American Express Credit 10-K/A 2017 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OFTHE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File No. 1-6908

AMERICAN EXPRESS CREDIT CORPORATION

(Exact name of Registrant as specified in its charter)

 

Delaware	11-1988350
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

200 Vesey Street, New York, New York	10285
(Address of principal executive offices)	(Zip Code)

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

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class	Name of each exchange on which registered
2.375 percent Medium-Term Senior Notes	New York Stock Exchange
Series F, due May 26, 2020
0.625 percent Senior Notes, due 2021	New York Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I (1) (a) AND (b) OF FORM 10-K AND HAS THEREFORE OMITTED CERTAIN ITEMS FROM THIS REPORT IN ACCORDANCE WITH THE REDUCED DISCLOSURE FORMAT PERMITTED UNDER INSTRUCTION I.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes  No 

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  No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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  No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

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 definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 	Accelerated filer 
Non-accelerated filer 	Smaller reporting company 
	Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 

American Express Company, through a wholly-owned subsidiary, owns all of the outstanding common stock of the registrant. Accordingly, there is no market for the registrant’s common stock. At March 1, 2018, 1,504,938 shares of the common stock, par value $0.10 per share, were outstanding.

Documents incorporated by reference: None

EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K of American Express Credit Corporation for the year ended December 31, 2017, originally filed with the Securities and Exchange Commission on March 1, 2018, is being filed solely to correct an administrative error in the content of the Report of Independent Registered Public Accounting Firm included in Part II, Item 8. Financial Statements and Supplementary Data of the Form 10-K.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Form 10-K/A also contains new certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. In addition, a new consent of PricewaterhouseCoopers LLP dated as of the filing date of this Form 10-K/A is attached hereto.

Other than as discussed above, this Form 10-K/A does not update or amend any other information or any exhibits as originally filed on the Form 10-K and does not otherwise reflect events occurring after the original filing date of the Form 10-K. Accordingly, this Form 10-K/A should be read in conjunction with the Form 10-K and with other filings made by American Express Credit Corporation with the Securities and Exchange Commission subsequent to the filing of the Form 10-K.

Table of Contents
Item Number		Page
	PART II
8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	1
	Management’s Report on Internal Control Over Financial Reporting	1
	Report of Independent Registered Public Accounting Firm	2
	Index to Consolidated Financial Statements	3
	Consolidated Financial Statements	4
	Notes to Consolidated Financial Statements	9
	PART IV
15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	33
16.	SIGNATURES	34
	EXHIBIT INDEX	E-1

PART II

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Report on Internal Control over Financial Reporting

Credco’s management is responsible for establishing and maintaining adequate internal control over financial reporting.

Credco’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP), and includes those policies and procedures that:

 Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Credco;

 Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of Credco are being made only in accordance with authorizations of management and directors of Credco; and

 Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Credco’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Credco’s management assessed the effectiveness of Credco’s internal control over financial reporting as of December 31, 2017. In making this assessment, Credco’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).

Based on management’s assessment and those criteria, management has concluded that, as of December 31, 2017, Credco’s internal control over financial reporting is effective.

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

American Express Credit Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of American Express Credit Corporation and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, cash flows and shareholder’s equity for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Significant Transactions with Related Parties

As discussed in Note 9 to the consolidated financial statements, the Company has entered into significant related party transactions with affiliates.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 1, 2018

We have served as the Company’s auditor since 2005.

PricewaterhouseCoopers LLP, PricewaterhouseCoopers Center, 300 Madison Avenue, New York, NY 10017

T: (646) 471 3000, F: (646) 471 8320, www.pwc.com/us

2

(Item 15 (a))

AMERICAN EXPRESS CREDIT CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTSCOVERED BY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Consolidated Financial Statements	Page
Consolidated Statements of Income – For the Years Ended December 31, 2017, 2016 and 2015	4
Consolidated Statements of Comprehensive Income – For the Years Ended December 31, 2017, 2016 and 2015	5
Consolidated Balance Sheets – December 31, 2017 and 2016	6
Consolidated Statements of Cash Flows – For the Years Ended December 31, 2017, 2016 and 2015	7
Consolidated Statements of Shareholder’s Equity – For the Years Ended December 31, 2017, 2016 and 2015	8
Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies	9
Note 2 – Card Member Receivables and Loans	12
Note 3 – Reserves for Losses	15
Note 4 – Debt	16
Note 5 – Restrictions as to Dividends and Limitations on Indebtedness	17
Note 6 – Derivatives and Hedging Activities	17
Note 7 – Fair Values	21
Note 8 – Variable Interest Entity	24
Note 9 – Transactions with Affiliates	24
Note 10 – Changes in Accumulated Other Comprehensive Income	27
Note 11 – Income Taxes	28
Note 12 – Significant Credit Concentrations	31
Note 13 – Geographic Regions	32
Note 14 – Quarterly Financial Data (Unaudited)	32

All other schedules are omitted since the required information is not present or because the information required is included in the Consolidated Financial Statements or notes thereto.

3

AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31 (Millions)	2017			2016		2015
Revenues
Discount revenue earned from purchased Card Member receivables and loans	$	760		$	471	$	479
Interest income from affiliates and other		279			207		246
Finance revenue		48			40		30
Total revenues		1,087			718		755
Expenses
Provisions for losses		244			151		165
Interest expense		495			317		350
Interest expense to affiliates		58			24		10
Other, net		15			14		(22	)
Total expenses		812			506		503
Pretax income		275			212		252
Income tax provision		878			15		38
Net (loss) income	$	(603	)	$	197	$	214

See Notes to Consolidated Financial Statements.

4

AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31 (Millions)	2017			2016			2015
Net (loss) income	$	(603	)	$	197		$	214
Other comprehensive income:
Foreign currency translation adjustments, net of tax		265			(107	)		(369	)
Other comprehensive income (loss)		265			(107	)		(369	)
Comprehensive (loss) income	$	(338	)	$	90		$	(155	)

See Notes to Consolidated Financial Statements.

5

AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
(Millions, except share data)	2017			2016
Assets
Cash and cash equivalents	$	196		$	1,211
Card Member receivables, less reserves: 2017, $145; 2016, $110		20,131			18,108
Card Member loans, less reserves: 2017, $5; 2016, $5		556			471
Loans to affiliates and other		14,527			10,659
Due from affiliates		189			997
Other assets		290			490
Total assets	$	35,889		$	31,936
Liabilities and Shareholder’s Equity
Liabilities
Short-term debt	$	1,308		$	2,993
Short-term debt to affiliates		5,997			4,559
Long-term debt		24,153			20,512
Long-term debt to affiliates		270			―
Total debt		31,728			28,064	��
Due to affiliates		1,988			1,517
Accrued interest and other liabilities		302			146
Total liabilities	$	34,018		$	29,727
Shareholder’s Equity
Common stock, $0.10 par value, authorized 3 million shares; issued and outstanding 1.5 million shares		―			―
Additional paid-in capital		161			161
Retained earnings		2,708			3,311
Accumulated other comprehensive loss
Foreign currency translation adjustments, net of tax of: 2017, $17; 2016, $329		(998	)		(1,263	)
Total accumulated other comprehensive loss		(998	)		(1,263	)
Total shareholder’s equity		1,871			2,209
Total liabilities and shareholder’s equity	$	35,889		$	31,936

See Notes to Consolidated Financial Statements.

6

AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31 (Millions)	2017			2016			2015
Cash Flows from Operating Activities
Net (loss) income	$	(603	)	$	197		$	214
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Provisions for losses		244			151			165
Amortization of underwriting expense		28			23			30
Deferred taxes		55			14			8
Changes in operating assets and liabilities:
Interest, taxes and other amounts due to/from affiliates		1,088			(39	)		(262	)
Other operating assets and liabilities		(378	)		475			458
Net cash provided by operating activities		434			821			613
Cash Flows from Investing Activities
Net increase in Card Member receivables and loans, including held for sale(a)		(1,998	)		(1,059	)		(3,592	)
Increase in interest bearing restricted cash to affiliates		(100	)		―			―
Net (increase) decrease in loans to affiliates and other		(1,245	)		2,973			152
Net (decrease) increase in due to/from affiliates		(1,718	)		(515	)		2,605
Net cash (used in) provided by investing activities		(5,061	)		1,399			(835	)
Cash Flows from Financing Activities
Net (decrease) increase in short-term debt		(1,685	)		873			1,351
Net increase (decrease) in short-term debt to affiliates		1,414			(861	)		1,112
Proceeds from long-term debt		8,438			3,791			6,522
Principal payments of long-term debt		(4,900	)		(4,961	)		(8,545	)
Proceeds from long-term debt to affiliates		270			―			―
Dividends paid		―			―			(115	)
Net cash provided by (used in) financing activities		3,537			(1,158	)		325
Effect of foreign currency exchange rates on cash and cash equivalents		75			(24	)		(4	)
Net (decrease) increase in cash and cash equivalents		(1,015	)		1,038			99
Cash and cash equivalents at beginning of year		1,211			173			74
Cash and cash equivalents at end of year	$	196		$	1,211		$	173

Supplemental cash flow information
Non-cash investing activities
Transfer of Card Member receivables, during the fourth quarter of 2015, to Card Member receivables held for sale, net of reserves.	$	―	$	―	$	21
Replacement of due from affiliate balance with new loan arrangement with affiliates(b)	$	2,129	$	―	$	―

(a) Refer to Note 1 for additional information.

(b) To more effectively manage inter-affiliate funding, Credco entered into new loan agreements in July 2017 with American Express Limited and American Express International, Inc. The new loans were funded by the assignment of its existing loan to American Express Company and outstanding due from affiliate balance with TRS.

See Notes to Consolidated Financial Statements.

7

AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

Three Years Ended December 31, 2017 (Millions)	Total			Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings
Balances as of December 31, 2014	$	2,389		$	―	$	161	$	(787	)	$	3,015
Net income		214										214
Other comprehensive loss		(369	)						(369	)
Cash dividends paid		(115	)									(115	)
Balances as of December 31, 2015		2,119			―		161		(1,156	)		3,114
Net income		197										197
Other comprehensive loss		(107	)						(107	)
Cash dividends paid		―										―
Balances as of December 31, 2016		2,209			―		161		(1,263	)		3,311
Net loss		(603	)									(603	)
Other comprehensive income		265							265
Cash dividends paid		―										―
Balances as of December 31, 2017	$	1,871		$	―	$	161	$	(998	)	$	2,708

See Notes to Consolidated Financial Statements.

8

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Summary of Significant Accounting Policies

The Company

American Express Credit Corporation (Credco), together with its subsidiaries, is a wholly owned subsidiary of American Express Travel Related Services Company, Inc. (TRS), which is a wholly owned subsidiary of American Express Company (American Express).

Credco is engaged in the business of financing non-interest-earning Card Member receivables arising from the use of the American Express charge cards issued in the United States and in certain countries outside the United States. Credco also finances certain interest-earning revolving loans generated by Card Member spending on American Express credit cards issued in non-U.S. markets, although interest-earning revolving loans are primarily funded by subsidiaries of TRS other than Credco.

Credco executes material transactions with its affiliates. The agreements between Credco and its affiliates provide that the parties intend that the transactions thereunder be conducted on an arm’s length basis; however, there can be no assurance that the terms of these arrangements are the same as would be negotiated between independent, unrelated parties.

American Express provides Credco with financial support with respect to maintenance of its minimum overall 1.25 fixed charge coverage ratio, which is achieved by charging appropriate discount rates on the purchases of receivables Credco makes from, and the interest rates on the loans Credco provides to, TRS and other American Express subsidiaries. Each monthly period, the discount and interest rates are determined to generate income for Credco that is sufficient to maintain its minimum fixed charge coverage ratio. The revenue earned by Credco from purchasing Card Member receivables and loans at a discount is reported as discount revenue on the Consolidated Statements of Income.

Principles of Consolidation

The Consolidated Financial Statements of Credco are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Significant intercompany transactions are eliminated.

Credco consolidates entities in which it holds a controlling financial interest. For voting interest entities, Credco is considered to hold a controlling financial interest when it is able to exercise control over the investees’ operating and financial decisions. For variable interest entities (VIEs), the determination of which is based on the amount and characteristics of the entity’s equity, Credco is considered to hold a controlling financial interest when it is determined to be the primary beneficiary. A primary beneficiary is the party that has both: (1) the power to direct the activities that most significantly impact that VIE’s economic performance, and (2) the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that could potentially be significant to that VIE.

Foreign Currency

Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of the reporting period; non-monetary assets and liabilities are translated at the historic exchange rate at the date of the transaction; revenues and expenses are translated at the average month-end exchange rates during the year. Resulting translation adjustments, along with any related qualifying hedge and tax effects, are included in accumulated other comprehensive income (loss) (AOCI), a component of shareholder’s equity. Translation adjustments, including qualifying hedge and tax effects, are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Gains and losses related to transactions in a currency other than the functional currency are reported net in Other expenses, in Credco’s Consolidated Statements of Income. Net foreign currency transaction gains amounted to approximately $21 million, $1 million and $14 million in 2017, 2016 and 2015, respectively.

9

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts Based on Estimates and Assumptions

Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part, on management’s assumptions concerning future events. Among the more significant assumptions are those that relate to reserves for Card Member losses on receivables and loans, fair value measurements and income taxes. These accounting estimates reflect the best judgment of management, but actual results could differ.

Discount Revenue Earned from Purchased Card Member Receivables and Loans

Credco earns discount revenue from purchasing Card Member receivables and loans at a discount to par value. The discount is deferred and recognized as revenue over the period that the receivables and loans are estimated to be outstanding or funded. Estimates are based on the historical average life of Card Member receivables and loans.

Interest Income from Affiliates

Interest income from affiliates is earned on interest-bearing loans made by Credco to affiliates. Interest income is accrued primarily using the average daily balance method on loans and is recognized based on the outstanding loan principal amount and interest rates specified in the agreements until the outstanding loan balance is paid.

Finance Revenue

Finance revenue is assessed using the average daily balance method for Card Member loans and is recognized based upon the loan principal amount outstanding in accordance with the terms of the applicable account agreement until the outstanding balance is paid or written off.

Interest Expense

Interest expense includes interest incurred primarily to fund Card Member receivables and loans, general corporate purposes and liquidity needs, and is recognized as incurred.

Cash and Cash Equivalents

Cash and cash equivalents include cash and amounts due from banks, interest-bearing bank balances, and other highly liquid investments with original maturities of 90 days or less.

Other Significant Accounting Policies

The following table identifies Credco’s other significant accounting policies, the Note and page where the Note can be found.

	Note
Significant Accounting Policy	Number	Note Title	Page
Card Member Receivables and Loans	Note 2	Card Member Receivables and Loans	12
Reserves for Losses – Card Member Receivables and Loans	Note 3	Reserves for Losses	15
Derivative Financial Instruments and Hedging Activities	Note 6	Derivatives and Hedging Activities	17
Fair Value Measurements	Note 7	Fair Values	21
Income Taxes	Note 11	Income Taxes	28

10

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued new accounting guidance on revenue recognition. The accounting standard 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 and effective January 1, 2018, supersedes most of the revenue recognition requirements in effect prior to that date.

Most revenue associated with financial instruments, including interest income, loan origination fees and credit card fees, is outside the scope of the new revenue standard. Gains and losses on investment securities, derivatives and sales of financial instruments are similarly excluded from the scope. As Credco is engaged in the business of financing Card Member receivables and loans, and in providing loans to certain of its affiliates, the new revenue standard has no impact on the Consolidated Financial Statements and underlying operational processes and accounting policies. Credco’s implementation efforts have included analyzing revenues and related costs to identify any within the scope of the new standard to determine if any changes will be required. Credco has completed the evaluation of the potential impact of this guidance on the timing, recognition, and presentation of revenues and expenses and has not identified any changes.

In January 2016, the FASB issued new accounting guidance on the recognition and measurement of financial assets and financial liabilities, which was effective and adopted by Credco as of January 1, 2018. The guidance, makes targeted changes to GAAP; specifically to the classification and measurement of equity securities, and to certain disclosure requirements associated with the fair value of financial assets and liabilities. The adoption of the guidance, as of January 1, 2018, did not have a material impact on Credco’s financial position, results of operations and cash flows. Credco implemented changes to its accounting policies, business processes and internal controls in support of the new guidance.

In June 2016, the FASB issued new accounting guidance for recognition of credit losses on financial instruments, 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. The guidance requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. Credco 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 CECL model will alter the assumptions used in estimating credit losses on Card Member receivables and loans, and may result in material increases to Credco’s credit reserves as the new guidance involves earlier recognition of expected losses for the life of the assets. American Express has established an enterprise-wide, cross-discipline governance structure to implement the new standard, and continues to identify and conclude on key interpretive issues along with evaluating existing American Express’ credit loss forecasting models and processes in relation to the new guidance to determine what modifications may be required.

In November 2016, the FASB issued new accounting guidance on the cash flow classification and presentation of changes in restricted cash or restricted cash equivalents, effective January 1, 2018. The guidance provides specifically that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents on the statement of cash flows. Credco holds a restricted cash balance such that it becomes a material change to the way balances will be presented on the statement of cash flows. Beginning with the quarter ending March 31, 2018, Credco’s consolidated statements of cash flows will reflect the adoption of the standard using the full retrospective method, which applies the new standard to each prior reporting period presented.

In August 2017, the FASB issued new accounting guidance providing targeted improvements to the accounting for hedging activities, effective January 1, 2019, with early adoption permitted in any interim period or fiscal year before the effective date. The guidance introduces a number of amendments, several of which are optional, that are designed to simplify the application of hedge accounting, improve financial statement transparency and more closely align hedge accounting with an entity’s risk management strategies. Effective January 1, 2018, Credco adopted the guidance with no material impact on its financial position, results of operations and cash flows, along with associated changes to its accounting policies, business processes and internal controls in support of the new guidance.

11

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In February 2018, as a result of the enactment of the Tax Cuts and Jobs Act (the Tax Act), the FASB issued new accounting guidance on the reclassification of certain tax effects from AOCI to retained earnings. The optional guidance is effective January 1, 2019, with early adoption permitted. Credco is evaluating whether it will adopt the new guidance along with any impacts on the Credco’s financial position, results of operations and cash flows, none of which are expected to be material.

Other Information

During the fourth quarter of 2015, American Express determined it would sell Card Member loans and receivables related to certain of its cobrand partnerships. As a result of the determination, Credco classified Card Member receivables related to the Costco portfolio purchased from American Express Receivables Financing Corporation VIII LLC (RFC VIII) in the form of participation interest as Card Member receivables held for sale (HFS) on its Consolidated Balance Sheets as of December 31, 2015 and March 31, 2016.

During the first half of 2016, American Express completed the sales of substantially all of its outstanding Card Member loans and receivables HFS, and consequently Credco also sold back all of its participation interests in Card Member receivables HFS to RFC VIII.

Note 2 – Card Member Receivables and Loans

American Express’ charge and credit card products result in the generation of Card Member receivables and Card Member loans, respectively.

Card Member Receivables

Card Member receivables represent amounts due on American Express charge card products. For American Express, the Card Member receivables are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant. Each charge card transaction is authorized based on its likely economics, a Card Member’s most recent credit information and spend patterns. Additionally, global spend limits are established to limit the maximum exposure for American Express. Charge Card Members generally must pay the full amount billed each month.

Credco records these Card Member receivables at the time they are purchased from TRS and certain of its subsidiaries that issue the card (card issuers). Card Member receivable balances are presented on the Consolidated Balance Sheets, net of reserves for losses (refer to Note 3). Card Member receivables also include participation interests purchased from an affiliate. Participation interests in Card Member receivables represent undivided interests in the cash flows of the non-interest-earning Card Member receivables. In conjunction with TRS’ securitization program, Credco, through its wholly owned subsidiary, Credco Receivables Corporation (CRC), purchases participation interests from American Express Receivables Financing Corporation VIII LLC (RFC VIII), a wholly owned subsidiary of TRS that receives undivided, pro rata interests in Card Member receivables transferred to the American Express Issuance Trust (the Charge Trust), by TRS. The Charge Trust is a special purpose entity that is consolidated by TRS.

Card Member receivables as of December 31, 2017 and 2016 consisted of:

(Millions)	2017		2016
U.S. Consumer Services	$	3,557	$	3,518
International Consumer and Network Services (a)		1,827		1,526
Global Commercial Services (b)		14,892		13,174
Card Member receivables (c)		20,276		18,218
Less: Reserve for losses		145		110
Card Member receivables, net (d)	$	20,131	$	18,108

(a) Comprised of International consumer card business.

(b) Comprised of Corporate and Small Business Services.

(c) Net of deferred discount revenue totaling $43 million and $27 million as of December 31, 2017 and 2016, respectively.

(d) Card Member receivables modified in a troubled debt restructuring (TDR) program were immaterial.

12

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Card Member Loans

Card Member loans represent revolving amounts due on American Express cards. For American Express lending card products, these Card Member loans are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant, as well as amounts due from charge Card Members who utilize the Pay Over Time features on their account and elect to revolve a portion of the outstanding balance by entering into a revolving payment arrangement with American Express. These loans have a range of terms such as credit limits, interest rates, fees and payment structures, which can be revised over time based on new information about Card Members and in accordance with applicable regulations and the respective product’s terms and conditions. Card Members holding revolving loans are typically required to make monthly payments based on pre-established amounts and the amounts that Card Members choose to revolve are subject to finance charges.

Credco records these Card Member loans at the time they are purchased from TRS and certain of its subsidiaries that issue the card (card issuers). Card Member loans are presented on the Consolidated Balance Sheets, net of reserves for losses (refer to Note 3), and include principal and any related accrued interest and fees. American Express’ policy generally is to cease accruing interest on a Card Member loan at the time the account is written off, and establish reserves for interest that will not be collected.

Card Member loans as of December 31, 2017 and 2016 consisted of:

(Millions)	2017		2016
International Consumer and Network Services (a)	$	561	$	476
Less: Reserve for losses		5		5
Card Member loans, net (b)	$	556	$	471

(a) Comprised of International consumer card business.

(b) Card Member loans modified in a TDR program were immaterial.

Card Member Receivables and Loans 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 receivables and Card Member loans as of December 31, 2017 and 2016:

2017 (Millions)	Current			30-59 Days Past Due		60-89 Days Past Due	90+ Days Past Due		Total
Card Member Receivables:
U.S. Consumer Services	$	3,531	$	10	$	6	$	10	$	3,557
International Consumer and Network Services		1,805		8		5		9		1,827
Global Commercial Services
Global Small Business Services		1,397		5		4		6		1,412
Global Corporate Payments (a)	(b)		(b)		(b)			112		13,480
Card Member Loans:
International Consumer and Network Services	$	557	$	1	$	1	$	2	$	561

13

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2016 (Millions)	Current			30-59 Days Past Due		60-89 Days Past Due	90+ Days Past Due		Total
Card Member Receivables:
U.S. Consumer Services	$	3,501	$	9	$	3	$	5	$	3,518
International Consumer and Network Services		1,506		6		4		10		1,526
Global Commercial Services
Global Small Business Services		1,202		9		2		5		1,218
Global Corporate Payments (a)	(b)		(b)		(b)			108		11,956
Card Member Loans:
International Consumer and Network Services	$	472	$	1	$	1	$	2	$	476

(a) For Global Corporate Payments Card Member receivables in Global Commercial Services, 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 collection procedures are initiated 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. See also (b).

(b) Delinquency data for periods other than 90 days past billing is not available due to system constraints. Therefore, such data has not been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference between the Total and the 90+ Days Past Due balances.

Credit Quality Indicators for Card Member Receivables and Loans

The following tables present the key credit quality indicators as of or for the years ended December 31:

		2017				2016
				30+ Days				30+ Days
		Net		Past Due		Net		Past Due
		Write-off		as a % of		Write-off		as a % of
		Rate	(a)	Total		Rate	(a)	Total
Card Member Receivables:
	U.S. Consumer Services	0.83	%	0.73	%	0.54	%	0.48	%
	International Consumer and Network Services	1.50	%	1.20	%	1.86	%	1.31	%
	Global Small Business Services	1.11	%	1.06	%	1.03	%	1.31	%
Card Member Loans:
	International Consumer and Network Services	1.24	%	0.71	%	1.15	%	0.84	%

		2017				2016
		Net Loss Ratio as a % of Charge Volume	(b)	90+ Days Past Billing as a % of Receivables		Net Loss Ratio as a % of Charge Volume	(b)	90+ Days Past Billing as a % of Receivables
Card Member Receivables:
	Global Corporate Payments	0.08	%	0.83	%	0.06	%	0.90	%

(a) Represents the amount of Card Member receivables or Card Member loans owned by Credco that are written off, net of recoveries, expressed as a percentage of the average Card Member receivables or Card Member loans balances in each of the periods indicated.

(b) Represents the amount of Card Member receivables owned by Credco that are written off, net of recoveries, expressed as a percentage of the volume of Card Member receivables purchased by Credco in each of the periods indicated.

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

14

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – Reserves for Losses

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

Reserves for losses are primarily based upon statistical and analytical models that analyze portfolio performance and reflect management’s judgment regarding the quantitative components of the reserve. The models take into account several factors, including delinquency-based loss migration rates, loss emergence periods and average losses and recoveries over an appropriate historical period. Management considers whether to adjust the quantitative reserves for certain external and internal qualitative factors, which may increase or decrease the reserves for losses on Card Member receivables and loans. These external factors include employment, spend, sentiment, housing and credit, and changes in the legal and regulatory environment, while the internal factors include increased risk in certain portfolios, impact of risk management initiatives, changes in underwriting requirements and overall process stability. As part of this evaluation process, management also considers various reserve coverage metrics, such as reserves as a percentage of past due amounts, reserves as a percentage of Card Member receivables or loans and net write-off coverage ratios.

Card Member receivables and loans balances are written off when management considers amounts to be uncollectible, which is generally determined by the number of days past due and is typically no later than 180 days past due. Card Member receivables and loans in bankruptcy or owed by deceased individuals are generally written off upon notification, and recoveries are recognized as they are collected.

This Note is presented excluding amounts associated with the Card Member receivables HFS as of December 31, 2015; Credco did not have any Card Member receivables HFS as of December 31, 2017 or 2016.

Changes in Card Member Receivables Reserve for Losses

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

(Millions)	2017			2016			2015
Balance, January 1	$	110		$	114		$	94
Provisions		238			145			160
Other credits(a)		58			20			32
Net write-offs(b)		(198	)		(146	)		(157	)
Other debits(c)(d)		(63	)		(23	)		(15	)
Balance, December 31	$	145		$	110		$	114

(a) Primarily reserve balances applicable to new groups of Card Member receivables purchased from TRS and certain of its subsidiaries and participation interests from affiliates. New groups of Card Member receivables purchased totaled $9.4 billion, $5.4 billion and $5.8 billion for the years ended December 31, 2017, 2016 and 2015, respectively.

(b) Net of recoveries of $95 million, $91 million and $100 million for the years ended December 31, 2017, 2016 and 2015, respectively.

(c) Primarily reserve balances related to participation interests in Card Member receivables sold to an affiliate. Participation interests in Card Member receivables sold totaled $9.4 billion, $5.7 billion and $2.6 billion for the years ended December 31, 2017, 2016 and 2015, respectively.

(d) 2015 includes the impact of the transfer of reserves relating to the HFS portfolio, which was not significant.

Changes in Card Member Loans Reserve for Losses

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

(Millions)	2017			2016			2015
Balance, January 1	$	5		$	4		$	3
Provisions		6			6			5
Net write-offs(a)		(6	)		(5	)		(4	)
Balance, December 31	$	5		$	5		$	4

(a) Net of recoveries of $1 million for each of the years ended December 31, 2017, 2016 and 2015.

15

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 – Debt

Short-Term Debt

Credco’s short-term debt outstanding (excluding short-term debt to affiliates), defined as borrowings with original contractual maturity dates of less than one year, as of December 31 were as follows:

	2017					2016
(Millions, except percentages)	Outstanding Balance		Year-End Stated Rate on Debt(a)			Outstanding Balance		Year-End Stated Rate on Debt(a)
Commercial paper(b)	$	1,168		1.54	%	$	2,993		1.13	%
Other short-term borrowings(c)		140		1.27			―		―
Total	$	1,308		1.51	%	$	2,993		1.13	%

(a) For floating-rate issuances, the stated interest rates are weighted based on the outstanding balances and rates in effect as of December 31, 2017 and 2016.

(b) Average commercial paper outstanding was $1,076 million and $491 million in 2017 and 2016, respectively.

(c) Represents interest-bearing overdrafts with banks.

Long-Term Debt

Credco’s long-term debt outstanding, defined as debt with original contractual maturity dates of one year or greater, as of December 31 was as follows:

		2017							2016
(Millions, except percentages)	Original Contractual Maturity Dates	Outstanding Balance		(a)	Year-End Stated Rate on Debt	(b)	Year-End Effective Interest Rate with Swaps	(b)(c)	Outstanding Balance		(a)	Year-End Stated Rate on Debt	(b)	Year-End Effective Interest Rate with Swaps	(b)(c)
Fixed Rate Senior Notes	2018-2027	$	19,652		2.24	%	2.27	%	$	16,201		1.98	%	1.44	%
Floating Rate Senior Notes	2018-2022		4,550		2.09		―			4,350		1.52		―
Unamortized Underwriting Fees			(49	)						(39	)
Total Long-TermDebt		$	24,153		2.21	%			$	20,512		1.88	%

(a) The outstanding balances include (i) unamortized discount and premium, (ii) the impact of movements in exchange rates on foreign currency denominated debt and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate through the use of interest rate swaps. Under fair value hedge accounting, the outstanding balances on these fixed-rate notes are adjusted to reflect the impact of changes in fair value due to changes in interest rates. Refer to Note 6 for more details on Credco’s treatment of fair value hedges.

(b) For floating-rate issuances, the stated and effective interest rates are weighted based on outstanding balances and rates in effect as of December 31, 2017 and 2016.

(c) Effective interest rates are only presented when swaps are in place to hedge the underlying debt.

16

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Aggregate annual maturities on long-term debt obligations (based on contractual maturity or anticipated redemption dates) as of December 31, 2017 were as follows:

(Millions)
2018	$	3,654
2019		7,150
2020		6,600
2021		2,939
2022		2,050
Thereafter		2,000
Total		24,393
Unamortized Underwriting Fees		(49	)
Unamortized Discount and Premium		(36	)
Impacts due to Fair Value Hedge Accounting		(155	)
Total Long-Term Debt	$	24,153

Credco maintained a bank line of credit of $3.5 billion and $3.0 billion as of December 31, 2017 and 2016, respectively, all of which was undrawn as of the respective dates. These undrawn amounts support contingent funding needs. Credco paid $6.0 million and $2.2 million in fees to maintain these lines for the years ended December 31, 2017 and 2016, respectively. The availability of the credit line is subject to compliance with certain financial covenants, including the maintenance of a 1.25 ratio of earnings to fixed charges. As of December 31, 2017, Credco’s ratio of earnings to fixed charges was 1.50. As of December 31, 2017 and 2016, Credco was not in violation of any of its debt covenants.

The committed facility does not contain material adverse change clauses that would preclude borrowing under the credit facility. Additionally, the facility may not be terminated should there be a change in Credco’s credit ratings.

Credco paid total interest, primarily related to short- and long-term debt, and corresponding interest rate swaps of $0.5 billion for the year ended December 31, 2017, and $0.3 billion for both the years ended December 31, 2016 and 2015.

Note 5 – Restrictions as to Dividends and Limitations on Indebtedness

The debt instruments issued by Credco impose the requirement that Credco maintain a minimum consolidated net worth of $50 million, which limits the amount of dividends Credco can pay to its parent. There are no limitations on the amount of debt that can be issued by Credco, provided it maintains the minimum fixed charge coverage ratio of 1.25.

Note 6 – Derivatives and Hedging Activities

Credco 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 rates and foreign exchange rates, and are carried at fair value on the Consolidated Balance Sheets. These instruments enable end users to increase, reduce or alter exposure to various market risks and, for that reason, are an integral component of Credco’s market risk management. Credco does not transact in derivatives for trading purposes.

Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Credco’s market risk exposures include:

 Interest rate risk in its funding activities; and

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

American Express centrally monitors market risks using market risk limits and escalation triggers as defined in its Asset/Liability Management Policy.

17

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest rate exposure within charge card and fixed-rate lending products is managed by varying the proportion of total funding provided by short-term and variable-rate debt compared to fixed-rate debt. In addition, interest rate swaps are used from time to time to economically convert fixed-rate debt obligations to variable-rate obligations or to convert variable-rate debt obligations to fixed-rate obligations. Credco may change the mix between variable-rate and fixed-rate funding based on changes in business volumes and mix, among other factors.

Foreign exchange risk is generated by funding foreign currency Card Member receivables and loans with U.S. dollars, foreign currency balance sheet exposures, foreign subsidiary equity and foreign currency earnings in entities outside the United States. Credco’s 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 forwards and cross-currency swap contracts. Exposures from foreign subsidiary equity in Credco’s entities outside the United States are hedged through the use of foreign exchange forwards executed either by Credco or TRS.

Derivatives may give rise to counterparty credit risk, which is the risk that a derivative counterparty will default on, or otherwise be unable to perform pursuant to an uncollateralized derivative exposure. This risk is managed by considering the current exposure, which is the replacement cost of contracts on the measurement date, as well as estimating the maximum potential value of the contracts over the next 12 months, considering such factors as the volatility of the underlying or reference index. To mitigate derivative credit risk, counterparties are required to be pre-approved by American Express and rated as investment grade, and counterparty risk exposures are centrally monitored.

Additionally, in order to mitigate the bilateral counterparty credit risk associated with derivatives, Credco has in certain instances entered into master netting agreements with its derivative counterparties, which provide a right of offset for certain exposures between the parties. A majority of Credco’s derivative assets and liabilities as of December 31, 2017 and 2016 are subject to master netting agreements with its derivative counterparties. Credco has no derivative amounts subject to enforceable master netting arrangements that are not offset on the Consolidated Balance Sheets. To further mitigate bilateral counterparty credit risk, Credco exercises its rights under executed credit support agreements with certain of its derivative counterparties. These agreements require that, in the event the fair value change in the net derivatives position between the two parties exceeds certain dollar thresholds, the party in the net liability position posts collateral to its counterparty. All derivative contracts cleared through a central clearinghouse are collateralized to the full amount of the fair value of the contracts.

In relation to Credco’s credit risk, under the terms of the derivative agreements it has with its various counterparties, Credco is not required to either immediately settle any outstanding liability balances or post collateral upon the occurrence of a specified credit risk-related event. Credco has no individually significant derivative counterparties and therefore, no significant risk exposure to any single derivative counterparty. Based on its assessment of the credit risk of Credco’s derivative counterparties as of December 31, 2017 and 2016, no credit risk adjustment to the derivative portfolio was required.

Credco’s derivatives are carried at fair value on the Consolidated Balance Sheets. The accounting for changes in fair value depends on the instruments’ intended use and the resulting hedge designation, if any, as discussed below. Refer to Note 7 for a description of Credco’s methodology for determining the fair value of derivatives.

18

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of December 31:

	Other Assets						Other Liabilities
	Fair Value						Fair Value
(Millions)	2017			2016			2017			2016
Derivatives designated as hedging instruments:
Fair value hedges - Interest rate contracts (a)	$	―		$	22		$	―		$	69
Net investment hedges - Foreign exchange contracts		54			151			38			1
Total derivatives designated as hedging instruments		54			173			38			70
Derivatives not designated as hedging instruments:
Foreign exchange contracts		9			128			57			28
Total derivatives, gross		63			301			95			98
Less: Cash collateral netting (b)(c)		―			(2	)		―			(49	)
Derivative asset and derivative liability netting (d)		(26	)		(27	)		(26	)		(27	)
Total derivatives, net	$	37		$	272		$	69		$	22

(a) Effective January 2017, the Central Clearing Party (CCP) changed the legal characterization of variation margin payments for centrally cleared derivatives to be settlement payments, as opposed to collateral. As of December 31, 2017, there was no unsettled derivative asset or liability with the CCP.

(b) Represents the offsetting of the fair value of bilateral interest rate contracts with the right to reclaim cash collateral or the obligation to return cash collateral.

(c) Credco held no non-cash collateral as of December 31, 2017 and 2016, respectively. To mitigate counterparty credit risk related to derivatives, Credco may accept non-cash collateral from its derivatives counterparties. Additionally, Credco posted $115 million and $144 million as of December 31, 2017 and 2016, respectively, as initial margin on its centrally cleared interest rate swaps; such amounts are recorded within Other assets on Credco’s Consolidated Balance Sheets and are not netted against the derivative balances.

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

Derivative Financial Instruments that Qualify for Hedge Accounting

Derivatives executed for hedge accounting purposes are documented and designated as such when Credco enters into the contracts. In accordance with its risk management policies, Credco structures its hedges with terms similar to those of the item being hedged. Credco formally assesses, at inception of the hedge accounting relationship and on a quarterly basis, whether derivatives designated as hedges are highly effective in offsetting the fair value or cash flows of the hedged items. These assessments usually are made through the application of a regression analysis method. If it is determined that a derivative is not highly effective as a hedge, Credco will discontinue the application of hedge accounting.

Fair Value Hedges

A fair value hedge involves a derivative designated to hedge Credco’s exposure to future changes in the fair value of an asset or a liability, or an identified portion thereof that is attributable to a particular risk.

Credco is exposed to interest rate risk associated with its fixed-rate long-term debt obligations. At the time of issuance, certain fixed-rate debt obligations are designated in fair value hedging relationships using interest rate swaps to economically convert the fixed interest rate to a floating interest rate. Credco has $16.2 billion and $14.8 billion of fixed-rate debt obligations designated in fair value hedging relationships as of December 31, 2017 and 2016, respectively.

19

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

To the extent the fair value hedge is effective, the gain or loss on the hedging instrument offsets the loss or gain on the hedged item attributable to the hedged risk. Any difference between the changes in the fair value of the derivative and the changes in the hedged item is referred to as hedge ineffectiveness and is reported as a component of Other expenses. Hedge ineffectiveness may be caused by differences between a debt obligation’s interest rate and the benchmark rate, primarily due to credit spreads at inception of the hedging relationship that are not reflected in the fair value of the interest rate swap. Furthermore, hedge ineffectiveness may be caused by changes in 1-month LIBOR, 3-month LIBOR and the overnight indexed swap rate, as spreads between these rates impact the fair value of the interest rate swap without causing an exact offsetting impact to the fair value of the hedged debt.

For the periods presented, Credco considers all fair value hedges to be highly effective and did not de-designate any fair value hedge relationships.

The following table summarizes the gains (losses) recognized in Other expenses associated with Credco’s fair value hedges for the years ended December 31:

(Millions)	2017			2016			2015
Interest rate derivative contracts	$	(129	)	$	(102	)	$	(31	)
Hedged items		100			91			44
Net hedge ineffectiveness (losses) gains	$	(29	)	$	(11	)	$	13

Credco also recognized a net reduction in interest expense on long-term debt of $53 million, $126 million and $177 million for the years ended December 31, 2017, 2016 and 2015, respectively, primarily related to the net settlements (interest accruals) on Credco’s interest rate derivatives designated as fair value hedges.

Net Investment Hedges

A net investment hedge is used to hedge future changes in currency exposure of a net investment in a foreign operation. Credco primarily designates foreign currency derivatives, typically foreign exchange forwards, and on occasion foreign currency denominated debt, as hedges of net investments in certain foreign operations. These instruments reduce exposure to changes in currency exchange rates on Credco’s investments in non-U.S. subsidiaries. The effective portion of the gain or loss on net investment hedges, net of taxes, recorded in AOCI as part of the cumulative translation adjustment were losses of $174 million and gains of $80 million and $235 million for the years ended December 31, 2017, 2016 and 2015, respectively, with any ineffective portion recognized in Other expenses during the period. No ineffectiveness or other amounts associated with net investment hedges were reclassified from AOCI into income for the years ended December 31, 2017, 2016 and 2015.

Derivatives Not Designated As Hedges

Credco has derivatives that act as economic hedges, but are not designated as such for hedge accounting purposes. Foreign currency transactions from time to time may be partially or fully economically hedged through foreign currency contracts, primarily foreign exchange forwards. These hedges generally mature within one year. Foreign currency contracts involve the purchase and sale of designated currencies at an agreed upon rate for settlement on a specified date.

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 a net gains of $21 million, $1 million and $14 million for the years ended December 31, 2017, 2016 and 2015, respectively, and are recognized in Other expenses.

20

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 – Fair Values

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

GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:

 Level 1 – Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.

 Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:

- Quoted prices for similar assets or liabilities in active markets;

- Quoted prices for identical or similar assets or liabilities in markets that are not active;

- Inputs other than quoted prices that are observable for the asset or liability; and

- Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 Level 3 – Inputs that are unobservable and reflect Credco’s own estimates about the estimates market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows). Credco did not measure any financial instruments presented on the Consolidated Balance Sheets at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2017 and 2016, although the disclosed fair value of certain assets that are not carried at fair value, as presented later in this Note, are classified within Level 3.

Credco monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in and out of the levels of the fair value hierarchy, Credco discloses the fair value measurement at the beginning of the reporting period during which the transfer occurred. For the years ended December 31, 2017 and 2016, there were no significant transfers between levels.

Financial Assets and Financial Liabilities Carried at Fair Value

The following table summarizes Credco’s financial assets and financial liabilities measured at fair value on a recurring basis, categorized by GAAP’s fair value hierarchy as Level 2 (as described in the preceding paragraphs), as of December 31:

(Millions)	2017		2016
Assets:
Derivatives (a)	$	63	$	301
Total assets		63		301
Liabilities:
Derivatives (a)		95		98
Total liabilities	$	95	$	98

(a) Refer to Note 6 for the fair values of derivative assets and liabilities, on a further disaggregated basis.

21

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Valuation Techniques Used in the Fair Value Measurement of Financial Assets and Financial Liabilities Carried at Fair Value

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

Derivative Financial Instruments

The fair value of Credco’s derivative financial instruments is estimated internally by using third-party pricing models, where the inputs to those models are readily observable from actively quoted markets. The pricing models used are consistently applied and reflect the contractual terms of the derivatives as described below. Credco reaffirms its understanding of the valuation techniques at least annually and validates the valuation output on a quarterly basis. Credco’s derivative instruments are classified within Level 2 of the fair value hierarchy.

The fair value of Credco’s interest rate swaps is determined based on a discounted cash flow method using the following significant inputs: the contractual terms of the swap such as the notional amount, fixed coupon rate, floating coupon rate and tenor, as well as discount rates consistent with the underlying economic factors of the currency in which the cash flows are denominated.

The fair value of foreign exchange forward contracts is determined based on a discounted cash flow method using the following significant inputs: the contractual terms of the forward contracts such as the notional amount, maturity dates and contract rate, as well as relevant foreign currency forward curves, and discount rates consistent with the underlying economic factors of the currency in which the cash flows are denominated.

Credit valuation adjustments are necessary when the market parameters, such as a benchmark curve, used to value derivatives are not indicative of the credit quality of Credco or its counterparties. Credco considers the counterparty credit risk by applying an observable forecasted default rate to the current exposure. Refer to Note 6 for additional fair value information.

Financial Assets and Financial Liabilities Carried at Other Than Fair Value

The following table summarizes the estimated fair value for Credco’s financial assets and financial liabilities that are not required to be carried at fair value on a recurring basis, as of December 31, 2017 and 2016. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of December 31, 2017 and 2016, respectively, and require management judgment. These figures may not be indicative of future fair values nor can the fair value of Credco be estimated by aggregating the amounts presented.

	Carrying		Corresponding Fair Value Amount
2017 (Billions)	Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Financial assets for which carrying values equal or approximate fair value(a)
Cash and cash equivalents	$	0.2	$	0.2	$	0.2	$	―	$	―
Other financial assets		20.6		20.6		0.1		20.5		―
Financial assets carried at other than fair value
Card Member loans, net		0.6		0.6		―		―		0.6
Loans to affiliates and other		14.5		14.4		―		10.0		4.4
Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value		8.6		8.6		―		8.6		―
Financial liabilities carried at other than fair value
Long-term debt		24.2		24.5		―		24.5		―
Long-term debt with affiliates	$	0.3	$	0.3	$	―	$	0.3	$	―

22

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	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(a)
Cash and cash equivalents	$	1.2	$	1.2	$	0.2	$	1.0	$	―
Other financial assets		19.3		19.3		―		19.3		―
Financial assets carried at other than fair value
Card Member loans, net		0.5		0.5		―		―		0.5
Loans to affiliates and other		10.7		10.7		―		7.9		2.8
Financial Liabilities:
Financial liabilities for which carrying values equal or approximate fair value		9.1		9.1		―		9.1		―
Financial liabilities carried at other than fair value
Long-term debt		20.5		20.7		―		20.7		―
Long-term debt with affiliates	$	―	$	―	$	―	$	―	$	―

(a) Level 1 amounts reflect interest-bearing deposits and Level 2 amount primarily reflects time deposits, short-term investments and Card Member receivables.

The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of December 31, 2017 and 2016, respectively, and require management judgment. These figures may not be indicative of future fair values. The fair value of Credco cannot be reliably estimated by aggregating the amounts presented.

Valuation Techniques Used in the Fair Value Measurement of Financial Assets and Financial Liabilities Carried at Other Than Fair Value

For the financial assets and liabilities that are not required to be carried at fair value on a recurring basis (categorized in the valuation hierarchy table), Credco applies the following valuation techniques to measure fair value:

Financial Assets For Which Carrying Values Equal Or Approximate Fair Value

Financial assets for which carrying values equal or approximate fair value include cash and cash equivalents, Card Member receivables, due from affiliates, accrued interest and certain other assets. For these assets, the carrying values approximate fair value because they are short term in duration, have no defined maturity or have a market-based interest rate.

Financial Assets Carried At Other Than Fair Value

Card Member loans

Card Member loans are recorded at historical cost, less reserves, on the Consolidated Balance Sheets. In estimating the fair value for Credco’s Card Member loans, Credco uses a discounted cash flow model. Due to the lack of a comparable whole loan sales market for similar loans and the lack of observable pricing inputs thereof, Credco uses various inputs derived from an equivalent securitization market to estimate fair value. Such inputs include projected income, pay-down rates, discount rates, relevant credit costs and cost of funding assumptions.

Loans to affiliates and other

Loans to affiliates and other are recorded at historical cost on the Consolidated Balance Sheets. In estimating the fair value for Credco’s loans to affiliates and other, Credco uses discounted cash flow models. For loans to affiliates collateralized by Card Member loans, Credco derives the value of the loans based on the fair value of the underlying collateral used to finance the loans using a discounted cash flow model with inputs as detailed above (Card Member loans), and as such is classified as Level 3. For the remaining loans to affiliates and other, the models use market observable interest rates and adjust those rates for necessary risks.

23

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Liabilities For Which Carrying Values Equal Or Approximate Fair Value

Financial liabilities for which carrying values equal or approximate fair value include short-term debt, short-term debt to affiliates, due to affiliates, accrued interest and certain other liabilities for which the carrying values approximate fair value because they are short term in duration, have no defined maturity or have a market-based interest rate.

Financial Liabilities Carried At Other Than Fair Value

Long-term debt

Long-term debt, including with affiliates, is recorded at historical issuance cost on the Consolidated Balance Sheets adjusted for the impact of fair value hedge accounting on certain fixed-rate notes and current translation rates for foreign-denominated debt. The fair value of Credco’s long-term debt is measured using quoted offer prices when quoted market prices are available. If quoted market prices are not available, the fair value is determined by discounting the future cash flows of each instrument at rates currently observed in publicly-traded debt markets for debt of similar terms and credit risk. For long-term debt, where there are no rates currently observable in publicly-traded debt markets of similar terms and comparable credit risk, Credco uses market interest rates and adjusts those rates for necessary risks, including its own credit risk. In determining an appropriate spread to reflect its credit standing, Credco considers credit default swap spreads, bond yields of other long-term debt offered by Credco, and interest rates currently offered to Credco for similar debt instruments of comparable maturities.

Nonrecurring Fair Value Measurements

Credco did not have any assets that were measured at fair value due to impairment on a nonrecurring basis during the years ended December 31, 2017 and 2016.

Note 8 – Variable Interest Entity

Credco has established a VIE, American Express Canada Credit Corporation (AECCC), used primarily to lend funds to affiliates, through the issuance of notes in Canada under a medium-term note program. All notes issued under this program are fully guaranteed by Credco. Credco is considered the primary beneficiary of the entity and owns all of the outstanding voting interests and, therefore, consolidates the entity. Total assets as of December 31, 2017 and 2016 were $0.5 billion and $1.7 billion respectively. As of December 31, 2017 and 2016, nil and $1.7 billion, respectively, of assets were eliminated in consolidation. Total liabilities as of December 31, 2017 and 2016 were $0.5 billion and $1.7 billion respectively. As of December 31, 2017 and 2016, nil and $1.3 billion, respectively, of liabilities were eliminated in consolidation. The assets of the VIE are not used solely to settle the obligations of the VIE. The note holders of the VIE have recourse to Credco.

Note 9 – Transactions with Affiliates

As described below, Credco executes material transactions with its affiliates. The agreements between Credco and its affiliates provide that the parties intend that the transactions thereunder be conducted on an arm’s length basis. However, there can be no assurance that the terms of these arrangements are the same as would be negotiated between independent parties.

In 2017, 2016 and 2015, Credco purchased Card Member receivables and loans without recourse from TRS and certain of its subsidiaries totaling approximately $262 billion, $225 billion and $227 billion, respectively. In 2017, 2016 and 2015, Credco sold Card Member receivables and participating interests to affiliates totaling $9.4 billion, $5.7 billion and $2.6 billion, respectively. The discount revenue on purchased Card Member receivables and loans totaled $760 million, $471 million and $479 million for the years ended December 31, 2017, 2016 and 2015, respectively. The receivables agreements require TRS and its subsidiaries to perform servicing, clerical and other services necessary to bill and collect all Card Member receivables and loans owned by Credco. Since settlements under the agreements occur monthly, an amount due from, or payable to, such affiliates may arise at the end of each month.

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AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2017 and 2016, CRC owned approximately $4.1 billion and $4.0 billion, respectively, of participation interests purchased from RFC VIII.

Transactions with affiliates as of or for the years ended December 31, were as follows:

(Millions, except percentages)	2017			2016			2015
Loans to affiliates and other	$	14,527		$	10,659		$	14,262
Average interest rate on loans to affiliates and other		2.19	%		1.78	%		1.81	%
Due from affiliates	$	189		$	997		$	615
Restricted cash with affiliates		100			―			―
Short-term debt to affiliates		5,997			4,559			5,439
Average interest rate on short-term debt to affiliates		1.04	%		0.49	%		0.19	%
Maximum month-end level of short-term borrowings during the year	$	8,377		$	5,091		$	5,439
Long term debt to affiliates		270			―			―
Average interest rate on long-term debt to affiliates		0.23	%		―			―
Maximum month-end level of long-term borrowings during the year	$	270		$	―		$	―
Due to affiliates		1,988			1,517			1,727
Maximum month-end level of loans to affiliates during the year		14,527			13,083			17,711
Interest income from affiliates and other		279			207			246
Interest expense to affiliates		58			24			10
Other, net expense	$	2		$	1		$	1

Credco’s loans to affiliates represent floating-rate interest-bearing intercompany borrowings by American Express Company, other wholly owned subsidiaries of TRS and the American Express joint ventures. Revenue earned from loans to affiliates and other is recorded as interest income from affiliates and other in the Consolidated Statements of Income. As of December 31, 2017 and 2016, no amount of loss reserves has been recorded and no loans are 30 days or more past due.

The components of loans to affiliates and other as of December 31 were as follows:

(Millions)	2017		2016
American Express Limited	$	3,847	$	―
American Express Services Europe Limited		2,747		2,484
Amex Bank of Canada		1,737		1,593
American Express Australia Limited		1,616		1,290
American Express International, Inc.		1,180		―
American Express Company		961		4,044
Amex Global Holdings C.V.		888		―
American Express Company (Mexico) S.A. de C.V.		812		765
American Express Bank (Mexico) S.A.		325		291
Alpha Card S.C.R.L./C.V.B.A.		138		―
American Express International, Inc- Branch - Singapore		124		107
American Express International (NZ), Inc.		80		85
Amex Funding Management (Europe) Limited		38		―
American Express Saudi Arabia (C) JSC		34		―
Total (a)	$	14,527	$	10,659

(a) As of December 31, 2017 and 2016, approximately $5.0 billion and $3.3 billion, respectively, were collateralized by the underlying Card Member receivables and loans transferred with recourse.

Due from/to affiliates relate primarily to timing differences from the purchase of Card Member receivables, net of remittances from TRS, as well as from operating activities. As of December 31, 2017, due to affiliates primarily represents tax liability on account of the Tax Act. Refer to Note 11 to the Consolidated Financial Statements.

25

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2017 and 2016, the amount of interest-bearing restricted cash was $100 million and nil, respectively, which represents cash placed with Amex Bank of Canada relating to the new collateralized loan arrangement for transfer of Card Member loans described above and has been included under “Other Assets” on the Consolidated Balance Sheets.

Components of short-term debt to affiliates as of December 31 were as follows:

(Millions)	2017		2016
AE Exposure Management Limited.	$	4,548	$	3,361
American Express Europe LLC		765		515
American Express Swiss Holdings GmbH		444		376
American Express Holdings Netherlands CV		192		192
Accertify Inc.		48		42
Amex Funding Management (Europe) Limited		―		73
Total	$	5,997	$	4,559

Short-term debt to affiliates consists primarily of master note agreements repayable on demand. Credco does not expect any changes to its short-term funding strategies with affiliates.

Long-term debt to affiliates represents an unsecured amount due to LB Luxembourg Two S.a.r.l amounting to $270 million and nil as of December 31, 2017 and 2016, respectively, payable by December 2020.

Service Fees to Affiliates

Credco’s affiliates do not explicitly charge Credco a servicing fee for the servicing of receivables purchased. Instead Credco receives a lower discount rate on the receivables purchased than would be the case if servicing fees were charged. If a servicing fee had been charged by these affiliates from which Credco purchases receivables, fees to affiliates for servicing receivables would have been approximately $234 million, $253 million and $242 million for the years ended December 31, 2017, 2016 and 2015, respectively. Correspondingly, discount revenue would have increased by approximately the same amounts in these periods.

26

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 – Changes in Accumulated Other Comprehensive Income

AOCI is a balance sheet item in the Shareholder’s Equity section of Credco’s Consolidated Balance Sheets. It is comprised of items that have not been recognized in earnings but may be recognized in earnings in the future when certain events occur. Changes in Foreign Currency Translation Adjustments for the three years ended December 31 were as follows:

	Foreign
	Currency
	Translation
(Millions), net of tax	Adjustments
Balances as of December 31, 2014	$	(787	)
Net translation loss of investments in foreign operations		(604	)
Net gains related to hedges of investment in foreign operations		235
Net change in accumulated other comprehensive loss		(369	)
Balances as of December 31, 2015		(1,156	)
Net translation loss of investments in foreign operations		(187	)
Net gains related to hedges of investment in foreign operations		80
Net change in accumulated other comprehensive loss		(107	)
Balances as of December 31, 2016		(1,263	)
Net translation gain of investments in foreign operations(a)		439
Net losses related to hedges of investment in foreign operations		(174	)
Net change in accumulated other comprehensive loss		265
Balances as of December 31, 2017	$	(998	)

(a) Includes $289 million of recognized tax benefit (refer to Note 11).

The following table shows the tax impact for the three years ended December 31 for the changes in Foreign Currency Translation Adjustments presented above:

	Tax (benefit) expense
(Millions)	2017			2016		2015
Foreign currency translation adjustments (a)	$	(209	)	$	49	$	―
Net investment hedges		(103	)		48		140
Total tax impact	$	(312	)	$	97	$	140

(a) Include $289 million of tax benefit recognized in the year ended December 31, 2017 (refer to Note 11).

No amounts were reclassified out of AOCI into the Consolidated Statements of Income for the years ended December 31, 2017 and 2016.

27

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 – Income Taxes

The Tax Act, enacted by the U.S. government on December 22, 2017, makes broad and complex changes to the U.S. tax code which will require time to interpret. The SEC issued Staff Accounting Bulletin No. 118 (SAB 118) in December, 2017, to provide guidance on accounting for the effects of the Tax Act. SAB 118 provides for a measurement period of up to one year from the Tax Act enactment date for companies to complete their assessment of and accounting for those effects of the Tax Act required under ASC 740 “Implementation Guidance on Accounting for Uncertainty in Income Taxes’’ to be reported in the period of enactment. Under SAB 118, a company must first reflect the income tax effects of the Tax Act for which the accounting is complete in the period of the date of enactment. To the extent the accounting for other income tax effects is incomplete, but for which a reasonable estimate can be determined, companies must record a provisional estimate to be included in their financial statements. For any income tax effect for which a reasonable estimate cannot be determined, an entity must continue to apply ASC 740 based on the provisions of the tax laws in effect immediately prior to the Tax Act being enacted until such time as a reasonable estimate can be determined.

Credco has recorded a discrete net charge of $858 million in the period ended December 31, 2017 related to the Tax Act. For the reasons stated below, Credco requires additional time to complete its analysis of the impacts of the Tax Act and therefore its accounting for the Tax Act is provisional.

1. Impacts of the Deemed Repatriation: The Tax Act imposed a one-time transition tax on unrepatriated post-1986 accumulated earnings and profits (E&P) of certain of our foreign subsidiaries. To calculate this tax, Credco must determine the cumulative amount of E&P, as well as the amount of foreign taxes paid on such earnings. In addition, Credco made a decision to no longer assert that the accumulated post-1986 E&P of its non-U.S. subsidiaries that are subject to this one-time transition tax are intended to be permanently reinvested outside the United States. As a result Credco recorded a deferred tax liability for the state income and foreign withholding tax consequences of any future cash dividends paid from such E&P. Credco has recorded reasonable estimates based on data available for both the deemed repatriation tax for 2017 of $737 million, and the deferred state income and foreign withholding taxes on potential future distributions of these earnings of $105 million. Until Credco fully completes its analysis of both items, Credco’s accounting for these items is provisional.

2. Remeasurement of Deferred Tax Assets and Liabilities: Credco has recorded a deferred tax charge of $16 million related to the remeasurement of its U.S. federal net deferred tax assets for 2017. This charge reflects the change in the corporate tax rate from 35 percent to 21 percent, effective January 1, 2018, as well as other provisions of the Tax Act. Certain components of the remeasurement are reasonable estimates based on available information. Until Credco fully completes its analysis of all components, Credco’s accounting for the remeasurement of its net deferred tax assets is provisional.

Credco will complete its analysis of and finalize its accounting for these provisional estimates during the one-year measurement period as prescribed by SAB 118.

The results of operations of Credco are included in the consolidated U.S. federal income tax return of American Express. Under an agreement with American Express, provision for income taxes is recognized on a separate company basis. If benefits for net operating losses, future tax deductions and foreign tax credits cannot be recognized on a separate company basis, such benefits are then recognized based upon a share, derived by formula, of those deductions and credits that are recognizable on an American Express consolidated reporting basis.

28

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of income tax expense (benefit) for the years ended December 31 included in Credco’s Consolidated Statements of Income were as follows:

(Millions)	2017			2016			2015
Current income tax expense (benefit):
U.S. federal (a)	$	785		$	(4	)	$	15
U.S. state and local		15			(6	)		(4	)
Non-U.S.		24			11			20
Total current income tax expense		824			1			31
Deferred income tax expense (benefit) :
U.S. federal (b)		58			10			(5	)
U.S. state and local		1			1			―
Non-U.S.		(5	)		3			12
Total deferred income tax expense		54			14			7
Total income tax expense	$	878		$	15		$	38

(a) 2017 includes a charge of $737 million related to the Tax Act deemed repatriation tax on certain non-U.S. earnings.

(b) 2017 includes charges related to the Tax Act of $16 million due to the remeasurement of certain federal net deferred tax assets to the lower federal tax rate of 21 percent and $105 million due to deferred state income and foreign withholding tax consequences of future cash distributions from non-U.S. subsidiaries.

A reconciliation of the U.S. federal statutory rate of 35 percent to Credco’s actual income tax rate for the years ended December 31 was as follows:

	2017			2016			2015
U.S. statutory federal income tax rate		35.0	%		35.0	%		35.0	%
(Decrease) increase in taxes resulting from:
State and local income taxes, net of federal benefit		(0.3	)		(0.5	)		―
Non-U.S. subsidiaries earnings(a)		(25.7	)		(25.1	)		(25.5	)
Tax Settlements(b)		(1.1	)		(1.4	)		(0.4	)
U.S. Tax Act(c)		311.6			―			―
Other(d)		(0.2	)		(0.9	)		6.0
Actual tax rate		319.3	%		7.1	%		15.1	%

(a) Results for all years include recurring permanent tax benefits, in relation to the level of pretax income. Expenses in the United States are attracting a 35 percent statutory benefit whereas foreign earnings are taxed at lower rates and were indefinitely reinvested prior to the impacts of the Tax Act in 2017 (refer footnote (c)). Credco’s effective tax rate reflects the favorable impact of the tax benefit related to its ongoing funding activities outside of the United States.

(b) Relates to the resolution of tax matters in various jurisdictions.

(c) Relates to the $858 million charge for the impacts of the Tax Act.

(d) Results for 2016 and 2015 include the impact of prior year tax returns filed in the current year.

The results for the year ended December 31, 2015 reflect out-of-period corrections that increased tax expense by $11 million and the effective tax rate by approximately 4.4 percent. The corrections relate to tax calculations of foreign exchange gains/losses in one jurisdiction reflected in the 2014 results. None of the current or prior period financial statements were materially misstated from these corrections.

Credco records a deferred income tax (benefit) provision when there are differences between assets and liabilities measured for financial reporting and for income tax return purposes. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are expected to reverse. In particular, the 2017 balances were reduced to reflect the remeasurement of certain federal net deferred tax assets due to the enacted lower federal tax rate of 21 percent.

29

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:

(Millions)	2017			2016
Deferred tax assets:
Reserves not yet deducted for tax purposes	$	26		$	23
State income taxes		5			9
Foreign exchange loss		7			―
Other		―			1
Gross deferred tax assets		38			33
Deferred tax liabilities:
Investment in foreign subsidiaries(a)		105			―
Foreign exchange gain		―			8
Gross deferred tax liabilities		105			8
Net deferred tax assets	$	(67	)	$	25

(a) Deferred state income and foreign withholding tax consequences of future cash distributions from non-U.S. subsidiaries.

Credco is subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which American Express operates. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. Given these inherent complexities, Credco must make judgments in assessing the likelihood that a tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position. A tax position is recognized only when, based on management’s judgment regarding the application of income tax laws, it is more likely than not that the tax position will be sustained upon examination. The amount of benefit recognized for financial reporting purposes is based on management’s best judgment of the largest amount of benefit that is more likely than not to be realized on ultimate settlement with the taxing authority given the facts, circumstances and information available at the reporting date. Credco adjusts the level of unrecognized tax benefits when there is new information available to assess the likelihood of the outcome.

American Express is under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which American Express has significant business operations. The tax years under examination and open for examination vary by jurisdiction. In February 2017, American Express received notification that all matters outstanding with the IRS for the tax years 1997-2007 were resolved. The resolution of such matters did not impact Credco’s effective tax rate. American Express is currently under examination with the IRS for the tax years 2008 through 2014.

The following table presents changes in unrecognized tax benefits:

(Millions)	2017			2016			2015
Balance, January 1	$	308		$	211		$	364
Increases:
Current year tax positions		8			79			2
Tax positions related to prior years		―			24			1
Decreases:
Tax positions related to prior years (a)		(289	)		(1	)		(152	)
Settlements with tax authorities		―			(1	)		―
Lapse of statute of limitations		(3	)		(4	)		(4	)
Balance, December 31	$	24		$	308		$	211

(a) Decrease due to the resolution with the IRS of an uncertain tax position in January 2017, which resulted in the recognition of $289 million in shareholders’ equity, specifically within AOCI.

Included in the unrecognized tax benefits of $24 million, $308 million and $211 million for December 31, 2017, 2016 and 2015, respectively, are approximately $19 million, $12 million and $14 million, respectively that if recognized, would favorably affect the effective tax rate in a future period.

30

AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credco believes it is reasonably possible that its unrecognized tax benefits could decrease within the next 12 months by as much as $3 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 $3 million of unrecognized tax benefits, approximately $2 million relates to amounts that, if recognized, would impact the effective tax rate in a future period.

Interest and penalties relating to unrecognized tax benefits are reported in the income tax provision. For the years ended December 31, 2017, 2016 and 2015, Credco recognized tax benefits of approximately $1 million, $2 million and $1 million, respectively, for interest and penalties. Credco had approximately $5 million and $48 million accrued for the payment of interest and penalties as of December 31, 2017 and 2016, respectively. The reduction in accrued interest in 2017 includes approximately $42 million related to the resolution of an uncertain tax position with the IRS in January 2017, which had no net impact on the income tax provision.

Current taxes due to American Express or affiliates as of December 31, 2017 and 2016 were $786 million and $17 million, respectively. The amount due to American Express for 2017 includes a $729 million payable related to the deemed repatriation tax.

	Payments due by year
(Millions)	2018			2019 – 2020		2021 - 2022	2023 and thereafter		Total
Deemed repatriation tax(a)	$	―	$	122	$	116	$	491	$	729

(a) Represents Credco’s estimated obligation under the Tax Act to pay the deemed repatriation tax to American Express on certain non-U.S. earnings over eight years, which has been calculated on a provisional basis. This amount does not reflect other related non-cash accruals.

Net income taxes refunded to Credco during 2017 were approximately $308 million and net income taxes paid by Credco during 2016 were approximately $45 million.

Note 12 – Significant Credit Concentrations

Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to Credco’s total credit exposure. Credco’s primary credit exposure, Card Member receivables and loans and loans to affiliates and other, is diversified among its affiliated companies with Card Members that operate in diverse industries, economic sectors and geographic regions.

The following table details Credco’s maximum credit exposure of the on-balance sheet assets by category, as of December 31:

(Billions)	2017		2016
On-balance sheet:
Loans to affiliates and other	$	15	$	11
Institutions(a)		13		11
Individuals(b)		7		7
Financial Services(c)		1		2
Due from affiliates		―		1
Total on-balance sheet	$	36	$	32

(a) Primarily reflects Card Member receivables from other corporate institutions, which are governed by institutional credit risk management.

(b) Primarily reflects Card Member receivables and loans, which are governed by individual credit risk management.

(c) Represents banks, broker-dealers, insurance companies and savings and loan associations.

As of December 31, 2017 and 2016, Credco’s most significant concentration of credit risk was with Loans to affiliates and Corporate institutions, including Card Member receivables. Credco purchased Card Member receivables and loans from TRS and certain of its subsidiaries. TRS generally advances these amounts on an unsecured basis. However, TRS reviews each potential customer’s credit application and evaluates the applicant’s financial history and ability and willingness to repay. TRS also considers, on behalf of Credco, credit performance by customer tenure, industry and geographic location in managing credit exposure.

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AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table details Credco’s Card Member receivables and loans exposure in the United States and outside the United States as of December 31:

(Billions)	2017		2016
United States	$	15	$	14
Outside the United States		6		5
Total	$	21	$	19

Note 13 – Geographic Regions

Credco is principally engaged in the business of financing the Card Member receivables and loans of its affiliates. Management makes operating decisions and assesses performance based on an ongoing review of these financing activities, which constitute Credco’s only operating segment for financial reporting purposes.

The following table presents Credco’s revenues and pretax income in different geographic regions based, in part, upon internal allocations, which necessarily involve management’s judgment:

(Millions)	2017		2016		2015
Revenues
United States	$	779	$	440	$	442
Outside the United States		308		278		313
Consolidated	$	1,087	$	718	$	755
Pretax income
United States	$	9	$	16	$	111
Outside the United States		266		196		141
Consolidated	$	275	$	212	$	252

Note 14 – Quarterly Financial Data (Unaudited)

Quarterly financial information for the years ended December 31, 2017 and 2016 are summarized as follows:

(Millions)	2017									2016
Quarters ended		12/31			9/30		6/30		3/31		12/31		9/30		6/30		3/31
Revenues	$	296		$	286	$	253	$	252	$	179	$	180	$	179	$	180
Pretax income		72			85		52		66		20		70		65		57
Net (loss) income (a)	$	(791	)	$	72	$	57	$	59	$	29	$	60	$	57	$	51

(a) The fourth quarter of 2017 includes impact of the Tax Act (refer to Note 11).

32

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)	1.	Financial Statements:
		See Index to the Financial Statements on page 3.
	2.	Exhibits:
		See Exhibit Index.

Item 16. SIGNATURES

33

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 CREDIT CORPORATION(Registrant)

Date:	June 22, 2018	By	/s/ David L. Yowan
			David L. Yowan
			Chief Executive Officer

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date:	June 22, 2018	By	/s/ David L. Yowan
			David L. Yowan
			Chief Executive Officer and Director
Date:	June 22, 2018	By	/s/ Leah A. Schweller
			Leah A. Schweller
			Chief Accounting Officer
Date:	June 22, 2018	By	/s/ Anderson Y. Lee
			Anderson Y. Lee
			Chief Financial Officer and Director
Date:	June 22, 2018	By	/s/ Vivian Y. Zhou
			Vivian Y. Zhou
			Director

34

EXHIBIT INDEXPursuant to Item 601 of Regulation S-K

Exhibit No.	Description	How Filed
23	Consent of PricewaterhouseCoopers LLP Independent Registered Public Accounting Firm	Electronically filed herewith.
31.1	Certification of David L. Yowan, Chief Executive Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended	Electronically filed herewith.
31.2	Certification of Anderson Y. Lee, Chief Financial Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended	Electronically filed herewith.
32.1	Certification of David L. Yowan, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Electronically filed herewith.
32.2	Certification of Anderson Y. Lee, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Electronically filed herewith.
101.INS	XBRL Instance Document	Electronically filed herewith.
101.SCH	XBRL Taxonomy Extension Schema Document	Electronically filed herewith.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Electronically filed herewith.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Electronically filed herewith.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Electronically filed herewith.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Electronically filed herewith.

E-1