JP Morgan Chase 2003 Annual Report Download - page 101

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discussed above. Accrued interest on all other loans is generally
reversed against interest income w hen the consumer loan is
charged off.
A collateralized loan is considered an in-substance foreclosure
and is reclassified to assets acquired in loan satisfactions, within
Other assets, only w hen JPM organ Chase has taken physical
possession of the collateral. This is regardless of w hether formal
foreclosure proceedings have taken place.
The composition of the loan portfolio at each of the dates indi-
cated w as as follows:
J.P. Morgan Chase & Co. / 2003 Annual Report 99
2003 2002
December 31, (in millions) U.S. Non-U.S. Total U.S. Non-U.S. Total
Commercial loans:
Commercial and industrial $43,631 $ 24,618 $ 68,249 $49,205 $ 31,446 $ 80,651
Commercial real estate:
Commercial mortgage 3,182 — 3,182 3,176 2 3,178
Construction 589 79 668 516 379 895
Financial institutions 4,622 5,671 10,293 3,770 2,438 6,208
Non-U.S. governments —705 705 —616 616
Total commercial loans 52,024 31,073 83,097(d) 56,667 34,881 91,548
Consumer loans:
1–4 family residential mortgages:
First liens 54,460 — 54,460 49,357 12 49,369
Home equity loans 19,252 — 19,252 14,643 — 14,643
Credit card(a) 16,793 — 16,793 19,677 — 19,677
Automobile financings 38,695 — 38,695 33,615 — 33,615
Other consumer 7,193 28 7,221 7,395 117 7,512
Total consumer loans 136,393 28 136,421 124,687 129 124,816
Total loans(b)(c) $188,417 $ 31,101 $ 219,518 $181,354 $ 35,010 $ 216,364
(a) At December 31, 2003, excludes $1.1 billion of accrued interest and fees on securitized credit card loans that were classified in Other assets, consistent w ith the FASB Staff Position, Accounting for
Accrued Interest Receivable Related to Securitized and Sold Receivables under SFAS 140.
(b) Loans are presented net of unearned income of $1.29 billion and $1.89 billion at December 31, 2003 and 2002, respectively.
(c) Includes loans held for sale (principally mortgage-related loans) of $20.8 billion and $25.0 billion at December 31, 2003 and 2002, respectively.
(d) Includes $5.8 billion of loans held by VIEs consolidated under FIN 46.
The follow ing table reflects information about the Firm’s loans held for sale, principally mortgage-related:
Year ended December 31, (in millions) 2003 2002 2001
Net gains on sales of loans held for sale $933 $754 $ 581
Low er of cost or market adjustments 26 (36) (177)
Impaired loans
JPM organ Chase accounts for and discloses nonaccrual commer-
cial loans as impaired loans and recognizes their interest income
as discussed previously for nonaccrual loans. The Firm excludes
from impaired loans its small-balance, homogeneous consumer
loans; loans carried at fair value or the low er of cost or fair
value; debt securities; and leases.
The table below sets forth information about JPM organ Chase’s
impaired loans. The Firm primarily uses the discounted cash flow
method for valuing impaired loans:
December 31, (in millions) 2003 2002
Impaired loans with an allowance $1,597 $3,250
Impaired loans without an allowance(a) 406 412
Total impaired loans $2,003 $3,662
Allowance for impaired loans under SFAS 114(b) $595 $1,106
Average balance of impaired loans during the year 2,969 2,805
Interest income recognized on impaired loans
during the year 414
(a) When the discounted cash flow s, collateral value or market price equals or exceeds the
carrying value of the loan, then the loan does not require an allowance under SFAS 114.
(b) The allowance for impaired loans under SFAS 114 is included in JPMorgan Chase’s
allowance for loan losses.