Thursday, April 23, 2009

Securitization Income of American Express

--securitization income in 2008 was 1 bil, ~5% of total revenue The following table summarizes the activity related to securitized loans reported in securitization income, net for the years ended December 31: (Millions) 2008 2007 2006 Excess spread, net(a) $ 544 $ 1,025 $ 1,055 Servicing fees 543 425 407 (Losses) Gains on sales from securitizations(b) (17 ) 57 27 Securitization income, net $ 1,070 $ 1,507 $ 1,489 (a) Excess spread, net is the net cash flow from interest and fee collections allocated to the investors’ interests after deducting the interest paid on investor certificates, credit losses, contractual servicing fees, other expenses, and the changes in the fair value of the interest-only strip in 2008 and 2007. (b) Excludes $446 million and $(177) million of credit provision impact from cardmember loan sales and maturities for 2008, $144 million and $(84) million of credit provision impact from cardmember loan sales and maturities for 2007, as well as $83 million and $(104) million of credit provision impact from cardmember loan sales and maturities for 2006. At the time of a cardmember loan securitization, the Company records a gain (loss) on sale, which is calculated as the difference between the proceeds from the sale and the book basis of the cardmember loans sold. The book basis is determined by allocating the carrying amount of the sold cardmember loans, net of applicable credit reserves, between the cardmember loans sold and the interests retained based on their relative fair values. Such fair values are based on market prices at the date of transfer for the sold cardmember loans and on the estimated present value of future cash flows for retained interests. Gains (Losses) on sale from securitizations are reported in securitization income, net in the Company’s Consolidated Statements of Income. The income component resulting from the release of credit reserves upon sale is reported as a reduction of provision for losses from cardmember lending.

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