JP Morgan Chase 2009 Annual Report Download - page 169

JPMorgan Chase & Co./2009 Annual Report 167
Fair value measurements using significant unobservable inputs
Year ended
December 31, 2007
(in millions)
Fair value,
January 1, 2007
Total
realized/
unrealized
(gains)/losses
Purchases,
issuances
settlements, net
Transfers
into and/or
out of
level 3
Fair value,
December 31,
2007
Change in
unrealized
(gains)/losses
related to financial
instruments held at
December 31, 2007
Liabilities(h):
Deposits $ 385 $ 42(c) $ 667 $ 67 $ 1,161 $ 38
(c)
Other borrowed funds — 67(c) 34 4 105 135
(c)
Trading liabilities:
Debt and equity instruments 32 (383)(c) 125 706 480 734
(c)
Accounts payable and other liabilities
— 460(c) (435) — 25 25
(c)
Beneficial interests issued by
consolidated VIEs 8 (6)(c) (1) 81 82 —
Long-term debt 11,386 1,142(c) 6,633 2,777 21,938 468
(c)
(a) For further discussion of residential and commercial MBS, see the “Mortgage-related exposures carried at fair value” section of this Note on pages 169–170.
(b) Includes assets within accrued interest receivable and other assets at December 31, 2009, 2008 and 2007.
(c) Reported in principal transactions revenue, except for changes in fair value for Retail Financial Services (“RFS”) mortgage loans originated with the intent to sell,
which are reported in mortgage fees and related income.
(d) Realized gains and losses on available-for-sale securities, as well as other-than-temporary impairment losses that are recorded in earnings, are reported in securities
gains. Unrealized gains and losses are reported in other comprehensive income.
(e) Changes in fair value for RFS mortgage servicing rights are measured at fair value and reported in mortgage fees and related income.
(f) Predominantly reported in other income.
(g) Beginning January 1, 2008, all transfers into and/or out of level 3 are assumed to occur at the beginning of the reporting period.
(h) Level 3 liabilities as a percentage of total Firm liabilities accounted for at fair value (including liabilities carried at fair value on a nonrecurring basis) were 29%, 25%
and 17% at December 31, 2009, 2008 and 2007, respectively.
Assets and liabilities measured at fair value on a nonrecurring basis
Certain assets, liabilities and unfunded lending-related commitments are measured at fair value on a nonrecurring basis; that is, the instruments
are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when
there is evidence of impairment). The following tables present the financial instruments carried on the Consolidated Balance Sheets by caption
and level within the valuation hierarchy (as described above) as of December 31, 2009 and 2008, for which a nonrecurring change in fair value
has been recorded during the reporting period.
Fair value hierarchy
December 31, 2008 (in millions) Level 1 Level 2 Level 3 Total fair value
Loans retained(a) $ — $ 2,344 $ 345 $ 2,689
Loans held-for-sale(b) — 2,647 3,654 6,301
Total loans — 4,991 3,999 8,990
Other real estate owned — 706 103 809
Other assets — 1,057 188 1,245
Total other assets — 1,763 291 2,054
Total assets at fair value on a nonrecurring basis $ — $ 6,754 $ 4,290 $ 11,044
Accounts payable and other liabilities(c) $ — $ 212 $ 98 $ 310
Total liabilities at fair value on a nonrecurring basis $ — $ 212 $ 98 $ 310
(a) Reflects delinquent mortgage and home equity loans where the carrying value is based on the fair value of the underlying collateral.
(b) Predominantly includes leveraged lending loans carried on the Consolidated Balance Sheets at the lower of cost or fair value.
(c) Represents, at December 31, 2009 and 2008, the fair value adjustment associated with $648 million and $1.5 billion, respectively, of unfunded held-for-sale lending-
related commitments within the leveraged lending portfolio.
Fair value hierarchy
December 31, 2009 (in millions) Level 1 Level 2 Level 3 Total fair value
Loans retained(a) $ — $ 4,544 $ 1,137 $ 5,681
Loans held-for-sale(b) — 601 1,029 1,630
Total loans — 5,145 2,166 7,311
Other real estate owned — 307 387 694
Other assets — — 184 184
Total other assets — 307 571 878
Total assets at fair value on a nonrecurring basis $ — $ 5,452 $ 2,737 $ 8,189
Accounts payable and other liabilities(c) $ — $ 87 $ 39 $ 126
Total liabilities at fair value on a nonrecurring basis $ — $ 87 $ 39 $ 126