The Quarterly

Jpmorgan Chase & Co (JPM) SEC Quarterly Report (10-Q) for Q3 2015

JPM Q1 2016 10-Q
JPM Q1 2016 10-Q


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934


For the quarterly period ended

Commission file

September 30, 2015

number 1-5805


JPMorgan Chase & Co.

(Exact name of registrant as specified in its charter)

Delaware

13-2624428

(State or other jurisdiction of

incorporation or organization)

(I.R.S. employer

identification no.)

270 Park Avenue, New York, New York

10017

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (212) 270-6000


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes

o

No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes

o

No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x

Accelerated filer o

Non-accelerated filer (Do not check if a smaller reporting company) o

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes

x No

Number of shares of common stock outstanding as of September 30, 2015 : 3,681,129,777


FORM 10-Q

TABLE OF CONTENTS

Part I - Financial information

Page

Item 1

Consolidated Financial Statements – JPMorgan Chase & Co.:

Consolidated statements of income (unaudited) for the three and nine months ended September 30, 2015 and 2014

86

Consolidated statements of comprehensive income (unaudited) for the three and nine months ended September 30, 2015 and 2014

87

Consolidated balance sheets (unaudited) at September 30, 2015, and December 31, 2014

88

Consolidated statements of changes in stockholders' equity (unaudited) for the nine months ended September 30, 2015 and 2014

89

Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2015, and 2014

90

Notes to Consolidated Financial Statements (unaudited)

91

Report of Independent Registered Public Accounting Firm

175

Consolidated Average Balance Sheets, Interest and Rates (unaudited) for the three and nine months ended September 30, 2015 and 2014

176

Glossary of Terms and Line of Business Metrics

178

Item 2

Management's Discussion and Analysis of Financial Condition and Results of Operations:

Consolidated Financial Highlights

3

Introduction

4

Executive Overview

5

Consolidated Results of Operations

7

Consolidated Balance Sheets Analysis

10

Off-Balance Sheet Arrangements

12

Consolidated Cash Flows Analysis

13

Explanation and Reconciliation of the Firm's Use of Non-GAAP Financial Measures

14

Business Segment Results

17

Enterprise-Wide Risk Management

46

Credit Risk Management

47

Market Risk Management

63

Country Risk Management

67

Operational Risk Management

68

Capital Management

69

Liquidity Risk Management

76

Supervision and Regulation

80

Critical Accounting Estimates Used by the Firm

81

Accounting and Reporting Developments

84

Forward-Looking Statements

85

Item 3

Quantitative and Qualitative Disclosures About Market Risk

185

Item 4

Controls and Procedures

185

Part II - Other information

Item 1

Legal Proceedings

185

Item 1A

Risk Factors

185

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

185

Item 3

Defaults Upon Senior Securities

186

Item 4

Mine Safety Disclosure

186

Item 5

Other Information

186

Item 6

Exhibits

186




2


JPMorgan Chase & Co.

Consolidated financial highlights

(unaudited)

As of or for the period ended, (in millions, except share, ratio, headcount data and where otherwise noted)

Nine months ended

September 30,

3Q15

2Q15

1Q15

4Q14

3Q14

2015

2014

Selected income statement data

Total net revenue

$

22,780


$

23,812


$

24,066


$

22,750


$

24,469


$

70,658


$

72,362


Total noninterest expense

15,368


14,500


14,883


15,409


15,798


44,751


45,865


Pre-provision profit

7,412


9,312


9,183


7,341


8,671


25,907


26,497


Provision for credit losses

682


935


959


840


757


2,576


2,299


Income before income tax expense

6,730


8,377


8,224


6,501


7,914


23,331


24,198


Income tax expense/(benefit)

(74

)

2,087


2,310


1,570


2,349


4,323


7,384


Net income

$

6,804


$

6,290


$

5,914


$

4,931


$

5,565


$

19,008


$

16,814


Earnings per share data

Net income: Basic

$

1.70


$

1.56


$

1.46


$

1.20


$

1.37


$

4.72


$

4.13


 Diluted

1.68


1.54


1.45


1.19


1.35


4.68


4.09


Average shares: Basic

3,694.4


3,707.8


3,725.3


3,730.9


3,755.4


3,709.2


3,774.4


 Diluted

3,725.6


3,743.6


3,757.5


3,765.2


3,788.7


3,742.2


3,808.3


Market and per common share data

Market capitalization

224,438


250,581


224,818


232,472


225,188


224,438


225,188


Common shares at period-end

3,681.1


3,698.1


3,711.1


3,714.8


3,738.2


3,681.1


3,738.2


Share price (a) :

High

$

70.61


$

69.82


$

62.96


$

63.49


$

61.85


$

70.61


$

61.85


Low

50.07


59.65


54.27


54.26


54.96


50.07


52.97


Close

60.97


67.76


60.58


62.58


60.24


60.97


60.24


Book value per share

59.67


58.49


57.77


56.98


56.41


59.67


56.41


Tangible book value per share ("TBVPS") (b)

47.36


46.13


45.45


44.60


44.04


47.36


44.04


Cash dividends declared per share

0.44


0.44


0.40


0.40


0.40


1.28


1.18


Selected ratios and metrics

Return on common equity ("ROE")

12

%

11

%

11

%

9

%

10

%

11

%

10

%

Return on tangible common equity ("ROTCE") (b)

15


14


14


11


13


14


13


Return on assets ("ROA")

1.11


1.01


0.94


0.78


0.90


1.02


0.93


Overhead ratio

67


61


62


68


65


63


63


Loans-to-deposits ratio

64


61


56


56


56


64


56


High quality liquid assets ("HQLA") (in billions) (c)

$

505


$

532


$

614


$

600


$

572


$

505


$

572


Common equity Tier 1 ("CET1") capital ratio (d)

11.5

%

11.2

%

10.7%


10.2

%

10.2

%

11.5

%

10.2

%

Tier 1 capital ratio (d)

13.3


12.8


12.1


11.6


11.5


13.3


11.5


Total capital ratio (d)

14.9


14.4


13.7


13.1


12.8


14.9


12.8


Tier 1 leverage ratio (d)

8.4


8.0


7.5


7.6


7.6


8.4


7.6


Selected balance sheet data (period-end)

Trading assets

$

361,708


$

377,870


$

398,981


$

398,988


$

410,657


$

361,708


$

410,657


Securities (e)

306,660


317,795


331,136


348,004


366,358


306,660


366,358


Loans

809,457


791,247


764,185


757,336


743,257


809,457


743,257


Core loans

698,988


674,767


641,285


628,785


607,617


698,988


607,617


Total assets

2,417,121


2,449,599


2,577,148


2,572,773


2,526,655


2,417,121


2,526,655


Deposits

1,273,106


1,287,332


1,367,887


1,363,427


1,334,534


1,273,106


1,334,534


Long-term debt (f)

292,945


286,693


280,608


276,836


268,721


292,945


268,721


Common stockholders' equity

219,660


216,287


214,371


211,664


210,876


219,660


210,876


Total stockholders' equity

245,728


241,205


235,864


231,727


230,939


245,728


230,939


Headcount

235,678


237,459


241,145


241,359


242,388


235,678


242,388


Credit quality metrics

Allowance for credit losses

$

14,201


$

14,535


$

14,658


$

14,807


$

15,526


$

14,201


$

15,526


Allowance for loan losses to total retained loans

1.67%


1.78%


1.86%


1.90%


2.02%


1.67

%

2.02

%

Allowance for loan losses to retained loans excluding purchased credit-impaired loans (g)

1.40


1.45


1.52


1.55


1.63


1.40


1.63


Nonperforming assets

$

7,294


$

7,588


$

7,714


$

7,967


$

8,390


$

7,294


$

8,390


Net charge-offs

963


1,007


1,052


1,218


1,114


3,022


3,541


Net charge-off rate

0.49%


0.53%


0.57%


0.65%


0.60%


0.53%


0.65%


Note: Effective January 1, 2015, the Firm adopted new accounting guidance for investments in affordable housing projects that qualify for the low-income housing tax credit. The guidance was required to be applied retrospectively and accordingly, certain prior period amounts have been revised to conform with the current period presentation. For additional information, see Explanation and Reconciliation of the Firm's Use of Non-GAAP Financial Measures on pages 14–16 , as well as Accounting and Reporting Developments on page 84 and Note 1.

(a)

Share prices shown for JPMorgan Chase's common stock are from the New York Stock Exchange.

(b)

TBVPS and ROTCE are non-GAAP financial measures. For further discussion of these measures, see Explanation and Reconciliation of the Firm's Use of Non-GAAP Financial Measures on pages 14–16 .

(c)

HQLA represents the amount of assets that qualify for inclusion in the liquidity coverage ratio under the final U.S. rule ("U.S. LCR") for 3Q15, 2Q15 and 1Q15 as well as the estimated amount as of 4Q14 and 3Q14, prior to the effective date of the final rule. For additional information, see HQLA on page 76 .

(d)

Ratios presented are calculated under the transitional rules of the Basel Committee's most recent capital framework ("Basel III") and represent the Collins Floor. See Regulatory capital on pages 69–73 for additional information on Basel III.

(e)

Included held-to-maturity ("HTM") securities of $50.2 billion , $51.6 billion , $49.3 billion , $49.3 billion , and $48.8 billion at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, and September 30, 2014, respectively.

(f)

Included unsecured long-term debt of $215.1 billion, $209.6 billion, $209.5 billion, $207.5 billion, and $204.7 billion at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, and September 30, 2014, respectively.

(g)

Excluded the impact of residential real estate PCI loans, a non-GAAP financial measure. For further discussion of these measures, see Explanation and Reconciliation of the Firm's Use of Non-GAAP Financial Measures on pages 14–16 . For further discussion, see Allowance for credit losses on pages 60–62 .


3


INTRODUCTION

The following is management's discussion and analysis ("MD&A") of the financial condition and results of operations of JPMorgan Chase & Co. ("JPMorgan Chase" or the "Firm") for the third quarter of 2015.

This Form 10-Q should be read in conjunction with JPMorgan Chase's Annual Report on Form 10-K for the year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission ("2014 Annual Report" or "2014 Form 10-K"), to which reference is hereby made. See the Glossary of terms on pages 178–181 for definitions of terms used throughout this Form 10-Q.

The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on 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. For a discussion of those risks and uncertainties and the factors that could cause JPMorgan Chase's actual results to differ materially because of those risks and uncertainties, see Forward-looking Statements on page 85 of this Form 10-Q and Part I, Item 1A, Risk Factors, on pages 8–17 of JPMorgan Chase's 2014 Annual Report.

JPMorgan Chase & Co., a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States of America ("U.S."), with operations worldwide; the Firm had $2.4 trillion in assets and $245.7 billion in stockholders' equity as of September 30, 2015 . The Firm is a leader in investment banking, financial services for consumers and small

businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S. and many of the world's most prominent corporate, institutional and government clients.

JPMorgan Chase's principal bank subsidiaries are JPMorgan Chase Bank, National Association ("JPMorgan Chase Bank, N.A."), a national banking association with U.S. branches in 23 states, and Chase Bank USA, National Association ("Chase Bank USA, N.A."), a national banking association that is the Firm's credit card–issuing bank. JPMorgan Chase's principal nonbank subsidiary is J.P. Morgan Securities LLC ("JPMorgan Securities"), the Firm's U.S. investment banking firm. The bank and nonbank subsidiaries of JPMorgan Chase operate nationally as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. One of the Firm's principal operating subsidiaries in the United Kingdom ("U.K.") is J.P. Morgan Securities plc, a subsidiary of JPMorgan Chase Bank, N.A.

For management reporting purposes, the Firm's activities are organized into four major reportable business segments, as well as a Corporate segment. The Firm's consumer business is the Consumer & Community Banking ("CCB") segment. The Corporate & Investment Bank ("CIB"), Commercial Banking ("CB"), and Asset Management ("AM") segments comprise the Firm's wholesale businesses. For a description of the Firm's business segments, and the products and services they provide to their respective client bases, refer to Note 33 of JPMorgan Chase's 2014 Annual Report.





4


EXECUTIVE OVERVIEW

This executive overview of the MD&A highlights selected information and may not contain all of the information that is important to readers of this Form 10-Q. For a complete description of the trends and uncertainties, as well as the risks and critical accounting estimates affecting the Firm and its various lines of business, this Form 10-Q should be read in its entirety.

Financial performance of JPMorgan Chase

(unaudited)

As of or for the period ended,

Three months ended September 30,

Nine months ended September 30,

(in millions, except per share data and ratios)

2015

2014

Change

2015

2014

Change

Selected income statement data

Total net revenue

$

22,780


$

24,469


(7

)%

$

70,658


$

72,362


(2)%


Total noninterest expense

15,368


15,798


(3

)

44,751


45,865


(2

)

Pre-provision profit

7,412


8,671


(15

)

25,907


26,497


(2

)

Provision for credit losses

682


757


(10

)

2,576


2,299


12


Net income

6,804


5,565


22


19,008


16,814


13


Diluted earnings per share

$

1.68


$

1.35


24

 %

$

4.68


$

4.09


14

 %

Return on common equity

12

%

10

%

11

%

10

%

Capital ratios (a)

CET1

11.5


10.2


11.5


10.2


Tier 1 capital

13.3


11.5


13.3


11.5


(a)

Ratios presented are calculated under the transitional Basel III rules and represent the Collins Floor. See Regulatory capital on pages 69–73 for additional information on Basel III.

Business Overview

JPMorgan Chase reported third-quarter 2015 net income

of $6.8 billion, or $1.68 per share, on net revenue of $22.8 billion. The Firm reported a return on equity of 12%. Excluding tax benefits, legal expense and a net reduction in the allowance for credit losses, the Firm would have earned $5.4 billion in net income, or $1.32 per share. Both of these measures are non-GAAP financial measures. For further discussion, see Explanation and Reconciliation of the Firm's Use of Non-GAAP Financial Measures on pages 14–16 .

Net income increased 22% compared with the third quarter of 2014, despite lower revenue, primarily due to tax benefits. Net revenue was $22.8 billion, down 7% compared with the prior year. Noninterest revenue was $11.9 billion, down 11% compared with the prior year, driven by lower CIB Markets revenue reflecting the impact of business simplification and lower Mortgage Banking revenue. Net interest income was $10.9 billion, down 2% compared with the prior year, reflecting lower investment securities balances and lower trading net interest income, predominantly offset by loan growth.

Noninterest expense was $15.4 billion, down 3% compared with the prior year, driven by lower CIB expense related to compensation and business simplification, partially offset by higher legal expense.

The provision for credit losses was $682 million, down 10% compared with the prior year, due to lower net charge-offs, largely offset by a lower reduction in the allowance for loan losses. In the current quarter, the reduction in the consumer allowance for loan losses was $591 million, reflecting continued improvement in home prices and delinquencies

as well as increased granularity in the impairment estimates. This decrease was largely offset by an increase in the allowance for credit losses across the wholesale businesses of $310 million reflecting the impact of select downgrades, including within the Oil & Gas portfolio.

Consumer net charge-offs were $961 million, compared with $1.1 billion in the prior year, resulting in net charge-off rates, excluding purchased credit-impaired ("PCI") loans, of 0.94% and 1.19%, respectively. The Firm's allowance for loan losses to period-end loans retained, excluding PCI loans, was 1.40%, compared with 1.63% in the prior year. The Firm's allowance for loan losses to retained nonaccrual loans, excluding PCI loans, was 161%, compared with 155% in the prior year. The Firm's nonperforming assets totaled $7.3 billion, down from the prior quarter and prior year levels of $7.6 billion and $8.4 billion, respectively.

The current quarter reflected tax benefits of $2.2 billion due to the resolution of tax audits and the release of deferred taxes from the restructuring of certain non-U.S. entities.

Firmwide core loans increased 15% compared with the prior year and 4% compared with the second quarter of 2015. Within Consumer & Community Banking, Consumer & Business Banking ("CBB") average deposits were up 9%, Business Banking period-end loans were up 6%, and credit card sales volume was $126.6 billion, up 6% from the prior year. Within CB, period-end loans were up 13% from the prior year and the business reported its eleventh consecutive quarter of single-digit net charge-off rates or net recoveries. AM period-end loans were up 8% over the prior year and 81% of mutual fund AUM ranked in the 1st or 2nd quartiles over the past five years. CIB maintained its


5


#1 ranking for Global Investment Banking fees with an 8.2% fee share for the third quarter of 2015. For a detailed discussion of results by line of business, refer to the Business Segment Results section beginning on page 17 .

The Firm maintained its fortress balance sheet and added to its capital, ending the third quarter with a tangible book value per share of $47.36, up 8% over the prior year. The Firm's estimated Basel III Advanced Fully Phased-In CET1 capital and ratio were $172.4 billion and 11.4%, respectively. The Firm's fully phased-in supplementary leverage ratio ("SLR") was 6.4% and JPMorgan Chase Bank, N.A.'s fully phased-in SLR was 6.5%. The Firm was also compliant with the fully phased-in U.S. liquidity coverage ratio ("LCR") and had $505 billion of high quality liquid assets ("HQLA") as of September 30, 2015. Tangible book value per share and each of these fully phased-in measures are non-GAAP financial measures and are used by management, bank regulators, investors and analysts to assess and monitor the Firm's capital position and liquidity. For further discussion of Basel III Advanced Fully Phased-in measures and the SLR under the U.S. final SLR rule, see Regulatory capital on pages 69–73 , and for further discussion of LCR and HQLA, see Liquidity Risk Management on pages 76–80 .

JPMorgan Chase continued to support consumers, businesses and communities around the globe. The Firm provided credit and raised capital of $1.5 trillion for commercial and consumer clients during the first nine months of 2015. This included providing $462 billion of credit to corporations, $177 billion to consumers, and $16 billion to U.S. small businesses. During the first nine months of 2015, the Firm also raised $763 billion of capital for clients and $55 billion of credit was provided to, and capital was raised for, nonprofit and government entities, including states, municipalities, hospitals and universities.

2015 Business outlook

These current expectations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase's management and are subject to significant risks and uncertainties. These risks and uncertainties could cause the Firm's actual results to differ materially from those set forth in such forward-looking statements. See Forward-Looking Statements on page 85 of this Form 10-Q and Risk Factors on pages 8–17 of JPMorgan Chase's 2014 Annual Report. There is no assurance that actual results for the fourth quarter or full year of 2015 will be in line with the outlook set forth below, and the Firm does not undertake to update any of these forward-looking statements to reflect the impact of circumstances or events that arise after the date hereof.

JPMorgan Chase's outlook for the remainder of 2015 should be viewed against the backdrop of the global and U.S. economies, financial markets activity, the geopolitical environment, the competitive environment, client activity levels, and regulatory and legislative developments in the

U.S. and other countries where the Firm does business. Each of these interrelated factors will affect the performance of the Firm and its lines of business.

Management expects core loan growth of approximately 15% in the fourth quarter of 2015. The Firm continues to experience net charge-offs at levels lower than its through-the-cycle expectations. If stable credit quality trends continue, management expects the Firm's total net charge-offs for the second half of 2015 to be consistent with the first half of 2015. Firmwide adjusted expense for the full year 2015 is expected to be approximately $56.5 billion, excluding firmwide legal expense.

In Mortgage Banking within CCB, management expects noninterest revenue in the fourth quarter of 2015 to decline by approximately $250 million compared with the prior year fourth quarter; the actual results will be market dependent. In Card Services within CCB, management expects the revenue rate in the fourth quarter of 2015 to be approximately 11.75%, driven by the impact of Card partnership renegotiations, which are expected to decrease run-rate noninterest revenue by approximately $200 million per quarter. However, in the fourth quarter of 2015, management expects noninterest revenue to be relatively flat compared with the prior year fourth quarter given the impact of non-core portfolio exits in the year-ago quarter, and expects net interest income to be relatively flat year-over-year as well.

In CIB, Markets revenue in the fourth quarter of 2015 is expected to decline sequentially due to seasonal trends. In Securities Services within CIB, at current market levels, management expects revenue to be below $950 million in the fourth quarter of 2015.

In CB, management expects noninterest expense to be approximately $720 million in the fourth quarter of 2015.

Business events

For a discussion of business events during the nine months ended September 30, 2015 , see Note 2.



6


CONSOLIDATED RESULTS OF OPERATIONS

The following section of the MD&A provides a comparative discussion of JPMorgan Chase's Consolidated Results of Operations on a reported basis for the three and nine months ended September 30, 2015 and 2014 . Factors that relate primarily to a single business segment are discussed in more

detail within that business segment. For a discussion of the Critical Accounting Estimates Used by the Firm that affect the Consolidated Results of Operations, see pages 81–83 of this Form 10-Q and pages 161–165 of JPMorgan Chase's 2014 Annual Report.


Revenue

Three months ended September 30,

Nine months ended September 30,

(in millions)

2015


2014


Change

2015


2014


Change

Investment banking fees

$

1,604


$

1,538


4

 %

$

5,231


$

4,709


11

 %

Principal transactions

2,367


2,966


(20

)

8,856


9,196


(4

)

Lending- and deposit-related fees

1,463


1,479


(1

)

4,244


4,347


(2

)

Asset management, administration and commissions

3,845


3,978


(3

)

11,667


11,821


(1

)

Securities gains

33


6


450


129


48


169


Mortgage fees and related income

469


903


(48

)

1,957


2,708


(28

)

Card income

1,447


1,537


(6

)

4,493


4,494


-


Other income (a)

628


955


(34

)

1,796


2,467


(27

)

Noninterest revenue

11,856


13,362


(11

)

38,373


39,790


(4

)

Net interest income

10,924


11,107


(2

)

32,285


32,572


(1

)

Total net revenue

$

22,780


$

24,469


(7)%


$

70,658


$

72,362


(2)%


(a)

Included operating lease income of $536 million and $433 million for the three months ended September 30, 2015 and 2014 , respectively, and $1.5 billion and $1.3 billion for the nine months ended September 30, 2015 and 2014 , respectively.

Total net revenue for the three and nine months ended September 30, 2015 was down by 7% and 2%, respectively, compared with the prior year, predominantly driven by lower CIB Fixed Income Markets revenue, including the impact of business simplification, lower Mortgage Banking revenue, and lower private equity gains, predominantly in Corporate. For the three and nine months ended September 30, 2015, these factors were partially offset by higher CIB Equity Markets revenue and higher Firmwide investment banking fees.

Investment banking fees increased from the three and nine months ended September 30, 2014, reflecting higher debt underwriting and advisory fees, partially offset by lower equity underwriting fees. The increase in debt underwriting fees for the three month period reflected higher noninvestment-grade issuance fees; for the nine month period, the increase was primarily driven by a higher share of fees from investment-grade bonds. The increase in advisory fees for both periods was driven by a greater share of fees for completed transactions; for the nine month period, growth in industry-wide fee levels also contributed to the increase. The decrease in equity underwriting fees for both periods was driven by a decline in industry-wide fee levels. Investment banking fee share and industry-wide data are sourced from Dealogic. For additional information on investment banking fees, see CIB segment results on

pages 30–35 , CB segment results on pages 36–39 and

Note 6.

Principal transactions revenue decreased in the three and nine months ended September 30, 2015 compared with the prior year, reflecting lower private equity gains in Corporate, driven by lower valuation gains and lower net gains on sales; and lower Fixed Income Markets revenue in CIB, driven by the impact of business simplification, and lower revenue in Securitized Products and Credit, partially

offset by strong performance in Currencies & Emerging Markets; and additionally for the first nine months, by strong performance in Rates. The decrease in Fixed Income was partially offset by higher Equity Markets revenue reflecting strong performance across derivatives and cash equities, driven by higher client volumes. For additional information on principal transactions revenue, see CIB and Corporate segment results on pages 30–35 and pages 44–45 , respectively, and Note 6.

Asset management, administration and commissions revenue for the three months and nine months ended September 30, 2015, decreased compared with the prior year, largely as a result of lower administration and other fees in CIB. For the nine months ended September 30, 2015, the decrease was partially offset by higher asset management fees on net client inflows into assets under management and higher average market levels in AM

and CCB. For additional information on these fees and commissions, see the segment discussions of CCB

on pages 18–29 , AM on pages 40–43 , and Note 6.

Mortgage fees and related income decreased compared with the three months ended September 30, 2014, driven by lower mortgage servicing rights ("MSR") risk management income and lower servicing revenue, partially due to lower average third-party loans serviced. Compared with the nine months ended September 30, 2014, mortgage fees and related income decreased, driven by lower servicing revenue, largely as a result of lower average third-party loans serviced and lower net production revenue, reflecting a lower repurchase benefit. For further information on mortgage fees and related income, see the segment discussion of CCB on pages 18–29 and Note 16.

For additional information on lending- and deposit-related fees, see the segment results for CCB on pages 18–29 , CIB


7


on pages 30–35 , and CB on pages 36–39 ; securities gains, see the Corporate segment discussion on pages 44–45 and

Note 11; and card income, see CCB segment results on pages 18–29 .

Other income for the three months ended September 30, 2015 decreased compared with the prior year, reflecting the impact of business simplification in CIB; the absence of a nonrecurring gain in Mortgage Banking ("MB"); and the impact of the sale of Retirement Plan Services ("RPS") business in 2014 and lower gains on seed capital investments in AM. These factors were partially offset by higher operating lease income as a result of growth in auto operating lease assets in CCB. In the nine months ended September 30, 2015, other income decreased from the prior year as a result of the impact of business simplification in CIB; the absence in the current period of a benefit recognized in the second quarter of 2014 from a franchise tax settlement; losses related to the accelerated amortization of cash flow hedges associated with the exit of certain non-operating deposits; and losses on the early redemption of trust preferred securities in the second quarter of 2015 and long-term debt in the first quarter of 2015 in Corporate. The decrease was partially offset by

higher operating lease income as a result of growth in auto operating lease assets in CCB.

Net interest income decreased in the three months ended September 30, 2015 compared with the prior year, predominantly reflecting the impact of lower average investment securities balances and lower average trading asset balances and yields, partially offset by higher average loan balances. For the nine months ended September 30, 2015, net interest income decreased from the prior year, predominantly reflecting lower loan yields, lower average investment securities balances, and lower trading asset yields; these factors were partially offset by higher average loan balances, and the impact of lower deposit and long-term debt yields. The Firm's average interest-earning assets were $2.1 trillion in the three months ended September 30, 2015, and the net interest yield on these assets, on a fully taxable equivalent ("FTE") basis, was 2.16%, a decrease of 3 basis points from the prior year. For the nine months ended September 30, 2015, the Firm's average interest-earning assets were $2.1 trillion, and the net interest yield on these assets, on a FTE basis, was 2.11%, a decrease of 8 basis points from the prior year.


Provision for credit losses

Three months ended September 30,

Nine months ended September 30,

(in millions)

2015


2014


Change

2015

2014

Change

Consumer, excluding credit card

$

(389

)

$

99


NM


$

(345

)

$

181


NM


Credit card

759


798


(5

)%

2,348


2,371


(1

)%

Total consumer

370


897


(59

)%

2,003


2,552


(22

)%

Wholesale

312


(140

)

NM


573


(253

)

NM


Total provision for credit losses

$

682


$

757


(10

)%

$

2,576


$

2,299


12

 %

The provision for credit losses in the three months ended September 30, 2015 decreased from the prior year as a result of a decline in the consumer, excluding credit card, provision, due to a larger reduction in the residential real estate portfolio allowance for loan losses, reflecting the continued improvement in home prices and delinquencies as well as increased granularity in the impairment estimates, and lower net charge-offs. The decrease was partially offset by an increase in the wholesale provision, reflecting the impact of select downgrades, including within the Oil & Gas portfolio. For the nine months ended

September 30, 2015, the provision for credit losses increased from the prior year as a result of an increase in the wholesale provision, reflecting the impact of the aforementioned downgrades, partially offset by a decline in the consumer provision, reflecting lower net charge-offs. For a more detailed discussion of the credit portfolio

and the allowance for credit losses, see the segment

discussions of CCB on pages 18–29 , CIB on pages 30–35 ,

CB on pages 36–39 , and the Allowance for credit losses on pages 60–62 .


Noninterest expense

Three months ended September 30,

Nine months ended September 30,

(in millions)

2015


2014


Change

2015

2014

Change

Compensation expense

$

7,320


$

7,831


(7

)%

$

23,057


$

23,300


(1

)%

Noncompensation expense:

Occupancy

965


978


(1

)

2,821


2,903


(3

)

Technology, communications and equipment

1,546


1,465


6


4,536


4,309


5


Professional and outside services

1,776


1,907


(7

)

5,178


5,625


(8

)

Marketing

704


610


15


1,937


1,824


6


Other expense (a)(b)

3,057


3,007


2


7,222


7,904


(9

)

Total noncompensation expense

8,048


7,967


1


21,694


22,565


(4

)

Total noninterest expense

$

15,368


$

15,798


(3

)%

$

44,751


$

45,865


(2

)%

(a)

Included firmwide legal expense of $1.3 billion and $1.1 billion for the three months ended September 30, 2015 and 2014 , respectively, and $2.3 billion and $1.8 billion for the nine months ended September 30, 2015 and 2014 , respectively

(b)

Included Federal Deposit Insurance Corporation-related ("FDIC") expense of $298 million and $250 million for the three months ended September 30, 2015 and 2014 , respectively, and $916 million and $809 million for the nine months ended September 30, 2015 and 2014 , respectively.


8


Total noninterest expense for the three and nine months ended September 30, 2015 decreased by 3% and 2%, respectively, from the prior year, driven by lower CIB expense related to compensation and business simplification, and lower professional and outside services expense, partially offset by higher legal expense.

Compensation expense decreased compared with the three and nine months ended September 30, 2014, predominantly driven by lower performance-based incentives and the impact of reduced headcount in MB, partially offset by higher postretirement benefit costs and the impact of investments in the businesses, including headcount for controls.

Noncompensation expense in the three months ended September 30 2015 was relatively flat compared with the prior year, reflecting higher legal expense (which is included in other expense), higher depreciation expense,

predominantly associated with a higher volume of auto operating lease assets in CCB, and higher marketing expense. These factors were offset by the benefits of lower costs resulting from business simplification in CIB and lower professional and outside services expense, reflecting lower legal services expense and the impact of a reduced number of contractors in the businesses. For the nine months ended September 30, 2015, noncompensation expense decreased from the prior year, reflecting the benefits from business simplification in CIB; lower professional and outside services expense, reflecting lower legal services expense and the impact of a reduced number of contractors in the businesses; and lower amortization of intangibles. These factors were partially offset by higher legal expense, higher depreciation expense, largely associated with a higher volume of auto operating lease assets in CCB, higher marketing expense in CCB, and higher FDIC-related expense. For a further discussion of legal expense, see Note 23.


Income tax expense

(in millions, except rate)

Three months ended September 30,

Nine months ended September 30,

2015


2014


Change

2015

2014

Change

Income before income tax expense

$

6,730


$

7,914


(15

)%

$

23,331


$

24,198


(4

)%

Income tax expense/(benefit)

(74

)

2,349


NM


4,323


7,384


(41

)

Effective tax rate

(1.1

)%

29.7

%

18.5

%

30.5

%




The effective tax rate in the three and nine months ended September 30, 2015 decreased compared with the respective prior year periods, predominantly due to the recognition of tax benefits in 2015 of $2.2 billion and $2.7 billion , respectively, which reduced the Firm's effective tax rate by 32.0% and 11.7% , respectively. The effective tax rate was also affected by the change in mix of income and expense subject to U.S. federal and state and local taxes. The recognition of tax benefits in 2015 resulted from the resolution of various tax audits, as well as the release of U.S. deferred taxes associated with the restructuring of certain non-U.S. entities. For further information see Note 26 of JPMorgan Chase's 2014 Annual Report, and Note 2 of this Form 10-Q.



9


CONSOLIDATED BALANCE SHEETS ANALYSIS

Consolidated balance sheets overvie w

JPMorgan Chase's total assets and total liabilities decreased by 6% and 7%, respectively, compared with December 31, 2014 . The following is a discussion of the significant changes.

Selected Consolidated balance sheets data

(in millions)

Sep 30,
2015

Dec 31,
2014

Change

Assets

Cash and due from banks

$

21,258


$

27,831


(24

)%

Deposits with banks

376,196


484,477


(22

)

Federal funds sold and securities purchased under resale agreements

218,467


215,803


1


Securities borrowed

105,668


110,435


(4

)

Trading assets:

Debt and equity instruments

293,040


320,013


(8

)

Derivative receivables

68,668


78,975


(13

)

Securities

306,660


348,004


(12

)

Loans

809,457


757,336


7


Allowance for loan losses

(13,466

)

(14,185

)

(5

)

Loans, net of allowance for loan losses

795,991


743,151


7


Accrued interest and accounts receivable

57,926


70,079


(17

)

Premises and equipment

14,709


15,133


(3

)

Goodwill

47,405


47,647


(1

)

Mortgage servicing rights

6,716


7,436


(10

)

Other intangible assets

1,036


1,192


(13

)

Other assets

103,381


102,597


1


Total assets

$

2,417,121


$

2,572,773


(6

)

Cash and due from banks and deposits with banks

The Firm's excess cash was placed with various central banks, predominantly Federal Reserve Banks. The net decrease in cash and due from banks and deposits with banks was driven by lower wholesale non-operating deposits.

Trading assets debt and equity instruments

The decrease in trading assets was predominantly due to client-driven market-making activities in CIB, which resulted in lower levels of equity securities. For additional information, refer to Notes 3.

Trading assets and liabilities derivative receivables and payables

The decrease in both receivables and payables was predominantly due to client-driven market-making activities in CIB, as a result of market movements, maturities and settlements. For additional information, refer to Derivative contracts on pages 58–59 , and Notes 3 and 5.

Securities

The decrease was largely due to paydowns and maturities of non-U.S. residential mortgage-backed securities ("MBS"), U.S. government agency MBS, and non-U.S. government debt securities; the decrease reflected a shift to higher loan balances. For additional information related to securities, refer to the discussion in the Corporate segment on pages 44–45 , and Notes 3 and 11.

Loans and allowance for loan losses

The increase in loans reflected higher consumer and wholesale balances. The increase in consumer loans was due to originations and retention of high-quality prime

mortgages in Mortgage Banking ("MB") and AM, partially offset by lower credit card loans due to seasonality and non-core loan portfolio sales. The increase in wholesale loans largely reflected higher commercial real estate originations, particularly in CB.

The decrease in the allowance for loan losses was due to a reduction in the residential real estate portfolio allowance, driven by the continued improvement in home prices and delinquencies, as well as increased granularity in the impairment estimates. The credit card allowance was relatively unchanged. The wholesale allowance increased reflecting the impact of select downgrades, including within the Oil & Gas portfolio. For a more detailed discussion of loans and the allowance for loan losses, refer to Credit Risk Management on pages 47–62 , and Notes 3, 4, 13 and 14.

Accrued interest and accounts receivable

The decrease was predominantly due to lower client receivables related to client activity in CIB.

Mortgage servicing rights

For additional information on MSRs, see Note 16.

Other assets

Other assets was relatively flat, as the increase in tax receivables associated with the resolution of certain tax audits and higher auto operating lease assets from growth in business volume was offset by lower private equity investments driven by the sale of a portion of the Private Equity business and other portfolio sales.



10





Selected Consolidated balance sheets data (continued)

(in millions)

Sep 30,
2015

Dec 31,
2014

Change

Liabilities

Deposits

$

1,273,106


$

1,363,427


(7

)

Federal funds purchased and securities loaned or sold under repurchase agreements

180,319


192,101


(6

)

Commercial paper

19,656


66,344


(70

)

Other borrowed funds

27,174


30,222


(10

)

Trading liabilities:

Debt and equity instruments

84,334


81,699


3


Derivative payables

57,140


71,116


(20

)

Accounts payable and other liabilities

187,986


206,939


(9

)

Beneficial interests issued by consolidated VIEs

48,733


52,362


(7

)

Long-term debt

292,945


276,836


6


Total liabilities

2,171,393


2,341,046


(7

)

Stockholders' equity

245,728


231,727


6


Total liabilities and stockholders' equity

$

2,417,121


$

2,572,773


(6

)%

Deposits

The decrease was attributable to lower wholesale deposits, partially offset by higher consumer deposits. The decrease in wholesale deposits reflected the impact of the Firm's actions to reduce non-operating deposits, consistent with

its announcement in February 2015, as well as the normalization of deposit levels from year-end seasonal inflows. The increase in consumer deposits reflected a continuing positive growth trend, resulting from strong customer retention based on higher customer satisfaction. For more information on deposits, refer to the CCB, CIB, CB and AM segment discussions on pages 18–29 , pages 30–35 , pages 36–39 , and pages 40–43 , respectively; the Liquidity Risk Management discussion on pages 76–80 ; and Notes 3 and 17.

Federal funds purchased and securities loaned or sold under repurchase agreements

The decrease reflected a decline in secured financing of trading assets-debt and equity instruments. For additional information on the Firm's Liquidity Risk Management, see pages 76–80 .

Commercial paper

The decrease was due to the discontinuation of a cash management product that offered customers the option of sweeping their deposits into commercial paper ("customer sweeps"), and lower issuances in the wholesale markets, consistent with Treasury's short-term funding plans. For additional information, see Liquidity Risk Management on pages 76–80 .

Accounts payable and other liabilities

The decrease was due to lower brokerage customer payables related to client activity in CIB.

Beneficial interests issued by consolidated VIEs

For further information on Firm-sponsored variable interest

entities ("VIEs") and loan securitization trusts, see Off-

Balance Sheet Arrangements on page 12 and Note 15.

Long-term debt

The increase was due to net issuances, consistent with Treasury's long-term funding plans. For additional information on the Firm's long-term debt activities, see Liquidity Risk Management on pages 76–80 .

Stockholders' equity

The increase was due to net income and preferred stock issuances, partially offset by the declaration of cash dividends on common and preferred stock, and repurchases of common stock. For additional information on accumulated other comprehensive income/(loss) ("AOCI"), see Note 19; for the Firm's capital actions, see Capital actions on pages 74–75 .


11


OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of business, the Firm enters into various contractual obligations that may require future cash payments. Certain obligations are recognized on-balance sheet, while others are off-balance sheet under U.S. GAAP. The Firm is involved with several types of off–balance sheet arrangements, including through nonconsolidated special-purpose entities ("SPEs"), which are a type of VIE, and through lending-related financial instruments (e.g., commitments and guarantees). For further discussion, see Note 21 of this Form 10-Q and Off–Balance Sheet Arrangements and Contractual Cash Obligations on pages 74–75 and Note 29 of JPMorgan Chase's 2014 Annual Report.

Special-purpose entities

The most common type of VIE is an SPE. SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. SPEs are an important part of the financial markets, including the mortgage- and asset-backed securities and commercial paper markets, as they provide market liquidity by facilitating investors' access to specific portfolios of assets and risks. The Firm holds capital, as deemed appropriate, against all SPE-related transactions and related exposures, such as derivative transactions and lending-related commitments and guarantees. For further information on the types of SPEs, see Note 15 of this Form 10-Q, and Note 1 and Note 16 of JPMorgan Chase's 2014 Annual Report.

Implications of a credit rating downgrade to JPMorgan Chase Bank, N.A.

For certain liquidity commitments to SPEs, JPMorgan Chase Bank, N.A., could be required to provide funding if its short-term credit rating were downgraded below specific levels, primarily "P-1," "A-1" and "F1" for Moody's Investors Service ("Moody's"), Standard & Poor's and Fitch, respectively. These liquidity commitments support the issuance of asset-backed commercial paper by Firm-administered consolidated SPEs. In the event of a short-term credit rating downgrade, JPMorgan Chase Bank, N.A., absent other solutions, would be required to provide funding to the SPE, if the commercial paper could not be reissued as it matured. The aggregate amounts of commercial paper outstanding held by third parties as of September 30, 2015 , and December 31, 2014 , was $13.0 billion and $12.1 billion , respectively. The aggregate amounts of commercial paper issued by these SPEs and outstanding could increase in future periods should clients of the Firm-administered consolidated SPEs draw down on certain unfunded lending-related commitments. These unfunded lending-related commitments were $6.9 billion and $9.9 billion at September 30, 2015 , and December 31, 2014 , respectively. The Firm could facilitate the refinancing of some of the clients' assets in order to reduce the funding obligation. For further information, see the discussion of Firm-administered multiseller conduits in Note 15.

The Firm also acts as liquidity provider for certain municipal bond vehicles. The Firm's obligation to perform as liquidity provider is conditional and is limited by certain termination events, which include bankruptcy or failure to pay by the municipal bond issuer and any credit enhancement provider, an event of taxability on the municipal bonds or the immediate downgrade of the municipal bond to below investment grade. See Note 15 for additional information.

Off–balance sheet lending-related financial instruments, guarantees, and other commitments

JPMorgan Chase provides lending-related financial instruments (e.g., commitments and guarantees) to meet the financing needs of its customers. The contractual amount of these financial instruments represents the maximum possible credit risk to the Firm should the counterparty draw upon the commitment or the Firm be required to fulfill its obligation under the guarantee, and should the counterparty subsequently fail to perform according to the terms of the contract. Most of these commitments and guarantees expire without being drawn or a default occurring. As a result, the total contractual amount of these instruments is not, in the Firm's view, representative of its actual future credit exposure or funding requirements. For further discussion of lending-related financial instruments, guarantees and other commitments, and the Firm's accounting for them, see Lending-related commitments on page 58 and Note 21 (including the table that presents the related amounts by contractual maturity as of September 30, 2015 ). For a discussion of liabilities associated with loan sales- and securitization-related indemnifications, see Note 21.


12


CONSOLIDATED CASH FLOWS ANALYSIS

For a discussion of the activities affecting the Firm's cash flows, see Consolidated Balance Sheets Analysis on pages 10–11 of this Form 10-Q and page 76 of JPMorgan Chase's 2014 Annual Report.

(in millions)

Nine months ended September 30,

2015

2014

Net cash provided by/(used in)

Operating activities

$

57,299


$

7,847


Investing activities

79,722


(95,630

)

Financing activities

(143,513

)

74,061


Effect of exchange rate changes on cash

(81

)

(677

)

Net decrease in cash and due from banks

$

(6,573

)

$

(14,399

)


Operating activities

Operating assets and liabilities can vary significantly in the normal course of business due to the amount and timing of cash flows, which are affected by client-driven and risk management activities and market conditions. The Firm believes cash flows from operations, available cash balances and its capacity to generate cash through secured and unsecured funding sources are sufficient to meet the Firm's operating liquidity needs.

Cash provided by operating activities in 2015 resulted from a decrease in trading assets predominantly due to client-driven market-making activities in CIB resulting in lower levels of equity securities, offset by a decrease in accounts payable and other liabilities due to lower brokerage customer payables related to client activity in CIB. Cash used during 2014 resulted from higher trading assets, predominantly debt and equity instruments related to client-driven marketing-making activities in CIB. For both periods, cash was provided by net income after noncash operating adjustments; and higher net proceeds from loan securitizations and sales activities, reflecting lower levels of activity over the prior year.

Investing activities

Cash provided by investing activities during 2015 predominantly resulted from a net decrease in deposits with banks which was driven by lower wholesale non-operating deposits, and net proceeds from paydowns, maturities, sales, and purchases of investment securities. Partially offsetting these net inflows was cash used for net originations of consumer and wholesale loans. Cash used in investing activities during 2014 predominantly resulted from increases in deposits with banks, reflecting higher levels of excess funds; increases in wholesale loans due to net originations; and net purchases of investment securities. Partially offsetting these net cash outflows in 2014 was a net decline in securities purchased under resale agreements due to a shift in the deployment of the Firm's excess cash by Treasury.

Financing activities

Cash used in financing activities in 2015 resulted from lower wholesale deposits partially offset by higher consumer deposits. The decrease in wholesale deposits reflects the impact of the Firm's commitment to reduce non-operating deposits as announced in February 2015, as well as the normalization of deposit levels from year-end seasonal inflows. The increase in consumer deposits reflected a continuing positive growth trend, resulting from strong customer retention based on higher customer satisfaction. Additionally, in 2015 cash outflows were attributable to lower levels of commercial paper due to a discontinuation of a cash management product that offered customers the option of sweeping their deposits into commercial paper, and lower issuances in the wholesale markets. Offsetting these outflows were net proceeds from long-term borrowings. Cash provided by financing activities in 2014 resulted predominantly from higher consumer and wholesale deposits and an increase in securities loaned or sold under repurchase agreements due to higher financing of the Firm's trading assets-debt and equity instruments. For both periods, cash was provided by the issuance of preferred stock and used for repurchases of common stock and dividends on common and preferred stock.

* * *

For a further discussion of the activities affecting the Firm's cash flows, see Consolidated Balance Sheets Analysis on pages 10–11 , Capital Management on pages 69–75 , and Liquidity Risk Management on pages 76–80 .



13


EXPLANATION AND RECONCILIATION OF THE FIRM'S USE OF NON-GAAP FINANCIAL MEASURES

The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the U.S. ("U.S. GAAP"); these financial statements appear on pages 86–90 . 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, including the overhead ratio, 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 certain reclassifications to present total net revenue for the Firm (and each of the reportable business segments) on an FTE basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable investments 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 tax-exempt items is recorded within income tax expense. These adjustments have no impact on net income as reported by the Firm as a whole or by the lines of business.

Effective January 1, 2015, the Firm adopted new accounting guidance for investments in affordable housing projects that qualify for the low-income housing tax credit, which impacted the CIB. As a result of the adoption of this new guidance, the Firm made an accounting policy election to amortize the initial cost of qualifying investments in proportion to the tax credits and other benefits received, and to present the amortization as a component of income tax expense; previously such amounts were predominantly presented in other income. The guidance was required to be applied retrospectively and, accordingly, certain prior period amounts have been revised to conform with the current period presentation. The adoption of the guidance did not materially change the Firm's results of operations on a managed basis as the Firm had previously presented and will continue to present the revenue from such investments on an FTE basis for the purposes of managed basis reporting.

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 particular business segment and, therefore, facilitate a comparison of the business segment with the performance of its competitors. Non-GAAP financial measures used by the Firm may not be comparable to similarly named non-GAAP financial measures used by other companies.


The following summary table provides a reconciliation from the Firm's reported U.S. GAAP results to managed basis.

Three months ended September 30,

2015

2014

(in millions, except ratios)

Reported

results

Fully taxable-equivalent adjustments (a)

Managed

basis

Reported

results

Fully taxable-equivalent adjustments (a)

Managed

basis

Other income

$

628


$

477


$

1,105


$

955


$

424


$

1,379


Total noninterest revenue

11,856


477


12,333


13,362


424


13,786


Net interest income

10,924


278


11,202


11,107


253


11,360


Total net revenue

22,780


755


23,535


24,469


677


25,146


Pre-provision profit

7,412


755


8,167


8,671


677


9,348


Income before income tax expense

6,730


755


7,485


7,914


677


8,591


Income tax expense/(benefit)

$

(74

)

$

755


$

681


$

2,349


$

677


$

3,026


Overhead ratio

67

%

NM


65

%

65

%

NM


63

%

Nine months ended September 30,

2015

2014

(in millions, except ratios)

Reported
results

Fully taxable-equivalent adjustments (a)

Managed
basis

Reported
results

Fully taxable-equivalent adjustments (a)

Managed
basis

Other income

$

1,796


$

1,405


$

3,201


$

2,467


$

1,251


$

3,718


Total noninterest revenue

38,373


1,405


39,778


39,790


1,251


41,041


Net interest income

32,285


823


33,108


32,572


723


33,295


Total net revenue

70,658


2,228


72,886


72,362


1,974


74,336


Pre-provision profit

25,907


2,228


28,135


26,497


1,974


28,471


Income before income tax expense

23,331


2,228


25,559


24,198


1,974


26,172


Income tax expense/(benefit)

$

4,323


$

2,228


$

6,551


$

7,384


$

1,974


$

9,358


Overhead ratio

63

%

NM


61

%

63

%

NM


62

%

(a) Predominantly recognized in CIB and CB business segments and Corporate.


14


Tangible common equity ("TCE"), ROTCE and TBVPS are each non-GAAP financial measures. TCE represents the Firm's common stockholders' equity (i.e., total stockholders' equity less preferred stock) less goodwill and identifiable intangible assets (other than MSRs), net of related deferred tax liabilities. ROTCE measures the Firm's earnings as a percentage of average TCE. TBVPS represents the Firm's TCE

at period-end divided by common shares at period-end. TCE, ROTCE, and TBVPS are meaningful to the Firm, as well as investors and analysts, in assessing the Firm's use of equity. Additionally, certain capital ratios disclosed by the Firm are non-GAAP measures. For additional information on these non-GAAP measures, see Regulatory capital on pages 69–73 .


Tangible common equity

Period-end

Average

Three months ended September 30,

Nine months ended September 30,

(in millions, except per share and ratio data)

Sep 30,
2015

Dec 31,
2014

2015

2014

2015

2014

Common stockholders' equity

$

219,660


$

211,664


$

217,023


$

209,621


$

214,389


$

205,888


Less: Goodwill

47,405


47,647


47,428


48,081


47,468


48,073


Less: Certain identifiable intangible assets

1,036


1,192


1,064


1,308


1,112


1,423


Add: Deferred tax liabilities (a)

3,105


2,853


2,991


2,980


2,909


2,959


Tangible common equity

$

174,324


$

165,678


$

171,522


$

163,212


$

168,718


$

159,351


Return on tangible common equity

NA


NA


15

%

13

%

14

%

13

%

Tangible book value per share

$

47.36


$

44.60


NA


NA


NA


NA


(a)

Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable intangibles created in nontaxable transactions, which are netted against goodwill and other intangibles when calculating TCE.

Net interest income excluding markets (formerly core net interest income)

In addition to reviewing net interest income on a managed basis, management also reviews net interest income excluding CIB's markets-based activities to assess the performance of its lending, investing (including asset-liability management) and deposit-raising activities. The data presented below are non-GAAP financial measures due

to the exclusion of CIB's markets-based net interest income and related assets. Management believes this exclusion provides investors and analysts with another measure by which to analyze the non-market-related business trends of the Firm and provides a comparable measure to other financial institutions that are primarily focused on lending, investing and deposit-raising activities.


Net interest income excluding CIB markets-based activities data

Three months ended September 30,

Nine months ended September 30,

(in millions, except rates)

2015

2014

Change

2015

2014

Change

Net interest income – managed basis (a)(b)

$

11,202


$

11,360


(1

)%

$

33,108


$

33,295


(1

)%

Less: Markets-based net interest income

1,164


1,542


(25

)

3,661


4,102


(11

)

Net interest income excluding markets (a)

$

10,038


$

9,818


2


$

29,447


$

29,193


1


Average interest-earning assets

$

2,056,890


$

2,061,785


-


$

2,100,773


$

2,030,665


3


Less: Average markets-based interest-earning assets

476,120


513,051


(7

)

495,460


507,675


(2

)

Average interest-earning assets excluding markets

$

1,580,770


$

1,548,734


2

 %

$

1,605,313


$

1,522,990


5

 %

Net interest yield on average interest-earning assets

   – managed basis

2.16

%

2.19

%

2.11

%

2.19

%

Net interest yield on average markets-based interest-earning assets

0.97


1.19


0.99


1.08


Net interest yield on average interest-earning assets excluding markets

2.52

%

2.52

%

2.45

%

2.56

%

(a)

Interest includes the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable.

(b)

For a reconciliation of net interest income on a reported and managed basis, see reconciliation from the Firm's reported U.S. GAAP results to managed basis on page 14 .


15


Quarterly and year-to-date results

Net interest income excluding CIB's markets-based activities increased by $220 million and $254 million, respectively, for the three and nine months ended September 30, 2015, when compared with the prior year periods. Results for the three months ended September 30, 2015 reflected higher average loan balances partially offset by the impact of lower average investment securities balances. Results for the nine months ended September 30, 2015 reflected higher average loan balances and the impact of lower deposit and long-term debt yields, partially offset by lower loan yields and lower average investment securities balances. Average interest-earning assets excluding assets related to CIB's markets-based activities increased by $32 billion to $1.6 trillion and by $82 billion to $1.6 trillion, respectively, for the three and nine months ended September 30, 2015, when compared with the prior year periods; these increases primarily reflected the impact of higher average deposits with banks. The net interest yield excluding CIB's markets-based activities was flat at 2.52% for the three months ended September 30, 2015 and decreased by 11 basis points to 2.45% for the nine months ended September 30, 2015.

Income before income tax expense, net income and earnings per share excluding certain items

Presented below are the Firm's income before income tax expense, net income and earnings per share excluding certain items. These measures should be viewed in addition to, and not as a substitute for, the Firm's reported results. Management believes this information helps investors understand the effect of these items on reported results and provides an additional presentation of the Firm's performance. The table below provides a reconciliation of reported results to these non-GAAP financial measures.

Reconciliation of reported to adjusted results

Three months ended

September 30, 2015

(in millions, except per share)

Income before income tax expense

Net income

Earnings per share

Reported results

$

6,730


$

6,804


$

1.68


Adjustments:

Firmwide legal expense

1,347


973


0.26


Firmwide tax benefits

-


(2,164

)

(0.57

)

Consumer credit reserve releases

(591

)

(366

)

(0.10

)

Wholesale credit reserve builds

310


192


0.05


Total adjustments

1,066


(1,365

)

(0.36

)

Adjusted results

$

7,796


$

5,439


$

1.32




16


BUSINESS SEGMENT RESULTS

The Firm is managed on a line of business basis. There are four major reportable business segments – Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking and Asset Management. In addition, there is a Corporate segment.

The business segments are determined based on the products and services provided, or the type of customer served, and they reflect the manner in which financial information is currently evaluated by management. Results of these lines of business are presented on a managed basis. For a definition of managed basis, see Explanation and Reconciliation of the Firm's Use of Non-GAAP Financial Measures, on pages 14–16 .

Description of business segment reporting methodology

Results of the business segments are intended to reflect each segment as if it were essentially a stand-alone business. The management reporting process that derives business segment results allocates income and expense using market-based methodologies. The Firm continues to assess the assumptions, methodologies and reporting

classifications used for segment reporting, and further refinements may be implemented in future periods.

For a further discussion of those methodologies, see Business Segment Results – Description of business segment reporting methodology on pages 79–80 of JPMorgan Chase's 2014 Annual Report.

Business segment capital allocation changes

On at least an annual basis, the Firm assesses the level of capital required for each line of business as well as the assumptions and methodologies used to allocate capital to its lines of business and updates the equity allocations to its lines of business as refinements are implemented.  Each business segment is allocated capital by taking into consideration regulatory capital requirements (as estimated under Basel III Advanced Fully Phased-In), economic risk measures and stand-alone peer comparisons. The amount of capital assigned to each business is referred to as equity.  For further information about these capital changes, see Line of business equity on page 74 .


Segment Results – Managed basis

The following tables summarize the business segment results for the periods indicated.

Three months ended September 30,

Total net revenue

Total noninterest expense

Pre-provision profit/(loss)

(in millions)

2015


2014


Change

2015


2014


Change

2015


2014


Change

Consumer & Community Banking

$

10,879


$

11,367


(4)%


$

6,237


$

6,305


(1)%


$

4,642


$

5,062


(8)%


Corporate & Investment Bank

8,168


9,105


(10

)

6,131


6,035


2


2,037


3,070


(34

)

Commercial Banking

1,644


1,703


(3

)

719


668


8


925


1,035


(11

)

Asset Management

2,894


3,046


(5

)

2,109


2,081


1


785


965


(19

)

Corporate

(50

)

(75

)

33


172


709


(76

)

(222

)

(784

)

72


Total

$

23,535


$

25,146


(6)%


$

15,368


$

15,798


(3)%


$

8,167


$

9,348


(13)%


Three months ended September 30,

Provision for credit losses

Net income

Return on common equity

(in millions, except ratios)

2015


2014


Change

2015


2014


Change

2015


2014


Consumer & Community Banking

$

389


$

902


(57

)%

$

2,630


$

2,529


4%


20

%

19

%

Corporate & Investment Bank

232


(67

)

NM


1,464


1,680


(13

)

8


10


Commercial Banking

82


(79

)

NM


518


671


(23

)

14


18


Asset Management

(17

)

9


NM


475


590


(19

)

20


25


Corporate

(4

)

(8

)

50


1,717


95


NM


NM

NM

Total

$

682


$

757


(10

)%

$

6,804


$

5,565


22%


12

%

10

%

Nine months ended September 30,

Total net revenue

Total noninterest expense

Pre-provision profit/(loss)

(in millions)

2015


2014


Change

2015


2014


Change

2015


2014


Change

Consumer & Community Banking

$

32,598


$

33,419


(2)%


$

18,637


$

19,198


(3

)%

$

13,961


$

14,221


(2

)%

Corporate & Investment Bank

26,473


27,212


(3

)

16,925


17,697


(4

)

9,548


9,515


-


Commercial Banking

5,125


5,112


-


2,131


2,029


5


2,994


3,083


(3

)

Asset Management

9,074


8,828


3


6,690


6,218


8


2,384


2,610


(9

)

Corporate

(384

)

(235

)

(63

)

368


723


(49

)

(752

)

(958

)

22


Total

$

72,886


$

74,336


(2)%


$

44,751


$

45,865


(2

)%

$

28,135


$

28,471


(1

)%

Nine months ended September 30,

Provision for credit losses

Net income

Return on common equity

(in millions, except ratios)

2015


2014


Change

2015


2014


Change

2015


2014


Consumer & Community Banking

$

2,021


$

2,570


(21)%


$

7,382


$

7,006


5%


18

%

18

%

Corporate & Investment Bank

251


(102

)

NM


6,342


5,936


7


13


12


Commercial Banking

325


(141

)

NM


1,641


1,942


(15

)

15


18


Asset Management

(13

)

1


NM


1,428


1,613


(11

)

20


23


Corporate

(8

)

(29

)

72


2,215


317


NM


NM

NM

Total

$

2,576


$

2,299


12%


$

19,008


$

16,814


13%


11%


10

%


17



CONSUMER & COMMUNITY BANKING

For a discussion of the business profile of CCB, see pages 81–91 of JPMorgan Chase's 2014 Annual Report and Line of Business Metrics on page 182 .

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2015


2014


Change

2015

2014

Change

Revenue

Lending- and deposit-related fees

$

836


$

804


4

 %

$

2,320


$

2,257


3

 %

Asset management, administration and commissions

565


534


6


1,648


1,558


6


Mortgage fees and related income

469


902


(48

)

1,955


2,706


(28

)

Card income

1,335


1,478


(10

)

4,165


4,312


(3

)

All other income

524


496


6


1,466


1,283


14


Noninterest revenue

3,729


4,214


(12

)

11,554


12,116


(5

)

Net interest income

7,150


7,153


-


21,044


21,303


(1

)

Total net revenue

10,879


11,367


(4

)

32,598


33,419


(2

)

Provision for credit losses

389


902


(57

)

2,021


2,570


(21

)

Noninterest expense

Compensation expense

2,413


2,627


(8

)

7,421


8,003


(7

)

Noncompensation expense

3,824


3,678


4


11,216


11,195


-


Total noninterest expense

6,237


6,305


(1

)

18,637


19,198


(3

)

Income before income tax expense

4,253


4,160


2


11,940


11,651


2


Income tax expense

1,623


1,631


-


4,558


4,645


(2

)

Net income

$

2,630


$

2,529


4

 %

$

7,382


$

7,006


5

 %

Financial ratios

Return on common equity

20

%

19

%

18

%

18

%

Overhead ratio

57


55


57


57


Note: In the discussion and the tables which follow, CCB presents certain financial measures which exclude the impact of PCI loans; these are non-GAAP financial measures. For additional information, see Explanation and Reconciliation of the Firm's Use of Non-GAAP Financial Measures on pages 14–16 .

Quarterly results

Consumer & Community Banking net income was $2.6 billion, an increase of 4% compared with the prior year, driven by lower provision for credit losses, offset by lower net revenue.

Net revenue was $10.9 billion, a decrease of 4% compared with the prior year. Net interest income was $7.2 billion, flat, reflecting spread compression, offset by higher deposit and loan balances, and a reduction in the reserve for uncollectible interest and fees in Credit Card. Noninterest revenue was $3.7 billion, down 12%, predominantly driven by lower mortgage fees and related income.

The provision for credit losses was $389 million, a decrease of 57% compared with the prior year, reflecting a larger reduction in the allowance for loan losses and lower net charge-offs. The current-quarter provision reflected a $575 million reduction in the allowance for loan losses. The prior year included a $200 million reduction in the allowance for loan losses. For more information, including net charge-off amounts and rates, see Consumer Credit Portfolio on pages 48–53 .

Noninterest expense was $6.2 billion, a decrease of 1% from the prior year, driven by lower Mortgage Banking and Consumer & Business Banking expense, largely offset by higher Card expense.

Year-to-date results

Consumer & Community Banking net income was $7.4 billion, an increase of 5% compared with the prior year, driven by lower noninterest expense and lower provision for credit losses, largely offset by lower net revenue.

Net revenue was $32.6 billion, a decrease of 2% compared with the prior year. Net interest income was $21.0 billion, down 1%, driven by spread compression, predominantly offset by higher deposit and loan balances, and lower reversals of interest and fees due to lower net charge-offs in Credit Card. Noninterest revenue was $11.6 billion, down 5%, driven by lower mortgage fees and related income, partially offset by higher Auto lease income.

The provision for credit losses was $2.0 billion, a decrease of 21% from the prior year, reflecting lower net charge-offs. Both the current- and prior-year provision reflected a $1.0 billion reduction in the allowance for loan losses. For more information, including net charge-off amounts and rates, see Consumer Credit Portfolio on pages 48–53 .

Noninterest expense was $18.6 billion, a decrease of 3% from the prior year, driven by lower Mortgage Banking expense.


18



Selected metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except headcount)

2015

2014

Change

2015

2014

Change

Selected balance sheet data (period-end)

Total assets

$

484,253


$

448,033


8

 %

$

484,253


$

448,033


8

 %

Trading assets – loans (a)

6,633


10,750


(38

)

6,633


10,750


(38

)

Loans:

Loans retained

427,958


390,709


10


427,958


390,709


10


Loans held-for-sale (b)

1,582


876


81


1,582


876


81


Total loans

429,540


391,585


10


429,540


391,585


10


Core loans

320,415


259,943


23


320,415


259,943


23


Deposits

539,182


493,249


9


539,182


493,249


9


Equity (c)

51,000


51,000


-


51,000


51,000


-


Selected balance sheet data (average)

Total assets

$

478,914


$

447,121


7


$

465,782


$

446,904


4


Trading assets – loans (a)

8,468


9,346


(9

)

7,845


7,802


1


Loans:

Loans retained

419,741


390,129


8


407,042


389,024


5


Loans held-for-sale (d)

2,124


876


142


2,399


749


220


Total loans

421,865


391,005


8


409,441


389,773


5


Deposits

535,987


492,022


9


525,951


483,297


9


Equity (c)

51,000


51,000


-


51,000


51,000


-


Headcount

128,601


138,686


(7

)%

128,601


138,686


(7

)%

(a)

Predominantly consists of prime mortgages originated with the intent to sell that are accounted for at fair value.

(b)

Included period-end credit card loans held-for-sale of $1.3 billion and $395 million at September 30, 2015 and 2014 , respectively. These amounts were excluded when calculating delinquency rates and the allowance for loan losses to period-end loans.

(c)

Equity is allocated to the sub-business segments with $5.0 billion and $3.0 billion of capital in 2015 and 2014, respectively, held at the CCB level related to legacy mortgage servicing matters.

(d)

Included average credit card loans held-for-sale of $1.3 billion and $335 million for the three months ended September 30, 2015 and 2014, respectively, and $1.9 billion and $352 million for the nine months ended September 30, 2015 and 2014. These amounts are excluded when calculating the net charge-off rate.


19



Selected metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except ratios and where otherwise noted)

2015


2014


Change

2015

2014

Change

Credit data and quality statistics

Net charge-offs (a)

$

965


$

1,102


(12

)%

$

3,046


$

3,576


(15

)%

Nonaccrual loans (b)(c)

5,433


6,639


(18

)

5,433


6,639


(18

)

Nonperforming assets (b)(c)

5,778


7,138


(19

)

5,778


7,138


(19

)

Allowance for loan losses (a)

9,211


10,993


(16

)

9,211


10,993


(16

)

Net charge-off rate (a)

0.91

%

1.12

%

1.00

%

1.23

%

Net charge-off rate, excluding PCI loans

1.02


1.28


1.12


1.41


Allowance for loan losses to period-end loans retained

2.15


2.81


2.15


2.81


Allowance for loan losses to period-end loans retained, excluding PCI loans (d)

1.67


2.14


1.67


2.14


Allowance for loan losses to nonaccrual loans retained, excluding credit card (b)(d)

55


57


55


57


Nonaccrual loans to total period-end loans, excluding credit card

1.80


2.51


1.80


2.51


Nonaccrual loans to total period-end loans, excluding credit card and PCI loans  (b)

2.09


3.07


2.09


3.07


Business metrics

Number of:

Branches

5,471


5,613


(3

)%

5,471


5,613


(3

)%

ATMs

18,623


20,513


(9

)

18,623


20,513


(9

)

Active online customers (in thousands)  (e)

38,511


35,957


7


38,511


35,957


7


Active mobile customers (in thousands)

22,232


18,351


21


22,232


18,351


21


CCB households (in millions)

58.0


57.1


2


58.0


57.1


2


(a)

Net charge-offs and the net charge-off rates excluded $52 million and $87 million of write-offs in the PCI portfolio for the three months ended September 30, 2015 and 2014 , respectively, and $162 million and $196 million of write-offs in the PCI portfolio for the nine months ended September 30, 2015 and 2014 , respectively. These write-offs decreased the allowance for loan losses for PCI loans. For further information on PCI write-offs, see Allowance for Credit Losses on pages 60–62 .

(b)

Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as they are all performing.

(c)

At September 30, 2015 and 2014, nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $6.6 billion and $7.8 billion, respectively, that are 90 or more days past due; (2) student loans insured by U.S. government agencies under the Federal Family Education Loan Program ("FFELP") of $289 million and $354 million, respectively, that are 90 or more days past due; (3) real estate owned ("REO") insured by U.S. government agencies of $327 million and $464 million, respectively. These amounts have been excluded based upon the government guarantee.

(d)

The allowance for loan losses for PCI loans was $2.8 billion and $3.7 billion at September 30, 2015 and 2014 , respectively; these amounts were also excluded from the applicable ratios.

(e)

Users of all internet browsers and mobile platforms (mobile smartphone, tablet and SMS) who have logged in within the past 90 days.


20



Consumer & Business Banking


Selected financial statement data

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except ratios)

2015

2014

Change

2015

2014

Change

Revenue

Lending- and deposit-related fees

$

829


$

796


4

 %

$

2,300


$

2,234


3

 %

Asset management, administration and commissions

546


522


5


1,592


1,512


5


Card income

440


409


8


1,279


1,191


7


All other income

135


127


6


392


411


(5

)

Noninterest revenue

1,950


1,854


5


5,563


5,348


4


Net interest income

2,605


2,807


(7

)

7,833


8,319


(6

)

Total net revenue

4,555


4,661


(2

)

13,396


13,667


(2

)

Provision for credit losses

50


75


(33

)

178


217


(18

)

Noninterest expense

2,956


3,032


(3

)

8,970


9,123


(2

)

Income before income tax expense

1,549


1,554


-


4,248


4,327


(2

)

Net income

$

954


$

927


3


$

2,613


$

2,582


1


Return on common equity

32

%

33

%

29

%

31

%

Overhead ratio

65


65


67


67


Equity (period-end and average)

$

11,500


$

11,000


5

 %

$

11,500


$

11,000


5

 %

Quarterly results

Consumer & Business Banking net income was $954 million, an increase of 3% compared with the prior year.

Net revenue was $4.6 billion, down 2% compared with the prior year. Net interest income was $2.6 billion, down 7% due to deposit spread compression, largely offset by higher deposit balances. Noninterest revenue was $2.0 billion, up 5%, driven by higher deposit-related fees, higher debit card revenue, reflecting an increase in transaction volume, and higher investment revenue, reflecting an increase in client investment assets.

Noninterest expense was $3.0 billion, a decrease of 3% from the prior year, driven by branch efficiencies.

Year-to-date results

Consumer & Business Banking net income was $2.6 billion, an increase of 1% compared with the prior year.

Net revenue was $13.4 billion, down 2% compared with the prior year. Net interest income was $7.8 billion, down 6% due to deposit spread compression, largely offset by higher deposit balances. Noninterest revenue was $5.6 billion, up 4%, driven by higher debit card revenue, reflecting an increase in transaction volume, and higher investment revenue, reflecting an increase in client investment assets.

Noninterest expense was $9.0 billion, a decrease of 2% from the prior year, driven by branch efficiencies, partially offset by higher legal expense.



21



Selected metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except ratios and where otherwise noted)

2015


2014


Change

2015

2014

Change

Business metrics

Business banking origination volume

$

1,715


$

1,649


4%


$

5,166


$

5,070


2

 %

Period-end loans

22,346


20,644


8


22,346


20,644


8


Period-end deposits:

Checking

231,968


203,839


14


231,968


203,839


14


Savings

273,468


251,661


9


273,468


251,661


9


Time and other

18,547


23,304


(20

)

18,547


23,304


(20

)

Total period-end deposits

523,983


478,804


9


523,983


478,804


9


Average loans

22,069


20,382


8


21,709


19,923


9


Average deposits:

Checking

229,003


201,473


14


223,753


196,194


14


Savings

271,526


250,845


8


266,440


247,889


7


Time and other

18,885


23,845


(21

)

19,843


24,712


(20

)

Total average deposits

519,414


476,163


9


510,036


468,795


9


Deposit margin

1.86

%

2.20

%

1.92

%

2.24

%

Average assets

$

40,991


$

38,089


8


$

41,348


$

38,006


9


Credit data and quality statistics

Net charge-offs

$

50


$

75


(33

)

$

177


$

220


(20

)

Net charge-off rate

0.90

%

1.46

%

1.09

%

1.48

%

Allowance for loan losses

$

703


$

703


-


$

703


$

703


-


Nonperforming assets

242


304


(20

)

242


304


(20

)

Retail branch business metrics

Net new investment assets

$

2,783


$

4,269


(35

)

$

9,966


$

12,834


(22

)

Client investment assets

213,263


207,790


3


213,263


207,790


3


% managed accounts

41

%

39

%

41

%

39

%

Number of:

Chase Private Client locations

2,740


2,461


11


2,740


2,461


11


Personal bankers

18,554


20,965


(12

)

18,554


20,965


(12

)

Sales specialists

3,600


4,155


(13

)

3,600


4,155


(13

)

Client advisors

2,965


3,099


(4

)

2,965


3,099


(4

)

Chase Private Clients

418,258


290,662


44


418,258


290,662


44


Accounts (in thousands) (a)

31,277


30,424


3

 %

31,277


30,424


3

 %

(a)

Includes checking accounts and Chase Liquid ® cards.



22


Mortgage Banking

Selected financial statement data

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except ratios)

2015


2014


Change

2015

2014

Change

Revenue

Mortgage fees and related income (a)

$

469


$

902


(48

)%

$

1,955


$

2,706


(28

)%

All other income

(26

)

66


NM

(42

)

46


NM

Noninterest revenue

443


968


(54

)

1,913


2,752


(30

)

Net interest income

1,112


1,059


5


3,224


3,199


1


Total net revenue

1,555


2,027


(23

)

5,137


5,951


(14

)

Provision for credit losses

(534

)

(19

)

NM

(749

)

(230

)

(226

)

Noninterest expense

1,118


1,279


(13

)

3,447


3,988


(14

)

Income before income tax expense

971


767


27


2,439


2,193


11


Net income

$

602


$

465


29


$

1,512


$

1,330


14


Return on common equity

14

%

10

%

12

%

9

%

Overhead ratio

72

63

67

67

Equity (period-end and average)

$

16,000


$

18,000


(11

)%

$

16,000


$

18,000


(11

)%

(a)

For further information on mortgage fees and related income, see Note 16.

Quarterly results

Mortgage Banking net income was $602 million, an increase of 29% from the prior year, driven by a higher benefit from the provision for credit losses and lower noninterest expense, largely offset by lower net revenue.

Net revenue was $1.6 billion, a decrease of 23% compared with the prior year. Noninterest revenue was $443 million, a decrease of 54% from the prior year. This decrease was driven by lower MSR risk management income, lower servicing revenue, partially due to lower average third-party loans serviced, and the absence of a non-recurring gain from the prior year. See Note 16 for further information regarding changes in value of the MSR asset and related hedges, and mortgage fees and related income.

The provision for credit losses was a benefit of $534 million, compared with a benefit of $19 million in the prior year, reflecting a larger reduction in the allowance for loan losses and lower net charge-offs. The current-quarter provision reflected a $375 million reduction in the purchased credit-impaired allowance for loan losses and a $200 million reduction in the non credit-impaired allowance for loan losses; the prior-year provision included a $100 million reduction in the non credit-impaired allowance for loan losses. These reductions were due to continued improvement in home prices and delinquencies in both periods, as well as increased granularity in the impairment estimates in the current quarter. See Consumer Credit Portfolio on pages 48–53 for the net charge-off amounts and rates.

Noninterest expense was $1.1 billion, a decrease of 13% from the prior year, reflecting lower headcount-related expense and lower professional fees.

Year-to-date results

Mortgage Banking net income was $1.5 billion, an increase of 14% from the prior year, driven by lower noninterest expense and a higher benefit from the provision for credit losses, predominantly offset by lower net revenue.

Net revenue was $5.1 billion, a decrease of 14% compared with the prior year. Noninterest revenue was $1.9 billion, a decrease of 30% from the prior year. This decrease was driven by lower servicing revenue, largely as a result of lower average third-party loans serviced and lower net production revenue, reflecting a lower repurchase benefit.

The provision for credit losses was a benefit of $749 million, compared with a benefit of $230 million in the prior year, reflecting a larger reduction in the allowance for loan losses and lower net charge-offs. The current-year provision reflected a $600 million reduction in the non credit-impaired allowance for loan losses and a $375 million reduction in the purchased credit-impaired allowance for loan losses; the prior-year provision included a $300 million reduction in the purchased credit-impaired allowance for loan losses and a $300 million reduction in the non credit-impaired allowance for loan losses. These reductions were due to continued improvement in home prices and delinquencies in both periods, as well as increased granularity in the impairment estimates in the current year. See Consumer Credit Portfolio on pages 48–53 for the net charge-off amounts and rates.

Noninterest expense was $3.4 billion, a decrease of 14% from the prior year, reflecting lower headcount-related expense and lower professional fees.


23


Supplemental information

Three months ended September 30,

Nine months ended September 30,

(in millions)

2015

2014

Change

2015

2014

Change

Net interest income:

Mortgage Production and Mortgage Servicing

$

147


$

204


(28

)%

$

444


$

564


(21

)%

Real Estate Portfolios

965


855


13


2,780


2,635


6


Total net interest income

$

1,112


$

1,059


5


$

3,224


$

3,199


1


Noninterest expense:

Mortgage Production

$

374


$

381


(2

)

$

1,155


$

1,271


(9

)

Mortgage Servicing

453


577


(21

)

1,501


1,708


(12

)

Real Estate Portfolios

291


321


(9

)

791


1,009


(22

)

Total noninterest expense

$

1,118


$

1,279


(13

)%

$

3,447


$

3,988


(14

)%

Selected balance sheet data

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions)

2015

2014

Change

2015

2014

Change

Trading assets – loans (period-end) (a)

$

6,633


$

10,750


(38

)%

$

6,633


$

10,750


(38

)%

Trading assets – loans (average) (a)

8,468


9,346


(9

)

7,845


7,802


1


Loans, excluding PCI loans

Period-end loans owned

Home equity

45,359


52,679


(14

)

45,359


52,679


(14

)

Prime mortgage, including option ARMs

122,714


74,338


65


122,714


74,338


65


Subprime mortgage

3,853


5,547


(31

)

3,853


5,547


(31

)

Other

417


492


(15

)

417


492


(15

)

Total period-end loans owned

172,343


133,056


30


172,343


133,056


30


Average loans owned

Home equity

46,250


53,560


(14

)

48,121


55,288


(13

)

Prime mortgage, including option ARMs

114,537


72,774


57


100,091


69,410


44


Subprime mortgage

4,261


5,922


(28

)

4,652


6,558


(29

)

Other

426


502


(15

)

446


521


(14

)

Total average loans owned

165,474


132,758


25


153,310


131,777


16


PCI loans

Period-end loans owned

Home equity

15,490


17,572


(12

)

15,490


17,572


(12

)

Prime mortgage

9,196


10,887


(16

)

9,196


10,887


(16

)

Subprime mortgage

3,329


3,790


(12

)

3,329


3,790


(12

)

Option ARMs

14,221


16,238


(12

)

14,221


16,238


(12

)

Total period-end loans owned

42,236


48,487


(13

)

42,236


48,487


(13

)

Average loans owned

Home equity

15,775


17,806


(11

)

16,321


18,270


(11

)

Prime mortgage

9,372


11,103


(16

)

9,717


11,484


(15

)

Subprime mortgage

3,385


3,843


(12

)

3,492


3,989


(12

)

Option ARMs

14,451


16,503


(12

)

14,943


17,084


(13

)

Total average loans owned

42,983


49,255


(13

)

44,473


50,827


(13

)

Total Mortgage Banking

Period-end loans owned

Home equity

60,849


70,251


(13

)

60,849


70,251


(13

)

Prime mortgage, including option ARMs

146,131


101,463


44


146,131


101,463


44


Subprime mortgage

7,182


9,337


(23

)

7,182


9,337


(23

)

Other

417


492


(15

)

417


492


(15

)

Total period-end loans owned

214,579


181,543


18


214,579


181,543


18


Average loans owned

Home equity

62,025


71,366


(13

)

64,442


73,558


(12

)

Prime mortgage, including option ARMs

138,360


100,380


38


124,751


97,978


27


Subprime mortgage

7,646


9,765


(22

)

8,144


10,547


(23

)

Other

426


502


(15

)

446


521


(14

)

Total average loans owned

208,457


182,013


15%


197,783


182,604


8%


(a)

Predominantly consists of prime mortgages originated with the intent to sell that are accounted for at fair value.


24


Credit data and quality statistics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except ratios)

2015


2014


Change

2015


2014


Change

Net charge-offs/(recoveries), excluding PCI loans (a)

Home equity

$

82


$

95


(14

)%

$

238


$

386


(38

)%

Prime mortgage, including option ARMs

9


9


-


34


(6

)

NM

Subprime mortgage

(51

)

(25

)

(104

)

(51

)

(17

)

(200

)

Other

1


2


(50

)

5


7


(29

)

Total net charge-offs/(recoveries), excluding PCI loans

41


81


(49

)

226


370


(39

)

Net charge-off/(recovery) rate, excluding PCI loans

Home equity

0.70

%

0.70

%

0.66

%

0.93

%

Prime mortgage, including option ARMs

0.03


0.05


0.05


(0.01

)

Subprime mortgage

(5.17

)

(1.68

)

(1.51

)

(0.35

)

Other

0.93


1.58


1.50


1.80


Total net charge-off/(recovery) rate, excluding PCI loans

0.10


0.24


0.20


0.38


Net charge-off/(recovery) rate – reported (a)

Home equity

0.52


0.53


0.49


0.70


Prime mortgage, including option ARMs

0.03


0.04


0.04


(0.01

)

Subprime mortgage

(2.77

)

(1.02

)

(0.85

)

(0.22

)

Other

0.93


1.58


1.50


1.80


Total net charge-off/(recovery) rate – reported

0.08


0.18


0.15


0.27


30+ day delinquency rate, excluding PCI loans (b)(c)

1.74


2.76


1.74


2.76


Allowance for loan losses, excluding PCI loans

$

1,588


$

2,288


(31

)

$

1,588


$

2,288


(31

)

Allowance for PCI loans (a)

2,788


3,662


(24

)

2,788


3,662


(24

)

Allowance for loan losses

4,376


5,950


(26

)

4,376


5,950


(26

)

Nonperforming assets (d)(e)

5,143


6,455


(20

)%

5,143


6,455


(20

)%

Allowance for loan losses to period-end loans retained

2.04

%

3.29

%

2.04

%

3.29

%

Allowance for loan losses to period-end loans retained, excluding PCI loans

0.92


1.73


0.92


1.73


(a)

Net charge-offs and the net charge-off rates excluded $52 million and $87 million of write-offs in the PCI portfolio for the three months ended September 30, 2015 and 2014 , respectively, and $162 million and $196 million of write-offs in the PCI portfolio for the nine months ended September 30, 2015 and 2014 . These write-offs decreased the allowance for loan losses for PCI loans. For further information on PCI write-offs, see Allowance for Credit Losses on pages 60–62 .

(b)

At September 30, 2015 and 2014 , excluded mortgage loans insured by U.S. government agencies of $8.5 billion and $9.6 billion, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee. For further discussion, see Note 13 which summarizes loan delinquency information.

(c)

The 30+ day delinquency rate for PCI loans was 11.29% and 13.69%, at September 30, 2015 and 2014 , respectively.

(d)

At September 30, 2015 and 2014 , nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $6.6 billion and $7.8 billion, respectively, that are 90 or more days past due and (2) REO insured by U.S. government agencies of $327 million and $464 million, respectively. These amounts have been excluded based upon the government guarantee.

(e)

Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as they are all performing.



25


Business metrics

As of or for the three months
ended September 30

As of or for the nine months
ended September 30,

(in billions, except ratios)

2015


2014


Change

2015

2014

Change

Mortgage origination volume by channel

Retail

$

9.5


$

7.9


20

 %

$

27.4


$

21.8


26

 %

Correspondent

20.4


13.3


53


56.5


33.2


70


Total mortgage origination volume (a)

29.9


21.2


41


83.9


55.0


53


Total loans serviced (period-end)

929.0


963.4


(4

)

929.0


963.4


(4

)

Third-party mortgage loans serviced (period-end)

702.6


766.3


(8

)

702.6


766.3


(8

)

Third-party mortgage loans serviced (average)

713.0


776.3


(8

)

724.6


793.3


(9

)

MSR carrying value (period-end)

6.7


8.2


(18)%


6.7


8.2


(18)%


Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end)

0.95

%

1.07

%

0.95

%

1.07

%

Ratio of annualized loan servicing-related revenue to third-party mortgage loans serviced (average)

0.34


0.35


0.35


0.36


MSR revenue multiple (b)

2.79

x

3.06

x

2.71

x

2.97

x

(a)

Firmwide mortgage origination volume was $32.2 billion and $22.7 billion for the three months ended September 30, 2015 , and 2014 , respectively, and $90.5 billion and $58.9 billion for the nine months ended September 30, 2015 and 2014 , respectively.

(b)

Represents the ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) divided by the ratio of annualized loan servicing-related revenue to third-party mortgage loans serviced (average).

Mortgage servicing-related matters

The financial crisis resulted in unprecedented levels of delinquencies and defaults of 1–4 family residential real estate loans. Such loans required varying degrees of loss mitigation activities. Foreclosure is usually a last resort, and accordingly, the Firm has made, and continues to make, significant efforts to help borrowers remain in their homes.

The Firm has entered into various Consent Orders and settlements with federal and state governmental agencies and private parties related to mortgage servicing, origination, and residential mortgage-backed securities activities.

The requirements of these Consent Orders and settlements vary, but in the aggregate, include cash compensatory payments (in addition to fines) and/or "borrower relief," which may include principal reduction, refinancing, short sale assistance, and other specified types of borrower relief. Other obligations required under certain Consent Orders and settlements, as well as under new regulatory requirements, include enhanced mortgage servicing and foreclosure standards and processes.

On June 11, 2015, the Firm signed an Amended Consent Order focused on the subset of ten items that must be resolved to complete the requirements of the Consent Orders with the Office of the Comptroller of the Currency ("OCC") and Federal Reserve. The Firm has completed its work on those items and is awaiting confirmation by the banking regulators of its satisfactory compliance with the items in the Amended Consent Order. The Amended Consent Order also requires a supervisory non-objection before the Firm may acquire new contracts to perform mortgage servicing rights; outsource or subservice new mortgage servicing activities; offshore new mortgage servicing activities; or appoint senior officers in mortgage servicing.

The mortgage servicing Consent Orders and settlements are subject to ongoing oversight by the Mortgage Compliance Committee of the Firm's Board of Directors. In addition, certain of the Consent Orders and settlements are the subject of ongoing reporting to various regulators and independent overseers. The Firm's compliance with certain of these settlements is detailed in periodic reports published by the independent overseers. The Firm is committed to fulfilling all of these commitments with appropriate due diligence and oversight.





26


Card, Commerce Solutions & Auto ("Card")

Selected financial statement data

As of or for the three

months ended September 30,

As of or for the nine

months ended September 30,

(in millions, except ratios)

2015


2014


Change

2015

2014

Change

Revenue

Card income

$

895


$

1,068


(16)%


$

2,885


$

3,120


(8

)%

All other income

441


324


36


1,193


896


33


Noninterest revenue

1,336


1,392


(4

)

4,078


4,016


2


Net interest income

3,433


3,287


4


9,987


9,785


2


Total net revenue

4,769


4,679


2


14,065


13,801


2


Provision for credit losses

873


846


3


2,592


2,583


-


Noninterest expense (a)

2,163


1,994


8


6,220


6,087


2


Income before income tax expense

1,733


1,839


(6

)

5,253


5,131


2


Net income

$

1,074


$

1,137


(6

)

$

3,257


$

3,094


5


Return on common equity

22

%

23

%

23

%

21

%

Overhead ratio

45


43


44


44


Equity (period-end and average)

$

18,500


$

19,000


(3

)%

$

18,500


$

19,000


(3

)%

Note: Chase Commerce Solutions, formerly known as Merchant Services, includes Chase Paymentech, ChaseNet and Chase Offers businesses.

(a)

Included operating lease depreciation expense of $372 million and $293 million for the three months ended September 30, 2015 and 2014 , respectively, and $1.0 billion and $851 million for the nine months ended September 30, 2015 and 2014 , respectively.

Quarterly results

Card net income was $1.1 billion, a decrease of 6% compared with the prior year, driven by higher noninterest expense, largely offset by higher net revenue.

Net revenue was $4.8 billion, an increase of 2% compared with the prior year. Net interest income was $3.4 billion, up 4% from the prior year, driven by a reduction in the reserve for uncollectible interest and fees and higher loan balances. Noninterest revenue was $1.3 billion, down 4% compared with the prior year, driven by the impact of renegotiated

co-brand partnership agreements and higher amortization of new account origination costs, predominantly offset by higher auto lease and card sales volumes.

The provision for credit losses was $873 million, compared with $846 million in the prior year, reflecting a smaller reduction in the allowance for loan losses, largely offset by lower net charge-offs. The prior-year provision included a $100 million reduction in the allowance for loan losses in Auto and Student.

Noninterest expense was $2.2 billion, up 8% from the prior year, driven by higher auto lease depreciation and higher marketing expense.


Year-to-date results

Card net income was $3.3 billion, an increase of 5% compared with the prior year, driven by higher net revenue, largely offset by higher noninterest expense.

Net revenue was $14.1 billion, an increase of 2% compared with the prior year. Net interest income was $10.0 billion, up 2% from the prior year, driven by higher loan balances and lower reversals of interest and fees due to lower net charge-offs in Credit Card, partially offset by spread compression. Noninterest revenue was $4.1 billion, up 2% compared with the prior year, driven by higher auto lease and card sales volumes, predominantly offset by the impact of renegotiated co-brand partnership agreements and higher amortization of new account origination costs.

The provision for credit losses was $2.6 billion, flat compared with the prior year, reflecting a smaller reduction in the allowance for loan losses, offset by lower net charge-offs. The current-year provision reflected a $51 million reduction in the allowance for loan losses, primarily due to runoff in the student loan portfolio. The prior-year provision included a $403 million reduction in the allowance for loan losses, primarily related to a decrease in the asset-specific allowance resulting from increased granularity of the impairment estimates and lower balances related to credit card loans modified in TDRs, runoff in the student loan portfolio and lower estimated losses in auto loans.

Noninterest expense was $6.2 billion, up 2% from the prior year, driven by higher auto lease depreciation and higher marketing expense, partially offset by lower legal expense.



27


Selected metrics

As of or for the three

months ended September 30,

As of or for the nine

months ended September 30,

(in millions, except ratios and where otherwise noted)

2015


2014


Change

2015

2014

Change

Selected balance sheet data (period-end)

Loans:

Credit Card

$

126,979


$

126,959


-


$

126,979


$

126,959


-


Auto

57,174


52,778


8


57,174


52,778


8


Student

8,462


9,661


(12

)

8,462


9,661


(12

)

Total loans

$

192,615


$

189,398


2


$

192,615


$

189,398


2


Auto operating lease assets

8,428


6,431


31


8,428


6,431


31


Selected balance sheet data (average)

Total assets

$

206,653


$

202,833


2


$

205,068


$

201,775


2


Loans:

Credit Card

126,305


126,107


-


125,294


124,360


1


Auto

56,412


52,666


7


55,744


52,741


6


Student

8,622


9,837


(12

)

8,911


10,145


(12

)

Total loans

$

191,339


$

188,610


1


$

189,949


$

187,246


1


Auto operating lease assets

8,073


6,269


29


7,474


5,956


25


Business metrics

Credit Card, excluding Commercial Card

Sales volume (in billions)

$

126.6


$

119.5


6


$

365.1


$

342.0


7


New accounts opened

2.0


2.2


(9

)

6.2


6.4


(3

)

Open accounts

62.9


65.5


(4

)

62.9


65.5


(4

)

Accounts with sales activity

33.0


32.1


3


33.0


32.1


3


% of accounts acquired online

69

%

56

%

65

%

54

%

Commerce Solutions (Chase Paymentech Solutions)

Merchant processing volume (in billions)

$

235.8


$

213.3


11

$

691.1


$

617.7


12


Total transactions (in billions)

10.4


9.4


11

30.3


27.8


9


Auto

Loan and lease origination volume (in billions)

$

8.1


$

6.8


19%

$

23.2


$

20.6


13%




28


Selected metrics

As of or for the three

months ended September 30,

As of or for the nine

months ended September 30,

(in millions, except ratios)

2015


2014


Change

2015

2014

Change

Credit data and quality statistics

Net charge-offs:

Credit Card

$

759


$

798


(5)%


$

2,348


$

2,571


(9)%


Auto

57


50


14

140


120


17


Student

58


98


(41

)

155


295


(47

)

Total net charge-offs

$

874


$

946


(8)

$

2,643


$

2,986


(11

)

Net charge-off rate:

Credit Card (a)

2.41

%

2.52

%

2.54

%

2.77

%

Auto

0.40


0.38


0.34


0.30


Student

2.67


3.95


2.33


3.89


Total net charge-off rate

1.82


1.99


1.88


2.14


Delinquency rates

30+ day delinquency rate:

Credit Card (b)

1.38


1.43


1.38


1.43


Auto

1.06


0.97


1.06


0.97


Student (c)

1.99


2.43


1.99


2.43


Total 30+ day delinquency rate

1.31


1.35


1.31


1.35


90+ day delinquency rate – Credit Card (b)

0.66


0.67


0.66


0.67


Nonperforming assets (d)

$

393


$

379


4


$

393


$

379


4


Allowance for loan losses:

Credit Card

$

3,434


$

3,590


(4

)

$

3,434


$

3,590


(4

)

Auto & Student

698


750


(7

)

698


750


(7

)

Total allowance for loan losses

$

4,132


$

4,340


(5

)%

$

4,132


$

4,340


(5)%


Allowance for loan losses to period-end loans:

Credit Card (b)

2.73

%

2.84

%

2.73

%

2.84

%

Auto & Student

1.06


1.20


1.06


1.20


Total allowance for loan losses to period-end loans

2.16


2.30


2.16


2.30


(a)

Average credit card loans included loans held-for-sale of $1.3 billion and $335 million for the three months ended September 30, 2015 and 2014 , respectively, and $1.9 billion and $352 million for the nine months ended September 30, 2015 and 2014, respectively. These amounts are excluded when calculating the net charge-off rate.

(b)

Period-end credit card loans included loans held-for-sale of $1.3 billion and $395 million at September 30, 2015 and 2014 , respectively. These amounts were excluded when calculating delinquency rates and the allowance for loan losses to period-end loans.

(c)

Excluded student loans insured by U.S. government agencies under the FFELP of $507 million and $640 million at September 30, 2015 and 2014 , respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.

(d)

Nonperforming assets excluded student loans insured by U.S. government agencies under the FFELP of $289 million and $354 million at September 30, 2015 and 2014 , respectively, that are 90 or more days past due. These amounts have been excluded from nonaccrual loans based upon the government guarantee.

Card Services supplemental information

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2015


2014


Change

2015

2014

Change

Revenue

Noninterest revenue

$

838


$

991


(15)%


$

2,676


$

2,857


(6

)%

Net interest income

3,051


2,876


6


8,807


8,515


3


Total net revenue

3,889


3,867


1


11,483


11,372


1


Provision for credit losses

759


798


(5

)

2,348


2,371


(1

)

Noninterest expense

1,581


1,494


6


4,521


4,584


(1

)

Income before income tax expense

1,549


1,575


(2

)

4,614


4,417


4


Net income

$

961


$

979


(2)%


$

2,861


$

2,668


7

 %

Percentage of average loans:

Noninterest revenue

2.63

%

3.12

%

2.86

%

3.07

%

Net interest income

9.58


9.05


9.40


9.15


Total net revenue

12.22


12.17


12.25


12.23



29


CORPORATE & INVESTMENT BANK

For a discussion of the business profile of CIB, see pages 92–96 of JPMorgan Chase's 2014 Annual Report and Line of Business Metrics on pages 182–183 .

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2015


2014


Change

2015

2014

Change

Revenue

Investment banking fees

$

1,612


$

1,542


5

 %

$

5,198


$

4,759


9

 %

Principal transactions

2,370


2,567


(8

)

8,509


8,235


3


Lending- and deposit-related fees

389


424


(8

)

1,186


1,317


(10

)

Asset management, administration and commissions

1,083


1,141


(5

)

3,418


3,506


(3

)

All other income

294


455


(35

)

744


1,057


(30

)

Noninterest revenue

5,748


6,129


(6

)

19,055


18,874


1


Net interest income

2,420


2,976


(19

)

7,418


8,338


(11

)

Total net revenue (a)

8,168


9,105


(10

)

26,473


27,212


(3

)

Provision for credit losses

232


(67

)

NM


251


(102

)

NM

Noninterest expense

Compensation expense

2,434


2,805


(13

)

8,113


8,432


(4

)

Noncompensation expense

3,697


3,230


14


8,812


9,265


(5

)

Total noninterest expense

6,131


6,035


2


16,925


17,697


(4

)

Income before income tax expense

1,805


3,137


(42

)

9,297


9,617


(3

)

Income tax expense

341


1,457


(77

)

2,955


3,681


(20

)

Net income

$

1,464


$

1,680


(13

)%

$

6,342


$

5,936


7

 %

Financial ratios

Return on common equity

8

%

10

%

13

%

12

%

Overhead ratio

75


66


64


65

%

Compensation expense as a percentage of total net revenue

30


31


31


31


(a)

Included tax-equivalent adjustments, predominantly due to income tax credits related to alternative energy investments; income tax credits and amortization of the cost of investments in affordable housing projects; as well as tax-exempt income from municipal bond investments of $417 million and $374 million for the three months ended September 30, 2015 and 2014, respectively, and $1.2 billion and $1.1 billion for the nine months ended September 30, 2015 and 2014, respectively.

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions)

2015

2014

Change

2015

2014

Change

Revenue by business

Investment banking revenue (a)

$

1,530


$

1,451


5

 %

$

4,906


$

4,472


10

 %

Treasury Services (b)

899


940


(4

)

2,730


2,791


(2

)

Lending (b)

334


313


7


1,071


1,189


(10

)

Total Banking (a)

2,763


2,704


2


8,707


8,452


3


Fixed Income Markets (a)

2,933


3,787


(23

)

10,018


11,422


(12

)

Equity Markets (a)

1,403


1,286


9


4,630


3,901


19


Securities Services

915


1,088


(16

)

2,844


3,257


(13

)

Credit Adjustments & Other (c)

154


240


(36

)

274


180


52


Total Markets & Investor Services (a)

5,405


6,401


(16

)

17,766


18,760


(5

)

Total net revenue

$

8,168


$

9,105


(10

)%

$

26,473


$

27,212


(3)%


(a)

Effective in the second quarter of 2015, Investment banking revenue (formerly Investment banking fees) incorporates all revenue associated with investment banking activities, and is reported net of investment banking revenue shared with other lines of business; previously such shared revenue had been reported in Fixed Income Markets and Equity Markets. Prior period amounts have been revised to conform with the current period presentation.

(b)

Effective in the second quarter of 2015, Trade Finance revenue was transferred from Treasury Services to Lending. Prior period amounts have been revised to conform with the current period presentation.

(c)

Consists primarily of credit valuation adjustments ("CVA") managed by the credit portfolio group, and funding valuation adjustments ("FVA") and debit valuation adjustments ("DVA") on OTC derivatives and structured notes. Results are presented net of associated hedging activities and net of CVA and FVA amounts allocated to Fixed Income Markets and Equity Markets.


30


Quarterly results

Net income was $1.5 billion, down 13% compared with $1.7 billion in the prior year, reflecting lower net revenue and a higher provision for credit losses, predominantly offset by lower income tax expense, largely reflecting the release in 2015 of U.S. deferred taxes associated with the restructuring of certain non-U.S. entities.

Banking revenue was $2.8 billion, up 2% from the prior year. Investment banking revenue was up 5% compared with the prior year on higher advisory and debt underwriting fees, largely offset by lower equity underwriting fees. Advisory fees were up 22% driven by a greater share of fees for completed transactions. Debt underwriting fees were up 17% compared with the prior year, reflecting higher noninvestment-grade issuance fees. Equity underwriting fees were down 35% as industry-wide fee levels declined. Treasury Services revenue was $899 million, down 4% compared with the prior year, driven by lower net interest income.

Markets & Investor Services revenue was $5.4 billion, down 16% from the prior year. Fixed Income Markets revenue of $2.9 billion was down 23% from the prior year driven by the impact of business simplification, lower revenue in Commodities and continued weakness in Credit, partially offset by strength in Currencies & Emerging Markets. The lower Fixed Income revenue also reflected higher interest costs on higher long-term debt. Equity Markets revenue of $1.4 billion was up 9% with strong performance across derivatives and cash equities driven by higher client volumes.

The provision for credit losses was $232 million, compared to a benefit of $67 million in the prior year, reflecting a higher allowance for loan losses, including the impact of select downgrades within the Oil & Gas portfolio.

Noninterest expense was $6.1 billion, up 2% from the prior year, driven by higher legal expense, offset by lower compensation expense and the benefit from business simplification.


Year-to-date results

Net income was $6.3 billion, up 7% compared with $5.9 billion in the prior year, reflecting lower noninterest expense and lower income tax expense, largely reflecting the release in 2015 of U.S. deferred taxes associated with the restructuring of certain non-U.S. entities, largely offset by lower net revenue and a higher provision for credit losses.

Banking revenue was $8.7 billion, up 3% from the prior year. Investment banking revenue was $4.9 billion, up 10% from the prior year. The increase was primarily driven by higher advisory and debt underwriting fees, partially offset by lower equity underwriting fees. Advisory fees of $1.5 billion were up 27%, driven by a greater share of fees for completed transactions and growth in industry-wide fee levels. Debt underwriting fees were $2.6 billion, up 11%, primarily driven by a higher share of fees for investment-grade bonds. Equity underwriting fees of $1.1 billion were down 10% on lower industry-wide fee levels. Treasury Services revenue was $2.7 billion, down 2% compared with the prior year, primarily driven by lower net interest income. Lending revenue was $1.1 billion, down 10% from the prior year, primarily driven by lower revenue in trade finance and losses on securities received from restructurings.

Markets & Investor Services revenue was $17.8 billion, down 5% compared with the prior year. Fixed Income Markets revenue of $10.0 billion was down 12% from the prior year, primarily driven by the impact of business simplification and weakness in Credit, partially offset by strength in Currencies & Emerging Markets and Rates. The lower Fixed Income revenue also reflected higher interest costs on higher long-term debt. Equity Markets revenue of $4.6 billion was up 19% on higher derivatives and cash equities driven by higher client volumes.

The provision for credit losses was $251 million, compared to a benefit of $102 million in the prior year, reflecting a higher allowance for loan losses, including the impact of select downgrades within the Oil & Gas portfolio.

Noninterest expense was $16.9 billion, down 4% from the prior year, primarily driven by the benefit from business simplification, partially offset by higher legal expense.







31


Selected metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except headcount)

2015

2014

Change

2015

2014

Change

Selected balance sheet data (period-end)

Assets

$

801,133


$

873,971


(8

)%

$

801,133


$

873,971


(8

)%

Loans:

Loans retained (a)

101,420


95,608


6


101,420


95,608


6


Loans held-for-sale and loans at fair value

3,369


6,724


(50

)

3,369


6,724


(50

)

Total loans

104,789


102,332


2


104,789


102,332


2


Core loans

104,270


99,653


5


104,270


99,653


5


Equity

62,000


61,000


2


62,000


61,000


2


Selected balance sheet data (average)

Assets

$

789,975


$

853,453


(7

)

$

833,233


$

850,362


(2

)

Trading assets-debt and equity instruments

288,828


320,380


(10

)

306,072


314,577


(3

)

Trading assets-derivative receivables

63,561


63,068


1


69,904


62,235


12


Loans:

Loans retained (a)

97,518


95,373


2


97,108


95,972


1


Loans held-for-sale and loans at fair value

3,827


8,018


(52

)

4,463


8,331


(46

)

Total loans

101,345


103,391


(2

)

101,571


104,303


(3

)

Equity

62,000


61,000


2


62,000


61,000


2


Headcount (b)

49,384


51,437


(4

)%

49,384


51,437


(4

)%

(a)

Loans retained includes credit portfolio loans, trade finance loans, other held-for-investment loans and overdrafts.

(b)

Effective in the second quarter of 2015, certain technology staff were transferred from CIB to CB; previously-reported headcount has been revised to conform with the current period presentation. As the related expense for these staff is not material, prior period expenses have not been revised. Prior to the second quarter of 2015, compensation expense related to this headcount was recorded in the CIB, with an allocation to CB (reported in noncompensation expense); commencing with the second quarter of 2015, such expense is recorded as compensation expense in CB and accordingly total noninterest expense related to this headcount in both CB and CIB remains unchanged.


32


Selected metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except ratios and where otherwise noted)

2015

2014

Change

2015

2014

Change

Credit data and quality statistics

Net charge-offs/(recoveries)

$

2


$

(3

)

NM

$

(24

)

$

(8

)

(200

)%

Nonperforming assets:

Nonaccrual loans:

Nonaccrual loans retained (a)(b)

464


112


314


464


112


314


Nonaccrual loans held-for-sale and loans at fair value

12


119


(90

)

12


119


(90

)

Total nonaccrual loans

476


231


106


476


231


106


Derivative receivables

235


312


(25

)

235


312


(25

)

Assets acquired in loan satisfactions

56


67


(16

)

56


67


(16

)

Total nonperforming assets

767


610


26


767


610


26


Allowance for credit losses:

Allowance for loan losses

1,205


1,083


11


1,205


1,083


11


Allowance for lending-related commitments

547


445


23


547


445


23


Total allowance for credit losses

1,752


1,528


15%


1,752


1,528


15%


Net charge-off/(recovery) rate (a)

0.01%


(0.01

)%

(0.03)%


(0.01

)%

Allowance for loan losses to period-end loans retained (a)

1.19


1.13


1.19


1.13


Allowance for loan losses to period-end loans retained, excluding trade finance and conduits (c)

1.85


1.88


1.85


1.88


Allowance for loan losses to nonaccrual loans retained (a)(b)

260


967


260


967


Nonaccrual loans to total period-end loans

0.45

%

0.23

 %

0.45

 %

0.23

 %

(a)

Loans retained includes credit portfolio loans, trade finance loans, other held-for-investment loans and overdrafts.

(b)

Allowance for loan losses of $160 million and $19 million were held against these nonaccrual loans at September 30, 2015 and 2014, respectively.

(c)

Management uses allowance for loan losses to period-end loans retained, excluding trade finance and conduits, a non-GAAP financial measure, to provide a more meaningful assessment of CIB's allowance coverage ratio.


33


Business metrics

Three months ended September 30,

Nine months ended September 30,

(in millions, except where otherwise noted)

2015

2014

Change

2015

2014

Change

Advisory

$

503


$

413


22%


$

1,511


$

1,193


27%


Equity underwriting

269


414


(35

)

1,120


1,244


(10

)

Debt underwriting

840


715


17


2,567


2,322


11


Total investment banking fees

$

1,612


$

1,542


5%


$

5,198


$

4,759


9%



League table results – wallet share

Nine months ended
September 30, 2015

Full-year 2014


Share

Rank


Share

Rank

Based on fees (a)

Debt, equity and equity-related

Global

8.0

%

#1

7.6

%

#1


U.S.

11.7


1

10.7


1


Long-term debt (b)

Global

8.5


1

8.0


1


U.S.

11.9


1

11.6


1


Equity and equity-related

Global (c)

7.4


1

7.1


3


U.S.

11.4


1

9.6


2


M&A (d)

Global

8.6


2

8.0


2


U.S.

9.8


2

9.7


2


Loan syndications

Global

8.2


1

9.3


1


U.S.

11.7


1

13.1


1


Global investment banking fees (e)

8.2

%

#1

8.0

%

#1


League table results – volumes

Nine months ended
September 30, 2015

Full-year 2014

Share

Rank

Share

Rank

Based on volumes (f)

Debt, equity and equity-related

Global

7.1

%

#1

6.8

%

#1


U.S.

11.8


1

11.8


1


Long-term debt (b)

Global

7.0


1

6.7


1


U.S.

11.2


1

11.3


1


Equity and

equity-related

Global (c)

7.4


2

7.5


3


U.S.

12.8


1

11.0


2


M&A announced (d)

Global

24.2


3

20.3


2


U.S.

30.2


3

25.1


3


Loan syndications

Global

10.9


1

12.3


1


U.S.

16.6

%

#1

19.0

%

#1



(a)

Source: Dealogic. Reflects the ranking of revenue wallet and market share

(b)

Long-term debt rankings include investment-grade, high-yield, supranationals, sovereigns, agencies, covered bonds, asset-backed securities ("ABS") and mortgage-backed securities; and exclude money market, short-term debt, and U.S. municipal securities.

(c)

Global equity and equity-related rankings include rights offerings and Chinese A-Shares.

(d)

M&A and Announced M&A rankings reflect the removal of any withdrawn transactions. U.S. M&A revenue wallet represents wallet from client parents based in the U.S. U.S. announced M&A volumes represents any U.S. involvement ranking.

(e)

Global investment banking fees per Dealogic exclude money market, short-term debt and shelf deals.

(f)

Source: Dealogic. Reflects transaction volume and market share. Global announced M&A is based on transaction value at announcement; because of joint M&A assignments, M&A market share of all participants will add up to more than 100%. All other transaction volume-based rankings are based on proceeds, with full credit to each book manager/equal if joint.


Business metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except where otherwise noted)

2015

2014

Change

2015

2014

Change

Assets under custody ("AUC") by asset class (period-end)

(in billions):

Fixed Income

$

12,190


$

12,525


(3)%


$

12,190


$

12,525


(3)%


Equity

5,848


7,037


(17

)

5,848


7,037


(17

)

Other (a)

1,653


1,683


(2

)

1,653


1,683


(2

)

Total AUC

$

19,691


$

21,245


(7

)

$

19,691


$

21,245


(7

)

Client deposits and other third party liabilities (average)

$

372,070


$

419,576


(11

)

$

405,576


$

411,824


(2

)

Trade finance loans (period-end)

21,138


27,510


(23

)%

21,138


27,510


(23

)%

(a)

Consists of mutual funds, unit investment trusts, currencies, annuities, insurance contracts, options and other contracts.


34


International metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except where otherwise noted)

2015

2014

Change

2015

2014

Change

Total net revenue (a)

Europe/Middle East/Africa

$

2,508


$

3,025


(17

)%

$

8,689


$

9,471


(8

)%

Asia/Pacific

1,224


1,235


(1

)

3,845


3,407


13


Latin America/Caribbean

300


339


(12

)

851


905


(6

)

Total international net revenue

4,032


4,599


(12

)

13,385


13,783


(3

)

North America

4,136


4,506


(8

)

13,088


13,429


(3

)

Total net revenue

$

8,168


$

9,105


(10

)

$

26,473


$

27,212


(3

)

Loans (period-end) (a)

Europe/Middle East/Africa

$

25,793


$

25,742


-


$

25,793


$

25,742


-


Asia/Pacific

17,453


22,960


(24

)

17,453


22,960


(24

)

Latin America/Caribbean

8,418


9,508


(11

)

8,418


9,508


(11

)

Total international loans

51,664


58,210


(11

)

51,664


58,210


(11

)

North America

49,756


37,398


33


49,756


37,398


33


Total loans

$

101,420


$

95,608


6


$

101,420


$

95,608


6


Client deposits and other third-party liabilities (average) (a)

Europe/Middle East/Africa

$

130,247


$

157,436


(17

)

$

146,155


$

150,653


(3

)

Asia/Pacific

66,101


70,840


(7

)

67,259


65,751


2


Latin America/Caribbean

21,462


21,438


-


22,800


22,364


2


Total international

$

217,810


$

249,714


(13

)

$

236,214


$

238,768


(1

)

North America

154,260


169,862


(9

)

169,362


173,056


(2

)

Total client deposits and other third-party liabilities

$

372,070


$

419,576


(11

)

$

405,576


$

411,824


(2

)

AUC (period-end)

(in billions) (a)

North America

$

11,944


$

11,690


2


$

11,944


$

11,690


2


All other regions

7,747


9,555


(19

)

7,747


9,555


(19

)

Total AUC

$

19,691


$

21,245


(7

)%

$

19,691


$

21,245


(7

)%


(a)

Total net revenue is based predominantly on the domicile of the client or location of the trading desk, as applicable. Loans outstanding (excluding loans held-for-sale and loans at fair value), client deposits and other third-party liabilities, and AUC are based predominantly on the domicile of the client.


35


COMMERCIAL BANKING

For a discussion of the business profile of CB, see pages 97–99 of JPMorgan Chase's 2014 Annual Report and Line of Business Metrics on page 183 .

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions)

2015

2014

Change

2015

2014

Change

Revenue

Lending- and deposit-related fees

$

229


$

241


(5

)%

$

708


$

739


(4

)%

Asset management, administration and commissions

22


21


5


68


70


(3

)

All other income (a)

271


309


(12

)

991


897


10


Noninterest revenue

522


571


(9

)

1,767


1,706


4


Net interest income

1,122


1,132


(1

)

3,358


3,406


(1

)

Total net revenue (b)

1,644


1,703


(3

)

5,125


5,112


-


Provision for credit losses

82


(79

)

NM


325


(141

)

NM


Noninterest expense

Compensation expense

311


301


3


928


900


3


Noncompensation expense

408


367


11


1,203


1,129


7


Total noninterest expense

719


668


8


2,131


2,029


5


Income before income tax expense

843


1,114


(24

)

2,669


3,224


(17

)

Income tax expense

325


443


(27

)

1,028


1,282


(20

)

Net income

$

518


$

671


(23

)%

$

1,641


$

1,942


(15

)%

(a)

Includes revenue from investment banking products and commercial card transactions.

(b)

Total net revenue included tax-equivalent adjustments from income tax credits related to equity investments in designated community development entities that provide loans to qualified businesses in low-income communities, as well as tax-exempt income from municipal bond activity of $116 million and $108 million for the three months ended September 30, 2015 and 2014 , respectively, and $344 million and $317 million for the nine months ended September 30, 2015 and 2014 , respectively.


Quarterly results

Net income was $518 million, a decrease of 23% compared with the prior year, driven by a higher provision for credit losses, lower net revenue, and higher noninterest expense.

Net revenue was $1.6 billion, a decrease of 3% compared with the prior year. Net interest income was $1.1 billion, or flat compared with the prior year, reflecting yield compression in both loans and deposits, partially offset by higher lending balances. Noninterest revenue was $522 million, down 9% compared with the prior year, driven by lower investment banking revenue.

Noninterest expense was $719 million, up 8% compared with the prior year, driven by higher investment in controls.

The provision for credit losses was $82 million, reflecting a modest increase in the allowance for loan losses for Oil & Gas exposure. The prior year quarter was a benefit of $79 million.

Year-to-date results

Net income was $1.6 billion, a decrease of 15% compared with the prior year, driven by a higher provision for credit losses and higher noninterest expense.

Net revenue was $5.1 billion, flat compared with the prior year. Net interest income was $3.4 billion, or flat compared with the prior year, reflecting yield compression, largely offset by higher lending balances. Noninterest revenue was $1.8 billion, up 4% compared with the prior year, driven by higher investment banking revenue.

Noninterest expense was $2.1 billion, up 5% compared with the prior year, driven by higher investment in controls.

The provision for credit losses was $325 million, reflecting an increase in the allowance for loan losses for Oil & Gas exposure and other select downgrades. The prior year was a benefit of $141 million.


36


Selected metrics

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2015

2014

Change

2015

2014

Change

Revenue by product

Lending (a)

$

850


$

828


3

 %

$

2,542


$

2,515


1

 %

Treasury services (a)

633


670


(6

)

1,926


2,024


(5

)

Investment banking

130


166


(22

)

574


478


20


Other (a)

31


39


(21

)

83


95


(13

)

Total Commercial Banking net revenue

$

1,644


$

1,703


(3

)

$

5,125


$

5,112


-


Investment banking revenue, gross (b)

$

382


$

501


(24

)

$

1,724


$

1,429


21


Revenue by client segment

Middle Market Banking (c)

$

675


$

686


(2

)

$

2,040


$

2,099


(3

)

Corporate Client Banking (c)

446


502


(11

)

1,542


1,458


6


Commercial Term Lending

318


312


2


944


939


1


Real Estate Banking

123


124


(1

)

356


375


(5

)

Other

82


79


4


243


241


1


Total Commercial Banking net revenue

$

1,644


$

1,703


(3

)%

$

5,125


$

5,112


-

 %

Financial ratios

Return on common equity

14%


18

%

15

%

18

%

Overhead ratio

44


39


42


40



(a)

Effective in the second quarter of 2015, Commercial Card and Chase Commerce Solutions/Paymentech product revenue was transferred from Lending and Other, respectively, to Treasury Services. Prior period amounts were revised to conform with the current period presentation.

(b)

Represents the total revenue from investment banking products sold to CB clients.

(c)

Effective in the first quarter of 2015, mortgage warehouse lending clients were transferred from Middle Market Banking to Corporate Client Banking. Prior period revenue, period-end loans, and average loans by client segment were revised to conform with the current period presentation.


37


Selected metrics (continued)

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except headcount)

2015

2014

Change

2015

2014

Change

Selected balance sheet data (period-end)

Total assets

$

201,157


$

191,563


5

 %

$

201,157


$

191,563


5

 %

Loans:

Loans retained

162,269


143,490


13


162,269


143,490


13


Loans held-for-sale and loans at fair value

213


353


(40

)

213


353


(40

)

Total loans

$

162,482


$

143,843


13


$

162,482


$

143,843


13


Core loans

161,662


142,548


13


161,662


142,548


13


Equity

14,000


14,000


-


14,000


14,000


-


Period-end loans by client segment

Middle Market Banking (a)

$

51,985


$

50,909


2


$

51,985


$

50,909


2


Corporate Client Banking (a)

29,634


23,244


27


29,634


23,244


27


Commercial Term Lending

60,684


52,235


16


60,684


52,235


16


Real Estate Banking

15,068


12,818


18


15,068


12,818


18


Other

5,111


4,637


10


5,111


4,637


10


Total Commercial Banking loans

$

162,482


$

143,843


13


$

162,482


$

143,843


13


Selected balance sheet data (average)

Total assets

$

197,274


$

190,678


3


$

197,319


$

191,922


3


Loans:

Loans retained

158,845


142,139


12


154,595


139,566


11


Loans held-for-sale and loans at fair value

359


649


(45

)

595


889


(33

)

Total loans

$

159,204


$

142,788


11


$

155,190


$

140,455


10


Client deposits and other third-party liabilities

180,892


204,654


(12

)

195,874


202,532


(3

)

Equity

14,000


14,000


-


14,000


14,000


-


Average loans by client segment

Middle Market Banking (a)

$

51,373


$

50,955


1


$

51,120


$

50,995


-


Corporate Client Banking (a)

28,964


23,501


23


28,209


22,757


24


Commercial Term Lending

59,323


51,567


15


56,980


50,479


13


Real Estate Banking

14,487


12,268


18


13,901


11,803


18


Other

5,057


4,497


12


4,980


4,421


13


Total Commercial Banking loans

$

159,204


$

142,788


11


$

155,190


$

140,455


10


Headcount (b)

7,735


7,413


4

 %

7,735


7,413


4

 %

(a)

Effective in the first quarter of 2015, mortgage warehouse lending clients were transferred from Middle Market Banking to Corporate Client Banking. Prior period revenue, period-end loans, and average loans by client segment were revised to conform with the current period presentation.

(b)

Effective in the second quarter of 2015, certain technology staff were transferred from CIB to CB; previously-reported headcount has been revised to conform with the current period presentation. As the related expense for these staff is not material, prior period expenses have not been revised. Prior to the second quarter of 2015, compensation expense related to this headcount was recorded in the CIB, with an allocation to CB (reported in noncompensation expense); commencing with the second quarter of 2015, such expense is recorded as compensation expense in CB and accordingly total noninterest expense related to this headcount in both CB and CIB remains unchanged.


38


Selected metrics (continued)

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except ratios)

2015

2014

Change

2015


2014


Change

Credit data and quality statistics

Net charge-offs/(recoveries)

$

(2

)

$

5


NM

$

5


$

(35

)

NM


Nonperforming assets

Nonaccrual loans:

Nonaccrual loans retained (a)

423


361


17


423


361


17

 %

Nonaccrual loans held-for-sale and loans at fair value

16


14


14


16


14


14


Total nonaccrual loans

439


375


17


439


375


17


Assets acquired in loan satisfactions

4


11


(64

)

4


11


(64

)

Total nonperforming assets

443


386


15


443


386


15


Allowance for credit losses:

Allowance for loan losses

2,782


2,529


10


2,782


2,529


10


Allowance for lending-related commitments

170


178


(4

)

170


178


(4

)

Total allowance for credit losses

2,952


2,707


9

 %

2,952


2,707


9

 %

Net charge-off/(recovery) rate (b)

-


0.01

%

-


(0.03

)%

Allowance for loan losses to period-end loans retained

1.71


1.76


1.71


1.76


Allowance for loan losses to nonaccrual loans retained (a)

658


701


658


701


Nonaccrual loans to period-end total loans

0.27


0.26


0.27


0.26


(a)

Allowance for loan losses of $80 million and $71 million was held against nonaccrual loans retained at September 30, 2015 and 2014 , respectively.

(b)

Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.


39


ASSET MANAGEMENT

For a discussion of the business profile of AM, see pages 100–102 of JPMorgan Chase's 2014 Annual Report and Line of Business Metrics on pages 183–184 .

Selected income statement data

(in millions, except ratios and headcount)

Three months ended September 30,

Nine months ended September 30,

2015

2014

Change

2015


2014


Change

Revenue

Asset management, administration and commissions

$

2,237


$

2,263


(1

)%

$

6,847


$

6,605


4

 %

All other income

24


159


(85

)

342


415


(18

)

Noninterest revenue

2,261


2,422


(7

)

7,189


7,020


2


Net interest income

633


624


1


1,885


1,808


4


Total net revenue

2,894


3,046


(5

)

9,074


8,828


3


Provision for credit losses

(17

)

9


NM


(13

)

1


NM


Noninterest expense

Compensation expense

1,218


1,278


(5

)

3,806


3,765


1


Noncompensation expense

891


803


11


2,884


2,453


18


Total noninterest expense

2,109


2,081


1


6,690


6,218


8


Income before income tax expense

802


956


(16

)

2,397


2,609


(8

)

Income tax expense

327


366


(11

)

969


996


(3

)

Net income

$

475


$

590


(19

)

$

1,428


$

1,613


(11

)

Revenue by line of business

Global Investment Management

$

1,483


$

1,609


(8

)

$

4,686


$

4,587


2


Global Wealth Management

1,411


1,437


(2

)

4,388


4,241


3


Total net revenue

$

2,894


$

3,046


(5

)

$

9,074


$

8,828


3


Financial ratios

Return on common equity

20

%

25

%

20

%

23

%

Overhead ratio

73


68


74


70


Pretax margin ratio:

Global Investment Management

31


35


29


31


Global Wealth Management

24


27


24


27


Asset Management

28


31


26


30


Headcount

20,651


19,653


5


20,651


19,653


5


Number of client advisors

2,796


2,873


(3

)%

2,796


2,873


(3

)%

Quarterly results

Net income was $475 million, a decrease of 19% compared with the prior year, reflecting lower net revenue and higher noninterest expense.

Net revenue was $2.9 billion, an decrease of 5%. Net interest income was $633 million, up 1%, driven by higher loan balances. Noninterest revenue was $2.3 billion, down 7%, reflecting the sale of the Retirement Plan Services ("RPS") business in 2014, lower market levels driving lower transactional revenue and lower valuations of seed capital investments within All other income.

Noninterest expense was $2.1 billion, an increase of 1%, due to continued investment in both infrastructure and controls.

Year-to-date results

Net income was $1.4 billion, a decrease of 11% compared with the prior year, reflecting higher noninterest expense, largely offset by higher net revenue .

Net revenue was $9.1 billion, an increase of 3%. Net interest income was $1.9 billion, up 4%, driven by higher loan balances. Noninterest revenue was $7.2 billion, up 2%, on net client inflows into assets under management and higher average market levels, partially offset by the sale of RPS and lower transactional revenue.

Noninterest expense was $6.7 billion, an increase of 8%, predominantly due to higher legal expense, continued investment in both infrastructure and controls, and the impact of a loss from a held-for-sale asset.


40


Selected metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except ranking data and ratios)

2015

2014

Change

2015


2014


Change

% of JPM mutual fund assets rated as 4- or 5-star (a)

57

%

49

%

57

%

49

%

% of JPM mutual fund assets ranked in 1 st  or 2 nd  quartile: (b)

1 year

79


54


79


54


3 years

82


69


82


69


5 years

81


71


81


71


Selected balance sheet data (period-end)

Total assets

$

131,412


$

130,296


1

 %

$

131,412


$

130,296


1

 %

Loans (c)

110,314


102,411


8


110,314


102,411


8


Core loans

110,314


102,411


8


110,314


102,411


8


Deposits

140,121


150,268


(7

)

140,121


150,268


(7

)

Equity

9,000


9,000


-


9,000


9,000


-


Selected balance sheet data (average)

Total assets

$

131,100


$

128,477


2


$

129,326


$

125,567


3


Loans

108,741


101,427


7


106,446


98,615


8


Deposits

141,896


151,240


(6

)

150,840


149,480


1


Equity

9,000


9,000


-


9,000


9,000


-


Credit data and quality statistics

Net charge-offs

$

2


$

11


(82

)

$

4


$

3


33


Nonaccrual loans

229


184


24


229


184


24


Allowance for credit losses:

Allowance for loan losses

258


273


(5

)

258


273


(5

)

Allowance for lending-related commitments

4


4


-


4


4


-


Total allowance for credit losses

262


277


(5

)%

262


277


(5

)%

Net charge-off rate

0.01

%

0.04

%

0.01

%

-


Allowance for loan losses to period-end loans

0.23


0.27


0.23


0.27


Allowance for loan losses to nonaccrual loans

113


148


113


148


Nonaccrual loans to period-end loans

0.21


0.18


0.21


0.18


(a)

Represents the "overall star rating" derived from Morningstar for the U.S., the U.K., Luxembourg, Hong Kong and Taiwan domiciled funds; and Nomura "star rating" for Japan domiciled funds. Includes only Global Investment Management retail open ended mutual funds that have a rating. Excludes money market funds, Undiscovered Managers Fund, and Brazil and India domiciled funds.

(b)

Quartile ranking sourced from: Lipper for the U.S. and Taiwan domiciled funds; Morningstar for the U.K., Luxembourg and Hong Kong domiciled funds; Nomura for Japan domiciled funds and Fund Doctor for South Korea domiciled funds. Includes only Global Investment Management retail open ended mutual funds that are ranked by the aforementioned sources. Excludes money market funds, Undiscovered Managers Fund, and Brazil and India domiciled funds.

(c)

Included $25.4 billion and $21.3 billion of prime mortgage loans reported in the Consumer, excluding credit card, loan portfolio at September 30, 2015 and 2014 , respectively. For the same periods, excluded $2.2 billion and $3.0 billion , respectively, of prime mortgage loans reported in the Chief Investment Office ("CIO") portfolio within the Corporate segment.


41


Client assets

Assets under management were $1.7 trillion, flat compared with the prior year, due to net inflows to long-term and liquidity products offset by the effect of lower market levels.

Client assets were $2.3 trillion, down 1% from the prior year.


Client assets

September 30,

(in billions)

2015


2014


Change

Assets by asset class

Liquidity

$

463


$

440


5

 %

Fixed income

351


359


(2

)

Equity

336


372


(10

)

Multi-asset and alternatives

561


540


4


Total assets under management

1,711


1,711


-


Custody/brokerage/administration/deposits

612


633


(3

)

Total client assets

$

2,323


$

2,344


(1

)

Memo:

Alternatives client assets (a)

$

172


$

166


4


Assets by client segment

Private Banking

$

438


$

429


2


Institutional

816


799


2


Retail

457


483


(5

)

Total assets under management

$

1,711


$

1,711


-


Private Banking

$

1,037


$

1,052


(1

)

Institutional

823


803


2


Retail

463


489


(5

)

Total client assets

$

2,323


$

2,344


(1

)%

(a)

Represents assets under management, as well as client balances in brokerage accounts.


42


Client assets (continued)

Three months ended
September 30,

Nine months ended
September 30,

(in billions)

2015

2014

2015


2014


Assets under management rollforward

Beginning balance

$

1,781


$

1,707


$

1,744


$

1,598


Net asset flows:

Liquidity

(5

)

8


-


(9

)

Fixed income

(5

)

4


-


29


Equity

(5

)

-


(2

)

3


Multi-asset and alternatives

6


12


27


38


Market/performance/other impacts

(61

)

(20

)

(58

)

52


Ending balance, September 30

$

1,711


$

1,711


$

1,711


$

1,711


Client assets rollforward

Beginning balance

$

2,423


$

2,473


$

2,387


$

2,343


Net asset flows

(7

)

35


26


71


Market/performance/other impacts

(93

)

(164

)

(90

)

(70

)

Ending balance, September 30

$

2,323


$

2,344


$

2,323


$

2,344


International metrics

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in billions, except where otherwise noted)

2015

2014

Change

2015


2014


Change

Total net revenue

(in millions) (a)

Europe/Middle East/Africa

$

473


$

536


(12

)%

$

1,468


$

1,549


(5

)%

Asia/Pacific

267


295


(9

)

855


857


-


Latin America/Caribbean

182


209


(13

)

590


624


(5

)

Total international net revenue

922


1,040


(11

)

2,913


3,030


(4

)

North America

1,972


2,006


(2

)

6,161


5,798


6


Total net revenue

$

2,894


$

3,046


(5

)

$

9,074


$

8,828


3


Assets under management

Europe/Middle East/Africa

$

292


$

324


(10

)

$

292


$

324


(10

)

Asia/Pacific

119


132


(10

)

119


132


(10

)

Latin America/Caribbean

44


48


(8

)

44


48


(8

)

Total international assets under management

455


504


(10

)

455


504


(10

)

North America

1,256


1,207


4


1,256


1,207


4


Total assets under management

$

1,711


$

1,711


-


$

1,711


$

1,711


-


Client assets

Europe/Middle East/Africa

$

341


$

385


(11

)

$

341


$

385


(11

)

Asia/Pacific

168


181


(7

)

168


181


(7

)

Latin America/Caribbean

108


119


(9

)

108


119


(9

)

Total international client assets

617


685


(10

)

617


685


(10

)

North America

1,706


1,659


3


1,706


1,659


3


Total client assets

$

2,323


$

2,344


(1

)%

$

2,323


$

2,344


(1

)%

(a)

Regional revenue is based on the domicile of the client.



43


CORPORATE

For a discussion of Corporate, see pages 103–104 of JPMorgan Chase's 2014 Annual Report.

Selected income statement data

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions, except headcount)

2015


2014


Change


2015


2014


Change

Revenue

Principal transactions

$

(70

)

$

310


NM


$

97


$

688


(86

)%

Securities gains

25


6


317


118


43


174


All other income

118


134


(12

)

(2

)

594


NM

Noninterest revenue

73


450


(84

)

213


1,325


(84

)

Net interest income

(123

)

(525

)

77


(597

)

(1,560

)

62


Total net revenue (a)

(50

)

(75

)

33


(384

)

(235

)

(63

)

Provision for credit losses

(4

)

(8

)

50


(8

)

(29

)

72


Noninterest expense

Compensation expense

944


820


15


2,789


2,200


27


Noncompensation expense (b)

960


1,468


(35

)

2,697


3,242


(17

)

Subtotal

1,904


2,288


(17

)

5,486


5,442


1


Net expense allocated to other businesses

(1,732

)

(1,579

)

(10

)

(5,118

)

(4,719

)

(8

)

Total noninterest expense

172


709


(76

)

368


723


(49

)

Loss before income tax benefit

(218

)

(776

)

72


(744

)

(929

)

20


Income tax benefit

(1,935

)

(871

)

(122

)

(2,959

)

(1,246

)

(137

)

Net income

$

1,717


$

95


NM


$

2,215


$

317


NM

Total net revenue

Treasury and CIO

(89

)

(365

)

76


(630

)

(1,074

)

41


Other Corporate (c)

39


290


(87

)

246


839


(71

)

Total net revenue

$

(50

)

$

(75

)

33


$

(384

)

$

(235

)

(63

)

Net income/(loss)

Treasury and CIO

(40

)

(333

)

88


(373

)

(960

)

61


Other Corporate (c)

1,757


428


311


2,588


1,277


103


Total net income

$

1,717


$

95


NM


$

2,215


$

317


NM

Selected balance sheet data (period-end)

Total assets

$

799,166


$

882,792


(9

)

$

799,166


$

882,792


(9

)

Loans

2,332


3,086


(24

)

2,332


3,086


(24

)

Core loans

2,327


3,062


(24

)

2,327


3,062


(24

)

Headcount

29,307


25,199


16

 %

29,307


25,199


16%

(a)

Included tax-equivalent adjustments, predominantly due to tax-exempt income from municipal bond investments of $215 million and $190 million for the three months ended September 30, 2015 and 2014 , respectively, and $620 million and $534 million for the nine months ended September 30, 2015 and 2014 , respectively.

(b)

Included legal expense of $102 million and $512 million for the three months ended September 30, 2015 and 2014 , respectively, and $425 million and $737 million for the nine months ended September 30, 2015 and 2014 , respectively.

(c)

Effective with the first quarter of 2015, the Firm began including the results of Private Equity in the Other Corporate line within the Corporate segment. Prior period amounts have been revised to conform with the current period presentation. The Corporate segment's balance sheets and results of operations were not impacted by this reporting change.

Quarterly results

Net Income was $1.7 billion, compared with $95 million in the prior year.

Net revenue was a loss of $50 million in the current year, compared to a loss of $75 million in the prior year. Private Equity gains were $391 million lower compared to the prior year, reflecting lower valuation gains and lower net gains on sales.

Noninterest expense was $172 million, a decrease of $537 million from the prior year, primarily driven by lower legal expense.

The current quarter reflected tax benefits of $1.9 billion from the resolution of various tax audits compared with tax benefits of approximately $400 million in the prior year.


44


Year-to-date results

Net Income was $2.2 billion, compared with $317 million in the prior year.

Net revenue was a loss of $384 million, compared to a loss of $235 million in the prior year. Private Equity gains were $698 million lower compared to the prior year, reflecting lower valuation gains and lower net gains on sales. The current year included a $173 million pretax loss in Treasury and CIO primarily related to the accelerated amortization of cash flow hedges associated with the exit of certain non-operating deposits.

Noninterest expense was $368 million, a decrease of $355 million from the prior year, primarily driven by lower legal expense.

The current year reflected tax benefits of $2.4 billion from the resolution of various tax audits compared with tax benefits of approximately $550 million in the prior year.

Treasury and CIO overview

For a discussion of Treasury and CIO, see page 104 of the Firm's 2014 Annual Report.

At September 30, 2015 , the total Treasury and CIO investment securities portfolio was $303.1 billion , and the average credit rating of the securities comprising the portfolio was AA+ (based upon external ratings where available and, where not available, based primarily upon internal ratings that correspond to ratings as defined by S&P and Moody's). See Note 11 for further information on the Firm's investment securities portfolio.

For further information on liquidity and funding risk, see Liquidity Risk Management on pages 76–80 . For information on interest rate, foreign exchange and other risks, Treasury and CIO value-at-risk ("VaR") and the

Firm's earnings-at-risk, see Market Risk Management on pages 63–66 .


Selected income statement and balance sheet data

As of or for the three months
ended September 30,

As of or for the nine months
ended September 30,

(in millions)

2015


2014


Change


2015


2014


Change


Securities gains

$

25


$

6


317

 %

$

118


$

43


174

 %

Investment securities portfolio (average) (a)

306,370


355,577


(14

)

320,905


349,893


(8

)

Investment securities portfolio (period-end) (b)

303,057


358,516


(15

)

303,057


358,516


(15

)

Mortgage loans (average)

2,400


3,183


(25

)

2,595


3,424


(24

)

Mortgage loans (period-end)

2,293


3,048


(25

)%

2,293


3,048


(25

)%

(a)

Average investment securities included held-to-maturity balances of $50.7 billion and $48.3 billion for the three months ended September 30, 2015 and 2014 , respectively, and $50.2 billion and $46.6 billion for the nine months ended September 30, 2015 and 2014 , respectively.

(b)

Period-end investment securities included held-to-maturity balance of $50.2 billion and $48.8 billion at September 30, 2015 and 2014 , respectively.

Private equity portfolio information (a)(b)

(in millions)

September 30, 2015


December 31, 2014


Change


Carrying value

$

2,192


$

5,866


(63)%


Cost

3,832


6,281


(39)%


(a)

For more information on the Firm's methodologies regarding the valuation of the private equity portfolio, see Note 3 of JPMorgan Chase's 2014 Annual Report .

(b)

The sale of a portion of the Private Equity business was completed on January 9, 2015.



45


ENTERPRISE-WIDE RISK MANAGEMENT

Risk is an inherent part of JPMorgan Chase's business activities. When the Firm extends a consumer or wholesale loan, advises customers on their investment decisions, makes markets in securities, or conducts any number of other services or activities, the Firm takes on some degree of risk. The Firm's overall objective in managing risk is to protect the safety and soundness of the Firm, avoid excessive risk taking, and manage and balance risk in a manner that serves the interest of its clients, customers and shareholders.

The Firm's approach to risk management covers a broad spectrum of risk areas, such as credit, market, liquidity, model, structural interest rate, principal, country, operational, fiduciary and reputation risk.

The Firm believes that effective risk management requires:

Acceptance of responsibility, including identification and escalation of risk issues, by all individuals within the Firm;

Ownership of risk management within each line of business and corporate function; and

Firmwide structures for risk governance.

Firmwide Risk Management is overseen and managed on an enterprise-wide basis. The Firm's Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO"), Chief Risk Officer ("CRO") and Chief Operating Officer ("COO") develop and set the risk management framework and governance structure for the Firm, which is intended to provide comprehensive controls and ongoing management of the major risks inherent in the Firm's business activities. The Firm's risk management framework is intended to create a culture of transparency, awareness and personal responsibility through reporting, collaboration, discussion, escalation and sharing of information. The CEO, CFO, CRO and COO are ultimately responsible and accountable to the Firm's Board of Directors.

The Firm's risk culture strives for continual improvement through ongoing employee training and development, as well as talent retention. The Firm also approaches its incentive compensation arrangements through an integrated risk, compensation and financial management framework to encourage a culture of risk awareness and personal accountability.


The following provides an index of key risk management disclosures. For further information on these disclosures, refer to the page references noted below in both this Form 10-Q and JPMorgan Chase's 2014 Annual Report.

Risk disclosure

Form 10-Q page reference

Annual Report page reference

Enterprise-Wide Risk Management

46–80

105–160

Risk governance

106–109

Credit Risk Management

47–62

110–130

Credit Portfolio

112

Consumer Credit Portfolio

48–53

113–119

Wholesale Credit Portfolio

54–59

120–127

Allowance For Credit Losses

60–62

128–130

Market Risk Management

63–66

131–136

Risk identification and classification

132

Value-at-risk

63–65

133–135

Economic-value stress testing

135

Earnings-at-risk

66

136

Country Risk Management

67

137–138

Model Risk Management

139

Principal Risk Management

140

Operational Risk Management

68

141–143

Operational Risk Capital Measurement

141–142

Cybersecurity

68

142

Business and Technology resiliency

142–143

Legal Risk Management

144

Compliance Risk Management

144

Fiduciary Risk management

145

Reputation Risk Management

145

Capital Management

69–75

146–155

Liquidity Risk Management

76–80

156–160

HQLA

76

157

Funding

76–79

157–160

Credit ratings

79–80

160


46


CREDIT RISK MANAGEMENT

Credit risk is the risk of loss arising from the default of a customer, client or counterparty. The Firm provides credit to a variety of customers, ranging from large corporate and institutional clients to individual consumers and small businesses. For a further discussion of the Firm's Credit Risk Management framework and organization, and the identification, monitoring and management of credit risks, see Credit Risk Management on pages 110–130 of JPMorgan Chase's 2014 Annual Report.

In the following tables, reported loans include loans retained (i.e., held-for-investment); loans held-for-sale (which are carried at the lower of cost or fair value, with valuation changes recorded in noninterest revenue); and certain loans accounted for at fair value. In addition, the Firm records certain loans accounted for at fair value in trading assets. For further information regarding these loans, see Note 3. For additional information on the Firm's loans and derivative receivables, including the Firm's accounting policies, see Note 13 and Note 5, respectively.

For further information regarding the credit risk inherent in the Firm's investment securities portfolio, see Note 11 of this Form 10-Q, and Notes 11 and 12 of JPMorgan Chase's 2014 Annual Report; and for information regarding the credit risk inherent in the securities financing portfolio, see Note 12 of this Form 10-Q.

A significant deterioration in the credit quality of one of the Firm's borrowers or counterparties could lead to concerns about the credit quality of other borrowers or counterparties in similar, related, or dependent industries and thereby could exacerbate the Firm's credit risk exposure and potentially increase its losses, including mark-to-market losses in its trading businesses. 

Effective January 1, 2015, the Firm no longer includes within its disclosure of wholesale lending-related commitments the unused amount of advised uncommitted lines of credit as it is within the Firm's discretion whether or not to make a loan under these lines, and the Firm's approval is generally required prior to funding. Prior period amounts have been revised to conform with the current period presentation.

Total credit portfolio

Credit exposure

Nonperforming (b)(c)(d)

(in millions)

Sep 30,
2015

Dec 31,
2014

Sep 30,
2015

Dec 31,
2014

Loans retained

$

804,293


$

747,508


$

6,616


$

7,017


Loans held-for-sale

2,029


7,217


7


95


Loans at fair value

3,135


2,611


21


21


Total loans – reported

809,457


757,336


6,644


7,133


Derivative receivables

68,668


78,975


235


275


Receivables from customers and other

17,016


29,080


-


-


Total credit-related assets

895,141


865,391


6,879


7,408


Assets acquired in loan satisfactions

Real estate owned

NA


NA


367


515


Other

NA


NA


48


44


Total assets acquired in loan satisfactions

NA


NA


415


559


Total assets

895,141


865,391


7,294


7,967


Lending-related commitments

940,786


950,997


176


103


Total credit portfolio

$

1,835,927


$

1,816,388


$

7,470


$

8,070


Credit portfolio management derivatives notional, net (a)

$

(24,524

)

$

(26,703

)

$

(10

)

$

-


Liquid securities and other cash collateral held against derivatives

(19,699

)

(19,604

)

NA


NA


(in millions,

except ratios)

Three months

ended September 30,

Nine months
ended September 30,

2015


2014


2015

2014

Net charge-offs

$

963


$

1,114


$

3,022


$

3,541


Average retained loans

Loans – reported

787,678


732,288


767,952


726,659


Loans – reported, excluding residential real estate PCI loans

744,692


683,028


723,475


675,827


Net charge-off rates

Loans – reported

0.49

%

0.60

%

0.53

%

0.65

%

Loans – reported, excluding PCI

0.51


0.65


0.56


0.70


(a)

Represents the net notional amount of protection purchased and sold through credit derivatives used to manage both performing and nonperforming wholesale credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For additional information, see Credit derivatives on page 59 and Note 5.

(b)

Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as they are all performing.

(c)

At September 30, 2015 , and December 31, 2014 , nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $6.6 billion and $7.8 billion , respectively, that are 90 or more days past due; (2) student loans insured by U.S. government agencies under the FFELP of $289 million and $367 million , respectively, that are 90 or more days past due; and (3) REO insured by U.S. government agencies of $327 million and $462 million , respectively. These amounts have been excluded based upon the government guarantee. In addition, the Firm's policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance issued by the Federal Financial Institutions Examination Council ("FFIEC").

(d)

At September 30, 2015 , and December 31, 2014 , total nonaccrual loans represented 0.82% and 0.94% , respectively, of total loans.




47


CONSUMER CREDIT PORTFOLIO

The Firm's consumer portfolio consists primarily of residential real estate loans, credit card loans, auto loans, business banking loans, and student loans. The Firm's focus is on serving the prime segment of the consumer credit

market. For further information on consumer loans, see Note 13 of this Form 10-Q and Consumer Credit Portfolio on pages 113–119 and Note 14 of JPMorgan Chase's 2014 Annual Report.



The following table presents consumer credit-related information with respect to the credit portfolio held by CCB, prime mortgage and home equity loans held by AM, and prime mortgage loans held by Corporate.

Consumer credit portfolio

Three months ended September 30,

Nine months ended September 30,


(in millions, except ratios)

Credit exposure

Nonaccrual

loans (f)(g)

Net charge-offs/(recoveries) (h)

Average annual net charge-off/(recovery) rate (h)(i)

Net charge-offs/(recoveries) (h)

Average annual net charge-off/(recovery) rate (h)(i)

Sep 30,
2015

Dec 31,
2014

Sep 30,
2015

Dec 31,
2014

2015

2014

2015

2014

2015

2014

2015

2014

Consumer, excluding

credit card

Loans, excluding PCI loans and loans held-for-sale

Home equity – senior lien

$

15,156


$

16,367


$

883


$

938


$

23


$

19


0.57

 %

0.47

 %

$

58


$

65


0.50

 %

0.53

 %

Home equity – junior lien

31,974


36,375


1,373


1,590


60


76


0.70


0.80


187


321


0.77


1.11


Prime mortgage, including option ARMs

150,114


104,921


1,863


2,190


7


13


0.02


0.05


34


4


0.04


0.01


Subprime mortgage

3,853


5,056


812


1,036


(51

)

(25

)

(5.17

)

(1.68

)

(51

)

(17

)

(1.51

)

(0.35

)

Auto (a)

57,174


54,536


110


115


57


50


0.40


0.38


140


120


0.34


0.30


Business banking

20,871


20,058


236


279


50


75


0.96


1.53


177


220


1.16


1.53


Student and other

10,354


10,970


253


270


56


91


2.12


3.21


147


271


1.84


3.18


Total loans, excluding PCI loans and loans held-for-sale

289,496


248,283


5,530


6,418


202


299


0.29


0.50


692


984


0.35


0.55


Loans – PCI

Home equity

15,490


17,095


NA


NA


NA


NA


NA


NA


NA


NA


NA

NA

Prime mortgage

9,196


10,220


NA


NA


NA


NA


NA


NA


NA


NA


NA

NA

Subprime mortgage

3,329


3,673


NA


NA


NA


NA


NA


NA


NA


NA


NA

NA

Option ARMs

14,221


15,708


NA


NA


NA


NA


NA


NA


NA


NA


NA

NA

Total loans – PCI

42,236


46,696


NA


NA


NA


NA


NA


NA


NA


NA


NA

NA

Total loans – retained

331,732


294,979


5,530


6,418


202


299


0.25


0.41


692


984


0.30


0.46


Loans held-for-sale

237


(e)

395


(e)

-


91


-


-


-


-


-


-


-


-


Total consumer, excluding credit card loans

331,969


295,374


5,530


6,509


202


299


0.25


0.41


692


984


0.30


0.46


Lending-related commitments (b)

60,005


58,153


Receivables from customers (c)

119


108


Total consumer exposure, excluding credit card

392,093


353,635


Credit card

Loans retained (d)

125,634


128,027


-


-


759


798


2.41


2.52


2,348


2,571


2.54


2.77


Loans held-for-sale

1,345


3,021


-


-


-


-


-


-


-


-


-


-


Total credit card loans

126,979


131,048


-


-


759


798


2.41


2.52


2,348


2,571


2.54


2.77


Lending-related commitments (b)

526,433


525,963


Total credit card exposure

653,412


657,011


Total consumer credit portfolio

$

1,045,505


$

1,010,646


$

5,530


$

6,509


$

961


$

1,097


0.85

 %

1.05

 %

$

3,040


$

3,555


0.93

 %

1.15

 %

Memo: Total consumer credit portfolio,

excluding PCI

$

1,003,269


$

963,950


$

5,530


$

6,509


$

961


$

1,097


0.94

 %

1.19

 %

$

3,040


$

3,555


1.04

 %

1.31

 %

(a)

At September 30, 2015 , and December 31, 2014 , excluded operating lease assets of $8.4 billion and $6.7 billion , respectively.

(b)

Credit card and home equity lending-related commitments represent the total available lines of credit for these products. The Firm has not experienced, and does not anticipate, that all available lines of credit would be used at the same time. For credit card and home equity commitments (if certain conditions are met), the Firm can reduce or cancel these lines of credit by providing the borrower notice or, in some cases as permitted by law, without notice.

(c)

Receivables from customers represent margin loans to retail brokerage customers, and are included in accrued interest and accounts receivable on the Consolidated balance sheets.

(d)

Includes accrued interest and fees net of an allowance for the uncollectible portion of accrued interest and fee income.

(e)

Predominantly represents prime mortgage loans held-for-sale.


48


(f)

At September 30, 2015 , and December 31, 2014 , nonaccrual loans excluded: (1) mortgage loans insured by U.S. government agencies of $6.6 billion and $7.8 billion , respectively, that are 90 or more days past due; and (2) student loans insured by U.S. government agencies under the FFELP of $289 million and $367 million , respectively, that are 90 or more days past due. These amounts have been excluded from nonaccrual loans based upon the government guarantee. In addition, credit card loans are generally exempt from being placed on nonaccrual status, as permitted by regulatory guidance.

(g)

Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as they are all performing.

(h)

Net charge-offs and the net charge-off rates excluded write-offs in the PCI portfolio of $52 million and $87 million for the three months ended September 30, 2015 and 2014 , respectively, and $162 million and $ 196 million for the nine months ended September 30, 2015 and 2014 , respectively. These write-offs decreased the allowance for loan losses for PCI loans. See Consumer Credit Portfolio on pages 113–119 of JPMorgan Chase 's 2014 Annual Report for further details.

(i)

Average consumer loans held-for-sale were $2.1 billion and $876 million for the three months ended September 30, 2015 and 2014 , respectively, and $2.4 billion and $749 million for the nine months ended September 30, 2015 and 2014 , respectively. These amounts were excluded when calculating net charge-off rates.

Consumer, excluding credit card

Portfolio analysis

Consumer loan balances increased during the nine months ended September 30, 2015 , predominantly due to originations of high-quality prime mortgage loans that have been retained, partially offset by paydowns and the charge-off or liquidation of delinquent loans. Credit performance has continued to improve across most portfolios as the economy strengthened and home prices increased.

PCI loans are excluded from the following discussions of individual loan products and are addressed separately below. For further information about the Firm's consumer portfolio, including information about delinquencies, loan modifications and other credit quality indicators, see Note 14 of JPMorgan Chase's 2014 Annual Report.

Home equity: The home equity portfolio declined from 2014 year-end primarily reflecting loan paydowns and charge-offs. Early-stage delinquencies showed improvement from December 31, 2014 . Late-stage delinquencies continue to be elevated, although the Firm has seen improvement in the number of loans becoming severely delinquent, this improvement was offset by higher collateral values, which resulted in lower write-downs on these delinquent loans. Net charge-offs for the nine months ended September 30, 2015 for both senior and junior lien home equity loans declined when compared with the same period of the prior year as a result of improvement in home prices and delinquencies, but charge-offs remain elevated compared with pre-recessionary levels.

Approximately 15% of the Firm's home equity portfolio consists of home equity loans ("HELOANs") and the remainder consists of home equity lines of credit ("HELOCs"). Approximately 60% of the HELOANs are senior liens and the remainder are junior liens. For further information on the Firm's home equity portfolio, see Consumer Credit Portfolio on pages 113–119 of JPMorgan Chase's 2014 Annual Report.

The unpaid principal balance of HELOCs outstanding was $42 billion at September 30, 2015 . Of this $42 billion , approximately $6 billion has recast since January 1, 2014 from interest-only to fully amortizing payments; based upon contractual terms, approximately $17 billion is scheduled to recast, consisting of $1 billion during the remainder of 2015, $6 billion in 2016, $6 billion in 2017 and $4 billion in 2018 and beyond. However, of the total $17 billion scheduled to recast, $11 billion is expected to actually recast; and the remaining $6 billion represents loans to borrowers who are expected either to pre-pay or charge-off prior to recast. The Firm has considered this payment recast risk in its allowance for loan losses based upon the estimated amount of payment shock (i.e., the excess of the fully-amortizing payment over the interest-only payment in effect prior to recast) expected to occur at the payment recast date, along with the corresponding estimated probability of default and loss severity assumptions. Certain factors, such as future developments in both unemployment rates and home prices, could have a significant impact on the performance of these loans.

The Firm manages the risk of HELOCs during their revolving period by closing or reducing the undrawn line to the extent permitted by law when borrowers are exhibiting a material deterioration in their credit risk profile. The Firm will continue to evaluate both the near-term and longer-term repricing and recast risks inherent in its HELOC portfolio to ensure that changes in the Firm's estimate of incurred losses are appropriately considered in the allowance for loan losses and that the Firm's account management practices are appropriate given the portfolio's risk profile.

High-risk seconds are junior lien loans where the borrower has a senior lien loan that is either delinquent or has been modified. Such loans are considered to pose a higher risk of default than junior lien loans for which the senior lien is neither delinquent nor modified. At September 30, 2015 , the Firm estimated that its home equity portfolio contained approximately $1.5 billion of current junior lien loans that were considered high risk seconds, compared with $1.8 billion at December 31, 2014 . The Firm estimates the balance of its total exposure to high-risk seconds on a quarterly basis using internal data and loan level credit bureau data (which typically provides the delinquency status of the senior lien). The estimated balance of these high-risk seconds may vary from quarter to quarter for reasons such as the movement of related senior liens into and out of the 30+ day delinquency bucket.


49


Current high-risk seconds

(in billions)

September 30,
2015

December 31,
2014

Junior liens subordinate to:

Modified current senior lien

$

0.6


$

0.7


Senior lien 30 – 89 days delinquent

0.4


0.5


Senior lien 90 days or more delinquent (a)

0.5


0.6


Total current high-risk seconds

$

1.5


$

1.8


(a)

Junior liens subordinate to senior liens that are 90 days or more past due are classified as nonaccrual loans. At September 30, 2015 , and December 31, 2014 , excluded approximately $30 million and approximately $50 million , respectively, of junior liens that are performing but not current, which were placed on nonaccrual status in accordance with the regulatory guidance.

Of the estimated $1.5 billion of high-risk junior liens at September 30, 2015 , the Firm owns approximately 10% and services approximately 20% of the related senior lien loans to the same borrowers. The performance of the Firm's junior lien loans is generally consistent regardless of whether the Firm owns or services, or does not own or service, the senior lien. The increased probability of default associated with these higher-risk junior lien loans was considered in estimating the allowance for loan losses.

Mortgage: Prime mortgages, including option adjustable-rate mortgages ("ARMs") and loans held-for-sale, increased from December 31, 2014 as originations of high-quality loans that have been retained were partially offset by paydowns, the runoff of option ARM loans and the charge-off or liquidation of delinquent loans. High-quality originations for the nine months ended September 30, 2015 included both jumbo and conforming loans, primarily consisting of fixed interest rate loans. Excluding loans insured by U.S. government agencies, both early-stage and late-stage delinquencies showed improvement from December 31, 2014 . Nonaccrual loans decreased from December 31, 2014 , but remain elevated primarily as a result of loss mitigation activities. Net charge-offs for the three and nine months ended September 30, 2015 remain low, reflecting continued improvement in home prices and delinquencies.

At September 30, 2015 , and December 31, 2014 , the Firm's prime mortgage portfolio included $11.3 billion and $12.4 billion , respectively, of mortgage loans insured and/or guaranteed by U.S. government agencies, of which $8.5 billion and $9.7 billion , respectively, were 30 days or more past due (of these past due loans, $6.6 billion and $7.8 billion , respectively, were 90 days or more past due). The Firm has entered into a settlement regarding loans insured under federal mortgage insurance programs overseen by the Federal Housing Administration ("FHA"), the U.S. Department of Housing and Urban Development ("HUD"), and the U.S. Department of Veterans Affairs ("VA"); the Firm will continue to monitor exposure on future claim payments for government insured loans, but any financial impact related to exposure on future claims is not expected to be significant and was considered in estimating the

allowance for loan losses. For further discussion of the settlement, see Note 31 of JPMorgan Chase's 2014 Annual Report .

At September 30, 2015 , and December 31, 2014 , the Firm's prime mortgage portfolio included $17.3 billion and $16.3 billion , respectively, of interest-only loans, which represented 12% and 15% , respectively, of the prime mortgage portfolio. These loans have an interest-only payment period generally followed by an adjustable-rate or fixed-rate fully amortizing payment period to maturity and are typically originated as higher-balance loans to higher-income borrowers. To date, losses on this portfolio generally have been consistent with the broader prime mortgage portfolio and the Firm's expectations. The Firm continues to monitor the risks associated with these loans.

Subprime mortgages continued to decrease due to portfolio runoff. Early-stage and late-stage delinquencies have improved from December 31, 2014 . Net charge-offs for the three and nine months ended September 30, 2015 have benefited from improvement in home prices and delinquencies compared with the prior year.

Auto: Auto loans increased compared with December 31, 2014 as new originations outpaced paydowns and payoffs. Nonaccrual loans decreased compared with December 31, 2014 . Net charge-offs for the three and nine months ended September 30, 2015 increased compared with the same periods of the prior year as a result of higher loan balances and a moderate increase in loss severity. The auto loan portfolio predominantly consists of prime-quality credits.

Business banking: Business banking loans increased compared with December 31, 2014 as new originations outpaced paydowns and payoffs. Nonaccrual loans decreased compared with December 31, 2014 . Net charge-offs for the three and nine months ended September 30, 2015 decreased from the same periods of the prior year.

Student and other: Student and other loans decreased from December 31, 2014 , due primarily to the runoff of the student loan portfolio. Student nonaccrual loans decreased from December 31, 2014 . Net charge-offs for the three and nine months ended September 30, 2015 decreased from the same periods of the prior year.

Purchased credit-impaired loans: PCI loans acquired in the Washington Mutual transaction decreased as the portfolio continues to run off.

As of September 30, 2015 , approximately 14% of the option ARM PCI loans were delinquent and approximately 64% of the portfolio has been modified into fixed-rate, fully amortizing loans. Substantially all of the remaining loans are making amortizing payments, although such payments are not necessarily fully amortizing. This latter group of loans is subject to the risk of payment shock due to future payment recast. Default rates generally increase on option ARM loans when payment recast results in a payment increase. The expected increase in default rates is considered in the Firm's quarterly impairment assessment.


50


The following table provides a summary of lifetime principal loss estimates included in either the nonaccretable difference or the allowance for loan losses.

Summary of PCI loans lifetime principal loss estimates

Lifetime loss

 estimates (a)

LTD liquidation

 losses (b)

(in billions)

Sep 30,
2015

Dec 31,
2014

Sep 30,
2015

Dec 31,
2014

Home equity

$

14.4


$

14.6


$

12.7


$

12.4


Prime mortgage

4.0


3.8


3.6


3.5


Subprime mortgage

3.3


3.3


3.0


2.8


Option ARMs

10.1


9.9


9.5


9.3


Total

$

31.8


$

31.6


$

28.8


$

28.0


(a)

Includes the original nonaccretable difference established in purchase accounting of $30.5 billion for principal losses plus additional principal losses recognized subsequent to acquisition through the provision and allowance for loan losses. The remaining nonaccretable difference for principal losses was $1.6 billion and $2.3 billion at September 30, 2015 , and December 31, 2014 , respectively.

(b)

Life-to-date ("LTD") liquidation losses represent both realization of loss upon loan resolution and any principal forgiven upon modification.

Current estimated LTVs of residential real estate loans

The current estimated average loan-to-value ("LTV") ratio for residential real estate loans retained, excluding mortgage loans insured by U.S. government agencies and PCI loans, was 60% at September 30, 2015 , compared with 61% at December 31, 2014 .

The following table presents the current estimated LTV ratios for PCI loans, as well as the ratios of the carrying value of the underlying loans to the current estimated collateral value. Because such loans were initially measured at fair value, the ratios of the carrying value to the current estimated collateral value will be lower than the current estimated LTV ratios, which are based on the unpaid principal balances. The estimated collateral values used to calculate these ratios do not represent actual appraised loan-level collateral values; as such, the resulting ratios are necessarily imprecise and should therefore be viewed as estimates.


LTV ratios and ratios of carrying values to current estimated collateral values – PCI loans

September 30, 2015

December 31, 2014

(in millions,

except ratios)

Unpaid principal balance

Current estimated

LTV ratio (a)

Net carrying value (c)

Ratio of net

carrying value

to current estimated

collateral value (c)

Unpaid principal

balance

Current estimated

LTV ratio (a)

Net carrying value (c)

Ratio of net

carrying value

to current estimated

collateral value (c)

Home equity

$

15,867


80

%

(b)

$

13,782


74

%

(d)

$

17,740


83

%

(b)

$

15,337


78

%

(d)

Prime mortgage

9,220


72


8,165


64


10,249


76


9,027


67


Subprime mortgage

4,151


77


3,329


62


4,652


82


3,493


62


Option ARMs

14,766


70


14,172


67


16,496


74


15,514


70


(a)

Represents the aggregate unpaid principal balance of loans divided by the estimated current property value. Current property values are estimated at least quarterly based on home valuation models that utilize nationally recognized home price index valuation estimates; such models incorporate actual data to the extent available and forecasted data where actual data is not available.

(b)

Represents current estimated combined LTV for junior home equity liens, which considers all available lien positions, as well as unused lines, related to the property. All other products are presented without consideration of subordinate liens on the property.

(c)

Net carrying value includes the effect of fair value adjustments that were applied to the consumer PCI portfolio at the date of acquisition and is also net of the allowance for loan losses at September 30, 2015 , and December 31, 2014 , of $1.0 billion and $1.2 billion for prime mortgage, $49 million and $194 million for option ARMs, $1.7 billion and $1.8 billion for home equity, respectively, and $180 million for subprime mortgage at December 31, 2014 . There was no allowance for loan losses for subprime mortgage at September 30, 2015 .

(d)

The current period ratio has been updated to include the effect of any outstanding senior lien related to a property for which the Firm holds the junior home equity lien. The prior period ratio has been revised to conform with the current presentation.


The current estimated average LTV ratios were 74% and 81% for California and Florida PCI loans, respectively, at September 30, 2015 , compared with 77% and 88% , respectively, at December 31, 2014 . Average LTV ratios have declined consistent with recent improvements in home prices. Although home prices have improved, home prices in most areas of California and Florida are still lower than at the peak of the housing market; this continues to negatively affect current estimated average LTV ratios and the ratio of net carrying value to current estimated collateral value for loans in the PCI portfolio.

For further information on current estimated LTVs on residential real estate loans, see Note 13.

Geographic composition of residential real estate loans

For information on the geographic composition of the Firm's residential real estate loans, see Note 13.

Loan modification activities – residential real estate loans

The performance of modified loans generally differs by product type due to differences in both the credit quality and the types of modifications provided. Performance metrics for modifications to the residential real estate portfolio, excluding PCI loans, that have been seasoned more than nine months show weighted-average redefault rates of 19% for senior lien home equity, 22% for junior lien home equity, 17% for prime mortgages including option ARMs, and 29% for subprime mortgages. The cumulative performance metrics for modifications to the PCI residential real estate portfolio that have been seasoned more than nine months show weighted average redefault


51


rates of 20% for home equity, 18% for prime mortgages, 16% for option ARMs and 33% for subprime mortgages. The favorable performance of the PCI option ARM modifications is the result of a targeted proactive program which fixed the borrower's payment to the amount at the point of modification. The cumulative redefault rates reflect the performance of modifications completed under both the Home Affordable Modification Program ("HAMP") and the Firm's proprietary modification programs (primarily the Firm's modification program that was modeled after HAMP) from October 1, 2009, through September 30, 2015 .

Certain loans that were modified under HAMP and the Firm's proprietary modification programs have interest rate reset provisions ("step-rate modifications"). Interest rates on these loans generally began to increase beginning in 2014 by 1% per year, and continue to do so, until the rate reaches a specified cap, typically at a prevailing market interest rate for a fixed-rate loan as of the modification date. The carrying value of non-PCI loans modified in step-rate modifications was $4 billion at September 30, 2015 , with $0.5 billion that have experienced or are scheduled to experience the initial interest rate increase in 2015 and $1 billion that are scheduled to experience the initial rate increase in each of 2016 and 2017. The unpaid principal balance of PCI loans modified in step-rate modifications was $10 billion at September 30, 2015 , with $1 billion that have experienced or are scheduled to experience the initial interest rate increase in 2015, and $3 billion and $2 billion scheduled to experience the initial interest rate increase in 2016 and 2017, respectively. The impact of these potential interest rate increases is considered in the Firm's allowance for loan losses. The Firm continues to monitor this risk exposure to ensure that it is appropriately considered in the allowance for loan losses.

The following table presents information as of September 30, 2015 , and December 31, 2014 , relating to modified retained residential real estate loans for which concessions have been granted to borrowers experiencing financial difficulty. For further information on modifications for the three and nine months ended September 30, 2015 and 2014 , see Note 13.

Modified residential real estate loans

September 30, 2015

December 31, 2014

(in millions)

Retained loans

Non-accrual
retained loans (d)

Retained loans

Non-accrual
retained loans (d)

Modified residential real estate loans, excluding

   PCI loans (a)(b)

Home equity – senior lien

$

1,063


$

596


$

1,101


$

628


Home equity – junior lien

1,309


641


1,304


632


Prime mortgage, including option ARMs

4,973


1,373


6,145


1,559


Subprime mortgage

1,928


718


2,878


931


Total modified residential real estate loans, excluding PCI loans

$

9,273


$

3,328


$

11,428


$

3,750


Modified PCI loans (c)

Home equity

$

2,562


NA


$

2,580


NA


Prime mortgage

5,830


NA


6,309


NA


Subprime mortgage

3,303


NA


3,647


NA


Option ARMs

10,681


NA


11,711


NA


Total modified PCI loans

$

22,376


NA


$

24,247


NA


(a)

Amounts represent the carrying value of modified residential real estate loans.

(b)

At September 30, 2015 , and December 31, 2014 , $4.2 billion and $4.9 billion , respectively, of loans modified subsequent to repurchase from Ginnie Mae in accordance with the standards of the appropriate government agency (i.e., FHA, VA, RHS) are not included in the table above. When such loans perform subsequent to modification in accordance with Ginnie Mae guidelines, they are generally sold back into Ginnie Mae loan pools. Modified loans that do not re-perform become subject to foreclosure. For additional information about sales

of loans in securitization transactions with Ginnie Mae, see Note 15.

(c)

Amounts represent the unpaid principal balance of modified PCI loans.

(d)

As of September 30, 2015 , and December 31, 2014 , nonaccrual loans included $2.6 billion and $2.9 billion , respectively, of troubled debt restructurings ("TDRs") for which the borrowers were less than 90 days past due. For additional information about loans modified in a TDR that are on nonaccrual status, see Note 13.

Nonperforming assets

The following table presents information as of September 30, 2015 , and December 31, 2014 , about consumer, excluding credit card, nonperforming assets.

Nonperforming assets (a)

(in millions)

September 30,
2015

December 31,
2014

Nonaccrual loans (b)

Residential real estate

$

4,931


$

5,845


Other consumer

599


664


Total nonaccrual loans

5,530


6,509


Assets acquired in loan satisfactions

Real estate owned

307


437


Other

41


36


Total assets acquired in loan satisfactions

348


473


Total nonperforming assets

$

5,878


$

6,982


(a)

At September 30, 2015 , and December 31, 2014 , nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $6.6 billion and $7.8 billion , respectively, that are 90 or more days past due; (2) student loans insured by U.S. government


52


agencies under the FFELP of $289 million and $367 million , respectively, that are 90 or more days past due; and (3) real estate owned insured by U.S. government agencies of $327 million and $462 million , respectively. These amounts have been excluded based upon the government guarantee.

(b)

Excludes PCI loans that were acquired as part of the Washington Mutual transaction, which are accounted for on a pool basis. Since each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, the past-due status of the pools, or that of individual loans within the pools, is not meaningful. Because the Firm is recognizing interest income on each pool of loans, they are all considered to be performing.

Nonaccrual loans in the residential real estate portfolio totaled $4.9 billion at September 30, 2015 , of which 30% were greater than 150 days past due, compared with nonaccrual residential real estate loans of $5.8 billion at December 31, 2014 , of which 32% were greater than 150 days past due. In the aggregate, the unpaid principal balance of residential real estate loans greater than 150 days past due was charged down by approximately 46% and 50% to the estimated net realizable value of the collateral at September 30, 2015 , and December 31, 2014 , respectively.

Active and suspended foreclosure: For information on loans that were in the process of active or suspended foreclosure, see Note 13.

Nonaccrual loans: The following table presents changes in consumer, excluding credit card, nonaccrual loans for the nine months ended September 30, 2015 and 2014 .

Nonaccrual loans

Nine months ended September 30,

(in millions)

2015

2014

Beginning balance

$

6,509


$

7,496


Additions

2,714


3,811


Reductions:

Principal payments and other (a)

1,331


1,378


Charge-offs

614


1,061


Returned to performing status

1,323


1,691


Foreclosures and other liquidations

425


475


Total reductions

3,693


4,605


Net additions/(reductions)

(979

)

(794

)

Ending balance

$

5,530


$

6,702


(a)

Other reductions includes loan sales.


Credit Card

Total credit card loans decreased from December 31, 2014 due to seasonality, sales of non-core loans and the transfer of commercial card loans to the CIB. The 30+ day delinquency rate decreased to 1.38% at September 30, 2015 , from 1.44% at December 31, 2014 , and remains near record lows. For the three months ended September 30, 2015 and 2014 , the net charge-off rates were 2.41% and 2.52% , respectively. For the nine months ended September 30, 2015 and 2014, the net charge-off rates were 2.54% and 2.77% , respectively. Charge-offs improved compared with the prior year as a result of lower delinquent loans. The credit card portfolio continues to reflect a well-seasoned, largely rewards-based portfolio that has good U.S. geographic diversification. For information on the geographic composition of the Firm's credit card loans, see Note 13.

Modifications of credit card loans

At September 30, 2015 , and December 31, 2014 , the Firm had $1.6 billion and $2.0 billion , respectively, of credit card loans outstanding that have been modified in TDRs. These balances included both credit card loans with modified payment terms and credit card loans that reverted back to their pre-modification payment terms because the cardholder did not comply with the modified payment terms. The decrease in modified credit card loans outstanding from December 31, 2014 , was attributable to a reduction in new modifications as well as ongoing payments and charge-offs on previously modified credit card loans.

Consistent with the Firm's policy, all credit card loans typically remain on accrual status until charged-off. However, the Firm establishes an allowance, which is offset against loans and charged to interest income, for the estimated uncollectible portion of accrued interest and fee income.

For additional information about loan modification programs to borrowers, see Consumer Credit Portfolio

on pages 48–53 and Note 13.


53


WHOLESALE CREDIT PORTFOLIO

The Firm's wholesale businesses are exposed to credit risk through underwriting, lending and trading activities with and for clients and counterparties, as well as through various operating services such as cash management and clearing activities. A portion of the loans originated or acquired by the Firm's wholesale businesses is generally retained on the balance sheet. The Firm distributes a significant percentage of the loans it originates into the market as part of its syndicated loan business and to manage portfolio concentrations and credit risk.

As of September 30, 2015 , wholesale credit exposure (primarily CIB, CB and AM), excluding select downgrades within the Oil & Gas portfolio, continued to experience a generally favorable credit environment, characterized by stable credit quality trends with low levels of criticized exposure , nonaccrual loans and charge-offs. 

Wholesale credit portfolio

Credit exposure

Nonperforming (c)

(in millions)

Sep 30,
2015

Dec 31,
2014

Sep 30,
2015

Dec 31,
2014

Loans retained

$

346,927


$

324,502


$

1,086


$

599


Loans held-for-sale

447


3,801


7


4


Loans at fair value

3,135


2,611


21


21


Loans – reported

350,509


330,914


1,114


624


Derivative receivables

68,668


78,975


235


275


Receivables from customers and other (a)

16,897


28,972


-


-


Total wholesale credit-related assets

436,074


438,861


1,349


899


Lending-related commitments

354,348


366,881


176


103


Total wholesale credit exposure

$

790,422


$

805,742


$

1,525


$

1,002


Credit portfolio management derivatives notional, net (b)

$

(24,524

)

$

(26,703

)

$

(10

)

$

-


Liquid securities and other cash collateral held against derivatives

(19,699

)

(19,604

)

NA


NA


(a)

Receivables from customers and other include $16.8 billion and $28.8 billion of margin loans at September 30, 2015 , and December 31, 2014 , respectively, to prime and retail brokerage customers; these are classified in accrued interest and accounts receivable on the Consolidated balance sheets.

(b)

Represents the net notional amount of protection purchased and sold through credit derivatives used to manage both performing and nonperforming wholesale credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For additional information, see Credit derivatives on page 59 , and Note 5.

(c)

Excludes assets acquired in loan satisfactions.


54


The following tables present the maturity and ratings profiles of the wholesale credit portfolio as of September 30, 2015 , and December 31, 2014 . The ratings scale is based on the Firm's internal risk ratings, which generally correspond to the ratings as defined by S&P and Moody's.

Wholesale credit exposure – maturity and ratings profile

Maturity profile (e)

Ratings profile

September 30, 2015

Due in 1 year or less

Due after 1 year through 5 years

Due after 5 years

Total

Investment-grade

Noninvestment-grade

Total

Total % of IG

(in millions, except ratios)

AAA/Aaa to BBB-/Baa3

BB+/Ba1 & below

Loans retained

$

112,755


$

146,370


$

87,802


$

346,927


$

261,189


$

85,738


$

346,927


75

%

Derivative receivables

68,668


68,668


Less: Liquid securities and other cash collateral held against derivatives

(19,699

)

(19,699

)

Total derivative receivables, net of all collateral

13,754


13,623


21,592


48,969


42,864


6,105


48,969


88


Lending-related commitments

97,229


248,898


8,221


354,348


262,656


91,692


354,348


74


Subtotal

223,738


408,891


117,615


750,244


566,709


183,535


750,244


76


Loans held-for-sale and loans at fair value (a)

3,582


3,582


Receivables from customers and other

16,897


16,897


Total exposure – net of liquid securities and other cash collateral held against derivatives

$

770,723


$

770,723


Credit portfolio management derivatives net notional by reference entity ratings profile (b)(c)(d)

$

(1,308

)

$

(10,419

)

$

(12,797

)

$

(24,524

)

$

(21,140

)

$

(3,384

)

$

(24,524

)

86

%

Maturity profile (e)

Ratings profile

December 31, 2014

Due in 1 year or less

Due after 1 year through 5 years

Due after 5 years

Total

Investment-grade

Noninvestment-grade

Total

Total % of IG

(in millions, except ratios)

AAA/Aaa to BBB-/Baa3

BB+/Ba1 & below

Loans retained

$

112,411


$

134,277


$

77,814


$

324,502


$

241,666


$

82,836


$

324,502


74

%

Derivative receivables

78,975


78,975


Less: Liquid securities and other cash collateral held against derivatives

(19,604

)

(19,604

)

Total derivative receivables, net of all collateral

20,032


16,130


23,209


59,371


52,150


7,221


59,371


88


Lending-related commitments

94,635


262,572


9,674


366,881


284,288


82,593


366,881


77


Subtotal

227,078


412,979


110,697


750,754


578,104


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