JP Morgan Chase 2015 Annual Report Download - page 211

JPMorgan Chase & Co./2015 Annual Report 201
Assets and liabilities measured at fair value on a
nonrecurring basis
At December 31, 2015 and 2014, assets measured at fair
value on a nonrecurring basis were $1.7 billion and $4.5
billion, respectively, consisting predominantly of loans that
had fair value adjustments for the years ended December
31, 2015 and 2014. At December 31, 2015, $696 million
and $959 million of these assets were classified in levels 2
and 3 of the fair value hierarchy, respectively. At December
31, 2014, $1.3 billion and $3.2 billion of these assets were
classified in levels 2 and 3 of the fair value hierarchy,
respectively. Liabilities measured at fair value on a
nonrecurring basis were not significant at December 31,
2015 and 2014. For the years ended December 31, 2015,
2014 and 2013, there were no significant transfers
between levels 1, 2 and 3 related to assets held at the
balance sheet date.
Of the $959 million in level 3 assets measured at fair value
on a nonrecurring basis as of December 31, 2015:
• $556 million related to residential real estate loans
carried at the net realizable value of the underlying
collateral (i.e., collateral-dependent loans and other
loans charged off in accordance with regulatory
guidance). These amounts are classified as level 3, as
they are valued using a broker’s price opinion and
discounted based upon the Firm’s experience with actual
liquidation values. These discounts to the broker price
opinions ranged from 4% to 59%, with a weighted
average of 22%.
The total change in the recorded value of assets and
liabilities for which a fair value adjustment has been
included in the Consolidated statements of income for the
years ended December 31, 2015, 2014 and 2013, related
to financial instruments held at those dates, were losses of
$294 million, $992 million and $789 million, respectively;
these reductions were predominantly associated with loans.
For further information about the measurement of impaired
collateral-dependent loans, and other loans where the
carrying value is based on the fair value of the underlying
collateral (e.g., residential mortgage loans charged off in
accordance with regulatory guidance), see Note 14.
Additional disclosures about the fair value of financial
instruments that are not carried on the Consolidated
balance sheets at fair value
U.S. GAAP requires disclosure of the estimated fair value of
certain financial instruments, and the methods and
significant assumptions used to estimate their fair value.
Financial instruments within the scope of these disclosure
requirements are included in the following table. However,
certain financial instruments and all nonfinancial
instruments are excluded from the scope of these disclosure
requirements. Accordingly, the fair value disclosures
provided in the following table include only a partial
estimate of the fair value of JPMorgan Chase’s assets and
liabilities. For example, the Firm has developed long-term
relationships with its customers through its deposit base
and credit card accounts, commonly referred to as core
deposit intangibles and credit card relationships. In the
opinion of management, these items, in the aggregate, add
significant value to JPMorgan Chase, but their fair value is
not disclosed in this Note.
Financial instruments for which carrying value approximates
fair value
Certain financial instruments that are not carried at fair
value on the Consolidated balance sheets are carried at
amounts that approximate fair value, due to their short-
term nature and generally negligible credit risk. These
instruments include cash and due from banks, deposits with
banks, federal funds sold, securities purchased under resale
agreements and securities borrowed, short-term
receivables and accrued interest receivable, commercial
paper, federal funds purchased, securities loaned and sold
under repurchase agreements, other borrowed funds,
accounts payable, and accrued liabilities. In addition, U.S.
GAAP requires that the fair value of deposit liabilities with
no stated maturity (i.e., demand, savings and certain money
market deposits) be equal to their carrying value;
recognition of the inherent funding value of these
instruments is not permitted.