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.

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

#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.

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

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.

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

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.

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 .

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.

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.

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.

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 .

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.

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.

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 .

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.

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 .

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.