JP morgan financial statements

8/7/2019 JP morgan financial statements

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JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

(a wholly-owned subsidiary of JPMorgan Chase & Co.)

CONSOLIDATED FINANCIAL STATEMENTS

For the quarterly period ended June 30, 2009


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TABLE OF CONTENTS

For the quarterly period ended June 30, 2009

Page(s)

Consolidated Financial Statements JPMorgan Chase Bank, National Association

Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2009 and 2008 ........... ..... 3

Consolidated Balance Sheets (unaudited) at June 30, 2009, and December 31, 2008......... ........... ........... .......... .......... .... 4

Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income (unaudited) for the

six months ended June 30, 2009 and 2008 .....................................................................................................................5

Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2009 and 2008 ............ ........... .. 6

Notes to Consolidated Financial Statements (unaudited) ........... ........... ........... ........... .......... ........... ............ ........... .... 773

Supplementary Information

Selected Quarterly Financial Data (unaudited).................. ........... .......... ........... ........... .......... ............ .......... .......... ......... 74

Selected Annual Financial Data (unaudited) ................................................................................................................... 75

Glossary of Terms....................................................................................................................................................7678


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JPMORGAN CHASE BANK, NATIONAL ASSOCIATION(a wholly-own subsidiary of JPMorgan Chase & Co.)

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three months ended June 30, Six months ended June 30,

(in millions) 2009 2008 2009 2008

RevenueInvestment banking fees $ 1,057 $ 818 $ 1,796 $ 1,394

Principal transactions 1,931 1,779 5,035 4,254

Lending & deposit-related fees 1,765 1,103 3,448 2,134

Asset management, administration and commissions 2,270 2,503 4,405 5,034

Securities gains(a) 362 333 564 388

Mortgage fees and related income 694 693 2,270 1,217

Credit card income 1,025 831 2,067 1,664

Other income 330 269 605 616

Noninterest revenue 9,434 8,329 20,190 16,701

Interest income 12,497 13,253 26,135 27,587

Interest expense 2,653 6,288 5,828 14,039

Net interest income 9,844 6,965 20,307 13,548

Total net revenue 19,278 15,294 40,497 30,249Provision for credit losses 5,799 2,533 11,877 6,271

Noninterest expenseCompensation expense 5,188 5,277 11,134 8,725

Occupancy expense 814 594 1,598 1,179

Technology, communications and equipment expense 1,003 873 1,999 1,737

Professional & outside services 1,049 987 2,107 1,983

Marketing 152 135 295 285

Other expense 2,880 2,039 5,018 3,638

Amortization of intangibles 152 153 302 304

Merger costs 141 19 317 19

Total noninterest expense 11,379 10,077 22,770 17,870

Income before income tax expense 2,100 2,684 5,850 6,108

Income tax expense 644 674 1,891 1,878Net income $ 1,456 $ 2,010 $ 3,959 $ 4,230

(a) Securities gains for the three and six months ended June 30, 2009, each included credit losses of $66 million, consisting of $676 millionof gross unrealized losses, net of $610 million recognized in other comprehensive income.

The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.


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CONSOLIDATED BALANCE SHEETS (UNAUDITED)June 30, December 31,

(in millions, except share data) 2009 2008Assets

Cash and due from banks $ 24,279 $ 25,502Deposits with banks 60,124 127,623Federal funds sold and securities purchased under resale agreements (included $18,315 and $19,865 at fair value at

June 30, 2009, and December 31, 2008, respectively) 193,364 199,716Securities borrowed (included $3,360 and $3,381 at fair value at June 30, 2009, and December 31, 2008,

respectively) 48,343 42,658Trading assets (included assets pledged of $42,209 and $118,079 at June 30, 2009, and December 31, 2008,

respectively) 276,837 365,365Securities (included $334,589 and $199,710 at fair value at June 30, 2009, and December 31, 2008,

respectively, and assets pledged of $105,594 and $26,376 at June 30, 2009, and December 31, 2008,respectively) 334,618 199,744

Loans (included $1,990 and $6,038 at fair value at June 30, 2009, and December 31, 2008, respectively) 596,605 662,312Allowance for loan losses (21,995) (17,153)

Loans, net of allowance for loan losses 574,610 645,159

Accrued interest and accounts receivable 45,757 44,345Premises and equipment 9,601 9,161Goodwill 27,438 27,371Other intangible assets:

Mortgage servicing rights 14,430 9,236Purchased credit card relationships 122 128All other intangibles 3,089 3,346

Other assets (included $1,450 and $1,780 at fair value at June 30, 2009, and December 31, 2008,respectively) 51,386 46,888

Total assets $ 1,663,998 $ 1,746,242

LiabilitiesDeposits (included $3,787 and $5,605 at fair value at June 30, 2009, and December 31, 2008, respectively) $ 974,480 $ 1,055,765Federal funds purchased and securities loaned or sold under repurchase agreements (included $2,957 and $2,968 at

fair value at June 30, 2009, and December 31, 2008, respectively) 258,421 180,716Other borrowed funds (included $1,098 and $2,714 at fair value at June 30, 2009, and December 31, 2008,

respectively) 52,673 94,953Trading liabilities 102,267 142,409Accounts payable and other liabilities (included the allowance for lending-related commitments

of $745 and $656 at June 30, 2009, and December 31, 2008, respectively, and $8 and zero at fair value at

June 30, 2009, and December 31, 2008, respectively) 66,060 67,014Beneficial interests issued by consolidated variable interest entities (included $1,185 and $1,364 at fair value atJune 30, 2009, and December 31, 2008, respectively) 10,700 4,156

Long-term debt (included $31,490 and $34,924 at fair value at June 30, 2009, and December 31, 2008,respectively) 67,667 71,862

Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities 600 600

Total liabilities 1,532,868 1,617,475

Commitments and contingencies (see Note 24 of these Consolidated Financial Statements)Stockholders equityPreferred stock ($1 par value; authorized 15,000,000 shares at June 30, 2009, and December 31, 2008;

issued 0 shares at June 30, 2009, and December 31, 2008, respectively) Common stock ($12 par value; authorized 150,000,000 shares at June 30, 2009, and December 31, 2008; issued

148,761,243 shares at June 30, 2009, and December 31, 2008, respectively) 1,785 1,785Capital surplus 78,031 77,254Retained earnings 52,267 52,309Accumulated other comprehensive income (loss) (953) (2,581)Total stockholders equity 131,130 128,767

Total liabilities and stockholders equity $ 1,663,998 $ 1,746,242



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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITYAND COMPREHENSIVE INCOME (UNAUDITED)

Six months ended June 30,

(in millions) 2009 2008

Common stock

Balance at January 1, and June 30 $ 1,785 $ 1,785

Capital surplusBalance at January 1 77,254 62,439Cash capital contribution from JPMorgan Chase & Co. 604 1

Adjustments to capital due to transactions with JPMorgan Chase & Co. 173 68

Balance at June 30 78,031 62,508

Retained earningsBalance at January 1 52,309 42,808

Net income 3,959 4,230

Cash dividends paid to JPMorgan Chase & Co. (4,000) (1,000)

Net legal entity mergers (1)

Balance at June 30 52,267 46,038

Accumulated other comprehensive income (loss)

Balance at January 1 (2,581) (686)Other comprehensive income (loss) 1,628 (716)

Balance at June 30 (953) (1,402)

Total stockholders equity $ 131,130 $ 108,929

Comprehensive incomeNet income $ 3,959 $ 4,230

Other comprehensive income (loss) 1,628 (716)

Comprehensive income $ 5,587 $ 3,514



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JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

(a wholly-own subsidiary of JPMorgan Chase & Co.)CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six months ended June 30,(in millions) 2009 2008

Operating activitiesNet income $ 3,959 $ 4,230Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Provision for credit losses 11,877 6,271Depreciation and amortization 1,291 1,190Amortization of intangibles 302 304Deferred tax benefit (2,308) (1,099)Investment securities gains (564) (388)

Originations and purchases of loans held-for-sale (9,843) (21,269)Proceeds from sales, securitizations and paydowns of loans held-for-sale 15,787 22,589Net change in:

Trading assets 117,585 8,137Securities borrowed (5,704) (14,864)Accrued interest and accounts receivable (1,444) 300Other assets 15,598 (12,991)Trading liabilities (57,263) (889)Accounts payable and other liabilities 796 (2,241)

Other operating adjustments (2,797) 1,730

Net cash provided by (used in) operating activities 87,272 (8,990)

Investing activitiesNet change in:

Deposits with banks 67,456 (1,854)Federal funds sold and securities purchased under resale agreements 5,877 (15,910)

Held-to-maturity securities:Proceeds 5 5

Available-for-sale securities:Proceeds from maturities 46,747 21,078Proceeds from sales 65,245 31,403Purchases (242,832) (85,624)

Proceeds from sales and securitization of loans held-for-investment 21,973 8,838Other changes in loans, net 33,613 (35,917)Net cash used in business acquisitions or dispositions (29) (174)Net maturities of asset-backed commercial paper guaranteed by the FRBB 130 All other investing activities, net (918) (2,776)

Net cash used in investing activities (2,733) (80,931)

Financing activitiesNet change in:

Deposits (111,747) 39,682Federal funds purchased and securities loaned or sold under repurchase agreements 77,797 57,880Other borrowed funds (42,121) (7,602)

Proceeds from the issuance of long-term debt and trust-preferred capital debt securities 9,285 12,238Repayments of long-term debt and trust-preferred capital debt securities (15,001) (19,653)Cash capital contribution from JPMorgan Chase & Co. 604 1Cash dividends paid (4,000) (1,000)All other financing activities, net (681) 660

Net cash (used in) provided by financing activities (85,864) 82,206

Effect of exchange rate changes on cash and due from banks 102 244

Net (decrease) in cash and due from banks (1,223) (7,471)Cash and due from banks at the beginning of the year 25,502 38,696

Cash and due from banks at the end of the period $ 24,279 $ 31,225

Cash interest paid $ 5,187 $ 16,143Cash income taxes paid 4,709 3,335



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See Glossary of Terms on pages 7678 of these Consolidated Financial Statements for definitions of terms usedthroughout the Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 BASIS OF PRESENTATION

JPMorgan Chase Bank, National Association (JPMorgan Chase Bank, N.A.) is a wholly-owned bank subsidiary ofJPMorgan Chase & Co. (JPMorgan Chase), which is a leading global financial services firm and one of the largestbanking institutions in the United States of America (U.S.), with operations in more than 60 countries. JPMorganChase Bank, N.A. offers a wide range of banking services to its customers both domestically in the U.S. andinternationally, including investment banking, financial services for consumers and businesses, financial transactionsprocessing and asset management. Under the J.P. Morgan and Chase brands, JPMorgan Chase Bank, N.A. servesmillions of customers in the U.S. and many of the worlds most prominent corporate, institutional and governmentalclients.

JPMorgan Chase Bank, N.A. is chartered by the Office of the Comptroller of the Currency (OCC), a bureau of theUnited States Department of the Treasury. JPMorgan Chase Bank, N.A.s main office is located in Columbus, Ohio, andit has branches in 23 states.

The accounting and financial reporting policies of JPMorgan Chase Bank, N.A. and its subsidiaries conform to

accounting principles generally accepted in the United States of America (U.S. GAAP). Additionally, whereapplicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities.The unaudited consolidated financial statements prepared in conformity with U.S. GAAP require management to makeestimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expense, and the disclosures ofcontingent assets and liabilities. Actual results could be different from these estimates. In the opinion of management, allnormal recurring adjustments have been included for a fair statement of this interim financial information. These unauditedconsolidated financial statements should be read in conjunction with the audited consolidated financial statements andrelated notes thereto included in JPMorgan Chase Bank, N.A.s Consolidated Financial Statements for the year endedDecember 31, 2008 (the 2008 Annual Financial Statements).

Certain amounts in prior periods have been reclassified to conform to the current presentation.

NOTE 2 ACCOUNTING AND REPORTING DEVELOPMENTS

Business combinations/noncontrolling interests in consolidated financial statementsIn December 2007, the FASB issued SFAS 141R and SFAS 160, which amend the accounting and reporting of businesscombinations, as well as noncontrolling (i.e., minority) interests. For JPMorgan Chase Bank, N.A., SFAS 141R becameeffective for business combinations that close on or after January 1, 2009. SFAS 160 became effective for JPMorganChase Bank, N.A. for fiscal periods beginning January 1, 2009. In April 2009, the FASB issued FSP FAS 141(R)-1,which amends the accounting for contingencies acquired in a business combination.

SFAS 141R, as amended, will generally only impact the accounting for future business combinations and will impactcertain aspects of business combination accounting, such as transaction costs and certain merger-related restructuringreserves, as well as the accounting for partial acquisitions where control is obtained by JPMorgan Chase Bank, N.A. Oneexception to the prospective application of SFAS 141R relates to accounting for income taxes associated with businesscombinations that closed prior to January 1, 2009. Once the purchase accounting measurement period closes for theseacquisitions, any further adjustments to income taxes recorded as part of these business combinations will impact incometax expense. Previously, further adjustments were predominantly recorded as adjustments to goodwill.

SFAS 160 requires that noncontrolling interests be accounted for and presented as equity if material, rather than as aliability or mezzanine equity. SFAS 160s presentation and disclosure requirements are to be applied retrospectively. Theadoption of the reporting requirements of this pronouncement was not material to JPMorgan Chase Bank, N.A.sConsolidated Balance Sheets or financial performance.

Accounting for transfers of financial assets and repurchase financing transactionsIn February 2008, the FASB issued FSP FAS 140-3, which requires an initial transfer of a financial asset and arepurchase financing that was entered into contemporaneously with, or in contemplation of, the initial transfer to beevaluated together as a linked transaction under SFAS 140, unless certain criteria are met. JPMorgan Chase Bank, N.A.adopted FSP FAS 140-3 on January 1, 2009, for new transactions entered into after the date of adoption. The adoption ofFSP FAS 140-3 did not have a material impact on the Consolidated Balance Sheets or financial performance.


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Disclosures about derivative instruments and hedging activities FASB Statement No. 161In March 2008, the FASB issued SFAS 161, which amends the disclosure requirements of SFAS 133. SFAS 161requires increased disclosures about derivative instruments and hedging activities and their effects on an entitysfinancial position, financial performance and cash flows. SFAS 161 is effective for fiscal years beginning afterNovember 15, 2008. JPMorgan Chase Bank, N.A. adopted SFAS 161 on January 1, 2009. SFAS 161 only affectedJPMorgan Chase Bank, N.A.s disclosures of derivative instruments and related hedging activities, and not itsConsolidated Balance Sheets, financial performance or Consolidated Statements of Cash Flows.

Determining whether an instrument (or embedded feature) is indexed to an entitys own stockIn September 2008, the EITF issued EITF 07-5, which establishes a two-step process for evaluating whether equity-linked financial instruments and embedded features are indexed to a companys own stock for purposes of determiningwhether the derivative scope exception in SFAS 133 should be applied. EITF 07-5 is effective for fiscal years beginningafter December 2008. The adoption of this EITF on January 1, 2009, did not have an impact on JPMorgan Chase Bank,N.A.s Consolidated Balance Sheets or financial performance.

The recognition and presentation of other-than-temporary impairmentIn April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, which amends the other-than-temporary impairmentmodel for debt securities. Under the FSP, an other-than-temporary-impairment must be recognized if an investor has theintent to sell the debt security or if it is more likely than not that it will be required to sell the debt security beforerecovery of its amortized cost basis. In addition, the FSP changes the amount of impairment to be recognized in current-period earnings when an investor does not have the intent to sell or if it is more likely than not that it will not be required

to sell the debt security, as in these cases only the amount of the impairment associated with credit losses is recognized inincome. The FSP also requires additional disclosures regarding the calculation of credit losses, as well as factorsconsidered in reaching a conclusion that an investment is not other-than-temporarily impaired. The FSP is effective forinterim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending afterMarch 15, 2009. JPMorgan Chase Bank, N.A. elected to early adopt the FSP as of January 1, 2009. For additionalinformation regarding the impact on JPMorgan Chase Bank, N.A. of the adoption of the FSP, see Note 12 on pages 3843 of these Consolidated Financial Statements.

Determining fair value when the volume and level of activity for the asset or liability have significantly decreased,and identifying transactions that are not orderlyIn April 2009, the FASB issued FSP FAS 157-4. The FSP provides additional guidance for estimating fair value inaccordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly declined.The FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. The FSP iseffective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted. JPMorganChase Bank, N.A. elected to early adopt the FSP in the first quarter of 2009. The application of the FSP did not have animpact on JPMorgan Chase Bank, N.A.s Consolidated Balance Sheets or financial performance.

Interim disclosures about fair value of financial instrumentsIn April 2009, the FASB issued FSP FAS 107-1 and APB 28-1. The FSP requires the SFAS 107 disclosures about thefair value of financial instruments to be presented in interim financial statements in addition to annual financialstatements. The FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permittedfor periods ending after March 15, 2009. JPMorgan Chase Bank, N.A. adopted the additional disclosure requirements forsecond quarter reporting.

Employers disclosures about postretirement benefit plan assetsIn December 2008, the FASB issued FSP FAS 132(R)-1, which requires more detailed disclosures about employersplan assets, including investment strategies, major categories of plan assets, concentrations of risk within plan assets, andvaluation techniques used to measure the fair value of plan assets. This FSP is effective for fiscal years ending after

December 15, 2009. JPMorgan Chase Bank, N.A. intends to adopt these additional disclosure requirements on theeffective date.

Accounting for transfers of financial assets and consolidation of variable interest entitiesIn June 2009, the FASB issued two new standards (SFAS 166 and SFAS 167), which amend the guidance of accountingfor the transfers of financial assets and the consolidation of variable interest entities. SFAS 166 eliminates the concept ofQSPEs and provides additional guidance with regard to accounting for transfers of financial assets. SFAS 167 changesthe approach for determining the primary beneficiary of a VIE from a quantitative risk and reward model to a qualitativemodel, based on control and economics. Both standards are effective for annual reporting periods beginning afterNovember 15, 2009, including all interim periods within the first annual reporting period. Upon adoption, all existingQSPEs must be evaluated for consolidation. Entities expected to be impacted include revolving securitization entities,


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bank-administered asset-backed commercial paper conduits, and certain mortgage and consumer securitization entities.JPMorgan Chase Bank, N.A. is still assessing the potential impact of the standards.

Subsequent eventsIn May 2009, the FASB issued SFAS 165, which establishes general standards of accounting for and disclosure of eventsthat occur after the balance sheet date but before financial statements are issued or are available to be issued. Thestatement is effective for interim or annual financial periods ending after June 15, 2009. JPMorgan Chase Bank, N.A.

adopted the statement in the second quarter of 2009. The application of the statement did not have any impact onJPMorgan Chase Bank, N.A.s Consolidated Balance Sheets or financial performance.

NOTE 3 BUSINESS CHANGES AND DEVELOPMENTS

Acquisition of the banking operations of Washington Mutual BankRefer to Note 3 on pages 1011 of JPMorgan Chase Bank, N.A.s 2008 Annual Financial Statements for a discussion ofJPMorgan Chase Bank, N.A.s acquisition of the banking operations of Washington Mutual Bank (Washington Mutual) onSeptember 25, 2008, including its purchase price and the allocation of the purchase price to the net assets acquired and theresulting extraordinary gain. The acquisition is being accounted for under the purchase method of accounting in accordancewith SFAS 141. The total purchase price to complete the acquisition was $1.9 billion, which was allocated to the WashingtonMutual assets acquired and liabilities assumed using their fair values as of September 25, 2008. The allocation of the purchaseprice may be modified through September 25, 2009, as more information is obtained about the fair value of assets acquired andliabilities assumed.

Unaudited pro forma condensed combined financial information reflecting the Washington Mutual transactionThe following unaudited pro forma condensed combined financial information presents the results of operations ofJPMorgan Chase Bank, N.A. as they may have appeared for the three and six months ended June 30, 2008, if theWashington Mutual transaction had been completed on January 1, 2008.

Three months ended Six months ended(in millions) June 30, 2008 June 30, 2008

Total net revenue $ 18,843 $ 37,313Net income 71 329

The unaudited pro forma combined financial information is presented for illustrative purposes only and does not indicatethe financial results of the combined company had the companies actually been combined as of January 1, 2008, nor is itindicative of the results of operations in future periods. Included in the unaudited pro forma combined financial

information for the three and six months ended June 30, 2008, were pro forma adjustments to reflect the results ofoperations of Washington Mutuals banking operations, considering the purchase accounting, valuation and accountingconformity adjustments related to the transaction. The amortization of purchase accounting adjustments to reportinterest-earnings assets acquired and interest-bearing liabilities assumed at current interest rates is reflected.

Merger with The Bear Stearns Companies Inc.Refer to Note 3 on pages 1011 of JPMorgan Chase Bank, N.A.s 2008 Annual Financial Statementsfor a discussion of themerger on May 30, 2008, of a wholly-owned subsidiary of JPMorgan Chase with The Bear Stearns Companies Inc. (BearStearns). The merger is being accounted for under the purchase method of accounting in accordance with SFAS 141. Thetotal purchase price to complete the merger was $1.5 billion, which was allocated to the Bear Stearns assets acquired andliabilities assumed using their fair values as of April 8, 2008, and May 30, 2008. Additional information regarding themerger is provided in Note 2 on pages 125127 of JPMorgan Chases Annual Report on Form 10-K for the year endedDecember 31, 2008, and Note 2 on pages 9699 of JPMorgan Chases Quarterly Report on Form 10-Q for the quarterlyperiod ended June 30, 2009.

Subsequent eventsJPMorgan Chase Bank, N.A. has performed an evaluation of events that have occurred subsequent to June 30, 2009, andthrough August 28, 2009 (the date of the issuance of these Consolidated Financial Statements). There have been nosubsequent events that occurred during such period that would require disclosure in these Consolidated FinancialStatements or would be required to be recognized in the Consolidated Financial Statements as of or for the three- andsix-month periods ending June 30, 2009.


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NOTE 4 FAIR VALUE MEASUREMENT

For a further discussion of JPMorgan Chase Bank, N.A.s valuation methodologies for assets, liabilities and lending-relatedcommitments measured at fair value and the SFAS 157 valuation hierarchy, see Note 5 on pages 1324 of JPMorgan ChaseBank, N.A.s 2008 Annual Financial Statements.

During the first half of 2009, there were no material changes made to JPMorgan Chase Bank, N.A.s valuation models.

For a further discussion of the accounting for trading assets and liabilities, see Note 7 on pages 2728 of JPMorgan ChaseBank, N.A.s 2008 Annual Financial Statements.

The following table presents the financial instruments carried at fair value as of June 30, 2009, and December 31, 2008, by

major product category and by the SFAS 157 valuation hierarchy.

Assets and liabilities measured at fair value on a recurring basis

Fair value hierarchy

June 30, 2009 (in millions) Level 1 Level 2 Level 3FIN 39

netting(d)Total

fair value

Federal funds sold and securities purchased under resaleagreements $ $ 18,315 $ $ $ 18,315

Securities borrowed 3,360 3,360

Trading assets:Debt instruments:

Mortgage-backed securities:U.S. government agencies(a)

2,009 2,009Residential-nonagency 545 208 753Commercial-nonagency 47 168 215

Total mortgage-backed securities 2,009 592 376 2,977U.S. Treasury and government agencies

(a) 5,049 12 5,061

Obligations of U.S. states and municipalities 1,022 300 1,322Certificates of deposit, bankers acceptances and

commercial paper 878 878Non-U.S. government debt securities 30,324 27,446 62 57,832Corporate debt securities 33,511 4,934 38,445Loans 15,732 13,158 28,890Asset-backed securities 1,085 6,462 7,547

Total debt instruments 37,382 80,278 25,292 142,952Equity securities 44,401 1,161 224 45,786Physical commodities

(b) 984 2,121 3,105

Other 1,150 149 1,299Total debt and equity instruments 82,767 84,710 25,665 193,142Derivative receivables

(c) 1,719 1,725,134 56,888 (1,700,046) 83,695

Total trading assets 84,486 1,809,844 82,553 (1,700,046) 276,837

Available-for-sale securities:Mortgage-backed securities:

U.S. government agencies(a)

176,701 3,738 180,439Residential-nonagency 11,255 1,053 12,308Commercial-nonagency 4,235 4,235

Total mortgage-backed securities 176,701 19,228 1,053 196,982U.S. Treasury and government agencies

(a) 606 33,982 34,588

Obligations of U.S. states and municipalities 3,136 3,136Certificates of deposit 5,603 5,603Non-U.S. government debt securities 5,034 11,317 16,351Corporate debt securities 3,714 44,046 52 47,812

Asset-backed securities: Credit card receivables 16,401 16,401Collateralized debt and loan obligations 10 11,489 11,499Other 1,428 1,428

Equity securities 689 48 52 789Total available-for-sale securities 186,744 135,199 12,646 334,589

Loans 1,285 705 1,990Mortgage servicing rights 14,430 14,430Other assets 1,450 1,450Total assets measured at fair value on a recurring basis $ 271,230 $ 1,968,003 $ 111,784 $ (1,700,046) $ 650,971


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June 30, 2009 (in millions) Level 1 Level 2 Level 3FIN 39

netting(d)

Total

fair value

Deposits $ $ 3,160 $ 627 $ $ 3,787Federal funds purchased and securities loaned or sold

under repurchase agreements 2,957 2,957

Other borrowed funds 1,006 92 1,098Trading liabilities:

Debt and equity instruments 29,310 9,542 44 38,896Derivative payables

(c) 1,363 1,705,012 39,103 (1,682,107) 63,371

Total trading liabilities 30,673 1,714,554 39,147 (1,682,107) 102,267Accounts payable and other liabilities 4 4 8Beneficial interests issued by consolidated VIEs 157 1,028 1,185Long-term debt 17,094 14,396 31,490Total liabilities measured at fair value on a

recurring basis $ 30,673 $ 1,738,932 $ 55,294 $ (1,682,107) $ 142,792


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December 31, 2008 (in millions) Level 1 Level 2 Level 3FIN 39

netting(d)Total

fair value

Federal funds sold and securities purchased underresale agreements $ $ 19,865 $ $ $ 19,865

Securities borrowed 3,381 3,381

Trading assets(e):Debt instruments:

Mortgage-backed securities:U.S. government agencies(a) 7,025 3,565 10,590Residential- nonagency 145 615 760Commercial- nonagency 140 174 314

Total mortgage-backed securities 7,025 3,850 789 11,664U.S. Treasury and government agencies(a) 7,368 1,489 8,857Obligations of U.S. states and municipalities 1,709 353 2,062Certificates of deposit, bankers acceptances and

commercial paper 1,180 1,204 2,384Non-U.S. government debt securities 20,716 17,992 12 38,720Corporate debt securities 18 47,370 4,838 52,226Loans 14,254 14,481 28,735

Asset-backed securities 1,082 5,540 6,622

Total debt instruments 36,307 88,950 26,013 151,270Equity securities 64,867 2,218 235 67,320Physical commodities(b) 3,455 3,455Other 4 1,718 21 1,743

Total debt and equity instruments 101,178 96,341 26,269 223,788Derivative receivables(c) 1,759 2,661,825 50,663 (2,572,670) 141,577

Total trading assets 102,937 2,758,166 76,932 (2,572,670) 365,365

Available-for-sale securities(e):Mortgage-backed securities:U.S. government agencies(a) 109,008 8,377 117,385Residential-nonagency 8,964 6 8,970Commercial-nonagency 3,939 3,939

Total mortgage-backed securities 109,008 21,280 6 130,294

U.S. Treasury and government agencies

(a)

537 9,741 10,278Obligations of U.S. states and municipalities 34 879 913Certificates of deposit 17,282 17,282Non-U.S. government debt securities 6,112 2,232 8,344Corporate debt securities 9,448 57 9,505Asset-backed securities:

Credit card receivables 9,468 9,468Collateralized debt and loan obligations 11,195 11,195Other 643 643

Equity securities 1,776 12 1,788

Total available-for-sale securities 117,467 70,985 11,258 199,710

Loans 4,641 1,397 6,038Mortgage servicing rights 9,236 9,236Other assets 130 1,650 1,780

Total assets measured at fair value on a recurringbasis $ 220,404 $ 2,857,168 $ 100,473 $ (2,572,670) $ 605,375


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December 31, 2008 (in millions) Level 1 Level 2 Level 3FIN 39

netting(d)Total

fair value

Deposits $ $ 4,370 $ 1,235 $ $ 5,605Federal funds purchased and securities loaned

or sold under repurchase agreements 2,968 2,968

Other borrowed funds 2,658 56 2,714

Trading liabilities:Debt and equity instruments 21,595 9,030 287 30,912Derivative payables(c) 1,211 2,610,277 41,731 (2,541,722) 111,497

Total trading liabilities 22,806 2,619,307 42,018 (2,541,722) 142,409

Accounts payable and other liabilities Beneficial interests issued by consolidated VIEs 1,364 1,364Long-term debt 20,399 14,525 34,924

Total liabilities measured at fair value on arecurring basis $ 22,806 $ 2,651,066 $ 57,834 $(2,541,722) $ 189,984

(a) Includes total U.S. government-sponsored enterprise obligations of $174.9 billion and $130.6 billion at June 30, 2009, and December31, 2008, respectively, which were predominantly mortgage-related.

(b) Physical commodities inventories are accounted for at the lower of cost or fair value.(c) Derivative receivables and derivative payables balances are presented net on the Consolidated Balance Sheets where there is a legally

enforceable master netting agreement in place with counterparties. For purposes of the table above, JPMorgan Chase Bank, N.A. doesnot reduce the derivative receivables and derivative payables balances for this netting adjustment, either within or across the levels ofthe fair value hierarchy, as such netting is not relevant to a presentation that is based on the transparency of inputs to the valuation of anasset or liability. Therefore, the balances reported in the fair value hierarchy table are gross of any counterparty netting adjustments.

However, if JPMorgan Chase Bank, N.A. were to net such balances, the reduction in the level 3 derivative receivables and derivativepayables balances would be $20.2 billion at June 30, 2009

(d) As permitted under FIN 39, JPMorgan Chase Bank, N.A. has elected to net derivative receivables and derivative payables and therelated cash collateral received and paid when a legally enforceable master netting agreement exists.

(e) Prior periods have been revised to conform to the current presentation.

Changes in level 3 recurring fair value measurementsThe following tables include a rollforward of the balance sheet amounts for the three and six months ended June 30,2009 and 2008 (including changes in fair value), for financial instruments classified by JPMorgan Chase Bank, N.A.within level 3 of the valuation hierarchy. When a determination is made to classify a financial instrument within level 3,the determination is based on the significance of the unobservable parameters to the overall fair value measurement.However, level 3 financial instruments typically include, in addition to the unobservable or level 3 components,observable components (that is, components that are actively quoted and can be validated to external sources);accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that arepart of the valuation methodology. Also, JPMorgan Chase Bank, N.A. risk manages the observable components of level3 financial instruments using securities and derivative positions that are classified within level 1 or 2 of the valuationhierarchy; as these level 1 and level 2 risk management instruments are not included below, the gains or losses in thefollowing tables do not reflect the effect of JPMorgan Chase Bank, N.A.s risk management activities related to suchlevel 3 instruments.


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Fair value measurements using significant unobservable inputs

Three months endedJune 30, 2009(in millions)

Fair value,March 31,

2009

Totalrealized/

unrealizedgains/(losses)

Purchases,issuances,

settlements,net

Transfersinto and/or

out oflevel 3

Fair value,June 30,

2009

Change in unrealizedgains and (losses)related to financialinstruments heldat June 30, 2009

Assets:Trading assets:

Debt instruments:Mortgage-backed securities:

U.S. government agencies $ $ $ $ $ $ Residential-nonagency 221 20 (17) (16) 208 6Commercial-nonagency 172 51 (56) 1 168 15

Total mortgage-backedsecurities 393 71 (73) (15) 376 21

Obligations of U.S. states andmunicipalities 293 10 (3) 300 10

Non-U.S. government debtsecurities 77 9 (23) (1) 62 4

Corporate debt securities 5,468 72 (697) 91 4,934 49Loans 13,059 383 (76) (208) 13,158 336

Asset-backed securities 5,278 827 421 (64) 6,462 721Total debt instruments 24,568 1,372 (451) (197) 25,292 1,141Equity securities 52 14 69 89 224 12Other 53 9 51 36 149 10

Total debt and equity instruments 24,673 1,395(b)(c) (331) (72) 25,665 1,163(b)(c)Net derivative receivables 19,419 (6,472)(b) 932 3,906 17,785 (4,962)(b)Available-for-sale securities:

Asset-backed securities 10,632 765 92 11,489 766Other 779 33 340 5 1,157 32

Total available-for-sale securities 11,411 798(d) 432 5 12,646 798(d)

Loans 1,882 (31)(b) (1,128) (18) 705 (67)(b)Mortgage servicing rights 10,486 3,798(c) 146 14,430 3,798(c)Other assets 1,685 (97)(e) (133) (5) 1,450 (99)(e)

Liabilities(a):Deposits $ (928) $ (9)(b) $ 310 $ $ (627) $ (9)(b)Other borrowed funds (5) (10)(b) (40) (37) (92) (7)(b)Trading liabilities:

Debt and equity instruments (259) 16(b) 199 (44) 20(b)Accounts payable and other liabilities (6) 2(b) (4) 4(b)Beneficial interests issued by

consolidated VIEs (160)(b) 122 (990) (1,028) (160)(b)Long-term debt (14,153) (864)(b) 619 2 (14,396) (1,016)(b)


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Three months endedJune 30, 2008(in millions)

Fair value,March 31,

2008

Totalrealized/



settlements,net


out oflevel 3

Fair value,June 30,

2008



Debt and equity instruments $ 28,044 $ (431)(b)(c) $ 719 $ 2,792 $ 31,124 $ (806)(b)(c)Net derivative receivables 2,445 693(b) 2,482 211 5,831 (138)(b)

Available-for-sale securities 9 1(d) 10 2(d)

Loans 7,848 (86)(b) 29 (704) 7,087 (156)(b)Mortgage servicing rights 8,419 1,519(c) 992 10,930 1,519(c)

Other assets 790 (17)(e) 19 (25) 767 (38)(e)

Liabilities:Deposits $ (1,279) $ (44)(b) $ (7) $ (50) $ (1,380) $ (45)(b)

Other borrowed funds (101) (110)(b) 1 (39) (249) (23)(b)

Trading liabilities:Debt and equity instruments (727) 22(b) 3 (702) (164)(b)

Accounts payable and other

liabilities Beneficial interests issued by

consolidated VIEs (51) 22(b) (29) 22(b)

Long-term debt (20,306) (404)(b) 661 (140) (20,189) (407)(b)


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Six months endedJune 30, 2009(in millions)

Fair value,January 1,

2009

Totalrealized/



settlements,net


out oflevel 3

Fair value,June 30,

2009



Debt instruments:Mortgage-backed securities:

U.S. government agencies $ $ $ $ $ $ Residential-nonagency 615 12 (32) (387) 208 (23)Commercial-nonagency 174 53 (60) 1 168 31

Total mortgage-backedsecurities 789 65 (92) (386) 376 8

Obligations of U.S. states andmunicipalities 353 (8) (45) 300 (8)

Non-U.S. government debtsecurities 12 34 (18) 34 62 2

Corporate debt securities 4,838 37 (3,225) 3,284 4,934 32Loans 14,481 (771) (573) 21 13,158 (782)Asset-backed securities 5,540 732 292 (102) 6,462 634

Total debt instruments 26,013 89 (3,661) 2,851 25,292 (114)Equity securities 235 (74) (76) 139 224 11Other 21 (3) 81 50 149 (2)

Total debt and equity instruments 26,269 12(b)(c) (3,656) 3,040 25,665 (105)(b)(c)

Net derivative receivables 8,932 (6,205)(b) (685) 15,743 17,785 (5,998)(b)Available-for-sale securities:

Asset-backed securities 11,195 (133) 427 11,489 (320)Other 63 33 340 721 1,157 33

Total available-for-sale securities 11,258 (100)(d) 767 721 12,646 (287)(d)

Loans 1,397 (303)(b) (1,319) 930 705 (270)(b)Mortgage servicing rights 9,236 5,103(c) 91 14,430 5,103(c)Other assets 1,650 (262)(e) 45 17 1,450 (261)(e)Liabilities(a):Deposits $ (1,235) $ (23)(b) $ 693 $ (62) $ (627) $ (36)(b)Other borrowed funds (56) 74(b) (78) (32) (92) (5)(b)Trading liabilities:

Debt and equity instruments (287) (46)(b) 286 3 (44) 13(b)Accounts payable and other

liabilities 4(b) (8) (4) 4(b)Beneficial interests issued by

consolidated VIEs (160)(b) 122 (990) (1,028) (160)(b)Long-term debt (14,525) 9(b) 1,782 (1,662) (14,396) (303)(b)


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Fair value,January 1,

2008

Totalrealized/



settlements,net


out oflevel 3

Fair value,June 30,

2008



Debt and equity instruments $ 18,815 $ (372)(b)(c) $ 4,041 $ 8,640 $ 31,124 $ (439)(b)(c)Net derivative receivables 206 2,293(b) 2,801 531 5,831 416(b)

Available-for-sale securities 10 2(d) (2) 10 2(d)Loans 7,797 (280)(b) 274 (704) 7,087 (221)(b)Mortgage servicing rights 8,632 887(c) 1,411 10,930 887(c)Other assets 797 3(e) (8) (25) 767 25(e)

Liabilities(a):Deposits $ (1,228) $ (62)(b) $ (38) $ (52) $ (1,380) $ (69)(b)

Other borrowed funds (101) (75)(b) (137) 64 (249) (b)

Trading liabilities:Debt and equity instruments (480) (71)(b) (9) (142) (702) (253)(b)

Accounts payable and other

liabilities (25) 25 Beneficial interests issued byconsolidated VIEs (82) 53(b) (29) 53(b)

Long-term debt (21,198) (185)(b) 1,739 (545) (20,189) (97)(b)

(a) Level 3 liabilities as a percentage of total liabilities accounted for at fair value (including liabilities carried at fair value on a nonrecurring basis)were 39% and 30% at June 30, 2009, and December 31, 2008, respectively.

(b) Reported in principal transactions revenue.(c) Changes in fair value for retail mortgage loans originated with the intent to sell, and mortgage servicing rights are measured at fair value and

reported in mortgage fees and related income.(d) Realized gains (losses) and credit-related unrealized losses are reported in securities gains (losses). Unrealized gains (losses) not related to credit

are reported in accumulated other comprehensive income (loss).(e) Reported in other income.

Assets and liabilities measured at fair value on a nonrecurring basisCertain assets, liabilities and unfunded lending-related commitments are measured at fair value on a nonrecurring basis;

that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments onlyin certain circumstances (for example, when there is evidence of impairment). The following tables present assets andliabilities carried on the Consolidated Balance Sheets as well as off-balance sheet instruments by caption and levelwithin the SFAS 157 valuation hierarchy (as described above) as of June 30, 2009, and December 31, 2008, for which anonrecurring change in fair value has been recorded during the reporting period.


June 30, 2009 (in millions) Level 1 Level 2 Level 3 Total fair value

Loans(a) $ $ 4,364 $ 3,419 $ 7,783

Other real estate owned 110 134 244Other assets 197 197Total other assets 110 331 441

Total assets at fair value on a nonrecurring basis $ $ 4,474 $ 3,750 $ 8,224

Accounts payable and other liabilities(b) $ $ 147 $ 90 $ 237

Total liabilities at fair value on a nonrecurring basis $ $ 147 $ 90 $ 237


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December 31, 2008 (in millions) Level 1 Level 2 Level 3 Total fair value

Loans(a) $ $ 4,975 $ 3,685 $ 8,660

Other real estate owned 6 103 109Other assets 257 35 292

Total other assets 263 138 401Total assets at fair value on a nonrecurring basis $ $ 5,238 $ 3,823 $ 9,061

Accounts payable and other liabilities(b) $ $ 207 $ 81 $ 288

Total liabilities at fair value on a nonrecurring basis $ $ 207 $ 81 $ 288

(a) Includes leveraged lending and other loan warehouses held-for-sale.(b) Represents the fair value adjustment associated with $887 million and $1.4 billion of unfunded held-for-sale lending-related commitments within

the leveraged lending portfolio at June 30, 2009, and December 31, 2008, respectively.

Nonrecurring fair value changesThe following table presents the total change in value of financial instruments for which a fair value adjustment has beenincluded in the Consolidated Statements of Income for the three and six months ended June 30, 2009 and 2008, related tofinancial instruments held at June 30, 2009 and 2008.


(in millions) 2009 2008 2009 2008

Loans $ (1,329) $ (843) $ (2,302) $ (1,565)Other assets (40) (2) (77) (4)Accounts payable and other liabilities 16 47

Total nonrecurring fair value gains (losses) $ (1,353) $ (845) $ (2,332) $ (1,569)

In the above table, loans predominantly include: (1) write-downs of delinquent consumer residential mortgage and homeequity loans within the retail business, where impairment is based on the fair value of the underlying collateral; and (2)the change in fair value of leveraged lending and warehouse loans in the investment banking business, which are carriedon the Consolidated Balance Sheet at the lower of cost or fair value. Accounts payable and other liabilitiespredominantly include the change in fair value for unfunded lending-related commitments within the leveraged lendingportfolio.

Level 3 analysis

Consolidated Balance Sheets changesLevel 3 assets (including assets measured at fair value on a nonrecurring basis) were 7% of total JPMorgan Chase Bank,N.A. assets and 18% of total assets measured at fair value at June 30, 2009, compared with 6% and 17%, respectively, atDecember 31, 2008. The following describes significant changes to level 3 assets during the quarter.

For the three months ended June 30, 2009Level 3 assets decreased by $6.4 billion in the second quarter of 2009, largely due to an $11.8 billion decrease inderivative receivables predominantly due to changes in credit spreads. This decrease was partially offset by a $3.9billion increase in mortgage servicing rights (MSRs) primarily due to market interest rate and other changes impactingJPMorgan Chase Bank, N.A.s estimate of future prepayments, as well as sales in the retail business of originated loans forwhich servicing rights were retained.

For the six months ended June 30, 2009Level 3 assets increased by $11.2 billion in the first half of 2009 due to the following:

Transfer of structured credit derivative receivables resulting from a decrease in transaction activity and the lack ofobservable market data. At June 30, 2009, the fair value of these receivables was approximately $32.3 billion.Offsetting these receivables were derivative payables with a fair value of $17.5 billion at June 30, 2009.

$5.2 billion increase in MSRs primarily due to market interest rate and other changes impacting JPMorgan ChaseBank, N.A.s estimate of future prepayments, as well as sales in the retail business of originated loans for whichservicing rights were retained.

$3.1 billion transfer of certain structured notes reflecting lower liquidity and pricing observability in the first quarter.


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The increase in level 3 assets described above was partially offset by:

$17.7 billion transfer of single-name CDS on ABS from level 3 to level 2, resulting from a decline in pricinguncertainty. The fair value of these assets is generally based on observable market data from third-party transactions,benchmarking to relevant indices such as the Asset-Backed Securities Index (ABX), and calibration to otheravailable market information such as broker quotes.

$11.2 billion of derivative receivables principally due to changes in credit spreads. $3.6 billion related to sales of CDS positions on CMBS and RMBS. $3.1 billion related to sales and unwinds of structured transactions with hedge funds. $1.5 billion decrease in trading assets debt and equity, primarily in residential and commercial mortgage-backed

securities and loans, principally driven by markdowns and sales, partially offset by increases of $922 million incertain asset-backed securities.

Gains and LossesJPMorgan Chase Bank, N.A. risk manages level 3 financial instruments using securities and derivative positionsclassified within level 1 or 2 of the valuation hierarchy; the effect of these risk management activities is not reflected inthe level 3 gains and losses included in the tables above.

Three months ended June 30, 2009Included in the tables for the three months ended June 30, 2009 were gains and losses resulting from:

$6.5 billion of net losses on derivatives primarily related to changes in credit spreads;

$864 million of losses related to structured note liabilities, primarily due to volatility in the equity markets; $3.8 billion in gains on MSRs; $1.4 billion in gains on trading debt and equity instruments, primarily from certain asset-backed securities.Three months ended June 30, 2008Included in the tables for the three months ended June 30, 2008 were gains and losses resulting from:

$1.5 billion of gains on MSRs; Net gains of approximately $690 million, principally related to fixed income and equity derivatives transactions; $700 million of losses on leveraged loans. Leveraged loans are typically classified as held-for-sale and measured at

the lower of cost or fair value and therefore included in the nonrecurring fair value assets;

Losses of approximately $430 million on trading debt and equity instruments, principally from mortgage-relatedtransactions;

Net losses of approximately $400 million on equity-related structured notes.Six months ended June 30, 2009Included in the tables for the first six months of 2009 were gains and losses resulting from:

$6.2 billion of net losses on derivatives primarily related to changes in credit spreads and changes in interest rates; $808 million of losses on leveraged loans. Leveraged loans are primarily classified as held-for-sale and measured at

the lower of cost or fair value and therefore included in nonrecurring fair value assets;

$5.1 billion of gains on MSRs.


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Six months ended June 30, 2008Included in the tables for the first six months of 2008 were gains and losses resulting from:

Net gains of approximately $2.3 billion related to fixed income and equity derivatives; Gains of $887 million on MSRs; Losses of approximately $1.6 billion on leveraged loans. Leveraged loans are typically classified as held-for-sale

and measured at the lower of cost or fair value and therefore included in the nonrecurring fair value assets;

Losses on trading debt and equity instruments of approximately $370 million, principally from mortgage-relatedtransactions.

For further information on changes in the fair value of the MSRs see Note 18 on pages 6364 of these ConsolidatedFinancial Statements.

Financial disclosures required by SFAS 107Many, but not all, of the financial instruments held by JPMorgan Chase Bank, N.A. are recorded at fair value on theConsolidated Balance Sheets. SFAS 107 requires disclosure of the estimated fair value of certain financial instruments andthe methods and significant assumptions used to estimate their fair value. Financial instruments within the scope of SFAS107 are included in the following table. Additionally, certain financial instruments and all nonfinancial instruments areexcluded from the scope of SFAS 107. Accordingly, the fair value disclosures required by SFAS 107 provide only a partialestimate of the fair value of JPMorgan Chase Bank, N.A. For example, JPMorgan Chase Bank, N.A. 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 valueto JPMorgan Chase Bank, N.A., but their fair value is not disclosed in this Note.

Financial instruments for which carrying value approximates fair valueCertain financial instruments that are not carried at fair value on the Consolidated Balance Sheets are carried at amountsthat approximate fair value, due to their short-term nature and generally negligible credit risk. These instruments includecash and due from banks; deposits with banks, federal funds sold and securities purchased under resale agreements; andsecurities borrowed with short-dated maturities; short-term receivables and accrued interest receivable; commercialpaper; federal funds purchased, and securities loaned or sold, under repurchase agreements with short-dated maturities;other borrowed funds (excluding advances from Federal Home Loan Banks); accounts payable; and accrued liabilities. Inaddition, SFAS 107 requires that the fair value for deposit liabilities with no stated maturity (i.e., demand, savings andcertain money market deposits) be equal to their carrying value. SFAS 107 does not allow for the recognition of theinherent funding value of these instruments.


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Difference between aggregate fair value and aggregate remaining contractual principal balance outstandingThe following table reflects the difference between the aggregate fair value and the aggregate remaining contractualprincipal balance outstanding as of June 30, 2009, and December 31, 2008, for loans and long-term debt for which the SFAS159 fair value option has been elected. The loans were classified in trading assets debt and equity instruments or in loans.

June 30, 2009 December 31, 2008

(in millions)

Contractualprincipal

outstanding Fair value

Fair value

over (under)contractualprincipal

outstanding

Contractualprincipal

outstanding Fair value

Fair value

over (under)contractualprincipal

outstanding

LoansPerforming loans 90 days or more past due

Loans reported as trading assets $ $ $ $ $ $ Loans

Nonaccrual loansLoans reported as trading assets 3,395 1,127 (2,268) 2,653 894 (1,759)Loans 332 142 (190) 22 10 (12)

Subtotal 3,727 1,269 (2,458) 2,675 904 (1,771)All other performing loans

Loans reported as trading assets 33,554 27,763 (5,791) 34,240 27,841 (6,399)Loans 2,631 1,848 (783) 7,189 6,028 (1,161)

Total loans $ 39,912 $ 30,880 $ (9,032) $ 44,104 $ 34,773 $ (9,331)

Long-term debtPrincipal protected debt $ (11,807)

(c) $ (11,443) $ (364) $ (10,411)

(c)$ (10,377) $ (34)

Nonprincipal protected debt(a)

NA (20,047) NA NA (24,547) NA

Total long-term debt NA $ (31,490) NA NA $ (34,924) NA

Total FIN 46R long-term beneficialinterests(a)(b) NA $ (1,185) NA NA $ (1,364) NA

(a) Remaining contractual principal is not applicable to nonprincipal-protected notes. Unlike principal-protected notes, for which JPMorgan ChaseBank, N.A. is obligated to return a stated amount of principal at the maturity of the note, nonprincipal-protected notes do not obligate JPMorganChase Bank, N.A. to return a stated amount of principal at maturity, but to return an amount based on the performance of an underlying variable orderivative feature embedded in the note.

(b) Includes only nonprincipal protected debt at June 30, 2009, and December 31, 2008.(c) Where JPMorgan Chase Bank, N.A. issues principal-protected zero-coupon or discount notes, the balance reflected as the remaining contractual

principal is the final principal payment at maturity.


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NOTE 6 DERIVATIVE INSTRUMENTS

Derivative instruments enable end-users to transform or mitigate exposure to credit or market risks. Counterparties to aderivative contract seek to obtain risks and rewards similar to those that could be obtained from purchasing or selling arelated cash instrument without having to exchange the full purchase or sales price upfront. JPMorgan Chase Bank, N.A.makes markets in derivatives for customers and also uses derivatives to hedge or manage risks of market exposures. Themajority of JPMorgan Chase Bank, N.A.s derivatives are entered into for market-making purposes.

Trading DerivativesJPMorgan Chase Bank, N.A. transacts in a variety of derivatives in its trading portfolios to meet the needs of customers(both dealers and clients) and to generate revenue through this trading activity. JPMorgan Chase Bank, N.A. makes marketsin derivatives for its customers (collectively, client derivatives) seeking to mitigate or transform interest rate, credit,foreign exchange, equity and commodity risks. JPMorgan Chase Bank, N.A. actively manages the risks from its exposure tothese derivatives by entering into other derivative transactions or by purchasing or selling other financial instruments thatpartially or fully offset the exposure from client derivatives. JPMorgan Chase Bank, N.A. also seeks to earn a spreadbetween the client derivatives and offsetting positions, and from the remaining open risk positions. For more informationabout trading derivatives, see the trading derivatives gains and losses table on page 31 of this Note.

Risk Management DerivativesJPMorgan Chase Bank, N.A. manages its market exposures using various derivative instruments.

Interest rate contracts are used to minimize fluctuations in earnings that are caused by changes in interest rates. Fixed-rate

assets and liabilities appreciate or depreciate in market value as interest rates change. Similarly, interest income and interestexpense increase or decrease as a result of variable-rate assets and liabilities resetting to current market rates, and as a resultof the repayment and subsequent origination or issuance of fixed-rate assets and liabilities at current market rates. Gains andlosses on the derivative instruments that are related to such assets and liabilities are expected to substantially offset thisvariability in earnings. JPMorgan Chase Bank, N.A. generally uses interest rate swaps, forwards and futures to manage theimpact of interest rate fluctuations on earnings.

Foreign currency forward contracts are used to manage the foreign exchange risk associated with certain foreigncurrencydenominated (i.e., non-U.S.) assets and liabilities and forecasted transactions denominated in a foreigncurrency, as well as JPMorgan Chase Bank, N.A.s net investments in certain non-U.S. subsidiaries or branches whosefunctional currencies are not the U.S. dollar. As a result of fluctuations in foreign currencies, the U.S. dollarequivalentvalues of the foreign currencydenominated assets and liabilities or forecasted revenue or expense increase or decrease.Gains or losses on the derivative instruments that are related to the foreign currencydenominated assets or liabilities, orforecasted transactions, are expected to substantially offset this variability.

Gold forward contracts are used to manage the price risk of gold inventory in JPMorgan Chase Bank, N.A.scommodities portfolio. Gains or losses on the gold forwards are expected to substantially offset the depreciation orappreciation of the gold inventory as a result of gold price changes. Also in the commodities portfolio, electricity andnatural gas futures and forwards contracts are used to manage the price risk associated with energy-related tolling andload-serving contracts and energy-related investments.

JPMorgan Chase Bank, N.A. uses credit derivatives to manage the counterparty credit risk associated with loans andlending-related commitments. Credit derivatives compensate the purchaser when the entity referenced in the contractexperiences a credit event, such as bankruptcy or a failure to pay an obligation when due. For a further discussion ofcredit derivatives, see the discussion in the Credit derivatives section on pages 3234 of this Note.

For more information about risk management derivatives, see the risk management derivatives gains and losses table onpage 31 of this Note.


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Notional amount of derivative contractsThe following table summarizes the notional amount of derivative contracts outstanding as of June 30, 2009.

Notional amounts(b)

(in billions) June 30, 2009

Interest rate contractsSwaps $ 48,996

Futures and forwards 6,050Written options 4,776Purchased options 4,742

Total interest rate contracts 64,564Credit derivatives(a) 6,818

Foreign exchange contractsCross-currency swaps 1,848Spot, futures and forwards 3,677Written options 727Purchased options 752

Total foreign exchange contracts 7,004

Equity contractsSwaps 83Futures and forwards 45Written options 831

Purchased options 614Total equity contracts 1,573

Commodity contractsSwaps 229Spot, futures and forwards 84Written options 204Purchased options 198

Total commodity contracts 715

Total derivative notional amounts $ 80,674

(a) For more information on volumes and types of credit derivative contracts, see the credit derivative discussion on pages 3234 of this Note.(b) Represents the sum of gross long and gross short third-party notional derivative contracts.


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While the notional amounts disclosed above indicate the volume of JPMorgan Chase Bank, N.A.s derivative activity, the

notional amounts significantly exceed, in JPMorgan Chase Bank, N.A.s view, the possible losses that could arise from such

transactions. For most derivative transactions, the notional amount does not change hands; it is used simply as a reference to

calculate payments.

Accounting for DerivativesAll free-standing derivatives are required to be recorded on the Consolidated Balance Sheets at fair value. The

accounting for changes in value of a derivative depends on whether or not the contract has been designated and qualifiesfor hedge accounting. Derivatives that are not designated as hedges are marked to market through earnings. The tabulardisclosures on pages 2834 of this Note provide additional information on the amount of and reporting for derivativeassets, liabilities, gains and losses. For further discussion of derivatives embedded in structured notes, see Notes 5 and 6on pages 1324 and 2527, respectively, of JPMorgan Chase Bank, N.A.s 2008 Annual Financial Statements.

Derivatives designated as hedgesJPMorgan Chase Bank, N.A. applies hedge accounting to certain derivatives executed for risk management purposes typically interest rate, foreign exchange and gold derivatives, as described above. JPMorgan Chase Bank, N.A. does notseek to apply hedge accounting to all of JPMorgan Chase Bank, N.A.s risk management activities involving derivatives.For example, JPMorgan Chase Bank, N.A. does not apply hedge accounting to purchased credit default swaps used tomanage the credit risk of loans and commitments, because of the difficulties in qualifying such contracts as hedges. Forthe same reason, JPMorgan Chase Bank, N.A. does not apply hedge accounting to certain interest rate derivatives usedfor risk management purposes, or to commodity derivatives used to manage the price risk of tolling and load-servingcontracts.

To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the exposurebeing hedged. In addition, for a derivative to be designated as a hedge, the risk management objective and strategy mustbe documented. Hedge documentation must identify the derivative hedging instrument, the asset or liability and type ofrisk to be hedged, and how the effectiveness of the derivative will be assessed prospectively and retrospectively. Toassess effectiveness, JPMorgan Chase Bank, N.A. uses statistical methods such as regression analysis, as well asnonstatistical methods including dollar-value comparisons of the change in the fair value of the derivative to the changein the fair value or cash flows of the hedged item. The extent to which a derivative has been, and is expected to continueto be, effective at offsetting changes in the fair value or cash flows of the hedged item must be assessed and documentedat least quarterly. Any hedge ineffectiveness (i.e., the amount by which the gain or loss on the designated derivativeinstrument does not exactly offset the gain or loss on the hedged item attributable to the hedged risk) must be reported incurrent-period earnings. If it is determined that a derivative is not highly effective at hedging the designated exposure,

hedge accounting is discontinued.There are three types of hedge accounting designations: fair value hedges, cash flow hedges and net investment hedges.JPMorgan Chase Bank, N.A. uses fair value hedges primarily to hedge fixed-rate long-term debt, available-for-sale(AFS) securities and gold inventory. For qualifying fair value hedges, the changes in the fair value of the derivative, andin the value of the hedged item for the risk being hedged, are recognized in earnings. If the hedge relationship isterminated, then the fair value adjustment to the hedged item continues to be reported as part of the basis of the hedgeditem and is amortized to earnings as a yield adjustment.

JPMorgan Chase Bank, N.A. uses cash flow hedges to hedge the exposure to variability in cash flows from floating-ratefinancial instruments and forecasted transactions, primarily the rollover of short-term assets and liabilities, and foreigncurrencydenominated revenue and expense. For qualifying cash flow hedges, the effective portion of the change in thefair value of the derivative is recorded in other comprehensive income (loss) (OCI) and recognized in the ConsolidatedStatements of Income when the hedged cash flows affect earnings. Derivative amounts affecting earnings are recognizedconsistent with the classification of the hedged item primarily interest income, interest expense, noninterest revenueand compensation expense. The ineffective portions of cash flow hedges are immediately recognized in earnings. If thehedge relationship is terminated, then the value of the derivative recorded in accumulated other comprehensive income(loss) (AOCI) is recognized in earnings when the cash flows that were hedged affect earnings. For hedge relationshipsthat are discontinued because a forecasted transaction is not expected to occur according to the original hedge forecast,any related derivative values recorded in AOCI are immediately recognized in earnings.

JPMorgan Chase Bank, N.A. uses foreign currency hedges to protect the value of its net investments in certain non-U.S.subsidiaries or branches whose functional currencies are not the U.S. dollar. For qualifying net investment hedges,changes in the fair value of the derivatives are recorded in the translation adjustments account within AOCI.


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Impact of derivatives on the Consolidated Balance SheetsThe following table summarizes information on derivative fair values that are reflected on JPMorgan Chase Bank,N.A.s Consolidated Balance Sheets as of June 30, 2009, by accounting designation (e.g., whether the derivatives weredesignated as hedges or not) and contract type.

Free-standing derivatives(a)Derivative receivables Derivative payables

June 30, 2009(in millions)Not designated as

hedgesDesignated as

hedgesTotal derivative

receivablesNot designated

as hedgesDesignated as

hedges(c)

Total derivative

payables

Trading assets andliabilitiesInterest rate $ 1,242,171 $ 1,693 $ 1,243,864 $ 1,209,697 $ 70 $ 1,209,767Credit 295,935 295,935 285,018 285,018Foreign exchange 151,775 1,018 152,793 157,839 1,170 159,009Equity 54,601 54,601 55,237 55,237Commodity 36,548 36,548 36,447 36,447

Gross fair value oftrading assets andliabilities $ 1,781,030 $ 2,711 $ 1,783,741 $ 1,744,238 $ 1,240 $ 1,745,478

FIN 39 netting(b)

(1,700,046) (1,682,107)

Carrying value ofderivative trading

assets and tradingliabilities on theConsolidated BalanceSheet $ 83,695 $ 63,371

(a) Excludes structured notes for which the fair value option has been elected. See Note 5 on pages 2224 of these Consolidated Financial Statementsfor further information.

(b) FIN 39 permits the netting of derivative receivables and derivative payables and the related cash collateral received and paid when a legallyenforceable master netting agreement exists between JPMorgan Chase Bank, N.A. and a derivative counterparty.

(c) Excludes $1.0 billion related to separated commodity derivatives used as fair value hedging instruments that are recorded in the line item of thehost contract (i.e., other borrowed funds).

Derivative receivables and payables mark-to-market

The following table summarizes the fair values of derivative receivables and payables by contract type after applicationof FIN 39 netting as of June 30, 2009, and December 31, 2008.

(in millions) June 30, 2009 December 31, 2008Derivative receivables:

Interest rate(a) $ 34,788 $ 48,991Credit 19,710 34,172Foreign exchange(a) 17,944 38,889Equity 6,331 11,939Commodity 4,922 7,586

Total derivative receivables $ 83,695 $ 141,577

Trading liabilitiesDerivative payables:

Interest rate(a) $ 14,976 $ 32,002Credit 8,793 14,217Foreign exchange(a) 24,206 44,639Equity 12,692 15,770

Commodity 2,704 4,869Total derivative payables $ 63,371 $ 111,497

(a) During the first quarter of 2009, cross-currency interest rate swaps previously reported in interest rate contracts were reclassified to foreignexchange contracts to be more consistent with industry practice. The effect of this change resulted in reclassifications of $14.1 billion and $20.6billion of derivative receivables and derivative payables, respectively, between cross-currency interest rate swaps and foreign exchange contracts,as of December 31, 2008.


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Impact of derivatives and hedged items on the income statement and on other comprehensive incomeThe following table summarizes the total pretax impact of JPMorgan Chase Bank, N.A.s derivative-related activities onits Consolidated Statements of Income and Other Comprehensive Income for the three and six months ended June 30,2009, by accounting designation.

Derivative-related gains/(losses)

Consolidated Statements

of Income(in millions) Fair valuehedges(a)Cash flow

hedgesNet investment

hedges

Risk

managementactivities Tradingactivities(a) Total

Three months endedJune 30, 2009 $ 326 $ 55 $ (19) $ (4,564) $ 5,268 $ 1,066

Six months endedJune 30, 2009 97 142 (28) (5,228) 9,158 4,141

Derivative-related net changes in other comprehensive income

Other ComprehensiveIncome (loss)

(in millions)Fair value

hedgesCash flow

hedgesNet investment

hedges

Riskmanagement

activitiesTradingactivities Total

Three months endedJune 30, 2009 NA $ (82) $ (236) NA NA $ (318)

Six months endedJune 30, 2009 NA 168 (136) NA NA 32

(a) Includes the hedge accounting impact of the hedged item for fair value hedges and includes cash instruments within trading activities.

The tables that follow reflect more detailed information regarding the derivative-related income statement impact byaccounting designation for the three and six months ended June 30, 2009.

Fair value hedge gains and lossesThe following table presents derivative instruments, by contract type, used in fair value hedge accounting relationships,as well as pretax gains (losses) recorded on such derivatives and the related hedged items for the three and six monthsended June 30, 2009. JPMorgan Chase Bank, N.A. includes gains (losses) on the hedging derivative and the relatedhedged item in the same line item in the Consolidated Statements of Income.

Gains/(losses) recorded in income

Three months ended

June 30, 2009(in millions) Derivatives hedged risk Hedged items Hedgeineffectiveness(d)

Derivatives

excludedcomponents

(e)

Total incomestatement impact

Contract typeInterest rate(a) $ (332) $ 294 $ (38) $ (36) $ (74)Foreign exchange(b) (2,060) 2,060 415 415Commodity(c) (24) 24 (15) (15)

Total $ (2,416) $ 2,378 $ (38) $ 364 $ 326


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Gains/(losses) recorded in income


Derivatives hedged risk Hedged items

Hedgeineffectiveness(d)

Derivatives excluded

components(e)Total income

statement impact

Contract typeInterest rate(a) $ (297) $ 234 $ (63) $ 37 $ (26)Foreign exchange(b) (1,723) 1,723 136 136Commodity

(c)(182) 182 (13) (13)

Total $ (2,202) $ 2,139 $ (63) $ 160 $ 97

(a) Primarily consists of hedges of the benchmark (e.g., LIBOR) interest rate risk of fixed-rate long-term debt. Gains and losses wererecorded in net interest income.

(b) Primarily consists of hedges of the foreign currency risk of long-term debt and AFS securities for changes in spot foreign currency rates.Gains and losses related to the derivatives and the hedged items due to changes in spot foreign currency rates were recorded in principaltransactions revenue and net interest income. The excluded components were recorded in net interest income.

(c) Consists of overall fair value hedges of physical gold inventory. Gains and losses were recorded in principal transactions revenue.(d) Hedge ineffectiveness is the amount by which the gain or loss on the designated derivative instrument does not exactly offset the gain or

loss on the hedged item attributable to the hedged risk.(e) Certain components of hedging derivatives are permitted to be excluded from the assessment of hedge effectiveness, such as forward

points on a futures or forwards contract. Amounts related to excluded components are recorded in current-period income.

Cash flow hedge gains and lossesThe following table presents derivative instruments, by contract type, used in cash flow hedge accounting relationships,and the pretax gains (losses) recorded on such derivatives, for the three and six months ended June 30, 2009. JPMorganChase Bank, N.A. includes the gain (loss) on the hedging derivative in the same line item as the offsetting change in cashflows on the hedged item in the Consolidated Statements of Income.

Gains/(losses) recorded in income and other comprehensive income (loss)

Three months endedJune 30, 2009 (in millions)

Derivatives effective portionreclassified from

AOCI into income

Hedgeineffectiveness

recorded directlyin income

(c)


Derivatives effective portionrecorded in OCI

Total change inOCI

for period

Contract typeInterest rate

(a)$ (26) $ 1 $ (25) $ (343) $ (317)

Foreign exchange(b)

80 80 315 235

Total $ 54 $ 1 $ 55 $ (28) $ (82)

Gains/(losses) recorded in income and other comprehensive income (loss)

Six months endedJune 30, 2009 (in millions)

Derivatives effective portionreclassified from

AOCI into income

Hedgeineffectiveness

recorded directlyin income

(c)


Derivatives effective portionrecorded in OCI

Total change inOCI

for period

Contract typeInterest rate(a) $ (69) $ 2 $ (67) $ (299) $ (230)Foreign exchange

(b)209 209 607 398

Total $ 140 $ 2 $ 142 $ 308 $ 168

(a) Primarily consists of benchmark interest rate hedges of LIBOR-indexed floating-rate assets and floating-rate liabilities. Gains and losseswere recorded in net interest income.

(b) Primarily consists of hedges of the foreign currency risk of non-U.S. dollardenominated revenue and expense. The income statementclassification of gains and losses follows the hedged item primarily net interest income, compensation expense and other expense.

(c) Hedge ineffectiveness is the amount by which the cumulative gain or loss on the designated derivative instrument exceeds the present

value of the cumulative expected change in cash flows on the hedged item attributable to the hedged risk.

Over the next 12 months, it is expected that $61 million (after tax) of net losses recorded in AOCI at June 30, 2009,related to cash flow hedges will be recognized in income. The maximum length of time over which forecastedtransactions are hedged is 10 years, and such transactions primarily relate to core lending and borrowing activities.


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For a further discussion of credit derivatives, including a description of the different types used by JPMorgan ChaseBank, N.A., see Note 30 on pages 8083 of JPMorgan Chase Bank, N.A.s 2008 Annual Financial Statements.

The following table presents a summary of the notional amounts of credit derivatives and credit-related notes JPMorganChase Bank, N.A. sold and purchased as of June 30, 2009, and December 31, 2008. Upon a credit event, JPMorganChase Bank, N.A. as seller of protection would typically pay out only a percentage of the full notional amount of netprotection sold, as the amount actually required to be paid on the contracts takes into account the recovery value of the

reference obligation at the time of settlement. JPMorgan Chase Bank, N.A. manages the credit risk on contracts to sellprotection by purchasing protection with identical or similar underlying reference entities. As such, other purchasedprotection referenced in the following table includes credit derivatives bought on related, but not identical, referencepositions; these include indices, portfolio coverage and other reference points. JPMorgan Chase Bank, N.A. does not usenotional as the primary measure of risk management for credit derivatives because notional does not take into accountthe probability of occurrence of a credit event, recovery value of the reference obligation, or related cash instruments andeconomic hedges.

Total credit derivatives and credit-related notes

Maximum payout/Notional amount

June 30, 2009(in millions) Protection sold

Protection purchased withidentical underlyings(c)

Net protection(sold)/purchased(d)

Other protectionpurchased(e)

Credit derivativesCredit default swaps $ (3,317,959) $ 3,400,665 $ 82,706 $ 41,539

Other credit derivatives(a)

(11,206) 13,707 2,501 32,712Total credit derivatives (3,329,165) 3,414,372 85,207 74,251Credit-related notes (3,247) (3,247) 985

Total $ (3,332,412) $ 3,414,372 $ 81,960 $ 75,236

Maximum payout/Notional amount

December 31, 2008(in millions) Protection sold

Protection purchased withidentical underlyings(c)

Net protection(sold)/purchased(d)

Other protectionpurchased(e)

Credit derivativesCredit default swaps(b) $ (4,103,539) $ 3,984,139 $ (119,400) $ 278,181Other credit derivatives(a) (3,726) (3,726) 22,044(b)

Total credit derivatives (4,107,265) 3,984,139 (123,126) 300,225Credit-related notes(b) (4,080) (4,080) 2,373

Total $ (4,111,345) $ 3,984,139 $ (127,206) $ 302,598

(a) Primarily consists of total return swaps and credit default swap options.(b) Total credit derivatives and credit-related notes amounts of protection purchased and protection sold have been revised for the prior period.(c) Represents the notional amount of purchased credit derivatives where the underlying reference instrument is identical to the reference

instrument on which JPMorgan Chase Bank, N.A. has sold credit protection.(d)Does not take into account the fair value of the reference obligation at the time of settlement, which would generally reduce the amount

the seller of protection pays to the buyer of protection in determining settlement value.(e)Represents single-name and index CDS protection JPMorgan Chase Bank, N.A. purchased.


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NOTE 8 INTEREST INCOME AND INTEREST EXPENSE

Details of interest income and interest expense were as follows.


(in millions) 2009 2008 2009 2008

Interest income(a)

Loans $ 7,213 $ 6,951 $ 15,225 $ 14,591

Securities 3,071 1,369 5,872 2,538Trading assets 1,674 2,675 3,439 5,809Federal funds sold, securities purchased under resale

agreements and securities borrowed 374 1,862 1,011 3,929Deposits with banks 232 363 638 687

Other assets(b) (67) 33 (50) 33

Total interest income 12,497 13,253 26,135 27,587

Interest expense(a)Interest-bearing deposits 1,283 3,940 3,086 8,807Short-term and other liabilities(c) 1,011 1,902 2,060 4,253Long-term debt 332 390 622 840Beneficial interests issued by consolidated VIEs 27 56 60 139

Total interest expense 2,653 6,288 5,828 14,039

Net interest income 9,844 6,965 20,307 13,548Provision for credit losses 5,799 2,533 11,877 6,271

Net interest income after provision for credit losses $ 4,045 $ 4,432 $ 8,430 $ 7,277

(a)Interest income and interest expense include the current-period interest accruals for financial instruments measured at fair value, except forfinancial instruments containing embedded derivatives that would be separately accounted for in accordance with SFAS 133 absent the SFAS 159fair value election; for those instruments, all changes in fair value, including any interest elements, are reported in principal transactions revenue.

(b)Predominantly margin loans.(c)Includes brokerage customer payables.NOTE 9 PENSION AND OTHER POSTRETIREMENT EMPLOYEE BENEFIT PLANS

For a discussion of JPMorgan Chase Bank, N.A.s pension plans and United Kingdom (U.K.) other postretirementemployee benefit (OPEB) plan, see Note 10 on pages 3034 of JPMorgan Chase Bank, N.A.s 2008 Annual FinancialStatements.

The following table presents the components of net periodic benefit cost reported in the Consolidated Statements ofIncome for JPMorgan Chase Bank, N.A.s U.S. nonqualified defined benefit pension plans, non-U.S. defined benefitpension plans and U.K. OPEB plan.

Defined benefit pension plans

U.S. Non-U.S. U.K. OPEB plan

Three months ended June 30, (in millions) 2009 2008 2009 2008 2009 2008

Components of net periodic benefit costBenefits earned during the period $ 1 $ 1 $ 6 $ 7 $ $

Interest cost on benefit obligations 4 4 30 38 1 1

Expected return on plan assets (28) (41)

Amortization of net loss 1 11 7

Net periodic benefit cost 6 5 19 11 1 1

Other defined benefit pension plans(a) 4 3 2 3 NA NA

Total defined benefit pension and OPEB plans 10 8 21 14 1 1Total defined contribution plans 67 57 55 73 NA NA

Total pension and OPEB cost included in compensation expense $ 77 $ 65 $ 76 $ 87 $ 1 $ 1


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Defined benefit pension plans

U.S. Non-U.S. U.K. OPEB plan

Six months ended June 30, (in millions) 2009 2008 2009 2008 2009 2008

Components of net periodic benefit costBenefits earned during the period $ 2 $ 2 $ 12 $ 14 $ $

Interest cost on benefit obligations 11 9 56 76 1 2

Expected return on plan assets (52) (82)

Amortization of net loss 1 21 14

Net periodic benefit cost 14 11 37 22 1 2

Other defined benefit pension plans(a) 7 6 5 6 NA NA

Total defined benefit pension and OPEB plans 21 17 42 28 1 2

Total defined contribution plans 131 108 107 145 NA NA

Total pension and OPEB cost included in compensation expense $ 152 $ 125 $ 149 $ 173 $ 1 $ 2

(a) Includes various defined benefit pension plans, which are individually immaterial.The fair value of plan assets for the material non-U.S. defined benefit pension plans were $2.2 billion as of June 30,2009, and $2.0 billion as of December 31, 2008. See Note 22 on page 67 of these Consolidated Financial Statements forfurther information on unrecognized amounts (i.e., net loss and prior service costs/(credit)) reflected in accumulatedother comprehensive income for the six months ended June 30, 2009 and 2008.

The 2009 potential contributions for JPMorgan Chase Bank, N.A.s U.S. non-qualified defined benefit pension plans are $39million. The 2009 potential contributions for JPMorgan Chase Bank, N.A.s non-U.S. defined benefit pension plans (excludingthe main U.K. plan) are $44 million and for the U.K. OPEB plan is $2 million. The amount of potential 2009 contributions toJPMorgan Chase Bank, N.A.s main U.K. defined benefit pension plan is not reasonably estimable at this time.

JPMorgan Chase charged JPMorgan Chase Bank, N.A. $63 million and $51 million, for the three months ended June 30,2009 and 2008, respectively, and $124 million and $101 million in the first six months of 2009 and 2008, respectively,for its share of the U.S. qualified defined benefit pension plan expense. For its share of the U.S. OPEB plan expense,JPMorgan Chase charged JPMorgan Chase Bank, N.A. $1 million for the three months ended June 30, 2009 and 2008,and $3 million and $2 million in

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