SEC Comment Letter for JPMORGAN CHASE & CO (JPM, AMJB, VYLD, JPM-PC, JPM-PD, JPM-PJ, JPM-PK, JPM-PL, JPM-PM) (CIK 0000019617) (JPM) — Jan 31, 2011
JPMORGAN CHASE & CO (JPM, AMJB, VYLD, JPM-PC, JPM-PD, JPM-PJ, JPM-PK, JPM-PL, JPM-PM) (CIK 0000019617)
Date: Jan. 31, 2011 · CIK: 0000019617 · Accession: 0000000000-11-006185
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-05805, 333-155535, 333-169900
Referenced dates: December 20, 2010, July 23, 2010, November 4, 2010
Letter
January 31, 2011 Douglas L. Braunstein Chief Financial Officer JPMorgan Chase & Co. 270 Park Avenue New York, NY 10017 By U.S. Mail and facsimile to (212) 622-0422
Re: JPMorgan Chase & Co. Form 10-K for the Fiscal Year Ended December 31, 2009 Form 10-Q for the Quarterly Period Ended March 31, 2010 Form 10-Q for the Quarterly Period Ended June 30, 2010 Form 10-Q for the Quarterly Period Ended September 30, 2010 Form 8-K filed January 14, 2011 File No. 001-05805
Dear Mr. Braunstein: We have reviewed your filings as well as your response letter dated December 20, 2010 and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within te n business days by providing the requested information, including a draft of your proposed disclosures to be made in future filings, or by advising us when you will provide the requested response. If you do not believe our comments apply to your facts and circumstances or do not believe future revisions are appropriate, please tell us why in your response. After reviewing the information you provide in response to these comments, including the draft of your proposed disclosures, we may have additional comments. Form 10-K for the fiscal year ended December 31, 2009
General 1. We note your response to prior comment 1 in our letter dated July 23, 2010. We do not agree with your conclusion that the op inion filed as Exhibit 5.1 to yo ur shelf registration statement (File No. 333-155535) satisfies the requirements of Item 601(b)(5)(i) of Regulation S-K. We note the same with respect to your shelf registration statemen t filed on October 13, 2010 (File No. 333-169900). Accordingly, please file clean legal opinions in connection with any takedowns from your shelf registration stat ements. Alternatively, you may amend your registration statements to file clean legal opinions that cover future takedowns. See
Douglas L. Braunstein JPMorgan Chase & Co. January 31, 2011 Page 2
Securities Act Rules Compliance and Disclo sure Interpretation 212.05 and Securities Act Forms Compliance and Disclosure Interpretation 118.02. Consolidated Financial Statements
Notes to Consolidated Financial Statements Note 30. Commitments and contingencies, page 230 2. Please be advised that we ar e still evaluating your response to prior comment two in our letter dated November 4, 2010. Form 10-Q for the Quarterly Period Ended September 30, 2010
Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations Loan modification activities – credit card loans, page 93 3. We note that you have a significant credit car d portfolio and that as of September 30, 2010 you had $8.8 billion of on-balance sheet credit ca rd loans outstanding for borrowers enrolled in a credit card modification program, substant ially all of which are modifications that are considered to be troubled debt restructurings (TDRs). Please tell us whether any of your credit card loan agreements have provisions wher e the interest rate on the credit card loan is automatically increased due to non-payment, late -payment, or similar events. If so, tell us how you determined the effective interest rate of the loan existing at the origination or acquisition of the loan at the time of the TDR for purposes of measuring the amount of the impairment. For example, tell us whether fo r purposes of this cal culation you assumed the interest rate existing at the origination was the original rate, prior to being increased for any events of default/late payment, or the rate im mediately in effect prior to the modification. Consolidated Financial Statements
Notes to Consolidated Financial Statements (unaudited) Note 14 - Allowance for Credit Losses, page 154 4. Please tell us whether your "formula-based" a llowance for credit losses factors in contractual interest payments not expected to be collected on the loan. If so, tell us how your model captures this expectation and c onsider providing further disclosu re about this in your Form 10-K for the fiscal year ended December 31, 2010. Form 8-K filed January 14, 2011
5. We note your disclosure on page 4 of your ear nings release that you recorded a $632 million adjustment related to the timing of when you recognize charge-offs on delinquent loans. Please tell us the cause of the change in char ge-off policies for the specific loans in question and enhance your disclosures in future filings to discuss the loans impacted and the reason for the change.
Douglas L. Braunstein JPMorgan Chase & Co. January 31, 2011 Page 3
6. We note your response to prior comment 4 to our letter dated November 4, 2010 where you indicate that you do not believe you can estima te the amount of losses that are at least reasonably possible in excess of the amounts accr ued related to your mortgage repurchase liability. We also note statements made by your Chief Executive Officer on your fourth quarter earnings call that given the levels that you have take n in both expense and reserves, and the guidance given for 2011, that you have a good chance of being “done” on the agency repurchase side. Furthermore, we note statem ents made by your Chief Financial Officer on the same call indicating that you are likely to expense additional charges early in the year, but once determined that you are fully rese rved, you would be charging future amounts against the reserve. Based on these factors, it would appear that there is a reasonable possibility that there will be losses in ex cess of the amounts accrued and that you have the ability to estimate the amount, at least for some of your counterparties. We note that these amounts and estimates would be updated as time progresses and new information is identified. Please tell us a nd revise your disclosure in futu re filings, beginning with your Form 10-K for the fiscal year ended December 31, 2010, to provide the range of reasonably possible losses for all of your counter parties for which this is possible. You may contact Michael Seaman at (202) 551-3366 or Mark Webb at (202) 551-3698 if you have questions regarding comment one. Plea se contact Benjamin Phippen, Staff Accountant at (202) 551-3697 or me at (202) 551-3512 with any other questions.
Sincerely,
Stephanie L. Hunsaker
Senior Assistant Chief Accountant
Show Raw Text
January 31, 2011
Douglas L. Braunstein Chief Financial Officer JPMorgan Chase & Co. 270 Park Avenue
New York, NY 10017
By U.S. Mail and facsimile to (212) 622-0422
Re: JPMorgan Chase & Co.
Form 10-K for the Fiscal Year Ended December 31, 2009
Form 10-Q for the Quarterly Period Ended March 31, 2010 Form 10-Q for the Quarterly Period Ended June 30, 2010 Form 10-Q for the Quarterly Period Ended September 30, 2010 Form 8-K filed January 14, 2011 File No. 001-05805
Dear Mr. Braunstein:
We have reviewed your filings as well as your response letter dated December 20, 2010
and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter within te n business days by providing the requested
information, including a draft of your proposed disclosures to be made in future filings, or by
advising us when you will provide the requested response. If you do not believe our comments
apply to your facts and circumstances or do not believe future revisions are appropriate, please
tell us why in your response.
After reviewing the information you provide in response to these comments, including
the draft of your proposed disclosures, we may have additional comments.
Form 10-K for the fiscal year ended December 31, 2009
General
1. We note your response to prior comment 1 in our letter dated July 23, 2010. We do not agree
with your conclusion that the op inion filed as Exhibit 5.1 to yo ur shelf registration statement
(File No. 333-155535) satisfies the requirements of Item 601(b)(5)(i) of Regulation S-K. We
note the same with respect to your shelf registration statemen t filed on October 13, 2010 (File
No. 333-169900). Accordingly, please file clean legal opinions in connection with any
takedowns from your shelf registration stat ements. Alternatively, you may amend your
registration statements to file clean legal opinions that cover future takedowns. See
Douglas L. Braunstein JPMorgan Chase & Co. January 31, 2011 Page 2
Securities Act Rules Compliance and Disclo sure Interpretation 212.05 and Securities Act
Forms Compliance and Disclosure Interpretation 118.02.
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 30. Commitments and contingencies, page 230
2. Please be advised that we ar e still evaluating your response to prior comment two in our
letter dated November 4, 2010.
Form 10-Q for the Quarterly Period Ended September 30, 2010
Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations
Loan modification activities – credit card loans, page 93
3. We note that you have a significant credit car d portfolio and that as of September 30, 2010
you had $8.8 billion of on-balance sheet credit ca rd loans outstanding for borrowers enrolled
in a credit card modification program, substant ially all of which are modifications that are
considered to be troubled debt restructurings (TDRs). Please tell us whether any of your
credit card loan agreements have provisions wher e the interest rate on the credit card loan is
automatically increased due to non-payment, late -payment, or similar events. If so, tell us
how you determined the effective interest rate of the loan existing at the origination or
acquisition of the loan at the time of the TDR for purposes of measuring the amount of the
impairment. For example, tell us whether fo r purposes of this cal culation you assumed the
interest rate existing at the origination was the original rate, prior to being increased for any
events of default/late payment, or the rate im mediately in effect prior to the modification.
Consolidated Financial Statements
Notes to Consolidated Financial Statements (unaudited)
Note 14 - Allowance for Credit Losses, page 154
4. Please tell us whether your "formula-based" a llowance for credit losses factors in contractual
interest payments not expected to be collected on the loan. If so, tell us how your model
captures this expectation and c onsider providing further disclosu re about this in your Form
10-K for the fiscal year ended December 31, 2010.
Form 8-K filed January 14, 2011
5. We note your disclosure on page 4 of your ear nings release that you recorded a $632 million
adjustment related to the timing of when you recognize charge-offs on delinquent loans.
Please tell us the cause of the change in char ge-off policies for the specific loans in question
and enhance your disclosures in future filings to discuss the loans impacted and the reason
for the change.
Douglas L. Braunstein JPMorgan Chase & Co. January 31, 2011 Page 3
6. We note your response to prior comment 4 to our letter dated November 4, 2010 where you
indicate that you do not believe you can estima te the amount of losses that are at least
reasonably possible in excess of the amounts accr ued related to your mortgage repurchase
liability. We also note statements made by your Chief Executive Officer on your fourth
quarter earnings call that given the levels that you have take n in both expense and reserves,
and the guidance given for 2011, that you have a good chance of being “done” on the agency
repurchase side. Furthermore, we note statem ents made by your Chief Financial Officer on
the same call indicating that you are likely to expense additional charges early in the year,
but once determined that you are fully rese rved, you would be charging future amounts
against the reserve. Based on these factors, it would appear that there is a reasonable
possibility that there will be losses in ex cess of the amounts accrued and that you have the
ability to estimate the amount, at least for some of your counterparties. We note that these
amounts and estimates would be updated as time progresses and new information is
identified. Please tell us a nd revise your disclosure in futu re filings, beginning with your
Form 10-K for the fiscal year ended December 31, 2010, to provide the range of reasonably
possible losses for all of your counter parties for which this is possible.
You may contact Michael Seaman at (202) 551-3366 or Mark Webb at (202) 551-3698 if
you have questions regarding comment one. Plea se contact Benjamin Phippen, Staff Accountant
at (202) 551-3697 or me at (202) 551-3512 with any other questions.
Sincerely,
Stephanie L. Hunsaker
Senior Assistant Chief Accountant