American Express (AXP) 10-Q 5 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	AXP
Entity Registrant Name	AMERICAN EXPRESS CO
Entity Central Index Key	0000004962
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,201,260,494

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
Non-interest revenues
Discount revenue	$3,466		$3,066
Net card fees	521		532
Travel commissions and fees	386		365
Other commissions and fees	500		453
Securitization income, net			141
Other	426		450
Total non-interest revenues	5,299		5,007
Interest income
Interest and fees on loans	1,775		1,292
Interest and dividends on investment securities	117		154
Deposits with banks and other	13		28
Total interest income	1,905		1,474
Interest expense
Deposits	128		85
Short-term borrowings	1		27
Long-term debt and other	469		443
Total interest expense	598		555
Net interest income	1,307		919
Total revenues net of interest expense	6,606		5,926
Provisions for losses
Charge card	227		336
Cardmember loans	688		1,414
Other	28		53
Total provisions for losses	943		1,803
Total revenues net of interest expense after provisions for losses	5,663		4,123
Expenses
Marketing, promotion, rewards and cardmember services	1,962		1,302
Salaries and employee benefits	1,327		1,253
Professional services	561		519
Other, net	561		505
Total	4,411		3,579
Pretax income from continuing operations	1,252		544
Income tax provision	367		101
Income from continuing operations	885		443
Loss from discontinued operations, net of tax			(6)
Net income	$885		$437
Earnings per Common Share - Basic: (Note 14)
Income from continuing operations attributable to common shareholders	0.74	[1]	0.32	[1]
Loss from discontinued operations, net of tax			-0.01
Net income attributable to common shareholders	0.74	[1]	0.31	[1]
Earnings per Common Share - Diluted: (Note 14)
Income from continuing operations attributable to common shareholders	0.73	[1]	0.32	[1]
Loss from discontinued operations, net of tax			-0.01
Net income attributable to common shareholders	0.73	[1]	0.31	[1]
Average common shares outstanding for earnings per common share:
Basic	1,185		1,156
Diluted	1,191		1,156
Cash dividends declared per common share	0.18		0.18
[1]Calculated based on income from continuing operations or net income, as applicable, less (i) preferred shares dividends and related accretion of $72 million for the quarter ended March 31, 2009 and (ii) earnings allocated to participating share awards of $12 million and $4 million for the quarters ended March 31, 2010 and 2009, respectively.

1_CONSOLIDATED STATEMENTS OF IN

CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Income from continuing operations or net income, as applicable, preferred shares dividends and related accretion		$72
Income from continuing operations or net income, as applicable, earnings allocated to participating share awards	$12	$4

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	3 Months Ended Mar. 31, 2010		12 Months Ended Dec. 31, 2009
Cash and cash equivalents
Cash and cash due from banks	$329		$881
Interest-bearing deposits in other banks (including securities purchased under resale agreements: 2010, $291; 2009, $212)	18,893		10,597
Short-term investment securities	1,876		4,064
Total	21,098		15,542
Accounts receivable
Cardmember receivables (includes gross receivables of a consolidated variable interest entity: 2010, $7,348; 2009, $8,314), less reserves: 2010, $498; 2009, $546	33,197		33,197
Other receivables, less reserves: 2010, $156; 2009, $109	2,727		5,007
Loans
Cardmember loans (includes gross loans of a consolidated variable interest entity: 2010, $33,968), less reserves: 2010, $5,314; 2009, $3,268	52,281	[1]	29,504	[1]
Other, less reserves: 2010, $27; 2009, $27	440		506
Investment securities	18,341		24,337
Premises and equipment - at cost, less accumulated depreciation: 2010, $4,248; 2009, $4,130	2,731		2,782
Other assets (includes restricted cash of consolidated variable interest entities: 2010, $653; 2009, $1,799)	12,499	[1]	13,213	[1]
Total assets	143,314		124,088
Liabilities
Customer deposits	28,120		26,289
Travelers Cheques outstanding	5,529		5,975
Accounts payable	9,195		8,926
Short-term borrowings	1,931		2,344
Long-term debt (includes debt issued by consolidated variable interest entities: 2010, $25,545; 2009, $4,970)	72,293		52,338
Other liabilities	12,821		13,810
Total liabilities	129,889		109,682
Contingencies (see Note 16)
Shareholders' Equity
Common shares, $.20 par value, authorized 3.6 billion shares; issued and outstanding 1,197 million shares in 2010 and 1,192 million shares in 2009	238		237
Additional paid-in capital	11,302		11,144
Retained earnings	2,925		3,737
Accumulated other comprehensive loss, net of tax:
Net unrealized securities losses, net of tax: 2010, $(88); 2009, $(291)	176		507
Net unrealized derivatives losses, net of tax: 2010, $12; 2009, $15	(21)		(28)
Foreign currency translation adjustments, net of tax: 2010, $34; 2009, $31	(753)		(722)
Net unrealized pension and other postretirement benefit costs, net of tax: 2010 $220; 2009, $244	(442)		(469)
Total accumulated other comprehensive loss	(1,040)		(712)
Total shareholders' equity	13,425		14,406
Total liabilities and shareholders' equity	$143,314		$124,088
[1]The balance as of December 31, 2009 includes an undivided, pro-rata interest in an unconsolidated variable interest entity (historically referred to as "seller's interest") totaling $8,752, of which $8,033 is included in cardmember loans and $719 is included in other assets. Refer to Note 7 for additional details.

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data	Mar. 31, 2010	Dec. 31, 2009
Interest-bearing deposits in other banks, securities purchased under resale agreements	$291	$212
Cardmember receivables, reserves	498	546
Cardmember receivables, gross receivables of a consolidated variable interest entity	7,348	8,314
Other receivables, reserves	156	109
Cardmember loans, reserves	5,314	3,268
Cardmember loans, gross loans of a consolidated variable interest entity	33,968
Other, reserves	27	27
Premises and equipment, accumulated depreciation	4,248	4,130
Other assets, restricted cash of consolidated variable interest entities	653	1,799
Long-term debt, debt issued by consolidated variable interest entities	25,545	4,970
Common shares, par value	0.2	0.2
Common shares, authorized	3,600,000,000	3,600,000,000
Common shares, issued	1,197,000,000	1,192,000,000
Common shares, outstanding	1,197,000,000	1,192,000,000
Net unrealized securities losses, tax	(88)	(291)
Net unrealized derivatives losses, tax	12	15
Foreign currency translation adjustments, tax	34	31
Net unrealized pension and other postretirement benefit costs, tax	220	244
Total, undivided, pro rata interest in an unconsolidated variable interest entity		8,752
Cardmember loans, undivided, pro rata interest in an unconsolidated variable interest entity		8,033
Other assets, undivided, pro rata interest in an unconsolidated variable interest entity		$719

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash Flows from Operating Activities
Net income	$885	$437
Loss from discontinued operations, net of tax		6
Income from continuing operations	885	443
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Provisions for losses	943	1,803
Depreciation and amortization	221	192
Deferred taxes, acquisition costs and other	149	(375)
Stock-based compensation	51	53
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Other receivables	278	1,466
Other assets	(25)	230
Accounts payable and other liabilities	(971)	(2,304)
Travelers Cheques outstanding	(455)	(515)
Net cash provided by operating activities attributable to discontinued operations		1
Net cash provided by operating activities	1,076	994
Cash Flows from Investing Activities
Sale of investments	720	351
Maturity and redemption of investments	3,917	544
Purchase of investments	(2,293)	(6,039)
Net decrease in cardmember loans/receivables	3,069	8,489
Maturities of cardmember loan securitizations		(1,500)
Purchase of premises and equipment	(153)	(88)
Sale of premises and equipment	6	9
Acquisitions/Dispositions, net of cash acquired	(254)
Net decrease in restricted cash	3,101	20
Net cash provided by investing activities attributable to discontinued operations		12
Net cash provided by investing activities	8,113	1,798
Cash Flows from Financing Activities
Net change in customer deposits	1,823	2,647
Net decrease in short-term borrowings	(379)	(6,041)
Issuance of long-term debt	117
Principal payments on long-term debt	(5,127)	(2,271)
Issuance of American Express Series A preferred shares and warrants		3,389
Issuance of American Express common shares	121
Common and preferred dividends paid	(216)	(226)
Net cash used in financing activities attributable to discontinued operations		(3)
Net cash used in financing activities	(3,661)	(2,505)
Effect of exchange rate changes on cash	28	(27)
Net increase in cash and cash equivalents	5,556	260
Cash and cash equivalents at beginning of period includes cash of discontinued operations: 2010, $0; 2009, $3	15,542	20,550
Cash and cash equivalents at end of period includes cash of discontinued operations: 2010, $0; 2009, $13	$21,098	$20,810

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
Basis of Presentation	1. Basis of Presentation The Company American Express is a global service company that provides customers with access to products, insights and experiences that enrich lives and build business success. The Companys principal products and services are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. The accompanying Consolidated Financial Statements should be read in conjunction with the financial statements incorporated by reference in the Annual Report on Form 10-K of American Express Company (the Company) for the year ended December31, 2009 (2009 Form 10-K). The interim consolidated financial information in this report has not been audited. In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial position and the consolidated results of operations for the interim periods have been made. All adjustments made were of a normal, recurring nature. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. Certain amounts in prior periods have been reclassified to conform to the current presentation. Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part, on managements assumptions concerning future events. Among the more significant assumptions are those that relate to reserves for cardmember losses relating to loans and charge card receivables, reserve for Membership Rewards cost, fair value measurements, goodwill and income taxes. These accounting estimates reflect the best judgment of management, but actual results could differ. Recently Issued Accounting Standards Effective January1, 2010, the Company adopted Accounting Standards Update (ASU) No.2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets and ASU No.2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (generally referred to herein as new GAAP effective January1, 2010). These standards eliminate the concept of a qualifying special purpose entity (QSPE), therefore requiring these entities to be evaluated under the accounting guidance for consolidation of variable interest entities (VIEs). In addition, ASU 2009-17 requires an entity to reconsider its previous consolidation conclusions reached under the VIE consolidation model, including (i)whether an entity is a VIE, (ii)whether the enterprise is the VIEs primary beneficiary and (iii)the required financial statement disclosures. Upon adoption of new GAAP effective January1, 2010, the Company was required to change its accounting for the American Express Credit Account Master Trust (the Lending Trust), a previously unconsolidated VIE, which is now consolidated. As a result, beginning January1, 2010, the securitized cardmember loans and related debt securities issued to third parties by the Lending Trust are included on the Companys Consolidated Balance Sheet. The Company continues to consolidate the American Express Issuance Trust (the Charge Trust). Prior perio

Acquisition

Acquisition
	3 Months Ended Mar. 31, 2010
Acquisition	2. Acquisition On January15, 2010, the Company purchased Revolution Money, a provider of secure person-to-person payment services through an internet based platform, for a cash purchase price of approximately $305 million. Among the assets acquired was $184 million of goodwill, $119 million of amortizing intangible assets, and other miscellaneous net assets totaling $2 million. As of March31, 2010, these assets are reflected in the Corporate Other segment; the final purchase price and segment allocation will be completed in a subsequent quarter. The acquisition of Revolution Money did not have a significant impact on the Companys results of operations for the quarter ended March31, 2010.

Fair Values

Fair Values
	3 Months Ended Mar. 31, 2010
Fair Values	3. Fair Values Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, and is based on the Companys principal or most advantageous market for the specific asset or liability. Generally Accepted Accounting Principles (GAAP) provide for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows: Level 1 - Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including: Quoted prices for similar assets or liabilities in active markets Quoted prices for identical or similar assets or liabilities in markets that are not active Inputs other than quoted prices that are observable for the asset or liability Inputs that are derived principally from or corroborated by observable market data by correlation or other means Level 3 - Inputs that are unobservable and reflect the Companys own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g. internally derived assumptions surrounding the timing and amount of expected cash flows). The following table summarizes the Companys financial assets and financial liabilities measured at fair value on a recurring basis by GAAPs valuation hierarchy (as described above), as of March31, 2010 and December31, 2009: (Millions) 2010 2009 Total Level1 Level 2 Level3 Total Level1 Level 2 Level3 Assets: Investment securities(a): Equity securities $ 487 $ 487 $ $ $ 530 $ 530 $ $ Retained subordinated securities(b) 3,599 3,599 Debt securities and other 17,854 17,854 20,208 20,208 Interest-only strip(b) 20 20 Derivatives(c) 922 922 833 833 Total assets $ 19,263 $ 487 $ 18,776 $ $ 25,190 $ 530 $ 21,041 $ 3,619 Liabilities: Derivatives(c) $ 241 $ $ 241 $ $ 283 $ $ 283 $ Total liabilities $ 241 $ $ 241 $ $ 283 $ $ 283 $ (a) Refer to Note 6 for the fair values of investment securities on a further disaggregated basis. (b) As a result of new GAAP effective January1, 2010, the Company no longer presents the retained subordinated securities and interest-

Accounts Receivable

Accounts Receivable
	3 Months Ended Mar. 31, 2010
Accounts Receivable	4. Accounts Receivable Accounts receivable as of March31, 2010 and December31, 2009, consisted of: (Millions) 2010 2009 U.S. Card Services(a) $ 16,571 $ 17,750 International Card Services 5,542 5,944 Global Commercial Services(b) 11,383 9,844 Global Network Merchant Services(c) 199 205 Cardmember receivables, gross(d) 33,695 33,743 Less: Cardmember reserve for losses 498 546 Cardmember receivables, net $ 33,197 $ 33,197 Other receivables, net(e) $ 2,727 $ 5,007 (a) Includes $6.8 billion and $7.8 billion of gross cardmember receivables of a consolidated VIE as of March31, 2010 and December31, 2009, respectively. (b) Includes $0.5 billion of gross cardmember receivables of a consolidated VIE as of both March31, 2010 and December31, 2009. (c) Includes receivables primarily related to the Companys International Currency Card portfolios. (d) Includes approximately $10.4 billion of cardmember receivables outside the United States as of both March31, 2010 and December31, 2009. (e) Other receivables primarily represent amounts due from the Companys travel customers, third party issuing partners, accrued interest on investments, and other receivables due to the Company in the ordinary course of business. As of December31, 2009, these amounts also include $1.9 billion of cash held in an unconsolidated VIE required for daily settlement requirements. Beginning January1, 2010, this VIE is consolidated by the Company and cash held by this consolidated VIE is considered restricted cash included in other assets on the Companys Consolidated Balance Sheets. Refer to Note 7 for additional details. The following table presents changes in the cardmember receivable reserve for losses for the three months ended March31: (Millions) 2010 2009 Balance, January1 $ 546 $ 810 Additions: Cardmember receivables provisions(a) 184 318 Cardmember receivables provisionsother(b) 43 18 Total provision 227 336 Deductions: Cardmember receivables net write-offs(c)(d) (244 ) (332 ) Cardmember receivablesother(e) (31 ) (4 ) Balance, March31 $ 498 $ 810 (a) Represents loss provisions for cardmember receivables consisting of principal (resulting from authorized transactions) and fee reserve components. (b) Primarily represents adjustments to cardmember receivables resulting from unauthorized transactions. (c) Represents write-offs consisting of principal (resulting from authorized transactions) and fee components, less recoveries of $101 million and $77 million for the three months ended March31, 2010 and 2009, respectively. For the three months ended March31, 2009, these amounts also include adjustments to cardmember receivables resulting from unauthorized transactions. (d) Through December31, 2009, cardmember receivable

Loans

Loans
	3 Months Ended Mar. 31, 2010
Loans	5. Loans Loans as of March31, 2010 and December31, 2009 consisted of: (Millions) 2010 2009 U.S. Card Services(a) $ 49,205 $ 23,507 International Card Services 8,354 9,241 Global Commercial Services 36 24 Cardmember loans(b) 57,595 32,772 Less: Cardmember loans reserve for losses 5,314 3,268 Cardmember loans, net $ 52,281 $ 29,504 Other loans, net(c) $ 440 $ 506 (a) As of March31, 2010, includes approximately $34 billion of gross cardmember loans of a consolidated VIE. As of December31, 2009 includes approximately $8 billion for an undivided, pro-rata interest in an unconsolidated VIE (historically referred to as sellers interest). Refer to Note 7 for additional details. (b) Cardmember loan balance is net of unamortized net card fees of $115 million and $114 million as of March31, 2010 and December31, 2009, respectively. (c) Other loans primarily represent small business installment loans, a store card portfolio whose billed business is not processed on the Companys network and small business loans associated with the CPS acquisition. The following table presents changes in the cardmember loans reserve for losses for the three months ended March31: (Millions) 2010 2009 Balance, January1 $ 3,268 $ 2,570 Reserves established for consolidation of a variable interest entity 2,531 Total adjusted balance, January1 5,799 2,570 Additions: Cardmember loans provisions(a) 670 1,401 Cardmember loansother(b) 18 13 Total provision 688 1,414 Deductions: Cardmember loans net write-offs principal(c) (1,035 ) (782 ) Cardmember loans net write-offs interest and fees(c) (114 ) (155 ) Cardmember loansother(d) (24 ) (34 ) Balance, March31 $ 5,314 $ 3,013 (a) Represents loss provisions for cardmember loans consisting of principal (resulting from authorized transactions), interest and fee reserves components. (b) Primarily represents adjustments to cardmember loans resulting from unauthorized transactions. (c) Cardmember loans net write-offs principal for the three months ended March31, 2010 and 2009 include recoveries of $139 million and $96 million, respectively. Recoveries of interest and fees were de minimis. (d) These amounts include foreign currency translation adjustments and net write-offs related to unauthorized transactions. Impaired Loans and Receivables Impaired loans and receivables are defined by GAAP as individual larger balance or homogeneous pools of smaller balance restructured loans and receivables for which it is probable that the lender will be unable to collect all amounts due according to the original contractual terms of the loan and receivable agreement. The Compa

Investment Securities

Investment Securities
	3 Months Ended Mar. 31, 2010
Investment Securities	6. Investment Securities Investment securities include debt and equity securities and are classified as available for sale. The Companys investment securities, principally debt securities, are carried at fair value on the Consolidated Balance Sheets with unrealized gains (losses) recorded in AOCI, net of income tax provisions (benefits). Realized gains and losses are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis. Refer to Note 3 for a description of the Companys methodology for determining the fair value of its investment securities. The following is a summary of investment securities as of March31, 2010 and December31, 2009: 2010 2009 (Millions) Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value State and municipal obligations $ 6,215 $ 46 $ (231 ) $ 6,030 $ 6,457 $ 51 $ (258 ) $ 6,250 U.S. Government treasury obligations 3,911 9 (2 ) 3,918 5,556 10 5,566 U.S. Government agency obligations 6,141 40 6,181 6,699 47 (1 ) 6,745 Mortgage-backed securities(a) 197 2 (1 ) 198 179 3 (2 ) 180 Retained subordinated securities(b) 3,088 512 (1 ) 3,599 Equity securities(c) 100 387 487 100 430 530 Corporate debt securities(d) 1,385 17 (7 ) 1,395 1,333 14 (12 ) 1,335 Foreign government bonds and obligations 88 4 92 90 2 92 Other(e) 40 40 40 40 Total $ 18,077 $ 505 $ (241 ) $ 18,341 $ 23,542 $ 1,069 $ (274 ) $ 24,337 (a) Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. (b) As a result of the adoption of new GAAP effective January1, 2010, the Company no longer presents the retained subordinated securities within its Consolidated Financial Statements in periods subsequent to December31, 2009. The December31, 2009 balance consists of investments in retained subordinated securities issued by unconsolidated VIEs related to the Companys cardmember loan securitization programs. Refer to Note 7 for further details. (c) Principally represents the Companys investment in Industrial and Commercial Bank of China (ICBC). (d) The March31, 2010 and December31, 2009 balances include, on a cost basis, $1.2 billion and $1.1 billion, respectively, of corporate debt obligations issued under the Temporary Liquidity Guarantee Program (TLGP) that are guaranteed by the Federal Deposit Insurance Corporation (FDIC). (e) Other is comprised of investments in various mutual funds. Other-Than-Temporary Impairment Realized losses are recognized when management determin

Asset Securitizations

Asset Securitizations
	3 Months Ended Mar. 31, 2010
Asset Securitizations	7. Asset Securitizations Charge Trust and Lending Trust The Company periodically securitizes cardmember receivables and loans arising from its card business through the transfer of those assets to securitization trusts. The trusts then issue securities to third-party investors, collateralized by the transferred assets. Cardmember receivables are transferred to the American Express Issuance Trust (the Charge Trust), and cardmember loans are transferred to the American Express Credit Account Master Trust (the Lending Trust). As of December31, 2009 and for all prior periods, cardmember receivables transferred to the Charge Trust did not qualify as accounting sales and, accordingly, the Charge Trust was consolidated by the Company. As a result, securitized cardmember receivables and the related debt securities issued to third parties by the Charge Trust were included on the Companys Consolidated Balance Sheets. The Lending Trust met the criteria of a QSPE for GAAP in effect through December31, 2009 and, accordingly, cardmember loans transferred to the Lending Trust qualified as accounting sales. As a result, when cardmember loans were sold through securitizations, the Company removed the loans from its Consolidated Balance Sheets and recognized a gain or loss on sale, recorded certain retained interests in the securitization (i.e., retained subordinated securities and an interest-only strip asset) and received an undivided pro-rata interest in the excess loans held in the Lending Trust (historically referred to as sellers interest). Upon adoption of new GAAP effective January1, 2010, the Company continues to consolidate the Charge Trust. In addition, the Company was required to change its accounting for the Lending Trust, which is now consolidated. As a result, beginning January1, 2010, the securitized cardmember loans and the related debt securities issued to third parties by the Lending Trust are included on the Companys Consolidated Balance Sheets. Prior period Consolidated Financial Statements have not been restated for this accounting change. The Charge Trust and the Lending Trust are consolidated by American Express Travel Related Services Company, Inc. (TRS), which is a consolidated subsidiary of the Company. The trusts are considered VIEs as they have insufficient equity at risk to finance their activities, which are to issue securities that are collateralized by the underlying cardmember receivables and loans. TRS, in its role as servicer of the Charge Trust and the Lending Trust, has the power to direct the most significant activity of the trusts, which is the collection of the underlying cardmember receivables and loans in the trusts. In addition, TRS owns approximately $1.4 billion of subordinated securities issued by the Lending Trust as of March 31, 2010. These subordinated securities have the obligation to absorb losses of the Lending Trust and provide the right to receive benefits from the Lending Trust, both of which are significant. TRS role as servicer for the Charge Trust does not provide it with a significant obligation to absorb losses or a significant right to receive benefits. However, TRS position as t

Customer Deposits

Customer Deposits
	3 Months Ended Mar. 31, 2010
Customer Deposits	8. Customer Deposits As of March31, 2010 and December31, 2009, customer deposits were categorized as interest-bearing or non-interest-bearing deposits as follows: (Millions) 2010 2009 U.S.: Interest-bearing $ 27,381 $ 25,579 Non-interest-bearing 11 13 Non-U.S.: Interest-bearing 706 680 Non-interest-bearing 22 17 Total customer deposits $ 28,120 $ 26,289 The customer deposits are aggregated by deposit type offered by the Company as of March31, 2010 and December31, 2009 as follows: (Millions) 2010 2009 U.S. retail deposits: Cash sweep and savings accounts $ 11,837 $ 10,498 Certificates of deposit 15,544 15,081 Other deposits 739 710 Total customer deposits $ 28,120 $ 26,289 The scheduled maturities of all certificates of deposit as of March31, 2010 are as follows: (Millions) U.S. Non-U.S. Total 2010 $ 3,873 $ 419 $ 4,292 2011 5,286 1 5,287 2012 2,645 2,645 2013 2,225 2,225 2014 1,014 1,014 After 5 years 501 501 Total $ 15,544 $ 420 $ 15,964 As of March31, 2010 and December31, 2009, the outstanding amounts of certificates of deposit in denominations of $100,000 or more were as follows: (Millions) 2010 2009 U.S. $ 253 $ 196 Non-U.S. 303 293 Total $ 556 $ 489

Derivatives and Hedging Activit

Derivatives and Hedging Activities
	3 Months Ended Mar. 31, 2010
Derivatives and Hedging Activities	9. Derivatives and Hedging Activities The Company uses derivative financial instruments (derivatives) to manage exposure to various market risks. Market risk is the risk to earnings or value resulting from movements in market prices. The Companys market risk exposure is primarily generated by: Interest rate risk in its card and insurance and travelers cheque businesses, and its investment portfolios; and Foreign exchange risk in its internationaloperations. General principles and the overall framework for managing market risk across the Company are defined in the Market Risk Policy, which is the responsibility of the Asset-Liability Committee (ALCO). Market risk limits and escalation triggers in that policy are approved by the ALCO and by the Enterprise-wide Risk Management Committee (ERMC). Market risk is centrally managed by the Market Risk Committee, which is chaired by the Chief Market Risk Officer of the Company and reports into the ALCO. Market risk management is also guided by policies covering the use of derivatives, funding and liquidity and investments. Derivatives derive their value from an underlying variable or multiple variables, including interest rate, foreign exchange, and equity indices or prices. 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 Companys market risk management. The Company does not engage in derivatives for trading purposes. The Companys market exposures are in large part by-products of the delivery of its products and services. Interest rate risk arises through the funding of cardmember receivables and fixed-rate loans with variable-rate borrowings as well as through the risk to net interest margin from changes in the relationship between benchmark rates such as Prime and LIBOR. Interest rate exposure within the Companys charge card and fixed-rate lending products is managed by varying the proportion of total funding provided by short-term and variable-rate debt and deposits compared to fixed-rate debt and deposits. In addition, interest rate swaps are used from time to time to effectively convert fixed-rate debt to variable-rate or to convert variable-rate debt to fixed rate. The Company may change the mix between variable-rate and fixed-rate funding based on changes in business volumes and mix, among other factors. The majority of its cardmember loans, which are linked to a benchmark rate such as Prime that can reprice monthly, are funded with variable-rate funding, the majority of which are linked to LIBOR. Foreign exchange risk is generated by cardmember cross-currency charges, foreign currency balance sheet exposures, translation of foreign subsidiary equity, and foreign currency earnings in international units. The Companys foreign exchange risk is managed primarily by entering into agreements to buy and sell currencies on a spot basis or by hedging this market exposure to the extent it is economically justified through various means, including the use of derivatives such as foreign exchange forward, and cross-currency swap contracts, which can help lock

Guarantees

Guarantees
	3 Months Ended Mar. 31, 2010
Guarantees	10. Guarantees The Company provides cardmember protection plans that cover losses associated with purchased products, as well as certain other guarantees in the ordinary course of business which are within the scope of GAAP governing the accounting for guarantees. In relation to its maximum amount of undiscounted future payments as seen in the table that follows, to date the Company has not experienced any significant losses related to guarantees. The Companys initial recognition of guarantees is at fair value, which has been determined in accordance with GAAP governing fair value measurement. In addition, the Company establishes reserves when an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. The following table provides information related to such guarantees as of March31, 2010 and December31, 2009: Maximumamountof undiscountedfuture payments(a) (Billions) Amountof related liability(b) (Millions) 2010 2009 2010 2009 Type of Guarantee Card and travel operations(c) $ 66 $ 66 $ 113 $ 112 Other (d) 1 1 101 74 Total $ 67 $ 67 $ 214 $ 186 (a) Represents the notional amounts that could be lost under the guarantees and indemnifications if there were a total default by the guaranteed parties. The Merchant Protection guarantee is calculated using managements best estimate of maximum exposure based on all eligible claims as measured against annual billed business volumes. The Company mitigates this risk by withholding settlement from the merchant or obtaining deposits and other collateral from merchants considered higher risk due to various factors. The amounts being held by the Company are not significant when compared to the maximum potential amount of future payments under this guarantee. (b) Included as part of other liabilities on the Companys Consolidated Balance Sheets. (c) Includes Credit Card Registry, Return Protection, Account Protection and Merchant Protection, which the Company offers directly to cardmembers. (d) Other primarily includes guarantees related to the Companys business dispositions, real estate and tax, as well as contingent consideration obligations, each of which are individually smaller indemnifications.

Comprehensive Income

Comprehensive Income
	3 Months Ended Mar. 31, 2010
Comprehensive Income	11. Comprehensive Income Comprehensive income includes net income and changes in AOCI, which is a balance sheet item in the Shareholders Equity section of the Companys Consolidated Balance Sheets. 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. The components of comprehensive income, net of tax, were as follows: Three Months Ended March31 (Millions) 2010 2009 Net income $ 885 $ 437 Other comprehensive income gains (losses): Net unrealized securities gains (losses) (16 ) 332 Net unrealized derivative gains (losses) 7 19 Foreign currency translation adjustments (31 ) (19 ) Net unrealized pension and other postretirement benefit costs 27 21 Total $ 872 $ 790

Restructuring Charges

Restructuring Charges
	3 Months Ended Mar. 31, 2010
Restructuring Charges	12. Restructuring Charges During the three months ended March31, 2010, the Company recorded $16 million of restructuring charges, including a net increase of $5 million to previously accrued amounts. The restructuring activity in the quarter related principally to downsizing and reorganizing certain operations, and revisions of prior estimates within the Companys business travel and staff group areas. Restructuring charges related to severance obligations are included in salaries and employee benefits in the Companys Consolidated Statements of Income, while charges pertaining to other exit costs are included in occupancy and equipment, professional services and other net expenses. The following table summarizes the Companys restructuring reserves activity for the three months ended March31, 2010: (Millions) Severance(a) Other(b) Total Liability balance as of December31, 2009 $ 253 $ 32 $ 285 Restructuring charges, including $5 in net adjustments(c) 17 (1 ) 16 Payments (44 ) (3 ) (47 ) Other non-cash(d) (9 ) (1 ) (10 ) Liability balance as of March31, 2010(e) $ 217 $ 27 $ 244 (a) Accounted for in accordance with the GAAP governing the accounting for nonretirement postemployment benefits and for costs associated with exit or disposal activities. (b) Other primarily includes facility exit, asset impairment and contract termination costs. (c) Net adjustments of $5 million were recorded in the Companys reportable operating segments as follows: $(1) million in USCS, $(2) million in ICS, $12 million in GCS, $1 million in GNMS, and $(5) million in Corporate Other. These adjustments primarily relate to revisions of prior estimates. (d) Consists of foreign exchange impacts. (e) The majority of cash payments related to the remaining restructuring liabilities are expected to be completed in 2011, with the exception of certain smaller amounts related to contractual long-term severance arrangements which are expected to be completed in 2013, and certain lease obligations which will continue until their expiration in 2018. The following table summarizes the Companys restructuring charges, net of adjustments, by reportable segment for the three months ended March31, 2010, and the cumulative amounts relating to the restructuring programs that were in progress during 2010 and initiated at various dates between 2007 and 2010: 2010 CumulativeRestructuringExpenseIncurredToDate on In Progress Restructuring Programs (Millions) TotalRestructuring Charges including Net Adjustments Severance Other Total USCS $ (1 ) $ 46 $ 6 $ 52 ICS 80 3 83 GCS 18 239 30 269 GNMS 1 49 9 58 Corporate Other (2 ) 117 35 152 (a) Total $ 16 $ 531 $ 83 $ 614 (b) (a) The Corpora

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Income Taxes	13. Income Taxes 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. In June2008, the IRS completed its field examination of the Companys federal tax returns for the years 1997 through 2002.In July 2009, the IRS completed its field examination of the Companys federal tax returns for the years 2003 and 2004. However, all of these years continue to remain open as a consequence of certain issues under appeal. The Company is currently under examination by the IRS for the years 2005 through 2007. The Company believes it is reasonably possible that its unrecognized tax benefits could decrease within the next 12 months by as much as $664 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 timing of recognition of certain gross income, the deductibility of certain expenses or losses, and the attribution of taxable income to a particular jurisdiction or jurisdictions. Of the $664 million of unrecognized tax benefits, approximately $309 million are temporary differences that, if recognized, would only impact the effective rate due to net interest assessments and state tax rate differentials. With respect to the remaining decrease of $355 million, it is not possible to quantify the impact that the decrease could have on the effective tax rate and net income due to the inherent complexities and the number of tax years open for examination in multiple jurisdictions.Resolution of the prior years items that comprise this remaining amount could have an impact on the effective tax rate and on net income, either favorably (principally as a result of settlements that are less than the liability for unrecognized tax benefits) or unfavorably (if such settlements exceed the liability for unrecognized tax benefits). The following table summarizes the Companys effective tax rate: Three Months Ended March31 2010 2009 Effective tax rate(a) 29 % 19 % (a) Each of the periods reflects recurring, permanent tax benefits in relation to the level of pretax income.

Earnings Per Common Share

Earnings Per Common Share (EPS)
	3 Months Ended Mar. 31, 2010
Earnings Per Common Share (EPS)	14. Earnings Per Common Share (EPS) The following table presents computations of basic and diluted EPS: ThreeMonthsEndedMarch31(Millions,exceptpershare amounts) 2010 2009 Numerator: Basic and diluted: Income from continuing operations $ 885 $ 443 Preferred shares dividends, accretion, and recognition of remaining unaccreted dividends(a) (72 ) Earnings allocated to participating share awards and other items (12 ) (4 ) Loss from discontinued operations, net of tax (6 ) Net income attributable to common shareholders $ 873 $ 361 Denominator: Basic: weighted-average common stock 1,185 1,156 Add: weighted-average stock options and warrants(b) 6 Diluted 1,191 1,156 Basic EPS: Income from continuing operations attributable to common shareholders $ 0.74 $ 0.32 Loss from discontinued operations (0.01 ) Net income attributable to common shareholders $ 0.74 $ 0.31 Diluted EPS: Income from continuing operations attributable to common shareholders $ 0.73 $ 0.32 Loss from discontinued operations (0.01 ) Net income attributable to common shareholders $ 0.73 $ 0.31 (a) Includes dividends paid for the period January9, 2009 through February15, 2009 of $17 million, as well as dividends declared, but not yet paid, for the period February16, 2009 through May15, 2009 of $44 million on 3.39million shares of Fixed Rate Cumulative Perpetual Preferred Shares Series A (the Preferred Shares) issued to the Treasury Department under the United States Department of Treasury Capital Purchase Program on January9, 2009. The Company repurchased the Preferred Shares at par on June17, 2009. (b) For the three months ended March31, 2010 and 2009, the dilutive effect of unexercised stock options excluded 40million and 87million options, respectively, and 24million warrants for the three months ended March31, 2009, from the computation of EPS because inclusion of the options and warrants would have been anti-dilutive. The subordinated debentures issued by the Company would affect the EPS computation only in the unlikely event the Company fails to achieve specified performance measures related to the Companys tangible common equity and consolidated net income. In that circumstance the Company would reflect the additional common shares in the EPS computation.

Details of Certain Consolidated

Details of Certain Consolidated Statements of Income Lines
	3 Months Ended Mar. 31, 2010
Details of Certain Consolidated Statements of Income Lines	15. Details of Certain Consolidated Statements of Income Lines The following is a detail of other commissions and fees for the three months ended March31: (Millions) 2010 2009 Foreign currency conversion revenue $ 188 $ 143 Delinquency fees 159 171 Service fees 82 78 Other 71 61 Total other commissions and fees $ 500 $ 453 The following is a detail of other revenues for the three months ended March31: (Millions) 2010 2009 Insurance premium revenue $ 74 $ 77 Gain on investment securities 1 1 Other 351 372 Total other revenues $ 426 $ 450 The following is a detail of marketing, promotion, rewards and cardmember services for the three months ended March31: (Millions) 2010 2009 Marketing and promotion $ 595 $ 345 Cardmember rewards 1,218 846 Cardmember services 149 111 Total marketing, promotion, rewards and cardmember services $ 1,962 $ 1,302 The following is a detail of other, net expense for the three months ended March31: (Millions) 2010 2009 Occupancy and equipment $ 384 $ 358 Communications 95 104 MasterCard and Visa settlements (213 ) (213 ) Other 295 256 Total other, net expense $ 561 $ 505

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
Contingencies	16. Contingencies The Company and its subsidiaries are involved in a number of legal and arbitration proceedings, including class actions, concerning matters arising in connection with the conduct of their respective business activities. The Company believes it has meritorious defenses to each of these actions and intends to defend them vigorously. In the course of its business, the Company and its subsidiaries are also subject to governmental examinations, information gathering requests, subpoenas, inquiries and investigations. The Company believes it is not a party to, nor are any of its properties the subject of, any pending legal, arbitration, regulatory, tax or investigative proceedings that would have a material adverse effect on the Companys consolidated financial condition or liquidity. However, it is possible that the outcome of any such proceedings could have a material impact on results of operations in any particular reporting period as the proceedings are resolved.

Reportable Operating Segments

Reportable Operating Segments
	3 Months Ended Mar. 31, 2010
Reportable Operating Segments	17. Reportable Operating Segments The Company is a leading global payments, network, and travel company that is principally engaged in businesses comprising four reportable operating segments: U.S. Card Services (USCS), International Card Services (ICS), Global Commercial Services (GCS), and the Global Network Merchant Services (GNMS). Corporate functions and auxiliary businesses, including the Companys publishing business, the Global Prepaid business, as well as other company operations are included in Corporate Other. Beginning in the first quarter of 2010, the Company made changes to the manner in which it allocates equity capital as well as funding and the related interest expense charged to its reportable operating segments. The changes reflect the inclusion of additional factors in its allocation methodologies that the Company believes more accurately reflect the capital characteristics and funding requirements of its segments. The segment results for quarters prior to the first quarter of 2010 have been restated for this change. Debt and cash and investment balances associated with the Companys excess liquidity funding and the related net negative interest spread continues to be reported in the Corporate Other segment. The following table presents certain operating segment information for the three months ended March31, 2010: (Millions) USCS ICS GCS GNMS Corporate Other(a) Consolidated Non-interest revenues $ 2,317 $ 882 $ 1,069 $ 949 $ 82 $ 5,299 Interest income 1,411 363 1 1 129 1,905 Interest expense 190 106 48 (47 ) 301 598 Total revenues net of interest expense 3,538 1,139 1,022 997 (90 ) 6,606 Income (loss) from continuing operations $ 428 $ 151 $ 92 $ 267 $ (53 ) $ 885 The following table presents certain operating segment information for the three months ended March31, 2009: (Millions) USCS ICS GCS GNMS Corporate Other(a) Consolidated Non-interest revenues $ 2,336 $ 787 $ 982 $ 807 $ 95 $ 5,007 Interest income 928 365 1 180 1,474 Interest expense 162 108 45 (50 ) 290 555 Total revenues net of interest expense 3,102 1,044 938 857 (15 ) 5,926 Income (loss) from continuing operations $ (7 ) $ 52 $ 81 $ 250 $ 67 $ 443 (a) Corporate Other includes adjustments and eliminations for intersegment activity.