Note 25 – Earnings per share

Effective January 1, 2009, the Firm implemented accounting guidance for participating securities, which clarifies that unvested stock-based compensation awards containing nonforfeitable rights to dividends or dividend equivalents (collectively, “dividends”) are participating securities and should be included in the earnings per share (“EPS”) calculation using the two-class method. Under the two-class method, all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities, based on their respective rights to receive dividends. JPMorgan Chase grants restricted stock and RSUs to certain employees under its stock-based compensation programs, which entitle the recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock; these unvested awards meet the definition of participating securities. EPS data for the prior periods were revised as required by the accounting guidance. Options issued under employee benefit plans that have an antidilutive effect are excluded from the computation of diluted EPS.

The following table presents the calculation of basic and diluted EPS for the years ended December 31, 2010, 2009 and 2008.


Year ended December 31,
(in millions, except per share amounts)	2010		2009			2008

Basic earnings per share
Income before extraordinary gain	$	17,370	$	11,652		$	3,699
Extraordinary gain		—		76			1,906

Net income		17,370		11,728			5,605
Less: Preferred stock dividends		642		1,327			674
Less: Accelerated amortization from redemption of preferred stock issued to the U.S. Treasury		—		1,112	^(c)		—

Net income applicable to common equity		16,728		9,289	^(c)		4,931
Less: Dividends and undistributed earnings allocated to participating securities		964		515			189

Net income applicable to common stockholders	$	15,764	$	8,774		$	4,742
Total weighted-average basic shares outstanding		3,956.3		3,862.8			3,501.1

Per share
Income before extraordinary gain	$	3.98	$	2.25	^(c)	$	0.81
Extraordinary gain		—		0.02			0.54

Net income	$	3.98	$	2.27	^(c)	$	1.35


Year ended December 31,
(in millions, except per share
amounts)	2010		2009			2008

Diluted earnings per share
Net income applicable to common stockholders	$	15,764	$	8,774		$	4,742
Total weighted-average basic shares outstanding		3,956.3		3,862.8			3,501.1
Add: Employee stock options, SARs and warrants^(a)		20.6		16.9			20.7

Total weighted-average diluted shares outstanding^(b)		3,976.9		3,879.7			3,521.8

Per share
Income before extraordinary gain	$	3.96	$	2.24	^(c)	$	0.81
Extraordinary gain		—		0.02			0.54

Net income per share	$	3.96	$	2.26	^(c)	$	1.35


(a)		Excluded from the computation of diluted EPS (due to their antidilutive effect) were options issued under employee benefit plans and the warrants originally issued in 2008 under the U.S. Treasury’s Capital Purchase Program to purchase shares of the Firm’s common stock aggregating 233 million, 266 million and 209 million for the full years ended December 31, 2010, 2009 and 2008, respectively.

(b)		Participating securities were included in the calculation of diluted EPS using the two-class method, as this computation was more dilutive than the calculation using the treasury stock method.

(c)		The calculation of basic and diluted EPS and net income applicable to common equity for full year 2009 includes a one-time, noncash reduction of $1.1 billion, or $0.27 per share, resulting from repayment of the U.S. Troubled Asset Relief Program (“TARP”) preferred capital.