JPMorgan Chase & Co.
J P MORGAN CHASE & CO (Form: 8-K, Received: 10/01/2004 17:18:41)    
 
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): October 1, 2004  

JPMORGAN CHASE & CO.
(Exact name of registrant as specified in its charter)

         
Delaware   1-5805   13-2624428
(State or Other Jurisdiction of
Incorporation)
  (Commission File Number)   (IRS Employer
Identification No.)
     
270 Park Avenue, New York, NY   10017
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (212) 270-6000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


TABLE OF CONTENTS

Item 7.01 Regulation FD Disclosure
Item 9.01 Financial Statements and Exhibits
SIGNATURES
EXHIBIT INDEX
EX-99.1 PRO FORMA COMBINED HISTORICAL FINANCIAL STATEMENT SUPPLEMENT


Table of Contents

 

Item 7.01 Regulation FD Disclosure

Effective July 1, 2004, Bank One Corporation (“Bank One”), merged with and into JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) pursuant to the Agreement and Plan of Merger, dated January 14, 2004. Bank One’s results of operations will be included in the Firm’s results beginning July 1, 2004.

The unaudited pro forma combined historical financial information contained in Exhibit 99.1 is being furnished pursuant to Regulation FD in order to assist investors in understanding (i) how the financial information of JPMorgan Chase and Bank One may have appeared on a combined basis had the two companies actually been merged as of the earliest date indicated and (ii) how the financial information of the lines of business of the new combined company may have appeared had the two companies actually been merged as of the earliest date indicated.

The unaudited pro forma combined historical financial information included in Exhibit 99.1 does not necessarily indicate the combined results of operations or the combined financial position of the Firm that would have resulted had the merger actually been completed at the beginning of the applicable periods presented nor is it indicative of the results of operations in future periods or the future financial position of the Firm. The information presented is intended to be supplementary financial information only and is not intended to be incorporated by reference into registration statements or reports filed by JPMorgan Chase & Co. under the Securities Act of 1933 or the Securities Exchange Act of 1934, as the case may be.

 

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

 
     
Exhibit Number   Description of Exhibit
   
 
99.1   
JPMorgan Chase & Co. Pro Forma Combined Historical Financial Statement Supplement

2


Table of Contents

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

     
  JPMORGAN CHASE & CO.
  (Registrant)
 
   
  By: /s/ Joseph L. Sclafani
  Joseph L. Sclafani
 
   
  Executive Vice President and Controller
  [Principal Accounting Officer]

Dated: October 1, 2004

3


Table of Contents

 

EXHIBIT INDEX

 
     
Exhibit Number   Description of Exhibit
   
 
99.1   
JPMorgan Chase & Co. Pro Forma Combined Historical Financial Statement Supplement

4


 
 
 

Exhibit 99.1

(JPMORGANCHASE LOGO)

PRO FORMA COMBINED HISTORICAL

FINANCIAL SUPPLEMENT

 


 

JPMORGAN CHASE & CO.
TABLE OF CONTENTS
  (JPMORGANCHASE LOGO)
         
    Page  
 
       
Explanatory Note
    1  
 
       
Overview of Pro Forma Combined Historical Financial Supplement
    2  
 
       
Pro Forma Combined Historical Statement of Income — Reported Basis
    8  
 
       
Pro Forma Combined Historical Statement of Income — Operating Basis
    9  
 
       
Reconciliation from Reported to Operating Basis
    10  
 
       
Pro Forma Combined Line of Business Financial Highlights — Operating Basis
    11  
 
       
Pro Forma Combined Historical Line of Business Summary Information:
       
 
       
Investment Bank
    12  
 
       
Retail Financial Services
    14  
 
       
Card Services
    19  
 
       
Card Reconciliation of Reported and Managed Data
    21  
 
       
Commercial Banking
    22  
 
       
Treasury & Securities Services
    23  
 
       
Asset & Wealth Management
    25  
 
       
Corporate
    27  
 
       
Credit-Related Information
    28  
 
       
Appendix — Pro Forma Combined Historical Detail Information:
       
 
       
Pro Forma Combined Historical Statement of Income — Operating Basis
    33  
 
       
Investment Bank
    39  
 
       
Retail Financial Services
    45  
 
       
Card Services
    51  
 
       
Commercial Banking
    57  
 
       
Treasury & Securities Services
    63  
 
       
Asset & Wealth Management
    69  
 
       
Corporate
    75  


 

EXPLANATORY NOTE

The unaudited pro forma combined historical financial information contained in this document is being furnished pursuant to Regulation FD in order to assist investors in understanding (i) how the financial information of JPMorgan Chase & Co. and Bank One Corporation may have appeared on a combined basis had the two companies actually been merged as of the earliest date indicated and (ii) how the financial information of the lines of business of the new combined company may have appeared had the two companies actually been merged as of the earliest date indicated. The information presented is intended to be supplementary financial information only and is not intended to be incorporated by reference into registration statements or reports filed by JPMorgan Chase & Co. under the Securities Act of 1933 or the Securities Exchange Act of 1934, as the case may be.

     The unaudited pro forma combined historical financial information has been derived from and should be read in conjunction with the historical financial statements and related notes of JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) and Bank One Corporation (“Bank One”), as filed with the Securities and Exchange Commission.

     The pro forma historical lines of business information present the seven new business segments of the combined company as if these segments had existed for the combined company as of the earliest date indicated. See the Executive Summary on pages 2-7 for more information on the composition of the new business segments.

     In addition to analyzing the Firm’s results on a reported basis, management reviews the line-of-business results on an “operating basis,” which is a non-GAAP financial measure. The definition of operating basis starts with the reported U.S. GAAP results. In the case of IB, operating basis includes in Trading revenue the NII related to trading activities. Trading activities generate revenues which are recorded for U.S. GAAP purposes in two line items on the income statement: Trading revenue, which includes the mark-to-market gains or losses on trading positions; and Net interest income, which includes the interest income or expense related to those positions. Combining, for operating basis purposes, both the trading revenue and related net interest income enables management to evaluate IB’s trading activities by considering all revenue related to these activities, and facilitates operating comparisons to other competitors. In the case of Card Services, operating or managed basis excludes the impact of credit card securitizations on revenue, the provision for credit losses, net charge-offs and receivables. JPMorgan Chase uses the concept of “managed receivables” to evaluate the credit performance of the underlying credit card loans, both sold and not sold: as the same borrower is continuing to use the credit card for ongoing charges, a borrower’s credit performance will impact both the receivables sold under SFAS 140 and those not sold. Thus, in its disclosures regarding managed receivables, JPMorgan Chase treats the sold receivables as if they were still on the balance sheet in order to disclose the credit performance (such as net charge-off rates) of the entire managed credit card portfolio. Finally, operating basis excludes the Merger costs and the Litigation reserve charge, as management believes these items are not part of the Firm’s normal daily business operations (and therefore not indicative of trends), and do not provide meaningful comparisons with other periods.

     The unaudited pro forma combined historical financial information include (i) purchase price adjustments as of July 1, 2004 to reflect the merger as of such date of Bank One with JPMorgan Chase, (ii) estimated adjustments to record the assets and liabilities of Bank One at their respective fair values as of July 1, 2004, and (iii) adjustments for changes in management accounting policies. For more information about these purchase price and fair value adjustments reference is made to the Current Report on Form 8-K/A1 filed by JPMorgan Chase on July 30, 2004 (as amended by Form 8-K/A2 filed by JPMorgan Chase on August 13, 2004 which includes Bank One’s financial statements as of and for the period ended June 30, 2004), which Current Report contained pro forma financial information reflecting the consummation on July 1, 2004, of the merger of the two companies.

     The unaudited pro forma combined historical financial information is presented for illustrative purposes only. This information does not include:

   (i)   the impact of the sale of the Bank One corporate trust business to JPMorgan Chase;

   (ii)  any future cost savings anticipated from the merger (including without limitation the previously announced $3.0 billion (pre-tax) of cost savings);

   (iii) merger-related costs anticipated to be incurred to combine the operations of JPMorgan Chase and Bank One, post June 30, 2004;

   (iv) the impact of possible future revenue enhancements or share repurchases.

   Reclassifications of prior periods included in these pro forma combined historical financial statements reflect the conformity of certain management accounting policies as disclosed in the Executive Summary on pages 2-7; additional conformity of accounting policies and further reclassifications may be made in the future.

For the reasons stated above, the unaudited pro forma combined historical financial information included in this document does not necessarily indicate the combined results of operations or the combined financial position of the company that would have resulted had the merger actually been completed at the beginning of the applicable periods presented nor is it indicative of the results of operations in future periods or the future financial position of the company.

Page 1


 

Overview Page Executive summary 3 Mapping of old business segments into new lines of business 4 Proforma combined compared to historical press release 5 Management accounting policy changes 6 Purchase accounting adjustments 7 Page 2


 

Executive Summary - Proforma Combined Historical Financial Statements We are presenting for 6 quarters proforma combined financial information for periods beginning January 1st, 2003 for JPMorgan Chase (JPMC) and Bank One (ONE) Consolidated results are presented both on a proforma reported basis and on an proforma operating basis Operating results exclude merger costs and litigation reserve charge Operating results also include income statement reclassifications that have no bottom line impact Trading net interest income Credit card securitizations ("managed basis") Proforma combined operating numbers are based on historical results and restated for: Organizational changes (i.e. new business alignments) Elimination of ONE's gain on sale of its corporate trust business to JPMC (Q4'2003) Purchase accounting adjustments Intangible amortization Fair value adjustments Reporting reclassifications Minor shifts between revenues, provision, and expenses Impacts firm and segments; no bottom line impact Management accounting policy changes Include the following: Funds transfer pricing Expense allocations Capital allocations Revenue share Impact segments only; no bottom line impact Page 3


 

JPMC - Mapping of old business segments into new lines of business Page 4 Heritage J.P. Morgan Chase Heritage Bank One New JPMorgan Chase Investment Bank Commercial Banking JPMorgan Partners Support Units & Corporate Investment Management & Private Banking Chase Financial Services Treasury & Securities Services Corporate (Private Equity/ Treasury) Investment Management Group Retail Card Services Investment Bank Commercial Banking Retail Financial Services Asset & Wealth Management Corporate Card Services Treasury & Securities Services Global Treasury IB excluding: Chase Regional Banking Chase Auto Finance Chase Home Finance Chase Middle Market Chase Cardmember Services Middle Market Global Treasury Services Commercial Banking excluding: Insurance Investment Mgmt excluding: Portion of Large Corporate Portion of Large Corporate


 

Proforma Combined compared to Historical Press Release Differences are due to line item reclassifications and purchase accounting adjustments Expenses have increased by $125m in Q2, which is offset by a revenue increase of $105m and a decrease in provision of $20m due to remapping to conform policies in Card Services and Retail Financial Services In addition, Noninterest Revenue of $341m in Q2 has been remapped to Net Interest Income in Card Services to conform policies Purchase accounting adjustments to revenue, expenses, and taxes reflect minor changes from the July 8K due to changes in line item reclassifications; the impact on operating earnings is unchanged JPMC Press Release ONE Press Release = = Purchase Accounting Combined Line item reclassifi- cations (Net Income Neutral) Proforma Combined Operating/managed basis Will not tie to ONE press release due to rounding Page 5 Q2'2004 Example Second Quarter 2004 - Proforma Combined


 

Management Accounting Policy Changes Main drivers of the new policy: core deposit rate applied and duration of deposits Impacts primarily deposit based businesses (Retail Financial Services, Treasury & Securities Services, Asset & Wealth Management and Commercial Banking) In general terms, the new policy results in higher net interest income in the lines of business and the offset is in the Corporate sector (corporate treasury) Funds Transfer Pricing Policy changes do not have any impact at the consolidated level but they impact business segment results Policy changes will be refined in the future New "retained expense" policy Certain expenses related to corporate functions and technology & operations are not being allocated to the lines of business and are being reflected in Corporate; As of 2Q04 retained expenses are approximately $350mm (excluding Private Equity and Treasury); adjustments will still be made in 2005 Expenses not charged to the lines of business include Holding company costs reflected now in Corporate functions Executive management Vacant space (real estate amnesty for unused space) Certain technology and operations costs: Start up costs and market price adjustments Corporate initiatives Services priced to be "best in market" to the businesses Expense Allocations New capital allocated to the lines of business ( Disclosed in next earnings release) Allocated capital to each of the lines of business considers several factors: standalone peer comparables, economic risk measures, and regulatory capital requirements Capital Allocations Reflects new agreement to share economics where clients and products cross the business segments T&SS clients shared with IB report T&SS revenues in T&SS T&SS clients shared with Commercial Bank report T&SS revenues in Commercial Bank Other small agreements between the lines of business Revenue Share Page 6


 

Purchase accounting adjustments Purchase accounting adjustments are composed of fair value adjustments and amortization of intangibles Purchase accounting adjustments provided in the 8K filed on July 30, 2004 reflected 6-month impact (3Q04 and 4Q04) In this filing, purchase accounting adjustments reflect 3Q04 applied to each of the prior six quarters, to come up with proforma combined numbers Adjustments to revenue, expenses, and taxes reflect minor changes from the July 8K due to changes in line item reclassifications; the impact on operating earnings is unchanged Purchase accounting adjustments are also being provided on a line of business basis Page 7


 

     
JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME — REPORTED BASIS
(in millions)
  (JPMORGANCHASE LOGO)
 
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Investment Banking Fees
  $ 939     $ 744     $ 925     $ 742     $ 899     $ 696     $  
Trading Revenue
    968       1,777       777       852       1,469       1,303        
Lending & Deposit Related Fees
    957       941       953       959       894       861        
Asset Management, Administration and Commissions
    2,258       2,295       2,092       1,986       1,880       1,850       2  
Securities / Private Equity Gains (Losses)
    403       587       33       375       893       336        
Mortgage Fees and Related Income
    360       258       171       63       321       450       (1 )
Credit Card Income
    1,686       1,556       1,762       1,658       1,529       1,475       17  
Other Income
    434       338       344       84       170       164       4  
 
                           
Subtotal
    8,005       8,496       7,057       6,719       8,055       7,135       22  
 
                                                       
Interest Income
    8,736       8,854       8,906       8,970       9,124       9,552       (45 )
Interest Expense
    3,462       3,543       3,468       3,540       3,772       4,057       (190 )
 
                           
Net Interest Income
    5,274       5,311       5,438       5,430       5,352       5,495       145  
 
                           
 
                                                       
 
                           
TOTAL NET REVENUE
    13,279       13,807       12,495       12,149       13,407       12,630       167  
 
                           
 
                                                       
Provision for Credit Losses
    248       153       808       635       892       1,235        
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    4,227       4,567       3,691       3,810       4,351       4,270       35  
Occupancy Expense
    596       594       641       552       695       646       (14 )
Technology and Communications Expense
    960       989       933       895       903       794       (2 )
Professional & Outside Services
    1,106       1,197       1,153       1,053       1,061       1,001        
Marketing
    521       489       464       432       382       390        
Other Expense
    1,037       885       1,031       818       774       749       (9 )
Amortization of Intangibles
    392       391       391       387       384       385       279  
 
                           
Total Noninterest Expense before Merger Costs and Litigation Reserve Charge
    8,839       9,112       8,304       7,947       8,550       8,235       289  
Merger Costs
    90                                      
Litigation Reserve Charge
    3,700                         100              
 
                           
TOTAL NONINTEREST EXPENSE
    12,629       9,112       8,304       7,947       8,650       8,235       289  
 
                           
 
                                                       
Income before Income Tax Expense
    402       4,542       3,383       3,567       3,865       3,160       (122 )
Income Tax Expense (Benefit)
    (31 )     1,515       1,055       1,193       1,319       1,078       14  
 
                           
NET INCOME (b)
  $ 433     $ 3,027     $ 2,328     $ 2,374     $ 2,546     $ 2,082     $ (136 )
 
                           

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.
(b)  
Excludes the net gain on the sale of the Bank One corporate trust business to JPMorgan Chase of $597 million (pre-tax) or $380 million (after-tax) in the fourth quarter of 2003.

Page 8


 

     
JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME — OPERATING BASIS
(in millions)
  (JPMORGANCHASE LOGO)
 
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Investment Banking Fees
  $ 939     $ 744     $ 925     $ 742     $ 899     $ 696     $  
Trading-Related Revenue (Including Trading NII)
    1,407       2,353       1,295       1,301       1,948       1,986        
Lending & Deposit Related Fees
    957       941       953       959       894       861        
Asset Management, Administration and Commissions
    2,258       2,295       2,092       1,986       1,880       1,850       2  
Securities / Private Equity Gains (Losses)
    403       587       33       375       893       336        
Mortgage Fees and Related Income
    360       258       171       63       321       450       (1 )
Credit Card Income
    975       807       964       863       829       745       17  
Other Income
    389       299       313       70       146       161       4  
 
                           
Subtotal
    7,688       8,284       6,746       6,359       7,810       7,085       22  
 
                                                       
Interest Income
    10,561       10,544       10,692       10,717       10,766       11,017       (45 )
Interest Expense
    3,612       3,697       3,636       3,698       3,938       4,223       (190 )
 
                           
Net Interest Income
    6,949       6,847       7,056       7,019       6,828       6,794       145  
 
                           
 
                                                       
 
                           
TOTAL NET REVENUE
    14,637       15,131       13,802       13,378       14,638       13,879       167  
 
                           
 
                                                       
Managed Provision for Credit Losses
    1,606       1,477       2,115       1,864       2,123       2,484        
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    4,227       4,567       3,691       3,810       4,351       4,270       35  
Occupancy Expense
    596       594       641       552       695       646       (14 )
Technology and Communications Expense
    960       989       933       895       903       794       (2 )
Professional & Outside Services
    1,106       1,197       1,153       1,053       1,061       1,001        
Marketing
    521       489       464       432       382       390        
Other Expense
    1,037       885       1,031       818       874       749       (9 )
Amortization of Intangibles
    392       391       391       387       384       385       279  
 
                           
TOTAL NONINTEREST EXPENSE
    8,839       9,112       8,304       7,947       8,650       8,235       289  
 
                           
 
                                                       
Operating Earnings before Income Tax Expense
    4,192       4,542       3,383       3,567       3,865       3,160       (122 )
Income Tax Expense (Benefit)
    1,405       1,515       1,055       1,193       1,319       1,078       14  
 
                           
OPERATING EARNINGS (b)
  $ 2,787     $ 3,027     $ 2,328     $ 2,374     $ 2,546     $ 2,082     $ (136 )
 
                           

Note: For additional information, see pages 33-38.

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.
(b)  
Excludes the net gain on the sale of the Bank One corporate trust business to JPMorgan Chase of $597 million (pre-tax) or $380 million (after-tax) in the fourth quarter of 2003.

Page 9


 

 
     
JPMORGAN CHASE & CO.
RECONCILIATION FROM REPORTED TO OPERATING BASIS
(in millions)
  (JPMORGANCHASE LOGO)
 
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
REPORTED
                                               
Revenue
                                               
Investment Banking Fees
  $ 939     $ 744     $ 925     $ 742     $ 899     $ 696  
Trading Revenue
    968       1,777       777       852       1,469       1,303  
Lending & Deposit Related Fees
    957       941       953       959       894       861  
Asset Management, Administration and Commissions
    2,258       2,295       2,092       1,986       1,880       1,850  
Securities / Private Equity Gains (Losses)
    403       587       33       375       893       336  
Mortgage Fees and Related Income
    360       258       171       63       321       450  
Credit Card Income
    1,686       1,556       1,762       1,658       1,529       1,475  
Other Income
    434       338       344       84       170       164  
 
                       
Subtotal
    8,005       8,496       7,057       6,719       8,055       7,135  
 
                                               
Interest Income
    8,736       8,854       8,906       8,970       9,124       9,552  
Interest Expense
    3,462       3,543       3,468       3,540       3,772       4,057  
 
                       
Net Interest Income
    5,274       5,311       5,438       5,430       5,352       5,495  
 
                       
 
                                               
Total Net Revenue
    13,279       13,807       12,495       12,149       13,407       12,630  
 
                       
 
                                               
Provision for Credit Losses
    248       153       808       635       892       1,235  
 
                                               
Noninterest Expense
                                               
Merger Costs
    90                                
Litigation Reserve Charge
    3,700                         100        
All Other Noninterest Expense
    8,839       9,112       8,304       7,947       8,550       8,235  
 
                       
Total Noninterest Expense
    12,629       9,112       8,304       7,947       8,650       8,235  
 
                       
 
                                               
Income (Loss) before Income Tax Expense
    402       4,542       3,383       3,567       3,865       3,160  
Income Tax Expense (Benefit)
    (31 )     1,515       1,055       1,193       1,319       1,078  
 
                       
Net Income (Loss)
  $ 433     $ 3,027     $ 2,328     $ 2,374     $ 2,546     $ 2,082  
 
                       
 
                                               
RECONCILING ITEMS (a)
                                               
Revenue
                                               
Trading-Related Revenue (b)
  $ 439     $ 576     $ 518     $ 449     $ 479     $ 683  
Credit Card Income (c)
    (711 )     (749 )     (798 )     (795 )     (700 )     (730 )
Other Income (c)
    (45 )     (39 )     (31 )     (14 )     (24 )     (3 )
Net Interest Income:
                                               
Trading-Related (b)
    (439 )     (576 )     (518 )     (449 )     (479 )     (683 )
Credit Card Securitizations (c)
    2,114       2,112       2,136       2,038       1,955       1,982  
 
                       
Total Net Interest Income
    1,675       1,536       1,618       1,589       1,476       1,299  
 
                       
 
                                               
Total Net Revenue
    1,358       1,324       1,307       1,229       1,231       1,249  
 
                       
 
                                               
Securitized Credit Losses (c)
    1,358       1,324       1,307       1,229       1,231       1,249  
 
                                               
Noninterest Expense
                                               
Merger Costs (d)
    (90 )                              
Litigation Reserve Charge (d)
    (3,700 )                              
All Other Noninterest Expense
                                   
 
                       
Total Noninterest Expense
    (3,790 )                              
 
                       
 
                                               
Income before Income Tax Expense
    3,790                                
Income Tax Expense (Benefit)
    1,436                                
 
                       
Net Income
  $ 2,354     $     $     $     $     $  
 
                       
 
                                               
OPERATING
                                               
Revenue
                                               
Investment Banking Fees
  $ 939     $ 744     $ 925     $ 742     $ 899     $ 696  
Trading-Related Revenue (Including Trading NII)
    1,407       2,353       1,295       1,301       1,948       1,986  
Lending & Deposit Related Fees
    957       941       953       959       894       861  
Asset Management, Administration and Commissions
    2,258       2,295       2,092       1,986       1,880       1,850  
Securities / Private Equity Gains (Losses)
    403       587       33       375       893       336  
Mortgage Fees and Related Income
    360       258       171       63       321       450  
Credit Card Income
    975       807       964       863       829       745  
Other Income
    389       299       313       70       146       161  
 
                       
Subtotal
    7,688       8,284       6,746       6,359       7,810       7,085  
 
                                               
Interest Income
    10,561       10,544       10,692       10,717       10,766       11,017  
Interest Expense
    3,612       3,697       3,636       3,698       3,938       4,223  
 
                       
Net Interest Income
    6,949       6,847       7,056       7,019       6,828       6,794  
 
                       
 
                                               
Total Net Revenue
    14,637       15,131       13,802       13,378       14,638       13,879  
 
                       
 
                                               
Managed Provision for Credit Losses
    1,606       1,477       2,115       1,864       2,123       2,484  
 
                                               
Noninterest Expense
                                               
Merger Costs
                                   
Litigation Reserve Charge
                            100        
All Other Noninterest Expense
    8,839       9,112       8,304       7,947       8,550       8,235  
 
                       
Total Noninterest Expense
    8,839       9,112       8,304       7,947       8,650       8,235  
 
                       
 
                                               
Operating Earnings before Income Tax Expense
    4,192       4,542       3,383       3,567       3,865       3,160  
Income Tax Expense (Benefit)
    1,405       1,515       1,055       1,193       1,319       1,078  
 
                       
Operating Earnings
  $ 2,787     $ 3,027     $ 2,328     $ 2,374     $ 2,546     $ 2,082  
 
                       

(a)  
Represents only those line items on the Consolidated Statement of Income impacted by the reclassification of trading-related net interest income and the impact of credit card securitizations, as well as for the second quarter of 2004, the Merger Costs and Litigation Reserve Charge line items on the Consolidated Statement of Income.
(b)  
The reclassification of trading-related net interest income from Net Interest Income to Trading Revenue primarily impacts the Investment Bank segment results. See page 12 for further information.
(c)  
The impact of credit card securitizations impacts Card Services. See page 21 for further information.
(d)  
The impact of the Merger Costs and Litigation Reserve Charge are excluded from Operating Earnings, as management believes these items are not part of the Firm’s normal daily business operations (and therefore not indicative of trends), and also do not provide meaningful comparisons with other periods.

Page 10


 

 
     
JPMORGAN CHASE & CO.
PRO FORMA COMBINED LINE OF BUSINESS FINANCIAL HIGHLIGHTS — OPERATING BASIS
(in millions)
  (JPMORGANCHASE LOGO)
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
REVENUE
                                               
Investment Bank
  $ 3,397     $ 4,207     $ 3,316     $ 3,202     $ 3,931     $ 3,805  
Retail Financial Services
    3,947       3,784       3,666       3,390       3,938       3,776  
Card Services
    3,776       3,624       3,737       3,552       3,401       3,278  
Commercial Banking
    866       833       851       855       855       836  
Treasury & Securities Services
    1,368       1,280       1,270       1,199       1,173       1,130  
Asset & Wealth Management
    1,185       1,213       1,189       1,096       1,019       971  
Corporate
    98       190       (227 )     84       321       83  
 
                       
TOTAL NET REVENUE
  $ 14,637     $ 15,131     $ 13,802     $ 13,378     $ 14,638     $ 13,879  
 
                       
 
                                               
OPERATING EARNINGS
                                               
Investment Bank
  $ 1,016     $ 1,351     $ 1,157     $ 1,030     $ 952     $ 790  
Retail Financial Services
    938       744       429       542       880       782  
Card Services
    409       336       396       359       330       283  
Commercial Banking
    234       289       225       191       216       200  
Treasury & Securities Services
    103       93       129       125       94       106  
Asset & Wealth Management
    190       229       199       178       144       108  
Corporate
    (103 )     (15 )     (207 )     (51 )     (70 )     (187 )
 
                       
TOTAL OPERATING EARNINGS
  $ 2,787     $ 3,027     $ 2,328     $ 2,374     $ 2,546     $ 2,082  
 
                       

Page 11


 

 
     
JPMORGAN CHASE & CO.
INVESTMENT BANK
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME
(in millions)
  (JPMORGANCHASE LOGO)
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Investment Banking Fees:
                                                       
Advisory
  $ 269     $ 147     $ 161     $ 161     $ 164     $ 160     $  
Equity Underwriting
    223       179       255       176       168       108        
Debt Underwriting
    445       417       509       402       564       443        
 
                           
Total Investment Banking Fees
    937       743       925       739       896       711        
 
                                                       
Trading-Related Revenue: (b)
                                                       
Fixed Income and Other
    1,416       1,994       1,137       1,164       1,766       1,731        
Equities
    (88 )     333       93       98       161       206        
 
                           
Total Trading-Related Revenue
    1,328       2,327       1,230       1,262       1,927       1,937        
 
                                                       
Lending & Deposit Related Fees
    172       155       154       139       126       116        
Asset Management, Administration and Commissions
    357       405       333       335       334       315        
Other Income
    128       105       166       128       68       58        
 
                           
Subtotal
    2,922       3,735       2,808       2,603       3,351       3,137        
Net Interest Income (b)
    475       472       508       599       580       668       1  
 
                           
TOTAL NET REVENUE
    3,397       4,207       3,316       3,202       3,931       3,805       1  
 
                           
 
                                                       
Provision for Credit Losses
    (315 )     (303 )     (396 )     (298 )     (45 )     317        
Credit Reimbursement from T&SS (c)
    43       43       54       54       54       54        
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    1,240       1,492       949       1,061       1,482       1,401        
Noncompensation Expense
    935       936       980       859       1,068       915       (5 )
Amortization of Intangibles
                                         
 
                           
TOTAL NONINTEREST EXPENSE
    2,175       2,428       1,929       1,920       2,550       2,316       (5 )
 
                           
 
                                                       
Operating Earnings before Income Tax Expense
    1,580       2,125       1,837       1,634       1,480       1,226       6  
Income Tax Expense (Benefit)
    564       774       680       604       528       436       2  
 
                           
OPERATING EARNINGS
  $ 1,016     $ 1,351     $ 1,157     $ 1,030     $ 952     $ 790     $ 4  
 
                           

Note: For additional information, see pages 39-44.

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.
(b)  
Trading revenue, on a reported basis, excludes the impact of net interest income related to IB’s trading activities; this income is recorded within Net interest income. However, in assessing the profitability of IB’s trading business, the Firm combines these revenues for segment reporting. The amount reclassified from Net interest income to Trading revenue was $427 million, $581 million, $512 million, $447 million, $482 million and $682 million during the quarters ended June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively.
(c)  
Management has charged T&SS a credit reimbursement, which is the pre-tax amount of earnings, less cost of capital, related to certain exposures managed within the IB credit portfolio on behalf of clients shared with T&SS.

Page 12


 

 
     
JPMORGAN CHASE & CO.
INVESTMENT BANK BUSINESS-RELATED METRICS
PRO FORMA COMBINED HISTORICAL LINE OF BUSINESS INFORMATION
(in millions, except ratios)
  (JPMORGANCHASE LOGO)
 
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
REVENUE BY BUSINESS
                                               
Investment Banking
  $ 937     $ 743     $ 925     $ 739     $ 896     $ 711  
Fixed Income Markets
    1,815       2,330       1,557       1,632       2,389       2,193  
Equities Markets
    194       674       346       347       394       439  
Credit Portfolio
    451       460       488       484       252       462  
 
                       
Total Net Revenue
  $ 3,397     $ 4,207     $ 3,316     $ 3,202     $ 3,931     $ 3,805  
 
                       
 
                                               
REVENUE BY REGION
                                               
Americas
  $ 1,936     $ 2,376     $ 2,109     $ 2,037     $ 2,246     $ 2,316  
Europe/Middle East/Africa
    1,042       1,307       914       921       1,347       1,223  
Asia/Pacific
    419       524       293       244       338       266  
 
                       
Total Net Revenue
  $ 3,397     $ 4,207     $ 3,316     $ 3,202     $ 3,931     $ 3,805  
 
                       
 
                                               
SELECTED BALANCE SHEET (Average)
                                               
Total Assets
  $ 503,396     $ 496,529     $ 482,958     $ 478,720     $ 461,902     $ 482,734  
Loans (a)
    48,968       51,855       60,533       66,830       58,919       66,278  
 
CREDIT DATA AND QUALITY STATISTICS
                                               
 
                                               
Net Charge-offs
  $ 3     $ 24     $ 5     $ 263     $ 277     $ 332  
Nonperforming Assets
                                               
- Nonperforming Loans
    1,345       1,703       1,991       2,846       3,250       3,667  
- Other Nonperforming Assets
    340       357       370       383       395       395  
Net Charge-off Rate (a)
    0.03 %     0.21 %     0.04 %     1.65 %     2.05 %     2.16 %

(a)  
Loans include loans held for sale of $5,259 million, $5,742 million, $4,279 million, $3,778 million, $4,811 million and $3,935 million as of June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the net charge-off rates.

Page 13


 

 
     
JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME
(in millions)
  (JPMORGANCHASE LOGO)
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Lending & Deposit Related Fees
  $ 375     $ 358     $ 371     $ 373     $ 351     $ 324     $  
Asset Management, Administration and Commissions
    338       357       318       295       288       301       2  
Securities / Private Equity Gains (Losses)
                18       (61 )     324       102        
Mortgage Fees and Related Income
    398       261       172       56       317       453       (1 )
Credit Card Income
    89       75       75       79       90       79        
Other Income
    65       4       16       (4 )     (12 )     (19 )      
 
                           
Subtotal
    1,265       1,055       970       738       1,358       1,240       1  
Net Interest Income
    2,608       2,625       2,696       2,652       2,580       2,536       24  
 
                           
TOTAL NET REVENUE
    3,873       3,680       3,666       3,390       3,938       3,776       25  
 
                           
 
                                                       
Provision for Credit Losses
    175       197       270       375       289       389        
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    840       897       802       739       817       789        
Noncompensation Expense
    1,297       1,349       1,352       1,276       1,212       1,219       (3 )
Amortization of Intangibles
    133       133       133       133       133       133       132  
 
                           
TOTAL NONINTEREST EXPENSE
    2,270       2,379       2,287       2,148       2,162       2,141       129  
 
                           
 
                                                       
Operating Earnings before Income Tax Expense and Non-Core Portfolio Actions
    1,428       1,104       1,109       867       1,487       1,246       (104 )
Income Tax Expense (Benefit)
    536       413       423       325       554       464       (41 )
 
                           
Operating Earnings before Non-Core Portfolio Actions
    892       691       686       542       933       782       (63 )
 
                           
 
                                                       
Non-Core Portfolio Actions: (b)
                                                       
Impacts to:
                                                       
Other Income
    74       104                                
Provision for Credit Losses
          18       415             85              
 
                           
Total Non-Core Portfolio Actions
    74       86       (415 )           (85 )            
Income Tax Expense (Benefit)
    28       33       (158 )           (32 )            
 
                           
Operating Earnings from Non-Core Portfolio Actions
    46       53       (257 )           (53 )            
 
                           
OPERATING EARNINGS
  $ 938     $ 744     $ 429     $ 542     $ 880     $ 782     $ (63 )
 
                           

Note: For additional information, see pages 45-50.

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.
(b)  
Includes gains on loan sales, valuation adjustments and loan loss reserve increases on the Bank One brokered home equity portfolio.

Page 14


 

 
     
JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME
(in millions, except ratios)
  (JPMORGANCHASE LOGO)
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
SELECTED BALANCE SHEET (Average)
                                               
Total Assets
  $ 226,193     $ 220,424     $ 231,045     $ 231,797     $ 224,044     $ 210,219  
Loans (a)
    195,912       190,350       196,446       196,621       187,315       178,939  
Core Deposits (b)
    161,237       153,275       150,888       155,982       150,274       143,359  
Total Deposits
    186,994       180,019       178,558       184,747       180,474       175,119  
 
                                               
CREDIT DATA AND QUALITY STATISTICS
                                               
Net Charge-offs (c)
  $ 176     $ 236     $ 969     $ 318     $ 285     $ 303  
Nonperforming Loans (d)
    1,282       1,483       1,692       1,851       1,838       1,910  
Nonperforming Assets
    1,551       1,796       2,053       2,215       2,273       2,357  
Allowance for Loan Losses
    1,907       1,909       1,937       2,223       2,166       2,076  
 
                                               
Net Charge-off Rate (a)
    0.40 %     0.56 %     2.26 %     0.77 %     0.72 %     0.80 %
Allowance for Loan Losses to Average Loans (a)
    1.08       1.13       1.14       1.35       1.37       1.35  
Allowance for Loan Losses to Nonperforming Loans (d)
    168       153       138       123       120       110  
Nonperforming Loans to Total Loans
    0.65       0.78       0.86       0.94       0.98       1.07  

(a)  
Loans include loans held for sale of $19,818 million, $21,165 million, $25,998 million, $32,376 million, $28,777 million and $25,438 million at June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the net charge-off rate or the allowance coverage ratios.
(b)  
Includes demand and savings deposits.
(c)  
Fourth quarter 2003 includes $652 million of net charge-offs related to the non-core Bank One brokered home equity portfolio.
(d)  
Nonperforming loans include loans held for sale of $144 million, $233 million, $286 million, $40 million, $32 million and $30 million at June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the allowance coverage ratios.

Page 15


 

JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES FINANCIAL HIGHLIGHTS AND BUSINESS-RELATED METRICS
PRO FORMA COMBINED HISTORICAL LINE OF BUSINESS INFORMATION
(in millions, except ratios and where otherwise noted)
  (JPMORGANCHASE LOGO)
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
RETAIL BUSINESSES
                                               
HOME FINANCE (a)
                                               
Net Revenue
  $ 1,276     $ 1,109     $ 1,173     $ 1,002     $ 1,611     $ 1,442  
Provision for Credit Losses
    78       45       114       187       163       226  
Noninterest Expense
    541       605       603       565       532       508  
Operating Earnings
    418       294       286       163       582       451  
 
                                               
Origination Volume by Channel (in billions)
                                               
Retail
  $ 27.2     $ 20.0     $ 21.2     $ 35.8     $ 32.1     $ 23.4  
Wholesale
    15.7       9.5       11.2       23.1       18.7       14.4  
Correspondent
    7.9       5.3       9.3       15.5       11.7       8.0  
Correspondent Negotiated Transactions
    12.4       7.7       14.0       25.7       22.5       21.1  
 
                       
Total
    63.2       42.5       55.7       100.1       85.0       66.9  
 
                                               
Origination Volume by Business (in billions)
                                               
Mortgage
  $ 47.9     $ 31.5     $ 44.1     $ 87.9     $ 74.1     $ 59.3  
Home Equity
    15.3       11.0       11.6       12.2       10.9       7.6  
 
                       
Total
    63.2       42.5       55.7       100.1       85.0       66.9  
 
                                               
Business Metrics (in billions)
                                               
Loans Serviced (Ending)
  $ 538.9     $ 521.2     $ 516.2     $ 501.7     $ 486.5     $ 477.8  
MSR Net Carrying Value (Ending)
    5.8       4.3       4.9       4.1       3.0       3.3  
Average Loans Owned
                                               
Mortgage Loans (Average)
    54.9       50.8       61.0       64.8       57.4       50.7  
Home Equity and Other Loans (Average)
    62.4       59.2       57.0       54.9       53.0       52.0  
 
                       
Total Average Loans Owned (b)
    117.3       110.0       118.0       119.7       110.4       102.7  
 
                                               
Credit Quality Statistics
                                               
30+ Day Delinquency Rate
    1.39 %     1.59 %     2.07 %     2.89 %     3.11 %     3.41 %
Net Charge-offs
                                               
Mortgage
  $ 5     $ 4     $ 28     $ 7     $ 13     $ 7  
Home Equity and Other Loans
    62       101       110       147       128       147  
 
                       
Total Net Charge-offs
    67       105       138       154       141       154  
Net Charge-off Rate
                                               
Mortgage
    0.05 %     0.04 %     0.27 %     0.08 %     0.16 %     0.10 %
Home Equity and Other Loans
    0.41       0.72       0.79       1.06       0.97       1.15  
Total Net Charge-off Rate (b)
    0.27       0.45       0.57       0.68       0.67       0.78  
Nonperforming Assets
  $ 987     $ 1,220     $ 1,419     $ 1,517     $ 1,599     $ 1,674  

(a)  
Excludes impacts of noncore portfolio actions disclosed on page 14.
(b)  
Loans include loans held for sale of $17.2 billion, $16.5 billion, $22.5 billion, $29.5 billion, $25.5 billion and $22.1 billion at June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the net charge-off rates.

Page 16


 

JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES FINANCIAL HIGHLIGHTS AND BUSINESS-RELATED METRICS, CONTINUED
PRO FORMA COMBINED HISTORICAL LINE OF BUSINESS INFORMATION
(in millions, except ratios and where otherwise noted)
  (JPMORGANCHASE LOGO)
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
RETAIL BUSINESSES, CONTINUED
                                               
CONSUMER & SMALL BUSINESS BANKING
                                               
Net Revenue
  $ 1,969     $ 2,007     $ 1,896     $ 1,877     $ 1,852     $ 1,865  
Provision for Credit Losses
    37       57       38       58       31       32  
Noninterest Expense
    1,432       1,479       1,380       1,358       1,430       1,437  
Operating Earnings
    308       290       292       283       241       244  
 
                                               
Business Metrics (in billions)
                                               
Small Business Loans (Average)
  $ 12.4     $ 12.2     $ 11.9     $ 11.9     $ 11.7     $ 11.6  
Consumer and Other Loans (Average)
    2.2       2.6       2.3       2.3       2.4       2.8  
 
                       
Total Loans
    14.6       14.8       14.2       14.2       14.1       14.4  
Core Deposits (Average)
    148.2       143.5       139.0       136.2       133.5       129.3  
Total Deposits (Average)
    173.8       170.1       166.4       164.7       163.4       160.7  
 
                                               
Number of Branches
    2,435       2,409       2,402       2,370       2,363       2,358  
Number of ATMs
    6,549       6,496       6,325       6,304       6,029       5,874  
Number of Personal Bankers
    5,417       5,421       5,420       4,899       4,579       4,585  
Debit Cards Issued (in thousands)
    8,057       7,815       7,597       7,485       7,329       7,181  
Number of Personal Checking Accounts (in thousands)
    7,045       6,892       6,757       6,691       6,554       6,463  
Number of Business Checking Accounts (in thousands)
    881       870       860       856       848       842  
 
                                               
Retail Brokerage Business Metrics
                                               
Investment Sales Volume
  $ 2,893     $ 2,717     $ 2,596     $ 2,655     $ 2,738     $ 2,193  
Number of Dedicated Investment Sale Representatives
    1,404       1,440       1,322       1,248       1,207       1,181  
Market Value Customer Assets - End of Period (in billions)
    59.9       58.8       56.6       54.0       52.5       49.5  
 
                                               
Credit Quality Statistics
                                               
Net Charge-offs
                                               
Small Business
  $ 29     $ 20     $ 31     $ 30     $ 33     $ 25  
Consumer and Other Loans
    11       7       18       16       3       1  
 
                       
Total Net Charge-offs
    40       27       49       46       36       26  
Net Charge-off Rate
                                               
Small Business
    0.94 %     0.66 %     1.03 %     1.00 %     1.13 %     0.87 %
Consumer and Other Loans
    2.01       1.08       3.10       2.76       0.50       0.14  
Total Net Charge-off Rate
    1.10       0.73       1.37       1.29       1.02       0.73  
Nonperforming Assets
  $ 317     $ 327     $ 336     $ 373     $ 366     $ 351  

Page 17


 

JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES FINANCIAL HIGHLIGHTS AND BUSINESS-RELATED METRICS, CONTINUED
PRO FORMA COMBINED HISTORICAL LINE OF BUSINESS INFORMATION
(in millions, except ratios and where otherwise noted)
  (JPMORGANCHASE LOGO)
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
RETAIL BUSINESSES, CONTINUED
                                               
AUTO FINANCE
                                               
Net Revenue
  $ 454     $ 382     $ 421     $ 432     $ 436     $ 435  
Provision for Credit Losses
    60       95       118       130       95       131  
Noninterest Expense
    159       160       160       157       162       159  
Operating Earnings
    144       77       88       89       110       89  
 
                                               
Business Metrics (in billions)
                                               
Average Loans and Lease Receivables
                                               
Loan Outstanding (Average)
  $ 53.9     $ 54.5     $ 52.4     $ 50.3     $ 50.0     $ 49.0  
Lease Receivables (Average)
    10.1       10.7       11.4       12.1       12.5       12.8  
 
                       
Total Average Loans and Lease Receivables (a)
    64.0       65.2       63.8       62.4       62.5       61.8  
 
                                               
Credit Quality Statistics
                                               
30+ Day Delinquency Rate
    1.30 %     1.26 %     1.71 %     1.68 %     1.64 %     1.56 %
Net Charge-offs
                                               
Loans
  $ 57     $ 85     $ 110     $ 95     $ 87     $ 96  
Lease Receivables
    12       19       20       23       21       27  
 
                       
Total Net Charge-offs
    69       104       130       118       108       123  
Net Charge-off Rate
                                               
Loans (a)
    0.45 %     0.69 %     0.89 %     0.80 %     0.75 %     0.85 %
Lease Receivables
    0.48       0.71       0.70       0.75       0.67       0.86  
Total Net Charge-off Rate (a)
    0.45       0.69       0.86       0.79       0.73       0.85  
Nonperforming Assets
  $ 247     $ 249     $ 298     $ 325     $ 308     $ 332  
 
                                               
INSURANCE
                                               
Net Revenue
  $ 174     $ 182     $ 176     $ 79     $ 39     $ 34  
Noninterest Expense
    138       135       144       68       38       37  
Operating Earnings
    22       30       20       7             (2 )
Memo:
                                               
Consolidated Gross Insurance-Related Revenue (b)
    424       413       412       306       270       271  
 
                                               
Business Metrics (Ending Balances)
                                               
Invested Assets
  $ 7,343     $ 7,957     $ 7,638     $ 7,500     $ 1,850     $ 1,567  
Insurance Policy and Claims Reserves
    7,731       7,976       7,808       7,515       1,116       971  
Proprietary Annuity Sales
    74       76       80       127       143       198  
A.M Best Rating
    A       A       A       A       A       A  

(a)  
Loans include loans held for sale of $2.6 billion, $4.7 billion, $3.5 billion, $2.9 billion, $3.3 billion and $3.3 billion at June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the net charge-off rates.
(b)  
Consolidated gross insurance-related revenue includes revenue reported in the results of other lines of business.

Page 18


 

 
JPMORGAN CHASE & CO.
CARD SERVICES — MANAGED BASIS
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME
(in millions)
  (JPMORGANCHASE LOGO)
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Asset Management, Administration and Commissions
  $ 26     $ 25     $ 27     $ 26     $ 26     $ 33     $  
Credit Card Income
    823       678       839       746       702       635       17  
Other Income
    32       66       35       31       72       33       4  
 
                           
Subtotal
    881       769       901       803       800       701       21  
Net Interest Income
    2,895       2,855       2,836       2,749       2,601       2,577       (140 )
 
                           
TOTAL NET REVENUE
    3,776       3,624       3,737       3,552       3,401       3,278       (119 )
 
                           
 
                                                       
Managed Provision for Credit Losses
    1,757       1,725       1,801       1,705       1,641       1,644        
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    315       323       302       306       298       297        
Noncompensation Expense
    864       853       805       774       744       697       (6 )
Amortization of Intangibles
    187       187       195       192       189       189       93  
 
                           
TOTAL NONINTEREST EXPENSE
    1,366       1,363       1,302       1,272       1,231       1,183       87  
 
                                                       
Operating Earnings Before Income Tax Expense
    653       536       634       575       529       451       (206 )
Income Tax Expense
    244       200       238       216       199       168       (75 )
 
                           
OPERATING EARNINGS
  $ 409     $ 336     $ 396     $ 359     $ 330     $ 283     $ (131 )
 
                           
 
                                                       
Memo: Net Securitization Gains (Amortization)
  $ (2 )   $ 2     $ (19 )   $ (9 )   $ 22     $          
 
                               

Note: For additional information, see pages 51-56.

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.

Page 19


 

 
JPMORGAN CHASE & CO.
CARD SERVICES — MANAGED BASIS
FINANCIAL HIGHLIGHTS
(in millions, except ratios and where otherwise noted)
  (JPMORGANCHASE LOGO)
 
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
FINANCIAL METRICS
                                               
% of Average Managed Outstandings:
                                               
Net Interest Income
    9.17 %     9.10 %     8.96 %     8.71 %     8.43 %     8.41 %
Managed Provision for Credit Losses
    5.57       5.50       5.69       5.40       5.32       5.37  
Noninterest Income
    2.79       2.45       2.85       2.55       2.59       2.29  
Risk Adjusted Margin
    6.40       6.05       6.11       5.85       5.70       5.33  
Noninterest Expense
    4.33       4.34       4.11       4.03       3.99       3.86  
Pre-tax Income
    2.07       1.71       2.00       1.82       1.71       1.47  
Operating Earnings
    1.30       1.07       1.25       1.14       1.07       0.92  
 
                                               
BUSINESS METRICS
                                               
Charge Volume (in billions)
  $ 70.6     $ 63.5     $ 68.9     $ 65.4     $ 62.3     $ 58.7  
Net Accounts Opened (in thousands) (a)
    10,269       2,011       1,908       1,976       2,835       2,036  
Credit Cards Issued (in thousands)
    96,343       87,014       85,942       86,150       86,161       84,593  
 
                                               
Merchant Acquiring Business
                                               
Bank Card Volume (in billions)
  $ 119.3     $ 110.1     $ 119.2     $ 107.9     $ 104.4     $ 91.6  
Total Transactions (in millions)
    3,926       3,714       3,934       3,615       3,490       3,135  
 
                                               
SELECTED ENDING BALANCES
                                               
Loans:
                                               
Loans on Balance Sheet
  $ 28,981     $ 29,187     $ 29,543     $ 30,873     $ 31,437     $ 30,669  
Securitized Loans
    69,752       68,747       71,956       71,078       69,621       67,682  
Seller’s Interest and Accrued Interest Receivable (b)
    30,177       27,485       27,193       23,285       24,414       25,156  
 
                       
Managed Loans
  $ 128,910     $ 125,419     $ 128,692     $ 125,236     $ 125,472     $ 123,507  
 
                       
 
                                               
SELECTED AVERAGE BALANCES
                                               
Managed Assets
  $ 134,141     $ 133,797     $ 133,077     $ 132,479     $ 131,686     $ 132,113  
Loans:
                                               
Loans on Balance Sheet
  $ 29,748     $ 29,473     $ 30,042     $ 33,773     $ 32,145     $ 31,229  
Securitized Loans
    68,008       70,054       71,814       69,556       68,313       66,528  
Seller’s Interest and Accrued Interest Receivable (b)
    29,181       26,652       23,763       21,829       23,281       26,458  
 
                       
Managed Loans
  $ 126,937     $ 126,179     $ 125,619     $ 125,158     $ 123,739     $ 124,215  
 
                       
 
                                               
CREDIT QUALITY STATISTICS
                                               
Net Charge-offs
  $ 1,754     $ 1,722     $ 1,736     $ 1,713     $ 1,690     $ 1,695  
Net Charge-off Rate
    5.56 %     5.49 %     5.48 %     5.43 %     5.48 %     5.53 %
12 Month Lagged
    5.70       5.58       5.67       5.74       5.91       6.11  
 
                                               
Delinquency ratios
                                               
30+ days
    3.72 %     4.02 %     4.21 %     4.24 %     4.13 %     4.29 %
90+ days
    1.73       1.95       1.99       1.95       1.92       2.00  
 
                                               
Allowance for Loan Losses
    1,677       1,674       1,671       1,606       1,616       1,667  
Allowance for Loan Losses to Period-end Loans
    5.79 %     5.74 %     5.66 %     5.20 %     5.14 %     5.44 %

(a)  
Net accounts opened includes originations, purchases and sales.
(b)  
Due to the decertification of seller’s interest effective July 1, 2004, seller’s interest will be reported in Loans on the Consolidated balance sheet in future reporting periods.

Page 20


 

 
JPMORGAN CHASE & CO.
CARD RECONCILIATION OF REPORTED AND MANAGED DATA
(in millions)
  (JPMORGANCHASE LOGO)
 
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
INCOME STATEMENT DATA (a)
                                               
Credit Card Income
                                               
Reported Data for the period
  $ 1,534     $ 1,427     $ 1,637     $ 1,541     $ 1,402     $ 1,365  
Securitization Adjustments
    (711 )     (749 )     (798 )     (795 )     (700 )     (730 )
 
                       
Managed Credit Card Income
  $ 823     $ 678     $ 839     $ 746     $ 702     $ 635  
 
                       
 
                                               
Other Income
                                               
Reported Data for the Period
  $ 77     $ 105     $ 66     $ 45     $ 96     $ 36  
Securitization Adjustments
    (45 )     (39 )     (31 )     (14 )     (24 )     (3 )
 
                       
Managed Other Income
  $ 32     $ 66     $ 35     $ 31     $ 72     $ 33  
 
                       
 
                                               
Net Interest Income
                                               
Reported Data for the Period
  $ 781     $ 743     $ 700     $ 711     $ 646     $ 595  
Securitization Adjustments
    2,114       2,112       2,136       2,038       1,955       1,982  
 
                       
Managed Net Interest Income
  $ 2,895     $ 2,855     $ 2,836     $ 2,749     $ 2,601     $ 2,577  
 
                       
 
                                               
Total Net Revenue (b)
                                               
Reported Data for the Period
  $ 2,418     $ 2,300     $ 2,430     $ 2,323     $ 2,170     $ 2,029  
Securitization Adjustments
    1,358       1,324       1,307       1,229       1,231       1,249  
 
                       
Managed Total Net Revenue
  $ 3,776     $ 3,624     $ 3,737     $ 3,552     $ 3,401     $ 3,278  
 
                       
 
                                               
Provision for Credit Losses
                                               
Reported Data for the Period
  $ 399     $ 401     $ 494     $ 476     $ 410     $ 395  
Securitization Adjustments
    1,358       1,324       1,307       1,229       1,231       1,249  
 
                       
Managed Provision for Credit Losses
  $ 1,757     $ 1,725     $ 1,801     $ 1,705     $ 1,641     $ 1,644  
 
                       
 
                                               
BALANCE SHEET — AVERAGE BALANCES
                                               
Total Average Assets
                                               
Reported Data for the Period
  $ 66,133     $ 63,743     $ 61,263     $ 62,923     $ 63,373     $ 65,585  
Securitization Adjustments
    68,008       70,054       71,814       69,556       68,313       66,528  
 
                       
Managed Average Assets
  $ 134,141     $ 133,797     $ 133,077     $ 132,479     $ 131,686     $ 132,113  
 
                       
 
                                               
CREDIT QUALITY STATISTICS
                                               
Net Charge-offs
                                               
Reported Net Charge-offs Data for the Period
  $ 396     $ 398     $ 429     $ 484     $ 459     $ 446  
Securitization Adjustments
    1,358       1,324       1,307       1,229       1,231       1,249  
 
                       
Managed Net Charge-offs
  $ 1,754     $ 1,722     $ 1,736     $ 1,713     $ 1,690     $ 1,695  
 
                       

(a)  
JPMorgan Chase uses the concept of “managed receivables” to evaluate the credit performance of the underlying credit card loans, both sold and not sold: as the same borrower is continuing to use the credit card for ongoing charges, a borrower’s credit performance will impact both the receivables sold under SFAS 140 and those not sold. Thus, in its disclosures regarding managed receivables, JPMorgan Chase treats the sold receivables as if they were still on the balance sheet in order to disclose the credit performance (such as net charge-off rates) of the entire managed credit card portfolio. Operating results exclude the impact of credit card securitizations on revenue, the provision for credit losses, net charge-offs and receivables. Securitization does not change reported net income versus operating earnings; however, it does affect the classification of items on the Consolidated statement of income.
(b)  
Includes Credit Card Income, Other Income and Net Interest Income.

Page 21


 

 
     
JPMORGAN CHASE & CO.
COMMERCIAL BANKING
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME
(in millions, except ratios)
  (JPMORGANCHASE LOGO)
 
 
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Lending & Deposit Related Fees
  $ 168     $ 162     $ 169     $ 188     $ 188     $ 180     $  
Asset Management, Administration and Commissions
    10       11       11       12       12       13        
Other Income (b)
    95       77       75       66       62       55        
 
                           
Subtotal
    273       250       255       266       262       248        
Net Interest Income
    593       583       596       589       593       588       (12 )
 
                           
TOTAL NET REVENUE
    866       833       851       855       855       836       (12 )
 
                           
 
                                                       
Provision for Credit Losses
    18       (86 )     33       84       42       52        
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    167       158       152       162       147       150        
Noncompensation Expense
    286       274       281       280       297       291       (1 )
Amortization of Intangibles
    18       18       18       19       19       19       18  
 
                           
TOTAL NONINTEREST EXPENSE
    471       450       451       461       463       460       17  
 
                           
 
                                                       
Operating Earnings before Income Tax Expense
    377       469       367       310       350       324       (29 )
Income Tax Expense (Benefit)
    143       180       142       119       134       124       (11 )
 
                           
OPERATING EARNINGS
  $ 234     $ 289     $ 225     $ 191     $ 216     $ 200     $ (18 )
 
                           
 
                                                       
SELECTED BALANCE SHEET (Average)
                                                       
Total Assets
  $ 55,268     $ 54,279     $ 54,359     $ 56,206     $ 57,699     $ 59,426          
Loans
    49,727       48,858       48,874       50,461       52,097       53,598          
Deposits
    67,695       64,324       59,875       58,259       55,034       54,646          
 
                                                       
CREDIT DATA AND QUALITY STATISTICS
                                                       
Net Charge-offs
  $ 30     $     $ 51     $ 83     $ 60     $ 79          
Nonperforming Loans
    614       780       875       1,084       1,240       1,192          
Net Charge-off Rate
    0.24 %     %     0.41 %     0.65 %     0.46 %     0.60 %        

Note: For additional information, see pages 57-62.

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.
(b)  
IB-related revenues are included in Other Income.

Page 22


 

 
     
JPMORGAN CHASE & CO.
TREASURY & SECURITIES SERVICES
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME
(in millions)
  (JPMORGANCHASE LOGO)
 
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Lending & Deposit Related Fees
  $ 243     $ 245     $ 243     $ 238     $ 229     $ 227     $  
Asset Management, Administration and Commissions
    645       601       551       522       509       473        
Other Income
    109       85       123       75       73       70        
 
                           
Subtotal
    997       931       917       835       811       770        
Net Interest Income
    371       349       353       364       362       360        
 
                           
TOTAL NET REVENUE
    1,368       1,280       1,270       1,199       1,173       1,130        
 
                           
 
                                                       
Provision for Credit Losses
    3       1       3       2       4       2        
Credit Reimbursement to IB (b)
    (43 )     (43 )     (54 )     (54 )     (54 )     (54 )      
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    466       470       452       437       431       428        
Noncompensation Expense
    678       599       540       499       526       469        
Amortization of Intangibles
    31       32       25       22       22       22       16  
 
                           
TOTAL NONINTEREST EXPENSE
    1,175       1,101       1,017       958       979       919       16  
 
                           
 
                                                       
Operating Earnings before Income Tax Expense
    147       135       196       185       136       155       (16 )
Income Tax Expense (Benefit)
    44       42       67       60       42       49       (6 )
 
                           
OPERATING EARNINGS
  $ 103     $ 93     $ 129     $ 125     $ 94     $ 106     $ (10 )
 
                           
 
                                                       
REVENUE BY BUSINESS
                                                       
Treasury Services (c)
  $ 584     $ 566     $ 526     $ 517     $ 500     $ 522          
Investor Services
    470       413       396       383       372       351          
Institutional Trust Services
    314       301       348       299       301       257          
 
                               
TOTAL NET REVENUE
  $ 1,368     $ 1,280     $ 1,270     $ 1,199     $ 1,173     $ 1,130          
 
                               
 
                                                       
MEMO
                                                       
Treasury Services Firmwide Revenue (c)
  $ 1,164     $ 1,131     $ 1,095     $ 1,112     $ 1,097     $ 1,084          
 
                               

Note: For additional information, see pages 63-68.

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.
(b)  
Management has charged T&SS a credit reimbursement, which is the pre-tax amount of earnings, less cost of capital, related to certain exposures managed within the IB credit portfolio on behalf of clients shared with T&SS.
(c)  
T&SS firmwide revenues include T&SS revenues recorded in the other lines of business. Revenues associated with Treasury Services customers who are also customers of the Commercial Bank, Consumer & Small Business and Asset and Wealth Management lines of business are reported in these other lines of business and are excluded from Treasury Services as follows:
 
                                                         
($’s in millions)   2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003        
Treasury Services Revenue Reported in Commercial Banking
  $ 485     $ 476     $ 474     $ 483     $ 468     $ 453          
Treasury Services Revenue Reported in Other Lines of Business
    95       89       95       112       129       109          

Page 23


 

 
     
JPMORGAN CHASE & CO.
TREASURY & SECURITIES SERVICES
PRO FORMA COMBINED HISTORICAL LINE OF BUSINESS INFORMATION
(in millions, except ratios and where otherwise noted)
  (JPMORGANCHASE LOGO)
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
BUSINESS METRICS
                                               
Assets under Custody (in billions)
  $ 7,980     $ 8,001     $ 7,597     $ 6,926     $ 6,777     $ 6,269  
Corporate Trust Securities under Administration (in billions)
    2,198       1,924       1,909       1,888       1,982       1,965  
 
                                               
SELECTED BALANCE SHEET (Average)
                                               
Total Assets
  $ 26,745     $ 25,141     $ 26,610     $ 24,853     $ 25,719     $ 22,578  
Loans
    8,272       7,524       7,775       7,865       7,874       5,733  
Deposits (a)
    134,822       124,824       115,578       115,701       108,257       104,440  

(a)  
Includes DDA, money markets and foreign deposits.

Page 24


 

 
     
JPMORGAN CHASE & CO.
ASSET & WEALTH MANAGEMENT
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME
(in millions, except ratios)
  (JPMORGANCHASE LOGO)
 
 
 
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Lending & Deposit Related Fees
  $ 9     $ 10     $ 11     $ 11     $ 10     $ 12     $  
Asset Management, Administration and Commissions
    886       911       844       790       723       715        
Other Income
    49       52       89       53       54       17        
 
                           
Subtotal
    944       973       944       854       787       744        
Net Interest Income
    241       240       245       242       232       227       (5 )
 
                           
TOTAL NET REVENUE
    1,185       1,213       1,189       1,096       1,019       971       (5 )
 
                           
 
                                                       
Provision for Credit Losses
    (5 )     9       37       (3 )     6       8        
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    448       428       409       424       400       393        
Noncompensation Expense
    423       394       413       374       365       368        
Amortization of Intangibles
    23       23       22       22       22       22       20  
 
                           
TOTAL NONINTEREST EXPENSE
    894       845       844       820       787       783       20  
 
                           
 
                                                       
Operating Earnings before Income Tax Expense
    296       359       308       279       226       180       (25 )
Income Tax Expense (Benefit)
    106       130       109       101       82       72       (9 )
 
                           
OPERATING EARNINGS
  $ 190     $ 229     $ 199     $ 178     $ 144     $ 108     $ (16 )
 
                           
 
                                                       
REVENUE BY CLIENT SEGMENT
                                                       
Institutional
  $ 269     $ 281     $ 264     $ 246     $ 222     $ 236          
Private Bank
    388       394       406       386       369       354          
Private Client Services
    241       254       237       231       228       224          
Retail
    287       284       282       233       200       157          
 
                               
Total Net Revenue
  $ 1,185     $ 1,213     $ 1,189     $ 1,096     $ 1,019     $ 971          
 
                               
 
                                                       
SELECTED BALANCE SHEET (Average)
                                                       
Total Assets
  $ 40,223     $ 40,171     $ 38,765     $ 37,834     $ 38,471     $ 38,279          
Loans
    24,943       24,130       23,618       22,751       23,353       23,617          
Deposits
    36,552       34,792       32,722       31,372       30,151       29,246          
 
                                                       
CREDIT DATA AND QUALITY STATISTICS
                                                       
Net Charge-offs
  $ 6     $ 53     $ 1     $ 2     $ 17     $ 1          
Nonperforming Loans
    144       159       215       196       221       254          
Net Charge-off Rate
    0.10 %     0.88 %     0.02 %     0.03 %     0.29 %     0.02 %        

Note: For additional information, see pages 69-74.

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.

Page 25


 

 
     
JPMORGAN CHASE & CO.
ASSET & WEALTH MANAGEMENT
PRO FORMA COMBINED HISTORICAL LINE OF BUSINESS INFORMATION
(in billions)
  (JPMORGANCHASE LOGO)
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
Asset Class
                                               
Liquidity
  $ 216     $ 228     $ 228     $ 215     $ 215     $ 215  
Fixed Income
    180       185       181       183       173       165  
Equities, Balanced and Other
    355       359       335       304       293       277  
 
                       
Assets under Management
    751       772       744       702       681       657  
Custody / Brokerage / Administration / Deposits
    428       415       397       385       366       301  
 
                       
Total Assets under Supervision
  $ 1,179     $ 1,187     $ 1,141     $ 1,087     $ 1,047     $ 958  
 
                       
 
                                               
Client Segment
                                               
Institutional
                                               
Assets under Management
  $ 436     $ 449     $ 436     $ 417     $ 383     $ 370  
Custody / Brokerage / Administration / Deposits
    170       164       160       156       148       141  
 
                       
Assets under Supervision
    606       613       596       573       531       511  
Private Bank
                                               
Assets under Management
    139       141       138       132       130       125  
Custody / Brokerage / Administration / Deposits
    138       135       128       127       121       109  
 
                       
Assets under Supervision
    277       276       266       259       251       234  
Private Client Services
                                               
Assets under Management
    51       52       52       50       50       48  
Custody / Brokerage / Administration / Deposits
    40       39       38       36       36       34  
 
                       
Assets under Supervision
    91       91       90       86       86       82  
Retail
                                               
Assets under Management
    125       129       117       103       118       114  
Custody / Brokerage / Administration / Deposits
    80       78       72       66       61       17  
 
                       
Assets under Supervision
    205       207       189       169       179       131  
 
                       
Total Assets under Supervision
  $ 1,179     $ 1,187     $ 1,141     $ 1,087     $ 1,047     $ 958  
 
                       
 
                                               
Geographic Region
                                               
Americas
                                               
Assets under Management
  $ 546     $ 560     $ 548     $ 526     $ 521     $ 512  
Custody / Brokerage / Administration / Deposits
    396       385       362       352       335       273  
 
                       
Assets under Supervision
    942       945       910       878       856       785  
International
                                               
Assets under Management
    205       212       196       176       161       146  
Custody / Brokerage / Administration / Deposits
    32       30       35       33       30       27  
 
                       
Assets under Supervision
    237       242       231       209       191       173  
 
                       
Total Assets under Supervision
  $ 1,179     $ 1,187     $ 1,141     $ 1,087     $ 1,047     $ 958  
 
                       
 
                                               
Assets Under Supervision Rollforward
                                               
Beginning Balance
  $ 1,187     $ 1,141     $ 1,087     $ 1,047     $ 958     $ 974  
Net Assets Flows
          14       (1 )     11       (8 )     (11 )
Market / Other Impact
    (8 )     32       55       29       97       (5 )
 
                       
Ending Balance
  $ 1,179     $ 1,187     $ 1,141     $ 1,087     $ 1,047     $ 958  
 
                       

Page 26


 

 
JPMORGAN CHASE & CO.
CORPORATE
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME
(in millions)
  (JPMORGANCHASE LOGO)
                                                         
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR   Memo: Pro Forma
    2004   2004   2003   2003   2003   2003   Adjustments (a)
REVENUE
                                                       
Trading Revenue
  $ 70     $ 17     $ 21     $ 34     $ 30     $ 50     $  
Securities / Private Equity Gains (Losses)
    343       561       (9 )     405       528       207        
Other Income
    (81 )     (111 )     (61 )     (179 )     (117 )     (12 )      
 
                           
Subtotal
    332       467       (49 )     260       441       245        
Net Interest Income
    (234 )     (277 )     (178 )     (176 )     (120 )     (162 )     277  
 
                           
TOTAL NET REVENUE
    98       190       (227 )     84       321       83       277  
 
                           
 
                                                       
Provision for Credit Losses
    (27 )     (84 )     (48 )     (1 )     101       72        
 
                                                       
NONINTEREST EXPENSE
                                                       
Compensation Expense
    751       799       625       681       776       812       35  
Noncompensation Expense
    1,200       1,201       1,230       1,084       1,127       1,069       (10 )
Net Expenses Allocated to Other Businesses
    (1,463 )     (1,452 )     (1,379 )     (1,396 )     (1,424 )     (1,448 )      
Amortization of Intangibles
          (2 )     (2 )     (1 )     (1 )            
 
                           
TOTAL NONINTEREST EXPENSE
    488       546       474       368       478       433       25  
 
                           
 
                                                       
Operating Earnings before Income Tax Expense
    (363 )     (272 )     (653 )     (283 )     (258 )     (422 )     252  
Income Tax Expense (Benefit)
    (260 )     (257 )     (446 )     (232 )     (188 )     (235 )     154  
 
                           
OPERATING EARNINGS
  $ (103 )   $ (15 )   $ (207 )   $ (51 )   $ (70 )   $ (187 )   $ 98  
 
                           
 
                                                       
Treasury Securities Gains (Losses) (b)
  $ (54 )   $ 226     $ (267 )   $ 107     $ 477     $ 423          
 
                               
Treasury Investment Portfolio
    89,248       85,460       97,926       99,029       94,014       86,097          
 
                               
 
                                                       
Private Equity Gains (Losses)
                                                       
Direct Investments
  $ 370     $ 310     $ 150     $ 287     $ 155     $ (118 )        
Third-Party Fund Investments
    22       23       72       28       (113 )     (101 )        
 
                               
Total Private Equity Gains (Losses)
  $ 392     $ 333     $ 222     $ 315     $ 42     $ (219 )        
 
                               
 
                                                       
Private Equity Portfolio information
                                                       
Direct Investments
                                                       
Public Securities
                                                       
Carrying Value
  $ 936     $ 809     $ 741     $ 774     $ 660     $ 538          
Cost
    623       578       509       633       604       697          
Quoted Public Value
    1,431       1,239       1,109       1,182       967       770          
Private Direct Securities
                                                       
Carrying Value
    6,140       6,424       6,980       6,945       6,704       6,480          
Cost
    7,757       7,924       8,429       8,488       8,305       8,045          
Third-Party Fund Investments
                                                       
Carrying Value
    1,559       1,803       1,896       2,142       2,256       2,436          
Cost
    2,161       2,447       2,614       2,912       3,016       3,289          
 
                               
 
                                                       
Total Private Equity Portfolio — Carrying Value
  $ 8,635     $ 9,036     $ 9,617     $ 9,861     $ 9,620     $ 9,454          
 
                               
 
                                                       
Total Private Equity Portfolio — Cost
  $ 10,541     $ 10,949     $ 11,552     $ 12,033     $ 11,925     $ 12,031          
 
                               

Note: For additional information, see pages 75-80.

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.
(b)  
Excludes gains/losses on securities used to manage the risk associated with mortgage servicing rights.

Page 27


 

 
JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL CREDIT-RELATED INFORMATION
(in millions)
  (JPMORGANCHASE LOGO)
                                                 
    Jun 30   Mar 31   Dec 31   Sep 30   Jun 30   Mar 31
    2004   2004   2003   2003   2003   2003
CREDIT EXPOSURE
                                               
WHOLESALE (a)
                                               
Loans — U.S.
  $ 102,234     $ 101,829     $ 106,477     $ 113,512     $ 112,917     $ 113,753  
Loans — Non-U.S.
    33,151       34,376       33,832       33,290       38,871       37,204  
 
                       
TOTAL WHOLESALE LOANS — REPORTED
    135,385       136,205       140,309       146,802       151,788       150,957  
 
                                               
CONSUMER (b)
                                               
Home Finance
    120,100       111,318       110,716       123,385       112,422       104,267  
Auto Finance
    62,671       64,784       63,754       63,375       62,007       62,664  
Small Business and Other Consumer
    13,835       13,665       13,343       13,476       14,323       13,661  
Credit Card Receivables — Reported
    28,981       29,187       29,543       30,873       31,437       30,669  
 
                       
TOTAL CONSUMER LOANS — REPORTED
    225,587       218,954       217,356       231,109       220,189       211,261  
 
                                               
TOTAL LOANS — REPORTED
    360,972       355,159       357,665       377,911       371,977       362,218  
Credit Card Securitizations
    99,929       96,232       99,149       94,363       94,035       92,838  
 
                       
TOTAL LOANS- MANAGED
    460,901       451,391       456,814       472,274       466,012       455,056  
Derivative Receivables
    55,085       63,898       88,959       89,390       98,945       91,206  
Other Receivables
    108       108       108       108       108       108  
 
                       
TOTAL CREDIT-RELATED ASSETS
    516,094       515,397       545,881       561,772       565,065       546,370  
Wholesale Lending-Related Commitments
    321,615       333,655       324,030       348,631       364,091       365,080  
 
                       
TOTAL
  $ 837,709     $ 849,052     $ 869,911     $ 910,403     $ 929,156     $ 911,450  
 
                       
 
                                               
Memo: Total by Category
                                               
Total Wholesale Exposure (c)
  $ 512,193     $ 533,866     $ 553,406     $ 584,931     $ 614,932     $ 607,351  
Total Consumer Managed Loans (d) (e)
    325,516       315,186       316,505       325,472       314,224       304,099  
 
                       
Total
  $ 837,709     $ 849,052     $ 869,911     $ 910,403     $ 929,156     $ 911,450  
 
                       

(a)  
Includes Investment Bank, Treasury & Securities Services, Asset & Wealth Management and Commercial Banking.
(b)  
Includes Retail Financial Services and Card Services.
(c)  
Represents Total Wholesale Loans, Derivative Receivables, Other Receivables and Wholesale Lending-Related Commitments.
(d)  
Excludes consumer lending-related commitments.
(e)  
Represents Total Consumer Loans plus Credit Card Securitizations.

Page 28


 

 
JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL CREDIT-RELATED INFORMATION, CONTINUED
(in millions, except ratios)
  (JPMORGANCHASE LOGO)
                                                 
    Jun 30   Mar 31   Dec 31   Sep 30   Jun 30   Mar 31
    2004   2004   2003   2003   2003   2003
NONPERFORMING ASSETS AND RATIOS
                                               
WHOLESALE
                                               
Loans — U.S.
  $ 1,382     $ 1,786     $ 2,108     $ 2,804     $ 3,488     $ 3,755  
Loans — Non-U.S.
    726       856       973       1,322       1,223       1,358  
 
                       
TOTAL WHOLESALE LOANS REPORTED (Excluding Purchased HFS Wholesale Loans)
    2,108       2,642       3,081       4,126       4,711       5,113  
 
                                               
CONSUMER
                                               
Home Finance
    750       944       1,103       1,197       1,207       1,271  
Auto Finance
    221       220       264       292       280       304  
Small Business and Other Consumer
    311       319       325       362       351       335  
Credit Card Receivables — Reported
    9       10       11       12       13       14  
 
                       
TOTAL CONSUMER LOANS REPORTED
    1,291       1,493       1,703       1,863       1,851       1,924  
 
                                               
TOTAL LOANS REPORTED (Excluding Purchased HFS Wholesale Loans)
    3,399       4,135       4,784       5,989       6,562       7,037  
Derivative Receivables
    223       240       253       260       276       277  
Other Receivables
    108       108       108       108       108       108  
Assets Acquired in Loan Satisfactions
    320       369       422       430       474       480  
 
                       
TOTAL NONPERFORMING ASSETS (Excluding Purchased HFS Wholesale Loans)
  $ 4,050     $ 4,852     $ 5,567     $ 6,787     $ 7,420     $ 7,902  
 
                       
 
                                               
PURCHASED HELD FOR SALE WHOLESALE LOANS (a)
  $ 374     $ 331     $ 22     $ 21     $ 1     $  
 
                                               
TOTAL NONPERFORMING LOANS TO TOTAL LOANS
    0.94 %     1.16 %     1.34 %     1.58 %     1.76 %     1.94 %

(a)  
Represents distressed wholesale loans purchased as part of the IB’s proprietary investing activities.

Page 29


 

 
JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL CREDIT-RELATED INFORMATION, CONTINUED
(in millions, except ratios)
  (JPMORGANCHASE LOGO)
 
                                                 
    Jun 30   Mar 31   Dec 31   Sep 30   Jun 30   Mar 31
    2004   2004   2003   2003   2003   2003
NET CHARGE-OFFS
                                               
Wholesale Loans
  $ 41     $ 78     $ 57     $ 348     $ 354     $ 412  
Consumer (Excluding Card)
    176       236       969       318       285       303  
Credit Card Receivables — Reported
    396       398       429       484       459       446  
 
                       
Total Loans — Reported
    613       712       1,455       1,150       1,098       1,161  
Credit Card Securitizations
    1,358       1,324       1,307       1,229       1,231       1,249  
 
                       
Total Loans — Managed
  $ 1,971     $ 2,036     $ 2,762     $ 2,379     $ 2,329     $ 2,410  
 
                       
 
                                               
NET CHARGE-OFF RATES — ANNUALIZED
                                               
Wholesale Loans (a)
    0.13 %     0.25 %     0.17 %     0.96 %     1.03 %     1.15 %
Consumer (Excluding Card) (b)
    0.40       0.56       2.26       0.77       0.72       0.80  
Credit Card Receivables — Reported
    5.35       5.43       5.67       5.69       5.73       5.79  
Total Loans — Reported (a) (b)
    0.74       0.88       1.71       1.33       1.34       1.43  
Credit Card Securitizations
    5.62       5.51       5.43       5.34       5.39       5.45  
Total Loans — Managed (a) (b)
    1.85       1.94       2.53       2.18       2.23       2.31  
 
                                               
Memo: Credit Card — Managed
    5.56       5.49       5.48       5.43       5.48       5.53  

(a)  
Loans include loans held for sale of $5,259 million, $5,742 million, $4,279 million, $3,778 million, $4,811 million and $3,935 million as of June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the net charge-off rates.
(b)  
Loans include loans held for sale of $19,818 million, $21,165 million, $25,998 million, $32,376 million, $28,777 million and $25,438 million as of June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the net charge-off rates.

Page 30


 

JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL CREDIT-RELATED INFORMATION, CONTINUED
(in millions, except ratios)
  (JPMORGANCHASE LOGO)
 
 
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
CHANGE IN THE ALLOWANCE FOR LOAN LOSSES
                                               
Beginning Balance
  $ 7,443     $ 7,995     $ 8,660     $ 9,049     $ 9,141     $ 9,273  
Net Charge-Offs
    (613 )     (712 )     (1,455 )     (1,150 )     (1,098 )     (1,161 )
Provision for Loan Losses
    285       162       790       758       1,008       1,165  
Other (a)
    (25 )     (2 )           3       (2 )     (136 )
 
                       
Ending Balance (b)
  $ 7,090     $ 7,443     $ 7,995     $ 8,660     $ 9,049     $ 9,141  
 
                       
CHANGE IN THE ALLOWANCE FOR LENDING-RELATED COMMITMENTS
                                               
Beginning Balance
  $ 805     $ 814     $ 796     $ 920     $ 1,036     $ 965  
Provision for Lending-Related Commitments
    (37 )     (9 )     18       (123 )     (116 )     70  
Other
                      (1 )           1  
 
                       
Ending Balance (b)
  $ 768     $ 805     $ 814     $ 796     $ 920     $ 1,036  
 
                       
ALLOWANCE COMPONENTS AND RATIOS
                                               
ALLOWANCE FOR LOAN LOSSES
                                               
Total Wholesale
  $ 3,506     $ 3,860     $ 4,387     $ 4,831     $ 5,267     $ 5,398  
Total Consumer
    3,584       3,583       3,608       3,829       3,782       3,743  
 
                       
Total Allowance for Loan Losses
    7,090       7,443       7,995       8,660       9,049       9,141  
ALLOWANCE FOR LENDING-RELATED COMMITMENTS
    768       805       814       796       920       1,036  
 
                       
Total Allowance for Credit Losses
  $ 7,858     $ 8,248     $ 8,809     $ 9,456     $ 9,969     $ 10,177  
 
                       
Wholesale Allowance for Loan Losses to Total Wholesale Loans (c)
    2.69 %     2.96 %     3.23 %     3.38 %     3.58 %     3.67 %
Consumer Allowance for Loan Losses to Total Consumer Loans (d)
    1.74       1.81       1.89       1.93       1.98       2.01  
Allowance for Loan Losses to Total Loans (c) (d)
    2.11       2.27       2.44       2.53       2.67       2.75  
Allowance for Loan Losses to Total Nonperforming Loans (e)
    219       192       179       149       139       131  

(a)  
First quarter 2003 includes $138 million related to the transfer of the allowance for accrued interest and fees on securitized credit card loans.
(b)  
Not restated for the adoption of the combined Firm methodology for estimating the allowance for credit losses.
(c)  
Loans include loans held for sale of $5,259 million, $5,742 million, $4,279 million, $3,778 million, $4,811 million and $3,935 million as of June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the allowance coverage ratios.
(d)  
Loans include loans held for sale of $19,818 million, $21,165 million, $25,998 million, $32,376 million, $28,777 million and $25,438 million as of June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the allowance coverage ratios.
(e)  
Nonperforming loans include loans held for sale of $155 million, $263 million, $319 million, $181 million, $55 million and $79 million as of June 30, 2004, March 31, 2004, December 31, 2003, September 30, 2003, June 30, 2003 and March 31, 2003, respectively. These amounts are not included in the allowance coverage ratios.

Page 31


 

JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL CREDIT-RELATED INFORMATION, CONTINUED
(in millions, except ratios)
  (JPMORGANCHASE LOGO)
 
 
 
                                                 
    2QTR   1QTR   4QTR   3QTR   2QTR   1QTR
    2004   2004   2003   2003   2003   2003
PROVISION FOR CREDIT LOSSES
                                               
LOANS
                                               
Investment Bank
  $ (283 )   $ (297 )   $ (389 )   $ (175 )   $ 12     $ 277  
Commercial Banking
    22       (78 )     10       83       101       30  
Treasury & Securities Services
    3       1       3       2       3       2  
Asset & Wealth Management
    (4 )     8       37       (3 )     7       8  
Corporate
    (27 )     (83 )     (48 )     (1 )     101       64  
 
                       
Total Wholesale
    (289 )     (449 )     (387 )     (94 )     224       381  
 
                                               
Retail Financial Services
    175       210       683       376       374       389  
Card Services
    399       401       494       476       410       395  
 
                       
Total Consumer
    574       611       1,177       852       784       784  
 
                       
Total Provision for Loan Losses
    285       162       790       758       1,008       1,165  
 
                       
 
                                               
LENDING-RELATED COMMITMENTS
                                               
Investment Bank
    (32 )     (6 )     (7 )     (123 )     (57 )     40  
Commercial Banking
    (4 )     (8 )     23       1       (59 )     22  
Treasury & Securities Services
                            1        
Asset & Wealth Management
    (1 )     1                   (1 )      
Corporate
          (1 )                       8  
 
                       
Total Wholesale
    (37 )     (14 )     16       (122 )     (116 )     70  
Retail Financial Services
          5       2       (1 )            
Card Services
                                   
 
                       
Total Consumer
          5       2       (1 )            
 
                       
Total Provision for Lending-Related Commitments
    (37 )     (9 )     18       (123 )     (116 )     70  
 
                       
 
                                               
PROVISION FOR CREDIT LOSSES
                                               
Investment Bank
    (315 )     (303 )     (396 )     (298 )     (45 )     317  
Commercial Banking
    18       (86 )     33       84       42       52  
Treasury & Securities Services
    3       1       3       2       4       2  
Asset & Wealth Management
    (5 )     9       37       (3 )     6       8  
Corporate
    (27 )     (84 )     (48 )     (1 )     101       72  
 
                       
Total Wholesale
    (326 )     (463 )     (371 )     (216 )     108       451  
Retail Financial Services
    175       215       685       375       374       389  
Card Services
    399       401       494       476       410       395  
 
                       
Total Consumer
    574       616       1,179       851       784       784  
 
                       
Total Provision for Credit Losses
    248       153       808       635       892       1,235  
 
                       
 
                                               
Securitized Credit Losses
    1,358       1,324       1,307       1,229       1,231       1,249  
 
                       
Managed Provision for Credit Losses
  $ 1,606     $ 1,477     $ 2,115     $ 1,864     $ 2,123     $ 2,484  
 
                       

Page 32


 

(JPMORGANCHASE LOGO)

APPENDIX

 


 

 
JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME — OPERATING BASIS
(in millions)
  (JPMORGANCHASE LOGO)
                                         
    Second Quarter 2004
    Historical   Historical   Total Historical   Pro Forma   Pro Forma
    JPMC   Bank One   Combined   Adjustments(a)   Combined
REVENUE
                                       
Investment Banking Fees
  $ 893     $ 46     $ 939     $     $ 939  
Trading Revenue
    1,312       95       1,407             1,407  
Lending & Deposit Related Fees
    412       545       957             957  
Asset Management, Administration and Commissions
    1,770       486       2,256       2       2,258  
Securities / Private Equity Gains (Losses)
    460       (57 )     403             403  
Mortgage Fees and Related Income
    338       23       361       (1 )     360  
Credit Card Income
    324       634       958       17       975  
Other Income
    215       170       385       4       389  
 
                   
Subtotal
    5,724       1,942       7,666       22       7,688  
 
                                       
Interest Income
    6,013       4,593       10,606       (45 )     10,561  
Interest Expense
    2,620       1,182       3,802       (190 )     3,612  
 
                   
Net Interest Income
    3,393       3,411       6,804       145       6,949  
 
                   
 
                                       
 
                   
TOTAL NET REVENUE
    9,117       5,353       14,470       167       14,637  
 
                   
 
                                       
Managed Provision for Credit Losses
    689       917       1,606             1,606  
 
                                       
NONINTEREST EXPENSE
                                       
Compensation Expense
    2,943       1,249       4,192       35       4,227  
Occupancy Expense
    440       170       610       (14 )     596  
Technology and Communications Expense
    786       176       962       (2 )     960  
Professional & Outside Services
    752       354       1,106             1,106  
Marketing
    202       319       521             521  
Other Expense
    511       535       1,046       (9 )     1,037  
Amortization of Intangibles
    79       34       113       279       392  
 
                   
TOTAL NONINTEREST EXPENSE
    5,713       2,837       8,550       289       8,839  
 
                   
 
                                       
Operating Earnings before Income Tax Expense
    2,715       1,599       4,314       (122 )     4,192  
Income Tax Expense (Benefit)
    909       482       1,391       14       1,405  
 
                   
OPERATING EARNINGS
  $ 1,806     $ 1,117     $ 2,923     $ (136 )   $ 2,787  
 
                   

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.

Page 33


 

 
JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME — OPERATING BASIS
(in millions)
  (JPMORGANCHASE LOGO)
                                         
    First Quarter 2004
    Historical   Historical   Total Historical   Pro Forma   Pro Forma
    JPMC   Bank One   Combined   Adjustments (a)   Combined
REVENUE
                                       
Investment Banking Fees
  $ 692     $ 52     $ 744     $     $ 744  
Trading Revenue
    2,296       57       2,353             2,353  
Lending & Deposit Related Fees
    414       527       941             941  
Asset Management, Administration and Commissions
    1,771       522       2,293       2       2,295  
Securities / Private Equity Gains (Losses)
    432       155       587             587  
Mortgage Fees and Related Income
    259             259       (1 )     258  
Credit Card Income
    279       511       790       17       807  
Other Income
    93       202       295       4       299  
 
                   
Subtotal
    6,236       2,026       8,262       22       8,284  
 
                                       
Interest Income
    5,888       4,701       10,589       (45 )     10,544  
Interest Expense
    2,640       1,247       3,887       (190 )     3,697  
 
                   
Net Interest Income
    3,248       3,454       6,702       145       6,847  
 
                   
 
                                       
 
                   
TOTAL NET REVENUE
    9,484       5,480       14,964       167       15,131  
 
                   
 
                                       
Managed Provision for Credit Losses
    488       989       1,477             1,477  
 
                                       
NONINTEREST EXPENSE
                                       
Compensation Expense
    3,302       1,230       4,532       35       4,567  
Occupancy Expense
    431       177       608       (14 )     594  
Technology and Communications Expense
    819       172       991       (2 )     989  
Professional & Outside Services
    816       381       1,197             1,197  
Marketing
    199       290       489             489  
Other Expense
    447       447       894       (9 )     885  
Amortization of Intangibles
    79       33       112       279       391  
 
                   
TOTAL NONINTEREST EXPENSE
    6,093       2,730       8,823       289       9,112  
 
                   
 
                                       
Operating Earnings before Income Tax Expense
    2,903       1,761       4,664       (122 )     4,542  
Income Tax Expense (Benefit)
    973       528       1,501       14       1,515  
 
                   
OPERATING EARNINGS
  $ 1,930     $ 1,233     $ 3,163     $ (136 )   $ 3,027  
 
                   

(a)  
Reflects purchase accounting adjustments estimated for 3Q04 applied to each of the prior six quarters.

Page 34


 

 
JPMORGAN CHASE & CO.
PRO FORMA COMBINED HISTORICAL STATEMENT OF INCOME — OPERATING BASIS
(in millions)
  (JPMORGANCHASE LOGO)
                                         
    Fourth Quarter 2003
    Historical   Historical   Total Historical   Pro Forma   Pro Forma
    JPMC   Bank One   Combined   Adjustments (a)   Combined
REVENUE
                                       
Investment Banking Fees
  $ 846     $ 79     $ 925     $     $ 925  
Trading Revenue
    1,272       23       1,295             1,295  
Lending & Deposit Related Fees
    451       502       953             953  
Asset Management, Administration and Commissions
    1,586       504       2,090       2       2,092  
Securities / Private Equity Gains (Losses)
    192       (159 )     33             33  
Mortgage Fees and Related Income
    149       23       172       (1 )     171  
Credit Card Income
    317       630       947       17       964  
Other Income
    232       77       309       4       313  
 
                   
Subtotal
    5,045       1,679       6,724       22       6,746  
 
                                       
Interest Income
    6,117       4,620       10,737       (45 )     10,692  
Interest Expense
    2,594       1,232       3,826       (190 )     3,636  
 
                   
Net Interest Income
    3,523       3,388       6,911       145       7,056  
 
                   
 
                                       
 
                   
TOTAL NET REVENUE
    8,568       5,067       13,635       167       13,802  
 
                   
 
                                       
Managed Provision for Credit Losses
    601       1,514       2,115             2,115  
 
                                       
NONINTEREST EXPENSE
                                       
Compensation Expense
    2,508       1,148       3,656       35       3,691  
Occupancy Expense
    482       173       655       (14 )     641  
Technology and Communications Expense
    756       179       935       (2 )     933  
Professional & Outside Services
    777       376       1,153             1,153  
Marketing
    200       264       464             464  
Other Expense
    461       579       1,040       (9 )     1,031  
Amortization of Intangibles
    74       38       112       279       391  
 
                   
TOTAL NONINTEREST EXPENSE
    5,258       2,757       8,015       289       8,304  
 
                   
 
                                       
Operating Earnings before Income Tax Expense
    2,709       796       3,505       (122 )     3,383  
Income Tax Expense (Benefit)
    845       196       1,041       14       1,055  
 
                   
OPERATING EARNINGS (b)
  $ 1,864     $ 600     $ 2,464     $ (136 )   $ 2,328