JP Morgan Chase 2009 Annual Report Download - page 105

JPMorgan Chase & Co./2009 Annual Report 103
CREDIT PORTFOLIO
The following table presents JPMorgan Chase’s credit portfolio as
of December 31, 2009 and 2008. Total credit exposure at Decem-
ber 31, 2009, decreased by $322.6 billion from December 31,
2008, reflecting decreases of $170.5 billion in the wholesale port-
folio and $152.1 billion in the consumer portfolio. During 2009,
lending-related commitments decreased by $130.3 billion, man-
aged loans decreased by $112.4 billion and derivative receivables
decreased by $82.4 billion.
While overall portfolio exposure declined, the Firm provided more
than $600 billion in new loans and lines of credit to consumer and
wholesale clients in 2009, including individuals, small businesses,
large corporations, not-for-profit organizations, U.S. states and
municipalities, and other financial institutions.
In the table below, reported loans include loans retained; loans held-for-sale (which are carried at the lower of cost or fair value, with changes in
value recorded in noninterest revenue); and loans accounted for at fair value. Loans retained are presented net of unearned income, unamortized
discounts and premiums, and net deferred loan costs; for additional information, see Note 13 on pages 200–204 of this Annual Report. Nonper-
forming assets include nonaccrual loans and assets acquired in satisfaction of debt (primarily real estate owned). Nonaccrual loans are those for
which the accrual of interest has been suspended in accordance with the Firm’s accounting policies, which are described in Note 13 on pages
200–204 of this Annual Report. Average retained loan balances are used for the net charge-off rate calculations.
Total credit portfolio
As of or for the year ended
December 31, Credit exposure
Nonperforming
assets(c)(d)
90 days or more past due
and still accruing(d) Net charge-offs
Average annual
net charge-off rate(e)(f)
(in millions, except ratios) 2009 2008 2009 2008 2009 2008 2009
2008 2009 2008
Total credit portfolio
Loans retained $ 627,218 $ 728,915 $ 17,219 $ 8,921 $ 4,355 $ 3,275 $ 22,965 $ 9,835 3.42% 1.73 %
Loans held-for-sale 4,876 8,287 234 12 — — —
— — —
Loans at fair value 1,364 7,696 111 20 — — — — — —
Loans – reported 633,458 744,898 17,564 8,953 4,355 3,275 22,965
9,835 3.42 1.73
Loans – securitized(a) 84,626 85,571 — — 2,385 1,802 6,443 3,612 7.55 4.53
Total managed loans 718,084 830,469 17,564 8,953 6,740 5,077 29,408
13,447 3.88 2.08
Derivative receivables 80,210 162,626 529 1,079 — — NA NA NA NA
Receivables from customers 15,745 16,141 — — — — NA
NA NA NA
Interests in purchased
receivables 2,927 — — — — — —
— — —
Total managed
credit-related assets 816,966 1,009,236 18,093 10,032 6,740 5,077 29,408
13,447 3.88 2.08
Lending-related
commitments 991,095 1,121,378 NA NA NA NA NA
NA NA NA
Assets acquired in
loan satisfactions
Real estate owned NA NA 1,548 2,533 NA NA NA NA NA NA
Other NA NA 100 149 NA NA NA
NA NA NA
Total assets acquired
in loan satisfactions NA NA 1,648 2,682 NA NA NA
NA NA NA
Total credit portfolio $ 1,808,061 $ 2,130,614 $ 19,741 $ 12,714 $ 6,740 $ 5,077 $ 29,408 $ 13,447 3.88% 2.08 %
Net credit derivative
hedges notional(b) $ (48,376) $ (91,451) $ (139) $ — NA NA NA NA NA NA
Liquid securities collateral
held against derivatives (15,519)
(19,816) NA NA NA NA NA NA NA NA
(a) Represents securitized credit card receivables. For further discussion of credit card securitizations, see Note 15 on pages 206–213 of this Annual Report.
(b) Represents the net notional amount of protection purchased and sold of single-name and portfolio credit derivatives used to manage both performing and nonperforming
credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For additional information, see Credit derivatives on pages 111–112 and Note 5 on
pages 175–183 of this Annual Report.
(c) At December 31, 2009 and 2008, nonperforming loans and assets excluded: (1) mortgage loans insured by U.S. government agencies of $9.0 billion and $3.0 billion, respectively; (2) real
estate owned insured by U.S. government agencies of $579 million and $364 million, respectively; and (3) student loans that are 90 days past due and still accruing, which are insured by
U.S. government agencies under the Federal Family Education Loan Program of $542 million and $437 million, respectively. These amounts are excluded, as reimbursement is proceeding
normally. In addition, the Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance. Under guidance issued by the
Federal Financial Institutions Examination Council, credit card loans are charged off by the end of the month in which the account becomes 180 days past due or within 60 days from receiv-
ing notification about a specified event (e.g., bankruptcy of the borrower), whichever is earlier.
(d) Excludes purchased credit-impaired loans that were acquired as part of the Washington Mutual transaction, which are accounted for on a pool basis. Since each pool is
accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, the past due status of the pools, or that of individual loans
within the pools, is not meaningful. Because the Firm is recognizing interest income on each pool of loans, they are all considered to be performing.
(e) Net charge-off ratios were calculated using: (1) average retained loans of $672.3 billion and $567.0 billion for the years ended December 31, 2009 and 2008, respectively;
(2) average securitized loans of $85.4 billion and $79.6 billion for the years ended December 31, 2009 and 2008, respectively; and (3) average managed loans of $757.7 billion and
$646.6 billion for the years ended December 31, 2009 and 2008, respectively.
(f) Firmwide net charge-off ratios were calculated including average purchased credit-impaired loans of $85.4 billion and $22.3 billion at December 31, 2009 and 2008, respec-
tively. Excluding the impact of purchased credit-impaired loans, the total Firm’s managed net charge-off rate would have been 4.37% and 2.15% respectively.