JPMorgan Chase & Co.
J P MORGAN CHASE & CO (Form: 8-K, Received: 10/14/2009 07:09:13)
 
 
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 14, 2009
JPMORGAN CHASE & CO.
(Exact name of registrant as specified in its charter)
         
Delaware
(State or Other Jurisdiction of
Incorporation)
  1-5805
(Commission File Number)
  13-2624428
(IRS Employer
Identification No.)
     
270 Park Avenue, New York, NY
(Address of Principal Executive Offices)
  10017
(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))
 
 

 


 

Item 2.02 Results of Operations and Financial Condition
On October 14, 2009, JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) reported 2009 third quarter net income of $3.6 billion, or $0.82 per share, compared with net income of $527 million, or $0.09 per share, for the third quarter of 2008. A copy of the 2009 third quarter earnings release is attached hereto as Exhibit 99.1, and a copy of the earnings release financial supplement is attached hereto as Exhibit 99.2.
Each of the Exhibits provided with this Form 8-K shall be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended.
This current report on Form 8-K (including the Exhibits hereto) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause JPMorgan Chase’s actual results to differ materially from those described in the forward-looking statements can be found in the Firm’s Quarterly Reports on Form 10-Q for the quarters ended June 30, 2009 and March 31, 2009, and its Annual Report on Form 10-K for the year ended December 31, 2008, each of which has been filed with the Securities and Exchange Commission and is available on JPMorgan Chase’s website ( www.jpmorganchase.com ) and on the Securities and Exchange Commission’s website ( www.sec.gov ). JPMorgan Chase does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
     
Exhibit Number   Description of Exhibit
12.1
  JPMorgan Chase & Co. Computation of Ratio of Earnings to Fixed Charges
 
   
12.2
  JPMorgan Chase & Co. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements
 
   
99.1
  JPMorgan Chase & Co. Earnings Release — Third Quarter 2009 Results
 
   
99.2
  JPMorgan Chase & Co. Earnings Release Financial Supplement — Third Quarter 2009

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SIGNATURE
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/ Louis Rauchenberger    
    Louis Rauchenberger   
 
  Managing Director and Controller
[Principal Accounting Officer] 
 
 
Dated: October 14, 2009 

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EXHIBIT INDEX
     
Exhibit Number   Description of Exhibit
12.1
  JPMorgan Chase & Co. Computation of Ratio of Earnings to Fixed Charges
 
   
12.2
  JPMorgan Chase & Co. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements
 
   
99.1
  JPMorgan Chase & Co. Earnings Release — Third Quarter 2009 Results
 
   
99.2
  JPMorgan Chase & Co. Earnings Release Financial Supplement — Third Quarter 2009

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EXHIBIT 12.1
JPMORGAN CHASE & CO.
Computation of Ratio of Earnings to Fixed Charges
         
Nine months ended September 30, (in millions, except ratios)   2009  
Excluding interest on deposits
       
Income before income tax expense and extraordinary gain
  $ 12,191  
 
     
Fixed charges:
       
Interest expense
    8,024  
One-third of rents, net of income from subleases  (a)
    428  
 
     
Total fixed charges
    8,452  
 
     
Less: Equity in undistributed income of affiliates
    (24 )
 
     
Income before income tax expense and extraordinary gain and fixed charges, excluding capitalized interest
  $ 20,619  
 
     
Fixed charges, as above
  $ 8,452  
 
     
Ratio of earnings to fixed charges
    2.44  
 
     
 
       
Including interest on deposits
       
Fixed charges, as above
  $ 8,452  
Add: Interest on deposits
    3,937  
 
     
Total fixed charges and interest on deposits
  $ 12,389  
 
     
Income before income tax expense and extraordinary gain and fixed charges, excluding capitalized interest, as above
  $ 20,619  
Add: Interest on deposits
    3,937  
 
     
Total income before income tax expense and extraordinary gain, fixed charges and interest on deposits
  $ 24,556  
 
     
Ratio of earnings to fixed charges
    1.98  
 
     
 
(a)   The proportion deemed representative of the interest factor.

EXHIBIT 12.2
JPMORGAN CHASE & CO.
Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements
         
Nine months ended September 30, (in millions, except ratios)   2009  
Excluding interest on deposits
       
Income before income tax expense and extraordinary gain
  $ 12,191  
 
     
Fixed charges:
       
Interest expense
    8,024  
One-third of rents, net of income from subleases (a)
    428  
 
     
Total fixed charges
    8,452  
 
     
Less: Equity in undistributed income of affiliates
    (24 )
 
     
Income before income tax expense and extraordinary gain and fixed charges, excluding capitalized interest
  $ 20,619  
 
     
Fixed charges, as above
  $ 8,452  
 
       
Preferred stock dividends (pre-tax) (b)
    3,314  
 
       
 
     
Fixed charges including preferred stock dividends
  $ 11,766  
 
     
Ratio of earnings to fixed charges and preferred stock dividend requirements
    1.75  
 
     
 
       
Including interest on deposits
       
Fixed charges including preferred stock dividends, as above
  $ 11,766  
Add: Interest on deposits
    3,937  
 
     
Total fixed charges including preferred stock dividends and interest on deposits
  $ 15,703  
 
     
Income before income tax expense and extraordinary gain and fixed charges, excluding capitalized interest, as above
  $ 20,619  
Add: Interest on deposits
    3,937  
 
     
Total income before income tax expense and extraordinary gain, fixed charges and interest on deposits
  $ 24,556  
 
     
Ratio of earnings to fixed charges and preferred stock dividend requirements
    1.56  
 
     
 
(a)   The proportion deemed representative of the interest factor.
 
(b)   Includes a one-time $1.6 billion pre-tax payment of TARP preferred dividends.

JPMorgan Chase & Co.
270 Park Avenue, New York, NY 10017-2070
NYSE symbol: JPM
www.jpmorganchase.com
(JP MORGAN CHASE LOGO)


News release: IMMEDIATE RELEASE
JPMORGAN CHASE REPORTS THIRD-QUARTER 2009
NET INCOME OF $3.6 BILLION, OR $0.82 PER SHARE
    Firmwide revenue of $28.8 billion, resulting in record year-to-date revenue (on a managed basis 1 ):
  -   Reported strong earnings in the Investment Bank; maintained #1 year-to-date rankings for Global Debt, Equity and Equity-related, and Global Investment Banking Fees
 
  -   Solid performance in Asset Management, Commercial Banking and Retail Banking
    Credit costs remain high; added $2.0 billion to consumer credit reserves, bringing the firmwide total to $31.5 billion; firmwide loan loss coverage ratio of 5.3% 1 as of September 30, 2009
 
    Capital generation further strengthened Tier 1 Common 1 to $101 billion; Tier 1 Common ratio of 8.2% and Tier 1 Capital ratio of 10.2%
New York, October 14, 2009 — JPMorgan Chase & Co. (NYSE: JPM) today reported third-quarter 2009 net income of $3.6 billion, compared with net income of $527 million in the third quarter of 2008. Earnings per share were $0.82, compared with $0.09 in the prior year.
Jamie Dimon, Chairman and Chief Executive Officer, commented: “Our net income of $3.6 billion in the quarter reflected the strong earnings power of the company, with broad-based growth across the Investment Bank, Asset Management, Commercial Banking and Retail Banking. However, credit costs remain high and are expected to stay elevated for the foreseeable future in the Consumer Lending and Card Services loan portfolios. Accordingly, we have added $2.0 billion to our consumer credit reserves, bringing the firmwide total to $31.5 billion, or 5.3% 1 of total loans. Tier 1 Common Capital, another key element of our fortress balance sheet, was also strengthened through capital generation during the quarter, to $101 billion, or 8.2%.”
Dimon further remarked: “JPMorgan Chase continues to help consumers and communities in this challenging economy. We recently announced the decision to revamp our overdraft policies to make it easier for customers to have more control over the fees they pay. In addition, our Card Services business has developed new innovative products that enhance the way customers manage their spending and borrowing. We are also aiding communities by working with struggling mortgage customers to modify their loans. We have approved more than 262,000 new trial modifications under the U.S. Making Home Affordable Program and our own modification program, nearly 90% of which include a reduction in payments for the homeowner. Since 2007,
we have helped families by initiating 782,000 actions to prevent foreclosure, and we are committed to doing our part to support economic recovery going forward.”
 
Investor Contact: Lauren Tyler (212) 270-7325   Media Contact: Joe Evangelisti (212) 270-7438
     
1   For notes on financial measures, see page 12.

 


 

J.P. Morgan Chase & Co.
News Release
Discussing the firm’s outlook, Dimon concluded: “While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue. Despite this near-term uncertainty about the path of the economy, our strong capital position and underlying earnings power will enable us to continue to invest in our businesses, creating a lasting franchise for many years to come.”
In the discussion below of the business segments and of JPMorgan Chase as a firm, information is presented on a managed basis. Managed basis starts with GAAP results and includes the following adjustments: for Card Services and the firm as a whole, the impact of credit card securitizations is excluded; and for each line of business and the firm as a whole, net revenue is shown on a tax-equivalent basis. For more information about managed basis, as well as other financial measures used by management to evaluate the performance of each line of business, see page 12.
The following discussion compares the third quarter of 2009 with the third quarter of 2008 unless otherwise noted.
INVESTMENT BANK (IB)
                                                         
Results for IB                           2Q09   3Q08
($ millions)   3Q09   2Q09   3Q08   $ O/(U)   O/(U) %   $ O/(U)   O/(U) %
Net Revenue
  $ 7,508     $ 7,301     $ 4,066     $ 207       3 %   $ 3,442       85 %
Provision for Credit Losses
    379       871       234       (492 )     (56 )     145       62  
Noninterest Expense
    4,274       4,067       3,816       207       5       458       12  
Net Income
  $ 1,921     $ 1,471     $ 882     $ 450       31 %   $ 1,039       118 %
Discussion of Results:
Net income was $1.9 billion, an increase of $1.0 billion from the third quarter of 2008. These results included the negative impact of the tightening of the firm’s credit spread, offset by the positive impact of counterparty spread tightening and gains on legacy leveraged lending and mortgage-related positions.
Net revenue was $7.5 billion, an increase of $3.4 billion, or 85%, from the prior year. Investment banking fees were up 4% to $1.7 billion, consisting of equity underwriting fees of $681 million (up 31%), debt underwriting fees of $593 million (up 19%) and advisory fees of $384 million (down 33%). Fixed Income Markets revenue was $5.0 billion, up by $4.2 billion, reflecting strong results across most products and gains of approximately $400 million on legacy leveraged lending and mortgage-related positions, compared with markdowns of $3.6 billion in the prior year. These results also included losses of $497 million from the tightening of the firm’s credit spread on certain structured liabilities, compared with gains of $343 million in the prior year from the widening of the spread on those liabilities. Equity Markets revenue was $941 million, down by $709 million, or 43%, which included losses of $343 million from the tightening of the firm’s credit spread on certain structured liabilities, compared with gains in the prior year of $429 million from the widening of the spread on those liabilities. The current period’s results also included solid client revenue, particularly in prime services, and strong trading results. Credit Portfolio revenue was a loss of $102 million, reflecting mark-to-market losses on hedges of retained loans, largely offset by a combination of the positive net impact of credit spreads on derivative assets and liabilities, and net interest income on loans.
The provision for credit losses increased to $379 million, compared with $234 million in the prior year. The increase in the provision reflected higher charge-offs of $750 million, partially offset by

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J.P. Morgan Chase & Co.
News Release
a reduction of $371 million in the allowance for credit losses. The resulting allowance for loan losses to end-of-period loans retained was 8.44%, compared with 3.62% in the prior year. Nonperforming loans were $4.9 billion, up by $4.5 billion from the prior year and $1.4 billion from the prior quarter.
Noninterest expense was $4.3 billion, up by $458 million, or 12%, from the prior year. The increase was driven by higher performance-based compensation, partially offset by lower headcount-related expense 1 .
Key Metrics and Business Updates:
(All comparisons refer to the prior-year quarter except as noted)
  §   Ranked #1 in Global Debt, Equity and Equity-related; #1 in Global Equity and Equity-related; #1 in Global Long-Term Debt; #1 in Global Syndicated Loans; and #4 in Global Announced M&A, based on volume, for the year to date ended September 30, 2009, according to Thomson Reuters.
 
  §   Ranked #1 in Global Investment Banking Fees for the year to date ended September 30, 2009, according to Dealogic.
 
  §   Return on Equity was 23% on $33.0 billion of average allocated capital.
 
  §   End-of-period loans retained were $55.7 billion, down 24% from the prior year. End-of-period fair-value and held-for-sale loans were $4.6 billion, down by $12.1 billion, or 73%, from the prior year, driven primarily by a reduction in leveraged loan exposure.
RETAIL FINANCIAL SERVICES (RFS)
                                                         
Results for RFS                           2Q09   3Q08
($ millions)   3Q09   2Q09   3Q08   $ O/(U)   O/(U) %   $ O/(U)   O/(U) %
Net Revenue
  $ 8,218     $ 7,970     $ 4,963     $ 248       3 %   $ 3,255       66 %
Provision for Credit Losses
    3,988       3,846       2,056        142       4       1,932       94  
Noninterest Expense
    4,196       4,079       2,779       117       3       1,417       51  
Net Income
  $ 7     $ 15     $ 64       ($8 )     (53 )%     ($57 )     (89 )%
Discussion of Results:
Net income was $7 million, a decrease of $57 million from the third quarter of 2008, as an increase in the provision for credit losses was largely offset by the positive impact of the Washington Mutual transaction. Compared with the prior quarter, net income decreased by $8 million, reflecting a decrease in mortgage production revenue, an increase in the provision for credit losses, higher noninterest expense and lower loan balances; these effects were largely offset by positive MSR risk management results and wider loan and deposit spreads.
Net revenue was $8.2 billion, an increase of $3.3 billion, or 66%, from the prior year. Net interest income was $5.2 billion, up by $1.9 billion, or 60%, reflecting the impact of the Washington Mutual transaction, wider loan spreads and higher deposit balances offset partially by lower loan balances. Noninterest revenue was $3.1 billion, up by $1.3 billion, or 77%, driven by the impact of the Washington Mutual transaction, higher net mortgage servicing revenue and higher deposit-related fees, partially offset by lower mortgage production revenue.
The provision for credit losses was $4.0 billion, an increase of $1.9 billion from the prior year. Weak economic conditions and housing price declines continued to drive higher estimated losses for the home equity and mortgage loan portfolios. The provision included an addition of $1.4 billion to the allowance for loan losses, compared with additions of $730 million in the prior year

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J.P. Morgan Chase & Co.
News Release
and $1.2 billion in the prior quarter. Included in the third-quarter 2009 addition to the allowance for loan losses was a $1.1 billion increase related to estimated deterioration in the Washington Mutual purchased credit-impaired portfolio. Home equity net charge-offs were $1.1 billion (4.25% net charge-off rate 1 ), compared with $663 million (2.78% net charge-off rate) in the prior year. Subprime mortgage net charge-offs were $422 million (12.31% net charge-off rate 1 ), compared with $273 million (7.65% net charge-off rate) in the prior year. Prime mortgage net charge-offs were $525 million (3.45% net charge-off rate 1 ), compared with $177 million (1.79% net charge-off rate) in the prior year.
Noninterest expense was $4.2 billion, an increase of $1.4 billion, or 51%. The increase reflected the impact of the Washington Mutual transaction and higher servicing expense, partially offset by lower mortgage reinsurance losses.
Retail Banking reported net income of $1.0 billion, up by $320 million, or 44%, from the prior year. Compared with the prior quarter, net income increased by $73 million, or 8%, due to a decline in the provision for credit losses, wider deposit spreads and higher deposit-related fees; these were offset largely by higher noninterest expense and lower deposit balances.
Net revenue was $4.6 billion, up by $1.7 billion, or 61%, from the prior year. The increase reflected the impact of the Washington Mutual transaction, higher deposit balances, higher deposit-related fees and wider deposit spreads.
The provision for credit losses was $208 million, compared with $70 million in the prior year, reflecting higher estimated losses for Business Banking loans.
Noninterest expense was $2.6 billion, up by $1.1 billion, or 67%. The increase reflected the impact of the Washington Mutual transaction, higher headcount-related expense 1 and higher FDIC insurance premiums.
Key Metrics and Business Updates:
(All comparisons refer to the prior-year quarter except as noted)
  §   Checking accounts totaled 25.5 million, up 4% from the prior year and 1% from the prior quarter.
 
  §   Average total deposits were $339.6 billion, up 62% from the prior year (primarily due to the Washington Mutual transaction) and down 2% from the prior quarter.
 
  §   Deposit margin was 2.99%, compared with 3.06% in the prior year and 2.92% in the prior quarter.
 
  §   Average Business Banking and other loans were $17.7 billion, compared with $16.6 billion in the prior year, and originations were $589 million, compared with $1.2 billion in the prior year.
 
  §   Branch sales of credit cards were down 16% from the prior year and 18% from the prior quarter.
 
  §   Branch sales of investment products increased by 42% from the prior year and 18% from the prior quarter.
 
  §   Overhead ratio (excluding amortization of core deposit intangibles) was 56%, compared with 52% in the prior year and 55% in the prior quarter.
 
  §   Number of branches declined to 5,126, down 5% from the prior year and 1% from the prior quarter, primarily due to Washington Mutual branch consolidation.

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J.P. Morgan Chase & Co.
News Release
  §   Successfully completed the second phase of Washington Mutual deposit conversions, migrating nearly 8 million consumer banking and small business accounts across 694 branches onto the Chase deposit platform.
Consumer Lending reported a net loss of $1.0 billion, compared with a net loss of $659 million in the prior year and $955 million in the prior quarter. Compared with the prior quarter, results decreased by $81 million, reflecting a decrease in mortgage production revenue, an increase in the provision for credit losses and lower loan balances, largely offset by higher MSR risk management results and wider loan spreads.
Net revenue was $3.6 billion, up by $1.5 billion, or 72%, from the prior year. The increase was driven by the impact of the Washington Mutual transaction, higher mortgage fees and related income and wider loan spreads, partially offset by lower loan balances. Mortgage production revenue was negative $70 million, compared with positive $66 million in the prior year, as an increase in reserves for the repurchase of previously-sold loans was predominantly offset by wider margins on new originations. Operating revenue, which represents loan servicing revenue net of other changes in fair value of the MSR asset, was $508 million, compared with $264 million in the prior year, reflecting growth in average third-party loans serviced as a result of the Washington Mutual transaction. MSR risk management results were $435 million, compared with $108 million in the prior year.
The provision for credit losses was $3.8 billion, compared with $2.0 billion in the prior year, reflecting continued weakness in the home equity and mortgage loan portfolios (see Retail Financial Services discussion of the provision for credit losses, above, for further detail).
Noninterest expense was $1.6 billion, up by $351 million, or 29%, from the prior year, reflecting higher servicing expense due to increased delinquencies and defaults and the impact of the Washington Mutual transaction, partially offset by lower mortgage reinsurance losses.
Key Metrics and Business Updates:
(All comparisons refer to the prior-year quarter except as noted)
  §   Allowance for loan losses to end-of-period loans retained was 4.56% 1 , compared with 2.50% in the prior year and 4.34% 1 in the prior quarter .
 
  §   Average mortgage loans were $140.0 billion, up by $86.1 billion, due to the Washington Mutual transaction. Mortgage loan originations were $37.1 billion, down 2% from the prior year and 10% from the prior quarter.
 
  §   Total third-party mortgage loans serviced were $1.1 trillion, a decrease of $15.9 billion, or 1%.
 
  §   Average home equity loans were $134.0 billion, up by $39.2 billion, due to the Washington Mutual transaction. Home equity originations were $494 million, down 81% from the prior year and 17% from the prior quarter.
 
  §   Average auto loans were $43.3 billion, down 1%. Auto loan originations were $6.9 billion, up 82%.

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J.P. Morgan Chase & Co.
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CARD SERVICES (CS) (a)
                                                         
Results for CS                           2Q09   3Q08
($ millions)   3Q09   2Q09   3Q08   $ O/(U)   O/(U) %   $ O/(U)   O/(U) %
Net Revenue
  $ 5,159     $ 4,868     $ 3,887     $ 291       6 %   $ 1,272       33 %
Provision for Credit Losses
    4,967       4,603       2,229       364       8       2,738       123  
Noninterest Expense
    1,306       1,333       1,194       (27 )     (2 )     112       9 %
Net Income/(Loss)
    ($700 )     ($672 )   $ 292       ($28 )     (4 )%     ($992 )     NM  
 
(a)   Presented on a managed basis; see notes on page 12 for further explanation of managed basis.
Discussion of Results:
Card Services reported a net loss of $700 million, a decline of $992 million from the third quarter of 2008. The decrease was driven by a higher provision for credit losses, partially offset by higher net revenue.
End-of-period managed loans were $165.2 billion, a decrease of $21.3 billion, or 11%, from the prior year and $6.3 billion, or 4%, from the prior quarter. The decrease from the prior year was due to lower charge volume and a higher level of charge-offs. Average managed loans were $169.2 billion, an increase of $11.6 billion, or 7%, from the prior year and a decrease of $4.9 billion, or 3%, from the prior quarter. Excluding the impact of the Washington Mutual transaction, end-of-period and average managed loans were $144.1 billion and $146.9 billion, respectively.
Managed net revenue was $5.2 billion, an increase of $1.3 billion, or 33%, from the prior year. Net interest income was $4.3 billion, up by $1.1 billion, or 34%, driven by the impact of the Washington Mutual transaction and wider loan spreads. These benefits were offset partially by higher revenue reversals associated with higher charge-offs, lower average loan balances and a decreased level of fees. Noninterest revenue was $831 million, up by $185 million, or 29%. The increase was driven by higher merchant servicing revenue related to the dissolution of the Chase Paymentech Solutions joint venture and the impact of the Washington Mutual transaction.
The managed provision for credit losses was $5.0 billion, an increase of $2.7 billion from the prior year, reflecting a higher level of charge-offs and an increase of $575 million in the allowance for loan losses. The managed net charge-off rate for the quarter was 10.30%, up from 5.00% in the prior year and 10.03% in the prior quarter. The 30-day managed delinquency rate was 5.99%, up from 3.91% in the prior year and 5.86% in the prior quarter. Excluding the impact of the Washington Mutual transaction, the managed net charge-off rate for the third quarter was 9.41%, and the 30-day delinquency rate was 5.38%.
Noninterest expense was $1.3 billion, an increase of $112 million, or 9%, from the prior year, due to the dissolution of the Chase Paymentech Solutions joint venture and the impact of the Washington Mutual transaction.
   Key Metrics and Business Updates:
   (All comparisons refer to the prior-year quarter except as noted)
  §   Return on equity was negative 19%, down from positive 8% in the prior year.
 
  §   Pretax income to average managed loans (ROO) was negative 2.61%, compared with positive 1.17% in the prior year and negative 2.46% in the prior quarter.
 
  §   Net interest income as a percentage of average managed loans was 10.15%, up from 8.18% in the prior year and 9.93% in the prior quarter. Excluding the impact of the Washington Mutual transaction, the ratio was 9.10%.

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J.P. Morgan Chase & Co.
News Release
  §   Net accounts of 2.4 million were opened.
 
  §   Charge volume was $82.6 billion, a decrease of $11.3 billion, or 12%, from the prior year. Excluding the impact of the Washington Mutual transaction, charge volume was $78.9 billion, a decrease of $15.0 billion, or 16%, driven by a 6% decline in sales volume.
 
  §   Merchant processing volume was $103.5 billion, on 4.5 billion total transactions processed.
COMMERCIAL BANKING (CB)
                                                         
Results for CB                           2Q09   3Q08
($ millions)   3Q09   2Q09   3Q08   $ O/(U)   O/(U) %   $ O/(U)   O/(U) %
Net Revenue
  $ 1,459     $ 1,453     $ 1,125     $ 6       %   $ 334       30 %
Provision for Credit Losses
    355       312       126       43       14       229       182  
Noninterest Expense
    545       535       486       10       2       59       12  
Net Income
  $ 341     $ 368     $ 312       ($27 )     (7 )%   $ 29       9 %
Discussion of Results:
Net income was $341 million, an increase of $29 million, or 9%, from the third quarter of 2008. Higher net revenue, reflecting the impact of the Washington Mutual transaction, was predominantly offset by a higher provision for credit losses and higher noninterest expense.
Net revenue was $1.5 billion, an increase of $334 million, or 30%, from the prior year. Net interest income was $985 million, up by $248 million, or 34%, driven by the impact of the Washington Mutual transaction. Excluding Washington Mutual, net interest income was flat compared with the prior year, as spread compression on liability products and lower loan balances were offset by wider loan spreads, a shift to higher-spread liability products and overall growth in liability balances. Noninterest revenue was $474 million, an increase of $86 million, or 22%, reflecting higher lending- and deposit-related fees.
Revenue from Middle Market Banking was $771 million, an increase of $42 million, or 6%, from the prior year. Revenue from Commercial Term Lending was $232 million, an increase of $8 million, or 4%, from the prior quarter. Revenue from Mid-Corporate Banking was $278 million, an increase of $42 million, or 18%, from the prior year. Revenue from Real Estate Banking was $121 million, an increase of $30 million, or 33%, from the prior year due to the impact of the Washington Mutual transaction.
The provision for credit losses was $355 million, compared with $126 million in the prior year, reflecting continued deterioration in the credit environment across all business segments, particularly real estate-related segments. Net charge-offs were $291 million (1.11% net charge-off rate), compared with $40 million (0.22% net charge-off rate) in the prior year and $181 million (0.67% net charge-off rate) in the prior quarter. The allowance for loan losses to end-of-period loans retained was 3.01%, up from 2.30% in the prior year and 2.87% in the prior quarter. Nonperforming loans were $2.3 billion, up by $1.5 billion from the prior year and up by $191 million from the prior quarter.
Noninterest expense was $545 million, an increase of $59 million, or 12%, from the prior year, due to the impact of the Washington Mutual transaction and higher FDIC insurance premiums.

7


 

J.P. Morgan Chase & Co.
News Release
Key Metrics and Business Updates:
(All comparisons refer to the prior-year quarter except as noted)
  §   Overhead ratio was 37%, an improvement from 43%.
 
  §   Gross investment banking revenue (which is shared with the Investment Bank) was $301 million, up by $49 million, or 19%.
 
  §   Average loan balances were $104.0 billion, up by $31.8 billion, or 44%, from the prior year, predominantly due to the impact of the Washington Mutual transaction, and down by $5.0 billion, or 5%, from the prior quarter. End-of-period loan balances were $101.9 billion, down by $15.7 billion, or 13%, from the prior year and $4.0 billion, or 4%, from the prior quarter.
 
  §   Average liability balances were $109.3 billion, up by $9.9 billion, or 10%, from the prior year and $3.5 billion, or 3%, from the prior quarter.
TREASURY & SECURITIES SERVICES (TSS)
                                                         
Results for TSS                           2Q09   3Q08
($ millions)   3Q09   2Q09   3Q08   $ O/(U)   O/(U) %   $ O/(U)   O/(U) %
Net Revenue
  $ 1,788     $ 1,900     $ 1,953       ($112 )     (6 )%     ($165 )     (8 )%
Provision for Credit Losses
    13       (5 )     18       18     NM     (5 )     (28 )
Noninterest Expense
    1,280       1,288       1,339       (8 )     (1 )     (59 )     (4 )
Net Income
  $ 302     $ 379     $ 406       ($77 )     (20 )%     ($104 )     (26 )%
Discussion of Results:
Net income was $302 million, a decrease of $104 million, or 26%, from the third quarter of 2008. The decrease was driven by lower net revenue offset partially by lower noninterest expense. Net income decreased by $77 million, or 20%, from the prior quarter, reflecting a decline of seasonal activity in securities lending and depositary receipts.
Net revenue was $1.8 billion, a decrease of $165 million, or 8%, from the prior year. Worldwide Securities Services net revenue was $869 million, a decrease of $138 million, or 14%. The decrease was driven by lower securities lending balances, primarily as a result of declines in asset valuations and demand, lower spreads and balances on liability products, and the effect of market depreciation on certain custody assets. Treasury Services net revenue was $919 million, a decrease of $27 million, or 3%. The decrease reflected spread compression on deposit products offset by higher trade revenue driven by wider spreads, and higher card product volumes. TSS firmwide net revenue, which includes net revenue recorded in other lines of business, was $2.5 billion, a decrease of $149 million, or 6%, primarily due to declines in Worldwide Securities Services. Treasury Services firmwide net revenue was $1.7 billion, flat compared with the prior year.
The provision for credit losses was $13 million, a decrease of $5 million from the prior year.
Noninterest expense was $1.3 billion, a decrease of $59 million, or 4%. The decrease reflected lower headcount-related expense 1 , partially offset by higher FDIC insurance premiums.

8


 

J.P. Morgan Chase & Co.
News Release
Key Metrics and Business Updates:
(All comparisons refer to the prior-year quarter except as noted)
  §   Pretax margin 1 was 26%, down from 29% in the prior year and from 31% in the prior quarter.
 
  §   Average liability balances were $231.5 billion, down 11% from the prior year and 1% from the prior quarter.
 
  §   Assets under custody were $14.9 trillion, up 3% from the prior year and 8% from the prior quarter.
ASSET MANAGEMENT (AM)
                                                         
Results for AM                           2Q09   3Q08
($ millions)   3Q09   2Q09   3Q08   $ O/(U)   O/(U) %   $ O/(U)   O/(U) %
Net Revenue
  $ 2,085     $ 1,982     $ 1,961     $ 103       5 %   $ 124       6 %
Provision for Credit Losses
    38       59       20       (21 )     (36 )     18       90  
Noninterest Expense
    1,351       1,354       1,362       (3 )           (11 )     (1 )
Net Income
  $ 430     $ 352     $ 351     $ 78       22 %   $ 79       23 %
Discussion of Results:
Net income was $430 million, an increase of $79 million, or 23%, from the third quarter of 2008, as higher net revenue and lower noninterest expense were offset partially by a higher provision for credit losses.
Net revenue was $2.1 billion, an increase of $124 million, or 6%, from the prior year. Noninterest revenue was $1.7 billion, an increase of $100 million, or 6%, due to gains on the firm’s seed capital investments and net inflows, largely offset by the effect of lower market levels and decreased placement fees. Net interest income was $404 million, up by $24 million, or 6%, from the prior year, due to wider loan spreads and higher deposit balances, largely offset by narrower deposit spreads and lower loan balances.
Revenue from the Private Bank was $639 million, up 1%, from the prior year. Revenue from Institutional was $534 million, up 10%. Revenue from Retail was $471 million, up 18%. Revenue from Private Wealth Management was $339 million, down 4%. Revenue from Bear Stearns Private Client Services was $102 million, up 10%.
Assets under supervision were $1.7 trillion, an increase of $108 billion, or 7%, from the prior year. Assets under management were $1.3 trillion, an increase of $106 billion, or 9%. The increases were due to inflows in liquidity, fixed income and equity products, partially offset by the effect of lower market levels and outflows in alternative products. Custody, brokerage, administration and deposit balances were $411 billion, up by $2 billion, due to brokerage inflows in the Private Bank, partially offset by the effect of lower market levels on custody and brokerage balances.
The provision for credit losses was $38 million, an increase of $18 million from the prior year, reflecting continued deterioration in the credit environment.
Noninterest expense was $1.4 billion, down by $11 million, or 1%, from the prior year. The decrease was due to lower headcount-related expense 1 , offset by higher performance-based compensation and higher FDIC insurance premiums.

9


 

J.P. Morgan Chase & Co.
News Release
Key Metrics and Business Updates:
(All comparisons refer to the prior-year quarter except as noted)
  §   Pretax margin 1 was 33%, up from 30%.
 
  §   Assets under management net inflows were $34 billion for the quarter and $113 billion for the 12-month period ended September 30, 2009.
 
  §   Assets under management ranked in the top two quartiles for investment performance were 74% over five years, 70% over three years and 60% over one year.
 
  §   Customer assets in 4 and 5 Star—rated funds were 39%.
 
  §   Average loans were $34.8 billion, down by $4.9 billion, or 12%, mainly driven by paydowns in the Private Bank. End-of-period loan balances were $35.9 billion, down by $3.8 billion, or 10%, from the prior year, and up by $451 million, or 1%, from the prior quarter.
 
  §   Average deposits were $73.6 billion, up by $8 billion, or 12%.
CORPORATE/PRIVATE EQUITY (a)
                                                         
Results for Corporate/Private                 2Q09   3Q08
Equity ($ millions)   3Q09   2Q09   3Q08   $ O/(U)   O/(U) %   $ O/(U)   O/(U) %
Net Revenue
  $ 2,594     $ 2,265       ($1,836 )   $ 329       15 %   $ 4,430     NM
Provision for Credit Losses
    62       9       1,977       53     NM     (1,915 )     (97 )%
Noninterest Expense
    503       864       161       (361 )     (42 )     342       212  
Extraordinary Gain
    76             581       76     NM     (505 )     (87 )%
Net Income/(Loss)
  $ 1,287     $ 808       ($1,780 )   $ 479       59 %   $ 3,067     NM
 
(a)   This segment includes the results of the Private Equity and Corporate business segments, as well as merger-related items.
Discussion of Results:
Net income was $1.3 billion, compared with a net loss of $1.8 billion in the third quarter of 2008.
Private Equity reported net income of $88 million, compared with a net loss of $164 million in the prior year. Net revenue was $172 million, an increase of $388 million, reflecting Private Equity gains of $155 million, compared with losses of $206 million in the prior year. Noninterest expense was $34 million, a decrease of $7 million.
Net income for Corporate was $1.3 billion, compared with a net loss of $881 million in the prior year. Net revenue was $2.4 billion, reflecting continued elevated levels of investment portfolio trading income and net interest income.

10


 

J.P. Morgan Chase & Co.
News Release
JPMORGAN CHASE (JPM) (a)
                                                         
Results for JPM (a)                           2Q09   3Q08
($ millions)   3Q09   2Q09   3Q08   $ O/(U)   O/(U) %   $ O/(U)   O/(U) %
Net Revenue
  $ 28,780     $ 27,709     $ 16,088     $ 1,071       4 %   $ 12,692       79 %
Provision for Credit Losses
    9,802       9,695       6,660       107       1       3,142       47  
Noninterest Expense
    13,455       13,520       11,137       (65 )           2,318       21  
Extraordinary Gain
    76             581       76     NM     (505 )     (87 )%
Net Income
  $ 3,588     $ 2,721     $ 527     $ 867       32 %   $ 3,061     NM
 
(a)   Presented on a managed basis; see notes on page 12 for further explanation of managed basis. Net revenue on a U.S. GAAP basis was $26,622 million, $25,623 million, and $14,737 million for the third quarter of 2009, second quarter of 2009 and third quarter of 2008, respectively.
Discussion of Results:
Net income was $3.6 billion, an increase of $3.1 billion from the third quarter of 2008. The increase in earnings was driven by higher net revenue, partially offset by increases to both the provision for credit losses and noninterest expense.
Managed net revenue was $28.8 billion, an increase of $12.7 billion, or 79%, from the prior year. Noninterest revenue was $14.0 billion, up by $8.7 billion, or 167%. The increase was driven by higher principal transactions, primarily related to the absence of markdowns on legacy leveraged lending and mortgage positions and strong trading results in the Investment Bank, as well as higher investment portfolio trading income in Corporate. These results also benefited from the impact of the Washington Mutual transaction. Net interest income was $14.8 billion, up by $3.9 billion, or 36%, due to the impact of Washington Mutual, wider loan spreads and higher investment portfolio net interest income.
The managed provision for credit losses was $9.8 billion, up by $3.1 billion, or 47%, from the prior year. The consumer-managed provision for credit losses was $9.0 billion, compared with $5.7 billion in the prior year, reflecting higher net charge-offs and an increase in the allowance for credit losses in the home lending and credit card loan portfolios. Consumer-managed net charge-offs were $7.0 billion, compared with $3.3 billion in the prior year, resulting in managed net charge-off rates of 6.29% and 3.39%, respectively. The wholesale provision for credit losses was $779 million, compared with $962 million in the prior year. The current-quarter provision reflected higher net charge-offs, partially offset by a reduction in allowance in the Investment Bank. Wholesale net charge-offs were $1.1 billion, compared with $52 million in the prior year, resulting in net charge-off rates of 1.93% and 0.10%, respectively. The firm’s nonperforming assets totaled $20.4 billion at September 30, 2009, up from the prior-year level of $9.5 billion.
Noninterest expense was $13.5 billion, up by $2.3 billion, or 21%, from the prior year. The increase was driven by the impact of the Washington Mutual transaction and higher performance-based compensation expense, partially offset by lower headcount-related expense 1 .
Key Metrics and Business Updates:
(All comparisons refer to the prior-year quarter except as noted)
  §   Tier 1 Capital ratio was 10.2% at September 30, 2009 (estimated), 9.7% at June 30, 2009, and 8.9% at September 30, 2008.
 
  §   Tier 1 Common ratio was 8.2% at September 30, 2009 (estimated), 7.7% at June 30, 2009, and 6.8% at September 30, 2008.
 
  §   Headcount was 220,861, a decrease of 7,591 compared with the prior year.

11


 

J.P. Morgan Chase & Co.
News Release
1. Notes on financial measures:
a. In addition to analyzing the firm’s results on a reported basis, management analyzes the firm’s
results and the results of the lines of business on a managed basis, which is a non-GAAP financial
measure. The firm’s definition of managed basis starts with the reported U.S. GAAP results and
includes the following adjustments.
First, for Card Services and the firm, managed basis excludes the impact of credit card
securitizations on total net revenue, the provision for credit losses, net charge-offs and loan
receivables. The presentation of Card Services results on a managed basis assumes that credit card
loans that have been securitized and sold still remain on the balance sheet, and that the earnings
on the securitized loans are classified in the same manner as the earnings on retained loans
recorded on the balance sheet. JPMorgan Chase uses the concept of managed basis to evaluate the
credit performance and overall financial performance of the entire managed credit card portfolio.
Operations are funded and decisions are made about allocating resources, such as employees and
capital, based on managed financial information. In addition, the same underwriting standards and
ongoing risk monitoring are used for both loans on the balance sheet and securitized loans.
Although securitizations result in the sale of credit card receivables to a trust, JPMorgan Chase
retains the ongoing customer relationships, as the customers may continue to use their credit
cards; accordingly, the customer’s credit performance will affect both the securitized loans and
the loans retained on the balance sheet. JPMorgan Chase believes managed-basis information is
useful to investors, enabling them to understand both the credit risks associated with the loans
reported on the balance sheet and the firm’s retained interests in securitized loans.
Second, managed revenue (noninterest revenue and net interest income) for each of the segments and
the firm is presented on a tax-equivalent basis. Accordingly, revenue from tax-exempt securities
and investments that receive tax credits is presented in the managed results on a basis comparable
to taxable securities and investments. This methodology allows management to assess the
comparability of revenue arising from both taxable and tax-exempt sources. The corresponding
income tax impact related to these items is recorded within income tax expense.
See page 6 of JPMorgan Chase’s Earnings Release Financial Supplement (third quarter 2009) for a
reconciliation of JPMorgan Chase’s income statement from a reported basis to a managed basis.
b. The ratio for the allowance for loan losses to end-of-period loans excludes the following: loans accounted
for at fair value and loans held-for-sale; purchased credit-impaired loans; the allowance for loan losses
related to purchased credit-impaired loans; and, loans from the Washington Mutual Master Trust,
which were consolidated on the firm’s balance sheet at fair value during the second quarter of 2009.
Additionally, Consumer Lending net charge-off rates exclude the impact of purchased credit-impaired loans.
The allowance related to the purchased credit-impaired portfolio was $1.1 billion at September 30, 2009.
c. Tier 1 Common Capital (“Tier 1 Common”) is calculated, for all purposes, as Tier 1 Capital less
qualifying perpetual preferred stock, qualifying trust preferred securities and qualifying
minority interest in subsidiaries.
d. Headcount-related expense includes salary and benefits, and other noncompensation costs related
to employees.
e. Pretax margin represents income before income tax expense divided by total net revenue, which
is, in management’s view, a comprehensive measure of pretax performance derived by measuring
earnings after all costs are taken into consideration. It is, therefore, another basis that
management uses to evaluate the performance of TSS and AM against the performance of their
respective competitors.

12


 

J.P. Morgan Chase & Co.
News Release
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.0
trillion and operations in more than 60 countries. The firm is a leader in investment banking,
financial services for consumers, small business and commercial banking, financial transaction
processing, asset management and private equity. A component of the Dow Jones Industrial Average,
JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most
prominent corporate, institutional and government clients under its J.P. Morgan, Chase, and WaMu
brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com .
JPMorgan Chase will host a conference call today at 9:00 a.m. (Eastern Time) to review
third-quarter financial results. The general public can access the call by dialing (866) 541-2724
or (877) 368-8360 in the U.S. and Canada; and (706) 634-7246 for International participants. The
live audio webcast and presentation slides will be available at the firm’s website,
www.jpmorganchase.com , under Investor Relations, Investor Presentations.
A replay of the conference call will be available beginning at approximately noon on Wednesday,
October 14, through midnight on Saturday, October 31, by telephone at (800) 642-1687 (U.S. and
Canada) or (706) 645-9291 (International); use Conference ID 26186483. The replay will also be
available via webcast on www.jpmorganchase.com under Investor Relations, Investor Presentations.
Additional detailed financial, statistical and business-related information is included in a
financial supplement. The earnings release and the financial supplement are available at
www.jpmorganchase.com .
This earnings release contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and
expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties.
Actual results may differ from those set forth in the forward-looking statements. Factors that
could cause JPMorgan Chase’s actual results to differ materially from those described in the
forward-looking statements can be found in JPMorgan Chase’s Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2009 and June 30, 2009, and in its Annual Report on Form 10-K for the year
ended December 31, 2008, each of which has been filed with the Securities and Exchange Commission
and is available on JPMorgan Chase’s website ( www.jpmorganchase.com ) and on the Securities and
Exchange Commission’s website ( www.sec.gov ). JPMorgan Chase does not undertake to update the
forward-looking statements to reflect the impact of circumstances or events that may arise after
the date of the forward-looking statements.

13


 

JPMORGAN CHASE & CO.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in millions, except per share, ratio and headcount data)
  (JP MORGAN CHASE LOGO)
                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                            3Q09 Change                     2009 Change  
    3Q09     2Q09     3Q08     2Q09     3Q08     2009     2008     2008  
SELECTED INCOME STATEMENT DATA:
                                                               
Reported Basis
                                                               
Total net revenue
  $ 26,622     $ 25,623     $ 14,737       4 %     81 %   $ 77,270     $ 50,026       54 %
Total noninterest expense
    13,455       13,520       11,137             21       40,348       32,245       25  
Pre-provision profit
    13,167       12,103       3,600       9       266       36,922       17,781       108  
Provision for credit losses
    8,104       8,031       5,787       1       40       24,731       13,666       81  
Income (loss) before extraordinary gain
    3,512       2,721       (54 )     29     NM     8,374       4,322       94  
Extraordinary gain
    76             581     NM     (87 )     76       581       (87 )
NET INCOME
    3,588       2,721       527       32     NM     8,450       4,903       72  
                                                                 
Managed Basis (a)
                                                               
Total net revenue
  $ 28,780     $ 27,709     $ 16,088       4       79     $ 83,411     $ 53,664       55  
Total noninterest expense
    13,455       13,520       11,137             21       40,348       32,245       25  
Pre-provision profit
    15,325       14,189       4,951       8       210       43,063       21,419       101  
Provision for credit losses
    9,802       9,695       6,660       1       47       29,557       16,050       84  
Income (loss) before extraordinary gain
    3,512       2,721       (54 )     29     NM     8,374       4,322       94  
Extraordinary gain
    76             581     NM     (87 )     76       581       (87 )
NET INCOME
    3,588       2,721       527       32     NM     8,450       4,903       72  
                                                                 
PER COMMON SHARE:
                                                               
Basic Earnings (b)
                                                               
Income (loss) before extraordinary gain
    0.80       0.28       (0.08 )     186     NM     1.50       1.14       32  
Net income
    0.82       0.28       0.09       193     NM     1.52       1.31       16  
                                                                 
Diluted Earnings (b) (c)
                                                               
Income (loss) before extraordinary gain
    0.80       0.28       (0.08 )     186     NM     1.50       1.13       33  
Net income
    0.82       0.28       0.09       193     NM     1.51       1.30       16  
                                                                 
Cash dividends declared
    0.05       0.05       0.38             (87 )     0.15       1.14       (87 )
Book value
    39.12       37.36       36.95       5       6       39.12       36.95       6  
Closing share price
    43.82       34.11       46.70       28       (6 )     43.82       46.70       (6 )
Market capitalization
    172,596       133,852       174,048       29       (1 )     172,596       174,048       (1 )
                                                                 
COMMON SHARES OUTSTANDING:
                                                               
Weighted-average diluted shares outstanding (b)
    3,962.0       3,824.1       3,444.6       4       15       3,848.3       3,446.2       12  
Common shares outstanding at period-end
    3,938.7       3,924.1       3,726.9             6       3,938.7       3,726.9       6  
                                                                 
FINANCIAL RATIOS: (d)  
                                                               
Income (loss) before extraordinary gain:
                                                               
Return on common equity (“ROE”) (e)
    9 %     3 %     (1 )%                     6 %     4 %        
Return on tangible common equity (“ROTCE”) (e) (f)
    13       5       (1 )                     9       7          
Return on assets (“ROA”)
    0.70       0.54       (0.01 )                     0.55       0.35          
Net income:
                                                               
ROE (e)
    9       3       1                       6       5          
ROTCE (e) (f)
    14       5       2                       9       8          
ROA
    0.71       0.54       0.12                       0.56       0.39          
                                                                 
CAPITAL RATIOS:
                                                               
Tier 1 common capital ratio
    8.2 (g)     7.7       6.8                                          
Tier 1 capital ratio
    10.2 (g)     9.7       8.9                                          
Total capital ratio
    13.8 (g)     13.3       12.6                                          
                                                                 
SELECTED BALANCE SHEET DATA (Period-end)  
                                                               
Total assets
  $ 2,041,009     $ 2,026,642     $ 2,251,469       1       (9 )   $ 2,041,009     $ 2,251,469       (9 )
Wholesale loans
    218,953       231,625       288,445       (5 )     (24 )     218,953       288,445       (24 )
Consumer loans
    434,191       448,976       472,936       (3 )     (8 )     434,191       472,936       (8 )
Deposits
    867,977       866,477       969,783             (10 )     867,977       969,783       (10 )
Common stockholders’ equity
    154,101       146,614       137,691       5       12       154,101       137,691       12  
Total stockholders’ equity
    162,253       154,766       145,843       5       11       162,253       145,843       11  
                                                                 
Headcount
    220,861       220,255       228,452             (3 )     220,861       228,452       (3 )
                                                                 
LINE OF BUSINESS NET INCOME (LOSS)  
                                                               
Investment Bank
  $ 1,921     $ 1,471     $ 882       31       118     $ 4,998     $ 1,189       320  
Retail Financial Services
    7       15       64       (53 )     (89 )     496       256       94  
Card Services
    (700 )     (672 )     292       (4 )     NM       (1,919 )     1,151       NM  
Commercial Banking
    341       368       312       (7 )     9       1,047       959       9  
Treasury & Securities Services
    302       379       406       (20 )     (26 )     989       1,234       (20 )
Asset Management
    430       352       351       22       23       1,006       1,102       (9 )
Corporate/Private Equity
    1,287       808       (1,780 )     59       NM       1,833       (988 )     NM  
 
                                                     
Net income
  $ 3,588     $ 2,721     $ 527       32     NM   $ 8,450     $ 4,903       72  
 
                                                     
 
(a)   For further discussion of managed basis, see Note a on page 12.
 
(b)   Effective January 1, 2009, the Firm implemented new FASB guidance for participating securities. Accordingly, prior period amounts have been revised as required. For further discussion of the guidance, see Per share-related information on page 36 of JPMorgan Chase’s Earnings Release Financial Supplement.
 
(c)   The calculation of second quarter 2009 earnings per share includes a one-time, non-cash reduction of $1.1 billion, or $0.27 per share, resulting from repayment of TARP preferred capital.
 
(d)   Ratios are based upon annualized amounts.
 
(e)   The calculation of second quarter 2009 net income applicable to common equity includes a one-time, non-cash reduction of $1.1 billion resulting from repayment of TARP preferred capital. Excluding this reduction the adjusted ROE and ROTCE were 6% and 10% for the second quarter 2009, respectively. The Firm views the adjusted ROE and ROTCE, non-GAAP financial measures, as meaningful because it increases the comparability to prior periods.
 
(f)   Net income applicable to common equity divided by total average common stockholders’ equity (i.e., total stockholders’ equity less preferred stock) less identifiable intangible assets (other than MSRs) and goodwill, net of related deferred tax liabilities. The Firm uses return on tangible common equity, a non-GAAP financial measure, to evaluate the operating performance of the Firm.
 
(g)   Estimated.

14

(JPMORGAN CHASE & CO)
EARNINGS RELEASE FINANCIAL SUPPLEMENT
THIRD QUARTER 2009

 


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
TABLE OF CONTENTS
         
    Page  
 
       
Consolidated Results
       
Consolidated Financial Highlights
    2  
Statements of Income
    3  
Consolidated Balance Sheets
    4  
Condensed Average Balance Sheets and Annualized Yields
    5  
Reconciliation from Reported to Managed Summary
    6  
 
       
Business Detail
       
Line of Business Financial Highlights — Managed Basis
    7  
Investment Bank
    8  
Retail Financial Services
    11  
Card Services — Managed Basis
    17  
Commercial Banking
    20  
Treasury & Securities Services
    22  
Asset Management
    24  
Corporate/Private Equity
    27  
 
       
Credit-Related Information
    29  
 
       
Market Risk-Related Information
    34  
 
       
Supplemental Detail
       
Capital, Intangible Assets and Deposits
    35  
Per Share-Related Information
    36  
 
       
Glossary of Terms
    37  

Page 1


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in millions, except per share, ratio and headcount data)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
SELECTED INCOME STATEMENT DATA:
                                                                               
Reported Basis
                                                                               
Total net revenue
  $ 26,622     $ 25,623     $ 25,025     $ 17,226     $ 14,737       4 %     81 %   $ 77,270     $ 50,026       54 %
Total noninterest expense
    13,455       13,520       13,373       11,255       11,137             21       40,348       32,245       25  
Pre-provision profit
    13,167       12,103       11,652       5,971       3,600       9       266       36,922       17,781       108  
Provision for credit losses
    8,104       8,031       8,596       7,313       5,787       1       40       24,731       13,666       81  
Income (loss) before extraordinary gain
    3,512       2,721       2,141       (623 )     (54 )     29     NM       8,374       4,322       94  
Extraordinary gain
    76                   1,325       581     NM       (87 )     76       581       (87 )
NET INCOME
    3,588       2,721       2,141       702       527       32     NM       8,450       4,903       72  
 
                                                                               
Managed Basis (a)
                                                                               
Total net revenue
  $ 28,780     $ 27,709     $ 26,922     $ 19,108     $ 16,088       4       79     $ 83,411     $ 53,664       55  
Total noninterest expense
    13,455       13,520       13,373       11,255       11,137             21       40,348       32,245       25  
Pre-provision profit
    15,325       14,189       13,549       7,853       4,951       8       210       43,063       21,419       101  
Provision for credit losses
    9,802       9,695       10,060       8,541       6,660       1       47       29,557       16,050       84  
Income (loss) before extraordinary gain
    3,512       2,721       2,141       (623 )     (54 )     29     NM       8,374       4,322       94  
Extraordinary gain
    76                   1,325       581     NM       (87 )     76       581       (87 )
NET INCOME
    3,588       2,721       2,141       702       527       32     NM       8,450       4,903       72  
 
                                                                               
PER COMMON SHARE:
                                                                               
Basic Earnings (b)
                                                                               
Income (loss) before extraordinary gain
    0.80       0.28       0.40       (0.29 )     (0.08 )     186     NM       1.50       1.14       32  
Net income
    0.82       0.28       0.40       0.06       0.09       193     NM       1.52       1.31       16  
 
                                                                               
Diluted Earnings (b) (c)
                                                                               
Income (loss) before extraordinary gain
    0.80       0.28       0.40       (0.29 )     (0.08 )     186     NM       1.50       1.13       33  
Net income
    0.82       0.28       0.40       0.06       0.09       193     NM       1.51       1.30       16  
 
                                                                               
Cash dividends declared
    0.05       0.05       0.05       0.38       0.38             (87 )     0.15       1.14       (87 )
Book value
    39.12       37.36       36.78       36.15       36.95       5       6       39.12       36.95       6  
Closing share price
    43.82       34.11       26.58       31.53       46.70       28       (6 )     43.82       46.70       (6 )
Market capitalization
    172,596       133,852       99,881       117,695       174,048       29       (1 )     172,596       174,048       (1 )
 
                                                                               
COMMON SHARES OUTSTANDING:
                                                                               
Weighted-average diluted shares outstanding (b)
    3,962.0       3,824.1       3,758.7       3,737.5       3,444.6       4       15       3,848.3       3,446.2       12  
Common shares outstanding at period-end
    3,938.7       3,924.1       3,757.7       3,732.8       3,726.9             6       3,938.7       3,726.9       6  
 
                                                                               
FINANCIAL RATIOS: (d)
                                                                               
Income (loss) before extraordinary gain:
                                                                               
Return on common equity (“ROE”) (e)
    9 %     3 %     5 %     (3 )%     (1 )%                     6 %     4 %        
Return on tangible common equity (“ROTCE”) (e) (f)
    13       5       8       (5 )     (1 )                     9       7          
Return on assets (“ROA”)
    0.70       0.54       0.42       (0.11 )     (0.01 )                     0.55       0.35          
Net income:
                                                                               
ROE (e)
    9       3       5       1       1                       6       5          
ROTCE (e) (f)
    14       5       8       1       2                       9       8          
ROA
    0.71       0.54       0.42       0.13       0.12                       0.56       0.39          
 
                                                                               
CAPITAL RATIOS:
                                                                               
Tier 1 common capital ratio
    8.2 (g)     7.7       7.3       7.0       6.8                                          
Tier 1 capital ratio
    10.2 (g)     9.7       11.4       10.9       8.9                                          
Total capital ratio
    13.8 (g)     13.3       15.2       14.8       12.6                                          
 
                                                                               
SELECTED BALANCE SHEET DATA (Period-end)
                                                                               
Total assets
  $ 2,041,009     $ 2,026,642     $ 2,079,188     $ 2,175,052     $ 2,251,469       1       (9 )   $ 2,041,009     $ 2,251,469       (9 )
Wholesale loans
    218,953       231,625       242,284       262,044       288,445       (5 )     (24 )     218,953       288,445       (24 )
Consumer loans
    434,191       448,976       465,959       482,854       472,936       (3 )     (8 )     434,191       472,936       (8 )
Deposits
    867,977       866,477       906,969       1,009,277       969,783             (10 )     867,977       969,783       (10 )
Common stockholders’ equity
    154,101       146,614       138,201       134,945       137,691       5       12       154,101       137,691       12  
Total stockholders’ equity
    162,253       154,766       170,194       166,884       145,843       5       11       162,253       145,843       11  
 
                                                                               
Headcount
    220,861       220,255       219,569       224,961       228,452             (3 )     220,861       228,452       (3 )
 
                                                                               
LINE OF BUSINESS NET INCOME (LOSS)
                                                                               
Investment Bank
  $ 1,921     $ 1,471     $ 1,606     $ (2,364 )   $ 882       31       118     $ 4,998     $ 1,189       320  
Retail Financial Services
    7       15       474       624       64       (53 )     (89 )     496       256       94  
Card Services
    (700 )     (672 )     (547 )     (371 )     292       (4 )   NM       (1,919 )     1,151     NM  
Commercial Banking
    341       368       338       480       312       (7 )     9       1,047       959       9  
Treasury & Securities Services
    302       379       308       533       406       (20 )     (26 )     989       1,234       (20 )
Asset Management
    430       352       224       255       351       22       23       1,006       1,102       (9 )
Corporate/Private Equity
    1,287       808       (262 )     1,545       (1,780 )     59     NM       1,833       (988 )   NM  
 
                                                               
Net income
  $ 3,588     $ 2,721     $ 2,141     $ 702     $ 527       32     NM     $ 8,450     $ 4,903       72  
 
                                                               
 
(a)   For further discussion of managed basis, see Reconciliation from reported to managed summary on page 6.
 
(b)   Effective January 1, 2009, the Firm implemented new FASB guidance for participating securities. Accordingly, prior period amounts have been revised as required. For further discussion of the guidance, see Per share-related information on page 36.
 
(c)   The calculation of second quarter 2009 earnings per share includes a one-time, non-cash reduction of $1.1 billion, or $0.27 per share, resulting from repayment of TARP preferred capital.
 
(d)   Ratios are based upon annualized amounts.
 
(e)   The calculation of second quarter 2009 net income applicable to common equity includes a one-time, non-cash reduction of $1.1 billion resulting from repayment of TARP preferred capital. Excluding this reduction the adjusted ROE and ROTCE were 6% and 10% for the second quarter 2009, respectively. The Firm views the adjusted ROE and ROTCE, non-GAAP financial measures, as meaningful because it increases the comparability to prior periods.
 
(f)   Net income applicable to common equity divided by total average common stockholders’ equity (i.e., total stockholders’ equity less preferred stock) less identifiable intangible assets (other than MSRs) and goodwill, net of related deferred tax liabilities. The Firm uses return on tangible common equity, a non-GAAP financial measure, to evaluate the operating performance of the Firm.
 
(g)   Estimated.

Page 2


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
STATEMENTS OF INCOME
(in millions, except per share and ratio data)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
REVENUE
                                                                               
Investment banking fees
  $ 1,679     $ 2,106     $ 1,386     $ 1,382     $ 1,316       (20 )%     28 %   $ 5,171     $ 4,144       25 %
Principal transactions
    3,860       3,097       2,001       (7,885 )     (2,763 )     25     NM       8,958       (2,814 )   NM  
Lending & deposit-related fees
    1,826       1,766       1,688       1,776       1,168       3       56       5,280       3,312       59  
Asset management, administration and commissions
    3,158       3,124       2,897       3,234       3,485       1       (9 )     9,179       10,709       (14 )
Securities gains
    184       347       198       456       424       (47 )     (57 )     729       1,104       (34 )
Mortgage fees and related income
    843       784       1,601       1,789       457       8       84       3,228       1,678       92  
Credit card income
    1,710       1,719       1,837       2,049       1,771       (1 )     (3 )     5,266       5,370       (2 )
Other income
    625       10       50       593       (115 )   NM     NM       685       1,576       (57 )
 
                                                                 
Noninterest revenue
    13,885       12,953       11,658       3,394       5,743       7       142       38,496       25,079       53  
 
                                                                               
Interest income
    16,260       16,549       17,926       21,631       17,326       (2 )     (6 )     50,735       51,387       (1 )
Interest expense
    3,523       3,879       4,559       7,799       8,332       (9 )     (58 )     11,961       26,440       (55 )
 
                                                                 
Net interest income
    12,737       12,670       13,367       13,832       8,994       1       42       38,774       24,947       55  
 
                                                                 
 
                                                                               
TOTAL NET REVENUE
    26,622       25,623       25,025       17,226       14,737       4       81       77,270       50,026       54  
 
                                                                               
Provision for credit losses
    8,104       8,031       8,596       7,313       5,787       1       40       24,731       13,666       81  
 
                                                                               
NONINTEREST EXPENSE
                                                                               
Compensation expense
    7,311       6,917       7,588       5,024       5,858       6       25       21,816       17,722       23  
Occupancy expense
    923       914       885       955       766       1       20       2,722       2,083       31  
Technology, communications and equipment expense
    1,140       1,156       1,146       1,207       1,112       (1 )     3       3,442       3,108       11  
Professional & outside services
    1,517       1,518       1,515       1,819       1,451             5       4,550       4,234       7  
Marketing
    440       417       384       501       453       6       (3 )     1,241       1,412       (12 )
Other expense (a)
    1,767       2,190       1,375       1,242       1,096       (19 )     61       5,332       2,498       113  
Amortization of intangibles
    254       265       275       326       305       (4 )     (17 )     794       937       (15 )
Merger costs
    103       143       205       181       96       (28 )     7       451       251       80  
 
                                                                 
TOTAL NONINTEREST EXPENSE
    13,455       13,520       13,373       11,255       11,137             21       40,348       32,245       25  
 
                                                                 
 
                                                                               
Income (loss) before income tax expense and extraordinary gain
    5,063       4,072       3,056       (1,342 )     (2,187 )     24     NM       12,191       4,115       196  
Income tax expense (benefit) (b)
    1,551       1,351       915       (719 )     (2,133 )     15     NM       3,817       (207 )   NM  
 
                                                                 
Income (loss) before extraordinary gain
    3,512       2,721       2,141       (623 )     (54 )     29     NM       8,374       4,322       94  
Extraordinary gain (c)
    76                   1,325       581     NM       (87 )     76       581       (87 )
 
                                                                 
NET INCOME
  $ 3,588     $ 2,721     $ 2,141     $ 702     $ 527       32     NM     $ 8,450     $ 4,903       72  
 
                                                                 
 
                                                                               
DILUTED EARNINGS PER SHARE
                                                                               
Income (loss) before extraordinary gain (d)(e)
  $ 0.80     $ 0.28     $ 0.40     $ (0.29 )   $ (0.08 )     186     NM     $ 1.50     $ 1.13       33  
Extraordinary gain
    0.02                   0.35       0.17     NM       (88 )     0.01       0.17       (94 )
 
                                                                 
NET INCOME (d)(e)
  $ 0.82     $ 0.28     $ 0.40     $ 0.06     $ 0.09       193     NM     $ 1.51     $ 1.30       16  
 
                                                                 
 
                                                                               
FINANCIAL RATIOS
                                                                               
Income (loss) before extraordinary gain:
                                                                               
ROE (f)
    9 %     3 %     5 %     (3) %     (1) %                     6 %     4 %        
ROTCE (f)
    13       5       8       (5 )     (1 )                     9       7          
ROA
    0.70       0.54       0.42       (0.11 )     (0.01 )                     0.55       0.35          
Net income:
                                                                               
ROE (f)
    9       3       5       1       1                       6       5          
ROTCE (f)
    14       5       8       1       2                       9       8          
ROA
    0.71       0.54       0.42       0.13       0.12                       0.56       0.39          
Effective income tax rate (b)
    31       33       30       54       98                       31       (5 )        
Overhead ratio
    51       53       53       65       76                       52       64          
 
                                                                               
EXCLUDING IMPACT OF MERGER COSTS (g)
                                                                               
Income (loss) before extraordinary gain
  $ 3,512     $ 2,721     $ 2,141     $ (623 )   $ (54 )     29     NM     $ 8,374     $ 4,322       94  
Merger costs (after-tax)
    64       89       127       112       60       (28 )     7       280       156       79  
 
                                                                 
Income (loss) before extraordinary gain excluding merger costs
  $ 3,576     $ 2,810     $ 2,268     $ (511 )   $ 6       27     NM     $ 8,654     $ 4,478       93  
 
                                                                 
 
                                                                               
Diluted Per Share:
                                                                               
Income (loss) before extraordinary gain (d)(e)
  $ 0.80     $ 0.28     $ 0.40     $ (0.29 )   $ (0.08 )     186     NM     $ 1.50     $ 1.13       33  
Merger costs (after-tax)
    0.02       0.02       0.03       0.03       0.02                   0.07       0.05       40  
 
                                                                 
Income (loss) before extraordinary gain excluding merger costs (d)(e)
  $ 0.82     $ 0.30     $ 0.43     $ (0.26 )   $ (0.06 )     173     NM     $ 1.57     $ 1.18       33  
 
                                                                 
 
(a)   Second quarter 2009 includes a $675 million FDIC special assessment.
 
(b)   The income tax benefit in the third quarter of 2008 includes the realization of a benefit from the release of deferred tax liabilities associated with the undistributed earnings of certain non-U.S. subsidiaries that were deemed to be reinvested indefinitely.
 
(c)   JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price, which resulted in negative goodwill. In accordance with U.S. GAAP for business combinations, nonfinancial assets that are not held-for-sale were written down against that negative goodwill. The negative goodwill that remained after writing down nonfinancial assets was recognized as an extraordinary gain.
 
(d)   Effective January 1, 2009, the Firm implemented new FASB guidance for participating securities. Accordingly, prior period amounts have been revised as required. For further discussion of this guidance, see Per share-related information on page 36.
 
(e)   The calculation of second quarter 2009 earnings per share includes a one-time, non-cash reduction of $1.1 billion, or $0.27 per share, resulting from repayment of TARP preferred capital.
 
(f)   The calculation of second quarter 2009 net income applicable to common equity includes a one-time, non-cash reduction of $1.1 billion resulting from repayment of TARP preferred capital. Excluding this reduction the adjusted ROE and ROTCE were 6% and 10% for the second quarter 2009, respectively. The Firm views the adjusted ROE and ROTCE, non-GAAP financial measures, as meaningful because it increases the comparability to prior periods.
 
(g)   Net income excluding merger costs, a non-GAAP financial measure, is used by the Firm to facilitate comparison of results against the Firm’s ongoing operations and with other companies’ U.S. GAAP financial statements.

Page 3


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
CONSOLIDATED BALANCE SHEETS
(in millions)
                                                         
                                            Sep 30, 2009  
                                            Change  
    Sep 30     Jun 30     Mar 31     Dec 31     Sep 30     Jun 30     Sep 30  
    2009     2009     2009     2008     2008     2009     2008  
ASSETS
                                                       
Cash and due from banks
  $ 21,068     $ 25,133     $ 26,681     $ 26,895     $ 54,350       (16 )%     (61 )%
Deposits with banks
    59,623       61,882       89,865       138,139       34,372       (4 )     73  
Federal funds sold and securities purchased under resale agreements
    171,007       159,170       157,237       203,115       233,668       7       (27 )
Securities borrowed
    128,059       129,263       127,928       124,000       152,050       (1 )     (16 )
Trading assets:
                                                       
Debt and equity instruments
    330,370       298,135       298,453       347,357       401,609       11       (18 )
Derivative receivables
    94,065       97,491       131,247       162,626       118,648       (4 )     (21 )
Securities
    372,867       345,563       333,861       205,943       150,779       8       147  
Loans
    653,144       680,601       708,243       744,898       761,381       (4 )     (14 )
Less: allowance for loan losses
    30,633       29,072       27,381       23,164       19,052       5       61  
 
                                             
Loans, net of allowance for loan losses
    622,511       651,529       680,862       721,734       742,329       (4 )     (16 )
Accrued interest and accounts receivable
    59,948       61,302       52,168       60,987       104,232       (2 )     (42 )
Premises and equipment
    10,675       10,668       10,336       10,045       9,962             7  
Goodwill
    48,334       48,288       48,201       48,027       46,121             5  
Other intangible assets:
                                                       
Mortgage servicing rights
    13,663       14,600       10,634       9,403       17,048       (6 )     (20 )
Purchased credit card relationships
    1,342       1,431       1,528       1,649       1,827       (6 )     (27 )
All other intangibles
    3,520       3,651       3,821       3,932       3,653       (4 )     (4 )
Other assets (a)
    103,957       118,536       106,366       111,200       180,821       (12 )     (43 )
 
                                             
TOTAL ASSETS
  $ 2,041,009     $ 2,026,642     $ 2,079,188     $ 2,175,052     $ 2,251,469       1       (9 )
 
                                             
 
                                                       
LIABILITIES
                                                       
Deposits
  $ 867,977     $ 866,477     $ 906,969     $ 1,009,277     $ 969,783             (10 )
Federal funds purchased and securities loaned or sold under repurchase agreements
    310,219       300,931       279,837       192,546       224,075       3       38  
Commercial paper
    53,920       42,713       33,085       37,845       54,480       26       (1 )
Other borrowed funds (a)
    50,824       73,968       112,257       132,400       167,827       (31 )     (70 )
Trading liabilities:
                                                       
Debt and equity instruments
    65,233       56,021       53,786       45,274       76,213       16       (14 )
Derivative payables
    69,214       67,197       86,020       121,604       85,816       3       (19 )
Accounts payable and other liabilities (including the allowance for lending-related commitments)
    171,386       171,685       165,521       187,978       260,563             (34 )
Beneficial interests issued by consolidated VIEs
    17,859       20,945       9,674       10,561       11,437       (15 )     56  
Long-term debt
    254,413       254,226       243,569       252,094       238,034             7  
Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities
    17,711       17,713       18,276       18,589       17,398             2  
 
                                             
TOTAL LIABILITIES
    1,878,756       1,871,876       1,908,994       2,008,168       2,105,626             (11 )
 
                                                       
STOCKHOLDERS’ EQUITY
                                                       
Preferred stock
    8,152       8,152       31,993       31,939       8,152              
Common stock
    4,105       4,105       3,942       3,942       3,942             4  
Capital surplus
    97,564       97,662       91,469       92,143       90,535             8  
Retained earnings
    59,573       56,355       55,487       54,013       55,217       6       8  
Accumulated other comprehensive income (loss)
    283       (3,438 )     (4,490 )     (5,687 )     (2,227 )   NM     NM  
Shares held in RSU trust
    (86 )     (86 )     (86 )     (217 )     (267 )           68  
Treasury stock, at cost
    (7,338 )     (7,984 )     (8,121 )     (9,249 )     (9,509 )     8       23  
 
                                             
TOTAL STOCKHOLDERS’ EQUITY
    162,253       154,766       170,194       166,884       145,843       5       11  
 
                                             
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 2,041,009     $ 2,026,642     $ 2,079,188     $ 2,175,052     $ 2,251,469       1       (9 )
 
                                             
 
(a)   On September 19, 2008, the Federal Reserve established a special lending facility, the AML Facility, to provide liquidity to eligible money market mutual funds. The Firm participated in the AML Facility and had ABCP investments totaling $14.5 billion, $6.0 billion, $11.2 billion, and $61.3 billion at June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively. There was no ABCP investment at September 30, 2009. These ABCP investments were recorded in other assets with the corresponding nonrecourse liability to the Federal Reserve Bank of Boston for the same amounts recorded in other borrowed funds.

Page 4


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
CONDENSED AVERAGE BALANCE SHEETS AND ANNUALIZED YIELDS
(in millions, except rates)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
AVERAGE BALANCES
                                                                               
ASSETS
                                                                               
Deposits with banks
  $ 62,248     $ 68,001     $ 88,587     $ 106,156     $ 41,303       (8 )%     51 %   $ 72,849     $ 37,378       95 %
Federal funds sold and securities purchased under resale agreements
    151,705       142,226       160,986       205,182       164,980       7       (8 )     151,606       158,195       (4 )
Securities borrowed
    129,301       122,235       120,752       123,523       134,651       6       (4 )     124,127       106,258       17  
Trading assets — debt instruments
    250,148       245,444       252,098       269,576       298,760       2       (16 )     249,223       307,899       (19 )
Securities
    359,451       354,216       281,420       174,652       119,443       1       201       331,981       106,392       212  
Loans
    665,386       697,908       726,959       752,524       536,890       (5 )     24       696,526       533,829       30  
Other assets (a)
    24,155       36,638       27,411       56,322       37,237       (34 )     (35 )     29,389       17,694       66  
 
                                                                 
Total interest-earning assets
    1,642,394       1,666,668       1,658,213       1,687,935       1,333,264       (1 )     23       1,655,701       1,267,645       31  
Trading assets — equity instruments
    66,790       63,507       62,748       72,782       92,300       5       (28 )     64,363       90,220       (29 )
Goodwill
    48,328       48,273       48,071       46,838       45,947             5       48,225       45,809       5  
Other intangible assets:
                                                                               
Mortgage servicing rights
    14,384       12,256       11,141       14,837       11,811       17       22       12,605       10,017       26  
All other intangible assets
    4,984       5,218       5,443       5,586       5,512       (4 )     (10 )     5,214       5,845       (11 )
All other noninterest-earning assets
    222,296       242,450       281,503       339,887       267,525       (8 )     (17 )     248,532       245,749       1  
 
                                                                 
TOTAL ASSETS
  $ 1,999,176     $ 2,038,372     $ 2,067,119     $ 2,167,865     $ 1,756,359       (2 )     14     $ 2,034,640     $ 1,665,285       22  
 
                                                                 
 
                                                                               
LIABILITIES
                                                                               
Interest-bearing deposits
  $ 660,998     $ 672,350     $ 736,460     $ 777,604     $ 589,348       (2 )     12     $ 689,660     $ 600,554       15  
Federal funds purchased and securities loaned or sold under repurchase agreements
    303,175       289,971       226,110       203,568       200,032       5       52       273,368       194,446       41  
Commercial paper
    42,728       37,371       33,694       40,486       47,579       14       (10 )     37,964       47,496       (20 )
Other borrowings and liabilities (b)
    178,985       207,489       236,673       264,236       161,821       (14 )     11       207,504       127,076       63  
Beneficial interests issued by consolidated VIEs
    19,351       14,493       9,757       9,440       11,431       34       69       14,569       14,490       1  
Long-term debt
    271,281       274,323       258,732       248,125       261,385       (1 )     4       268,158       230,472       16  
 
                                                                 
Total interest-bearing liabilities
    1,476,518       1,495,997       1,501,426       1,543,459       1,271,596       (1 )     16       1,491,223       1,214,534       23  
Noninterest-bearing liabilities
    365,038       373,172       397,243       460,894       351,023       (2 )     4       378,366       320,978       18  
 
                                                                 
TOTAL LIABILITIES
    1,841,556       1,869,169       1,898,669       2,004,353       1,622,619       (1 )     13       1,869,589       1,535,512       22  
 
                                                                 
Preferred stock
    8,152       28,338       31,957       24,755       7,100       (71 )     15       22,729       3,895       484  
Common stockholders’ equity
    149,468       140,865       136,493       138,757       126,640       6       18       142,322       125,878       13  
 
                                                                 
TOTAL STOCKHOLDERS’ EQUITY
    157,620       169,203       168,450       163,512       133,740       (7 )     18       165,051       129,773       27  
 
                                                                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 1,999,176     $ 2,038,372     $ 2,067,119     $ 2,167,865     $ 1,756,359       (2 )     14     $ 2,034,640     $ 1,665,285       22  
 
                                                                 
 
                                                                               
AVERAGE RATES
                                                                               
INTEREST-EARNING ASSETS
                                                                               
Deposits with banks
    0.83 %     1.45 %     2.03 %     3.34 %     3.04 %                     1.50 %     3.66 %        
Federal funds sold and securities purchased under resale agreements
    0.96       1.04       1.64       2.88       3.76                       1.22       3.80          
Securities borrowed
    (0.09 )     (0.32 )     0.29       0.92       2.07                       (0.04 )     2.53          
Trading assets — debt instruments
    4.78       4.91       5.27       6.18       6.06                       4.99       5.80          
Securities
    3.62       3.64       4.16       5.14       5.09                       3.78       5.26          
Loans
    5.64       5.65       5.87       6.44       6.31                       5.72       6.58          
Other assets (a)
    2.18       0.80       2.44       3.06       3.29                       1.69       3.49          
Total interest-earning assets
    3.95       4.00       4.41       5.12       5.22                       4.12       5.47          
 
                                                                               
INTEREST-BEARING LIABILITIES
                                                                               
Interest-bearing deposits
    0.65       0.70       0.93       1.53       2.26                       0.76       2.57          
Federal funds purchased and securities sold under repurchase agreements
    0.20       0.23       0.36       0.95       2.63                       0.25       2.87          
Commercial paper
    0.23       0.24       0.47       1.17       2.05                       0.30       2.54          
Other borrowings and liabilities (b)
    1.70       1.32       1.46       2.56       2.84                       1.48       3.73          
Beneficial interests issued by consolidated VIEs
    1.43       1.59       1.57       3.79       2.87                       1.52       2.90          
Long-term debt
    2.09       2.60       2.73       3.87       3.31                       2.47       3.44          
Total interest-bearing liabilities
    0.95       1.04       1.23       2.01       2.61                       1.07       2.91          
 
                                                                               
INTEREST RATE SPREAD
    3.00 %     2.96 %     3.18 %     3.11 %     2.61 %                     3.05 %     2.56 %        
 
                                                                 
NET YIELD ON INTEREST-EARNING ASSETS
    3.10 %     3.07 %     3.29 %     3.28 %     2.73 %                     3.15 %     2.68 %        
 
                                                                 
NET YIELD ON INTEREST-EARNING ASSETS ADJUSTED FOR SECURITIZATIONS
    3.40 %     3.37 %     3.60 %     3.55 %     3.06 %                     3.45 %     3.02 %        
 
                                                                 
 
(a)   Includes margin loans and the Firm’s investment in asset-backed commercial paper under the Federal Reserve Bank of Boston’s AML facility.
 
(b)   Includes securities sold but not yet purchased, brokerage customer payables and advances from Federal Home Loan Banks.

Page 5


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
RECONCILIATION FROM REPORTED TO MANAGED SUMMARY
(in millions)
The Firm prepares its consolidated financial statements using accounting principles generally accepted in the United States of America (“U.S. GAAP”). That presentation, which is referred to as “reported basis,” provides the reader with an understanding of the Firm’s results that can be tracked consistently from year to year and enables a comparison of the Firm’s performance with other companies’ U.S. GAAP financial statements.
In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s results and the results of lines of business on a “managed” basis, which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications that assume credit card loans securitized by Card Services remain on the balance sheet and presents revenue on a fully taxable-equivalent (“FTE”) basis. These adjustments do not have any impact on net income as reported by the lines of business or by the Firm as a whole. The impact of these adjustments are summarized below. For additional information about managed basis, please refer to the Glossary of Terms on page 37.
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
CREDIT CARD INCOME
                                                                               
Credit card income — reported
  $ 1,710     $ 1,719     $ 1,837     $ 2,049     $ 1,771       (1 )%     (3 )%   $ 5,266     $ 5,370       (2 )%
Impact of:
                                                                               
Credit card securitizations
    (285 )     (294 )     (540 )     (710 )     (843 )     3       66       (1,119 )     (2,623 )     57  
 
                                                                 
Credit card income — managed
  $ 1,425     $ 1,425     $ 1,297     $ 1,339     $ 928             54     $ 4,147     $ 2,747       51  
 
                                                                 
 
                                                                               
OTHER INCOME
                                                                               
Other income — reported
  $ 625     $ 10     $ 50     $ 593     $ (115 )   NM     NM     $ 685     $ 1,576       (57 )
Impact of:
                                                                               
Tax-equivalent adjustments
    371       335       337       556       323       11       15       1,043       773       35  
 
                                                                 
Other income — managed
  $ 996     $ 345     $ 387     $ 1,149     $ 208       189       379     $ 1,728     $ 2,349       (26 )
 
                                                                 
 
                                                                               
TOTAL NONINTEREST REVENUE
                                                                               
Total noninterest revenue — reported
  $ 13,885     $ 12,953     $ 11,658     $ 3,394     $ 5,743       7       142     $ 38,496     $ 25,079       53  
Impact of:
                                                                               
Credit card securitizations
    (285 )     (294 )     (540 )     (710 )     (843 )     3       66       (1,119 )     (2,623 )     57  
Tax-equivalent adjustments
    371       335       337       556       323       11       15       1,043       773       35  
 
                                                                 
Total noninterest revenue — managed
  $ 13,971     $ 12,994     $ 11,455     $ 3,240     $ 5,223       8       167     $ 38,420     $ 23,229       65  
 
                                                                 
 
                                                                               
NET INTEREST INCOME
                                                                               
Net interest income — reported
  $ 12,737     $ 12,670     $ 13,367     $ 13,832     $ 8,994       1       42     $ 38,774     $ 24,947       55  
Impact of:
                                                                               
Credit card securitizations
    1,983       1,958       2,004       1,938       1,716       1       16       5,945       5,007       19  
Tax-equivalent adjustments
    89       87       96       98       155       2       (43 )     272       481       (43 )
 
                                                                 
Net interest income — managed
  $ 14,809     $ 14,715     $ 15,467     $ 15,868     $ 10,865       1       36     $ 44,991     $ 30,435       48  
 
                                                                 
 
                                                                               
TOTAL NET REVENUE
                                                                               
Total net revenue — reported
  $ 26,622     $ 25,623     $ 25,025     $ 17,226     $ 14,737       4       81     $ 77,270     $ 50,026       54  
Impact of:
                                                                               
Credit card securitizations
    1,698       1,664       1,464       1,228       873       2       95       4,826       2,384       102  
Tax-equivalent adjustments
    460       422       433       654       478       9       (4 )     1,315       1,254       5  
 
                                                                 
Total net revenue — managed
  $ 28,780     $ 27,709     $ 26,922     $ 19,108     $ 16,088       4       79     $ 83,411     $ 53,664       55  
 
                                                                 
 
                                                                               
PRE-PROVISION PROFIT
                                                                               
Total pre-provision profit — reported
  $ 13,167     $ 12,103     $ 11,652     $ 5,971     $ 3,600       9       266     $ 36,922     $ 17,781       108  
Impact of:
                                                                               
Credit card securitizations
    1,698       1,664       1,464       1,228       873       2       95       4,826       2,384       102  
Tax-equivalent adjustments
    460       422       433       654       478       9       (4 )     1,315       1,254       5  
 
                                                                 
Total pre-provision profit — managed
  $ 15,325     $ 14,189     $ 13,549     $ 7,853     $ 4,951       8       210     $ 43,063     $ 21,419       101  
 
                                                                 
 
                                                                               
PROVISION FOR CREDIT LOSSES
                                                                               
Provision for credit losses — reported
  $ 8,104     $ 8,031     $ 8,596     $ 7,313     $ 5,787       1       40     $ 24,731     $ 13,666       81  
Impact of:
                                                                               
Credit card securitizations
    1,698       1,664       1,464       1,228       873       2       95       4,826       2,384       102  
 
                                                                 
Provision for credit losses — managed
  $ 9,802     $ 9,695     $ 10,060     $ 8,541     $ 6,660       1       47     $ 29,557     $ 16,050       84  
 
                                                                 
 
                                                                               
INCOME TAX EXPENSE
                                                                               
Income tax expense (benefit) — reported
  $ 1,551     $ 1,351     $ 915     $ (719 )   $ (2,133 )     15     NM     $ 3,817     $ (207 )   NM  
Impact of:
                                                                               
Tax-equivalent adjustments
    460       422       433       654       478       9       (4 )     1,315       1,254       5  
 
                                                                 
Income tax expense (benefit) — managed
  $ 2,011     $ 1,773     $ 1,348     $ (65 )   $ (1,655 )     13     NM     $ 5,132     $ 1,047       390  
 
                                                                 

Page 6


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
LINE OF BUSINESS FINANCIAL HIGHLIGHTS — MANAGED BASIS
(in millions, except ratio data)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
TOTAL NET REVENUE (FTE)
                                                                               
Investment Bank (a)
  $ 7,508     $ 7,301     $ 8,371     $ (272 )   $ 4,066       3 %     85 %   $ 23,180     $ 12,607       84 %
Retail Financial Services
    8,218       7,970       8,835       8,684       4,963       3       66       25,023       14,836       69  
Card Services
    5,159       4,868       5,129       4,908       3,887       6       33       15,156       11,566       31  
Commercial Banking
    1,459       1,453       1,402       1,479       1,125             30       4,314       3,298       31  
Treasury & Securities Services
    1,788       1,900       1,821       2,249       1,953       (6 )     (8 )     5,509       5,885       (6 )
Asset Management
    2,085       1,982       1,703       1,658       1,961       5       6       5,770       5,926       (3 )
Corporate/Private Equity (a)
    2,563       2,235       (339 )     402       (1,867 )     15     NM       4,459       (454 )   NM  
 
                                                                 
TOTAL NET REVENUE
  $ 28,780     $ 27,709     $ 26,922     $ 19,108     $ 16,088       4       79     $ 83,411     $ 53,664       55  
 
                                                                 
 
                                                                               
TOTAL PRE-PROVISION PROFIT
                                                                               
Investment Bank (a)
  $ 3,234     $ 3,234     $ 3,597     $ (3,013 )   $ 250           NM     $ 10,065     $ 1,504     NM  
Retail Financial Services
    4,022       3,891       4,664       4,638       2,184       3       84       12,577       6,805       85  
Card Services
    3,853       3,535       3,783       3,419       2,693       9       43       11,171       7,915       41  
Commercial Banking
    914       918       849       980       639             43       2,681       1,851       45  
Treasury & Securities Services
    508       612       502       910       614       (17 )     (17 )     1,622       2,001       (19 )
Asset Management
    734       628       405       445       599       17       23       1,767       1,841       (4 )
Corporate/Private Equity (a)
    2,060       1,371       (251 )     474       (2,028 )     50     NM       3,180       (498 )   NM  
 
                                                                 
TOTAL PRE-PROVISION PROFIT
  $ 15,325     $ 14,189     $ 13,549     $ 7,853     $ 4,951       8       210     $ 43,063     $ 21,419       101  
 
                                                                 
 
                                                                               
NET INCOME (LOSS)
                                                                               
Investment Bank
  $ 1,921     $ 1,471     $ 1,606     $ (2,364 )   $ 882       31       118     $ 4,998     $ 1,189       320  
Retail Financial Services
    7       15       474       624       64       (53 )     (89 )     496       256       94  
Card Services
    (700 )     (672 )     (547 )     (371 )     292       (4 )   NM       (1,919 )     1,151     NM  
Commercial Banking
    341       368       338       480       312       (7 )     9       1,047       959       9  
Treasury & Securities Services
    302       379       308       533       406       (20 )     (26 )     989       1,234       (20 )
Asset Management
    430       352       224       255       351       22       23       1,006       1,102       (9 )
Corporate/Private Equity
    1,287       808       (262 )     1,545       (1,780 )     59     NM       1,833       (988 )   NM  
 
                                                                 
TOTAL NET INCOME
  $ 3,588     $ 2,721     $ 2,141     $ 702     $ 527       32     NM     $ 8,450     $ 4,903       72  
 
                                                                 
 
                                                                               
AVERAGE EQUITY (b)
                                                                               
Investment Bank
  $ 33,000     $ 33,000     $ 33,000     $ 33,000     $ 26,000             27     $ 33,000     $ 23,781       39  
Retail Financial Services
    25,000       25,000       25,000       25,000       17,000             47       25,000       17,000       47  
Card Services
    15,000       15,000       15,000       15,000       14,100             6       15,000       14,100       6  
Commercial Banking
    8,000       8,000       8,000       8,000       7,000             14       8,000       7,000       14  
Treasury & Securities Services
    5,000       5,000       5,000       4,500       3,500             43       5,000       3,500       43  
Asset Management
    7,000       7,000       7,000       7,000       5,500             27       7,000       5,190       35  
Corporate/Private Equity
    56,468       47,865       43,493       46,257       53,540       18       5       49,322       55,307       (11 )
 
                                                                 
TOTAL AVERAGE EQUITY
  $ 149,468     $ 140,865     $ 136,493     $ 138,757     $ 126,640       6       18     $ 142,322     $ 125,878       13  
 
                                                                 
 
                                                                               
RETURN ON EQUITY (b)
                                                                               
Investment Bank
    23 %     18 %     20 %     (28) %     13 %                     20 %     7 %        
Retail Financial Services
                8       10       1                       3       2          
Card Services
    (19 )     (18 )     (15 )     (10 )     8                       (17 )     11          
Commercial Banking
    17       18       17       24       18                       17       18          
Treasury & Securities Services
    24       30       25       47       46                       26       47          
Asset Management
    24       20       13       14       25                       19       28          
 
(a)   In the second quarter of 2009, Investment Bank (“IB”) began reporting credit reimbursement from TSS as a component of total net revenue, whereas TSS continues to report its credit reimbursement to IB as a separate line item on its income statement (not part of total net revenue). Corporate/Private Equity includes an adjustment to offset IB’s inclusion of the credit reimbursement in total net revenue. Prior periods have been revised for IB and Corporate/Private Equity to reflect this presentation.
 
(b)   Each business segment is allocated capital by taking into consideration stand-alone peer comparisons, economic risk measures and regulatory capital requirements. The amount of capital assigned to each business is referred to as equity.

Page 7


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
INVESTMENT BANK
FINANCIAL HIGHLIGHTS
(in millions, except ratio data)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
INCOME STATEMENT
                                                                               
REVENUE
                                                                               
Investment banking fees
  $ 1,658     $ 2,239     $ 1,380     $ 1,373     $ 1,593       (26) %     4 %   $ 5,277     $ 4,534       16 %
Principal transactions
    2,714       1,841       3,515       (6,160 )     (922 )     47     NM       8,070       (882 )   NM  
Lending & deposit-related fees
    185       167       138       138       118       11       57       490       325       51  
Asset management, administration and commissions
    633       717       692       764       847       (12 )     (25 )     2,042       2,300       (11 )
All other income (a)
    63       (108 )     (56 )     139       (248 )   NM     NM       (101 )     (480 )     79  
 
                                                                 
Noninterest revenue
    5,253       4,856       5,669       (3,746 )     1,388       8       278       15,778       5,797       172  
Net interest income
    2,255       2,445       2,702       3,474       2,678       (8 )     (16 )     7,402       6,810       9  
 
                                                                 
TOTAL NET REVENUE (b)
    7,508       7,301       8,371       (272 )     4,066       3       85       23,180       12,607       84  
 
                                                                               
Provision for credit losses
    379       871       1,210       765       234       (56 )     62       2,460       1,250       97  
NONINTEREST EXPENSE
                                                                               
Compensation expense
    2,778       2,677       3,330       1,166       2,162       4       28       8,785       6,535       34  
Noncompensation expense
    1,496       1,390       1,444       1,575       1,654       8       (10 )     4,330       4,568       (5 )
 
                                                                 
TOTAL NONINTEREST EXPENSE
    4,274       4,067       4,774       2,741       3,816       5       12       13,115       11,103       18  
 
                                                                 
 
                                                                               
Income (loss) before income tax expense
    2,855       2,363       2,387       (3,778 )     16       21     NM       7,605       254     NM  
Income tax expense (benefit) (c)
    934       892       781       (1,414 )     (866 )     5     NM       2,607       (935 )   NM  
 
                                                                 
NET INCOME (LOSS)
  $ 1,921     $ 1,471     $ 1,606     $ (2,364 )   $ 882       31       118     $ 4,998     $ 1,189       320  
 
                                                                 
 
                                                                               
FINANCIAL RATIOS
                                                                               
ROE
    23 %     18 %     20 %     (28) %     13 %                     20 %     7 %        
ROA
    1.12       0.83       0.89       (1.08 )     0.39                       0.94       0.19          
Overhead ratio
    57       56       57     NM       94                       57       88          
Compensation expense as a % of total net revenue
    37       37       40     NM       53                       38       52          
 
                                                                               
REVENUE BY BUSINESS
                                                                               
Investment banking fees:
                                                                               
Advisory
  $ 384     $ 393     $ 479     $ 579     $ 576       (2 )     (33 )   $ 1,256     $ 1,429       (12 )
Equity underwriting
    681       1,103       308       330       518       (38 )     31       2,092       1,419       47  
Debt underwriting
    593       743       593       464       499       (20 )     19       1,929       1,686       14  
 
                                                                 
Total investment banking fees
    1,658       2,239       1,380       1,373       1,593       (26 )     4       5,277       4,534       16  
Fixed income markets
    5,011       4,929       4,889       (1,671 )     815       2     NM       14,829       3,628       309  
Equity markets
    941       708       1,773       (94 )     1,650       33       (43 )     3,422       3,705       (8 )
Credit portfolio (a)
    (102 )     (575 )     329       120       8       82     NM       (348 )     740     NM  
 
                                                                 
Total net revenue
  $ 7,508     $ 7,301     $ 8,371     $ (272 )   $ 4,066       3       85     $ 23,180     $ 12,607       84  
 
                                                                 
 
                                                                               
REVENUE BY REGION (a)
                                                                               
Americas
  $ 3,913     $ 4,177     $ 4,800     $ (2,203 )   $ 1,072       (6 )     265     $ 12,890     $ 4,813       168  
Europe/Middle East/Africa
    2,855       2,235       2,595       2,026       2,517       28       13       7,685       5,684       35  
Asia/Pacific
    740       889       976       (95 )     477       (17 )     55       2,605       2,110       23  
 
                                                                 
Total net revenue
  $ 7,508     $ 7,301     $ 8,371     $ (272 )   $ 4,066       3       85     $ 23,180     $ 12,607       84  
 
                                                                 
 
(a)   Treasury & Securities Services (“TSS”) was charged a credit reimbursement related to certain exposures managed within the Investment Bank credit portfolio on behalf of clients shared with TSS. IB recognizes this credit reimbursement in its credit portfolio business in all other income. Prior periods have been revised to conform with the current presentation.
 
(b)   Total net revenue included tax-equivalent adjustments, predominantly due to income tax credits related to affordable housing and alternative energy investments, as well as, tax-exempt income from municipal bond investments, of $371 million, $334 million, $365 million, $583 million, and $427 million for the quarters ended September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively, and $1.1 billion for both year-to-date 2009 and 2008.
 
(c)   The income tax benefit in the third quarter of 2008 is predominantly the result of reduced deferred tax liabilities on overseas earnings.

Page 8


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
INVESTMENT BANK
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except headcount and ratio data)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
SELECTED BALANCE SHEET DATA (Period-end)
                                                                               
Loans:
                                                                               
Loans retained (a)
  $ 55,703     $ 64,500     $ 66,506     $ 71,357     $ 73,347       (14) %     (24) %   $ 55,703     $ 73,347       (24) %
Loans held-for-sale & loans at fair value
    4,582       6,814       10,993       13,660       16,667       (33 )     (73 )     4,582       16,667       (73 )
 
                                                                 
Total loans
    60,285       71,314       77,499       85,017       90,014       (15 )     (33 )     60,285       90,014       (33 )
Equity
    33,000       33,000       33,000       33,000       33,000                   33,000       33,000        
SELECTED BALANCE SHEET DATA (Average)
                                                                               
Total assets
  $ 678,796     $ 710,825     $ 733,166     $ 869,159     $ 890,040       (5 )     (24 )   $ 707,396     $ 820,497       (14 )
Trading assets — debt and equity instruments
    270,695       265,336       272,998       306,168       360,821       2       (25 )     269,668       365,802       (26 )
Trading assets — derivative receivables
    86,651       100,536       125,021       153,875       105,462       (14 )     (18 )     103,929       98,390       6  
Loans:
                                                                               
Loans retained (a)
    61,269       68,224       70,041       73,110       69,022       (10 )     (11 )     66,479       73,107       (9 )
Loans held-for-sale & loans at fair value
    4,981       8,934       12,402       16,378       17,612       (44 )     (72 )     8,745       19,215       (54 )
 
                                                                 
Total loans
    66,250       77,158       82,443       89,488       86,634       (14 )     (24 )     75,224       92,322       (19 )
Adjusted assets (b)
    515,718       531,632       589,163       685,242       694,459       (3 )     (26 )     545,235       677,945       (20 )
Equity
    33,000       33,000       33,000       33,000       26,000             27       33,000       23,781       39  
 
                                                                               
Headcount
    24,828       25,783       26,142       27,938       30,993       (4 )     (20 )     24,828       30,993       (20 )
 
                                                                               
CREDIT DATA AND QUALITY STATISTICS
                                                                               
Net charge-offs (recoveries)
  $ 750     $ 433     $ 36     $ 87     $ 13       73     NM   $ 1,219     $ 18     NM  
Nonperforming assets:
                                                                               
Nonperforming loans:
                                                                               
Nonperforming loans
retained (a)
    4,782       3,407       1,738       1,143       404       40     NM     4,782       404     NM  
Nonperforming loans held-for-sale & loans at fair value
    128       112       57       32       32       14       300       128       32       300  
 
                                                                 
Total nonperforming loans
    4,910       3,519       1,795       1,175       436       40     NM     4,910       436     NM  
Derivative receivables
    624       704       1,010       1,079       34       (11 )   NM     624       34     NM  
Assets acquired in loan satisfactions
    248       311       236       247       113       (20 )     119       248       113       119  
 
                                                                 
Total nonperforming assets
    5,782       4,534       3,041       2,501       583       28     NM     5,782       583     NM  
Allowance for credit losses:
                                                                               
Allowance for loan losses
    4,703       5,101       4,682       3,444       2,654       (8 )     77       4,703       2,654       77  
Allowance for lending-related commitments
    401       351       295       360       463       14       (13 )     401       463       (13 )
 
                                                                 
Total allowance for credit losses
    5,104       5,452       4,977       3,804       3,117       (6 )     64       5,104       3,117       64  
 
                                                                               
Net charge-off (recovery) rate (a)
    4.86 %     2.55 %     0.21 %     0.47 %     0.07 %                     2.45 %     0.03 %        
Allowance for loan losses to period-end loans retained (a)
    8.44       7.91       7.04       4.83       3.62                       8.44       3.62          
Allowance for loan losses to average loans retained (a) (d)
    7.68       7.48       6.68       4.71       3.85                       7.07       3.63          
Allowance for loan losses to nonperforming loans retained (c)
    98       150       269       301       657                       98       657          
Nonperforming loans to total period-end loans
    8.14       4.93       2.32       1.38       0.48                       8.14       0.48          
Nonperforming loans to total average loans
    7.41       4.56       2.18       1.31       0.50                       6.53       0.47          
 
(a)   Loans retained included credit portfolio loans, leveraged leases and other accrual loans, and excluded loans held-for-sale and loans accounted for at fair value.
 
(b)   Adjusted assets, a non-GAAP financial measure, equals total assets minus (1) securities purchased under resale agreements and securities borrowed less securities sold, not yet purchased; (2) assets of consolidated variable interest entities (“VIEs”); (3) cash and securities segregated and on deposit for regulatory and other purposes; (4) goodwill and intangibles; (5) securities received as collateral; and (6) investments purchased under the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. The amount of adjusted assets is presented to assist the reader in comparing the Investment Bank’s (“IB”) asset and capital levels to other investment banks in the securities industry. Asset-to-equity leverage ratios are commonly used as one measure to assess a company’s capital adequacy. IB believes an adjusted asset amount that excludes the assets discussed above, which were considered to have a low risk profile, provides a more meaningful measure of balance sheet leverage in the securities industry.
 
(c)   Nonperforming loans excluded distressed loans held-for-sale that were purchased as part of IB’s proprietary activities.
 
(d)   Excluding the impact of a loan originated in March 2008 to Bear Stearns, the adjusted ratio would be 3.76% for year-to-date 2008. The average balance of the loan extended to Bear Stearns was $2.6 billion for year-to-date 2008.

Page 9


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
INVESTMENT BANK
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except ratio and rankings data)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
MARKET RISK — AVERAGE TRADING AND CREDIT PORTFOLIO VAR - 99% CONFIDENCE LEVEL (a)
                                                                               
Trading activities:
                                                                               
Fixed income
  $ 243     $ 249     $ 218     $ 276     $ 183       (2) %     33 %   $ 237     $ 150       58 %
Foreign exchange
    30       26       40       55       20       15       50       32       27       19  
Equities
    28       77       162       87       80       (64 )     (65 )     88       47       87  
Commodities and other
    38       34       28       30       41       12       (7 )     34       33       3  
Diversification (b)
    (134 )     (136 )     (159 )     (146 )     (104 )     1       (29 )     (144 )     (95 )     (52 )
 
                                                                 
Total trading VaR (c)
    205       250       289       302       220       (18 )     (7 )     247       162       52  
 
                                                                               
Credit portfolio VaR (d)
    50       133       182       165       47       (62 )     6       120       38       216  
Diversification (b)
    (49 )     (116 )     (135 )     (140 )     (49 )     58             (99 )     (39 )     (154 )
 
                                                                 
Total trading and credit portfolio VaR
  $ 206     $ 267     $ 336     $ 327     $ 218       (23 )     (6 )   $ 268     $ 161       66  
 
                                                                 
                 
    September 30, 2009 YTD   Full Year 2008
    Market       Market    
MARKET SHARES AND RANKINGS (e)   Share   Rankings   Share   Rankings
Global debt, equity and equity-related
  10%   #1     9%   #1
Global syndicated loans
    9%   #1   11%   #1
Global long-term debt (f)
    9%   #1     9%   #3
Global equity and equity-related (g)
  15%   #1   10%   #1
Global announced M&A (h)
  25%   #4   28%   #2
U.S. debt, equity and equity-related
  15%   #1   15%   #2
U.S. syndicated loans
  23%   #1   25%   #1
U.S. long-term debt (f)
  14%   #1   15%   #2
U.S. equity and equity-related (g)
  18%   #1   11%   #1
U.S. announced M&A (h)
  33%   #4   35%   #2
 
(a)   Results for year-to-date 2008 include four months of the combined Firm’s (JPMorgan Chase & Co.’s and Bear Stearns’) results and five months of heritage JPMorgan Chase & Co results.
 
(b)   Average VaRs were less than the sum of the VaRs of their market risk components, which was due to risk offsets resulting from portfolio diversification. The diversification effect reflected the fact that the risks were not perfectly correlated. The risk of a portfolio of positions is usually less than the sum of the risks of the positions themselves.
 
(c)   Trading VaR includes predominantly all trading activities in IB; however, particular risk parameters of certain products are not fully captured, for example, correlation risk. Trading VaR does not include VaR related to held-for-sale funded loans and unfunded commitments, nor the debit valuation adjustments (“DVA”) taken on derivative and structured liabilities to reflect the credit quality of the Firm. Trading VaR also does not include the MSR portfolio or VaR related to other corporate functions, such as Corporate/Private Equity. Beginning in the fourth quarter of 2008, trading VaR includes the estimated credit spread sensitivity of certain mortgage products.
 
(d)   Includes VaR on derivative credit valuation adjustments (“CVA”), hedges of the CVA and mark-to-market hedges of the retained loan portfolio, which are all reported in principal transactions revenue. This VaR does not include the retained loan portfolio.
 
(e)   Source: Thomson Reuters. Full year 2008 results are pro forma for the Bear Stearns merger.
 
(f)   Includes asset-backed securities, mortgage-backed securities and municipal securities.
 
(g)   Includes rights offerings; U.S. domiciled equity and equity-related transactions.
 
(h)   Global announced M&A is based upon rank value; all other rankings are based upon proceeds, with full credit to each book manager/equal if joint. Because of joint assignments, market share of all participants will add up to more than 100%. Global and U.S. announced M&A market share and rankings for 2008 include transactions withdrawn since December 31, 2008. U.S. announced M&A represents any U.S. involvement ranking.

Page 10


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
FINANCIAL HIGHLIGHTS
(in millions, except ratio and headcount data)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
INCOME STATEMENT
                                                                               
REVENUE
                                                                               
Lending & deposit-related fees
  $ 1,046     $ 1,003     $ 948     $ 1,050     $ 538       4 %     94 %   $ 2,997     $ 1,496       100 %
Asset management, administration and commissions
    408       425       435       412       346       (4 )     18       1,268       1,098       15  
Mortgage fees and related income
    873       807       1,633       1,962       438       8       99       3,313       1,659       100  
Credit card income
    416       411       367       367       204       1       104       1,194       572       109  
Other income
    321       294       214       183       206       9       56       829       556       49  
 
                                                                 
Noninterest revenue
    3,064       2,940       3,597       3,974       1,732       4       77       9,601       5,381       78  
Net interest income
    5,154       5,030       5,238       4,710       3,231       2       60       15,422       9,455       63  
 
                                                                 
TOTAL NET REVENUE
    8,218       7,970       8,835       8,684       4,963       3       66       25,023       14,836       69  
 
                                                                               
Provision for credit losses
    3,988       3,846       3,877       3,576       2,056       4       94       11,711       6,329       85  
 
                                                                               
NONINTEREST EXPENSE
                                                                               
Compensation expense
    1,728       1,631       1,631       1,604       1,120       6       54       4,990       3,464       44  
Noncompensation expense
    2,385       2,365       2,457       2,345       1,559       1       53       7,207       4,267       69  
Amortization of intangibles
    83       83       83       97       100             (17 )     249       300       (17 )
 
                                                                 
TOTAL NONINTEREST EXPENSE
    4,196       4,079       4,171       4,046       2,779       3       51       12,446       8,031       55  
 
                                                                 
 
                                                                               
Income before income tax expense
    34       45       787       1,062       128       (24 )     (73 )     866       476       82  
Income tax expense
    27       30       313       438       64       (10 )     (58 )     370       220       68  
 
                                                                 
NET INCOME
  $ 7     $ 15     $ 474     $ 624     $ 64       (53 )     (89 )   $ 496     $ 256       94  
 
                                                                 
 
                                                                               
FINANCIAL RATIOS
                                                                               
ROE
    %     %     8 %     10 %     1 %                     3 %     2 %        
Overhead ratio
    51       51       47       47       56                       50       54          
Overhead ratio excluding core deposit intangibles (a)
    50       50       46       45       54                       49       52          
 
                                                                               
SELECTED BALANCE SHEET DATA (Period-end)
                                                                               
Assets
  $ 397,673     $ 399,916     $ 412,505     $ 419,831     $ 426,435       (1 )     (7 )   $ 397,673     $ 426,435       (7 )
Loans:
                                                                               
Loans retained
    346,765       353,934       364,220       368,786       371,153       (2 )     (7 )     346,765       371,153       (7 )
Loans held-for-sale & loans at fair value (b)
    14,303       13,192       12,529       9,996       10,223       8       40       14,303       10,223       40  
 
                                                                 
Total loans
    361,068       367,126       376,749       378,782       381,376       (2 )     (5 )     361,068       381,376       (5 )
Deposits
    361,046       371,241       380,140       360,451       353,660       (3 )     2       361,046       353,660       2  
Equity
    25,000       25,000       25,000       25,000       25,000                   25,000       25,000        
 
                                                                               
SELECTED BALANCE SHEET DATA (Average)
                                                                               
Assets
  $ 401,620     $ 410,228     $ 423,472     $ 423,699     $ 265,367       (2 )     51     $ 411,693     $ 264,400       56  
Loans:
                                                                               
Loans retained
    349,762       359,372       366,925       369,172       222,640       (3 )     57       358,623       219,464       63  
Loans held-for-sale & loans at fair value (b)
    19,025       19,043       16,526       13,848       16,037             19       18,208       18,116       1  
 
                                                                 
Total loans
    368,787       378,415       383,451       383,020       238,677       (3 )     55       376,831       237,580       59  
Deposits
    366,944       377,259       370,278       358,523       222,180       (3 )     65       371,482       224,731       65  
Equity
    25,000       25,000       25,000       25,000       17,000             47       25,000       17,000       47  
 
                                                                               
Headcount
    106,951       103,733       100,677       102,007       101,826       3       5       106,951       101,826       5  
 
(a)   Retail Financial Services uses the overhead ratio (excluding the amortization of core deposit intangibles (“CDI”)), a non-GAAP financial measure, to evaluate the underlying expense trends of the business. Including CDI amortization expense in the overhead ratio calculation results in a higher overhead ratio in the earlier years and a lower overhead ratio in later years; this method would result in an improving overhead ratio over time, all things remaining equal. This non-GAAP ratio excludes Retail Banking’s core deposit intangibles amortization expense related to the 2006 Bank of New York transaction and the 2004 Bank One merger of $83 million, $82 million, $83 million, $97 million, and $99 million, for the quarters ending September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively, and $248 million and $297 million for year-to-date 2009 and 2008, respectively.
 
(b)   Loans at fair value consist of prime mortgages originated with the intent to sell that are accounted for at fair value and classified as trading assets on the Consolidated Balance Sheets. These loans totaled $12.8 billion, $11.3 billion, $8.9 billion, $8.0 billion, and $8.6 billion, at September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively. Average balances of these loans totaled $17.7 billion, $16.2 billion, $13.4 billion, $12.0 billion, and $14.5 billion, for the quarters ended September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively, and $15.8 billion and $14.9 billion for year-to-date 2009 and 2008, respectively.

Page 11


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except ratio data)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
CREDIT DATA AND QUALITY STATISTICS
                                                                               
Net charge-offs
  $ 2,550     $ 2,649     $ 2,176     $ 1,701     $ 1,326       (4) %     92 %   $ 7,375     $ 3,176       132 %
Nonperforming loans:
                                                                               
Nonperforming loans retained
    10,091       8,792       7,714       6,548       5,517       15       83       10,091       5,517       83  
Nonperforming loans held-for-sale and loans at fair value
    242       203       264       236       207       19       17       242       207       17  
 
                                                             
Total nonperforming loans (a) (b) (c)
    10,333       8,995       7,978       6,784       5,724       15       81       10,333       5,724       81  
Nonperforming assets (a) (b) (c)
    11,883       10,554       9,846       9,077       8,085       13       47       11,883       8,085       47  
Allowance for loan losses
    13,286       11,832       10,619       8,918       7,517       12       77       13,286       7,517       77  
 
Net charge-off rate
    2.89 %     2.96 %     2.41 %     1.83 %     2.37 %                     2.75 %     1.93 %        
Net charge-off rate excluding purchased credit-impaired loans (d)
    3.81       3.89       3.16       2.41       2.37                       3.62       1.93          
Allowance for loan losses to ending loans retained
    3.83       3.34       2.92       2.42       2.03                       3.83       2.03          
Allowance for loan losses to ending loans retained excluding purchased credit-impaired loans (d)
    4.63       4.41       3.84       3.19       2.56                       4.63       2.56          
Allowance for loan losses to nonperforming loans retained (a)(d)
    121       135       138       136       136                       121       136          
Nonperforming loans to total loans
    2.86       2.45       2.12       1.79       1.50                       2.86       1.50          
Nonperforming loans to total loans excluding purchased credit-impaired loans (a)
    3.72       3.19       2.76       2.34       1.88                       3.72       1.88          
 
(a)   Excludes purchased credit-impaired loans that were acquired as part of the Washington Mutual transaction. These loans are accounted for on a pool basis and the pools are considered to be performing.
 
(b)   Certain of these loans are classified as trading assets on the Consolidated Balance Sheets.
 
(c)   Nonperforming loans and assets excluded: (1) mortgage loans insured by U.S. government agencies of $7.0 billion, $4.2 billion, $4.2 billion, $3.0 billion, and $1.4 billion, at September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively; and (2) real estate owned insured by U.S. government agencies of $579 million, $508 million, $433 million, $364 million, and $370 million at September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively; and (3) student loans that are 90 days past due and still accruing, which are insured by U.S. government agencies under the Federal Family Education Loan Program, of $511 million, $473 million, $433 million, $437 million, and $405 million, at September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively. These amounts for mortgage and student loans are excluded, as reimbursement is proceeding normally.
 
(d)   Excludes the impact of purchased credit-impaired loans that were acquired as part of the Washington Mutual transaction. These loans were accounted for at fair value on the acquisition date, which incorporated management’s estimate, as of that date, of credit losses over the remaining life of the portfolio. An allowance for loan losses of $1.1 billion has been recorded for these loans as of September 30, 2009. No allowance for loan losses was recorded as of June 30, 2009, March 31, 2009, December 31, 2008, and September 30, 2008, respectively.

Page 12


 

(JPMORGAN HEADER)
JPMORGAN CHASE & CO.
RETAIL FINANCIAL SERVICES
FINANCIAL HIGHLIGHTS, CONTINUED
(in millions, except ratio data and where otherwise noted)
                                                                                 
    QUARTERLY TRENDS     YEAR-TO-DATE  
                                            3Q09 Change                     2009 Change  
    3Q09     2Q09     1Q09     4Q08     3Q08     2Q09     3Q08     2009     2008     2008  
RETAIL BANKING
                                                                               
Noninterest revenue
  $ 1,844     $ 1,803     $ 1,718     $ 1,834     $ 1,089       2 %     69 %   $ 5,365     $ 3,117       72 %
Net interest income
    2,732       2,719       2,614       2,687       1,756             56       8,065       4,972       62  
 
                                                                 
Total net revenue
    4,576       4,522       4,332       4,521       2,845       1       61       13,430       8,089       66  
Provision for credit losses
    208       361       325       268       70       (42 )     197       894       181       394  
Noninterest expense
    2,646       2,557       2,580       2,533       1,580       3       67       7,783       4,699       66  
 
                                                                 
Income before income tax expense
    1,722       1,604       1,427       1,720       1,195       7       44       4,753       3,209       48  
 
                                                                 
Net income
  $ 1,043     $ 970     $ 863     $ 1,040     $ 723       8       44     $ 2,876     $ 1,942       48  
 
                                                                 
 
                                                                               
Overhead ratio
    58 %     57 %     60 %     56 %     56 %                     58 %     58 %        
Overhead ratio excluding core deposit intangibles (a)
    56       55       58       54       52                       56       54          
BUSINESS METRICS (in billions)
                                                                               
Business banking origination volume
  $ 0.5     $ 0.6     $ 0.5     $ 0.8     $ 1.2       (17 )     (58 )   $ 1.6     $ 4.7       (66 )
End-of-period loans owned
    17.4       17.8       18.2       18.4       18.6       (2 )     (6 )     17.4       18.6       (6 )
End-of-period deposits:
                                                                               
Checking
  $ 115.5     $ 114.1     $ 113.9     $ 109.2     $ 106.7       1       8     $ 115.5     $ 106.7       8  
Savings
    151.6       150.4       152.4       144.0       146.4       1       4       151.6       146.4       4  
Time and other
    66.6       78.9       86.5       89.1       85.8       (16 )     (22 )     66.6       85.8       (22 )
 
                                                                 
Total end-of-period deposits
    333.7       343.4       352.8       342.3       338.9       (3 )     (2 )     333.7       338.9       (2 )
Average loans owned
  $ 17.7     $ 18.0     $ 18.4     $ 18.2     $ 16.6       (2 )     7     $ 18.0     $ 16.2       11  
Average deposits:
                                                                               
Checking
  $ 114.0     $ 114.2     $ 109.4     $ 105.8     $ 68.0             68     $ 112.6     $ 67.5       67  
Savings
    151.2       151.2       148.2       145.3       105.4             43       150.1       103.9