What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-11 compared with 2021-02-12 · 282 added, 275 removed, 1612 unchanged (26% of the section changed)

48 unchanged sentences

Management estimates lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.

In estimating expected credit losses, management uses a combination of statistically-based models that entail a significant amount of judgment.

As disclosed by management, in estimating expected credit losses, management uses a combination of statistically-based models that entail a significant amount of judgment.

The primary areas of judgment used in measuring the quantitative components of the Company’s reserves relate to the determination of the appropriate R&S Period, the modeling of the probability of and exposure at default, and the methodology to incorporate current and future economic conditions.

5 unchanged sentences

The qualitative reserves address possible limitations within the models or factors not included within the models, such as external conditions, emerging portfolio trends, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due accounts, or management risk actions.

The principal considerations for our determination that performing procedures relating to the reserves for credit losses on Card Member loans is a critical audit matter are (i) the estimate of the reserves for credit losses on Card Member loans involved significant judgment by management, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the models, significant inputs, qualitative reserves, and significant assumptions, including the R&S Period and the loss rates used to estimate expected credit losses beyond the R&S Period and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

The principal considerations for our determination that performing procedures relating to the reserves for credit losses on Card Member loans is a critical audit matter are (i) the estimate of the reserves for credit losses on Card Member loans involved significant judgment by management, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the models, significant inputs, qualitative reserves, and significant assumptions, including the R&S Period and the loss rates used to estimate expected credit losses beyond the R&S Period and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

6 unchanged sentences

The weighted average cost (WAC) per point and the Ultimate Redemption Rate (URR) are key assumptions used to estimate the liability.

The URR assumption is used by management to estimate the number of points earned that will ultimately be redeemed in future periods.

As disclosed by management, the URR assumption is used by management to estimate the number of points earned that will ultimately be redeemed in future periods.

Management uses statistical and actuarial models to estimate the URR based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes.

The WAC per point assumption is derived from the previous 12 months of redemptions and is adjusted as appropriate for certain changes in redemption costs that are not representative of future cost expectations and expected developments in redemption patterns.

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

The WAC per point assumption is derived from 12 months of redemptions and is adjusted as appropriate for certain changes in redemption costs that are not representative of future cost expectations and expected developments in redemption patterns.

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

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

29 unchanged sentences

Note 1 6 – Common and Preferred Shares

Note 1 7 – Changes in Accumulated Other Comprehensive Income

Note 1 7 – Changes in Accumulated Other Comprehensive Income (Loss)

Note 18 – Other Fees and Commissions and Other Expenses

6 unchanged sentences

Note 2 5 – Parent Company

Note 2 6 – Quarterly Financial Data (Unaudited)

CONSOLIDATED STATEMENTS OF INCOME

39 unchanged sentences

Diluted 790 806 830

(a) Represents net income less (i) earnings allocated to participating share awards of $ 20 million, $ 47 million and $ 54 million for the years ended December 31, 2020, 2019 and 2018, respectively, and (ii) dividends on preferred shares of $ 79 million, $ 81 million and $ 80 million for the years ended December 31, 2020, 2019 and 2018, respectively.

(a) Represents net income less (i) earnings allocated to participating share awards of $ 56 million, $ 20 million and $ 47 million for the years ended December 31, 2021, 2020 and 2019, respectively, (ii) dividends on preferred shares of $ 71 million, $ 79 million and $ 81 million for the years ended December 31, 2021, 2020 and 2019, respectively, and (iii) equity-related adjustments of $ 16 million related to the redemption of preferred shares for the year ended December 31, 2021.

See Notes to Consolidated Financial Statements.

4 unchanged sentences

Other comprehensive (loss) income:

Net unrealized securities gains (losses), net of tax 32 41 ( 8 )

Net unrealized debt securities gains (losses), net of tax ( 42 ) 32 41

Foreign currency translation adjustments, net of tax ( 163 ) ( 40 ) ( 56 )

6 unchanged sentences

Cash and cash equivalents

Cash and due from banks $ 2,984 $ 3,613

Cash and due from banks (includes restricted cash of consolidated variable interest entities:

$ 1,292 $ 2,984

Interest-bearing deposits in other banks (includes securities purchased under resale agreements:

2021, $ 463 ;

Short-term investment securities (includes restricted cash of consolidated variable interest entities:

20,548 29,824

Short-term investment securities (includes restricted investments of consolidated variable interest entities:

Total cash and cash equivalents 22,028 32,965

3 unchanged sentences

53,581 43,434

43,434 56,794

Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity:

5 unchanged sentences

Other loans, less reserves for credit losses:

2020, $ 238 ;

Investment securities 2,591 21,631

23 unchanged sentences

Retained earnings 13,474 13,837

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Net unrealized debt securities gains, net of tax of:

7 unchanged sentences

( 576 ) ( 731 )

Total accumulated other comprehensive loss ( 2,895 ) ( 2,737 )

Total accumulated other comprehensive income (loss) ( 2,945 ) ( 2,895 )

Total shareholders’ equity 22,177 22,984

9 unchanged sentences

Depreciation and amortization 1,695 1,543 1,188

Deferred taxes and other ( 256 ) 426 455

Stock-based compensation 330 249 283

Deferred taxes 294 ( 939 ) ( 151 )

Other non-cash items (a)

( 772 ) 683 577

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:

6 unchanged sentences

Purchase of investments ( 1,517 ) ( 20,562 ) ( 11,166 )

Net decrease (increase) in Card Member loans and receivables, and other loans 26,906 ( 11,047 ) ( 15,854 )

Net (increase) decrease in Card Member loans and receivables, and other loans ( 27,557 ) 26,906 ( 11,047 )

Purchase of premises and equipment, net of sales:

2 unchanged sentences

Other investing activities — 135 152

Net cash provided by (used in) investing activities 11,632 ( 16,707 ) ( 19,615 )

Net cash (used in) provided by investing activities ( 10,529 ) 11,632 ( 16,707 )

Cash Flows from Financing Activities

Net increase in customer deposits 13,542 3,330 5,542

Net (decrease) increase in short-term borrowings ( 4,627 ) 3,316 ( 148 )

Net (decrease) increase in customer deposits ( 2,468 ) 13,542 3,330

Net increase (decrease) in short-term borrowings 461 ( 4,627 ) 3,316

Proceeds from long-term debt 7,788 69 12,706

Payments of long-term debt ( 11,662 ) ( 15,593 ) ( 13,850 )

Issuance of American Express preferred shares 1,584 — —

Redemption of American Express preferred shares ( 1,600 ) — —

Issuance of American Express common shares 64 44 86

1 unchanged sentence

Dividends paid ( 1,448 ) ( 1,474 ) ( 1,422 )

Net cash (used in) provided by financing activities ( 9,068 ) ( 519 ) 5,101

Net cash used in financing activities ( 14,933 ) ( 9,068 ) ( 519 )

Effect of foreign currency exchange rates on cash and cash equivalents ( 120 ) 364 232

Net increase (decrease) in cash and cash equivalents 8,519 ( 3,362 ) ( 5,455 )

Net (decrease) increase in cash and cash equivalents ( 10,937 ) 8,519 ( 3,362 )

Cash and cash equivalents at beginning of year 32,965 24,446 27,808

1 unchanged sentence

Supplemental cash flow information

Cash, cash equivalents and restricted cash reconciliation Dec-20 Dec-19 Dec-18

Cash and cash equivalents reconciliation 2021 2020 2019

Cash and cash equivalents per Consolidated Balance Sheets $ 22,028 $ 32,965 $ 24,446

Restricted cash included in Cash and cash equivalents 606 514 363

Total Cash and cash equivalents, excluding restricted cash $ 32,359 $ 23,932 $ 27,445

Restricted balances included in Cash and cash equivalents 525 606 514

Total cash and cash equivalents, excluding restricted balances $ 21,503 $ 32,359 $ 23,932

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

See Notes to Consolidated Financial Statements.

3 unchanged sentences

Comprehensive

Loss Retained Earnings

Income (Loss) Retained Earnings

Balances as of December 31, 2018 $ 22,290 $ — $ 170 $ 12,218 $ ( 2,597 ) $ 12,499

10 unchanged sentences

Balances as of December 31, 2019 23,071 — 163 11,774 ( 2,737 ) 13,871

Cumulative effect of change in accounting principle - Reserve for Credit Losses (a)

( 882 ) — — — — ( 882 )

Net income 3,135 — — — — 3,135

9 unchanged sentences

Balances as of December 31, 2020 22,984 — 161 11,881 ( 2,895 ) 13,837

Cumulative effect of change in accounting principle - Reserve for Credit Losses (a)

( 882 ) — — — — ( 882 )

Net income 8,060 — — — — 8,060

Other comprehensive loss ( 50 ) — — — ( 50 ) —

Preferred shares issued 1,584 — — 1,584 — —

Redemption of preferred shares ( 1,600 ) — — ( 1,584 ) — ( 16 )

Repurchase of common shares ( 7,598 ) — ( 9 ) ( 631 ) — ( 6,958 )

4 unchanged sentences

( 23 ) — — — — ( 23 )

Cash dividends declared preferred Series D, $ 13,213.89 per share

( 21 ) — — — — ( 21 )

Cash dividends declared common, $ 1.72 per share

1 unchanged sentence

Balances as of December 31, 2021 $ 22,177 $ — $ 153 $ 11,495 $ ( 2,945 ) $ 13,474

(a) Represents $ 1,170 million, net of tax of $ 288 million, related to the impact as of January 1, 2020 of adopting the new accounting guidance for the recognition of credit losses on certain financial instruments.

(a) Represents $ 1,170 million, net of tax of $ 288 million, related to the impact as of January 1, 2020 of adopting the current expected credit loss (CECL) methodology for the recognition of credit losses on certain financial instruments.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

Our principal products and services are credit and charge card products, along with travel and lifestyle related services, offered to consumers and businesses around the world.

Business travel-related services are offered through the non-consolidated joint venture, American Express Global Business Travel.

Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations.

These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct mail, telephone, in-house sales teams, and direct response advertising.

These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party service providers and business partners, direct mail, telephone, in-house sales teams, and direct response advertising.

Refer to Note 24 for additional discussion of the products and services that comprise each segment.

40 unchanged sentences

Net card fees represent revenue earned from annual card membership fees, which vary based on the type of card and the number of cards for each account.

These fees, net of acquisition costs and a reserve for projected refunds for Card Member cancellations, are deferred and recognized on a straight-line basis over the twelve-month card membership period as Net card fees in the Consolidated Statements of Income.

The unamortized net card fee balance is reported in Other liabilities on the Consolidated Balance Sheets (refer to Note 9).

The unamortized net card fee balance is reported in Other liabilities on the Consolidated Balance Sheets.

Effective April 1, 2021, we prospectively changed the recognition of certain costs paid to a third party previously recognized over the twelve month card membership period in Net card fees in the Consolidated Statements of Income;

such costs are now recorded as incurred in Marketing and business development expense.

This change is not material to the Consolidated Financial Statements.

Other Fees and Commissions

18 unchanged sentences

Marketing and business development expense includes costs incurred in the development and initial placement of advertising, which are expensed in the year in which the advertising first takes place.

Also included in Marketing and business development expense are payments to our cobrand partners, Card Member statement credits for qualifying charges on eligible card accounts, corporate incentive payments earned on achievement of pre-set targets, and certain payments to GNS card issuing partners.

Also included in Marketing and business development expense are payments to our cobrand partners, Card Member statement credits and promotional rewards-based incentives for qualifying charges on eligible card accounts, corporate client incentive payments earned on achievement of pre-set targets, and certain payments to GNS partners.

These costs are generally expensed as incurred.

Card Member Rewards

We issue charge and credit cards that allow Card Members to participate in various rewards programs (e.g., Membership Rewards, cobrand and cash back).

We issue charge and credit cards that allow Card Members to participate in various rewards programs (e.g., Membership Rewards, cash back and cobrand).

Rewards expense is recognized in the period Card Members earn rewards, generally by spending on their enrolled card products.

We record a Card Member rewards liability that represents the estimated cost of points earned that are expected to be redeemed.

Pursuant to cobrand agreements, we make payments to our cobrand partners based primarily on the amount of Card Member spending and corresponding rewards earned on such spending.

The partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program.

For Membership Rewards and cash back, we record a liability that represents the rewards that are expected to be redeemed, as well as, for Membership Rewards, the estimated cost of points earned.

For cobrand, we record a liability based primarily on rewards earned on Card Member spending on cobrand cards, and make associated payments to our cobrand partners.

The partner is liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program.

Card Member rewards liabilities are impacted over time by enrollment levels, attrition, the volume of points earned and redeemed, and the associated redemption costs.

8 unchanged sentences

We evaluate goodwill for impairment annually as of June 30, or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of one or more of our reporting units below its carrying value.

completing the assessment of goodwill for impairment, we also perform a recoverability test of certain long-lived assets.

Prior to completing the assessment of goodwill for impairment, we also perform a recoverability test of certain long-lived assets.

We have the option to perform a qualitative assessment of goodwill impairment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

2 unchanged sentences

If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then perform the impairment evaluation using the quantitative assessment.

Under the quantitative assessment, the first step identifies whether there is a potential impairment by comparing the fair value of a reporting unit to the carrying amount, including goodwill.

If the carrying amount of a reporting unit exceeds the fair value, then a test is performed to determine the implied fair value of goodwill.

An impairment loss is recognized based on the amount that the carrying amount of goodwill exceeds the implied fair value.

The quantitative assessment compares the fair value of a reporting unit with its carrying amount, including goodwill.

If the carrying amount exceeds the reporting unit's fair value, an impairment loss is recognized for the amount over and above the reporting unit's fair value.

When measuring the fair value of our reporting units in the quantitative assessment, we use widely accepted valuation techniques, applying a combination of the income approach (discounted cash flows) and market approach (market multiples).

1 unchanged sentence

To discount these cash flows, we use the expected cost of equity, determined by using a capital asset pricing model.

We believe the discount rates used appropriately reflect the risks and uncertainties in the financial markets generally and specifically in our internally-developed forecasts.

We believe the discount rates appropriately reflect the risks and uncertainties in the financial markets generally and specifically in our internally-developed forecasts.

When using market multiples under the market approach, we apply comparable publicly traded companies’ multiples (e.g., earnings or revenues) to our reporting units’ actual results.

5 unchanged sentences

Certain costs associated with the acquisition or development of internal-use software are also capitalized and recorded in Premises and equipment.

Once the software is ready for its intended use, these costs are amortized on a straight-line basis over the software’s estimated useful life, generally 5 years.

Once the specific software feature is ready for its intended use, these costs are amortized on a straight-line basis over the software’s estimated useful life, generally 5 years.

We review these assets for impairment using the same impairment methodology used for our intangible assets.

20 unchanged sentences

CLASSIFICATION OF VARIOUS ITEMS

Certain reclassifications of prior period amounts have been made to conform to the current period presentation, including reclassification of restricted cash from Other assets to Cash and cash equivalents on the Consolidated Balance Sheets.

RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS

In March 2020, the Financial Accounting Standards Board issued new accounting guidance related to the effects of reference rate reform on financial reporting.

The guidance, effective for reporting periods through December 31, 2022, provides accounting relief for contract modifications that replace an interest rate impacted by reference rate reform (e.g., LIBOR) with a new alternative reference rate.

The guidance is applicable to investment securities, receivables, loans, debt, leases, derivatives and hedge accounting elections and other contractual arrangements.

We adopted the guidance as of March 31, 2020, with no material impact on our financial position, results of operations and cash flows.

There were no significant changes to our accounting policies, business processes or internal controls as a result of adopting the new guidance.

The CECL methodology requires measurement of expected credit losses for the estimated life of the financial instrument, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information.

Upon implementation, total loan reserves increased by $ 1,663 million and total receivable reserves decreased by $ 493 million, along with the associated current and deferred tax impact of $ 288 million, and an offset to the opening balance of retained earnings, net of tax, of $ 882 million.

There were no material changes to our business processes or internal controls as a result of adopting the new guidance.

Refer to Note 3 for additional information on how management estimates reserves for credit losses in accordance with the CECL methodology.

In addition, for available-for-sale debt securities, the new methodology replaces the other-than-temporary impairment model and requires the recognition of an allowance for reductions in a security’s fair value attributable to declines in credit quality, instead of a direct write-down of the security, when a valuation decline is determined to be other-than-temporary.

There was no financial impact related to this implementation.

Refer to Note 4 for additional information.

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

RECENTLY ADOPTED ACCOUNTING STANDARDS

Effective January 1, 2021, we elected to change our accounting for investments in qualified affordable housing (QAH) projects from the equity method of accounting to the proportional amortization method (PAM) in accordance with the accounting guidance.

PAM results in the amortization of the initial cost of the investment in proportion to the related tax credits, and recognition of the net investment performance in the statement of income as a component of Income tax provision, while the equity method reflected losses related to the investments as a component of Other, net expenses.

As a result, we believe PAM is preferable as it better reflects the economics of our tax credit investments.

Since the impact of this change is immaterial to our prior and current year financial statements, we implemented PAM on a prospective basis which resulted in a one-time charge to Income tax provision of $ 55 million in the first quarter of 2021, reflecting the cumulative impact of the difference in the timing of expense recognition between the equity method and PAM.

Effective January 1, 2020, we adopted the new credit reserving methodology, applicable to certain financial instruments, known as the Current Expected Credit Loss (CECL) methodology resulting in an increase in the reserves for total loans and receivables credit losses on adoption, which was recorded under a modified retrospective transition with an offset to the opening balance of retained earnings.

Refer to Note 3 for additional information on impact of adoption and how management estimates reserves for credit losses in accordance with the CECL methodology.

LOANS AND CARD MEMBER RECEIVABLES

1 unchanged sentence

We also extend credit to consumer and commercial customers through non-card financing products, resulting in Other loans.

Reserves for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods.

Reserves for reporting periods beginning on and after January 1, 2020 are presented using the CECL methodology, while information as of and for the year ended December 31, 2019 continues to be reported in accordance with the incurred loss methodology then in effect.

CARD MEMBER AND OTHER LOANS

Card Member loans are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and represent revolving amounts due on lending card products, as well as amounts due from charge Card Members who utilize the Pay Over Time features on their account and revolve a portion of the outstanding balance by entering into a revolving payment arrangement with us.

These loans have a range of terms such as credit limits, interest rates, fees and payment structures, which can be revised over time based on new information about Card Members, and in accordance with applicable regulations and the respective product’s terms and conditions.

Card Members holding revolving loans are typically required to make monthly payments based on pre-established amounts and the amounts that Card Members choose to revolve are subject to finance charges.

Card Member loans are generally recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and represent revolve-eligible transactions on our card products, as well as any finance charges and associated card-related fees.

Card Members with outstanding revolving loans are required to make a minimum monthly payment and the balances that Card Members choose to revolve are subject to finance charges.

These loans have varying terms such as credit limits, interest rates, fees and payment structures, which can be revised over time based on new information about Card Members, and in accordance with applicable regulations and the respective product’s terms and conditions.

Card Member loans are presented on the Consolidated Balance Sheets net of reserves for credit losses (refer to Note 3), and include principal and any related accrued interest and fees.

11 unchanged sentences

Card Member loans 88,562 73,373

Reserve for credit losses 5,344 2,383

Reserves for credit losses 3,305 5,344

Card Member loans, net $ 85,257 $ 68,029

3 unchanged sentences

(b) Other loans represent consumer and commercial non-card financing products, and Small Business Administration Paycheck Protection Program (PPP) loans.

There were $ 0.6 billion of gross PPP loans outstanding as of December 31, 2020.

There were $ 36 million and $ 630 million of gross PPP loans outstanding as of December 31, 2021 and 2020, respectively.

Other loans are presented net of reserves for credit losses of $ 52 million and $ 238 million as of December 31, 2021 and 2020, respectively.

CARD MEMBER RECEIVABLES

Card Member receivables are also recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and represent amounts due on charge card products.

Each charge card transaction is authorized based on its likely economics, a Card Member’s most recent credit information and spend patterns.

Card Member receivables are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and represent amounts due on our card products and card-related fees that need to be paid in full on or before the Card Member’s payment due date.

Charge Card Members generally must pay the full amount billed each month.

2 unchanged sentences

(Millions) 2021 2020

Global Consumer Services Group (a)

Global Consumer Services Group

$ 22,392 $ 18,685

Global Commercial Services (b)

Global Commercial Services (a)

31,253 25,016

Card Member receivables 53,645 43,701

Reserve for credit losses 267 619

Reserves for credit losses 64 267

Card Member receivables, net $ 53,581 $ 43,434

(a) Includes nil and $ 8.3 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of December 31, 2020 and 2019, respectively.

(b) Includes $ 4.3 billion and nil of gross Card Member receivables available to settle obligations of a consolidated VIE as of December 31, 2020 and 2019, respectively.

(a) Includes $ 5.2 billion and $ 4.3 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of December 31, 2021 and 2020, respectively.

CARD MEMBER LOANS AND RECEIVABLES AGING

Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing statement date.

Generally, a Card Member account is considered past due if payment due is not received within 30 days after the billing statement date.

The following table presents the aging of Card Member loans and receivables as of December 31, 2021 and 2020:

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Global Small Business Services 0.3 % 0.4 % 0.7 % 2.1 % 2.3 % 0.7 %

Global Corporate Payments (b) 1.9 % (c) (b) (d) (c)

Global Corporate Payments (d)

(b) — % (c) (b) 1.9 % (c)

(a) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention.

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

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

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

1 unchanged sentence

Delinquency data for periods other than 90+ days past billing is not available due to system constraints.

90+ Days Past Billing as a % of total was 0.6 % and 0.8 % for the years ended December 31, 2020 and 2019, respectively.

(d) Net loss ratio was the credit quality indicator for GCP Card Member receivables for prior periods and represents the ratio of GCP Card Member receivables write-offs, consisting of principal (resulting from authorized transactions) and fee components, less recoveries, on Card Member receivables expressed as a percentage of gross amounts billed to corporate Card Members.

The net loss ratio for the year ended December 31, 2019 was 0.08 %.

90+ days past billing as a % of total was 0.3 % and 0.6 % as of December 31, 2021 and 2020, respectively.

(d) The net write-off rate for the year ended December 31, 2021 includes a $ 37 million partial recovery in Card Member receivables related to a corporate client bankruptcy, which had resulted in a $ 53 million write-off in the year ended December 21, 2020.

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

1 unchanged sentence

Impaired loans and receivables are individual larger balance or homogeneous pools of smaller balance loans and receivables for which it is probable that we will be unable to collect all amounts due according to the original contractual terms of the customer agreement.

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

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

In instances where the customer is experiencing financial difficulty, we may modify, through various financial relief programs, loans and receivables with the intention to minimize losses and improve collectability, while providing customers with temporary or permanent financial relief.

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Based on the nature of our programs, we have not elected the accounting and reporting relief afforded by this legislation and continue to report modifications as TDRs.

In the first quarter of 2020, we created a Customer Pandemic Relief (CPR) program for customers who have been impacted by the COVID-19 pandemic to provide a concession in the form of payment deferrals and waivers of certain fees and interest.

In the first quarter of 2020, we created a Customer Pandemic Relief (CPR) program for customers who had been impacted by the COVID-19 pandemic to provide a concession in the form of payment deferrals and waivers of certain fees and interest.

We assessed the CPR program and determined that eligible loan modifications were temporary in nature, for example, less than three months, and not considered TDRs.

Our short-term CPR programs are no longer widely available with immaterial balances remaining in the program as of December 31, 2020.

Our short-term CPR programs are no longer widely available and have no remaining balances in the program as of December 31, 2021.

The following tables provide additional information with respect to our impaired loans and receivables as of December 31, 2021, 2020 and 2019.

30 unchanged sentences

Global Commercial Services — — 534 75 609 139

Other Loans (f)

2 1 248 6 257 80

Total $ 226 $ 176 $ 3,086 $ 430 $ 3,918 $ 1,346

23 unchanged sentences

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

Prior period balances were not significant.

Balances as of December 31, 2019 were not significant.

LOANS AND RECEIVABLES MODIFIED AS TDRs

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

The following tables provide additional information with respect to loans and receivables that were modified as TDRs during the years ended December 31:

2021 Number of Accounts

(thousands) Outstanding Balances

(thousands) Account Balances

(millions) (a)

8 unchanged sentences

2020 Number of Accounts

(thousands) Outstanding Balances

(thousands) Account Balances

(millions) (a)

5 unchanged sentences

Card Member Receivables 47 1,202 (c) 19

Other Loans (d)

Total 328 $ 3,894

2019 Number of Accounts

(thousands) Outstanding Balances

(thousands) Account Balances

(millions) (a)

12 unchanged sentences

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

Prior period balances were not significant.

The following table provides information with respect to loans and receivables modified as TDRs that subsequently defaulted within 12 months of modification for the years ended December 31, 2020, 2019 and 2018.

Balances for the year ended December 31, 2019 were not significant.

The following tables provide information with respect to loans and receivables modified as TDRs that subsequently defaulted within twelve months of modification.

A customer can miss up to three payments before being considered in default, depending on the terms of the modification program.

For all customers that defaulted from a modification program, the probability of default is factored into the reserves for loans and receivables.

2021 Number of Accounts

1 unchanged sentence

Outstanding Balances

Upon Default (a)

(millions) (a)

Troubled Debt Restructurings That Subsequently Defaulted:

3 unchanged sentences

Total 32 $ 239

Number of Accounts Aggregated

2020 Number of Accounts (thousands) Aggregated

Outstanding Balances

Upon Default (a)

2019 (thousands) (millions)

Upon Default (millions) (a)

Troubled Debt Restructurings That Subsequently Defaulted:

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Card Member Receivables 3 55

Other Loans (b)

Total 23 $ 188

Number of Accounts Aggregated Outstanding

Upon Default (a)

2018 (thousands) (millions)

2019 Number of Accounts (thousands) Aggregated

Outstanding Balances

Upon Default (millions) (a)

Troubled Debt Restructurings That Subsequently Defaulted:

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

Prior period balances were not significant.

Balances for the year ended December 31, 2019 were not significant.

RESERVES FOR CREDIT LOSSES

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Future recoveries are estimated taking into consideration the time of default, time elapsed since default and macroeconomic conditions.

We also estimate the likelihood and magnitude of recovery of previously written off accounts considering how long ago the account was written off and future economic conditions.

We also estimate the likelihood and magnitude of recovery of previously written off accounts considering how long ago the account was written off and future economic conditions, even if such expected recoveries exceed expected losses.

Our models are developed using historical loss experience covering the economic cycle and consider the impact of account characteristics on expected losses.

Future economic conditions that are incorporated over the R&S Period include multiple macroeconomic scenarios provided to us by an independent third party.

Management reviews these economic scenarios and applies judgment to weight them in order to reflect the uncertainty surrounding these scenarios.

These macroeconomic scenarios contain certain variables, including unemployment rates and real gross domestic product, that are significant to our models.

Management reviews these economic scenarios each period and applies judgment to weight them in order to reflect the uncertainty surrounding these scenarios.

These macroeconomic scenarios contain certain variables, including unemployment rates and real gross domestic product (GDP), that are significant to our models.

We also evaluate whether to include qualitative reserves to cover losses that are expected but, in our assessment, may not be adequately represented in the quantitative methods or the economic assumptions.

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Credit losses on accrued interest are measured and presented as part of Reserves for credit losses on the Consolidated Balance Sheets and within the Provisions for credit losses in the Consolidated Statements of Income, rather than reversing interest income.

Separate models are used for accounts deemed a troubled debt restructuring, which are measured individually using a discounted cash flow model.

Separate models are used for accounts deemed a troubled debt restructuring, which are measured individually and incorporate a discounted cash flow model.

See Note 2 for information on troubled debt restructurings.

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Loans and receivables in bankruptcy or owed by deceased individuals are generally written off upon notification.

Results for reporting periods beginning January 1, 2020 are presented using the CECL methodology while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior years.

Results for reporting periods beginning on and after January 1, 2020 are presented using the CECL methodology, while information as of and for the year ended December 31, 2019 continues to be reported in accordance with the incurred loss methodology then in effect.

Reserves for credit losses under the incurred loss methodology were primarily based upon statistical and analytical models that analyzed portfolio performance and reflected management’s judgments regarding the quantitative components of the reserve.

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Similar to the CECL methodology, we considered whether to adjust the quantitative reserves for certain external and internal qualitative factors, which may increase or decrease the reserves for credit losses.

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

Unemployment Rate U.S.

GDP Growth (Contraction) (a)

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Fourth quarter of 2021 5 %

First quarter of 2022 4 % - 7 %

Fourth quarter of 2022 4 % - 9 %

Fourth quarter of 2023 3 % - 7 %

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

CHANGES IN CARD MEMBER LOANS RESERVE FOR CREDIT LOSSES

Card Member loans reserve for credit losses increased for the year ended December 31, 2020, primarily driven by deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit performance and a decline in outstanding balances.

Card Member loans reserve for credit losses decreased for the year ended December 31, 2021, primarily due to improved portfolio quality and macroeconomic outlook, in large part driven by improvement in unemployment rate projections, partially offset by an increase in outstanding loan balances.

Card Member loans reserve for credit losses increased for the year ended December 31, 2020, primarily driven by deterioration

of the global macroeconomic outlook as a result of the COVID-19 pandemic, partially offset by a decline in outstanding loan balances and lower delinquencies.

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

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CHANGES IN CARD MEMBER RECEIVABLES RESERVE FOR CREDIT LOSSES

Card Member receivables reserve for credit losses increased for the year ended December 31, 2020, primarily driven by deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit performance and a decline in outstanding balances.

Card Member receivables reserve for credit losses decreased for the year ended December 31, 2021, primarily due to improved portfolio quality and macroeconomic outlook, in large part driven by improvement in unemployment rate projections, partially offset by an increase in outstanding receivable balances.

Card Member receivables reserve for credit losses increased for the year ended December 31, 2020, primarily driven by

deterioration of the global macroeconomic outlook as a result of the COVID-19 pandemic, partially offset by a decline in outstanding receivable balances.

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

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(c) Net write-offs are presented less recoveries of $ 378 million, $ 386 million and $ 374 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Amounts include net recoveries (write-offs) from TDRs of $( 47 ) million, $( 16 ) million and nil , for the years ended December 31, 2020, 2019 and 2018, respectively.

(d) Primarily includes foreign currency translation adjustments of $ 5 million, nil and $( 6 ) million for the years ended December 31, 2020, 2019 and 2018, respectively.

Amounts include net recoveries (write-offs) from TDRs of $( 64 ) million, $( 47 ) million and $( 16 ) million, for the years ended December 31, 2021, 2020 and 2019, respectively.

(d) Primarily includes foreign currency translation adjustments of $( 1 ) million, $ 5 million and nil for the years ended December 31, 2021, 2020 and 2019, respectively.

INVESTMENT SECURITIES

Investment securities principally include available-for-sale debt securities carried at fair value on the Consolidated Balance Sheets.

The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses for all available-for-sale debt securities in an unrealized loss position.

Comparative information continues to be reported in accordance with the methodology in effect for prior periods.

The methodology for estimating credit losses for available for sale debt securities requires us to estimate lifetime credit losses for all available-for-sale debt securities in an unrealized loss position.

When estimating a security’s probability of default and the recovery rate, we assess the security’s credit indicators, including credit ratings.

If our assessment indicates that an expected credit loss exists, we determine the portion of the unrealized loss attributable to credit deterioration and record a reserve for the expected credit loss through the Consolidated Statements of Income in Other loans Provision for credit losses.

If our assessment indicates that an estimated credit loss exists, we determine the portion of the unrealized loss attributable to credit deterioration and record a reserve for the estimated credit loss through the Consolidated Statements of Income in Other loans Provision for credit losses.

Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax.

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

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

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

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

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Government treasury obligations 1,680 25 ( 1 ) 1,704 20,655 76 — 20,731

Corporate debt securities 22 — — 22 27 — — 27

Mortgage-backed securities (a)

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Foreign government bonds and obligations 630 — — 630 581 — — 581

Equity securities (b)

43 — — 43 22 — — 22

Equity securities (c)

66 17 ( 4 ) 79 56 27 ( 2 ) 81

Total $ 2,548 $ 48 $ ( 5 ) $ 2,591 $ 21,521 $ 112 $ ( 2 ) $ 21,631

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

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

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

The following table provides information about our available-for-sale debt securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2021.

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Value Gross Unrealized

State and municipal obligations $ 18 $ ( 1 ) $ — $ —

Government treasury obligations 477 ( 1 ) — —

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Government treasury obligations 832 862 10 — 1,704

Corporate debt securities 11 11 — — 22

Mortgage-backed securities (a)

Mortgage-backed securities (a)(b)

Foreign government bonds and obligations 628 1 1 — 630

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Total Cost $ 1,476 $ 879 $ 35 $ 92 $ 2,482

Weighted average yields (b)

Weighted average yields (d)

1.74 % 2.42 % 5.46 % 3.10 % 2.08 %

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Government agency obligations and mortgage-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.

(b) Average yields for investment securities have been calculated using the effective yield on the date of purchase.

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

(c) Represents investments in corporate debt securities and debt securities issued by Community Development Financial Institutions.

(d) Average yields for investment securities have been calculated using the effective yield on the date of purchase.

Yields on tax-exempt investment securities have been computed on a tax-equivalent basis using the U.S.

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The long-term debt of each Trust is payable only out of collections on their respective underlying securitized assets (refer to Note 8).

Restricted cash held by the Lending Trust and Charge Trust was $ 47 million and nil , respectively, as of December 31, 2020 and $ 85 million and nil , respectively, as of December 31, 2019.

Restricted cash and cash equivalents held by the Lending Trust and Charge Trust was $ 42 million and $ 1 million, respectively, as of December 31, 2021 and $ 47 million and nil , respectively, as of December 31, 2020.

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.

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Total $ 17,244 $ 17,679

(a) Primarily includes prepaid assets, net deferred tax assets, other receivables net of reserves, investments in non-consolidated entities, tax credit investments and right-of-use lease assets.

(a) Primarily includes other receivables net of reserves, prepaid assets, net deferred tax assets, tax credit investments, right-of-use lease assets and investments in non-consolidated entities.

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

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Dispositions — — — —

( 7 ) ( 3 ) ( 2 ) ( 12 )

Balance as of December 31, 2020 $ 1,058 $ 2,234 $ 560 $ 3,852

Dispositions ( 3 ) — — ( 3 )

( 37 ) ( 8 ) — ( 45 )

Balance as of December 31, 2021 $ 1,018 $ 2,226 $ 560 $ 3,804

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The gross carrying amount for other intangible assets as of December 31, 2021 and 2020 was $ 733 million and $ 759 million, respectively, with accumulated amortization of $ 532 million and $ 494 million, respectively.

Amortization expense, which is recorded within Other expense in the Consolidated Statements of Income, was $ 54 million, $ 49 million and $ 212 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Amortization expense was $ 57 million, $ 54 million and $ 49 million for the years ended December 31, 2021, 2020 and 2019, respectively.

For other intangible assets on the Consolidated Balance Sheets as of December 31, 2021, amortization expense is expected to be $ 52 million in 2022, $ 50 million in 2023, $ 44 million in 2024, $ 21 million in 2025, $ 11 million in 2026 and $ 23 million thereafter.

TAX CREDIT INVESTMENTS

We account for our tax credit investments, including Qualified Affordable Housing (QAH) investments, using the equity method of accounting.

We account for our QAH investments using PAM, which we elected to implement on January 1, 2021 on a prospective basis, and other tax credit investments using the equity method of accounting.

Refer to Note 1 for further information on the implementation of PAM .

As of December 31, 2021 and 2020, we had $ 1,124 million and $ 1,147 million in tax credit investments, respectively, included in Other assets on the Consolidated Balance Sheets, of which $ 1,084 million and $ 1,095 million, respectively, related to QAH investments.

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As of December 31, 2021, we committed to provide funding related to certain of these QAH investments, which is expected to be paid between 2022 and 2036 , resulting in $ 238 million in unfunded commitments reported in Other liabilities, of which $ 192 million specifically related to unconsolidated VIEs.

In addition, as of December 31, 2020 we had contractual off-balance sheet obligations, which were not deemed probable of being drawn, to provide additional funding up to $ 106 million for these QAH investments, fully related to unconsolidated VIEs.

During the years ended December 31, 2020, 2019 and 2018 we recognized equity method losses related to our QAH investments of $ 128 million, $ 101 million and $ 126 million, respectively, which were recognized in Other, net expenses;

and associated tax credits of $ 129 million, $ 119 million and $ 97 million, respectively, recognized in Income tax provision.

In addition, as of December 31, 2021 we had contractual off-balance sheet obligations to provide additional funding up to $ 53 million for these QAH investments, fully related to unconsolidated VIEs.

We may be required to fund these amounts between 2022 and 2036.

During the year ended December 31, 2021, we recognized QAH investment losses of $ 226 million, with associated tax credits of $ 135 million, in Income tax provision.

These losses included the one-time charge related to the implementation of PAM.

During the years ended December 31, 2020 and 2019 we recognized QAH investment equity method losses of $ 128 million and $ 101 million, respectively, in Other, net expenses, with associated tax credits of $ 129 million and $ 119 million, respectively, recognized in Income tax provision.

CUSTOMER DEPOSITS

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Non-interest-bearing (includes Card Member credit balances of:

2020, $ 576 million;

2019, $ 389 million)

2021, $ 527 ;

2020, $ 576 )

Interest-bearing 18 19

Non-interest-bearing (includes Card Member credit balances of:

2020, $ 671 million;

2019, $ 401 million)

2021, $ 503 ;

2020, $ 671 )

Total customer deposits $ 84,382 $ 86,875

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(Millions) 2021 2020

retail deposits:

Savings accounts ― Direct $ 63,512 $ 46,394

Savings and transaction accounts $ 66,142 $ 63,512

Certificates of deposit:

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Other deposits 42 45

non-interest-bearing deposits 23 26

deposits 22 26

Card Member credit balances ― U.S.

Card Member credit balances 1,030 1,247

Total customer deposits $ 84,382 $ 86,875

The scheduled maturities of certificates of deposit as of December 31, 2021 were as follows:

(Millions) U.S.

2021 $ 3,820 $ 8 $ 3,828

2022 3,053 — 3,053

2023 645 — 645

2024 276 — 276

2025 207 — 207

(Millions) Total

After 5 years —

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(a) For floating-rate issuances, the stated interest rates are weighted based on the outstanding principal balances and interest rates in effect as of December 31, 2021 and 2020.

(b) Average commercial paper outstanding was $ 628 million and $ 299 million in 2020 and 2019, respectively.

(b) Average commercial paper outstanding was nil and $ 628 million in 2021 and 2020, respectively.

(c) Includes borrowings from banks and book overdrafts with banks due to timing differences arising in the ordinary course of business.

We maintained a 3 -year committed, revolving, secured borrowing facility that gives us the right to sell up to $ 2.0 billion face amount of eligible certificates issued from the Lending Trust at any time through September 15, 2022 .

We maintained a three-year committed, revolving, secured borrowing facility that gives us the right to sell up to $ 2.0 billion face amount of eligible certificates issued from the Lending Trust at any time through September 16, 2024 .

The facility was undrawn as of both December 31, 2021 and 2020.

Additionally, certain of our subsidiaries maintained total committed lines of credit of $ 145 million and $ 148 million as of December 31, 2021 and 2020, respectively.

As of December 31, 2020 and 2019, nil and $ 58 million were drawn on these committed lines, respectively.

We paid $ 7.7 million in fees to maintain the secured borrowing facility in both 2020 and 2019.

As of December 31, 2021 and 2020, $ 7.2 million and nil were drawn on these committed lines, respectively.

We paid $ 7.8 million and $ 7.7 million in fees to maintain the secured borrowing facility in 2021 and 2020, respectively.

The committed facility does not contain a material adverse change clause, which might otherwise preclude borrowing under the facility, nor is it dependent on our credit rating.

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Floating Rate Subordinated Notes 2022 - 2023 79 0.68 — 79 0.73 —

Floating Rate Conduit Borrowings 2024 2,000 0.40 — — — —

Finance Leases 2024 - 2033 14 5.49 — 17 5.54 —

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Lending Trust 6,381 2,685 2,750 — — — 11,816

Charge Trust — — 2,000 — — — 2,000

Other 77 88 136 — — 10 311

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We maintained a committed syndicated bank credit facility of $ 3.5 billion as of December 31, 2021 and 2020, all of which was undrawn as of the respective dates.

The availability of the credit line is subject to compliance with certain covenants by American Express Credit Corporation (Credco), principally the maintenance by Credco of a 1.25 ratio of its combined earnings, certain capital contributions and fixed charges, to fixed charges.

As of December 31, 2020 and 2019, Credco was not in violation of any of these covenants.

This facility was maintained by our wholly owned subsidiary American Express Credit Corporation (Credco) through September 30, 2021 and the availability of the credit line was subject to compliance with certain covenants by Credco, principally the maintenance by Credco of a 1.25 ratio of its combined earnings, certain capital contributions and fixed charges, to fixed charges.

Effective October 1, 2021, this facility was terminated, and we entered into a new committed syndicated bank credit facility for the same amount with a maturity date of October 15, 2024 with American Express Company and American Express Travel Related Services Company, Inc.

(TRS) as co-borrowers and co-obligors.

The availability of the new credit facility is subject to our maintenance of a minimum Common Equity Tier 1 (CET1) risk-based capital ratio of 4.5 percent, with certain restrictions in relation to either accessing the facility or distributing capital to common shareholders in the event our CET1 risk-based capital ratio falls between 4.5 percent and 6.5 percent.

As of December 31, 2021, we were in compliance with the covenants contained in the new credit facility.

Additionally, we maintained a three-year committed, revolving, secured borrowing facility that gives us the right to sell up to $ 3.0 billion face amount of eligible notes issued from the Charge Trust at any time through July 15, 2024 .

No amounts were drawn on this facility as of December 31, 2020 and 2019.

As of December 31, 2021 and 2020, $ 2.0 billion and nil were drawn on this facility, respectively.

The amount drawn as of December 31, 2021 was repaid in full on January 18, 2022.

We paid $ 15.7 million and $ 14.2 million in fees to maintain these lines in 2021 and 2020, respectively.

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Employee-related liabilities (a)

Deferred card and other fees, net 2,516 2,282

Card Member rebate and reward accruals (b)

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income tax liabilities, and deferred tax liabilities for foreign jurisdictions.

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

(d) Primarily includes book overdraft balances for accounts without an associated overdraft credit facility, Travelers Cheques and other prepaid products, lease liabilities, accruals for general operating expenses, payments to cobrand partners, marketing and business development liabilities, dividends payable and client incentives.

MEMBERSHIP REWARDS

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For stock options that were exercised during 2021, 2020 and 2019, the intrinsic value, based upon the fair value of our stock price at the date the options were exercised, was $ 86 million, $ 47 million and $ 104 million, respectively;

cash received from the exercise of stock options was $ 44 million, $ 84 million and $ 87 million during those respective periods.

cash received by the Company from the exercise of stock options was $ 64 million, $ 44 million and $ 84 million during those respective periods.

The income tax benefit recognized in the Consolidated Statements of Income related to stock option exercises was $ 14 million, $ 7 million and $ 18 million in 2021, 2020 and 2019, respectively.

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The fair value of RSUs that do not include the r-TSR modifier, including those that contain only service conditions, is measured using our stock price on the grant date.

The fair value of service and performance-based RSUs that include the r-TSR modifier is determined using a Monte Carlo valuation model with the following weighted-average assumptions for December 31:

The fair value of service and performance-based RSUs that include the r-TSR modifier is determined using a Monte Carlo valuation model with the following weighted-average assumptions in 2021, 2020 and 2019:

2021 2020 2019

Expected volatility (a)

41 % 19 % 20 %

Risk-free interest rate 0.2 % 1.4 % 2.5 %

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We also sponsor unfunded other postretirement benefit plans that provide health care and life insurance to certain retired U.S.

For these plans, the total net benefit was $ 8 million, $ 8 million and $ 0.4 million in 2020, 2019 and 2018, respectively.

For these plans, the total net benefit was $ 26 million in 2021 and $ 8 million in both 2020 and 2019.

We recognize the funded status of our defined benefit pension plans and other postretirement benefit plans, measured as the difference between the fair value of the plan assets and the projected benefit obligation, on the Consolidated Balance Sheets.

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On January 15, 2020, our motion to compel arbitration of claims brought by merchants who accept American Express and to dismiss claims of merchants who do not was granted.

Plaintiffs have appealed part of this decision.

On November 22, 2021, that decision was affirmed on appeal.

On February 25, 2020, we were named as a defendant in a case filed in the Superior Court of California, Los Angeles County, captioned Laurelwood Cleaners LLC v.

American Express Co., et al.

, in which the plaintiff seeks a public injunction prohibiting American Express from enforcing its anti-steering and non-discrimination provisions and from requiring merchants “to offer the service of Amex-card acceptance for free.” We intend to vigorously defend the case.

, in which the plaintiff seeks a public injunction in California prohibiting American Express from enforcing its anti-steering and non-discrimination provisions and from requiring merchants “to offer the service of Amex-card acceptance for free.” The case has been stayed pending the outcome of arbitration proceedings.

On January 29, 2019, we were named in a putative class action brought in the United States District Court for the Eastern District of New York, captioned Anthony Oliver, et al.

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

In 2006, Mawarid Investments Limited filed a request for confidential arbitration under the 1998 London Court of International Arbitration Rules in connection with certain claims arising under a shareholders agreement between Mawarid and TRS relating to a joint venture between the parties, Amex (Middle East) BSC(c) (AEME).

In 2008, the tribunal rendered a partial award, including a direction that an audit should take place to verify whether acquirer discount revenue related to transactions occurring with airlines located in the Middle East region had been properly allocated to AEME since its inception in 1992.

In September 2021, the tribunal rendered a further partial award regarding the location of transactions through non-physical channels.

The consequences of the tribunal’s 2008 and 2021 partial awards on the allocation of airline acquirer revenues will be determined in the remaining phase of the arbitration.

We are being challenged in a number of countries regarding our application of value-added taxes (VAT) to certain of our international transactions, which are in various stages of audit, or are being contested in legal actions.

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We evaluate, on a quarterly basis, developments in legal proceedings that could cause an increase or decrease in the amount of the accrual that has been previously recorded, or a revision to the disclosed estimated range of possible losses, as applicable.

For those disclosed material legal proceedings where a loss is reasonably possible in future periods, whether in excess of a recorded accrual for legal or tax contingencies, or where there is no such accrual, and for which we are able to estimate a range of possible loss, the current estimated range is zero to $ 210 million in excess of any accruals related to those matters.

For those disclosed legal proceedings where a loss is reasonably possible in future periods, whether in excess of a recorded accrual for legal or tax contingencies, or where there is no such accrual, and for which we are able to estimate a range of possible loss, the current estimated range is zero to $ 170 million in excess of any accruals related to those matters.

This range represents management’s estimate based on currently available information and does not represent our maximum loss exposure;

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In addition, it is possible that significantly increased merchant steering or other actions impairing the Card Member experience as a result of an adverse resolution in one or any combination of the disclosed merchant cases could have a material adverse effect on our business and results of operations.

In addition, we face exposure associated with Card Member purchases of goods and services, including with respect to the following:

In addition, we face exposure associated with Card Member purchases, including with respect to the following:

• Return Protection — refunds the price of qualifying purchases made with eligible cards, where the merchant will not accept the return, for up to 90 days from the date of purchase;

• Merchant Protection — protects Card Members primarily against non-delivery of goods and services, usually in the event of the bankruptcy or liquidation of a merchant.

• Merchant Protection — protects Card Members primarily against non-delivery of purchases, usually in the event of the bankruptcy or liquidation of a merchant.

When this occurs, the Card Member may dispute the transaction for which we will generally credit the Card Member’s account.

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The largest component of the exposure relates to Card Member transactions associated with travel-related merchants, primarily through business arrangements where we have remitted payment to such merchants for a Card Member travel purchase that has not yet been used or “flown.”

We have an accrual of $ 58 million related to these exposures as of December 31, 2020.

A reasonably possible loss related to these exposures in excess of any recorded accruals cannot be quantified as the Card Member purchases that may include or result in claims are not sufficiently estimable.

To date, we have not experienced significant losses related to these exposures;

however, our historical experience may not be representative in the current environment given the economic and financial disruptions caused by the COVID-19 pandemic and resulting containment measures.

A reasonably possible loss related to these exposures in excess of the recorded accrual cannot be quantified as the Card Member purchases that may include or result in claims are not sufficiently estimable, although we believe our risk of loss has increased as a result of the COVID-19 pandemic.

however, our historical experience may not be representative given the disruptions in the travel industry as a result of the COVID-19 pandemic.

Total lease expense includes rent expenses, adjustments for rent concessions, rent escalations and leasehold improvement allowances and is recognized on a straight-line basis over the lease term.

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In the event these payments do not fully satisfy the commitment, we generally pay the cobrand partner up to the amount of the commitment in exchange for an equivalent value of reward points.

As of December 31, 2020, we also had certain cobrand arrangements that include commitments based on variables, the values of which are not yet determinable and thus the amount is not quantifiable.

DERIVATIVES AND HEDGING ACTIVITIES

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Our market risk exposures include:

• Interest rate risk due to changes in the relationship between interest rates on our assets (such as loans, receivables and investment securities) and interest rates on our liabilities (such as debt and deposits);

• Foreign exchange risk related to earnings, funding, transactions and investments in currencies other than the U.S.

• Interest rate risk due to changes in the relationship between the interest rates on our assets (such as loans, receivables and investment securities) and the interest rates on our liabilities (such as debt and deposits);

• Foreign exchange risk related to transactions, funding, investments and earnings in currencies other than the U.S.

We centrally monitor market risks using market risk limits and escalation triggers as defined in our Asset/Liability Management Policy.

Our market exposures are in large part by-products of the delivery of our products and services.

Interest rate risk primarily arises through the funding of Card Member receivables and fixed-rate loans with variable-rate borrowings, as well as through the risk to net interest margin from changes in the relationship between benchmark rates such as Prime, LIBOR and the overnight indexed swap rate.

Interest rate exposure within our charge card and fixed-rate lending products is managed by varying the proportion of total funding provided by short-term and variable-rate debt and deposits compared to fixed-rate debt and deposits.

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We may change the mix between variable-rate and fixed-rate funding based on changes in business volumes and mix, among other factors.

Foreign exchange risk is generated by Card Member cross-currency spend, foreign currency balance sheet exposures, foreign subsidiary equity and foreign currency earnings in entities outside the United States.

Foreign exchange exposures arise in four principal ways:

(1) Card Member spending in currencies that are not the billing currency, (2) cross-currency transactions and balances from our funding activities, (3) cross-currency investing activities, such as in the equity of foreign subsidiaries, and (4) revenues generated and expenses incurred in foreign currencies, which impact earnings.

Our foreign exchange risk is managed primarily by entering into agreements to buy and sell currencies on a spot basis or by hedging this market exposure, to the extent it is economical, through various means, including the use of derivatives such as foreign exchange forwards.

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( 93 ) ( 98 ) ( 93 ) ( 98 )

Cash collateral netting (c) (d)

Cash collateral netting (c)

( 204 ) ( 500 ) ( 4 ) ( 16 )

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

(d) We posted $ 34 million and $ 47 million as of December 31, 2020 and 2019, respectively, as initial margin on our centrally cleared interest rate swaps;

We posted $ 11 million and $ 34 million as of December 31, 2021 and 2020, respectively, as initial margin on our centrally cleared interest rate swaps;

such amounts are recorded within Other assets on the Consolidated Balance Sheets and are not netted against the derivative balances.

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At the time of issuance, certain fixed-rate long-term debt obligations are designated in fair value hedging relationships, using interest rate swaps, to economically convert the fixed interest rate to a floating interest rate.

We have $ 15.8 billion and $ 22.6 billion of fixed-rate debt obligations designated in fair value hedging relationships as of December 31, 2020 and 2019, respectively.

We had $ 12.9 billion and $ 15.8 billion of fixed-rate debt obligations designated in fair value hedging relationships as of December 31, 2021 and 2020, respectively.

Gains or losses on the fair value hedging instrument principally offset the losses or gains on the hedged item attributable to the hedged risk.

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The carrying values of the hedged liabilities, recorded within Long-term debt on the Consolidated Balance Sheets, were $ 13.1 billion and $ 16.4 billion as of December 31, 2021 and 2020, respectively, including the cumulative amount of fair value hedging adjustments of $ 237 million and $ 622 million for the respective periods.

We recognized a net decrease of $ 256 million and net increases of $ 102 million and $ 51 million in Interest expense on Long-term debt for the years ended December 31, 2020, 2019, and 2018, respectively, primarily related to the net settlements including interest accruals on our interest rate derivatives designated as fair value hedges.

We recognized in Interest expense on Long-term debt net decreases of $ 256 million for both the years ended December 31, 2021 and 2020 and a net increase of $ 102 million for the year ended December 31, 2019.

These were primarily related to the net settlements including interest accruals on our interest rate derivatives designated as fair value hedges.

NET INVESTMENT HEDGES

A net investment hedge is used to hedge future changes in currency exposure of a net investment in a foreign operation.

We primarily designate foreign currency derivatives, typically foreign exchange forwards, and on occasion foreign currency denominated debt, as hedges of net investments in certain foreign operations.

These instruments reduce exposure to changes in currency exchange rates on our investments in non-U.S.

We primarily designate foreign currency derivatives as net investment hedges to reduce our exposure to changes in currency exchange rates on our investments in non-U.S.

subsidiaries.

We had notional amounts of approximately $ 12.6 billion and $ 10.5 billion of foreign currency derivatives designated as net investment hedges as of December 31, 2021 and 2020, respectively.

The gain or loss on net investment hedges, net of taxes, recorded in AOCI as part of the cumulative translation adjustment, were losses of $ 252 million and $ 140 million and a gain of $ 328 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Net investment hedge reclassifications out of AOCI into the Consolidated Statements of Income associated with the sale or liquidation of a business, net of taxes, were $ 1 million, nil and $ 1 million for the years ended December 31, 2020, 2019, and 2018, respectively.

The gain or loss on net investment hedges, net of taxes, recorded in AOCI as part of the cumulative translation adjustment, were gains of $ 176 million and losses of $ 253 million and $ 140 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Net investment hedge reclassifications out of AOCI into the Consolidated Statements of Income were no t significant for the years ended December 31, 2021, 2020 and 2019, respectively.

DERIVATIVES NOT DESIGNATED AS HEDGES

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The changes in the fair value of derivatives that are not designated as hedges are intended to offset the related foreign exchange gains or losses of the underlying foreign currency exposures.

The changes in the fair value of the derivatives and the related underlying foreign currency exposures resulted in net gains of $ 10 million, $ 64 million and $ 60 million for the years ended December 31, 2020, 2019, and 2018, respectively, that are recognized in Other, net expenses in the Consolidated Statements of Income.

Changes in the fair value of an embedded derivative were nil for the year ended December 31, 2020.

We had notional amounts of approximately $ 19.0 billion and $ 14.4 billion as of December 31, 2021 and 2020, respectively.

The changes in the fair value of the derivatives and the related underlying foreign currency exposures resulted in a net loss of $ 21 million and net gains of $ 10 million and $ 64 million for the years ended December 31, 2021, 2020 and 2019, respectively, that are recognized in Other, net expenses in the Consolidated Statements of Income.

Changes in the fair value of an embedded derivative were nil for both the years ended December 31, 2021 and 2020.

Included in the net gain of $ 64 million for the year ended December 31, 2019 is a gain of $ 3 million related to a change in the fair value of an embedded derivative.

The change in the fair value of the embedded derivative for the year ended December 31, 2018 resulted in a loss of $ 11 million that is recognized in Card Member services expense in the Consolidated Statements of Income.

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

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

We did not measure any financial instruments presented on the Consolidated Balance Sheets at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2020 and 2019, although the disclosed fair value of certain assets that are not carried at fair value, as presented later in this Note, are classified within Level 3.

We monitor the market conditions and evaluate the fair value hierarchy levels at least quarterly.

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Refer to Note 4 for additional fair value information.

Within Level 3 of the fair value hierarchy are our holdings of debt securities issued by Community Development Financial Institutions.

We take the carrying value for these investment securities to be a reasonable proxy for their fair value unless we determine, based on our internal credit model, that there are indicators that the contractual cash flows will not be received in full.

Derivative Financial Instruments

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$ 43 $ 45 $ — $ 45 $ —

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

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

(b) Balances include Card Member receivables (including fair values of Card Member receivables of $ 5.2 billion and $ 4.2 billion held by a consolidated VIE as of December 31, 2021 and 2020, respectively), other receivables and other miscellaneous assets.

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For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if they are determined to be impaired or where there are observable price changes for equity investments without readily determinable fair values.

During the years ended December 31, 2020 and 2019, we did no t have any material assets that were measured at fair value due to impairment and there were no material fair value adjustments for equity investments without readily determinable fair values.

The maximum potential undiscounted future payments and related liability resulting from guarantees and indemnifications provided by us in the ordinary course of business were $ 1 billion and $ 24 million, respectively, as of December 31, 2020, and $ 1 billion and $ 29 million, respectively, as of December 31, 2019, all of which were primarily related to our real estate and business dispositions.

During the years ended December 31, 2021 and 2020, we did no t have any material assets that were measured at fair value due to impairment.

We estimate the Level 3 fair value of equity investments without readily determinable fair values based on price changes as of the date of new similar equity financing transactions completed by the companies in our portfolio.

The carrying value of equity investments without readily determinable fair values totaled $ 1.3 billion and $ 530 million as of December 31, 2021 and 2020, respectively.

These amounts are included within Other assets on the Consolidated Balance Sheets.

We recorded net unrealized gains of $ 727 million, $ 93 million and $ 80 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Unrealized losses including any impairments were not significant for each of the years ended December 31, 2021, 2020 and 2019.

Since the adoption of new accounting guidance on the recognition and measurement of financial assets and financial liabilities on January 1, 2018, cumulative net unrealized gains for equity investments without readily determinable fair values totaled $ 1.1 billion and $ 347 million as of December 31, 2021 and 2020, respectively.

In addition, we also have certain equity investments measured at fair value using the net asset value practical expedient.

Such investments were immaterial as of both December 31, 2021 and 2020.

The maximum potential undiscounted future payments and related liability resulting from guarantees and indemnifications provided by us in the ordinary course of business were $ 1 billion and $ 24 million, respectively, as of both December 31, 2021 and 2020, all of which were primarily related to our real estate and business dispositions.

To date, we have not experienced any significant losses related to guarantees or indemnifications.

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As of December 31, 2021, we had approximately 56 million common shares remaining under the Board share repurchase authorization.

Common shares are generally retired by us upon repurchase (except for 2.5 million, 2.6 million and 2.7 million shares held as treasury shares as of December 31, 2020, 2019 and 2018, respectively);

Common shares are generally retired by us upon repurchase (except for 2.5 million shares held as treasury shares as of both December 31, 2021 and 2020 and 2.6 million shares held as treasury shares as of December 31, 2019);

retired common shares and treasury shares are excluded from the shares outstanding in the table above.

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The Board of Directors is authorized to permit us to issue up to 20 million preferred shares at a par value of $1.66 2/3 without further shareholder approval.

We have the following perpetual Fixed Rate/Floating Rate Noncumulative Preferred Share series issued and outstanding as of December 31, 2020:

Series B Series C

Issuance date November 10, 2014 March 2, 2015

We have the following perpetual Fixed Rate Reset Noncumulative Preferred Share series issued and outstanding as of December 31, 2021:

Issuance date August 3, 2021

Securities issued 1,600 Preferred shares;

represented by 1,600,000 depositary shares

850 Preferred Shares;

represented by 850,000 depositary shares

Aggregate liquidation preference $ 750 million $ 850 million

Fixed dividend rate per annum 5.20 % 4.90 %

Semi-annual fixed dividend payment dates Beginning May 15, 2015

Beginning September 15, 2015

Floating dividend rate per annum 3 month LIBOR+ 3.428 %

3 month LIBOR+ 3.285 %

Quarterly floating dividend payment dates Beginning February 15, 2020 Beginning June 15, 2020

Fixed to floating rate conversion date (a)

November 15, 2019 March 15, 2020

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

In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Company, the preferred stock then outstanding takes precedence over our common stock for the payment of dividends and the distribution of assets out of funds legally available for distribution to shareholders.

Each outstanding series of Preferred Shares has a liquidation price of $ 1 million per Preferred Share, plus any accrued but unpaid dividends.

We may redeem these Preferred Shares at $ 1 million per Preferred Share (equivalent to $ 1,000 per depositary share) plus any declared but unpaid dividends in whole or in part, from time to time, on any dividend payment date on or after the respective fixed to floating rate conversion date, or in whole, but not in part, within 90 days of certain bank regulatory changes.

Dividend rate per annum 3.55 % through September 14, 2026;

resets September 15, 2026 and every subsequent 5-year anniversary at 5-year Treasury rate plus 2.854 %

Dividend payment date Quarterly beginning September 15, 2021

Earliest redemption date

September 15, 2026

Aggregate liquidation preference $ 1,600 million

Carrying value (a)

$ 1,584 million

(a) Carrying value, presented in the Statements of Shareholders' Equity, represents the issuance proceeds, net of underwriting fees and offering costs.

In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Company, the preferred shares then outstanding takes precedence over our common shares for the payment of dividends and the distribution of assets out of funds legally available for distribution to shareholders.

We may redeem the outstanding series of preferred shares at $ 1 million per preferred share (equivalent to $ 1,000 per depositary share) plus any declared but unpaid dividends in whole or in part, from time to time, on any dividend payment date on or after the earliest redemption date, or in whole, but not in part, within 90 days of certain bank regulatory changes.

We paid $ 850 million to redeem in full the outstanding 4.900 % Fixed Rate/Floating Rate Noncumulative Preferred Shares, Series C, on September 15, 2021 and paid $ 750 million to redeem in full the outstanding 5.200 % Fixed Rate/Floating Rate Noncumulative Preferred Shares, Series B on November 15, 2021.

The difference between the redemption value and carrying value of the redeemed Series C and Series B preferred shares resulted in a $ 16 million reduction to net income available to common shareholders.

There were no warrants issued and outstanding as of December 31, 2021, 2020 and 2019.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

AOCI is a balance sheet item in Shareholders’ equity on the Consolidated Balance Sheets.

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Gains (Losses) Accumulated Other

Comprehensive (Loss)

Comprehensive Income (Loss)

Balances as of December 31, 2018 $ ( 8 ) $ ( 2,133 ) $ ( 456 ) $ ( 2,597 )

Net unrealized losses ( 10 ) — — ( 10 )

Net unrealized gains 41 — — 41

Net translation on investments in foreign operations — 84 — 84

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Pension and other postretirement benefits — — ( 125 ) ( 125 )

Other 2 — — 2

Net change in accumulated other comprehensive (loss) income ( 8 ) ( 172 ) 11 ( 169 )

Net change in accumulated other comprehensive income (loss) 41 ( 56 ) ( 125 ) ( 140 )

Balances as of December 31, 2019 33 ( 2,189 ) ( 581 ) ( 2,737 )

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Pension and other postretirement benefits — ( 150 ) ( 150 )

Net change in accumulated other comprehensive (loss) income 41 ( 56 ) ( 125 ) ( 140 )

Net change in accumulated other comprehensive income (loss) 32 ( 40 ) ( 150 ) ( 158 )

Balances as of December 31, 2020 65 ( 2,229 ) ( 731 ) ( 2,895 )

Net unrealized gains 32 — — 32

Amounts reclassified into earnings — ( 3 ) — ( 3 )

Net unrealized losses ( 42 ) — — ( 42 )

Net translation on investments in foreign operations — ( 339 ) — ( 339 )

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Pension and other postretirement benefits — — 155 155

Net change in accumulated other comprehensive (loss) income 32 ( 40 ) ( 150 ) ( 158 )

Net change in accumulated other comprehensive income (loss) ( 42 ) ( 163 ) 155 ( 50 )

Balances as of December 31, 2021 $ 23 $ ( 2,392 ) $ ( 576 ) $ ( 2,945 )

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(Millions) 2021 2020 2019

Net unrealized investment securities $ 9 $ 12 $ ( 2 )

Net unrealized (losses) gains on debt securities $ ( 13 ) $ 9 $ 12

Net translation on investments in foreign operations

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Total tax impact $ 90 $ ( 81 ) $ ( 45 )

The following table presents the effects of reclassifications out of AOCI and into the Consolidated Statements of Income associated with the sale or liquidation of a business, net of taxes for the years ended December 31:

Gains (losses) recognized in earnings

Description (Millions)

Income Statement Line Item 2020 2019 2018

Foreign currency translation adjustments

Reclassification of translation adjustments and related hedges Other expenses $ 3 $ — $ 1

Related income tax Income tax provision — — ( 1 )

Reclassification of foreign currency translation adjustments $ 3 $ — $ —

Reclassifications out of AOCI into the Consolidated Statements of Income, net of taxes, were no t significant for the years ended December 31, 2021, 2020, and 2019.

OTHER FEES AND COMMISSIONS AND OTHER EXPENSES

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Loyalty coalition-related fees 508 435 456

Service fees and other (a)

Travel commissions and fees 244 102 424

Service fees and other (a)

Total Other fees and commissions $ 2,392 $ 2,163 $ 3,297

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(Millions) 2021 2020 2019

Occupancy and equipment $ 2,334 $ 2,168 $ 2,033

Data processing and equipment (a)

$ 2,431 $ 2,334 $ 2,168

Professional services 1,958 1,789 2,091

Net unrealized and realized gains on Amex Ventures equity investments ( 767 ) ( 152 ) ( 77 )

1,195 1,354 1,674

Total Other expenses $ 4,817 $ 5,325 $ 5,856

(a) Other expense primarily includes general operating expenses, communication expenses, non-income taxes, unrealized gains and losses on certain equity investments, Card Member and merchant-related fraud losses and litigation expenses.

For the year ended December 31, 2018, Other expense also includes the loss on a transaction involving the operations of our prepaid reloadable and gift card business.

(a) Effective for the first quarter of 2021, we changed the expense category name from Occupancy and equipment to Data processing and equipment to better reflect the nature and components of the expense.

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

RESTRUCTURING

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We had $ 67 million, $ 197 million and $ 135 million accrued in total restructuring reserves as of December 31, 2021, 2020 and 2019, respectively.

New charges, including net revisions to existing restructuring reserves, which primarily relate to the redeployment of displaced colleagues to other positions, were $ 125 million, $ 125 million and $( 23 ) million, for the years ended December 31, 2020, 2019 and 2018, respectively.

New charges, including net revisions to existing restructuring reserves, which primarily relate to the redeployment of displaced colleagues to other positions, were $( 10 ) million for the year ended December 31, 2021 and $ 125 million for each of the years ended December 31, 2020 and 2019, respectively.

Cumulatively, we recognized $ 223 million relating to the restructuring programs that were in progress during 2021 and initiated at various dates between 2019 and 2020, the majority of which has been reflected within Corporate & Other.

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(Decrease) increase in taxes resulting from:

Tax-exempt income ( 4.1 ) ( 1.9 ) ( 1.7 )

Tax credits and tax-exempt income (a)

( 0.1 ) ( 4.1 ) ( 1.9 )

State and local income taxes, net of federal benefit 3.0 3.7 2.8

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1.1 2.4 ( 0.5 )

Tax settlements (a)

Tax settlements

( 0.1 ) ( 0.3 ) ( 0.3 )

Tax Act and related adjustments (b)

Valuation allowances — 4.0 ( 0.2 )

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Actual tax rates 24.6 % 27.0 % 19.8 %

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

(b) 2018 included changes to the tax method of accounting for certain expenses and adjustments to the 2017 provisional Tax Act charge.

(a) Includes the implementation of PAM related to investments in QAH projects for the year ended December 31, 2021.

Refer to Note 1 for further information.

We record a deferred income tax (benefit) provision when there are differences between assets and liabilities measured for financial reporting and for income tax return purposes.

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federal and non-U.S.

net operating loss (NOL) carryforwards of $ 140 million and $ 1.0 billion, respectively, and foreign tax credit (FTC) carryforwards of $ 100 million.

net operating loss (NOL) carryforwards of $ 84 million and $ 910 million, respectively, and foreign tax credit (FTC) carryforwards of $ 110 million.

If not utilized, certain U.S.

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The valuation allowances for both periods presented above are associated with certain non-U.S.

deferred tax assets.

In addition, the valuation allowances as of December 31, 2020 are also associated with FTC carryforwards.

deferred tax assets and FTC carryforwards.

Accumulated earnings of certain non-U.S.

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( 14 ) ( 24 ) ( 14 )

Settlements with tax authorities (a)

Settlements with tax authorities

( 15 ) ( 15 ) ( 40 )

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Balance, December 31 $ 1,024 $ 790 $ 726

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

Included in the unrecognized tax benefits of $ 1.0 billion, $ 0.8 billion and $ 0.7 billion for December 31, 2021, 2020 and 2019, respectively, are approximately $ 780 million, $ 580 million and $ 623 million, respectively, that, if recognized, would favorably affect the effective tax rate in a future period.

We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next 12 months by as much as $ 130 million, principally as a result of potential resolutions of prior years’ tax items with various taxing authorities.

We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next twelve months by as much as $ 167 million, principally as a result of potential resolutions of prior years’ tax items with various taxing authorities.

The prior years’ tax items include unrecognized tax benefits relating to the deductibility of certain expenses or losses and the attribution of taxable income to a particular jurisdiction or jurisdictions.

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Interest and penalties relating to unrecognized tax benefits are reported in the income tax provision.

For the year ended December 31, 2020 and 2019, we recognized approximately $ 260 million and $ 5 million, respectively, in expenses for interest and penalties.

For the year ended December 31, 2018, we recognized benefits of approximately $ 18 million, for interest and penalties.

For the years ended December 31, 2021, 2020 and 2019, we recognized approximately $ 40 million, $ 260 million, and $ 5 million, respectively, in expenses for interest and penalties.

We had approximately $ 380 million and $ 350 million accrued for the payment of interest and penalties as of December 31, 2021 and 2020, respectively.

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Preferred dividends ( 71 ) ( 79 ) ( 81 )

Equity-related adjustments (a)

Net income available to common shareholders 7,973 3,056 6,678

Earnings allocated to participating share awards (a)

Earnings allocated to participating share awards (b)

( 56 ) ( 20 ) ( 47 )

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Weighted-average common stock

Weighted-average stock options (b)

Weighted-average stock options (c)

$ 10.04 $ 3.77 $ 8.00

Diluted EPS $ 10.02 $ 3.77 $ 7.99

(a) Our unvested restricted stock awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered participating securities.

(a) Represents the difference between the redemption value and carrying value of the Series C and Series B preferred shares, which were redeemed on September 15, 2021 and November 15, 2021, respectively.

The carrying value represents the original issuance proceeds, net of underwriting fees and offering costs for the preferred shares.

(b) Our unvested restricted stock awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered participating securities.

Calculations of EPS under the two-class method exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities.

The related participating securities are similarly excluded from the denominator.

(b) The dilutive effect of unexercised stock options excludes from the computation of EPS 0.5 million, 0.2 million and 0.7 million of options for the years ended December 31, 2020, 2019 and 2018, respectively, because inclusion of the options would have been anti-dilutive.

(c) The dilutive effect of unexercised stock options excludes from the computation of EPS 0.01 million, 0.53 million and 0.20 million of options for the years ended December 31, 2021, 2020 and 2019, respectively, because inclusion of the options would have been anti-dilutive.

REGULATORY MATTERS AND CAPITAL ADEQUACY

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American Express National Bank 6.5 % 8.0 % 10.0 % 5.0 %

Effective Minimum (c)

Minimum capital ratios (c)

4.5 % 6.0 % 8.0 % 4.0 %

Effective Minimum (d)

American Express Company 7.0 % 8.5 % 10.5 % 4.0 %

American Express National Bank 7.0 % 8.5 % 10.5 % 4.0 %

Minimum capital ratios (d)

4.5 % 6.0 % 8.0 % 4.0 %

(a) Capital ratios reported using Basel III capital definitions and risk-weighted assets using the Basel III standardized approach.

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There is no CET1 capital ratio or Tier 1 leverage ratio requirement for a bank holding company to be considered “well capitalized.”

(c) Represents Basel III minimum capital requirement and applicable regulatory buffers as defined by the federal banking regulators, which includes the stress capital buffer for American Express Company and the capital conservation buffer for American Express National Bank.

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

(d) Represents Basel III minimum capital requirement and applicable regulatory buffers as defined by the federal banking regulators, which includes the stress capital buffer for American Express Company and the capital conservation buffer for American Express National Bank.

RESTRICTED NET ASSETS OF SUBSIDIARIES

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• Global Consumer Services Group (GCSG) primarily issues a wide range of proprietary consumer cards globally.

GCSG also provides services to consumers, including travel and lifestyle services and non-card financing products, and manages certain international joint ventures and our partnership agreements in China.

• Global Commercial Services (GCS) primarily issues a wide range of proprietary corporate and small business cards.

In addition, GCS provides payment, expense management, and commercial financing products.

GCSG also provides services to consumers, including travel and lifestyle services and non-card financing products, and manages certain international joint ventures, our partnership agreements in China and our loyalty coalition businesses operated in certain countries.

• Global Commercial Services (GCS) primarily issues a wide range of proprietary corporate and small business cards globally.

GCS also provides payment, expense management and financing solutions to businesses.

• Global Merchant and Network Services (GMNS) operates a global payments network that processes and settles card transactions, acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics, leveraging our global integrated network.

GMNS manages our partnership relationships with third-party card issuers, merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global network.

GMNS also manages loyalty coalition businesses.

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

Effective for the first quarter of 2020, we made certain enhancements to our transfer pricing methodology related to the sharing of revenues between our card issuing, network and merchant businesses, and our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios.

These enhancements resulted in certain changes to Non-interest revenues, Interest expense and operating expenses across our reportable operating segments and geographic regions.

Prior period amounts have been revised to conform to the current period presentation.

These changes had no impact on our Consolidated Results of Operations.

As a result of organizational changes announced during the second quarter of 2021, our loyalty coalition businesses results, which were previously reported within the GMNS segment, are now reported within the GCSG segment.

Prior period segment results have been revised to conform with current period presentation.

The following table presents certain selected financial information for our reportable operating segments and Corporate & Other as of or for the years ended December 31, 2021, 2020 and 2019:

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Total revenues net of interest expense 24,831 12,500 5,072 ( 23 ) 42,380

Net income (loss) 2,701 736 954 ( 1,256 ) 3,135

Pretax income (loss) 6,826 2,928 1,949 ( 1,014 ) 10,689

Total assets (billions)

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Total revenues net of interest expense 21,777 10,619 4,243 ( 552 ) 36,087

Net income (loss) 3,807 2,191 2,132 ( 1,371 ) 6,759

Pretax income (loss) 3,687 936 1,315 ( 1,642 ) 4,296

Total assets (billions)

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Total revenues net of interest expense 24,861 13,108 5,758 ( 171 ) 43,556

Net income (loss) 3,615 2,012 1,910 ( 616 ) 6,921

Pretax income (loss) 4,845 2,692 2,685 ( 1,793 ) 8,429

Total assets (billions)

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The allocated expenses include service costs allocated based on activities directly attributable to the segment, and overhead expenses allocated based on the relative levels of revenue and Card Member loans and receivables.

An income tax provision (benefit) is allocated to each reportable operating segment based on the effective tax rates applicable to various businesses that comprise the segment.

GEOGRAPHIC OPERATIONS

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Maturities and redemptions of investment securities — — 1

Decrease (increase) in loans to subsidiaries and affiliates 11,434 ( 4,405 ) ( 6,281 )

(Increase) decrease in loans to subsidiaries and affiliates ( 176 ) 11,434 ( 4,405 )

Investments in subsidiaries and affiliates ( 60 ) ( 52 ) ( 15 )

Other investing activities — 74 82

Net cash provided by (used in) investing activities 11,456 ( 4,337 ) ( 6,311 )

Net cash (used in) provided by investing activities ( 236 ) 11,456 ( 4,337 )

Cash Flows from Financing Activities

Net decrease in short-term debt from subsidiaries and affiliates ( 2,636 ) ( 3,289 ) ( 1,500 )

Proceeds from long-term debt 3,000 — 6,469

Payments of long-term debt ( 5,000 ) ( 2,000 ) ( 641 )

Net decrease in short-term debt from subsidiaries and affiliates ( 3,289 ) ( 1,500 ) ( 140 )

Issuance of American Express preferred shares 1,584 — —

Redemption of American Express preferred shares ( 1,600 ) — —

Issuance of American Express common shares 64 44 86

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Dividends paid ( 1,448 ) ( 1,474 ) ( 1,422 )

Net cash (used in) provided by financing activities ( 7,748 ) ( 1,693 ) 2,438

Net increase (decrease) in cash and cash equivalents 6,538 1,143 ( 1,439 )

Net cash used in financing activities ( 13,688 ) ( 7,748 ) ( 1,693 )

Net (decrease) increase in cash and cash equivalents ( 5,627 ) 6,538 1,143

Cash and cash equivalents at beginning of year 10,968 4,430 3,287

7 unchanged sentences

Short-term debts from subsidiaries and affiliates — 4,971 —

QUARTERLY FINANCIAL DATA (UNAUDITED )

(Millions, except per share amounts) 2020 2019

Quarters Ended 12/31 9/30 6/30 3/31 12/31 9/30 6/30 3/31

Total revenues net of interest expense $ 9,351 $ 8,751 $ 7,675 $ 10,310 $ 11,365 $ 10,989 $ 10,838 $ 10,364

Pretax income 1,858 1,364 622 452 1,986 2,266 2,219 1,958

Net income 1,438 1,073 257 367 1,693 1,755 1,761 1,550

Earnings Per Common Share — Basic:

Net income attributable to common shareholders (a)

1.76 1.31 0.29 0.41 2.04 2.09 2.07 1.81

Earnings Per Common Share — Diluted:

Net income attributable to common shareholders (a)

1.76 1.30 0.29 0.41 2.03 2.08 2.07 1.80

Cash dividends declared per common share $ 0.43 $ 0.43 $ 0.43 $ 0.43 $ 0.43 $ 0.43 $ 0.39 $ 0.39

(a) Represents net income, less (i) earnings allocated to participating share awards of $ 9 million, $ 7 million, $ 2 million and $ 2 million for the quarters ended December 31, September 30, June 30 and March 31, 2020, respectively, and $ 12 million, $ 11 million, $ 13 million and $ 11 million for the quarters ended December 31, September 30, June 30 and March 31, 2019, respectively, and (ii) dividends on preferred shares of $ 14 million, $ 16 million, $ 17 million and $ 32 million for the quarters ended December 31, September 30, June 30 and March 31, 2020, respectively, and $ 20 million, $ 21 million, $ 19 million and $ 21 million for the quarters ended December 31, September 30, June 30 and March 31, 2019, respectively.

Proceeds from long-term debt $ 1,787 $ — $ —

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data