JP Morgan Chase 2006 Annual Report Download - page 112

Download and view the complete annual report

Please find page 112 of the 2006 JP Morgan Chase annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JPMorgan Chase & Co.
110 JPMorgan Chase & Co. / 2006 Annual Report
Securities with gross unrealized losses
Less than 12 months 12 months or more Total
Gross Gross Total Gross
Fair unrealized Fair unrealized Fair unrealized
2005 (in millions) value losses value losses value losses
Available-for-sale securities
U.S. government and federal agency obligations:
U.S. treasuries $ 3,789 $ 1 $ 85 $ 1 $ 3,874 $ 2
Mortgage-backed securities — — 47 — 47 —
Agency obligations 7 — 13 — 20 —
Collateralized mortgage obligations 15 — 30 — 45 —
U.S. government-sponsored enterprise obligations 10,607 242 11,007 354 21,614 596
Obligations of state and political subdivisions 237 3 107 4 344 7
Debt securities issued by non-U.S. governments 2,380 17 71 1 2,451 18
Corporate debt securities 3,076 52 678 22 3,754 74
Equity securities 1,838 7 2 — 1,840 7
Other, primarily asset-backed securities 778 14 370 9 1,148 23
Total securities with gross unrealized losses $ 22,727 $ 336 $ 12,410 $ 391 $ 35,137 $ 727
Impairment of AFS securities is evaluated considering numerous factors, and
their relative significance varies case-by-case. Factors considered include the
length of time and extent to which the market value has been less than cost;
the financial condition and near-term prospects of the issuer of a security;
and the Firm’s intent and ability to retain the security in order to allow for an
anticipated recovery in fair value. If, based upon an analysis of each of the
above factors, it is determined that the impairment is other-than-temporary,
the carrying value of the security is written down to fair value, and a loss is
recognized through earnings.
Included in the $546 million of gross unrealized losses on AFS securities at
December 31, 2006, was $242 million of unrealized losses that have existed for
a period greater than 12 months. These securities are predominately rated AAA
and the unrealized losses primarily are due to overall increases in market inter-
est rates and not concerns regarding the underlying credit of the issuers. The
majority of the securities with unrealized losses aged greater than 12 months
are obligations of U.S. government-sponsored enterprises and have a fair value
at December 31, 2006, that is within 3% of their amortized cost basis.
The following table presents the fair value and gross unrealized losses for AFS securities by aging category at December 31:
Securities with gross unrealized losses
Less than 12 months 12 months or more Total
Gross Gross Total Gross
Fair unrealized Fair unrealized Fair unrealized
2006 (in millions) value losses value losses value losses
Available-for-sale securities
U.S. government and federal agency obligations:
U.S. treasuries $ 2,268 $ 23 $ — $ — $ 2,268 $ 23
Mortgage-backed securities 81 —— 8 1
Agency obligations —— — — — —
Collateralized mortgage obligations —— — — — —
U.S. government-sponsored enterprise obligations 17,877 262 6,946 198 24,823 460
Obligations of state and political subdivisions — — 180 4 180 4
Debt securities issued by non-U.S. governments 3,141 13 2,354 39 5,495 52
Corporate debt securities 387 3 — — 387 3
Equity securities 17 1 — — 17 1
Other, primarily asset-backed securities 1,556 1 82 1 1,638 2
Total securities with gross unrealized losses $ 25,254 $ 304 $ 9,562 $ 242 $ 34,816 $ 546