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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the fiscal year ended December 31, 2021

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the transition period from to

Commission File No. 1-7657
American Express Company
(Exact name of registrant as specified in its charter)

New York | 13-4922250
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
200 Vesey Street New York, New York | 10285
(Address of principal executive offices) | (Zip Code)

Registrant’s telephone number, including area code: (212) 640-2000
Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common Shares (par value $0.20 per Share) | AXP | New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company ☐ | Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ
As of June 30, 2021, the aggregate market value of the registrant’s voting shares held by non-affiliates of the registrant was approximately $131.1 billion based on the closing sale price as reported on the New York Stock Exchange.
As of February 3, 2022, there were 759,354,994 common shares of the registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III: Portions of Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Shareholders to be held on May 3, 2022.

Table of Contents
TABLE OF CONTENTS

Form 10-K Item Number |  | Page
| PART I |
1. | Business | 1
| Competition | 9
| Supervision and Regulation | 11
| Additional Information | 21
1A. | Risk Factors | 22
1B. | Unresolved Staff Comments | 37
2. | Properties | 37
3. | Legal Proceedings | 37
4. | Mine Safety Disclosures | 37
| PART II |
5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 38
6. | [R eserved] | 39
7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) | 40
| Executive Overview | 40
| Consolidated Results of Operations | 43
| Business Segment Results of Operations | 51
| Consolidated Capital Resources and Liquidity | 60
| Risk Management | 69
| Critical Accounting Estimates | 78
| Other Matters | 82
7A. | Quantitative and Qualitative Disclosures about Market Risk | 87
8. | Financial Statements and Supplementary Data | 87
| Management’s Report on Internal Control Over Financial Reporting | 87
| Report of Independent Registered Public Accounting Firm (PCAOB ID 238) | 88
| Index to Consolidated Financial Statements | 91
| Consolidated Financial Statements | 92
| Notes to Consolidated Financial Statements | 97
9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 154
9A. | Controls and Procedures | 154
9B. | Other Information | 154
9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 154
| PART III |
10. | Directors, Executive Officers and Corporate Governance | 155
11. | Executive Compensation | 155
12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 155
13. | Certain Relationships and Related Transactions, and Director Independence | 155
14. | Principal Account ant Fees and Services | 156
| PART IV |
15. | Exhibit and Financial Statement Schedules | 157
16. | Form 10-K Summary | 163
| Signatures | 164
| Statistical Disclosure by Bank Holding Companies | A-1

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This Annual Report on Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You can identify forward-looking statements by words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,” “continue” or other similar expressions. We discuss certain factors that affect our business and operations and that may cause our actual results to differ materially from these forward-looking statements under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statements.
This report includes trademarks, such as American Express®, which are protected under applicable intellectual property laws and are the property of American Express Company or its subsidiaries. This report also contains trademarks, service marks, copyrights and trade names of other companies, which are the property of their respective owners. Solely for convenience, our trademarks and trade names referred to in this report may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names.
Throughout this report the terms “American Express,” “we,” “our” or “us,” refer to American Express Company and its subsidiaries on a consolidated basis, unless stated or the context implies otherwise. The use of the term “partner” or “partnering” in this report does not mean or imply a formal legal partnership, and is not meant in any way to alter the terms of American Express’ relationship with any third parties. Refer to the “MD&A ― Glossary of Selected Terminology” for the definitions of other key terms used in this report.

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PART I
ITEM 1. BUSINESS
Overview
American Express is a globally integrated payments company that provides our customers with access to products, insights and experiences that enrich lives and build business success. We are a leader in providing credit and charge cards to consumers, small businesses, mid-sized companies and large corporations around the world. American Express® cards issued by us, as well as by third-party banks and other institutions on the American Express network, can be used by Card Members to charge purchases at the millions of merchants around the world that accept cards bearing our logo.
Our various products and services are sold globally to diverse customer groups 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.
We were founded in 1850 as a joint stock association and were incorporated in 1965 as a New York corporation. American Express Company and its principal operating subsidiary, American Express Travel Related Services Company, Inc. (TRS), are bank holding companies under the Bank Holding Company Act of 1956, as amended (the BHC Act), subject to supervision and examination by the Board of Governors of the Federal Reserve System (the Federal Reserve).
We principally engage in businesses comprising three reportable operating segments: Global Consumer Services Group (GCSG), Global Commercial Services (GCS) and Global Merchant and Network Services (GMNS). Corporate functions and certain other businesses are included in Corporate & Other. Our businesses are global in scope and function together to form our end-to-end integrated payments platform, which we believe is a differentiator that underpins our business model. While our business was significantly impacted by the COVID-19 pandemic in 2020, we believe our growth momentum through 2021 strengthens our focus on our strategic imperatives and the resilience of our differentiated business model.
For further information about our reportable operating segments, please see “Business Segment Results of Operations” under “MD&A.”
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Our Integrated Payments Platform
Through our general-purpose card-issuing, merchant-acquiring and card network businesses, we are able to connect participants and provide differentiated value across the commerce path. We maintain direct relationships with both our Card Members (as a card issuer) and merchants (as an acquirer), and we handle all key aspects of those relationships. These relationships create a “closed loop” in that we have direct access to information at both ends of the card transaction, which distinguishes our integrated payments platform from the bankcard networks.
Our integrated payments platform allows us to analyze information on Card Member spending and build algorithms and other analytical tools that we use to underwrite risk, reduce fraud and provide targeted marketing and other information services for merchants and special offers and services to Card Members, all while respecting Card Member preferences and protecting Card Member and merchant data in compliance with applicable policies and legal requirements. Through contractual relationships, we also obtain information from third-party card issuers, merchant acquirers, aggregators and processors with whom we do business.
Card Issuing Businesses
Our global proprietary card-issuing businesses are conducted through our GCSG and GCS reportable operating segments. We offer a broad set of card products, rewards and services to a diverse consumer and commercial customer base, in the United States and internationally. We acquire and retain high-spending, engaged and creditworthy Card Members by:
•Designing innovative products and features that appeal to our target customer base and meet their spending and borrowing needs
•Using incentives to drive spending on our various card products and engender loyal Card Members, including our Membership Rewards® program, cash-back reward features and participation in loyalty programs sponsored by our cobrand and other partners
•Providing digital and mobile services and an array of benefits and experiences across card products, such as airport lounge access, dining experiences and other travel and lifestyle benefits, which we believe are difficult for others to replicate and help increase Card Member engagement
•Creating world-class service experiences by delivering exceptional customer care
•Developing a wide range of partner relationships, including with other corporations and institutions that sponsor certain of our cards under cobrand arrangements and provide benefits and services to our Card Members
Over the last several years, we have focused on broadening the appeal of our products to attract new customers, particularly Millennial and Gen Z customers, as well as expanding our position with small and mid-sized enterprise (SME) customers by providing more ways to help them manage and grow their businesses. During 2020, we enhanced our value propositions on many of our products, including adjusting our rewards programs and adding limited time offers and statement credits in categories that were relevant to how customer spending behaviors were changing, such as wireless telephone services, streaming services, business essentials and food delivery. We also enhanced and expanded our financial relief programs to assist our customers who faced financial hardships. As the pandemic continued, we made the decision to increase investments to drive customer acquisition, engagement and retention. These initiatives have driven retention and satisfaction metrics higher than pre-pandemic levels. During 2021, we relaunched our consumer Platinum Card and Business Platinum Card in the United States and introduced our first business checking account product and new digital capabilities, in part resulting from the Kabbage technology platform we acquired in 2020.
For the year ended December 31, 2021, worldwide billed business (spending on American Express cards issued by us) was $1.1 trillion and at December 31, 2021, we had 71.4 million proprietary cards-in-force worldwide.
Merchant Acquiring Business
Our GMNS reportable operating segment builds and manages relationships with millions of merchants around the world that choose to accept American Express cards. This includes signing new merchants to accept our cards, agreeing on the discount rate (a fee charged to the merchant for accepting our cards) and handling servicing for merchants. We also build and maintain relationships with merchant acquirers, aggregators and processors to manage aspects of our merchant services business. For example, through our OptBlue® merchant-acquiring program, third-party acquirers contract directly with small merchants for card acceptance on our network and determine merchant pricing. We continue to grow merchant acceptance of American Express cards around the world and work with merchant partners so that our Card Members are warmly welcomed and encouraged to spend in the millions of places where their American Express cards are accepted.
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GMNS also provides fraud-prevention tools, marketing solutions, data analytics and other programs and services to merchants and other partners that leverage the capabilities of our integrated payments platform.
During the pandemic, we increased our investments in our Shop Small campaigns to support small businesses around the world, created a Stand for Small coalition and supported minority-owned small businesses in the United States. We launched debit capabilities on the American Express network and in 2021 introduced our first-ever proprietary debit card in connection with the business checking account product mentioned above.
Card Network Business
We operate a payments network through which we establish and maintain relationships with third-party banks and other institutions in approximately 103 countries and territories, licensing the American Express brand and extending the reach of our global network. These network partners are licensed to issue local currency American Express-branded cards in their countries and/or serve as the merchant acquirer for local merchants on our network.
During 2021, we continued to grow our business in China through our joint venture with Lianlian DigiTech Co., Ltd, a Chinese fintech services company.
For the year ended December 31, 2021, worldwide network services processed volume (spending on American Express cards issued by third parties) was $194.4 billion and at December 31, 2021, we had 50.3 million cards-in-force issued by third parties worldwide.
Diverse Customer Base and Global Footprint
Our broad and diverse customer base spans consumers, small businesses, mid-sized companies and large corporations around the world. The following charts provide a summary of our diverse set of customers and broad geographic footprint based on worldwide network volumes:
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Partners and Relationships
Our integrated payments platform allows us to work with a range of business partners, and our partners in return help drive the scale and relevance of the platform.
There are many examples of how we connect partners with our integrated payments platform, including: issuing cards under cobrand arrangements with other corporations and institutions (e.g., Delta Air Lines, Marriott International, Hilton Worldwide Holdings and British Airways); offering innovative ways for our Card Members to earn and use points with our merchants (e.g., Pay with Points at Amazon.com); expanding merchant acceptance with third-party acquirers (e.g., OptBlue partners); developing new capabilities and features with our digital partners (e.g., PayPal); integrating into the supplier payment processes of our business customers (e.g., Bill.com, SAP Ariba and Coupa); and extending the platform into travel services with American Express leisure and business travel (e.g., Fine Hotels and Resorts).
Delta Air Lines is our largest strategic partner. Our relationships with, and revenues and expenses related to, Delta are significant and represent an important source of value for our Card Members. We issue cards under cobrand arrangements with Delta and the Delta cobrand portfolio represented approximately 9 percent of worldwide network volumes and approximately 21 percent of worldwide Card Member loans as of December 31, 2021. The Delta cobrand portfolio generates fee revenue and interest income from Card Members and discount revenue from Delta and other merchants for spending on Delta cobrand cards. The current Delta cobrand agreement runs through the end of 2029 and we expect to continue to make significant investments in this partnership. Among other things, Delta is also a key participant in our Membership Rewards program, provides travel-related benefits and services, including airport lounge access for certain American Express Card Members, accepts American Express cards as a merchant and is a corporate payments customer.
Working with all of our partners, we seek to provide value, choice and unique experiences across our customer base.
Our Spend-Centric Model and Revenue Mix
Our “spend-centric” business model focuses on generating revenues primarily by driving spending on our cards and secondarily through finance charges and fees. Spending on our cards, which is higher on average on a per-card basis versus our competitors, offers superior value to merchants in the form of loyal customers and larger transactions. Because of the revenues generated from having high-spending Card Members and the annual card fees we charge on many of our products, we are able to invest in attractive rewards and other benefits for Card Members, as well as targeted marketing and other programs and investments for merchants. This creates incentives for Card Members to spend more on their cards and positively differentiates American Express cards.
We believe our spend-centric model gives us the ability to provide differentiated value to Card Members, merchants and business partners.
The American Express Brand and Service Excellence
Our brand and its attributes—trust, security and service—are key assets. We invest heavily in managing, marketing, promoting and protecting our brand, including through the delivery of our products and services in a manner consistent with our brand promise. The American Express brand is ranked among the most valuable brands in the world. We place significant importance on trademarks, service marks and patents, and seek to secure our intellectual property rights around the world.
We aim to provide the world’s best customer experience every day and our reputation for world-class service has been recognized by numerous awards over the years. Our customer care professionals, travel consultants and partners treat servicing interactions as an opportunity to bring the brand to life for our customers, add meaningful value and deepen relationships.
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Our Business Strategies
During 2021, we focused on investing to rebuild growth momentum by firing up our core business, scaling next-horizon opportunities and continuing to retain financial flexibility. Over the longer term, we seek to grow our business by focusing on four strategic imperatives:
First, we aim to expand our leadership in the premium consumer space by continuing to deliver membership benefits that span our customers’ everyday spending, borrowing, travel and lifestyle needs, expanding our roster of business partners around the globe and developing a range of experiences that attract high-spending customers.
Second, we seek to build on our strong position in commercial payments by evolving our card value propositions, further differentiating our corporate card and accounts payable expense management solutions and designing innovative products and features, including financing, banking and payment solutions for our business customers.
Third, we are focused on strengthening our global network to provide unique value by continuing to help merchants navigate the convergence of online and offline commerce with fraud protection services, marketing insights and digital connections to higher-spending Card Members and continuing to work with our network partners to offer expanded products and services.
Finally, we want to continue to make American Express an essential part of our customers’ digital lives by developing more digital features, solutions and services, expanding our digital partnerships and making targeted acquisitions.
We also have an Environmental, Social and Governance (ESG) strategy that focuses on three pillars. The Promoting Diversity, Equity and Inclusion (DE&I) pillar supports a diverse, equitable and inclusive workforce, marketplace and society. The Building Financial Confidence pillar seeks to provide responsible, secure and transparent products and services to help people and businesses build financial resilience. Finally, the Advancing Climate Solutions pillar focuses on enhancing our operations and capabilities to meet customer and community needs in the transition to a low-carbon future.
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Our Colleagues
We are committed to delivering a great colleague experience every day. We work to foster an inclusive and diverse culture and help our colleagues grow in their careers and thrive both professionally and personally. As a result, we believe our colleagues are more engaged, committed, creative and effective in driving results. At the heart of our culture is what we call our Blue Box Values – a set of guiding principles that reflect who we are and what we stand for:

We Back Our Customers |  | We Embrace Diversity
We Make It Great |  | We Stand for Inclusion
We Do What's Right |  | We Win as A Team
We Respect People |  | We Support Our Communities

As of December 31, 2021, we employed approximately 64,000 people, whom we refer to as colleagues, with approximately 22,000 colleagues in the United States and approximately 42,000 colleagues outside the United States. To attract and retain the best talent, we continuously invest in programs, benefits and resources to foster the personal and professional growth of our colleagues. We provide learning opportunities in many forms, including tools and guidance for maximizing learning on the job; cross-border and cross-business unit assignments; career coaching, mentoring, and professional networking; rotation opportunities; virtual learning sessions; and formal classroom instruction. We take a holistic approach to well-being, providing resources that address the physical, financial and emotional health of our colleagues. Throughout the pandemic, one of our top priorities has been to ensure our colleagues have the flexibility and resources they need to stay safe, healthy and productive.
We conduct an annual Colleague Experience Survey to better understand our colleagues’ needs and overall experience at American Express and in 2021, 90 percent of colleagues who participated in the survey said they would recommend American Express as a great place to work. Our 2021 annual company scorecard included talent retention and diversity representation goals to increase minority and women representation and retain our key talent. While we experienced an increase in colleague attrition in 2021, our high potential and multi-year high performer retention rates met or exceeded our goals. As of December 31, 2021, women represented 52.9 percent of our global workforce and Asian, Black/African American and Hispanic/Latinx people represented 19.5 percent, 13.3 percent and 13.8 percent, respectively, of our U.S. workforce based on preliminary data for our 2021 U.S. EEO-1 submission.
We regularly review our compensation practices to ensure colleagues in the same job, level and location are compensated fairly regardless of gender globally, and race and ethnicity in the United States. These reviews consider several factors known to affect compensation, including role, level, tenure, performance and geography. In the instances where a review has found inconsistencies, we have made adjustments. After making these adjustments, we believe we maintained 100 percent pay equity in 2021 for colleagues across genders globally and across races and ethnicities in the United States.
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Information About Our Executive Officers
Set forth below, in alphabetical order, is a list of our executive officers as of February 11, 2022, including each executive officer’s principal occupation and employment during the past five years and reflecting recent organizational changes. None of our executive officers has any family relationship with any other executive officer, and none of our executive officers became an officer pursuant to any arrangement or understanding with any other person. Each executive officer has been elected to serve until the next annual election of officers or until his or her successor is elected and qualified. Each officer’s age is indicated by the number in parentheses next to his or her name.

DOUGLAS E. BUCKMINSTER — | Vice Chairman and Group President, Global Consumer Services Group
Mr. Buckminster (61) has been Vice Chairman since April 2021 and Group President, Global Consumer Services Group since February 2018. Prior thereto, he had been President, Global Consumer Services Group since October 2015.
JEFFREY C. CAMPBELL — | Vice Chairman and Chief Financial Officer
Mr. Campbell (61) has been Vice Chairman since April 2021 and Chief Financial Officer since August 2013.
MONIQUE HERENA — | Chief Colleague Experience Officer
Ms. Herena (50) has been Chief Colleague Experience Officer since April 2019. Ms. Herena joined American Express from BNY Mellon, where she served as the Chief Human Resources Officer and Senior Executive Vice President, Human Resources, Marketing and Communications since 2014.
RAYMOND JOABAR — | Group President, Global Merchant and Network Services
Mr. Joabar (56) has been Group President, Global Merchant and Network Services since April 2021. Prior thereto, he had been President, Global Risk and Compliance and Chief Risk Officer since September 2019. He also served as President of International Consumer Services and Global Travel and Lifestyle Services from February 2018 to September 2019 and as Executive Vice President, Global Servicing Network from February 2016 to February 2018.
ANNA MARRS — | Group President, Global Commercial Services and Credit & Fraud Risk
Ms. Marrs (48) has been Group President, Global Commercial Services and Credit & Fraud Risk since April 2021. Prior thereto, she had been President, Global Commercial Services since September 2018. Ms. Marrs joined American Express from Standard Chartered Bank, where she served as Regional CEO, ASEAN and South Asia since November 2016.
DAVID NIGRO — | Chief Risk Officer
Mr. Nigro (60) has been Chief Risk Officer since April 2021. Prior thereto, he had been Executive Vice President and Chief Credit Officer, Global Consumer Services and Credit and Fraud Risk Capability since April 2018 and Executive Vice President and Chief Credit Officer, U.S. Consumer Card Services since December 2013.
DENISE PICKETT — | President, Global Services Group
Ms. Pickett (56) has been President, Global Services Group since September 2019. Prior thereto, she had been Chief Risk Officer and President, Global Risk, Banking & Compliance since February 2018 and President, U.S. Consumer Services from October 2015 to February 2018.
RAVI RADHAKRISHNAN — | Chief Information Officer
Mr. Radhakrishnan (50) has been Chief Information Officer since January 2022. Mr. Radhakrishnan joined American Express from Wells Fargo & Company, where he served as Chief Information Officer for the Commercial Banking and Corporate & Investment Banking businesses since May 2020. Prior thereto, he had been Chief Information Officer, Wholesale, Wealth & Investment Management and Innovation from May 2019 to May 2020. He also served as Enterprise Chief Information Officer from March 2017 to May 2019 and as Chief Information Officer, Wholesale Banking from October 2015 to March 2017.
ELIZABETH RUTLEDGE — | Chief Marketing Officer
Ms. Rutledge (60) has been Chief Marketing Officer since February 2018. Prior thereto, she had been Executive Vice President, Global Advertising & Media since February 2016.
LAUREEN E. SEEGER — | Chief Legal Officer
Ms. Seeger (60) has been Chief Legal Officer since July 2014.

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JENNIFER SKYLER — | Corporate Affairs Officer
Ms. Skyler (45) has been Corporate Affairs Officer since October 2019. Ms. Skyler joined American Express from WeWork, where she served as Chief Communications Officer from January 2018 to September 2019. Prior thereto, she had been Global Head of Public Affairs from January 2016 to January 2018.
STEPHEN J. SQUERI — | Chairman and Chief Executive Officer
Mr. Squeri (62) has been Chairman and Chief Executive Officer since February 2018. Prior thereto, he had been Vice Chairman since July 2015.
ANRÉ WILLIAMS — | Group President, Enterprise Services
Mr. Williams (56) has been Group President, Enterprise Services since April 2021. Prior thereto, he had been Group President, Global Merchant and Network Services since February 2018 and President of Global Merchant Services and Loyalty since October 2015. Mr. Williams also serves as the Chief Executive Officer of American Express National Bank.

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COMPETITION
We compete in the global payments industry with card networks, issuers and acquirers, paper-based transactions (e.g., cash and checks), bank transfer models (e.g., wire transfers and Automated Clearing House, or ACH), as well as evolving and growing alternative mechanisms, systems and products that leverage new technologies, business models and customer relationships to create payment or financing solutions. The payments industry continues to undergo dynamic changes in response to evolving technologies, consumer habits and merchant needs, some of which have accelerated as a result of the pandemic, such as an increased shift to e-commerce and demand for contactless payments.
As a card issuer, we compete with financial institutions that issue general-purpose credit and debit cards. We also encounter competition from businesses that issue private label cards, operate mobile wallets or extend credit. We face intense competition in the premium space and for cobrand relationships, as both card issuer and network competitors have targeted high-spending customers and key business partners with attractive value propositions. We also face competition for partners and other differentiated offerings, such as lounge space in U.S. and global hub airports.
Our global card network competes in the global payments industry with other card networks, including, among others, China UnionPay, Visa, Mastercard, JCB, Discover and Diners Club International (which is owned by Discover). We are the fourth largest general-purpose card network globally based on purchase volume, behind China UnionPay, Visa and Mastercard. In addition to such networks, a range of companies globally, including merchant acquirers, processors and web- and mobile-based payment platforms (e.g., Alipay, PayPal and Venmo), as well as regional payment networks (such as the National Payments Corporation of India), carry out some activities similar to those performed by our GMNS business.
The principal competitive factors that affect the card-issuing, merchant and network businesses include:
•The features, value and quality of the products and services, including customer care, rewards programs, partnerships, travel and lifestyle-related benefits, and digital and mobile services, as well as the costs associated with providing such features and services
•Reputation and brand recognition
•The number, spending characteristics and credit performance of customers
•The quantity, diversity and quality of the establishments where the cards can be used
•The attractiveness of the value proposition to card issuers, merchant acquirers, cardholders, corporate clients and merchants (including the relative cost of using or accepting the products and services, and capabilities such as fraud prevention and data analytics)
•The number and quality of other cards and other forms of payment and financing available to customers
•The success of marketing and promotional campaigns
•The speed of innovation and investment in systems, technologies, and product and service offerings
•The nature and quality of expense management tools, electronic payment methods and data capture and reporting capabilities, particularly for business customers
•The security of cardholder, merchant and network partner information
Another aspect of competition is the dynamic and rapid growth of alternative payment and financing mechanisms, systems and products, which include payment aggregators, digital payment and electronic wallet platforms, point-of-sale lenders and buy now, pay later products, real-time settlement and processing systems, financial technology companies, digital currencies developed by both central banks and the private sector, blockchain and similar distributed ledger technologies, prepaid systems and gift cards, and systems linked to customer accounts or that provide payment solutions. Various competitors are integrating more financial services into their product offerings and competitors are seeking to attain the benefits of closed-loop, loyalty and rewards functionalities, such as ours.
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In addition to the discussion in this section, see “Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in the payments industry” in “Risk Factors” for further discussion of the potential impact of competition on our business, and “Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition” and “Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations, changes to our merchant agreements and/or business practices, substantial monetary damages and damage to our reputation and brand” in “Risk Factors” for a discussion of the potential impact on our ability to compete effectively due to government regulations or if ongoing legal proceedings limit our ability to prevent merchants from engaging in various actions to discriminate against our card products.
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SUPERVISION AND REGULATION
Overview
We are subject to extensive government regulation and supervision in jurisdictions around the world, and the costs of compliance are substantial. The financial services industry is subject to rigorous scrutiny, high regulatory expectations, a range of regulations and a stringent and unpredictable enforcement environment.
Governmental authorities have focused, and we believe will continue to focus, considerable attention on reviewing compliance by financial services firms with laws and regulations, and as a result, we continually work to evolve and improve our risk management framework, governance structures, practices and procedures. Reviews by us and governmental authorities to assess compliance with laws and regulations, as well as our own internal reviews to assess compliance with internal policies, including errors or misconduct by colleagues or third parties or control failures, have resulted in, and are likely to continue to result in, changes to our products, practices and procedures, restitution to our customers and increased costs related to regulatory oversight, supervision and examination. We have also been subject to regulatory actions and may continue to be the subject of such actions, including governmental inquiries, investigations, enforcement proceedings and the imposition of fines or civil money penalties, in the event of noncompliance or alleged noncompliance with laws or regulations. External publicity concerning investigations can increase the scope and scale of those investigations and lead to further regulatory inquiries.
In addition, legislators and regulators in various countries in which we operate have focused on the offering of consumer financial products and the operation of payment networks, resulting in changes to certain practices or pricing of card issuers, merchant acquirers and payment networks, and, in some cases, the establishment of broad and ongoing regulatory oversight regimes.
See “Risk Factors—Legal, Regulatory and Compliance Risks” for a discussion of the potential impact legislative and regulatory changes may have on our results of operations and financial condition.
Banking Regulation
Federal and state banking laws, regulations and policies extensively regulate the Company (which, for purposes of this section, refers to American Express Company as a bank holding company), TRS and our U.S. bank subsidiary, American Express National Bank (AENB). Both the Company and TRS are subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve and AENB is supervised, regulated and examined by the Office of the Comptroller of the Currency (OCC). The Company and its subsidiaries are also subject to the rulemaking, enforcement and examination authority of the Consumer Financial Protection Bureau (CFPB). Banking regulators have broad examination and enforcement power, including the power to impose substantial fines, limit dividends and other capital distributions, restrict operations and acquisitions and require divestitures, any of which could compromise our competitive position. Many aspects of our business also are subject to rigorous regulation by other U.S. federal and state regulatory agencies and by non-U.S. government agencies and regulatory bodies.
Activities
The BHC Act generally limits bank holding companies to activities that are considered to be banking activities and certain closely related activities. As noted above, each of the Company and TRS is a bank holding company and each has elected to become a financial holding company, which is authorized to engage in a broader range of financial and related activities. In order to remain eligible for financial holding company status, we must meet certain eligibility requirements. Those requirements include that each of the Company and AENB must be “well capitalized” and “well managed,” and AENB must have received at least a “satisfactory” rating on its most recent assessment under the Community Reinvestment Act of 1977 (the CRA). The Company and TRS engage in various activities permissible only for financial holding companies, including, in particular, providing travel agency services, acting as a finder and engaging in certain insurance underwriting and agency services. If the Company fails to meet eligibility requirements for financial holding company status, it and its subsidiaries are likely to be barred from engaging in new types of financial activities or making certain types of acquisitions or investments in reliance on its status as a financial holding company, and ultimately could be required to either discontinue the broader range of activities permitted to financial holding companies or divest AENB. In addition, the Company and its subsidiaries are prohibited by law from engaging in practices that the relevant regulatory authority deems unsafe or unsound (which such authorities generally interpret broadly).
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Acquisitions and Investments
Applicable federal and state laws place limitations on the ability of persons to invest in or acquire control of us without providing notice to or obtaining the approval of one or more of our regulators. In addition, we are subject to banking laws and regulations that limit our investments and acquisitions and, in some cases, subject them to the prior review and approval of our regulators, including the Federal Reserve and the OCC. Federal banking regulators have broad discretion in evaluating proposed acquisitions and investments that are subject to their prior review or approval.
Financial Regulatory Reform
The Company is subject to the U.S. federal bank regulatory agencies' rules that tailor the application of enhanced prudential standards to bank holding companies and depository institutions with $100 billion or more in total consolidated assets. Under these rules, each bank holding company, as well as its bank subsidiaries, is assigned to one of four categories based on its status as a U.S. global systemically important banking organization and five other risk-based indicators: (i) total assets, (ii) cross-jurisdictional activity, (iii) non-bank assets, (iv) off-balance sheet exposure, and (v) weighted short-term wholesale funding.
Under these rules, the Company (and its depository institution subsidiary, AENB) is subject to Category IV standards.
Because a firm’s categorization is determined by, and can change over time dependent upon, how the firm measures against the risk-based indicator thresholds, we are required to monitor and periodically report these risk-based indicators and there can be no assurance that the Company will continue to be a Category IV firm in the future.
Capital and Liquidity Regulation
Capital Rules
The Company and AENB are required to comply with the applicable capital adequacy rules established by federal banking regulators. These rules are intended to ensure that bank holding companies and depository institutions (collectively, banking organizations) have adequate capital given their level of assets and off-balance sheet obligations. The federal banking regulators’ current capital rules (the Capital Rules) implement the Basel Committee on Banking Supervision’s (the Basel Committee) framework for strengthening international capital regulation, known as Basel III. For additional information regarding our capital ratios, see “Consolidated Capital Resources and Liquidity” under “MD&A.”
Under the Capital Rules, banking organizations are required to maintain minimum ratios for Common Equity Tier 1 (CET1 capital), Tier 1 capital (that is, CET1 capital plus additional Tier 1 capital) and Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets. We report our capital adequacy ratios using risk-weighted assets calculated under the standardized approach. As a Category IV firm, we are not subject to the advanced approaches capital requirements.
In December 2017, the Basel Committee published standards that, among other things, revise the standardized approach for credit risk (including by recalibrating risk weights and introducing additional capital requirements for certain “unconditionally cancellable commitments” such as unused credit card lines of credit) and provide a new standardized calculation for operational risk capital requirements. If adopted in the United States as issued by the Basel Committee and applicable to us, the new standards are likely to result in higher capital requirements for us.
In December 2018, federal banking regulators issued a final rule that provides an optional three-year phase-in period for the adverse regulatory capital effects of adopting the Current Expected Credit Loss (CECL) methodology pursuant to new accounting guidance for the recognition of credit losses on certain financial instruments, which became effective January 1, 2020. In August 2020, federal banking regulators issued a final rule that provides an option to delay the estimated impact of the adoption of the CECL methodology on regulatory capital for up to two years, followed by the three-year phase-in period. We elected to adopt the two-year delay followed by the three-year phase-in period. Therefore, the Company began phasing in the cumulative amount that is not recognized in regulatory capital at 25 percent per year beginning January 1, 2022. See “Critical Accounting Estimates” under “MD&A” for additional information on CECL.
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The Company and AENB must each maintain CET1 capital, Tier 1 capital and Total capital ratios of at least 4.5 percent, 6.0 percent and 8.0 percent, respectively. On top of these minimum capital ratios, the Company is subject to a dynamic stress capital buffer (SCB) composed entirely of CET1 capital with a floor of 2.5 percent and AENB is subject to a static 2.5 percent capital conservation buffer (CCB). The SCB equals (i) the difference between a bank holding company’s starting and minimum projected CET1 capital ratios under the supervisory severely adverse scenario under the Federal Reserve's stress tests described below, plus (ii) one year of planned common stock dividends as a percentage of risk-weighted assets.
On June 24, 2021, the Federal Reserve confirmed the SCB for the Company of 2.5 percent, which remained unchanged from the level announced in August 2020. As a result, the effective minimum ratios for the Company (taking into account the SCB requirement) and AENB (taking into account the CCB requirement) are 7.0 percent, 8.5 percent and 10.5 percent for the CET1 capital, Tier 1 capital and Total capital ratios, respectively. Banking organizations whose ratios of CET1 capital, Tier 1 capital or Total capital to risk-weighted assets are below these effective minimum ratios face constraints on discretionary distributions such as dividends, repurchases and redemptions of capital securities, and executive compensation. A bank holding company’s SCB requirement is generally effective on October 1 of each year and will remain in effect through September 30 of the following year unless it is reset in connection with resubmission of a capital plan, as discussed below.
We are also required to comply with minimum leverage ratio requirements. The leverage ratio is the ratio of a banking organization’s Tier 1 capital to its average total consolidated assets (as defined for regulatory purposes). All banking organizations are required to maintain a leverage ratio of at least 4.0 percent.
Liquidity Regulation
The Federal Reserve’s enhanced prudential standards rule includes heightened liquidity and overall risk management requirements. The rule requires the maintenance of a liquidity buffer, consisting of highly liquid assets, that is sufficient to meet projected net outflows for 30 days over a range of liquidity stress scenarios, and a minimum liquidity coverage ratio (LCR) that measures a firm’s high-quality liquid assets to its projected net outflows. Category IV firms with less than $50 billion in weighted short-term wholesale funding, such as the Company, are not subject to a specific LCR requirement.
A second standard provided for in the Basel III liquidity framework, referred to as the net stable funding ratio (NSFR), requires a minimum amount of longer-term funding based on the assets and activities of banking entities. Under the NSFR rule, Category IV firms with less than $50 billion in weighted short-term wholesale funding, such as the Company, are not subject to a specific NSFR requirement.
Stress Testing and Capital Planning
Under the Federal Reserve’s regulations, the Company is subject to supervisory stress testing requirements that are designed to evaluate whether a bank holding company has sufficient capital on a total consolidated basis to absorb losses and support operations under adverse economic conditions. As part of the Comprehensive Capital Analysis and Review (CCAR), the Federal Reserve uses pro-forma capital positions and ratios under such stress scenarios to determine the size of the SCB for each CCAR participating firm.
As a Category IV firm, the Company is required to participate in the supervisory stress tests every other year and is subject to the Federal Reserve’s supervisory stress tests in 2022. The Company is required to develop and submit to the Federal Reserve an annual capital plan on or before April 5 of each year.
For Category IV firms, such as the Company, the portion of the SCB based on the Federal Reserve's supervisory stress tests is calculated every other year. During a year in which a Category IV firm does not undergo a supervisory stress test, the firm receives an updated SCB that reflects the firm's updated planned common stock dividends. A Category IV firm can elect to participate in the supervisory stress test in an “off year” and consequently receive an updated SCB.
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Due to the economic uncertainty related to the pandemic, the Federal Reserve prohibited share repurchases in the third and fourth quarters of 2020 for all bank holding companies participating in CCAR, but a llowed them to pay common stock dividends provided (a) they did not increase the amount of the dividend and (b) the dividends did not exceed the average of a firm’s net income for the four preceding calendar quarters. During the first and second quarters of 2021, the Federal Reserve allowed bank holding companies participating in CCAR to repurchase common stock and pay common stock dividends provided (a) the repurchases and dividends, in the aggregate, did not exceed the average of a firm’s net income for the four preceding calendar quarters and (b) the firm did not increase the amount of its common stock dividends beyond the level paid in the second quarter of 2020. The Federal Reserve also permitted stock repurchases equal to the amount of share issuances related to expensed employee compensation. These capital distribution restrictions ceased to apply on July 1, 2021. For additional information regarding our capital distributions, see “Consolidated Capital Resources and Liquidity” under “MD&A.”
We may be required to revise and resubmit our capital plan following certain events or developments, such as a significant acquisition or an event that could result in a material change in our risk profile or financial condition. If we are required to resubmit our capital plan, we must receive prior approval from the Federal Reserve for any capital distributions (including common stock dividend payments and share repurchases), other than a capital distribution on a newly issued capital instrument.
Dividends and Other Capital Distributions
The Company and TRS, as well as AENB and the Company’s insurance and other regulated subsidiaries, are limited in their ability to pay dividends by statutes, regulations and supervisory policy.
Common stock dividend payments and share repurchases by the Company are subject to the oversight of the Federal Reserve, as described above. The Company will be subject to limitations and restrictions on capital distributions if, among other things, (i) the Company's regulatory capital ratios do not satisfy applicable minimum requirements and buffers or (ii) the Company is required to resubmit its capital plan.
In general, federal laws and regulations prohibit, without first obtaining the OCC’s approval, AENB from making dividend distributions to TRS, if such distributions are not paid out of available recent earnings or would cause AENB to fail to meet capital adequacy standards. In addition to specific limitations on the dividends AENB can pay to TRS, federal banking regulators have authority to prohibit or limit the payment of a dividend if, in the banking regulator’s opinion, payment of a dividend would constitute an unsafe or unsound practice in light of the financial condition of the institution.
Prompt Corrective Action
The Federal Deposit Insurance Act (FDIA) requires, among other things, that federal banking regulators take prompt corrective action in respect of depository institutions insured by the FDIC (such as AENB) that do not meet minimum capital requirements. The FDIA establishes five capital categories for FDIC-insured banks: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. The FDIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the capital category in which an institution is classified. In order to be considered “well capitalized,” AENB must maintain CET1 capital, Tier 1 capital, Total capital and Tier 1 leverage ratios of 6.5 percent, 8.0 percent, 10.0 percent and 5.0 percent, respectively.
Under the FDIA, AENB could be prohibited from accepting brokered deposits (i.e., deposits raised through third-party brokerage networks) or offering interest rates on any deposits significantly higher than the prevailing rate in its normal market area or nationally (depending upon where the deposits are solicited), unless (1) it is well capitalized or (2) it is adequately capitalized and receives a waiver from the FDIC. A portion of our outstanding U.S. retail deposits are considered brokered deposits for bank regulatory purposes. If a federal regulator determines that we are in an unsafe or unsound condition or that we are engaging in unsafe or unsound banking practices, the regulator may reclassify our capital category or otherwise place restrictions on our ability to accept or solicit brokered deposits.
In December 2020, the FDIC issued a final rule intended to update and modernize the FDIC’s brokered deposit regulations. Effective April 1, 2021, the final rule, among other things, expanded the definition of “deposit broker” and updated the interest rate restrictions for less than well capitalized banks.
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Resolution Planning
Certain bank holding companies are required to submit resolution plans to the Federal Reserve and FDIC providing for the company’s strategy for rapid and orderly resolution in the event of its material financial distress or failure. However, Category IV firms, such as the Company, are not required to submit a holding company resolution plan.
AENB continues to be required to prepare and provide a separate resolution plan to the FDIC that would enable the FDIC, as receiver, to effectively resolve AENB under the FDIA in the event of failure. The FDIC issued an Advance Notice of Proposed Rulemaking on potential revisions to this separate resolution plan requirement for insured depository institutions in April 2019 and temporarily suspended resolution planning requirements for insured depository institutions. In January 2021, the FDIC lifted the moratorium on resolution plan submissions for insured depository institutions with $100 billion or more in assets, including AENB.
On June 25, 2021, the FDIC released a statement outlining a modified approach to implementing the FDIC’s rule requiring insured depository institutions with $100 billion or more in total assets to submit resolution plans. Among other things, the modified approach (i) extends the resolution plan’s submission frequency to a three-year cycle; (ii) lays out new details regarding the FDIC’s emphasis on engagement with firms; and (iii) exempts filers from other content requirements that the FDIC has determined have been less useful or are obtainable through other supervisory channels.
Orderly Liquidation Authority
The Company could become subject to the Orderly Liquidation Authority (OLA), a resolution regime under which the Treasury Secretary may appoint the FDIC as receiver to liquidate a systemically important financial institution, if the Company is in danger of default and is determined to present a systemic risk to U.S. financial stability. As under the FDIC resolution model, under the OLA, the FDIC has broad power as receiver. Substantial differences exist, however, between the OLA and the FDIC resolution model for depository institutions, including the right of the FDIC under the OLA to disregard the strict priority of creditor claims in limited circumstances, the use of an administrative claims procedure to determine creditor claims (as opposed to the judicial procedure used in bankruptcy proceedings), and the right of the FDIC to transfer claims to a “bridge” entity.
The FDIC has developed a strategy under OLA, referred to as the “single point of entry” or “SPOE” strategy, under which the FDIC would resolve a failed financial holding company by transferring its assets (including shares of its operating subsidiaries) and, potentially, very limited liabilities to a “bridge” holding company; utilize the resources of the failed financial holding company to recapitalize the operating subsidiaries; and satisfy the claims of unsecured creditors of the failed financial holding company and other claimants in the receivership by delivering securities of one or more new financial companies that would emerge from the bridge holding company. Under this strategy, management of the failed financial holding company would be replaced and its shareholders and creditors would bear the losses resulting from the failure.
FDIC Powers upon Insolvency of AENB
If the FDIC is appointed the conservator or receiver of AENB, the FDIC has the power: (1) to transfer any of AENB’s assets and liabilities to a new obligor without the approval of AENB’s creditors; (2) to enforce the terms of AENB’s contracts pursuant to their terms; or (3) to repudiate or disaffirm any contract or lease to which AENB is a party, the performance of which is determined by the FDIC to be burdensome and the disaffirmation or repudiation of which is determined by the FDIC to promote the orderly administration of AENB. In addition, the claims of holders of U.S. deposit liabilities and certain claims for administrative expenses of the FDIC against AENB would be afforded priority over other general unsecured claims against AENB, including claims of debt holders and depositors in non-U.S. offices, in the liquidation or other resolution of AENB. As a result, whether or not the FDIC ever sought to repudiate any debt obligations of AENB, the debt holders and depositors in non-U.S. offices would be treated differently from, and could receive substantially less, if anything, than the depositors in the U.S. offices of AENB.
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Other Banking Regulations
Source of Strength
The Company is required to act as a source of financial and managerial strength to its U.S. bank subsidiary, AENB, and may be required to commit capital and financial resources to support AENB. Such support may be required at times when, absent this requirement, the Company otherwise might determine not to provide it. Capital loans by the Company to AENB are subordinate in right of payment to deposits and to certain other indebtedness of AENB. In the event of the Company’s bankruptcy, any commitment by the Company to a federal banking regulator to maintain the capital of AENB will be assumed by the bankruptcy trustee and entitled to a priority of payment.
Transactions Between AENB and its Affiliates
Certain transactions (including loans and credit extensions from AENB) between AENB and its affiliates (including the Company, TRS and their other subsidiaries) are subject to quantitative and qualitative limitations, collateral requirements and other restrictions imposed by statute and regulation. Transactions subject to these restrictions are generally required to be made on an arm’s-length basis.
FDIC Deposit Insurance and Insurance Assessments
AENB accepts deposits that are insured by the FDIC up to the applicable limits. Under the FDIA, the FDIC may terminate the insurance of an institution’s deposits upon a finding that the institution has engaged in unsafe or unsound practices; is in an unsafe or unsound condition to continue operations; or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that would lead to termination of deposit insurance at AENB. The FDIC’s deposit insurance fund is funded by assessments on insured depository institutions, including AENB, which are subject to adjustment by the FDIC.
Community Reinvestment Act
AENB is subject to the CRA, which imposes affirmative, ongoing obligations on depository institutions to meet the credit needs of their local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of the institution. In May 2020, the OCC issued a final rule intended to (i) clarify which activities qualify for CRA credit; (ii) update where activities count for CRA credit; and (iii) change the methods for CRA measurement, data collection, recordkeeping and reporting for national banks and federal savings associations. Effective January 1, 2022, that final rule was rescinded and replaced with a rule based on the rules adopted jointly by the federal banking agencies in 1995, as amended. This action was intended to promote consistency for all insured depository institutions while the agencies continue their ongoing work to modernize the CRA framework on an interagency basis.
Climate Risk Management
The U.S. banking agencies steadily increased their focus on climate risk-related supervision during 2021 and are expected to expand and formalize that focus in 2022. For example, on October 21, 2021, the Financial Stability Oversight Council (FSOC) issued its Report on Climate-Related Financial Risk, which contains 35 recommendations for FSOC’s member agencies and serves as a framework for next steps. In addition, on December 16, 2021, the OCC issued for public comment a set of proposed “Principles for Climate-Related Financial Risk Management for Large Banks.” The principles would apply to OCC-regulated institutions with more than $100 billion in total consolidated assets, like AENB, and are broadly designed to provide a high-level framework for the safe and sound management of exposures to climate-related financial risks consistent with existing OCC rules and guidance. The principles outline six key aspects of climate-related financial risk management: governance; policies, procedures and limits; strategic planning; risk management; data, risk measurement and reporting; and scenario analysis. In addition, the principles offer risk assessment guidance for incorporating climate-related financial risks in various traditional risk categories. It is too early to determine what regulations and policies may be adopted or apply to the Company and AENB and the effect of any such regulations or policies on the Company and AENB.
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Consumer Financial Products Regulation
In the United States, our marketing, sale and servicing of consumer financial products and our compliance with certain federal consumer financial laws are supervised and examined by the CFPB, which has broad rulemaking and enforcement authority over providers of credit, savings and payment services and products, and authority to prevent “unfair, deceptive or abusive” acts or practices. The CFPB has the authority to write regulations under federal consumer financial protection laws, to enforce those laws and to examine for compliance. It is also authorized to collect fines and require consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data and promote the availability of financial services to underserved consumers and communities. In addition, a number of U.S. states have significant consumer credit protection, disclosure and other laws (in certain cases more stringent than U.S. federal laws). U.S. federal law also regulates abusive debt collection practices, which, along with bankruptcy and debtor relief laws, can affect our ability to collect amounts owed to us or subject us to regulatory scrutiny.
On November 30, 2021, the CFPB’s final rule that sets forth additional requirements for third-party debt collection agencies, which we use in the ordinary course of business, became effective. See “We are exposed to credit risk and trends that affect Card Member spending and the ability of customers and partners to pay us, which could have a material adverse effect on our results of operations and financial condition” under “Risk Factors” for potential impacts related to legal and regulatory changes on our ability to collect amounts owed to us.
We are also regulated in the United States under the “money transmitter” or “sale of check” laws in effect in most states. In addition, we are required by the laws of many states to comply with unclaimed and abandoned property laws, under which we must pay to states the face amount of any Travelers Cheque or prepaid card that is uncashed or unredeemed after a period of time depending on the type of product. Additionally, we are regulated under insurance laws in the United States and other countries where we offer insurance services.
In countries outside the United States, regulators continue to focus on a number of key areas impacting our card-issuing businesses, particularly consumer protection (such as in the European Union (EU), the United Kingdom and Canada) and responsible lending (such as in Australia, Mexico, New Zealand and Singapore), with increasing importance on and attention to customers and outcomes rather than just ensuring compliance with local rules and regulations. Regulators’ expectations of firms in relation to their compliance, risk and control frameworks continue to increase and regulators are placing significant emphasis on a firm’s systems and controls relating to the identification and resolution of issues.
Payments Regulation
Legislators and regulators in various countries in which we operate have focused on the operation of card networks, including through enforcement actions, legislation and regulations to change certain practices or pricing of card issuers, merchant acquirers and payment networks, and, in some cases, to establish broad and ongoing regulatory oversight regimes for payment systems.
The EU, Australia, Canada and other jurisdictions have focused on interchange fees (that is, the fee paid by the bankcard merchant acquirer to the card issuer in payment networks like Visa and Mastercard), as well as the rules, contract terms and practices governing merchant card acceptance. Regulation and other governmental actions relating to pricing or practices could affect all networks directly or indirectly, as well as adversely impact consumers and merchants. Among other things, regulation of bankcard fees has negatively impacted and may continue to negatively impact the discount revenue we earn, including as a result of downward pressure on our discount rate from decreases in competitor pricing in connection with caps on interchange fees. In some cases, regulations also extend to certain aspects of our business, such as network and cobrand arrangements or the terms of card acceptance for merchants, and we have exited our network businesses in the EU and Australia as a result of regulation in those jurisdictions, for example. There is uncertainty as to when or how interchange fee caps and other provisions of the EU and UK payments legislation might apply when we work with cobrand partners and agents in the EU and the UK. Given differing interpretations by regulators and participants in cobrand arrangements, we are subject to regulatory action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU or the UK.
In various countries, such as certain Member States in the EU and Australia, merchants are permitted by law to surcharge card purchases. In addition, the laws of a number of states in the United States that prohibit surcharging have been overturned and certain states have passed or are considering laws to permit surcharging by merchants. Surcharging is an adverse customer experience and could have a material adverse effect on us, particularly where it only or disproportionately impacts credit card usage or card usage generally, our Card Members or our business. In addition, other steering or differential acceptance practices that are permitted by regulation in some jurisdictions could also have a material adverse effect on us. See “Surcharging or steering by merchants could materially adversely affect our business and results of operations” under “Risk Factors.”
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In some countries, governments have established regulatory regimes that require international card networks to be locally licensed and/or to localize aspects of their operations. For example, the Reserve Bank of India, which has broad power under the Payment and Settlement Systems Act, 2007 to regulate the membership and operations of card networks, has issued a mandate requiring payment systems operators in India to store certain payments data locally. On April 23, 2021, the Reserve Bank of India imposed restrictions on the ability of American Express Banking Corp. to engage in certain card issuing activities in India from May 1, 2021 until it complies with a regulation requiring storage of payment transaction data exclusively in India. This order does not impact existing customers. We are working towards complying with the regulation. Governments in some countries also provide resources or protection to select domestic payment card networks. The development and enforcement of these and other similar laws, regulations and policies may adversely affect our ability to compete effectively and maintain and extend our global network.
Privacy, Data Protection, Data Governance, Information and Cyber Security
Regulatory and legislative activity in the areas of privacy, data protection, data governance and information and cyber security continues to increase worldwide. We have established and continue to maintain policies and a governance framework to comply with applicable privacy, data protection, data governance and information and cyber security laws and requirements, meet evolving customer and industry expectations and support and enable business innovation and growth.
Our regulators are increasingly focused on ensuring that our privacy, data protection, data governance and information and cyber security-related policies and practices are adequate to inform customers of our data collection, use, sharing and/or security practices, to provide them with choices, if required, about how we use and share their information, and to appropriately safeguard their personal information and account access. Regulators are also focused on data management, data governance and our third-party risk management policies and practices.
In the United States, certain of our businesses are subject to the privacy, disclosure and safeguarding provisions of the Gramm-Leach-Bliley Act (GLBA) and its implementing regulations and guidance. Among other things, GLBA imposes certain limitations on our ability to share consumers’ nonpublic personal information with nonaffiliated third parties and requires us to develop, implement and maintain a written comprehensive information security program containing safeguards that are appropriate to the size and complexity of our business, the nature and scope of our activities and the sensitivity of customer information that we process. More recently, we have expanded privacy rights to California residents who are not covered by GLBA, pursuant to the California Consumer Privacy Act and the California Privacy Rights Act. Various regulators, U.S. states and territories are considering similar requirements or have adopted laws, rules and regulations pertaining to privacy and/or information and cyber security that may be more stringent and/or expansive than federal requirements.
We are also subject to certain privacy, data protection, data governance and information and cyber security laws in other countries in which we operate (including countries in the EU, Australia, Canada, China, Japan, Hong Kong, India, Mexico, Singapore and the United Kingdom), some of which are more stringent and/or expansive than those in the United States and some of which may conflict with each other. Some countries and the EU have instituted or are considering instituting requirements that make it onerous to transfer personal data to other jurisdictions. Other countries may require in-country data processing and/or in-country storage of data. Compliance with such laws results in higher technology, administrative and other costs for us, could limit our ability to optimize the use of our closed-loop data, and could require use of local technology services. Some of these laws also require us to provide foreign governments and other third parties broader access to our data and intellectual property. Data breach and operational outage notification laws or regulatory activities to encourage such notifications and regulatory activity and laws around resiliency, business continuity and third-party risk management are also becoming more prevalent in jurisdictions outside the United States in which we operate.
In Europe, the EU General Data Protection Regulation (GDPR) imposes legal and compliance obligations on companies that process personal data of individuals in the EU, irrespective of the geographical location of the company, with the potential for significant fines for non-compliance (up to 4 percent of total annual worldwide revenue). The GDPR includes, among other things, a requirement for prompt notice of data breaches, in certain circumstances, to affected individuals and supervisory authorities. The UK GDPR, which became effective in January 2021, mirrors the compliance requirements and fine structure of the GDPR.
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Anti-Money Laundering, Sanctions and Anti-Corruption Compliance
We are subject to significant supervision and regulation, and an increasingly stringent enforcement environment, with respect to compliance with anti-money laundering (AML), sanctions and anti-corruption laws and regulations in the United States and in other jurisdictions in which we operate. Failure to maintain and implement adequate programs and policies and procedures for AML, sanctions and anti-corruption compliance could have material financial, legal and reputational consequences.
Anti-Money Laundering
We are subject to a significant number of AML laws and regulations as a result of being a financial company headquartered in the United States, as well as having a global presence. In the United States, the majority of AML requirements are derived from the Currency and Foreign Transactions Reporting Act and the accompanying regulations issued by the U.S. Department of the Treasury (collectively referred to as the Bank Secrecy Act), as amended by the USA PATRIOT Act of 2001 (the Patriot Act). The Anti-Money Laundering Act of 2020 (the AMLA), enacted in January 2021, amended the Bank Secrecy Act and is intended to comprehensively reform and modernize U.S. AML laws. Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, the effects of which are not known at this time. In Europe, AML requirements are largely the result of countries transposing the 5th and 6th EU Anti-Money Laundering Directives (and preceding EU Anti-Money Laundering Directives) into local laws and regulations. Numerous other countries, such as Argentina, Australia, Canada, India, Mexico, New Zealand and Russia, have also enacted or proposed new or enhanced AML legislation and regulations applicable to American Express.
Among other things, these laws and regulations require us to establish AML programs that meet certain standards, including, in some instances, expanded reporting, particularly in the area of suspicious transactions, and enhanced information gathering and recordkeeping requirements. Our AML programs have become the subject of heightened scrutiny in some countries, including certain Member States in the EU. Any errors, failures or delays in complying with AML and counter-terrorist financing laws, perceived deficiencies in our AML programs or association of our business with money laundering, terrorist financing, tax fraud or other illicit activity can give rise to significant supervisory, criminal and civil proceedings and lawsuits, which could result in significant penalties and forfeiture of assets, loss of licenses or restrictions on business activities, or other enforcement actions.
Office of Foreign Assets Control Regulation
The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. The United States prohibits U.S. persons from engaging with individuals and entities identified as “Specially Designated Nationals,” such as terrorists and narcotics traffickers. These prohibitions are administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and are typically known as the OFAC rules. The OFAC rules prohibit U.S. persons from engaging in financial transactions with or relating to the prohibited individual, entity or country, require the blocking of assets in which the individual, entity or country has an interest, and prohibit transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons) to such individual, entity or country. Blocked assets (e.g., property or bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. We maintain a global sanctions program designed to ensure compliance with OFAC requirements. Failure to comply with such requirements could subject us to serious legal and reputational consequences, including criminal penalties.
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Anti-Corruption
We are subject to complex international and U.S. anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act (the FCPA), the UK Bribery Act and other laws that prohibit the making or offering of improper payments. The FCPA makes it illegal to corruptly offer or provide anything of value to foreign government officials, political parties or political party officials for the purpose of obtaining or retaining business or an improper advantage. The FCPA also requires us to strictly comply with certain accounting and internal controls standards. The UK Bribery Act also prohibits commercial bribery and the receipt of a bribe, and makes it a corporate offense to fail to prevent bribery by an associated person, in addition to prohibiting improper payments to foreign government officials. Failure of the Company, our subsidiaries, colleagues, contractors or agents to comply with the FCPA, the UK Bribery Act and other similar laws can expose us and/or individual colleagues to investigation, prosecution and potentially severe criminal and civil penalties.
Compensation Practices
Our compensation practices are subject to oversight by the Federal Reserve and the OCC. The federal banking regulators’ guidance on sound incentive compensation practices sets forth three key principles for incentive compensation arrangements that are designed to help ensure that incentive compensation plans do not encourage imprudent risk-taking and are consistent with the safety and soundness of banking organizations. The three principles provide that a banking organization’s incentive compensation arrangements should (1) provide incentives that appropriately balance risk and financial results in a manner that does not encourage employees to expose their organizations to imprudent risks, (2) be compatible with effective internal controls and risk management, and (3) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. Any deficiencies in our compensation practices that are identified by the banking regulators in connection with their review of our compensation practices may be incorporated into our supervisory ratings, which can affect our ability to make acquisitions or perform other actions. Enforcement actions may be taken against us if our incentive compensation arrangements or related risk-management control or governance processes are determined to pose a risk to our safety and soundness, and we have not taken prompt and effective measures to correct the deficiencies.
In May 2016, the federal banking regulators, the Securities and Exchange Commission (SEC), the Federal Housing Finance Agency and the National Credit Union Administration re-proposed a rule, originally proposed in 2011, on incentive-based compensation practices. The re-proposed rule would apply deferral, downward adjustment and forfeiture, and clawback requirements to incentive-based compensation arrangements granted to senior executive officers and significant risk-takers of covered institutions, with specific requirements varying based on the asset size of the covered institution and the category of employee. If these or other regulations are adopted in a form similar to what has been proposed, they will impose limitations on the manner in which we may structure compensation for our colleagues, which could adversely affect our ability to hire, retain and motivate key colleagues.
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ADDITIONAL INFORMATION
We maintain an Investor Relations website at http://ir.americanexpress.com. We make available free of charge, on or through this website, our annual, quarterly and current reports and any amendments to those reports as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC.
In addition, we routinely post financial and other information, some of which could be material to investors, on our Investor Relations website. Information regarding our corporate responsibility and sustainability initiatives, including our Environmental, Social and Governance reports, are available on our Corporate Responsibility website at http://about.americanexpress.com/corporate-responsibility.
The content of any of our websites referred to in this report is not incorporated by reference into this report or any other report filed with or furnished to the SEC. We have included such website addresses only as inactive textual references and do not intend them to be active links.
You can find certain statistical disclosures required of bank holding companies starting on page A-1, which are incorporated herein by reference.
Our business as a whole has not experienced significant seasonal fluctuations, although network volumes tend to be moderately higher in the fourth quarter than in other quarters. As a result, the amount of Card Member loans and receivables outstanding tend to be moderately higher during that quarter. The average discount rate also tends to be slightly lower during the fourth quarter due to a higher level of retail-related billed business.
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ITEM 1A. RISK FACTORS
This section highlights certain risks that could affect us and our businesses, broadly categorized as “Strategic, Business and Competitive Risks,” “Legal, Regulatory and Compliance Risks” and “Credit, Liquidity and Market Risks.” You should carefully consider each of the following risks and all of the other information set forth in this Annual Report on Form 10-K, including the “Risk Management” section under “MD&A,” which describes our approach to identifying, monitoring and managing the risks we assume in conducting our businesses and provides certain quantitative and qualitative disclosures about market risks. The risks and uncertainties we face are not limited to those described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.
Strategic, Business and Competitive Risks
Business and economic conditions are a major driver of our results of operations and difficult conditions in the business and economic environment, including as a result of the COVID-19 pandemic, have had a material adverse effect on our business.
We offer a broad array of products and services to consumers, small businesses and commercial clients and thus are very dependent upon the level of consumer and business activity and the demand for payment and financing products. Slow economic growth, economic contraction or shifts in broader consumer and business trends significantly impact customer behaviors, including spending on our cards, the ability and willingness of Card Members to borrow and pay amounts owed to us, and demand for fee-based products and services. Factors such as consumer spending and confidence, household income and housing prices, unemployment rates, business investment and inventory levels, bankruptcies, geopolitical instability, public policy decisions, government spending, international trade relationships, interest rates, taxes, energy costs, availability of capital and credit, inflation and deflation all affect the economic environment and, ultimately, our profitability. Such factors may also cause our earnings, billings, loan balances, credit metrics and margins to fluctuate and diverge from expectations of analysts and investors, who may have differing assumptions regarding their impact on our business, adversely affecting, and/or increasing the volatility of, the trading price of our common shares. The consequences of negative circumstances impacting us or the economic environment generally can be sudden and severe and can impact customer types and geographies in which we operate in very different ways.
The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and consumer and business spending. The pandemic and resulting containment measures adversely impacted a significant portion of our network volumes (including, but not limited to, travel and entertainment (T&E) spending) and spending in certain categories have still not recovered to pre-pandemic levels. For example, airline-related billed business was down 62 percent in 2021 relative to 2019 and spending by large and global corporate customers was down 45 percent relative to 2019. The global macroeconomic outlook continues to remain uncertain due to a variety of factors, including the Omicron variant, labor shortages, supply chain disruptions and inflation, and the impacts of the COVID-19 pandemic may continue even after the outbreak has subsided and containment measures are lifted, all of which may continue to exacerbate many of the other risks described in this “Risk Factors” section.
The extent to which our business and results of operations could be adversely affected by the continuing impacts of the pandemic will depend on numerous evolving factors and future developments that we are not able to predict, including the continued spread and severity of the virus and new variants; the imposition or concern of the possible imposition of further containment measures; the availability, distribution and use of effective treatments and vaccines; the extent to which vaccines are effective over the long term and against new, emerging variants; the extent and duration of the effect on the economy, inflation, consumer confidence and consumer and business spending; the impact on consumers and businesses as forbearance and government support programs end; the continued stress on businesses due to shutdowns, operational changes and staffing issues; and how quickly and to what extent normal operating conditions and customer behaviors resume, such as with respect to travel, dining and in-person events.
Our business is subject to the effects of geopolitical conditions, weather, natural disasters and other catastrophic events.
Geopolitical conditions, terrorist attacks, natural disasters, severe weather, widespread health emergencies or pandemics, information or cyber security incidents (including intrusion into or degradation of systems or technology by cyberattacks) and other catastrophic events can have a material adverse effect on our business. Political and social conditions, fiscal and monetary policies, trade wars and tariffs, labor shortages, prolonged or recurring government shutdowns, regional or domestic hostilities, economic sanctions and the prospect or occurrence of more widespread conflicts could also negatively affect our business, operations and partners, consumer and business spending, including travel patterns and business investment, and demand for credit.
As noted above, the COVID-19 pandemic has had, and may continue to have, a material adverse impact on our business and results of operations. Because of our proximity to the World Trade Center site, our headquarters were damaged as a result of the terrorist attacks of September 11, 2001. Recent hurricanes and other natural disasters have impacted spending and credit performance in the areas affected. Other disasters or catastrophic events in the future, and the impact of such events on certain industries or the overall economy, could have a negative effect on our business, results of operations and infrastructure,
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including our technology and systems. Climate change may exacerbate certain of these threats, including the frequency and severity of weather-related events. Card Members in California, New York, Florida, Texas and Georgia account for a significant portion of U.S. Consumer billed business and Card Members loans, and our results of operations could be impacted by events or conditions that disproportionately or specifically affect one or more of those states.
Because we derive a portion of our revenues from travel-related spending, our business is sensitive to safety concerns related to travel and tourism, limitations on travel and mobility, and health-related risks, including travel restrictions and bans as a result of the COVID-19 pandemic, concerns that additional containment measures may be imposed on short notice and changes in customer behaviors that may continue even after the outbreak has subsided and containment measures are lifted, such as decisions to delay or forgo business or personal travel. In addition, disruptions in air travel and other forms of travel can result in the payment of claims under travel interruption insurance policies we offer.
Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in the payments industry.
The payments industry is highly competitive, and we compete with card networks, issuers and acquirers, paper-based transactions (e.g., cash and checks), bank transfer models (e.g., wire transfers and ACH), as well as evolving and growing alternative payment and financing providers. If we are not able to differentiate ourselves from our competitors, develop compelling value propositions for our customers and/or effectively grow in areas such as mobile and online payments and emerging technologies, we may not be able to compete effectively.
We believe Visa and Mastercard are larger than we are in most countries based on purchase volume. As a result, card issuers and acquirers on the Visa and Mastercard networks may be able to benefit from the dominant position, scale, resources, marketing and pricing of those networks. Our business may also be negatively affected if we are unable to continue increasing merchant acceptance (including by merchants that accept cards on the Visa and Mastercard networks) and perceptions of coverage, or if our Card Members do not experience welcome acceptance of our cards.
Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have and may offer richer value propositions or a wider range of programs and services than we offer or may use more effective strategies to acquire and retain more customers, capture a greater share of spending and borrowings, develop more attractive cobrand card and other partner programs and maintain greater merchant acceptance than we have. We may not be able to compete effectively against these threats or respond or adapt to changes in consumer spending and borrowing habits as effectively as our competitors. Costs such as Card Member rewards and Card Member services expenses could continue to increase as we evolve our value propositions, including in response to increased competition.
Spending on our cards could continue to be impacted by increasing consumer usage of credit and debit cards issued on other networks, as well as adoption of alternative payment mechanisms, systems and products. The fragmentation of customer spending to take advantage of different merchant or card incentives or for convenience with technological solutions may continue to increase. Revolving credit balances on our cards could also be impacted by alternative financing providers, such as point-of-sale lenders and buy now, pay later products. To the extent other payment and financing mechanisms, systems and products continue to successfully expand, our discount revenues earned from Card Member spending and our net interest income earned from Card Member borrowing could be negatively impacted. In addition, companies that control access to consumer and merchant payment method choices at the point of sale or through digital wallets, commerce-related experiences, mobile applications or other technologies could choose not to accept, suppress use of, or degrade the experience of using our products or could restrict our access to our customers and transaction data. Such companies could also require payments from us to participate in such digital wallets, experiences or applications or negotiate incentives or pricing concessions, impacting our profitability on transactions.
The competitive value of our closed-loop data may also be diminished as traditional and non-traditional competitors use other, new data sources and technologies to derive similar insights. Certain regulations, such as open banking initiatives, could also diminish the value of our closed-loop data or the demand for our products and services by disintermediating existing financial services providers.
To the extent we expand into new business areas and new geographic regions, such as mainland China, we will face competitors with more experience and more established relationships with relevant customers, regulators and industry participants, which could adversely affect our ability to compete. Laws and business practices that favor local competitors, require card transactions to be routed over domestic networks or prohibit or limit foreign ownership of certain businesses could limit our growth in international regions. We may face additional compliance and regulatory risks to the extent that we expand into new business areas, and we may need to dedicate more expense, time and resources to comply with regulatory requirements than our competitors, particularly those that are not regulated financial institutions.
Many of our competitors are subject to different, and in some cases, less stringent, legislative and regulatory regimes, and some may have lower cost structures and more agile business models and systems. More restrictive laws and regulations that do not apply to all of our competitors can put us at a disadvantage, including prohibiting us from engaging in certain transactions, regulating our business practices or adversely affecting our cost structure.
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We face intense competition for partner relationships, which could result in a loss or renegotiation of these arrangements that could have a material adverse impact on our business and results of operations.
In the ordinary course of our business we enter into different types of contractual arrangements with business partners in a variety of industries. For example, we have partnered with Delta, Marriott, Hilton and British Airways, as well as many others globally, to offer cobranded cards for consumers and small businesses, and through our Membership Rewards program we have partnered with businesses in many industries, including Delta and others in the airline industry, to offer benefits to Card Member participants. See “Partners and Relationships” under “Business” for additional information on our business partnerships, including with Delta.
Competition for relationships with key business partners is very intense and there can be no assurance we will be able to grow or maintain these partner relationships or that they will remain as profitable or valued by our customers. Establishing and retaining attractive cobrand card partnerships is particularly competitive among card issuers and networks as these partnerships typically appeal to high-spending loyal customers. All of our cobrand portfolios in the aggregate accounted for approximately 19 percent of our worldwide network volumes for the year ended December 31, 2021. Card Member loans related to our cobrand portfolios accounted for approximately 40 percent of our worldwide Card Member loans as of December 31, 2021.
Cobrand arrangements are entered into for a fixed period, generally ranging from five to ten years, and will terminate in accordance with their terms, including at the end of the fixed period unless extended or renewed at the option of the parties, or upon early termination as a result of an event of default or otherwise. We face the risk that we could lose partner relationships, even after we have invested significant resources in the relationships. We may also choose to not renew certain cobrand relationships. Network volumes could decline and Card Member attrition could increase, in each case, significantly as a result of the termination of one or more cobrand partnership relationships. In addition, some of our cobrand arrangements provide that, upon expiration or termination, the cobrand partner may purchase or designate a third party to purchase the loans generated with respect to its program, which could result in the loss of the card accounts and a significant decline in our Card Member loans outstanding.
We regularly seek to extend or renew cobrand arrangements in advance of the end of the contract term and face the risk that existing relationships will be renegotiated with less favorable terms for us or that we may be unable to renegotiate on terms that are acceptable to us, as competition for such relationships continues to increase. We make payments to our cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The amount we pay to our cobrand partners has increased, particularly in the United States, and may continue to increase as arrangements are renegotiated due to increasingly intense competition for cobrand partners among card issuers and networks.
The loss of exclusivity arrangements with business partners, the loss of the partner relationship altogether (whether by non-renewal at the end of the contract period, such as the end of our relationship with Costco in the United States in 2016, or as the result of a merger, legal or regulatory action or otherwise, such as the withdrawal of American Airlines in 2014 from our Airport Club Access program for Centurion® and Platinum Card® Members) or the renegotiation of existing partnerships with terms that are significantly worse for us could have a material adverse impact on our business and results of operations. See “Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition” for information on the uncertainty regarding our cobrand and agent relationships in the EU and the UK. In addition, any publicity associated with the loss of any of our key business partners could harm our reputation, making it more difficult to attract and retain Card Members and merchants, and could weaken our negotiating position with our remaining and prospective business partners.
Arrangements with our business partners represent a significant portion of our business. We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners.
Our success is, in many ways, dependent on the success of our partners. From customer acquisition to cobranding arrangements, from participation in our rewards programs to facilitating B2B supplier payments for our corporate clients, we rely on our business partners across many aspects of our company and our arrangements with business partners represent a significant portion of our business. Some of our partners manage certain aspects of our customer relationships, such as our OptBlue partners. To the extent any of our partners fail to effectively promote and support our products, experience a slowdown in their business, operational disruptions, reputational issues or loss of consumer confidence, or are otherwise unable to meet our expectations or those of their other stakeholders, our business may be materially negatively impacted. We face the risk that existing relationships will be renegotiated with less favorable terms for us or that we may be unable to renegotiate on terms that are acceptable to us. In addition, we may be obligated to make or accelerate payments to certain business partners such as cobrand partners upon the occurrence of certain triggering events such as a shortfall in certain performance and revenue levels. If we are not able to effectively manage these triggering events, we could unexpectedly have to make payments to these partners, which could have a negative effect on our financial condition and results of operations. See Note 12 to our “Consolidated Financial Statements” for additional information on financial commitments related to agreements with certain cobrand partners.
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Similarly, we are exposed to risk from bankruptcies, liquidations, insolvencies, financial distress, restructurings, consolidations, operational outages, cyber security incidents and other similar events that may occur in any industry representing a significant portion of our network volumes, which could negatively impact particular card products and services (and volumes generally) and our financial condition and results of operations. During 2020, we pre-purchased a significant amount of loyalty points from certain of our travel cobrand partners, which we have used and intend to continue to use for promotions, rewards and incentive programs for our customers. To the extent such partners cease operations or the loyalty points are no longer desired by our customers, the value of any pre-purchased points we still have at that time may be diminished and may result in an impairment charge. We could also be materially impacted if we were obligated or elected to reimburse Card Members for products and services purchased from merchants that have ceased operations or stopped accepting our cards. For example, we are exposed to credit risk in the airline industry to the extent we protect Card Members against non-delivery of purchases, such as where we have remitted payment to an airline for a Card Member purchase of tickets that have not yet been used or “flown.” If we are unable to collect the amount from the airline, we may bear the loss for the amount credited to the Card Member. At December 31, 2021, our best estimate of the maximum amount of billed business for purchases that had yet to be delivered by, or could be charged back to, merchants was $24.5 billion. This amount assumes all such merchants worldwide cease operations and thus are no longer available to deliver such purchases or to accept such chargebacks, and that all such billed business results in claims-in-full by Card Members. Such a maximum amount has not been indicative of our actual loss exposure in the past and we have not experienced significant losses related to these exposures to date; however, our historical experience may not be representative in the current environment given the economic and financial disruptions, particularly to travel, caused by the COVID-19 pandemic and resulting containment measures and staff shortages. See Note 12 to the “Consolidated Financial Statements” for additional information regarding this exposure.
For additional information relating to the general risks related to the airline industry, see “Risk Management—Institutional Credit Risk—Exposure to the Airline and Travel Industry” under “MD&A.”
We face continued intense competitive pressure that may materially impact the prices we charge for accepting our cards for payment, as well as the risk of losing merchant relationships, which could have a material adverse impact on our business and results of operations.
We face pressure from competitors that primarily rely on sources of revenue other than discount revenue or have lower costs that can make their pricing for card acceptance more attractive. Merchants, business partners and third-party merchant acquirers and aggregators are also able to negotiate incentives, pricing concessions and other favorable contractual provisions from us as a condition to accepting our cards, being cobrand partners, offering benefits to our Card Members or signing merchants on our behalf. As merchants become even larger (such as the largest tech companies), we may have to increase the amount of incentives and/or concessions we provide to them. We also face the risk of losing a merchant relationship that could materially adversely affect our network volumes, ability to retain current Card Members and attract new Card Members and therefore, our business and results of operations.
Our average merchant discount rate has been impacted by regulatory changes affecting competitor pricing in certain international countries and may in the future be impacted by pricing regulation. We have also experienced erosion of our average merchant discount rate as we increase merchant acceptance. We may not be successful in significantly expanding merchant acceptance or offsetting rate erosion with volumes at new merchants. In addition, the regulatory environment and differentiated payment models and technologies from non-traditional players in the alternative payments space could pose challenges to our traditional payment model and adversely impact our average merchant discount rate. Some merchants continue to invest in their own payment solutions, such as proprietary-branded mobile wallets, using both traditional and new technology platforms. If merchants are able to drive broad consumer adoption and usage, it could adversely impact our average merchant discount rate and network volumes.
A continuing priority of ours is to drive greater and differentiated value to our merchants that, if not successful, could negatively impact our discount revenue and financial results. We may not succeed in maintaining merchant discount rates or offsetting the impact of declining merchant discount rates, for the reasons discussed above and others, which could materially and adversely affect our revenues and profitability, and therefore our ability to invest in innovation and in value-added services for merchants and Card Members.
Surcharging or steering by merchants could materially adversely affect our business and results of operations.
In certain countries, such as Australia and certain Member States in the EU, and in certain states in the U.S., merchants are expressly permitted by law to surcharge certain card purchases. In jurisdictions allowing surcharging, we have seen merchant surcharging on American Express cards in certain merchant categories, and in some cases, either the surcharge is greater than that applied to Visa and Mastercard cards or Visa and Mastercard cards are not surcharged at all (practices that are known as differential surcharging), even though there are many cards issued on competing networks that have an equal or greater cost of acceptance for the merchant.
We also encounter merchants that accept our cards, but tell their customers that they prefer to accept another type of payment or otherwise seek to suppress use of our cards or certain of our cards, which could become more prevalent with the introduction of debit cards on the American Express network. Our Card Members value the ability to use their cards where and when they want to, and we, therefore, take steps to meet our Card Members’ expectations and to protect the American Express brand by
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prohibiting discrimination through provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, subject to local legal requirements. When we work with merchant acquirers, aggregators and processors to manage certain aspects of the merchant relationship, we are dependent on them to promote and support the acceptance and usage of our cards, but such third parties may have business interests, strategies or goals that are inconsistent with ours.
New products, such as debit cards on the American Express network, could fail to gain market acceptance and American Express cards could become less desirable to consumers and businesses generally due to surcharging, steering or other forms of discrimination, which could result in a decrease in cards-in-force and transaction volumes. The impact could vary depending on such factors as: the industry or manner in which a surcharge is levied; how Card Members are surcharged or steered to other card products or payment forms at the point of sale; the ease and speed of implementation for merchants, including as a result of new or emerging technologies; the size and recurrence of the underlying charges; and whether and to what extent these actions are applied to other forms of payment, including whether it varies depending on the type of card (e.g., credit or debit), product, network, acquirer or issuer. Discrimination against American Express cards could have a material adverse effect on our business, financial condition and results of operations, particularly where it only or disproportionately impacts credit card usage or card usage generally, our Card Members or our business.
We may not be successful in our efforts to promote card usage through marketing and promotion, merchant acceptance and Card Member rewards and services, or to effectively control the costs of such investments, both of which may materially impact our profitability.
Revenue growth is dependent on increasing consumer and business spending on our cards, growing loan balances and increasing fee revenue. We have been investing in a number of growth initiatives, including to attract new Card Members, retain existing Card Members and capture a greater share of customers’ total spending and borrowings. There can be no assurance that our investments will continue to be effective, particularly with changing consumer and business behaviors as a result of the COVID-19 pandemic. In addition, if we develop new products or offers that attract customers looking for short-term incentives rather than incentivize long-term loyalty, Card Member attrition and costs could increase. Increasing spending on our cards also depends on our continued expansion of merchant acceptance of our cards. If we are unable to continue growing merchant acceptance and perceptions of coverage or merchants decide to no longer accept American Express cards, our business could suffer. Expanding our service offerings, adding customer acquisition channels and forming new partnerships or renewing current partnerships could have higher costs than our current arrangements, fail to resonate with customers, adversely impact our average discount rate or dilute our brand.
Another way we invest in customer value is through our Membership Rewards program, as well as other Card Member benefits. Any significant change in, or failure by management to reasonably estimate, actual redemptions of Membership Rewards points and associated redemption costs could adversely affect our profitability. We rely on third parties for certain redemption options and may not be able to continue to offer such redemption options in the future, which could diminish the value of the program for our Card Members. Our two largest redemption partners are Amazon and Delta. In addition, many credit card issuers have instituted rewards and cobrand programs and may introduce programs and services that are similar to or more attractive than ours. Our inability to differentiate our products and services could materially adversely affect us.
We may not be able to cost-effectively manage and expand Card Member benefits, including containing the growth of marketing, promotion, rewards and Card Member services expenses in the future. If such expenses increase beyond our expectations, we will need to find ways to offset the financial impact by increasing other areas of revenues such as fee-based revenues, decreasing operating expenses or other investments in our business, or both. We may not succeed in doing so, particularly in the current competitive and regulatory environment. In addition, increased costs as a result of inflation, colleague retention and recruitment, supply chain issues and shortages of materials such as chips for our cards, and readiness efforts for returning to our offices may require that we reduce investments in other areas.
Our brand and reputation are key assets of our Company, and our business may be materially affected by how we are perceived in the marketplace.
Our brand and its attributes are key assets, and we believe our continued success depends on our ability to preserve, grow and realize the benefits of the value of our brand. Our ability to attract and retain consumer and small business Card Members and corporate clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, privacy and data protection, management, workplace culture, merchant acceptance, financial condition, response to political and social issues or catastrophic events (including our response to the COVID-19 pandemic and natural disasters) and other subjective qualities. Negative perceptions or publicity regarding these matters — even if related to seemingly isolated incidents and whether or not factually correct—could erode trust and confidence and damage our reputation among existing and potential Card Members, corporate clients, merchants and partners, which could make it difficult for us to attract new customers and maintain existing ones. Negative public opinion could result from actual or alleged conduct in any number of activities or circumstances, including card practices, regulatory compliance, the use and protection of customer information, conduct by our colleagues and policy engagement, including activities of the American Express Company Political Action Committee, and from actions taken by regulators or others in response thereto. Discussion about such matters in social media channels can also cause rapid, widespread reputational harm to our brand.
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Our brand and reputation may also be harmed by actions taken by third parties that are outside our control. For example, any shortcoming of or controversy related to a third-party service provider, business partner, merchant acquirer or network partner may be attributed by Card Members and merchants to us, thus damaging our reputation and brand value. Acceptance of American Express cards by merchants in certain industries can also affect perceptions of us. The lack of acceptance, suppression of card usage or surcharging by merchants can also negatively impact perceptions of our brand and our products, lower overall transaction volume and increase the attractiveness of other payment products or systems. Adverse developments with respect to our industry may also, by association, negatively impact our reputation, or result in greater regulatory or legislative scrutiny or litigation against us. Furthermore, as a corporation with headquarters and operations located in the United States, a negative perception of the United States arising from its political or other positions could harm the perception of our company and our brand. Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely affect our business volumes, revenues and profitability.
We publicly share certain information about our ESG initiatives. We may face increased scrutiny related to these activities, and our failure to achieve progress in these areas on a timely basis, if at all, could impact our reputation, colleague retention and public perceptions of our business.
A major information or cyber security incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our cards.
We and third parties collect, process, transfer, host, store, analyze, retain, provide access to and dispose of account information, payment transaction information, and certain types of personally identifiable and other information pertaining to our customers and colleagues in connection with our cards and other products and in the normal course of our business.
Global financial institutions like us, as well as our customers, colleagues, regulators, service providers and other third parties, have experienced a significant increase in information and cyber security risk in recent years and will likely continue to be the target of increasingly sophisticated cyberattacks, including computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing, impersonation and identity takeover attempts), corporate espionage, hacking, website defacement, denial-of-service attacks, exploitation of vulnerabilities and other attacks and similar disruptions from the misconfiguration or unauthorized use of or access to computer systems. These threats can arise from external parties, as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities. There are a number of motivations for cyber threat actors, including criminal activities such as fraud, identity theft and ransom, corporate or nation-state espionage, political agendas, public embarrassment with the intent to cause financial or reputational harm, intent to disrupt information technology systems and supply chains, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites.
Our networks and systems are subject to constant attempts to disrupt our business operations and capture, destroy, manipulate or expose various types of information relating to corporate trade secrets, customer information, including Card Member, travel and loyalty program data, colleague information and other sensitive business information, including acquisition activity, non-public financial results and intellectual property. For example, we and other U.S. financial services providers have been the target of distributed denial-of-service attacks from sophisticated third parties. We develop and maintain systems and processes aimed at detecting and preventing information and cyber security incidents and fraudulent activity, which require significant investment, maintenance and ongoing monitoring and updating as technologies and regulatory requirements change, new vulnerabilities and exploits are discovered and as efforts to overcome security measures become more sophisticated. In addition, we maintain cyber crisis response procedures and regularly test our procedures to remain prepared and reduce the risk of harm to our business operations, customers and third parties in the event of an information or cyber security incident.
Despite our efforts and the efforts of third parties that process, transmit or store our data and data of our customers and colleagues or support our operations, such as service providers, merchants and regulators, the possibility of information, operational and cyber security incidents, malicious social engineering, corporate espionage, fraudulent or other malicious activities and human error or malfeasance cannot be eliminated entirely and will evolve as new and emerging technology is deployed, including the increasing use of personal mobile and computing devices that are outside of our network and control environments. In addition, new products and services, such as checking accounts and non-card lending, may increase our exposure to fraud and other malfeasance. Risks associated with such incidents and activities include theft of funds and other monetary loss, disruption of our operations and the unauthorized disclosure, release, gathering, monitoring, misuse, modification, loss or destruction of confidential, proprietary, trade secret or other information (including account data information). An incident may not be detected until well after it occurs and the severity and potential impact may not be fully known for a substantial period of time after it has been discovered. Our ability to address incidents may also depend on the timing and nature of assistance that may be provided from relevant governmental or law enforcement agencies.
Information, operational or cyber security incidents, fraudulent activity and other actual or perceived failures to maintain confidentiality, integrity, availability of services, privacy and/or security has led to increased regulatory scrutiny and may lead to regulatory investigations and intervention (such as mandatory card reissuance), consent decrees, increased litigation (including class action litigation), response costs (including notification and remediation costs), fines, negative assessments of
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us and our subsidiaries by banking regulators and rating agencies, reputational and financial damage to our brand, and reduced usage of our products and services, all of which could have a material adverse impact on our business. The disclosure of sensitive company information could also undermine our competitive advantage and divert management attention and resources.
Successful cyberattacks, data breaches, disruptions or other incidents related to the actual or perceived failures to maintain confidentiality, integrity, privacy and/or security at other large financial institutions, large retailers, travel and hospitality companies, government agencies or other market participants, whether or not we are impacted, could lead to a general loss of customer confidence that could negatively affect us, including harming the market perception of the effectiveness of our security measures or harming the reputation of the financial system in general, which could result in reduced use of our products and services. Such events could also result in legislation and additional regulatory requirements. Although we maintain cyber insurance, there can be no assurance that liabilities or losses we may incur will be covered under such policies or that the amount of insurance will be adequate.
The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations.
Our information technology systems, including our transaction authorization, clearing and settlement systems, and data centers, may experience service disruptions or degradation because of technology malfunction, sudden increases in customer or automated transaction volume, natural disasters, accidents, power outages, internet outages, telecommunications failures, fraud, denial-of-service and other cyberattacks, terrorism, computer viruses, vulnerabilities in hardware or software, physical or electronic break-ins, or similar events. An increase in remote working as a result of the pandemic may increase the risk of such events occurring and the impact of such events on our business and operations. Service disruptions or degradations could prevent access to our online services and account information, compromise or limit access to company or customer data, impede or prevent transaction processing and financial reporting, and lead to regulatory investigations and fines, increased regulatory oversight and litigation (including class action litigation). Any such service disruption or degradation could adversely affect the perception of the reliability of our products and services and materially adversely affect our overall business, reputation and results of operations.
We rely on third-party providers for acquiring and servicing customers, technology, platforms and other services integral to the operations of our businesses. These third parties may act in ways that could materially harm our business.
We rely on third-party service providers, cobrand partners, merchants, affiliate marketing firms, processors, aggregators, network partners and other third parties for services that are integral to our operations and are subject to the risk that activities of such third parties may adversely affect our business. As outsourcing, specialization of functions, third-party digital services and technology innovation within the payments industry increase (including with respect to mobile technologies, tokenization, big data, artificial intelligence and cloud storage solutions), more third parties are involved in processing card transactions, handling our data and supporting our operations. For example, we rely on third parties for the timely transmission of accurate information across our global network, card acquisition and provision of services to our customers. If a service provider or other third party fails to fulfill its obligations to us, it could interrupt or compromise the quality of our services to customers or impact our business. A disruption or other event at a third party affecting one of our service providers or partners could also impede their ability to provide to us services or data on which we rely to operate our business. Service providers or other third parties could also cease providing data to us or use our data in a way that diminishes the value of our closed loop.
The confidentiality, integrity, privacy, availability and/or security of data communicated over third-party networks or platforms or held by, or accessible to, third parties, including merchants that accept our cards, payment processors, payment intermediaries and our third-party service providers and business partners, could become compromised, which could lead to operational disruptions, unauthorized use of our data or fraudulent transactions on our cards, as well as costs associated with responding to such an incident, including notification and remediation costs, regulatory investigations and fines, increased regulatory oversight and litigation.
The management and oversight of multiple service providers increases our operational complexity and governance challenges and decreases our control. A failure to exercise adequate oversight over service providers, including compliance with service level agreements or regulatory or legal requirements, could result in regulatory actions, fines, litigation, sanctions or economic and reputational harm to us. In addition, we may not be able to effectively monitor or mitigate operational risks relating to our third-party providers' service providers. We are also exposed to the risk that a service disruption at a service provider common to our third-party providers could impede their ability to provide services to us. Notwithstanding any attempts to diversify our reliance on third parties, we may not be able to effectively mitigate operational risks relating to the service providers of our third-party providers.
If we are not able to invest successfully in, and compete at the leading edge of, technological developments across all our businesses, our revenue and profitability could be materially adversely affected.
Our industry is subject to rapid and significant technological changes. In order to compete in our industry, we need to continue to invest in technology across all areas of our business, including in transaction processing, data management and analytics, machine learning and artificial intelligence, customer interactions and communications, open banking and alternative payment and financing mechanisms, authentication technologies and digital identification, tokenization, real-time settlement, and risk
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management and compliance systems. Incorporating new technologies into our products and services, including developing the appropriate governance and controls consistent with regulatory expectations, requires substantial expenditures and takes considerable time, and ultimately may not be successful. We expect that new technologies in the payments industry will continue to emerge, and these new technologies may be superior to, or render obsolete, our existing technology.
The process of developing new products and services, enhancing existing products and services and adapting to technological changes and evolving industry standards is complex, costly and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately could significantly impede our ability to compete effectively. Consumer and merchant adoption is a key competitive factor and our competitors may develop products, platforms or technologies that become more widely adopted than ours. In addition, we may underestimate the resources needed and our ability to develop new products and services, particularly beyond our traditional card products and travel-related services. Our use of artificial intelligence and machine learning is subject to risks related to flaws in our algorithms and datasets that may be insufficient or contain biased information. These deficiencies could undermine the decisions, predictions or analysis such technologies produce, subjecting us to competitive harm, legal liability, and brand or reputational harm.
Our ability to develop, acquire or access competitive technologies or business processes on acceptable terms may also be limited by intellectual property rights that third parties, including those that current and potential competitors, may assert. In addition, our ability to adopt new technologies may be inhibited by the emergence of industry-wide standards, a changing legislative and regulatory environment, an inability to develop appropriate governance and controls, a lack of internal product and engineering expertise, resistance to change from Card Members or merchants, lack of appropriate change management processes or the complexity of our systems.
We may not be successful in realizing the benefits associated with our acquisitions, strategic alliances, joint ventures and investment activity, and our business and reputation could be materially adversely affected.
We have acquired a number of businesses, including Kabbage, and have made a number of strategic investments, and continue to evaluate potential transactions. There is no assurance that we will be able to successfully identify suitable candidates, value potential investment or acquisition opportunities accurately, negotiate acceptable terms for those opportunities, or complete proposed acquisitions and investments. The process of integrating an acquired company, business or technology could create unforeseen operating difficulties and expenditures, result in unanticipated liabilities, including legal claims, violations of laws, commercial disputes and information security vulnerabilities or breaches (including from not integrating the acquired company, business or technology quickly or appropriately, from activities that occurred prior to the acquisition, and from exposure to third party relationships of the acquired company or business or new laws and regulations), and harm our business generally. It may take us longer than expected to fully realize the anticipated benefits of these transactions, and those benefits may ultimately be smaller than anticipated or may not be realized at all, which could materially adversely affect our business and operating results, including as a result of write-downs of goodwill and other intangible assets.
Joint ventures, including our joint venture in China, and minority investments in companies such as American Express Global Business Travel (GBT) inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks associated with the joint venture or minority investment, including as a result of being subject to different laws or regulations. In addition, we may be dependent on joint venture partners, controlling shareholders or management who may have business interests, strategies or goals that are inconsistent with ours. GBT has entered into a business combination agreement with a third party, the consummation of which will result in GBT becoming a public company. GBT currently plans to continue to conduct its day-to-day business under its existing name and brand pursuant to a license from us even after it becomes a public company. Business decisions or other actions or omissions of a joint venture partner, other shareholders or management of our joint ventures and companies in which we have minority investments may adversely affect the value of our investment, result in litigation or regulatory action against us and otherwise damage our reputation and brand. In addition, trade secrets and other proprietary information we may provide to a joint venture may become available to third parties beyond our control. The ability to enforce intellectual property and contractual rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions.
We may also face risks with other types of strategic transactions, such as the sale to InComm of the operations relating to our prepaid reloadable and gift card business. The reloadable operations have experienced disruptions in the past, impacting the ability of our prepaid customers to load and use their cards. If such operations are interrupted, suspended or terminated in the future, it could further negatively impact our customers’ experience, result in additional costs, litigation and regulatory action, and harm our business and reputation.
Our success is dependent on maintaining a culture of integrity and respect, the resilience of our colleagues through the pandemic, and upon our executive officers and other key personnel, and misconduct by or loss of personnel could materially adversely affect our business.
We rely upon our personnel not only for business success, but also to act with integrity and promote a culture of respect. To the extent our colleagues behave in a manner that does not comport with our company’s values, the consequences to our brand and reputation could be severe and could negatively affect our financial condition and results of operations. Our colleagues have had to adapt to rapidly changing conditions during the pandemic, and if we are unable to continue addressing the safety, health and productivity of our colleagues, our business could suffer. The pandemic may also have long-term effects on the nature of
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the office environment and remote working, which may result in increased costs and present operational and workplace culture challenges that may also adversely affect our business.
The market for qualified individuals with diverse perspectives and reflecting the diversity of our communities is highly competitive, and we may not be able to attract and retain such individuals. We have and may continue to experience increased costs related to compensation and other benefits necessary to attract and retain qualified personnel. Changes in immigration and work permit laws and regulations or the administration or enforcement of such laws or regulations or other changes in the legal or regulatory environment, including as a result of the exit of the United Kingdom from the EU (commonly referred to as Brexit), can also impair our ability to attract and retain qualified personnel, or to employ colleagues in the location(s) of our choice. Our compensation practices are subject to review and oversight by the Federal Reserve and the compensation practices of AENB are subject to review and oversight by the OCC. This regulatory review and oversight could further affect our ability to attract and retain our executive officers and other key personnel. Our inability to attract and retain highly skilled, motivated and diverse personnel could materially adversely affect our business and our culture.
Our operations, business, customers and partners could be materially adversely affected by climate change.
There are increasing and rapidly evolving concerns over the risks of climate change and related environmental sustainability matters. The physical risks of climate change include rising average global temperatures, rising sea levels and an increase in the frequency and severity of extreme weather events and natural disasters. Such events and disasters could disrupt our operations or the operations of customers or third parties on which we rely and could result in market volatility or negatively impact our customers’ spending behaviors or ability to pay outstanding loans. Additionally, we may face risks related to the transition to a low-carbon economy. Changes in consumer preferences, travel patterns and legal requirements could increase expenses or otherwise adversely impact our business, our customers and partners. We could also experience increased expenses resulting from strategic planning, litigation and changes to our technology, operations, products and services, as well as reputational harm as a result of negative public sentiment, regulatory scrutiny and reduced stakeholder confidence, due to our response to climate change and our efforts relating to the Advancing Climate Solutions pillar of our ESG strategy.
Legal, Regulatory and Compliance Risks
Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition.
We are subject to comprehensive government regulation and supervision in jurisdictions around the world, which significantly affects our business and requires continual enhancement of our compliance efforts. Supervision efforts and the enforcement of existing laws and regulations impact the scope and profitability of our existing business activities, limit our ability to pursue certain business opportunities and adopt new technologies, compromise our competitive position, and affect our relationships with Card Members, partners, merchants, service providers and other third parties. New laws or regulations could similarly affect our business, increase our costs of doing business, impact what we are able to charge for, or offer in connection with, our products and services, and require us to change certain of our business practices and invest significant management attention and resources, all of which could adversely affect our results of operations and financial condition. Legislators and regulators around the world are aware of each other’s approaches to the regulation of the financial services industry. Consequently, a development in one country, state or region may influence regulatory approaches in another.
In preparation for the completion of Brexit, numerous EU laws and regulations were separately adopted into UK domestic legislation in order to ensure continuity. However, the UK plans to evaluate the extent to which these EU-legacy laws and regulations should change going forward and has already indicated some areas where it may take a different approach from the EU. To the extent that different regulatory systems impose overlapping or inconsistent requirements on the conduct of our business, we face complexity and additional costs in our compliance efforts, as well as potential regulatory enforcement actions and penalties.
If we fail to satisfy regulatory requirements or maintain our financial holding company status, our financial condition and results of operations could be adversely affected, and we may be restricted in our ability to take certain capital actions (such as declaring dividends or repurchasing outstanding shares) or engage in certain business activities or acquisitions, which could compromise our competitive position. Additionally, our banking regulators have wide discretion in the examination and the enforcement of applicable banking statutes and regulations and may restrict our ability to engage in certain business activities or acquisitions or require us to maintain more capital.
Legislators and regulators continue to focus on the operation of card networks, including interchange fees paid to card issuers in payment networks such as Visa and Mastercard and the fees merchants are charged to accept cards. Even where we are not directly regulated, regulation of bankcard fees significantly negatively impacts the discount revenue derived from our business, including as a result of downward pressure on our discount rate from decreases in competitor pricing in connection with caps on interchange fees. In some cases, regulations also extend, or may extend, to certain aspects of our business, such as network and cobrand arrangements, new products or services we may offer, or the terms of card acceptance for merchants, including terms relating to non-discrimination and honor-all-cards. For example, we have exited our network businesses in the EU and Australia as a result of regulation in those jurisdictions. In addition, there is uncertainty as to when or how interchange fee caps and other provisions of payments legislation might apply when we work with cobrand partners and agents in the EU and the UK. In a
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ruling issued on February 7, 2018, the EU Court of Justice confirmed the validity of the application of the fee caps and other provisions in circumstances where three-party networks issue cards with a cobrand partner or through an agent, although the ruling provided only limited guidance as to when or how the provisions might apply in such circumstances and remains subject to differing interpretations by regulators and participants in cobrand arrangements. As a result, we are subject to regulatory action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU or the UK.
We are subject to certain provisions of the Bank Secrecy Act, as amended by the Patriot Act and the AMLA, with regard to maintaining effective AML programs. Similar AML requirements apply under the laws of most jurisdictions where we operate. As regulators increase their focus in this area, new technologies such as digital currencies develop and we introduce new products like checking accounts, we face increased costs related to oversight, supervision and potential fines. Our AML programs have become the subject of heightened scrutiny in some countries, including certain Member States in the EU. Any errors, failures or delays in complying with AML and counter-terrorist financing laws, perceived deficiencies in our AML programs or association of our business with money laundering, terrorist financing, tax fraud or other illicit activities can give rise to significant supervisory, criminal and civil proceedings and lawsuits, which could result in significant penalties and forfeiture of assets, loss of licenses or restrictions on business activities, or other enforcement actions, and our reputation may suffer due to our customers’ association with certain countries, persons or entities or the existence of any such transactions.
Various regulatory agencies and legislatures are also considering regulations and legislation covering identity theft, account management guidelines, credit bureau reporting, disclosure rules, security and marketing that would impact us directly, in part due to increased scrutiny of our underwriting and account management standards. Any new requirements may restrict our ability to issue cards or partner with other financial institutions, which could adversely affect our revenue growth.
See “Supervision and Regulation” for more information about certain laws and regulations to which we are subject and their impact on us.
Litigation and regulatory actions could subject us to significant fines, penalties, judgments and/or requirements resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business.
At any given time, we are involved in a number of legal proceedings, including class action lawsuits. Many of these actions have included claims for substantial compensatory or punitive damages. While we have historically relied on our arbitration clause in agreements with customers to limit our exposure to class action litigation, there can be no assurance that we will continue to be successful in enforcing our arbitration clause in the future, including as a result of regulation that would require that our consumer arbitration clause not apply to cases filed in court as class actions, and claims of the type we previously arbitrated could be subject to the complexities, risks and costs associated with class action cases. The continued focus of merchants on issues relating to the acceptance of various forms of payment may lead to additional litigation and other legal actions. Given the inherent uncertainties involved in litigation, and the very large or indeterminate damages sought in some matters asserted against us, there is significant uncertainty as to the ultimate liability we may incur from litigation.
We are also involved at any given time with governmental and regulatory inquiries, investigations and proceedings. Regulatory action could subject us to significant fines, penalties or other requirements resulting in Card Member reimbursements, increased expenses, limitations or conditions on our business activities, and damage to our reputation and our brand, all of which could adversely affect our results of operations and financial condition. We expect that financial institutions, such as us, will continue to face significant regulatory scrutiny, with regulators taking formal enforcement actions against financial institutions in addition to addressing supervisory concerns through non-public supervisory actions or findings, which could involve restrictions on our activities, among other limitations, that could adversely affect our business. In addition, a violation of law or regulation by another financial institution could give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us. Further, a single event may give rise to numerous and overlapping investigations and proceedings. External publicity concerning investigations can increase the scope and scale of investigations and lead to further regulatory inquiries. For example, as previously disclosed, beginning in May 2020, we began responding to a regulatory review led by the OCC and the Department of Justice Civil Division regarding historical sales practices relating to certain small business card sales. We also conducted an internal review of certain sales from 2015 and 2016 and have taken appropriate disciplinary and remedial actions, including voluntarily providing remediation to certain current and former customers. Information regarding our investigation has been provided to our other regulators, including the Federal Reserve. In January 2021, we received a grand jury subpoena from the United States Attorney’s Office for the Eastern District of New York regarding the sales practices for small business cards and a Civil Investigative Demand from the CFPB seeking information on sales practices related to consumers. We are cooperating with all of these inquiries into our sales practices and related compliance practices and continue to review and enhance our processes and controls related to our sales practices and business conduct generally. We do not believe this matter will have a material adverse impact on our business or results of operations.
We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions, such as a renewed focus on fair lending laws, and actions governmental authorities take in response to those conditions, including participation in the paycheck protection program.
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Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations, changes to our merchant agreements and/or business practices, substantial monetary damages and damage to our reputation and brand.
We are, and have been in the past, a defendant in a number of actions, including legal proceedings and proposed class actions, challenging certain provisions of our card acceptance agreements. See Note 12 to the “Consolidated Financial Statements” for a description of certain outstanding legal proceedings.
An adverse outcome in these proceedings could have a material adverse effect on our business and results of operations, require us to change our merchant agreements in a way that could expose our cards to increased merchant steering and other forms of discrimination that could impair the Card Member experience, result in additional litigation and/or arbitrations, impose substantial monetary damages and damage our reputation and brand. Even if we were not required to change our merchant agreements, changes in Visa’s and Mastercard’s policies or practices as a result of legal proceedings, lawsuit settlements or regulatory actions pending against them could result in changes to our business practices and materially and adversely impact our profitability.
We are subject to capital adequacy and liquidity rules, and if we fail to meet these rules, our business would be materially adversely affected.
Failure to meet current or future capital or liquidity requirements could compromise our competitive position and could result in restrictions imposed by the Federal Reserve, including limiting our ability to pay dividends, repurchase our capital stock, invest in our business, expand our business or engage in acquisitions. Some elements of the capital and liquidity regimes are not yet final and certain developments could significantly impact the requirements applicable to financial institutions. For example, if the 2017 Basel Committee revisions to the standardized approach for credit risk and operational risk capital requirements are adopted in the United States, we could be required to hold significantly more capital. In addition, it may be necessary for us to hold additional capital because of an increase in the SCB requirement based on results from a supervisory stress test.
Compliance with capital adequacy and liquidity rules requires a material investment of resources. An inability to meet regulatory expectations regarding our compliance with applicable capital adequacy and liquidity rules may also negatively impact the assessment of us and our U.S. bank subsidiary by federal banking regulators.
For more information on capital adequacy requirements, see “Capital and Liquidity Regulation” under “Supervision and Regulation.”
We are subject to restrictions that limit our ability to pay dividends and repurchase our capital stock. Our subsidiaries are also subject to restrictions that limit their ability to pay dividends to us, which may adversely affect our liquidity.
We are limited in our ability to pay dividends and repurchase capital stock by our regulators, who have broad authority to prohibit any action that would be considered an unsafe or unsound banking practice. We are subject to a requirement to submit capital plans to the Federal Reserve for review that include, among other things, projected dividend payments and repurchases of capital stock. As part of the capital planning and stress testing process, our proposed capital actions are assessed against our ability to satisfy applicable capital requirements in the event of a stressed market environment. If we fail to satisfy applicable capital requirements, including the stress capital buffer, our ability to undertake capital actions may be restricted.
Our ability to declare or pay dividends on, or to purchase, redeem or otherwise acquire, shares of our common stock will be prohibited, subject to certain exceptions, in the event that we do not declare and pay in full dividends for the last preceding dividend period of our preferred stock.
American Express Company relies on dividends from its subsidiaries for liquidity, and such dividends may be limited by law, regulation or supervisory policy. For example, our U.S. bank subsidiary, AENB, is subject to various statutory and regulatory limitations on its declaration and payment of dividends. These limitations may hinder our ability to access funds we may need to make payments on our obligations, make dividend payments on outstanding American Express Company capital stock or otherwise achieve strategic objectives.
Any future reduction or elimination of our common stock dividend or share repurchase program could adversely affect the market price of our common stock and market perceptions of American Express. For more information on bank holding company and depository institution dividend restrictions, see “Stress Testing and Capital Planning” and “Dividends and Other Capital Distributions” under “Supervision and Regulation,” as well as “Consolidated Capital Resources and Liquidity—Dividends and Share Repurchases” under “MD&A” and Note 22 to our “Consolidated Financial Statements.”
Regulation in the areas of privacy, data protection, data governance, account access and information and cyber security could increase our costs and affect or limit our business opportunities and how we collect and/or use personal information.
Legislators and regulators in the United States and other countries in which we operate are increasingly adopting or revising privacy, data protection, data governance, account access and information and cyber security laws, including data localization, authentication and notification laws. As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the
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context of ensuring that adequate data governance, data protection, incident management, resiliency, third party management, data transfer, security controls and account access mechanisms are in place.
Compliance with current or future privacy, data protection, data governance, resiliency, data transfer, account access and information and cyber security laws could significantly impact our collection, use, sharing, retention and safeguarding of consumer and/or colleague information and could restrict our ability to fully maximize our closed-loop capability or provide certain products and services or work with certain service providers, which could materially and adversely affect our profitability. Our failure to comply with such laws could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, ongoing regulatory monitoring, customer attrition, decreases in the use or acceptance of our cards and damage to our reputation and our brand. In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection and information and cyber security in the United States, the EU and various other countries in which we operate.
For more information on regulatory and legislative activity in this area, see “Privacy, Data Protection, Data Governance, Information and Cyber Security” under “Supervision and Regulation.”
We may not be able to effectively manage the operational and compliance risks to which we are exposed.
We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or information systems, or impacts from the external environment (e.g., natural disasters). Operational risk includes, among others, the risk that error or misconduct could result in a material financial misstatement, a failure to monitor a third party’s compliance with regulatory or legal requirements, or a failure to adequately monitor and control access to, or use of, data in our systems we grant to third parties. As processes or organizations are changed, or new products and services are introduced, such as new lending features, debit products and checking accounts, we may not fully appreciate or identify new operational risks that may arise from such changes. Through human error, fraud or malfeasance, conduct risk can result in harm to customers, legal liability, fines, sanctions, customer remediation and brand damage.
Compliance risk arises from violations of, or failure to conform or comply with, laws, rules, regulations, internal policies and procedures, and ethical standards. We need to continually update and enhance our control environment to address operational and compliance risks. Operational and compliance failures, deficiencies in our control environment or an inability to maintain an ethical workplace and high standards of business conduct can expose us to reputational and legal risks as well as fines, civil money penalties or payment of damages and can lead to diminished business opportunities and diminished ability to expand key operations.
If we are not able to protect our intellectual property, or successfully defend against any infringement or misappropriation assertions brought against us, our revenue and profitability could be negatively affected.
We rely on a variety of measures to protect our intellectual property and control access to, and distribution of, our trade secrets and other proprietary information. These measures may not prevent infringement of our intellectual property rights or misappropriation of our proprietary information and a resulting loss of competitive advantage. The ability to enforce intellectual property rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions. In addition, competitors or other third parties may allege that our products, systems, processes or technologies infringe on their intellectual property rights. Given the complex, rapidly changing and competitive technological and business environments in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, a future assertion of an infringement or misappropriation claim against us could cause us to lose significant revenues, incur significant defense, license, royalty or technology development expenses, and/or pay significant monetary damages.
Tax legislative initiatives or assessments could adversely affect our results of operations and financial condition.
We are subject to income and other taxes in the United States and in various foreign jurisdictions. The laws and regulations related to tax matters are extremely complex and subject to varying interpretations. Although management believes our positions are reasonable, we are subject to audit by the Internal Revenue Service in the United States and by tax authorities in all the jurisdictions in which we conduct business operations. We are being challenged in a number of countries regarding our application of value-added taxes (VAT) to certain transactions. While we believe we comply with all applicable VAT and other tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes or apply existing laws and regulations more broadly, which could result in a significant increase in liabilities for taxes and interest in excess of accrued liabilities.
New tax legislative initiatives, including increases in the corporate tax rate, are currently being considered and may be enacted. In addition, new guidelines issued by the Organization for Economic Cooperation and Development (OECD) could have an impact on how multinational enterprises are taxed on their global profits. These potential changes could adversely impact our effective tax rate, our tax positions and tax liabilities. In addition, actions by tax authorities, including an increase in tax audit activity, could have an adverse impact on our tax liabilities.
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Credit, Liquidity and Market Risks
Our risk management policies and procedures may not be effective.
Our risk management framework seeks to identify and mitigate risk and appropriately balance risk and return. Although we have devoted significant resources to develop our risk management policies and procedures and expect to continue to do so in the future, these policies and procedures, as well as our risk management techniques, such as our hedging strategies, may not be fully effective. There may also be risks that exist, or develop in the future, that we have not appropriately identified or mitigated. As regulations, technology and competition continue to evolve, our risk management framework may not always keep sufficient pace with those changes. If our risk management framework does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.
Management of our risks in some cases depends upon the use of analytical and/or forecasting models. Although we have a governance framework for model development and independent model validation, the modeling methodology or key assumptions could be erroneous or the models could be misused. In addition, issues with the quality or effectiveness of our data aggregation and validation procedures, as well as the quality and integrity of data inputs, could result in ineffective or inaccurate model outputs and reports. For example, models based on historical data sets might not be accurate predictors of future outcomes and their ability to appropriately predict future outcomes may degrade over time. The CECL methodology requires measurement of expected credit losses for the estimated life of certain financial instruments, not only based on historical experience and current conditions, but also by including forecasts incorporating forward-looking information. Our ability to accurately forecast future losses under that methodology may be impaired by the significant uncertainty surrounding the pandemic and the lack of comparable precedent. If our business decisions or estimates for credit losses are based on incorrect or misused models and assumptions or we fail to manage data inputs effectively and to aggregate or analyze data in an accurate and timely manner, our results of operations and financial condition may be materially adversely affected.
We are exposed to credit risk and trends that affect Card Member spending and the ability of customers and partners to pay us, which could have a material adverse effect on our results of operations and financial condition.
We are exposed to both individual credit risk, principally from consumer and small business Card Member loans and receivables, and institutional credit risk, principally from corporate Card Member loans and receivables, merchants, network partners, loyalty coalition partners and treasury and investment counterparties. Third parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. General economic factors, such as gross domestic product, unemployment, inflation and interest rates, may result in greater delinquencies that lead to greater credit losses. A customer’s ability and willingness to repay us can be negatively impacted not only by economic, market, political and social conditions but also by a customer’s other payment obligations, and increasing leverage can result in a higher risk that customers will default or become delinquent in their obligations to us. Further, our credit performance may be negatively impacted as forbearance and government support programs broadly available during the pandemic come to an end, to the extent customers relied on such programs and stimulus funds to stay current on their obligations to us.
We rely principally on the customer’s creditworthiness for repayment of loans or receivables and therefore often have no other recourse for collection. Our ability to assess creditworthiness may be impaired if the criteria or models we use to manage our credit risk prove inaccurate in predicting future losses, which could have a negative impact on our results of operations. This may be exacerbated to the extent information we have historically relied upon to make credit decisions does not accurately portray a customer's creditworthiness as a result of forbearance programs or the reported consumer deleveraging that occurred during the pandemic. Further, our pricing strategies, particularly for new lending features and non-card lending products, may not offset the negative impact on profitability caused by increases in delinquencies and losses; thus any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us. Although we make estimates to provide for credit losses in our outstanding portfolio of loans and receivables, these estimates may not be accurate. In addition, the information we use in managing our credit risk may be inaccurate or incomplete.
Rising delinquencies and rising rates of bankruptcy are often precursors of future write-offs and may require us to increase our reserve for credit losses. Higher write-off rates and the resulting increase in our reserves for credit losses adversely affect our profitability and the performance of our securitizations, and may increase our cost of funds.
Although we regularly review our credit exposure to specific clients and counterparties and to specific industries, countries and regions that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to foresee or detect, such as fraud. In addition, our ability to manage credit risk or collect amounts owed to us may be adversely affected by legal or regulatory changes (such as restrictions on collections or changes in bankruptcy laws, minimum payment regulations and re-age guidance). Increased credit risk, whether resulting from underestimating the credit losses inherent in our portfolio of loans and receivables, deteriorating economic conditions (particularly in the United States where, for example, Card Members were responsible for approximately 87 percent of our total Card Member loans outstanding as of December 31, 2021), increases in the level of loan balances, changes in our mix of business or otherwise, could require us to increase our provisions for losses and could have a material adverse effect on our results of operations and financial condition.
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Interest rate changes could materially adversely affect our earnings.
Our interest expense was approximately $1.3 billion for the year ended December 31, 2021. If the rate of interest we pay on our borrowings increases more or decreases less than the rate of interest we earn on our loans, our net interest yield, and consequently our net interest income, could decrease. As of December 31, 2021, a hypothetical immediate 100 basis point increase in market interest rates would have a detrimental impact on our annual net interest income of up to $206 million. A hypothetical immediate 100 basis point decrease in market interest rates would have a smaller but still detrimental impact on our annual net interest income. We expect the rates we pay on our deposits will change if benchmark interest rates change. In addition, interest rate changes may affect customer behavior, such as impacting the loan balances Card Members carry on their credit cards or their ability to make payments as higher interest rates lead to higher payment requirements, further impacting our results of operations. For a further discussion of our interest rate risk, see “Risk Management ― Market Risk Management Process” under “MD&A.”
The discontinuance of LIBOR may negatively impact our access to funding and the value of our financial instruments and commercial agreements.
Certain of our financial instruments and commercial agreements will need to be amended or otherwise modified to replace references to the London interbank offered rate (LIBOR) with an alternative reference rate, as the LIBOR tenors referenced are expected to be quoted only through June 2023. Alternative reference rates, such as the secured overnight financing rate, are calculated using components different from those used in the calculation of LIBOR and may fluctuate differently than, and not be representative of, LIBOR. In order to compensate for these differences, certain of our financial instruments and commercial agreements allow for a benchmark replacement adjustment. However, there is no assurance that any benchmark replacement adjustment will be sufficient to produce the economic equivalent of LIBOR, either at the benchmark replacement date or over the life of such instruments and agreements.
Uncertainty as to the replacement of LIBOR with alternative reference rates and the discontinuance of LIBOR generally may negatively impact market liquidity, our access to funding and the trading market for our financial instruments. Furthermore, the timing of implementation and use of alternative reference rates and corresponding adjustments or other reforms could be subject to disputes, could cause the interest payable on our outstanding financial instruments and commercial agreements to be materially different than expected and may impact the value of such instruments and agreements.
Adverse market conditions may significantly affect our access to, and cost of, capital and ability to meet liquidity needs.
Our ability to obtain financing in the debt capital markets for unsecured term debt and asset securitizations is dependent on financial market conditions. Disruptions, uncertainty or volatility across the financial markets, as well as adverse developments affecting our competitors and the financial industry generally, could negatively impact market liquidity and limit our access to funding required to operate our business. Such market conditions may also limit our ability to replace, in a timely manner, maturing liabilities, satisfy regulatory capital requirements and access the funding necessary to grow our business. In some circumstances, we may incur an unattractive cost to raise capital, which could decrease profitability and significantly reduce financial flexibility. Additional factors affecting the extent to which we may securitize loans and receivables in the future include the overall credit quality of our loans and receivables, the costs of securitizing our loans and receivables, the demand for credit card asset-backed securities and the legal, regulatory, accounting or tax rules affecting securitization transactions and asset-backed securities, generally. Our liquidity and cost of funds would also be adversely affected by the occurrence of events that could result in the early amortization of our existing securitization transactions. For a further discussion of our liquidity and funding needs, see “Consolidated Capital Resources and Liquidity” under “MD&A.”
Any reduction in our credit ratings could increase the cost of our funding from, and restrict our access to, the capital markets and have a material adverse effect on our results of operations and financial condition.
Ratings of our long-term and short-term debt and deposits are based on a number of factors, including financial strength, as well as factors not within our control, including conditions affecting the financial services industry, and the macroeconomic environment. Our ratings could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we are able to obtain funding. Our ability to raise funding through the securitization market also depends, in part, on the credit ratings of the securities we issue from our securitization trusts. If we are not able to satisfy rating agency requirements to confirm the ratings of our asset-backed securities, it could limit our ability to access the securitization markets.
Adverse currency fluctuations and foreign exchange controls could decrease earnings we receive from our international operations and impact our capital.
During 2021, approximately 22 percent of our total revenues net of interest expense were generated from activities outside the United States. We are exposed to foreign exchange risk from our international operations, and accordingly the revenue we generate outside the United States is subject to unpredictable fluctuations if the values of other currencies change relative to the U.S. dollar, which could have a material adverse effect on our results of operations.
Foreign exchange regulations or capital controls might restrict or prohibit the conversion of other currencies into U.S. dollars or our ability to transfer them. Political and economic conditions in other countries could also impact the availability of foreign
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exchange for the payment to us by the local card issuer for obligations arising out of local Card Members’ spending outside such country and for the payment by Card Members who are billed in a currency other than their local currency. Substantial and sudden devaluation of local Card Members’ currency can also affect their ability to make payments to the local issuer of the card in connection with spending outside the local country. The occurrence of any of these circumstances could further impact our results of operations.
An inability to accept or maintain deposits due to market demand or regulatory constraints could materially adversely affect our liquidity position and our ability to fund our business.
Our U.S. bank subsidiary, AENB, accepts deposits and uses the proceeds as a source of funding, with our direct retail deposits becoming a larger proportion of our funding over time. We continue to face strong competition with regard to deposits, and pricing and product changes may adversely affect our ability to attract and retain cost-effective deposit balances. To the extent we offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted.
Our ability to obtain deposit funding and offer competitive interest rates on deposits is also dependent on AENB’s capital levels. The FDIA’s brokered deposit provisions and related FDIC rules in certain circumstances prohibit banks from accepting or renewing brokered deposits and apply other restrictions, such as a cap on interest rates that can be paid. Additionally, our regulators can adjust applicable capital requirements at any time and have authority to place limitations on our deposit businesses. An inability to attract or maintain deposits in the future could materially adversely affect our ability to fund our business.
The value of our investments may be adversely impacted by economic, political or market conditions.
Market risk includes the loss in value of portfolios and financial instruments due to adverse changes in market variables, which could negatively impact our financial condition. We held approximately $3 billion of investment securities as of December 31, 2021. In the event that actual default rates of these investment securities were to significantly change from historical patterns due to economic conditions or otherwise, it could have a material adverse impact on the value of our investment portfolio, potentially resulting in impairment charges. Defaults or economic disruptions, even in countries or territories in which we do not have material investment exposure, conduct business or have operations, could adversely affect us.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our principal executive offices are in a 2.2 million square foot building located in lower Manhattan on land leased from the Battery Park City Authority for a term expiring in 2069. We have an approximately 49 percent ownership interest in the building and an affiliate of Brookfield Financial Properties owns the remaining approximately 51 percent interest in the building. We also lease space in the building from Brookfield’s affiliate.
Other owned or leased principal locations include American Express offices in Phoenix, Arizona, Sunrise, Florida, Gurgaon, India, Brighton, England, Manila, Philippines, Tokyo, Japan, Kuala Lumpur, Malaysia and Sydney, Australia; the American Express data centers in Phoenix, Arizona and Greensboro, North Carolina; the headquarters for AENB in Sandy, Utah; the headquarters for American Express Services Europe Limited in London, England; the headquarters for American Express Europe, S.A. in Madrid, Spain; the headquarters for Amex Bank of Canada and Amex Canada Inc. in Toronto, Ontario, Canada; and the headquarters for American Express Bank (Mexico) S.A. Institucion de Banca Multiple and American Express Company (Mexico) S.A. de C.V. in Mexico City, Mexico. We also lease and operate multiple travel lounges as a benefit for our Card Members in major U.S. and global hub airports.
ITEM 3. LEGAL PROCEEDINGS
Refer to Note 12 to our “Consolidated Financial Statements,” which is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a)Our common stock trades principally on The New York Stock Exchange under the trading symbol AXP. As of December 31, 2021, we had 18,626 common shareholders of record. You can find dividend information concerning our common stock in our Consolidated Statements of Shareholders' Equity in our “Consolidated Financial Statements.” For information on dividend restrictions, see “Dividends and Other Capital Distributions” under “Supervision and Regulation” and Note 22 to our “Consolidated Financial Statements.” You can find information on securities authorized for issuance under our equity compensation plans under the caption “Executive Compensation — Equity Compensation Plans” to be contained in our definitive 2022 proxy statement for our Annual Meeting of Shareholders, which is scheduled to be held on May 3, 2022. The information to be found under such caption is incorporated herein by reference. Our definitive 2022 proxy statement for our Annual Meeting of Shareholders is expected to be filed with the SEC in March 2022 (and, in any event, not later than 120 days after the close of our most recently completed fiscal year).
Stock Performance Graph
The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act.
The following graph compares the cumulative total shareholder return on our common shares with the total return on the S&P 500 Index and the S&P Financial Index for the last five years. It shows the growth of a $100 investment on December 31, 2016, including the reinvestment of all dividends.

Year-end Data |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021
American Express |  | $ | 100.00 |  |  | $ | 136.20 |  |  | $ | 132.62 |  |  | $ | 175.75 |  |  | $ | 173.73 |  |  | $ | 237.81 |
S&P 500 Index |  | $ | 100.00 |  |  | $ | 121.82 |  |  | $ | 116.47 |  |  | $ | 153.13 |  |  | $ | 181.29 |  |  | $ | 233.28 |
S&P Financial Index |  | $ | 100.00 |  |  | $ | 122.14 |  |  | $ | 106.21 |  |  | $ | 140.30 |  |  | $ | 137.83 |  |  | $ | 185.90 |

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(b) Not applicable.
(c) Issuer Purchases of Securities
The table below sets forth the information with respect to purchases of our common stock made by or on behalf of us during the quarter ended December 31, 2021.

|  | Total Number of Shares Purchased |  | Average Price Paid Per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(c) |  | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1-31, 2021 |  |  |  |  |  |  |  |
Repurchase program(a) |  | 10,756,494 |  |  | $ | 178.35 |  |  | 10,756,494 |  |  | 62,662,993 |
Employee transactions(b) |  | 40 |  |  | $ | 171.95 |  |  | N/A |  | N/A
November 1-30, 2021 |  |  |  |  |  |  |  |
Repurchase program(a) |  | 1,908,965 |  |  | $ | 170.90 |  |  | 1,908,965 |  |  | 60,754,028 |
Employee transactions(b) |  | 24,224 |  |  | $ | 173.78 |  |  | N/A |  | N/A
December 1-31, 2021 |  |  |  |  |  |  |  |
Repurchase program(a) |  | 4,520,163 |  |  | $ | 162.30 |  |  | 4,520,163 |  |  | 56,233,865 |
Employee transactions(b) |  | — |  |  | $ | — |  |  | N/A |  | N/A
Total |  |  |  |  |  |  |  |
Repurchase program(a) |  | 17,185,622 |  |  | $ | 171.77 |  |  | 17,185,622 |  |  | 56,233,865 |
Employee transactions(b) |  | 24,264 |  |  | $ | 173.78 |  |  | N/A |  | N/A

(a)On September 23, 2019, the Board of Directors authorized the repurchase of up to 120 million common shares from time to time, subject to market conditions and in accordance with our capital plans. This authorization replaced the prior repurchase authorization and does not have an expiration date. See “MD&A – Consolidated Capital Resources and Liquidity” for additional information regarding share repurchases.
(b)Includes: (i) shares surrendered by holders of employee stock options who exercised options (granted under our incentive compensation plans) in satisfaction of the exercise price and/or tax withholding obligation of such holders and (ii) restricted shares withheld (under the terms of grants under our incentive compensation plans) to offset tax withholding obligations that occur upon vesting and release of restricted shares. Our incentive compensation plans provide that the value of the shares delivered or attested to, or withheld, be based on the price of our common stock on the date the relevant transaction occurs.
(c)Share purchases under publicly announced programs are made pursuant to open market purchases, 10b5-1 plans, privately negotiated transactions (including employee benefit plans) or other purchases, including block trades, accelerated share repurchase programs or any combination of such methods as market conditions warrant and at prices we deem appropriate.
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
EXECUTIVE OVERVIEW
BUSINESS INTRODUCTION
We are a globally integrated payments company with three reportable operating segments: Global Consumer Services Group (GCSG), Global Commercial Services (GCS) and Global Merchant and Network Services (GMNS). Corporate functions and certain other businesses and operations are included in Corporate & Other.
Our range of products and services includes:
•Credit card, charge card, banking and other payment and financing products
•Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants
•Network services
•Other fee services, including fraud prevention services and the design and operation of customer loyalty programs
•Expense management products and services
•Travel and lifestyle services
Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party service providers and business partners, direct mail, telephone, in-house sales teams, and direct response advertising. We have a significant ownership position in, and extensive commercial arrangements with, American Express Global Business Travel (GBT). The commercial arrangements with GBT include, among other things, a long-term trademark license agreement pursuant to which GBT uses the American Express brand, GBT’s support of certain of our partnerships, joint negotiation with travel suppliers and a strategic relationship between GBT and our GCS business. During the fourth quarter of 2021, our economic interest in GBT was reduced to approximately 41 percent from 50 percent as a result of GBT’s acquisition of Egencia; our voting rights remain at 50 percent. Also during the fourth quarter of 2021, GBT entered into a business combination agreement with Apollo Strategic Growth Capital (APSG). Upon consummation of the business combination, which is subject to the satisfaction of customary closing conditions, including approval by APSG’s shareholders and certain regulatory approvals, the terms of certain of our commercial arrangements with GBT will be amended and GBT will become a public company.
The following types of revenue are generated from our various products and services:
•Discount revenue, our largest revenue source, primarily represents the amount we earn on transactions occurring at merchants that have entered into a card acceptance agreement with us, or a Global Network Services (GNS) partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members. The amount of fees charged for accepting our cards as payment, or merchant discount, varies with, among other factors, the industry in which the merchant does business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope for the related card acceptance agreement between the merchant and us (e.g., domestic or global) and the transaction amount. In some instances, an additional flat transaction fee is assessed as part of the merchant discount, and additional fees may be charged such as a variable fee for “non-swiped” card transactions or for transactions using cards issued outside the United States at merchants located in the United States;
•Interest income, principally represents interest earned on outstanding loan balances;
•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;
•Other fees and commissions, primarily represent Card Member delinquency fees, foreign currency conversion fees charged to Card Members, loyalty coalition-related fees, service fees earned from merchants, travel commissions and fees, and Membership Rewards program fees; and
•Other revenue, primarily represents revenues arising from contracts with our GNS partners (including commissions and signing fees less issuer rate payments), cross-border Card Member spending, ancillary merchant-related fees, earnings (losses) from equity method investments (including GBT), insurance premiums, and prepaid card and Travelers Cheque-related revenue.
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Effective for the first quarter of 2021, we changed the way we describe our volume metrics, replacing billed business, proprietary billed business and GNS billed business with network volumes, billed business and processed volumes, respectively. Within processed volumes we now include transactions associated with certain alternative payment solutions that were not previously reported in our volume metrics. Prior period amounts have been recast to conform with current period presentation. Refer to the “Glossary of Selected Terminology” for definitions of each updated term.
NON-GAAP MEASURES
We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included within this report constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies.
BUSINESS ENVIRONMENT
Our results for the year reflect the strong growth momentum we have seen in our business throughout 2021, and our strategy of investing in our customers, brand and talent is helping in our effort to drive share, scale and relevance. Spending on our network reached record levels and credit metrics remained around historic lows. Net income more than doubled versus the prior year to $8.1 billion and exceeded 2019 levels; contributing to this increase in Net income in the current year was a $2.5 billion credit reserve release and sizeable net gains on equity investments.
Year-over-year comparisons reflect the adverse impacts on our business in 2020 due to the COVID-19 pandemic. As certain of the pandemic-related restrictions were lifted and macroeconomic conditions improved, and through the successful execution of our investment strategy, we saw a steady recovery in our business, with certain key areas growing beyond pre-pandemic (2019) levels in 2021.
Worldwide network volumes for the year increased 24 percent compared to the prior year and reached 2019 levels. Billed business, which represented 85 percent of our total network volumes and drives most of our financial results, increased 25 percent and continued to show different paces of recovery for G&S and T&E spend. G&S spend, which accounts for the majority of our billed business, grew by 19 percent on a year-over-year basis, and was 18 percent above 2019 levels. This growth was primarily driven by ongoing strong performance in online and card-not-present spending even as offline spending fully recovered and resumed growth compared to 2019 levels. Global T&E spend grew 59 percent versus the prior year, reflecting a steady recovery throughout the year, which resulted in fourth quarter T&E volumes reaching 82 percent of 2019 levels. The year-over-year growth in billed business was led by the U.S., where spend increased 26 percent versus the prior year and exceeded 2019 levels by 6 percent, primarily driven by U.S. consumers and small and mid-sized enterprises.
Total revenues net of interest expense increased 17 percent year-over-year, reflecting double digit growth in all our non-interest revenue lines. Discount revenue, our largest revenue line, increased 26 percent year-over-year, driven primarily by growth in Card Member spending. Other fees and commissions and Other revenues increased year-over-year, primarily driven by higher travel-related revenues. Net card fees grew consistently throughout 2021 and were up 11 percent year over year, as new card acquisitions increased, and Card Member retention remained high, demonstrating the impact of investments we have made in our premium value propositions. Net interest income declined 3 percent versus the prior year, primarily due to a decrease in net interest yields driven by higher paydown rates on revolving loan balances.
Card Member loans increased 21 percent, which was lower than the growth in billed business due to higher paydown rates driven in part by the continued liquidity and financial strength of our customer base. Provisions for credit losses decreased and resulted in a net benefit, primarily due to a $2.5 billion reserve release in the current year versus a reserve build in the prior year and lower net write-offs in the current year. The reserve release in the current year was driven by improved portfolio quality and macroeconomic outlook, partially offset by an increase in the outstanding balance of loans and receivables. We do not expect to see reserve releases of this magnitude in 2022.
Card Member rewards, Card Member services and business development expenses are generally correlated to volumes or are variable based on usage, and increased year-over-year due to growth in spend and higher usage of travel-related benefits. Additionally, our higher rewards expense versus last year was partially driven by an increase to our Membership Rewards liability to reflect a higher mix of redemptions in travel-related categories. During the year we increased marketing investments to build growth momentum and accelerate new card acquisitions. Our ongoing investments in differentiated value propositions and expansion of our digital capabilities are helping to drive increased Card Member engagement and strong retention rates. Our operating expenses for 2021 were in line with 2020; however, the current year included sizeable net gains associated with the Amex Ventures equity investments that we do not expect to occur with the same magnitude in 2022. We expect to continue to invest strategically in marketing, value propositions on our products, technology and our colleagues.
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During the year, we returned $9 billion of capital to our shareholders through common share repurchases and divided payments, which resulted in us ending the year with our Common Equity Tier 1 (CET1) capital ratio back within our target range of 10 to 11 percent. We plan to continue to manage our CET1 capital ratio within our target range. We also expect to increase our dividend payment by approximately 20 percent in the first quarter of 2022, subject to approval by our Board of Directors.
The growth momentum we generated throughout this year has strengthened our resolve to continue to focus on our strategic imperatives – expand our leadership in the premium consumer space, build on our strong position in commercial payments, strengthen our global merchant network, and make American Express an essential part of our customers’ digital lives. We believe that continuing our strategy of investing at high levels in our customers, brand and talent will position us well as we seek to deliver sustainable and profitable long-term growth.
See “Supervision and Regulation” in “Business” for information on legislative and regulatory changes that could have a material adverse effect on our results of operations and financial condition and “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for information on additional impacts of the COVID-19 pandemic and the potential impacts of economic, geopolitical and competitive conditions and certain litigation and regulatory matters on our business.
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CONSOLIDATED RESULTS OF OPERATIONS
Refer to the “Glossary of Selected Terminology” for the definitions of certain key terms used in this section.
The discussions in the “Financial Highlights”, “Consolidated Results of Operations” and “Business Segment Results of Operations” provide commentary on the variances for the year ended December 31, 2021 compared to the year ended December 31, 2020, as presented in the accompanying tables. These discussions should be read in conjunction with the discussion under “Business Environment,” which contains further information on the COVID-19 pandemic and the related impacts on our results. For a discussion of the financial condition and results of operations for 2020 compared to 2019, please refer to Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 12, 2021.
TABLE 1: SUMMARY OF FINANCIAL PERFORMANCE

Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages and per share amounts) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Total revenues net of interest expense |  | $ | 42,380 |  |  | $ | 36,087 |  |  | $ | 43,556 |  |  | $ | 6,293 |  |  | 17 | % |  | $ | (7,469) |  |  | (17) | %
Provisions for credit losses (a) |  | (1,419) |  |  | 4,730 |  |  | 3,573 |  |  | (6,149) |  |  | # |  | 1,157 |  |  | 32 |
Expenses |  | 33,110 |  |  | 27,061 |  |  | 31,554 |  |  | 6,049 |  |  | 22 |  |  | (4,493) |  |  | (14) |
Pretax income |  | 10,689 |  |  | 4,296 |  |  | 8,429 |  |  | 6,393 |  |  | # |  | (4,133) |  |  | (49) |
Income tax provision |  | 2,629 |  |  | 1,161 |  |  | 1,670 |  |  | 1,468 |  |  | # |  | (509) |  |  | (30) |
Net income |  | 8,060 |  |  | 3,135 |  |  | 6,759 |  |  | 4,925 |  |  | # |  | (3,624) |  |  | (54) |
Earnings per common share — diluted (b) |  | $ | 10.02 |  |  | $ | 3.77 |  |  | $ | 7.99 |  |  | $ | 6.25 |  |  | # |  | $ | (4.22) |  |  | (53) | %
Return on average equity (c) |  | 33.7 | % |  | 14.2 | % |  | 29.6 | % |  |  |  |  |  |  |  |
Effective tax rate |  | 24.6 | % |  | 27.0 | % |  | 19.8 | % |  |  |  |  |  |  |  |

# Denotes a variance of 100 percent or more.
(a)Results for reporting periods beginning on and after January 1, 2020 are presented using the Current Expected Credit Loss (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. Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.
(b)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. Refer to Note 16 and Note 21 to the “Consolidated Financial Statements” for further details on preferred shares and earnings per common share (EPS), respectively.
(c)Return on average equity (ROE) is calculated for the relevant periods by dividing the (i) preceding twelve months of net income ($8.1 billion, $3.1 billion and $6.8 billion for 2021, 2020 and 2019, respectively) by (ii) one-year monthly average of total shareholders’ equity ($23.9 billion, $22.0 billion and $22.8 billion for 2021, 2020 and 2019, respectively).
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TABLE 2: TOTAL REVENUES NET OF INTEREST EXPENSE SUMMARY

Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Discount revenue |  | $ | 25,727 |  |  | $ | 20,401 |  |  | $ | 26,167 |  |  | $ | 5,326 |  |  | 26 | % |  | $ | (5,766) |  |  | (22) | %
Net card fees (a) |  | 5,195 |  |  | 4,664 |  |  | 4,042 |  |  | 531 |  |  | 11 |  |  | 622 |  |  | 15 |
Other fees and commissions |  | 2,392 |  |  | 2,163 |  |  | 3,297 |  |  | 229 |  |  | 11 |  |  | (1,134) |  |  | (34) |
Other |  | 1,316 |  |  | 874 |  |  | 1,430 |  |  | 442 |  |  | 51 |  |  | (556) |  |  | (39) |
Total non-interest revenues |  | 34,630 |  |  | 28,102 |  |  | 34,936 |  |  | 6,528 |  |  | 23 |  |  | (6,834) |  |  | (20) |
Total interest income |  | 9,033 |  |  | 10,083 |  |  | 12,084 |  |  | (1,050) |  |  | (10) |  |  | (2,001) |  |  | (17) |
Total interest expense |  | 1,283 |  |  | 2,098 |  |  | 3,464 |  |  | (815) |  |  | (39) |  |  | (1,366) |  |  | (39) |
Net interest income |  | 7,750 |  |  | 7,985 |  |  | 8,620 |  |  | (235) |  |  | (3) |  |  | (635) |  |  | (7) |
Total revenues net of interest expense |  | $ | 42,380 |  |  | $ | 36,087 |  |  | $ | 43,556 |  |  | $ | 6,293 |  |  | 17 | % |  | $ | (7,469) |  |  | (17) | %

(a)Effective April 1, 2021, we prospectively changed the recognition of certain costs paid to a third party previously recognized in Net card fees. Refer to Note 1 to the “Consolidated Financial Statements” for further details.
TOTAL REVENUES NET OF INTEREST EXPENSE
Discount revenue increased, primarily driven by an increase in worldwide network volumes of 24 percent, reflecting, in part, the recovery from the adverse impacts of the COVID-19 pandemic in the prior year. U.S. network volumes increased 27 percent and non-U.S. network volumes increased 17 percent. See Tables 5 and 6 for more details on volume performance.
The increase in discount revenue was also driven by an increase in the average discount rate, primarily due to a change in the mix of spending driven by increased levels of T&E-related volumes, as compared to the prior year. The average discount rate was 2.30 percent and 2.28 percent for 2021 and 2020, respectively.
Net card fees increased, primarily driven by growth in our premium card portfolios.
Other fees and commissions increased, primarily due to higher travel commissions and fees from our consumer travel business and higher foreign exchange conversion revenue related to cross-border Card Member spending, both of which reflect the partial recovery of travel-related revenues in the current year.
Other revenues increased, primarily driven by a non-cash gain related to an increase in GBT's total equity book value arising from GBT's acquisition of Egencia and a lower net loss in the current year from GBT as compared to the prior year.
Interest income decreased, primarily due to a decline in the interest yield on average Card Member loans driven by higher paydown rates on revolving loan balances.
Interest expense decreased, primarily driven by lower interest rates paid on deposits and a reduction in average debt.
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TABLE 3: PROVISIONS FOR CREDIT LOSSES SUMMARY

Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Card Member receivables |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net write-offs |  | $ | 129 |  |  | $ | 881 |  |  | $ | 900 |  |  | $ | (752) |  |  | (85) | % |  | $ | (19) |  |  | (2) | %
Reserve (release) build (a) |  | (202) |  |  | 134 |  |  | 63 |  |  | (336) |  |  | # |  | 71 |  |  | #
Total |  | (73) |  |  | 1,015 |  |  | 963 |  |  | (1,088) |  |  | # |  | 52 |  |  | 5 |
Card Member loans |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net write-offs |  | 879 |  |  | 2,170 |  |  | 2,235 |  |  | (1,291) |  |  | (59) |  |  | (65) |  |  | (3) |
Reserve (release) build (a) |  | (2,034) |  |  | 1,283 |  |  | 227 |  |  | (3,317) |  |  | # |  | 1,056 |  |  | #
Total |  | (1,155) |  |  | 3,453 |  |  | 2,462 |  |  | (4,608) |  |  | # |  | 991 |  |  | 40 |
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net write-offs — Other loans (b) |  | 21 |  |  | 111 |  |  | 98 |  |  | (90) |  |  | (81) |  |  | 13 |  |  | 13 |
Net write-offs — Other receivables (c) |  | 33 |  |  | 27 |  |  | 20 |  |  | 6 |  |  | 22 |  |  | 7 |  |  | 35 |
Reserve (release) build — Other loans (a)(b) |  | (185) |  |  | 66 |  |  | 28 |  |  | (251) |  |  | # |  | 38 |  |  | #
Reserve (release) build — Other receivables (a)(c) |  | (60) |  |  | 58 |  |  | 2 |  |  | (118) |  |  | # |  | 56 |  |  | #
Total |  | (191) |  |  | 262 |  |  | 148 |  |  | (453) |  |  | # |  | 114 |  |  | 77 |
Total provisions for credit losses (d) |  | $ | (1,419) |  |  | $ | 4,730 |  |  | $ | 3,573 |  |  | $ | (6,149) |  |  | # |  | $ | 1,157 |  |  | 32 | %

# Denotes a variance of 100 percent or more
(a)Refer to the “Glossary of Selected Terminology” for a definition of reserve (release) build.
(b)Relates to Other loans of $2.9 billion, $2.9 billion and $4.8 billion less reserves of $52 million, $238 million and $152 million, as of December 31, 2021, 2020 and 2019, respectively.
(c)Relates to Other receivables included in Other assets on the Consolidated Balance Sheets of $2.7 billion, $3.0 billion and $3.1 billion, less reserves of $25 million, $85 million and $27 million as of December 31, 2021, 2020 and 2019, respectively.
(d)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. Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.
PROVISIONS FOR CREDIT LOSSES
Card Member receivables and loans provisions for credit losses decreased and resulted in a net benefit, primarily driven by reserve releases in the current year versus reserve builds in the prior year and lower net write-offs in the current year. The reserve releases in the current year were due to improved portfolio quality and macroeconomic outlook, in large part driven by improvement in unemployment rate projections, partially offset by increases in the outstanding balances of receivables and loans. The reserve builds in the prior year were due to the deterioration of the global macroeconomic outlook as a result of the COVID-19 pandemic, partially offset by declines in the outstanding balances of receivables and loans and lower delinquencies.
Other provision for credit losses decreased and resulted in a net benefit, primarily due to a reserve release in the current year versus a reserve build in the prior year and lower net write-offs in the current year. The reserve release in the current year was due to improved portfolio quality and macroeconomic outlook. The reserve build in the prior year was due to deteriorating portfolio quality and the previously mentioned deterioration of the global macroeconomic outlook, partially offset by a decline in the outstanding balance of other loans.
Refer to Note 3 to the “Consolidated Financial Statements” for the range of key variables in the macroeconomic scenarios utilized for the computation of our reserves for credit losses.
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TABLE 4: EXPENSES SUMMARY

Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Marketing and business development |  | $ | 9,053 |  |  | $ | 6,747 |  |  | $ | 7,125 |  |  | $ | 2,306 |  |  | 34 | % |  | $ | (378) |  |  | (5) | %
Card Member rewards |  | 11,007 |  |  | 8,041 |  |  | 10,439 |  |  | 2,966 |  |  | 37 |  |  | (2,398) |  |  | (23) |
Card Member services |  | 1,993 |  |  | 1,230 |  |  | 2,223 |  |  | 763 |  |  | 62 |  |  | (993) |  |  | (45) |
Total marketing, business development, and Card Member rewards and services |  | 22,053 |  |  | 16,018 |  |  | 19,787 |  |  | 6,035 |  |  | 38 |  |  | (3,769) |  |  | (19) |
Salaries and employee benefits |  | 6,240 |  |  | 5,718 |  |  | 5,911 |  |  | 522 |  |  | 9 |  |  | (193) |  |  | (3) |
Other, net |  | 4,817 |  |  | 5,325 |  |  | 5,856 |  |  | (508) |  |  | (10) |  |  | (531) |  |  | (9) |
Total expenses |  | $ | 33,110 |  |  | $ | 27,061 |  |  | $ | 31,554 |  |  | $ | 6,049 |  |  | 22 | % |  | $ | (4,493) |  |  | (14) | %

EXPENSES
Marketing and business development expense increased, primarily due to increases in marketing investments to continue building growth momentum and higher partner payments driven by higher spending volumes.
Card Member rewards expense increased, primarily driven by increases in Membership Rewards and cash back rewards expenses of $2.2 billion and cobrand rewards expense of $769 million, both of which were primarily driven by higher billed business. The increase in Membership Rewards expense was also driven by a larger proportion of spend in categories that earn incremental rewards and a higher mix of redemptions in travel-related categories, as compared to the prior year.
The Membership Rewards Ultimate Redemption Rate (URR) for current program participants was 96 percent (rounded down) at December 31, 2021 and 96 percent (rounded up) at December 31, 2020.
Card Member services expense increased, primarily due to higher usage of travel-related benefits in the current year, as compared to the prior year during which travel was more negatively impacted by the COVID-19 pandemic.
Salaries and employee benefits expense increased, primarily driven by higher compensation.
Other expenses decreased, primarily driven by higher net gains in the current year on Amex Ventures equity investments, the impact of the implementation of the Proportional Amortization Method (PAM) related to investments in qualified affordable housing projects and a net reserve release in the current year versus a reserve build in the prior year associated with merchant exposure for Card Member purchases, all of which were partially offset by an increase in professional services expense.
Refer to Note 1 to the “Consolidated Financial Statements” for further information on PAM.
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INCOME TAXES
The effective tax rate was 24.6 percent and 27.0 percent for 2021 and 2020, respectively. The reduction in the effective tax rate primarily reflected discrete tax charges in the prior year related to the realizability of certain foreign deferred tax assets. The tax rates in both years reflected the level of pretax income in relation to recurring permanent tax benefits and the geographic mix of business. The current year's effective tax rate also reflected the implementation of PAM related to investments in qualified affordable housing projects. Refer to Note 1 to the “Consolidated Financial Statements” for further information on PAM.
TABLE 5: SELECTED CARD-RELATED STATISTICAL INFORMATION

|  |  |  |  |  |  |  | Change |  | Change
Years Ended December 31, |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Network volumes: (billions) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 897.0 |  |  | $ | 708.1 |  |  | $ | 840.7 |  |  | 27 | % |  | (16) | %
Outside the U.S. |  | 387.2 |  |  | 329.7 |  |  | 425.0 |  |  | 17 |  |  | (22) |
Total |  | $ | 1,284.2 |  |  | $ | 1,037.8 |  |  | $ | 1,265.7 |  |  | 24 |  |  | (18) |
Billed business |  | $ | 1,089.8 |  |  | $ | 870.7 |  |  | $ | 1,070.5 |  |  | 25 |  |  | (19) |
Processed volumes |  | 194.4 |  |  | 167.1 |  |  | 195.2 |  |  | 16 |  |  | (14) |
Total |  | $ | 1,284.2 |  |  | $ | 1,037.8 |  |  | $ | 1,265.7 |  |  | 24 |  |  | (18) |
Cards-in-force: (millions) |  |  |  |  |  |  |  |  |  |
U.S. |  | 56.4 |  |  | 53.8 |  |  | 54.7 |  |  | 5 |  |  | (2) |
Outside the U.S. |  | 65.3 |  |  | 58.2 |  |  | 59.7 |  |  | 12 |  |  | (3) |
Total |  | 121.7 |  |  | 112.0 |  |  | 114.4 |  |  | 9 |  |  | (2) |
Proprietary |  | 71.4 |  |  | 68.9 |  |  | 70.3 |  |  | 4 |  |  | (2) |
GNS |  | 50.3 |  |  | 43.1 |  |  | 44.1 |  |  | 17 |  |  | (2) |
Total |  | 121.7 |  |  | 112.0 |  |  | 114.4 |  |  | 9 |  |  | (2) |
Basic cards-in-force: (millions) |  |  |  |  |  |  |  |  |  |
U.S. |  | 44.3 |  |  | 42.2 |  |  | 43.0 |  |  | 5 |  |  | (2) |
Outside the U.S. |  | 56.4 |  |  | 49.1 |  |  | 50.0 |  |  | 15 |  |  | (2) |
Total |  | 100.7 |  |  | 91.3 |  |  | 93.0 |  |  | 10 |  |  | (2) |
Average proprietary basic Card Member spending: (dollars) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 22,477 |  |  | $ | 18,085 |  |  | $ | 21,515 |  |  | 24 |  |  | (16) |
Outside the U.S. |  | $ | 15,251 |  |  | $ | 12,264 |  |  | $ | 16,351 |  |  | 24 |  |  | (25) |
Worldwide Average |  | $ | 20,392 |  |  | $ | 16,352 |  |  | $ | 19,972 |  |  | 25 |  |  | (18) |
Average discount rate |  | 2.30 | % |  | 2.28 | % |  | 2.37 | % |  |  |  |
Average fee per card (dollars)(a) |  | $ | 74 |  |  | $ | 67 |  |  | $ | 58 |  |  | 10 | % |  | 16 | %

(a)Average fee per card is computed on an annualized basis based on proprietary Net card fees divided by average proprietary total cards-in-force.
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TABLE 6: NETWORK VOLUMES-RELATED STATISTICAL INFORMATION

|  | 2021 |  | 2020
|  | Year over Year Percentage Increase (Decrease) |  | Percentage Increase (Decrease) Assuming No Changes in FX Rates(a) |  | Year over Year Percentage Increase (Decrease) |  | Percentage Increase (Decrease) Assuming No Changes in FX Rates(a)
Worldwide |  |  |  |  |  |  |  |
Network volumes |  | 24 | % |  | 23 | % |  | (18) | % |  | (19) | %
Total billed business |  | 25 |  |  | 24 |  |  | (19) |  |  | (19) |
Consumer billed business |  | 29 |  |  | 28 |  |  | (17) |  |  | (18) |
Commercial billed business |  | 21 |  |  | 20 |  |  | (21) |  |  | (21) |
Processed volumes |  | 16 |  |  | 14 |  |  | (14) |  |  | (15) |
U.S. |  |  |  |  |  |  |  |
Network volumes |  | 27 |  |  |  |  | (16) |  |  |
Total billed business |  | 26 |  |  |  |  | (16) |  |  |
Consumer billed business |  | 32 |  |  |  |  | (15) |  |  |
Commercial billed business |  | 21 |  |  |  |  | (18) |  |  |
Outside the U.S. |  |  |  |  |  |  |  |
Network volumes |  | 17 |  |  | 14 |  |  | (22) |  |  | (24) |
Total billed business |  | 21 |  |  | 17 |  |  | (26) |  |  | (28) |
Consumer billed business |  | 23 |  |  | 19 |  |  | (21) |  |  | (24) |
Commercial billed business |  | 18 |  |  | 14 |  |  | (32) |  |  | (34) |
Asia Pacific, Australia & New Zealand network volumes |  | 12 |  |  | 9 |  |  | (15) |  |  | (18) |
Latin America, Canada & Caribbean network volumes |  | 23 |  |  | 22 |  |  | (32) |  |  | (27) |
Europe, the Middle East & Africa network volumes |  | 25 |  |  | 19 |  |  | (29) |  |  | (33) |
Merchant Industry Metrics |  |  |  |  |  |  |  |
Worldwide billed business |  |  |  |  |  |  |  |
G&S-related (81% and 86% of worldwide billed business for 2021 and 2020, respectively) |  | 19 |  |  | 18 |  |  | (1) |  |  | (1) |
T&E-related (19% and 14% of worldwide billed business for 2021 and 2020, respectively) |  | 59 |  |  | 58 |  |  | (60) |  |  | (60) |
Airline-related (3% and 3% of worldwide billed business for 2021 and 2020, respectively) |  | 63 |  |  | 61 | % |  | (76) |  |  | (76) | %
U.S. billed business |  |  |  |  |  |  |  |
G&S-related (82% and 87% of U.S. billed business for 2021 and 2020, respectively) |  | 19 |  |  |  |  | (1) |  |  |
T&E-related (18% and 13% of U.S. billed business for 2021 and 2020, respectively) |  | 70 |  |  |  |  | (58) |  |  |
Airline-related (3% and 2% of U.S. billed business for 2021 and 2020, respectively) |  | 80 | % |  |  |  | (75) | % |  |

(a)The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current year apply to the corresponding prior-year period against which such results are being compared).
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TABLE 7: SELECTED CREDIT-RELATED STATISTICAL INFORMATION

As of or for the Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages and where indicated) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Worldwide Card Member loans |  |  |  |  |  |  |  |  |  |
Card Member loans: (billions) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 76.9 |  |  | $ | 64.2 |  |  | $ | 76.0 |  |  | 20 | % |  | (16) | %
Outside the U.S. |  | 11.7 |  |  | 9.2 |  |  | 11.4 |  |  | 27 |  |  | (19) |
Total |  | $ | 88.6 |  |  | $ | 73.4 |  |  | $ | 87.4 |  |  | 21 |  |  | (16) |
Credit loss reserves: |  |  |  |  |  |  |  |  |  |
Beginning balance (a) |  | $ | 5,344 |  |  | $ | 4,027 |  |  | $ | 2,134 |  |  | 33 |  |  | 89 |
Provisions — principal, interest and fees |  | (1,155) |  |  | 3,453 |  |  | 2,462 |  |  | # |  | 40 |
Net write-offs — principal less recoveries |  | (672) |  |  | (1,795) |  |  | (1,860) |  |  | (63) |  |  | (3) |
Net write-offs — interest and fees less recoveries |  | (207) |  |  | (375) |  |  | (375) |  |  | (45) |  |  | — |
Other (b) |  | (5) |  |  | 34 |  |  | 22 |  |  | # |  | 55 |
Ending balance |  | $ | 3,305 |  |  | $ | 5,344 |  |  | $ | 2,383 |  |  | (38) |  |  | #
% of loans |  | 3.7 | % |  | 7.3 | % |  | 2.7 | % |  |  |  |
% of past due |  | 555 | % |  | 727 | % |  | 177 | % |  |  |  |
Average loans (billions) |  | $ | 76.1 |  |  | $ | 74.6 |  |  | $ | 82.8 |  |  | 2 |  |  | (10) |
Net write-off rate — principal only (c) |  | 0.9 | % |  | 2.4 | % |  | 2.2 | % |  |  |  |
Net write-off rate — principal, interest and fees (c) |  | 1.2 | % |  | 2.9 | % |  | 2.7 | % |  |  |  |
30+ days past due as a % of total |  | 0.7 | % |  | 1.0 | % |  | 1.5 | % |  |  |  |
Worldwide Card Member receivables |  |  |  |  |  |  |  |  |  |
Card Member receivables: (billions) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 38.4 |  |  | $ | 30.5 |  |  | $ | 39.0 |  |  | 26 |  |  | (22) |
Outside the U.S. |  | 15.2 |  |  | 13.2 |  |  | 18.4 |  |  | 15 |  |  | (28) |
Total |  | $ | 53.6 |  |  | $ | 43.7 |  |  | $ | 57.4 |  |  | 23 |  |  | (24) |
Credit loss reserves: |  |  |  |  |  |  |  |  |  |
Beginning balance (a) |  | $ | 267 |  |  | $ | 126 |  |  | $ | 573 |  |  | # |  | (78) |
Provisions — principal and fees |  | (73) |  |  | 1,015 |  |  | 963 |  |  | # |  | 5 |
Net write-offs — principal and fees less recoveries (d) |  | (129) |  |  | (881) |  |  | (900) |  |  | (85) |  |  | (2) |
Other (b) |  | (1) |  |  | 7 |  |  | (17) |  |  | # |  | #
Ending balance |  | $ | 64 |  |  | $ | 267 |  |  | $ | 619 |  |  | (76) | % |  | (57) | %
% of receivables |  | 0.1 | % |  | 0.6 | % |  | 1.1 | % |  |  |  |
Net write-off rate — principal and fees (c)(d)(e) |  | 0.3 | % |  | 2.0 | % |  | 1.6 | % |  |  |  |

# Denotes a variance of 100 percent or more
(a)Includes an increase of $1,643 million and decrease of $493 million to the beginning reserve balances for Card Member loans and receivables, respectively, as of January 1, 2020, related to the adoption of the CECL methodology. Refer to Note 3 to the “Consolidated Financial Statements” for further information.
(b)Other includes foreign currency translation adjustments.
(c)We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.
(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 31, 2020 in the GCS segment.
(e)Refer to Tables 10 and 13 for Net write-off rate — principal only and 30+ days past due metrics for GCSG and Global Small Business Services (GSBS) receivables, respectively. A net write-off rate based on principal losses only for Global Corporate Payments (GCP), which reflects global, large and middle market corporate accounts, is not available due to system constraints.
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TABLE 8: NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS

Years Ended December 31, |  |  |  |  |  |
(Millions, except percentages and where indicated) |  | 2021 |  | 2020 |  | 2019
Net interest income |  | $ | 7,750 |  |  | $ | 7,985 |  |  | $ | 8,620 |
Exclude: |  |  |  |  |  |
Interest expense not attributable to our Card Member loan portfolio (a) |  | 738 |  |  | 1,295 |  |  | 1,833 |
Interest income not attributable to our Card Member loan portfolio (b) |  | (379) |  |  | (668) |  |  | (1,227) |
Adjusted net interest income (c) |  | $ | 8,109 |  |  | $ | 8,612 |  |  | $ | 9,226 |
Average Card Member loans (billions) |  | $ | 76.0 |  |  | $ | 74.6 |  |  | $ | 82.8 |
Net interest income divided by average Card Member loans (c) |  | 10.2 | % |  | 10.7 | % |  | 10.4 | %
Net interest yield on average Card Member loans (c) |  | 10.7 | % |  | 11.5 | % |  | 11.1 | %

(a)Primarily represents interest expense attributable to maintaining our corporate liquidity pool and funding Card Member receivables.
(b)Primarily represents interest income attributable to Other loans, interest-bearing deposits and the fixed income investment portfolios.
(c)Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to “Glossary of Selected Terminology” for the definitions of these terms. We believe adjusted net interest income is useful to investors because it represents the interest expense and interest income attributable to our Card Member loan portfolio and is a component of net interest yield on average Card Member loans, which provides a measure of profitability of our Card Member loan portfolio. Net interest yield on average Card Member loans reflects adjusted net interest income divided by average Card Member loans, computed on an annualized basis. Net interest income divided by average Card Member loans, computed on an annualized basis, a GAAP measure, includes elements of total interest income and total interest expense that are not attributable to the Card Member loan portfolio, and thus is not representative of net interest yield on average Card Member loans.
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BUSINESS SEGMENT RESULTS OF OPERATIONS
We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution channels, geographic considerations (primarily United States versus outside the United States) and regulatory considerations. Refer to Note 24 to the “Consolidated Financial Statements” and Part I, Item 1. “Business” for additional discussion of products and services that comprise each segment.
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.
Results of the reportable operating segments generally treat each segment as a stand-alone business. The management reporting process that derives these results allocates revenue and expense using various methodologies as described below.
TOTAL REVENUES NET OF INTEREST EXPENSE
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the GCSG and GCS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue.
Net card fees and Other fees and commissions are directly attributable to the segment in which they are reported.
Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.
PROVISIONS FOR CREDIT LOSSES
The provisions for credit losses are directly attributable to the segment in which they are reported.
EXPENSES
Marketing and business development expense is included in each segment based on the actual expenses incurred. Global brand advertising is primarily allocated to the segments based on the relative levels of revenue. Rewards and Card Member services expenses are included in each segment based on the actual expenses incurred.
Salaries and employee benefits and other operating expenses reflect both costs incurred directly within each segment, as well as allocated expenses. 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.
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GLOBAL CONSUMER SERVICES GROUP
TABLE 9: GCSG SELECTED INCOME STATEMENT DATA

Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest revenues |  | $ | 18,157 |  |  | $ | 14,632 |  |  | $ | 17,178 |  |  | $ | 3,525 |  |  | 24 | % |  | $ | (2,546) |  |  | (15) | %
Interest income |  | 7,391 |  |  | 8,199 |  |  | 9,414 |  |  | (808) |  |  | (10) |  |  | (1,215) |  |  | (13) |
Interest expense |  | 717 |  |  | 1,054 |  |  | 1,731 |  |  | (337) |  |  | (32) |  |  | (677) |  |  | (39) |
Net interest income |  | 6,674 |  |  | 7,145 |  |  | 7,683 |  |  | (471) |  |  | (7) |  |  | (538) |  |  | (7) |
Total revenues net of interest expense |  | 24,831 |  |  | 21,777 |  |  | 24,861 |  |  | 3,054 |  |  | 14 |  |  | (3,084) |  |  | (12) |
Provisions for credit losses (a) |  | (945) |  |  | 3,150 |  |  | 2,636 |  |  | (4,095) |  |  | # |  | 514 |  |  | 19 |
Total revenues net of interest expense after provisions for credit losses |  | 25,776 |  |  | 18,627 |  |  | 22,225 |  |  | 7,149 |  |  | 38 |  |  | (3,598) |  |  | (16) |
Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketing, business development, and Card Member rewards and services |  | 13,898 |  |  | 9,841 |  |  | 12,201 |  |  | 4,057 |  |  | 41 |  |  | (2,360) |  |  | (19) |
Salaries and employee benefits and other operating expenses |  | 5,052 |  |  | 5,099 |  |  | 5,179 |  |  | (47) |  |  | (1) |  |  | (80) |  |  | (2) |
Total expenses |  | 18,950 |  |  | 14,940 |  |  | 17,380 |  |  | 4,010 |  |  | 27 |  |  | (2,440) |  |  | (14) |
Pretax segment income |  | $ | 6,826 |  |  | $ | 3,687 |  |  | $ | 4,845 |  |  | $ | 3,139 |  |  | 85 | % |  | $ | (1,158) |  |  | (24) | %

# Denotes a variance of 100 percent or more
(a)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. Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.
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, our partnership agreements in China and our loyalty coalition businesses operated in certain countries.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues increased, primarily driven by higher Discount revenue, Net card fees and Other fees and commissions.
Discount revenue increased 31 percent, primarily driven by an increase in consumer billed business of 29 percent reflecting, in part, recovery from the adverse impacts of the COVID-19 pandemic in the prior year.
See Tables 5, 6 and 10 for more details on volume performance.
Net card fees increased 12 percent, primarily driven by growth in our premium card portfolios.
Other fees and commissions increased 11 percent, primarily due to higher travel commissions and fees from our consumer travel business and higher foreign exchange conversion revenue related to increased cross-border Card Member spending, both of which reflect the partial recovery of travel-related revenues in the current year.
Net interest income decreased, primarily due to a decline in interest income driven by lower revolving Card Member loan balances, partially offset by lower cost of funds.
PROVISIONS FOR CREDIT LOSSES
Provisions for credit losses decreased and resulted in a net benefit, primarily driven by reserve releases in the current year versus reserve builds in the prior year and lower net write-offs in the current year. The reserve releases in the current year were due to improved portfolio quality and macroeconomic outlook, in large part driven by improvement in unemployment rate projections, partially offset by increases in the outstanding balances of receivables and loans. The reserve builds in the prior year were due to the deterioration of the global macroeconomic outlook as a result of the COVID-19 pandemic, partially offset by decreases in the outstanding balances of receivables and loans.
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EXPENSES
Marketing, business development, and Card Member rewards and services expenses increased across all expense categories. The increase in Card Member rewards expense was primarily driven by higher billed business as well as a larger proportion of spend in categories that earn incremental rewards and a higher mix of redemptions in travel-related categories, as compared to the prior year. The increase in Marketing and business development expense was primarily due to increases in marketing investments to continue building growth momentum as well as higher spending volumes. The increase in Card Member services expense was primarily due to higher usage of travel-related benefits in the current year, as compared to the prior year during which travel was more negatively impacted by the COVID-19 pandemic.
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TABLE 10: GCSG SELECTED STATISTICAL INFORMATION

As of or for the Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages and where indicated) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Billed business: (billions) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 444.2 |  |  | $ | 337.6 |  |  | $ | 398.8 |  |  | 32 | % |  | (15) | %
Outside the U.S. |  | 148.9 |  |  | 121.1 |  |  | 154.0 |  |  | 23 |  |  | (21) |
Total |  | $ | 593.1 |  |  | $ | 458.7 |  |  | $ | 552.8 |  |  | 29 |  |  | (17) |
Proprietary cards-in-force: |  |  |  |  |  |  |  |  |  |
U.S. |  | 39.0 |  |  | 37.7 |  |  | 37.9 |  |  | 3 |  |  | (1) |
Outside the U.S. |  | 17.0 |  |  | 16.7 |  |  | 17.5 |  |  | 2 |  |  | (5) |
Total |  | 56.0 |  |  | 54.4 |  |  | 55.4 |  |  | 3 |  |  | (2) |
Proprietary basic cards-in-force: |  |  |  |  |  |  |  |  |  |
U.S. |  | 27.3 |  |  | 26.6 |  |  | 26.9 |  |  | 3 |  |  | (1) |
Outside the U.S. |  | 11.9 |  |  | 11.6 |  |  | 12.1 |  |  | 3 |  |  | (4) |
Total |  | 39.2 |  |  | 38.2 |  |  | 39.0 |  |  | 3 |  |  | (2) |
Average proprietary basic Card Member spending: (dollars) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 16,498 |  |  | $ | 12,641 |  |  | $ | 14,801 |  |  | 31 |  |  | (15) |
Outside the U.S. |  | $ | 12,759 |  |  | $ | 10,175 |  |  | $ | 12,884 |  |  | 25 |  |  | (21) |
Average |  | $ | 15,368 |  |  | $ | 11,881 |  |  | $ | 14,212 |  |  | 29 |  |  | (16) |
Total segment assets (billions) |  | $ | 102.1 |  |  | $ | 87.4 |  |  | $ | 107.0 |  |  | 17 |  |  | (18) |
Card Member loans: |  |  |  |  |  |  |  |  |  |
Total loans (billions) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 59.8 |  |  | $ | 51.4 |  |  | $ | 62.4 |  |  | 16 |  |  | (18) |
Outside the U.S. |  | 10.7 |  |  | 8.7 |  |  | 10.9 |  |  | 23 |  |  | (20) |
Total |  | $ | 70.5 |  |  | $ | 60.1 |  |  | $ | 73.3 |  |  | 17 |  |  | (18) |
Average loans (billions) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 52.0 |  |  | $ | 53.0 |  |  | $ | 59.4 |  |  | (2) |  |  | (11) |
Outside the U.S. |  | 9.0 |  |  | 8.6 |  |  | 10.0 |  |  | 5 |  |  | (14) |
Total |  | $ | 61.0 |  |  | $ | 61.6 |  |  | $ | 69.4 |  |  | (1) | % |  | (11) | %
U.S. |  |  |  |  |  |  |  |  |  |
Net write-off rate — principal only (a) |  | 0.8 | % |  | 2.4 | % |  | 2.3 | % |  |  |  |
Net write-off rate — principal, interest and fees (a) |  | 1.1 | % |  | 2.9 | % |  | 2.8 | % |  |  |  |
30+ days past due as a % of total |  | 0.7 | % |  | 1.0 | % |  | 1.6 | % |  |  |  |
Outside the U.S. |  |  |  |  |  |  |  |  |  |
Net write-off rate — principal only (a) |  | 1.7 | % |  | 3.0 | % |  | 2.4 | % |  |  |  |
Net write-off rate — principal, interest and fees (a) |  | 2.2 | % |  | 3.7 | % |  | 2.9 | % |  |  |  |
30+ days past due as a % of total |  | 0.8 | % |  | 1.7 | % |  | 1.8 | % |  |  |  |
Total |  |  |  |  |  |  |  |  |  |
Net write-off rate — principal only (a) |  | 0.9 | % |  | 2.5 | % |  | 2.3 | % |  |  |  |
Net write-off rate — principal, interest and fees (a) |  | 1.3 | % |  | 3.0 | % |  | 2.8 | % |  |  |  |
30+ days past due as a % of total |  | 0.7 | % |  | 1.1 | % |  | 1.6 | % |  |  |  |

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|  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages and where indicated) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Card Member receivables: (billions) |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 14.7 |  |  | $ | 11.9 |  |  | $ | 14.2 |  |  | 24 | % |  | (16) | %
Outside the U.S. |  | 7.7 |  |  | 6.8 |  |  | 8.6 |  |  | 13 |  |  | (21) |
Total |  | $ | 22.4 |  |  | $ | 18.7 |  |  | $ | 22.8 |  |  | 20 | % |  | (18) | %
U.S. |  |  |  |  |  |  |  |  |  |
Net write-off rate — principal only (a) |  | — | % |  | 1.3 | % |  | 1.4 | % |  |  |  |
Net write-off rate — principal and fees (a) |  | 0.1 | % |  | 1.4 | % |  | 1.6 | % |  |  |  |
30+ days past due as a % of total |  | 0.4 | % |  | 0.4 | % |  | 1.2 | % |  |  |  |
Outside the U.S. |  |  |  |  |  |  |  |  |  |
Net write-off rate — principal only (a) |  | 0.8 | % |  | 2.5 | % |  | 2.2 | % |  |  |  |
Net write-off rate — principal and fees (a) |  | 0.9 | % |  | 2.7 | % |  | 2.4 | % |  |  |  |
30+ days past due as a % of total |  | 0.7 | % |  | 1.0 | % |  | 1.3 | % |  |  |  |
Total |  |  |  |  |  |  |  |  |  |
Net write-off rate — principal only (a) |  | 0.3 | % |  | 1.7 | % |  | 1.7 | % |  |  |  |
Net write-off rate — principal and fees (a) |  | 0.4 | % |  | 1.9 | % |  | 1.9 | % |  |  |  |
30+ days past due as a % of total |  | 0.5 | % |  | 0.6 | % |  | 1.2 | % |  |  |  |

(a) Refer to Table 7 footnote (c).
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TABLE 11: GCSG NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS

As of or for the Years Ended December 31, |  |  |  |  |  |
(Millions, except percentages and where indicated) |  | 2021 |  | 2020 |  | 2019
U.S. |  |  |  |  |  |
Net interest income |  | $ | 5,933 |  |  | $ | 6,222 |  |  | $ | 6,660 |
Exclude: |  |  |  |  |  |
Interest expense not attributable to our Card Member loan portfolio(a) |  | 158 |  |  | 288 |  |  | 276 |
Interest income not attributable to our Card Member loan portfolio(b) |  | (110) |  |  | (189) |  |  | (220) |
Adjusted net interest income(c) |  | $ | 5,981 |  |  | $ | 6,321 |  |  | $ | 6,716 |
Average Card Member loans (billions) |  | $ | 52.0 |  |  | $ | 53.0 |  |  | $ | 59.4 |
Net interest income divided by average Card Member loans(c) |  | 11.4 | % |  | 11.7 | % |  | 11.2 | %
Net interest yield on average Card Member loans(c) |  | 11.5 | % |  | 11.9 | % |  | 11.3 | %
Outside the U.S. |  |  |  |  |  |
Net interest income |  | $ | 741 |  |  | $ | 923 |  |  | $ | 1,024 |
Exclude: |  |  |  |  |  |
Interest expense not attributable to our Card Member loan portfolio(a) |  | 108 |  |  | 105 |  |  | 85 |
Interest income not attributable to our Card Member loan portfolio(b) |  | (8) |  |  | (12) |  |  | (15) |
Adjusted net interest income(c) |  | $ | 841 |  |  | $ | 1,016 |  |  | $ | 1,094 |
Average Card Member loans (billions) |  | $ | 9.0 |  |  | $ | 8.6 |  |  | $ | 10.0 |
Net interest income divided by average Card Member loans(c) |  | 8.2 | % |  | 10.7 | % |  | 10.2 | %
Net interest yield on average Card Member loans(c) |  | 9.4 | % |  | 11.9 | % |  | 10.9 | %
Total |  |  |  |  |  |
Net interest income |  | $ | 6,674 |  |  | $ | 7,145 |  |  | $ | 7,683 |
Exclude: |  |  |  |  |  |
Interest expense not attributable to our Card Member loan portfolio(a) |  | 266 |  |  | 393 |  |  | 361 |
Interest income not attributable to our Card Member loan portfolio(b) |  | (118) |  |  | (201) |  |  | (234) |
Adjusted net interest income(c) |  | $ | 6,822 |  |  | $ | 7,337 |  |  | $ | 7,810 |
Average Card Member loans (billions) |  | $ | 61.0 |  |  | $ | 61.6 |  |  | $ | 69.4 |
Net interest income divided by average Card Member loans(c) |  | 10.9 | % |  | 11.6 | % |  | 11.1 | %
Net interest yield on average Card Member loans(c) |  | 11.2 | % |  | 11.9 | % |  | 11.3 | %

(a)Refer to Table 8 footnote (a).
(b)Refer to Table 8 footnote (b).
(c)Refer to Table 8 footnote (c).
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GLOBAL COMMERCIAL SERVICES
TABLE 12: GCS SELECTED INCOME STATEMENT DATA

Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest revenues |  | $ | 11,489 |  |  | $ | 9,652 |  |  | $ | 12,242 |  |  | $ | 1,837 |  |  | 19 | % |  | $ | (2,590) |  |  | (21) | %
Interest income |  | 1,460 |  |  | 1,586 |  |  | 1,900 |  |  | (126) |  |  | (8) |  |  | (314) |  |  | (17) |
Interest expense |  | 449 |  |  | 619 |  |  | 1,034 |  |  | (170) |  |  | (27) |  |  | (415) |  |  | (40) |
Net interest income |  | 1,011 |  |  | 967 |  |  | 866 |  |  | 44 |  |  | 5 |  |  | 101 |  |  | 12 |
Total revenues net of interest expense |  | 12,500 |  |  | 10,619 |  |  | 13,108 |  |  | 1,881 |  |  | 18 |  |  | (2,489) |  |  | (19) |
Provisions for credit losses (a) |  | (438) |  |  | 1,493 |  |  | 918 |  |  | (1,931) |  |  | # |  | 575 |  |  | 63 |
Total revenues net of interest expense after provisions for credit losses |  | 12,938 |  |  | 9,126 |  |  | 12,190 |  |  | 3,812 |  |  | 42 |  |  | (3,064) |  |  | (25) |
Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketing, business development, and Card Member rewards and services |  | 6,592 |  |  | 4,991 |  |  | 6,237 |  |  | 1,601 |  |  | 32 |  |  | (1,246) |  |  | (20) |
Salaries and employee benefits and other operating expenses |  | 3,418 |  |  | 3,199 |  |  | 3,261 |  |  | 219 |  |  | 7 |  |  | (62) |  |  | (2) |
Total expenses |  | 10,010 |  |  | 8,190 |  |  | 9,498 |  |  | 1,820 |  |  | 22 |  |  | (1,308) |  |  | (14) |
Pretax segment income |  | $ | 2,928 |  |  | $ | 936 |  |  | $ | 2,692 |  |  | $ | 1,992 |  |  | # |  | $ | (1,756) |  |  | (65) | %

# Denotes a variance of 100 percent or more
(a)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. Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.
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.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues increased, primarily driven by higher Discount revenue and Net card fees.
Discount revenue increased 21 percent, primarily driven by an increase in commercial billed business of 21 percent reflecting, in part, the recovery from the adverse impacts of the COVID-19 pandemic in the prior year.
See Tables 5, 6 and 13 for more details on volume performance.
Net card fees increased 9 percent, primarily driven by growth in our premium card portfolios.
Net interest income increased, primarily due to lower cost of funds, partially offset by lower average revolving Card Member loan balances.
PROVISIONS FOR CREDIT LOSSES
Provisions for credit losses decreased and resulted in a net benefit, primarily driven by reserve releases in the current year versus reserve builds in the prior year and lower net write-offs in the current year. The reserve releases in the current year were due to improved portfolio quality and macroeconomic outlook, in large part driven by improvement in unemployment rate projections. For Card Member receivables and loans provisions for credit losses, the reserve releases were partially offset by increases in the outstanding balances of receivables and loans. The reserve builds in the prior year were due to the deterioration of the global macroeconomic outlook as a result of the COVID-19 pandemic, partially offset by decreases in the outstanding balances of receivables and loans.
EXPENSES
Marketing, business development, and Card Member rewards and services expenses increased across all expense categories. The increase in Card Member rewards expense was primarily driven by higher billed business as well as a larger proportion of spend in categories that earn incremental rewards and a higher mix of redemptions in travel-related categories, as compared to the prior year. The increase in Marketing and business development expense was primarily due to increases in marketing investments to continue building growth momentum.
Salaries and employee benefits and other operating expenses increased, primarily due to higher compensation and the Company's partial repayment of a prior year insurance claim associated with insured losses from a corporate client bankruptcy that were partially recovered during the current year.
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TABLE 13: GCS SELECTED STATISTICAL INFORMATION

As of or for the Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages and where indicated) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Billed business (billions) |  | $ | 490.9 |  |  | $ | 406.5 |  |  | $ | 513.3 |  |  | 21 | % |  | (21) | %
Proprietary cards-in-force |  | 15.4 |  |  | 14.5 |  |  | 14.9 |  |  | 6 |  |  | (3) |
Average Card Member spending (dollars) |  | $ | 33,055 |  |  | $ | 27,769 |  |  | $ | 34,905 |  |  | 19 |  |  | (20) |
Total segment assets (billions) |  | $ | 52.9 |  |  | $ | 42.1 |  |  | $ | 52.8 |  |  | 26 |  |  | (20) |
GSBS Card Member loans: |  |  |  |  |  |  |  |  |  |
Total loans (billions) |  | $ | 18.0 |  |  | $ | 13.2 |  |  | $ | 14.1 |  |  | 36 |  |  | (6) |
Average loans (billions) |  | $ | 15.0 |  |  | $ | 12.9 |  |  | $ | 13.3 |  |  | 16 |  |  | (3) |
Net write-off rate — principal only(a) |  | 0.6 | % |  | 2.1 | % |  | 1.9 | % |  |  |  |
Net write-off rate — principal, interest and fees(a) |  | 0.8 | % |  | 2.4 | % |  | 2.2 | % |  |  |  |
30+ days past due as a % of total |  | 0.5 | % |  | 0.7 | % |  | 1.3 | % |  |  |  |
Calculation of Net Interest Yield on Average Card Member Loans: |  |  |  |  |  |  |  |  |  |
Net interest income |  | $ | 1,011 |  |  | $ | 967 |  |  | $ | 866 |  |  |  |  |
Exclude: |  |  |  |  |  |  |  |  |  |
Interest expense not attributable to our Card Member loan portfolio(b) |  | 354 |  |  | 478 |  |  | 772 |  |  |  |  |
Interest income not attributable to our Card Member loan portfolio(c) |  | (78) |  |  | (170) |  |  | (222) |  |  |  |  |
Adjusted net interest income(d) |  | $ | 1,287 |  |  | $ | 1,275 |  |  | $ | 1,416 |  |  |  |  |
Average Card Member loans (billions) |  | $ | 15.0 |  |  | $ | 13.0 |  |  | $ | 13.4 |  |  |  |  |
Net interest income divided by average Card Member loans(d) |  | 6.7 | % |  | 7.4 | % |  | 6.5 | % |  |  |  |
Net interest yield on average Card Member loans(d) |  | 8.6 | % |  | 9.8 | % |  | 10.6 | % |  |  |  |
Card Member receivables: |  |  |  |  |  |  |  |  |  |
Total receivables (billions) |  | $ | 31.3 |  |  | $ | 25.0 |  |  | $ | 34.6 |  |  | 25 |  |  | (28) |
Net write-off rate — principal and fees(e)(f) |  | 0.2 | % |  | 2.1 | % |  | 1.4 | % |  |  |  |
GCP Card Member receivables: |  |  |  |  |  |  |  |  |  |
Total receivables (billions) |  | $ | 13.3 |  |  | $ | 10.9 |  |  | $ | 17.2 |  |  | 22 |  |  | (37) |
90+ days past billing as a % of total(e) |  | 0.3 | % |  | 0.6 | % |  | 0.8 | % |  |  |  |
Net write-off rate — principal and fees(e)(f) |  | — | % |  | 1.9 | % |  | 0.8 | % |  |  |  |
GSBS Card Member receivables: |  |  |  |  |  |  |  |  |  |
Total receivables (billions) |  | $ | 18.0 |  |  | $ | 14.1 |  |  | $ | 17.4 |  |  | 28 | % |  | (19) | %
Net write-off rate — principal only(a) |  | 0.3 | % |  | 2.1 | % |  | 1.9 | % |  |  |  |
Net write-off rate — principal and fees(a) |  | 0.4 | % |  | 2.3 | % |  | 2.1 | % |  |  |  |
30+ days past due as a % of total |  | 0.7 | % |  | 0.7 | % |  | 1.7 | % |  |  |  |

(a)Refer to Table 7 footnote (c).
(b)Refer to Table 8 footnote (a).
(c)Refer to Table 8 footnote (b).
(d)Refer to Table 8 footnote (c).
(e)For GCP Card Member receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. GCP delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.
(f)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 31, 2020.
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GLOBAL MERCHANT AND NETWORK SERVICES
TABLE 14: GMNS SELECTED INCOME STATEMENT AND OTHER DATA

Years Ended December 31, |  |  |  |  |  |  |  | Change |  | Change
(Millions, except percentages and where indicated) |  | 2021 |  | 2020 |  | 2019 |  | 2021 vs. 2020 |  | 2020 vs. 2019
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-interest revenues |  | $ | 4,964 |  |  | $ | 4,143 |  |  | $ | 5,428 |  |  | $ | 821 |  |  | 20 | % |  | $ | (1,285) |  |  | (24) | %
Interest income |  | 16 |  |  | 18 |  |  | 27 |  |  | (2) |  |  | (11) |  |  | (9) |  |  | (33) |
Interest expense |  | (92) |  |  | (82) |  |  | (303) |  |  | (10) |  |  | 12 |  |  | 221 |  |  | (73) |
Net interest income |  | 108 |  |  | 100 |  |  | 330 |  |  | 8 |  |  | 8 |  |  | (230) |  |  | (70) |
Total revenues net of interest expense |  | 5,072 |  |  | 4,243 |  |  | 5,758 |  |  | 829 |  |  | 20 |  |  | (1,515) |  |  | (26) |
Provisions for credit losses (a) |  | (37) |  |  | 87 |  |  | 19 |  |  | (124) |  |  | # |  | 68 |  |  | #
Total revenues net of interest expense after provisions for credit losses |  | 5,109 |  |  | 4,156 |  |  | 5,739 |  |  | 953 |  |  | 23 |  |  | (1,583) |  |  | (28) |
Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketing, business development, and Card Member rewards and services |  | 1,478 |  |  | 1,130 |  |  | 1,263 |  |  | 348 |  |  | 31 |  |  | (133) |  |  | (11) |
Salaries and employee benefits and other operating expenses |  | 1,682 |  |  | 1,711 |  |  | 1,791 |  |  | (29) |  |  | (2) |  |  | (80) |  |  | (4) |
Total expenses |  | 3,160 |  |  | 2,841 |  |  | 3,054 |  |  | 319 |  |  | 11 |  |  | (213) |  |  | (7) |
Pretax segment income |  | 1,949 |  |  | 1,315 |  |  | 2,685 |  |  | 634 |  |  | 48 |  |  | (1,370) |  |  | (51) |
Total segment assets (billions) |  | $ | 15.2 |  |  | $ | 14.0 |  |  | $ | 17.2 |  |  | $ | 1.2 |  |  | 9 | % |  | $ | (3) |  |  | (19) | %

# Denotes a variance of 100 percent or more
(a)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. Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.
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.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues increased, primarily driven by higher Discount revenue due to increases in worldwide network volumes reflecting, in part, the recovery from the adverse impacts of the COVID-19 pandemic in the prior year.
The average discount rate increased, primarily due to a change in the mix of spending driven by increased levels of T&E volumes, as compared to the prior year.
See Tables 5 and 6 for more details on volume performance.
GMNS receives an interest expense credit relating to internal transfer pricing due to its merchant payables. Net interest income increased, primarily due to a higher interest expense credit, primarily driven by an increase in average merchant payables related to year-over-year network volume growth.
EXPENSES
Marketing, business development, and Card Member rewards and services expenses increased, primarily driven by higher Marketing and business development expense, as a result of increased spend on initiatives to support merchant engagement and increased network issuer expense, reflecting higher processed volumes from certain GNS partners.
Salaries and employee benefits and other operating expenses decreased, primarily driven by a net reserve release in the current year versus a net reserve build in the prior year associated with merchant exposure for Card Member purchases, partially offset by higher compensation.
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CORPORATE & OTHER
Corporate functions and certain other businesses are included in Corporate & Other.
Corporate & Other pretax loss was $1.0 billion and $1.6 billion in 2021 and 2020, respectively. The decrease in the pretax loss was primarily driven by higher net gains in the current year on Amex Ventures equity investments, a non-cash gain related to an increase in GBT's total equity book value arising from GBT's acquisition of Egencia and a lower net loss in the current year from GBT as compared to the prior year, partially offset by higher compensation.
CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY
Our balance sheet management objectives are to maintain:
•A solid and flexible equity capital profile;
•A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and
•Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements for at least a twelve-month period in the event we are unable to continue to raise new funds under our regular funding programs during a substantial weakening in economic conditions.
The global macroeconomic outlook continues to remain uncertain due to a variety of factors, including the Omicron variant, labor shortages, supply chain disruptions and inflation. We monitor the changing macroeconomic environment and manage our balance sheet to reflect evolving circumstances.
CAPITAL STRATEGY
We believe capital allocated to growing businesses with a return on risk-adjusted equity in excess of our costs will generate shareholder value. Our objective is to retain sufficient levels of capital generated through net income and other sources, such as the exercise of stock options by employees, to maintain a strong balance sheet, provide flexibility to support future business growth, and distribute excess capital to shareholders through dividends and share repurchases. See “Dividends and Share Repurchases” below.
The level and composition of our consolidated capital position are determined through our Internal Capital Adequacy Assessment Process, which takes into account our business activities, as well as marketplace conditions and requirements or expectations of credit rating agencies, regulators and shareholders, among others. As a bank holding company, we are subject to regulatory requirements administered by the U.S. federal banking agencies. The Federal Reserve has established specific capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items. Failure to maintain minimum regulatory capital levels at American Express or our U.S. bank subsidiary, American Express National Bank (AENB), could affect our status as a financial holding company and cause the banking regulators with oversight of American Express or AENB to take actions that could limit our business operations.
We seek to maintain capital levels and ratios in excess of the minimum regulatory requirements, specifically within a 10 to 11 percent target range for American Express' Common Equity Tier 1 (CET1) risk-based capital ratio.
We maintain certain flexibility to shift capital across our businesses as appropriate. For example, we may infuse additional capital into subsidiaries to maintain capital at targeted levels in consideration of debt ratings and regulatory requirements. These infused amounts can affect our capital and liquidity positions at the American Express parent company level.
We report our capital ratios using the Basel III capital definitions and the Basel III standardized approach for calculating risk-weighted assets.
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The following table presents our regulatory risk-based capital and leverage ratios and those of AENB, as of December 31, 2021.
TABLE 15: REGULATORY RISK-BASED CAPITAL AND LEVERAGE RATIOS

|  | Effective Minimum (a) |  | Ratios as of December 31, 2021
Risk-Based Capital |  |  |  |
Common Equity Tier 1 |  | 7.0 | % |  |
American Express Company |  |  |  | 10.5 | %
American Express National Bank |  |  |  | 11.8
Tier 1 |  | 8.5 |  |
American Express Company |  |  |  | 11.5
American Express National Bank |  |  |  | 11.8
Total |  | 10.5 |  |
American Express Company |  |  |  | 12.9
American Express National Bank |  |  |  | 13.7
Tier 1 Leverage |  | 4.0 | % |  |
American Express Company |  |  |  | 10.5
American Express National Bank |  |  |  | 10.5 | %

(a)Represents Basel III minimum requirements and applicable regulatory buffers as defined by the federal banking regulators, which includes the stress capital buffer (SCB) for American Express Company and the capital conservation buffer for AENB. Refer to “Capital and Liquidity Regulation” under “Supervision and Regulation” and Note 22 to our “Consolidated Financial Statements” for additional information.
The following table presents American Express Company's regulatory risk-based capital and risk-weighted assets as of December 31, 2021:
TABLE 16: REGULATORY RISK-BASED CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS

American Express Company ($ in Billions) |  | December 31, 2021
Risk-Based Capital |  |
Common Equity Tier 1 |  | $ | 17.6 |
Tier 1 Capital |  | 19.2 |
Tier 2 Capital |  | 2.3 |
Total Capital |  | 21.5 |
Risk-Weighted Assets |  | 166.5 |
Average Total Assets to calculate the Tier 1 Leverage Ratio |  | $ | 183.5 |

The following are definitions for our regulatory risk-based capital ratios and leverage ratio, which are calculated as per standard regulatory guidance:
Risk-Weighted Assets — Assets are weighted for risk according to a formula used by the Federal Reserve to conform to capital adequacy guidelines. On- and off-balance sheet items are weighted for risk, with off-balance sheet items converted to balance sheet equivalents, using risk conversion factors, before being allocated a risk-adjusted weight. Off-balance sheet exposures comprise a minimal part of the total risk-weighted assets.
Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as CET1 capital, divided by risk-weighted assets. CET1 capital is common shareholders’ equity, adjusted for ineligible goodwill and intangible assets and certain deferred tax assets. CET1 capital is also adjusted for the CECL final rules, as described below.
Tier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital divided by risk-weighted assets. Tier 1 capital is the sum of CET1 capital, preferred shares and third-party non-controlling interests in consolidated subsidiaries, adjusted for capital held by insurance subsidiaries. The minimum requirement for the Tier 1 risk-based capital ratio is 1.5 percent higher than the minimum for the CET1 risk-based capital ratio. We issue preferred shares to help address a portion of the Tier 1 capital requirements in excess of common equity requirements. See “Preferred Shares” below for further information.
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Total Risk-Based Capital Ratio — Calculated as the sum of Tier 1 capital and Tier 2 capital, divided by risk-weighted assets. Tier 2 capital is the sum of the reserve for loan and receivable credit losses adjusted for the CECL final rules (limited to 1.25 percent of risk-weighted assets), and $240 million of eligible subordinated notes, adjusted for capital held by insurance subsidiaries. The $240 million of eligible subordinated notes reflect a 60 percent, or $360 million, reduction of Tier 2 capital credit for the $600 million subordinated debt issued in December 2014.
Tier 1 Leverage Ratio — Calculated by dividing Tier 1 capital by our average total consolidated assets for the most recent quarter.
We elected to delay the impact of the adoption of the CECL methodology on regulatory capital for two years followed by a three-year phase-in period pursuant to rules issued by federal banking regulators (the CECL final rules). As of December 31, 2021, our reported regulatory capital excluded the $0.9 billion impact to retained earnings upon the adoption of the CECL methodology and 25 percent of the $0.9 billion decrease in reserves for credit losses from January 1, 2020 to December 31, 2021. We have begun phasing in the $0.7 billion cumulative amount that is not recognized in regulatory capital at 25 percent per year beginning January 1, 2022. Refer to “Capital and Liquidity Regulation” under Part 1, Item 1. “Business - Supervision and Regulation” for additional details.
As a Category IV firm, we were not subject to the Federal Reserve's supervisory stress tests in 2021 and will be participating in the Federal Reserve's supervisory stress tests in 2022. We are required to submit to the Federal Reserve our annual capital plan, on or before April 5 of each year.
On June 24, 2021, the Federal Reserve confirmed our SCB of 2.5 percent and resulting CET1 capital ratio requirement of 7 percent, which remain unchanged from the levels announced in August 2020.
DIVIDENDS AND SHARE REPURCHASES
We return capital to common shareholders through dividends and share repurchases. The share repurchases reduce common shares outstanding and generally more than offset the issuance of new shares as part of employee compensation plans.
During the year ended December 31, 2021, we returned $9.0 billion to our shareholders in the form of common stock dividends of $1.4 billion and share repurchases of $7.6 billion. We repurchased 46 million common shares at an average price of $165.40 in 2021. These dividend and share repurchase amounts collectively represent approximately 109 percent of total capital generated during the year.
We plan to increase the regular quarterly dividend on our common shares outstanding by approximately 20 percent, from 43 cents to 52 cents per share beginning with the first quarter of 2022, subject to approval by our Board of Directors.
In addition, during the year ended December 31, 2021, we paid $71 million in dividends on non-cumulative perpetual preferred shares outstanding. Refer to Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares.
During the first six months of 2021, the Federal Reserve placed restrictions on common stock dividends and common share repurchases for bank holding companies like us that participate in the Federal Reserve's Comprehensive Capital Analysis and Review (CCAR). These capital distribution restrictions ceased to apply on July 1, 2021. Our capital distributions have since returned to being governed by the SCB framework and based on managing our CET1 risk-based capital ratio within a 10 to 11 percent target range. We may conduct share repurchases through a variety of methods, including open market purchases, 10b5-1 plans, privately negotiated transactions (including employee benefit plans) or other purchases, including block trades, accelerated share repurchase programs or any combination of such methods as market conditions warrant and at prices we deem appropriate.
Our decisions on capital distributions depend on various factors, including: our capital levels and regulatory capital requirements; regulatory guidance or restrictions, actual and forecasted business results; economic and market conditions; revisions to, or revocation of, the Federal Reserve’s authorization of our capital plan; and the supervisory stress test process.
PREFERRED SHARES
We issue preferred shares to finance a portion of the Tier 1 capital requirements in excess of common equity requirements. On August 3, 2021, we issued $1.6 billion of 3.550% Fixed Rate Reset Noncumulative Preferred Shares, Series D. With the proceeds from that issuance, we redeemed in full the $850 million of 4.900% Fixed Rate/Floating Rate Noncumulative Preferred Shares, Series C on September 15, 2021 and the $750 million of 5.200% Fixed Rate/Floating Rate Noncumulative Preferred Shares, Series B on November 15, 2021. Refer to Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares.
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FUNDING STRATEGY
Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to finance our global businesses and to maintain a strong liquidity profile. Our funding strategy and activities are integrated into our asset-liability management activities. We have in place a funding policy covering American Express Company and all of our subsidiaries.
Our global proprietary card-issuing businesses generate significant assets in both domestic and international Card Member lending and receivable activities. Our financing needs are in large part a consequence of our proprietary card-issuing businesses, where we generally pay merchants for card transactions prior to reimbursement by Card Members and therefore fund the merchant payments during the period Card Member loans and receivables are outstanding. In addition, we maintain a liquidity position to meet regulatory requirements and support our business activities.
We aim to satisfy these financing needs with a diverse set of funding sources. The diversity of funding sources by type of instrument, by tenor and by investor base, among other factors, mitigates the impact of disruptions in any one type of instrument, tenor or investor. We seek to achieve diversity and cost efficiency in our funding sources by maintaining scale and market relevance in unsecured debt, asset securitizations and deposits, and access to secured borrowing facilities and a committed bank credit facility.
Our direct retail deposits have become a larger proportion of our funding over time. We expect the balance of these deposits to continue to grow. Our funding plan is primarily driven by the size and mix of business asset growth, our liquidity position, and choice of funding sources, as well as cash requirements generated by the redemptions of deposits by our customers, the maturities of debt outstanding and related interest payments. In executing our funding plan, we aim to maintain a balanced debt maturity profile with an appropriate mix of short-term and long-term refinancing requirements.
FUNDING PROGRAMS AND ACTIVITIES
We had the following customer deposits and consolidated debt outstanding as of December 31:
TABLE 17: SUMMARY OF CUSTOMER DEPOSITS AND CONSOLIDATED DEBT

(Billions) |  | 2021 |  | 2020
Customer deposits |  | $ | 84.4 |  |  | $ | 86.9 |
Short-term borrowings |  | 2.2 |  |  | 1.9 |
Long-term debt |  | 38.7 |  |  | 43.0 |
Total debt and customer deposits |  | $ | 125.3 |  |  | $ | 131.8 |

We may redeem from time to time certain debt securities prior to the original contractual maturity dates in accordance with the optional redemption provisions of those debt securities.
Our funding plan for the full year 2022 includes, among other sources, approximately $8.0 billion to $12.0 billion of unsecured term debt issuance and approximately $6.0 billion to $10.0 billion of secured term debt issuance. Actual funding activities can vary from our plans due to various factors, such as future business growth, the impact of global economic, political and other events on market capacity and funding needs, demand for securities offered by us, regulatory changes, ability to securitize and sell receivables, and the performance of receivables previously sold in securitization transactions. Many of these factors are beyond our control.
In order to simplify our funding and reporting structure, in October 2021 we terminated the commercial paper program at American Express Credit Corporation (Credco) and Credco's committed syndicated bank credit facility, the undrawn amounts from which could serve as a backstop for the amount of commercial paper outstanding. Concurrently, we established a new commercial paper program at American Express Travel Related Services Company, Inc. (TRS) and a new credit facility with American Express Company and TRS as co-borrowers and co-obligors, as described further below. We also completed an exchange offer on November 30, 2021, in which American Express Company issued $1.7 billion of new senior notes with a 3.300% coupon and May 3, 2027 maturity in exchange for the same amount of outstanding senior notes with the same coupon and maturity issued by Credco. Following completion of the exchange offer, $339 million of Credco's 3.300% senior notes with May 3, 2027 maturity remain outstanding. Due to the limited amount of publicly issued debt outstanding, Credco deregistered from ongoing SEC reporting beginning January 1, 2022. Credco will continue to finance certain Card Member receivables and loans using intercompany borrowing as its primary funding source.
Our equity capital and funding strategies are designed, among other things, to maintain appropriate and stable unsecured debt ratings from the major credit rating agencies: Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch). Such ratings help support our access to cost-effective unsecured funding as part of our overall funding strategy. Our asset securitization activities are rated separately.
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TABLE 18: UNSECURED DEBT RATINGS

Credit Agency |  | American Express Entity |  | Short-Term Ratings |  | Long-Term Ratings |  | Outlook
Fitch |  | American Express Credit Corporation |  | N/A |  | A |  | Stable
Fitch |  | All other rated entities |  | F1 |  | A |  | Stable
Moody’s |  | American Express Travel Related Services Company, Inc. |  | Prime-1 |  | A2 |  | Stable
Moody's |  | American Express Credit Corporation |  | N/A |  | A2 |  | Stable
Moody’s |  | American Express National Bank |  | Prime-1 |  | A3 |  | Stable
Moody's |  | American Express Company |  | N/A |  | A2 |  | Stable
S&P |  | American Express Travel Related Services Company, Inc. |  | A-2 |  | A- |  | Stable
S&P |  | American Express Credit Corporation |  | N/A |  | A- |  | Stable
S&P |  | American Express National Bank |  | A-2 |  | A- |  | Stable
S&P |  | American Express Company |  | A-2 |  | BBB+ |  | Stable

These ratings are not a recommendation to buy or hold any of our securities and they may be revised or revoked at any time at the sole discretion of the rating organization.
Downgrades in the ratings of our unsecured debt or asset securitization program securities could result in higher funding costs, as well as higher fees related to borrowings under our unused credit facilities. Declines in credit ratings could also reduce our borrowing capacity in the unsecured debt and asset securitization capital markets. We believe our funding mix, including the proportion of U.S. retail deposits insured by the Federal Deposit Insurance Corporation (FDIC) to total funding, should reduce the impact that credit rating downgrades would have on our funding capacity and costs.
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DEPOSIT PROGRAMS
We offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to an amount that is at least $250,000 per account holder through the FDIC. Our ability to obtain deposit funding and offer competitive interest rates is dependent on, among other factors, the capital level of AENB. Direct retail deposits offered by AENB is our primary deposit product channel, which makes FDIC-insured high-yield savings account and certificates of deposit (CDs) products available directly to consumers. AENB also offers checking account products and sources deposits through third-party distribution channels as needed to meet our overall funding objectives. As of December 31, 2021, we had $84.4 billion in deposits. Refer to Note 7 to the “Consolidated Financial Statements” for a further description of these deposits and scheduled maturities of certificates of deposits.
SHORT-TERM FUNDING PROGRAMS
Short-term borrowings, such as commercial paper, are defined as any debt with an original maturity of twelve months or less, as well as interest-bearing overdrafts with banks. Our short-term funding programs are used primarily to fund working capital needs, such as managing seasonal variations in receivables balances. The amount of short-term borrowings issued in the future will depend on our funding strategy, our needs and market conditions. As of December 31, 2021, we had nil commercial paper outstanding and an average of nil in commercial paper outstanding during 2021. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.
LONG-TERM DEBT AND ASSET SECURITIZATION PROGRAMS
As of December 31, 2021, we had $38.7 billion in long-term debt outstanding, including unsecured debt and asset-backed securities. During 2021, we issued $5.8 billion of unsecured debt and asset-backed securities with maturities ranging from 2 to 5 years. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings and scheduled maturities of long-term debt obligations.
We periodically securitize Card Member loans and receivables arising from our U.S. card business, as the securitization market provides us with cost-effective funding. Securitization of Card Member loans and receivables is accomplished through the transfer of those assets to a trust, which in turn issues securities collateralized by the transferred assets to third-party investors. The proceeds from issuance are distributed to us, through our wholly owned subsidiaries, as consideration for the transferred assets. Refer to Note 5 to the “Consolidated Financial Statements” for a further description of our asset securitizations.
TABLE 19: DEBT ISSUANCES

(Billions) |  | 2021
American Express Company: |  |
Fixed Rate Senior Notes (weighted-average coupon rate of 1.27%) |  | $ | 1.9 |
Floating Rate Senior Notes (compounded SOFR (a) plus weighted-average spread of 42 basis points) |  | 1.1 |
American Express Credit Account Master Trust: |  |
Fixed Rate Class A Certificates (weighted-average coupon of 0.90%) |  | 2.8 |
Total |  | $ | 5.8 |

(a)Secured overnight financing rate (SOFR).
In addition, American Express Company issued $1.7 billion of 3.300% new senior notes in exchange for the same amount of outstanding senior notes issued by Credco, as described above.
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LIQUIDITY MANAGEMENT
Our liquidity objective is to maintain access to a diverse set of on- and off-balance sheet liquidity sources. We seek to maintain liquidity sources in amounts sufficient to meet our expected future financial obligations and business requirements for liquidity for a period of at least twelve months in the event we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions.
Our liquidity management strategy includes a number of elements, including, but not limited to:
•Maintaining diversified funding sources (refer to the “Funding Strategy” section for more details);
•Maintaining unencumbered liquid assets and off-balance sheet liquidity sources;
•Projecting cash inflows and outflows under a variety of economic and market scenarios; and
•Establishing clear objectives for liquidity risk management, including compliance with regulatory requirements.
We seek to maintain access to a diverse set of on-balance sheet and off-balance sheet liquidity sources, including cash and other liquid assets, committed bank credit facilities and secured borrowing facilities. Through our U.S. bank subsidiary, AENB, we also hold collateral eligible for use at the Federal Reserve’s discount window.
The amount and type of liquidity resources we maintain can vary over time, based upon the results of stress scenarios required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as additional stress scenarios required under our liquidity risk policy. These stress scenarios possess distinct characteristics, varying by cash flow assumptions, time horizon and qualifying liquidity sources, among other factors. Scenarios under our liquidity risk policy include market-wide, firm-specific and combined liquidity stresses. We consider other factors in determining the amount and type of liquidity we maintain, such as economic and financial market conditions, seasonality in business operations, growth in our businesses, potential acquisitions or dispositions, the cost and availability of alternative liquidity sources and credit rating agency guidelines and requirements.
We believe that we currently maintain sufficient liquidity to meet all internal and regulatory liquidity requirements. As of December 31, 2021, we had a total of $24.6 billion in Cash and cash equivalents and Investment securities (which are substantially comprised of U.S. Government Treasury obligations). The decrease of $30.0 billion from $54.6 billion as of December 31, 2020 was primarily driven by the increase in the balances of our Card Member loans and receivables, debt maturities, share repurchases and a reduction in customer deposits, partially offset by the issuance of unsecured and secured debt securities.
The investment income we receive on liquidity resources is less than the interest expense on the sources of funding for these balances. In 2021, the net interest costs to maintain these resources were substantial. The level of future net interest costs depends on the amount of liquidity resources we maintain and the difference between our cost of funding these amounts and their investment yields.
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Securitized Borrowing Capacity
As of December 31, 2021, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15, 2024, which gives us the right to sell up to $3.0 billion face amount of eligible AAA notes from the American Express Issuance Trust II (the Charge Trust). We also maintained our committed, revolving, secured borrowing facility, with a maturity date of September 16, 2024, which gives us the right to sell up to $2.0 billion face amount of eligible AAA certificates from the American Express Credit Account Master Trust (the Lending Trust). Both facilities are used in the ordinary course of business to fund working capital needs, as well as to further enhance our contingent funding resources. As of December 31, 2021, $2.0 billion was drawn on the Charge Trust facility, which was subsequently repaid on January 18, 2022. No amounts were drawn on the Lending Trust facility.
Federal Reserve Discount Window
As an insured depository institution, AENB may borrow from the Federal Reserve Bank of San Francisco, subject to the amount of qualifying collateral that it may pledge. The Federal Reserve has indicated that both credit and charge card receivables are a form of qualifying collateral for secured borrowings made through the discount window. Whether specific assets will be considered qualifying collateral and the amount that may be borrowed against the collateral remain at the discretion of the Federal Reserve.
We had approximately $80.8 billion as of December 31, 2021 in U.S. credit card loans and charge card receivables that could be sold over time through our securitization trusts or pledged in return for secured borrowings to provide further liquidity, subject in each case to applicable market conditions and eligibility criteria.
Committed Bank Credit Facility
In addition to the secured borrowing facilities described above, we maintained a committed syndicated bank credit facility of $3.5 billion as of December 31, 2021. This facility was maintained by our wholly owned subsidiary 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 TRS as co-borrowers and co-obligors. The availability of the new credit facility is subject to our maintenance of a minimum 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 and no amounts were drawn on the facility. We may, from time to time, use this facility in the ordinary course of business to fund working capital needs. Any undrawn portion of this facility could serve as a backstop for the amount of commercial paper outstanding.
The new credit 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.
Off-balance Sheet Arrangements
We have certain off-balance sheet obligations that include guarantees, indemnifications and certain Card Member and partner arrangements that may have a material current or future effect on our financial condition, changes in financial condition, results of operations, or liquidity and capital resources. For more information on these obligations, refer to Note 12, Note 15 and Note 23 to the “Consolidated Financial Statements.”
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CASH FLOWS
The following table summarizes our cash flow activity, followed by a discussion of the major drivers impacting operating, investing and financing cash flows for the year ended December 31, 2021 compared to the year ended December 31, 2020.
TABLE 20: CASH FLOWS

(Billions) |  | 2021 |  | 2020 |  | 2019
Total cash provided by (used in): |  |  |  |  |  |
Operating activities |  | $ | 14.6 |  |  | $ | 5.6 |  |  | $ | 13.6 |
Investing activities |  | (10.5) |  |  | 11.6 |  |  | (16.7) |
Financing activities |  | (14.9) |  |  | (9.1) |  |  | (0.5) |
Effect of foreign currency exchange rates on cash and cash equivalents |  | (0.1) |  |  | 0.4 |  |  | 0.2 |
Net (decrease) increase in cash and cash equivalents |  | $ | (10.9) |  |  | $ | 8.5 |  |  | $ | (3.4) |

Cash Flows from Operating Activities
Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions for credit losses, depreciation and amortization, stock-based compensation, deferred taxes and other non-cash items and (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.
In 2021, the net cash provided by operating activities was primarily driven by cash generated from net income for the period and higher net operating liabilities, primarily resulting from an increase in Membership Rewards liability and higher accounts payable to merchants related to growth in billed business.
In 2020, the net cash provided by operating activities was primarily driven by the cash generated from net income for the period, partially offset by lower accounts payable to merchants and purchases of loyalty program points from certain of our cobrand partners, which resulted in an increase in Other assets.
Cash Flows from Investing Activities
Our cash flows from investing activities primarily include changes in Card Member loans and receivables, as well as changes in our available-for-sale investment securities portfolio.
In 2021, the net cash used in investing activities was primarily driven by higher Card Member loan and receivable balances, resulting from higher Card Member spending, partially offset by net maturities of our investment securities.
In 2020, the net cash provided by investing activities was primarily driven by a decline in Card Member loan and receivable balances, partially offset by net purchases of investment securities. The decline in Card Member loan and receivable balances was due to the ongoing pay down of outstanding balances by Card Members combined with significant declines in spending that occurred due to the COVID-19 pandemic.
Cash Flows from Financing Activities
Our cash flows from financing activities primarily include changes in customer deposits, long-term debt and short-term borrowings, as well as dividend payments and share repurchases.
In 2021, the net cash used in financing activities was primarily driven by share repurchases, net debt repayments, decreases in customer deposits, dividends and redemption of preferred shares, partially offset by the proceeds from the issuance of preferred shares.
In 2020, the net cash used in financing activities was primarily driven by debt repayments, dividends and share repurchases, partially offset by growth in customer deposits.
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RISK MANAGEMENT
GOVERNANCE
We use our comprehensive Enterprise-wide Risk Management (ERM) program to identify, aggregate, monitor, and manage risks. The program also defines our risk appetite, governance, culture and capabilities. The implementation and execution of the ERM program is headed by our Chief Risk Officer.
Risk management is overseen by our Board of Directors through three Board committees: the Risk Committee, the Audit and Compliance Committee, and the Compensation and Benefits Committee. Each committee consists entirely of independent directors and provides regular reports to the full Board regarding matters reviewed at their committee. The committees meet regularly in private sessions with our Chief Risk Officer, the Chief Compliance & Ethics Officer, the Chief Audit Executive and other senior management with regard to our risk management processes, controls, talent and capabilities. The Board monitors the “tone at the top,” our risk culture, and oversees emerging and strategic risks.
The Risk Committee of our Board of Directors provides oversight of our ERM framework, processes and methodologies. The Risk Committee approves our ERM policy. The ERM policy governs risk governance, risk oversight and risk appetite for risks, including individual credit risk, institutional credit risk, operational risk, compliance risk, reputational risk, market risk, funding and liquidity risk, model risk, strategic and business risk, country risk and environmental, social and governance risk. Risk appetite defines the authorized risk limits to control exposures within our risk capacity and risk tolerance, including stressed forward-looking scenarios. In addition, it establishes principles for risk taking in the aggregate and for each risk type, and is supported by a comprehensive system for monitoring limits, escalation triggers and assessing control programs.
The Risk Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Risk Officer and receives regular updates from the Chief Risk Officer on key risks, transactions and exposures.
The Risk Committee reviews our risk profile against the tolerances specified in the Risk Appetite Framework, including significant risk exposures, risk trends in our portfolios and major risk concentrations.
The Risk Committee also provides oversight of our compliance with Regulatory capital and liquidity standards, our Internal Capital Adequacy Assessment Process, including the CCAR submissions.
The Audit and Compliance Committee of our Board of Directors reviews and approves compliance policies, which include our Compliance Risk Tolerance Statement. In addition, the Audit and Compliance Committee reviews the effectiveness of our Corporate-wide Compliance Risk Management Program. More broadly, this committee is responsible for assisting the Board in its oversight responsibilities relating to the integrity of our financial statements and financial reporting process, internal and external auditing, including the qualifications and independence of the independent registered public accounting firm and the performance of our internal audit services function, and the integrity of our systems of internal controls.
The Audit and Compliance Committee provides oversight of our Internal Audit Group. The Audit and Compliance Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Audit Executive, who reports to the Audit and Compliance Committee, and approves Internal Audit’s annual audit plan, charter, policies, budget and staffing levels, and overall risk assessment methodology. The Audit and Compliance Committee also receives regular updates on the audit plan’s status and results, including significant reports issued by Internal Audit and the status of our corrective actions.
The Compensation and Benefits Committee of our Board of Directors works with the Chief Risk Officer to ensure our overall compensation programs, as well as those covering our risk-taking employees, appropriately balance risk with business incentives and how business performance is achieved without taking imprudent or excessive risk. Our Chief Risk Officer is actively involved in setting risk goals for the Company. Our Chief Risk Officer also reviews the current and forward-looking risk profiles of each business unit and provides input into performance evaluation. The Chief Risk Officer meets with the Compensation and Benefits Committee and attests whether performance goals and results have been achieved without taking imprudent risks. The Compensation and Benefits Committee uses a risk-balanced incentive compensation framework to decide on our bonus pools and the compensation of senior executives.
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There are several internal management committees, including the Enterprise-wide Risk Management Committee (ERMC), chaired by our Chief Risk Officer. The ERMC is the highest-level management committee to oversee all firm-wide risks and is responsible for risk governance, risk oversight and risk appetite. It maintains the enterprise-wide risk appetite framework and monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk policies company-wide. The ERMC reviews key risk exposures, trends and concentrations, significant compliance matters, and provides guidance on the steps to monitor, control and report major risks. In addition, the Asset Liability Committee, chaired by our Chief Financial Officer, is responsible for managing our capital, funding and liquidity, investment, market risk and asset/liability activities in accordance with our policies and in compliance with applicable regulatory requirements.
As defined in the ERM policy, we follow the “three lines of defense” approach to risk management. The first line of defense comprises functions and management committees directly initiating risk taking. The Chief Executive Officer, business unit presidents and the Chief Financial Officer are part of the first line of defense. The second line comprises independent functions overseeing risk-taking activities of the first line. The Chief Risk Officer, the Chief Compliance & Ethics Officer, the Chief Operational Risk Officer and certain control groups, both at the enterprise level and within regulated entities, are part of the second line of defense. The global risk oversight team oversees the policies, strategies, frameworks, models, processes and capabilities deployed by the first line teams and provides challenges and independent assessments on how the first line of defense is managing risks. Our Internal Audit Group constitutes the third line of defense and provides independent assessments and effective challenge of the first and second lines of defense.
CREDIT RISK MANAGEMENT PROCESS
Credit risk is defined as loss due to default or changes in the credit quality of a customer, obligor or security. Our credit risks are divided into two broad categories: individual and institutional. Each has distinct risk management capabilities, strategies, and tools. Business units that create individual or institutional credit risk exposures of significant importance are supported by dedicated risk management teams, each led by a Chief Credit Officer.
INDIVIDUAL CREDIT RISK
Individual credit risk arises from consumer and small business charge cards, credit cards, and term loans. These portfolios consist of millions of customers across multiple geographies, industries and levels of net worth. We benefit from the high-quality profile of our customers, which is driven by our brand, premium customer servicing, product features and risk management capabilities, which span underwriting, customer management and collections. The risk in these portfolios is generally correlated to broad economic trends, such as unemployment rates and gross domestic product (GDP) growth.
The business unit leaders and their Chief Credit Officers take the lead in managing the credit risk process. These Chief Credit Officers are guided by the Individual Credit Risk Committee (ICRC), which is responsible for implementation and enforcement of the Individual Credit Risk Management Policy. The ICRC ensures compliance with ERMC guidelines and procedures and escalates to the ERMC as appropriate.
Credit risk management is supported by sophisticated proprietary scoring and decision-making models that use up-to-date information on prospects and customers, such as spending and payment history and data feeds from credit bureaus. We have developed data-driven economic decision logic for customer interactions to better serve our customers.
INSTITUTIONAL CREDIT RISK
Institutional credit risk arises principally within our GCS and GMNS businesses, as well as investment and liquidity management activities. Unlike individual credit risk, institutional credit risk is characterized by a lower loss frequency but higher severity. It is affected both by general economic conditions and by client-specific events. The absence of large losses in any given year or over several years is not necessarily representative of the level of risk of institutional portfolios, given the infrequency of loss events in such portfolios.
Similar to individual credit risk, business units taking institutional credit risks are supported by Chief Credit Officers. These officers are guided by the Institutional Risk Management Committee (IRMC), which is responsible for implementation and enforcement of the Institutional Credit Risk Management Policy and for providing guidance to the credit officers of each business unit with substantial institutional credit risk exposures. The committee, along with the business unit Chief Credit Officers, makes investment decisions in core risk capabilities, ensures proper implementation of the underwriting standards and contractual rights for risk mitigation, monitors risk exposures, and determines risk mitigation actions. The IRMC formally reviews large institutional risk exposures to ensure compliance with ERMC guidelines and procedures and escalates them to the ERMC as appropriate. At the same time, the IRMC provides guidance to the business unit risk management teams to optimize risk-adjusted returns on capital. A centralized risk rating unit provides risk assessment of our institutional obligors.
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Exposure to the Airline and Travel Industry
We have multiple important cobrand, rewards, merchant acceptance and corporate payments arrangements with airlines. The ERM program evaluates the risks posed by our airline partners and the overall airline strategy company-wide through comprehensive business analysis of global airlines, and the travel industry more broadly, including cruise lines, travel agencies and tour operators. Our largest airline partner is Delta, and this relationship includes an exclusive cobrand credit card partnership and other arrangements including Membership Rewards redemption, merchant acceptance, travel and corporate payments. See “We face intense competition for partner relationships, which could result in a loss or renegotiation of these arrangements that could have a material adverse impact on our business and results of operations” and “Arrangements with our business partners represent a significant portion of our business. We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners” under “Risk Factors” for additional information.
Debt Exposure
As part of our ongoing risk management process, we monitor our financial exposure to both sovereign and non-sovereign customers and counterparties, and measure and manage concentrations of risk by geographic regions, as well as by economic sectors and industries. A primary focus area for monitoring is credit deterioration due to weaknesses in economic and fiscal profiles. We evaluate countries based on the market assessment of the riskiness of their sovereign debt and our assessment of the economic and financial outlook and closely monitor those deemed high risk. As of December 31, 2021, we considered our gross credit exposures to government entities, financial institutions and corporations in those countries deemed high risk to be individually and collectively not material.
OPERATIONAL RISK MANAGEMENT PROCESS
We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or information systems, or impacts from the external environment, including failures to comply with laws and regulations as well as impacts from relationships with third parties. Operational risk is inherent in all business activities and can impact an organization through direct or indirect financial loss, brand damage, customer dissatisfaction, or legal and regulatory penalties.
To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk framework that is defined in the Operational Risk Management Policy approved by the ERMC. The Operational Risk Management Committee (ORMC), chaired by the Chief Operational Risk Officer, coordinates with all control groups on effective risk assessments and controls and oversees the preventive, responsive and mitigation efforts by Operational Excellence teams in the business units and staff groups.
We use the operational risk framework to identify, measure, monitor and report inherent and emerging operational risks. This framework, supervised by the ORMC, consists of (a) operational risk event capture, (b) a project office to coordinate issue management and control enhancements, (c) key risk indicators, and (d) process and entity-level risk assessments.
The framework requires the assessment of operational risk events to determine root causes, impact to customers and/or us, and resolution plan accountability to correct any defect, remediate customers, and enhance controls and testing to mitigate future issues. The impact is assessed from an operational, financial, brand, regulatory compliance and legal perspective.
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INFORMATION AND CYBER SECURITY
We define information and cyber security risk as the risk that a security incident could impact the confidentiality, integrity or availability of American Express customer, colleague or proprietary information.
Our information and cyber security program is designed to protect the confidentiality, integrity, and availability of information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction. The program is built upon a foundation of advanced security technology, a well-staffed and highly trained team of experts, and robust operations based on the National Institute of Standards and Technology Cybersecurity Framework. This consists of controls designed to identify, protect, detect, respond and recover from information and cyber security incidents. We continue to invest in enhancements to cyber security capabilities and engage in industry and government forums to promote advancements to the broader financial services cyber security ecosystem.
See “A major information or cyber security incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our cards” under “Risk Factors” for additional information.
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INFORMATION TECHNOLOGY
We define information technology risk as the risk that events or circumstances could compromise the processing, stability, capacity, performance, or resilience of information technology and cause financial, reputational, and/or regulatory impacts.
We manage information technology risk through our policies, procedures, governance structure, and control framework to preserve the confidentiality, integrity, and availability of systems and processes across our Company.
See “The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations” under “Risk Factors” for additional information.
PRIVACY
We define privacy risk as the risk of financial loss, reputational damage, or regulatory or legal action resulting from decisions related to the violation of applicable laws, rules, regulations, contractual obligations, or the non-adherence to privacy policies, disclosures, or standards that apply to the processing of personal data.
The Global Privacy Policy establishes the privacy framework and defines the American Express Data Protection & Privacy Principles, which governs the way we collect, use, store, share, transmit, delete or otherwise process our customer and colleague personal data globally. Chaired by the Chief Privacy Officer, the Privacy Risk Management Committee, a sub-committee of the ORMC, provides oversight and governance for our privacy program.
DATA MANAGEMENT AND GOVERNANCE
We define data management and governance risk as the risk of financial, reputational, and/or regulatory impacts due to inadequate data governance and/or data management practices adversely impacting the accuracy, completeness, timeliness, comprehensiveness or usability of data throughout its lifecycle.
Our Enterprise Data Governance Policy establishes the framework for defining in-scope critical data and the requirements for managing such data effectively throughout its lifecycle as a critical corporate asset. This policy is approved by the ERMC.
Chaired by the Chief Data Officer, our Enterprise Data Committee, a sub-committee of the ERMC, provides governance and oversight for our enterprise-wide data governance and management activities.
COMPLIANCE RISK MANAGEMENT PROCESS
We define compliance risk as the risk of legal or reputational harm, fines, monetary penalties and payment of damages or other forms of sanction as a result of non-compliance with applicable laws and/or regulations, internal policies and procedures and related practices, or ethical standards.
We view our ability to effectively mitigate compliance risk as an important aspect of our business model. Our Global Compliance and Ethics organization is responsible for establishing and maintaining our corporate-wide Compliance Risk Management Program. Pursuant to this program, we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed. The Compliance Risk Management Committee (CRMC), chaired by the Chief Compliance and Ethics Officer, is responsible for identifying, evaluating, managing, and escalating compliance risks. The CRMC has a dual reporting relationship directly to both the ERMC and the Audit and Compliance Committee.
We have a comprehensive Anti-Money Laundering program that monitors and reports suspicious activity to the appropriate government authorities. As part of that program, the Global Risk Oversight team provides independent risk assessment of the rules used by the Anti-Money Laundering team. In addition, the Internal Audit Group reviews the processes for practices consistent with regulatory guidance.
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REPUTATIONAL RISK MANAGEMENT PROCESS
We define reputational risk as the risk that negative stakeholder reaction to our products, services, client and partner relationships, business activities and policies, management and workplace culture, or our response to unexpected events, could cause sustained critical media coverage, a decline in revenue or investment, talent attrition, litigation, or government or regulatory scrutiny.
We view protecting our reputation for excellent customer service, trust, security and high integrity as core to our vision of providing the world’s best customer experience and fundamental to our long-term success.
Our business leaders are responsible for considering the reputational risk implications of business activities and strategies and ensuring the relevant subject matter experts are engaged as needed. The ERMC is responsible for ensuring reputational risk considerations are included in the scope of appropriate subordinate risk policies and committees and properly reflected in all decisions escalated to the ERMC.
MARKET RISK MANAGEMENT PROCESS
Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk exposures include (i) 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) and (ii) foreign exchange risk related to transactions, funding, investments and earnings in currencies other than the U.S. dollar.
Our risk policies establish the framework that guides and governs market risk management, including quantitative limits and escalation triggers. These policies are approved by the ERMC, Asset Liability Committee or Market Risk Management Committee.
Market risk is managed by the Market Risk Management Committee. The Market Risk Oversight Officer provides an independent risk assessment and oversight over the policies and exposure management for market risk and Asset Liability Management activities, as well as overseeing compliance with associated regulatory requirements. Market risk management is also guided and governed by policies covering the use of derivative financial instruments, funding, liquidity and investments.
Interest Rate Risk
We analyze a variety of interest rate scenarios to inform us of the potential impacts from interest rate changes on earnings and the value of assets, liabilities and the economic value of equity. Our interest rate exposure can vary over time as a result of, among other things, the proportion of our total funding provided by variable and fixed-rate debt and deposits compared to our Card Member loans and receivables. Interest rate swaps are used from time to time to effectively convert debt issuances to variable-rate from fixed-rate, or vice versa. Refer to Note 13 to the “Consolidated Financial Statements” for further discussion of our derivative financial instruments.
As of December 31, 2021, a hypothetical, immediate 100 basis point increase in market interest rates would have a detrimental impact of approximately $206 million on our annual net interest income. A hypothetical immediate 100 basis point decrease in market interest rates, which are assumed to remain at or above zero percent, would have a smaller but still detrimental impact on our annual net interest income. This measure first projects net interest income over the following twelve-month time horizon considering forecasted business growth and anticipated future market interest rates. The detrimental impact from rate changes is then measured by instantaneously increasing or decreasing the anticipated future interest rates by 100 basis points. Our estimated repricing risk assumes that our interest-rate sensitive assets and liabilities that reprice within the twelve-month horizon generally reprice by the same magnitude as benchmark rate changes. It is further assumed that, within our interest-rate sensitive liabilities, certain deposits reprice at lower magnitudes than benchmark rate movements, and the magnitude of this repricing in turn depends on, among other factors, the direction of rate movements. These assumptions are consistent with historical deposit repricing experience in the industry and within our own portfolio. Actual changes in our net interest income will depend on many factors, and therefore may differ from our estimated risk to changes in market interest rates.
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LIBOR Transition
We have an enterprise-wide, cross-functional initiative to identify, assess and monitor risks associated with the London interbank offered rate (LIBOR), engage with industry participants, customers and regulators and to transition to new alternative reference rates, such as the secured overnight financing rate. As part of this initiative, we have amended and continue to amend contracts to replace references to USD LIBOR tenors that will cease to be quoted after June 2023 and have updated our operational processes, IT systems and models for a timely transition.
See “The discontinuance of LIBOR may negatively impact our access to funding and the value of our financial instruments and commercial agreements” under “Risk Factors” for additional information.
Foreign Exchange Risk
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.
These foreign exchange risks are managed primarily by entering into foreign exchange spot transactions or hedged with foreign exchange forward contracts when the hedge costs are economically justified and in notional amounts designed to offset pretax impacts from currency movements in the period in which they occur. As of December 31, 2021, foreign currency derivative instruments with total notional amounts of approximately $32 billion were outstanding.
With respect to Card Member spending and cross-currency transactions, including related foreign exchange forward contracts outstanding, the impact of a hypothetical 10 percent strengthening of the U.S. dollar would have been immaterial to projected earnings as of December 31, 2021. With respect to translation exposure of foreign subsidiary equity balances, including related foreign exchange forward contracts outstanding, a hypothetical 10 percent strengthening of the U.S. dollar would result in an immaterial reduction in other comprehensive income and equity as of December 31, 2021. With respect to anticipated earnings denominated in foreign currencies for the next twelve months, the adverse impact on pretax income of a hypothetical 10 percent strengthening of the U.S. dollar would be approximately $112 million as of December 31, 2021.
To a much lesser extent, we are also subject to market risk arising from activities conducted by our Foreign Exchange International Payments business. We aim to minimize market risk from these activities through hedging, where appropriate, and the establishment of limits.
The actual impact of interest rate and foreign exchange rate changes will depend on, among other factors, the timing of rate changes, the extent to which different rates do not move in the same direction or in the same direction to the same degree, changes in the cost, volume and mix of our hedging activities and changes in the volume and mix of our businesses.
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FUNDING & LIQUIDITY RISK MANAGEMENT PROCESS
Funding and liquidity risk is defined as our inability to meet our ongoing financial and business obligations at a reasonable cost as they become due.
Our Board-approved Liquidity Risk Policy establishes the framework that guides and governs liquidity risk management.
Funding and liquidity risk is managed by the Funding and Liquidity Committee. To manage this risk, we seek to maintain access to a diverse set of cash, readily-marketable securities and contingent sources of liquidity, such that we can continuously meet our business requirements and expected future financing obligations for at least a twelve-month period in the event we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions. We consider the trade-offs between maintaining too much liquidity, which can be costly and limit financial flexibility, and having inadequate liquidity, which may result in financial distress during a liquidity event.
Funding and liquidity risk is managed at an aggregate consolidated level as well as at certain subsidiaries in order to ensure that sufficient and accessible liquidity resources are maintained. The Funding and Liquidity Committee reviews forecasts of our aggregate and subsidiary cash positions and financing requirements, approves funding plans designed to satisfy those requirements under normal and stressed conditions, establishes guidelines to identify the amount of liquidity resources required and monitors positions and determines any actions to be taken.
MODEL RISK MANAGEMENT PROCESS
We define model risk as the risk of adverse consequences, such as financial loss, poor business and strategic decision making, damage to our reputation or customer harm, from decisions based on incorrect or misused model outputs and outcomes.
Model risk is managed through a comprehensive risk management and governance framework, including policies and procedures for model development, independent model validation, model risk reporting and change management capabilities that seek to minimize erroneous model methodology, outputs, and misuse. We also assess model performance and model- related issues on an ongoing basis and seek to address deficiencies in a timely manner. In addition, we utilize artificial intelligence and machine learning (AI/ML) models for a variety of business use cases. We perform extensive reviews and testing to reduce the risk that these AI/ML techniques result in adverse consequences.
STRATEGIC AND BUSINESS RISK MANAGEMENT PROCESS
Strategic and business risk is the risk related to our inability to achieve our business objectives due to poor strategic decisions, including decisions related to mergers, acquisitions, and divestitures, poor implementation of strategic decisions or declining demand for our products and services.
Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with company policies. We seek to manage strategic and business risks through risk controls embedded in these processes as well as overall risk management oversight over business goals. Existing product performance is reviewed periodically by committees and business leaders. Mergers, acquisitions and divestitures can only be approved following Executive Committee due diligence, a comprehensive risk assessment by operational, market, credit and oversight leaders provided to the Chief Risk Officer and approval by either the Chief Risk Officer or appropriate risk committees. All new products and material changes in business processes are reviewed and approved by the New Products Committee and appropriate credit or risk committees.
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COUNTRY RISK MANAGEMENT PROCESS
Country risk is defined as the risk that economic, social, and/or political conditions and events in a country present. They might adversely impact us, primarily as a result of greater credit losses, increased operational or market risk or the inability to repatriate capital.
We manage country risk as part of the normal course of business. Policies and procedures establish country risk escalation thresholds to control and limit exposure, driven by processes that enable the monitoring of conditions in countries where we have exposure.
CLIMATE-RELATED RISK
We define climate-related risk as: (1) risks related to the transition to a low-carbon economy, which may include extensive changes pertaining to policy, legal, technology, market and reputational risks, and (2) risks related to the physical impacts of climate change, typically driven by acute physical risk such as increased severity of extreme weather events (e.g., cyclones, hurricanes, floods) and chronic physical risk which are longer-term shifts in climate patterns (e.g., sea level rise, chronic heat waves). Such transition and physical risk events driven by climate change can have broad impact to our customers, operations, suppliers and business.
Climate-related risk is interconnected and overarching across all risk types as it may manifest as credit risk, operational risk, market risk, liquidity risk and other risk types. We continue to enhance our focus on climate-related risk within our risk governance framework. We are currently performing a risk identification process for climate-related risk to determine the meaningfulness and measurability of the risk. Furthermore, Environmental, Social and Governance (ESG) issues with an emphasis on climate-related risk are currently identified as an “emerging risk” within our risk governance framework.
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CRITICAL ACCOUNTING ESTIMATES
Refer to Note 1 to the “Consolidated Financial Statements” for a summary of our significant accounting policies. Certain of our accounting policies requiring significant management assumptions and judgments are as follows:
RESERVES FOR CARD MEMBER CREDIT LOSSES
Reserves for Card Member credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.
In estimating expected credit losses, we use a combination of statistically based models and analysis of the results produced by these models to determine the quantitative and qualitative components of our total balance sheet reserves for credit losses. These quantitative and qualitative components entail a significant amount of judgment. The primary areas of judgment used in measuring the quantitative components of our 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. We use these models and assumptions, combined with historical loss experience, to determine the reserve rates that are applied to the outstanding loan or receivable balances to produce our reserves for expected credit losses for the R&S Period. The qualitative component is intended to capture expected losses that may not have been fully captured in the quantitative component. Through an established governance structure, we consider certain external and internal factors, including emerging portfolio characteristics and trends, which consequentially may increase or decrease the reserves for Card Member credit losses.
The R&S Period, which is approximately three years, represents the maximum time-period beyond the balance sheet date over which we can reasonably estimate expected credit losses, using all available portfolio information, current economic conditions and forecasts of future economic conditions. Card Member loan products do not have a contractual term and balances can revolve if minimum required payments are made, causing some balances to remain outstanding beyond the R&S Period. To determine expected credit losses beyond the R&S Period, we immediately revert to long-term average loss rates. Card Member receivable products are contractually required to be paid in full; therefore, we have assumed the balances will be either paid or written-off no later than 180 days past due.
Within the R&S Period, our models use past loss experience and current and future economic conditions to estimate the probability of default, exposure at default and expected recoveries to estimate net losses at default. A significant area of judgment relates to how we apply future Card Member payments to the reporting period balances when determining the exposure at default. The nature of revolving loan products inherently includes a relationship between future payments and spend behavior, which creates complexity in the application of how future payments are either partially or entirely attributable to the existing balance at the end of the reporting period. Using historical customer behavior and other factors, we have assumed that future payments are first allocated to interest and fees associated with the reporting period balance and future spend. We then allocate a portion of the payment to the estimated higher minimum payment amount due because of any future spend. Any remaining portion of the future payment is then allocated to the remaining reporting period balance.
CECL requires that the R&S Period include an assumption about current and future economic conditions. We incorporate multiple macroeconomic scenarios provided to us by an independent third party. The estimated credit losses calculated from each macroeconomic scenario are reviewed each period and weighted to reflect management's judgment about uncertainty surrounding these scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real GDP, that are significant to our models.
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Macroeconomic Sensitivity
To demonstrate the sensitivity of estimated credit losses to the macroeconomic scenarios, we compared our modeled estimates under a baseline scenario to that under a pessimistic downside scenario. For every 10 percentage points change in weighting from the baseline scenario to the pessimistic downside scenario, the estimated credit losses increased by approximately $110 million.
The modeled estimates under these scenarios were influenced by the duration, severity and timing of changes in economic variables within each scenario and these macroeconomic scenarios, under different conditions or using different assumptions, could result in significantly different estimated credit losses. It is difficult to estimate how potential changes in specific factors might affect the estimated credit losses, and current results may not be indicative of the potential future impact of macroeconomic forecast changes.
In addition, this sensitivity analysis relates only to the modeled credit loss estimates under two scenarios without considering management’s judgment on the relative weighting for those and other scenarios, including the weight that has been placed on the downside scenario at the balance sheet date, or any potential changes in other adjustments to the quantitative reserve component or the impact of management judgment for the qualitative reserve component, which may have a positive or negative effect on the results. Thus, the results of this sensitivity analysis are hypothetical and are not intended to estimate or reflect our expectations of any changes in the overall reserves for credit losses due to changes in the macroeconomic environment.
Refer to Note 3 to the “Consolidated Financial Statements” for further information on the range of macroeconomic scenario key variables used, in conjunction with other inputs described above, to calculate reserves for Card Member credit losses.
The process of estimating these reserves requires a high degree of judgment. To the extent our expected credit loss models are not indicative of future performance, actual losses could differ significantly from our judgments and expectations, resulting in either higher or lower future provisions for credit losses in any period.
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LIABILITY FOR MEMBERSHIP REWARDS
The Membership Rewards program is our largest card-based rewards program. Card Members can earn points for purchases charged on their enrolled card products. A significant portion of our cards, by their terms, allow Card Members to earn bonus points for purchases at merchants in particular industry categories. Membership Rewards points are redeemable for a broad variety of rewards, including travel, shopping, gift cards, and covering eligible charges. Points typically do not expire, and there is no limit on the number of points a Card Member may earn. Membership Rewards expense is driven by charge volume on enrolled cards, customer participation in the program and contractual arrangements with redemption partners.
We record a Membership Rewards liability that represents our best estimate of the cost of points earned that are expected to be redeemed by Card Members in the future. The Membership Rewards liability is impacted over time by enrollment levels, attrition, the volume of points earned and redeemed, and the associated redemption costs. We estimate the Membership Rewards liability by determining the URR and the weighted average cost (WAC) per point, which are applied to the points of current enrollees. Refer to Note 9 to the “Consolidated Financial Statements” for additional information.
The URR assumption is used to estimate the number of points earned by current enrollees that will ultimately be redeemed in future periods. We use statistical and actuarial models to estimate the URR of points earned to date by current Card Members based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes. The WAC per point assumption is used to estimate future redemption costs and is primarily based on redemption choices made by Card Members, reward offerings by partners, and Membership Rewards program changes. 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.
We periodically evaluate our liability estimation process and assumptions based on developments in redemption patterns, cost per point redeemed, partner contract changes and other factors.
The process of estimating the Membership Rewards liability includes a high degree of judgment. Actual redemptions and associated redemption costs could differ significantly from our estimates, resulting in either higher or lower Membership Rewards expense.
Changes in the Membership Rewards URR and WAC per point have the effect of either increasing or decreasing the liability through the current period Membership Rewards expense by an amount estimated to cover the cost of all points previously earned but not yet redeemed by current enrollees as of the end of the reporting period. As of December 31, 2021, an increase in the estimated URR of current enrollees of 25 basis points would increase the Membership Rewards liability and corresponding rewards expense by approximately $140 million. Similarly, an increase in the WAC per point of 1 basis point would increase the Membership Rewards liability and corresponding rewards expense by approximately $168 million.
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GOODWILL RECOVERABILITY
Goodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level annually or when events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of the reporting unit below its carrying value. Our methodology for conducting this goodwill impairment testing contains both a qualitative and quantitative assessment.
We have the option to initially perform an assessment of qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-specific events. 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 a more detailed quantitative assessment. We could also directly perform this quantitative assessment for any reporting unit, bypassing the qualitative assessment.
Our methodology for conducting the quantitative goodwill impairment testing is fundamentally based on the measurement of fair value for our reporting units, which inherently entails the use of significant management judgment. For valuation, we use a combination of the income approach (discounted cash flows) and market approach (market multiples) in estimating the fair value of our reporting units.
When preparing discounted cash flow models under the income approach, we estimate future cash flows using the reporting unit’s internal multi-year forecast, and a terminal value calculated using a growth rate that we believe is appropriate in light of current and expected future economic conditions. To discount these cash flows we use our expected cost of equity, determined using a capital asset pricing model. When using the market method under the market approach, we apply comparable publicly traded companies’ multiples (e.g., earnings, revenues) to our reporting units’ actual results. The judgment in estimating forecasted cash flows, discount rates and market comparables is significant, and imprecision could materially affect the fair value of our reporting units.
We could be exposed to an increased risk of goodwill impairment if future operating results or macroeconomic conditions differ significantly from management’s current assumptions.
INCOME TAXES
We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. In establishing a provision for income tax expense, we must make judgments about the application of inherently complex tax laws.
Unrecognized Tax Benefits
We establish a liability for unrecognized tax benefits, which are the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized in the financial statements.
In establishing a liability for an unrecognized tax benefit, assumptions may be made in determining whether, and the extent to which, a tax position should be sustained. A tax position is recognized only when it is more likely than not to be sustained upon examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit recognized is the largest benefit that we believe is more likely than not to be realized on ultimate settlement. As new information becomes available, we evaluate our tax positions and adjust our unrecognized tax benefits, as appropriate.
Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such differences generally impacting the provision for income tax.
Deferred Tax Asset Realization
Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are expected to reverse.
Since deferred taxes measure the future tax effects of items recognized in the Consolidated Financial Statements, certain estimates and assumptions are required to determine whether it is more likely than not that all or some portion of the benefit of a deferred tax asset will not be realized. In making this assessment, we analyze and estimate the impact of future taxable income, reversing temporary differences and available tax planning strategies. These assessments are performed quarterly, taking into account any new information.
Changes in facts or circumstances can lead to changes in the ultimate realization of deferred tax assets due to uncertainties.
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OTHER MATTERS
RECENTLY ADOPTED ACCOUNTING STANDARDS
Refer to the Recently Adopted Accounting Standards section of Note 1 to the “Consolidated Financial Statements.”
GLOSSARY OF SELECTED TERMINOLOGY
Adjusted net interest income — A non-GAAP measure that represents net interest income attributable to our Card Member loans (which includes, on a GAAP basis, interest that is deemed uncollectible), excluding the impact of interest expense and interest income not attributable to our Card Member loans.
Airline-related volume — Represents spend at airlines as a merchant, which is included within T&E-related volume.
Asset securitizations — Asset securitization involves the transfer and sale of loans or receivables to a special-purpose entity created for the securitization activity, typically a trust. The trust, in turn, issues securities, commonly referred to as asset-backed securities that are secured by the transferred loans and receivables. The trust uses the proceeds from the sale of such securities to pay the purchase price for the transferred loans or receivables. The securitized loans and receivables of our Lending Trust and Charge Trust (collectively, the Trusts) are reported as assets and the securities issued by the Trusts are reported as liabilities on our Consolidated Balance Sheets.
Average discount rate — This calculation is generally designed to reflect the average pricing at all merchants accepting American Express cards and represents the percentage of network volumes retained by us from spend at merchants we acquire, or from merchants acquired by third parties on our behalf, net of amounts retained by such third parties. The average discount rate, together with network volumes, drive our discount revenue.
Billed business — Represents transaction volumes (including cash advances) on cards and other payment products issued by American Express. Billed business is reported as inside the United States or outside the United States based on the location of the issuer.
Capital ratios — Represents the minimum standards established by regulatory agencies as a measure to determine whether the regulated entity has sufficient capital to absorb on- and off-balance sheet losses beyond current loss accrual estimates. Refer to the Capital Strategy section under “Consolidated Capital Resources and Liquidity” for further related definitions under Basel III.
Card Member — The individual holder of an issued American Express-branded card.
Card Member loans — Represents revolve-eligible transactions on our card products, as well as any interest charges and associated card-related fees.
Card Member receivables — Represents transactions 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.
Cards-in-force — Represents the number of cards that are issued and outstanding by American Express (proprietary cards-in-force) and cards issued and outstanding under network partnership agreements with banks and other institutions, including joint ventures (GNS cards-in-force), except for GNS retail cobrand cards that had no out-of-store spending activity during the prior twelve months. Basic cards-in-force excludes supplemental cards issued on consumer accounts. Cards-in-force is useful in understanding the size of our Card Member base.
Charge cards — Represents cards that generally carry no pre-set spending limits and are primarily designed as a method of payment and not as a means of financing purchases. Each charge card transaction is authorized based on its likely economics reflecting a Card Member’s most recent credit information and spend patterns. Charge Card Members must pay the full amount of balances billed each month, with the exception of balances that can be revolved under lending features offered on certain charge cards, such as Pay Over Time and Plan It, that allow Card Members to pay for eligible purchases with interest over time.
Cobrand cards — Cards issued under cobrand agreements with selected commercial partners. Pursuant to the cobrand agreements, we make payments to our cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program.
Credit cards — Represents cards that have a range of revolving payment terms, structured payment features (e.g. Plan It), grace periods, and rate and fee structures.
Discount revenue — Primarily represents the amount earned on transactions occurring at merchants that have entered into a card acceptance agreement with us, a GNS partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members.
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Goods and Services (G&S)-related volume — Includes spend in merchant categories other than T&E-related merchant categories, which includes B2B spending by small and medium size enterprise customers in our GCS segment.
Interest expense — Includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes and liquidity needs. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to interest expense on our long-term financing and short-term borrowings, (e.g., commercial paper, federal funds purchased, bank overdrafts and other short-term borrowings), as well as the realized impact of derivatives hedging interest rate risk on our long-term debt.
Interest income — Includes (i) interest on loans, (ii) interest and dividends on investment securities and (iii) interest income on deposits with banks and other.
Interest on loans — Assessed using the average daily balance method for Card Member loans. Unless the loan is classified as non-accrual, interest is recognized based upon the principal amount outstanding in accordance with the terms of the applicable account agreement until the outstanding balance is paid or written off.
Interest and dividends on investment securities — Primarily relates to our performing fixed-income securities. Interest income is recognized using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so a constant rate of return is recognized on the outstanding balance of the related investment security throughout its term. Amounts are recognized until securities are in default or when it is likely that future interest payments will not be made as scheduled.
Interest income on deposits with banks and other — Primarily relates to the placement of cash in excess of near-term funding requirements in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call accounts.
Loyalty coalitions — Programs that enable consumers to earn rewards points and use them to save on purchases from a variety of participating merchants through multi-category rewards platforms. Merchants in these programs generally fund the consumer offers and are responsible to us for the cost of rewards points; we earn revenue from operating the loyalty platform and by providing marketing support.
Net card fees — Represents the card membership fees earned during the period recognized as revenue over the covered card membership period (typically one year), net of the provision for projected refunds for Card Membership cancellation and deferred acquisition costs.
Net interest yield on average Card Member loans — A non-GAAP measure that is computed by dividing adjusted net interest income by average Card Member loans, computed on an annualized basis. Reserves and net write-offs related to uncollectible interest are recorded through provision for credit losses and are thus not included in the net interest yield calculation.
Net write-off rate — principal only — Represents the amount of proprietary consumer or small business Card Member loans or receivables written off, consisting of principal (resulting from authorized transactions), less recoveries, as a percentage of the average loan or receivable balance during the period.
Net write-off rate — principal, interest and fees — Includes, in the calculation of the net write-off rate, amounts for interest and fees in addition to principal for Card Member loans, and fees in addition to principal for Card Member receivables.
Network volumes — Represents the total of billed business and processed volumes. Network volumes are reported as United States or outside the United States based on the location of the issuer.
Operating expenses — Represents salaries and employee benefits, professional services, data processing and equipment, and other expenses.
Processed volumes — Represents transaction volumes (including cash advances) on cards issued under network partnership agreements with banks and other institutions, including joint ventures, as well as alternative payment solutions facilitated by American Express. Processed volume is reported as United States or outside the United States based on the location of the issuer.
Reserve build (release) — Represents the portion of the provisions for credit losses for the period related to increasing or decreasing reserves for credit losses as a result of, among other things, changes in volumes, macroeconomic outlook, portfolio composition and credit quality of portfolios. Reserve build represents the amount by which the provision for credit losses exceeds net write-offs, while reserve release represents the amount by which net write-offs exceed the provision for credit losses.
Return on average equity — Calculated by dividing the preceding twelve months of net income by one-year monthly average total shareholders’ equity.
T&E-related volume — Represents spend on travel and entertainment, which primarily includes airline, cruise, lodging and dining merchant categories.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address our current expectations regarding business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,” “continue” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:
•our ability to grow earnings per share in the future, which will depend in part on revenue growth, credit performance and the effective tax rate remaining consistent with current expectations and our ability to continue investing in customers, brand and talent, controlling operating expenses, effectively managing risk and executing our share repurchase program; any of which could be impacted by, among other things, the factors identified in the subsequent paragraphs as well as the following: the extent and duration of the effect of the pandemic on the economy, inflation, consumer confidence, consumer and business spending, and customer behaviors, such as with respect to travel, dining, shopping and in-person events; the impact on consumers and businesses as forbearance and government support programs end; the continued stress on businesses due to containment measures, operational changes, supply chain issues and staffing shortages; issues impacting brand perceptions and our reputation; the impact of any future contingencies, including, but not limited to, restructurings, investment gains, impairments, changes in reserves, legal costs, the imposition of fines or civil money penalties and increases in Card Member reimbursements; impacts related to new or renegotiated cobrand and other partner agreements; and the impact of regulation and litigation, which could affect the profitability of our business activities, limit our ability to pursue business opportunities, require changes to business practices or alter our relationships with partners, merchants and Card Members;
•our ability to grow revenues net of interest expense, which could be impacted by, among other things, uncertainty regarding the continued spread of COVID-19 (including new variants) and the availability, distribution and use of effective treatments and vaccines; a deterioration in global economic and business conditions; consumer and business spending not growing in line with expectations; prolonged measures to contain the spread of COVID-19 (including travel restrictions), concern of the possible imposition of further containment measures or premature easing of such containment measures, any of which could further exacerbate the effects on business activity and our Card Members, partners and merchants; health concerns associated with the pandemic continuing to affect customer behaviors, spending levels and preferences, and travel patterns and demand even after containment measures are lifted; the amount and efficacy of investments in share, scale and relevance; growth in Card Member loans and the yield on Card Member loans not remaining consistent with current expectations; the average discount rate changing by a greater or lesser amount than expected; an inability of business partners to meet their obligations to us and our customers due to slowdowns or disruptions in their businesses, bankruptcy or liquidation, or otherwise; and an inability to address competitive pressures and implement our strategies and business initiatives, including within the premium consumer space, commercial payments, the global merchant network and digital environment;
•future credit performance, the level of future delinquency and write-off rates and the amount and timing of future reserve builds and releases, which will depend in part on changes in consumer behavior that affect loan and receivable balances (such as paydown and revolve rates); macroeconomic factors such as unemployment rates, GDP and the volume of bankruptcies; the ability and willingness of Card Members to pay amounts owed to us, particularly as forbearance and government support programs end; the enrollment in, and effectiveness of, hardship programs and troubled debt restructurings; the performance of accounts as they graduate and exit from financial relief programs; collections capabilities and recoveries of previously written-off loans and receivables; and governmental actions that provide forms of relief with respect to certain loans and fees, such as limiting debt collections efforts and encouraging or requiring extensions, modifications or forbearance;
•net interest income and the growth rate of loans outstanding being higher or lower than current expectations, which will depend on the behavior of Card Members and their actual spending, borrowing and paydown patterns; our ability to effectively manage risk and enhance Card Member value propositions; changes in benchmark interest rates; changes in capital and credit market conditions and the availability and cost of capital; credit actions, including line size and other adjustments to credit availability; and the effectiveness of our strategies to capture a greater share of existing Card Members’ spending and borrowings, and attract new, and retain existing, customers;
•the actual amount we spend on marketing in the future, which will be based in part on continued changes in the macroeconomic and competitive environment and business performance; management’s identification and assessment of attractive investment opportunities and the receptivity of Card Members and prospective customers to advertising and customer acquisition initiatives; our ability to balance expense control and investments in the business; and management’s ability to realize efficiencies and optimize investment spending;
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•the actual amount to be spent on Card Member rewards and services and business development, and the relationship of these variable customer engagement costs to revenues, which could be impacted by continued changes in macroeconomic conditions and Card Member behavior as it relates to their spending patterns (including the level of spend in bonus categories), the redemption of rewards and offers (including travel redemptions) and usage of travel-related benefits; the costs related to reward point redemptions; inflation; further enhancements to product benefits to make them attractive to Card Members and prospective customers, potentially in a manner that is not cost-effective; new and renegotiated contractual obligations with business partners; and the pace and cost of the expansion of our global lounge collection;
•our ability to control operating expenses and the actual amount we spend on operating expenses in the future, which could be impacted by, among other things, salary and benefit expenses to attract and retain talent; costs due to new hybrid working arrangements; supply chain issues; a persistent inflationary environment; management’s decision to increase or decrease spending in such areas as technology, business and product development, sales force, premium servicing and digital capabilities depending on overall business performance; our ability to innovate efficient channels of customer interactions; restructuring activity; fraud costs; information security or compliance expenses or consulting, legal and other professional services fees, including as a result of litigation or internal and regulatory reviews; the level of M&A activity and related expenses; the payment of civil money penalties, disgorgement, restitution, non-income tax assessments and litigation-related settlements; impairments of goodwill or other assets; and the impact of changes in foreign currency exchange rates on costs;
•net card fees not performing consistent with current expectations, which could be impacted by, among other things, a deterioration in macroeconomic conditions impacting the ability and desire of Card Members to pay card fees; higher Card Member attrition rates; the pace of Card Member acquisition activity; and our inability to address competitive pressures, develop attractive value propositions and implement our strategy of refreshing card products and enhanced benefits and services;
•the average discount rate not performing consistent with current expectations, including as a result of further changes in the mix of spending by location and industry (including the level of T&E spending), merchant negotiations (including merchant incentives, concessions and volume-related pricing discounts), competition, pricing regulation (including regulation of competitors’ interchange rates) and other factors;
•our tax rate not remaining consistent with current levels, which could be impacted by, among other things, further changes in tax laws and regulation, our geographic mix of income, unfavorable tax audits and other unanticipated tax items;
•changes in the substantial and increasing worldwide competition in the payments industry, including competitive pressure that may materially impact the prices charged to merchants that accept American Express cards, the desirability of our premium card products, competition for new and existing cobrand relationships, competition from new and non-traditional competitors and the success of marketing, promotion and rewards programs;
•changes affecting our plans regarding the return of capital to shareholders, including increasing the level of our dividend, subject to approval by our Board of Directors, which will depend on factors such as capital levels and regulatory capital ratios; changes in the stress testing and capital planning process and new guidance from the Federal Reserve; our results of operations and financial condition; our credit ratings and rating agency considerations; and the economic environment and market conditions in any given period;
•our ability to expand our leadership in the premium consumer space, which will be impacted in part by competition, brand perceptions (including perceptions related to merchant coverage) and reputation, and our ability to develop and market value propositions that appeal to Card Members and new customers and offer attractive services and rewards programs, which will depend in part on ongoing investments, addressing changing customer behaviors, new product innovation and development, Card Member acquisition efforts and enrollment processes, including through digital channels, and infrastructure to support new products, services and benefits;
•our ability to build on our leadership in commercial payments, which will depend in part on competition, the willingness and ability of companies to credit and charge cards for procurement and other business expenditures as well as use our other products and services for financing needs, perceived or actual difficulties and costs related to setting up card-based B2B payment platforms, our ability to offer attractive value propositions to potential customers, our ability to enhance and expand our payment and lending solutions, and continue the rollout of the Kabbage platform to our small business customers;
•our ability to expand merchant coverage globally, which will depend in part on our success, as well as the success of OptBlue merchant acquirers and GNS partners in signing merchants to accept American Express, which could be impacted by our value propositions offered to merchants and merchant acquirers for card acceptance, as well as the awareness and willingness of Card Members to use American Express cards at merchants, our ability to increase coverage in priority international regions and execute on our plans in China, and technological developments, including capabilities that allow for greater digital integration;
•our ability to stay on the leading edge of technology and digital payment solutions, which will depend on our success in evolving our products and processes for the digital environment, developing new features in the Amex app and enhancing our digital channels, building partnerships and executing programs with other companies, effectively utilizing artificial intelligence to address servicing and other customer needs, and supporting the use of our products as a means of payment
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through online and mobile channels, all of which will be impacted by investment levels, new product innovation and development and infrastructure to support new products, services and benefits;
•a failure in or breach of our operational or security systems, processes or infrastructure, or those of third parties, including as a result of cyberattacks, which could compromise the confidentiality, integrity, privacy and/or security of data, disrupt our operations, reduce the use and acceptance of American Express cards and lead to regulatory scrutiny, litigation, remediation and response costs, and reputational harm;
•changes in capital and credit market conditions, which may significantly affect our ability to meet our liquidity needs and expectations regarding capital ratios; our access to capital and funding costs; the valuation of our assets; and our credit ratings or those of our subsidiaries;
•our deposit rates increasing faster or slower than current expectations and changes affecting our ability to grow retail direct deposits, including due to market demand, changes in benchmark interest rates, competition or regulatory restrictions on our ability to obtain deposit funding or offer competitive interest rates, which could affect our net interest yield and ability to fund our businesses;
•our funding plan being implemented in a manner inconsistent with current expectations, which will depend on various factors such as future business growth, the impact of global economic, political and other events on market capacity, demand for securities we offer, regulatory changes, ability to securitize and sell loans and receivables and the performance of loans and receivables previously sold in securitization transactions;
•our ability to implement our ESG strategies and initiatives, which depend in part on the amount and efficacy of our investments in product innovations, marketing campaigns, our supply chain and operations, and philanthropic, colleague and community programs; customer behaviors; and the cost and availability of solutions for a low carbon economy;
•legal and regulatory developments, which could affect the profitability of our business activities; limit our ability to pursue business opportunities or conduct business in certain jurisdictions; require changes to business practices or alter our relationships with Card Members, partners, merchants and other third parties, including our ability to continue certain cobrand relationships in the EU and UK; exert further pressure on the average discount rate and GNS business; result in increased costs related to regulatory oversight, litigation-related settlements, judgments or expenses, restitution to Card Members or the imposition of fines or civil money penalties; materially affect capital or liquidity requirements, results of operations or ability to pay dividends; or result in harm to the American Express brand;
•changes in the financial condition and creditworthiness of our business partners, such as bankruptcies, restructurings or consolidations, including of cobrand partners and merchants that represent a significant portion of our business, such as the airline industry, or partners in GNS or financial institutions that we rely on for routine funding and liquidity, which could materially affect our financial condition or results of operations; and
•factors beyond our control such as continued waves of COVID-19 cases, the severity and contagiousness of new variants, severe weather conditions, natural disasters, power loss, disruptions in telecommunications, terrorism and other catastrophic events, any of which could significantly affect demand for and spending on American Express cards, delinquency rates, loan and receivable balances and other aspects of our business and results of operations or disrupt our global network systems and ability to process transactions.
A further description of these uncertainties and other risks can be found in “Risk Factors” above and our other reports filed with the SEC.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to “Risk Management” under “MD&A” for quantitative and qualitative disclosures about market risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP), and includes those policies and procedures that:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of assets;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —Integrated Framework (2013).
Based on management’s assessment and those criteria, we conclude that, as of December 31, 2021, our internal control over financial reporting is effective.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, has issued an audit report appearing on the following page on the effectiveness of our internal control over financial reporting as of December 31, 2021.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of American Express Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of American Express Company and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses on certain financial instruments in 2020.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Reserves for Credit Losses on Card Member Loans
As described in Note 3 to the consolidated financial statements, reserves for credit losses on Card Member loans represent management’s estimate of the expected credit losses in the Company’s outstanding portfolio of Card Member loans as of the balance sheet date. The reserves for credit losses on Card Member loans was $3.3 billion as of December 31, 2021. 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. 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. Management uses these models and assumptions, combined with historical loss experience, to determine the reserve rates that are applied to the outstanding loan balances to produce its reserves for expected credit losses. Within the R&S Period, the Company’s models use past loss experience and current and future economic conditions to estimate the probability of default, exposure at default and expected recoveries to estimate net losses at default. Beyond the R&S Period, expected credit losses are estimated by immediately reverting to long-term average loss rates. Management also estimates the likelihood and magnitude of recovery of previously written off loans considering how long ago the loan was written off and future economic conditions. Additionally, management evaluates whether to include qualitative reserves to cover losses that are expected but may not be adequately represented in the quantitative methods or the economic assumptions. 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 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. These procedures included testing the effectiveness of controls relating to the reserves for credit losses on Card Member loans. These procedures also included, among others, testing management’s process for estimating the reserves for credit losses on Card Member loans through (i) evaluating the appropriateness of management’s methodology, (ii) testing the completeness and accuracy of significant inputs and (iii) evaluating the reasonableness of certain qualitative reserves and significant assumptions used to estimate the reserves. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s methodology and the reasonableness of certain qualitative reserves and certain significant assumptions, including the R&S Period and the loss rates used to estimate expected credit losses beyond the R&S Period.
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Membership Rewards Liability
As described in Note 9 to the consolidated financial statements, the Membership Rewards liability represents management’s estimate of the cost of Membership Rewards points earned that are expected to be redeemed in the future. The Membership Rewards liability was $11.4 billion as of December 31, 2021. The weighted average cost (WAC) per point and the Ultimate Redemption Rate (URR) are key assumptions used to estimate the liability. 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 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. These procedures included testing the effectiveness of controls relating to the estimate of the Membership Rewards liability, including the URR and WAC assumptions. These procedures also included, among others, (i) testing the completeness and accuracy of significant inputs to the statistical and actuarial models used to estimate the URR assumption, including redemption trends, card product type, enrollment tenure, and card spend levels, (ii) the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate of the URR assumption and comparing the independent estimate to management’s assumption to evaluate its reasonableness, (iii) evaluating management’s methodology for determining the WAC assumption and (iv) comparing our independently calculated Membership Rewards liability to management’s estimate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 11, 2022
We have served as the Company’s auditor since 2005.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS | PAGE
Consolidated Statements of Income – For the Years Ended December 31, 20 2 1, 20 20 and 2019 | 92
Consolidated Statements of Comprehensive Income – For the Years Ended December 31, 20 2 1, 20 20 and 2019 | 93
Consolidated Balance Sheets – December 31, 20 2 1 and 2020 | 94
Consolidated Statements of Cash Flows – For the Years Ended December 31, 20 2 1, 20 20 and 2019 | 95
Consolidated Statements of Shareholders’ Equity – For the Years Ended December 31, 20 2 1, 20 20 and 20 20 | 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 97
Note 1 – Summary of Significant Accounting Policies | 97
Note 2 – Loans and Card Member Receivables | 103
Note 3 – Reserves for Credit Losses | 111
Note 4 – Investment Securities | 114
Note 5 – Asset Securitizations | 116
Note 6 – Other Assets | 117
Note 7 – Customer Deposits | 119
Note 8 – Debt | 120
Note 9 – Other Liabilities | 123
Note 1 0 – Stock Plans | 124
Note 1 1 – Retirement Plans | 126
Note 1 2 – Contingencies and Commitments | 127
Note 1 3 – Derivatives and Hedging Activities | 130
Note 1 4 – Fair Values | 133
Note 1 5 – Guarantees | 138
Note 1 6 – Common and Preferred Shares | 138
Note 1 7 – Changes in Accumulated Other Comprehensive Income (Loss) | 140
Note 18 – Other Fees and Commissions and Other Expenses | 141
Note 19 – Restructuring | 141
Note 2 0 – Income Taxes | 142
Note 2 1 – Earnings Per Common Share (EPS) | 145
Note 2 2 – Regulatory Matters and Capital Adequacy | 146
Note 2 3 – Significant Credit Concentrations | 148
Note 2 4 – Reportable Operating Segments and Geographic Operations | 149
Note 2 5 – Parent Company | 152

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CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31 (Millions, except per share amounts) |  | 2021 |  | 2020 |  | 2019
Revenues |  |  |  |  |  |
Non-interest revenues |  |  |  |  |  |
Discount revenue |  | $ | 25,727 |  |  | $ | 20,401 |  |  | $ | 26,167 |
Net card fees |  | 5,195 |  |  | 4,664 |  |  | 4,042 |
Other fees and commissions |  | 2,392 |  |  | 2,163 |  |  | 3,297 |
Other |  | 1,316 |  |  | 874 |  |  | 1,430 |
Total non-interest revenues |  | 34,630 |  |  | 28,102 |  |  | 34,936 |
Interest income |  |  |  |  |  |
Interest on loans |  | 8,850 |  |  | 9,779 |  |  | 11,308 |
Interest and dividends on investment securities |  | 83 |  |  | 127 |  |  | 188 |
Deposits with banks and other |  | 100 |  |  | 177 |  |  | 588 |
Total interest income |  | 9,033 |  |  | 10,083 |  |  | 12,084 |
Interest expense |  |  |  |  |  |
Deposits |  | 458 |  |  | 943 |  |  | 1,559 |
Long-term debt and other |  | 825 |  |  | 1,155 |  |  | 1,905 |
Total interest expense |  | 1,283 |  |  | 2,098 |  |  | 3,464 |
Net interest income |  | 7,750 |  |  | 7,985 |  |  | 8,620 |
Total revenues net of interest expense |  | 42,380 |  |  | 36,087 |  |  | 43,556 |
Provisions for credit losses |  |  |  |  |  |
Card Member receivables |  | (73) |  |  | 1,015 |  |  | 963 |
Card Member loans |  | (1,155) |  |  | 3,453 |  |  | 2,462 |
Other |  | (191) |  |  | 262 |  |  | 148 |
Total provisions for credit losses |  | (1,419) |  |  | 4,730 |  |  | 3,573 |
Total revenues net of interest expense after provisions for credit losses |  | 43,799 |  |  | 31,357 |  |  | 39,983 |
Expenses |  |  |  |  |  |
Marketing and business development |  | 9,053 |  |  | 6,747 |  |  | 7,125 |
Card Member rewards |  | 11,007 |  |  | 8,041 |  |  | 10,439 |
Card Member services |  | 1,993 |  |  | 1,230 |  |  | 2,223 |
Salaries and employee benefits |  | 6,240 |  |  | 5,718 |  |  | 5,911 |
Other, net |  | 4,817 |  |  | 5,325 |  |  | 5,856 |
Total expenses |  | 33,110 |  |  | 27,061 |  |  | 31,554 |
Pretax income |  | 10,689 |  |  | 4,296 |  |  | 8,429 |
Income tax provision |  | 2,629 |  |  | 1,161 |  |  | 1,670 |
Net income |  | $ | 8,060 |  |  | $ | 3,135 |  |  | $ | 6,759 |
Earnings per Common Share — (Note 21)(a) |  |  |  |  |  |
Basic |  | $ | 10.04 |  |  | $ | 3.77 |  |  | $ | 8.00 |
Diluted |  | $ | 10.02 |  |  | $ | 3.77 |  |  | $ | 7.99 |
Average common shares outstanding for earnings per common share: |  |  |  |  |  |
Basic |  | 789 |  |  | 805 |  |  | 828 |
Diluted |  | 790 |  |  | 806 |  |  | 830 |

(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.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31 (Millions) |  | 2021 |  | 2020 |  | 2019
Net income |  | $ | 8,060 |  |  | $ | 3,135 |  |  | $ | 6,759 |
Other comprehensive (loss) income: |  |  |  |  |  |
Net unrealized debt securities gains (losses), net of tax |  | (42) |  |  | 32 |  |  | 41 |
Foreign currency translation adjustments, net of tax |  | (163) |  |  | (40) |  |  | (56) |
Net unrealized pension and other postretirement benefits, net of tax |  | 155 |  |  | (150) |  |  | (125) |
Other comprehensive (loss) income |  | (50) |  |  | (158) |  |  | (140) |
Comprehensive income |  | $ | 8,010 |  |  | $ | 2,977 |  |  | $ | 6,619 |

See Notes to Consolidated Financial Statements.
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CONSOLIDATED BALANCE SHEETS

December 31 (Millions, except share data) |  | 2021 |  | 2020
Assets |  |  |  |
Cash and cash equivalents |  |  |  |
Cash and due from banks (includes restricted cash of consolidated variable interest entities: 2021, $11; 2020, nil) |  | $ | 1,292 |  |  | $ | 2,984 |
Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2021, $463; 2020, $92) |  | 20,548 |  |  | 29,824 |
Short-term investment securities (includes restricted investments of consolidated variable interest entities: 2021, $32; 2020, $47) |  | 188 |  |  | 157 |
Total cash and cash equivalents |  | 22,028 |  |  | 32,965 |
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2021, $5,175; 2020, $4,296), less reserves for credit losses: 2021, $64; 2020, $267 |  | 53,581 |  |  | 43,434 |
Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2021, $26,587; 2020, $25,908), less reserves for credit losses: 2021, $3,305; 2020, $5,344 |  | 85,257 |  |  | 68,029 |
Other loans, less reserves for credit losses: 2021, $52; 2020, $238 |  | 2,859 |  |  | 2,614 |
Investment securities |  | 2,591 |  |  | 21,631 |
Premises and equipment, less accumulated depreciation and amortization: 2021, $8,602; 2020, $7,540 |  | 4,988 |  |  | 5,015 |
Other assets, less reserves for credit losses: 2021, $25; 2020, $85 |  | 17,244 |  |  | 17,679 |
Total assets |  | $ | 188,548 |  |  | $ | 191,367 |
Liabilities and Shareholders’ Equity |  |  |  |
Liabilities |  |  |  |
Customer deposits |  | $ | 84,382 |  |  | $ | 86,875 |
Accounts payable |  | 10,574 |  |  | 9,444 |
Short-term borrowings |  | 2,243 |  |  | 1,878 |
Long-term debt (includes debt issued by consolidated variable interest entities: 2021, $13,803; 2020, $12,760) |  | 38,675 |  |  | 42,952 |
Other liabilities |  | 30,497 |  |  | 27,234 |
Total liabilities |  | $ | 166,371 |  |  | $ | 168,383 |
Contingencies and Commitments (Note 12) |  |  |  |
Shareholders’ Equity |  |  |  |
Preferred shares, $1.66 2/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares as of December 31, 2021 and 2020 (Note 16) |  | — |  |  | — |
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 761 million shares as of December 31, 2021 and 805 million shares as of December 31, 2020 |  | 153 |  |  | 161 |
Additional paid-in capital |  | 11,495 |  |  | 11,881 |
Retained earnings |  | 13,474 |  |  | 13,837 |
Accumulated other comprehensive income (loss) |  |  |  |
Net unrealized debt securities gains, net of tax of: 2021, $7; 2020, $20 |  | 23 |  |  | 65 |
Foreign currency translation adjustments, net of tax of: 2021, $(330); 2020, $(381) |  | (2,392) |  |  | (2,229) |
Net unrealized pension and other postretirement benefits, net of tax of: 2021, $(184); 2020, $(236) |  | (576) |  |  | (731) |
Total accumulated other comprehensive income (loss) |  | (2,945) |  |  | (2,895) |
Total shareholders’ equity |  | 22,177 |  |  | 22,984 |
Total liabilities and shareholders’ equity |  | $ | 188,548 |  |  | $ | 191,367 |

See Notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31 (Millions) |  | 2021 |  | 2020 |  | 2019
Cash Flows from Operating Activities |  |  |  |  |  |
Net income |  | $ | 8,060 |  |  | $ | 3,135 |  |  | $ | 6,759 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Provisions for credit losses |  | (1,419) |  |  | 4,730 |  |  | 3,573 |
Depreciation and amortization |  | 1,695 |  |  | 1,543 |  |  | 1,188 |
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: |  |  |  |  |  |
Other assets |  | 1,068 |  |  | (1,785) |  |  | (368) |
Accounts payable & other liabilities |  | 5,389 |  |  | (2,025) |  |  | 1,771 |
Net cash provided by operating activities |  | 14,645 |  |  | 5,591 |  |  | 13,632 |
Cash Flows from Investing Activities |  |  |  |  |  |
Sale of investment securities |  | 62 |  |  | 69 |  |  | 22 |
Maturities and redemptions of investment securities |  | 20,032 |  |  | 7,159 |  |  | 7,329 |
Purchase of investments |  | (1,517) |  |  | (20,562) |  |  | (11,166) |
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: 2021, $88; 2020, $1; 2019, $43 |  | (1,550) |  |  | (1,478) |  |  | (1,645) |
Acquisitions/dispositions, net of cash acquired |  | 1 |  |  | (597) |  |  | (352) |
Other investing activities |  | — |  |  | 135 |  |  | 152 |
Net cash (used in) provided by investing activities |  | (10,529) |  |  | 11,632 |  |  | (16,707) |
Cash Flows from Financing Activities |  |  |  |  |  |
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 |
Repurchase of American Express common shares and other |  | (7,652) |  |  | (1,029) |  |  | (4,685) |
Dividends paid |  | (1,448) |  |  | (1,474) |  |  | (1,422) |
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 (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 |
Cash and cash equivalents at end of year |  | $ | 22,028 |  |  | $ | 32,965 |  |  | $ | 24,446 |

Supplemental cash flow information

Cash and cash equivalents reconciliation |  | 2021 |  | 2020 |  | 2019
Cash and cash equivalents per Consolidated Balance Sheets |  | $ | 22,028 |  |  | $ | 32,965 |  |  | $ | 24,446 |
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.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Millions, except per share amounts) |  | Total |  | Preferred Shares |  | Common Shares |  | Additional Paid-in Capital |  | Accumulated Other Comprehensive Income (Loss) |  | Retained Earnings
Balances as of December 31, 2018 |  | $ | 22,290 |  |  | $ | — |  |  | $ | 170 |  |  | $ | 12,218 |  |  | $ | (2,597) |  |  | $ | 12,499 |
Net income |  | 6,759 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,759 |
Other comprehensive loss |  | (140) |  |  | — |  |  | — |  |  | — |  |  | (140) |  |  | — |
Repurchase of common shares |  | (4,585) |  |  | — |  |  | (8) |  |  | (671) |  |  | — |  |  | (3,906) |
Other changes, primarily employee plans |  | 186 |  |  | — |  |  | 1 |  |  | 227 |  |  | — |  |  | (42) |
Cash dividends declared preferred Series B, $52,000.00 per share |  | (39) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (39) |
Cash dividends declared preferred Series C, $49,000.00 per share |  | (42) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (42) |
Cash dividends declared common, $1.64 per share |  | (1,358) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,358) |
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 |
Other comprehensive loss |  | (158) |  |  | — |  |  | — |  |  | — |  |  | (158) |  |  | — |
Repurchase of common shares |  | (875) |  |  | — |  |  | (2) |  |  | (105) |  |  | — |  |  | (768) |
Other changes, primarily employee plans |  | 164 |  |  | — |  |  | — |  |  | 212 |  |  | — |  |  | (48) |
Cash dividends declared preferred Series B, $45,807.57 per share |  | (34) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (34) |
Cash dividends declared preferred Series C, $52,919.91 per share |  | (45) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (45) |
Cash dividends declared common, $1.72 per share |  | (1,392) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,392) |
Balances as of December 31, 2020 |  | 22,984 |  |  | — |  |  | 161 |  |  | 11,881 |  |  | (2,895) |  |  | 13,837 |
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) |
Other changes, primarily employee plans |  | 227 |  |  | — |  |  | 1 |  |  | 245 |  |  | — |  |  | (19) |
Cash dividends declared preferred Series B, $36,419.41 per share |  | (27) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (27) |
Cash dividends declared preferred Series C, $26,317.47 per share |  | (23) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (23) |
Cash dividends declared preferred Series D, $13,213.89 per share |  | (21) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (21) |
Cash dividends declared common, $1.72 per share |  | (1,359) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,359) |
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 current expected credit loss (CECL) methodology for the recognition of credit losses on certain financial instruments.
See Notes to Consolidated Financial Statements.
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NOTES TO CONSOLID ATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE C OMPANY
We are a globally integrated payments company that provides our customers with access to products, insights and experiences that enrich lives and build business success. Our principal products and services are credit and charge card products, along with travel and lifestyle related services, offered to consumers and businesses around the world. Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party service providers and business partners, direct mail, telephone, in-house sales teams, and direct response advertising.
Refer to Note 24 for additional discussion of the products and services that comprise each segment. Corporate functions and certain other businesses and operations are included in Corporate & Other.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Significant intercompany transactions are eliminated.
We consolidate entities in which we hold a “controlling financial interest.” For voting interest entities, we are considered to hold a controlling financial interest when we are able to exercise control over the investees’ operating and financial decisions. For variable interest entities (VIEs), the determination of which is based on the amount and characteristics of the entity’s equity, we are considered to hold a controlling financial interest when we are determined to be the primary beneficiary. A primary beneficiary is the party that has both: (1) the power to direct the activities that most significantly impact that VIE’s economic performance, and (2) the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that could potentially be significant to that VIE.
Entities in which our voting interest in common equity does not provide it with control, but allows us to exert significant influence over operating and financial decisions, are accounted for under the equity method. We also have investments in equity securities where our voting interest is below the level of significant influence, including investments that we make in non-public companies in the ordinary course of business. Such investments are initially recorded at cost and adjusted to fair value through earnings for observable price changes in orderly transactions for identical or similar transactions of the same company or if they are determined to be impaired. See Note 4 for the accounting policy for our marketable equity securities.
FOREIGN CURRENCY
Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of the reporting period; non-monetary assets and liabilities are translated at the historic exchange rate at the date of the transaction; revenues and expenses are translated at the average month-end exchange rates during the year. Resulting translation adjustments, along with any related qualifying hedge and tax effects, are included in accumulated other comprehensive income (loss) (AOCI), a component of shareholders’ equity. Translation adjustments, including qualifying hedge and tax effects, are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Gains and losses related to transactions in a currency other than the functional currency are reported in Other, net expenses in the Consolidated Statements of Income.
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AMOUNTS BASED ON ESTIMATES AND ASSUMPTIONS
Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part, on management’s assumptions concerning future events. Among the more significant assumptions are those that relate to reserves for Card Member credit losses on loans and receivables, Membership Rewards liability, goodwill and income taxes. These accounting estimates reflect the best judgment of management, but actual results could differ.
INCOME STATEMENT
Discount Revenue
Discount revenue primarily represents the amount we earn on transactions occurring at merchants that have entered into a card acceptance agreement with us, or a Global Network Services (GNS) partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members. The amount of fees charged for accepting our cards as payment for goods or services, or merchant discount, varies with, among other factors, the industry in which the merchant conducts business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope of the card acceptance agreement between the merchant and us (e.g., local or global) and the transaction amount. The merchant discount is generally deducted from the payment to the merchant and recorded as discount revenue at the time the Card Member transaction occurs.
The card acceptance agreements, which include the agreed-upon terms for charging the merchant discount fee, vary in duration. Our contracts with small- and medium-sized merchants generally have no fixed contractual duration, while those with large merchants are generally for fixed periods, which typically range from three to seven years in duration. Our fixed-period agreements may include auto-renewal features, which may allow the existing terms to continue beyond the stated expiration date until a new agreement is reached. We satisfy our obligations under these agreements over the contract term, often on a daily basis, including through the processing of Card Member transactions and the availability of our payment network.
In cases where the merchant acquirer is a third party (which is the case, for example, under our OptBlue program, or with certain of our GNS partners), we receive a network rate fee in our settlement with the merchant acquirer, which is individually negotiated between us and that merchant acquirer and is recorded as discount revenue at the time the Card Member transaction occurs. In our role as the operator of the American Express network, we also settle with merchants on behalf of our GNS card issuing partners, who in turn receive an issuer rate that is individually negotiated between that issuer and us and is recorded as expense in Marketing and business development (see below) or as contra-revenue in Other revenue.
Revenue expected to be recognized in future periods related to contracts that have an original expected duration of one year or less and contracts with variable consideration (e.g. discount revenue) is not required to be disclosed. Non-interest revenue expected to be recognized in future periods through remaining contracts with customers is not material.
Net Card Fees
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 and are therefore more stable in relation to short term business or economic shifts. 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
Other fees and commissions includes certain fees charged to Card Members, including delinquency fees and foreign currency conversion fees, which are primarily recognized in the period in which they are charged to the Card Member. Other fees and commissions also includes Membership Rewards program fees, which are deferred and recognized over the period covered by the fee, typically one year, the unamortized portion of which is included in Other liabilities on the Consolidated Balance Sheets. In addition, Other fees and commissions includes loyalty coalition-related fees, travel commissions and fees and service fees earned from merchants, that are recognized when the service is performed, which is generally in the period the fee is charged. Refer to Note 18 for additional information.
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Contra-revenue
Payments made pursuant to contractual arrangements with our merchants, GNS partners, and other customers are classified as contra-revenue, except where we receive goods, services or other benefits for which the fair value is determinable and measurable, in which case they are recorded as expense.
Interest Income
Interest on Card Member loans is assessed using the average daily balance method. Unless the loan is classified as non-accrual, interest is recognized based upon the principal amount outstanding, in accordance with the terms of the applicable account agreement, until the outstanding balance is paid, or written off.
Interest and dividends on investment securities primarily relate to our performing fixed-income securities. Interest income is recognized as earned using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so that a constant rate of return is recognized on the investment security’s outstanding balance. Amounts are recognized until securities are in default or when it becomes likely that future interest payments will not be made as scheduled.
Interest on deposits with banks and other is recognized as earned, and primarily relates to the placement of cash, in excess of near-term funding requirements, in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call accounts.
Interest Expense
Interest expense includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes and liquidity needs, and is recognized as incurred. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to interest expense on our long-term debt and short-term borrowings, as well as the realized impact of derivatives used to hedge interest rate risk on our long-term debt.
Marketing and Business Development
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 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, cash back and cobrand). Rewards expense is recognized in the period Card Members earn rewards, generally by spending on their enrolled card products. 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. Changes in the Card Member rewards liabilities during the period are taken as an increase or decrease to the Card Member rewards expense in the Consolidated Statements of Income.
BALANCE SHEET
Cash and Cash Equivalents
Cash and cash equivalents include cash and amounts due from banks, interest-bearing bank balances, including securities purchased under resale agreements, restricted cash, and other highly liquid investments with original maturities of 90 days or less. Restricted cash primarily represents amounts related to Card Member credit balances as well as upcoming debt maturities of consolidated VIEs.
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Goodwill
Goodwill represents the excess of the acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. We allocate goodwill to our reporting units for the purpose of impairment testing. A reporting unit is defined as an operating segment, or a business that is one level below an operating segment, for which discrete financial information is regularly reviewed by the operating segment manager.
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. 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. Alternatively, we can perform a more detailed quantitative assessment of goodwill impairment.
This qualitative assessment entails the evaluation of factors such as economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-specific events. 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.
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). When preparing discounted cash flow models under the income approach, we use internal forecasts to estimate future cash flows expected to be generated by the reporting units. 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 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.
For the years ended December 31, 2021 and 2020, we performed a qualitative assessment in connection with our annual goodwill impairment evaluation and determined that it was more likely than not that the fair values of each of our reporting units exceeded their carrying values.
Premises and Equipment
Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation. Costs incurred during construction are capitalized and are depreciated once an asset is placed in service. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 10 years for equipment, furniture and building improvements, and from 40 to 50 years for premises, which are depreciated based upon their estimated useful life at the acquisition date.
Certain costs associated with the acquisition or development of internal-use software are also capitalized and recorded in Premises and equipment. 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.
Leasehold improvements are depreciated using the straight-line method over the lesser of the remaining term of the leased facility, or the economic life of the improvement, and range from 5 to 10 years. We recognize lease restoration obligations at the fair value of the restoration liabilities when incurred and amortize the restoration assets over the lease term.
Leases
We have operating leases worldwide for facilities and equipment, which, for those leases with terms greater than 12 months, are recorded as lease-related assets and liabilities. We do not separate lease and non-lease components. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities, adjusted for prepaid lease payments, initial direct costs and lease incentives. Lease liabilities are recognized at the present value of the contractual fixed lease payments, discounted using our incremental borrowing rate as of the lease commencement date or upon modification of the lease. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.
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OTHER SIGNIFICANT ACCOUNTING POLICIES
The following table identifies our other significant accounting policies, along with the related Note.

Significant Accounting Policy |  | Note Number |  | Note Title
Loans and Card Member Receivables |  | Note 2 |  | Loans and Card Member Receivables
Reserves for Credit Losses |  | Note 3 |  | Reserves for Credit Losses
Investment Securities |  | Note 4 |  | Investment Securities
Asset Securitizations |  | Note 5 |  | Asset Securitizations
Legal Contingencies |  | Note 12 |  | Contingencies and Commitments
Derivative Financial Instruments and Hedging Activities |  | Note 13 |  | Derivatives and Hedging Activities
Fair Value Measurements |  | Note 14 |  | Fair Values
Guarantees |  | Note 15 |  | Guarantees
Income Taxes |  | Note 20 |  | Income Taxes

CLASSIFICATION OF VARIOUS ITEMS
Certain reclassifications of prior period amounts have been made to conform to the current period presentation.
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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.
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NOTE 2
LOANS AND CARD MEMBER RECEIVABLES
Our lending and charge payment card products result in the generation of Card Member loans and Card Member receivables. We also extend credit to consumer and commercial customers through non-card financing products, resulting in Other loans. 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 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. Our policy generally is to cease accruing interest on a Card Member loan at the time the account is written off, and establish reserves for interest that we believe will not be collected.
Other loans are recorded at the time any extension of credit is provided to consumer and commercial customers for non-card financing products. These loans have a range of fixed terms such as interest rates, fees and repayment periods. Borrowers are typically required to make pre-established monthly payments over the term of the loan. Non-card financing products are not associated with a Card Member agreement, and instead are governed by a separate borrowing relationship. Other loans are presented on the Consolidated Balance Sheets net of reserves for credit losses, and include principal and any related accrued interest and fees.
Card Member loans by segment and Other loans as of December 31, 2021 and 2020 consisted of:

(Millions) |  | 2021 |  | 2020
Global Consumer Services Group (a) |  | $ | 70,467 |  |  | $ | 60,084 |
Global Commercial Services |  | 18,095 |  |  | 13,289 |
Card Member loans |  | 88,562 |  |  | 73,373 |
Less: Reserves for credit losses |  | 3,305 |  |  | 5,344 |
Card Member loans, net |  | $ | 85,257 |  |  | $ | 68,029 |
Other loans, net (b) |  | $ | 2,859 |  |  | $ | 2,614 |

(a)Includes approximately $26.6 billion and $25.9 billion of gross Card Member loans available to settle obligations of a consolidated VIE as of December 31, 2021 and 2020, respectively.
(b)Other loans represent consumer and commercial non-card financing products, and Small Business Administration Paycheck Protection Program (PPP) loans. 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.
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CARD MEMBER RECEIVABLES
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. Card Member receivable balances are presented on the Consolidated Balance Sheets net of reserves for credit losses (refer to Note 3), and include principal and any related accrued fees.
Card Member receivables by segment as of December 31, 2021 and 2020 consisted of:

(Millions) |  | 2021 |  | 2020
Global Consumer Services Group |  | $ | 22,392 |  |  | $ | 18,685 |
Global Commercial Services (a) |  | 31,253 |  |  | 25,016 |
Card Member receivables |  | 53,645 |  |  | 43,701 |
Less: Reserves for credit losses |  | 64 |  |  | 267 |
Card Member receivables, net |  | $ | 53,581 |  |  | $ | 43,434 |

(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.
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CARD MEMBER LOANS AND RECEIVABLES AGING
Generally, a Card Member account is considered past due if payment due is not received within 30 days after the billing statement date. The following table presents the aging of Card Member loans and receivables as of December 31, 2021 and 2020:

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

2020 (Millions) |  | Current |  | 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90+ Days Past Due |  | Total
Card Member Loans: |  |  |  |  |  |  |  |  |  |
Global Consumer Services Group |  | $ | 59,442 |  |  | $ | 177 |  |  | $ | 148 |  |  | $ | 317 |  |  | $ | 60,084 |
Global Commercial Services |  |  |  |  |  |  |  |  |  |
Global Small Business Services |  | 13,132 |  |  | 27 |  |  | 20 |  |  | 47 |  |  | 13,226 |
Global Corporate Payments (a) |  | (b) |  | (b) |  | (b) |  | — |  |  | 63 |
Card Member Receivables: |  |  |  |  |  |  |  |  |  |
Global Consumer Services Group |  | 18,570 |  |  | 33 |  |  | 26 |  |  | 56 |  |  | 18,685 |
Global Commercial Services |  |  |  |  |  |  |  |  |  |
Global Small Business Services |  | $ | 14,023 |  |  | $ | 37 |  |  | $ | 21 |  |  | $ | 38 |  |  | $ | 14,119 |
Global Corporate Payments (a) |  | (b) |  | (b) |  | (b) |  | $ | 60 |  |  | $ | 10,897 |

(a)Global Corporate Payments (GCP) reflects global, large and middle market corporate accounts. Delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member loan or receivable balance is classified as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes. See also (b).
(b)Delinquency data for periods other than 90+ days past billing is not available due to system constraints. Therefore, such data has not been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference between the Total and the 90+ Days Past Due balances.
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CREDIT QUALITY INDICATORS FOR CARD MEMBER LOANS AND RECEIVABLES
The following tables present the key credit quality indicators as of or for the years ended December 31:

|  | 2021 |  | 2020
|  | Net Write-Off Rate |  |  |  | Net Write-Off Rate |  |
|  | Principal Only (a) |  | Principal, Interest & Fees (a) |  | 30+ Days Past Due as a % of Total |  | Principal Only (a) |  | Principal, Interest & Fees (a) |  | 30+ Days Past Due as a % of Total
Card Member Loans: |  |  |  |  |  |  |  |  |  |  |  |
Global Consumer Services Group |  | 0.9 | % |  | 1.3 | % |  | 0.7 | % |  | 2.5 | % |  | 3.0 | % |  | 1.1 | %
Global Small Business Services |  | 0.6 | % |  | 0.8 | % |  | 0.5 | % |  | 2.1 | % |  | 2.4 | % |  | 0.7 | %
Card Member Receivables: |  |  |  |  |  |  |  |  |  |  |  |
Global Consumer Services Group |  | 0.3 | % |  | 0.4 | % |  | 0.5 | % |  | 1.7 | % |  | 1.9 | % |  | 0.6 | %
Global Small Business Services |  | 0.3 | % |  | 0.4 | % |  | 0.7 | % |  | 2.1 | % |  | 2.3 | % |  | 0.7 | %
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, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.
(b)Net write-off rate based on principal losses only is not available due to system constraints.
(c)For GCP Card Member receivables, delinquency data is tracked based on days past billing status rather than days past due. Delinquency data for periods other than 90+ days past billing is not available due to system constraints. 90+ days past billing as a % of total was 0.3% and 0.6% 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.
IMPAIRED LOANS AND RECEIVABLES
Impaired loans and receivables are individual larger balance or homogeneous pools of smaller balance loans and receivables for which it is probable that we will be unable to collect all amounts due according to the original contractual terms of the customer agreement. We consider impaired loans and receivables to include (i) loans over 90 days past due still accruing interest, (ii) non-accrual loans and (iii) loans and receivables modified as troubled debt restructurings (TDRs).
In instances where the customer is experiencing financial difficulty, we may modify, through various financial relief programs, loans and receivables with the intention to minimize losses and improve collectability, while providing customers with temporary or permanent financial relief. We have classified loans and receivables in these modification programs as TDRs and continue to classify customer accounts that have exited a modification program as a TDR, with such accounts identified as “Out of Program TDRs.”
Such modifications to the loans and receivables primarily include (i) temporary interest rate reductions (possibly as low as zero percent, in which case the loan is characterized as non-accrual in our TDR disclosures), (ii) placing the customer on a fixed payment plan not to exceed 60 months and (iii) suspending delinquency fees until the customer exits the modification program. Upon entering the modification program, the customer’s ability to make future purchases is either limited, canceled, or in certain cases suspended until the customer successfully exits from the modification program. In accordance with the modification agreement with the customer, loans and/or receivables may revert back to the original contractual terms (including the contractual interest rate where applicable) when the customer exits the modification program, which is (i) when all payments have been made in accordance with the modification agreement or (ii) when the customer defaults out of the modification program.
Reserves for modifications deemed TDRs are measured individually and incorporate a discounted cash flow model. All changes in the impairment measurement are included within provisions for credit losses.
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In response to the COVID-19 pandemic, the United States enacted legislation that provided the option to temporarily suspend (i) certain requirements under U.S. GAAP for loan modifications related to the COVID-19 pandemic that would otherwise be treated as TDRs and (ii) any determination that a loan modified as a result of the COVID-19 pandemic is a TDR (including impairment for accounting purposes). 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 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 and have no remaining balances in the program as of December 31, 2021.
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The following tables provide additional information with respect to our impaired loans and receivables as of December 31, 2021, 2020 and 2019.

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

|  | As of December 31, 2020
|  |  |  |  |  | Accounts Classified as a TDR (c) |  |  |  |
2020 (Millions) |  | Over 90 days Past Due & Accruing Interest (a) |  | Non-Accruals (b) |  | In Program (d) |  | Out of Program(e) |  | Total Impaired Balance |  | Reserve for Credit Losses - TDRs
Card Member Loans: |  |  |  |  |  |  |  |  |  |  |  |
Global Consumer Services Group |  | $ | 203 |  |  | $ | 146 |  |  | $ | 1,586 |  |  | $ | 248 |  |  | $ | 2,183 |  |  | $ | 782 |
Global Commercial Services |  | 21 |  |  | 29 |  |  | 478 |  |  | 67 |  |  | 595 |  |  | 285 |
Card Member Receivables: |  |  |  |  |  |  |  |  |  |  |  |
Global Consumer Services Group |  | — |  |  | — |  |  | 240 |  |  | 34 |  |  | 274 |  |  | 60 |
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 |

|  | As of December 31, 2019
|  |  |  |  |  | Accounts Classified as a TDR (c) |  |  |  |
2019 (Millions) |  | Over 90 days Past Due & Accruing Interest (a) |  | Non-Accruals (b) |  | In Program (d) |  | Out of Program(e) |  | Total Impaired Balance |  | Reserve for Credit Losses - TDRs
Card Member Loans: |  |  |  |  |  |  |  |  |  |  |  |
Global Consumer Services Group |  | $ | 384 |  |  | $ | 284 |  |  | $ | 500 |  |  | $ | 175 |  |  | $ | 1,343 |  |  | $ | 137 |
Global Commercial Services |  | 44 |  |  | 54 |  |  | 97 |  |  | 38 |  |  | 233 |  |  | 22 |
Card Member Receivables: |  |  |  |  |  |  |  |  |  |  |  |
Global Consumer Services Group |  | — |  |  | — |  |  | 56 |  |  | 16 |  |  | 72 |  |  | 3 |
Global Commercial Services |  | — |  |  | — |  |  | 109 |  |  | 30 |  |  | 139 |  |  | 6 |
Total |  | $ | 428 |  |  | $ | 338 |  |  | $ | 762 |  |  | $ | 259 |  |  | $ | 1,787 |  |  | $ | 168 |

(a)Our policy is generally to accrue interest through the date of write-off (typically 180 days past due). We establish reserves for interest that we believe will not be collected. Amounts presented exclude loans classified as a TDR.
(b)Non-accrual loans not in modification programs primarily include certain loans placed with outside collection agencies for which we have ceased accruing interest. Amounts presented exclude loans classified as TDRs.
(c)Accounts classified as a TDR include $41 million, $32 million and $26 million that are over 90 days past due and accruing interest and $19 million, $11 million and $10 million that are non-accruals as of December 31, 2021, 2020 and 2019, respectively.
(d)In Program TDRs include accounts that are currently enrolled in a modification program.
(e)Out of Program TDRs include $1,621 million, $316 million and $188 million of accounts that have successfully completed a modification program and $143 million, $114 million and $72 million of accounts that were not in compliance with the terms of the modification programs as of December 31, 2021, 2020 and 2019, respectively.
(f)Other loans primarily represent consumer and commercial non-card financing products. Balances as of December 31, 2019 were not significant.
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LOANS AND RECEIVABLES MODIFIED AS TDRs
The following tables provide additional information with respect to loans and receivables that were modified as TDRs during the years ended December 31:

2021 |  | Number of Accounts (thousands) |  | Account Balances (millions) (a) |  | Average Interest Rate Reduction (% points) |  | Average Payment Term Extensions (# of months)
Troubled Debt Restructurings: |  |  |  |  |  |  |  |
Card Member Loans |  | 112 |  |  | $ | 789 |  |  | 13 |  |  | (b)
Card Member Receivables |  | 21 |  |  | 437 |  |  | (c) |  | 18
Other Loans (d) |  | 4 |  |  | $ | 13 |  |  | 3 |  |  | 16
Total |  | 137 |  |  | $ | 1,239 |  |  |  |  |

2020 |  | Number of Accounts (thousands) |  | Account Balances (millions) (a) |  | Average Interest Rate Reduction (% points) |  | Average Payment Term Extensions (# of months)
Troubled Debt Restructurings: |  |  |  |  |  |  |  |
Card Member Loans |  | 272 |  |  | $ | 2,347 |  |  | 14 |  |  | (b)
Card Member Receivables |  | 47 |  |  | 1,202 |  |  | (c) |  | 19
Other Loans (d) |  | 9 |  |  | $ | 345 |  |  | 3 |  |  | 16
Total |  | 328 |  |  | $ | 3,894 |  |  |  |  |

2019 |  | Number of Accounts (thousands) |  | Account Balances (millions) (a) |  | Average Interest Rate Reduction (% points) |  | Average Payment Term Extensions (# of months)
Troubled Debt Restructurings: |  |  |  |  |  |  |  |
Card Member Loans |  | 78 |  |  | $ | 602 |  |  | 13 |  |  | (b)
Card Member Receivables |  | 9 |  |  | 210 |  |  | (c) |  | 26
Total |  | 87 |  |  | $ | 812 |  |  |  |  |

(a)Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and accrued interest on loans and principal and fees on receivables. Modifications did not reduce the principal balance.
(b)For Card Member loans, there have been no payment term extensions.
(c)We do not offer interest rate reduction programs for Card Member receivables as the receivables are non-interest bearing.
(d)Other loans primarily represent consumer and commercial non-card financing products. Balances for the year ended December 31, 2019 were not significant.
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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.

2021 |  | Number of Accounts (thousands) |  | Aggregated Outstanding Balances Upon Default (millions) (a)
Troubled Debt Restructurings That Subsequently Defaulted: |  |  |  |
Card Member Loans |  | 24 |  |  | $ | 174 |
Card Member Receivables |  | 5 |  |  | 56 |
Other Loans (b) |  | 3 |  |  | 9 |
Total |  | 32 |  |  | $ | 239 |

2020 |  | Number of Accounts (thousands) |  | Aggregated Outstanding Balances Upon Default (millions) (a)
Troubled Debt Restructurings That Subsequently Defaulted: |  |  |  |
Card Member Loans |  | 17 |  |  | $ | 127 |
Card Member Receivables |  | 3 |  |  | 55 |
Other Loans (b) |  | 3 |  |  | 6 |
Total |  | 23 |  |  | $ | 188 |

2019 |  | Number of Accounts (thousands) |  | Aggregated Outstanding Balances Upon Default (millions) (a)
Troubled Debt Restructurings That Subsequently Defaulted: |  |  |  |
Card Member Loans |  | 12 |  |  | $ | 86 |
Card Member Receivables |  | 4 |  |  | 20 |
Total |  | 16 |  |  | $ | 106 |

(a)The outstanding balances upon default include principal, fees and accrued interest on loans, and principal and fees on receivables.
(b)Other loans primarily represent consumer and commercial non-card financing products. Balances for the year ended December 31, 2019 were not significant.
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NOTE 3
RESERVES FOR CREDIT LOSSES
Reserves for credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period), which is approximately three years, beyond the balance sheet date. We make various judgments combined with historical loss experience to determine a reserve rate that is applied to the outstanding loan or receivable balance to produce a reserve for expected credit losses.
We use a combination of statistically-based models that incorporate current and future economic conditions throughout the R&S Period. The process of estimating expected credit losses is based on several key models: Probability of Default (PD), Exposure at Default (EAD), and future recoveries for each month of the R&S Period. Beyond the R&S Period, we estimate expected credit losses by immediately reverting to long-term average loss rates.
•PD models are used to estimate the likelihood an account will be written-off.
•EAD models are used to estimate the balance of an account at the time of write-off. This includes balances less expected repayments based on historical payment and revolve behavior, which vary by customer. Due to the nature of revolving loan portfolios, the EAD models are complex and involve assumptions regarding the relationship between future spend and payment behaviors.
•Recovery models are used to estimate amounts that are expected to be received from Card Members after default occurs, typically as a result of collection efforts. Future recoveries are estimated taking into consideration the time of default, time elapsed since default and macroeconomic conditions.
We also estimate the likelihood and magnitude of recovery of previously written off accounts considering how long ago the account was written off and future economic conditions, even if such expected recoveries exceed expected losses. Our models are developed using historical loss experience covering the economic cycle and consider the impact of account characteristics on expected losses.
Future economic conditions that are incorporated over the R&S Period include multiple macroeconomic scenarios provided to us by an independent third party. Management reviews these economic scenarios each period and applies judgment to weight them in order to reflect the uncertainty surrounding these scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real gross domestic product (GDP), that are significant to our models.
We also evaluate whether to include qualitative reserves to cover losses that are expected but, in our assessment, may not be adequately represented in the quantitative methods or the economic assumptions. We consider whether to adjust the quantitative reserves (higher or lower) to address possible limitations within the models or factors not included within the models, such as external conditions, emerging portfolio trends, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due accounts, or management risk actions.
Lifetime losses for most of our loans and receivables are evaluated at an appropriate level of granularity, including assessment on a pooled basis where financial assets share similar risk characteristics, such as past spend and remittance behaviors, credit bureau scores where available, delinquency status, tenure of balance outstanding, amongst others. Credit losses on accrued interest are measured and presented as part of Reserves for credit losses on the Consolidated Balance Sheets and within the Provisions for credit losses in the Consolidated Statements of Income, rather than reversing interest income. Separate models are used for accounts deemed a troubled debt restructuring, which are measured individually and incorporate a discounted cash flow model. See Note 2 for information on troubled debt restructurings.
Loans and receivable balances are written off when we consider amounts to be uncollectible, which is generally determined by the number of days past due and is typically no later than 180 days past due for pay in full or revolving loans and 120 days past due for term loans. Loans and receivables in bankruptcy or owed by deceased individuals are generally written off upon notification.
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. The models considered several factors, including delinquency-based loss migration rates, loss emergence periods and average losses and recoveries over an appropriate historical period. 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.
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The following table reflects the range of macroeconomic scenario key variables used, in conjunction with other inputs, to calculate reserves for credit losses:

|  | U.S. Unemployment Rate |  | U.S. GDP Growth (Contraction) (a)
|  | December 31, 2021 |  |  | December 31, 2020 |  | December 31, 2021 |  |  |  | December 31, 2020
Fourth quarter of 2021 |  | 5% |  |  |  | 7% - 11% |  | 7% |  |  |  | 6% -(2)%
First quarter of 2022 |  | 4% - 7% |  |  |  | 7% - 11% |  | 6% - (4)% |  |  |  | 5% - (2)%
Fourth quarter of 2022 |  | 4% - 9% |  |  |  | 6% - 12% |  | 2% - 1% |  |  |  | 4% - 3%
Fourth quarter of 2023 |  | 3% - 7% |  |  |  | 4% - 10% |  | 4% - 3% |  |  |  | 5% -3%

(a)Real GDP quarter over quarter percentage change seasonally adjusted to annualized rates.
CHANGES IN CARD MEMBER LOANS RESERVE FOR CREDIT LOSSES
Card Member loans reserve for credit losses decreased for the 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:

(Millions) |  | 2021 |  | 2020 |  | 2019
Beginning Balance(a) |  | $ | 5,344 |  |  | $ | 4,027 |  |  | $ | 2,134 |
Provisions(b) |  | (1,155) |  |  | 3,453 |  |  | 2,462 |
Net write-offs (c) |  |  |  |  |  |
Principal |  | (672) |  |  | (1,795) |  |  | (1,860) |
Interest and fees |  | (207) |  |  | (375) |  |  | (375) |
Other(d) |  | (5) |  |  | 34 |  |  | 22 |
Ending Balance |  | $ | 3,305 |  |  | $ | 5,344 |  |  | $ | 2,383 |

(a)For the year ended December 31, 2020, beginning balance includes an increase of $1,643 million as of January 1, 2020, related to the adoption of the CECL methodology.
(b)Provisions for principal, interest and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs.
(c)Principal write-offs are presented less recoveries of $657 million, $568 million and $525 million for the years ended December 31, 2021, 2020 and 2019, respectively. Recoveries of interest and fees were not significant. Amounts include net (write-offs) recoveries from TDRs of $(171) million, $(134) million and $(79) million for the years ended December 31, 2021, 2020 and 2019, respectively.
(d)Primarily includes foreign currency translation adjustments of $(6) million, $35 million and $4 million for the years ended December 31, 2021, 2020 and 2019, respectively.
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CHANGES IN CARD MEMBER RECEIVABLES RESERVE FOR CREDIT LOSSES
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:

(Millions) |  | 2021 |  | 2020 |  | 2019
Beginning Balance (a) |  | $ | 267 |  |  | $ | 126 |  |  | $ | 573 |
Provisions (b) |  | (73) |  |  | 1,015 |  |  | 963 |
Net write-offs (c) |  | (129) |  |  | (881) |  |  | (900) |
Other (d) |  | (1) |  |  | 7 |  |  | (17) |
Ending Balance |  | $ | 64 |  |  | $ | 267 |  |  | $ | 619 |

(a)For the year ended December 31, 2020, beginning balance includes a decrease of $493 million as of January 1, 2020, related to the adoption of the CECL methodology.
(b)Provisions for principal and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs.
(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 $(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.
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NOTE 4
INVESTMENT SECURITIES
Investment securities principally include available-for-sale debt securities carried at fair value on the Consolidated Balance Sheets. 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 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. We had accrued interest on our available-for-sale debt securities totaling $12 million and $26 million, as of December 31, 2021 and 2020, respectively, presented as Other assets on the Consolidated Balance Sheets.
Investment securities also include equity securities carried at fair value on the Consolidated Balance Sheets with unrealized gains and losses recorded in the Consolidated Statements of Income as Other, net expense.
Realized gains and losses are recognized upon disposition of the securities using the specific identification method and recorded in the Consolidated Statements of Income as Other, net expense.
Refer to Note 14 for a description of our methodology for determining the fair value of investment securities.
The following is a summary of investment securities as of December 31:

|  | 2021 |  | 2020
Description of Securities (Millions) |  | Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State and municipal obligations |  | $ | 106 |  |  | $ | 5 |  |  | $ | — |  |  | $ | 111 |  |  | $ | 172 |  |  | $ | 7 |  |  | $ | — |  |  | $ | 179 |
U.S. Government agency obligations |  | 6 |  |  | — |  |  | — |  |  | 6 |  |  | 7 |  |  | — |  |  | — |  |  | 7 |
U.S. Government treasury obligations |  | 1,680 |  |  | 25 |  |  | (1) |  |  | 1,704 |  |  | 20,655 |  |  | 76 |  |  | — |  |  | 20,731 |
Mortgage-backed securities (a) |  | 17 |  |  | 1 |  |  | — |  |  | 18 |  |  | 28 |  |  | 2 |  |  | — |  |  | 30 |
Foreign government bonds and obligations |  | 630 |  |  | — |  |  | — |  |  | 630 |  |  | 581 |  |  | — |  |  | — |  |  | 581 |
Other (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)Represents investments in Corporate debt securities and debt securities issued by Community Development Financial Institutions.
(c)Equity securities comprise investments in common stock, exchange-traded funds and mutual funds.
The following table provides information about our available-for-sale debt securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2021. There were no available-for-sale debt securities with gross unrealized losses as of December 31, 2020.

|  | 2021 |  |
|  | Less than 12 months |  | 12 months or more |  |  |  |
Description of Securities (Millions) |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses |  |  |  |  |  |  |  |
U.S. Government treasury obligations |  | 477 |  |  | (1) |  |  | — |  |  | — |  |  |  |  |  |  |  |  |
Total |  | $ | 477 |  |  | $ | (1) |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  |  |  |

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The following table summarizes the gross unrealized losses by ratio of fair value to amortized cost as of December 31, 2021. There were no available-for-sale debt securities with gross unrealized losses as of December 31, 2020.

|  | Less than 12 months |  | 12 months or more |  | Total
Ratio of Fair Value to Amortized Cost (Dollars in millions) |  | Number of Securities |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Number of Securities |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Number of Securities |  | Estimated Fair Value |  | Gross Unrealized Losses
2021: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
90%–100% |  | 5 |  | $ | 477 |  |  | $ | (1) |  |  | — |  | $ | — |  |  | $ | — |  |  | 5 |  | $ | 477 |  |  | $ | (1) |
Total as of December 31, 2021 |  | 5 |  | $ | 477 |  |  | $ | (1) |  |  | — |  | $ | — |  |  | $ | — |  |  | 5 |  | $ | 477 |  |  | $ | (1) |

Weighted average yields and contractual maturities for investment securities with stated maturities as of December 31, 2021 were as follows:

(Millions) |  | Due within 1 year |  | Due after 1 year but within 5 years |  | Due after 5 years but within 10 years |  | Due after 10 years |  | Total
State and municipal obligations (a) |  | $ | 6 |  |  | $ | 5 |  |  | $ | 30 |  |  | $ | 70 |  |  | $ | 111 |
U.S. Government agency obligations (a) |  | — |  |  | — |  |  | — |  |  | 6 |  |  | 6 |
U.S. Government treasury obligations |  | 832 |  |  | 862 |  |  | 10 |  |  | — |  |  | 1,704 |
Mortgage-backed securities (a)(b) |  | — |  |  | — |  |  | — |  |  | 18 |  |  | 18 |
Foreign government bonds and obligations |  | 628 |  |  | 1 |  |  | 1 |  |  | — |  |  | 630 |
Other (c) |  | 11 |  |  | 32 |  |  | — |  |  | — |  |  | 43 |
Total Estimated Fair Value |  | $ | 1,477 |  |  | $ | 900 |  |  | $ | 41 |  |  | $ | 94 |  |  | $ | 2,512 |
Total Cost |  | $ | 1,476 |  |  | $ | 879 |  |  | $ | 35 |  |  | $ | 92 |  |  | $ | 2,482 |
Weighted average yields (d) |  | 1.74 | % |  | 2.42 | % |  | 5.46 | % |  | 3.10 | % |  | 2.08 | %

(a)The expected payments on state and municipal obligations, U.S. Government agency obligations and mortgage-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.
(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. federal statutory tax rate of 21 percent.
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NOTE 5
ASSET SECURITIZATIONS
We periodically securitize Card Member loans and receivables arising from our card businesses through the transfer of those assets to securitization trusts, American Express Credit Account Master Trust (the Lending Trust) and American Express Issuance Trust II (the Charge Trust and together with the Lending Trust, the Trusts). The Trusts then issue debt securities collateralized by the transferred assets to third-party investors.
The Trusts are considered VIEs as they have insufficient equity at risk to finance their activities, which are to issue debt securities that are collateralized by the underlying Card Member loans and receivables. Refer to Note 1 for further details on the principles of consolidation. We perform the servicing and key decision making for the Trusts, and therefore have the power to direct the activities that most significantly impact the Trusts’ economic performance, which are the collection of the underlying Card Member loans and receivables. In addition, we hold all of the variable interests in both Trusts, with the exception of the debt securities issued to third-party investors. As of December 31, 2021 and 2020, our ownership of variable interests was $15.0 billion and $13.4 billion, respectively, for the Lending Trust and $3.2 billion and $4.3 billion, respectively, for the Charge Trust. These variable interests held by us provide us with the right to receive benefits and the obligation to absorb losses, which could be significant to both the Lending Trust and the Charge Trust. Based on these considerations, we are the primary beneficiary of the Trusts and therefore consolidate the Trusts.
The debt securities issued by the Trusts are non-recourse to us. The securitized Card Member loans and receivables held by the Lending Trust and the Charge Trust, respectively, are available only for payment of the debt securities or other obligations issued or arising in the securitization transactions (refer to Note 2). 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 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.
Under the respective terms of the Lending Trust and the Charge Trust agreements, the occurrence of certain triggering events associated with the performance of the assets of each Trust could result in payment of trust expenses, establishment of reserve funds, or, in a worst-case scenario, early amortization of debt securities. During the years ended December 31, 2021 and 2020, no such triggering events occurred.
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NOTE 6
OTHER ASSETS
The following is a summary of Other assets as of December 31:

(Millions) |  | 2021 |  | 2020
Goodwill |  | $ | 3,804 |  |  | $ | 3,852 |
Other intangible assets, at amortized cost |  | 201 |  |  | 265 |
Other (a) |  | 13,239 |  |  | 13,562 |
Total |  | $ | 17,244 |  |  | $ | 17,679 |

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

(Millions) |  | GCSG |  | GCS |  | GMNS |  | Total
Balance as of December 31, 2019 |  | $ | 1,026 |  |  | $ | 1,781 |  |  | $ | 508 |  |  | $ | 3,315 |
Acquisitions |  | — |  |  | 442 |  |  | 52 |  |  | 494 |
Dispositions |  | — |  |  | — |  |  | — |  |  | — |
Other (a) |  | 32 |  |  | 11 |  |  | — |  |  | 43 |
Balance as of December 31, 2020 |  | $ | 1,058 |  |  | $ | 2,234 |  |  | $ | 560 |  |  | $ | 3,852 |
Acquisitions |  | — |  |  | — |  |  | — |  |  | — |
Dispositions |  | (3) |  |  | — |  |  | — |  |  | (3) |
Other (a) |  | (37) |  |  | (8) |  |  | — |  |  | (45) |
Balance as of December 31, 2021 |  | $ | 1,018 |  |  | $ | 2,226 |  |  | $ | 560 |  |  | $ | 3,804 |

(a)Primarily includes foreign currency translation.
Accumulated impairment losses were $221 million as of both December 31, 2021 and 2020.
OTHER INTANGIBLE ASSETS
Intangible assets are amortized on a straight-line basis over their estimated useful lives of 1 to 22 years. We review long-lived assets and asset groups, including intangible assets, for impairment whenever events and circumstances indicate their carrying amounts may not be recoverable. An impairment is recognized if the carrying amount is not recoverable and exceeds the asset or asset group’s fair value.
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 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.
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TAX CREDIT INVESTMENTS
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. Included in QAH investments as of December 31, 2021 and 2020, we had $994 million and $1,028 million, respectively, related to investments in unconsolidated VIEs for which we do not have a controlling financial interest.
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, 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.
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NOTE 7
CUSTOMER DEPOSITS
As of December 31, customer deposits were categorized as interest-bearing or non-interest-bearing as follows:

(Millions) |  | 2021 |  | 2020
U.S.: |  |  |  |
Interest-bearing |  | $ | 83,304 |  |  | $ | 85,583 |
Non-interest-bearing (includes Card Member credit balances of: 2021, $527; 2020, $576) |  | 553 |  |  | 599 |
Non-U.S.: |  |  |  |
Interest-bearing |  | 18 |  |  | 19 |
Non-interest-bearing (includes Card Member credit balances of: 2021, $503; 2020, $671) |  | 507 |  |  | 674 |
Total customer deposits |  | $ | 84,382 |  |  | $ | 86,875 |

Customer deposits by deposit type as of December 31 were as follows:

(Millions) |  | 2021 |  | 2020
Savings and transaction accounts |  | $ | 66,142 |  |  | $ | 63,512 |
Certificates of deposit: |  |  |  |
Direct |  | 1,415 |  |  | 2,440 |
Third-party (brokered) |  | 3,095 |  |  | 5,561 |
Sweep accounts ―Third-party (brokered) |  | 12,658 |  |  | 14,070 |
Other deposits |  | 42 |  |  | 45 |
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) |  |  |  |  |  | Total
2022 |  |  |  |  |  | $ | 3,216 |
2023 |  |  |  |  |  | 777 |
2024 |  |  |  |  |  | 287 |
2025 |  |  |  |  |  | 211 |
2026 |  |  |  |  |  | 19 |
After 5 years |  |  |  |  |  | — |
Total |  |  |  |  |  | $ | 4,510 |

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

(Millions) |  | 2021 |  | 2020
U.S. |  | $ | 521 |  |  | $ | 930 |
Non-U.S. |  | 1 |  |  | 1 |
Total |  | $ | 522 |  |  | $ | 931 |

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NOTE 8
DEBT
SHORT-TERM BORROWINGS
Our short-term borrowings outstanding, defined as borrowings with original contractual maturity dates of less than one year, as of December 31 were as follows:

|  | 2021 |  | 2020
(Millions, except percentages) |  | Outstanding Balance |  | Year-End Stated Interest Rate on Debt (a) |  | Outstanding Balance |  | Year-End Stated Interest Rate on Debt (a)
Commercial paper (b) |  | $ | — |  |  | — | % |  | $ | — |  |  | — | %
Other short-term borrowings (c) |  | 2,243 |  |  | 0.58 |  |  | 1,878 |  |  | 0.61 |
Total |  | $ | 2,243 |  |  | 0.58 | % |  | $ | 1,878 |  |  | 0.61 | %

(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 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 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, 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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LONG-TERM DEBT
Our long-term debt outstanding, defined as debt with original contractual maturity dates of one year or greater, as of December 31 was as follows:

|  | 2021 |  | 2020
(Millions, except percentages) |  | Original Contractual Maturity Dates |  | Outstanding Balance(a) |  | Year-End Interest Rate on Debt(b) |  | Year-End Interest Rate with Swaps(b)(c) |  | Outstanding Balance(a) |  | Year-End Interest Rate on Debt(b) |  | Year-End Interest Rate with Swaps(b)(c)
American Express Company (Parent Company only) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed Rate Senior Notes |  | 2022 - 2042 |  | $ | 18,324 |  |  | 3.02 | % |  | 2.03 | % |  | $ | 18,251 |  |  | 3.25 | % |  | 2.09 | %
Floating Rate Senior Notes |  | 2022 - 2026 |  | 3,300 |  |  | 0.69 |  |  | — |  |  | 4,000 |  |  | 0.84 |  |  | — |
Fixed Rate Subordinated Notes |  | 2024 |  | 599 |  |  | 3.63 |  |  | 1.38 |  |  | 599 |  |  | 3.63 |  |  | 1.43 |
American Express Credit Corporation |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed Rate Senior Notes |  | 2022 - 2027 |  | 2,078 |  |  | 2.80 |  |  | 1.32 |  |  | 6,746 |  |  | 2.38 |  |  | 1.67 |
Floating Rate Senior Notes |  | 2022 |  | 300 |  |  | 0.87 |  |  | — |  |  | 300 |  |  | 0.93 |  |  | — |
Lending Trust |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed Rate Senior Notes |  | 2022 - 2024 |  | 8,199 |  |  | 2.01 |  |  | 1.82 |  |  | 8,325 |  |  | 2.74 |  |  | 2.55 |
Floating Rate Senior Notes |  | 2022 - 2023 |  | 3,325 |  |  | 0.49 |  |  | — |  |  | 4,125 |  |  | 0.51 |  |  | — |
Fixed Rate Subordinated Notes |  | 2022 |  | 212 |  |  | 2.72 |  |  | — |  |  | 246 |  |  | 2.80 |  |  | — |
Floating Rate Subordinated Notes |  | 2022 - 2023 |  | 79 |  |  | 0.68 |  |  | — |  |  | 79 |  |  | 0.73 |  |  | — |
Charge Trust |  |  |  |  |  |  |  |  |  |  |  |  |  |
Floating Rate Conduit Borrowings |  | 2024 |  | 2,000 |  |  | 0.40 |  |  | — |  |  | — |  |  | — |  |  | — |
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |
Finance Leases |  | 2024 - 2033 |  | 14 |  |  | 5.49 |  |  | — |  |  | 17 |  |  | 5.54 |  |  | — |
Floating Rate Borrowings |  | 2022 - 2024 |  | 297 |  |  | 0.42 |  |  | — | % |  | 328 |  |  | 0.42 |  |  | — | %
Unamortized Underwriting Fees |  |  |  | (52) |  |  |  |  |  |  | (64) |  |  |  |  |
Total Long-Term Debt |  |  |  | $ | 38,675 |  |  | 2.22 | % |  |  |  | $ | 42,952 |  |  | 2.49 | % |  |

(a)The outstanding balances include (i) unamortized discount, (ii) the impact of movements in exchange rates on foreign currency denominated debt and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate through the use of interest rate swaps. Refer to Note 13 for more details on our treatment of fair value hedges.
(b)For floating-rate issuances, the stated interest rate on debt is weighted based on the outstanding principal balances and interest rates in effect as of December 31, 2021 and 2020.
(c)Interest rates with swaps are only presented when swaps are in place to hedge the underlying debt. The interest rates with swaps are weighted based on the outstanding principal balances and the interest rates on the floating leg of the swaps in effect as of December 31, 2021 and 2020.
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Aggregate annual maturities on long-term debt obligations (based on contractual maturity or anticipated redemption dates) as of December 31, 2021 were as follows:

(Millions) |  | 2022 |  | 2023 |  | 2024 |  | 2025 |  | 2026 |  | Thereafter |  | Total
American Express Company (Parent Company only) |  | $ | 5,675 |  |  | $ | 5,750 |  |  | $ | 5,000 |  |  | $ | 750 |  |  | $ | 2,450 |  |  | $ | 2,933 |  |  | $ | 22,558 |
American Express Credit Corporation |  | 2,050 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 339 |  |  | 2,389 |
Lending Trust |  | 6,381 |  |  | 2,685 |  |  | 2,750 |  |  | — |  |  | — |  |  | — |  |  | 11,816 |
Charge Trust |  | — |  |  | — |  |  | 2,000 |  |  | — |  |  | — |  |  | — |  |  | 2,000 |
Other |  | 77 |  |  | 88 |  |  | 136 |  |  | — |  |  | — |  |  | 10 |  |  | 311 |
|  | $ | 14,183 |  |  | $ | 8,523 |  |  | $ | 9,886 |  |  | $ | 750 |  |  | $ | 2,450 |  |  | $ | 3,282 |  |  | $ | 39,074 |
Unamortized Underwriting Fees |  |  |  |  |  |  |  |  |  |  |  |  |  | (52) |
Unamortized Discount and Premium |  |  |  |  |  |  |  |  |  |  |  |  |  | (584) |
Impacts due to Fair Value Hedge Accounting |  |  |  |  |  |  |  |  |  |  |  |  |  | 237 |
Total Long-Term Debt |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 38,675 |

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. 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. 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. These committed facilities do not contain material adverse change clauses, which might otherwise preclude borrowing under the credit facilities, nor are they dependent on our credit rating.
We paid total interest, primarily related to short- and long-term debt, corresponding interest rate swaps and customer deposits, of $1.1 billion, $2.0 billion and $3.4 billion in 2021, 2020 and 2019, respectively.
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NOTE 9
OTHER LIABILITIES
The following is a summary of Other liabilities as of December 31:

(Millions) |  | 2021 |  | 2020
Membership Rewards liability |  | $ | 11,398 |  |  | $ | 9,750 |
Employee-related liabilities (a) |  | 2,528 |  |  | 2,336 |
Deferred card and other fees, net |  | 2,516 |  |  | 2,282 |
Card Member rebate and reward accruals (b) |  | 1,809 |  |  | 1,367 |
Income tax liability (c) |  | 1,576 |  |  | 943 |
Other (d) |  | 10,670 |  |  | 10,556 |
Total |  | $ | 30,497 |  |  | $ | 27,234 |

(a)Includes employee benefit plan obligations and incentive compensation.
(b)Card Member rebate and reward accruals include payments to third-party reward partners and cash-back rewards.
(c)Includes repatriation tax liability of $1,012 million as of both December 31, 2021 and 2020, which represents our remaining obligation under the Tax Cuts and Jobs Act enacted on December 22, 2017 (Tax Act) to pay a one-time transition tax on unrepatriated earnings and profits of certain foreign subsidiaries, the net position for current federal, state and non-U.S. income tax liabilities, and deferred tax liabilities for foreign jurisdictions.
(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
The Membership Rewards program allows enrolled Card Members to earn points that can be redeemed for a broad variety of rewards including travel, shopping, gift cards, and covering eligible charges. We record a Membership Rewards liability that represents management’s best estimate of the cost of points earned that are expected to be redeemed by Card Members in the future. The weighted average cost (WAC) per point and the Ultimate Redemption Rate (URR) are key assumptions used to estimate the liability. We use 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 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 expense for Membership Rewards points is included in Card Member rewards expense. We periodically evaluate our liability estimation process and assumptions based on developments in redemption patterns, cost per point redeemed, partner contract changes and other factors.
DEFERRED CARD AND OTHER FEES, NET
The carrying amount of deferred card and other fees, net of deferred direct acquisition costs and reserves for membership cancellations, as of December 31, 2021 was as follows:

(Millions) |  | 2021 |  | 2020
Deferred card and other fees (a) |  | $ | 2,838 |  |  | $ | 2,639 |
Deferred direct acquisition costs |  | (169) |  |  | (166) |
Reserves for membership cancellations |  | (153) |  |  | (191) |
Deferred card and other fees, net |  | $ | 2,516 |  |  | $ | 2,282 |

(a)Includes deferred fees for Membership Rewards program participants.
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NOTE 10
STOCK PLANS
STOCK OPTION AND AWARD PROGRAMS
Under our 2016 Incentive Compensation Plan (amended and restated effective May 5, 2020) and previously under our 2007 Incentive Compensation Plan (collectively, Incentive Compensation Plans), awards may be granted to employees and other key individuals who perform services for us and our participating subsidiaries. These awards may be in the form of stock options, restricted stock units or awards (collectively referred to as RSUs), portfolio grants (PGs) or other incentives or similar awards designed to meet the requirements of non-U.S. jurisdictions.
For our Incentive Compensation Plans, there were a total of 12 million, 14 million and 9 million common shares unissued and available for grant as of December 31, 2021, 2020 and 2019, respectively, as authorized by our Board of Directors and shareholders. We generally issue new common shares upon exercise of options and vesting of RSUs.
Stock-based compensation expense recognized in Salaries and employee benefits in the Consolidated Statements of Income was $326 million, $247 million and $280 million in 2021, 2020 and 2019, respectively, with corresponding income tax benefits of $78 million, $59 million and $67 million in those respective periods.
A summary of stock option and RSU activity as of December 31, 2021, and corresponding changes during the year, are as follows:

|  | Stock Options |  | Service-Based RSUs |  | Service and Performance-Based RSUs
(Shares in thousands) |  | Shares |  | Weighted-Average Exercise Price |  | Shares |  | Weighted- Average Grant Price |  | Shares |  | Weighted- Average Grant Price
Outstanding as of December 31, 2020 |  | 3,751 |  |  | $ | 83.59 |  |  | 2,078 |  |  | $ | 109.23 |  |  | 3,146 |  |  | $ | 103.08 |
Granted |  | 345 |  |  | 117.52 |  |  | 889 |  |  | 120.91 |  |  | 1,787 |  |  | 125.02 |
Exercised/vested |  | (992) |  |  | 64.96 |  |  | (842) |  |  | 102.05 |  |  | (951) |  |  | 98.56 |
Forfeited |  | — |  |  | — |  |  | (250) |  |  | 113.99 |  |  | (241) |  |  | 110.72 |
Expired |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Outstanding as of December 31, 2021 |  | 3,104 |  |  | 93.33 |  |  | 1,875 |  |  | $ | 117.36 |  |  | 3,741 |  |  | $ | 114.22 |
Options vested and expected to vest as of December 31, 2021 |  | 3,104 |  |  | 93.33 |  |  |  |  |  |  |  |  |
Options exercisable as of December 31, 2021 |  | 1,976 |  |  | $ | 79.42 |  |  |  |  |  |  |  |  |

Stock-based compensation expense is generally recognized ratably based on the grant-date fair value of the awards, net of expected forfeitures, over the vesting period. The vesting period is the shorter of the vesting schedule as defined in each award agreement or the date an individual will become eligible to retire. Retirement eligibility is dependent upon age and/or years of service.
STOCK OPTIONS
Each stock option has an exercise price equal to the market price of our common stock on the date of grant. Stock options generally vest on the third anniversary of the grant date and have a contractual term of 10 years from the date of grant.
The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of our stock price exceeds the exercise price of the option) of the stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2021, were as follows:

|  | Outstanding |  | Exercisable |  | Vested and Expected to Vest
Weighted-average remaining contractual life (in years) |  | 5.3 |  | 3.8 |  | 5.3
Aggregate intrinsic value (millions) |  | $ | 218 |  |  | $ | 166 |  |  | $ | 218 |

As of December 31, 2021, there was $4 million of total unrecognized compensation cost related to unvested options, which will be recognized ratably over the weighted-average remaining vesting period of 1.3 years.
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The fair value of each option is estimated on the date of grant using a Black-Scholes-Merton option-pricing model. The following weighted-average assumptions were used for options granted in 2021, 2020 and 2019:

|  | 2021 |  | 2020 |  | 2019
Dividend yield |  | 1.5 | % |  | 1.4 | % |  | 1.5 | %
Expected volatility(a) |  | 31 | % |  | 20 | % |  | 24 | %
Risk-free interest rate |  | 0.8 | % |  | 1.6 | % |  | 2.6 | %
Expected life of stock option (in years)(b) |  | 7.2 |  | 7.1 |  | 7.1
Weighted-average fair value per option |  | $ | 32.38 |  |  | $ | 25.83 |  |  | $ | 23.38 |

(a)The expected volatility is based on both weighted historical and implied volatilities of our common stock price.
(b)The expected life of stock options was determined using both historical data and expectations of option exercise behavior.
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 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.
RESTRICTED STOCK UNITS/AWARDS
We grant RSUs that contain either a) service conditions or b) both service and performance conditions. RSUs containing only service conditions generally vest 25 percent per year beginning with the first anniversary of the grant date. RSUs containing both service and performance conditions generally vest on the third anniversary of the grant date, and the number of shares earned depends on the achievement of predetermined Company metrics. All RSU holders receive non-forfeitable dividends or dividend equivalents.
Beginning in 2019, a relative total shareholder return (r-TSR) modifier was added to the performance-based RSUs, so that our actual shareholder return relative to a competitive peer group is one of the performance conditions that determines the number of shares ultimately granted upon vesting.
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 in 2021, 2020 and 2019:

|  | 2021 |  | 2020 |  | 2019
Expected volatility(a) |  | 41 | % |  | 19 | % |  | 20 | %
Risk-free interest rate |  | 0.2 | % |  | 1.4 | % |  | 2.5 | %
Remaining performance period (in years) |  | 2.9 |  | 2.9 |  | 2.9

(a)The expected volatility is based on historical volatility of our common stock price.
As of December 31, 2021, there was $256 million of total unrecognized compensation cost related to non-vested RSUs, which will be recognized ratably over the weighted-average remaining vesting period of 1.9 years.
The weighted-average grant date fair value of RSUs granted in 2021, 2020 and 2019 was $123.66, $124.47 and $96.24, respectively.
For RSUs vested during 2021, 2020 and 2019, the total fair value, based upon our stock price at the date the RSUs vested, was $227 million, $291 million and $286 million, respectively.
LIABILITY-BASED AWARDS
In 2018, certain employees were awarded PGs and other incentive awards that can be settled with cash or equity shares at our discretion and final Compensation and Benefits Committee payout approval; beginning in 2019, we discontinued granting PGs. These awards earn value based on performance, market and/or service conditions, and vest over a period of three years.
PGs and other incentive awards are generally settled with cash and thus are classified as liabilities; therefore, the fair value is determined at the date of grant and remeasured quarterly as part of compensation expense over the vesting period. Cash paid upon vesting of these awards in 2021, 2020 and 2019 was $53 million, $81 million and $81 million, respectively.
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NOTE 11
RETIREMENT PLANS
DEFINED CONTRIBUTION RETIREMENT PLANS
We sponsor defined contribution retirement plans, the principal plan being the Retirement Savings Plan (RSP), a 401(k) savings plan with a profit-sharing component. The RSP is a tax-qualified retirement plan subject to the Employee Retirement Income Security Act of 1974 and covers most employees in the United States. The total expense for all defined contribution retirement plans globally was $269 million, $267 million and $278 million in 2021, 2020 and 2019, respectively.
DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
Our primary defined benefit pension plans that cover certain employees in the United States and United Kingdom are closed to new entrants and existing participants do not accrue any additional benefits. Most employees outside the United States and United Kingdom are covered by local retirement plans, some of which are funded, while other employees receive payments at the time of retirement or termination under applicable labor laws or agreements. We comply with minimum funding requirements in all countries. We also sponsor unfunded other postretirement benefit plans that provide health care and life insurance to certain retired U.S. employees. 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. As of December 31, 2021 and 2020, the unfunded status related to the defined benefit pension plans and other postretirement benefit plans was $414 million and $706 million, respectively, and is recorded in Other liabilities.
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NOTE 12
CONTINGENCIES AND COMMITMENTS
CONTINGENCIES
In the ordinary course of business, we and our subsidiaries are subject to various pending and potential legal actions, arbitration proceedings, claims, investigations, examinations, regulatory proceedings, information gathering requests, subpoenas, inquiries and matters relating to compliance with laws and regulations (collectively, legal proceedings).
Based on our current knowledge, and taking into consideration our litigation-related liabilities, we do not believe we are a party to, nor are any of our properties the subject of, any legal proceeding that would have a material adverse effect on our consolidated financial condition or liquidity. However, in light of the uncertainties involved in such matters, including the fact that some pending legal proceedings are at preliminary stages or seek an indeterminate amount of damages, it is possible that the outcome of legal proceedings could have a material impact on our results of operations. Certain legal proceedings involving us or our subsidiaries are described below.
A putative merchant class action in the Eastern District of New York, consolidated in 2011 and collectively captioned In re: American Express Anti-Steering Rules Antitrust Litigation (II), alleged that provisions in our merchant agreements prohibiting merchants from differentially surcharging our cards or steering a customer to use another network’s card or another type of general-purpose card (“anti-steering” and “non-discrimination” contractual provisions) violate U.S. antitrust laws. 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. 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 in California prohibiting American Express from enforcing its anti-steering and non-discrimination provisions and from requiring merchants “to offer the service of Amex-card acceptance for free.” The case has been stayed pending the outcome of arbitration proceedings.
On January 29, 2019, we were named in a putative class action brought in the United States District Court for the Eastern District of New York, captioned Anthony Oliver, et al. v. American Express Company and American Express Travel Related Services Company Inc., in which the plaintiffs are holders of MasterCard, Visa and/or Discover credit cards (but not American Express cards) and allege they paid higher prices as a result of our anti-steering and non-discrimination provisions in violation of federal antitrust law and the antitrust and consumer laws of various states. Plaintiffs seek unspecified damages and other forms of relief. The court dismissed plaintiffs’ federal antitrust claim, numerous state antitrust and consumer protection claims and their unjust enrichment claim. The remaining claims in plaintiffs’ complaint arise under the antitrust laws of 11 states and the consumer protection laws of six states.
In July 2004, we were named as a defendant in another putative class action filed in the Southern District of New York and subsequently transferred to the Eastern District of New York, captioned The Marcus Corporation v. American Express Co., et al., in which the plaintiffs allege an unlawful antitrust tying arrangement between certain of our charge cards and credit cards in violation of various state and federal laws. The plaintiffs in this action seek injunctive relief and an unspecified amount of damages.
On March 8, 2016, plaintiffs B&R Supermarket, Inc. d/b/a Milam’s Market and Grove Liquors LLC, on behalf of themselves and others, filed a suit, captioned B&R Supermarket, Inc. d/b/a Milam’s Market, et al. v. Visa Inc., et al., for violations of the Sherman Antitrust Act, the Clayton Antitrust Act, California’s Cartwright Act and unjust enrichment in the United States District Court for the Northern District of California, against American Express Company, other credit and charge card networks, other issuing banks and EMVCo, LLC. Plaintiffs allege that the defendants, through EMVCo, conspired to shift liability for fraudulent, faulty and otherwise rejected consumer credit card transactions from themselves to merchants after the implementation of EMV chip payment terminals. Plaintiffs seek damages and injunctive relief. An amended complaint was filed on July 15, 2016. On September 30, 2016, the court denied our motion to dismiss as to claims brought by merchants who do not accept American Express cards, and on May 4, 2017, the California court transferred the case to the United States District Court for the Eastern District of New York. On August 28, 2020, the court granted plaintiffs' motion for class certification.
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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. While we believe we have complied with all applicable tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional VAT. In certain jurisdictions where we are contesting the assessments, we were required to pay the VAT assessments prior to contesting.
Our legal proceedings range from cases brought by a single plaintiff to class actions with millions of putative class members to governmental proceedings. These legal proceedings involve various lines of business and a variety of claims (including, but not limited to, common law tort, contract, application of tax laws, antitrust and consumer protection claims), some of which present novel factual allegations and/or unique legal theories. While some matters pending against us specify the damages sought, many seek an unspecified amount of damages or are at very early stages of the legal process. Even when the amount of damages claimed against us are stated, the claimed amount may be exaggerated and/or unsupported. As a result, some matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to estimate an amount of loss or a range of possible loss, while other matters have progressed sufficiently such that we are able to estimate an amount of loss or a range of possible loss.
We have accrued for certain of our outstanding legal proceedings. An accrual is recorded when it is both (a) probable that a loss has occurred and (b) the amount of loss can be reasonably estimated. There may be instances in which an exposure to loss exceeds the accrual. We evaluate, on a quarterly basis, developments in legal proceedings that could cause an increase or decrease in the amount of the accrual that has been previously recorded, or a revision to the disclosed estimated range of possible losses, as applicable.
For those disclosed legal proceedings where a loss is reasonably possible in future periods, whether in excess of a recorded accrual for legal or tax contingencies, or where there is no such accrual, and for which we are able to estimate a range of possible loss, the current estimated range is zero to $170 million in excess of any accruals related to those matters. This range represents management’s estimate based on currently available information and does not represent our maximum loss exposure; actual results may vary significantly. As such legal proceedings evolve, we may need to increase our range of possible loss or recorded accruals. In addition, it is possible that significantly increased merchant steering or other actions impairing the Card Member experience as a result of an adverse resolution in one or any combination of the disclosed merchant cases could have a material adverse effect on our business and results of operations.
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; and
•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. If we are unable to collect the amount from the merchant, we may bear the loss for the amount credited to the Card Member. 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.”
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 given the disruptions in the travel industry as a result of the COVID-19 pandemic.
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COMMITMENTS
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. Total lease expense for the years ended December 31, 2021, 2020 and 2019 was $161 million, $177 million and $151 million, respectively.
Lease liabilities are recognized at the present value of the contractual fixed lease payments, discounted using our incremental borrowing rate as of the lease commencement date or upon modification of the lease. For lease liabilities outstanding as of December 31, 2021, the weighted average remaining lease term was 18 years and the weighted average rate used to discount lease commitments was 3 percent.
The following represents the maturities of our outstanding lease commitments as of December 31, 2021:

(Millions) |  |
2022 |  | $ | 155 |
2023 |  | 155 |
2024 |  | 146 |
2025 |  | 123 |
2026 |  | 109 |
Thereafter |  | 986 |
Total Outstanding Fixed Lease Payments |  | $ | 1,674 |
Less: Amount representing interest |  | $ | (553) |
Lease Liabilities |  | $ | 1,121 |

As of December 31, 2021, we had approximately $2.6 billion in financial commitments outstanding related to agreements with certain cobrand partners under which we are required to make a certain level of minimum payments over the life of the agreement, generally ranging from five to ten years. Such commitments are designed to be satisfied by the payment we make to such cobrand partners primarily based on Card Members’ spending and earning rewards on their cobrand cards and as we acquire new Card Members. 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.
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NOTE 13
DERIVATIVES AND HEDGING ACTIVITIES
We use derivative financial instruments to manage exposures to various market risks. These instruments derive their value from an underlying variable or multiple variables, including interest rates and foreign exchange rates, and are carried at fair value on the Consolidated Balance Sheets. These instruments enable end users to increase, reduce or alter exposure to various market risks and, for that reason, are an integral component of our market risk management. We do not transact in derivatives for trading purposes.
Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk exposures include:
•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); and
•Foreign exchange risk related to transactions, funding, investments and earnings in currencies other than the U.S. dollar.
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, the London interbank offered rate (LIBOR), the secured overnight financing rate 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. In addition, interest rate swaps are used from time to time to economically convert fixed-rate debt obligations to variable-rate obligations, or to convert variable-rate debt obligations to fixed-rate obligations. 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 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.
Derivatives may give rise to counterparty credit risk, which is the risk that a derivative counterparty will default on, or otherwise be unable to perform pursuant to, an uncollateralized derivative exposure. We manage this risk by considering the current exposure, which is the replacement cost of contracts on the measurement date, as well as estimating the maximum potential future exposure of the contracts over the next 12 months, considering such factors as the volatility of the underlying or reference index. To mitigate derivative credit risk, counterparties are required to be pre-approved by us and rated as investment grade, and counterparty risk exposures are centrally monitored.
A majority of our derivative assets and liabilities as of December 31, 2021 and 2020 are subject to master netting agreements with our derivative counterparties. Accordingly, where appropriate, we have elected to present derivative assets and liabilities with the same counterparty on a net basis in the Consolidated Balance Sheets. To further mitigate counterparty credit risk, we exercise our rights under executed credit support agreements with the respective derivative counterparties for our bilateral interest rate swaps and select foreign exchange contracts. These agreements require that, in the event the fair value change in the net derivatives position between the two parties exceeds certain dollar thresholds, the party in the net liability position posts collateral to its counterparty. All derivative contracts cleared through a central clearinghouse are collateralized to the full amount of the fair value of the contracts.
In relation to our credit risk, certain of our bilateral derivative agreements include provisions that allow our counterparties to terminate the agreement in the event of a downgrade of our debt credit rating below investment grade and settle the outstanding net liability position. As of December 31, 2021, these derivatives were not in a material net liability position and we had no material risk exposure to any individual derivative counterparty. Based on our assessment of the credit risk of our derivative counterparties and our own credit risk as of December 31, 2021 and 2020, no credit risk adjustment to the derivative portfolio was required.
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Our derivatives are carried at fair value on the Consolidated Balance Sheets. The accounting for changes in fair value depends on the instruments’ intended use and the resulting hedge designation, if any, as discussed below. Refer to Note 14 for a description of our methodology for determining the fair value of derivatives.
The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of December 31:

|  | Other Assets Fair Value |  | Other Liabilities Fair Value
(Millions) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Fair value hedges - Interest rate contracts (a) |  | $ | 204 |  |  | $ | 500 |  |  | $ | — |  |  | $ | — |
Net investment hedges - Foreign exchange contracts |  | 219 |  |  | 24 |  |  | 54 |  |  | 474 |
Total derivatives designated as hedging instruments |  | 423 |  |  | 524 |  |  | 54 |  |  | 474 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange contracts |  | 167 |  |  | 105 |  |  | 85 |  |  | 228 |
Total derivatives, gross |  | 590 |  |  | 629 |  |  | 139 |  |  | 702 |
Derivative asset and derivative liability netting (b) |  | (93) |  |  | (98) |  |  | (93) |  |  | (98) |
Cash collateral netting (c) |  | (204) |  |  | (500) |  |  | (4) |  |  | (16) |
Total derivatives, net |  | $ | 293 |  |  | $ | 31 |  |  | $ | 42 |  |  | $ | 588 |

(a)For our centrally cleared derivatives, variation margin payments are legally characterized as settlement payments as opposed to collateral.
(b)Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an enforceable master netting arrangement.
(c)Represents the offsetting of the fair value of bilateral interest rate contracts and certain foreign exchange contracts with the right to cash collateral held from the counterparty or cash collateral posted with the counterparty.
We posted $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.
DERIVATIVE FINANCIAL INSTRUMENTS THAT QUALIFY FOR HEDGE ACCOUNTING
Derivatives executed for hedge accounting purposes are documented and designated as such when we enter into the contracts. In accordance with our risk management policies, we structure our hedges with terms similar to those of the item being hedged. We formally assess, at inception of the hedge accounting relationship and on a quarterly basis, whether derivatives designated as hedges are highly effective in offsetting the fair value or cash flows of the hedged items. These assessments usually are made through the application of a regression analysis method. If it is determined that a derivative is not highly effective as a hedge, we will discontinue the application of hedge accounting.
FAIR VALUE HEDGES
A fair value hedge involves a derivative designated to hedge our exposure to future changes in the fair value of an asset or a liability, or an identified portion thereof, that is attributable to a particular risk.
Interest Rate Contracts
We are exposed to interest rate risk associated with our fixed-rate debt obligations. At the time of issuance, certain fixed-rate long-term debt obligations are designated in fair value hedging relationships, using interest rate swaps, to economically convert the fixed interest rate to a floating interest rate. We had $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. The changes in the fair value of the derivative and the changes in the hedged item may not fully offset due to differences between a debt obligation’s interest rate and the benchmark rate, primarily due to credit spreads at inception of the hedging relationship that are not reflected in the fair value of the interest rate swap. Furthermore, the difference may be caused by changes in 1-month LIBOR, 3-month LIBOR and the overnight indexed swap rate, as spreads between these rates impact the fair value of the interest rate swap without an exact offsetting impact to the fair value of the hedged debt.
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The following table presents the gains and losses recognized in Interest expense on the Consolidated Statements of Income associated with the fair value hedges of our fixed-rate long-term debt for the years ended December 31:

|  | Gains (losses)
(Millions) |  | 2021 |  | 2020 |  | 2019
Fixed-rate long-term debt |  | $ | 385 |  |  | $ | (405) |  |  | $ | (458) |
Derivatives designated as hedging instruments |  | (385) |  |  | 409 |  |  | 462 |
Total |  | $ | — |  |  | $ | 4 |  |  | $ | 4 |

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 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 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 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 not significant for the years ended December 31, 2021, 2020 and 2019, respectively.
DERIVATIVES NOT DESIGNATED AS HEDGES
We have derivatives that act as economic hedges, but are not designated as such for hedge accounting purposes. Foreign currency transactions from time to time may be partially or fully economically hedged through foreign currency contracts, primarily foreign exchange forwards. These hedges generally mature within one year. Foreign currency contracts involve the purchase and sale of designated currencies at an agreed upon rate for settlement on a specified date.
We also have certain operating agreements containing payments that may be linked to a market rate or price, primarily foreign currency rates. The payment components of these agreements may meet the definition of an embedded derivative, in which case the embedded derivative is accounted for separately and is classified as a foreign exchange contract based on its primary risk exposure.
The changes in the fair value of derivatives that are not designated as hedges are intended to offset the related foreign exchange gains or losses of the underlying foreign currency exposures. We had notional amounts of approximately $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.
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NOTE 14
FAIR VALUES
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.
GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:
•Level 1 ― Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.
•Level 2 ― Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:
– Quoted prices for similar assets or liabilities in active markets;
– Quoted prices for identical or similar assets or liabilities in markets that are not active;
– Inputs other than quoted prices that are observable for the asset or liability; and
– Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•Level 3 ― Inputs that are unobservable and reflect 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 monitor the market conditions and evaluate the fair value hierarchy levels at least quarterly. For the years ended December 31, 2021 and 2020, there were no Level 3 transfers.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT FAIR VALUE
The following table summarizes our financial assets and financial liabilities measured at fair value on a recurring basis, categorized by GAAP’s fair value hierarchy (as described in the preceding paragraphs), as of December 31:

|  | 2021 |  | 2020
(Millions) |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities: (a) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities |  | $ | 79 |  |  | $ | 78 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 81 |  |  | $ | 80 |  |  | $ | 1 |  |  | $ | — |
Debt securities |  | 2,512 |  |  | — |  |  | 2,480 |  |  | 32 |  |  | 21,550 |  |  | — |  |  | 21,550 |  |  | — |
Derivatives, gross (a) |  | 590 |  |  | — |  |  | 590 |  |  | — |  |  | 629 |  |  | — |  |  | 629 |  |  | — |
Total Assets |  | 3,181 |  |  | 78 |  |  | 3,071 |  |  | 32 |  |  | 22,260 |  |  | 80 |  |  | 22,180 |  |  | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives, gross (a) |  | 139 |  |  | — |  |  | 139 |  |  | — |  |  | 702 |  |  | — |  |  | 702 |  |  | — |
Total Liabilities |  | $ | 139 |  |  | $ | — |  |  | $ | 139 |  |  | $ | — |  |  | $ | 702 |  |  | $ | — |  |  | $ | 702 |  |  | $ | — |

(a)Refer to Note 4 for the fair values of investment securities and to Note 13 for the fair values of derivative assets and liabilities, on a further disaggregated basis.
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VALUATION TECHNIQUES USED IN THE FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT FAIR VALUE
For the financial assets and liabilities measured at fair value on a recurring basis (categorized in the valuation hierarchy table above), we apply the following valuation techniques:
Investment Securities
When available, quoted prices of identical investment securities in active markets are used to estimate fair value. Such investment securities are classified within Level 1 of the fair value hierarchy.
When quoted prices of identical investment securities in active markets are not available, the fair values for our investment securities are obtained primarily from pricing services engaged by us, and we receive one price for each security. The fair values provided by the pricing services are estimated using pricing models, where the inputs to those models are based on observable market inputs or recent trades of similar securities. Such investment securities are classified within Level 2 of the fair value hierarchy. The inputs to the valuation techniques applied by the pricing services vary depending on the type of security being priced but are typically benchmark yields, benchmark security prices, credit spreads, prepayment speeds, reported trades and broker-dealer quotes, all with reasonable levels of transparency. The pricing services did not apply any adjustments to the pricing models used. In addition, we did not apply any adjustments to prices received from the pricing services.
We reaffirm our understanding of the valuation techniques used by our pricing services at least annually. In addition, we corroborate the prices provided by our pricing services by comparing them to alternative pricing sources. In instances where price discrepancies are identified between different pricing sources, we evaluate such discrepancies to ensure that the prices used for our valuation represent the fair value of the underlying investment securities. 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
The fair value of our derivative financial instruments is estimated internally by using third-party pricing models, where the inputs to those models are readily observable from active markets. The pricing models used are consistently applied and reflect the contractual terms of the derivatives as described below. We reaffirm our understanding of the valuation techniques at least annually and validate the valuation output on a quarterly basis. Our derivative instruments are classified within Level 2 of the fair value hierarchy.
The fair value of our interest rate swaps is determined based on a discounted cash flow method using the following significant inputs: the contractual terms of the swap such as the notional amount, fixed coupon rate, floating coupon rate and tenor, as well as discount rates consistent with the underlying economic factors of the currency in which the cash flows are denominated.
The fair value of foreign exchange forward contracts is determined based on a discounted cash flow method using the following significant inputs: the contractual terms of the forward contracts such as the notional amount, maturity dates and contract rate, as well as relevant foreign currency forward curves, and discount rates consistent with the underlying economic factors of the currency in which the cash flows are denominated.
Credit valuation adjustments are necessary when the market parameters, such as a benchmark curve, used to value derivatives are not indicative of our credit quality or that of our counterparties. We consider the counterparty credit risk by applying an observable forecasted default rate to the current exposure. Refer to Note 13 for additional fair value information.
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FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT OTHER THAN FAIR VALUE
The following table summarizes the estimated fair values of our financial assets and financial liabilities that are measured at amortized cost, and not required to be carried at fair value on a recurring basis, as of December 31, 2021 and 2020. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of December 31, 2021 and 2020, and require management’s judgment. These figures may not be indicative of future fair values, nor can the fair value of American Express be estimated by aggregating the amounts presented.

2021 (Billions) |  | Carrying Value |  | Corresponding Fair Value Amount
|  | Total |  | Level 1 |  | Level 2 |  | Level 3
Financial Assets: |  |  |  |  |  |  |  |  |  |
Financial assets for which carrying values equal or approximate fair value |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents(a) |  | $ | 22 |  |  | $ | 22 |  |  | $ | 20 |  |  | $ | 2 |  |  | $ | — |
Other financial assets(b) |  | 56 |  |  | 56 |  |  | — |  |  | 56 |  |  | — |
Financial assets carried at other than fair value |  |  |  |  |  |  |  |  |  |
Card Member and Other loans, less reserves(c) |  | 88 |  |  | 91 |  |  | — |  |  | — |  |  | 91 |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |
Financial liabilities for which carrying values equal or approximate fair value |  | 105 |  |  | 105 |  |  | — |  |  | 105 |  |  | — |
Financial liabilities carried at other than fair value |  |  |  |  |  |  |  |  |  |
Certificates of deposit(d) |  | 5 |  |  | 5 |  |  | — |  |  | 5 |  |  | — |
Long-term debt(c) |  | $ | 39 |  |  | $ | 40 |  |  | $ | — |  |  | $ | 40 |  |  | $ | — |

2020 (Billions) |  | Carrying Value |  | Corresponding Fair Value Amount
|  | Total |  | Level 1 |  | Level 2 |  | Level 3
Financial Assets: |  |  |  |  |  |  |  |  |  |
Financial assets for which carrying values equal or approximate fair value |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents(a) |  | $ | 33 |  |  | $ | 33 |  |  | $ | 31 |  |  | $ | 2 |  |  | $ | — |
Other financial assets(b) |  | 46 |  |  | 46 |  |  | — |  |  | 46 |  |  | — |
Financial assets carried at other than fair value |  |  |  |  |  |  |  |  |  |
Card Member and Other loans, less reserves(c) |  | 71 |  |  | 75 |  |  | — |  |  | — |  |  | 75 |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |
Financial liabilities for which carrying values equal or approximate fair value |  | 101 |  |  | 101 |  |  | — |  |  | 101 |  |  | — |
Financial liabilities carried at other than fair value |  |  |  |  |  |  |  |  |  |
Certificates of deposit(d) |  | 8 |  |  | 8 |  |  | — |  |  | 8 |  |  | — |
Long-term debt(c) |  | $ | 43 |  |  | $ | 45 |  |  | $ | — |  |  | $ | 45 |  |  | $ | — |

(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.
(c)Balances include amounts held by a consolidated VIE for which the fair values of Card Member loans were $26.7 billion and $25.8 billion as of December 31, 2021 and 2020, respectively, and the fair values of Long-term debt were $13.9 billion and $13.0 billion as of December 31, 2021 and 2020, respectively.
(d)Presented as a component of Customer deposits on the Consolidated Balance Sheets.
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VALUATION TECHNIQUES USED IN THE FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT OTHER THAN FAIR VALUE
For the financial assets and liabilities that are not required to be carried at fair value on a recurring basis (categorized in the valuation hierarchy table), we apply the following valuation techniques to measure fair value:
Financial Assets For Which Carrying Values Equal Or Approximate Fair Value
Financial assets for which carrying values equal or approximate fair value include cash and cash equivalents, Card Member receivables, accrued interest and certain other assets. For these assets, the carrying values approximate fair value because they are short term in duration, have no defined maturity or have a market-based interest rate.
Financial Assets Carried At Other Than Fair Value
Card Member and Other loans, less reserves
Card Member and Other loans are recorded at historical cost, less reserves, on the Consolidated Balance Sheets. In estimating the fair value for our loans, we use a discounted cash flow model. Due to the lack of a comparable whole loan sales market for similar loans and the lack of observable pricing inputs thereof, we use various inputs to estimate fair value. Such inputs include projected income, discount rates and forecasted write-offs. The valuation does not include economic value attributable to future receivables generated by the accounts associated with the loans.
Financial Liabilities For Which Carrying Values Equal Or Approximate Fair Value
Financial liabilities for which carrying values equal or approximate fair value include accrued interest, customer deposits (excluding certificates of deposit, which are described further below), Travelers Cheques and other prepaid products outstanding, accounts payable, short-term borrowings and certain other liabilities for which the carrying values approximate fair value because they are short term in duration, have no defined maturity or have a market-based interest rate.
Financial Liabilities Carried At Other Than Fair Value
Certificates of Deposit
Certificates of deposit (CDs) are recorded at their historical issuance cost on the Consolidated Balance Sheets. Fair value is estimated using a discounted cash flow methodology based on the future cash flows and the discount rate that reflects the current market rates for similar types of CDs within similar markets.
Long-term Debt
Long-term debt is recorded at historical issuance cost on the Consolidated Balance Sheets adjusted for (i) unamortized discount and unamortized fees, (ii) the impact of movements in exchange rates on foreign currency denominated debt and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate through the use of interest rate swaps. The fair value of our long-term debt is measured using quoted offer prices when quoted market prices are available. If quoted market prices are not available, the fair value is determined by discounting the future cash flows of each instrument at rates currently observed in publicly-traded debt markets for debt of similar terms and credit risk. For long-term debt, where there are no rates currently observable in publicly traded debt markets of similar terms and comparable credit risk, we use market interest rates and adjust those rates for necessary risks, including our own credit risk. In determining an appropriate spread to reflect our credit standing, we consider credit default swap spreads, bond yields of other long-term debt offered by us, and interest rates currently offered to us for similar debt instruments of comparable maturities.
NONRECURRING FAIR VALUE MEASUREMENTS
We have certain assets that are subject to measurement at fair value on a nonrecurring basis. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if they are determined to be impaired or where there are observable price changes for equity investments without readily determinable fair values. During the years ended December 31, 2021 and 2020, we did not have any material assets that were measured at fair value due to impairment.
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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.
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NOTE 15
GUARANTEES
The maximum potential undiscounted future payments and related liability resulting from guarantees and indemnifications provided by us in the ordinary course of business were $1 billion and $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. Our recognition of these instruments is at fair value. In addition, we establish reserves when a loss is probable and the amount can be reasonably estimated.
NOTE 16
COMMON AND PREFERRED SHARES
The following table shows authorized shares and provides a reconciliation of common shares issued and outstanding for the years ended December 31:

(Millions, except where indicated) |  | 2021 |  | 2020 |  | 2019
Common shares authorized (billions) (a) |  | 3.6 |  |  | 3.6 |  |  | 3.6 |
Shares issued and outstanding at beginning of year |  | 805 |  |  | 810 |  |  | 847 |
Repurchases of common shares |  | (46) |  |  | (7) |  |  | (40) |
Other, primarily stock option exercises and restricted stock awards granted |  | 2 |  |  | 2 |  |  | 3 |
Shares issued and outstanding as of December 31 |  | 761 |  |  | 805 |  |  | 810 |

(a)Of the common shares authorized but unissued as of December 31, 2021, approximately 21 million shares are reserved for issuance under employee stock and employee benefit plans.
On September 23, 2019, the Board of Directors authorized the repurchase of up to 120 million common shares from time to time, subject to market conditions and in accordance with our capital plans. This authorization replaced the prior repurchase authorization and does not have an expiration date. During 2021, 2020 and 2019, we repurchased 46 million common shares with a cost basis of $7.6 billion, 7 million common shares with a cost basis of $0.9 billion, and 40 million common shares with a cost basis of $4.6 billion, respectively. The cost basis includes commissions paid of $5.6 million, $1.0 million and $6.2 million in 2021, 2020 and 2019, respectively. 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 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. The treasury shares, with a cost basis of $271 million, $279 million and $292 million as of December 31, 2021, 2020 and 2019, respectively, are included as a reduction to Additional paid-in capital in Shareholders’ equity on the Consolidated Balance Sheets.
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PREFERRED SHARES
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 Reset Noncumulative Preferred Share series issued and outstanding as of December 31, 2021:

|  | Series D |  |
Issuance date |  | August 3, 2021 |  |
Securities issued |  | 1,600 Preferred shares; represented by 1,600,000 depositary shares |  |
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.
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NOTE 17
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
AOCI is a balance sheet item in Shareholders’ equity on the Consolidated Balance Sheets. It is comprised of items that have not been recognized in earnings but may be recognized in earnings in the future when certain events occur. Changes in each component for the three years ended December 31 were as follows:

(Millions), net of tax |  | Net Unrealized Gains (Losses) on Debt Securities |  | Foreign Currency Translation Adjustment Gains (Losses) |  | Net Unrealized Pension and Other Postretirement Benefit Gains (Losses) |  | Accumulated Other Comprehensive Income (Loss)
Balances as of December 31, 2018 |  | $ | (8) |  |  | $ | (2,133) |  |  | $ | (456) |  |  | $ | (2,597) |
Net unrealized gains |  | 41 |  |  | — |  |  | — |  |  | 41 |
Net translation on investments in foreign operations |  | — |  |  | 84 |  |  | — |  |  | 84 |
Net hedges of investments in foreign operations |  | — |  |  | (140) |  |  | — |  |  | (140) |
Pension and other postretirement benefits |  | — |  |  | — |  |  | (125) |  |  | (125) |
Net change in accumulated other comprehensive income (loss) |  | 41 |  |  | (56) |  |  | (125) |  |  | (140) |
Balances as of December 31, 2019 |  | 33 |  |  | (2,189) |  |  | (581) |  |  | (2,737) |
Net unrealized gains |  | 32 |  |  | — |  |  | — |  |  | 32 |
Net translation on investments in foreign operations |  | — |  |  | 213 |  |  | — |  |  | 213 |
Net hedges of investments in foreign operations |  | — |  |  | (253) |  |  | — |  |  | (253) |
Pension and other postretirement benefits |  | — |  |  |  |  | (150) |  |  | (150) |
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 losses |  | (42) |  |  | — |  |  | — |  |  | (42) |
Net translation on investments in foreign operations |  | — |  |  | (339) |  |  | — |  |  | (339) |
Net hedges of investments in foreign operations |  | — |  |  | 176 |  |  | — |  |  | 176 |
Pension and other postretirement benefits |  | — |  |  | — |  |  | 155 |  |  | 155 |
Net change in accumulated other comprehensive income (loss) |  | (42) |  |  | (163) |  |  | 155 |  |  | (50) |
Balances as of December 31, 2021 |  | $ | 23 |  |  | $ | (2,392) |  |  | $ | (576) |  |  | $ | (2,945) |

The following table shows the tax impact for the years ended December 31 for the changes in each component of AOCI presented above:

|  | Tax expense (benefit)
(Millions) |  | 2021 |  | 2020 |  | 2019
Net unrealized (losses) gains on debt securities |  | $ | (13) |  |  | $ | 9 |  |  | $ | 12 |
Net translation on investments in foreign operations |  | (1) |  |  | 17 |  |  | 24 |
Net hedges of investments in foreign operations |  | 52 |  |  | (79) |  |  | (43) |
Pension and other postretirement benefits |  | 52 |  |  | (28) |  |  | (38) |
Total tax impact |  | $ | 90 |  |  | $ | (81) |  |  | $ | (45) |

Reclassifications out of AOCI into the Consolidated Statements of Income, net of taxes, were not significant for the years ended December 31, 2021, 2020, and 2019.
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NOTE 18
OTHER FEES AND COMMISSIONS AND OTHER EXPENSES
The following is a detail of Other fees and commissions for the years ended December 31:

(Millions) |  | 2021 |  | 2020 |  | 2019
Fees charged to Card Members: |  |  |  |  |  |
Delinquency fees |  | $ | 637 |  |  | $ | 772 |  |  | $ | 1,028 |
Foreign currency conversion fee revenue |  | 523 |  |  | 433 |  |  | 982 |
Other customer fees: |  |  |  |  |  |
Loyalty coalition-related fees |  | 508 |  |  | 435 |  |  | 456 |
Travel commissions and fees |  | 244 |  |  | 102 |  |  | 424 |
Service fees and other (a) |  | 480 |  |  | 421 |  |  | 407 |
Total Other fees and commissions |  | $ | 2,392 |  |  | $ | 2,163 |  |  | $ | 3,297 |

(a)Other includes Membership Rewards program fees that are not related to contracts with customers.
The following is a detail of Other expenses for the years ended December 31:

(Millions) |  | 2021 |  | 2020 |  | 2019
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) |
Other (b) |  | 1,195 |  |  | 1,354 |  |  | 1,674 |
Total Other expenses |  | $ | 4,817 |  |  | $ | 5,325 |  |  | $ | 5,856 |

(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.
NOTE 19
RESTRUCTURING
We periodically initiate restructuring programs to support new business strategies and to enhance our overall effectiveness and efficiency. In connection with these programs, we will typically incur severance and other exit costs.
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 $(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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NOTE 20
INCOME TAXES
The components of income tax expense for the years ended December 31 included in the Consolidated Statements of Income were as follows:

(Millions) |  | 2021 |  | 2020 |  | 2019
Current income tax expense: |  |  |  |  |  |
U.S. federal |  | $ | 1,656 |  |  | $ | 1,122 |  |  | $ | 1,108 |
U.S. state and local |  | 351 |  |  | 339 |  |  | 276 |
Non-U.S. |  | 328 |  |  | 639 |  |  | 437 |
Total current income tax expense |  | 2,335 |  |  | 2,100 |  |  | 1,821 |
Deferred income tax (benefit) expense: |  |  |  |  |  |
U.S. federal |  | 231 |  |  | (931) |  |  | (58) |
U.S. state and local |  | 22 |  |  | (119) |  |  | (31) |
Non-U.S. |  | 41 |  |  | 111 |  |  | (62) |
Total deferred income tax (benefit) expense |  | 294 |  |  | (939) |  |  | (151) |
Total income tax expense |  | $ | 2,629 |  |  | $ | 1,161 |  |  | $ | 1,670 |

A reconciliation of the U.S. federal statutory rate of 21 percent as of December 31, 2021, 2020 and 2019, to our actual income tax rate was as follows:

|  | 2021 |  | 2020 |  | 2019
U.S. statutory federal income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
(Decrease) increase in taxes resulting from: |  |  |  |  |  |
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 |
Non-U.S. subsidiaries' earnings |  | 1.1 |  |  | 2.4 |  |  | (0.5) |
Tax settlements |  | (0.1) |  |  | (0.3) |  |  | (0.3) |
Valuation allowances |  | — |  |  | 4.0 |  |  | (0.2) |
Other |  | (0.3) |  |  | 0.3 |  |  | (1.1) |
Actual tax rates |  | 24.6 | % |  | 27.0 | % |  | 19.8 | %

(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. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are expected to reverse.
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The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:

(Millions) |  | 2021 |  | 2020
Deferred tax assets: |  |  |  |
Reserves not yet deducted for tax purposes |  | $ | 3,637 |  |  | $ | 3,905 |
Employee compensation and benefits |  | 359 |  |  | 383 |
Net operating loss and tax credit carryforwards |  | 398 |  |  | 399 |
Other |  | 809 |  |  | 765 |
Gross deferred tax assets |  | 5,203 |  |  | 5,452 |
Valuation allowance |  | (472) |  |  | (418) |
Deferred tax assets after valuation allowance |  | 4,731 |  |  | 5,034 |
Deferred tax liabilities: |  |  |  |
Intangibles and fixed assets |  | 1,320 |  |  | 1,433 |
Deferred revenue |  | 189 |  |  | 252 |
Deferred interest |  | 133 |  |  | 148 |
Investment in joint ventures |  | 183 |  |  | 135 |
Other |  | 521 |  |  | 366 |
Gross deferred tax liabilities |  | 2,346 |  |  | 2,334 |
Net deferred tax assets |  | $ | 2,385 |  |  | $ | 2,700 |

The net operating loss and tax credit carryforward balance as of December 31, 2021, shown in the table above, is related to pre-tax U.S. federal and non-U.S. 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. federal and non-U.S. NOL carryforwards will expire between 2022 and 2037, whereas others have an unlimited carryforward period. The FTC carryforwards will expire between 2029 and 2031.
A valuation allowance is established when management determines that it is more likely than not that all or some portion of the benefit of the deferred tax assets will not be realized. The valuation allowances for both periods presented above are associated with certain non-U.S. deferred tax assets and FTC carryforwards.
Accumulated earnings of certain non-U.S. subsidiaries, which totaled approximately $1.0 billion as of December 31, 2021, are intended to be permanently reinvested outside the U.S. We do not provide for state income and foreign withholding taxes on foreign earnings intended to be permanently reinvested outside the U.S. Accordingly, state income and foreign withholding taxes, which would have aggregated to approximately $0.1 billion as of December 31, 2021, have not been provided on those earnings.
Net income taxes paid by us during 2021, 2020 and 2019, were approximately $1.6 billion, $2.2 billion and $1.7 billion, respectively. These amounts include estimated tax payments and cash settlements relating to prior tax years.
We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. Given these inherent complexities, we must make judgments in assessing the likelihood that a tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position. A tax position is recognized only when, based on management’s judgment regarding the application of income tax laws, it is more likely than not that the tax position will be sustained upon examination. The amount of benefit recognized for financial reporting purposes is based on management’s best judgment of the largest amount of benefit that is more likely than not to be realized on ultimate settlement with the taxing authority given the facts, circumstances and information available at the reporting date. We adjust the level of unrecognized tax benefits when there is new information available to assess the likelihood of the outcome.
We are under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which we have significant business operations. The tax years under examination and open for examination vary by jurisdiction. We are currently under examination by the IRS for the 2017 and 2018 tax years.
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The following table presents changes in unrecognized tax benefits:

(Millions) |  | 2021 |  | 2020 |  | 2019
Balance, January 1 |  | $ | 790 |  |  | $ | 726 |  |  | $ | 701 |
Increases: |  |  |  |  |  |
Current year tax positions |  | 64 |  |  | 57 |  |  | 66 |
Tax positions related to prior years |  | 225 |  |  | 105 |  |  | 78 |
Effects of foreign currency translations |  | — |  |  | — |  |  | 10 |
Decreases: |  |  |  |  |  |
Tax positions related to prior years |  | (14) |  |  | (24) |  |  | (14) |
Settlements with tax authorities |  | (15) |  |  | (15) |  |  | (40) |
Lapse of statute of limitations |  | (17) |  |  | (58) |  |  | (75) |
Effects of foreign currency translations |  | (9) |  |  | (1) |  |  | — |
Balance, December 31 |  | $ | 1,024 |  |  | $ | 790 |  |  | $ | 726 |

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 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. Of the $167 million of unrecognized tax benefits, approximately $132 million relates to amounts that, if recognized, would impact the effective tax rate in a future period.
Interest and penalties relating to unrecognized tax benefits are reported in the income tax provision. 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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NOTE 21
EARNINGS PER COMMON SHARE (EPS)
The computations of basic and diluted EPS for the years ended December 31 were as follows:

(Millions, except per share amounts) |  | 2021 |  | 2020 |  | 2019
Numerator: |  |  |  |  |  |
Basic and diluted: |  |  |  |  |  |
Net income |  | $ | 8,060 |  |  | $ | 3,135 |  |  | $ | 6,759 |
Preferred dividends |  | (71) |  |  | (79) |  |  | (81) |
Equity-related adjustments (a) |  | (16) |  |  | — |  |  | — |
Net income available to common shareholders |  | 7,973 |  |  | 3,056 |  |  | 6,678 |
Earnings allocated to participating share awards (b) |  | (56) |  |  | (20) |  |  | (47) |
Net income attributable to common shareholders |  | $ | 7,917 |  |  | $ | 3,036 |  |  | $ | 6,631 |
Denominator: (b) |  |  |  |  |  |
Basic: Weighted-average common stock |  | 789 |  |  | 805 |  |  | 828 |
Add: Weighted-average stock options (c) |  | 1 |  |  | 1 |  |  | 2 |
Diluted |  | 790 |  |  | 806 |  |  | 830 |
Basic EPS |  | $ | 10.04 |  |  | $ | 3.77 |  |  | $ | 8.00 |
Diluted EPS |  | $ | 10.02 |  |  | $ | 3.77 |  |  | $ | 7.99 |

(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.
(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.
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NOTE 22
REGULATORY MATTERS AND CAPITAL ADEQUACY
We are supervised and regulated by the Board of Governors of the Federal Reserve System (the Federal Reserve) and are subject to the Federal Reserve’s requirements for risk-based capital and leverage ratios. Our U.S. bank subsidiary, American Express National Bank (AENB), is subject to supervision and regulation, including regulatory capital and leverage requirements, by the Office of the Comptroller of the Currency (OCC).
Under the risk-based capital guidelines of the Federal Reserve, we are required to maintain minimum ratios of CET1, Tier 1 and Total (Tier 1 plus Tier 2) capital to risk-weighted assets, as well as a minimum Tier 1 leverage ratio (Tier 1 capital to average adjusted on-balance sheet assets).
Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary actions by regulators, that, if undertaken, could have a direct material effect on our operating activities.
As of December 31, 2021 and 2020, we met all capital requirements to which we were subject and maintained regulatory capital ratios in excess of those required to qualify as well capitalized.
The following table presents the regulatory capital ratios:

(Millions, except percentages) |  | CET 1 capital |  | Tier 1 capital |  | Total capital |  | CET 1 capital ratio |  | Tier 1 capital ratio |  | Total capital ratio |  | Tier 1 leverage ratio |  |
December 31, 2021: (a) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
American Express Company |  | $ | 17,554 |  |  | $ | 19,186 |  |  | $ | 21,506 |  |  | 10.5 | % |  | 11.5 | % |  | 12.9 | % |  | 10.5 | % |  |
American Express National Bank |  | $ | 13,085 |  |  | $ | 13,085 |  |  | $ | 15,283 |  |  | 11.8 | % |  | 11.8 | % |  | 13.7 | % |  | 10.5 | % |  |
December 31, 2020: (a) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
American Express Company |  | $ | 18,693 |  |  | $ | 20,277 |  |  | $ | 22,385 |  |  | 13.5 | % |  | 14.7 | % |  | 16.2 | % |  | 11.0 | % |  |
American Express National Bank |  | $ | 14,617 |  |  | $ | 14,617 |  |  | $ | 16,578 |  |  | 16.2 | % |  | 16.2 | % |  | 18.3 | % |  | 10.9 | % |  |
Well-capitalized ratios (b) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
American Express Company |  |  |  |  |  |  |  | N/A |  | 6.0 | % |  | 10.0 | % |  | N/A |  |
American Express National Bank |  |  |  |  |  |  |  | 6.5 | % |  | 8.0 | % |  | 10.0 | % |  | 5.0 | % |  |
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 | % |  |

(a)Capital ratios reported using Basel III capital definitions and risk-weighted assets using the Basel III standardized approach.
(b)Represents requirements for bank holding companies and banking subsidiaries to be considered “well capitalized” pursuant to regulations issued under the Federal Reserve Regulation Y and the Federal Deposit Insurance Corporation Improvement Act, respectively. There is no CET1 capital ratio or Tier 1 leverage ratio requirement for a bank holding company to be considered “well capitalized.”
(c)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
Certain of our subsidiaries are subject to restrictions on the transfer of net assets under debt agreements and regulatory requirements. These restrictions have not had any effect on our shareholder dividend policy and management does not anticipate any impact in the future. Procedures exist to transfer net assets between the Company and its subsidiaries, while ensuring compliance with the various contractual and regulatory constraints. As of December 31, 2021, the aggregate amount of net assets of subsidiaries that are restricted to be transferred was approximately $10.0 billion.
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BANK HOLDING COMPANY DIVIDEND RESTRICTIONS
We are limited in our ability to pay dividends by the Federal Reserve, which could prohibit a dividend that would be considered an unsafe or unsound banking practice. It is the policy of the Federal Reserve that bank holding companies generally should pay dividends on preferred and common stock only out of net income available to common shareholders generated over the past year, and only if prospective earnings retention is consistent with the organization’s current and expected future capital needs, asset quality and overall financial condition. Moreover, bank holding companies are required by statute to be a source of strength to their insured depository institution subsidiaries and should not maintain dividend levels that undermine their ability to do so. On an annual basis, we are required to develop and maintain a capital plan, which includes planned dividends over a two-year horizon. We may be subject to limitations and restrictions on our dividends, if, among other things, (i) our regulatory capital ratios do not satisfy applicable minimum requirements and buffers or (ii) we are required to resubmit our capital plan.
BANK DIVIDEND RESTRICTIONS
In the year ended December 31, 2021, AENB paid dividends from retained earnings to its parent of $8.1 billion. AENB is limited in its ability to pay dividends by banking statutes, regulations and supervisory policy. In general, applicable federal and state banking laws prohibit, without first obtaining regulatory approval, insured depository institutions, such as AENB, from making dividend distributions if such distributions are not paid out of available retained earnings or would cause the institution to fail to meet capital adequacy standards. If AENB’s risk-based capital ratios do not satisfy minimum regulatory requirements and applicable buffers, it will face graduated constraints on dividends and other capital distributions. As of December 31, 2021, AENB's retained earnings available for the payment of dividends was $3.6 billion. In determining the dividends to pay its parent, AENB must also consider the effects on applicable risk-based capital and leverage ratio requirements, as well as policy statements of the federal regulatory agencies. In addition, AENB's banking regulators have authority to limit or prohibit the payment of a dividend by AENB under a number of circumstances, including if, in the banking regulator’s opinion, payment of a dividend would constitute an unsafe or unsound banking practice in light of the financial condition of the banking organization.
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NOTE 23
SIGNIFICANT CREDIT CONCENTRATIONS
Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to American Express’ total credit exposure. Our customers operate in diverse industries, economic sectors and geographic regions.
The following table details our maximum credit exposure of the on-balance sheet assets by category as of December 31:

(Billions) |  | 2021 |  | 2020
Individuals (a) |  | $ | 131 |  |  | $ | 108 |
Financial services (b) |  | 24 |  |  | 34 |
U.S. Government and agencies (c) |  | 2 |  |  | 22 |
Institutions (d) |  | 15 |  |  | 13 |
Total on-balance sheet |  | $ | 172 |  |  | $ | 177 |

(a)Primarily reflects loans and receivables from global consumer and small business Card Members, which are governed by individual credit risk management.
(b)Represents banks, broker-dealers, insurance companies and savings and loan associations.
(c)Represent debt obligations of the U.S. Government and its agencies, states and municipalities and government-sponsored entities.
(d)Primarily reflects loans and receivables from global corporate Card Members, which are governed by institutional credit risk management.
As of December 31, 2021 and 2020, our most significant concentration of credit risk was with individuals, including Card Member loans and receivables. These amounts are generally advanced on an unsecured basis. However, we review each potential customer’s credit application and evaluate the applicant’s financial history and ability and willingness to repay. We also consider credit performance by customer tenure, industry and geographic location in managing credit exposure.
The following table details our Card Member loans and receivables exposure (including unused lines-of-credit available to Card Members as part of established lending product agreements) in the United States and outside the United States as of December 31:

(Billions) |  | 2021 |  | 2020
On-balance sheet: |  |  |  |
U.S. |  | $ | 115 |  |  | $ | 95 |
Non-U.S. |  | 27 |  |  | 22 |
On-balance sheet |  | 142 |  |  | 117 |
Unused lines-of-credit: (a) |  |  |  |
U.S. |  | 261 |  |  | 251 |
Non-U.S. |  | 66 |  |  | 63 |
Total unused lines-of-credit |  | $ | 327 |  |  | $ | 314 |

(a)Total unused credit available to Card Members does not represent potential future cash requirements, as a significant portion of this unused credit will likely not be drawn. Our charge card products generally have no pre-set spending limit, and therefore are not reflected in unused credit available to Card Members.
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NOTE 24
REPORTABLE OPERATING SEGMENTS AND GEOGRAPHIC OPERATIONS
REPORTABLE OPERATING SEGMENTS
We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution channels, geographic considerations (primarily United States versus outside the United States), and regulatory environment considerations.
The following is a brief description of the primary business activities of our three reportable operating segments:
•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, 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.
Corporate functions and certain other businesses and operations are included in Corporate & Other.
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.
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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:

(Millions, except where indicated) |  | GCSG |  | GCS |  | GMNS |  | Corporate & Other (a) |  | Consolidated
2021 |  |  |  |  |  |  |  |  |  |
Total non-interest revenues |  | $ | 18,157 |  |  | $ | 11,489 |  |  | $ | 4,964 |  |  | $ | 20 |  |  | $ | 34,630 |
Revenue from contracts with customers (b) |  | 13,047 |  |  | 9,863 |  |  | 4,635 |  |  | 171 |  |  | 27,716 |
Interest income |  | 7,391 |  |  | 1,460 |  |  | 16 |  |  | 166 |  |  | 9,033 |
Interest expense |  | 717 |  |  | 449 |  |  | (92) |  |  | 209 |  |  | 1,283 |
Total revenues net of interest expense |  | 24,831 |  |  | 12,500 |  |  | 5,072 |  |  | (23) |  |  | 42,380 |
Pretax income (loss) |  | 6,826 |  |  | 2,928 |  |  | 1,949 |  |  | (1,014) |  |  | 10,689 |
Total assets (billions) |  | $ | 102 |  |  | $ | 53 |  |  | $ | 15 |  |  | $ | 19 |  |  | $ | 189 |
2020 |  |  |  |  |  |  |  |  |  |
Total non-interest revenues |  | $ | 14,632 |  |  | $ | 9,652 |  |  | $ | 4,143 |  |  | $ | (325) |  |  | $ | 28,102 |
Revenue from contracts with customers (b) |  | 9,974 |  |  | 8,145 |  |  | 3,882 |  |  | (27) |  |  | 21,974 |
Interest income |  | 8,199 |  |  | 1,586 |  |  | 18 |  |  | 280 |  |  | 10,083 |
Interest expense |  | 1,054 |  |  | 619 |  |  | (82) |  |  | 507 |  |  | 2,098 |
Total revenues net of interest expense |  | 21,777 |  |  | 10,619 |  |  | 4,243 |  |  | (552) |  |  | 36,087 |
Pretax income (loss) |  | 3,687 |  |  | 936 |  |  | 1,315 |  |  | (1,642) |  |  | 4,296 |
Total assets (billions) |  | $ | 87 |  |  | $ | 42 |  |  | $ | 14 |  |  | $ | 48 |  |  | $ | 191 |
2019 |  |  |  |  |  |  |  |  |  |
Total non-interest revenues |  | $ | 17,178 |  |  | $ | 12,242 |  |  | $ | 5,428 |  |  | $ | 88 |  |  | $ | 34,936 |
Revenue from contracts with customers (b) |  | 12,555 |  |  | 10,633 |  |  | 4,965 |  |  | 6 |  |  | 28,159 |
Interest income |  | 9,414 |  |  | 1,900 |  |  | 27 |  |  | 743 |  |  | 12,084 |
Interest expense |  | 1,731 |  |  | 1,034 |  |  | (303) |  |  | 1,002 |  |  | 3,464 |
Total revenues net of interest expense |  | 24,861 |  |  | 13,108 |  |  | 5,758 |  |  | (171) |  |  | 43,556 |
Pretax income (loss) |  | 4,845 |  |  | 2,692 |  |  | 2,685 |  |  | (1,793) |  |  | 8,429 |
Total assets (billions) |  | $ | 107 |  |  | $ | 53 |  |  | $ | 17 |  |  | $ | 21 |  |  | $ | 198 |

(a)Corporate & Other includes adjustments and eliminations for intersegment activity.
(b)Includes discount revenue, certain other fees and commissions and other revenues from customers.
Total Revenues Net of Interest Expense
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the GCSG and GCS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue.
Net card fees and other fees and commissions are directly attributable to the segment in which they are reported.
Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.
Provisions for Credit Losses
The provisions for credit losses are directly attributable to the segment in which they are reported.
Expenses
Marketing and business development expense is included in each segment based on the actual expenses incurred. Global brand advertising is primarily allocated to the segments based on the relative levels of revenue. Rewards and Card Member services expenses are included in each segment based on the actual expenses incurred.
Salaries and employee benefits and other operating expenses reflect both costs incurred directly within each segment, as well as allocated expenses. 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.
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GEOGRAPHIC OPERATIONS
The following table presents our total revenues net of interest expense and pretax income (loss) from continuing operations in different geographic regions based, in part, upon internal allocations, which necessarily involve management’s judgment:

(Millions) |  | United States |  | EMEA(a) |  | APAC(a) |  | LACC(a) |  | Other Unallocated(b) |  | Consolidated
2021 |  |  |  |  |  |  |  |  |  |  |  |
Total revenues net of interest expense |  | $ | 33,103 |  |  | $ | 3,643 |  |  | $ | 3,418 |  |  | $ | 2,238 |  |  | $ | (22) |  |  | $ | 42,380 |
Pretax income (loss) from continuing operations |  | 9,512 |  |  | 705 |  |  | 707 |  |  | 782 |  |  | (1,017) |  |  | 10,689 |
2020 |  |  |  |  |  |  |  |  |  |  |  |
Total revenues net of interest expense |  | $ | 28,263 |  |  | $ | 3,087 |  |  | $ | 3,271 |  |  | $ | 2,019 |  |  | $ | (553) |  |  | $ | 36,087 |
Pretax income (loss) from continuing operations |  | 4,418 |  |  | 398 |  |  | 665 |  |  | 452 |  |  | (1,638) |  |  | 4,296 |
2019 |  |  |  |  |  |  |  |  |  |  |  |
Total revenues net of interest expense |  | $ | 32,629 |  |  | $ | 4,388 |  |  | $ | 3,934 |  |  | $ | 2,776 |  |  | $ | (171) |  |  | $ | 43,556 |
Pretax income (loss) from continuing operations |  | 7,302 |  |  | 1,177 |  |  | 853 |  |  | 884 |  |  | (1,787) |  |  | 8,429 |

(a)EMEA represents Europe, the Middle East and Africa; APAC represents Asia Pacific, Australia and New Zealand; and LACC represents Latin America, Canada and the Caribbean.
(b)Other Unallocated includes net costs which are not directly allocated to specific geographic regions, including costs related to the net negative interest spread on excess liquidity funding and executive office operations expenses.
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NOTE 25
PARENT COMPANY
PARENT COMPANY – CONDENSED STATEMENTS OF INCOME

Years Ended December 31 (Millions) |  | 2021 |  | 2020 |  | 2019
Revenues |  |  |  |  |  |
Non-interest revenues |  |  |  |  |  |
Other |  | $ | 343 |  |  | $ | 480 |  |  | $ | 598 |
Total non-interest revenues |  | 343 |  |  | 480 |  |  | 598 |
Interest income |  | 96 |  |  | 228 |  |  | 692 |
Interest expense |  | 482 |  |  | 630 |  |  | 902 |
Total revenues net of interest expense |  | (43) |  |  | 78 |  |  | 388 |
Expenses |  |  |  |  |  |
Salaries and employee benefits |  | 359 |  |  | 333 |  |  | 366 |
Other |  | 346 |  |  | 562 |  |  | 816 |
Total expenses |  | 705 |  |  | 895 |  |  | 1,182 |
Pretax loss |  | (748) |  |  | (817) |  |  | (794) |
Income tax benefit |  | (248) |  |  | (236) |  |  | (282) |
Net loss before equity in net income of subsidiaries and affiliates |  | (500) |  |  | (581) |  |  | (512) |
Equity in net income of subsidiaries and affiliates |  | 8,560 |  |  | 3,716 |  |  | 7,271 |
Net income |  | $ | 8,060 |  |  | $ | 3,135 |  |  | $ | 6,759 |

PARENT COMPANY – CONDENSED BALANCE SHEETS

As of December 31 (Millions) |  | 2021 |  | 2020
Assets |  |  |  |
Cash and cash equivalents |  | $ | 5,341 |  |  | $ | 10,968 |
Equity in net assets of subsidiaries and affiliates |  | 22,623 |  |  | 23,306 |
Loans to subsidiaries and affiliates |  | 17,848 |  |  | 15,887 |
Due from subsidiaries and affiliates |  | 1,207 |  |  | 1,084 |
Other assets |  | 158 |  |  | 164 |
Total assets |  | 47,177 |  |  | 51,409 |
Liabilities and Shareholders’ Equity |  |  |  |
Liabilities |  |  |  |
Accounts payable and other liabilities |  | 2,107 |  |  | 1,743 |
Due to subsidiaries and affiliates |  | 443 |  |  | 1,100 |
Debt with subsidiaries and affiliates |  | 136 |  |  | 2,772 |
Long-term debt |  | 22,314 |  |  | 22,810 |
Total liabilities |  | 25,000 |  |  | 28,425 |
Shareholders’ Equity |  |  |  |
Total shareholders’ equity |  | 22,177 |  |  | 22,984 |
Total liabilities and shareholders’ equity |  | $ | 47,177 |  |  | $ | 51,409 |

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PARENT COMPANY – CONDENSED STATEMENTS OF CASH FLOWS

Years Ended December 31 (Millions) |  | 2021 |  | 2020 |  | 2019
Cash Flows from Operating Activities |  |  |  |  |  |
Net income |  | $ | 8,060 |  |  | $ | 3,135 |  |  | $ | 6,759 |
Adjustments to reconcile net income to cash provided by operating activities: |  |  |  |  |  |
Equity in net income of subsidiaries and affiliates |  | (8,560) |  |  | (3,716) |  |  | (7,271) |
Dividends received from subsidiaries and affiliates |  | 9,102 |  |  | 2,679 |  |  | 6,370 |
Other operating activities, primarily with subsidiaries and affiliates |  | (305) |  |  | 732 |  |  | 1,315 |
Net cash provided by operating activities |  | 8,297 |  |  | 2,830 |  |  | 7,173 |
Cash Flows from Investing Activities |  |  |  |  |  |
Maturities and redemptions of investment securities |  | — |  |  | — |  |  | 1 |
(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 (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) |
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 |
Repurchase of American Express common shares and other |  | (7,652) |  |  | (1,029) |  |  | (4,685) |
Dividends paid |  | (1,448) |  |  | (1,474) |  |  | (1,422) |
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 |
Cash and cash equivalents at end of year |  | $ | 5,341 |  |  | $ | 10,968 |  |  | $ | 4,430 |

Supplemental cash flow information |  |  |  |  |  |
Years Ended December 31 (Millions) |  | 2021 |  | 2020 |  | 2019
Non-Cash Investing Activities |  |  |  |  |  |
Loans to subsidiaries and affiliates |  | $ | (1,787) |  |  | $ | (4,971) |  |  | $ | — |
Non-Cash Financing Activities |  |  |  |  |  |
Short-term debts from subsidiaries and affiliates |  | — |  |  | 4,971 |  |  | — |
Proceeds from long-term debt |  | $ | 1,787 |  |  | $ | — |  |  | $ | — |

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
“Management’s Report on Internal Control over Financial Reporting,” which sets forth management’s evaluation of internal control over financial reporting, and the “Report of Independent Registered Public Accounting Firm” on the effectiveness of our internal control over financial reporting as of December 31, 2021 are set forth in “Financial Statements and Supplementary Data.”
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEMS 10, 11, 12 and 13. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE; EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS; CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We expect to file with the SEC in March 2022 (and, in any event, not later than 120 days after the close of our last fiscal year), a definitive proxy statement, pursuant to SEC Regulation 14A in connection with our Annual Meeting of Shareholders to be held May 3, 2022, which involves the election of directors. The following information to be included in such proxy statement is incorporated herein by reference:
•Information included under the caption “Corporate Governance at American Express — Our Corporate Governance Framework — Our Board’s Independence”
•Information included under the caption “Corporate Governance at American Express — Our Board Committees — Board Committee Responsibilities”
•Information included under the caption “Corporate Governance at American Express — Our Corporate Governance Framework — Director Attendance”
•Information included under the caption “Corporate Governance at American Express — Compensation of Directors”
•Information included under the caption “Stock Ownership Information”
•Information included under the caption “Corporate Governance at American Express — Item 1 — Election of Directors for a Term of One Year”
•Information included under the caption “Executive Compensation”
•Information under the caption “Corporate Governance at American Express — Certain Relationships and Transactions”
In addition, the information regarding executive officers called for by Item 401(b) of Regulation S-K may be found under the caption “Information About Our Executive Officers” in this Report.
We have adopted a set of Corporate Governance Principles, which together with the charters of the four standing committees of the Board of Directors (Audit and Compliance; Compensation and Benefits; Nominating, Governance and Public Responsibility; and Risk), our Code of Conduct (which constitutes our code of ethics) and the Code of Business Conduct for the Members of the Board of Directors, provide the framework for our governance. A complete copy of our Corporate Governance Principles, the charters of each of the Board committees, the Code of Conduct (which applies not only to our Chief Executive Officer, Chief Financial Officer and Controller, but also to all our other colleagues) and the Code of Business Conduct for the Members of the Board of Directors may be found by clicking on the “Corporate Governance” link found on our Investor Relations website at http://ir.americanexpress.com. We also intend to disclose any amendments to our Code of Conduct, or waivers of our Code of Conduct on behalf of our Chief Executive Officer, Chief Financial Officer or Controller, on our website. You may also access our Investor Relations website through our main website at www.americanexpress.com by clicking on the “Investor Relations” link, which is located at the bottom of the Company’s homepage. (Information from such sites is not incorporated by reference into this report.) You may also obtain free copies of these materials by writing to our Corporate Secretary at our headquarters.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information set forth under the heading “Item 2 — Ratification of Appointment of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP Fees and Services,” which will appear in our definitive proxy statement in connection with our Annual Meeting of Shareholders to be held May 3, 2022, is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a)
1. Financial Statements:
See the “Index to Consolidated Financial Statements” under “Financial Statements and Supplementary Data.”
2. Financial Statement Schedules:
All schedules are omitted since the required information is either not applicable, not deemed material, or shown in the Consolidated Financial Statements.
3. Exhibits:
The following exhibits are filed as part of this report. The exhibit numbers preceded by an asterisk (*) indicate exhibits electronically filed herewith. All other exhibit numbers indicate exhibits previously filed and are hereby incorporated herein by reference. Exhibits numbered 10.1 through 10.40 are management contracts or compensatory plans or arrangements.
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| 3.1 | Company's Amended and Restated Certificate of Incorporation as amended through August 2, 202 1 (incorporated by reference to Exhibit 3.1 of the Company's Q u a rterly R eport on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 2021).
| 3.2 | Company's By-Laws, as amended through September 26, 2016 (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated September 26, 2016 (f iled September 27, 2016)).
| 4.1 | The instruments defining the rights of holders of long-term debt securities of the Company and its subsidiaries are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company hereby agrees to furnish copies of these instruments to the SEC upon request.
| 4.2 | Description of American Express Company’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2020).
| 10.1 | American Express Company Deferred Compensation Plan for Directors and Advisors, as amended and restated effective April 1, 2018 (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended March 31, 2018).
| 10.2 | American Express Company 2007 Pay-for-Performance Deferral Program Document (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated November 20, 2006 (filed November 22, 2006)).
| 10.3 | Description of amendments to 1994–2006 Pay-for-Performance Deferral Programs (incorporated by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2006).
| 10.4 | American Express Company 2006 Pay-for-Performance Deferral Program Guide (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated November 21, 2005 (filed November 23, 2005)).
| 10.5 | American Express Company 2005 Pay-for-Performance Deferral Program Guide (incorporated by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2004).
| 10.6 | Description of American Express Company Pay-for-Performance Deferral Program (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated November 22, 2004 (filed January 28, 2005)).
| 10.7 | Amendment to the Pre-2008 Nonqualified Deferred Compensation Plans of American Express Company (incorporated by reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2008).
| 10.8 | American Express Company Retirement Plan for Non-Employee Directors, as amended (incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1988).
| 10.9 | Certificate of Amendment of the American Express Company Retirement Plan for Non-Employee Directors dated March 21, 1996 (incorporated by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1995).
| 10.10 | American Express Key Executive Life Insurance Plan, as amended (incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the fiscal year ended December 31, 1991).

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| 10.11 | Amendment to American Express Company Key Executive Life Insurance Plan (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 1994).
| 10.12 | Amendment to American Express Company Key Executive Life Insurance Plan, effective as of January 22, 2007 (incorporated by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2006).
| 10.13 | Amendment to American Express Company Key Executive Life Insurance Plan, effective as of January 1, 2011 (incorporated by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2010).
| 10.14 | American Express Key Employee Charitable Award Program for Education (incorporated by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1990).
| 10.15 | American Express Directors' Charitable Award Program (incorporated by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1990).
| 10.16 | American Express Company Salary/Bonus Deferral Plan (incorporated by reference to Exhibit 10.20 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1988).
| 10.17 | Amendment to American Express Company Salary/Bonus Deferral Plan (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 1994).
| 10.18 | American Express Senior Executive Severance Plan, as amended and restated effective May 1, 2018 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended June 30, 2018).
| 10.19 | Amendments of (i) the American Express Salary/Bonus Deferral Plan and (ii) the American Express Key Executive Life Insurance Plan (incorporated by reference to Exhibit 10.37 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1997).
| 10.20 | Second Amendment and Restatement of the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (as amended and restated effective as of January 1, 2012) (incorporated by reference to Exhibit 10.28 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2011).
| 10.21 | Third Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated March 29, 2012) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended March 31, 2012).
| 10.22 | Fourth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated October 24, 2012) (incorporated by reference to Exhibit 10.31 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2012).
| 10.23 | Fifth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated May 1, 2013) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended March 31, 2013).
| 10.24 | Sixth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated August 16, 2013) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 2013).

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| 10.25 | Seventh Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated September 26, 2013) (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 2013).
| 10.26 | Eighth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated December 1, 2013) (incorporated by reference to Exhibit 10.36 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2013).
| 10.27 | Ninth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated December 14, 2016) (incorporated by reference to Exhibit 10.30 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2016).
| 10.28 | Tenth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated December 17, 2018) (incorporated by reference to Exhibit 10.28 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2018).
* | 10.29 | Eleventh Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated December 9, 2021).
| 10.30 | American Express Company 2003 Share Equivalent Unit Plan for Directors, as amended and restated, effective January 1, 2015 (incorporated by reference to Exhibit 10.38 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2015).
| 10.31 | Description of Compensation Payable to Non-Management Directors effective January 1, 2015 (incorporated by reference to Exhibit 10.39 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2014).
| 10.32 | American Express Company 2007 Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated April 23, 2007 (filed April 27, 2007)).
| 10.33 | American Express Company 2007 Incentive Compensation Plan Master Agreement (as amended and restated effective January 23, 2012) (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated January 23, 2012 (filed January 27, 2012)).
| 10.34 | Form of nonqualified stock option award agreement for executive officers under the American Express Company 2007 Incentive Compensation Plan (for awards made after January 26, 2016) (incorporated by reference to Exhibit 10.43 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2015).
| 10.35 | American Express Company 2016 Incentive Compensation Plan (as amended and restated effective May 5, 2020) (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated May 5, 2020 (filed May 7, 2020)).
| 10.36 | Form of nonqualified stock option award agreement for executive officers under the American Express Company 2016 Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by reference to Exhibit 10.41 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2016).
| 10.37 | Form of restricted stock unit award agreement for executive officers under the American Express Company 2016 Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by reference to Exhibit 10.42 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2016).
| 10.38 | Form of award agreement for executive officers in connection with Performance Grant awards (a/k/a Executive Annual Incentive Awards) under the American Express Company 2016 Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by reference to Exhibit 10.43 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2016).

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| 10.39 | Amendment to the Form of nonqualified stock option award agreement and Form of restricted stock unit award for executive officers under the American Express Company 2016 Incentive Compensation Plan (for awards made after January 29, 2020) (incorporated by reference to Exhibit 10.41 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2019).
| 10.40 | Form of notice agreement in connection with Annual Incentive Awards under the American Express Company 2016 Incentive Compensation Plan (incorporated by reference to Exhibit 10.42 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2019).
| 10.41 | Restated Letter Agreement, dated May 6, 2019, between American Express Company and Berkshire Hathaway Inc., on behalf of itself and its subsidiaries (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated May 6, 2019 (filed May 6, 2019)).
| 10.42 | Time Sharing Agreement, dated February 13, 2018, by and between American Express Travel Related Services Company, Inc. and Stephen J. Squeri (incorporated by reference to Exhibit 10.48 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2017).
| 10.43 | Amendment No. 1, dated March 29, 2019, to the Time Sharing Agreement, dated February 13, 2018, by and between American Express Travel Related Services Company, Inc. and Stephen J. Squeri (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended March 31, 2019).
| 10.44 | Amendment No. 2, dated July 26, 2019, to the Time Sharing Agreement, dated February 13, 2018, by and between American Express Travel Related Services Company, Inc. and Stephen J. Squeri (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 2019).
| 10.45 | Amendment No. 3, dated December 15, 2020, to the Time Sharing Agreement, dated February 13, 2018, by and between American Express Travel Related Services Company, Inc. and Stephen J. Squeri (incorporated by reference to Exhibit 10.46 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2020).
* | 10.46 | Amendment No. 4, dated December 2 8, 2021, to the Time Sharing Agreement, dated February 13, 2018, by and between American Express Travel Related Services Company, Inc. and Stephen J. Squeri.
* | 21 | Subsidiaries of the Company.
* | 23 | Consent of PricewaterhouseCoopers LLP.
* | 31.1 | Certification of Stephen J. Squeri, Chief Executive Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
* | 31.2 | Certification of Jeffrey C. Campbell, Chief Financial Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
* | 32.1 | Certification of Stephen J. Squeri, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* | 32.2 | Certification of Jeffrey C. Campbell, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* | 101.INS | XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document
* | 101.SCH | XBRL Taxonomy Extension Schema Document
* | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document

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* | 101.LAB | XBRL Taxonomy Extension Label Linkbase Document
* | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document
* | 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document
* | 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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ITEM 16. FORM 10-K SUMMARY
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  | AMERICAN EXPRESS COMPANY
|  | /s/ JEFFREY C. CAMPBELL
|  | Jeffrey C. Campbell Vice Chairman and Chief Financial Officer

February 11, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated.

/s/ STEPHEN J. SQUERI |  | /s/ THEODORE J. LEONSIS
Stephen J. Squeri Chairman, Chief Executive Officer and Director |  | Theodore J. Leonsis Director
/s/ JEFFREY C. CAMPBELL |  | /s/ KAREN L. PARKHILL
Jeffrey C. Campbell Vice Chairman and Chief Financial Officer |  | Karen L. Parkhill Director
/s/ JESSICA LIEBERMAN QUINN |  | /s/ CHARLES E. PHILLIPS, JR.
Jessica Lieberman Quinn Executive Vice President and Corporate Controller (Principal Accounting Officer) |  | Charles E. Phillips, Jr. Director
/s/ THOMAS J. BALTIMORE, JR. |  | /s/ LYNN A. PIKE
Thomas J. Baltimore, Jr. Director |  | Lynn A. Pike Director
/s/ CHARLENE BARSHEFSKY |  | /s/ DANIEL L. VASELLA
Charlene Barshefsky Director |  | Daniel L. Vasella Director
/s/ JOHN J. BRENNAN |  | /s/ LISA W. WARDELL
John J. Brennan Director |  | Lisa W. Wardell Director
/s/ PETER CHERNIN |  | /s/ RONALD A. WILLIAMS
Peter Chernin Director |  | Ronald A. Williams Director
/s/ RALPH DE LA VEGA |  | /s/ CHRISTOPHER D. YOUNG
Ralph de la Vega Director |  | Christopher D. Young Director
/s/ MICHAEL O. LEAVITT |  |
Michael O. Leavitt Director |  |

February 11, 2022
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Appendix
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
The accompanying supplemental information should be read in conjunction with the “MD&A”, “Consolidated Financial Statements” and notes thereto.
Distribution of Assets, Liabilities, and Shareholders’ Equity; Interest Rates and Interest Differential
The following tables provide a summary of our consolidated average balances including major categories of interest-earning assets and interest-bearing liabilities along with an analysis of net interest earnings. Consolidated average balances, interest, and average yields are segregated between U.S. and non-U.S. offices. Assets, liabilities, interest income and interest expense are attributed to the United States and outside the United States based on the location of the office recording such items.

|  | 2021 |  | 2020 |  | 2019
Years Ended December 31, (Millions, except percentages) |  | Average Balance (a) |  | Interest Income |  | Average Yield |  | Average Balance (a) |  | Interest Income |  | Average Yield |  | Average Balance (a) |  | Interest Income |  | Average Yield
Interest-earning assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing deposits in other banks |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 25,583 |  |  | $ | 34 |  |  | 0.1 | % |  | $ | 31,446 |  |  | $ | 100 |  |  | 0.3 | % |  | $ | 22,169 |  |  | $ | 517 |  |  | 2.3 | %
Non-U.S. |  | 2,291 |  |  | 54 |  |  | 2.4 |  |  | 2,367 |  |  | 51 |  |  | 2.2 |  |  | 2,085 |  |  | 48 |  |  | 2.3 |
Federal funds sold and securities purchased under agreements to resell |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 19 |  |  | 3 |  |  | 15.8 |
Non-U.S. |  | 196 |  |  | 10 |  |  | 5.1 |  |  | 184 |  |  | 11 |  |  | 6.0 |  |  | 56 |  |  | 6 |  |  | 10.7 |
Short-term investment securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 360 |  |  | — |  |  | — |  |  | 658 |  |  | 7 |  |  | 1.1 |  |  | 409 |  |  | 11 |  |  | 2.7 |
Non-U.S. |  | 106 |  |  | — |  |  | — |  |  | 97 |  |  | 1 |  |  | 1.0 |  |  | 93 |  |  | 1 |  |  | 1.1 |
Card Member loans (b) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 66,436 |  |  | 7,553 |  |  | 11.4 |  |  | 65,559 |  |  | 8,196 |  |  | 12.5 |  |  | 72,422 |  |  | 9,452 |  |  | 13.1 |
Non-U.S. |  | 9,614 |  |  | 1,086 |  |  | 11.3 |  |  | 9,018 |  |  | 1,196 |  |  | 13.3 |  |  | 10,362 |  |  | 1,400 |  |  | 13.5 |
Other loans (b) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 2,341 |  |  | 181 |  |  | 7.7 |  |  | 4,078 |  |  | 342 |  |  | 8.4 |  |  | 4,101 |  |  | 413 |  |  | 10.1 |
Non-U.S. |  | 126 |  |  | 30 |  |  | 23.8 |  |  | 139 |  |  | 45 |  |  | 32.4 |  |  | 170 |  |  | 43 |  |  | 25.3 |
Taxable investment securities(c) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 13,765 |  |  | 62 |  |  | 0.5 |  |  | 14,002 |  |  | 100 |  |  | 0.7 |  |  | 6,335 |  |  | 147 |  |  | 2.3 |
Non-U.S. |  | 634 |  |  | 16 |  |  | 2.5 |  |  | 612 |  |  | 21 |  |  | 3.4 |  |  | 589 |  |  | 27 |  |  | 4.6 |
Non-taxable investment securities (c) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 87 |  |  | 3 |  |  | 4.7 |  |  | 128 |  |  | 5 |  |  | 5.1 |  |  | 237 |  |  | 11 |  |  | 5.9 |
Other assets (d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Primarily U.S. |  | 16 |  |  | 4 |  |  | n.m |  | 38 |  |  | 8 |  |  | n.m. |  | 17 |  |  | 5 |  |  | n.m.
Total interest-earning assets (e) |  | $ | 121,555 |  |  | $ | 9,033 |  |  | 7.4 | % |  | $ | 128,326 |  |  | $ | 10,083 |  |  | 7.9 | % |  | $ | 119,064 |  |  | $ | 12,084 |  |  | 10.2 | %
U.S. |  | 108,588 |  |  | 7,837 |  |  |  |  | 115,909 |  |  | 8,758 |  |  |  |  | 105,709 |  |  | 10,559 |  |  |
Non-U.S. |  | 12,967 |  |  | 1,196 |  |  |  |  | 12,417 |  |  | 1,325 |  |  |  |  | 13,355 |  |  | 1,525 |  |  |

n.m. Denotes rates determined to not be meaningful.
(a)Averages based on month-end balances.
(b)Average non-accrual loans were included in the average Card Member loan balances in amounts of $121 million, $275 million and $307 million in U.S. for 2021, 2020 and 2019, respectively. Average other loan balances for U.S. include average non-accrual loans of $1 million, $3 million and $7 million for 2021, 2020 and 2019, respectively. Average non-accrual loans are considered to determine the average yield on loans.
(c)Average yields for both taxable and non-taxable investment securities have been calculated using amortized cost balances and do not include changes in fair value recorded in other comprehensive loss. Average yield on non-taxable investment securities is calculated on a tax-equivalent basis using the U.S. federal statutory tax rate of 21 percent for 2021, 2020 and 2019.
(d)Amounts include (i) average equity securities balances, which are included in investment securities on the Consolidated Balance Sheets, and (ii) the associated income.
(e)The average yield on total interest-earning assets is adjusted for the impacts of the items mentioned in footnote (c).
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Years Ended December 31, (Millions, except percentages) |  | 2021 Average Balance (a) |  | 2020 Average Balance (a) |  | 2019 Average Balance (a)
Non-interest-earning assets |  |  |  |  |  |
Cash and due from banks |  |  |  |  |  |
U.S. |  | $ | 2,729 |  |  | $ | 2,205 |  |  | $ | 2,842 |
Non-U.S. |  | 868 |  |  | 823 |  |  | 732 |
Card Member receivables, net |  |  |  |  |  |
U.S. |  | 30,039 |  |  | 27,414 |  |  | 27,724 |
Non-U.S. |  | 16,632 |  |  | 16,009 |  |  | 28,040 |
Reserves for credit losses on Card Member and other loans |  |  |  |  |  |
U.S. |  | (3,964) |  |  | (4,682) |  |  | (2,057) |
Non-U.S. |  | (369) |  |  | (526) |  |  | (258) |
Other assets (b) |  |  |  |  |  |
U.S. |  | 16,589 |  |  | 14,680 |  |  | 12,689 |
Non-U.S. |  | 5,514 |  |  | 5,830 |  |  | 5,593 |
Total non-interest-earning assets |  | 68,038 |  |  | 61,753 |  |  | 75,305 |
U.S. |  | 45,393 |  |  | 39,617 |  |  | 41,198 |
Non-U.S. |  | 22,645 |  |  | 22,136 |  |  | 34,107 |
Total assets |  | $ | 189,593 |  |  | $ | 190,079 |  |  | $ | 194,369 |
U.S. |  | 153,981 |  |  | 155,526 |  |  | 146,908 |
Non-U.S. |  | 35,612 |  |  | 34,553 |  |  | 47,461 |
Percentage of total average assets attributable to non-U.S. activities |  | 18.8 | % |  | 18.2 | % |  | 24.4 | %

(a)Averages based on month-end balances.
(b)Includes premises and equipment, net of accumulated depreciation and amortization.
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|  | 2021 |  | 2020 |  | 2019
Years Ended December 31, (Millions, except percentages) |  | Average Balance (a) |  | Interest Expense |  | Average Rate |  | Average Balance (a) |  | Interest Expense |  | Average Rate |  | Average Balance (a) |  | Interest Expense |  | Average Rate
Interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer deposits |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Savings |  | $ | 78,084 |  |  | $ | 314 |  |  | 0.4 | % |  | $ | 69,796 |  |  | $ | 697 |  |  | 1.0 | % |  | $ | 59,087 |  |  | $ | 1,247 |  |  | 2.1 | %
Time |  | 6,092 |  |  | 139 |  |  | 2.3 |  |  | 9,898 |  |  | 237 |  |  | 2.4 |  |  | 12,179 |  |  | 298 |  |  | 2.4 |
Demand |  | 692 |  |  | 2 |  |  | 0.3 |  |  | 752 |  |  | 5 |  |  | 0.7 |  |  | 447 |  |  | 9 |  |  | 2.0 |
Non-U.S. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Time |  | 8 |  |  | — |  |  | — |  |  | 11 |  |  | 1 |  |  | 9.1 |  |  | 16 |  |  | 1 |  |  | 6.3 |
Other deposits |  | 11 |  |  | 3 |  |  | 27.3 |  |  | 11 |  |  | 3 |  |  | 27.3 |  |  | 10 |  |  | 4 |  |  | 40.0 |
Short-term borrowings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 3 |  |  | — |  |  | — |  |  | 769 |  |  | 18 |  |  | 2.3 |  |  | 407 |  |  | 22 |  |  | 5.4 |
Non-U.S. |  | 1,983 |  |  | 12 |  |  | 0.6 |  |  | 2,017 |  |  | 11 |  |  | 0.5 |  |  | 2,621 |  |  | 15 |  |  | 0.6 |
Long-term debt and other (b) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 38,157 |  |  | 808 |  |  | 2.1 |  |  | 48,690 |  |  | 1,123 |  |  | 2.3 |  |  | 57,936 |  |  | 1,859 |  |  | 3.2 |
Non-U.S. |  | 326 |  |  | 5 |  |  | 1.5 |  |  | 336 |  |  | 3 |  |  | 0.9 |  |  | 325 |  |  | 9 |  |  | 2.8 |
Total interest-bearing liabilities |  | $ | 125,356 |  |  | $ | 1,283 |  |  | 1.0 | % |  | $ | 132,280 |  |  | $ | 2,098 |  |  | 1.6 | % |  | $ | 133,028 |  |  | $ | 3,464 |  |  | 2.6 | %
U.S. |  | 123,028 |  |  | 1,263 |  |  |  |  | 129,905 |  |  | 2,080 |  |  |  |  | 130,056 |  |  | 3,435 |  |  |
Non-U.S. |  | 2,328 |  |  | 20 |  |  |  |  | 2,375 |  |  | 18 |  |  |  |  | 2,972 |  |  | 29 |  |  |
Non-interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 4,289 |  |  |  |  |  |  | 4,642 |  |  |  |  |  |  | 7,116 |  |  |  |  |
Non-U.S. |  | 5,107 |  |  |  |  |  |  | 4,737 |  |  |  |  |  |  | 6,202 |  |  |  |  |
Customer deposits(c) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 494 |  |  |  |  |  |  | 766 |  |  |  |  |  |  | 385 |  |  |  |  |
Non-U.S. |  | 569 |  |  |  |  |  |  | 682 |  |  |  |  |  |  | 387 |  |  |  |  |
Other liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 22,925 |  |  |  |  |  |  | 18,954 |  |  |  |  |  |  | 18,360 |  |  |  |  |
Non-U.S. |  | 6,943 |  |  |  |  |  |  | 6,016 |  |  |  |  |  |  | 6,079 |  |  |  |  |
Total non-interest-bearing liabilities |  | 40,327 |  |  |  |  |  |  | 35,797 |  |  |  |  |  |  | 38,529 |  |  |  |  |
U.S. |  | 27,708 |  |  |  |  |  |  | 24,362 |  |  |  |  |  |  | 25,861 |  |  |  |  |
Non-U.S. |  | 12,619 |  |  |  |  |  |  | 11,435 |  |  |  |  |  |  | 12,668 |  |  |  |  |
Total liabilities |  | 165,683 |  |  |  |  |  |  | 168,077 |  |  |  |  |  |  | 171,557 |  |  |  |  |
U.S. |  | 150,736 |  |  |  |  |  |  | 154,267 |  |  |  |  |  |  | 155,917 |  |  |  |  |
Non-U.S. |  | 14,947 |  |  |  |  |  |  | 13,810 |  |  |  |  |  |  | 15,640 |  |  |  |  |
Total shareholders' equity |  | 23,910 |  |  |  |  |  |  | 22,002 |  |  |  |  |  |  | 22,812 |  |  |  |  |
Total liabilities and shareholders' equity |  | $ | 189,593 |  |  |  |  |  |  | $ | 190,079 |  |  |  |  |  |  | $ | 194,369 |  |  |  |  |
Percentage of total average liabilities attributable to non-U.S. activities |  | 9.0 | % |  |  |  |  |  | 8.2 | % |  |  |  |  |  | 9.1 | % |  |  |  |
Interest rate spread |  |  |  |  |  | 6.4 | % |  |  |  |  |  | 6.3 | % |  |  |  |  |  | 7.6 | %
Net interest income and net average yield on interest-earning assets(d)` |  |  |  | $ | 7,750 |  |  | 6.4 | % |  |  |  | $ | 7,985 |  |  | 6.2 | % |  |  |  | $ | 8,620 |  |  | 7.2 | %

(a)Averages based on month-end balances.
(b)Interest expense primarily reflects interest on long-term financing and interest incurred on derivative instruments in qualifying hedging relationships on the hedged debt instruments.
(c)U.S. non-interest-bearing Customer deposits include average Card Member credit balances of $470 million, $742 million and $353 million for 2021, 2020 and 2019, respectively. Non-U.S. non-interest-bearing Customer deposits include average Card Member credit balances of $568 million, $679 million and $381 million for 2021, 2020 and 2019, respectively.
(d)Net average yield on interest-earning assets is defined as net interest income divided by average total interest-earning assets as adjusted for the items mentioned in footnote (c) from the table on A-1.
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Table of Contents
Changes in Net Interest Income − Volume and Rate Analysis (a)
The following table presents the amount of changes in interest income and interest expense due to changes in both average volume and average rate. Major categories of interest-earning assets and interest-bearing liabilities have been segregated between U.S. and non-U.S. offices. Average volume/rate changes have been allocated between the average volume and average rate variances on a consistent basis based upon the respective percentage changes in average balances and average rates.

|  | 2021 Versus 2020 |  | 2020 Versus 2019
|  | Increase (Decrease) due to change in: |  |  |  | Increase (Decrease) due to change in: |  |
Years Ended December 31, (Millions) |  | Average Volume |  | Average Rate |  | Net Change |  | Average Volume |  | Average Rate |  | Net Change
Interest-earning assets |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing deposits in other banks |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | (19) |  |  | $ | (47) |  |  | $ | (66) |  |  | $ | 216 |  |  | $ | (633) |  |  | $ | (417) |
Non-U.S. |  | (2) |  |  | 5 |  |  | 3 |  |  | 6 |  |  | (3) |  |  | 3 |
Federal funds sold and securities purchased under agreements to resell |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | — |  |  | — |  |  | — |  |  | (3) |  |  | — |  |  | (3) |
Non-U.S. |  | 1 |  |  | (2) |  |  | (1) |  |  | 14 |  |  | (9) |  |  | 5 |
Short-term investment securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | (3) |  |  | (4) |  |  | (7) |  |  | 7 |  |  | (11) |  |  | (4) |
Non-U.S. |  | — |  |  | (1) |  |  | (1) |  |  | — |  |  | — |  |  | — |
Card Member loans |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | 110 |  |  | (753) |  |  | (643) |  |  | (896) |  |  | (360) |  |  | (1,256) |
Non-U.S. |  | 79 |  |  | (189) |  |  | (110) |  |  | (182) |  |  | (22) |  |  | (204) |
Other loans |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | (146) |  |  | (15) |  |  | (161) |  |  | (2) |  |  | (69) |  |  | (71) |
Non-U.S. |  | (4) |  |  | (11) |  |  | (15) |  |  | (8) |  |  | 10 |  |  | 2 |
Taxable investment securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | (1) |  |  | (37) |  |  | (38) |  |  | 177 |  |  | (224) |  |  | (47) |
Non-U.S. |  | 1 |  |  | (6) |  |  | (5) |  |  | 1 |  |  | (7) |  |  | (6) |
Non-taxable investment securities |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | (2) |  |  | — |  |  | (2) |  |  | (7) |  |  | 1 |  |  | (6) |
Other assets |  |  |  |  |  |  |  |  |  |  |  |
Primarily U.S. |  | (5) |  |  | 1 |  |  | (4) |  |  | 6 |  |  | (3) |  |  | 3 |
Change in interest income |  | 9 |  |  | (1,059) |  |  | (1,050) |  |  | (671) |  |  | (1,330) |  |  | (2,001) |
Interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |
Customer deposits |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  |  |  |  |  |  |  |  |  |  |  |
Savings |  | 83 |  |  | (466) |  |  | (383) |  |  | 226 |  |  | (776) |  |  | (550) |
Time |  | (91) |  |  | (7) |  |  | (98) |  |  | (56) |  |  | (5) |  |  | (61) |
Demand |  | — |  |  | (3) |  |  | (3) |  |  | 6 |  |  | (10) |  |  | (4) |
Non-U.S. |  |  |  |  |  |  |  |  |  |  |  |
Time |  | — |  |  | (1) |  |  | (1) |  |  | — |  |  | — |  |  | — |
Other deposits |  | — |  |  | — |  |  | — |  |  | — |  |  | (1) |  |  | (1) |
Short-term borrowings |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | (18) |  |  | — |  |  | (18) |  |  | 20 |  |  | (24) |  |  | (4) |
Non-U.S. |  | — |  |  | 1 |  |  | 1 |  |  | (3) |  |  | (1) |  |  | (4) |
Long-term debt and other |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | (243) |  |  | (72) |  |  | (315) |  |  | (297) |  |  | (439) |  |  | (736) |
Non-U.S. |  | — |  |  | 2 |  |  | 2 |  |  | — |  |  | (6) |  |  | (6) |
Change in interest expense |  | (269) |  |  | (546) |  |  | (815) |  |  | (104) |  |  | (1,262) |  |  | (1,366) |
Change in net interest income |  | $ | 278 |  |  | $ | (513) |  |  | $ | (235) |  |  | $ | (567) |  |  | $ | (68) |  |  | $ | (635) |

(a)Refer to footnotes from “Distribution of Assets, Liabilities and Shareholders’ Equity” for additional information.
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Table of Contents
Maturities and Sensitivities to Changes in Interest Rates
The following table presents contractual maturities of loans and Card Member receivables by customer type, and segregated between U.S. and non-U.S. based on domicile of the borrowers, and distribution between fixed and floating interest rates for loans due after one year based upon the stated terms of the loan agreements.

December 31, (Millions) |  | 2021
|  | Within 1 year (a) |  | 1-5 years (b) (c) |  | 5-15 years (c) |  | After 15 years (c) |  | Total
Loans |  |  |  |  |  |  |  |  |  |
U.S. loans |  |  |  |  |  |  |  |  |  |
Card Member |  | $ | 76,500 |  |  | $ | 378 |  |  | $ | — |  |  | $ | — |  |  | $ | 76,878 |
Other |  | 554 |  |  | 1,997 |  |  | 98 |  |  | 34 |  |  | 2,683 |
Non-U.S. loans |  |  |  |  |  |  |  |  |  |
Card Member |  | 11,684 |  |  | — |  |  | — |  |  | — |  |  | 11,684 |
Other |  | 163 |  |  | 65 |  |  | — |  |  | — |  |  | 228 |
Total loans |  | $ | 88,901 |  |  | $ | 2,440 |  |  | $ | 98 |  |  | $ | 34 |  |  | $ | 91,473 |
Loans due after one year at fixed interest rates |  |  |  |  |  |  |  |  |  |
Card Member |  |  |  | $ | 378 |  |  | $ | — |  |  | $ | — |  |  | $ | 378 |
Other |  |  |  | 2,038 |  |  | — |  |  | 34 |  |  | 2,072 |
Loans due after one year at variable interest rates |  |  |  |  |  |  |  |  |  |
Card Member |  |  |  | — |  |  | — |  |  | — |  |  | — |
Other |  |  |  | 24 |  |  | 98 |  |  | — |  |  | 122 |
Total loans |  |  |  | $ | 2,440 |  |  | $ | 98 |  |  | $ | 34 |  |  | $ | 2,572 |
Card Member receivables |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 38,284 |  |  | $ | 128 |  |  | $ | — |  |  | $ | — |  |  | $ | 38,412 |
Non-U.S. |  | 15,233 |  |  | — |  |  | — |  |  | — |  |  | 15,233 |
Total Card Member receivables |  | $ | 53,517 |  |  | $ | 128 |  |  | $ | — |  |  | $ | — |  |  | $ | 53,645 |

(a)Card Member loans have no stated maturity and are therefore included in the due within one year category. However, many of our Card Members will revolve their balances, which may extend their repayment period beyond one year for balances outstanding as of December 31, 2021. Card member receivables are due upon receipt of Card Member statements and have no stated interest rate and are therefore included in the due within one year category.
(b)Card Member loans and receivables due after one year represent Troubled Debt Restructurings (TDRs). Card Members experiencing financial difficulties are offered modification programs wherein a long-term concession (more than 12 months) has been granted to the borrower and are classified as TDRs.
(c)Other loans due after one year primarily represents installment loans.
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Table of Contents
Credit Quality Indicators for Loans and Card Member Receivables
The following table summarizes the ratio of all loans and Card Member receivables categories.

Years Ended December 31, (Millions, except percentages and where indicated) |  | 2021 |  | 2020
Card Member loans |  |  |  |
Net write-offs — principal less recoveries |  | $ | 672 |  |  | $ | 1,795 |
Net write-offs — interest and fees less recoveries |  | $ | 207 |  |  | $ | 375 |
Average Card Member loans (billions)(a) |  | $ | 76.1 |  |  | $ | 74.6 |
Principal only net write-offs / average Card Member loans outstanding (b) |  | 0.9 | % |  | 2.4 | %
Principal, interest and fees net write-offs / average Card Member loans outstanding (b) |  | 1.2 | % |  | 2.9 | %
Other loans |  |  |  |
Net write-offs |  | $ | 21 |  |  | $ | 111 |
Average Other loans (billions)(a) |  | $ | 2.5 |  |  | $ | 4.2 |
Net write-offs/average other loans outstanding (b) |  | 0.9 | % |  | 2.6 | %
Card Member receivables |  |  |  |
Net write-offs — principal and fees less recoveries |  | $ | 129 |  |  | $ | 881 |
Average Card Member receivables (billions)(a) |  | $ | 46.8 |  |  | $ | 43.9 |
Net write-offs / average Card Member receivables outstanding (b) |  | 0.3 | % |  | 2.0 | %
Reserve for credit losses |  | $ | 3,421 |  |  | $ | 5,849 |
Non-accrual loans (c) |  | $ | 96 |  |  | $ | 176 |
Reserve for credit losses to total loans and Card Member receivables (d) |  | 2.4 | % |  | 4.9 | %
Non-accrual loans to total loans (e) |  | 0.1 | % |  | 0.2 | %
Reserve for credit losses to non-accrual loans (f) |  | 3476.3 | % |  | 3171.4 | %

(a)Averages are based on month-end balances for the periods presented.
(b)The net write-off rate presented is on a worldwide basis and is based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.
(c)Non-accrual loans not in modification programs primarily include certain loans placed with outside collection agencies for which we have ceased accruing interest. Amounts presented exclude loans classified as TDR. Lower non-accrual loans are primarily driven by higher enrollments under In House TDR programs and lower delinquencies.
(d)Represents the reserve for credit losses as a percentage of total loans and Card Member receivables. Refer to “Maturities and Sensitivities to Changes in Interest Rates” for total outstanding balances of loans and Card Member receivables.
(e)Represents percentage of non-accrual loans to total loans.
(f)Represents the total reserve for credit losses on Card Member loans and other loans as a percentage of total non-accrual loans. Refer to “Allocation of reserve for credit losses” for reserve related to Card Member loans and other loans.
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Table of Contents
Allocation of Reserve for Credit Losses
The following table shows the reserve for credit losses allocated to each of loans and Card Member receivables by customer type, and between U.S. and non-U.S. borrowers.

December 31, |  | 2021 |  | 2020
(Millions, except percentages) Reserve for credit losses at end of year applicable to |  | Amount |  | Percentage (a) |  | Amount |  | Percentage (a)
Loans U.S. loans |  |  |  |  |  |  |  |
Card Member |  | $ | 3,067 |  |  | 91 | % |  | $ | 4,820 |  |  | 86 | %
Other |  | 50 |  |  | 1 |  |  | 228 |  |  | 4 |
Non-U.S. loans |  |  |  |  |  |  |  |
Card Member |  | 238 |  |  | 8 |  |  | 524 |  |  | 10 |
Other |  | 2 |  |  | — |  |  | 10 |  |  | — |
|  | $ | 3,357 |  |  | 100 | % |  | $ | 5,582 |  |  | 100 | %
Card Member receivables |  |  |  |  |  |  |  |
U.S. |  | $ | 54 |  |  | 84 | % |  | $ | 216 |  |  | 81 | %
Non-U.S. |  | 10 |  |  | 16 |  |  | 51 |  |  | 19 |
|  | $ | 64 |  |  | 100 | % |  | $ | 267 |  |  | 100 | %

(a)Percentage of reserve for credit losses on loans and Card Member receivables in each category to the total reserve.
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Table of Contents
Uninsured Time Certificates of Deposit
The following table presents the amount of uninsured time certificates of deposit issued by us in our U.S. and non-U.S. offices, further segregated by time remaining until maturity. For any account holder with aggregate deposits in excess of insured limits, the uninsured deposits are calculated proportionately as a percentage of total deposits for each category of deposits held as of the reporting date.

| By remaining maturity as of December 31, 2021
(Millions) | 3 months or less |  | Over 3 months but within 6 months |  | Over 6 months but within 12 months |  | Over 12 months |  | Total
U.S. (a) | $ | 73 |  |  | $ | 30 |  |  | $ | 18 |  |  | $ | 93 |  |  | $ | 214 |
Non U.S. (b) | $ | 1 |  |  | $ | 1 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 5 |

(a)We offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to $250,000 per account holder through the FDIC.
(b)Includes time deposits in certain of our Non-U.S. offices, that exceed the insurance limit as defined by the regulatory rules in individual markets.
A-8