JP Morgan Chase 2009 Annual Report Download - page 72

Management’s discussion and analysis
JPMorgan Chase & Co./2009 Annual Report 70
Consumer Lending (continued)
Credit data and quality statistics
(in millions, except ratios) 2009 2008 2007
Net charge-offs excluding purchased
credit-impaired loans(a)
Home equity $ 4,682 $
2,391
$
564
Prime mortgage 1,886
526 33
Subprime mortgage 1,648
933 157
Option ARMs 63
— —
Auto loans 627
568 354
Other 365
113 79
Total net charge-offs $ 9,271
$
4,531
$ 1,187
Net charge-off rate excluding pur-
chased credit-impaired loans(a)
Home equity 4.32 %2.39% 0.62%
Prime mortgage 3.05 1.18 0.13
Subprime mortgage 11.86
6.10 1.55
Option ARMs 0.71
— —
Auto loans 1.44
1.30 0.86
Other 2.39
0.93 0.88
Total net charge-off rate
excluding purchased credit-
impaired loans(b) 3.68
2.08 0.67
Net charge-off rate – reported
Home equity 3.45 %2.23% 0.62%
Prime mortgage 2.28 1.05 0.13
Subprime mortgage 8.16
5.49 1.55
Option ARMs 0.16
— —
Auto loans 1.44
1.30 0.86
Other 2.39
0.93 0.88
Total net charge-off rate(b) 2.75
1.89 0.67
30+ day delinquency rate excluding
purchased credit-impaired
loans(c)(d)(e) 5.93
%4.21% 3.10%
Allowance for loan losses $ 13,798 $ 8,254 $ 2,418
Nonperforming assets(f)(g) 11,259
8,653 3,084
Allowance for loan losses to ending
loans 4.27
%2.36% 1.24%
Allowance for loan losses to end
ing
loans excluding purchased
credit-impaired loans(a) 5.04
3.16 1.24
(a) Excludes the impact of purchased credit-impaired loans that were acquired as
part of the Washington Mutual transaction. These loans were accounted for at
fair value on the acquisition date, which incorporated management’s estimate,
as of that date, of the credit losses over the remaining life of the portfolio. Dur-
ing 2009, an allowance for loan losses of $1.6 billion was recorded for these
loans, which has also been excluded from applicable ratios. To date, no
charge-offs have been recorded for these loans.
(b) Average loans included loans held-for-sale of $2.2 billion, $2.8 billion and
$10.6 billion for the years ended December 31, 2009, 2008 and 2007, respec-
tively, which were excluded when calculating the net charge-off rate.
(c) Excluded mortgage loans that are insured by U.S. government agencies of $9.7
billion, $3.5 billion and $1.4 billion at December 31, 2009, 2008 and 2007, respec-
tively. These amounts were excluded, as reimbursement is proceeding normally.
(d) Excluded loans that are 30 days past due and still accruing, which are insured
by U.S. government agencies under the Federal Family Education Loan Pro-
gram of $942 million, $824 million and $663 million at December 31, 2009,
2008 and 2007, respectively. These amounts are excluded, as reimbursement
is proceeding normally.
(e) The delinquency rate for purchased credit-impaired loans was 27.79% and
17.89% at December 31, 2009 and 2008, respectively.
(f) At December 31, 2009, 2008 and 2007, nonperforming assets excluded: (1)
mortgage loans insured by U.S. government agencies of $9.0 billion, $3.0 bil-
lion and $1.1 billion, respectively; (2) real estate owned insured by U.S. gov-
ernment agencies of $579 million, $364 million and $452 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, $437 million and $417 million, respectively. These
amounts are excluded, as reimbursement is proceeding normally.
(g) Excludes purchased credit-impaired loans that were acquired as part of the
Washington Mutual transaction. These loans are accounted for on a pool ba-
sis, and the pools are considered to be performing.
(in billions, except ratios and
where otherwise noted) 2009 2008 2007
Origination volume
Mortgage origination volume
by channel
Retail $ 53.9 $
41.1
$
45.5
Wholesale(a) 11.8 29.4 42.7
Correspondent 72.8 55.5 27.9
CNT (negotiated
transactions) 12.2 43.0 43.3
Total mortgage
origination volume 150.7 169.0 159.4
Home equity 2.4 16.3 48.3
Student loans 4.2 6.9 7.0
Auto 23.7 19.4 21.3
Application volume
Mortgage application volume
by channel
Retail 90.9 89.1 80.7
Wholesale(a) 16.4 63.0 86.7
Correspondent 99.3 82.5 41.5
Total mortgage
application volume 206.6 234.6 208.9
Average mortgage loans held-for-
sale and loans at fair value(b) 16.2 14.6 18.8
Average assets 378.6 278.1 216.1
Third-party mortgage loans
serviced (ending) 1,082.1 1,172.6 614.7
Third-party mortgage loans
serviced (average) 1,119.1 810.9 571.5
MSR net carrying value (ending) 15.5 9.3 8.6
Ratio of MSR net carrying value
(ending) to third-party mort-
gage loans serviced (ending) 1.43%
0.79% 1.40%
Supplemental mort
gage fees
and related income de
tails
(in millions)
Production revenue $ 503 $ 898 $ 880
Net mortgage servicing revenue:
Operating revenue:
Loan servicing revenue 4,942 3,258 2,334
Other changes in MSR
asset fair value (3,279) (2,052) (1,531)
Total operating revenue 1,663 1,206 803
Risk management:
Changes in MSR asset fair
value due to inputs or
assumptions in model 5,804 (6,849) (516)
Derivative valuation
adjustments and other (4,176) 8,366 927
Total risk management 1,628 1,517 411
Total net mortgage servicing
revenue 3,291 2,723 1,214
Mortgage fees and related
income 3,794 3,621 2,094
Ratio of annualized loan servicing
revenue to third-party mort-
gage loans serviced (average) 0.44%
0.40% 0.41%
MSR revenue multiple(c) 3.25x 1.98x 3.41x
(a) Includes rural housing loans sourced through brokers and underwritten under
U.S. Department of Agriculture guidelines.
(b) Loans at fair value consist of prime mortgages originated with the intent to
sell that are accounted for at fair value and classified as trading assets on the
Consolidated Balance Sheets. Average balances of these loans totaled $15.8
billion, $14.2 billion and $11.9 billion for the years ended December 31,
2009, 2008 and 2007, respectively.
(c) Represents the ratio of MSR net carrying value (ending) to third-party mort-
gage loans serviced (ending) divided by the ratio of annualized loan servicing
revenue to third-party mortgage loans serviced (average).