JP Morgan Chase 2003 Annual Report Download - page 98

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Notes to consolidated financial statements
J.P. M organ Chase & Co.
96 J.P. Morgan Chase & Co. / 2003 Annual Report
the Consolidated statement of income. A summary of such
costs, by expense category and segment, are show n in the
following table for 2003 and 2002.
Year ended December 31, (in millions) 2003 2002
Expense category
Compensation $294 $746
Occupancy 270 22(b)
Technology and communications 47 30
Other 19 92
Total (a) $630 $890
Segm ent
Investment Bank $347 $587
Treasury & Securities Services 61 17
Investment M anagement & Private Banking 44 47
JPMorgan Partners 2—
Chase Financial Services 95 99
Support Units and Corporate 81 140
Total(a) $630 $890
(a) With the exception of occupancy-related write-offs, all of the costs in the table required the
expenditure of cash.
(b) Excludes a $98 million charge for unoccupied excess real estate in 2002.
Other expense
Details of Other expense were as follow s:
Year ended December 31, (in millions) 2003 2002 2001
Other expense
Professional services $1,368 $1,303 $ 1,139
Outside services 1,187 994 888
Marketing 710 689 601
Travel and entertainment 422 411 453
Amortization of intangibles 294 323 729
All other 1,156 1,391 1,440
Total other expense $5,137 $5,111 $ 5,250
Securities
Securities are classified as Available-for-sale (“ AFS” ), Held-to-
maturity (“ HTM ” ) or Trading. Trading securities are discussed in
Note 3 on pages 87–88. Securities are classified as AFS w hen, in
management’s judgment, they may be sold in response to or in
anticipation of changes in market conditions. AFS securities are
carried at fair value on the Consolidated balance sheet.
Unrealized gains and losses after SFAS 133 valuation adjustments
are reported as net increases or decreases to Accumulated other
comprehensive income (loss). Impairment is evaluated consider-
ing numerous factors, and their relative significance varies from
case to case. Factors considered in the analysis include the
length of time and extent to w hich the market value has been
less than cost; the financial condition and near-term prospects
of the issuer; and the intent and ability to retain the security in
order to allow for an anticipated recovery in market value. If,
based on the analysis, it is determined that the impairment is
other-than-temporary, the security is w ritten dow n and a loss is
recognized. The specific identification method is used to deter-
mine realized gains and losses on AFS securities, which are
included in Securities gains (losses) on the Consolidated statement
of income. Securities that the Firm has the positive intent and
ability to hold to maturity are classified as HTM and are carried
at amortized cost on the Consolidated balance sheet.
The follow ing table presents realized gains and losses from AFS
securities:
Year ended December 31, (in millions) 2003 2002 2001
Realized gains $2,123 $1,904 $ 1,438
Realized losses (677) (341) (572)
Net realized gains (losses) $1,446 $1,563 $ 866
Note 9
The amortized cost and estimated fair value of AFS and HTM securities w ere as follow s for the dates indicated:
2003 2002
Gross Gross Gross Gross
Amortized unrealized unrealized Fair Amortized unrealized unrealized Fair
December 31, (in millions) cost gains losses value cost gains losses value
Available-for-sale securit ies
U.S. government and federal agencies/corporations
obligations:
Mortgage-backed securities $32,248 $ 101 $ 417 $ 31,932 $40,148 $ 449 $ 141 $ 40,456
Collateralized mortgage obligations 1,825 3 — 1,828 3,271 63 21 3,313
U.S. treasuries 11,617 15 168 11,464 22,870 531 24 23,377
Obligations of state and political subdivisions 2,841 171 52 2,960 1,744 145 14 1,875
Debt securities issued by non-U.S. governments 7,232 47 41 7,238 11,873 58 19 11,912
Corporate debt securities 818 23 8 833 870 20 8 882
Equity securities 1,393 24 11 1,406 1,198 16 18 1,196
Other, primarily asset-backed securities(a) 2,448 61 102 2,407 978 113 70 1,021
Total available-for-sale securities $60,422 $ 445 $ 799 $ 60,068 $82,952 $ 1,395 $ 315 $ 84,032
Held-t o-m aturit y securit ies
Total held-to-maturity securities(b) $176 $ 10 $ — $ 186 $431 $ 24 $ — $ 455
(a) Includes CMOs of private issuers, which generally have underlying collateral consisting of obligations of U.S. government and federal agencies and corporations.
(b) Consists primarily of mortgage-backed securities.