JP Morgan Chase 2006 Annual Report Download - page 120

The table below presents information about delinquencies, net charge-offs (recoveries) and components of reported and securitized financial assets at December 31, 2006
and 2005:
Nonaccrual and 90 days or Net loan charge-offs
Total Loans more past due(d) (recoveries) Year ended
December 31, (in millions) 2006 2005 2006 2005 2006 2005
Home Equity $ 85,730 $ 73,866 $ 454 $ 422 $ 143 $ 141
Mortgage 59,668 58,959 769 442 56 25
Auto loans and leases 41,009 46,081 132 193 238 277
All other loans 27,097 18,393 322 281 139 129
Credit card receivables 85,881 71,738 1,344 1,091 2,488 3,324
Total consumer loans 299,385 269,037 3,021(e) 2,429(e) 3,064 3,896
Total wholesale loans 183,742 150,111 420 1,042 (22) (77)
Total loans reported 483,127 419,148 3,441 3,471 3,042 3,819
Securitized consumer loans:
Residential mortgage(a) 7,995 8,061 191 370 57 105
Automobile 4,878 5,439 10 11 15 15
Credit card 66,950 70,527 962 730 2,210 3,776
Total consumer loans securitized 79,823 84,027 1,163 1,111 2,282 3,896
Securitized wholesale activities
Residential mortgage(a) 27,275 4,787 544 413 —
Commercial and other 13,756 4,262 6—3—
Total securitized wholesale activities 41,031 9,049 550 416 —
Total loans securitized(b) 120,854 93,076 1,713 1,115 2,298 3,896
Total loans reported and securitized(c) $ 603,981 $ 512,224 $ 5,154 $ 4,586 $ 5,340 $ 7,715
(a) Includes $18.6 billion and $11.9 billion of outstanding principal balances on securitized subprime 1–4 family residential mortgage loans as of December 31, 2006 and 2005, respectively.
(b) Total assets held in securitization-related SPEs were $262.9 billion and $204.2 billion at December 31, 2006 and 2005, respectively. The $120.9 billion and $93.1 billion of loans securitized at
December 31, 2006 and 2005, respectively, excludes: $122.5 billion and $85.6 billion of securitized loans, in which the Firm’s only continuing involvement is the servicing of the assets; $19.3 billion
and $24.8 billion of seller’s interests in credit card master trusts; and $0.2 billion and $0.7 billion of escrow accounts and other assets, respectively.
(c) Represents both loans on the Consolidated balance sheets and loans that have been securitized, but excludes loans for which the Firm’s only continuing involvement is servicing of the assets.
(d) Includes nonperforming HFS loans of $120 million and $136 million at December 31, 2006 and 2005, respectively.
(e) Excludes nonperforming assets related to (i) loans eligible for repurchase as well as loans repurchased from GNMA pools that are insured by U.S. government agencies and U.S. government-sponsored
enterprises of $1.2 billion and $1.1 billion for December 31, 2006 and 2005, respectively, and (ii) education 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 $0.2 billion at December 31, 2006. These amounts for GNMA and education loans are excluded, as reimbursement is proceeding normally.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JPMorgan Chase & Co.
118 JPMorgan Chase & Co. / 2006 Annual Report
Note 15 – Variable interest entities
Refer to Note 1 on page 94 of this Annual Report for a further description of
JPMorgan Chase’s policies regarding consolidation of variable interest entities.
JPMorgan Chase’s principal involvement with VIEs occurs in the following
business segments:
• Investment Bank: Utilizes VIEs to assist clients in accessing the financial
markets in a cost-efficient manner by providing flexibility relating to price,
yield and desired risk. There are two broad categories of transactions
involving VIEs in the IB: (1) multi-seller conduits and (2) client intermedia-
tion; both are discussed below. The IB also securitizes loans through
QSPEs, to create asset-backed securities, as further discussed in Note 14
on pages 114–118 of this Annual Report.
• Asset Management (“AM”): Provides investment management services to
a limited number of the Firm’s mutual funds deemed VIEs. AM earns a
fixed fee based upon assets managed; the fee varies with each fund’s
investment objective and is competitively priced. For the limited number of
funds that qualify as VIEs, AM’s relationships with such funds are not con-
sidered significant variable interests under FIN 46R.
• Treasury & Securities Services: Provides services to a number of VIEs. These
services are similar to those provided to non-VIEs. TSS earns market-based
fees for services provided. Such relationships are not considered significant
variable interests under FIN 46R.
• Commercial Banking: Utilizes VIEs to assist clients in accessing the financial
markets in a cost-efficient manner. This is often accomplished through the
use of products similar to those offered in the Investment Bank.
Commercial Banking may assist in the structuring and/or on-going admin-
istration of these VIEs and may provide liquidity, letters of credit and/or
derivative instruments in support of the VIE. Such relationships are not
considered significant variable interests under FIN 46R.
• The Private Equity business, included in Corporate, may be involved with
entities that could be deemed VIEs. Private equity activities are accounted
for in accordance with the Investment Company Audit Guide (“Audit
Guide”). The FASB deferred adoption of FIN 46R for nonregistered invest-
ment companies that apply the Audit Guide until the proposed Statement
of Position on the clarification of the scope of the Audit Guide is finalized.
The Firm continues to apply this deferral provision; had FIN 46R been
applied to VIEs subject to this deferral, the impact would have had an
insignificant impact on the Firm’s Consolidated financial statements as of
December 31, 2006.
As noted above, there are two broad categories of transactions involving VIEs
with which the IB is involved: multi-seller conduits and client intermediation.