JP Morgan Chase 2003 Annual Report Download - page 91

J.P. Morgan Chase & Co. / 2003 Annual Report 89
Details of Fees and commissions w ere as follow s:
Year ended December 31, (in millions) 2003 2002 2001
Investment management and service fees $2,244 $ 2,322 $ 2,454
Custody and institutional trust service fees 1,601 1,529 1,611
Credit card fees 2,971 2,869 2,108
Brokerage commissions 1,181 1,139 1,130
Lending-related service fees 580 546 495
Deposit service fees 1,146 1,128 1,023
Other fees 929 854 834
Total fees and commissions $10,652 $10,387 $ 9,655
Mortgage fees and related income
M ortgage fees and related income for the years 2003, 2002, and
2001 amounted to $892 million, $988 million, and $386 million,
respectively. M ortgage fees and related income primarily includes
fees from mortgage origination and servicing activities, revenue
generated through loan sales and securitization activities, includ-
ing related hedges, as w ell as the impact from hedging mortgage
servicing rights w ith derivatives (both those designated and not
designated under SFAS 133). M ortgage servicing fees are recog-
nized over the period that the related service is provided net of
amortization. The valuation changes of mortgage servicing rights
and the corresponding derivatives are adjusted through earnings
in the same period. Gains and losses on loan sales and securiti-
zations are recognized in income upon sale or securitization. Net
interest income and securities gains and losses related to these
mortgage banking activities are not included in M ortgage fees
and related income.
Interest income and interest expense
Details of Interest income and expense w ere as follow s:
Year ended December 31, (in millions) 2003 2002 2001
Interest incom e
Loans $11,276 $12,057 $ 15,544
Securities 3,542 3,367 3,647
Trading assets 6,592 6,798 7,390
Federal funds sold and securities
purchased under resale agreements 1,497 2,061 3,805
Securities borrowed 323 698 1,343
Deposits with banks 214 303 452
Total interest income $23,444 $25,284 $ 32,181
Interest expense
Deposits $3,604 $5,253 $ 7,998
Short-term and other liabilities 5,899 7,038 11,098
Long-term debt 1,498 1,467 2,283
Beneficial interests issued by consolidated
variable interest entities 106 — —
Total interest expense $11,107 $13,758 $ 21,379
Net interest income $12,337 $11,526 $ 10,802
Provision for credit losses 1,540 4,331 3,182
Net interest income after
provision for credit losses $10,797 $7,195 $ 7,620
Note 5
Postretirement employee benefit plans
The Firm’s defined benefit pension plans are accounted for in
accordance with SFAS 87 and SFAS 88. Its postretirement med-
ical and life insurance plans are accounted for in accordance
w ith SFAS 106.
JPM organ Chase uses a measurement date of December 31 for
its postretirement employee benefit plans. The fair value of plan
assets is used to determine the expected return on plan assets
for its U.S. and non-U.S. defined benefit pension plans. For the
U.S. postretirement benefit plan, the market-related value, w hich
recognizes changes in fair value over a five-year period, is used
to determine the expected return on plan assets. Unrecognized
net actuarial gains and losses are amortized over the average
remaining service period of active plan participants, if required.
The M edicare Prescription Drug, Improvement and M odernization
Act of 2003 (the “ Act” ) w as signed into law on December 8,
2003. As permitted under FSP SFAS 106-1, JPM organ Chase
elected to defer accounting for certain of the effects of the Act
pending issuance of final guidance and transition rules. The Firm
is currently reviewing the Act and the potential impact on its U.S.
postretirement medical plan. Accordingly, the accumulated postre-
tirement benefit obligation and net periodic benefit costs related
to this plan do not reflect the effects of the Act. Once final guid-
ance is issued, previously reported information is subject to change.
Defined benefit pension plans
JPM organ Chase has a qualified noncontributory U.S. defined
benefit pension plan that provides benefits to substantially
all U.S. employees. The U.S. plan employs a cash balance for-
mula, in the form of service and interest credits, to determine
the benefits to be provided at retirement, based on eligible
compensation and years of service. Employees begin to accrue
plan benefits after completing one year of service, and benefits
vest after five years of service. The Firm also offers benefits
through defined benefit pension plans to qualifying employees
in certain non-U.S. locations based on eligible compensation
and years of service.
It is JPM organ Chase’s policy to fund its pension plans in
amounts sufficient to meet the requirements under applicable
employee benefit and local tax law s. In 2003, the Firm made
tw o cash contributions to its U.S. defined benefit pension plan:
$127 million on February 10 to fully fund the plan’s projected
benefit obligation as of December 31, 2002, and $200 million
on December 29 to fully fund the plan’s projected benefit obli-
gation as of December 31, 2003. Additionally, the Firm made
cash contributions totaling $87 million to fund fully the accumu-
lated benefit obligations of certain non-U.S. defined benefit
pension plans as of December 31, 2003. Based on the current
funded status of the U.S. and non-U.S. pension plans, the Firm
does not expect to make significant fundings in 2004.
Note 6