JP Morgan Chase 2009 Annual Report Download - page 61

JPMorgan Chase & Co./2009 Annual Report
59
On January 1, 2010, the Firm adopted the new consolidation
accounting guidance for VIE’s. As the Firm will be deemed to be
the primary beneficiary of its credit card securitization trusts as a
result of this guidance, the Firm will consolidate the assets and
liabilities of these credit card securitization trusts at their carrying
values on January 1, 2010, and credit card–related income and
credit costs associated with these securitization activities will be
prospectively recorded on the 2010 Consolidated Statements of
Income in the same classifications that are currently used to report
such items on a managed basis. For additional information on the
new accounting guidance, see “Accounting and reporting devel-
opments” on pages 140–142 of this Annual Report.
Total net revenue for each of the business segments and the Firm
is presented on a FTE basis. Accordingly, investments that receive
tax credits and revenue from tax-exempt securities are presented
in the managed results on a basis comparable to taxable invest-
ments and securities. This non-GAAP financial measure 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.
Tangible common equity (“TCE”) represents common stockhold-
ers’ equity (i.e., total stockholders’ equity less preferred stock)
less identifiable intangible assets (other than MSRs) and good-
will, net of related deferred tax liabilities. ROTCE, a non-GAAP
financial ratio, measures the Firm’s earnings as a percentage of
TCE and is, in management’s view, another meaningful measure
to assess the Firm’s use of equity.
Management also uses certain non-GAAP financial measures at
the business-segment level, because it believes these other non-
GAAP financial measures provide information to investors about
the underlying operational performance and trends of the particu-
lar business segment and therefore facilitate a comparison of the
business segment with the performance of its competitors.
(Table continued from previous page)
2007
Reported Credit
Fully tax-
equivalent Managed
results card(d) adjustments basis
$ 6,635 $ — $ — $ 6,635
9,015 — — 9,015
3,938 — — 3,938
14,356 — — 14,356
164 — — 164
2,118 — — 2,118
6,911 (3,255) — 3,656
1,829 — 683 2,512
44,966 (3,255) 683 42,394
26,406 5,635 377 32,418
71,372 2,380 1,060 74,812
41,703 — — 41,703
29,669 2,380 1,060 33,109
6,864 2,380 — 9,244
— — — —
22,805 — 1,060 23,865
7,440 — 1,060 8,500
15,365 — — 15,365
— — — —
$ 15,365 $ — $ — $ 15,365
$ 4.33 $ — $ — $ 4.33
1.06% NM NM 1.01 %
58 NM NM 56
$ 519,374 $ 72,701 $ — $ 592,075
1,455,044 66,780 — 1,521,824
Calculation of certain U.S. GAAP and non-GAAP metrics
The table below reflects the formulas used to calculate both the
following U.S. GAAP and non-GAAP measures.
Return on common equity
Net income* / Average common stockholders’ equity
Return on tangible common equity(e)
Net income* / Average tangible common equity
Return on assets
Reported net income / Total average assets
Managed net income / Total average managed assets(f)
(including average securitized credit card receivables)
Overhead ratio
Total noninterest expense / Total net revenue
* Represents net income applicable to common equity
(e) The Firm uses ROTCE, a non-GAAP financial measure, to evaluate
the Firm’s use of equity and to facilitate comparisons with competitors.
Refer to the following page for the calculation of average tangible com-
mon equity.
(f) The Firm uses return on managed assets, a non-GAAP financial measure, to
evaluate the overall performance of the managed credit card portfolio,
including securitized credit card loans.