JP Morgan Chase 2010 Annual Report Download - page 138

Management’s discussion and analysis
138 JPMorgan Chase & Co./2010 Annual Report
If the cardholder does not comply with the modified payment
terms, then the credit card loan agreement generally reverts back
to its pre-modification payment rate terms. Assuming that those
borrowers do not begin to perform in accordance with those
payment terms, the loans continue to age and will ultimately be
charged off in accordance with the Firm’s standard charge-off
policy. In addition, if a borrower successfully completes a short-
term modification program, then the loan reverts back to its pre-
modification payment terms. However, in most cases the Firm
does not reinstate the borrower’s line of credit.
At December 31, 2010 and 2009, the Firm had $10.0 billion and
$6.2 billion, respectively, of on–balance sheet credit card loans
outstanding that have been modified in troubled debt restructur-
ings. These balances include both credit card loans with modified
payment terms and credit card loans that have reverted back to
their pre-modification payment terms. The increase in modified
credit card loans outstanding from December 31, 2009, to Decem-
ber 31, 2010, is primarily attributable to previously-modified loans
held in Firm-sponsored credit card securitization trusts being con-
solidated as a result of adopting the new accounting guidance
regarding consolidation of VIEs.
Consistent with the Firm’s policy, all credit card loans typically
remain on accrual status. However, the Firm separately establishes
an allowance for the estimated uncollectible portion of billed and
accrued interest and fee income on credit card loans.
COMMUNITY REINVESTMENT ACT EXPOSURE
The Community Reinvestment Act (“CRA”) encourages banks
to meet the credit needs of borrowers in all segments of their
communities, including neighborhoods with low or moderate
incomes. JPMorgan Chase is a national leader in community
development by providing loans, investments and community
development services in communities across the United States.
At December 31, 2010 and 2009, the Firm’s CRA loan portfolio
was approximately $16 billion and $18 billion, respectively. Of
the CRA portfolio 65% were residential mortgage loans and
15% were business banking loans at both December 31, 2010
and 2009, respectively; 9% and 8%, respectively, were com-
mercial real estate loans; and 11% and 12%, respectively, were
other loans. The CRA nonaccrual loans were 6% of the Firm’s
nonaccrual loans at both December 31, 2010 and 2009. Net
charge-offs in the CRA portfolio were 3% of the Firm’s net
charge-offs in both 2010 and 2009.