UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

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

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.)
World Financial Center, 200 Vesey Street, New York, NY		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 þ                     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 þ                     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o                     No þ

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 31, 2011
Common Shares (par value $.20 per share)		1,161,482,367 shares

 

 

AMERICAN EXPRESS COMPANY
FORM 10-Q

INDEX

		Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income — Three Months Ended September 30, 2011 and 2010			1
Consolidated Statements of Income — Nine Months Ended September 30, 2011 and 2010			2
Consolidated Balance Sheets — September 30, 2011 and December 31, 2010			3
Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2011 and 2010			4
Notes to Consolidated Financial Statements
Note 1 — Basis of Presentation			5
Note 2 — Acquisitions			5
Note 3 — Fair Values			6
Note 4 — Accounts Receivable and Loans			10
Note 5 — Reserves for Losses			16
Note 6 — Investment Securities			18
Note 7 — Asset Securitizations			20
Note 8 — Customer Deposits			21
Note 9 — Derivatives and Hedging Activities			22
Note 10 — Guarantees			28
Note 11 — Comprehensive Income			29
Note 12 — Income Taxes			30
Note 13 — Earnings per Common Share (EPS)			31
Note 14 — Details of Certain Consolidated Statements of Income Lines			32
Note 15 — Contingencies			33
Note 16 — Reportable Operating Segments			34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Item 3. Quantitative and Qualitative Disclosures about Market Risk			78
Item 4. Controls and Procedures			78
Part II. Other Information
Item 1. Legal Proceedings			81
Item 1A. Risk Factors			89
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			90
Item 6. Exhibits			91
Signatures			92
Exhibit Index			E-1
EX-12
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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)		2011				2010
Revenues
Non-interest revenues
Discount revenue		$	4,218			$	3,761
Net card fees			556				527
Travel commissions and fees			480				483
Other commissions and fees			604				515
Other			534				503
Total non-interest revenues			6,392				5,789
Interest income
Interest and fees on loans			1,653				1,675
Interest and dividends on investment securities			68				103
Deposits with banks and other			33				16
Total interest income			1,754				1,794
Interest expense
Deposits			127				141
Short-term borrowings			5				—
Long-term debt and other			443				469
Total interest expense			575				610
Net interest income			1,179				1,184
Total revenues net of interest expense			7,571				6,973
Provisions for losses
Charge card			174				89
Cardmember loans			48				262
Other			27				22
Total provisions for losses			249				373
Total revenues net of interest expense after provisions for losses			7,322				6,600
Expenses
Marketing, promotion, rewards and cardmember services			2,511				2,275
Salaries and employee benefits			1,598				1,354
Professional services			690				701
Other, net			812				630
Total			5,611				4,960
Pretax income			1,711				1,640
Income tax provision			476				547
Net income		$	1,235			$	1,093
Earnings per Common Share (Note 13):(a)
Basic		$	1.04			$	0.91
Diluted		$	1.03			$	0.90
Average common shares outstanding for earnings per common share:
Basic			1,175				1,193
Diluted			1,181				1,199
Cash dividends declared per common share		$	0.18			$	0.18

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Nine Months Ended September 30 (Millions, except per share amounts)		2011				2010
Revenues
Non-interest revenues
Discount revenue		$	12,398			$	10,863
Net card fees			1,638				1,568
Travel commissions and fees			1,457				1,302
Other commissions and fees			1,717				1,512
Other			1,546				1,414
Total non-interest revenues			18,756				16,659
Interest income
Interest and fees on loans			4,883				5,107
Interest and dividends on investment securities			255				345
Deposits with banks and other			71				45
Total interest income			5,209				5,497
Interest expense
Deposits			395				406
Short-term borrowings			6				2
Long-term debt and other			1,344				1,410
Total interest expense			1,745				1,818
Net interest income			3,464				3,679
Total revenues net of interest expense			22,220				20,338
Provisions for losses
Charge card			533				412
Cardmember loans			104				1,490
Other			66				66
Total provisions for losses			703				1,968
Total revenues net of interest expense after provisions for losses			21,517				18,370
Expenses
Marketing, promotion, rewards and cardmember services			7,542				6,405
Salaries and employee benefits			4,715				3,996
Professional services			2,098				1,898
Other, net			1,954				1,584
Total			16,309				13,883
Pretax income from continuing operations			5,208				4,487
Income tax provision			1,501				1,492
Income from continuing operations			3,707				2,995
Income from discontinued operations, net of tax			36				—
Net income		$	3,743			$	2,995
Earnings per Common Share — Basic (Note 13):
Income from continuing operations attributable to common shareholders(a)		$	3.09			$	2.49
Income from discontinued operations			0.03				—
Net income attributable to common shareholders(a)		$	3.12			$	2.49
Earnings per Common Share — Diluted (Note 13):
Income from continuing operations attributable to common shareholders(a)		$	3.08			$	2.47
Income from discontinued operations			0.03				—
Net income attributable to common shareholders(a)		$	3.11			$	2.47
Average common shares outstanding for earnings per common share:
Basic			1,184				1,189
Diluted			1,191				1,195
Cash dividends declared per common share		$	0.54			$	0.54

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)

		September 30,				December 31,
(Millions, except per share data)		2011				2010
Assets
Cash and cash equivalents
Cash and cash due from banks		$	1,942			$	2,145
Interest-bearing deposits in other banks (including securities purchased under resale agreements: 2011, $433; 2010, $372)			22,608				13,557
Short-term investment securities			395				654
Total			24,945				16,356
Accounts receivable
Cardmember receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2011, $7,115; 2010, $8,192), less reserves: 2011, $388; 2010, $386			39,371				36,880
Other receivables, less reserves: 2011, $111; 2010, $175			3,517				3,554
Loans
Cardmember loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2011, $31,574; 2010, $34,726), less reserves: 2011, $2,139; 2010, $3,646			56,068				57,204
Other loans, less reserves: 2011, $17; 2010, $24			359				412
Investment securities			9,269				14,010
Premises and equipment — at cost, less accumulated depreciation: 2011, $4,747; 2010, $4,483			3,187				2,905
Other assets (includes restricted cash of consolidated variable interest entities: 2011, $123; 2010, $3,759)			11,977				15,368
Total assets		$	148,693			$	146,689
Liabilities and Shareholders’ Equity
Liabilities
Customer deposits		$	33,142			$	29,727
Travelers Cheques outstanding			5,055				5,618
Accounts payable			10,585				9,691
Short-term borrowings			3,649				3,414
Long-term debt (includes debt issued by consolidated variable interest entities: 2011, $17,513; 2010, $23,341)			61,767				66,416
Other liabilities			16,395				15,593
Total liabilities			130,593				130,459
Contingencies (Note 15)
Shareholders’ Equity
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 1,169 million shares as of September 30, 2011 and 1,197 million shares as of December 31, 2010			233				238
Additional paid-in capital			12,150				11,937
Retained earnings			6,520				4,972
Accumulated other comprehensive (loss) income
Net unrealized securities gains, net of tax: 2011, $156; 2010, $(19)			262				57
Net unrealized derivatives losses, net of tax: 2011, $—; 2010, $4			(1	)			(7	)
Foreign currency translation adjustments, net of tax: 2011, $459; 2010, $405			(619	)			(503	)
Net unrealized pension and other postretirement benefit losses, net of tax: 2011, $214; 2010, $226			(445	)			(464	)
Total accumulated other comprehensive loss			(803	)			(917	)
Total shareholders’ equity			18,100				16,230
Total liabilities and shareholders’ equity		$	148,693			$	146,689

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended September 30 (Millions)		2011				2010
Cash Flows from Operating Activities
Net income		$	3,743			$	2,995
Income from discontinued operations, net of tax			(36	)			—
Income from continuing operations			3,707				2,995
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Provisions for losses			703				1,968
Depreciation and amortization			733				689
Deferred taxes and other			1,045				735
Stock-based compensation			227				185
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Other receivables			46				(232	)
Other assets			(234	)			(424	)
Accounts payable and other liabilities			1,346				1,843
Travelers Cheques outstanding			(585	)			(532	)
Net cash provided by operating activities			6,988				7,227
Cash Flows from Investing Activities
Sale of investments			944				1,759
Maturity and redemption of investments			4,714				8,998
Purchase of investments			(904	)			(7,054	)
Net (increase) decrease in cardmember loans/receivables			(1,971	)			66
Purchase of premises and equipment, net of sales: 2011, $6; 2010, $6			(885	)			(586	)
Acquisitions/Dispositions, net of cash acquired			(610	)			(254	)
Net decrease in restricted cash			3,658				2,369
Net cash provided by investing activities			4,946				5,298
Cash Flows from Financing Activities
Net increase in customer deposits			3,455				2,055
Net increase (decrease) in short-term borrowings			124				(274	)
Issuance of long-term debt			9,311				3,423
Principal payments on long-term debt			(14,113	)			(12,814	)
Issuance of American Express common shares			507				375
Repurchase of American Express common shares			(1,950	)			—
Dividends paid			(646	)			(650	)
Net cash used in financing activities			(3,312	)			(7,885	)
Effect of exchange rate changes on cash			(33	)			102
Net increase in cash and cash equivalents			8,589				4,742
Cash and cash equivalents at beginning of period			16,356				16,599
Cash and cash equivalents at end of period		$	24,945			$	21,341

See Notes to Consolidated Financial Statements

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.		Basis of Presentation
		The Company
		American Express Company (the Company) is a global service 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. The Company has also recently focused on generating alternative sources of revenue on a global basis in areas such as online and mobile payments and fee-based services. 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, targeted direct and third-party sales forces and direct response advertising.
		The accompanying Consolidated Financial Statements should be read in conjunction with the financial statements incorporated by reference in the Annual Report on Form 10-K of American Express Company for the year ended December 31, 2010.
		The interim consolidated financial information in this report has not been audited. In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial position and the consolidated results of operations for the interim periods have been made. All adjustments made were of a normal, recurring nature. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.
		Beginning the first quarter of 2011, certain payments to business partners previously expensed in other, net expense were reclassified as contra-revenue within total non-interest revenues or as marketing and promotion expense. These partner payments are primarily related to certain co-brand contracts where upfront payments are amortized over the life of the contract. Amounts in prior periods for this item and certain other amounts have been reclassified to conform to the current presentation and are insignificant to the affected line items. In addition, in the first quarter of 2011, the Company reclassified $353 million, reducing both cash and cash due from banks, and other liabilities, on the December 31, 2010 Consolidated Balance Sheet from amounts previously reported to correct for the effect of a misclassification.
		Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part, on management’s assumptions concerning future events. Among the more significant assumptions are those that relate to reserves for cardmember losses relating to loans and charge card receivables, reserves for Membership Rewards costs, fair value measurement, goodwill and income taxes. These accounting estimates reflect the best judgment of management, but actual results could differ.

2.		Acquisitions
		During the first quarter of 2011, the Company completed the acquisition of a controlling interest in Loyalty Partner (March 1, 2011) for total consideration of $616 million ($585 million plus $31 million in cash acquired). In addition, the Company may acquire the remaining noncontrolling equity interest (NCI) over a three-year period beginning at the end of 2013 at a price based on business performance, which currently has an estimated fair value of $150 million. Loyalty Partner is a leading marketing services company known for the loyalty programs it operates in Germany, Poland and India. Loyalty Partner also provides market analysis, operating platforms and consulting services that help merchants grow their businesses.

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

		The Company purchased Accertify (November 10, 2010) and Revolution Money (January 15, 2010) for total consideration of $151 million and $305 million, respectively. Accertify is an online fraud solution provider, and Revolution Money, which was subsequently rebranded by the Company as Serve, is a provider of secure person-to-person payment services through an internet-based platform. These acquisitions did not have a significant impact on either the Company’s consolidated results of operations or the segments in which they are reflected for the three and nine months ended September 30, 2011 and 2010.
		The following table summarizes the assets acquired and liabilities assumed for these acquisitions as of the acquisition dates:

		Loyalty								Revolution
(Millions)		Partner (a)				Accertify				Money
Goodwill		$	538			$	131			$	184
Definite-lived intangible assets			295				15				119
All other assets			206				11				7
Total assets			1,039				157				310
Total liabilities (including NCI)			423				6				5
Net assets acquired		$	616			$	151			$	305
Reportable operating segment		ICS				GNMS				Corporate & Other

(a)		Amounts have been updated from the first and second quarters of 2011 due to adjustments to the preliminary purchase price allocation. The final purchase price allocation will be completed in a subsequent quarter.

From time to time the Company may make smaller acquisitions that are not included in the table above.

3.		Fair Values
		Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, and is based on the Company’s principal or most advantageous market for the specific asset or liability.
		U.S. generally accepted accounting principles (GAAP) provide for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:

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

	-		Quoted prices for similar assets or liabilities in active markets
	-		Quoted prices for identical or similar assets or liabilities in markets that are not active
	-		Inputs other than quoted prices that are observable for the asset or liability
	-		Inputs that are derived principally from or corroborated by observable market data by correlation or other means

•

Level 3 — Inputs that are unobservable and reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows).

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table summarizes the Company’s financial assets and financial liabilities measured at fair value on a recurring basis, categorized by GAAP’s valuation hierarchy (as described in the preceding paragraphs), as of September 30, 2011 and December 31, 2010:

		2011												2010
(Millions)		Total				Level 1				Level 2				Total				Level 1				Level 2
Assets:
Investment securities:(a)
Equity securities		$	313			$	313			$	—			$	475			$	475			$	—
Debt securities and other			8,956				—				8,956				13,535				—				13,535
Derivatives(b)			1,790				—				1,790				1,089				—				1,089
Total assets		$	11,059			$	313			$	10,746			$	15,099			$	475			$	14,624
Liabilities:
Derivatives(b)		$	221			$	—			$	221			$	419			$	—			$	419
Total liabilities		$	221			$	—			$	221			$	419			$	—			$	419

(a)		Refer to Note 6 for the fair values of investment securities on a further disaggregated basis.
(b)		Refer to Note 9 for the fair values of derivative assets and liabilities on a further disaggregated basis, as well as the netting of both (i) cash collateral received or posted under credit support agreements and (ii) derivative assets and derivative liabilities under master netting agreements. These balances have been presented gross in the table above.

The Company did not measure any financial instruments at fair value using significantly unobservable inputs (Level 3) during the nine months ended September 30, 2011 or during the year ended December 31, 2010, nor were there transfers between Level 1 and Level 2 of the valuation hierarchy during those periods.

GAAP requires disclosure of the estimated fair value of all financial instruments. A financial instrument is defined as cash, evidence of an ownership in an entity, or a contract between two entities to deliver cash or another financial instrument or to exchange other financial instruments. The disclosure requirements for the fair value of financial instruments exclude leases, equity method investments, affiliate investments, pension and benefit obligations, insurance contracts and all non-financial instruments.

Valuation Techniques Used in Measuring Fair Value

For the financial assets and liabilities measured at fair value on a recurring basis (categorized in the valuation hierarchy table above) the Company applies the following valuation techniques to measure fair value:

Investment Securities

•		When available, quoted market prices in active markets are used to determine fair value. Such investment securities are classified within Level 1 of the fair value hierarchy.
•		When quoted prices in an active market are not available, the fair values for the Company’s investment securities are obtained primarily from pricing services engaged by the Company, and the Company receives one price for each security. The fair values provided by the pricing services are estimated using pricing models, where the inputs to those models are based on observable market inputs. The inputs to the valuation techniques applied by the pricing services vary depending on the type of security being priced but are typically benchmark yields, benchmark security prices, credit spreads, prepayment speeds, reported trades and broker-dealer quotes, all with reasonable levels of transparency. The pricing services did not apply any adjustments to the pricing models used. In addition, the Company did not apply any adjustments to prices received from the pricing services. The Company classifies the prices obtained from the pricing services within Level 2 of the fair value hierarchy because the underlying inputs are directly observable from active markets or recent trades of similar securities in inactive markets. However, the pricing models used do entail a certain amount of subjectivity and therefore differing judgments in how the underlying inputs are modeled could result in different estimates of fair value.

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

		The Company reaffirms its understanding of the valuation techniques used by its pricing services at least annually. In addition, the Company corroborates the prices provided by its pricing services to test their reasonableness by comparing their prices to valuations from different pricing sources as well as comparing prices to the sale prices received from sold securities. Refer to Note 6 for additional fair value information.
		Derivative Financial Instruments
		The fair value of the Company’s derivative financial instruments, which could be presented as either assets or liabilities on the Consolidated Balance Sheets, is estimated either by third-party valuation services that use proprietary pricing models or by internal pricing models. The pricing models do not contain a high level of subjectivity as the valuation techniques used do not require significant judgment, and inputs to those models are readily observable from actively quoted markets. The pricing models used are consistently applied and reflect the contractual terms of the derivatives, including the period of maturity, and market-based parameters such as interest rates, foreign exchange rates, equity indices or prices, and volatility.
		Credit valuation adjustments are necessary when the market parameters, such as a benchmark curve, used to value derivatives are not indicative of the credit quality of the Company or its counterparties. The Company considers the counterparty credit risk by applying an observable forecasted default rate to the current exposure, which is adjusted by agreements to exchange collateral and/or net derivative assets and derivative liabilities, as applicable. Refer to Note 9 for additional fair value information.
		Financial Assets and Financial Liabilities Carried at Other Than Fair Value
		The following table discloses the estimated fair value for the Company’s financial assets and financial liabilities that are not carried at fair value, as of September 30, 2011 and December 31, 2010:

		2011								2010
		Carrying				Fair				Carrying				Fair
(Billions)		Value				Value				Value				Value
Financial Assets:
Assets for which carrying values equal or approximate fair value		$	68			$	68	(a)		$	61			$	61	(b)
Loans, net		$	56			$	57	(a)		$	58			$	58	(b)
Financial Liabilities:
Liabilities for which carrying values equal or approximate fair value		$	47			$	47			$	43			$	43
Certificates of deposit		$	10			$	11			$	13			$	13
Long-term debt		$	62			$	64	(a)		$	66			$	69	(b)

(a)		Includes fair values of cardmember receivables and loans of $7.1 billion and $30.9 billion, respectively, available to settle obligations of consolidated variable interest entities (VIEs) and long-term debt of $17.8 billion issued by consolidated VIEs as of September 30, 2011. Refer to the Consolidated Balance Sheets for the related carrying values.
(b)		Includes fair values of cardmember receivables and loans of $8.1 billion and $33.2 billion, respectively, available to settle obligations of consolidated VIEs and long-term debt of $23.6 billion issued by consolidated VIEs as of December 31, 2010. Refer to the Consolidated Balance Sheets for the related carrying values.

The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of September 30, 2011 and December 31, 2010, and require management judgment. These figures may not be indicative of their future fair values. The fair value of the Company cannot be reliably estimated by aggregating the amounts presented.

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following methods were used to determine estimated fair values:

Financial Assets for Which Carrying Values Equal or Approximate Fair Value

Financial assets for which carrying values equal or approximate fair value include cash and cash equivalents, cardmember receivables, accrued interest and certain other assets. For these assets, the carrying values approximate fair value because they are short term in duration or variable rate in nature.

Financial Assets Carried at Other Than Fair Value

Loans, net

Loans are recorded at historical cost, less reserves, on the Consolidated Balance Sheets. In estimating the fair value for the Company’s loans the principal market is assumed to be the securitization market and the Company uses the hypothetical securitization price to determine the fair value of the portfolio. The securitization price is estimated from the assumed proceeds of the hypothetical securitization in the current market, adjusted for securitization uncertainties such as market conditions and liquidity.

Financial Liabilities for Which Carrying Values Equal or Approximate Fair Value

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

Financial Liabilities Carried at Other Than Fair Value

Certificates of Deposit

Certificates of deposit (CDs) are recorded at their historical issuance cost on the Consolidated Balance Sheets. Fair value is estimated using a discounted cash flow methodology based on the Company’s current borrowing rates for similar types of CDs.

Long-term Debt

Long-term debt is recorded at historical issuance cost on the Consolidated Balance Sheets. Fair value is estimated using either quoted market prices or discounted cash flows based on the Company’s current borrowing rates for similar types of borrowings.

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4.

Accounts Receivable and Loans

		The Company’s charge and lending payment card products result in the generation of cardmember receivables (from charge payment products) and cardmember loans (from lending payment products) described below.
		Cardmember and Other Receivables
		Cardmember receivables, representing amounts due from charge payment product customers, are recorded at the time a cardmember enters into a point-of-sale transaction with a merchant. Each charge card transaction is authorized based on its likely economics reflecting a cardmember’s most recent credit information and spend patterns. Global limits are established to limit the maximum exposure for the Company from high risk and some high spend charge cardmembers, and accounts of high risk, out-of-pattern charge cardmembers can be monitored even if they are current. Charge card customers generally must pay the full amount billed each month. Cardmember receivable balances are presented on the Consolidated Balance Sheets net of reserves for losses (refer to Note 5), and include principal and any related accrued fees. Accounts receivable as of September 30, 2011 and December 31, 2010 were as follows:

(Millions)		2011				2010
U.S. Card Services(a)		$	18,957			$	19,155
International Card Services			6,746				6,673
Global Commercial Services(b)			13,866				11,259
Global Network & Merchant Services(c)			190				179
Cardmember receivables, gross(d)			39,759				37,266
Less: Cardmember receivables reserve for losses			388				386
Cardmember receivables, net		$	39,371			$	36,880
Other receivables, net(e)		$	3,517			$	3,554

(a)		Includes $6.6 billion and $7.7 billion of gross cardmember receivables available to settle obligations of a consolidated VIE as of September 30, 2011 and December 31, 2010, respectively.
(b)		Includes $0.5 billion of gross cardmember receivables available to settle obligations of a consolidated VIE as of both September 30, 2011 and December 31, 2010.
(c)		Includes receivables primarily related to the Company’s International Currency Card portfolios.
(d)		Includes approximately $12.6 billion and $11.7 billion of cardmember receivables outside the United States as of September 30, 2011 and December 31, 2010, respectively.
(e)		Other receivables primarily represent amounts for tax-related receivables, amounts due from the Company’s travel customers and suppliers, purchased joint venture receivables, amounts due from third-party issuing partners, amounts due from certain merchants for billed discount revenue, accrued interest on investments and other receivables due to the Company in the ordinary course of business.

		Cardmember and Other Loans
		Cardmember loans, representing amounts due from lending payment product customers, are recorded at the time a cardmember enters into a point-of-sale transaction with a merchant or when a charge card customer enters into an extended payment arrangement. The Company’s lending portfolios primarily include revolving loans to cardmembers obtained through either their credit card accounts or the lending on charge feature of their charge card accounts. These loans have a range of terms such as credit limits, interest rates, fees and payment structures, which can be adjusted over time based on new information about cardmembers and in accordance with applicable regulations and the respective product’s terms and conditions. Cardmembers holding revolving loans are typically required to make monthly payments greater than or equal to certain pre-established amounts. The amounts that cardmembers choose to revolve are subject to finance charges. When cardmembers fall behind their required payments, their accounts are monitored.

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

		Cardmember loans are presented on the Consolidated Balance Sheets net of reserves for losses and unamortized net card fees and include accrued interest and fees receivable. The Company’s policy generally is to cease accruing for interest receivable on a cardmember loan at the time the account is written off. The Company establishes reserves for interest that the Company believes will not be collected.
		Loans as of September 30, 2011 and December 31, 2010 consisted of:

(Millions)		2011				2010
U.S. Card Services(a)		$	49,886			$	51,565
International Card Services			8,293				9,255
Global Commercial Services			28				30
Cardmember loans, gross(b)			58,207				60,850
Less: Cardmember loans reserve for losses			2,139				3,646
Cardmember loans, net		$	56,068			$	57,204
Other loans, net(c)		$	359			$	412

(a)		Includes approximately $31.6 billion and $34.7 billion of gross cardmember loans available to settle obligations of a consolidated VIE as of September 30, 2011 and December 31, 2010, respectively.
(b)		Cardmember loan balance includes unamortized net card fees of $138 million and $134 million as of September 30, 2011 and December 31, 2010, respectively.
(c)		Other loans primarily represent small business installment loans and a store card portfolio whose billed business is not processed on the Company’s network.

		Cardmember Loans and Cardmember Receivables Aging
		Generally, a cardmember account is considered past due if payment is not received within 30 days after the billing statement date. The following table represents the aging of cardmember loans and receivables as of September 30, 2011 and December 31, 2010:

						30-59				60-89				90+
						Days				Days				Days
						Past				Past				Past
2011(Millions)		Current				Due				Due				Due				Total
Cardmember Loans:
U.S. Card Services		$	49,146			$	230			$	161			$	349			$	49,886
International Card Services			8,134				51				35				73				8,293
Cardmember Receivables:
U.S. Card Services		$	18,575			$	147			$	75			$	160			$	18,957
International Card Services(a)			(b	)			(b	)			(b	)			63				6,746
Global Commercial Services(a)			(b	)			(b	)			(b	)			98				13,866
2010 (Millions)
Cardmember Loans:
U.S. Card Services		$	50,508			$	282			$	226			$	549			$	51,565
International Card Services			9,044				66				48				97				9,255
Cardmember Receivables:
U.S. Card Services		$	18,864			$	104			$	55			$	132			$	19,155
International Card Services(a)			(b	)			(b	)			(b	)			64				6,673
Global Commercial Services(a)			(b	)			(b	)			(b	)			96				11,259

(a)		For cardmember receivables in International Card Services (ICS) and Global Commercial Services (GCS), delinquency data is tracked based on days past billing status rather than days past due. A cardmember account is considered 90 days past billing if payment has not been received within 90 days of the cardmember’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 cardmember receivable balance is considered as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes.
(b)		Historically, data for periods prior to 90 days past billing are not available due to system constraints. Therefore, it has not been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference between the Total and the 90+ Days Past Due balances.

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Credit Quality Indicators for Loans and Receivables

The following tables present the key credit quality indicators as of or for the nine months ended September 30:

		2011												2010
		Net Write-Off Rate												Net Write-Off Rate
										30 Days												30 Days
						Principal,				Past Due								Principal,				Past Due
		Principal				Interest, &				as a % of				Principal				Interest, &				as a % of
		Only		(a)		Fees		(a)		Total				Only		(a)		Fees		(a)		Total
U.S. Card Services —
Cardmember Loans			3.2	%			3.5	%			1.5	%			6.2	%			6.8	%			2.5	%
International Card Services —
Cardmember Loans			2.9	%			3.5	%			1.9	%			4.9	%			5.8	%			2.8	%
U.S. Card Services —
Cardmember Receivables			1.7	%			1.8	%			2.0	%			1.7	%			1.8	%			1.7	%

		2011								2010
		Net Loss								Net Loss
		Ratio as				90 Days				Ratio as				90 Days
		a % of				Past Billing				a % of				Past Billing
		Charge				as a % of				Charge				as a % of
		Volume				Receivables				Volume		(b)		Receivables
International Card Services — Cardmember Receivables			0.15	%			0.9	%			0.27	%			1.0	%
Global Commercial Services — Cardmember Receivables			0.06	%			0.7	%			0.13	%			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’s practice is to include uncollectible interest and/or fees as part of its total provision for losses, a net write-off rate including principal, interest and/or fees is also presented.
(b)		In the first quarter of 2010, the Company modified its reporting in the ICS and GCS segments to write-off past due cardmember receivables when 180 days past due or earlier, versus its prior methodology of writing them off when 360 days past billing or earlier. This change is consistent with bank regulatory guidance and the write-off methodology adopted for the cardmember receivables portfolio in the U.S. Card Services (USCS) segment in the fourth quarter of 2008. This change resulted in approximately $60 million and $48 million of net write-offs for ICS and GCS, respectively, being included in the first quarter of 2010, which increased the net loss ratios and decreased the 90 days past billing metrics for these segments, but did not have a substantial impact on provisions for losses.

Refer to Note 5 for other factors, including external environmental factors, that management considers as part of its evaluation process for reserves for losses.

Impaired Loans and Receivables

Impaired loans and receivables are defined by GAAP as individual larger balance or homogeneous pools of smaller balance restructured loans and receivables for which it is probable that the lender will be unable to collect all amounts due according to the original contractual terms of the loan and receivable agreement. The Company considers impaired loans and receivables to include: (i) loans over 90 days past due still accruing interest, (ii) non-accrual loans, and (iii) loans and receivables modified as troubled debt restructurings (TDRs).

The Company may modify, through various company sponsored programs, cardmember loans and receivables in instances where the cardmember is experiencing financial difficulty to minimize losses to the Company while providing cardmembers with temporary or permanent financial relief. The Company has classified cardmember loans and receivables in these modification programs as TDRs. Such modifications to the loans and receivables may include (i) reducing the interest rate (as low as zero percent, in which case the loan is characterized as non-accrual in our TDR disclosures), (ii) reducing the outstanding balance (in the event of a settlement), (iii) suspending delinquency fees until the cardmember exits the TDR program, and (iv) placing the cardmember on a fixed payment plan not exceeding 60 months. Upon entering the modification program, the cardmember’s ability to make future purchases is either cancelled, or in certain

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

cases suspended until the cardmember successfully exits the TDR program. In accordance with the modification agreement with the cardmember, loans with modified terms will revert back to their original contractual terms (including their contractual interest rate) when they exit the TDR program, either (i) when all payments have been made in accordance with the modification agreement or (ii) in the event that a payment is not made in accordance with the modification agreement and the cardmember defaults out of the program. In either case, in accordance with its normal policy, the Company establishes a reserve for cardmember interest charges that it believes will not be collected.

The performance of a TDR is closely monitored to understand its impact on the Company’s reserve for losses. Though the ultimate success of these modification programs remains uncertain, the Company believes the programs improve the cumulative loss performance of such loans and receivables. Reserves for cardmember loans and receivables modified as TDRs are determined by the difference between the cash flows expected to be received from the cardmember, taking into consideration the probability of subsequent defaults, discounted at the original effective interest rates, and the carrying value of the cardmember loan or receivable balance. The Company determines the original effective interest rate as the interest rate in effect prior to the imposition of any penalty rate. All changes in the impairment measurement, including the component due to the passage of time, are included in the provision for losses within the Consolidated Statements of Income.

The following tables provide additional information with respect to the Company’s impaired cardmember loans and receivables as of September 30, 2011 and December 31, 2010:

		Loans over
		90 Days								Loans &				Total
		Past Due				Non-				Receivables				Impaired				Unpaid
		& Accruing				Accrual				Modified				Loans &				Principal				Allowance
(Millions)		Interest		(a)		Loans		(b)		as a TDR		(c)(d)		Receivables				Balance		(e)		for TDRs		(f)
2011
U.S. Card Services — Cardmember Loans		$	65			$	420			$	869			$	1,354			$	1,303			$	199
International Card Services — Cardmember Loans			71				6				9				86				84				4
U.S. Card Services — Cardmember Receivables			—				—				159				159				158				94
Total (g)		$	136			$	426			$	1,037			$	1,599			$	1,545			$	297

		Loans over
		90 Days								Loans &				Total
		Past Due				Non-				Receivables				Impaired				Unpaid
		& Accruing				Accrual				Modified				Loans &				Principal				Allowance
(Millions)		Interest		(a)		Loans		(b)		as a TDR		(c)		Receivables				Balance		(e)		for TDRs		(f)
2010
U.S. Card Services — Cardmember Loans		$	90			$	628			$	1,076			$	1,794			$	1,704			$	274
International Card Services — Cardmember Loans			95				8				11				114				112				5
U.S. Card Services — Cardmember Receivables			—				—				114				114				109				63
Total (g)		$	185			$	636			$	1,201			$	2,022			$	1,925			$	342

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table provides information with respect to the Company’s interest income recognized and average balances of impaired cardmember loans and receivables:

		Three Months Ended								Nine Months Ended
		September 30, 2011								September 30, 2011
		Interest								Interest
		Income				Average				Income				Average
(Millions)		Recognized				Balance				Recognized				Balance
U.S. Card Services — Cardmember Loans		$	16			$	1,390			$	51			$	1,541
International Card Services — Cardmember Loans			5				92				22				102
U.S. Card Services — Cardmember Receivables			—				149				—				138
Total (a)		$	21			$	1,631			$	73			$	1,781

		Three Months Ended								Nine Months Ended
		September 30, 2010								September 30, 2010
		Interest								Interest
		Income				Average				Income				Average
(Millions)		Recognized				Balance				Recognized				Balance
U.S. Card Services — Cardmember Loans		$	23			$	2,090			$	78			$	2,370
International Card Services — Cardmember Loans			7				134				32				149
U.S. Card Services — Cardmember Receivables			—				109				—				109
Total (a)		$	30			$	2,333			$	110			$	2,628

Cardmember Loans and Receivables Modified as TDRs

The following table provides additional information with respect to the cardmember loans and receivables modified as TDRs during the following periods:

						Three Months Ended												Nine Months Ended
						September 30, 2011												September 30, 2011
						Aggregated				Aggregated								Aggregated				Aggregated
						Pre-				Post-								Pre-				Post-
						Modification				Modification								Modification				Modification
		Number of				Outstanding				Outstanding				Number of				Outstanding				Outstanding
(Accounts in thousands, Dollars in millions)		Accounts				Balances		(a)(b)		Balances		(a)(b)		Accounts				Balances		(a)(b)		Balances		(a)(b)
Troubled Debt Restructurings:
U.S. Card Services — Cardmember Loans			35			$	269			$	259				116			$	875			$	839
U.S. Card Services — Cardmember Receivables			14				108				105				36				292				281
Total (c)			49			$	377			$	364				152			$	1,167			$	1,120

As described previously, the Company’s cardmember loans and receivables modification programs may include (i) reducing the interest rate, (ii) reducing the outstanding balance, (iii) suspending delinquency fees and (iv) placing the cardmember on a fixed payment plan not exceeding 60 months. Upon entering the modification program, the cardmember’s ability to make future purchases is either cancelled, or in certain cases suspended until the cardmember successfully exits the TDR program.

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Company has evaluated the primary financial effects of the impact of the changes to an account upon modification as follows:

•		Interest Rate Reduction: For the three and nine months ended September 30, 2011, the average interest rate reduction was 12% for USCS cardmember loans, resulting in an estimated reduction in interest income of approximately $2 million and $17 million, respectively. The Company does not offer interest rate reduction programs for USCS cardmember receivables as these receivables are non-interest bearing.
•		Outstanding Balance Reduction: The table above presents the financial effects on the Company as a result of reducing the outstanding balance for Short-Term Settlement Programs. The difference between the pre- and post-modification outstanding balances represents the amount that either has been written-off or will be written-off upon successful completion of the settlement program.
•		Payment Term Extension: For both the three and nine months ended September 30, 2011, the average payment term extension was approximately 15 months for USCS cardmember receivables. For USCS cardmember loans, there have been no extension of payment terms.

The following table provides information with respect to the cardmember loans and receivables modified as TDRs on which there was a default within 12 months of modification during the periods presented. A cardmember will default from a modification program after between one and up to three consecutive missed payments, depending on the terms of the modification program.

		Three Months Ended								Nine Months Ended
		September 30, 2011								September 30, 2011
						Aggregated								Aggregated
						Outstanding								Outstanding
		Number of				Balances				Number of				Balances
(Accounts in thousands, Dollars in millions)		Accounts				Upon Default		(a)		Accounts				Upon Default		(a)
Troubled Debt Restructurings That Subsequently Defaulted:
U.S. Card Services — Cardmember Loans			9			$	65				36			$	271
U.S. Card Services — Cardmember Receivables			1				7				5				32
Total (b)			10			$	72				41			$	303

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

5. Reserves for Losses

Reserves for losses relating to cardmember loans and receivables represent management’s best estimate of the losses inherent in the Company’s outstanding portfolio of loans and receivables. Management’s evaluation process requires certain estimates and judgments.

Reserves for these losses are primarily based upon models that analyze portfolio performance and reflect management’s judgment regarding overall reserve adequacy. The analytic models take into account several factors, including average losses and recoveries over an appropriate historical period. Management considers whether to adjust the analytic models for specific factors such as increased risk in certain portfolios, impact of risk management initiatives on portfolio performance and concentration of credit risk based on factors such as tenure, industry or geographic regions. In addition, management adjusts the reserves for losses on cardmember loans for other external environmental factors including leading economic and market indicators such as the unemployment rate, Gross Domestic Product (GDP), home price indices, non-farm payrolls, personal consumption expenditures index, consumer confidence index, purchasing managers index, bankruptcy filings and the legal and regulatory environment. Generally, due to the short-term nature of cardmember receivables, the impact of additional external factors on the inherent losses within the cardmember receivable portfolio is not significant. As part of this evaluation process, management also considers various reserve coverage metrics, such as reserves as a percentage of past due amounts, reserves as a percentage of cardmember receivables or loans and net write-off coverage.

Cardmember loans and receivables balances are written off when management deems amounts to be uncollectible and is generally determined by the number of days past due, which is generally no later than 180 days past due. Cardmember loans and receivables in bankruptcy or owed by deceased individuals are written off upon notification. Recoveries are recognized on a cash basis.

Changes in Cardmember Receivables Reserve for Losses

The following table presents changes in the cardmember receivables reserve for losses for the nine months ended September 30:

(Millions)		2011				2010
Balance, January 1		$	386			$	546
Additions:
Cardmember receivables provisions(a)			404				292
Cardmember receivables provisions — other(b)			129				120
Total provision			533				412
Deductions:
Cardmember receivables net write-offs(c)			(406	)			(481	)
Cardmember receivables — other(d)			(125	)			(113	)
Balance, September 30		$	388			$	364