JP Morgan Chase 2010 Annual Report Download - page 66

Management’s discussion and analysis
JPMorgan Chase & Co./2010 Annual Report
66
Average tangible common equity
Year ended December 31,
(in millions) 2010 2009 2008
Common stockholders’ equity
$
161,520
$ 145,903 $ 129,116
Less: Goodwill
48,61
8
48,254 46,068
Less: Certain identifiable
intangible assets 4,178 5,095 5,779
Add: Deferred tax liabilities
(a)
2,587 2,547 2,369
T
angible
C
ommon
E
quity
$
111,3
11
$ 95,101 $ 79,638
(a) Represents deferred tax liabilities related to tax-deductible goodwill and to
identifiable intangibles created in non-taxable transactions, which are netted
against goodwill and other intangibles when calculating TCE.
Impact of TARP preferred stock issued to the U.S. Treasury
The calculation of 2009 net income applicable to common equity
included a one-time, noncash reduction of $1.1 billion resulting
from the repayment of TARP preferred capital. Excluding this
reduction, ROE would have been 7% for 2009. The Firm views
adjusted ROE, a non-GAAP financial measure, as meaningful
because it enables the comparability to prior periods.
Year ended
December 31, 20
09
(in millions, except ratios) As reported
Excluding the
TARP redemption
Return on equity
Net income $ 11,728 $ 11,728
Less: Preferred stock dividends 1,327 1,327
Less:
Accelerated amort
i
zation
from redemption of preferred
stock issued to the U.S.
Treasury 1,112 —
Net income applicable to
common equity 9,289 10,401
Average common stockhol
d
ers’
equity $ 145,903 $ 145,903
ROE 6% 7 %
In addition, the calculated net income applicable to common equity for the
year ended December 31, 2009, was also affected by the TARP repayment.
The following table presents the effect on net income applicable to common
stockholders and the $0.27 reduction to diluted earnings per share (“EPS”)
for the year ended December 31, 2009.
Year ended
December 31, 200
9
(in millions, except per share) As reported
Effect of
TARP redemption
Diluted earnings per share
Net income $ 11,728 $ —
Less: Preferred stock dividends 1,327 —
Less: Accelerated amortiz
a
tion
from redemption of preferred
stock issued to the U.S. Treasury 1,112 1,112
Net income applicable to
common equity 9,289 (1,112 )
Less: Dividends and undistr
i
b
uted
earnings allocated to participating
securities 515 (62
)
Net income applicable to
common stockholders 8,774 (1,050 )
Total weighted average diluted
shares outstanding 3,879.7 3,879.7
Net income per share $ 2.26 $ (0.27 )
Other financial measures
The Firm also discloses the allowance for loan losses to total
retained loans, excluding home lending purchased credit-impaired
loans and loans held by the Washington Mutual Master Trust
(“WMMT”). For a further discussion of this credit metric, see
Allowance for Credit Losses on pages 139–141 of this Annual
Report.