JP Morgan Chase 2006 Annual Report Download - page 76

MANAGEMENT’S DISCUSSION AND ANALYSIS
JPMorgan Chase & Co.
74 JPMorgan Chase & Co. / 2006 Annual Report
Home equity: Home equity loans at December 31, 2006, were $85.7 billion,
an increase of $11.9 billion from year-end 2005. Growth in the portfolio
reflected organic growth, as well as The Bank of New York transaction. The
geographic distribution is well-diversified as shown in the table below.
Mortgage: Mortgage loans at December 31, 2006, were $59.7 billion.
Mortgage receivables as of December 31, 2006, reflected an increase of
$709 million from the prior year. Although the Firm provides mortgage loans
to the full spectrum of credit borrowers, more than 75% of RFS’ mortgage
loans on the balance sheet are to prime borrowers. In addition, the Firm
sells or securitizes virtually all fixed-rate mortgage originations, as well as a
portion of its adjustable rate originations. As a result, the portfolio of resi-
dential mortgage loans held-for-investment consists primarily of adjustable
rate products. The geographic distribution is well-diversified as shown in the
table below.
Auto loans and leases: As of December 31, 2006, Auto loans and leases
decreased to $41.0 billion from $46.1 billion at year-end 2005. The decrease
in outstanding loans was caused primarily by the de-emphasis of vehicle
finance leasing, which comprised $2 billion of outstanding loans as of
December 31, 2006, down from $4 billion in the prior year. The Auto loan
portfolio reflects a high concentration of prime and near-prime quality credits.
All other loans: All other loans primarily include business banking loans
(which are highly collateralized loans, often with personal loan guarantees),
Education loans and community development loans. As of December 31,
2006, Other loans increased to $27.1 billion compared with $18.4 billion at
year-end 2005. This increase is due primarily to an increase in education
loans as a result of the acquisition of Collegiate Funding Services. Loan bal-
ances also increased in Business banking primarily as a result of The Bank of
New York transaction.
Card Services
JPMorgan Chase analyzes its credit card portfolio on a managed basis, which
includes credit card receivables on the consolidated balance sheet and those
receivables sold to investors through securitization. Managed credit card
receivables were $152.8 billion at December 31, 2006, an increase of $10.6
billion from year-end 2005, reflecting organic growth and acquisitions, par-
tially offset by higher customer payment rates.
The managed credit card net charge-off rate decreased to 3.33% for 2006,
from 5.21% in 2005. This decrease was due primarily to lower bankruptcy-
related net charge-offs. The 30-day delinquency rates increased to 3.13% at
December 31, 2006, from 2.79% at December 31, 2005, primarily driven by
accelerated loss recognition of delinquent accounts in 2005, as a result of the
2005 bankruptcy reform legislation. The managed credit card portfolio contin-
ues to reflect a well-seasoned portfolio that has good U.S. geographic diversi-
fication.
Year ended December 31, Mortgage
(in billions, except ratios) 2006 2005
California $ 14.5 24% $ 13.8 23%
New York 8.9 15 9.2 16
Florida 7.1 12 6.8 12
New Jersey 2.6 4 2.6 4
Illinois 2.4 4 2.2 4
Texas 2.1 4 2.3 4
Virginia 1.5 3 1.7 3
Michigan 1.5 3 1.5 3
Arizona 1.5 3 1.2 2
Maryland 1.4 2 1.5 3
All other 16.2 26 16.2 26
Total $ 59.7 100% $ 59.0 100%
Consumer real estate loans by geographic location
Year ended December 31, Home equity
(in billions, except ratios) 2006 2005
California $ 12.9 15% $ 10.5 14%
New York 12.2 14 10.2 14
Illinois 6.2 7 5.5 7
Texas 5.8 7 5.3 7
Arizona 5.4 6 4.5 6
Ohio 5.3 6 5.2 7
Florida 4.4 5 3.5 5
Michigan 3.8 4 3.7 5
New Jersey 3.5 4 2.6 4
Indiana 2.6 3 2.6 4
All other 23.6 29 20.3 27
Total $ 85.7 100% $ 73.9 100%