UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

~~[X]~~☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2015~~2016

~~[ ]~~☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

~~SECURITIES~~ EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file number 1-7657

AMERICAN EXPRESS COMPANY

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (212) 640-2000


None

Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X ☑ No☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate ~~Web site,~~website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X ☑ No☐

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


Large accelerated filerx ☑		Accelerated filer¨ ☐

Non-accelerated filer¨ ~~(Do~~☐(Do not check if a smaller reporting company)		Smaller reporting company¨ ☐

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

Yes☐ No X ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at October ~~23, 2015~~18, 2016
Common Shares (par value $0.20 per share)		~~984,245,923 shares~~ 915,255,379 Shares

AMERICAN EXPRESS COMPANY

FORM 10-Q

INDEX

Part I.

Financial Information

Page No.

Item 1.

Financial Statements

Consolidated Statements of Income – Three Months Ended September 30, ~~2015~~2016 and ~~2014~~2015

Consolidated Statements of Income – Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015

Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015

Consolidated Balance Sheets – September 30, ~~2015~~2016 and December 31, ~~2014~~2015

Consolidated Statements of Cash Flows – Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34 32

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

74 70

Item 4.

Controls and Procedures

74 70

Part II.

Other Information

Item 1.

Legal Proceedings

77 73

Item 1A.

Risk Factors

79 75

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

80 76

Item 5.

Other Information

81 77

Item 6.

Exhibits

81 77

Signatures

82 78

Exhibit Index

E-1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Three Months Ended September 30,(Millions, except per share amounts)	2015		2014
Three Months Ended September 30 (Millions, except per share amounts)					2016		2015

Revenues
Non-interest revenues
Discount revenue	$	4,778	$ 4,889	$	4,516	$	4,778
Net card fees		679	680		747		679
Travel commissions and fees		87	104
Other commissions and fees		640	642
Other fees and commissions					694		727
Other		504	593		483		504

Total non-interest revenues		6,688	6,908		6,440		6,688

Interest income
Interest on loans		1,847	1,753		1,690		1,847
Interest and dividends on investment securities		38	45		34		38
Deposits with banks and other		19	17		40		19

Total interest income		1,904	1,815		1,764		1,904

Interest expense
Deposits		125	91		150		125
Long-term debt and other		274	329		280		274

Total interest expense		399	420		430		399

Net interest income		1,505	1,395		1,334		1,505

Total revenues net of interest expense		8,193	8,303		7,774		8,193

Provisions for losses
Charge card		203	196		174		203
Card Member loans		309	265		319		309
Other		17	27		11		17

Total provisions for losses		529	488		504		529

Total revenues net of interest expense after provisions for losses		7,664	7,815		7,270		7,664

Expenses
Marketing and promotion		847	783		930		847
Card Member rewards		1,763	1,695		1,566		1,763
Card Member services and other		269	205		278		269
Salaries and employee benefits		1,212	1,290		1,263		1,212
Other, net		1,635	1,596		1,498		1,635

Total expenses		5,726	5,569		5,535		5,726

Pretax income		1,938	2,246		1,735		1,938
Income tax provision		672	769		593		672

Net income	$	1,266	$ 1,477	$	1,142	$	1,266

Earnings per Common Share (Note 15):^(a)
Basic	$	1.24	$ 1.41	$	1.21	$	1.24
Diluted	$	1.24	$ 1.40	$	1.20	$	1.24

Average common shares outstanding for earnings per common share:
Basic		994	1,041		920		994
Diluted		997	1,047		923		997
Cash dividends declared per common share	$	0.29	$ 0.26	$	0.32	$	0.29

(a)

Represents net income less (i) earnings allocated to participating share awards of ~~$10~~$9 million and ~~$11~~$10 million for the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and (ii) dividends on preferred shares of ~~$22~~$21 million and ~~nil~~$22 million for the three months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively.

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Nine Months Ended September 30,(Millions, except per share amounts)	2015		2014
Nine Months Ended September 30(Millions, except per share amounts)				2016		2015

Revenues
Non-interest revenues
Discount revenue	$	14,384	$ 14,428	$	13,983	$	14,384
Net card fees		2,013	2,041		2,161		2,013
Travel commissions and fees		271	1,027
Other commissions and fees		1,891	1,884
Other fees and commissions					2,076		2,162
Other		1,493	1,679		1,514		1,493

Total non-interest revenues		20,052	21,059		19,734		20,052

Interest income
Interest on loans		5,418	5,160		5,446		5,418
Interest and dividends on investment securities		120	136		104		120
Deposits with banks and other		60	54		104		60

Total interest income		5,598	5,350		5,654		5,598

Interest expense
Deposits		337	276		450		337
Long-term debt and other		886	1,026		841		886

Total interest expense		1,223	1,302		1,291		1,223

Net interest income		4,375	4,048		4,363		4,375

Total revenues net of interest expense		24,427	25,107		24,097		24,427

Provisions for losses
Charge card		542	594		496		542
Card Member loans		829	797		831		829
Other		45	71		74		45

Total provisions for losses		1,416	1,462		1,401		1,416

Total revenues net of interest expense after provisions for losses		23,011	23,645		22,696		23,011

Expenses
Marketing and promotion		2,217	2,329		2,445		2,217
Card Member rewards		5,202	5,050		5,035		5,202
Card Member services and other		772	619		841		772
Salaries and employee benefits		3,767	4,488		4,052		3,767
Other, net		4,569	4,393		3,388		4,569

Total expenses		16,527	16,879		15,761		16,527

Pretax income		6,484	6,766		6,935		6,484
Income tax provision		2,220	2,328		2,352		2,220

Net income	$	4,264	$ 4,438	$	4,583	$	4,264

Earnings per Common Share (Note 15):^(a)
Basic	$	4.16	$ 4.19	$	4.77	$	4.16
Diluted	$	4.15	$ 4.17	$	4.76	$	4.15

Average common shares outstanding for earnings per common share:
Basic		1,007	1,051		940		1,007
Diluted		1,011	1,057		943		1,011
Cash dividends declared per common share	$	0.84	$ 0.75	$	0.90	$	0.84

(a)

Represents net income less (i) earnings allocated to participating share awards of ~~$32~~$37 million and ~~$35~~$32 million for the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and (ii) dividends on preferred shares of ~~$42~~$61 million and ~~nil~~$42 million for the nine months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively.

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

   Three Months Ended    Nine Months Ended
   September 30,    September 30,
(Millions)
   2015    2014    2015    2014








Net income
   $ 1,266       $ 1,477       $ 4,264       $        4,438
Other comprehensive (loss) income:

Net unrealized securities (losses) gains,
net of tax: 2015, $(2) and $(13); 2014, $(5) and $19
   (7)       (11)       (27)       31
Foreign currency translation adjustments,
net of tax: 2015, $181 and $221; 2014, $119 and $41
   (220)       (167)       (464)       (195)
Net unrealized pension and other postretirement benefit gains,
net of tax: 2015, $8 and $24; 2014, $9 and $29
   7       7       36       48









Other comprehensive loss
   (220)       (171)       (455)       (116)









Comprehensive income
   $ 1,046       $ 1,306       $ 3,809       $        4,322



	Three Months Ended						Nine Months Ended
	September 30,						September 30,

(Millions)	2016			2015			2016			2015

Net income	$	1,142		$	1,266		$	4,583		$	4,264
Other comprehensive income (loss):

Net unrealized securities losses, net of tax of: 2016, $(9) and $(7); 2015, $(2) and $(13)		(15	)		(7	)		(8	)		(27	)

Foreign currency translation adjustments, net of tax of: 2016, $(24) and $37; 2015, $181 and $221		11			(220	)		(115	)		(464	)

Net unrealized pension and other postretirement benefit gains, net of tax of: 2016, $7 and $36; 2015, $8 and $24		7			7			39			36

Other comprehensive income (loss)		3			(220	)		(84	)		(455	)

Comprehensive income	$	1,145		$	1,046		$	4,499		$	3,809

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)




	September 30,		December 31,

(Millions, except share data)	2015		2014		September 30, 2016			December 31, 2015

Assets
Cash and cash equivalents
Cash and due from banks	$	2,613	$ 2,628	$	2,524		$	2,935
Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2015, $222; 2014, $204)		16,716	19,190
Interest-bearing deposits in banks (includes securities purchased under resale agreements: 2016, $243; 2015, $41)					22,988			19,569
Short-term investment securities		609	470		1,008			258

Total cash and cash equivalents		19,938	22,288		26,520			22,762
Card Member loans and receivables held for sale (includes gross loans and receivables available to settle obligations of consolidated variable interest entities: 2016, nil; 2015, $4,966)					—			14,992
Accounts receivable
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2015, $5,959; 2014, $7,025), less reserves: 2015, $441; 2014, $465		43,890	44,386
Other receivables, less reserves: 2015, $61; 2014, $61		2,517	2,614
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2016, $5,485; 2015, $6,649), less reserves: 2016, $437; 2015, $462					44,821			43,671
Other receivables, less reserves: 2016, $48; 2015, $43					2,510			3,024
Loans
Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2015, $27,284; 2014, $30,115), less reserves: 2015, $1,164; 2014, $1,201		67,731	69,184
Other loans, less reserves: 2015, $18; 2014, $12		1,054	920
Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2016, $24,752; 2015, $23,559), less reserves: 2016, $1,114; 2015, $1,028					59,504			57,545
Other loans, less reserves: 2016, $30; 2015, $20					1,157			1,254
Investment securities		3,947	4,431		3,728			3,759
Premises and equipment, less accumulated depreciation and amortization: 2015, $6,733; 2014, $6,270		4,032	3,938
Other assets (includes restricted cash of consolidated variable interest entities: 2015, $748; 2014, $64)		11,107	11,342
Premises and equipment, less accumulated depreciation and amortization: 2016, $4,995; 2015, $6,801					4,301			4,108
Other assets (includes restricted cash of consolidated variable interest entities: 2016, $612; 2015, $155)					10,836			10,069

Total assets	$	154,216	$ 159,103	$	153,377		$	161,184

Liabilities and Shareholders’ Equity
Liabilities
Customer deposits	$	49,301	$ 44,171	$	53,500		$	54,997
Travelers Cheques and other prepaid products		3,044	3,673		2,656			3,247
Accounts payable		11,340	11,300		11,372			11,822
Short-term borrowings		3,160	3,480
Long-term debt (includes debt issued by consolidated variable interest entities: 2015, $13,285; 2014, $19,516)		48,653	57,955
Short-term borrowings (includes debt issued by a consolidated variable interest entity: 2016, nil; 2015, $100)					2,861			4,812
Long-term debt (includes debt issued by consolidated variable interest entities: 2016, $14,759; 2015, $13,602)					44,894			48,061
Other liabilities		17,383	17,851		17,077			17,572

Total liabilities		132,881	138,430		132,360			140,511

Contingencies (Note 8)
Commitments and Contingencies (Note 8)
Shareholders’ Equity
Preferred shares, $1.66^2/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares as of September 30, 2015, and 750 shares as of December 31, 2014		—	—
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 985 million shares as of September 30, 2015 and 1,023 million shares as of December 31, 2014		197	205
Preferred shares, $1.66^2/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares as of September 30, 2016 and December 31, 2015					—			—
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 917 million shares as of September 30, 2016 and 969 million shares as of December 31, 2015					184			194
Additional paid-in capital		13,487	12,874		12,790			13,348
Retained earnings		10,025	9,513		10,661			9,665
Accumulated other comprehensive loss
Net unrealized securities gains, net of tax: 2015, $39; 2014, $52		69	96
Foreign currency translation adjustments, net of tax: 2015, $(96); 2014, $(317)		(1,963)	(1,499)
Net unrealized pension and other postretirement benefit losses, net of tax: 2015, $(199); 2014, $(223)		(480)	(516)
Net unrealized securities gains, net of tax: 2016, $25; 2015, $32					50			58
Foreign currency translation adjustments, net of tax: 2016, $(63); 2015, $(100)					(2,159	)		(2,044	)
Net unrealized pension and other postretirement benefit losses, net of tax: 2016, $(188); 2015, $(223)					(509	)		(548	)

Total accumulated other comprehensive loss		(2,374)	(1,919)		(2,618	)		(2,534	)

Total shareholders’ equity		21,335	20,673		21,017			20,673

Total liabilities and shareholders’ equity	$	154,216	$ 159,103	$	153,377		$	161,184

See Notes to Consolidated Financial Statements.

AMERICAN EXPRESS COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Nine Months Ended September 30,(Millions)	2015		2014
Nine Months Ended September 30 (Millions)						2016			2015

Cash Flows from Operating Activities				Cash Flows from Operating Activities
Net income	$	4,264	$ 4,438		$	4,583		$	4,264
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for losses		1,416	1,462			1,401			1,416
Depreciation and amortization		780	764			810			780
Deferred taxes and other		25	(497)			(1,076	)		135
Stock-based compensation		200	210			190			200
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Other receivables		(166)	275			485			(203	)
Other assets		1,864	850			115			1,864
Accounts payable and Other liabilities		270	1,793
Accounts payable and other liabilities						(1,028	)		(53	)
Travelers Cheques and other prepaid products		(579)	(709)			(594	)		(579	)

Net cash provided by operating activities		8,074	8,586			4,886			7,824

Cash Flows from Investing Activities
Sales of available-for-sale investment securities		12	122			51			12
Maturities and redemptions of available-for-sale investment securities		1,821	966			1,209			1,821
Purchase of investments		(1,564)	(825)
Net increase in Card Member receivables/loans		(1,292)	(2,349)
Purchase of premises and equipment, net of sales: 2015, $32; 2014, $3		(879)	(854)
Business acquisitions, net of cash acquired		(122)	(130)
Net (increase) decrease in restricted cash		(683)	90
Purchases of investments						(1,355	)		(1,564	)
Net decrease (increase) in Card Member receivables and loans, including held for sale^(a)						11,818			(1,292	)
Purchase of premises and equipment, net of sales: 2016, $2; 2015, $32						(975	)		(879	)
Acquisitions/dispositions, net of cash acquired						(191	)		(122	)
Net increase in restricted cash						(427	)		(683	)

Net cash used in investing activities		(2,707)	(2,980)
Net cash provided by (used in) investing activities						10,130			(2,707	)

Cash Flows from Financing Activities
Net increase in customer deposits		5,171	917
Net (decrease) increase in customer deposits						(1,499	)		5,171
Net decrease in short-term borrowings		(273)	(1,595)			(2,040	)		(273	)
Issuance of long-term debt		7,925	11,329			5,926			7,923
Principal payments on long-term debt		(17,110)	(10,659)			(9,349	)		(16,858	)
Issuance of American Express preferred shares		841	—			—			841
Issuance of American Express common shares		169	251			78			169
Repurchase of American Express common shares		(3,330)	(3,205)			(3,477	)		(3,330	)
Dividends paid		(868)	(770)			(892	)		(868	)

Net cash used in financing activities		(7,475)	(3,732)			(11,253	)		(7,225	)

Effect of foreign currency exchange rates on cash and cash equivalents		(242)	(96)			(5	)		(242	)

Net (decrease) increase in Cash and cash equivalents		(2,350)	1,778
Net increase (decrease) in cash and cash equivalents						3,758			(2,350	)
Cash and cash equivalents at beginning of period		22,288	19,486			22,762			22,288

Cash and cash equivalents at end of period	$	19,938	$ 21,264		$	26,520		$	19,938


Supplemental cash flow information
Non-cash financing activities

Gain on business travel joint venture transaction	$	—	$ 641

(a)	Refer to Note 2 for additional information.

See Notes to Consolidated Financial Statements

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Basis of Presentation

The Company

American Express Company (the Company) is a global services company that provides customers with access to products, insights and experiences that enrich lives and build business success. The Company’s principal products and services are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. Business travel-related services are offered through the non-consolidated joint venture, American Express Global Business Travel (GBT JV). Prior to July 1, 2014, these business travel operations were wholly owned. The Company also focuses on generating alternative sources of revenue on a global basis in areas such as online and mobile payments, and fee-based services. The Company’s various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various channels, including direct mail, online applications, ~~targeted direct~~in-house and third-party sales forces and direct response advertising.

Effective for the first quarter of 2016, the Company realigned its segment presentation to reflect the organizational changes announced during the fourth quarter of 2015. Prior periods have been restated to conform to the new reportable operating segments, which are as follows:

U.S. Consumer Services (USCS), including the proprietary U.S. Consumer Card Services business and travel services in the United States;

International Consumer and Network Services (ICNS), including the proprietary International Consumer Card Services business, Global Network Services (GNS) business and travel services outside the United States;

Global Commercial Services (GCS), including the proprietary Global Corporate Payments (GCP) business, small business services businesses in the United States and internationally (collectively, Global Small Business Services), merchant financing products and foreign exchange services operations; and

Global Merchant Services (GMS), including the Global Merchant Services business and global loyalty coalition businesses.

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

The accompanying Consolidated Financial Statements should be read in conjunction with the ~~consolidated financial statements incorporated by reference~~Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 (the Annual Report). If not materially different, certain footnote disclosures included ~~in the Annual Report~~therein have been omitted from this Quarterly Report on Form 10-Q.

The interim consolidated financial information in this report has not been audited. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim period consolidated financial information, have been made. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

The preparation of ~~consolidated financial statements~~Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates reflect the best judgment of management, but actual results could differ.

~~In the first quarter~~Certain reclassifications of ~~2015, the Company changed the classification related to certain payments to partners, reducing both discount revenue and marketing and promotion expense. Prior~~prior period amounts have been ~~reclassified~~made to conform to the current period presentation. ~~None~~During 2016, the Company determined that in the Consolidated Statements of Cash Flows for the ~~prior period financial statements~~comparative periods ended June 30, 2015, September 30, 2015 and December 31, 2015, certain activities related to long-term debt repayments were ~~materially misstated from~~misclassified between financing activities and operating activities.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

There is no impact to the Consolidated Statements of Income or Consolidated Balance Sheets. The Company has evaluated the effects of these misclassifications and concluded that none are material to any of its previously issued quarterly or annual Consolidated Financial Statements. Nevertheless, the Company has elected to revise prospectively the comparative periods mentioned above. For the nine months ended September 30, 2015, this ~~misclassification.~~revision resulted in a $250 million decrease to both Net cash used in financing activities and Net cash provided by operating activities. In addition, travel commissions and fees, which were separately disclosed on the Consolidated Statements of Income historically, are now included within Other fees and commissions.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued new accounting guidance on revenue recognition. The guidance establishes the principles to apply to determine the amount and timing of revenue recognition, specifying the accounting for certain costs related to revenue, and requiring additional disclosures about the nature, amount, timing and uncertainty of revenues and related cash flows. The guidance, as amended, supersedes most of the current revenue recognition requirements, and is effective January 1, 2018, with early adoption as of January 1, 2017, permitted. The Company does not intend to adopt the new standard early and continues to evaluate the method of implementation and the impact this guidance ~~including the method of implementation,~~ will have on its financial position, results of operations and cash flows, among other items.

~~AMERICAN EXPRESS COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In January ~~2014,~~2016, the FASB issued new accounting guidance on ~~investments in Qualified Affordable Housing projects. Provided~~the recognition and measurement of financial assets and financial liabilities. The guidance, which is effective January 1, 2018, makes targeted changes to current GAAP, specifically to the classification and measurement of equity securities, and to certain ~~conditions are met, this standard permits entities to account for investments in Qualified Affordable Housing projects using~~disclosure requirements associated with the ~~proportional amortization method. The standard also requires new disclosures about all investments in Qualified Affordable Housing projects irrespective~~fair value of ~~the method used to account for the investments.~~financial instruments. The Company ~~has adopted~~continues to evaluate the impact this guidance inwill have on its financial position, results of operations and cash flows, among other items.

In February 2016, the ~~first quarter of 2015 and has elected not to use the proportional amortization method, but continues to account for these investments using the equity method of~~FASB issued new accounting ~~which has been the Company’s historical practice.~~

During the three and nine months ended September 30, 2015, the Company recognized equity method losses related to Qualified Affordable Housing of $14 million and $34 million, respectively, which were recognized in Other, net expenses; and associated tax credits of $15 million and $39 million, respectively, which were recognized in Income tax provision. Similarly, during the three and nine months ended September 30, 2014, the Company recognized equity method losses of $7 million and $39 million, respectively; and associated tax credits of $12 million and $30 million, respectively.guidance on leases. The carrying value of these investments was $605 million and $522 million as of September 30, 2015 and December 31, 2014, respectively. In addition, as of September 30, 2015, the Company is contractually committed to provide additional funding related to certain of these investments, resulting in a liability of $134 million for unfunded commitments reported in Other liabilities,guidance, which is ~~expected~~effective January 1, 2019, with early adoption permitted, requires virtually all leases to be ~~paid between 2015 and 2023.~~

2.	~~Divestiture and Portfolio Sale~~

On June 30, 2014, the Company completed a transaction to establish a non-consolidated joint venture comprising the former Global Business Travel (GBT) operations of the Company and an external cash investment. As a result of this transaction, the Company deconsolidated the GBT net assets, effective June 30, 2014, and began accounting for the GBT JV as an equity method investment reported in Other assets withinrecognized on the Consolidated Balance Sheets. ~~Prior~~The Company does not intend to adopt the ~~deconsolidation,~~new standard early and continues to evaluate the ~~carrying amount~~impact this guidance will have on its financial position, results of ~~GBT’s assets~~operations and ~~liabilities were~~cash flows, among other items.

In March 2016, the FASB issued new accounting guidance on employee share-based payments. The guidance, which is effective January 1, 2017, with early adoption permitted, simplifies various aspects of the accounting for share-based payment transactions, including the income tax consequences, accounting for award forfeitures, and classification on the Consolidated Statements of Cash Flows. Among other items, the guidance requires excess tax benefits and deficiencies, which under previous guidance would have been recorded within additional paid-in capital, to now be recognized in the income tax provision within the results of operations. The Company continues to evaluate the impact this guidance will have on its financial position, results of operations and cash flows, among other items, but does not expect the impacts of the standard to be material upon adoption. The Company will adopt the standard, prospectively, effective January 1, 2017.

In June 2016, the FASB issued new accounting guidance for recognition of credit losses on financial instruments, which is effective January 1, 2020, with early adoption permitted on January 1, 2019. The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (CECL) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information and will likely result in earlier recognition of credit reserves. The Company does not intend to adopt the new standard early and is currently evaluating the impact the new guidance will have on its financial position, results of operations and cash flows; however, it is expected that the new CECL model will alter the assumptions used in calculating credit losses on Card Member loans and receivables, among other financial instruments, and may result in material changes to the Company’s ~~financial position and its operations were reported within the Global Commercial Services (GCS) segment.~~

On October 26, 2015, the Company reached an agreement to sell the outstanding Card Member loan portfolio related to its co-brand partnership with JetBlue Airways Corporation (JetBlue). The carrying amount of the portfolio of JetBlue Card Member loans is not material to the Company’s financial position. The sale is subject to customary closing conditions, and is expected to be consummated in the first quarter of 2016 and is reported within the U.S. Card Services (USCS) segment, at which time the related gain will be recognized.credit reserves.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2.	Business Events

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

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3.	Loans and Accounts Receivable ~~and Loans~~

The Company’s ~~charge~~lending and ~~lending~~charge payment card products result in the generation of Card Member ~~receivables~~loans and Card Member receivables, respectively. This Note is presented excluding amounts associated with the Card Member loans ~~respectively.~~

~~Accounts receivable by segment~~and receivables HFS as of December 31, 2015; the Company did not have any Card Member loans and receivables HFS as of September 30, ~~2015~~2016.

Card Member loans by segment and Other loans as of September 30, 2016 and December 31, ~~2014,~~2015, consisted of:

(Millions)    2015    2014





U.S. Card Services^(a)
   $               21,965    $              22,468
International Card Services
   6,511    7,653
Global Commercial Services^(b)
   15,748    14,583
Global Network & Merchant Services^(c)
   107    147





Card Member receivables^(d)
   44,331    44,851
Less: Reserve for losses
   441    465





Card Member receivables, net
   $ 43,890    $              44,386





Other receivables, net^(e)
   $ 2,517    $                2,614



(Millions)		2016		2015

U.S. Consumer Services^(a)	$	44,857	$	43,495
International Consumer and Network Services		6,700		7,072
Global Commercial Services		9,061		8,006

Card Member loans		60,618		58,573
Less: Reserve for losses		1,114		1,028

Card Member loans, net	$	59,504	$	57,545

Other loans, net^(b)	$	1,157	$	1,254

(a)

Includes ~~$6.0~~approximately $24.8 billion and ~~$7.0~~$23.6 billion of gross Card Member ~~receivables~~loans available to settle obligations of a consolidated variable interest entity (VIE) as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

(b)

~~Includes $327~~Other loans primarily represent merchant financing loans. Other loans are presented net of reserves for losses of $30 million and ~~$636 million due from airlines, of which Delta Air Lines comprises $265 million and $606~~$20 million as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

Card Member accounts receivable by segment and Other receivables as of September 30, 2016 and December 31, 2015 consisted of:



(Millions)		2016		2015

U.S. Consumer Services^(a)	$	10,101	$	11,807
International Consumer and Network Services		5,551		5,599
Global Commercial Services		29,606		26,727

Card Member receivables^(b)		45,258		44,133
Less: Reserve for losses		437		462

Card Member receivables, net	$	44,821	$	43,671

Other receivables, net^(c)	$	2,510	$	3,024

~~(c)~~(a)

Includes $5.5 billion and $6.6 billion of gross Card Member receivables ~~primarily related~~available to ~~the Company’s International Currency Card portfolios.~~

settle obligations of a consolidated VIE as of September 30, 2016 and December 31, 2015, respectively.

~~(d)~~(b)

Includes approximately ~~$12.3~~$12.9 billion and ~~$13.3~~$11.9 billion of Card Member receivables outside the ~~U.S.~~United States as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

~~(e)~~(c)

Other receivables primarily represent amounts related to (i) certain merchants for billed discount revenue, ~~and~~ (ii) ~~Global Network Services (GNS)~~GNS partner banks for items such as royalty and franchise fees, and (iii) loyalty coalition partners for points issued, as well as program participation and servicing fees. Other receivables are presented net of reserves for losses of ~~$61 million as of both September 30, 2015 and December 31, 2014.~~

~~Loans by segment as of September 30, 2015 and December 31, 2014, consisted of:~~

(Millions)    2015    2014





U.S. Card Services^(a)
   $               62,133       $              62,592
International Card Services
   6,710       7,744
Global Commercial Services
   52       49





Card Member loans
   68,895       70,385
Less: Reserve for losses
   1,164       1,201





Card Member loans, net
   $ 67,731       $              69,184





Other loans, net^(b)
   $ 1,054       $                   920

~~(a)~~

~~Includes approximately $27.3 billion and $30.1 billion of gross Card Member loans available to settle obligations of a consolidated VIE as of September 30, 2015 and December 31, 2014, respectively.~~

~~(b)~~

~~Other loans primarily represent loans to merchants. Other loans are presented net of reserves for losses of $18~~$48 million and ~~$12~~$43 million as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Card Member Loans and Card Member Receivables Aging

Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing statement date. The following table presents the aging of Card Member loans and receivables as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:

      30-59    60-89    90+
      Days    Days    Days
      Past    Past    Past
2015 (Millions)    Current    Due    Due    Due    Total











Card Member Loans:

U.S. Card Services
   $       61,530       $             191       $             131       $             281       $      62,133
International Card Services
   6,604       35       22       49       6,710
Card Member Receivables:

U.S. Card Services
   $ 21,612       $ 133       $ 73       $ 147       $      21,965
International Card Services
   6,412       29       22       48       6,511
Global Commercial Services^(a)
   (b)       (b)       (b)       112       15,748

      30-59    60-89    90+
      Days    Days    Days
      Past    Past    Past
2014 (Millions)    Current    Due    Due    Due    Total











Card Member Loans:

U.S. Card Services
   $ 61,995       $ 179       $ 128       $ 290       $      62,592
International Card Services
   7,621       39       27       57       7,744
Card Member Receivables:

U.S. Card Services
   $ 22,096       $ 129       $ 72       $ 171       $      22,468
International Card Services
   7,557       29       20       47       7,653
Global Commercial Services^(a)
   (b)       (b)       (b)       120       14,583



2016(Millions)		Current			30-59 Days Past Due			60-89 Days Past Due			90+ Days Past Due		Total

Card Member Loans:
U.S. Consumer Services	$	44,367		$	149		$	105		$	236	$	44,857
International Consumer and Network Services		6,589			34			25			52		6,700
Global Commercial Services
Global Small Business Services		8,918			29			20			46		9,013
Global Corporate Payments^(a)		(b	)		(b	)		(b	)		1		48
Card Member Receivables:
U.S. Consumer Services	$	9,963		$	51		$	28		$	59	$	10,101
International Consumer and Network Services		5,470			25			17			39		5,551
Global Commercial Services
Global Small Business Services		13,605			77			44			83		13,809
Global Corporate Payments^(a)		(b	)		(b	)		(b	)		124		15,797



2015 (Millions)		Current			30-59 Days Past Due			60-89 Days Past Due			90+ Days Past Due		Total

Card Member Loans:
U.S. Consumer Services	$	43,063		$	128		$	94		$	210	$	43,495
International Consumer and Network Services		6,961			34			25			52		7,072
Global Commercial Services
Global Small Business Services		7,867			26			18			40		7,951
Global Corporate Payments^(a)		(b	)		(b	)		(b	)		1		55
Card Member Receivables:
U.S. Consumer Services	$	11,646		$	54		$	32		$	75	$	11,807
International Consumer and Network Services		5,515			24			18			42		5,599
Global Commercial Services
Global Small Business Services		12,734			69			45			102		12,950
Global Corporate Payments^(a)		(b	)		(b	)		(b	)		124		13,777

(a)

For GCP Card Member loans and receivables in GCS, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if the Company initiates collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member loan and receivable balance is classified as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes.

(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.


		10

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Credit Quality Indicators for Card Member Loans and Receivables

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

   2015 2014
       Net Write-Off Rate         Net Write-Off Rate



         30+ Days          30+ Days
   Principal, Past Due     Principal,    Past Due
           Principal   Interest, & as a % of         Principal Interest, &    as a % of
   Only ^(a) Fees ^(a) Total    Only ^(a) Fees ^(a)    Total





Card Member Loans:

U.S. Card Services
   1.4 % 1.6 % 1.0 % 1.6 % 1.8%    1.0%
International Card Services
   2.0 % 2.4 % 1.6 % 2.0 % 2.4%    1.6%
Card Member Receivables:

U.S. Card Services
   1.8 % 2.0 % 1.6 % 1.7 % 1.9%    1.6%
International Card Services
   2.1 % 2.2 % 1.5 % 2.0 % 2.1%    1.4%

   2015
2014
   Net Loss Net Loss
   Ratio as 90+ Days Ratio as    90+ Days
   a % of Past Billing a % of    Past Billing
   Charge as a % of Charge    as a % of
   Volume Receivables Volume    Receivables



Card Member Receivables:


Global Commercial Services

0.09 % 0.7 % 0.09%    0.8%



	2016						2015

	Net Write-Off Rate						Net Write-Off Rate

	Principal Only^(a)		Principal, Interest & Fees^(a)		30+ Days Past Due as a % of Total		Principal Only^(a)		Principal, Interest & Fees^(a)		30+ Days Past Due as a % of Total

Card Member Loans:
U.S. Consumer Services	1.5	%	1.8	%	1.1	%	1.4	%	1.6	%	1.0	%
International Consumer and Network Services	2.0	%	2.5	%	1.7	%	2.0	%	2.4	%	1.6	%
Global Small Business Services	1.4	%	1.7	%	1.1	%	1.3	%	1.5	%	1.0	%
Card Member Receivables:
U.S. Consumer Services	1.4	%	1.6	%	1.4	%	1.6	%	1.8	%	1.6	%
International Consumer and Network Services	2.1	%	2.3	%	1.5	%	2.1	%	2.3	%	1.6	%
Global Small Business Services	1.6	%	1.8	%	1.5	%	1.9	%	2.2	%	1.6	%



					2016				2015

					Net Loss Ratio as a % of Charge Volume		90+ Days Past Billing as a % of Receivables		Net Loss Ratio as a % of Charge Volume		90+ Days Past Billing as a % of Receivables

Card Member Receivables:
Global Corporate Payments					0.09	%	0.8	%	0.09	%	0.7	%

(a)

The Company presents a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, because the Company considers uncollectible interest and/or fees in estimating its reserves for credit losses, a net write-off rate including principal, interest and/or fees is also presented. The nine months ended September 30, 2015, reflects the impact of a change in the timing of charge-offs for Card Member loans and receivables in certain modification programs from 180 days past due to 120 days past due, which was fully recognized during the three months ended March 31, 2015.

Impaired Card Member Loans and Receivables

Impaired Card Member loans and receivables are individual larger balance or homogeneous pools of smaller balance loans and receivables for which it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the Card Member agreement. In certain cases, these Card Member loans and receivables are included in one of the Company’s various ~~modification programs. Beginning January 1, 2015, on a prospective basis the Company continues to classify Card Member accounts that have exited a modification program as a~~ Troubled Debt Restructuring (TDR)~~, with such accounts identified as “Out of Program TDRs.”~~ modification programs.


		11

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following ~~table provides~~tables provide additional information with respect to the Company’s impaired Card Member loans ~~(which~~and receivables. Impaired Card Member receivables are not significant for ~~GCS) and impaired Card Member receivables (which are not significant for International Card Services (ICS) and GCS)~~ICNS as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015; therefore, the segment’s receivables are not included in the following tables.

As of September 30, 2015
   Over 90 days Accounts Classified
as a TDR^(c)
   Past Due & Total    Unpaid
   Accruing Non- Out of Impaired    Principal    Allowance
(Millions)    Interest ^(a) Accruals ^(b) In Program ^(d) Program ^(e) Balance       Balance    for TDRs







Card Member Loans:

U.S. Card Services
   $             192    $             175    $             224    $             109    $             700       $            649    $              66
International Card Services
   49    —    —    —    49       49    —
Card Member Receivables:

U.S. Card Services
   —    —    26    4    30       30    18







Total
   $ 241    $ 175    $ 250    $ 113    $ 779       $728    $              84


   As of December 31, 2014



   Over 90 days
   Past Due & Total Unpaid
   Accruing Non- In Program Impaired Principal    Allowance
(Millions)    Interest ^(a) Accruals ^(b) TDRs ^(c)(d) Balance    Balance       for TDRs






Card Member Loans:

U.S. Card Services
   $ 161    $ 241    $ 286    $ 688    $ 646       $67
International Card Services
   57    —    —    57    56       —
Card Member Receivables:

U.S. Card Services
   —    —    48    48    48       35






Total
   $ 218    $ 241    $ 334    $ 793    $ 750       $102



	As of September 30, 2016

					Accounts Classified as a TDR^(c)

2016(Millions)	Over 90 days Past Due & Accruing Interest^(a)		Non- Accruals^(b)		In Program^(d)		Out of Program^(e)		Total Impaired Balance		Unpaid Principal Balance		Allowance for TDRs

Card Member Loans:
U.S. Consumer Services	$	156	$	133		168	$	124	$	581	$	532	$	50
International Consumer and Network Services		52		—		—		—		52		51		—
Global Commercial Services		27		29		27		25		108		100		10
Card Member Receivables:
U.S. Consumer Services		—		—		9		5		14		14		6
Global Commercial Services		—		—		24		8		32		32		18

Total	$	235	$	162		228	$	162	$	787	$	729	$	84




	As of December 31, 2015

					Accounts Classified as a TDR^(c)

2015(Millions)	Over 90 days Past Due & Accruing Interest^(a)		Non- Accruals^(b)		In Program^(d)		Out of Program^(e)		Total Impaired Balance		Unpaid Principal Balance		Allowance for TDRs

Card Member Loans:
U.S. Consumer Services	$	140	$	124		149	$	89	$	502	$	463	$	44
International Consumer and Network Services		52		—		—		—		52		51		—
Global Commercial Services		24		26		23		18		91		85		9
Card Member Receivables:
U.S. Consumer Services		—		—		11		3		14		14		8
Global Commercial Services		—		—		16		3		19		19		12

Total	$	216	$	150		199	$	113	$	678	$	632	$	73

(a)

The Company’s policy is generally to accrue interest through the date of write-off ~~(generally~~(typically 180 days past due). The Company establishes reserves for interest that it believes will not be collected. Amounts presented exclude Card Member loans classified as a TDR.

(b)

Non-accrual loans not in modification programs primarily include certain Card Member loans placed with outside collection agencies for which the Company has ceased accruing interest.

(c)

Accounts classified as a TDR include $19 million and ~~$26~~$20 million that are over 90 days past due and accruing interest and ~~$25~~$14 million and ~~$34~~$18 million that are ~~non-accrual~~non-accruals as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

(d)

In Program TDRs include Card Member accounts that are currently enrolled in a modification program.

(e)

Out of Program TDRs include ~~$82~~$123 million and $84 million of Card Member accounts that have successfully completed a modification program and ~~$31~~$39 million and $29 million of Card Member accounts that were not in compliance with the terms of the modification ~~programs.~~

programs as of September 30, 2016 and December 31, 2015, respectively.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides information with respect to the Company’s average balances of, and interest income recognized from, impaired Card Member loans ~~(which are not significant for GCS)~~ and the average balances of impaired Card Member receivables ~~(which are not significant for ICS and GCS)~~ for the three and nine months ended September 30:

   Three Months Ended    Nine Months Ended
   September 30, 2015    September 30, 2015




   Average      Interest Income    Average      Interest Income
2015 (Millions)    Balance      Recognized    Balance      Recognized









Card Member Loans:

U.S. Card Services
   $                             693         $                               16       $                             685         $                              43
International Card Services
   53         3       55         10
Card Member Receivables:

U.S. Card Services
   28         —       35         —









Total
   $ 774         $ 19       $ 775         $                              53

   Three Months Ended    Nine Months Ended
   September 30, 2014    September 30, 2014




   Average      Interest Income    Average      Interest Income
2014 (Millions)    Balance      Recognized    Balance      Recognized









Card Member Loans:

U.S. Card Services
   $ 675         $ 12       $ 734         $                              37
International Card Services
   63         4       63         12
Card Member Receivables:

U.S. Card Services
   44         —       47         —









Total
   $ 782         $ 16       $ 844         $                              49



	Three Months Ended September 30, 2016				Nine Months Ended September 30, 2016
(Millions)	Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized

Card Member Loans:
U.S. Consumer Services	$	587	$	14	$	555	$	38
International Consumer and Network Services		53		4		52		12
Global Commercial Services		111		4		102		10
Card Member Receivables:
U.S. Consumer Services		13		—		13		—
Global Commercial Services		29		—		24		—

Total	$	793	$	22	$	746	$	60



	Three Months Ended September 30, 2015				Nine Months Ended September 30, 2015
(Millions)	Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized

Card Member Loans:
U.S. Consumer Services	$	585	$	13	$	580	$	34
International Consumer and Network Services		53		3		55		10
Global Commercial Services		108		3		105		9
Card Member Receivables:
U.S. Consumer Services		11		—		14		—
Global Commercial Services		17		—		21		—

Total	$	774	$	19	$	775	$	53


		13

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Card Member Loans and Receivables Modified as TDRs

The following table provides additional information with respect to the USCS and GCS Card Member loans and receivables modified as TDRs for the three and nine months ended September 30, ~~2015~~2016 and ~~2014.~~2015. The ~~ICS~~ICNS Card Member loans and receivables modifications were not ~~significant and the Company does not offer modification programs for its GCS Card Member receivables;~~significant; therefore, ~~these segments are~~this segment is not included in the following TDR disclosures.



	Three Months Ended								Nine Months Ended
	September 30, 2015								September 30, 2015
							Average								Average
					Average		Payment						Average		Payment
	Number of		Outstanding		Interest Rate		Term		Number of		Outstanding		Interest Rate		Term
	Accounts		Balances^(a)		Reduction		Extension		Accounts		Balances^(a)		Reduction		Extension	Three Months Ended September 30, 2016										Nine Months Ended September 30, 2016
	(thousands)		(millions)		(% Points)		(Months)		(thousands)		(millions)		(% Points)		(Months)
																Number of Accounts (in thousands)		Outstanding Balances^(a) ($ in millions)		Average Interest Rate Reduction (% Points)			Average Payment Term Extension (# of Months)			Number of Accounts (in thousands)		Outstanding Balances^(a) ($ in millions)		Average Interest Rate Reduction (% Points)			Average Payment Term Extension (# of Months)
Troubled Debt Restructurings:
Card Member Loans		10	$	69		9		(b)		31	$	218		10	(b)		8	$	56		9			(b	)		23	$	163		10			(b	)
Card Member Receivables		3		37		(c)		12		9		111		(c)	12		2		29		(c	)		19			7		94		(c	)		17

Total		13	$	106						40	$	329					10	$	85								30	$	257



	Three Months Ended								Nine Months Ended							Three Months Ended September 30, 2015										Nine Months Ended September 30, 2015
	September 30, 2014								September 30, 2014
							Average								Average	Number of Accounts (in thousands)		Outstanding Balances^(a) ($ in millions)		Average Interest Rate Reduction (% Points)			Average Payment Term Extension (# of Months)			Number of Accounts (in thousands)		Outstanding Balances^(a) ($ in millions)		Average Interest Rate Reduction (% Points)			Average Payment Term Extension (# of Months)
					Average		Payment						Average		Payment
	Number of		Outstanding		Interest Rate		Term		Number of		Outstanding		Interest Rate		Term
	Accounts		Balances^(a)		Reduction		Extension		Accounts		Balances^(a)		Reduction		Extension
	(thousands)		(millions)		(% Points)		(Months)		(thousands)		(millions)		(% Points)		(Months)

Troubled Debt Restructurings:
Card Member Loans		11	$	83		9		(b)		35	$	261		11	(b)		10	$	69		9			(b	)		31	$	218		10			(b	)
Card Member Receivables		4		41		(c)		12		11		129		(c)	12		3		37		(c	)		12			9		111		(c	)		12

Total		15	$	124						46	$	390					13	$	106								40	$	329

(a)

Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and accrued interest on Card Member loans and principal and fees on Card Member receivables. Modifications did not reduce the principal balance.

(b)

For Card Member loans, there have been no payment term extensions.

(c)

The Company does not offer interest rate reduction programs for Card Member receivables as the receivables are non-interest bearing.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides information ~~for the three and nine months ended September 30, 2015 and 2014,~~ with respect to the USCS and GCS Card Member loans and receivables modified as TDRs that subsequently defaulted within 12 months of ~~modification.~~modification, in the three and nine months ended September 30, 2016 and 2015. A Card Member is considered in default of a modification program after one and up to two consecutive missed payments, depending on the terms of the modification program. For all Card Members that defaulted from a modification program, the probability of default is factored into the reserves for Card Member loans and receivables.

Three Months Ended
September 30, 2015

Nine Months Ended
September 30, 2015




   Number of
Accounts
      (thousands)
Outstanding
Balances
Upon Default
(millions)^(a)
   Number of
Accounts
      (thousands)
Outstanding
Balances
Upon Default
(millions) ^(a)









Troubled Debt Restructurings That Subsequently Defaulted:

Card Member Loans
   1    $                    14    6    $                    39
Card Member Receivables
   1    1    3    3









Total
   2    $                    15    9    $                    42



   Three Months Ended
September 30, 2014    Nine Months Ended
September 30, 2014




   Number of
Accounts
(thousands)    Outstanding
Balances
    Upon Default
(millions)^(a)(b)    Number of
Accounts
(thousands)    Outstanding
Balances
    Upon Default
(millions)^(a)(b)









Troubled Debt Restructurings That Subsequently Defaulted:

Card Member Loans
   2    $                    12    6    $                    40
Card Member Receivables
   1    2    2    9









Total
   3    $                    14    8    $                    49


	Three Months Ended September 30, 2016				Nine Months Ended September 30, 2016

	Number of Accounts (in thousands)		Aggregated Outstanding Balances Upon Default^(a) ($ in millions)		Number of Accounts (in thousands)		Aggregated Outstanding Balances Upon Default^(a) ($ in millions)

Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans		3	$	12		5	$	30
Card Member Receivables		1		1		3		3

Total		4	$	13		8	$	33



	Three Months Ended September 30, 2015				Nine Months Ended September 30, 2015

	Number of Accounts (in thousands)		Aggregated Outstanding Balances Upon Default^(a) ($ in millions)		Number of Accounts (in thousands)		Aggregated Outstanding Balances Upon Default^(a) ($ in millions)

Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans		1	$	14		6	$	39
Card Member Receivables		1		1		3		3

Total		2	$	15		9	$	42

(a)

The outstanding balances upon default include principal, fees and accrued interest on Card Member loans, and principal and fees on Card Member receivables.

~~(b)~~

~~The outstanding balances upon default have been revised to reflect the exclusion of written off accounts, which are not material.~~

~~AMERICAN EXPRESS COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

4.	Reserves for Losses

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

~~Changes in Card Member Receivables Reserve for Losses~~

~~The following table presents changes in~~This Note is presented excluding amounts associated with the Card Member loans and receivables ~~reserve for losses for~~HFS as of December 31, 2015; the ~~nine months ended September 30:~~

(Millions)                     2015                        2014



Balance, January 1
$ 465       $                     386
Provisions^(a)
542       594
Net write-offs^(b)
(544)       (527)
Other^(c)
(22)       (21)



Balance, September 30
$ 441       $                     432

~~(a)~~

~~Provisions for principal and fee reserve components.~~

~~(b)~~

Consists of principal and fee components, less recoveries of $302 million and $269 million, including net write-offs from TDRs of $49 million and $14 million, for the nine months ended September 30, 2015 and 2014, respectively.

~~(c)~~

For the nine months ended September 30, 2015, includes foreign currency translation adjustments of $(13) million, and other adjustments of $(9) million. For the nine months ended September 30, 2014, includes foreign currency translation adjustments of $(6) million, other adjustments of $(8) million, and an adjustment related to reserves for card-related fraud losses of $(7) million, which were reclassified to Other liabilities in the first quarter of 2014.

Company did not have any Card Member ~~Receivables Evaluated Individually~~loans and ~~Collectively for Impairment~~

~~The following table presents Card Member~~ receivables ~~evaluated individually and collectively for impairment, and related reserves,~~HFS as of September 30, ~~2015 and December 31, 2014:~~2016.

(Millions)               2015                  2014



Card Member receivables evaluated individually for impairment^(a)
$ 30       $                     48
Related reserves^(a)
$ 18       $                     35

Card Member receivables evaluated collectively for impairment
$ 44,301       $              44,803
Related reserves^(b)
$ 423       $                   430

~~(a)~~

~~Represents receivables modified as a TDR and related reserves.~~

~~(b)~~15

The reserves include the quantitative results of analytical models that are specific to individual pools of receivables, and reserves for internal and external qualitative risk factors that apply to receivables that are collectively evaluated for impairment.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Changes in Card Member Loans Reserve for Losses

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



(Millions)	2015		2014		2016			2015

Balance, January 1	$	1,201	$ 1,261	$	1,028		$	1,201
Provisions^(a)		829	797		831			829
Net write-offs
Principal^(b)		(733)	(786)		(687	)		(733	)
Interest and fees^(b)		(122)	(124)		(128	)		(122	)
Other^(c)		(11)	(2)		70			(11	)

Balance, September 30	$	1,164	$ 1,146	$	1,114		$	1,164

(a)

Provisions for principal, interest and fee reserve components.

(b)

Consists of principal write-offs, less recoveries of ~~$320~~$280 million and ~~$324~~$320 million, including net ~~write-offs/(recoveries)~~write-offs from TDRs of ~~$30~~$24 million and ~~$(5)~~$30 million, for the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively. Recoveries of interest and fees were de minimis.

(c)

~~For~~Includes foreign currency translation adjustments of $(3) million and $(18) million and other adjustments of $6 million and $7 million for the nine months ended September 30, 2016 and 2015, ~~includes foreign currency translation adjustments of $(18) million, and other adjustments of $7 million. For the~~respectively. The nine months ended September 30, ~~2014,~~2016 also includes ~~foreign currency translation adjustments~~reserves of ~~$(7)~~$67 million ~~other adjustments~~associated with $265 million of ~~$11 million, and an adjustment related~~retained Card Member loans reclassified from HFS to ~~reserves~~held for ~~card-related fraud losses of $(6) million, which were reclassified to Other liabilities in~~investment during the first ~~quarter~~half of ~~2014.~~

the year.

Card Member Loans Evaluated Individually and Collectively for Impairment

The following table presents Card Member loans evaluated individually and collectively for impairment and related reserves as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:



(Millions)	2015		2014		2016		2015

Card Member loans evaluated individually for impairment^(a)	$	333	$ 286	$	344	$	279
Related reserves^(a)	$	66	$ 67	$	60	$	53

Card Member loans evaluated collectively for impairment^(b)	$	68,562	$ 70,099	$	60,274	$	58,294
Related reserves^(b)	$	1,098	$ 1,134	$	1,054	$	975

(a)

Represents loans modified as a TDR and related reserves.

(b)

Represents current loans and loans less than 90 days past due, loans over 90 days past due and accruing interest, and non-accrual loans. The reserves include the quantitative results of analytical models that are specific to individual pools of loans, and reserves for internal and external qualitative risk factors that apply to loans that are collectively evaluated for impairment.

Changes in Card Member Receivables Reserve for Losses

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



(Millions)		2016			2015

Balance, January 1	$	462		$	465
Provisions^(a)		496			542
Net write-offs^(b)		(518	)		(544	)
Other^(c)		(3	)		(22	)

Balance, September 30	$	437		$	441

(a)

Provisions for principal and fee reserve components.

(b)

Consists of principal and fee components, less recoveries of $301 million and $302 million, including net write-offs from TDRs of $16 million and $49 million, for the nine months ended September 30, 2016 and 2015, respectively.

(c)

Includes foreign currency translation adjustments of nil and $(13) million and other adjustments of $(3) million and $(9) million for the nine months ended September 30, 2016 and 2015, respectively.


		16

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Card Member Receivables Evaluated Individually and Collectively for Impairment

The following table presents Card Member receivables evaluated individually and collectively for impairment, and related reserves, as of September 30, 2016 and December 31, 2015:



(Millions)	2016		2015

Card Member receivables evaluated individually for impairment^(a)	$	46	$	33
Related reserves^(a)	$	24	$	20

Card Member receivables evaluated collectively for impairment	$	45,212	$	44,100
Related reserves^(b)	$	413	$	442

(a)

Represents receivables modified as a TDR and related reserves.

(b)

5.	Investment Securities

Investment securities principally include debt securities ~~that~~ the Company classifies as available-for-sale and carries at fair value on the Consolidated Balance Sheets, with unrealized gains ~~(losses)~~and losses recorded in Accumulated Other Comprehensive Loss (AOCI), net of income taxes. Realized gains and losses are recognized upon disposition of securities on a trade-date basis in ~~results~~the Consolidated Statements of ~~operations upon disposition of the securities~~Income using the specific identification method.

The following is a summary of investment securities as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:



	2015								2014							2016									2015

Description of Securities (Millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value

State and municipal obligations	$	2,971	$	97	$	(4)	$	3,064	$	3,366	$	129	$	(2)	$ 3,493	$	2,255	$	50	$	—		$	2,305	$	2,813	$	85	$	(5	)	$	2,893
U.S. Government agency obligations		2		—		—		2		3		—		—	3		12		—		—			12		2		—		—			2
U.S. Government treasury obligations		297		5		—		302		346		4		—	350		529		12		—			541		406		4		(1	)		409
Corporate debt securities		30		1		—		31		37		3		—	40		20		1		—			21		29		1		—			30
Mortgage-backed securities^(a)		109		5		—		114		128		8		—	136		103		5		—			108		117		4		—			121
Equity securities		—		1		—		1		—		1		—	1		1		—		—			1		1		—		—			1
Foreign government bonds and obligations		379		6		(1)		384		350		9		—	359		682		10		—			692		250		6		(1	)		255
Other^(b)		50		—		(1)		49		50		—		(1)	49		50		—		(2	)		48		50		—		(2	)		48

Total	$	3,838	$	115	$	(6)	$	3,947	$	4,280	$	154	$	(3)	$ 4,431	$	3,652	$	78	$	(2	)	$	3,728	$	3,668	$	100	$	(9	)	$	3,759

(a)

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

(b)

Other comprises investments in various mutual funds.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides information about the Company’s investment securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:



	2015								2014							2016									2015

	Less than 12 months				12 months or more				Less than 12 months				12 months or more			Less than 12 months				12 months or more					Less than 12 months					12 months or more

Description of Securities (Millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses

State and municipal obligations	$	59	$	(2)	$	13	$	(2)	$	—	$	—	$	72	$ (2)	$	—	$	—	$	—		—		$	100	$	(3	)	$	13	$	(2	)
U.S. Government treasury obligations																	—		—		—		—			253		(1	)		—		—
Foreign government bonds and obligations		31		(1)		—		—		—		—		—	—		—		—		—		—			99		(1	)		—		—
Other		—		—		33		(1)		—		—		33	(1)		—		—		33		(1	)		—		—			33		(2	)

Total	$	90	$	(3)	$	46	$	(3)	$	—	$	—	$	105	$ (3)	$	—	$	—	$	33	$	(1	)	$	452	$	(5	)	$	46	$	(4	)

The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to amortized cost as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:



	Less than 12 months						12 months or more						Total					Less than 12 months							12 months or more							Total

Ratio of Fair Value to Amortized Cost ($ 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
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

2016:
90%–100%																			—	$	—	$	—			6	$	33	$	(1	)		6	$	33	$	(1	)

Total as of September 30, 2016																			—	$	—	$	—			6	$	33	$	(1	)		6	$	33	$	(1	)



2015:
90%–100%		35	$	88	$	(3)		12	$	37	$	(2)		47	$	125	$ (5)		52	$	450	$	(5	)		15	$	37	$	(2	)		67	$	487	$	(7	)
Less than 90%		—		—		—		2		9		(1)		2		9	(1)		—		—		—			2		9		(2	)		2		9		(2	)

Total as of September 30, 2015		35	$	88	$	(3)		14	$	46	$	(3)		49	$	134	$ (6)
Total as of December 31, 2015																			52	$	450	$	(5	)		17	$	46	$	(4	)		69	$	496	$	(9	)



2014:
90%–100%		—	$	—	$	—		15	$	105	$	(3)		15	$	105	$ (3)

Total as of December 31, 2014		—	$	—	$	—		15	$	105	$	(3)		15	$	105	$ (3)

~~AMERICAN EXPRESS COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

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

Contractual maturities of investment securities with stated maturities as of September 30, ~~2015,~~2016 were as follows:



(Millions)	Cost		Estimated Fair Value	Cost		Estimated Fair Value

Due within 1 year	$	459	$ 459	$	788	$	789
Due after 1 year but within 5 years		324	331		347		352
Due after 5 years but within 10 years		259	275		399		418
Due after 10 years		2,746	2,832		2,067		2,120

Total^(a)	$	3,788	$ 3,897	$	3,601	$	3,679

~~(a)~~

~~Balances primarily represent investments in state and municipal obligations, and foreign government bonds and obligations.~~

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

~~Supplemental Information~~


		18

Gross realized gains on the sales of investment securities, included in Other revenues, were $1 million for both the three and nine months ended September 30, 2015, and $20 million and $100 million for the three and nine months ended September 30, 2014, respectively. There were no realized losses during any of these periods.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6.	Asset Securitizations

The Company periodically securitizes Card Member ~~receivables~~loans and ~~loans~~receivables arising from its card ~~business~~businesses, including, prior to the sales discussed in Note 2, Card Member loans and receivables HFS, through the transfer of those assets to securitization trusts. The trusts then issue debt securities to third-party investors, collateralized by the transferred assets.

The following table provides information on the restricted cash held by the American Express ~~Issuance Trust II (the Charge Trust) and the American Express~~ Credit Account Master Trust (the Lending Trust) and the American Express Issuance Trust ~~and~~II (the Charge Trust, collectively the Trusts) as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, included in Other assets on the ~~Company’s~~ Consolidated Balance Sheets:



(Millions)	2015		2014	2016		2015

Lending Trust				$	611	$	153
Charge Trust	$	1	$ 2		1		2
Lending Trust		747	62

Total	$	748	$ 64	$	612	$	155

These amounts relate to collections of Card Member ~~receivables~~loans and ~~loans~~receivables to be used by the Trusts to fund future expenses and obligations, including interest on ~~investor~~debt securities, credit losses and upcoming debt maturities.

American Express Travel Related Services Company, Inc. (TRS), in its role as servicer of the Trusts, has the power to direct the most significant activity of the Trusts, which is ~~a consolidated subsidiary~~the collection of the ~~Company,~~underlying Card Member loans and receivables. In addition, TRS directly and indirectly (through its consolidated subsidiaries) holds all of the variable interests in both Trusts, with the exception of the debt securities issued to third-party investors. As of September 30, 2016, TRS’ direct and indirect ownership of variable interests was $13.3 billion for the Lending Trust and $2.0 billion for the Charge Trust. These variable interests held by TRS provide it with the right to receive benefits and the obligation to absorb losses, which could be significant to both the Lending Trust and the Charge Trust. Based on these considerations, TRS is the primary beneficiary of both Trusts and therefore consolidates both Trusts. ~~Excluding its consolidated subsidiaries, TRS owns approximately $1.0 billion of subordinated securities issued by the Lending Trust as of September 30, 2015.~~

Under the respective terms of the ~~Charge~~Lending Trust and ~~Lending~~the Charge Trust agreements, the occurrence of certain triggering events associated with the performance of the assets of each ~~trust~~Trust could result in payment of trust expenses, establishment of reserve funds, or, in a worst-case scenario, early amortization of ~~investor~~debt securities. During the nine months ended September 30, ~~2015~~2016 and the year ended December 31, ~~2014,~~2015, no such triggering events occurred.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7.	Customer Deposits

As of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, customer deposits were categorized as interest bearing ornon-interest bearing as follows:



(Millions)	2015		2014	2016		2015

U.S.:

Interest bearing	$	48,513	$ 43,279	$	52,767	$	54,102
Non-interest bearing (includes Card Member credit balances of:
2015, $312; 2014, $372)		356	418
Non-interest bearing (includes Card Member credit balances of: 2016, $297 million; 2015, $389 million)					333		478
Non-U.S.:

Interest bearing		106	115		88		82
Non-interest bearing (includes Card Member credit balances of:
2015, $314; 2014, $347)		326	359
Non-interest bearing (includes Card Member credit balances of: 2016, $297 million; 2015, $323 million)					312		335

Total customer deposits	$	49,301	$ 44,171	$	53,500	$	54,997

Customer deposits by deposit type as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015 were as follows:



(Millions)	2015		2014	2016		2015

U.S. retail deposits:
Savings accounts – Direct	$	28,229	$ 26,159	$	30,672	$	29,023
Certificates of deposit:
Direct		291	333		290		281
Third-party		11,053	7,838
Sweep accounts – Third-party		8,940	8,949
Third-party (brokered)					12,879		13,856
Sweep accounts – Third-party (brokered)					8,926		10,942
Other retail deposits:
Non-U.S. deposits and U.S. non-interest bearing deposits		162	173		139		183
Card Member credit balances — U.S. and non-U.S.		626	719		594		712

Total customer deposits	$	49,301	$ 44,171	$	53,500	$	54,997

The scheduled maturities of certificates of deposit as of September 30, ~~2015,~~2016 were as follows:



(Millions)	U.S.		Non-U.S.		Total	U.S.		Non-U.S.		Total

2015	$	398	$	18	$ 416
2016		2,411		5	2,416	$	1,416	$	2	$	1,418
2017		2,730		—	2,730		3,662		8		3,670
2018		2,527		—	2,527		3,203		—		3,203
2019		1,846		—	1,846		2,336		—		2,336
2020							2,518		—		2,518
After 5 years		1,432		—	1,432		34		—		34

Total	$	11,344	$	23	$ 11,367	$	13,169	$	10	$	13,179

As of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, certificates of deposit in denominations of $250,000 or more, in the aggregate, were as follows:



(Millions)	2015		2014	2016		2015

U.S.	$	106	$ 111	$	116	$	105
Non-U.S.		17	17		1		1

Total	$	123	$ 128	$	117	$	106


		20

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8.	Contingencies

In the ordinary course of business, the Company and its subsidiaries are subject to various claims, investigations, examinations, pending and potential legal actions, and other matters relating to compliance with laws and regulations (collectively, legal proceedings). The Company discloses its material legal proceedings under Part II, Item 1. “Legal Proceedings” in this Quarterly Report on Form 10-Q and Part I, Item 3. “Legal Proceedings” in the Annual Report.

The Company has recorded reserves for certain of its outstanding legal proceedings. A reserve 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 recorded reserve. The Company evaluates, on a quarterly basis, developments in legal proceedings that could cause an increase or decrease in the amount of the reserve that has been previously recorded, or a revision to the disclosed estimated range of possible losses, as applicable.

The Company’s legal proceedings range from cases brought by a single plaintiff to class actions with millions of putative class members. These legal proceedings involve various lines of business of the Company and a variety of claims (including, but not limited to, common law tort, contract, antitrust and consumer protection claims), some of which present novel factual allegations and/or unique legal theories. While some matters pending against the Company specify the damages claimed by the plaintiff or class, 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 the Company 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 the Company to estimate an amount of loss or a range of possible ~~loss.~~

~~Other~~loss, while other matters have progressed sufficiently ~~through discovery and/or development of important factual information and legal issues so~~such that the Company is able to estimate an amount of loss or a range of possible loss. ~~Accordingly,~~

For those disclosed material legal proceedings where a loss is reasonably possible in future periods, whether in excess of a related reserve for legal contingencies or where there is no such ~~liability,~~reserve, and for which the Company is able to estimate a range of possible loss, the current estimated range is zero to ~~$370~~$190 million in excess of any reserves related to ~~these~~those matters. This range represents management’s estimate based on currently available information and does not represent the Company’s maximum loss exposure; actual results may vary significantly. As such proceedings evolve, including the merchant claims described under ~~Part II, Item 1.~~ “Legal Proceedings” in ~~this Quarterly~~the Annual Report, ~~on Form 10-Q, we~~the Company may need to increase ~~our~~its range of possible loss or reserves for legal contingencies.

Based on its current knowledge, and taking into consideration its litigation-related liabilities, the Company believes it is not a party to, nor are any of its properties the subject of, any legal proceeding that would have a material adverse effect on the Company’s consolidated financial condition or liquidity. However, in light of the uncertainties involved in such matters, it is possible that the outcome of legal proceedings, including the possible resolution of merchant claims, could have a material impact on the Company’s results of operations.


		21

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9.	Derivatives and Hedging Activities

The Company uses derivative financial instruments (derivatives) to manage exposures to various market risks. These instruments derive their value from an underlying variable or multiple variables, including interest ~~rate,~~rates, foreign exchange rates, and equity index or price, 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 the Company’s market risk management. The Company does not transact in derivatives for trading purposes.

In relation to the Company’s credit risk, under the terms of the derivative agreements it has with its various counterparties, the Company is not required to either immediately settle any outstanding liability balances or post collateral upon the occurrence of a specified credit risk-related event. Based on ~~the~~its assessment of the credit risk of the Company’s derivative counterparties as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company does not have derivative positions that warrant credit valuation adjustments.

The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:



	Other Assets Fair Value				Other Liabilities Fair Value			Other Assets Fair Value						Other Liabilities Fair Value

(Millions)	2015		2014		2015		2014		2016			2015			2016			2015

Derivatives designated as hedging instruments:
Interest rate contracts
Fair value hedges	$	391	$	314	$	—	$ 4
Foreign exchange contracts
Net investment hedges		385		492		102	46
Interest rate contracts - Fair value hedges								$	330		$	236		$	—		$	9
Foreign exchange contracts - Net investment hedges									189			191			92			57

Total derivatives designated as hedging instruments		776		806		102	50		519			427			92			66
Derivatives not designated as hedging instruments:
Foreign exchange contracts, including certain embedded derivatives^(a)		146		185		116	114		201			117			149			135

Total derivatives, gross		922		991		218	164		720			544			241			201
Less: Cash collateral netting^(b)		(307)		(158)		—	(4)
Less: Cash collateral netting on interest rate contracts^(b)									(256	)		(155	)		—			—
Derivative asset and derivative liability netting^(c)		(130)		(122)		(130)	(122)		(99	)		(107	)		(99	)		(107	)

Total derivatives, net^(d)	$	485	$	711	$	88	$ 38	$	365		$	282		$	142		$	94

(a)

Includes foreign currency derivatives embedded in certain operating agreements.

(b)

Represents the offsetting of ~~derivative instruments~~derivatives and the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from ~~derivative instrument(s)~~derivatives executed with the same counterparty under an enforceable master netting arrangement. ~~From time to time, the~~The Company ~~also receives~~received non-cash collateral from ~~counterparties~~a counterparty in the form of security interests in U.S. Treasury securities with a fair value of $24 million as of September 30, 2016, none of which ~~reduces~~was sold or repledged. Such non-cash collateral economically reduced the Company’s risk exposure to $341 million but ~~does~~did not reduce the net exposure on the Company’s Consolidated Balance Sheets. The Company ~~had such non-cash collateral as of December 31, 2014 with a fair value of $91 million, none of which was sold or repledged. The Company~~ did not have any such non-cash collateral as of ~~September 30,~~December 31, 2015. Additionally, the Company posted ~~$155~~$144 million and ~~$114~~$149 million as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, as initial margin on its centrally cleared interest rate swaps; such amounts are recorded within Other receivables on the ~~Company’s~~ Consolidated Balance Sheets and are not netted against the derivative balances.

(c)

Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an enforceable master netting arrangement.

(d)

The Company has no individually significant derivative counterparties and therefore, no significant risk exposure to any single derivative counterparty. The total net derivative assets and net derivative liabilities are presented within Other assets and Other liabilities, respectively, on the ~~Company’s~~ Consolidated Balance Sheets.

A majority of the Company’s derivative assets and liabilities as of September 30, ~~2015~~2016 and December 31, ~~2014~~2015 are subject to master netting agreements with its derivative counterparties. ~~In addition, the~~The Company has no derivative amounts subject to enforceable master netting arrangements that are not offset on the ~~Company’s~~ Consolidated Balance Sheets.

~~AMERICAN EXPRESS COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Fair Value Hedges

~~Interest Rate Contracts~~

The Company is exposed to interest rate risk associated with its fixed-rate long-term debt. The Company uses interest rate swaps to economically convert certain fixed-rate debt obligations to floating-rate obligations at the time of issuance. ~~As of September 30, 2015 and December 31, 2014, the~~The Company hedged ~~$18.5~~$17.0 billion and ~~$17.6~~$18.8 billion ~~respectively,~~ of its fixed-rate debt to floating-rate debt using interest rate ~~swaps.~~swaps as of September 30, 2016 and December 31, 2015, respectively.

~~Total Return Contract~~


		22

AMERICAN EXPRESS COMPANY

The Company hedged its exposure to changes in the fair value of its equity investment in Industrial and Commercial Bank of China (ICBC) in local currency. The Company used a total return contract (TRC) to transfer its exposure to its derivative counterparty. On July 18, 2014, the Company sold its remaining shares in ICBC and terminated the TRC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes the ~~impact on the Consolidated Statements of Income~~gains (losses) recognized in Other expenses associated with the Company’s fair value hedges for the three and nine months ended September 30:

Three Months Ended September 30:(Millions)

   Gains (losses) recognized in income


   Derivative contract    Hedged item    Net hedge





      Amount       Amount    ineffectiveness






Derivative relationship
   Income Statement Line Item    2015       2014       Income Statement Line Item    2015       2014    2015       2014

















Interest rate contracts
   Other expenses    $ 108       $ (109)       Other expenses    $ (114)       $ 112    $ (6)       $                3




Nine Months Ended September 30:(Millions)

   Gains (losses) recognized in income


   Derivative contract    Hedged item    Net hedge





      Amount       Amount    ineffectiveness






Derivative relationship
   Income Statement Line Item            2015            2014       Income Statement Line Item            2015               2014            2015               2014

















Interest rate contracts
   Other expenses    $ 82    $ (170)       Other expenses    $ (85)       $ 176    $ (3)       $                6
Total return contract
   Other non-interest revenues    —       11       Other non-interest revenues    —       (11)    —       —



	Three Months Ended September 30,						Nine Months Ended September 30,

(Millions)		2016			2015			2016			2015

Interest rate derivative contracts	$	(123	)	$	108		$	103		$	82
Hedged items		134			(114	)		(90	)		(85	)

Net hedge ineffectiveness	$	11		$	(6	)	$	13		$	(3	)

The Company also recognized a net reduction in interest expense on long-term debt of ~~$73~~$55 million and ~~$74~~$73 million for the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and ~~$214~~$173 million and ~~$217~~$214 million for the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, primarily related to the net settlements (interest accruals) on the Company’s interest rate derivatives designated as fair value hedges.

Net Investment Hedges

The effective portion of the gain or loss on net investment hedges, net of taxes, recorded in ~~Accumulated Other Comprehensive Loss~~AOCI as part of the cumulative translation adjustment, was ~~$384~~a loss of $18 million and ~~$246~~a gain of $384 million for the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and ~~$545~~gains of $25 million and ~~$113~~$545 million for the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, with any ineffective portion recognized in Other expenses during the period of change. ~~During~~Specifically, the ~~three months ended September 30, 2015 and 2014, the Company reclassified~~net hedge ineffectiveness recognized was nil and ~~$(1) million, respectively, and~~a gain of $1 ~~million and $9~~ million for the nine months ended September 30, 2016 and 2015, ~~and 2014, respectively,~~respectively. Other amounts related to foreign exchange contracts reclassified from ~~Accumulated Other Comprehensive Loss to earnings as a component of~~AOCI into Other expenses ~~including ineffectiveness associated with~~included a gain of $5 million and nil for the nine months ended September 30, 2016 and 2015, respectively. There were no amounts related to foreign exchange contracts reclassified from AOCI into Other expenses during the three months ended September 30, 2016 and 2015.

Derivatives Not Designated as Hedges

The changes in the fair value of derivatives that are not designated as hedges are intended to offset the related foreign exchange gains or losses of the underlying foreign currency exposures. The changes in the fair value of the derivatives and the related underlying foreign currency exposures resulted in net ~~investment~~losses of $4 million and $3 million for the three months ended September 30, 2016 and 2015, respectively, and a net loss of $12 million and a net gain of $102 million for the nine months ended September 30, 2016 and 2015, respectively, and are recognized in Other expenses.

Related to its derivatives not designated as hedges, the Company previously disclosed in Note 9 to the Consolidated Financial Statements in its Quarterly Report on Form 10-Q for the period ended September 30, 2015, gains of ~~nil~~$19 million and $1$15 million for the three and nine months ended September 30, 2015, respectively. These amounts should have been disclosed as gains of $8 million and $389 million, respectively, which are the amounts used to calculate the above-referenced net loss of $3 million and net gain of $102 million. These changes to the previously disclosed amounts have no impact on the Consolidated Statements of Income, Balance Sheets or Cash Flows.

The changes in the fair value of an embedded derivative resulted in a gain of $1 million and a loss of $4 million for the three months ended September 30, 2016 and 2015, respectively, and a gain of $7 million and a loss of $2 million for the nine months ended September 30, 2016 and 2015, respectively, and are recognized in Card Member services and other expense.


		23

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~The following table summarizes the impact on the Consolidated Statements of Income associated with the Company’s derivatives not designated as hedges:~~

      Pretax (losses) gains


      Three Months Ended
September 30,
Nine Months Ended
September 30,




      Amount    Amount




Description (Millions)    Income Statement Line Item                    2015                    2014                    2015                    2014











Foreign exchange contracts^(a)
   Other expenses    $ (19)       $ 2         $ 15       $                84
   Cost of Card Member services    4       —         (2)       4











Total
      $ (15)       $ 2       $ 13       $                  88

~~(a)~~

~~Foreign exchange contracts include forwards and embedded foreign currency derivatives.~~

10.	Fair Values

Financial Assets and Financial Liabilities Carried at Fair Value

The following table summarizes the Company’s financial assets and financial liabilities measured at fair value on a recurring basis, categorized by GAAP’s valuation hierarchy, as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:



	2015								2014							2016								2015

(Millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3

Assets:
Investment securities:^(a)
Equity securities	$	1	$	1	$	—	$	—	$	1	$	1	$	—	$ —
Debt securities and other		3,946		302		3,644		—		4,430		350		4,080	—
Equity securities and other																$	49	$	1	$	48	$	—	$	50	$	1	$	49	$	—
Debt securities																	3,679		541		3,138		—		3,709		409		3,300		—
Derivatives^(a)		922		—		922		—		991		—		991	—		720		—		720		—		544		—		544		—

Total assets		4,869		303		4,566		—		5,422		351		5,071	—		4,448		542		3,906		—		4,303		410		3,893		—

Liabilities:
Derivatives^(a)		218		—		218		—		164		—		164	—		241		—		241		—		201		—		201		—

Total liabilities	$	218	$	—	$	218	$	—	$	164	$	—	$	164	$ —	$	241	$	—	$	241	$	—	$	201	$	—	$	201	$	—

(a)

Refer to Note 5 for the fair values of investment securities and to Note 9 for the fair values of derivative assets and liabilities, on a further disaggregated basis.


		24

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes the estimated fair values of the Company’s financial assets and financial liabilities that are not required to be carried at fair value on a recurring basis, as of September 30, ~~2015~~2016 and December 31, ~~2014.~~2015. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, and require ~~management~~management’s judgment. These figures may not be indicative of future fair values, nor can the fair value of the Company be estimated by aggregating the amounts presented.



												Carrying		Corresponding Fair Value Amount

2016(Billions)													Value		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)												$	27	$	27	$	25	$	2	$	—
Other financial assets^(b)													48		48		—		48		—
Financial assets carried at other than fair value
Loans, net^(c)													61		61		—		—		61

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value													63		63		—		63		—
Financial liabilities carried at other than fair value

Certificates of deposit^(d)													13		13		—		13		—
Long-term debt^(c)												$	45	$	46	$	—	$	46	$	—



	Carrying		Corresponding Fair Value Amount									Carrying		Corresponding Fair Value Amount

2015(Billions)	Value		Total			Level 1		Level 2			Level 3		Value		Total		Level 1		Level 2		Level 3

Financial Assets:
Financial assets for which carrying values equal or approximate fair value
Cash and cash equivalents	$	20	$	20		$	19	$	1	^(a)	$ —
Cash and cash equivalents^(a)												$	23	$	23	$	22	$	1	$	—
Other financial assets^(b)		48		48			—		48		—		47		47		—		47		—
Financial assets carried at other than fair value
Loans, net		69		69	^(c)		—		—		69
Card Member loans and receivables HFS^(e)													15		15		—		—		15

Loans, net^(c)													59		60		—		—		60

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value		62		62			—		62		—		67		67		—		67		—
Financial liabilities carried at other than fair value
Certificates of deposit^(d)		11		11			—		11		—		14		14		—		14		—
Long-term debt	$	49	$	50	^(c)	$	—	$	50		$ —
Long-term debt^(c)												$	48	$	49	$	—	$	49	$	—



	Carrying		Corresponding Fair Value Amount

2014 (Billions)	Value		Total			Level 1		Level 2			Level 3

Financial Assets:
Financial assets for which carrying values equal or approximate fair value
Cash and cash equivalents	$	22	$	22		$	21	$	1	^(a)	$ —
Other financial assets^(b)		48		48			—		48		—
Financial assets carried at other than fair value
Loans, net		70		71	^(c)		—		—		71

Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value		61		61			—		61		—
Financial liabilities carried at other than fair value
Certificates of deposit^(d)		8		8			—		8		—
Long-term debt	$	58	$	60	^(c)	$	—	$	60		$ —

(a)

~~Reflects~~Level 2 amounts reflect time ~~deposits.~~

deposits and short-term investments.

(b)

Includes ~~accounts receivable~~Card Member receivables (including fair values of Card Member receivables of ~~$5.9~~$5.5 billion and ~~$7.0~~$6.7 billion held by a consolidated VIE as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively), Other receivables, restricted cash and other miscellaneous assets.

(c)

~~Includes~~Balances include amounts held by a consolidated VIE for which the fair values of Card Member loans ~~of $27.2~~were $24.7 billion and ~~$29.9~~$23.5 billion ~~and long-term debt of $13.4 billion and $19.5 billion held by a consolidated VIE~~ as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, and the fair values of long-term debt were $14.8 billion and $13.6 billion as of September 30, 2016 and December 31, 2015, respectively.

(d)

Presented as a component of customer deposits on the Consolidated Balance Sheets.

(e)

Does not include any fair value associated with the Card Member account relationships. Refer to Note 2 for additional information.


		25

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nonrecurring Fair Value Measurements

The Company has 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 determined to be impaired. During the nine months ended September 30, ~~2015 and during the year ended December 31, 2014,~~2016, the Company did not have any material assets that were measured at fair value due to impairment.

~~AMERICAN EXPRESS COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

During the year ended December 31, 2015, the Company recorded a $384 million impairment charge, consisting of a $219 million write-down of the entire balance of goodwill in the Prepaid Services business and a $165 million write-down of technology and other assets, to fair value.

11.	Guarantees

The Company provides Card Member protection plans that cover losses associated with purchased products, as well as certain other guarantees and indemnifications in the ordinary course of business.

In relation to its maximum potential undiscounted future payments as shown in the table that follows, to date the Company has not experienced any significant losses related to guarantees or indemnifications. The Company’s initial recognition of these instruments is at fair value. In addition, the Company establishes reserves when a loss is probable and the amount can be reasonably estimated.

The following table provides information related to such guarantees and indemnifications as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:



					Maximum potential undiscounted future payments^(a) (Billions)				Related liability^(b) (Millions)
	Maximum potential undiscounted future payments^(a) (Billions)		Related liability^(b) (Millions)
Type of Guarantee	2015	2014	2015	2014		2016		2015		2016		2015

Return and Merchant Protection	$ 42	$ 37	$ 49	$ 44	$	42	$	42	$	41	$	49
Other^(c)	6	8	57	67		6		6		49		37

Total	$ 48	$ 45	$ 106	$ 111	$	48	$	48	$	90	$	86

(a)

Represents the notional amounts that could be lost under the guarantees and indemnifications if there were a total default by the guaranteed or indemnified parties. The maximum potential undiscounted future payments for Merchant Protection are measured using management’s best estimate of the maximum exposure, which is based on all eligible claims in relation to annual billed business volumes.

(b)

Included in Other liabilities on the ~~Company’s~~ Consolidated Balance Sheets.

(c)

Primarily includes guarantees related to the Company’s purchase protection, real estate and business dispositions.


		26

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12.	Changes In Accumulated Other Comprehensive ~~Loss~~Income

~~Accumulated Other Comprehensive Loss~~AOCI is comprised of items that have not been recognized in earnings but may be recognized in earnings in the future when certain events occur. Changes in each component for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 were as follows:

Three Months Ended September 30, 2015(Millions), net of tax    Net Unrealized
  Gains (Losses) on
Investment
Securities          Foreign Currency
Translation
Adjustments
Net Unrealized
Pension and
Other
Postretirement
    Benefit (Losses)
Gains
   Accumulated Other
    Comprehensive (Loss)
Income









Balances as of June 30, 2015
   $ 76       $ (1,743)       $ (487)       $                            (2,154)









Net unrealized loss
   (6)       —       —       (6)
Decrease due to amounts reclassified into earnings
   (1)       —       —       (1)
Net translation loss on investments in foreign operations
   —       (604)       —       (604)
Net gains related to hedges of investments in foreign operations
   —       384       —       384
Pension and other postretirement benefit gains
   —       —       7       7









Net change in accumulated other comprehensive (loss) income
   (7)       (220)       7       (220)









Balances as of September 30, 2015
   $ 69       $ (1,963)       $ (480)       $                            (2,374)



Three Months Ended September 30, 2016 (Millions), net of tax		Net Unrealized Gains (Losses) on Investment Securities			Foreign Currency Translation Adjustments			Net Unrealized Pension and Other Postretirement Benefit (Losses) Gains			Accumulated Other Comprehensive (Loss) Income

Balances as of June 30, 2016	$	65		$	(2,170	)	$	(516	)	$	(2,621	)

Net unrealized losses		(14	)		—			—			(14	)

Decrease due to amounts reclassified into earnings		(1	)		—			—			(1	)

Net translation gain of investments in foreign operations		—			29			—			29

Net losses related to hedges of investments in foreign operations		—			(18	)		—			(18	)

Pension and other postretirement benefit gains		—			—			7			7

Net change in accumulated other comprehensive loss		(15	)		11			7			3

Balances as of September 30, 2016	$	50		$	(2,159	)	$	(509	)	$	(2,618	)



Nine Months Ended September 30, 2016 (Millions), net of tax		Net Unrealized Gains (Losses) on Investment Securities			Foreign Currency Translation Adjustments			Net Unrealized Pension and Other Postretirement Benefit (Losses) Gains			Accumulated Other Comprehensive (Loss) Income

Balances as of December 31, 2015	$	58		$	(2,044	)	$	(548	)	$	(2,534	)

Net unrealized losses		(5	)		—			—			(5	)

Decrease due to amounts reclassified into earnings		(3	)		—			—			(3	)

Net translation loss of investments in foreign operations		—			(140	)		—			(140	)

Net gains related to hedges of investments in foreign operations		—			25			—			25

Pension and other postretirement benefit gains		—			—			39			39

Net change in accumulated other comprehensive loss		(8	)		(115	)		39			(84	)

Balances as of September 30, 2016	$	50		$	(2,159	)	$	(509	)	$	(2,618	)

Nine Months Ended September 30, 2015(Millions), net of tax    Net Unrealized
  Gains (Losses) on
Investment
Securities          Foreign Currency
Translation
Adjustments
Net Unrealized
Pension and
Other
Postretirement
    Benefit (Losses)
Gains
   Accumulated Other
    Comprehensive (Loss)
Income









Balances as of December 31, 2014
   $ 96       $ (1,499)       $ (516)       $                            (1,919)









Net unrealized loss
   (26)       —       —       (26)
Decrease due to amounts reclassified into earnings
   (1)       (1)       —       (2)
Net translation loss on investments in foreign operations
   —       (1,009)       —       (1,009)
Net gains related to hedges of investments in foreign operations
   —       546       —       546
Pension and other postretirement benefit gains
   —       —       36       36









Net change in accumulated other comprehensive (loss) income
   (27)       (464)       36       (455)









Balances as of September 30, 2015
   $ 69       $ (1,963)       $ (480)       $                            (2,374)


		27

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three Months Ended September 30, 2014(Millions), net of tax Net Unrealized
Gains (Losses) on
Investment
Securities Foreign Currency
Translation
Adjustments Net Unrealized
Pension and
Other
Postretirement
Benefit (Losses)
Gains Accumulated
Other
Comprehensive
(Loss) Income

Balances as of June 30, 2014
$ 105    $ (1,118)    $ (358)    $            (1,371)

Net unrealized gains
2    —    —    2
(Decrease) increase due to amounts reclassified into earnings
(13)    1    —    (12)
Net translation loss on investments in foreign operations
—    (414)    —    (414)
Net gains related to hedges of investments in foreign operations
—    246    —    246
Pension and other postretirement benefit gains
—    —    7    7

Net change in accumulated other comprehensive (loss) income
(11)    (167)    7    (171)

Balances as of September 30, 2014
$ 94    $ (1,285)    $ (351)    $            (1,542)

Nine Months Ended September 30, 2014 (Millions), net of tax Net Unrealized
Gains (Losses) on
Investment
Securities Foreign Currency
Translation
Adjustments Net Unrealized
Pension and
Other
Postretirement
Benefit (Losses)
Gains Accumulated
Other
Comprehensive
(Loss) Income

Balances as of December 31, 2013
$ 63    $ (1,090)    $ (399)    $            (1,426)

Net unrealized gains
102    —    —    102
(Decrease) increase due to amounts reclassified into earnings
(71)    5    —    (66)
Net translation loss on investments in foreign operations
—    (313)    —    (313)
Net gains related to hedges of investments in foreign operations
—    113    —    113
Pension and other postretirement benefit gains
—    —    48    48

Net change in accumulated other comprehensive income (loss)
31    (195)    48    (116)

Balances as of September 30, 2014
$ 94    $ (1,285)    $ (351)    $            (1,542)



Three Months Ended September 30, 2015 (Millions), net of tax		Net Unrealized Gains (Losses) on Investment Securities			Foreign Currency Translation Adjustments			Net Unrealized Pension and Other Postretirement Benefit (Losses) Gains			Accumulated Other Comprehensive (Loss) Income

Balances as of June 30, 2015	$	76		$	(1,743	)	$	(487	)	$	(2,154	)

Net unrealized losses		(6	)		—			—			(6	)

Decrease due to amounts reclassified into earnings		(1	)		—			—			(1	)

Net translation loss of investments in foreign operations		—			(604	)		—			(604	)

Net gains related to hedges of investments in foreign operations		—			384			—			384

Pension and other postretirement benefit gains		—			—			7			7

Net change in accumulated other comprehensive loss		(7	)		(220	)		7			(220	)

Balances as of September 30, 2015	$	69		$	(1,963	)	$	(480	)	$	(2,374	)



Nine Months Ended September 30, 2015 (Millions), net of tax		Net Unrealized Gains (Losses) on Investment Securities			Foreign Currency Translation Adjustments			Net Unrealized Pension and Other Postretirement Benefit (Losses) Gains			Accumulated Other Comprehensive (Loss) Income

Balances as of December 31, 2014	$	96		$	(1,499	)	$	(516	)	$	(1,919	)

Net unrealized losses		(26	)		—			—			(26	)

Decrease due to amounts reclassified into earnings		(1	)		(1	)		—			(2	)

Net translation loss of investments in foreign operations		—			(1,009	)		—			(1,009	)

Net gains related to hedges of investments in foreign operations		—			546			—			546

Pension and other postretirement benefit gains		—			—			36			36

Net change in accumulated other comprehensive loss		(27	)		(464	)		36			(455	)

Balances as of September 30, 2015	$	69		$	(1,963	)	$	(480	)	$	(2,374	)

The following table presents the effects of reclassifications out of ~~Accumulated Other Comprehensive Loss~~AOCI and into the Consolidated Statements of Income:



		Gains (losses) recognized in earnings

				Three Months Ended September 30,						Nine Months Ended September 30,						Gains (losses) recognized in earnings
																Three Months Ended September 30,				Nine Months Ended September 30,
				Amount						Amount						Amount				Amount

Description (Millions)	Income Statement Line Item			2015			2014			2015			2014		Income Statement Line Item		2016		2015		2016			2015

Available-for-sale securities

Reclassifications for previously unrealized net gains on investment securities	Other non-interest revenues		$		1	$		21	$		1	$	111		Other non-interest revenues	$	1	$	1	$	5		$	1
Related income tax expense	Income tax provision				—			(8)			—		(40)		Income tax provision		—		—		(2	)		—

Reclassification to net income related to available-for-sale securities					1			13			1		71				1		1		3			1

Foreign currency translation adjustments
Reclassification of realized losses on translation adjustments and related hedges	Other expenses				—			—			1		(8)

Reclassification of realized losses on translation adjustments and related net investments hedges															Other expenses		—		—		—			1
Related income tax benefit	Income tax provision				—			(1)			—		3		Income tax provision		—		—		—			—

Reclassification of foreign currency translation adjustments					—			(1)			1		(5)

Reclassification to net income related to foreign currency translation adjustments																	—		—		—			1

Total			$		1	$		12	$		2	$	66	Total		$	1	$	1	$	3		$	2


		28

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13.	Non-Interest Revenue and Expense Detail

The following is a detail of Other ~~commissions~~fees and ~~fees:~~commissions:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,				Three Months Ended September 30,				Nine Months Ended September 30,

(Millions)		2015		2014		2015	2014		2016		2015		2016			2015

Foreign currency conversion fee revenue	$	213	$	225	$	646	$ 665		$	207	$	213	$	610		$	646
Delinquency fees		197		184		586	539			183		197		575			586
Loyalty coalition-related fees		101		100		280	286			106		100		304			279
Travel commissions and fees										89		87		256			271
Service fees		97		94		279	274			71		97		228			279
Other^(a)		32		39		100	120			38		33		103			101
Total Other commissions and fees	$	640	$	642	$	1,891	$ 1,884

Total Other fees and commissions									$	694	$	727	$	2,076		$	2,162

(a) Other primarily includes revenues from fees related to Membership Rewards programs. The following is a detail of Other revenues:								(a) Other primarily includes revenues from fees related to Membership Rewards programs. The following is a detail of Other revenues:

									Three Months Ended September 30,				Nine Months Ended September 30,

(Millions)									2016		2015		2016			2015

Global Network Services partner revenues									$	156	$	156	$	498		$	474
Gross realized gains on sale of investment securities										1		1		5			1
Other^(a)										326		347		1,011			1,018

Total Other revenues									$	483	$	504	$	1,514		$	1,493

(a) Other includes revenues arising from net revenue earned on cross-border Card Member spending, insurance premiums earned from Card Member travel and other insurance programs, merchant-related fees, Travelers Cheques-related revenues, revenues related to the GBT JV transition services agreement, earnings from equity method investments (including the GBT JV) and other miscellaneous revenue and fees. The following is a detail of Other expenses:								(a) Other includes revenues arising from net revenue earned on cross-border Card Member spending, insurance premiums earned from Card Member travel and other insurance programs, merchant-related fees, Travelers Cheques-related revenues, revenues related to the GBT JV transition services agreement, earnings from equity method investments (including the GBT JV) and other miscellaneous revenue and fees. The following is a detail of Other expenses:

									Three Months Ended September 30,				Nine Months Ended September 30,

(Millions)									2016		2015		2016			2015

Professional services									$	630	$	687	$	1,862		$	1,966
Occupancy and equipment										429		523		1,332			1,372
Communications										68		84		231			257
Card and merchant-related fraud losses										67		64		182			247
Gain on sale of HFS portfolios^(a)										—		—		(1,218	)		—
Other^(b)										304		277		999			727

Total Other expenses									$	1,498	$	1,635	$	3,388		$	4,569

(a)

~~Other primarily includes revenues from fees related~~Refer to ~~Membership Rewards programs.~~

~~The following is a detail of Other revenues:~~

       Three Months Ended            Nine Months Ended
   September 30,    September 30,




(Millions)
   2015       2014       2015
2014
Global Network Services partner revenues
   $ 156       $ 173       $ 474       $             513
Net realized gains on investment securities
   1       20       1       100
Other^(a)
   347       400       1,018
1,066
Total Other revenues
   $ 504       $ 593       $ 1,493       $          1,679

~~(a)~~

Other includes revenues arising from net revenue earned on cross-border Card Member spending, merchant-related fees, insurance premiums earned from Card Member travel and other insurance programs, Travelers Cheques-related revenues, revenues related to the GBT JV transition services agreement, earnings from equity method investments (including the GBT JV) and other miscellaneous revenue and fees.

~~The following is a detail of Other expenses:~~

       Three Months Ended            Nine Months Ended
   September 30,    September 30,




(Millions)    2015    2014    2015    2014









Professional services
   $ 687       $ 731       $ 1,966       $          2,240
Occupancy and equipment
   523       432       1,372       1,361
Card and merchant-related fraud losses^(a)
   64       96       247       282
Communications
   84       91       257       285
Gain on business travel joint venture transaction
   —         (15)       —         (641)
Other^(b)
   277       261       727       866









Total Other expenses
   $ 1,635       $ 1,596       $ 4,569       $          4,393

~~(a)~~

~~Beginning January 1, 2015, merchant-related fraud losses are reported within Other expenses.~~

Note 2 for additional information.

(b)

Other expense primarily includes general operating expenses, gains ~~(losses)~~and losses on ~~sale~~sales of assets or businesses not classified as discontinued operations, ~~litigation,~~regulatory and litigation-related costs, certain ~~internal and regulatory review-related~~Card Member reimbursements, ~~and~~ insurance costs, ~~or settlements,~~ certain loyalty coalition-related expenses, and foreign currency-related gains and losses (including the favorable impact from the reassessment of the functional currency of certain UK legal entities in the nine months ended September 30, 2015).

In addition, the nine months ended September 30, 2016 includes a valuation allowance adjustment associated with loans and receivables HFS.

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

14.	Income Taxes

The effective tax rate was 34.2 percent and 34.7 percent for the three months ended September 30, 2016 and 2015, respectively, and 33.9 percent and 34.2 percent for the ~~three and~~ nine months ended September 30, 2016 and 2015, ~~respectively, and 34.2 percent and 34.4 percent for the three and nine months ended September 30, 2014,~~ respectively.

The changes in tax rates ~~for all periods reflect~~primarily reflected the level of pretax income in relation to recurring permanent tax benefits and the geographic mix of business.

The Company is under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which the Company has significant business operations. The tax years under examination and open for examination vary by jurisdiction. The IRS has completed its field examination of the Company’s federal tax returns for years through 2007; however, refund claims for certain years continue to be reviewed by the IRS. In addition, the Company is currently under examination by the IRS for the years 2008 through ~~2011.~~2014.

The Company believes it is reasonably possible that its unrecognized tax benefits could decrease within the next 12 months by as much as ~~$431~~$527 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 ~~$431~~$527 million of unrecognized tax benefits, approximately ~~$288~~$310 million relates to amounts that if recognized would be recorded in shareholders’ equity and would not impact the Company’s results of operations or its effective tax rate.

~~AMERICAN EXPRESS COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

15.	Earnings Per Common Share (EPS)~~; Preferred Shares~~

~~EPS~~

The computations of basic and diluted EPS were as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,			Three Months Ended September 30,						Nine Months Ended September 30,

(Millions, except per share amounts)	2015		2014		2015		2014	2016			2015			2016			2015

Numerator:
Basic and diluted:
Net income	$	1,266	$	1,477	$	4,264	$ 4,438	$	1,142		$	1,266		$	4,583		$	4,264
Preferred dividends		(22)		—		(42)	—		(21	)		(22	)		(61	)		(42	)

Net income available to common shareholders		1,244		1,477		4,222	4,438		1,121			1,244			4,522			4,222
Earnings allocated to participating share awards^(a)		(10)		(11)		(32)	(35)		(9	)		(10	)		(37	)		(32	)

Net income attributable to common shareholders	$	1,234	$	1,466	$	4,190	$ 4,403	$	1,112		$	1,234		$	4,485		$	4,190

Denominator:^(a)
Basic: Weighted-average common stock		994		1,041		1,007	1,051		920			994			940			1,007
Add: Weighted-average stock options^(b)		3		6		4	6		3			3			3			4

Diluted		997		1,047		1,011	1,057		923			997			943			1,011


Basic EPS	$	1.24	$	1.41	$	4.16	$ 4.19	$	1.21		$	1.24		$	4.77		$	4.16
Diluted EPS	$	1.24	$	1.40	$	4.15	$ 4.17	$	1.20		$	1.24		$	4.76		$	4.15

(a)

The Company’s unvested restricted stock awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered participating securities. Calculations of EPS under the two-class method exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities. The related participating securities are similarly excluded from the denominator.

(b)

The dilutive effect of unexercised stock options excludes from the computation of EPS ~~0.6~~3.2 million and ~~0.2~~0.6 million of options for the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, and ~~0.5~~2.2 million and ~~0.2~~0.5 million of options for the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively, because inclusion of the options would have been anti-dilutive.

For the three and nine months ended September 30, 2015 and 2014, the Company met specified performance measures related to the $750 million of Subordinated Debentures issued in 2006, and maturing in 2036. If the performance measures were not achieved in any given quarter, the Company would be required to issue common shares and apply the proceeds to make interest payments.

~~AMERICAN EXPRESS COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~Preferred Shares~~

~~The Board of Directors is authorized to permit the Company to issue up to 20 million Preferred Shares at a par value of $1.66~~^2/3 ~~without further shareholder approval. The Company has the following perpetual Fixed Rate/Floating Rate Noncumulative Preferred Share series issued and outstanding as of September 30, 2015:~~

Series B Series C

Issuance date November 10, 2014 March 2, 2015
Securities issued
750 Preferred Shares;
represented by 750,000
depositary shares

850 Preferred Shares;
represented by 850,000
depositary shares
Aggregate liquidation preference $750 million $850 million
Fixed dividend rate per annum 5.20% 4.90%
Semi-annual fixed dividend payment dates Beginning May 15, 2015 Beginning September 15, 2015
Floating dividend rate per annum 3 month LIBOR+ 3.428% 3 month LIBOR+ 3.285%
Quarterly floating dividend payment dates Beginning February 15, 2020 Beginning June 15, 2020
Fixed to floating rate conversion date^(a) November 15, 2019 March 15, 2020

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

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

AMERICAN EXPRESS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

16.	Reportable Operating Segments

The Company is a global services company that is principally engaged in businesses comprising four reportable operating segments: USCS, ~~ICS,~~ICNS, GCS and ~~Global Network & Merchant Services (GNMS).~~GMS. Corporate functions and certain other businesses ~~including the Company’s Enterprise Growth business, as well as other Company~~and operations are included in Corporate & Other.

The following table presents certain selected financial information for the Company’s reportable operating segments and Corporate & Other:

       Three Months Ended        Nine Months Ended
       September 30,        September 30,




(Millions)    2015    2014    2015    2014









Non-interest revenues:

USCS
   $ 3,302    $ 3,188       $ 9,822    $        9,375
ICS
   1,071    1,206       3,214    3,571
GCS
   858    957       2,653    3,538
GNMS
   1,302       1,368       3,898       4,027
Corporate & Other, including adjustments and eliminations^(a)
   155       189       465       548









Total
   $ 6,688    $ 6,908       $ 20,052    $      21,059









Interest income:

USCS
   $ 1,593    $ 1,465       $ 4,639    $        4,296
ICS
   226    273       706    825
GCS
   3    4       10    11
GNMS
   26       14       69       35
Corporate & Other, including adjustments and eliminations^(a)
   56       59       174       183









Total
   $ 1,904    $ 1,815       $ 5,598    $        5,350









Interest expense:

USCS
   $ 166    $ 152       $ 481    $455
ICS
   59    85       183    259
GCS
   44    61       138    186
GNMS
   (42)       (68)       (143)       (208)
Corporate & Other, including adjustments and eliminations^(a)
   172       190       564       610









Total
   $ 399    $ 420       $ 1,223    $        1,302









Total revenues net of interest expense:

USCS
   $ 4,729    $ 4,501       $ 13,980    $13,216
ICS
   1,238    1,394       3,737    4,137
GCS
   817    900       2,525    3,363
GNMS
   1,370       1,450       4,110       4,270
Corporate & Other, including adjustments and eliminations^(a)
   39       58       75       121









Total
   $ 8,193    $ 8,303       $ 24,427    $      25,107









Net income (loss):

USCS
   $ 794    $ 889       $ 2,614    $        2,535
ICS
   89    142       348    378
GCS
   151    204       534    949
GNMS
   462       427       1,354       1,243
Corporate & Other, including adjustments and eliminations^(a)
   (230)       (185)       (586)       (667)









Total
   $ 1,266    $ 1,477       $ 4,264    $        4,438




Three Months Ended September 30, 2016 (Millions, except where indicated)	USCS		ICNS		GCS		GMS			Corporate & Other^(a)			Consolidated

Non-interest revenues	$	1,849	$	1,205	$	2,240	$	1,044		$	102		$	6,440
Interest income		1,178		231		282		—			73			1,764
Interest expense		125		55		98		(60	)		212			430
Total revenues net of interest expense		2,902		1,381		2,424		1,104			(37	)		7,774
Net income (loss)	$	401	$	155	$	466	$	359		$	(239	)	$	1,142

Total assets(billions)	$	79	$	34	$	47	$	23		$	(30	)	$	153

Total equity (billions)	$	8	$	3	$	7	$	2		$	1		$	21




Nine Months Ended September 30, 2016 (Millions, except where indicated)	USCS		ICNS		GCS		GMS			Corporate & Other^(a)			Consolidated

Non-interest revenues	$	5,947	$	3,587	$	6,710	$	3,172		$	318		$	19,734
Interest income		3,847		692		913		1			201			5,654
Interest expense		404		167		297		(180	)		603			1,291
Total revenues net of interest expense		9,390		4,112		7,326		3,353			(84	)		24,097
Net income (loss)	$	2,162	$	571	$	1,527	$	1,089		$	(766	)	$	4,583

Total assets(billions)	$	79	$	34	$	47	$	23		$	(30	)	$	153

Total equity (billions)	$	8	$	3	$	7	$	2		$	1		$	21




Three Months Ended September 30, 2015 (Millions, except where indicated)	USCS		ICNS		GCS		GMS			Corporate & Other^(a)			Consolidated

Non-interest revenues	$	2,117	$	1,141	$	2,217	$	1,123		$	90		$	6,688
Interest income		1,324		228		297		—			55			1,904
Interest expense		123		55		91		(46	)		176			399
Total revenues net of interest expense		3,318		1,314		2,423		1,169			(31	)		8,193
Net income (loss)	$	542	$	154	$	468	$	397		$	(295	)	$	1,266

Total assets(billions)	$	84	$	35	$	46	$	23		$	(34	)	$	154

Total equity (billions)	$	7	$	3	$	7	$	3		$	1		$	21




Nine Months Ended September 30, 2015 (Millions, except where indicated)	USCS		ICNS		GCS		GMS			Corporate & Other^(a)			Consolidated

Non-interest revenues	$	6,324	$	3,449	$	6,677	$	3,323		$	279		$	20,052
Interest income		3,849		710		864		1			174			5,598
Interest expense		358		176		271		(154	)		572			1,223
Total revenues net of interest expense		9,815		3,983		7,270		3,478			(119	)		24,427
Net income (loss)	$	1,814	$	544	$	1,535	$	1,135		$	(764	)	$	4,264

Total assets(billions)	$	84	$	35	$	46	$	23		$	(34	)	$	154

Total equity (billions)	$	7	$	3	$	7	$	3		$	1		$	21

(a)

Corporate & Other includes adjustments and eliminations for intersegment activity.

ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Introduction

When we use the terms “American Express,” “the Company,” “we,” “our” or “us,” we mean American Express Company and its subsidiaries on a consolidated basis, unless we state or the context implies otherwise.

We are a global services company ~~with four reportable operating segments: U.S. Card Services (USCS), International Card Services (ICS), Global Commercial Services (GCS) and Global Network & Merchant Services (GNMS). We provide~~that provides our customers with access to products, insights and experiences that enrich lives and build business success. Our principal products and services are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. Business travel-related services are offered through ~~the~~our non-consolidated joint venture, American Express Global Business Travel (GBT JV). ~~Prior to July 1, 2014, these business travel operations were wholly owned.~~ Our range of products and services includes:

~~charge~~Charge and credit card ~~products;~~

products

~~expense management products and services;~~

Network services

~~travel-related services;~~

~~stored-value/prepaid products;~~

~~network services;~~

~~merchant~~Merchant acquisition and processing, servicing and settlement, ~~and point-of-sale,~~ marketing and information products and services for ~~merchants; and~~

merchants

~~fee~~Fee services, including fraud prevention services and the design and operation of ~~customized~~ customer loyalty and rewards ~~programs.~~programs

Expense management products and services

Other lending products, including merchant financing

Travel-related services

Stored-value/prepaid products

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 direct mail, online applications, in-house and third-party sales forces and direct response advertising.

We compete in the global payments industry with charge, credit and debit card networks, issuers and acquirers, as well as evolving and growing alternative payment providers. As the payments industry continues to evolve, we face increasing competition from non-traditional players that leverage new technologies and customers’ existing accounts and relationships to create payment or other fee-based solutions. We are transforming our existing businesses and creating new products and services for the digital marketplace as we seek to enhance our customers’ digital experiences and develop platforms for online and mobile commerce.

Our products and services generate the following types of revenue for the Company:

Discount revenue, our largest revenue source, which represents fees generally charged to merchants when Card Members use their cards to purchase goods and services at merchants on our network;

Interest on loans, which principally represents interest income earned on outstanding balances;

Net card fees, which represent revenue earned from annual card membership fees;

~~Travel~~Other fees and commissions, ~~and fees,~~ which are earned ~~by charging a transaction or management fee to both customers~~on card-related fees (such as late fees and ~~suppliers for travel-related transactions (business~~assessments), foreign exchange conversions, loyalty coalition-related fees, travel commissions and fees ~~included through June 30, 2014);~~

~~Other commissions and fees, which are earned on foreign exchange conversions, card-related fees, such as late fees and assessments, loyalty coalition-related fees~~ and other service fees;

and

Other revenue, which represents revenues arising from contracts with partners of our Global Network Services (GNS) business (including commissions and signing fees), insurance premiums earned from Card Member travel and other insurance programs, prepaid card-related revenues, revenues related to the GBT JV transition services agreement, earnings from equity method investments (including the GBT ~~JV after June 30, 2014)~~JV) and other miscellaneous revenue and ~~fees; and~~

fees.

~~Interest on loans,~~


		32

Effective for the first quarter of 2016, we realigned our segment presentation to reflect the organizational changes announced during the fourth quarter of 2015. Prior periods have been restated to conform to the new reportable operating segments, which ~~principally represents interest income earned on outstanding balances.~~are: U.S. Consumer Services (USCS), International Consumer and Network Services (ICNS), Global Commercial Services (GCS) and Global Merchant Services (GMS), with corporate functions and certain other businesses and operations included in Corporate & Other. Refer to Note 1 to the Consolidated Financial Statements for additional information.

Forward-Looking Statements and Non-GAAP Measures

Certain of the statements in this Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Refer to the “Cautionary Note Regarding Forward-Looking Statements” section. 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 Form 10-Q constitute non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies.

Bank Holding Company

American Express Company is a bank holding company under the Bank Holding Company Act of 1956 and The Board of Governors of the Federal Reserve System (the Federal Reserve) is our primary federal regulator. As such, we are subject to the Federal Reserve’s regulations, policies and minimum capital ~~leverage and liquidity requirements.~~standards.

~~Current~~ Business ~~Environment/Outlook~~Environment

Our third quarter performance was in line with our 2015 financial outlook, reflecting the headwinds that we have been managing throughout 2015, including a challenging economic, competitive and regulatory environment. Results for the quarter were significantly affected by higher spending on growth initiatives, as well as the continued impact of certain previously renewed co-brand partnerships and the stronger U.S. dollar. While our reported third quarter earnings reflected the impact of these discrete items, our performance continued to reflect healthy loan growth, write-off rates at historically low levels, disciplined operating expense control and the benefits of our strong capital position, as well as strong Card Member and merchant acquisitions.

On a reported basis, the Card Member billed business growth rate in the third quarter was modestly slower relative to the second quarter of 2015, and billings were flat when compared with the third quarter of 2014. Billings growth, particularly in the U.S., continued to be impacted by a number of headwinds during 2015. We saw lower average transaction sizes, although there has been an increase in the number of transactions. In addition, we saw a slowdown in growth in spending by middle market corporate customers in the U.S. We also saw spending by Costco U.S. co-brand Card Members soften compared to the prior year. While we will continue to face an evolving regulatory landscape, we have seen very solid performance trends across our international regions over the last several quarters. Overall, international volumes were up compared to the third quarter of 2014 excluding Canada (due to the termination of our relationship with Costco Canada last year) and after adjusting for foreign currency exchange rates.

We have continued to see strong growth in worldwide Card Member loans, which along with a reduction in borrowing costs during the quarter, contributed to an increase in net interest income. U.S. loan growth was steady and loan growth internationally, excluding the negative impact of foreign currency exchange rates and changes in Canadian loan balances, which were negatively impacted by the end of our Costco relationship in Canada, improved during the quarter. Our credit performance during the quarter, combined with higher loan balances, drove an increase in provision versus last year. While credit metrics had been steadily improving since the latter half of 2009, following the economic downturn, they have generally stabilized at their current levels over the course of the past year. Therefore, reserve releases from improved credit performance are no longer offsetting the additional reserves needed for higher loan balances. This performance is in line with our expectation that provision would increase year-over-year and, in part, reflects the steady growth that we are seeing in the loan portfolio. Going forward, we do anticipate that write-off rates will gradually increase from today’s low levels, in part due to the seasoning of our newer loan vintages.

We have increased our spending on growth initiatives, which appears in our marketing and promotion expenses, as well as in operating expenses and contra-discount revenue. Operating expenses for the third quarter of 2015 decreased on a reported basis, but are higher after adjusting for foreign currency exchange rates. We continue to remain committed to containing operating expense growth in 2015. For the third quarter of 2015, operating expenses include a $91 million impairment charge related to previously capitalized software development costs, primarily in our Enterprise Growth (EG) business, including our decision not to continue with certain investments in the business. We continuously evaluate our investments across the Company to ensure that we are deploying the right level of resources against our most attractive opportunities.

In this context, we decided to pull back on certain initiatives in our EG business during the current quarter, including the decision not to proceed with the launch of our Serve product in Mexico. These decisions are consistent with recent organizational changes designed to better align EG’s capabilities with the overall strategy and priorities of the Company, while focusing on those opportunities that can produce the best returns, and ensure that we have the proper operating structure to deliver results in the most efficient and effective way. We plan to continue to evaluate the strategic direction of the EG business in the fourth quarter, which could result in additional impairment.

While our business is diversified by product and geography, including a range of consumer and commercial card offerings, a large international business and GNS partners around the world, which we believe provide a range of growth opportunities, we will continue to face a number of challenges throughout the remainder of 2015 and 2016.

Global economic growth remains uneven. In addition, our results continued to be adversely impacted by the strengthening U.S. dollar, and we expect foreign exchange will continue to have an adverse impact for the remainder of 2015, and could impact 2016 as well. Our results could also be adversely affected by increases in interest rates and U.S. income tax law changes.

Regulation of the payments industry has increased significantly in recent years and various governments around the world have established or are proposing to establish payment system regulatory regimes. See “Certain Legislative, Regulatory and Other Developments” for additional information on the legislative and regulatory environment, including the potential impacts of regulatory changes in the card payment sector in the European Union (EU).

~~Competition is extremely intense across the payments industry, including within the co-brand space, which has generally led to increased costs in our renewed co-brand partnerships.~~ During the third quarter we remained focused on our key initiatives to accelerate revenue growth, optimize our investments and reset our cost base. Our results reflected progress on our cost reduction efforts and steady credit performance, partially offset by a higher level of ~~2015, both Card Member rewards expense~~investment spending and ~~cost of Card Member services continued to grow when compared to the prior year, reflecting~~ a ~~portion of the increased costs related to recently renewed co-brand partnerships.~~

As previously announced, our co-brand and merchant acceptance agreements with Costco in the U.S. will not be renewed and are contractually set to expire on March 31, 2016. Although the softening in spending by existing Costco U.S. co-brand Card Members mentioned above has adversely impacted ourrestructuring charge. Reported billed business, volumes, we have not yet seen a significant earnings impact, as lower volume growth has been offset by reduced marketing expenses associated with the co-brand portfolio earlier this year. In early 2015, as we considered the implications ofloans and revenues declined year-over-year primarily due to the end of our relationship with Costco Wholesale Corporation in the ~~U.S.,~~United States (Costco) and the sales of the Card Member loans and receivables related to our cobrand partnerships with Costco and JetBlue Airways Corporation (JetBlue) (collectively, the HFS portfolios). However, we ~~made the decision~~saw underlying growth in billed business, loans and revenues on an adjusted basis, as described further below. In addition, our strong capital position allowed us to ~~increase spending in 2015 across a range of business opportunities~~return capital to ~~best position us for long-term growth.~~shareholders.

For the ~~balance~~third quarter, worldwide billings adjusted for foreign currency exchange rates were down year-over-year, but were up after excluding Costco-related billings from the prior year. Billings in the quarter were also impacted by lower gas and airline ticket prices, which remained headwinds across our U.S. businesses. We continued to see differing trends between spending by large corporations, which declined year-over-year, and spending by middle market and small businesses, which grew versus the prior year after adjusting for the effects of Costco. International billings continued to be strong.

Revenues net of interest expense declined year-over-year on a reported basis, reflecting lower billed business and a decline in Card Member loans. After excluding Costco-related revenues from the prior year, adjusted revenues net of interest expense grew year-over-year resulting from an increase in adjusted billed business and growth in net card fees across our premium card portfolios. Net interest income also declined year-over-year on a reported basis, reflecting lower Card Member loans and higher funding costs related to our charge card portfolio, due to an increase in interest rates versus the prior year. Excluding Costco cobrand card-related activity from the prior year, adjusted net interest income grew year-over-year as a result of growth in adjusted Card Member loans.


		33

Card Member loans declined reflecting the sales of the HFS portfolios in the first half of the year. Adjusted Card Member loans grew year-over-year, after excluding from the prior year Card Member loans related to these portfolios. Provision expenses on a reported basis were also down year-over-year as the prior period included credit costs associated with the HFS portfolios. Provision expenses, adjusted for these credit costs, increased primarily as a result of growth in adjusted Card Member loans and seasoning of loans related to new Card Members. We expect that continued growth in adjusted loans and some modest upward pressure on our write-off rates, due primarily to this seasoning of loans related to new Card Members, will both contribute to an increase in provision expenses going forward.

Total expenses decreased versus the prior year, reflecting a decline in rewards expense, partially offset by an increase in investment spending on growth initiatives. The decrease in rewards expense was driven by the Costco cobrand expenses included in the prior year and the continued shift in volumes to cash rebate products, for which the rewards costs are classified as contra-discount revenue. After adjusting for the Costco cobrand, we expect ~~results~~rewards expense, including costs associated with cash rebate products, to ~~reflect some of the same headwinds~~grow faster than billings as ~~the current quarter, including incremental~~we continue to enhance our card product value propositions over time. In addition, we expect that our investment spending on growth initiatives, ~~as well as the discrete impacts from changes in our co-brand relationships~~including marketing and ~~a stronger U.S. dollar. Year-over-year earnings-per-share growth will also be negatively impacted by a net benefit in~~promotion, during the fourth quarter ~~of 2014 related to the sale of our investment in Concur. We estimate that full-year 2015 earnings per share~~ will be ~~between $5.20 and $5.35. We believe~~significantly higher than in the third quarter.

Competition remains intense across our outlook to return to positive earnings per share growth in 2016 and within our target range of 12 to 15 percent earnings per share growth in 2017 remains appropriate. Our outlook for 2015 through 2017 does not contemplate the impact of any restructuring charges or other contingencies.

As previously disclosed, a trial court ruled in favor of the U.S. Department of Justice (DOJ) in its antitrust lawsuit against us. Following the decision, on April 30, 2015, the trial court issued an injunction requiring us to change the provisions in our agreements with merchants accepting American Express cardsbusinesses, particularly in the U.S. ~~that historically prohibited~~While our businesses are global and diversified, to remain competitive we need to continue to demonstrate the value we deliver to merchants, ~~from engaging~~customers and business partners in ~~various actions~~all aspects of our relationships. More intense competition has and will continue to ~~encourage Card Members~~impact our cost of renewing and ability to ~~use~~win or extend cobrand and other ~~credit or charge card products or networks. The injunction became effective on July 20, 2015. We are vigorously pursuing an appeal of the decision and judgment, and~~relationships. Throughout our business, we are ~~vigorously defending similar antitrust claims initiated by merchants in other court~~focused on those products, services and ~~arbitration proceedings.~~ relationships that offer the best value to our customers while also providing appropriate returns to our business and shareholders.

See “Certain ~~Legislative, Regulatory~~legislative, regulatory and ~~Other Developments”~~other developments” in ~~this Report and Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q~~“Other Matters” for ~~the quarter ended June 30, 2015 for additional~~ information on ~~the potential impacts of the trial court’s decision, the subsequent injunction~~legislative and ~~the related merchant litigation~~regulatory changes that could have a material adverse effect on our ~~business.~~results of operations and financial condition.


		34

American Express Company

Consolidated Results of Operations

Refer to the “Glossary of Selected Terminology” for the definitions of certain key terms and related information appearing within this section.

~~As a result~~Effective December 1, 2015, we transferred the Card Member loans and receivables related to our HFS portfolios to Card Member loans and receivables HFS on the Consolidated Balance Sheets. On March 18, 2016 and June 17, 2016, we completed the sales of the ~~GBT JV transaction, we deconsolidated~~JetBlue and Costco cobrand card portfolios, respectively. For the ~~Global Business Travel (GBT)~~periods from December 1, 2015, through the sale completion dates, the primary impacts beyond the HFS classification on the Consolidated Balance Sheets were to provisions for losses and credit metrics, which do not reflect amounts related to these HFS loans and receivables, as credit costs were reported in Other expenses through a valuation allowance adjustment. Other, non-credit related metrics (i.e., billed business, cards-in-force, net ~~assets, effective June 30, 2014, resulting in a lack of comparability between~~interest yield) reflect amounts related to the ~~nine months ended September 30, 2015~~HFS portfolios through the sale completion dates. Additionally, for periods after the sale completion dates, activities associated with these cobrand partnerships and the ~~same period~~HFS portfolios are no longer included in our Consolidated Results of Operations. Specifically, these impacts include: Discount revenue from Costco in the ~~prior year.~~U.S. for spend on all American Express cards and from other merchants for spend on the Costco cobrand card; Other fees and commissions and Interest income from Costco cobrand Card Members; and Card Member rewards expense related to the Costco cobrand card.

Table 1: Summary of Financial Performance

(Millions, except percentages and
    Three Months Ended
    September 30,
       Nine Months Ended
    September 30,





per share amounts)    2015 2014 Change 2015 2014 Change



Total revenues net of interest expense
   $           8,193    $           8,303    $ (110)       (1) % $         24,427    $         25,107    $ (680)       (3)%
Provisions for losses
   529    488    41       8    1,416    1,462    (46)       (3)
Expenses
   5,726    5,569 �� 157       3    16,527    16,879    (352)       (2)
Net income
   1,266    1,477    (211)       (14)    4,264    4,438    (174)       (4)
Earnings per common share — diluted^(a)
   $ 1.24    $ 1.40    $     (0.16)           (11) % $ 4.15    $ 4.17    $     (0.02)       — %
Return on average equity^(b)
�� 26.8 % 28.8 %    26.8 % 28.8 %
Return on average tangible common equity^(c)
   34.2 % 35.6 %    34.2 % 35.6 %

(a) Earnings per common share — diluted was reduced by the impact of (i) earnings allocated to participating share awards and other items of $10 million and $11 million for three months ended September 30, 2015 and 2014, respectively, and $32 million and $35 million for the nine months ended September 30, 2015 and 2014, respectively, and (ii) dividends on preferred shares of $22 million and nil for the three months ended September 30, 2015 and 2014, respectively, and $42 million and nil for the nine months ended September 30, 2015 and 2014, respectively.
(b) Return on Average Equity (ROE) is computed by dividing (i) one-year period net income ($5.7 billion for both September 30, 2015 and 2014) by (ii) one-year average total shareholders’ equity ($21.4 billion and $19.9 billion for September 30, 2015 and 2014, respectively).
(c) Return on average tangible common equity (ROTCE), a non-GAAP measure, is computed in the same manner as ROE except the computation excludes from one-year average total shareholders’ equity, one-year average goodwill and other intangibles of $3.8 billion and $3.9 billion as of September 30, 2015 and 2014, respectively, and one-year average preferred shares of $1.1 billion and nil as of September 30, 2015 and 2014, respectively. We believe ROTCE is a useful measure of the profitability of our business.
Table 2: Total Revenue Net of Interest Expense Summary

       Three Months Ended
    September 30,     Nine Months Ended
    September 30,





(Millions, except percentages)    2015 2014 Change 2015 2014 Change



Discount revenue
   $ 4,778    $ 4,889    $ (111)       (2) % $         14,384    $ 14,428    $ (44)       — %
Net card fees
   679    680    (1)       —    2,013    2,041    (28)       (1)
Travel commissions and fees
   87    104    (17)       (16)    271    1,027    (756)       (74)
Other commissions and fees
   640    642    (2)       —    1,891    1,884    7       —
Other
   504    593    (89)       (15)    1,493    1,679    (186)       (11)





Total non-interest revenues
   6,688    6,908    (220)       (3)    20,052    21,059    (1,007)       (5)





Total interest income
   1,904    1,815    89       5    5,598    5,350    248       5
Total interest expense
   399    420    (21)       (5)    1,223    1,302    (79)       (6)





Net interest income
   1,505    1,395    110       8    4,375    4,048    327       8





Total revenues net of interest expense
   $         8,193    $         8,303    $     (110)       (1) % $ 24,427    $ 25,107    $ (680)       (3)%



	Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change
(Millions, except percentages and per share amounts)		2016			2015			2016 vs. 2015					2016			2015			2016 vs. 2015

Total revenues net of interest expense	$	7,774		$	8,193		$	(419	)	(5	)%	$	24,097		$	24,427		$	(330	)	(1	)%
Provisions for losses		504			529			(25	)	(5	)		1,401			1,416			(15	)	(1	)
Expenses		5,535			5,726			(191	)	(3	)		15,761			16,527			(766	)	(5	)
Net income		1,142			1,266			(124	)	(10	)		4,583			4,264			319		7
Earnings per common share - diluted^(a)	$	1.20		$	1.24		$	(0.04	)	(3	)%	$	4.76		$	4.15		$	0.61		15	%
Return on average equity^(b)		26.1	%		26.8	%							26.1	%		26.8	%

(a)

Earnings per common share - diluted was reduced by the impact of (i) earnings allocated to participating share awards and other items of $9 million and $10 million for the three months ended September 30, 2016 and 2015, respectively, and $37 million and $32 million for the nine months ended September 30, 2016 and 2015, respectively, and (ii) dividends on preferred shares of $21 million and $22 million for the three months ended September 30, 2016 and 2015, respectively, and $61 million and $42 million for the nine months ended September 30, 2016 and 2015, respectively.

(b)	Return on average equity (ROE) is computed by dividing (i) one-year period net income ($5.5 billion and $5.7 billion for September 30, 2016 and 2015, respectively) by (ii) one-year average total shareholders’ equity ($21.0 billion and $21.4 billion for September 30, 2016 and 2015, respectively).

Table 2: Total Revenue Net of Interest Expense Summary



	Three Months Ended September 30,				Change					Nine Months Ended September 30,				Change
(Millions, except percentages)		2016		2015		2016 vs. 2015					2016		2015		2016 vs. 2015

Discount revenue	$	4,516	$	4,778	$	(262	)	(5	)%	$	13,983	$	14,384	$	(401	)	(3	)%
Net card fees		747		679		68		10			2,161		2,013		148		7
Other fees and commissions		694		727		(33	)	(5	)		2,076		2,162		(86	)	(4	)
Other		483		504		(21	)	(4	)		1,514		1,493		21		1

Total non-interest revenues		6,440		6,688		(248	)	(4	)		19,734		20,052		(318	)	(2	)

Total interest income		1,764		1,904		(140	)	(7	)		5,654		5,598		56		1
Total interest expense		430		399		31		8			1,291		1,223		68		6

Net interest income		1,334		1,505		(171	)	(11	)		4,363		4,375		(12	)	—

Total revenues net of interest expense	$	7,774	$	8,193	$	(419	)	(5	)%	$	24,097	$	24,427	$	(330	)	(1	)%


		35

Total Revenues Net of Interest Expense

Discount revenue decreased ~~$111~~$262 million or 25 percent ~~for the three months ended September 30, 2015~~ and was relatively flat for the nine months ended September 30, 2015, as compared to the same periods in the prior year. Foreign currency-adjusted discount revenue, which excludes the impact of changes in foreign exchange (FX) rates, increased 1 percent and$401 million or 3 percent for the three and nine months ended September 30, ~~2015, respectively.~~¹~~The~~2016, respectively, compared to the same periods in the prior year, primarily driven by the Costco-related revenue included in the prior year, as previously mentioned, as well as increases ~~on an FX-adjusted basis were due to growth~~ in ~~billed business of 5 percent and 6 percent, also FX-adjusted, for the three and nine month periods, respectively,~~contra-discount revenues, including higher cash rebate rewards, partially offset by ~~a decrease in the average~~lower discount ~~rate, faster growth in~~revenue share with GNS billings than in overall Company billings, increases in cash rebate rewards (recognized as contra-discount revenue) and generally higher contra-revenues related to payments under previously renewed co-brand partnership agreements.¹issuing partners.

Billed business ~~in the U.S. increased 4~~decreased 3 percent and 5increased 1 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, ~~and~~compared to the same periods in the prior year. U.S. billed business decreased 89 percent and 51 percent ~~outside~~for the ~~U.S.,~~three and nine months ended September 30, 2016, respectively, primarily driven by Costco-related volumes in the prior year. Non-U.S. billed business increased 10 percent and 6 percent in the same respective ~~periods, with FX-adjusted billed business outside the U.S. increasing 8 percent for both the three and nine month~~ periods.¹

The average discount rate was 2.47 percent and 2.45 percent for the three and nine months ended September 30, 2016, respectively, and 2.46 percent and 2.48 percent for the three and nine months ended September 30, 2015, ~~respectively, and 2.48 percent and 2.49 percent~~respectively. The increase for the ~~three and nine months ended September 30, 2014, respectively. The decrease~~three-month period reflects the absence of Costco merchant volumes in the average discount rate for both the three and nine month periods was driven in part by growth of the OptBlue program, changes in industry mix, and competition, partially offset by the decline in Costco merchant volume in Canada (which wascurrent year, which were at a lower discount rate than the ~~average)~~average. The decrease for the nine-month period was driven primarily by a prior-year benefit related to certain merchant rebate accruals, growth of the OptBlue program and merchant negotiations, including those resulting from the recent European regulatory changes, partially offset by the benefit to the discount rate from the decline in Costco merchant volumes in the current period. We expect the average discount rate will likely decline over time due to ~~the expiration~~further expansion of ~~our merchant agreement, as well as changes in FX rates. As indicated in prior quarters,~~OptBlue, overall changes in the mix of spending by location and industry, ~~volume-related~~merchant incentives and concessions, volume related pricing discounts, strategic investments, certain pricing initiatives, competition, pricing regulation (including regulation of competitors’ interchange rates) and other ~~factors will likely result in continued erosion of our discount rate over time.~~factors. See Tables 5, 6 and 67 for more details on billed business performance and the average discount rate.

Net card fees ~~decreased $1~~increased $68 million ~~and $28 million for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year, while FX-adjusted net card fees increased 6~~or 10 percent and ~~5 percent for the respective periods, primarily driven by higher basic cards-in-force, as well as a benefit from certain pricing initiatives.~~¹

~~Travel commissions and fees decreased $17~~$148 million or ~~16 percent and $756 million or 74~~7 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, primarily ~~due to the business travel joint venture transaction~~driven by growth in the ~~prior year, resulting in a lack of comparability between periods.~~Platinum, Gold and Delta portfolios.

Other fees and commissions and fees remained relatively flat for both the three and nine months ended September 30, 2015, as compared to the same periods in the prior year, while FX-adjusted other commissions and fees increased 9decreased $33 million or 5 percent and ~~10 percent for the respective periods.~~¹ ~~The increases on an FX-adjusted basis were driven in part by higher loyalty coalition revenues, as well as higher delinquency fees.~~

~~Other revenue decreased $89~~$86 million or ~~15 percent and $186 million or 11~~4 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, ~~while FX-adjusted other revenue decreased 7 percent and 4 percent for the respective periods.~~¹ ~~The decrease on an FX-adjusted basis for the three month period was~~ primarily driven by ~~gains related to the sale of investment securities in the Industrial and Commercial Bank of China (ICBC) and in Concur Technologies~~Costco-related fees included in the prior year, ~~which for the nine month period was~~ partially offset by ~~higher~~an increase in delinquency and loyalty coalition-related fees.

Other revenues ~~earned~~decreased $21 million or 4 percent and increased $21 million or 1 percent for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year. Both periods reflect Costco-related revenues in the prior year and lower revenues related to the GBT JV transition services agreement in the current ~~year.~~

¹~~The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes~~period, both 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 year period against~~ which ~~such results are being compared). Certain amounts included~~were more than offset in the ~~calculations~~nine-month period by a contractual payment from a GNS partner in the second quarter of ~~foreign currency-adjusted~~2016 and higher revenues and expenses, which constitute non-GAAP measures, are subject to management allocations. We believe the presentation of information on a foreign currency adjusted basis is helpful to investors by making it easier to comparefrom our ~~performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.~~Prepaid Services business.

Interest income ~~increased $89~~decreased $140 million or 57 percent and ~~$248~~increased $56 million or 51 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year. Both periods reflect Costco-related interest income in the prior year, ~~primarily reflecting~~which was more than offset in the nine-month period by modestly higher yields and an increase in average Card Member ~~loans.~~loans (including Card Member loans HFS).

Interest expense ~~decreased $21~~increased $31 million or 58 percent and ~~$79~~$68 million or 6 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, primarily driven by ~~a lower cost of funds and~~higher average customer deposit balances, partially offset by lower average long-term debt.


		36

Table 3: Provisions for Losses Summary

   Three Months Ended
September 30,    Nine Months Ended
September 30,





(Millions, except percentages)    2015    2014    Change 2015    2014    Change











Charge card
   $ 203       $             196       $ 7       4 % $ 542       $ 594       $(52) (9)%
Card Member loans
   309       265       44       17    829       797       32 4
Other
   17       27             (10)           (37)    45       71       (26) (37)













Total provisions for losses
   $             529       $ 488       $ 41       8 % $          1,416       $          1,462       $      (46) (3)%

Provisions for Losses
Charge card provisions for losses increased $7 million or 4 percent and decreased $52 million or 9 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year. The increase for the three month period was primarily driven by higher write-off rates in USCS, versus the prior year and the decrease in the nine month period was primarily driven by a reserve release in the current year versus a reserve build in the prior year.
Card Member loans provision for losses increased $44 million or 17 percent and $32 million or 4 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year. The increases were driven by credit performance, combined with higher loan balances.
Table 4: Expenses Summary



   Three Months Ended
September 30,    Nine Months Ended
September 30,





(Millions, except percentages)    2015    2014    Change 2015    2014    Change











Marketing and promotion
   $ 847       $ 783       $ 64       8 % $ 2,217       $ 2,329       $(112) (5)%
Card Member rewards
   1,763       1,695       68       4    5,202       5,050       152 3
Card Member services and other
   269       205       64       31    772       619       153 25
Salaries and employee benefits
   1,212       1,290       (78)       (6)    3,767       4,488       (721) (16)
Other, net
   1,635       1,596       39       2    4,569       4,393       176 4













Total expenses
   $ 5,726       $ 5,569       $ 157       3 % $ 16,527       $ 16,879       $(352) (2)%



		Three Months Ended									Nine Months Ended
		September 30,				Change					September 30,				Change

(Millions, except percentages)		2016		2015		2016 vs. 2015					2016		2015		2016 vs. 2015

Charge card	$	174	$	203	$	(29	)	(14	)%	$	496	$	542	$	(46	)	(8	)%
Card Member loans		319		309		10		3			831		829		2		—
Other		11		17		(6	)	(35	)		74		45		29		64

Total provisions for losses^(a)	$	504	$	529	$	(25	)	(5	)%	$	1,401	$	1,416	$	(15	)	(1	)%

(a)	Beginning December 1, 2015 through to the sale completion dates, does not reflect the HFS portfolios.

~~Expenses~~Provisions for Losses

~~Marketing~~Charge card provision for losses decreased $29 million or 14 percent and ~~promotion expense increased $64~~$46 million or 8 ~~percent and decreased $112 million or 5~~ percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, compared to the same periods in the prior year, primarily driven by lower net write-offs and improved delinquencies.

Card Member loans provision for losses increased $10 million or 3 percent and remained flat for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year, as the current year periods do not reflect credit costs associated with the HFS portfolios, as previously mentioned, which was offset by strong momentum in our lending growth initiatives, resulting in higher loan balances and net write-offs.

Other provision for losses decreased $6 million and increased $29 million for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year. The increase ~~for~~in the ~~three month~~nine-month period was primarily driven by higher net write-offs in the merchant financing loan portfolio as a result of historic growth, whereas the decrease in the three-month period was due to improving merchant financing loan credit performance.

Table 4: Expenses Summary



		Three Months Ended									Nine Months Ended
		September 30,				Change					September 30,				Change

(Millions, except percentages)		2016		2015		2016 vs. 2015					2016		2015		2016 vs. 2015

Marketing and promotion	$	930	$	847	$	83		10	%	$	2,445	$	2,217	$	228		10	%
Card Member rewards		1,566		1,763		(197	)	(11	)		5,035		5,202		(167	)	(3	)
Card Member services and other		278		269		9		3			841		772		69		9

Total marketing, promotion, rewards, Card Member services and other		2,774		2,879		(105	)	(4	)		8,321		8,191		130		2

Salaries and employee benefits		1,263		1,212		51		4			4,052		3,767		285		8
Other, net^(a)		1,498		1,635		(137	)	(8	)		3,388		4,569		(1,181	)	(26	)

Total expenses	$	5,535	$	5,726	$	(191	)	(3	)%	$	15,761	$	16,527	$	(766	)	(5	)%

(a)	Beginning December 1, 2015 through to the sale completion dates, includes the valuation allowance adjustment associated with the HFS portfolios.

Expenses

Marketing and promotion expenses increased $83 million or 10 percent and $228 million or 10 percent for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year, driven by higher levels of spending on ~~incremental~~ growth initiatives, ~~while~~predominantly within the ~~decrease for the nine month period was primarily driven by the prior-year reinvestment of a significant portion of the gain from the business travel joint venture transaction in growth initiatives.~~USCS and ICNS segments.

Card Member rewards ~~expense increased $68~~expenses decreased $197 million or 411 percent and ~~$152~~$167 million or 3 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior ~~year, and FX-adjusted Card Member~~year. The decreases were primarily driven by lower cobrand rewards expense of $236 million and $289 million, in the same respective periods, primarily reflecting Costco-related expenses in the prior year, as well as, in the current year, a shift in volumes to cash rebate products for which the rewards costs are classified as contra-discount revenue, partially offset in both periods by increased ~~7 percent~~spending volumes across other cobrand card products. The lower cobrand rewards expense was partially offset by higher Membership Rewards expense of $38 million and ~~6 percent for~~$122 million, in the same respective ~~periods.~~²

~~The increase for the three months ended September 30, 2015, was~~periods, primarily ~~due to~~driven by an increase in ~~co-brand rewards expense of $60 million, driven by rate impacts~~new points earned as a result of the previously renewed co-brand partnership agreements, and an increase in Membership Rewards expense of $8 million. The latter was driven by an increase of $31 million related to new points earned, resulting from higher spending volumes ~~partially offset by a $23 million decrease from slower growth in the Membership Rewards ultimate redemption rate (URR),~~ and a ~~decline~~lower benefit in the weighted average cost ~~(WAC)~~ per ~~point.~~point (WAC).

The increase for the nine months ended September 30, 2015, was primarily due to an increase in co-brand rewards expense of $180 million, also driven by rate impacts, partially offset by a decrease in Membership Rewards expense of $28 million. The latter was driven by slower growth in the URR, and a charge in 2014 related to an enhancement in the Membership Rewards URR estimation process for certain international countries, partially offset by increased expenses related to new points earned, driven by higher spending volumes.


		37

The Membership Rewards URR for current program participants ~~remained at~~was 95 percent (~~rounded up~~)(rounded down) at September 30, ~~2015, in line with June 30, 2015 and~~2016, compared to 95 percent (rounded up) at September 30, ~~2014.~~2015.

Card Member services and other ~~expense~~expenses increased ~~$64~~$9 million or 313 percent and ~~$153~~$69 million or 259 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, ~~while FX-adjusted Card Member services and other expense increased 38 percent and 32 percent for the respective periods, primarily~~ driven by ~~higher costs related to the previously renewed co-brand partnership agreements.~~²increased usage of travel-related benefits.

Salaries and employee benefits ~~expense decreased $78~~expenses increased $51 million or 64 percent and ~~$721~~$285 million or 168 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, ascompared to the same periods in the prior year, primarily driven by restructuring in the current year.

Other expenses decreased $137 million or 8 percent and $1.2 billion or 26 percent for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year. The ~~decrease for the nine month period was primarily driven by the business travel joint venture transaction (resulting~~decreases in a lack of comparability between periods), and the restructuring charge in the prior year. The restructuring initiatives in the prior year resulted in lower compensation costs and contributed to the current year decrease for both ~~the three and nine month periods.~~

~~Other expenses increased $39 million or 2 percent and $176 million or 4 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same~~ periods ~~in the prior year, and FX-adjusted other expenses increased 6 percent and 8 percent for the respective periods.~~² ~~The increase in the three month period primarily~~ reflected ~~a $91 million~~an impairment charge related to previously capitalized software development costs, ~~primarily within our EG business, including our decision not to continue with certain initiatives within EG. Other expenses were also favorably impacted~~partially offset by a litigation reserve release, of $64 million in the GNMS segment associated with the rejected 2013 merchant litigation settlement. See Part II, Item 1. “Legal Proceedings” for further information on this merchant litigation. The increase in the nine month period reflected the net gain recognized as a result of the business travel joint venture transactionboth in the prior year, ~~(resulting in a lack of comparability between periods), as well as the previously mentioned impairment charge~~and lower technology-related costs in the current ~~year, which were~~year. The decrease in the nine-month period also reflected the gains on the sales of the HFS portfolios, partially offset by ~~a favorable impact~~the benefit in the prior year from both the reassessment of the functional currency of certain UK legal entities ~~in the current year, the litigation reserve release mentioned previously, a contribution to the American Express Foundation~~ and ~~a change in the estimated value of certain investments in our Community Reinvestment Act (CRA) portfolio, the latter two in the prior year.~~other foreign exchange (FX) related activity.

² ~~Refer to footnote 1 on page 39 for details regarding foreign currency adjusted information.~~

Income Taxes

The effective tax rate was 34.2 percent and 33.9 percent for the three and nine months ended September 30, 2016, respectively, and 34.7 percent and 34.2 percent for the three ~~months ended September 30, 2015~~ and ~~2014, respectively, and 34.2 percent and 34.4 percent for the~~ nine months ended September 30, 2015, ~~and 2014,~~ respectively. The changes in tax rates ~~for all periods reflect~~primarily reflected the level of pretax income in relation to recurring permanent tax benefits and the geographic mix of business.


		38

Table 5: Selected Card-Related Statistical Information



																As of or for the					Change			As of or for the					Change
																Three Months Ended					2016			Nine Months Ended					2016
	Three Months Ended September 30,							Nine Months Ended September 30,								September 30,					vs.			September 30,					vs.

	2015			2014			Change	2015			2014			Change		2016			2015		2015			2016			2015		2015

Card billed business:(billions)
United States	$	180.3		$	173.0		4 %	$	531.1		$	505.6		5 %	$	164.6		$	180.4		(9	)%	$	526.0		$	531.6		(1	)%
Outside the United States		78.6			85.1		(8)		235.4			248.7		(5)		86.6			78.5		10			248.3			234.9		6

Total	$	258.9		$	258.1		—	$	766.5		$	754.3		2
Worldwide															$	251.2		$	258.9		(3	)	$	774.3		$	766.5		1

Total cards-in-force:(millions)
United States		56.4			54.5		3		56.4			54.5		3		47.1			56.4		(16	)		47.1			56.4		(16	)
Outside the United States		59.4			56.6		5		59.4			56.6		5		61.7			59.4		4			61.7			59.4		4

Total		115.8			111.1		4		115.8			111.1		4
Worldwide																108.8			115.8		(6	)		108.8			115.8		(6	)

Basic cards-in-force: (millions)
United States		43.6			42.2		3		43.6			42.2		3		37.0			43.6		(15	)		37.0			43.6		(15	)
Outside the United States		49.0			46.3		6		49.0			46.3		6		51.1			49.0		4			51.1			49.0		4

Total		92.6			88.5		5		92.6			88.5		5
Worldwide																88.1			92.6		(5	)		88.1			92.6		(5	)

Average discount rate^(a)		2.46	%		2.48	%			2.48	%		2.49	%
Average basic Card Member spending^(b)	$	4,165		$	4,223		(1)	$	12,437		$	12,504		(1)
Average fee per card^(b)	$	39		$	40		(3)	$	39		$	41		(5)
Average fee per card, adjusted^(b)	$	44		$	45		(2)%	$	44		$	45		(2)%
Average basic Card Member spending:(dollars)^(a)
United States															$	4,937		$	4,503		10		$	13,732		$	13,432		2
Outside the United States																3,264			3,197		2			9,667			9,620		—
Worldwide Average																4,433			4,165		6			12,628			12,437		2
Card Member loans: (billions)
United States																53.9			62.1		(13	)		53.9			62.1		(13	)
Outside the United States																6.7			6.8		(1	)		6.7			6.8		(1	)

Worldwide															$	60.6		$	68.9		(12	)	$	60.6		$	68.9		(12	)

Average discount rate																2.47	%		2.46	%				2.45	%		2.48	%
Average fee per card(dollars)^(a)															$	49		$	39		26	%	$	43		$	39		10	%

(a)

In the three months ended March 31, 2015, we changed the classification related to certain payments to partners, reducing both discount revenue and marketing and promotion expense. The misclassification in prior periods has been revised to conform to the current period presentation. Accordingly, the average discount rate for prior periods was also revised, resulting in a reduction of between zero and one basis point in any period from what was originally reported.

~~(b)~~

Average basic Card Member spending and average fee per card are computed from proprietary card activities only. Average fee per card is computed based on net card fees ~~including the amortization of deferred direct acquisition costs~~ divided by average worldwide proprietary cards-in-force. The average fee per card, adjusted, which is a non-GAAP measure, is computed in the same manner, but excludes amortization of deferred direct acquisition costs. The amount of amortization excluded was $72 million and $77 million for the three months ended September 30, 2015 and 2014, respectively, and $217 million and $227 million for the nine months ended September 30, 2015 and 2014, respectively. We present the average fee per card, adjusted, because we believe this metric presents a useful indicator of card fee pricing across a range of our proprietary card products.


		39

Table 6: ~~Selected Statistical Information~~Billed Business Growth

      Three Months Ended
September 30, 2015



Percentage
Increase (Decrease)



    Percentage Increase
Assuming
No Changes in
Foreign Exchange
Rates^(a)
Worldwide^(b)

Billed business
      — % 5 %
Proprietary billed business
      1    4
GNS billed business^(c)
      (1)    13
Airline-related volume (8% of worldwide billed business)
      (6)    —
United States^(b)

Billed business
      4
Proprietary consumer card billed business^(d)
      4
Proprietary small business billed business^(d)
      7
Proprietary corporate services billed business^(e)
      —
T&E-related volume (26% of U.S. billed business)
      3
Non-T&E-related volume (74% of U.S. billed business)
      4
Airline-related volume (7% of U.S. billed business)
      (3)
Outside the United States^(b)

Billed business
      (8)    8
Japan, Asia Pacific & Australia (JAPA) billed business
      (1)    14
Latin America & Canada (LACC) billed business
      (23)    (4)
Europe, the Middle East & Africa (EMEA) billed business
      (4)    9
Proprietary consumer and small business billed business^(f)
      (13)    2
JAPA billed business
      (7)    10
LACC billed business
      (26)    (11)
EMEA billed business
      (2)    11
Proprietary corporate services billed business^(e)
      (10) % 5 %

(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).
(b) Captions in the table above not designated as “proprietary” or “GNS” include both proprietary and GNS data.
(c) Included in the GNMS segment.
(d) Included in the USCS segment.
(e) Included in the GCS segment.
(f) Included in the ICS segment.

~~Table 7: Selected Statistical Information~~

      Nine Months Ended
September 30, 2015



Percentage
Increase (Decrease)



    Percentage Increase
Assuming
No Changes in
Foreign Exchange
Rates^(a)
Worldwide^(b)

Billed business
      2 % 6%
Proprietary billed business
      1    4
GNS billed business^(c)
      3    15
Airline-related volume (9% of worldwide billed business)
      (5 ) 1
United States^(b)

Billed business
      5
Proprietary consumer card billed business^(d)
      5
Proprietary small business billed business^(d)
      7
Proprietary corporate services billed business^(e)
      2
T&E-related volume (26% of U.S. billed business)
      4
Non-T&E-related volume (74% of U.S. billed business)
      5
Airline-related volume (8% of U.S. billed business)
      (1 )
Outside the United States^(b)

Billed business
      (5 ) 8
JAPA billed business
      3    15
LACC billed business
      (18 ) (4)
EMEA billed business
      (6 ) 8
Proprietary consumer and small business billed business^(f)
      (12 ) 2
JAPA billed business
      (4 ) 10
LACC billed business
      (30 ) (19)
EMEA billed business
      (5 ) 10
Proprietary corporate services billed business^(e)
      (10 )% 4%



	Three Months Ended
	September 30, 2016

	Percentage Increase (Decrease)		Percentage Increase (Decrease) Assuming No Changes in FX Rates^(a)

Worldwide^(b)
Total billed business	(3	)%	(3	)%
Proprietary billed business	(5	)	(5	)
GNS billed business^(c)	10		10
Airline-related volume (8% of worldwide billed business)	(6	)	(5	)
United States^(b)
Billed business	(9	)
Proprietary consumer card billed business^(d)	(15	)
Proprietary small business and corporate services billed business^(e)	(1	)
T&E-related volume (26% of U.S. billed business)	(7	)
Non-T&E-related volume	(9	)
Airline-related volume (7% of U.S. billed business)	(11	)
Outside the United States^(b)
Billed business	10		11
Japan, Asia Pacific & Australia billed business	22		16
Latin America & Canada billed business	—		7
Europe, the Middle East & Africa billed business	2		7
Proprietary consumer card billed business^(c)	6		8
Proprietary small business and corporate services billed business^(e)	6	%	6	%

(a)

~~Refer~~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 ~~Note (a) in Table 6.~~

determine results for the current period apply to the corresponding period against which such results are being compared).

(b)	Captions in the table above not designated as “proprietary” or “GNS” include both proprietary and GNS data.

(c)	Included in the ICNS segment.

(d)	Included in the USCS segment.

(e)	Included in the GCS segment.


		40

Table 7: Billed Business Growth



	Nine Months Ended
	September 30, 2016

	Percentage Increase (Decrease)		Percentage Increase (Decrease) Assuming No Changes in FX Rates^(a)

Worldwide^(b)
Total billed business	1	%	2	%
Proprietary billed business	—		1
GNS billed business^(c)	7		11
Airline-related volume (8% of worldwide billed business)	(5	)	(3	)
United States^(b)
Billed business	(1	)
Proprietary consumer card billed business^(d)	(4	)
Proprietary small business and corporate services billed business^(e)	3
T&E-related volume (26% of U.S. billed business)	(3	)
Non-T&E-related volume	(1	)
Airline-related volume (7% of U.S. billed business)	(8	)
Outside the United States^(b)
Billed business	6		10
Japan, Asia Pacific & Australia billed business	14		14
Latin America & Canada billed business	(8	)	6
Europe, the Middle East & Africa billed business	3		7
Proprietary consumer card billed business^(c)	4		8
Proprietary small business and corporate services billed business^(e)	2	%	5	%

(a)	Refer to Note (a) in Table 6.

(b)	Captions in the table above not designated as “proprietary” or “GNS” include both proprietary and GNS data.

(c)	Included in the ~~GNMS~~ICNS segment.

(d)	Included in the USCS segment.

(e)	Included in the GCS segment.

~~(f)~~

~~Included in the ICS segment.~~


		41

Table 8: Selected Credit-Related Statistical Information

       As of or for the
    Three Months Ended
    September 30,
As of or for the
Nine Months Ended
     September 30,

(Millions, except percentages and where indicated)
   2015 2014 Change 2015 2014
Change
Worldwide Card Member receivables:

Total receivables(billions)
   $ 44.3    $ 45.1    (2) %   $ 44.3    $ 45.1    (2)%
Loss reserves:

Beginning balance
   $ 420    $ 413    2    $ 465    $ 386    20
Provisions^(a)
   203    196    4    542    594    (9)
Net write-offs^(b)
   (174)    (168)    4    (544)    (527)    3
Other
   (8)    (9)    (11)    (22)    (21)    5


Ending balance
   $ 441    $ 432    2    $ 441    $ 432    2


% of receivables
   1.0 % 1.0 % 1.0 % 1.0 %
Net write-off rate — principal only — USCS/ICS^(c)
   1.8    1.6    1.8    1.8
Net write-off rate — principal and fees — USCS/ICS^(c)
   2.0    1.8    2.1    2.0
30+ days past due as a % of total — USCS/ICS
   1.6    1.6    1.6    1.6
Net loss ratio as a % of charge volume — GCS
   0.08    0.09    0.09    0.09
90+ days past billing as a % of total — GCS
   0.7 % 0.8 % 0.7 % 0.8 %
Worldwide Card Member loans:

Total loans(billions)
   $ 68.9    $ 66.1    4    $ 68.9    $ 66.1    4
Loss reserves:

Beginning balance
   $ 1,132    $ 1,170    (3)    $ 1,201    $ 1,261    (5)
Provisions^(a)
   309    265    17    829    797    4
Net write-offs — principal^(b)
   (231)    (245)    (6)    (733)    (786)    (7)
Net write-offs — interest and fees^(b)
   (37)    (40)    (8)    (122)    (124)    (2)
Other
   (9)    (4)    #    (11)    (2)    #


Ending balance
   $     1,164    $     1,146    2    $     1,164    $     1,146    2


Ending reserves — principal
   $ 1,114    $ 1,093    2    $ 1,114    $ 1,093    2
Ending reserves — interest and fees
   $ 50    $ 53    (6)    $ 50    $ 53    (6)
% of loans
   1.7 % 1.7 % 1.7 % 1.7 %
% of past due
   164 % 165 % 164 % 165 %
Average loans(billions)
   $ 69.0    $ 66.4    4 % $ 68.3    $ 65.4    4 %
Net write-off rate — principal only^(c)
   1.3 % 1.5 % 1.4 % 1.6 %
Net write-off rate — principal, interest and fees^(c)
   1.6    1.7    1.7    1.9
30+ days past due as a % of total
   1.0    1.1    1.0    1.1
Net interest income divided by average loans^(d)
   8.7    8.5    8.5    8.1
Net interest yield on Card Member loans^(d)
   9.5 % 9.3 % 9.5 % 9.3 %

# Denotes a variance greater than 100 percent

(a) Provisions on principal (resulting from authorized transactions) and fee reserve components on Card Member receivables and provisions for principal (resulting from authorized transactions), interest and/or fees on Card Member loans.
(b) Write-offs, less recoveries.
(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, because we consider uncollectible interest and/or fees in our reserves for credit losses, a net write-off rate including principal, interest and/or fees is also presented. The nine months ended September 30, 2015 reflects the impact of a change in the timing of charge-offs for Card Member loans and receivables in certain modification programs from 180 days past due to 120 days past due, which was fully recognized in the three months ended September 30, 2015.
(d) Refer to Table 9 for the calculation of net interest income divided by average loans, a GAAP measure, net interest yield on Card Member loans, a non-GAAP measure, and our rationale for presenting net interest yield on Card Member loans.



	As of or for the						Change			As of or for the						Change
	Three Months Ended						2016			Nine Months Ended						2016
	September 30,						vs.			September 30,						vs.

(Millions, except percentages and where indicated)	2016			2015			2015			2016			2015			2015

Worldwide Card Member receivables:^(a)
Total receivables(billions)	$	45.3		$	44.3			2	%	$	45.3		$	44.3			2	%
Loss reserves:
Beginning balance	$	423		$	420			1		$	462		$	465			(1	)
Provisions^(b)		174			203			(14	)		496			542			(8	)
Net write-offs^(c)		(159	)		(174	)		(9	)		(518	)		(544	)		(5	)
Other		(1	)		(8	)		(88	)		(3	)		(22	)		(86	)

Ending balance	$	437		$	441			(1	)	$	437		$	441			(1	)

% of receivables		1.0	%		1.0	%					1.0	%		1.0	%
Net write-off rate — principal only^(d)		1.4			1.8						1.6			1.8
Net write-off rate — principal and fees^(d)		1.6			2.0						1.8			2.1
30+ days past due as a % of total^(d)		1.4			1.6						1.4			1.6
Net loss ratio as a % of charge volume — GCP		0.11			0.08						0.09			0.09
90+ days past billing as a % of total — GCP		0.8	%		0.7	%					0.8	%		0.7	%

Worldwide Card Member loans:^(a)
Total loans(billions)	$	60.6		$	68.9			(12	)	$	60.6		$	68.9			(12	)
Loss reserves:
Beginning balance	$	1,091		$	1,132			(4	)	$	1,028		$	1,201			(14	)
Provisions^(b)		319			309			3			831			829			—
Net write-offs — principal only^(c)		(250	)		(231	)		8			(687	)		(733	)		(6	)
Net write-offs — interest and fees^(c)		(48	)		(37	)		30			(128	)		(122	)		5
Other^(e)		2			(9	)		#			70			(11	)		#

Ending balance	$	1,114		$	1,164			(4	)	$	1,114		$	1,164			(4	)

Ending reserves — principal	$	1,050		$	1,114			(6	)	$	1,050		$	1,114			(6	)
Ending reserves — interest and fees	$	64		$	50			28		$	64		$	50			28
% of loans		1.8	%		1.7	%					1.8	%		1.7	%
% of past due		160	%		164	%					160	%		164	%
Average loans(billions)^(a)	$	60.3		$	69.0			(13	)%	$	58.9		$	68.3			(14	)%
Net write-off rate — principal only^(d)		1.7	%		1.3	%					1.6	%		1.4	%
Net write-off rate — principal, interest and fees^(d)		2.0			1.6						1.8			1.7
30+ days past due as a % of total^(d)		1.1	%		1.0	%					1.1	%		1.0	%

#	Denotes a variance greater than 100 percent.

(a)	Beginning December 1, 2015 through to the sale completion dates, does not reflect the HFS portfolios.

(b)	Provisions on principal and fee reserve components on Card Member receivables and provisions for principal, interest and/or fees on Card Member loans. Refer to Table 3 footnote (a).

(c)	Write-offs, less recoveries.

(d)

We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, because we consider uncollectible interest and/or fees in our reserves for credit losses, a net write-off rate including principal, interest and/or fees is also presented. The net write-off rates and 30+ days past due as a percentage of total for Card Member receivables relate to USCS, ICNS and Global Small Business Services (GSBS) Card Member receivables.

(e)	Includes reserves associated with Card Member loans reclassified from HFS to held for investment. Refer to Changes in Card Member loans reserve for losses under Note 4 to the Consolidated Financial Statements for additional information.


		42

Table 9: Net Interest Yield on Card Member Loans



											Three Months Ended						Nine Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,				September 30,						September 30,
(Millions, except percentages and where indicated)	2015			2014			2015			2014	2016			2015			2016			2015

Net interest income	$	1,505		$	1,395		$	4,375		$ 4,048	$	1,334		$	1,505		$	4,363		$	4,375
Exclude:
Interest expense not attributable to the Company’s Card Member loan portfolio		234			247			732		769		261			232			746			726
Interest income not attributable to the Company’s Card Member loan portfolio		(96)			(90)			(288)		(267)		(104	)		(89	)		(309	)		(266	)

Adjusted net interest income^(a)	$	1,643		$	1,552		$	4,819		$ 4,550	$	1,491		$	1,648		$	4,800		$	4,835

Average loans (billions)	$	69.0		$	66.4		$	68.3		$ 65.4
Exclude certain non-traditional Card Member loans and other fees (billions)		(0.2)			(0.2)			(0.2)		(0.2)

Adjusted average loans (billions)^(a)	$	68.8		$	66.2		$	68.1		$ 65.2
Average loans including HFS loan portfolios (billions)											$	60.3		$	69.0		$	66.6		$	68.3

Net interest income divided by average loans		8.7	%		8.5	%		8.5	%	8.1%		8.8	%		8.7	%		8.7	%		8.5	%
Net interest yield on Card Member loans^(a)		9.5	%		9.3	%		9.5	%	9.3%		9.8	%		9.5	%		9.6	%		9.5	%


(a) Adjusted net interest income, adjusted average loans, and net interest yield on Card Member loans are non-GAAP measures. Refer to “Glossary of Selected Terminology” for definitions of these terms. We believe adjusted net interest income and average loans are useful to investors because they are components of net interest yield on Card Member loans, which provides a measure of profitability of our Card Member loan portfolio.

(a)

Adjusted net interest income and net interest yield on Card Member loans are non-GAAP measures. Refer to “Glossary of Selected Terminology” for definitions of these terms. We believe adjusted net interest income is useful to investors because it is a component of net interest yield on Card Member loans, which provides a measure of profitability of our Card Member loan portfolio.


		43

Business Segment Results

U.S. ~~Card~~Consumer Services

Table 10: USCS Selected Income Statement Data



																				Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change
	Three Months Ended September 30,										Nine Months Ended September 30,
(Millions, except percentages)	2015			2014			Change				2015			2014			Change				2016			2015			2016 vs. 2015					2016			2015			2016 vs. 2015

Revenues
Non-interest revenues	$	3,302		$	3,188		$	114	4	%	$	9,822		$	9,375		$	447	5 %	$	1,849		$	2,117		$	(268	)	(13	)%	$	5,947		$	6,324			(377	)	(6	)%

Interest income		1,593			1,465			128	9			4,639			4,296			343	8		1,178			1,324			(146	)	(11	)		3,847			3,849			(2	)	—
Interest expense		166			152			14	9			481			455			26	6		125			123			2		2			404			358			46		13

Net interest income		1,427			1,313			114	9			4,158			3,841			317	8		1,053			1,201			(148	)	(12	)		3,443			3,491			(48	)	(1	)

Total revenues net of interest expense		4,729			4,501			228	5			13,980			13,216			764	6		2,902			3,318			(416	)	(13	)		9,390			9,815			(425	)	(4	)
Provisions for losses		390			316			74	23			1,013			997			16	2		275			294			(19	)	(6	)		702			730			(28	)	(4	)

Total revenues net of interest expense after provisions for losses		4,339			4,185			154	4			12,967			12,219			748	6		2,627			3,024			(397	)	(13	)		8,688			9,085			(397	)	(4	)

Expenses
Marketing, promotion, rewards, Card Member services and other		2,029			1,764			265	15			5,758			5,159			599	12		1,274			1,396			(122	)	(9	)		3,991			3,972			19		—
Salaries and employee benefits and other operating expenses		1,048			1,010			38	4			3,101			3,043			58	2		738			768			(30	)	(4	)		1,297			2,273			(976	)	(43	)

Total expenses		3,077			2,774			303	11			8,859			8,202			657	8		2,012			2,164			(152	)	(7	)		5,288			6,245			(957	)	(15	)

Pretax segment income		1,262			1,411			(149)	(11)			4,108			4,017			91	2		615			860			(245	)	(28	)		3,400			2,840			560		20
Income tax provision		468			522			(54)	(10)			1,494			1,482			12	1		214			318			(104	)	(33	)		1,238			1,026			212		21

Segment income	$	794		$	889		$	(95)	(11)	%	$	2,614		$	2,535		$	79	3 %	$	401		$	542		$	(141	)	(26	)%	$	2,162		$	1,814			348		19	%

Effective tax rate		37.1	%		37.0	%						36.4	%		36.9	%					34.8	%		37.0	%							36.4	%		36.1	%

USCS issues a wide range of ~~card products,~~proprietary consumer cards and provides ~~various~~ services to consumers ~~and small businesses~~ in the ~~U.S., provides~~United States, including consumer travel ~~services to Card Members and other consumers and operates a coalition loyalty business.~~services.

Non-interest revenues ~~increased $114~~decreased $268 million or 413 percent and $447 million or 5 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year, primarily driven by higher discount revenue, as a result of growth in billed business which increased 5 percent and 6 percent for the three and nine months ended September 30, 2015, respectively, compared to the same periods in the prior year. The growth in both periods was primarily driven by 5 percent higher cards-in-force and a 1 percent increase in average spending per proprietary basic card.

Interest income increased $128 million or 9 percent and $343 million or 8 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year, primarily driven by higher average Card Member loans.

~~Interest expense increased $14 million or 9 percent and $26~~$377 million or 6 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, ~~as compared to the same periods in the prior year, primarily driven by a higher cost of funds as a result of higher volumes.~~

Overall, provisions for losses increased $74 million or 23 percent and $16 million or 2 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year. Charge card provision for losses increased $15 million or 15 percent and decreased $41 million or 12 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year. The ~~increase for the three month period was~~decreases in both periods were primarily driven by higher write-off rates versus the prior year and the decrease for the nine month period was primarily driven by higher reserve releases in the current year versus a reserve build in the prior year. Card Member loans provision for losses increased $58due to lower discount revenue, which decreased $266 million or 2717 percent and ~~$57~~$413 million or 9 percent for the three and nine months ended September 30, ~~2015, as~~2016, respectively, compared to the same periods in the prior ~~year. The increases were driven by credit performance, combined with~~year, reflecting Costco-related revenues in the prior year and higher ~~loan balances. Refer to Table 11~~cash rebate rewards in the current year, for ~~Card Member receivables and loans write-off rates.~~

~~Marketing, promotion,~~which the rewards ~~Card Member services and other expenses increased $265 million or~~costs are classified as contra-discount revenue. Billed business decreased 15 percent and ~~$599 million or 12~~4 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year. The increases were primarily driven by a $109 million and $292 million increase in Card Member rewards expense for the three and nine months ended September 30, 2015, respectively, due to higher co-brand rewards expense of $80 million and $237 million, and increased Membership Rewards expense of $29 million and $55 million for the respective periods. The increases in co-brand rewards expense were driven by higher spending volumes and rate increases, due in part to the previously renewed co-brand partnership agreements. The increases in Membership Rewards expense were also due to higher spending volumes, partially offset by slower growth in the URR and a decline in the WAC per point. Card Member services and other expense increased $60 million or 48 percent and $163 million or 44 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year, primarily driven by ~~higher costs related to~~Costco-related volumes included in the ~~previously renewed co-brand partnership agreements. Marketing~~prior year. The decrease in discount revenue was partially offset by an increase in net card fees, resulting from growth in the Platinum, Gold and ~~promotion increased $96~~Delta portfolios.

Net interest income decreased $148 million or 2412 percent and ~~$144~~$48 million or 131 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, primarily driven by ~~increased spending on incremental growth initiatives.~~Costco-related interest income included in the prior year and higher interest expense in the current year, partially offset in the nine-month period by modestly higher yields and an increase in average Card Member loans (including Card Member loans HFS).

~~Salaries and employee benefits and other operating expenses increased $38~~Overall, provisions for losses decreased $19 million or 46 percent and ~~$58~~$28 million or 24 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, compared to the same periods in the prior year, as the current year periods do not reflect credit costs associated with the HFS portfolios, as previously mentioned, which was partially offset by strong momentum in our lending growth initiatives, resulting in higher loan balances and net write-offs.

Marketing, promotion, rewards, Card Member services and other expenses decreased $122 million or 9 percent and was relatively flat for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year. Both periods reflect lower cobrand rewards expense due to Costco-related expenses in the prior year, which was offset in the nine-month period by an increase in marketing and promotion expense, driven by higher levels of spending on growth initiatives, and an increase in Card Member services expense, driven by increased usage of new benefits.

Salaries and employee benefits and other operating expenses decreased $30 million or 4 percent and $976 million or 43 percent for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year. The ~~increases were~~decrease in the three-month period was primarily driven by ~~higher spending on incremental growth initiatives and~~ lower ~~fraud losses~~operating expenses, partially offset by restructuring in the current year. The ~~increase~~decrease in the ~~nine month~~nine-month period ~~was partially offset by a change in~~primarily reflects the ~~estimated value~~gains on the sales of ~~certain investments in our CRA portfolio in~~ the ~~prior year.~~HFS portfolios.


		45

Table 11: USCS Selected Statistical Information



	As of or for the Three Months Ended September 30,									As of or for the Nine Months Ended September 30,							As of or for the Three Months Ended September 30,						Change 2016 vs.			As of or for the Nine Months Ended September 30,						Change 2016 vs.
(Millions, except percentages and where indicated)	2015			2014			Change			2015			2014			Change	2016			2015			2015			2016			2015			2015
Card billed business (billions)	$	143.4		$	136.2			5	%	$	420.0		$	397.0		6 %	$	78.6		$	92.3			(15	)%	$	261.0		$	271.6			(4	)%
Total cards-in-force		47.4			45.2			5			47.4			45.2		5		32.3			40.0			(19	)		32.3			40.0			(19	)
Basic cards-in-force		35.4			33.7			5			35.4			33.7		5		22.9			28.0			(18	)		22.9			28.0			(18	)
Average basic Card Member spending (dollars)^*	$	4,098		$	4,069			1		$	12,166		$	12,008		1
U.S. Consumer Travel:
Travel sales	$	943		$	956			(1)		$	2,951		$	2,957		—
Travel commissions and fees/sales		7.1	%		7.4	%					6.9	%		7.1	%
Average basic Card Member spending (dollars)																	$	3,452		$	3,337			3		$	9,878		$	9,969			(1	)
Total segment assets (billions)^(a)	$	107.7		$	103.3			4		$	107.7		$	103.3		4	$	79.4		$	84.0			(5	)	$	79.4		$	84.0			(5	)
Segment capital	$	10,283		$	9,909			4		$	10,283		$	9,909		4
Segment capital (billions)																	$	7.5		$	7.3			3		$	7.5		$	7.3			3
Return on average segment capital^(b)		31.4	%		35.5	%					31.4	%		35.5	%			37.4	%		30.1	%					37.4	%		30.1	%
Return on average tangible segment capital^(b)		32.6	%		36.6	%					32.6	%		36.6	%

Card Member receivables:
Card Member receivables:^(c)
Total receivables (billions)	$	22.0		$	21.3			3		$	22.0		$	21.3		3	$	10.1		$	10.5			(4	)	$	10.1		$	10.5			(4	)
Net write-off rate – principal only^(c)		1.6	%		1.5	%					1.8	%		1.7	%
Net write-off rate – principal and fees^(c)		1.9			1.7						2.0			1.9
Net write-off rate – principal only^(d)																		1.1	%		1.5	%					1.4	%		1.6	%
Net write-off rate – principal and fees^(d)																		1.3	%		1.7	%					1.6	%		1.8	%
30+ days past due as a % of total		1.6	%		1.6	%					1.6	%		1.6	%			1.4	%		1.6	%					1.4	%		1.6	%

Card Member loans:
Card Member loans:^(c)
Total loans (billions)	$	62.1		$	58.0			7	%	$	62.1		$	58.0		7 %	$	44.9		$	52.2			(14	)%	$	44.9		$	52.2			(14	)%
Net write-off rate – principal only^(c)		1.3	%		1.4	%					1.4	%		1.6	%
Net write-off rate – principal, interest and fees^(c)		1.5			1.6						1.6			1.8
Average loans (billions)																	$	44.8		$	52.1			(14	)%	$	43.7		$	51.4			(15	)%
Net write-off rate – principal only^(d)																		1.6	%		1.3	%					1.5	%		1.4	%
Net write-off rate – principal, interest and fees^(d)																		1.9	%		1.5	%					1.8	%		1.6	%
30+ days past due loans as a % of total		1.0	%		1.0	%					1.0	%		1.0	%			1.1	%		1.0	%					1.1	%		1.0	%
Calculation of Net Interest Yield on
Card Member loans:
Net interest income	$	1,427		$	1,313					$	4,158		$	3,841			$	1,053		$	1,201					$	3,443		$	3,491
Exclude:
Interest expense not attributable to the Company’s Card Member loan portfolio		42			39						121			118				20			18						59			53
Interest income not attributable to the Company’s Card Member loan portfolio		(4)			(3)						(11)			(8)				(6	)		(5	)					(16	)		(11	)

Adjusted net interest income^(d)	$	1,465		$	1,349					$	4,268		$	3,951
Adjusted net interest income^(e)																	$	1,067		$	1,214					$	3,487		$	3,533
Average loans including HFS loan portfolios(billions)																	$	44.8		$	52.1					$	50.1		$	51.4
Net interest income divided by average loans																		9.4	%		9.2	%					9.2	%		9.1	%
Net interest yield on Card Member loans^(e)																		9.5	%		9.2	%					9.3	%		9.2	%

Average loans (billions)	$	62.1		$	58.0					$	61.2		$	57.0
Exclude certain non-traditional Card Member loans, and other fees (billions)		—			—						—			—

Adjusted average loans (billions)^(d)	$	62.1		$	58.0					$	61.2		$	57.0

Net interest income divided by average loans		9.2	%		9.1	%					9.1	%		9.0	%
Net interest yield on Card Member loans^(d)		9.4	%		9.2	%					9.3	%		9.3	%

*	~~Proprietary cards only.~~

(a)	~~Revised prospectively,~~Effective September 30, 2015, certain intercompany balances have been reclassified between operating segments as a result of ~~systems enhancements, to reclassify certain intercompany accounts.~~ system enhancements.

(b)

Return on average segment capital is calculated by dividing (i) one-year period segment income ($~~3.3~~2.7 billion and ~~$3.4~~$2.3 billion for the twelve months ended September 30, ~~2015~~2016 and ~~2014,~~2015, respectively) by (ii) one-year average segment capital ($~~10.4~~7.2 billion and ~~$9.6~~$7.6 billion for the twelve months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively). Return on average tangible segment capital, a non-GAAP measure, is computed in the same manner as return on average segment capital except the computation excludes from average segment capital average goodwill and other intangibles of $377 million and $299 million for the twelve months ended September 30, 2015 and 2014, respectively. We believe return on average tangible segment capital is a useful measure of the profitability of our business.

(c)	Refer to Table 8 footnote (a).

(d)	Refer to Table 8 footnote (d).

~~(d)~~(e)

Adjusted net interest income ~~adjusted average loans,~~ and net interest yield on 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 ~~and adjusted average loans are~~is useful to investors because ~~they are components~~it is a component of net interest yield on Card Member loans, which provides a measure of profitability of our Card Member loan portfolio.


		46

International ~~Card~~Consumer and Network Services

Table 12: ~~ICS~~ICNS Selected Income Statement Data



																					Three Months Ended September 30,						Change				Nine Months Ended September 30,						Change
	Three Months Ended September 30,											Nine Months Ended September 30,
(Millions, except percentages)	2015			2014			Change					2015			2014			Change				2016			2015			2016 vs. 2015				2016			2015			2016 vs. 2015

Revenues
Non-interest revenues	$	1,071		$	1,206		$	(135)		(11)	%	$	3,214		$	3,571		$	(357)	(10)%	$	1,205		$	1,141		$	64	6	%	$	3,587		$	3,449		$	138		4	%

Interest income		226			273			(47)		(17)			706			825			(119)	(14)		231			228			3	1			692			710			(18	)	(3	)
Interest expense		59			85			(26)		(31)			183			259			(76)	(29)		55			55			—	—			167			176			(9	)	(5	)

Net interest income		167			188			(21)		(11)			523			566			(43)	(8)		176			173			3	2			525			534			(9	)	(2	)

Total revenues net of interest expense		1,238			1,394			(156)		(11)			3,737			4,137			(400)	(10)		1,381			1,314			67	5			4,112			3,983			129		3
Provisions for losses	85			98			(13)		(13)			244			275			(31)		(11)		84			77			7	9			233			223			10		4

Total revenues net of interest expense after provisions for losses		1,153			1,296			(143)		(11)			3,493			3,862			(369)	(10)		1,297			1,237			60	5			3,879			3,760			119		3

Expenses
Marketing, promotion, rewards, Card Member services and other		500			532			(32)		(6)			1,409			1,605			(196)	(12)		554			504			50	10			1,535			1,433			102		7
Salaries and employee benefits and other operating expenses		548			588			(40)		(7)			1,651			1,809			(158)	(9)		535			532			3	1			1,608			1,608			—		—

Total expenses		1,048			1,120			(72)		(6)			3,060			3,414			(354)	(10)		1,089			1,036			53	5			3,143			3,041			102		3

Pretax segment income		105			176			(71)		(40)			433			448			(15)	(3)		208			201			7	3			736			719			17		2
Income tax provision		16			34			(18)		(53)			85			70			15	21		53			47			6	13			165			175			(10	)	(6	)

Segment income	$	89		$	142		$	(53)		(37)	%	$	348		$	378		$	(30)	(8)%	$	155		$	154		$	1	1	%	$	571		$	544		$	27		5	%

Effective tax rate		15.2	%		19.3	%							19.6	%		15.6	%					25.5	%		23.4	%						22.4	%		24.3	%

~~ICS~~ICNS issues a wide range of proprietary consumer ~~and small business~~ cards outside the ~~U.S.,~~United States and enters into partnership agreements with third-party card issuers and acquirers, licensing the American Express brand and extending the reach of the global network. It also provides ~~consumer~~ travel services to ~~Card Members and other~~ consumers ~~and operates a coalition loyalty business in various countries.~~outside the United States.

Non-interest revenues ~~decreased $135~~increased $64 million or 116 percent and ~~$357~~$138 million or 104 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, ~~and FX-adjusted non-interest revenues increased 4 percent for both periods,~~ primarily driven by ~~net foreign exchange~~higher discount revenue, ~~on cross-border Card Member spending,~~due to an increase in both proprietary and non-proprietary (i.e., GNS) billed business, and higher net card ~~fees and revenue~~fees. The increase in the nine-month period also reflected a contractual payment from ~~our Loyalty Partner business.~~³ ~~Also contributing was~~a GNS partner in the second quarter of 2016. Total billed business ~~which decreased 13~~increased 8 percent and 126 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, ~~and FX-adjusted billed business increased 2 percent for both periods,~~ primarily due to ~~higher Card Member spending, partially offset by lower~~increased proprietary and GNS cards-in-force ~~in Canada, primarily driven by the termination of our relationship with Costco in that country.~~³and average spend per card. Refer to Tables 6 and 7 for additional information on billed business by region.

Interest income was relatively flat and decreased ~~$47~~$18 million or ~~17 percent and $119 million or 14~~3 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, ascompared to the same periods in the prior year, reflecting the impact of changes in FX rates year-over-year. FX-adjusted interest income increased 8 percent and 7 percent, in the same respective periods, primarily driven by higher average FX-adjusted loan balances.¹

¹ 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 period apply to the corresponding period against which such results are being compared). FX-adjusted revenues and expenses constitute non-GAAP measures. We believe the presentation of information on a foreign currency adjusted basis is helpful to investors by making it easier to compare our performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.


		47

Interest expense was relatively flat and decreased $9 million or 5 percent for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year, reflecting the impact of changes in FX rates year-over-year. FX-adjusted interest expense increased 6 percent for both periods driven by higher funding costs.²

Provisions for losses increased $7 million or 9 percent and $10 million or 4 percent for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year, driven ~~primarily~~ by ~~lower average loans as a result of the termination of our relationship with Costco in Canada, partially offset by a~~ higher net ~~interest yield.~~write-offs.

~~Interest expense decreased $26~~Marketing, promotion, rewards, Card Member services and other expenses increased $50 million or 3110 percent and ~~$76~~$102 million or 297 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, primarily driven by ~~a lower cost~~higher levels of ~~funds, as a result of lower volumes.~~spending on growth initiatives.

³ ~~Refer to footnote 1 on page 39~~Salaries and employee benefits and other operating expenses were relatively flat for ~~details regarding foreign currency adjusted information.~~

~~Provisions for losses decreased $13 million or 13 percent and $31 million or 11 percent for~~both the three and nine months ended September 30, ~~2015, respectively, as~~2016, and increased 3 percent for both periods on an FX-adjusted basis, compared to the same periods in the prior year, ~~while FX-adjusted provisions for losses increased 5 percent for both periods.~~⁴ ~~Refer to Table 13 for Card Member receivables and loans write-off rates for the three and nine months ended September 30, 2015 and 2014.~~

Marketing, promotion, rewards, Card Member services and other expenses decreased $32 million or 6 percent and $196 million or 12 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year, and increased 9 percent and 1 percent for the respective periods on an FX-adjusted basis, primarily driven by ~~increased spending on incremental growth initiatives, primarily in marketing.~~⁴

Salaries and employee benefits and other operating expenses decreased $40 million or 7 percent and $158 million or 9 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periodsrestructuring in the ~~prior year, while FX-adjusted salaries and employee benefits and other operating expenses increased 1 percent and decreased~~ current year.^{2 percent for the respective periods.⁴ The decrease for the nine month period was primarily due to a prior-year restructuring charge.}

The effective tax rate in all periods reflects the recurring permanent tax benefit related to the segment’s ongoing funding activities outside the ~~U.S. in relation to the levels of pretax income. The benefit~~United States, which is allocated to ~~ICS~~ICNS under the Company’s internal tax allocation process. The effective tax rate for ~~2015~~2016 also ~~includes~~reflects the allocated share of tax benefits related to the resolution of certain prior years’ items. In addition, the effective tax rate in each of the periods reflects the impact of recurring permanent tax benefits on varying levels of pretax income.

⁴² Refer to footnote 1 on page 3947 for details regarding foreign currency adjusted information.


		48

Table 13: ~~ICS~~ICNS Selected Statistical Information

      As of or for the
   Three Months Ended
   September 30,   As of or for the
  Nine Months Ended
  September 30,
(Millions, except percentages and where indicated)
   2015 2014 Change 2015 2014
Change
Card billed business (billions)
   $   29.6    $   33.9    (13) % $     88.3    $   99.9    (12)%
Total cards-in-force
   15.2    15.8    (4)    15.2    15.8    (4)
Basic cards-in-force
   10.6    10.9    (3)    10.6    10.9    (3)
Average basic Card Member spending (dollars)^*
   $ 2,827    $ 3,100    (9)    $ 8,432    $ 9,185    (8)
International Consumer Travel:

Travel sales
   $ 325    $ 362    (10)    $ 992    $ 1,069    (7)
Travel commissions and fees/sales
   5.8 % 6.9 % 6.7 % 6.6 %
Total segment assets (billions)^(a)
   $ 34.9    $ 31.1    12    $ 34.9    $ 31.1    12
Segment capital
   $      3,338    $      2,974    12    $      3,338    $      2,974        12
Return on average segment capital^(b)
   11.9 % 15.8 % 11.9 % 15.8 %
Return on average tangible segment capital^(b)
   19.4 % 28.9 % 19.4 % 28.9 %



Card Member receivables:

Total receivables (billions)
   $ 6.5    $ 7.3    (11)    $ 6.5    $ 7.3    (11)
Net write-off rate – principal only^(c)
   2.2 % 1.9 % 2.1 % 2.0 %
Net write-off rate – principal and fees^(c)
   2.4    2.1    2.2    2.1
30+ days past due loans as a % of total
   1.5 % 1.4 % 1.5 % 1.4 %



Card Member loans:

Total loans (billions)
   $ 6.7    $ 8.0    (16) % $ 6.7    $ 8.0    (16)%
Net write-off rate – principal only^(c)
   1.8 % 1.9 % 2.0 % 2.0 %
Net write-off rate – principal, interest and fees^(c)
   2.3    2.4    2.4    2.4
30+ days past due loans as a % of total
   1.6 % 1.6 % 1.6 % 1.6 %
Calculation of Net Interest Yield on

Card Member loans:

Net interest income
   $ 167    $ 188    $ 523    $ 566
Exclude:

Interest expense not attributable to the Company’s Card Member loan portfolio
   18    24    51    63
Interest income not attributable to the Company’s Card Member loan portfolio
   (7)    (10)    (24)    (30)


Adjusted net interest income^(d)
   $ 178    $ 202    $ 550    $ 599
Average loans (billions)
   $ 6.9    $ 8.3    $ 7.0    $ 8.3
Exclude certain non-traditional Card Member loans, and other fees (billions)
   (0.1)    (0.2)    (0.1)    (0.2)


Adjusted average loans (billions)^(d)
   $ 6.8    $ 8.1    $ 6.9    $ 8.1
Net interest income divided by average loans
   9.7 % 9.1 % 10.0 % 9.1 %
Net interest yield on Card Member loans^(d)
   10.5 % 9.9 % 10.7 % 9.9 %


	As of or for the Three Months Ended September 30,						Change 2016 vs.			As of or for the Nine Months Ended September 30,						Change 2016 vs.

(Millions, except percentages and where indicated)	2016			2015			2015			2016			2015			2015

Card billed business (billions)
Proprietary	$	26.6		$	25.1			6	%	$	77.8		$	75.0			4	%
GNS		44.8			40.8			10			129.1			121.0			7

Total	$	71.4		$	65.9			8		$	206.9		$	196.0			6

Total cards-in-force
Proprietary		14.8			14.5			2			14.8			14.5			2
GNS		48.1			46.3			4			48.1			46.3			4

Total		62.9			60.8			3			62.9			60.8			3

Proprietary basic cards-in-force		10.3			9.9			4			10.3			9.9			4
Average proprietary basic Card Member spending(dollars)	$	2,596		$	2,547			2		$	7,665		$	7,591			1
Total segment assets (billions)^(a)	$	34.4		$	34.5			—		$	34.4		$	34.5			—
Segment capital (billions)	$	2.7		$	3.1			(13	)	$	2.7		$	3.1			(13	)
Return on average segment capital^(b)		26.4	%		21.9	%					26.4	%		21.9	%

Card Member receivables:^(c)
Total receivables (billions)	$	5.6		$	5.2			8		$	5.6		$	5.2			8
Net write-off rate – principal only^(d)		2.0	%		2.3	%					2.1	%		2.1	%
Net write-off rate – principal and fees^(d)		2.2	%		2.5	%					2.3	%		2.3	%
30+ days past due as a % of total		1.5	%		1.6	%					1.5	%		1.6	%

Card Member loans:^(c)
Total loans (billions)	$	6.7		$	6.7			—		$	6.7		$	6.7			—
Average loans (billions)	$	6.7		$	6.9			(3	)%	$	6.8		$	7.0			(3	)%
Net write-off rate – principal only^(d)		2.1	%		1.8	%					2.0	%		2.0	%
Net write-off rate – principal, interest and fees^(d)		2.6	%		2.3	%					2.5	%		2.4	%
30+ days past due loans as a % of total		1.7	%		1.6	%					1.7	%		1.6	%
Calculation of Net Interest Yield on Card Member loans:
Net interest income	$	176		$	173					$	525		$	534
Exclude:
Interest expense not attributable to the Company’s Card Member loan portfolio		12			14						33			42
Interest income not attributable to the Company’s Card Member loan portfolio		—			(6)						(7)			(15)

Adjusted net interest income^(e)	$	188		$	181					$	551		$	561

Average loans (billions)	$	6.7		$	6.9					$	6.8		$	7.0

Net interest income divided by average loans		10.5	%		10.1	%					10.4	%		10.1	%
Net interest yield on Card Member loans^(e)		11.2	%		10.5	%					10.9	%		10.7	%

*	~~Proprietary cards only.~~

(a)	~~Revised prospectively,~~Effective September 30, 2015, certain intercompany balances have been reclassified between operating segments as a result of ~~systems enhancements, to reclassify certain intercompany accounts.~~ system enhancements.

(b)

Return on average segment capital is calculated by dividing (i) one-year period segment income ($~~0.4~~712 million and $627 million for the twelve months ended September 30, 2016 and 2015, respectively) by (ii) one-year average segment capital ($2.7 billion and ~~$0.5~~$2.9 billion for the twelve months ended September 30, 2016 and 2015, ~~and 2014, respectively) by (ii) one-year average segment capital ($3.2 billion and $3.0 billion for the twelve months ended September 30, 2015 and 2014,~~ respectively). Return on average tangible segment capital, a non-GAAP measure, is computed in the same manner as return on average segment capital except the computation excludes from average segment capital average goodwill and other intangibles of $1.2 billion and $1.4 billion for the twelve months ended September 30, 2015 and 2014, respectively. We believe return on average tangible segment capital is a useful measure of the profitability of our business.

(c)	Refer to Table 8 footnote (a).

(d)	Refer to Table 8 footnote (d).

~~(d)~~(e)


		49

Global Commercial Services

Table 14: GCS Selected Income Statement Data

Three Months Ended
        September 30,

Nine Months Ended
        September 30,

(Millions, except percentages)    2015 2014 Change
      2015
2014 Change

Revenues

Non-interest revenues
   $          858    $          957    $      (99)       (10) % $      2,653    $       3,538    $   (885)       (25)%





Interest income
   3    4    (1)       (25)    10    11    (1)       (9)
Interest expense
   44    61    (17)       (28)    138    186    (48)       (26)





Net interest expense
   (41)    (57)    (16)       (28)    (128)    (175)    (47)       (27)





Total revenues net of interest expense
   817    900    (83)       (9)    2,525    3,363    (838)       (25)
Provisions for losses
   38    49    (11)       (22)    115    130    (15)       (12)





Total revenues net of interest expense after provisions for losses
   779    851    (72)       (8)    2,410    3,233    (823)       (25)





Expenses

Marketing, promotion, rewards, Card Member services and other
   160    161    (1)       (1)    480    504    (24)       (5)
Salaries and employee benefits and other operating expenses
   381    381    —       —    1,094    1,270    (176)       (14)





Total expenses
   541    542    (1)       —    1,574    1,774    (200)       (11)





Pretax segment income
   238    309    (71)       (23)    836    1,459    (623)       (43)
Income tax provision
   87    105    (18)       (17)    302    510    (208)       (41)





Segment income
   $ 151    $ 204    $ (53)       (26) % $ 534    $ 949    $ (415)       (44)%





Effective tax rate
   36.6 % 34.0 %    36.1 % 35.0 %


	Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change
(Millions, except percentages)	2016			2015			2016 vs. 2015					2016			2015			2016 vs. 2015

Revenues
Non-interest revenues	$	2,240		$	2,217		$	23		1	%	$	6,710		$	6,677		$	33		—	%

Interest income		282			297			(15	)	(5	)		913			864			49		6
Interest expense		98			91			7		8			297			271			26		10

Net interest income		184			206			(22	)	(11	)		616			593			23		4

Total revenues net of interest expense		2,424			2,423			1		—			7,326			7,270			56		1
Provisions for losses		134			148			(14	)	(9	)		433			435			(2	)	—

Total revenues net of interest expense after provisions for losses		2,290			2,275			15		1			6,893			6,835			58		1

Expenses
Marketing, promotion, rewards, Card Member services and other		808			826			(18	)	(2	)		2,415			2,358			57		2
Salaries and employee benefits and other operating expenses		753			712			41		6			2,078			2,074			4		—

Total expenses		1,561			1,538			23		1			4,493			4,432			61		1

Pretax segment income		729			737			(8	)	(1	)		2,400			2,403			(3	)	—
Income tax provision		263			269			(6	)	(2	)		873			868			5		1

Segment income	$	466		$	468		$	(2	)	—	%	$	1,527		$	1,535		$	(8	)	(1	)%

Effective tax rate		36.1	%		36.5	%							36.4	%		36.1	%

GCS ~~offers global~~issues a wide range of proprietary corporate and small business cards and provides payment and expense management services ~~to large~~globally. In addition, GCS provides financing products for qualified merchants.

Non-interest revenues were relatively flat for both the three and mid-sized companies. Our business travel operations, which had been included in GCS, were deconsolidated effective June 30, 2014 in connection with the formation of the GBT JV, discussed previously. Therefore, there is a lack of comparability for the nine months ended September 30, ~~2015. Our proportional share of~~2016, compared to the ~~GBT JV net~~same periods in the prior year, with billed business increasing 1 percent and 3 percent over the same respective periods, offset by Costco-related revenues in the prior year.

Net interest income ~~is reported within Other revenues.~~

~~Non-interest revenues~~ decreased ~~$99~~$22 million or 1011 percent and ~~$885~~increased $23 million or 254 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, ascompared to the same periods in the prior year. Both periods reflect Costco-related revenues in the prior year, which were more than offset in the nine-month period by an increase in average Card Member loans (including Card Member loans HFS), partially offset by higher interest expense.

Provisions for losses decreased $14 million or 9 percent and remained relatively flat for the three and nine months ended September 30, 2016, respectively, compared to the same periods in the prior year. The decrease ~~for~~in the ~~three month~~three-month period was ~~driven~~ primarily ~~by a reduction in billed business~~due to improving merchant financing loan credit performance.

Marketing, promotion, rewards, Card Member services and the gain related to the sale of investment securities in Concur Technologies in the prior year. The decrease for the nine month period was driven primarily by the business travel joint venture transaction (resulting in a lack of comparability between periods). Total billed businessother expenses decreased 3$18 million or 2 percent and increased $57 million or 2 percent for the three and nine months ended September 30, ~~2015, as~~2016, respectively, compared to the same periods in the prior year. ~~Billed business within~~The decrease in the ~~U.S.~~three-month period was ~~flat~~primarily driven by Costco-related expenses in the prior year, partially offset by higher investment spending in the current year. The increase in thenine-month period was primarily driven by higher Card Member rewards expense, due to higher spending volumes, and increased 2marketing and promotion expense.


		50

Salaries and employee benefits and other operating expenses increased $41 million or 6 percent and remained relatively flat for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year. Billed business outside the U.S. decreased 10 percent for both the three and nine months ended September 30, 2015, and FX-adjusted billed business outside the U.S. increased 5 percent and 4 percent for the respective periods.⁵

~~Net interest expense decreased $16 million or 28 percent and $47 million or 27 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods~~The increase in the ~~prior year, primarily driven by a lower cost of funds.~~

⁵ ~~Refer to footnote 1 on page 39 for details regarding foreign currency adjusted information.~~

Provisions for losses decreased $11 million or 22 percent and $15 million or 12 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year and FX-adjusted provisions for losses decreased 14 percent and 6 percent, for the respective periods.⁶ ~~Refer to Table 15 for the charge card net loss ratio as a percentage of charge volume.~~

Marketing, promotion, rewards, Card Member services and other expenses decreased $1 million or 1 percent and $24 million or 5 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year, primarily driven by the prior year reinvestment of a significant portion of the gain from the business travel joint venture transaction in growth initiatives.

Salaries and employee benefits and other operating expenses was flat for the three months and decreased $176 million or 14 percent for the nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year, while FX-adjusted salaries and employee benefits and other operating expenses increased 4 percent and decreased 8 percent, for the respective periods.⁶ ~~The increase for the three month~~three-month period was primarily due to ~~increased spending on incremental growth initiatives~~a restructuring charge in the current ~~year, which for~~quarter, and higher operating expenses, including technology development and professional fees. In the ~~nine month~~nine-month period, ~~was more than~~these increases were offset by the ~~impact from~~gains on the ~~business travel joint venture transaction in~~sales of the ~~second quarter of 2014 (resulting in a lack of comparability between periods).~~HFS portfolios.


		51

Table 15: GCS Selected Statistical Information

      As of or for the
   Three Months Ended
   September 30,   As of or for the
  Nine Months Ended
  September 30,
(Millions, except percentages and where indicated)
   2015 2014 Change 2015 2014
Change
Card billed business (billions)
   $ 45.0    $ 46.5    (3) % $ 136.6    $ 139.6    (2)%
Total cards-in-force
   6.9    6.9    —    6.9    6.9    —
Basic cards-in-force
   6.9    6.9    —    6.9    6.9    —
Average basic Card Member spending (dollars)^*
   $      6,529    $      6,691    (2)    $      19,838    $      19,905    —
Total segment assets (billions)^(a)
   $ 19.6    $ 20.6    (5)    $ 19.6    $ 20.6    (5)
Segment capital
   $ 3,595    $ 3,826    (6)    $ 3,595    $ 3,826    (6)
Return on average segment capital^(b)
   29.2 % 30.3 % 29.2 % 30.3 %
Return on average tangible segment capital^(b)
   51.4 % 56.0 % 51.4 % 56.0 %
Card Member receivables:

Total receivables (billions)
   $ 15.7    $ 16.4    (4) % $ 15.7    $ 16.4    (4)%
90+ days past billing as a % of total
   0.7 % 0.8 % 0.7 % 0.8 %
Net loss ratio (as a % of charge volume)
   0.08 % 0.09 % 0.09 % 0.09 %



	As of or for the Three Months Ended September 30,						Change 2016 vs.			As of or for the Nine Months Ended September 30,						Change 2016 vs.
(Millions, except percentages and where indicated)	2016			2015			2015			2016			2015			2015

Card billed business (billions)	$	100.1		$	99.5			1	%	$	302.8		$	295.4			3	%
Total cards-in-force		13.6			15.0			(9	)		13.6			15.0			(9	)
Basic cards-in-force		13.6			15.0			(9	)		13.6			15.0			(9	)
Average basic Card Member spending (dollars)	$	7,386		$	6,711			10		$	20,857		$	19,999			4
Total segment assets (billions)^(a)	$	46.8		$	45.9			2		$	46.8		$	45.9			2
Segment capital (billions)	$	7.3		$	6.8			7		$	7.3		$	6.8			7
Return on average segment capital^(b)		28.0	%		34.1	%					28.0	%		34.1	%
Card Member receivables (billions)	$	29.6		$	28.6			3		$	29.6		$	28.6			3
Card Member loans (billions)	$	9.1		$	10.0			(9	)	$	9.1		$	10.0			(9	)

Card Member receivables:^(c)
Total receivables - GCP (billions)	$	15.8		$	15.7			—		$	15.8		$	15.7			—
90+ days past billing as a % of total - GCP^(d)		0.8	%		0.7	%					0.8	%		0.7	%
Net loss ratio (as a % of charge volume) - GCP		0.11	%		0.08	%					0.09	%		0.09	%
Total receivables - GSBS (billions)	$	13.8		$	12.9			7		$	13.8		$	12.9			7
Net write-off rate (principal only) - GSBS^(e)		1.3	%		1.8	%					1.6	%		1.9	%
Net write-off rate (principal and fees) - GSBS^(e)		1.5	%		2.0	%					1.8	%		2.2	%
30+ days past due as a % of total - GSBS		1.5	%		1.6	%					1.5	%		1.6	%

Card Member loans:^(c)
Total loans - GSBS (billions)	$	9.0		$	10.0			(10	)	$	9.0		$	10.0			(10	)
Average loans - GSBS (billions)	$	8.8		$	9.9			(11	)%	$	8.4		$	9.8			(14	)%
Net write-off rate (principal only) - GSBS^(e)		1.5	%		1.3	%					1.4	%		1.3	%
Net write-off rate (principal, interest and fees) - GSBS^(e)		1.8	%		1.5	%					1.7	%		1.5	%
30+ days past due as a % of total - GSBS		1.1	%		1.0	%					1.1	%		1.0	%

Calculation of Net Interest Yield on Card Member loans:
Net interest income	$	184		$	206					$	616		$	593
Exclude:
Interest expense not attributable to the
Company’s Card Member loan portfolio		79			71						231			213
Interest income not attributable to the
Company’s Card Member loan portfolio		(28	)		(24	)					(85	)		(65	)

Adjusted net interest income^(f)	$	235		$	253					$	762		$	741

Average loans including HFS loan portfolios(billions)	$	8.8		$	10.0					$	9.8		$	9.8

Net interest income divided by average loans		8.3	%		8.3	%					8.4	%		8.1	%
Net interest yield on Card Member loans^(f)		10.6	%		10.0	%					10.4	%		10.1	%

*	~~Proprietary cards only.~~

(a)	~~Revised prospectively,~~Effective September 30, 2015, certain intercompany balances have been reclassified between operating segments as a result of ~~systems enhancements, to reclassify certain intercompany accounts.~~ system enhancements.

(b)

Return on average segment capital is calculated by dividing (i) one-year period segment income ($~~1.1 billion for both the twelve months ended September 30, 2015 and 2014) by (ii) one-year average segment capital ($3.9~~2.0 billion and ~~$3.7~~$2.4 billion for the twelve months ended September 30, 2016 and 2015, ~~and 2014,~~ respectively)~~. Return on average tangible segment capital, a non-GAAP measure, is computed in the same manner as return on~~ by (ii) one-year average segment capital ~~except the computation excludes from average segment capital average goodwill~~($7.2 billion and ~~other intangibles of $1.7~~$7.0 billion for ~~both~~ the twelve months ended September 30, 2016 and 2015, respectively).

(c)	Refer to Table 8 footnote (a).

(d)

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 the Company initiates 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. These amounts are shown above as 90+ Days Past Due for presentation purposes.

(e)	Refer to Table 8 footnote (d).

(f)

Adjusted net interest income and ~~2014.~~net interest yield on Card Member loans are non-GAAP measures. Refer to “Glossary of Selected Terminology” for the definitions of these terms. We believe ~~return on average tangible segment capital~~adjusted net interest income is useful to investors because it is a ~~useful~~component of net interest yield on Card Member loans, which provides a measure of ~~the~~ profitability of our ~~business.~~Card Member loan portfolio.


		52

⁶ ~~Refer to footnote 1 on page 39 for details regarding foreign currency adjusted information.~~

Global ~~Network &~~ Merchant Services

Table 16: ~~GNMS~~GMS Selected Income Statement Data



																				Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change
	Three Months Ended September 30,										Nine Months Ended September 30,
(Millions, except percentages)	2015			2014			Change				2015			2014			Change			2016			2015			2016 vs. 2015					2016			2015			2016 vs. 2015

Revenues
Non-interest revenues	$	1,302		$	1,368		$	(66)	(5)	%	$	3,898		$	4,027		$	(129)	(3)%	$	1,044		$	1,123		$	(79	)	(7	)%	$	3,172		$	3,323		$	(151	)	(5	)%

Interest income		26			14			12	86			69			35			34	97		—			—			—		—			1			1			—		—
Interest expense		(42)			(68)			26	(38)			(143)			(208)			65	(31)		(60	)		(46	)		(14	)	30			(180	)		(154	)		(26	)	17

Net interest income		68			82			(14)	(17)			212			243			(31)	(13)		60			46			14		30			181			155			26		17

Total revenues net of interest expense		1,370			1,450			(80)	(6)			4,110			4,270			(160)	(4)		1,104			1,169			(65	)	(6	)		3,353			3,478			(125	)	(4	)
Provisions for losses		14			24			(10)	(42)			38			58			(20)	(34)		8			8			—		—			21			22			(1	)	(5	)

Total revenues net of interest expense after provisions for losses		1,356			1,426			(70)	(5)			4,072			4,212			(140)	(3)		1,096			1,161			(65	)	(6	)		3,332			3,456			(124	)	(4	)

Expenses
Marketing, promotion, rewards, Card Member services and other		172			201			(29)	(14)			483			634			(151)	(24)		55			78			(23	)	(29	)		171			210			(39	)	(19	)
Salaries and employee benefits and other operating expenses		461			555			(94)	(17)			1,473			1,628			(155)	(10)		470			449			21		5			1,422			1,440			(18	)	(1	)

Total expenses		633			756			(123)	(16)			1,956			2,262			(306)	(14)		525			527			(2	)	—			1,593			1,650			(57	)	(3	)

Pretax segment income		723			670			53	8			2,116			1,950			166	9		571			634			(63	)	(10	)		1,739			1,806			(67	)	(4	)
Income tax provision		261			243			18	7			762			707			55	8		212			237			(25	)	(11	)		650			671			(21	)	(3	)

Segment income	$	462		$	427		$	35	8	%	$	1,354		$	1,243		$	111	9 %	$	359		$	397		$	(38	)	(10	)%	$	1,089		$	1,135		$	(46	)	(4	)%

Effective tax rate		36.1	%		36.3	%						36.0	%		36.3	%					37.1	%		37.4	%							37.4	%		37.2	%

~~GNMS~~GMS operates a global payments network that processes and settles proprietary and non-proprietary card transactions. ~~GNMS~~GMS acquires ~~merchants;~~merchants and provides ~~point-of-sale products,~~ multi-channel marketing programs and capabilities, services and data, leveraging the Company’s global closed-loop ~~network; and provides financing products for qualified merchants. It enters into partnership agreements with third-party card issuers and acquirers to license~~network. GMS also operates loyalty coalition businesses in certain countries around the ~~American Express brand and extend the reach of the global network.~~world.

Non-interest revenues decreased ~~$66~~$79 million or 57 percent and ~~$129~~$151 million or 35 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, ~~while FX-adjusted non-interest~~as a result of Costco-related revenues in the prior year, as well as higher contra-revenues in the current year.

Net interest income increased 1$14 million or 30 percent and ~~2 percent for the respective periods, primarily driven by higher royalties from our GNS bank partners.~~⁷ ~~Billed business was flat and increased 2~~$26 million or 17 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, ~~while FX-adjusted billed business increased 5 percent and 6 percent for the respective periods.~~⁷

Net interest income decreased $14 million or 17 percent and $31 million or 13 percent for the three and nine months ended September 30, 2015, respectively, as compared to the same periods in the prior year, while FX-adjusted net interest income decreased 12 percent and 6 percent for the respective periods.⁷ ~~The~~reflecting a higher interest expense credit ~~relates~~relating to internal transfer pricing and funding rates, which resulted in a net benefit for ~~GNMS~~GMS due to its merchant payables.

⁷ ~~Refer to footnote 1 on page 39 for details regarding foreign currency adjusted information.~~

Marketing, promotion, rewards, Card Member services and other expenses decreased ~~$29~~$23 million or 1429 percent and ~~$151~~$39 million or 2419 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior year, primarily driven by higher ~~investment spending~~marketing and promotion expenses related to our loyalty coalition business in the prior ~~year, including the reinvestment of a significant portion of the gain from the business travel joint venture transaction in growth initiatives.~~year.

Salaries and employee benefits and other operating expenses ~~decreased $94~~increased $21 million or 175 percent and ~~$155~~decreased $18 million or 101 percent for the three and nine months ended September 30, ~~2015,~~2016, respectively, as compared to the same periods in the prior ~~year, while FX-adjusted salaries and employee benefits and other operating expenses decreased 14 percent and 7 percent for~~year. The increase in the ~~respective periods.~~⁸ ~~For the three month~~three-month period ~~the decrease~~ was primarily driven by a litigation reserve release in prior year. In the nine-month period, this increase was more than offset by growth of ~~$64 million associated with~~ the ~~rejected 2013~~OptBlue program, which does not entail merchant ~~litigation settlement, and the decrease for the nine month period was primarily due to a prior year restructuring charge.~~acquirer payments.


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Table 17: ~~GNMS~~GMS Selected Statistical Information

   As of or for the
Three Months Ended
September 30, As of or for the
Nine Months Ended
September 30,
(Millions, except percentages and where indicated)
   2015 2014 Change 2015 2014
Change
Global Worldwide Card billed business (billions)
   $       258.9    $       258.1    — % $       766.5    $       754.3    2 %
Total segment assets (billions)^(a)
   $ 23.7    $ 18.2    30    $ 23.7    $ 18.2    30
Segment capital
   $ 2,529    $ 1,981    28    $ 2,529    $ 1,981    28
Return on average segment capital^(b)
   81.4 % 82.6 % 81.4 % 82.6 %
Return on average tangible segment capital^(b)
   89.5 % 91.3 % 89.5 % 91.3 %
Global Network Services:

Card billed business (billions)
   $ 41.1    $ 41.6    (1)    $ 122.1    $ 118.2    3
Total cards-in-force
   46.3    43.2    7 % 46.3    43.2    7 %



	As of or for the Three Months Ended September 30,						Change 2016 vs.			As of or for the Nine Months Ended September 30,						Change 2016 vs.
(Millions, except percentages and where indicated)	2016			2015			2015			2016			2015			2015

Loyalty Coalition revenue	$	106		$	100			6	%	$	304		$	279			9	%
Average discount rate		2.47	%		2.46	%					2.45	%		2.48	%
Total segment assets (billions)^(a)	$	23.2		$	23.3			—	%	$	23.2		$	23.3			—	%
Segment capital(billions)	$	2.3		$	2.6			(12	)%	$	2.3		$	2.6			(12	)%
Return on average segment capital^(b)		59.9	%		66.9	%					59.9	%		66.9	%

(a)	~~Revised prospectively,~~Effective September 30, 2015, certain intercompany balances have been reclassified between operating segments as a result of ~~systems enhancements, to reclassify certain intercompany accounts.~~ system enhancements.

(b)

Return on average segment capital is calculated by dividing (i) one-year period segment income ($1.8 billion and $1.6 billion for the twelve months ended September 30, 2015 and 2014, respectively) by (ii) one-year average segment capital ($2.2 billion and $2.0 billion for the twelve months ended September 30, 2015 and 2014, respectively). Return on average tangible segment capital, a non-GAAP measure, is computed in the same manner as return on average segment capital except the computation excludes from average segment capital average goodwill and other intangibles of $0.21.5 billion for both the twelve months ended September 30, ~~2015~~2016 and ~~2014. We believe return on~~2015) by (ii) one-year average ~~tangible~~ segment capital ~~is a useful measure of~~($2.4 billion and $2.2 billion for the ~~profitability of our business.~~

twelve months ended September 30, 2016 and 2015, respectively).

Corporate & Other

Corporate functions and certain other businesses, including EGour Prepaid Services business and other operations, are included in Corporate & Other.

Corporate & Other net expense ~~increased to $230 million and~~ decreased to ~~$586~~$239 million for the three ~~and nine~~ months ended September 30, ~~2015, respectively, as~~2016, compared to ~~$185~~$295 million ~~and $667 million for the three and nine months ended September 30, 2014, respectively. The increase~~ for the three months ended September 30, 2015, and increased to $766 million for the nine months ended September 30, 2016, compared to $764 million for the nine months ended September 30, 2015. The decrease for the three-month period was primarily driven by ~~a $91 million~~the impairment charge related to previously capitalized software development costs ~~primarily within EG,~~in the prior year, partially offset by restructuring in the current ~~year, and a gain~~year. In the nine-month period, this decrease, combined with higher income from our Prepaid Services business, was more than offset by the ~~sale of investment securities in ICBC~~benefit in the ~~prior year. The decrease in the nine months ended September 30,~~first quarter of 2015 ~~reflected a favorable impact~~ from both the reassessment of the functional currency of certain UK legal entities ~~in the first quarter of the current year.~~and otherFX-related activity.

⁸ ~~Refer to footnote 1 on page 39 for details regarding foreign currency adjusted information.~~

Results for both periods disclosed included net interest expense related to maintaining the liquidity pool discussed in “Consolidated Capital Resources and Liquidity – Liquidity Management”, as well as interest expense related to other corporate indebtedness.


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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 ~~12-month~~twelve-month period, even in the event we are unable to continue to raise new funds under our traditional funding programs during a substantial weakening in economic conditions.

~~Capital Strategy~~

Our objective is to retain sufficient levels of capital generated through earnings and other sources to maintain a solid equity capital base and to provide flexibility to support future business growth. We believe capital allocated to growing businesses with a return on risk-adjusted equity in excess of our costs will generate shareholder value.

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. Our consolidated capital position is also influenced by subsidiary capital requirements. As a bank holding company, we are also 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.

We report our capital ratios using the Basel III capital definitions, inclusive of transition provisions, and the Basel III Standardized Approach for calculating risk-weighted assets (see section on Transitional Basel III). The Basel III standards will be fully phased-in by January 1, 2019 (see section on Fully Phased-in Basel III).

We also report capital adequacy standards on a parallel basis to regulators under Basel requirements for Advanced Approaches institutions. The parallel period will continue until we receive regulatory approval to exit parallel reporting and subsequently begin publicly disclosing regulatory risk-based capital ratios using both the Standardized and Advanced Approaches.

Transitional Basel III

The following table presents our regulatory risk-based capital ratios and leverage ratios and those of our significant bank subsidiaries, American Express Centurion Bank (AECB) and American Express Bank, FSB (FSB), as well as additional ratios widely utilized in the marketplace, as of September 30, 2015. Definitions for our regulatory risk-based capital ratios and leverage ratio, which are calculated as per standard regulatory guidance, are found in the ‘Consolidated Capital Resources and Liquidity Section’ of American Express’ 2014 Annual Report.2016.

Table 18: Regulatory Risk-Based Capital and Leverage Ratios


	Basel III Standards 2016^(a)				Ratios as of September 30, 2016
		~~Basel III~~ ~~Standards~~ ~~2015~~^(a)				~~Ratios as of~~ ~~September 30,~~ ~~2015~~
Risk-Based Capital
Common Equity Tier 1			~~4.5~~5.1	%
American Express ~~Company~~						~~13.2%~~	13.6	%
~~American Express Centurion Bank~~AECB						~~18.7~~	17.0
~~American Express Bank,~~ FSB						~~14.1~~	17.5
Tier 1	6.6			~~6.0~~
American Express ~~Company~~						~~14.3~~	14.9
~~American Express Centurion Bank~~AECB						~~18.7~~	17.0
~~American Express Bank,~~ FSB						~~14.1~~	17.5
Total			~~8.0~~8.6
American Express ~~Company~~						~~16.2~~	16.6
~~American Express Centurion Bank~~AECB						~~20.0~~	18.3
~~American Express Bank,~~ FSB						~~15.9~~	18.7
Tier 1 Leverage			4.0
American Express ~~Company~~						~~12.1~~	11.9
~~American Express Centurion Bank~~AECB						~~18.8~~	15.9
~~American Express Bank,~~ FSB						~~13.3~~	13.6
Supplementary Leverage Ratio^(b)			3.0	%
American Express ~~Company~~						~~10.2~~	10.3
~~American Express Centurion Bank~~AECB						~~15.1~~	12.5
~~American Express Bank,~~ FSB						~~10.0~~
~~Common Equity to Risk-Weighted Assets~~ 11.5
~~American Express Company~~						~~15.2~~
~~Tangible Common Equity to Risk-Weighted Assets~~^(c)
~~American Express Company~~						~~12.3%~~
%

(a)	Transitional Basel III minimum capital requirement and additional capital conservation buffer as defined by the Federal Reserve for calendar year ~~2015~~2016 for Advanced Approaches institutions.

(b)	The minimum supplementary leverage ratio (SLR) requirement of 3 percent is effective January 1, 2018.

~~(c)~~

Tangible Common Equity to Risk-Weighted Assets, a non-GAAP measure, is calculated by dividing shareholders’ equity of $21.3 billion as of September 30, 2015, less preferred shares of $1.6 billion and goodwill and other intangibles of $3.8 billion, by risk-weighted assets of $130.2 billion. We believe presenting the ratio of Tangible Common Equity to Risk-Weighted Assets is a useful measure of evaluating the strength of our capital position. Tangible Common Equity to Risk-Weighted Assets ratio is widely used in the marketplace, although it may be calculated differently by different companies.


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Table 19: Regulatory Risk-Based Capital Components and Risk Weighted Assets



~~($ in Billions)~~		~~September 30,~~ ~~2015~~

~~Risk-Based Capital~~
~~Common Equity Tier 1~~		~~$ 17.1~~
~~Tier 1 Capital~~		~~18.7~~
~~Tier 2 Capital~~^(a)		~~2.4~~
~~Total Capital~~		~~21.1~~

~~Risk Weighted Assets~~		~~130.2~~
~~Average Total Assets to calculate the Tier 1 Leverage Ratio~~		~~153.7~~
~~Total Leverage Exposure to calculate SLR~~		~~$ 182.8~~


($ in Billions)		September 30, 2016
Risk-Based Capital
Common Equity Tier 1	$	16.8
Tier 1 Capital		18.4
Tier 2 Capital^(a)		2.1
Total Capital		20.5

Risk Weighted Assets		123.6
Average Total Assets to calculate the Tier 1 Leverage Ratio		154.2
Total Leverage Exposure to calculate SLR	$	178.7

(a)

Tier 2 capital is the sum of the allowance for receivable and loan losses (limited to 1.25 percent of risk-weighted assets) ~~a portion of the unrealized gains on equity securities,~~and $600 million of subordinated notes ~~issued in the fourth quarter of 2014 and a $750 million subordinated debentures. The $750 million subordinated debentures do not meet the requirements of Tier 2~~adjusted for capital under Basel III, and are being transitioned out of capital (the total amount included in Tier 2 capital as of September 30, 2015, was $187 million). Hence, the total amount of subordinated debt included in Tier 2 capital as of September 30, 2015, was $787 million.

held by insurance subsidiaries.

We seek to maintain capital levels and ratios in excess of the minimum regulatory requirements and finance such capital in a cost efficient manner; failure to maintain minimum capital levels could affect our status as a financial holding company and cause the ~~respective~~ regulatory agencies with oversight of American Express, AECB and FSB to take actions that could limit our business operations.

Our primary source of equity capital has been the generation of net income. Historically, capital generated through net income and other sources, such as the exercise of stock options by employees, has exceeded the annual growth in our capital requirements. To the extent capital has exceeded business, regulatory and rating agency requirements, we have historically returned excess capital to shareholders through our regular common share dividend and share repurchase program.

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 the capital profile and liquidity levels at the American Express parent company level. We do not currently intend or foresee a need to shift capital from non-U.S. subsidiaries with permanently reinvested earnings to a U.S. parent company.

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 Common Equity Tier 1 capital (“CET1”), divided by risk-weighted assets. CET1 is the sum of common shareholders’ equity, adjusted for ineligible goodwill and intangible assets, certain deferred tax assets, as well as certain other comprehensive income items as follows: net unrealized gains/losses on securities and derivatives, and net unrealized pension and other postretirement benefit/losses, all net of tax and subject to transition provisions.

Tier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital divided by risk-weighted assets. Tier 1 capital is the sum of CET1, our perpetual preferred stock and third-party non-controlling interests in consolidated subsidiaries adjusted for capital to be held by insurance subsidiaries and deferred tax assets from net operating losses not deducted from CET1.


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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 allowance for receivable and loan losses (limited to 1.25 percent of risk-weighted assets), a portion of the unrealized gains on equity securities, and $600 million of subordinated notes adjusted for capital held by insurance subsidiaries.

Tier 1 Leverage Ratio — The Tier 1 leverage ratio is calculated by dividing Tier 1 capital by our average total consolidated assets for the most recent quarter. Average total consolidated assets as of September 30, 2016 were $154.2 billion.

Supplementary Leverage Ratio — The supplementary leverage ratio is calculated by dividing Tier 1 capital by total leverage exposure under Basel III. Leverage exposure, which reflects average total consolidated assets with adjustments for Tier 1 capital deductions, average off-balance sheet derivatives exposures, securities purchased under agreements to resell and credit equivalents of undrawn commitments that are both conditionally and unconditionally cancellable. Total leverage exposure for supplementary leverage ratio purposes as of September 30, 2016 was $178.7 billion.

Fully Phased-in Basel III

Basel III, when fully phased-in, will require bank holding companies and their bank subsidiaries to maintain more capital than prior requirements, with a greater emphasis on common equity. The following table presents our estimates for our regulatory risk-based capital ratios and leverage ratios had Basel III been fully phased-in ~~during the nine months ended~~as of September 30, ~~2015.~~2016. These ratios are calculated using the Standardized Approach for determining risk-weighted assets. As noted previously, we are currently taking steps toward Basel III Advanced Approaches implementation in the ~~U.S.~~United States. We believe the presentation of these ratios is helpful to investors by showing the impact of future regulatory capital standards on our capital and leverage ratios.

Table 20: Estimated Fully Phased-in Basel III Capital and Leverage Ratios




~~($ in Billions)~~		~~September 30, 2015~~

~~Estimated Common Equity Tier 1 Ratio under Fully Phased-In Basel III~~^(a)		~~12.6%~~
~~Estimated Tier 1 Capital Ratio under Fully Phased-In Basel III~~^(a)		~~13.8~~

~~Estimated Tier 1 Leverage Ratio under Fully Phased-In Basel III~~^(b)		~~11.7~~
~~Estimated Supplementary Leverage Ratio under Fully Phased-In Basel III~~		~~9.8%~~

~~Estimated Risk-Weighted Assets under Fully Phased-In Basel III~~^(c)		~~$ 129.9~~
~~Estimated Average Total Assets to calculate the Tier 1 Leverage Ratio~~^(b)		~~153.2~~
~~Estimated Total Leverage Exposure to calculate SLR under Fully Phased-In Basel III~~^(d)		~~$ 182.3~~


($ in Billions)		September 30, 2016
Estimated Common Equity Tier 1 Ratio under Fully Phased-In Basel III^(a)		13.1	%
Estimated Tier 1 Capital Ratio under Fully Phased-In Basel III^(a)		14.3

Estimated Tier 1 Leverage Ratio under Fully Phased-In Basel III^(b)		11.6
Estimated Supplementary Leverage Ratio under Fully Phased-In Basel III		10.0	%

Estimated Risk-Weighted Assets under Fully Phased-In Basel III^(c)	$	124.7
Estimated Average Total Assets to calculate the Tier 1 Leverage Ratio^(b)		154.0
Estimated Total Leverage Exposure to calculate SLR under Fully Phased-In Basel III^(d)	$	178.4

(a)

The Fully Phased-in Basel III Common Equity Tier 1 and Tier 1 risk-based capital ratios, non-GAAP measures, are calculated as Common Equity Tier 1 or Tier 1 capital under Fully Phased-in Basel III rules, as applicable, divided by risk-weighted assets under Fully Phased-in Basel III rules. Refer to Table 21 for a reconciliation of Common Equity Tier 1 and Tier 1 capital under Fully Phased-in Basel III rules to Common Equity Tier 1 and Tier 1 capital under Transitional Basel III rules.

(b)

The Fully Phased-in Basel III Tier 1 and supplementary leverage ratios, non-GAAP measures, are calculated by dividing Fully Phased-in Basel III Tier 1 capital by our average total assets and Fully Phased-in total leverage exposure for supplementary leverage ratio purposes under Fully Phased-in Basel III, respectively.

(c)

Estimated Fully Phased-in Basel III risk-weighted assets, a non-GAAP measure, reflect our Basel IIII risk-weighted assets, ~~adjusted under Fully Phased-in Basel III rules.~~with all transition provisions fully phased in. This includes incremental risk weighting applied to deferred tax assets and significant investments in unconsolidated financial institutions, as well as exposures to past due accounts, equities and sovereigns.

(d)

Estimated Fully Phased-in Basel III Leverage Exposure, a non-GAAP measure, reflects average total consolidated assets with adjustments for Tier 1 capital deductions on a fully phased-in basis, off-balance sheet derivatives, undrawn conditionally and unconditionally cancellable commitments and other off-balance sheet liabilities.

The Basel capital standards establish minimum requirements for the Tier 1 risk-based capital ratios that are ~~1.5%~~1.5 percent higher than the minimum requirements for ~~Common Equity Tier 1~~CET1 risk-based capital ratios. This difference between Tier 1 capital, which includes common equity and qualifying preferred securities, and ~~Common Equity Tier 1~~CET1 is also present in the minimum capital requirements within Comprehensive Capital Analysis and Review (CCAR).


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We issued ~~$750 million~~$1.6 billion of preferred shares ~~in the fourth quarter of 2014 and $850 million in the first quarter of 2015. The preferred shares issuances~~to help to finance a portion of the Tier 1 capital requirements in excess of common equity requirements.

Our $750 million of subordinated debentures, which prior to 2014, were fully included in Tier 2 capital (but not in Tier 1 capital), do not meet the requirements of Tier 2 capital under Basel III. The phase-out of the subordinated debentures from Tier 2 capital began in the first quarter of 2014, which affects our total risk-based capital ratio. At our option, the subordinated debentures are redeemableIII and thus were redeemed for cash on ~~or after~~ September 1, 2016 at 100 percent of the principal amount ~~plus any accrued but unpaid interest. We currently intend to exercise this redemption option, subject to business and market conditions.~~outstanding. As previously mentioned, we issued $600 million of subordinated ~~debt in the fourth quarter of 2014,~~notes, which ~~qualifies~~qualify as Tier 2 capital under Basel rules. ~~Our total risk-based capital ratio is expected to remain well in excess of the required minimum.~~

The following table presents a comparison of our Common Equity Tier 1 and Tier 1 risk-based capital under Transitional Basel III rules to our estimated Common Equity Tier 1 and Tier 1 risk-based capital under Fully Phased-in Basel III rules as of September 30, ~~2015.~~2016.

Table 21: Transitional Basel III versus Fully Phased-in Basel III



(Billions)	CET 1		Tier 1		CET 1			Tier 1

Risk-Based Capital under Transitional Basel III	$	17.1	$ 18.7	$	16.8		$	18.4
Adjustments related to:
AOCI		(0.2)	(0.2)		(0.2	)		(0.2	)
Transition provisions for intangible assets		(0.5)	(0.5)		(0.3	)		(0.3	)
Deferred tax assets		(0.1)	(0.1)
Other		—	—		—			—

Estimated Common Equity Tier 1 (CET1) and Tier 1 Risk-Based Capital under Fully Phased-in Basel III	$	16.3	$ 17.9	$	16.3		$	17.9

Fully Phased-in Basel III Risk-Weighted Assets — Reflects our Basel III risk-weighted assets, with all transition provisions fully phased in. This includes incremental risk weighting applied to deferred tax assets and significant investments in unconsolidated financial institutions, as well as exposures to past due accounts, equities and sovereigns.

Fully Phased-in Basel III Tier 1 Leverage Ratio — Calculated by dividing Fully Phased-in Basel III Tier 1 capital by our average total consolidated assets.

Fully Phased-in Basel III Supplementary Leverage Ratio— Calculated by dividing Fully Phased-in Basel III Tier 1 capital by our Fully Phased-in total leverage exposure for supplementary leverage ratio purposes under Fully Phased-in Basel III.

Share Repurchases and Dividends

We ~~have a share repurchase program to~~ return ~~excess~~ capital to common ~~shareholders.~~shareholders through dividends and share repurchases. The share repurchases reduce common shares outstanding and more than offset ~~in whole or part,~~ the issuance of new shares as part of employee compensation plans.

During the three and nine months ended September 30, ~~2015,~~2016, we returned ~~$1.7~~$0.9 billion and ~~$4.1~~$4.2 billion, respectively, to our shareholders in the form of common stock dividends ($0.3 billion and $0.8 billion, respectively) and share repurchases ($~~1.4~~0.6 billion and ~~$3.3~~$3.4 billion, respectively). We repurchased ~~17.8~~8.8 million common shares at an average price of ~~$76.47~~$64.39 in the third quarter of ~~2015.~~2016. These dividend and share repurchase amounts collectively represent approximately ~~126~~75 percent and 9592 percent of total capital generated during the three and ~~nine month~~nine-month periods, respectively, which was above our on average and over time target to distribute approximately 50 percent of the capital to shareholders as dividends or through the repurchases of common stock. These distribution percentages result from the strength of our capital ratios and the amount of capital we generate from net income and through employee stock plans in relation to the amount of capital required to support our organic business growth and acquisitions.respectively.

In addition, during the three months ended September 30, ~~2015, there were~~2016, we had $750 million of non-cumulative perpetual preferred shares (the “Series B Preferred Shares”) and $850 million of non-cumulative perpetual preferred shares (the “Series C Preferred Shares”) outstanding. Dividends declared and paid on Series C Preferred Shares ~~dividend declared~~ during the third quarter ~~was $22.3~~of 2016 were $21 million. For additional information on the Company’s preferred shares refer to Note 17 “Common and Preferred Shares” of the 2014 Annual Report and Note 15 “Earnings per Common Share (EPS); Preferred Shares” of this Form 10-Q.


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Funding Strategy

Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to meet our maturing obligations, cost-effectively finance current and future asset growth in our global businesses as well as to maintain a strong liquidity profile. ~~The diversity~~

Summary of ~~funding sources by type~~Consolidated Debt

We had the following consolidated debt and customer deposits outstanding as of ~~instrument, by maturity~~September 30, 2016, and by investor base, among other factors, provides additional insulation from the impact of disruptions in any one type of instrument, maturity or investor. The mix of our funding in any period will seek to achieve cost efficiency consistent with both maintaining diversified sources and achieving our liquidity objectives. 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.

December 31, 2015:

Table 22: Consolidated Debt

Our proprietary card businesses are the primary asset-generating businesses, with significant assets in both domestic and international Card Member receivable and lending activities. Our financing needs are in large part a consequence of our proprietary card-issuing businesses and the maintenance of a liquidity position to support all of our business activities, such as merchant payments. 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. We also have additional financing needs associated with general corporate purposes, including acquisition activities.



(Billions)		September 30, 2016		December 31, 2015

Short-term borrowings	$	2.9	$	4.8
Long-term debt		44.9		48.1

Total debt		47.8		52.9
Customer deposits		53.5		55.0

Total debt and customer deposits	$	101.3	$	107.9

Management does not currently expect to make any significant changes to our funding programs in order to satisfy Basel III’s ~~liquidity coverage ratio~~Liquidity Coverage Ratio (LCR) standard based upon our current understanding of the requirements, which may be subject to change as we receive additional clarification and implementation guidance from regulators relating to the requirements and as the interpretation of requirements evolves over time.

During the three months ended September 30, 2015, we issued (i) $1.0 billion of asset-backed securities from American Express Credit Account Master Trust (the Lending Trust) with a maturity of two years consisting of $1.0 billion of Class A Certificates at a rate of 1-month LIBOR plus 29 basis points, (ii) $1.4 billion of senior unsecured notes from American Express Credit Corporation with a maturity of three years consisting of $900 million of fixed-rate senior notes with a coupon of 1.8 percent and $500 million of floating-rate senior notes at a rate of 3-month LIBOR plus 61 basis points, and (iii) $2.0 billion of senior unsecured notes from American Express Credit Corporation with a maturity of five years consisting of $1.5 billion of fixed-rate senior notes with a coupon of 2.6 percent and $500 million of floating-rate senior notes at a rate of 3-month LIBOR plus 105 basis points.

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), Fitch Ratings (Fitch) and Dominion Bond Rating Services (DBRS). Such ratings help support our access to cost-effective unsecured funding as part of our overall funding strategy. Our asset-backed securitization ~~(ABS)~~ activities are rated separately.

Table ~~22:~~23: Unsecured Debt Ratings



Credit Agency	American Express Entity	Short-Term Ratings ~~Ratings~~	Long-Term Ratings ~~Ratings~~	Outlook


DBRS	All rated entities	R-1 (middle)	A (high)	Stable

Fitch	All rated entities	F1	A+A	~~Stable~~Negative
Moody’s	TRS and rated operating subsidiaries^(a)	~~Prime-1~~Prime 1	A2	Stable
Moody’s	American Express Company	~~Prime-2~~Prime 2	A3	Stable
S&P	TRS and rated operating subsidiaries^(a)(b)	A-2	A-	Stable
S&P	American Express Company	A-2	BBB+	Stable

(a)	American Express Travel Related Services Company, Inc.

(b)	S&P does not provide a rating for TRS short-term debt.

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 lines of credit. 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), should reduce the impact that credit rating downgrades would have on our funding capacity and costs.


		59

Deposit Programs

We offer deposits within our American Express Centurion Bank (Centurion Bank) and American Express Bank, FSB (FSB) subsidiaries (together, the Banks). These funds are currently insured up to $250,000 per account holder through the FDIC. Our ability to obtain deposit funding and offer competitive interest rates is dependent on the Banks’ capital levels. We, through the FSB, have a direct retail deposit program, Personal Savings from American Express, to supplement our distribution of deposit products sourced through third-party distribution channels. The direct retail program makes FDIC-insured certificates of deposit (CDs) and high-yield savings account products available directly to consumers.

We held the following deposits as of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:

Table ~~23:~~24: Customer Deposits



						September 30,		December 31,
(Billions)		September 30, 2015		December 31, 2014		2016		2015

U.S. retail deposits:
Savings accounts — Direct	$		28.2	$ 26.2	$	30.7	$	29.0
Certificates of deposit:^(a)
Direct			0.3	0.3		0.3		0.3
Third-party			11.1	7.8
Sweep accounts — Third-party			8.9	9.0
Third-party (brokered)						12.9		13.9
Sweep accounts — Third-party (brokered)						8.9		10.9
Other retail deposits:
Non-U.S. deposits and U.S. non-interest bearing			0.2	0.2		0.1		0.2
Card Member credit balances - U.S. and non-U.S.			0.6	0.7		0.6		0.7

Total customer deposits	$		49.3	$ 44.2	$	53.5	$	55.0


(a) The weighted average remaining maturity and weighted average rate at issuance on the total portfolio of U.S. retail CDs, issued through direct and third-party programs, were 30.1 months and 1.66 percent, respectively, as of September 30, 2015.

(a)	The weighted average remaining maturity and weighted average rate at issuance on the total portfolio of U.S. retail CDs, issued through direct and third-party programs, were 23.8 months and 1.93 percent, respectively, as of September 30, 2016.

Asset Securitization Programs

We periodically securitize Card Member ~~receivables~~loans and ~~loans~~receivables arising from our card business, as the securitization market provides us with cost-effective funding. Securitization of Card Member ~~receivables~~loans and ~~loans~~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~~third-party investors. The proceeds from issuance are distributed to us, through our wholly owned subsidiaries, as consideration for the transferred assets.

The ~~receivables~~loans and ~~loans~~receivables being securitized are reported as Card Member ~~receivables~~loans and ~~loans~~receivables on our Consolidated Balance Sheets, and the related securities issued to third-party investors are reported as long-term debt.

Under the respective terms of the securitization 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 ~~investor~~debt securities. During the ~~nine~~three months ended September 30, ~~2015,~~2016, no such triggering events occurred.

Liquidity Management

We incur liquidity risk that arises in the course of offering our products and services. 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 business requirements and expected future financial obligations for a period of at least twelve months~~even in the event we are unable to raise new funds under our regular funding programs during a substantial weakening in economic ~~conditions. We have~~conditions, in ~~place~~amounts sufficient to meet our expected future financial obligations and our businesses’ requirements for liquidity for a period of at least twelve months. Our liquidity risk policy ~~that~~ sets out our objectives and approach to managing liquidity ~~risk on an enterprise-wide basis.~~

risk.

~~We incur and accept liquidity risk arising in the normal course of offering our products and services.~~ The liquidity risks that we are exposed to ~~can~~could arise from a wide variety of ~~sources, and thus our~~scenarios. Our liquidity management strategy thus includes a ~~variety~~number of ~~parameters, assessments and guidelines,~~elements, including, but not limited to:

●

~~Maintaining a diversified set of funding sources (refer to Funding Strategy~~

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;

Establishing clear objectives for liquidity risk management, including compliance with regulatory requirements;

Incorporating liquidity risk management as appropriate into our capital adequacy framework.

●
		~~Maintaining unencumbered liquid assets and off-balance sheet liquidity sources available to meet obligations;~~

●60

Projecting cash inflows and outflows from a variety of sources and under a variety of scenarios, including contingent liquidity exposures such as collateral requirements for derivative transactions; and

●

~~Incorporating tradeoffs between the risk of insufficient liquidity and our profitability into capital adequacy framework.~~

~~We seek to maintain access to a diverse set~~The amount and type of liquidity sources, including cash and other liquid assets on-balance sheet as well as off-balance sheet financing such as committed bank credit facilities and ABS conduit facilities, in order to comply with requirementsresources 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 (Dodd-Frank) and other regulatory measures of liquidity, such as the ~~LCR. We, through our U.S. bank subsidiaries, also hold collateral eligible for use at the Federal Reserve’s discount window.~~

~~We seek to satisfy the requirements of a variety of stress scenarios, including those required by law and regulation~~LCR, as well as ~~our own stress scenario, in order to determine the amount and mix of the liquidity sources we maintain at any given time. These~~additional stress scenarios ~~possess distinct characteristics and vary by cash flow assumptions, time horizon and qualifying~~required under our liquidity ~~sources, among other factors. Our own stress scenarios include market-wide and firm-specific liquidity events.~~risk policy. The LCR is another stress scenario that prescribes distinct cash flow assumptions over a 30-day period, and establishes criteria for qualifying High-Quality Liquid Assets. During the nine months ended September 30, 2015, the Company was in compliance with the liquidity requirements to which it is subject, including the ~~LCR.~~

~~In addition to satisfying internal and regulatory liquidity buffer requirements, we consider various factors in determining~~LCR, for the amount 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 regulatory and credit rating agency considerations.three months ended September 30, 2016.

The ~~yield~~investment income we receive on ~~our~~liquidity resources, such as cash, ~~and readily marketable securities~~ is ~~generally,~~ less than the interest expense on the sources of funding for these balances. ~~Thus, we incur substantial~~The net interest costs onto maintain these ~~amounts.~~resources have been substantial. The level of future net interest costs ~~will be dependent~~depends on the ~~size~~amount of ~~our cash~~liquidity resources we maintain and ~~readily marketable securities holdings, as well as~~ the difference between our cost of funding these amounts and their investment yields.

Securitized Borrowing Capacity

As of September 30, ~~2015,~~2016, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15, 2018, that 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).~~Trust. We also maintained our committed, revolving, secured borrowing facility, with a maturity date of September ~~15, 2017,~~17, 2018, that gives us the right to sell up to $2.0 billion face amount of eligible AAA certificates from the Lending Trust. On September 12, 2016, we extended the Lending Trust’s $2.0 billion facility by one year to mature on September 17, 2018. Both facilities are used in the ordinary course of business to fund seasonal working capital needs, as well as to further enhance our contingent funding resources. As of September 30, ~~2015, a de minimis amount~~2016, $2.2 billion was drawn on the Charge Trust ~~facility, which was subsequently repaid on October 15, 2015.~~facility. No amounts were drawn on the Lending Trust facility.

Federal Reserve Discount Window

As insured depository institutions, the Banks may borrow from the Federal Reserve Bank of San Francisco, subject to the amount of qualifying collateral that they 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 ~~$58.1~~$54.9 billion as of September 30, ~~2015~~2016 in U.S. credit card loans and charge card receivables that could be sold over time through our ~~existing~~ 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 Facilities

In addition to the secured borrowing facilities described earlier in this section, we maintained a committed syndicated bank credit facility as of September 30, ~~2015~~2016 of $3.0 billion, which expires on ~~April 23, 2017. On~~December 9, 2018. As of September ~~25, 2015,~~30, 2016, no amounts were drawn on this facility.

Certain Other Off-Balance Sheet Arrangements

As of September 30, 2016, we ~~repaid all outstanding loans on our Australian dollar~~had approximately $239 billion of unused credit ~~facility~~available to Card Members as part of established lending product agreements. 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 limit, and ~~terminated the facility~~therefore are not reflected in ~~accordance with our right~~unused credit available to ~~terminate prior to the termination date.~~Card Members.


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Cash Flows

The following table summarizes our cash flow activity for the nine months ended September 30:

Table ~~24:~~25: Cash Flows



For the nine months ended September 30,(Billions)	2015		2014
(Billions)					2016			2015

Total cash provided by (used in):
Operating activities	$	8.1	$ 8.6	$	4.9		$	7.8
Investing activities		(2.7)	(3.0)		10.1			(2.7	)
Financing activities		(7.5)	(3.7)		(11.2	)		(7.3	)
Effect of foreign currency exchange rates on cash and cash equivalents		(0.2)	(0.1)
Effect of foreign currency exchange rates on cash and cash equivalents and other					—			(0.2	)

Net (decrease) increase in cash and cash equivalents	$	(2.4)	$ 1.8
Net increase in cash and cash equivalents				$	3.8		$	(2.4	)

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 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.

For the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, net cash provided by operating activities was ~~$8.1~~$4.9 billion and ~~$8.6~~$7.8 billion, respectively, driven by ~~in both periods,~~ net income of ~~$4.3~~$4.6 billion and ~~$4.4~~$4.3 billion, respectively, adjusted for ~~non cash~~non-cash items including ~~certain~~ changes in provisions for losses, depreciation and amortization, deferred taxes, and stock-based compensation. The ~~decrease in the~~ current period ~~as compared to~~net income includes the ~~nine months ended September 30, 2014,~~$1.2 billion gain on the sales of the HFS portfolios, which is presented in Net decrease (increase) in Card Member receivables and loans, including held for sale, within cash flows from investing activities. The decrease was also driven primarily ~~resulted~~by impacts from movements in Other assets and Accounts payable and Other liabilities as a result of normal business operating ~~activities, and primarily driven by changes in merchant payable volumes.~~activities.

Cash Flows from Investing Activities

Our cash flows from investing activities primarily include changes in Card Member receivables and loans, including Card Member loans and receivables HFS, along with gains on sales related thereto, as well as changes in our available for sale investment securities portfolio.

For the nine months ended September 30, ~~2015~~2016, and ~~2014,~~2015, net cash ~~used in~~provided by (used in) investing activities was ~~$2.7~~$10.1 billion and ~~$3.0~~$(2.7) billion, respectively. The ~~decrease~~increase in the current period, as compared to the nine months ended September 30, ~~2014,~~2015, was primarily driven by ~~a comparative decrease in Card Member receivables and loans, offset by higher restricted cash related to upcoming maturities~~the sales of ~~long term debt in~~ the ~~American Express Credit Account Master Trust.~~HFS portfolios.

Cash Flows from Financing Activities

Our cash flows from financing activities primarily include issuing and repaying debt, changes in customer deposits, issuing and repurchasing our common shares, and paying dividends.

For the nine months ended September 30, ~~2015~~2016, and ~~2014,~~2015, net cash used in financing activities was ~~$7.5~~$11.2 billion and ~~$3.7~~$7.3 billion, respectively. The ~~variance was primarily driven by a higher net~~ increase in the current period, as compared to the nine months ended September 30, 2015, primarily resulted from a net decrease in short-term borrowings and customer deposits, partially offset by ~~higher~~lower net repayments of long-term debt ~~repayments~~ in the current year, ~~versus~~as compared to the same period in the prior year.

~~Certain Other Off-Balance Sheet Arrangements~~

As of September 30, 2015, we had approximately $289 billion of unused credit available to Card Members as part of established lending product agreements. 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 limit, and therefore are not reflected in unused credit available to Card Members.


		62

OTHER MATTERS

Certain Legislative, Regulatory and Other Developments

As a participant in the financial services industry, and as a bank holding company, we are subject to comprehensive examination and supervision by the Federal Reserve and to a range of laws and regulations that impact our business and operations. In light of ~~legislative initiatives over~~ the ~~last several years~~current environment of additional regulation, enhanced supervision efforts and ~~continuing~~increased regulatory ~~reform implementation,~~investigations and enforcement, compliance requirements and expenditures have risen for financial services firms, including us, and we expect compliance requirements and expenditures will continue to rise in the future.

In addition, legislators and regulators in various countries in which we operate have focused on the operation of card networks, including through antitrust actions, legislation and rules ~~that would or do impose changes on~~to change certain practices or pricing of card issuers, merchant acquirers and payment networks, and, ~~the establishment of~~in some cases, to establish broad and ongoing regulatory oversight regimes for payment systems. Regulators and legislators have focused on the fees merchants pay to accept cards, including the way bankcard network members collectively set the “interchange” (that is, the fee paid by the bankcard merchant acquirer to the card issuer in payment networks like Visa and MasterCard) ~~and the fees merchants are charged for card acceptance,~~, as well as the rules, contract terms and practices governing merchant card acceptance. Although, unlike the Visa and MasterCard networks, the American Express network does not have interchange fees or collectively set fees or rules, antitrust actions and government regulation relating to merchant pricing or terms of merchant rules and contracts could affect all networks directly or ~~indirectly.~~indirectly , as well as adversely impact consumers and merchants. Among other things, lower interchange and/or merchant discount revenue may lead card issuers to look for other sources of revenue from consumers such as higher annual card fees or interest charges, as well as to reduce costs by scaling back or eliminating rewards, services or benefits to cardholders and merchants. Broad regulatory oversight over payment systems can also include, in some cases, requirements for international card networks to ~~be locally licensed and/or to~~ localize aspects of their ~~operations.~~operations, such as processing infrastructure, which could increase our costs and diminish the value of our closed loop. The development and enforcement of payment system regulatory regimes generally continue to grow and may adversely affect our ability to compete effectively and maintain ~~or increase our revenues~~ and extend our global network.

In certain countries, such as Australia and certain Member States in the EU, merchants are permitted by law to surcharge card purchases. While surcharging continues to be actively considered in certain jurisdictions, the benefits to customers have not been apparent in countries that have allowed it, and in some cases regulators are addressing concerns about excessive surcharging by merchants. Surcharging, particularly where it disproportionately impacts American Express Card Members, which is known as differential surcharging, as well as other steering practices that are permitted by regulation in some countries could have a material adverse effect on us if it becomes widespread. The Reserve Bank of Australia allows us and other networks to limit a merchant’s right to surcharge to “the reasonable cost of card acceptance.” As discussed below, the Reserve Bank of Australia recently amended its rules to limit surcharging in Australia to the merchant’s actual cost of card acceptance. In the EU, in those Member States that permit surcharging, the Consumer Rights Directive prohibits merchants from surcharging card purchases more than the cost of acceptance.

On June 23, 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit,” which has caused and may continue to cause significant volatility in capital and currency markets worldwide. The full impact of Brexit, however, remains uncertain. A process of negotiation, which is likely to take two years or longer, will determine the future terms of the U.K.’s relationship with the European Union. It is unclear at this stage what financial, trade and legal implications the withdrawal of the U.K. from the European Union would have and how such withdrawal would affect us.


		63

European Union Payments Legislation

In ~~July 2013,~~2015, the European ~~Commission proposed~~Union adopted legislation in two parts, covering a wide range of topics across the payments industry. The first part was ~~a proposed~~an EU-wide regulation on interchange fees (the Interchange Fee Regulation); the second consisted of revisions to the Payment Services Directive (the PSD2).

The Interchange Fee Regulation was formally adopted in April 2015. The substantive terms as adopted include the following:

●

~~Price caps – Interchange fees on consumer card transactions in the EU will be~~

Price caps – Interchange fees on consumer card transactions in the EU are capped as of December 2015, generally at 20 basis points for debit and prepaid cards and 30 basis points for credit and charge cards, with the possibility of lower caps in some instances. Although we do not have interchange fees, as “four party” networks such as Visa and MasterCard have, and “three party” networks such as American Express are exempt from the application of the caps, the regulation provides that “three party” networks should be treated as “four party” networks when they license third party providers to issue cards and/or acquire merchants or when they issue cards with a co-brand partner or through an agent. This means, for example, the caps will apply to elements of the financial arrangements agreed to between us and each of our GNS partners in the EU. The caps will take effect in December 2015; however, individual EU Member States have the option to postpone for a further three years the effectiveness of these caps in relation to transactions with no cross-border component on “three party” networks with very limited market share in that Member State. The discount rates we agree to with merchants will not be capped, but the interchange caps will likely exert additional downward pressures on merchant fees across the industry, including our discount rates, and prepaid cards and 30 basis points for credit and charge cards, with the possibility of lower caps in some instances. Although we do not have interchange fees and “three party” networks such as American Express are exempt from the application of the caps, the regulation provides that “three party” networks should be treated as “four party” networks (such as Visa and MasterCard, which have interchange fees) when they license third-party providers to issue cards and/or acquire merchants or when they issue cards with a cobrand partner or through an agent. This means, for example, the caps will apply to elements of the financial arrangements agreed to between us and each of our GNS partners in the EU, which may undermine our ability to attract and retain GNS partners. While the discount rates we agree to with merchants are not capped, the interchange caps have exerted, and will likely continue to exert, downward pressures on merchant fees across the industry, including our discount rates. We have brought a legal challenge and seek a ruling from the EU Court of Justice to invalidate the application of price caps in circumstances where three party networks issue cards with a cobrand partner or through an agent. The Interchange Fee Regulation excludes commercial card transactions from the scope of the caps.

Card acceptance terms –“Anti-steering” and honor-all-cards rules across all card networks, including non-discrimination and honor-all-cards provisions in our card acceptance agreements, are prohibited with some exceptions. Removal of these provisions creates significant risk of customer confusion and Card Member dissatisfaction, which would result in harm to the American Express brand. The prohibition on “anti-steering rules” took effect immediately upon effectiveness of the regulation; the prohibition on honor-all-cards rules took effect in June 2016.

Network licensing – In December 2015, the geographic scope of the network licenses that we agree to with our GNS partners in the EU was amended to cover the entire EU in order to meet the requirements of the regulation. This allows GNS partners to actively pursue their American Express business throughout the EU, including countries where we or other GNS partners are present, and may undermine the value of licenses granted to some GNS partners to date, which have been subject to varying levels of exclusivity to incentivize development of the American Express business in relation to a particular country.

Separation of network processing – From June 2016, card networks are required to separate their network processing functions (in which transactions between different issuers and acquirers are processed for authorization, clearing and settlement). This provision does not generally apply to “three party” payment networks, such as American Express, but may be deemed applicable, for example, where a different GNS issuer and acquirer is involved in a transaction, which represent a very small percentage of transactions on our network.

Co-badging of cards – From June 2016, a single card may bear the brand of multiple networks and be used to process transactions on any of those networks. Merchants may install automatic mechanisms in point-of-sale equipment to prioritize selection of a particular network, subject to override by the cardholder. These provisions may harm the American Express brand insofar as GNS issuing partners will be able to offer multiple networks on a single card and merchants may program their point-of-sale equipment to prioritize selection of another network on such cards.

●
		Card acceptance terms –“Anti-steering” and “honor-all-cards” rules across all card networks, including non-discrimination and honor-all-cards provisions in our card acceptance agreements, are prohibited with some exceptions. Removal of these provisions creates significant risk of customer confusion and Card Member dissatisfaction, which would result in harm to the American Express brand. The prohibition on anti-steering rules took effect immediately upon effectiveness of the regulation; the prohibition on honor-all-cards rules takes effect in June 2016.

●64

Network licensing – From December 2016, the geographic scope of network licenses within the EU, including those we agree to with our GNS partners, will cover the entire EU. This may undermine the value of licenses granted to some GNS partners to date, which have been subject to varying levels of exclusivity in relation to a particular country.

●

Separation of network processing – From June 2016, card networks will be required to separate their network processing functions (in which transactions between different issuers and acquirers are processed for authorization, clearing and settlement). This requirement does not apply to three-party payment networks, such as American Express, but may be deemed applicable in situations where a different GNS issuer and acquirer is involved in a transaction, which represent a very small percentage of transactions on our network.

●

~~On October 8, 2015, the European Parliament formally adopted the PSD2. Following the European Parliament’s vote, the PSD2 will be formally adopted by the EU Council of Ministers.~~ The PSD2 ~~will then be~~was adopted on November 25, 2015, and was published in the Official Journal of the ~~EU, at which point each~~European Union on December 23, 2015. Each Member State ~~will have two years~~has until January 2018 to transpose the PSD2 into national law.

Among other terms, the published text of PSD2 includes provisions that ~~would~~will (i) further regulate surcharging so that transactions falling in scope of the interchange caps could not be surcharged, but transactions falling outside the scope of the caps could be surcharged up to cost, subject potentially to the ~~ability~~decision of an individual Member State to prohibit surcharging altogether; and (ii) require all networks, including ~~three-party~~“three party” payment networks that operate with licensing arrangements, such as our GNS business, to establish objective, proportionate and non-discriminatory criteria under which a financial institution may access the network, for example, as a licensed issuer or acquirer. The potential surcharging regulation may increase instances of differential surcharging of our cards, prompt customer and merchant confusion as to which transactions may be surcharged and lead to Card Member dissatisfaction. The access requirements ~~would~~will undermine the flexibility and discretion we have had to date in deciding with whom to partner in our GNS ~~business.~~business and, together with requirements in the Interchange Fee Regulation, may undermine the value of our GNS business in Europe.

Australia Payments Regulation

Following a formal review of the regulatory framework for card payments in Australia, the Reserve Bank of Australia adopted new regulations on May 26, 2016, including the following:

Interchange caps – as of July 1, 2017, the interchange fee paid on Visa and MasterCard credit transactions must not exceed a weighted-average benchmark of 0.50 percent across all transactions, with a maximum interchange fee cap of 0.80 percent for each individual credit card transaction.

The inclusion of our GNS business in Australia under interchange regulation, which subjects GNS payments to bank partners to the same interchange caps and regulations that apply to Visa and MasterCard credit card transactions in Australia, effective July 1, 2017.

Broadening the definition of interchange fees to include any fees paid by networks to card-issuing banks as incentives to issue cards, as well as any other net payments made to card issuers.

Increasing the frequency of periodic weighted-average benchmark calculations from every three years to quarterly to confirm compliance with the interchange caps. In determining compliance, all transactions at Australian merchants (including commercial card transactions, but excluding those on foreign-issued cards) will be taken into consideration.

Changing the rules on merchant surcharging to limit surcharging to the actual cost of card acceptance paid to the merchant acquirer, as recorded on the merchant statement issued by the merchant acquirer; the changes took effect as of September 1, 2016 for large merchants and will take effect September 1, 2017 for other merchants.

The inclusion of our GNS business under interchange regulation may undermine our ability to attract and retain GNS partners. While the discount rates we agree to with merchants do not include an interchange component and are therefore not capped, the interchange caps, once effective, will likely exert downward pressure on merchant fees across the industry, including our discount rates.

Dodd-Frank Wall Street Reform and Consumer Protection Act

Dodd-Frank contains a wide array of provisions intended to govern the practices and oversight of financial institutions and other participants in the financial markets. Among other matters, the law created an independent Consumer Financial Protection Bureau (the CFPB), which has broad rulemaking authority over providers of credit, savings, payment and other consumer financial products and services with respect to certain federal consumer financial laws. Moreover, the CFPB has examination and enforcement authority with respect to certain federal consumer financial laws for providers of consumer financial products and services, including ~~American Express Company and~~ certain of our subsidiaries. The CFPB is directed to prohibit “unfair, deceptive or abusive” acts or practices, and to ensure that all consumers have access to fair, transparent and competitive markets for consumer financial products and services.


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The review of products and practices to assess compliance and prevent unfair, deceptive or abusive conduct will be a continuing focus of the CFPB and ~~banking~~ regulators more broadly, as well as our own internal reviews. For example, federal banking regulators have recently announced they are conducting horizontal reviews of banking sales practices and we are cooperating with regulators in those reviews. Internal and regulatory reviews have resulted in, and are likely to continue to result in, changes to our practices, products and procedures. Such reviews are also likely to continue to result in increased costs related to regulatory oversight, supervision and examination, and additional restitution to our Card Members and may result in additional regulatory actions, including civil money penalties.

~~In December 2013, we announced that certain of our subsidiaries reached settlements with several banking regulators, including~~On May 5, 2016, the CFPB ~~to resolve regulatory reviews of marketing and billing practices related to several credit card add-on products. For~~issued a ~~description of these settlements, see Part I, Item 3. “Legal Proceedings” in our Annual Report onForm 10-K~~ ~~for the year ended December 31, 2013.~~

~~In October 2012, we announced~~proposed rule that, American Express Company and certain of our subsidiaries reached settlements with several bank regulators, including the CFPB, relating to certain aspects of our U.S. consumer card practices. For a description of these settlements, see Part I, Item 3. “Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2012.

~~On October 7, 2015, the CFPB announced a proposal that~~if enacted, would, among other changes, require that our consumer arbitration clause not apply to cases filed in court as class actions, unless and until class certification is denied or the class claims are dismissed. The CFPB has set a 90-day period for comment, with the rule becoming effective 211 days after enactment and applying to all agreements entered into after that date.

On July 28, 2016, the CFPB outlined proposals under consideration that would set forth additional requirements forthird-party debt collection agencies, which we use in the ordinary course. This proposal is ~~the beginning~~part of a rulemaking process that may not result in a final rule, if any, becoming effective before 2018.

~~Dodd-Frank prohibits payment card networks from restricting merchants from offering discounts~~ As of March 1, 2017, regulations implementing Dodd-Frank’s margin requirements would result in us collecting and remitting cash and/or incentives to customers to pay with particular forms of payment, such as cash, check, credit or debit card, or restricting merchants from setting certain minimum, and for certain merchants maximum, transaction amounts for credit cards, as long as any such discounts or incentives or any minimum or maximum transaction amounts do not discriminate on the basis of the issuer or network and comply with applicable federal or state disclosure requirements.

Under Dodd-Frank, the Federal Reserve is also authorized to regulate interchange fees paid to financial institutions on debit card and certain general-use prepaid card transactions to ensure that they are “reasonable and proportional”securities collateral relative to the ~~cost~~value of processing individual transactions, and to prohibit payment card networks and issuers from requiring transactions to be processed on a single payment network or fewer than two unaffiliated networks. The Federal Reserve’s rule provides that the regulations on interchange and routing do not apply to a three-party network like American Express when it acts as both the issuer and the network for prepaid cards, and we are therefore not a “payment card network” as that term is defined and used for the specific purposes of the rule.

Dodd-Frank also authorizes the Federal Reserve to establish enhanced prudential regulatory requirements, including capital, leverage and liquidity standards, risk management requirements, concentration limits on credit exposures, mandatory resolution plans (so-called “living wills”) and stress tests for, among others, large bank holding companies, such as American Express Company, that have greater than $50 billion in assets. We are also required to develop and maintain a “capital plan,” and to submit the capital plan to the Federal Reserve for our quantitative and qualitative review under the Federal Reserve’s CCAR process. In addition, certain uncleared derivative transactions are now required to be centrally cleared, which have increased our collateral posting requirements. In September 2014, the U.S. Commodity Futures Trading Commission and the U.S. federal banking agencies issued proposals that would impose mandatory margining requirements for certain non-cleared swaps,(variation margin), which may ~~further~~create or increase collateral posting requirements for us.

Antitrust Litigation

The U.S. Department of Justice (DOJ) and certain states’ attorneys general brought an action against us in 2010 alleging that the provisions in our card acceptance agreements with merchants that prohibit merchants from engaging in various actions to discriminate against our card products violate the U.S. antitrust laws. The trial court ~~has~~had ruled that the challenged provisions violate U.S. antitrust laws and issued an ~~injunction, effective July 20, 2015, prohibiting us from enforcing certain elements~~injunction. We appealed this judgment and on September 26, 2016, the Court of ~~such provisions in~~Appeals for the ~~United States. We are vigorously pursuing an appeal of~~Second Circuit reversed the trial court decision and directed the trial court to enter a judgment ~~and we are~~for American Express. We continue to vigorously ~~defending~~defend similar antitrust claims initiated by merchants in other court and arbitration proceedings. See Part II, Item 1. “Legal Proceedings” ~~below~~for a description of the DOJ case and Part I, Item 3. “Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2015 (the 2015 Form 10-K) for descriptions of the ~~DOJ action and~~ related cases. It is possible that significantly increased merchant steering or other actions impairing the Card Member experience, or the resolution of one or any combination of these merchant claims for damages, could have a material adverse effect on our business. See Part ~~II,~~I, Item 1A, “Risk Factors” in ~~our Quarterly Report on~~the 2015 Form ~~10-Q for the quarter ended June 30, 2015~~10-K for information on the potential impacts of an adverse decision in the ~~trial court’s decision, the subsequent injunction and the related~~ merchant ~~litigation~~litigations on our business.

~~Other Legislative and Regulatory Initiatives~~

In certain countries, such as Australia, and in certain Member States in the EU, merchants are permitted by law to surcharge card purchases. While surcharging continues to be actively considered in certain jurisdictions, the benefits to customers have not been apparent in countries that have allowed it, and in some cases regulators are addressing concerns about excessive surcharging by merchants. Surcharging, particularly where it disproportionately impacts American Express Card Members, which is known as differential surcharging, could have a material adverse effect on us if it becomes widespread. The Reserve Bank of Australia allows us and other networks to limit a merchant’s right to surcharge to “the reasonable cost of card acceptance.” In the EU, the Consumer Rights Directive prohibits merchants from surcharging card purchases more than the merchants’ cost of acceptance in those Member States that permit surcharging.

In December 2014, the Australian Financial System Inquiry published a report to the Australian Federal Government that included a number of recommendations for changing the way payment cards are regulated in Australia. If implemented by the government or the Reserve Bank of Australia, these recommendations would have a significant impact across the industry, including American Express. The Financial System Inquiry’s recommendations included the following:

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		~~Publishing thresholds for determining which payment networks are designated for regulation~~

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Broadening interchange fee caps to include all amounts payable to card issuers in regulated payment systems as well as other payments to card issuers across both three- and four-party card payment networks

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~~Lowering interchange fee caps, replacing periodic weighted-average caps with fixed percentage caps and applying caps as the lesser of a fixed amount or a fixed percentage~~

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Changing the rules on merchant surcharging to allow “low-cost” payment networks to prohibit surcharging, “medium-cost” networks to cap surcharges and “high-cost” networks to limit surcharging (as is currently the case) to the reasonable cost of card acceptance

On March 4, 2015, the Reserve Bank of Australia commenced a formal review of the regulatory framework for card payments in Australia, considering the above recommendations from the Financial Systems Inquiry along with a broader range of measures related to card payments regulation. The Australian Federal Government and Reserve Bank of Australia will now determine whether and how any of these recommendations, or alternative options, should be implemented. We do not expect changes, if any, to take effect before mid-2016.

On October 15, 2015, the Reserve Bank of Australia announced that it “designated” our GNS business. Designation is a formal step prior to regulation, which could subject our GNS business in Australia to the same interchange caps that apply to Visa and MasterCard in Australia. Any such regulation could have an adverse effect on our business and results of operations in Australia.

On October 6, 2015, the Court of Justice of the European Union ruled that the European Commission’s Safe Harbor Framework is invalid as a basis for transfers of personal data from the European Economic Area countries to the U.S. We generally rely on our Binding Corporate Rules and not on the Safe Harbor Framework as the primary method for lawfully transferring data from our European entities to our entities in the U.S. and elsewhere globally.

~~Refer to “Consolidated Capital Resources and Liquidity” for a discussion of capital adequacy requirements established by federal banking regulators.~~

Recently Issued Accounting Standards

Refer to the Recently Issued Accounting Standards section of Note 1 to the Consolidated Financial Statements.

Glossary of Selected Terminology

Adjusted ~~average loans~~ ~~— Represents average Card Member loans excluding the impact of certain non-traditional Card Member loans and other fees.~~

~~Adjusted~~ net interest income — ~~Represents~~A non-GAAP measure that represents net interest income attributable to our Card Member loans ~~portfolio~~and loans HFS (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 portfolio.~~loans. The Company believes adjusted net interest income is useful to investors because it is a component of net interest yield on Card Member loans.

Asset securitizations — Asset securitization involves the transfer and sale of ~~receivables~~loans or ~~loans~~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 ~~receivables~~loans or ~~loans.~~receivables. The trust uses the proceeds from the sale of such securities to pay the purchase price for the underlying ~~receivables~~loans or ~~loans.~~receivables. The ~~receivables~~loans and ~~loans~~receivables of our Lending Trust and Charge Trust ~~and Lending Trust~~(together, the Trusts) being securitized 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 pricing at merchants accepting ~~general purpose~~general-purpose American Express cards. It represents the percentage of billed business (generated from both proprietary and GNS Card Member ~~spend)~~spending) retained by us from merchants we acquire, or for merchants acquired by a third party on our behalf, net of amounts retained by such third party.

Basic cards-in-force — Proprietary basic consumer cards-in-force includes basic cards issued to the primary account owner, ~~and does~~(i.e., not ~~include~~including additional supplemental cards issued on ~~that account.~~accounts). Proprietary basic small business and corporate cards-in-force ~~include~~includes both basic and supplemental cards ~~issued to employee Card Members.~~issued. Non-proprietary basic cards-in-force includes cards that are issued and outstanding under network partnership agreements, except for supplemental cards and retail ~~co-brand~~cobrand Card Member accounts which have had no out-of-store ~~spend~~spending activity during the prior ~~12-month~~twelve-month period.

Billed business— Includes activities (including cash advances) related to proprietary cards, cards issued under network partnership agreements (non-proprietary billed business), corporate ~~payments~~payment services and certain insurance fees charged on proprietary cards. In-store ~~spend~~spending activity within retail ~~co-brand~~cobrand portfolios in GNS, from which we earn no revenue, is not included in non-proprietary billed business. Card billed business is included in the ~~U.S.~~United States or outside the ~~U.S.~~United States based on where the issuer is located.

Capital ratios — Represents the minimum standards established by the 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 Transitional Basel III and Fully Phased-in Basel III.

Card Member— The individual holder of an issued American Express-branded charge, credit and certain prepaid cards.

Card Member loans — Represents the outstanding amount due from Card Members for charges made on their American Express credit cards, as well as any interest charges and card-related fees. Card Member loans also include revolving balances on certain American Express charge card products.

Card Member loans and receivables HFS— Beginning as of December 1, 2015 and continuing until a sale is completed, represents Card Member loans and receivables related to our cobrand partnerships with Costco in the United States and JetBlue. The JetBlue and Costco portfolio sales were completed on March 18 and June 17, 2016, respectively.


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Card Member receivables — Represents the outstanding amount due from Card Members for charges made on their American Express charge cards, as well as any card-related fees.

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. Charge Card Members generally must pay the full amount billed each month. No finance charges are assessed on charge cards. Each charge card transaction is authorized based on its likely economics reflecting a ~~customer’s~~Card Member’s most recent credit information and spend patterns. Some charge card accounts have an additional lending-on-charge feature that allows revolving certain balances.

Credit cards — Represents cards that have a range of revolving payment terms, grace periods, and rate and fee structures.

Discount revenue — Represents revenue earned from fees generally charged to merchants who have entered into a card acceptance agreement. The discount fee generally is deducted from our payment for Card Member purchases. Discount revenue is reduced by ~~other~~incentive payments made to merchants, payments to third-party card issuing partners, cash-back reward costs and statement credits, corporate incentive payments and other ~~contra-revenue~~similar items.

Interest expense— ~~Interest expense includes~~Includes interest incurred primarily to fund Card Member loans ~~charge card product~~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 financing and short-term borrowings, ~~which primarily relates to interest expense on~~(e.g., commercial paper, federal funds purchased, bank overdrafts and other short-term ~~borrowings.~~borrowings), as well as the realized impact of derivatives hedging interest rate risk on our long-term debt.

Interest income— ~~Interest income includes~~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— ~~is assessed~~Assessed using the average daily balance method for ~~loans.~~Card Member loans and loans HFS. 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~~Primarily relates to our performing fixed-income securities. Interest income is ~~accrued~~recognized as earned using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so ~~that the related investment security recognizes~~ a constant rate of return is recognized on the outstanding balance of the related investment security throughout its term. ~~These amounts~~Amounts are recognized until ~~these~~ 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 — ~~is recognized~~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.

Liquidity Coverage Ratio— Represents the proposed minimum standards being established by the regulatory agencies as a measure to determine whether the regulated entity has sufficient liquidity to meet liquidity needs in periods of financial and economic stress.

Merchant acquisition — Represents our process of entering into agreements with merchants to accept American Express-branded cards.

Net card fees — Represents the card membership fees earned during the period. These fees are recognized as revenue over the covered card membership period (typically one year), net of the provision for projected refunds for Card Membership cancellation ~~of card membership.~~and deferred acquisition costs.


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Net interest yield on Card Member loans — ~~Net interest yield on Card Member loans~~A non-GAAP measure that is computed by dividing adjusted net interest income by ~~adjusted~~ average loans, computed on an annualized basis. ~~The calculation of net interest yield on Card Member loans includes interest that is deemed uncollectible. For all presentations of net interest yield on Card Member loans, reserves~~Reserves and net write-offs related to uncollectible interest are recorded through provisions for losses, ~~— Card Member loans; therefore, such reserves~~ and ~~net write-offs~~ are thus not included in the net interest yield calculation. The Company believes net interest yield on Card Member loans is useful to investors because it provides a measure of profitability of the Company’s Card Member loan portfolio.

Net loss ratio — Represents the ratio of ~~GCS~~GCP charge card write-offs, consisting of principal (resulting from authorized transactions) and fee components, less recoveries, on Card Member receivables expressed as a percentage of gross amounts billed to corporate Card Members.

Net write-off rate— principal only — Represents the amount of proprietary consumer or small business Card Member loans or ~~USCS and ICS Card Member~~ receivables written off, consisting of principal (resulting from authorized transactions), less recoveries, as a percentage of the average loan ~~balance~~ or ~~USCS and ICS average~~ receivables 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 ~~USCS and ICS~~ Card Member receivables.

Operating expenses — Represents salaries and employee benefits, professional services, occupancy and equipment, ~~communications~~ and other expenses.

Return on average equity — Calculated by dividing one-year period net income by one-year average total shareholders’ equity.

Return on average segment capital— Calculated by dividing one-year period segment income by one-year average segment capital.

~~Return on average tangible segment capital~~— Computed in the same manner as return on average segment capital except the computation of average tangible segment capital excludes from average segment capital average goodwill and other intangibles.

Segment capital — Represents the capital allocated to a segment based upon specific business operational needs, risk measures, and regulatory capital requirements.

Total cards-in-force — Represents the number of cards that are issued and outstanding. Non-proprietary cards-in-force includes all cards that are issued and outstanding under network partnership agreements, except for retail ~~co-brand~~cobrand Card Member accounts which have no out-of-store ~~spend~~spending activity during the prior ~~12-month~~twelve-month period.

~~Travel sales —~~ Represents the total dollar amount of travel transaction volume for airline, hotel, car rental, and other travel arrangements made for consumers and small businesses. We earn revenue on these transactions by charging a transaction or management fee.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk to earnings or ~~value~~asset and liability values resulting from movements in market prices. Our market risk ~~exposure is primarily generated by~~exposures include (i) interest rate risk due to changes in the relationship between interest rates on our ~~card~~assets (such as loans, receivables and ~~insurance businesses,~~investment securities) and on our liabilities (such as ~~well as our investment portfolios,~~debt and deposits); and (ii) foreign exchange risk related to earnings, transactions and investments in ~~our operations outside~~currencies other than the ~~United States.~~U.S. dollar. There were no material changes in these market risks since December 31, ~~2014.~~

2015.

ITEM 4. 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 fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 expected business and financial performance, ~~and which include management’s outlook for 2015-2017,~~ among other matters, contain words such as “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” 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 in the future, which will depend in part on the following: revenues growing consistently with current expectations, which could be impacted by, among other things, weakening economic conditions in the United States or internationally, a decline in consumer confidence impacting the willingness and ability of Card Members to sustain spending, a further decline in airfare and gas prices, a further strengthening of the U.S. dollar, a greater erosion of the average discount rate than expected, a greater impact on discount revenue from cash back, GNS volumes and cobrand partner and client incentive payments, more cautious spending by large and global corporate Card Members and lower spending on new cards acquired than estimated; our success in addressing competitive pressures and implementing strategies and business initiatives, including growing profitable spending from new and existing Card Members, increasing penetration among middle market and small business clients, expanding our international footprint and increasing merchant acceptance; the level of spend in bonus categories on rewards-based and/or cash-back cards and redemptions of Card Member rewards and offers; the impact of any future restructuring charges or other contingencies, including, but not limited to, litigation-related settlements, judgments or expenses, impairments, the imposition of fines or civil money penalties, an increase in Card Member reimbursements and changes in reserves; credit performance remaining consistent with current expectations;

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continued growth of Card Member loans; the ability to continue to realize benefits from restructuring actions and operating leverage at levels consistent with current expectations; the amount we spend on growth initiatives and our ability to ~~achieve earnings per common share (“EPS”)~~drive growth ~~for~~from such investments; changes in interest rates beyond current expectations; the ~~full year 2015 between $5.20~~impact of regulation and ~~$5.35,~~litigation, which ~~will depend~~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 tax rate remaining in ~~part on the following: billed business and revenue growth rates in the fourth quarter,~~line with current expectations, which could be impacted by, among other things, a decline in consumer confidence impacting the willingness and ability of Card Members to sustain spending, deterioration in corporate and small business spending levels, weakening economic conditions in the U.S. or internationally, and an increase in the erosion of the average discount rate due to mix, competition, timing of merchant re-signings or other factors; the impact of any potential restructuring charges or other contingencies, including, but not limited to, unanticipated litigation-related expenses, impairments to our EG business or otherwise to intangibles or other assets, regulatory fines, an increase in Card Member reimbursements and changes in reserves; credit performance worsening beyond current expectations; a decline in the Card Member loan portfolio; our tax rate remaining in line with recent performance, which could be impacted by, among other things, the potential failure of the U.S. Congress to renew legislation regarding the active financing exception to Subpart F of the Internal Revenue Code, our geographic mix of income being weighted more to higher tax jurisdictions than expected, changes in tax laws and regulation (including final and temporary Treasury regulations under Section 385 of the U.S. Internal Revenue Code) and unfavorable tax audits and other unanticipated tax items; the ability to continue to realize benefits from the 2014 restructuring actions and operating leverage at levels consistent with recent quarters; the U.S. dollar strengthening beyond current expectations; the amount we spend in the fourth quarter on growth initiatives; significant changes in interest rates; the impact of accounting changes and reclassifications; and our ability to continue executing the share repurchase program;

the actual amount to be spent on growth initiatives, including on marketing and promotion, as well as the timing of any such spending, which will be based in part on management’s assessment of competitive opportunities; overall business performance; prior commitments; contractual obligations with business partners and other fixed costs relative to revenue levels; management’s ability to identify attractive investment opportunities and make such investments, which could be impacted by business, regulatory or legal complexities; and our ability to realize efficiencies, optimize investment spending and control expenses to fund such spending;

rewards expense, including costs associated with cash rebate products, growing at a different rate than current expectations, which will depend in part on Card Member behavior as it relates to their spending patterns, spending volumes and redemption behaviors, as well as the degree of interest of Card Members in the value proposition we offer; our ability to enhance card products and services to make them attractive to Card Members; and the amount we spend on the promotion of enhanced card products and rewards categories and the success of such promotion;

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our ability to achieve earnings per share growth in 2016 and return to our on-average and over-time EPS growth target in 2017, which will depend on factors such as: our success in implementing our strategies and business initiatives, including growing profitable spending through proprietary, co-brand and network products, increasing penetration among corporate clients, expanding our international footprint, growing loyalty coalitions and marketing services, increasing merchant acceptance, controlling expenses and addressing the end of the Costco U.S. relationship; the outcome of the Costco U.S. Card Member loan portfolio sale discussions; the behavior of Card Members and their actual spending patterns; the impact of new regulations in the EU, the court’s order in the U.S. Department of Justice case in the marketplace and regulatory and competitive pressures generally; the effectiveness of our marketing and loyalty programs; credit trends; changes in foreign currency exchange and interest rates; changes in general economic conditions, such as GDP growth, consumer confidence, unemployment and the housing market; and on other factors outside management’s control;
our ability to reduce our overall cost base, which will depend in part on the timing and financial impact of reengineering plans, which could be impacted by factors such as our inability to mitigate the operational and other risks posed by potential staff reductions, our inability to develop and implement technology resources to realize cost savings and underestimating hiring and other employee needs; our ability to reduce annual operating expenses, which could be impacted by, among other things, the factors identified below; and our ability to optimize and lower marketing and promotion expenses, which could be impacted by higher advertising and Card Member acquisition costs, competitive pressures that may require additional expenditures or limit our ability to reduce costs, an inability to shift acquisition to digital channels, the availability of opportunities to invest at a higher level due to favorable business results and changes in macroeconomic conditions;
the ability to reduce annual operating expenses, which could be impacted by increases in significant categories of operating expenses, such as consulting or professional fees, including as a result of increased litigation, compliance or regulatory-related costs, technology costs or fraud costs; our ability to develop, implement and achieve substantial benefits from reengineering plans; higher than expected employee levels; the impact of changes in foreign currency exchange rates on costs; the payment of civil money penalties, disgorgement, restitution, non-income tax assessments and litigation-related settlements; impairments of goodwill or other assets; management’s decision to increase or decrease spending in such areas as technology, business and product development and sales forces depending on overall business performance; greater than expected inflation or merit increases; our ability to balance expense control and investments in the business; the impact of accounting changes and reclassifications; and the level of M&A activity and related expenses;

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		the actual amount to be spent on growth initiatives, including on marketing and promotion, technology development and contra-discount revenue items, as well as the timing of any such spending, which will be based in part on management’s assessment of competitive opportunities, overall business performance, the amount of any potential gain arising from a sale of the Costco U.S. Card Member loan portfolio management decides to spend on growth initiatives, contractual obligations with business partners, management’s ability to identify attractive investment opportunities and make such investments, which could be impacted by business, regulatory or legal complexities and our performance, and our ability to realize efficiencies and control expenses to fund such spending; 71

our lending write-off rates and provision expense being higher than current expectations, which will depend in part on changes in the level of loan balances, delinquency rates, mix of loan balances, loans related to new Card Members and other borrowers performing as expected, unemployment rates, the volume of bankruptcies and recoveries of previously written-off loans;

our ability to execute against our lending strategy and grow loans, which may be affected by increasing competition, brand perceptions and reputation, our ability to manage risk in a growing Card Member loan portfolio, and the behavior of Card Members and their actual spending and borrowing patterns, which in turn may be driven by our ability to issue new and enhanced card products, offer attractive non-card lending products, capture a greater share of existing Card Members’ spending and borrowings, reduce Card Member attrition and attract new customers;

the possibility that we will not fully execute on our plans for OptBlue to significantly increase merchant coverage, which will depend in part on the success of OptBlue merchant acquirers in signing merchants to accept American Express, which could be impacted by the pricing set by the merchant acquirers, the value proposition offered to small merchants and the efforts of OptBlue merchant acquirers to sign merchants for American Express acceptance, as well as the willingness of Card Members to use American Express cards at small merchants and of those merchants to accept American Express cards;

changes affecting our ability or desire to return capital to shareholders through dividends and share repurchases, which will depend on factors such as approval of our capital plans by our primary regulators, the amount we spend on acquisitions and results of operations and capital needs in any given period;

changes in global economic and business conditions, consumer and business spending, the availability and cost of capital, unemployment rates, geopolitical conditions (including potential impacts resulting from the proposed exit of the U.K. from the European Union), foreign currency rates and interest rates, all of which may significantly affect spending on American Express cards, delinquency rates, loan balances and other aspects of our business and results of operations;

changes in capital and credit market conditions, including sovereign creditworthiness, which may significantly affect our ability to meet our liquidity needs, expectations regarding capital and liquidity ratios, access to capital and cost of capital, including changes in interest rates; changes in market conditions affecting the valuation of our assets; or any reduction in our credit ratings or those of our subsidiaries, which could materially increase the cost and other terms of our funding, restrict our access to the capital markets or result in contingent payments under contracts;

legal and regulatory developments wherever we do business, including with regard to broad payment system regulatory regimes, such as in Europe and Australia, consumer financial product protection actions by the CFPB and other regulators and the stricter regulation of large, interconnected financial institutions, which could make fundamental changes to many of our business practices or materially affect our capital or liquidity requirements, results of operations, or ability to pay dividends or repurchase our stock; potential actions by the FDIC and credit rating agencies applicable to securitization trusts, which could impact our ABS program; or potential changes to the taxation of our businesses, the allowance of deductions for significant expenses, or the incidence of consumption taxes on our transactions, products and services;

changes in the substantial and increasing worldwide competition in the payments industry, including competitive pressure that may impact the prices we charge merchants that accept our cards, competition for cobrand relationships and the success of marketing, promotion or rewards programs;

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		uncertainty related to our ability to drive growth and achieve attractive returns from spending on growth initiatives, which will depend in part on our ability to develop and market value propositions that appeal to Card Members and new customers and on our ability to offer attractive services and rewards programs, as well as increasing competition, brand perceptions and reputation, the behavior of Card Members and their actual spending patterns, and ineffective or insufficient levels of investments, including on marketing and promotion expenses, new product development, acquisition efforts, including through digital channels, and attractive Card Member services and rewards programs;

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the ability to contain annual operating expense growth in 2015, which could be impacted by unanticipated increases in significant categories of operating expenses, such as consulting or professional fees, compliance or regulatory-related costs and technology costs, any potential restructuring charges, the payment of civil money penalties, disgorgement and restitution, our decision to increase or decrease spending in such areas as technology development depending on overall business performance, our ability to achieve the expected benefits of reengineering plans, our ability to balance expense control and investments in the business, the impact of changes in foreign currency exchange rates on costs, the impact of accounting changes and reclassifications, and the level of acquisition activity and related expenses;

●
our lending write-off rates increasing more quickly than current expectations and provision expense being higher than current expectations, which will depend in part on changes in the level of loan balances, delinquency rates of Card Members, unemployment rates, the volume of bankruptcies and recoveries of previously written-off loans;

●

uncertainty relating to the ultimate outcome of the antitrust lawsuit filed against us by the U.S. Department of Justice and certain state attorneys general, including the success or failure of our appeal, the impact of the court’s order in the marketplace, including significantly increased merchant steering or other actions impairing the Card Member experience, and the impact on existing private merchant cases and potentially additional litigation and/or arbitrations;

changes in the financial condition and creditworthiness of our business partners, such as bankruptcies, restructurings or consolidations, involving merchants that represent a significant portion of our business, such as the airline industry, or our 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

●

changes in global economic and business conditions, including consumer and business spending, the availability and cost of credit, unemployment and political conditions, all of which may significantly affect spending on American Express cards, delinquency rates, loan balances and other aspects of our business and results of operations;

●

legal and regulatory developments wherever we do business, including legislative and regulatory reforms in the U.S., such as the actions of the CFPB and Dodd-Frank’s stricter regulation of large, interconnected financial institutions, which could make fundamental changes to many of our business practices or materially affect our capital or liquidity requirements, results of operations, or ability to pay dividends or repurchase our stock; actions and potential future actions by the FDIC and credit rating agencies applicable to securitization trusts, which could impact our ABS program; or potential changes to the taxation of our businesses, the allowance of deductions for significant expenses, or the incidence of consumption taxes on our transactions, products and services;

●

changes in the substantial and increasing worldwide competition in the payments industry, including competitive pressure that may impact the prices we charge merchants that accept our cards, competition for co-brand partnerships and the success of marketing, promotion or rewards programs;

●

our ability to maintain and expand our presence in the digital payments space, including online and mobile channels, which will depend on our success in evolving our business models and processes for the digital environment, building partnerships and executing programs with companies, and utilizing digital capabilities that can be leveraged for future growth; and

●

factors beyond our control such as foreign currency rates, fire, power loss, disruptions in telecommunications, severe weather conditions, natural disasters, health pandemics, terrorism, cyber attacks or fraud, which could significantly affect spending on American Express cards, delinquency rates, loan balances and travel-related spending or disrupt our global network systems and ability to process transactions.

factors beyond our control such as fire, power loss, disruptions in telecommunications, severe weather conditions, natural disasters, health pandemics, terrorism, cyber attacks or fraud, which could significantly affect spending on American Express cards, delinquency rates, loan balances and travel-related spending or disrupt our global network systems and ability to process transactions.

A further description of these uncertainties and other risks can be found in ~~our Annual Report on~~the 2015 Form 10-K ~~for the year ended December 31, 2014 (2014 Form 10-K), our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2015~~ and our other reports filed with the Securities and Exchange Commission.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, we and our subsidiaries are subject to various claims, investigations, examinations, pending and potential legal actions, and other matters relating to compliance with laws and regulations (collectively, ~~legal proceedings)~~“legal proceedings”). We believe we have meritorious defenses to each of these legal proceedings and intend to defend them vigorously. Some of these proceedings are at preliminary stages and seek an indeterminate amount of damages.

We believe we are not 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, it is possible that the outcome of legal proceedings, including the possible resolution of merchant claims described ~~later~~ in ~~this section,~~our 2015 Form 10-K, could have a material impact on our results of operations. In addition, it is possible that significantly increased merchant steering or other actions impairing the Card Member experience as a result of the DOJ case described later in this section could have a material adverse effect on our business. Certain legal proceedings involving us or our subsidiaries are further described in this section and others, for which there have been no subsequent material developments since the filing of ~~the 2014~~our 2015 Form 10-K, are described in such report.

For those legal proceedings described in this section and in the ~~2014~~2015 Form 10-K where a loss is reasonably possible in future periods, whether in excess of a related reserve for legal contingencies or where there is no such ~~liability,~~reserve, and for which we are able to estimate a range of possible loss, the current estimated range is zero to ~~$370~~$190 million in excess of any reserves related to those matters. This range represents ~~management’s~~our estimate based on currently available information and does not represent our maximum loss exposure; actual results may vary significantly. As such proceedings evolve, including the merchant claims, we may need to increase our range of possible loss or reserves for legal contingencies. For additional information, ~~refer to~~see Note 8 to ~~the~~our Consolidated Financial Statements.

During the last several years, as regulatory interest in credit card network pricing to merchants or terms of merchant rules and contracts has increased, we have responded to many inquiries from banking and competition authorities around the world. In addition, the DOJ and various merchants have initiated legal proceedings to challenge aspects of our card acceptance agreements with merchants on antitrust grounds.

~~Antitrust Matters~~

In 2010, the DOJ, along with Attorneys General from Arizona, Connecticut, Hawaii (Hawaii has since withdrawn its claim), Idaho, Illinois, Iowa, Maryland, Michigan, Missouri, Montana, Nebraska, New Hampshire, Ohio, Rhode Island, Tennessee, Texas, Utah and Vermont filed a complaint in the U.S. District Court for the Eastern District of New York against us, MasterCard International Incorporated and Visa, Inc., alleging a violation of Section 1 of the Sherman Antitrust Act (the ~~DOJ case)~~“DOJ case”). The complaint included allegations that provisions in our merchant agreements prohibiting merchants from steering a customer to use another network’s card or another type of general-purpose card (“anti-steering” and “non-discrimination” contractual provisions) violate the antitrust laws. The complaint sought a judgment permanently enjoining us from enforcing our ~~anti-steering and~~ non-discrimination contractual provisions. The complaint did not seek monetary damages.

Following a non-jury trial in the DOJ case, the trial court found that the challenged provisions were anticompetitive and on April 30, 2015, the court issued ~~an order~~a final judgment entering a permanent injunction.


		73

Following our appeal of this judgment, on September 26, 2016, the Court of Appeals for the Second Circuit reversed the trial court decision and directed the trial court to enter a judgment for American Express.

On November 6, 2015, a putative representative action, captioned People of the State of California, ex. rel. Dennis Herrera v. American Express Co. et al., was filed in California state court on behalf of the People of California by the San Francisco City Attorney for the benefit of California merchants that accept American Express cards. The complaint alleges that certain terms in our merchant agreements violate California law and seeks relief in the form of: (1) a declaratory judgment; (2) an injunction ~~which became effective July 20, 2015, prohibits~~preventing us from enforcing ~~certain elements~~those terms; (3) statutory civil penalties in an amount to be determined by the court; (4) restitution for alleged overcharges; and (5) attorney’s fees and cost of suit. On October 7, 2016, the ~~anti-steering provisions in the U.S. We are vigorously pursuing an appeal of the decision and judgment.~~

In addition to the DOJ case, individual merchant cases and a putative class action are pending in the Eastern District of New York against us alleging that our anti-steering provisions in merchant card acceptance agreements violate U.S. antitrust laws. The individual merchant cases seek damages in unspecified amounts. Trial has been scheduled in the individual merchant cases for May 2, 2016. Our motion for summary judgment is pending, and the plaintiffs haveSan Francisco City Attorney filed a ~~motion for summary judgment.~~stipulation dismissing this action without prejudice.

~~Individual merchants have initiated arbitration proceedings raising similar claims concerning the anti-steering provisions in our card acceptance agreements and seeking damages.~~ We are ~~vigorously defending against those claims.~~

~~In July 2004, we were named as~~ a defendant in ~~another putative~~a class action ~~filed in the Eastern District of New York,~~ captioned~~The Marcus Corporation~~Kaufman v. American Express ~~Company, et al.~~Travel Related Services, in which ~~the plaintiffs allege an unlawful antitrust tying arrangement between certain of our charge cards~~was filed on February 14, 2007, and credit cards in violation of various state and federal laws. The plaintiffs in these actions seek injunctive relief and an unspecified amount of damages. In December 2013, we announced a proposed settlement of the~~Marcus~~ ~~case and the putative class action challenging our anti-steering provisions. The settlement, which provides for certain injunctive relief for the proposed classes, received preliminary approval~~is pending in the United States District Court for the ~~Eastern~~Northern District of ~~New York.~~Illinois. Plaintiffs’ principal allegation is that our gift cards violated consumer protection statutes because consumers allegedly had difficulty spending small residual amounts on the gift cards prior to the imposition of monthly service fees. The Court preliminarily certified a settlement class consisting of (with some exceptions) “all purchasers, recipients and holders of all gift cards issued by American Express from January 1, 2002 through the date of preliminary approval of the settlement.” On ~~August 4, 2015,~~March 2, 2016, the court ~~denied~~granted final approval of the ~~settlement; further proceedings are anticipated.~~

~~On March 20, 2015, a shareholder derivative action captionedLankford v. Chenault, et al., and American Express Co.~~ ~~was filed in New York State Supreme Court, New York County. The defendants include current and former Company executives, current and former members~~class-wide settlement. Notices of the Company’s Board of Directors and the Company itself, as a nominal defendant. No demand preceded the filing of the complaint. The complaint alleges that the defendants permitted and/or caused the Company to violate the antitrust laws through inclusion of its non-discrimination provisions in merchant contracts, which led to the recent negative result in the DOJ case discussed above. Based on those allegations, the complaint further alleges: breach of fiduciary duties by disseminating false and misleading information in our SEC filings and other public statements; failure to maintain internal controls, and failure to properly oversee and manage the Company; unjust enrichment; abuse of control; and gross mismanagement. The amount of purported damages is unspecified in the complaint. Our motion to dismiss is pending.

~~Corporate Matters~~appeal have been filed.

On July 30, 2015, plaintiff Plumbers and Steamfitters Local 137 Pension Fund, on behalf of themselves and other purchasers of American Express stock, filed a suit, ~~against~~captionedPlumbers and Steamfitters Local 137 Pension Fund v. American Express ~~Company,~~Co., Kenneth I. Chenault and Jeffrey C. Campbell, for violation of federal securities law, alleging that the Company deliberately issued false and misleading statements to, and omitted important information from, the public ~~and investors~~ relating to the financial importance of the Costco ~~co-brand~~cobrand relationship to the Company, including, but not limited to, the decision to accelerate negotiations to renew the ~~co-brand~~cobrand agreement. ~~We intend~~The plaintiff seeks damages and injunctive relief. The Company moved to ~~vigorously defend against those claims.~~dismiss the amended complaint on March 21, 2016.

On October 16, 2015, a putative class action, captionedHoussain v. American Express Company, et al., was filed in the United States District Court for the Southern District of New York ~~against the Company and certain officers of the Company~~ under the Employee Retirement Income Security Act of 1974 ~~(“ERISA”)~~(ERISA) relating to disclosures of the Costco ~~co-brand~~cobrand relationship. ~~The~~On May 10, 2016, the plaintiff filed an amended complaint ~~alleges~~naming certain officers of the Company as defendants and alleging that the defendants violated certain ERISA fiduciary obligations ~~by:~~by, among other things, allowing the investment of American Express Retirement Savings Plan ~~(“Plan”)~~(Plan) assets in American Express common stock when American Express common stock was not a prudent ~~investment;~~investment and misrepresenting and failing to disclose material facts to Plan participants in connection with the administration of the ~~Plan;~~Plan. The amended complaint seeks, among other remedies, an unspecified amount of damages. The defendants moved to dismiss the amended complaint on May 31, 2016.

On March 8, 2016, plaintiffs B&R Supermarket, Inc. d/b/a Milam’s Market and ~~breaching~~Grove Liquors LLC, on behalf of themselves and others, filed a suit, captionedB&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. On June 24, 2016, the court granted our motion to transfer to the Southern District of New York the claims brought against us by merchants who accept American Express cards. The court also granted plaintiffs’ leave to file an amended complaint and, on September 30, 2016, denied our motion to dismiss as to claims brought by merchants who do not accept American Express cards.


		74

In October 2009, a putative class action, captionedLopez, et al. v. American Express Bank, FSB and American Express Centurion Bank, was filed in the United States District Court for the Central District of California. The amended complaint sought to certify a class of California American Express Card Members whose interest rates were changed from fixed to variable in or around August 2009 or otherwise increased. On August 20, 2014, plaintiffs filed an amended nationwide complaint and an unopposed motion for preliminary approval of a settlement of the claims alleged in that complaint. The settlement provides for certain ~~fiduciary obligations. We intend~~relief to ~~vigorously defend against those claims.~~class members, attorneys’ fees and costs of up to $6 million. On October 17, 2016, the court granted final approval of the settlement.

~~ITEM 1A. RISK FACTORS~~

ITEM 1A.

RISK FACTORS

For a discussion of our risk factors, see Part I, Item 1A. “Risk Factors” of ~~our 2014~~the 2015 Form ~~10-K and Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (the Second QuarterForm 10-Q).~~10-K. There are no material changes from the risk factors set forth in the ~~2014~~2015 Form ~~10-K, as supplemented and updated in the Second Quarter Form 10-Q.~~10-K. However, the risks and uncertainties that we face are not limited to those set forth in the ~~2014~~2015 Form ~~10-K and Second Quarter Form 10-Q.~~10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our securities.


		75

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~(c) ISSUER PURCHASES OF SECURITIES~~

(c)

ISSUER PURCHASES OF SECURITIES

The table below sets forth the information with respect to purchases of the Company’s common stock made by or on behalf of the Company during the three months ended September 30, ~~2015.~~2016.



	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
						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
July 1-31, 2015


July 1-31, 2016
Repurchase program^(a)	2,379,400	75.67	2,379,400		137,274,826		2,511,954			$62.98		2,511,954		56,217,857

Employee transactions^(b)	6,643	80.32	N/A		N/A		34			$59.48		N/A		N/A

August 1-31, 2015

August 1-31, 2016
Repurchase program^(a)	8,482,743	77.73	8,482,743		128,792,083		3,799,200			$65.13		3,799,200		52,418,657

Employee transactions^(b)	26,487	76.04	N/A		N/A		63,497			$64.46		N/A		N/A

September 1-30, 2015

September 1-30, 2016
Repurchase program^(a)	6,892,129	75.20	6,892,129		121,899,954		2,538,136			$64.69		2,538,136		149,648,176

Employee transactions^(b)	231	77.03	N/A		N/A		(221	)		$53.39		N/A		N/A

Total

Repurchase program^(a)	17,754,272	76.47	17,754,272		121,899,954		8,849,290			$64.39		8,849,290		149,648,176

Employee transactions^(b)	33,361	76.90	N/A		N/A		63,310			$64.50		N/A		N/A

(a)

~~As of~~On September ~~30, 2015, there were approximately 122~~26, 2016, the Company announced the authorization to repurchase up to 150 million shares of common stock ~~remaining under Board authorization. Such~~from time to time, in accordance with the capital distribution plans approved by the Federal Reserve and subject to market conditions. The authorization replaced the prior repurchase authorization and does not have an expiration ~~date and, at present, there is no intention to modify or otherwise rescind such authorization.~~

date.

(b)

Includes: (i) shares surrendered by holders of employee stock options who exercised options (granted under the Company’s 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 the Company’s incentive compensation plans) to offset tax withholding obligations that occur upon vesting and release of restricted shares. The Company’s incentive compensation plans provide that the value of the shares delivered or attested to, or withheld, be based on the price of the Company’s common stock on the date the relevant transaction occurs.

(c)	Share purchases under publicly announced programs are made pursuant to open market purchases or privately negotiated transactions (including employee benefit plans) as market conditions warrant and at prices the Company deems appropriate.


		76

~~ITEM 5. OTHER INFORMATION~~

ITEM 5.

OTHER INFORMATION

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Exchange Act, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted outside the United States by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.

During the third quarter of ~~2015,~~2016, American Express Travel & Lifestyle Services obtained two visas from Iranian embassies in connection with certain travel arrangements on behalf of clients. In addition, American Express Global Business Travel ~~booked one hotel reservation at Homa Hotel Tehran~~(GBT) and ~~one hotel reservation at Esteghlal East Wing Hotel. In addition,~~ certain ~~third-party service providers~~entities that may be considered affiliates of GBT have informed us that during the third quarter of 2016 they obtained approximately ~~four~~80 visas from Iranian embassies and consulates around the world ~~during the third quarter of 2015~~ in connection with certain travel arrangements on behalf of ~~American Express Global Business Travel~~ clients. ~~American Express Global Business Travel~~We had negligible gross revenues and net profits attributable to these ~~transactions. American Express Global Business Travel believes these~~ transactions were permissible pursuant to certain exemptions from U.S. sanctions for travel-related transactions under the International Emergency Economic Powers Act, as amended. American Express Global Business Travel has informed us that it intendsand intend to continue to engage in these activities on a limited basis so long as such activities are permitted under U.S. law.

In addition, a travel company that may be considered an affiliate of ours, American Express Nippon Travel Agency, Inc. (“Nippon Travel Agency”), has informed us that during the third quarter of 2015 it obtained 39 visas from the Iranian embassy in Japan in connection with certain travel arrangements on behalf of clients. Nippon Travel Agency had negligible gross revenues and net profits attributable to these transactions. Nippon Travel Agency has informed us that it intends to continue to engage in this activity so long as such activity is permitted under U.S. law.

~~ITEM 6. EXHIBITS~~

ITEM 6.

EXHIBITS

The list of exhibits required to be filed as exhibits to this report are listed on page E-1 hereof, under “Exhibit Index” which is incorporated herein by reference.


		77

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AMERICAN EXPRESS COMPANY
	~~(Registrant)~~	(Registrant)

Date: October ~~28, 2015~~25, 2016	By	/s/ Jeffrey C. Campbell
		Jeffrey C. Campbell
		Executive Vice President and
		Chief Financial Officer

Date: October ~~28, 2015~~25, 2016	By	/s/ Linda Zukauckas
		Linda Zukauckas
		Executive Vice President and
		Corporate ~~Comptroller~~	Controller
		(Principal Accounting Officer)


		78

EXHIBIT INDEX

The following exhibits are filed as part of this Quarterly Report:


Exhibit		Description
3.1		American Express Company 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).

12		Computation in Support of Ratio of Earnings to ~~Combined~~ Fixed Charges and Preferred Stock ~~Dividends~~Dividends.

31.1		Certification of Kenneth I. Chenault pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

31.2		Certification of Jeffrey C. Campbell pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

32.1		Certification of Kenneth I. Chenault 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 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

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

~~E-1~~


		E-1



			30-59		60-89		90+
			Days		Days		Days
			Past		Past		Past
2015 (Millions)	Current		Due		Due		Due		Total

Card Member Loans:
U.S. Card Services	$	61,530	$	191	$	131	$	281	$ 62,133
International Card Services		6,604		35		22		49	6,710
Card Member Receivables:
U.S. Card Services	$	21,612	$	133	$	73	$	147	$ 21,965
International Card Services		6,412		29		22		48	6,511
Global Commercial Services^(a)		(b)		(b)		(b)		112	15,748



			30-59		60-89		90+
			Days		Days		Days
			Past		Past		Past
2014 (Millions)	Current		Due		Due		Due		Total

Card Member Loans:
U.S. Card Services	$	61,995	$	179	$	128	$	290	$ 62,592
International Card Services		7,621		39		27		57	7,744
Card Member Receivables:
U.S. Card Services	$	22,096	$	129	$	72	$	171	$ 22,468
International Card Services		7,557		29		20		47	7,653
Global Commercial Services^(a)		(b)		(b)		(b)		120	14,583



	As of September 30, 2015

	Over 90 days						Accounts Classified as a TDR^(c)
	Past Due &												Total		Unpaid
	Accruing			Non-						Out of			Impaired		Principal	Allowance
(Millions)		Interest	^(a)		Accruals	^(b)		In Program	^(d)		Program	^(e)		Balance	Balance	for TDRs

Card Member Loans:
U.S. Card Services	$	192		$	175		$	224		$	109		$	700	$ 649	$ 66
International Card Services		49			—			—			—			49	49	—
Card Member Receivables:
U.S. Card Services		—			—			26			4			30	30	18

Total	$	241		$	175		$	250		$	113		$	779	$728	$ 84



	As of December 31, 2014

	Over 90 days
	Past Due &									Total			Unpaid
	Accruing			Non-			In Program			Impaired			Principal		Allowance
(Millions)		Interest	^(a)		Accruals	^(b)		TDRs	^(c)(d)		Balance			Balance	for TDRs

Card Member Loans:
U.S. Card Services	$	161		$	241		$	286		$	688		$	646	$67
International Card Services		57			—			—			57			56	—
Card Member Receivables:
U.S. Card Services		—			—			48			48			48	35

Total	$	218		$	241		$	334		$	793		$	750	$102



	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015

	Number of Accounts (thousands)	Outstanding Balances Upon Default (millions)^(a)	Number of Accounts (thousands)	Outstanding Balances Upon Default (millions) ^(a)

Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans	1	$ 14	6	$ 39
Card Member Receivables	1	1	3	3

Total	2	$ 15	9	$ 42




	Three Months Ended September 30, 2014		Nine Months Ended September 30, 2014

	Number of Accounts (thousands)	Outstanding Balances Upon Default (millions)^(a)(b)	Number of Accounts (thousands)	Outstanding Balances Upon Default (millions)^(a)(b)

Troubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans	2	$ 12	6	$ 40
Card Member Receivables	1	2	2	9

Total	3	$ 14	8	$ 49



Three Months Ended September 30:(Millions)

	Gains (losses) recognized in income

	Derivative contract					Hedged item					Net hedge

		Amount					Amount				ineffectiveness

Derivative relationship	Income Statement Line Item		2015		2014	Income Statement Line Item		2015		2014		2015	2014

Interest rate contracts	Other expenses	$	108	$	(109)	Other expenses	$	(114)	$	112	$	(6)	$ 3




Nine Months Ended September 30:(Millions)

	Gains (losses) recognized in income

	Derivative contract					Hedged item					Net hedge

		Amount					Amount				ineffectiveness

Derivative relationship	Income Statement Line Item		2015		2014	Income Statement Line Item		2015		2014		2015	2014

Interest rate contracts	Other expenses	$	82	$	(170)	Other expenses	$	(85)	$	176	$	(3)	$ 6
Total return contract	Other non-interest revenues		—		11	Other non-interest revenues		—		(11)		—	—



		Pretax (losses) gains

		Three Months Ended September 30,				Nine Months Ended September 30,

		Amount				Amount

Description (Millions)	Income Statement Line Item	2015		2014		2015		2014

Foreign exchange contracts^(a)	Other expenses	$	(19)	$	2	$	15	$ 84
	Cost of Card Member services		4		—		(2)	4

Total		$	(15)	$	2	$	13	$ 88



	Series B	Series C

Issuance date	November 10, 2014	March 2, 2015

Securities issued	750 Preferred Shares; represented by 750,000 depositary shares	850 Preferred Shares; represented by 850,000 depositary shares
Aggregate liquidation preference	$750 million	$850 million
Fixed dividend rate per annum	5.20%	4.90%
Semi-annual fixed dividend payment dates	Beginning May 15, 2015	Beginning September 15, 2015
Floating dividend rate per annum	3 month LIBOR+ 3.428%	3 month LIBOR+ 3.285%

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

Fixed to floating rate conversion date^(a)	November 15, 2019	March 15, 2020



(Millions, except percentages and		Three Months Ended September 30,										Nine Months Ended September 30,

per share amounts)		2015			2014			Change				2015			2014			Change

Total revenues net of interest expense		$	8,193		$	8,303		$	(110)	(1)	%	$	24,427		$	25,107		$	(680)	(3)%
Provisions for losses			529			488			41	8			1,416			1,462			(46)	(3)
Expenses			5,726			5,569	��		157	3			16,527			16,879			(352)	(2)
Net income			1,266			1,477			(211)	(14)			4,264			4,438			(174)	(4)
Earnings per common share — diluted^(a)		$	1.24		$	1.40		$	(0.16)	(11)	%	$	4.15		$	4.17		$	(0.02)	— %
Return on average equity^(b)	��		26.8	%		28.8	%						26.8	%		28.8	%
Return on average tangible common equity^(c)			34.2	%		35.6	%						34.2	%		35.6	%


(a) Earnings per common share — diluted was reduced by the impact of (i) earnings allocated to participating share awards and other items of $10 million and $11 million for three months ended September 30, 2015 and 2014, respectively, and $32 million and $35 million for the nine months ended September 30, 2015 and 2014, respectively, and (ii) dividends on preferred shares of $22 million and nil for the three months ended September 30, 2015 and 2014, respectively, and $42 million and nil for the nine months ended September 30, 2015 and 2014, respectively.
(b) Return on Average Equity (ROE) is computed by dividing (i) one-year period net income ($5.7 billion for both September 30, 2015 and 2014) by (ii) one-year average total shareholders’ equity ($21.4 billion and $19.9 billion for September 30, 2015 and 2014, respectively).
(c) Return on average tangible common equity (ROTCE), a non-GAAP measure, is computed in the same manner as ROE except the computation excludes from one-year average total shareholders’ equity, one-year average goodwill and other intangibles of $3.8 billion and $3.9 billion as of September 30, 2015 and 2014, respectively, and one-year average preferred shares of $1.1 billion and nil as of September 30, 2015 and 2014, respectively. We believe ROTCE is a useful measure of the profitability of our business.

Table 2: Total Revenue Net of Interest Expense Summary

		Three Months Ended September 30,										Nine Months Ended September 30,

(Millions, except percentages)		2015			2014			Change				2015			2014			Change

Discount revenue		$	4,778		$	4,889		$	(111)	(2)	%	$	14,384		$	14,428		$	(44)	— %
Net card fees			679			680			(1)	—			2,013			2,041			(28)	(1)
Travel commissions and fees			87			104			(17)	(16)			271			1,027			(756)	(74)
Other commissions and fees			640			642			(2)	—			1,891			1,884			7	—
Other			504			593			(89)	(15)			1,493			1,679			(186)	(11)

Total non-interest revenues			6,688			6,908			(220)	(3)			20,052			21,059			(1,007)	(5)

Total interest income			1,904			1,815			89	5			5,598			5,350			248	5
Total interest expense			399			420			(21)	(5)			1,223			1,302			(79)	(6)

Net interest income			1,505			1,395			110	8			4,375			4,048			327	8

Total revenues net of interest expense		$	8,193		$	8,303		$	(110)	(1)	%	$	24,427		$	25,107		$	(680)	(3)%



	Three Months Ended September 30, 2015
		Percentage Increase (Decrease)		Percentage Increase Assuming No Changes in Foreign Exchange Rates^(a)
Worldwide^(b)
Billed business		—	%	5 %
Proprietary billed business		1		4
GNS billed business^(c)		(1)		13
Airline-related volume (8% of worldwide billed business)		(6)		—
United States^(b)
Billed business		4
Proprietary consumer card billed business^(d)		4
Proprietary small business billed business^(d)		7
Proprietary corporate services billed business^(e)		—
T&E-related volume (26% of U.S. billed business)		3
Non-T&E-related volume (74% of U.S. billed business)		4
Airline-related volume (7% of U.S. billed business)		(3)
Outside the United States^(b)
Billed business		(8)		8
Japan, Asia Pacific & Australia (JAPA) billed business		(1)		14
Latin America & Canada (LACC) billed business		(23)		(4)
Europe, the Middle East & Africa (EMEA) billed business		(4)		9
Proprietary consumer and small business billed business^(f)		(13)		2
JAPA billed business		(7)		10
LACC billed business		(26)		(11)
EMEA billed business		(2)		11
Proprietary corporate services billed business^(e)		(10)	%	5 %


(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). (b) Captions in the table above not designated as “proprietary” or “GNS” include both proprietary and GNS data. (c) Included in the GNMS segment. (d) Included in the USCS segment. (e) Included in the GCS segment. (f) Included in the ICS segment.

~~(State~~ (State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

200 Vesey Street, New York, NY
New York

(Address of principal executive offices)

(Zip Code)