strategies. The Company is evaluating the impact this guidance will have on its financial position, results of operations and cash flows, as well as the impact the standard will have on its accounting policies, business processes, systems and internal controls.





2.  Business Events

During the fourth quarter of 2015, it was determined the Company would sell the Card Member loans and receivables related to its cobrand partnerships with JetBlue Airways Corporation (JetBlue) and Costco Wholesale Corporation (Costco) in the United States (the HFS portfolios). As a result, the HFS portfolios were presented as held for sale (HFS) on the Consolidated Balance Sheets within Card Member loans and receivables HFS as of December 31, 2015.

During the first half of 2016, the Company completed the sales of substantially all of its outstanding Card Member loans and receivables HFS and recognized gains, as an expense reduction, in Other expenses, of $127 million and $1.1 billion during the three months ended March 31, 2016 and June 30, 2016, respectively. The impact of the sales, including the recognition of the proceeds received and the reclassification of the retained Card Member loans and receivables, is reported within the investing section of the Consolidated Statements of Cash Flows as a net decrease in Card Member receivables and loans, including HFS.

From the point of classification as HFS through the sale completion dates, the Company continued to recognize discount revenue, interest income, other revenues and expenses related to the HFS portfolios in the respective line items on the Consolidated Statements of Income, with changes in the valuation of the HFS portfolios recognized in Other expenses.
 
 

 
 
7

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 3.  Loans and Accounts Receivable

The Company’s lending and charge payment card products result in the generation of Card Member loans and Card Member receivables, respectively.

Card Member loans by segment and Other loans as of September 30, 2017 and December 31, 2016 consisted of:

(Millions)
 
2017
   
2016
 
U.S. Consumer Services(a)
 
$
49,326
   
$
48,758
 
International Consumer and Network Services
   
7,823
     
6,971
 
Global Commercial Services
   
10,729
     
9,536
 
Card Member loans
   
67,878
     
65,265
 
Less: Reserve for losses
   
1,502
     
1,223
 
Card Member loans, net
 
$
66,376
   
$
64,042
 
Other loans, net(b)
 
$
2,268
   
$
1,419
 
(a)
Includes approximately $24.2 billion and $26.1 billion of gross Card Member loans available to settle obligations of a consolidated variable interest entity (VIE) as of September 30, 2017 and December 31, 2016, respectively.
(b)
Other loans primarily represent personal and commercial financing products. Other loans are presented net of reserves for losses of $64 million and $42 million as of September 30, 2017 and December 31, 2016, respectively.

Card Member accounts receivable by segment and Other receivables as of September 30, 2017 and December 31, 2016 consisted of:

(Millions)
 
2017
   
2016
 
U.S. Consumer Services (a)
 
$
11,192
   
$
12,302
 
International Consumer and Network Services
   
6,512
     
5,966
 
Global Commercial Services
   
33,810
     
29,040
 
Card Member receivables
   
51,514
     
47,308
 
Less: Reserve for losses
   
512
     
467
 
Card Member receivables, net
 
$
51,002
   
$
46,841
 
Other receivables, net (b)
 
$
2,701
   
$
3,232
 
(a)
Includes $7.8 billion and $8.9 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of September 30, 2017 and December 31, 2016, respectively.
(b)
Other receivables primarily represent amounts related to (i) Global Network Services partner banks for items such as royalty and franchise fees, (ii) tax-related receivables, (iii) certain merchants for billed discount revenue, and (iv) loyalty coalition partners for points issued, as well as program participation and servicing fees. Other receivables are presented net of reserves for losses of $32 million and $45 million as of September 30, 2017 and December 31, 2016, respectively.
 
8

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Card Member Loans and Card Member Receivables Aging
Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing statement date. The following table presents the aging of Card Member loans and receivables as of September 30, 2017 and December 31, 2016:

2017  (Millions)
 
Current
   
30-59 Days Past Due
   
60-89 Days Past Due
   
90+ Days Past Due
   
Total
 
Card Member Loans:
                             
  U.S. Consumer Services
 
$
48,707
   
$
183
   
$
128
   
$
308
   
$
49,326
 
  International Consumer and Network Services
   
7,698
     
39
     
27
     
59
     
7,823
 
  Global Commercial Services
                                       
      Global Small Business Services
   
10,556
     
36
     
24
     
59
     
10,675
 
      Global Corporate Payments(a)
 
(b)
   
(b)
   
(b)
     
     
54
 
Card Member Receivables:
                                       
  U.S. Consumer Services
   
11,055
     
51
     
26
     
60
     
11,192
 
  International Consumer and Network Services
   
6,424
     
28
     
18
     
42
     
6,512
 
  Global Commercial Services
                                       
      Global Small Business Services
 
$
15,651
   
$
75
   
$
50
   
$
102
   
$
15,878
 
      Global Corporate Payments(a)
 
(b)
   
(b)
   
(b)
   
$
153
   
$
17,932
 
                                         
2016  (Millions)
 
Current
   
30-59 Days Past Due
   
60-89 Days Past Due
   
90+ Days Past Due
   
Total
 
Card Member Loans:
                                       
  U.S. Consumer Services
 
$
48,216
   
$
156
   
$
119
   
$
267
   
$
48,758
 
  International Consumer and Network Services
   
6,863
     
32
     
24
     
52
     
6,971
 
  Global Commercial Services
                                       
      Global Small Business Services
   
9,378
     
34
     
23
     
49
     
9,484
 
      Global Corporate Payments(a)
 
(b)
   
(b)
   
(b)
     
     
52
 
Card Member Receivables:
                                       
  U.S. Consumer Services
   
12,158
     
45
     
30
     
69
     
12,302
 
  International Consumer and Network Services
   
5,888
     
22
     
15
     
41
     
5,966
 
  Global Commercial Services
                                       
      Global Small Business Services
 
$
14,047
   
$
77
   
$
47
   
$
102
   
$
14,273
 
      Global Corporate Payments(a)
 
(b)
   
(b)
   
(b)
   
$
135
   
$
14,767
 
(a)
For Global Corporate Payments (GCP) Card Member loans and receivables in Global Commercial Services (GCS), 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 the Company initiates collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member loan and 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.

 
9

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 nine months ended September 30:
     
2017
 
2016
 
     
Net Write-Off Rate
     
Net Write-Off Rate
     
     
Principal Only(a)
 
Principal, Interest & Fees(a)
 
30+ Days Past Due as a % of Total
 
Principal Only(a)
 
Principal, Interest & Fees(a)
 
30+ Days Past Due as a % of Total
 
Card Member Loans:
                         
 
U.S. Consumer Services
 
1.7
%
2.0
%
1.3
%
1.5
%
1.8
%
1.1
%
 
International Consumer and Network Services
 
2.1
%
2.6
%
1.6
%
2.0
%
2.5
%
1.7
%
 
Global Small Business Services
 
1.6
%
1.9
%
1.1
%
1.4
%
1.7
%
1.1
%
Card Member Receivables:
                         
 
U.S. Consumer Services
 
1.3
%
1.5
%
1.2
%
1.4
%
1.6
%
1.4
%
 
International Consumer and Network Services
 
2.1
%
2.2
%
1.4
%
2.1
%
2.3
%
1.5
%
 
Global Small Business Services
 
1.6
%
1.8
%
1.4
%
1.6
%
1.8
%
1.5
%
                             
             
2017
 
2016
 
             
Net Loss Ratio as a % of Charge Volume
 
90+ Days Past Billing as a % of Receivables
 
Net Loss Ratio as a % of Charge Volume
 
90+ Days Past Billing as a % of Receivables
 
Card Member Receivables:
                 
 
 Global Corporate Payments
0.10
%
0.9
%
0.09
%
0.8
%
(a)
The Company presents a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, because the Company considers uncollectible interest and/or fees in estimating its reserves for credit losses, a net write-off rate including principal, interest and/or fees is also presented.

Impaired Card Member Loans and Receivables
Impaired Card Member loans and receivables are individual larger balance or homogeneous pools of smaller balance loans and receivables for which it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the Card Member agreement. In certain cases, these Card Member loans and receivables are included in one of the Company’s various Troubled Debt Restructuring (TDR) modification programs.

 
10

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following tables provide additional information with respect to the Company’s impaired Card Member loans and receivables. Impaired Card Member receivables are not significant for International Consumer and Network Services (ICNS) as of September 30, 2017 and December 31, 2016; therefore, this segment’s receivables are not included in the following tables.
   
As of September 30, 2017
 
                                           
               
Accounts Classified as a TDR(c)
                   
2017 (Millions)
 
Over 90 days Past Due & Accruing Interest(a)
   
Non-Accruals(b)
   
In Program(d)
   
Out of Program(e)
   
Total Impaired Balance
   
Unpaid Principal Balance
   
Allowance for TDRs
 
Card Member Loans:
                                         
U.S. Consumer Services
 
$
206
   
$
158
   
$
162
   
$
131
   
$
657
   
$
593
   
$
48
 
International Consumer and Network Services
   
59
     
     
     
     
59
     
58
     
 
Global Commercial Services
   
37
     
32
     
28
     
26
     
123
     
113
     
9
 
Card Member Receivables:
                                                       
U.S. Consumer Services
   
     
     
12
     
9
     
21
     
21
     
4
 
Global Commercial Services
   
     
     
31
     
16
     
47
     
47
     
8
 
Total
 
$
302
   
$
190
   
$
233
   
$
182
   
$
907
   
$
832
   
$
69
 

   
As of December 31, 2016
 
                                           
               
Accounts Classified as a TDR(c)
                   
2016 (Millions)
 
Over 90 days Past Due & Accruing Interest(a)
   
Non-Accruals(b)
   
In Program(d)
   
Out of Program(e)
   
Total Impaired Balance
   
Unpaid Principal Balance
   
Allowance for TDRs
 
Card Member Loans:
                                         
U.S. Consumer Services
 
$
178
    $
139
    $
165
    $
129
    $
611
    $
558
    $
51
 
International Consumer and Network Services
   
52
     
     
     
     
52
     
51
     
 
Global Commercial Services
   
30
     
30
     
26
     
26
     
112
     
103
     
9
 
Card Member Receivables:
                                                       
U.S. Consumer Services
   
     
     
11
     
6
     
17
     
17
     
7
 
Global Commercial Services
   
     
     
28
     
10
     
38
     
38
     
21
 
Total
 
$
260
   
$
169
   
$
230
   
$
171
   
$
830
   
$
767
   
$
88
 
(a)
The Company’s policy is generally to accrue interest through the date of write-off (typically 180 days past due). The Company establishes reserves for interest that it believes will not be collected. Amounts presented exclude Card Member loans classified as a TDR.
(b)
Non-accrual loans not in modification programs primarily include certain Card Member loans placed with outside collection agencies for which the Company has ceased accruing interest. Amounts presented exclude Card Member loans classified as a TDR.
(c)
Accounts classified as a TDR include $15 million and $20 million that are over 90 days past due and accruing interest and $6 million and $11 million that are non-accruals as of September 30, 2017 and December 31, 2016, respectively.
(d)
In Program TDRs include Card Member accounts that are currently enrolled in a modification program.
(e)
Out of Program TDRs include $139 million and $132 million of Card Member accounts that have successfully completed a modification program and $43 million and $39 million of Card Member accounts that were not in compliance with the terms of the modification programs as of September 30, 2017 and December 31, 2016, respectively.
 

 
11

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table provides information with respect to the Company’s average balances of, and interest income recognized from, impaired Card Member loans and the average balances of impaired Card Member receivables for the three and nine months ended September 30:
 
Three Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2017
 
(Millions)
 
Average Balance
   
Interest Income Recognized
   
Average Balance
   
Interest Income Recognized
 
Card Member Loans:
                       
U.S. Consumer Services
 
$
636
   
$
17
   
$
626
   
$
49
 
International Consumer and Network Services
   
59
     
4
     
56
     
12
 
Global Commercial Services
   
122
     
5
     
119
     
13
 
Card Member Receivables:
                               
U.S. Consumer Services
   
20
     
     
19
     
 
Global Commercial Services
   
44
     
     
42
     
 
Total
 
$
881
   
$
26
   
$
862
   
$
74
 
                                 
 
Three Months Ended
September 30, 2016
 
Nine Months Ended
September 30, 2016
 
(Millions)
 
Average Balance
   
Interest Income Recognized
   
Average Balance
   
Interest Income Recognized
 
Card Member Loans:
                               
U.S. Consumer Services
 
$
587
   
$
14
   
$
555
   
$
38
 
International Consumer and Network Services
   
53
     
4
     
52
     
12
 
Global Commercial Services
   
111
     
4
     
102
     
10
 
Card Member Receivables:
                               
U.S. Consumer Services
   
13
     
     
13
     
 
Global Commercial Services
   
29
     
     
24
     
 
Total
 
$
793
   
$
22
   
$
746
   
$
60
 
 
 
AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Card Member Loans and Receivables Modified as TDRs


The following table provides additional information with respect to the U.S. Consumer Services (USCS) and GCS Card Member loans and receivables modified as TDRs for the three and nine months ended September 30, 2017 and 2016. The ICNS Card Member loans and receivables modifications were not significant; therefore, this segment is not included in the following TDR disclosures.

   
Three Months Ended
   
Nine Months Ended
 
   
September 30, 2017
   
September 30, 2017
 
   
Number of Accounts (in thousands)
 
Outstanding Balances
($ in millions)(a)
   
Average Interest Rate Reduction
(% Points)
   
Average Payment Term Extension (# of Months)
   
Number of Accounts (in thousands)
 
Outstanding Balances
($ in millions)(a)
   
Average Interest Rate Reduction (% Points)
   
Average Payment Term Extension (# of Months)
 
Troubled Debt Restructurings:
                                               
Card Member Loans
   
8
   
$
57
     
9
   
(b)
     
23
   
$
160
     
10
   
(b)
 
Card Member Receivables
   
1
     
18
   
(c)
     
31
     
4
     
64
   
(c)
     
27
 
Total
   
9
   
$
75
                     
27
   
$
224
                 
                                                                 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30, 2016
   
September 30, 2016
 
   
Number of Accounts (in thousands)
 
Outstanding Balances
($ in millions)(a)
   
Average Interest Rate Reduction
(% Points)
   
Average Payment Term Extension (# of Months)
   
Number of Accounts (in thousands)
 
Outstanding Balances
($ in millions)(a)
   
Average Interest Rate Reduction (% Points)
   
Average Payment Term Extension (# of Months)
 
Troubled Debt Restructurings:
                                                               
Card Member Loans
   
8
   
$
56
     
9
   
(b)
     
23
   
$
163
     
10
   
(b)
 
Card Member Receivables
   
2
     
29
   
(c)
     
19
     
7
     
94
   
(c)
     
17
 
Total
   
10
   
$
85
                     
30
   
$
257
                 
(a)
Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and accrued interest on Card Member loans and principal and fees on Card Member receivables.
(b)
For Card Member loans, there have been no payment term extensions.
(c)
The Company does not offer interest rate reduction programs for Card Member receivables as the receivables are non-interest bearing.

 
 
13

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table provides information with respect to the USCS and GCS Card Member loans and receivables modified as TDRs that subsequently defaulted within 12 months of modification, for the three and nine months ended September 30, 2017 and 2016. A Card Member is considered in default of a modification program after one and up to two missed payments, depending on the terms of the modification program. For all Card Members that defaulted from a modification program, the probability of default is factored into the reserves for Card Member loans and receivables.
 
Three Months Ended
 
Nine Months Ended
 
 
September 30, 2017
 
September 30, 2017
 
   
Number of Accounts
(in thousands)
 
Aggregated Outstanding Balances Upon Default
($ in millions)(a)
   
Number of Accounts
(in thousands)
 
Aggregated Outstanding Balances Upon Default
($ in millions)(a)
 
Troubled Debt Restructurings That Subsequently Defaulted:
                       
Card Member Loans
   
2
   
$
9
     
5
   
$
30
 
Card Member Receivables
   
1
     
2
     
3
     
4
 
Total
   
3
   
$
11
     
8
   
$
34
 
                                 
                                 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30, 2016
 
September 30, 2016
 
   
Number of Accounts
(in thousands)
 
Aggregated Outstanding Balances Upon Default
($ in millions)(a)
   
Number of Accounts
(in thousands)
 
Aggregated Outstanding Balances Upon Default
($ in millions)(a)
 
Troubled Debt Restructurings That Subsequently Defaulted:
                               
Card Member Loans
   
3
   
$
12
     
5
   
$
30
 
Card Member Receivables
   
1
     
1
     
3
     
3
 
Total
   
4
   
$
13
     
8
   
$
33
 
(a)
The outstanding balances upon default include principal, fees and accrued interest on Card Member loans, and principal and fees on Card Member receivables.



14

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4.  Reserves for Losses

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

Changes in Card Member Loans Reserve for Losses

The following table presents changes in the Card Member loans reserve for losses for the nine months ended September 30:

(Millions)
 
2017
   
2016
 
Balance, January 1
 
$
1,223
   
$
1,028
 
Provisions(a)
   
1,272
     
831
 
Net write-offs(b)
               
Principal
   
(856
)
   
(687
)
Interest and fees
   
(163
)
   
(128
)
Other(c)
   
26
     
70
 
Balance, September 30
 
$
1,502
   
$
1,114
 
(a)
Provisions for principal, interest and fee reserve components.
(b)
Principal write-offs are presented less recoveries of $307 million and $280 million, and include net write-offs from TDRs of $25 million and $24 million, for the nine months ended September 30, 2017 and 2016, respectively. Recoveries of interest and fees were de minimis.
(c)
Includes foreign currency translation adjustments of $14 million and $(3) million and other adjustments of $12 million and $6 million for the nine months ended September 30, 2017 and 2016, respectively. The nine months ended September 30, 2016 also includes reserves of $67 million associated with $265 million of retained Card Member loans reclassified from HFS to held for investment as a result of retaining certain loans in connection with the respective sales of JetBlue and Costco cobrand card portfolios.

Card Member Loans Evaluated Individually and Collectively for Impairment
The following table presents Card Member loans evaluated individually and collectively for impairment and related reserves as of September 30, 2017 and December 31, 2016:
(Millions)
 
2017
   
2016
 
Card Member loans evaluated individually for impairment(a)
 
$
347
   
$
346
 
Related reserves (a)
 
$
57
   
$
60
 
Card Member loans evaluated collectively for impairment(b)
 
$
67,531
   
$
64,919
 
Related reserves (b)
 
$
1,445
   
$
1,163
 
(a)
Represents loans modified as a TDR and related reserves.
(b)
Represents current loans and loans less than 90 days past due, loans over 90 days past due and accruing interest, and non-accrual loans. The reserves include the quantitative results of analytical models that are specific to individual pools of loans, and reserves for internal and external qualitative risk factors that apply to loans that are collectively evaluated for impairment.
 
 
15

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Changes in Card Member Receivables Reserve for Losses
The following table presents changes in the Card Member receivables reserve for losses for the nine months ended September 30:

(Millions)
 
2017
   
2016
 
Balance, January 1
 
$
467
   
$
462
 
Provisions(a)
   
590
     
496
 
Net write-offs(b)
   
(548
)
   
(518
)
Other(c)
   
3
     
(3
)
Balance, September 30
 
$
512
   
$
437
 
(a)
Provisions for principal and fee reserve components.
(b)
Principal and fee write-offs are presented less recoveries of $271 million and $301 million, including net write-offs from TDRs of $2 million and $16 million, for the nine months ended September 30, 2017 and 2016, respectively.
(c)
Includes foreign currency translation adjustments of $18 million and nil and other adjustments of $(15) million and $(3) million for the nine months ended September 30, 2017 and 2016, respectively.

Card Member Receivables Evaluated Individually and Collectively for Impairment
The following table presents Card Member receivables evaluated individually and collectively for impairment, and related reserves, as of September 30, 2017 and December 31, 2016:
(Millions)
 
2017
   
2016
 
Card Member receivables evaluated individually for impairment(a)
 
$
68
   
$
55
 
Related reserves (a)
 
$
12
   
$
28
 
Card Member receivables evaluated collectively for impairment
 
$
51,446
   
$
47,253
 
Related reserves (b)
 
$
500
   
$
439
 
(a)
Represents receivables modified as a TDR and related reserves.
(b)
The reserves include the quantitative results of analytical models that are specific to individual pools of receivables, and reserves for internal and external qualitative risk factors that apply to receivables that are collectively evaluated for impairment.


5.  Investment Securities

Investment securities principally include debt securities the Company classifies as available-for-sale and carries at fair value on the Consolidated Balance Sheets, with unrealized gains and losses recorded in accumulated other comprehensive income (loss) (AOCI), net of income taxes. Realized gains and losses are recognized upon disposition of the securities using the specific identification method.

The following is a summary of investment securities as of September 30, 2017 and December 31, 2016:

   
2017
   
2016
 
         
Gross
   
Gross
   
Estimated
         
Gross
   
Gross
   
Estimated
 
         
Unrealized
   
Unrealized
   
Fair
         
Unrealized
   
Unrealized
   
Fair
 
Description of Securities (Millions)
 
Cost
   
Gains
   
Losses
   
Value
   
Cost
   
Gains
   
Losses
   
Value
 
State and municipal obligations
 
$
1,412
   
$
17
   
$
(2
)
 
$
1,427
   
$
2,019
   
$
28
   
$
(11
)
 
$
2,036
 
U.S. Government agency obligations
   
12
     
     
     
12
     
12
     
     
     
12
 
U.S. Government treasury obligations
   
1,115
     
8
     
(5
)
   
1,118
     
465
     
3
     
(8
)
   
460
 
Corporate debt securities
   
28
     
     
     
28
     
19
     
     
     
19
 
Mortgage-backed securities (a)
   
74
     
2
     
     
76
     
92
     
3
     
     
95
 
Equity securities
   
1
     
     
     
1
     
1
     
     
     
1
 
Foreign government bonds and obligations
   
539
     
1
     
     
540
     
486
     
1
     
(1
)
   
486
 
Other (b)
   
50
     
     
(2
)
   
48
     
50
     
     
(2
)
   
48
 
Total
 
$
3,231
   
$
28
   
$
(9
)
 
$
3,250
   
$
3,144
   
$
35
   
$
(22
)
 
$
3,157
 
(a)
Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
(b)
Other comprises investments in various mutual funds.
 
 
16

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table provides information about the Company’s investment securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2017 and December 31, 2016:
   
2017
   
2016
 
   
Less than 12 months
   
12 months or more
   
Less than 12 months
   
12 months or more
 
         
Gross
         
Gross
         
Gross
         
Gross
 
Description of Securities (Millions)
 
Estimated Fair Value
   
Unrealized Losses
   
Estimated Fair Value
   
Unrealized Losses
   
Estimated Fair Value
   
Unrealized Losses
   
Estimated Fair Value
   
Unrealized Losses
 
State and municipal obligations
 
$
101
   
$
(2
)
 
$
   
$
   
$
153
   
$
(11
)
 
$
   
$
 
U.S. Government treasury obligations
   
366
     
(5
)
   
     
     
298
     
(8
)
   
     
 
Other
   
     
     
32
     
(2
)
   
     
     
32
     
(2
)
Total
 
$
467
   
$
(7
)
 
$
32
   
$
(2
)
 
$
451
   
$
(19
)
 
$
32
   
$
(2
)

The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to amortized cost as of September 30, 2017 and December 31, 2016:

   
Less than 12 months
   
12 months or more
   
Total
 
Ratio of Fair Value to
             
Gross
               
Gross
               
Gross
 
Amortized Cost
 
Number of
   
Estimated
   
Unrealized
   
Number of
   
Estimated
   
Unrealized
   
Number of
   
Estimated
   
Unrealized
 
(Dollars in millions)
 
Securities
   
Fair Value
   
Losses
   
Securities
   
Fair Value
   
Losses
   
Securities
   
Fair Value
   
Losses
 
2017:
                                                     
90%–100%
   
22
   
$
467
   
$
(7
)
   
6
   
$
32
   
$
(2
)
   
28
   
$
499
   
$
(9
)
Total as of September 30, 2017
   
22
   
$
467
   
$
(7
)
   
6
   
$
32
   
$
(2
)
   
28
   
$
499
   
$
(9
)
                                                                         
2016:
                                                                       
90%–100%
   
33
   
$
411
   
$
(13
)
   
6
   
$
32
   
$
(2
)
   
39
   
$
443
   
$
(15
)
Less than 90%
   
4
     
40
     
(6
)
   
     
     
     
4
     
40
     
(6
)
Total as of December 31, 2016
   
37
   
$
451
   
$
(19
)
   
6
   
$
32
   
$
(2
)
   
43
   
$
483
   
$
(21
)

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

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

Contractual maturities for investment securities with stated maturities as of September 30, 2017 were as follows:

         
Estimated
 
(Millions)
 
Cost
   
Fair Value
 
Due within 1 year
 
$
648
   
$
648
 
Due after 1 year but within 5 years
   
998
     
1,000
 
Due after 5 years but within 10 years
   
268
     
272
 
Due after 10 years
   
1,267
     
1,282
 
Total
 
$
3,181
   
$
3,202
 

The expected payments on state and municipal obligations and mortgage-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.
 
 
17

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6.  Asset Securitizations

The Company periodically securitizes Card Member loans and receivables arising from its card businesses through the transfer of those assets to securitization trusts. The trusts then issue debt securities collateralized by the transferred assets to third-party investors.

The following table provides information on the restricted cash held by the American Express Credit Account Master Trust (the Lending Trust) and the American Express Issuance Trust II (the Charge Trust, collectively the Trusts) as of September 30, 2017 and December 31, 2016, included in Other assets on the Consolidated Balance Sheets:

(Millions)
 
2017
   
2016
 
Lending Trust
 
$
1,814
   
$
35
 
Charge Trust
   
2
     
3
 
Total
 
$
1,816
   
$
38
 

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.

The Company performs the servicing and key decision making for the Trusts, and therefore has 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, the Company holds all of the variable interests in both Trusts, with the exception of the debt securities issued to third-party investors. As of September 30, 2017, the Company’s ownership of variable interests was $10.7 billion for the Lending Trust and $6.5 billion for the Charge Trust. These variable interests held by the Company provide it 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, the Company is the primary beneficiary of both Trusts and therefore consolidates both Trusts.

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 nine months ended September 30, 2017 and the year ended December 31, 2016, no such triggering events occurred.
 
 
18

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
7.  Customer Deposits

As of September 30, 2017 and December 31, 2016, customer deposits were categorized as interest bearing or non-interest bearing as follows:

(Millions)
 
2017
   
2016
 
U.S.:
           
Interest bearing
 
$
60,573
   
$
52,316
 
Non-interest bearing (includes Card Member credit balances of: 2017, $300 million; 2016, $331 million)
   
337
     
367
 
Non-U.S.:
               
Interest bearing
   
32
     
58
 
Non-interest bearing (includes Card Member credit balances of: 2017, $334 million; 2016, $285 million)
   
348
     
301
 
Total customer deposits
 
$
61,290
   
$
53,042
 

Customer deposits by deposit type as of September 30, 2017 and December 31, 2016 were as follows:

(Millions)
 
2017
   
2016
 
U.S. retail deposits:
           
Savings accounts – Direct
 
$
30,780
   
$
30,980
 
Certificates of deposit:(a)
               
Direct
   
290
     
291
 
Third-party (brokered)
   
17,229
     
11,925
 
Sweep accounts – Third-party (brokered)
   
12,274
     
9,120
 
Other deposits:
               
U.S. non-interest bearing deposits
   
37
     
36
 
Non-U.S. deposits
   
46
     
74
 
Card Member credit balances ― U.S. and non-U.S.
   
634
     
616
 
Total customer deposits
 
$
61,290
   
$
53,042
 
(a)
The weighted average remaining maturity and weighted average interest rate at issuance on the total portfolio of U.S. retail certificates of deposit issued through direct and third-party programs were 44 months and 2.10 percent, respectively, as of September 30, 2017.
The scheduled maturities of certificates of deposit as of September 30, 2017 were as follows:
(Millions)
 
U.S.
   
Non-U.S.
   
Total
 
2017
 
$
1,450
   
$
3
   
$
1,453
 
2018
   
5,160