10-Q 1 corpq32014.htm FORM 10-Q CORP Q3 2014


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, 2014
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).
¨  Yes
x  No
 
Number of shares of common stock outstanding as of September 30, 2014: 3,738,188,746
 




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, 2014 and 2013
90
 
Consolidated statements of comprehensive income (unaudited) for the three and nine months ended September 30, 2014 and 2013
91
 
Consolidated balance sheets (unaudited) at September 30, 2014, and December 31, 2013
92
 
Consolidated statements of changes in stockholders’ equity (unaudited) for the nine months ended September 30, 2014 and 2013
93
 
Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2014 and 2013
94
 
Notes to Consolidated Financial Statements (unaudited)
95
 
Report of Independent Registered Public Accounting Firm
179
 
Consolidated Average Balance Sheets, Interest and Rates (unaudited) for the three and nine months ended September 30, 2014 and 2013
180
 
Glossary of Terms and Line of Business Metrics
182
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
8
 
Consolidated Balance Sheets Analysis
11
 
Off-Balance Sheet Arrangements
13
 
Consolidated Cash Flows Analysis
14
 
Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures
15
 
Business Segment Results
17
 
Enterprise-Wide Risk Management
48
 
Credit Risk Management
49
 
Market Risk Management
67
 
Country Risk Management
70
 
Operational Risk Management
71
 
Capital Management
73
 
Liquidity Risk Management
80
 
Supervision and Regulation
84
 
Critical Accounting Estimates Used by the Firm
85
 
Accounting and Reporting Developments
88
 
Forward-Looking Statements
89
Item 3
Quantitative and Qualitative Disclosures About Market Risk
187
Item 4
Controls and Procedures
187
Part II - Other information
 
Item 1
Legal Proceedings
188
Item 1A
Risk Factors
188
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
188
Item 3
Defaults Upon Senior Securities
190
Item 4
Mine Safety Disclosure
190
Item 5
Other Information
190
Item 6
Exhibits
190

2



JPMorgan Chase & Co.
Consolidated financial highlights
(unaudited)
As of or for the period ended,
 
 
 
 
 
Nine months ended
September 30,
(in millions, except per share, ratio, headcount data and where
 otherwise noted)
3Q14
2Q14
1Q14
4Q13
3Q13
2014
2013
Selected income statement data
 
 
 
 
 
 
 
Total net revenue
$
24,246

$
24,454

$
22,993

$
23,156

$
23,117

$
71,693

$
73,450

Total noninterest expense
15,798

15,431

14,636

15,552

23,626

45,865

54,915

Pre-provision profit/(loss)
8,448

9,023

8,357

7,604

(509
)
25,828

18,535

Provision for credit losses
757

692

850

104

(543
)
2,299

121

Income before income tax expense
7,691

8,331

7,507

7,500

34

23,529

18,414

Income tax expense
2,119

2,346

2,233

2,222

414

6,698

5,769

Net income/(loss)
$
5,572

$
5,985

$
5,274

$
5,278

$
(380
)
$
16,831

$
12,645

Earnings per share data
 
 
 
 
 
 
 
Net income/(loss):
Basic
$
1.37

$
1.47

$
1.29

$
1.31

$
(0.17
)
$
4.13

$
3.08

 
Diluted
1.36

1.46

1.28

1.30

(0.17
)
4.10

3.05

Average shares:
Basic
3,755.4

3,780.6

3,787.2

3,762.1

3,767.0

3,774.4

3,789.2

 
Diluted
3,788.7

3,812.5

3,823.6

3,797.1

3,767.0

3,808.3

3,820.9

Market and per common share data
 
 
 
 
 
 
 
Market capitalization
225,188

216,725

229,700

219,657

194,312

225,188

194,312

Common shares at period-end
3,738.2

3,761.3

3,784.7

3,756.1

3,759.2

3,738.2

3,759.2

Share price(a):
 
 
 
 
 
 
 
High
$
61.85

$
61.29

$
61.48

$
58.55

$
56.93

$
61.85

$
56.93

Low
54.96

52.97

54.20

50.25

50.06

52.97

44.20

Close
60.24

57.62

60.71

58.48

51.69

60.24

51.69

Book value per share
56.50

55.53

54.05

53.25

52.01

56.50

52.01

Tangible book value per share (“TBVPS”)(b)
44.13

43.17

41.73

40.81

39.51

44.13

39.51

Cash dividends declared per share
0.40

0.40

0.38

0.38

0.38

1.18

1.06

Selected ratios and metrics
 
 
 
 
 
 
 
Return on common equity (“ROE”)
10
%
11
%
10
%
10
%
(1
)%
10
%
8
%
Return on tangible common equity (“ROTCE”)(b)
13

14

13

14

(2
)
13

11

Return on assets (“ROA”)
0.90

0.99

0.89

0.87

(0.06
)
0.93

0.71

Overhead ratio
65

63

64

67

102

64

75

Loans-to-deposits ratio
56

57

57

57

57

56

57

High quality liquid assets (“HQLA”) (in billions)(c)
$
572

$
576

$
538

$
522

$
538

$
572

$
538

Common equity tier 1 (“CET1”) capital ratio(d)
10.2
%
9.8
%
10.9%

10.7
%
10.5
 %
10.2
%
10.5
%
Tier 1 capital ratio(d)
11.5

11.1

12.1

11.9

11.7

11.5

11.7

Total capital ratio(d)
12.8

12.5

14.5

14.4

14.3

12.8

14.3

Tier 1 leverage ratio(d)
7.6

7.6

7.4

7.1

6.9

7.6

6.9

Selected balance sheet data (period-end)
 
 
 
 
 
 
 
Trading assets
$
410,657

$
392,543

$
375,204

$
374,664

$
383,348

$
410,657

$
383,348

Securities(e)
366,358

361,918

351,850

354,003

356,556

366,358

356,556

Loans
743,257

746,983

730,971

738,418

728,679

743,257

728,679

Total assets
2,527,005

2,520,336

2,476,986

2,415,689

2,463,309

2,527,005

2,463,309

Deposits
1,334,534

1,319,751

1,282,705

1,287,765

1,281,102

1,334,534

1,281,102

Long-term debt(f)
268,721

269,929

274,512

267,889

263,372

268,721

263,372

Common stockholders’ equity
211,214

208,851

204,572

200,020

195,512

211,214

195,512

Total stockholders’ equity
231,277

227,314

219,655

211,178

206,670

231,277

206,670

Headcount
242,388

245,192

246,994

251,196

255,041

242,388

255,041

Credit quality metrics
 
 
 
 
 
 
 
Allowance for credit losses
$
15,526

$
15,974

$
16,485

$
16,969

$
18,248

$
15,526

$
18,248

Allowance for loan losses to total retained loans
2.02%

2.08%

2.20%

2.25%

2.43%

2.02%

2.43%

Allowance for loan losses to retained loans excluding purchased credit-impaired loans(g)
1.63

1.69

1.75

1.80

1.89

1.63

1.89

Nonperforming assets
$
8,390

$
9,017

$
9,473

$
9,706

$
10,380

$
8,390

$
10,380

Net charge-offs
1,114

1,158

1,269

1,328

1,346

3,541

4,474

Net charge-off rate
0.60%

0.64%

0.71%

0.73%

0.74%

0.65%

0.83%

(a)
Share price shown for JPMorgan Chase’s common stock is from the New York Stock Exchange. JPMorgan Chase’s common stock is also listed and traded on the London Stock Exchange and the Tokyo Stock Exchange.
(b)
TBVPS and ROTCE are non-GAAP financial measures. TBVPS represents the Firm’s tangible common equity divided by common shares at period-end. ROTCE measures the Firm’s annualized earnings as a percentage of tangible common equity. For further discussion of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 15–16.
(c)
HQLA is the estimated amount of assets that qualify for inclusion in the final U.S. Liquidity Coverage Ratio (“U.S. LCR”) for 3Q14 and in the Basel III Liquidity Coverage Ratio (“Basel III LCR”) for prior periods; for additional information, see HQLA on page 83.
(d)
Basel III Transitional rules became effective on January 1, 2014; prior period data is based on Basel I rules. As of September 30, 2014, and June 30, 2014, the ratios presented are calculated under the Basel III Advanced Transitional Approach. As of March 31, 2014, the ratios presented are calculated under the Basel III Standardized Transitional Approach. CET1 capital under Basel III replaced Tier 1 common capital under Basel I. Prior to Basel III becoming effective on January 1, 2014, Tier 1 common capital under Basel I was a non-GAAP financial measure. See Regulatory capital on pages 73–77 for additional information on Basel III and non-GAAP financial measures of regulatory capital.
(e)
Included held-to-maturity (“HTM”) securities of $48.8 billion, $47.8 billion, $47.3 billion, $24.0 billion and $4.5 billion at September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively.
(f)
Included unsecured long-term debt of $204.7 billion, $205.6 billion, $206.1 billion, $199.4 billion and $199.2 billion at September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively.
(g)
Excludes the impact of residential real estate purchased credit-impaired (“PCI”) loans. For further discussion, see Allowance for credit losses on pages 64–66.


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”) in this Form 10-Q.
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, 2013, filed with the U.S. Securities and Exchange Commission (“2013 Annual Report” or “2013 Form 10-K”), to which reference is hereby made. See the Glossary of terms on pages 182–185 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 from those risks and uncertainties, see Forward-looking Statements on page 89 of this Form 10-Q and Part I, Item 1A, Risk Factors, on pages 9–18 of JPMorgan Chase’s 2013 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 $2.5 trillion in assets and $231.3 billion in stockholders’ equity as of September 30, 2014. 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 bank with U.S. branches in 23 states, and Chase Bank USA, National Association (“Chase Bank USA, N.A.”), a national bank 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.
JPMorgan Chase’s activities are organized, for management reporting purposes, into four major reportable business segments, as well as a Corporate/Private Equity 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 2013 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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Selected income statement data
 
 
 
 
 
 
 
 
 
 
 
Total net revenue
$
24,246

 
$
23,117

 
5
%
 
$
71,693

 
$
73,450

 
(2
)%
Total noninterest expense
15,798

 
23,626

 
(33
)
 
45,865

 
54,915

 
(16
)
Pre-provision profit
8,448

 
(509
)
 
NM

 
25,828

 
18,535

 
39

Provision for credit losses
757

 
(543
)
 
NM

 
2,299

 
121

 
NM 
Net income/(loss)
5,572

 
(380
)
 
NM

 
16,831

 
12,645

 
33

Diluted earnings per share
$
1.36

 
$
(0.17
)
 
NM

 
$
4.10

 
$
3.05

 
34
%
Return on common equity
10
%
 
(1
)%
 
 
 
10
%
 
8
%
 
 
Capital ratios(a)
 
 
 
 
 
 
 
 
 
 
 
CET1
10.2

 
10.5

 
 
 
10.2

 
10.5

 
 
Tier 1 capital
11.5

 
11.7

 
 
 
11.5

 
11.7

 
 
(a)
Basel III Transitional rules became effective on January 1, 2014; prior period data is based on Basel I rules. As of September 30, 2014, the ratios presented are calculated under the Basel III Advanced Transitional Approach. CET1 capital under Basel III replaced Tier 1 common capital under Basel I. Prior to Basel III becoming effective on January 1, 2014, Tier 1 common capital under Basel I was a non-GAAP financial measure. See Regulatory capital on pages 73–77 for additional information on Basel III and non-GAAP financial measures of regulatory capital.
Business Overview
JPMorgan Chase reported third-quarter 2014 net income of $5.6 billion, or $1.36 per share, on net revenue of $24.2 billion. Net income increased by $6.0 billion, to $5.6 billion, in the third quarter of 2014. Return on equity for the quarter was 10%, compared with (1)% for the prior-year quarter.
The Firm delivered strong underlying performance for the quarter. The increase in net income from the third quarter of 2013 was driven by lower noninterest expense and higher net revenue, partially offset by higher provision for credit losses.
Net revenue was $24.2 billion up $1.1 billion, or 5%, compared with the prior year. Noninterest revenue was $13.1 billion, up $797 million, or 6%, compared with the prior year. Net interest income was $11.1 billion, up $332 million, or 3%, compared with the prior year, reflecting lower interest expense, higher investment securities yields and higher loan balances, partially offset by lower loan yields.
The provision for credit losses for the three months ended September 30, 2014 increased from the prior year, reflecting an increase in the consumer provision for credit losses. The increase in the consumer provision for credit losses was the result of a lower benefit from reductions in the consumer allowance for loan losses, partially offset by lower net charge-offs. The current-quarter consumer provision reflected a $200 million reduction in the allowance for loan losses, compared to a $1.6 billion reduction in the prior year. The current-quarter consumer allowance release primarily reflects the continued improvement in home prices and delinquencies in the
 
residential real estate portfolio, the run-off of the student loan portfolio and lower estimated losses in auto loans.
Consumer net charge-offs were $1.1 billion, compared with $1.3 billion in the prior year, resulting in net charge-off rates, excluding PCI loans, of 1.19% and 1.47%, respectively.
The wholesale provision for credit losses reflected a generally favorable credit environment and stable credit quality trends. The wholesale provision for credit losses was a benefit of $140 million, compared with a benefit of $270 million in the prior year. Wholesale net charge-offs were $17 million, compared with $26 million in the prior year, resulting in net charge-rates of 0.02% and 0.03%, respectively.
The Firm’s allowance for loan losses to period-end loans retained, excluding PCI loans, was 1.63%, compared with 1.89% in the prior year. The Firm’s allowance for loan losses to retained nonaccrual loans, excluding PCI loans, was 155%, compared with 140% in the prior year. The Firm’s nonperforming assets totaled $8.4 billion, down from the prior quarter and prior year levels of $9.0 billion and $10.4 billion, respectively.
Noninterest expense was $15.8 billion, down $7.8 billion, or 33%, compared with the prior year, driven by lower legal expense. The current quarter noninterest expense included $1.1 billion of legal expense, compared with $9.3 billion of legal expense in the prior year.
Consumer & Business Banking (“CBB”) average deposits were up 9% and Business Banking loan originations were up 27%. Client investment assets were a record $207.8 billion, up 16%, and credit card sales volume was $119.5 billion, up 12% from the prior year. CIB maintained its #1


5


ranking for Global Investment Banking fees, and assets under custody were up 8% compared with the prior year. CB period-end loan balances were up 6%, and gross investment banking revenue from CB clients was up 12%. AM reported positive net long-term product flows for the twenty-second consecutive quarter, assets under management up 11% and record average loan balances of $101.4 billion.
Net income during the nine months ended September 30, 2014, was $16.8 billion, or $4.10 per share, compared with $12.6 billion, or $3.05 per share, during the nine months ended September 30, 2013. The increase was primarily driven by a decrease in noninterest expense, partially offset by an increase in provision for credit losses and lower revenue. Net revenue during the nine months of 2014 was $71.7 billion, down $1.8 billion, or 2%, compared with the prior year. Noninterest revenue was $39.1 billion, down $1.9 billion, or 5%, compared with the prior year. Net interest income was $32.6 billion, flat compared with the prior year, reflecting lower interest expense, higher investment securities yields and higher loan balances, partially offset by lower loan yields and lower average interest-earning trading asset balances. The higher provision for credit losses reflected a lower benefit from reductions in the consumer allowance for loan losses, partially offset by lower net charge-offs. The decrease in noninterest expense was driven by lower legal expense.
The Firm maintained its fortress balance sheet, ending the third quarter with estimated Basel III Advanced Fully Phased-in CET1 capital of $163.2 billion and a CET1 capital ratio of 10.1%. The Firm’s supplementary leverage ratio (“SLR”) was 5.5% and the Firm had $572 billion of high quality liquid assets (“HQLA”) as of September 30, 2014. Basel III Advanced Fully Phased-In measures and the SLR under the U.S. final SLR rule are non-GAAP financial measures. These measures are used by management, bank regulators, investors and analysts to assess and monitor the Firm’s capital position. 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 73–77.
JPMorgan Chase continued to support consumers, businesses and communities around the globe. The Firm provided credit and raised capital of $1.6 trillion for commercial and consumer clients during the nine months ended September 30, 2014. This included $15 billion of credit provided to U.S. small businesses and $464 billion of credit provided to corporations. The Firm raised more than $881 billion of capital for clients. In addition, more than $55 billion of credit was provided to, and capital was raised for, nonprofit and government entities, including states, municipalities, hospitals and universities.
For a detailed discussion of results by Line of Business
refer to the Business Segment Results section beginning on page 17.

 
2014 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 89 of this Form 10-Q and Risk Factors on pages 9-18 of JPMorgan Chase’s 2013 Annual Report. There is no assurance that actual results for the fourth quarter or full year of 2014 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 2014 should be viewed against the backdrop of the global and U.S. economies, including the strength of consumers and businesses, U.S. housing prices, the unemployment rate, implied market interest rates, financial market levels and 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 linked factors will affect the performance of the Firm and its lines of business, although each of these factors will affect each of the lines of business to a different degree.
The Firm expects full year 2014 adjusted expense to be above $58 billion; the amount of actual firmwide expense will be affected by performance-related compensation for 2014, driven by higher markets-related revenue. Management also expects firmwide net charge-offs for the full year 2014 to be less than $5 billion, below previous guidance.
In the Mortgage Banking (“MB”) business within CCB, pretax income in Mortgage Production is expected to be a small negative in the fourth quarter of 2014; the actual results will be market dependent. In Mortgage Servicing within Mortgage Banking, management expects servicing revenue to be at or slightly below $600 million in the fourth quarter of 2014, and to continue to decrease in 2015.
If current positive consumer credit trends continue, management expects CCB to have a reduction in the consumer allowance for loan losses by $1 billion or more over the next couple of years.
In CIB, Markets revenue in the fourth quarter of 2014 will be impacted by the Firm’s business simplification initiatives. These business simplification initiatives are expected to result in a decline of approximately $300 million, or 8%, in Markets revenue and a decline of approximately $200 million in expense, for the fourth quarter of 2014 compared to the prior-year quarter.
In AM, pretax margin and return on equity for the full year 2014 are expected to be below through-the-cycle targets.


6


Business events
Business simplification
The Firm has made substantial progress in completing its business simplification agenda to exit certain noncore businesses and activities. Recent examples include exiting the CIB’s business of providing transaction services for certain correspondent banking clients, the sale or substantial liquidation of all of the CIB’s physical commodities business and Global Special Opportunities Group investment portfolio, and the sale of AM’s Retirement Plan Services business.  The Firm expects the sale of a portion of the One Equity Partners (“OEP”) investment portfolio, and the formation by the OEP investment professionals of a new, independent management company, to occur by year-end. These actions will enable the Firm to focus on core activities for its core clients with an enhanced focus on its operational, regulatory, and litigation risks.
Regulatory developments
On September 2, 2014, the Office of the Comptroller of the Currency (“OCC”) released final regulations and guidelines establishing heightened standards for large banks. The guidelines establish minimum standards for the design and implementation of a risk governance framework for banks. JPMorgan Chase has three national bank subsidiaries that will be required to comply with the guidelines: JPMorgan Chase Bank, N.A., Chase Bank USA, N.A., and JPMorgan Bank & Trust Company, NA.
On September 3, 2014, the Federal Reserve and the OCC issued final rules for the Supplementary Leverage Ratio (“SLR”) and Liquidity Coverage Ratio (“LCR”).  For additional details on these ratios, see Regulatory capital and Liquidity risk management on pages 73–77 and pages 80–84, respectively. The Firm also anticipates that bank regulatory authorities will issue proposals with respect to the potential recalibration of the global systemically important bank (“GSIB”) framework and Total Loss Absorbing Capital (“TLAC”) in late 2014 or early 2015.
 
On October 11, 2014, the Firm, along with 17 other financial institutions, agreed in principle to adhere to the Resolution Stay Protocol developed by the International Swaps and Derivatives Association, Inc. in response to regulator concerns that the closeout of derivatives transactions during the resolution of a large cross-border financial institution could impede resolution efforts and potentially destabilize markets. The Resolution Stay Protocol provides for the contractual recognition of cross-border stays under various statutory resolution regimes and a contractual stay on certain cross-default rights. It is expected that the Firm and the other 17 financial institutions will formally adhere to the Resolution Stay Protocol once the text of the protocol is finalized in early November.
For additional Business events during the nine months ended September 30, 2014, and Subsequent events, see Note 2.




7


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, 2014 and 2013. 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 85–87 of this Form 10-Q and pages 174–178 of JPMorgan Chase’s 2013 Annual Report.

Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
2014
 
2013
 
Change
 
2014
 
2013
 
Change

Investment banking fees
$
1,538

 
$
1,507

 
2
%
 
$
4,709

 
$
4,669

 
1
%
Principal transactions
2,966

 
2,662

 
11

 
9,196

 
10,183

 
(10
)
Lending- and deposit-related fees
1,479

 
1,519

 
(3
)
 
4,347

 
4,476

 
(3
)
Asset management, administration and commissions
3,978

 
3,667

 
8

 
11,821

 
11,131

 
6

Securities gains
6

 
26

 
(77
)
 
48

 
659

 
(93
)
Mortgage fees and related income
903

 
841

 
7

 
2,708

 
4,116

 
(34
)
Card income
1,537

 
1,518

 
1

 
4,494

 
4,440

 
1

Other income(a)
732

 
602

 
22

 
1,798

 
1,364

 
32

Noninterest revenue
13,139

 
12,342

 
6

 
39,121

 
41,038

 
(5
)
Net interest income
11,107

 
10,775

 
3

 
32,572

 
32,412

 

Total net revenue
$
24,246

 
$
23,117

 
5
%
 
$
71,693

 
$
73,450

 
(2
)%
(a)
Included operating lease income of $433 million and $376 million for the three months ended September 30, 2014 and 2013, respectively, and $1.3 billion and $1.1 billion for the nine months ended September 30, 2014 and 2013, respectively.
Total net revenue for the three months ended September 30, 2014, increased by $1.1 billion compared with the three months ended September 30, 2013. The increase was predominantly due to higher net interest income; higher asset management, administration and commissions revenue; and higher principal transactions revenue. For the nine months ended September 30, 2014, total net revenue decreased by $1.8 billion from the same period of the prior year. The decrease was predominantly due to lower mortgage fees and related income; lower principal transactions revenue; and lower securities gains; partially offset by higher asset management, administration and commissions revenue; and higher other income.
Investment banking fees for the three and nine months ended September 30, 2014, increased slightly compared with the prior year, due to higher advisory and equity underwriting fees, largely offset by lower debt underwriting fees. The increase in advisory and equity underwriting fees was driven by higher industry-wide fee levels, while the decrease in debt underwriting fees was primarily related to lower industry-wide loan fee levels. For additional information on investment banking fees, see CIB segment results on pages 32–37, CB segment results on pages 38–40, and Note 6.
Principal transactions revenue in the three months ended September 30, 2014, increased compared with the prior period due to higher market-making revenue in CIB on particularly strong performance in currencies and emerging markets. The increase in market-making revenue was partly offset by lower private equity gains due to lower net valuation gains on investments. For the nine months ended September 30, 2014, principal transactions revenue decreased from the prior year reflecting, in CIB, lower fixed income markets revenue on lower client activity across most products, as well as lower equity markets revenue on
 
lower derivatives revenue compared with a strong prior year. The decrease was partially offset by higher private equity gains as a result of higher net gains on sales. For additional information on principal transactions revenue, see CIB and Corporate/Private Equity segment results on pages 32–37 and pages 45–47, respectively, and Note 6.
Lending- and deposit-related fees decreased compared with the three and nine months ended September 30, 2013, reflecting the impact of business simplification initiatives and lower trade finance revenue in CIB.
Asset management, administration and commissions revenue increased compared with the three and nine months ended September 30, 2013, reflecting net client inflows and the effect of higher market levels in AM and CCB. The increase in the nine months ended September 30, 2014 was offset partially by lower revenue in CCB related to the exit of a non-core product in the second half of 2013. For additional information on these fees and commissions, see the segment discussions for CCB on pages 18–31, AM on pages 41–44, and Note 6.
Securities gains in the nine months ended September 30, 2014, decreased compared with the prior period, reflecting lower repositioning activity of the investment securities portfolio in the current period. For additional information, see the Corporate/Private Equity segment discussion on pages 45–47, and Note 11.
Mortgage fees and related income in the nine months ended September 30, 2014, decreased compared with the prior period. The decrease was predominantly related to lower net production revenue, driven by lower volumes. The lower net production revenue was partially offset by higher mortgage servicing rights (“MSR”) risk management results. For additional information, see pages 26–28, and Note 16.


8


Other income increased from the three months ended September 30, 2013, reflecting a nonrecurring gain in MB and higher auto lease income resulting from growth in auto lease volume. The increase in the nine months ended September 30, 2014 compared with the prior period was due to the aforementioned items, as well as a benefit from a franchise tax settlement recorded in the second quarter of 2014 and the absence of a modest loss on the redemption of trust preferred securities recorded in the second quarter of 2013. The increase was partially offset by lower all other revenue in CIB and lower valuations of seed capital investments in AM.
Net interest income increased in the three and nine months ended September 30, 2014, compared with the prior year. The increase from both 2013 periods predominantly reflected the impact of lower interest expense, higher yields
 
on investment securities, and higher average loan balances, partially offset by lower yields on loans due to the run-off of higher-yielding loans and new originations of lower-yielding loans. The increase from the nine months ended September 30, 2013, was also partially offset by lower average interest-earning trading asset balances. The Firm’s average interest-earning assets were $2.1 trillion for the three months ended September 30, 2014, and the net interest yield on those assets, on a fully taxable-equivalent (“FTE”) basis, was 2.19%, an increase of 1 basis point from the prior year. For the nine months ended September 30, 2014, the Firm’s average interest-earning assets were $2.0 trillion, and the net interest yield on those assets, on a FTE basis, was 2.19%, a decrease of 6 basis points from the prior year.

Provision for credit losses
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Consumer, excluding credit card
$
99

 
$
(815
)
 
NM 
 
$
181

 
$
(1,345
)
 
NM 
Credit card
798

 
542

 
47
%
 
2,371

 
1,588

 
49
%
Total consumer
897

 
(273
)
 
NM 
 
2,552

 
243

 
NM 
Wholesale
(140
)
 
(270
)
 
48

 
(253
)
 
(122
)
 
(107
)
Total provision for credit losses
$
757

 
$
(543
)
 
NM 
 
$
2,299

 
$
121

 
NM 
The provision for credit losses for the three and nine months ended September 30, 2014 increased from the prior year, reflecting an increase in the consumer provision for credit losses. The increase in the consumer provision for credit losses was the result of a lower benefit from reductions in the consumer allowance for loan losses, partially offset by lower net charge-offs. The consumer allowance release was primarily related to the continued improvement in home prices and delinquencies in the
 
residential real estate portfolio, and the run-off of the student loan portfolio. The wholesale provision reflected a generally favorable credit environment and stable credit quality trends. For a more detailed discussion of the credit portfolio and the allowance for credit losses, see the segment discussions for CCB on pages 18–31, CIB on pages 32–37 and CB on pages 38–40, and the Allowance for credit losses section on pages 64–66.

Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Compensation expense
$
7,831

 
$
7,325

 
7
%
 
$
23,300

 
$
23,758

 
(2
)%
Noncompensation expense:
 
 
 
 
 
 
 
 
 
 
 
Occupancy
978

 
947

 
3

 
2,903

 
2,752

 
5

Technology, communications and equipment
1,465

 
1,356

 
8

 
4,309

 
4,049

 
6

Professional and outside services
1,907

 
1,897

 
1

 
5,625

 
5,532

 
2

Marketing
610

 
588

 
4

 
1,824

 
1,755

 
4

Other expense(a)(b)
2,956

 
11,373

 
(74
)
 
7,590

 
16,625

 
(54
)
Amortization of intangibles
51

 
140

 
(64
)
 
314

 
444

 
(29
)
Total noncompensation expense
7,967

 
16,301

 
(51
)
 
22,565

 
31,157

 
(28
)
Total noninterest expense
$
15,798

 
$
23,626

 
(33
)%
 
$
45,865

 
$
54,915

 
(16
)%
(a)
Included Firmwide legal expense of $1.1 billion and $9.3 billion for the three months ended September 30, 2014 and 2013, respectively, and $1.8 billion and $10.3 billion for the nine months ended September 30, 2014 and 2013, respectively.
(b)
Included Federal Deposit Insurance Corporation-related (“FDIC”) expense of $250 million and $362 million for the three months ended September 30, 2014 and 2013, respectively, and $809 million and $1.1 billion for the nine months ended September 30, 2014 and 2013, respectively.

9


Total noninterest expense for the three months ended September 30, 2014, decreased by $7.8 billion compared with the prior year. The decrease was driven by lower other expense, in particular, legal expense, partially offset by higher compensation expense. For the nine months ended September 30, 2014, total noninterest expense decreased by $9.1 billion from the prior year. The decrease was driven by the aforementioned decline in other expense, as well as lower compensation expense.
Compensation expense increased compared with the three months ended September 30, 2013, predominantly driven by the Firm’s investments in the businesses, including headcount for controls, and higher compensation expense in CIB. The increase was partially offset by lower headcount-related expense in MB, and lower postretirement benefit costs. For the nine months ended September 30, 2014, compensation expense decreased predominantly driven by lower headcount-related expense in MB, lower
 
performance-based compensation expense in CIB, and lower postretirement benefit costs. The decrease in compensation expense was partially offset by the Firm’s investments, including headcount for controls.
Noncompensation expense in the three and nine months ended September 30, 2014, decreased compared with the prior year. The decrease for both periods was due to lower other expense, predominantly as a result of lower legal expense (as the prior year third quarter included a $9.3 billion expense). Lower expense for foreclosure-related matters and lower production and servicing-related expense in Mortgage Banking, and lower FDIC-related assessments, also contributed to the decline for both periods. The decrease was offset partially by the Firm’s investments in the businesses, including for controls, and costs related to business simplification initiatives in CIB. 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,
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Income before income tax expense
$
7,691

 
$
34

 
NM 
 
$
23,529

 
$
18,414

 
28
%
Income tax expense
2,119

 
414

 
412
%
 
6,698

 
5,769

 
16

Effective tax rate
27.6
%
 
NM

 
 
 
28.5
%
 
31.3
%
 


The effective tax rate for the three months ended September 30, 2014, reflected benefits from tax adjustments and the settlement of tax audits; these benefits were partially offset by the impact of legal expense, which included nondeductible penalties. The effective tax rate for the three months ended September 30, 2013, was impacted by the substantial effect of that period’s legal expense, a portion of which included nondeductible penalties. The decrease in the effective tax rate from the nine months ended September 30, 2013, was largely attributable to the effect of the aforementioned nondeductible penalties, partially offset by higher reported pretax income in combination with changes in the mix of income and expense subject to U.S. federal, state and local income taxes, the write-down of deferred tax assets as a result of tax law changes enacted in New York State, comparably lower tax benefits associated with tax adjustments and the settlement of tax audits. For additional information on income taxes, see Critical Accounting Estimates Used by the Firm on pages 85–87.


10


CONSOLIDATED BALANCE SHEETS ANALYSIS
Selected Consolidated Balance Sheets data
 
(in millions)
Sep 30,
2014
 
Dec 31,
2013
Change
Assets
 
 
 
 
Cash and due from banks
$
25,372

 
$
39,771

(36
)%
Deposits with banks
414,312

 
316,051

31

Federal funds sold and securities purchased under resale agreements
214,336

 
248,116

(14
)
Securities borrowed
118,873

 
111,465

7

Trading assets:
 
 
 
 
Debt and equity instruments
338,204

 
308,905

9

Derivative receivables
72,453

 
65,759

10

Securities
366,358

 
354,003

3

Loans
743,257

 
738,418

1

Allowance for loan losses
14,889

 
16,264

(8
)
Loans, net of allowance for loan losses
728,368

 
722,154

1

Accrued interest and accounts receivable
75,504

 
65,160

16

Premises and equipment
15,177

 
14,891

2

Goodwill
47,970

 
48,081


Mortgage servicing rights
8,236

 
9,614

(14
)
Other intangible assets
1,274

 
1,618

(21
)
Other assets
100,568

 
110,101

(9
)
Total assets
$
2,527,005

 
$
2,415,689

5

Liabilities
 
 
 
 
Deposits
$
1,334,534

 
$
1,287,765

4

Federal funds purchased and securities loaned or sold under repurchase agreements
198,746

 
181,163

10

Commercial paper
59,960

 
57,848

4

Other borrowed funds
31,892

 
27,994

14

Trading liabilities:
 
 
 


Debt and equity instruments
84,305

 
80,430

5

Derivative payables
58,951

 
57,314

3

Accounts payable and other liabilities
211,055

 
194,491

9

Beneficial interests issued by consolidated VIEs
47,564

 
49,617

(4
)
Long-term debt
268,721

 
267,889


Total liabilities
2,295,728

 
2,204,511

4

Stockholders’ equity
231,277

 
211,178

10

Total liabilities and stockholders’ equity
$
2,527,005

 
$
2,415,689

5
 %
Consolidated Balance Sheets overview
JPMorgan Chase’s total assets increased by $111.3 billion, and total liabilities increased by $91.2 billion from December 31, 2013.
The following is a discussion of the significant changes in the specific line item captions on the Consolidated Balance Sheets from December 31, 2013.
 
Cash and due from banks and deposits with banks
The net increase was attributable to higher levels of excess funds, which the Firm placed with various central banks, predominantly Federal Reserve Banks.
Federal funds sold and securities purchased under resale agreements; and securities borrowed
The decrease in federal funds sold and securities purchased under resale agreements was related to lower securities purchased under resale agreements, which was predominantly attributable to a shift in the deployment of the Firm’s excess cash by Treasury, and client activity in CIB. Securities borrowed increased due to a higher requirement for collateral to cover client-driven activities in CIB.
Trading assets and liabilitiesdebt and equity instruments
The increase in trading assets was predominantly related to client-driven market-making activities in CIB, which resulted in higher levels of debt and equity securities, and trading loans.
The increase in trading liabilities was predominantly related to client-driven market-making activities in CIB, which resulted in a higher level of short positions in debt securities. For additional information, refer to Note 3.
Trading assets and liabilitiesderivative receivables and payables
The increase in both receivables and payables was predominantly due to client-driven market-making activities in CIB, specifically in foreign exchange derivatives, as a result of the appreciation of the U.S. dollar against certain currencies, and interest rate derivatives. The increase was partially offset by a decline in equity derivatives. For additional information, refer to Derivative contracts on pages 62–63, and Notes 3 and 5.
Securities
The increase was largely due to higher levels of obligations of U.S. states and municipalities, U.S. mortgage-backed securities and U.S. Treasuries, partially offset by a lower level of non-U.S. residential mortgage-backed securities. For additional information related to securities, refer to the discussion in the Corporate/Private Equity segment on pages 45–47, and Notes 3 and 11.
Loans and allowance for loan losses
The increase in loans was attributable to higher wholesale loans, partly offset by lower consumer loans. The increase in wholesale loans was driven by net new originations of commercial real estate loans in CB, and AM loans both in the U.S. and internationally, partially offset by lower balances in CIB. The decrease in consumer loans reflected paydowns and charge-off or liquidation of delinquent loans offset primarily by originations of prime mortgage loans.
The decrease in allowance for loan losses was driven by a reduction in the consumer allowance, predominantly as a result of continued improvement in home prices and delinquencies in the residential real estate portfolio, a reduction in the credit card allowance due to a decrease in


11


the asset-specific allowance resulting from increased granularity of the impairment estimates and lower balances related to credit card loans modified in troubled debt restructurings (“TDRs”), and the run-off of the student loan portfolio. The wholesale allowance was relatively unchanged, reflecting a generally favorable credit environment and stable credit quality trends. For a more detailed discussion of the loan portfolio and the allowance for loan losses, refer to Credit Risk Management on pages 49–66, and Notes 3, 4, 13 and 14.
Accrued interest and accounts receivable
The increase was due to higher receivables from security sales that did not settle, and higher client receivables, related to client-driven market-making activities in CIB.
Mortgage servicing rights
The decrease was predominantly due to the impact of total changes in valuation due to inputs and assumptions. For additional information on MSRs, see Note 16.
Other assets
The decrease was driven by several categories, including lower collateral pledged; lower deferred tax assets; and lower private equity investments due to sales.
Deposits
The increase was attributable to higher consumer and wholesale deposits. The increase in consumer deposits reflected a continuing positive growth trend, which was the result of strong customer retention, maturing of recent branch builds, and net new business. The increase in wholesale deposits was related to strong client deposit inflows toward the end of September 2014. For more information on consumer deposits, refer to the CCB segment discussion on pages 18–31; the Liquidity Risk Management discussion on pages 80–84; and Notes 3 and 17. For more information on wholesale client deposits, refer to the AM, CB and CIB segment discussions on pages 41–44, pages 38–40 and pages 32–37, respectively.
 
Federal funds purchased and securities loaned or sold under repurchase agreements
The increase in federal funds purchased and securities loaned or sold under repurchase agreements was related to higher securities sold under repurchase agreements, which was predominantly attributable to higher financing of the Firm’s trading assets-debt and equity instruments, and a change in the mix of the Firm’s funding sources. The increase was partially offset by client activity in CIB. For additional information on the Firm’s Liquidity Risk Management, see pages 80–84.
Accounts payable and other liabilities
The increase was attributable to higher client short positions and higher payables from security purchases that did not settle, both in CIB. Higher taxes payable was offset by lower legal-related reserve, largely reflecting the settlement of previously disclosed legal and regulatory matters.
Stockholders’ equity
The increase was due to net income, preferred stock issuances, and higher accumulated other comprehensive income (“AOCI”). The increase was partially offset by the declaration of cash dividends on common and preferred stock, and repurchases of common stock. For additional information on AOCI, see Note 19; for the Firm’s capital actions, see Capital actions on pages 78-79.


12


OFF-BALANCE SHEET ARRANGEMENTS
JPMorgan Chase is involved with several types of off–balance sheet arrangements, including through nonconsolidated special-purpose entities (“SPEs”), which are a type of variable interest entity (“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 77–79 and Note 29 of JPMorgan Chase’s 2013 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 2013 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, 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, 2014, and December 31, 2013, was $8.4 billion and $15.5 billion, respectively. The aggregate amounts of commercial paper 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 $8.6 billion and $9.2 billion at September 30, 2014, and December 31, 2013, respectively. The Firm could facilitate the refinancing of some of the clients’ assets in order to reduce the funding obligation.

 


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 62 and Note 21 (including the table that presents the related amounts by contractual maturity as of September 30, 2014). For a discussion of liabilities associated with loan sales- and securitization-related indemnifications, see Note 21.


13


CONSOLIDATED CASH FLOWS ANALYSIS
For a discussion of the activities affecting the Firm’s cash flows, see pages 80–81 of JPMorgan Chase’s 2013 Annual Report and Balance Sheet Analysis of this Form 10-Q.
(in millions)
 
Nine months ended September 30,
 
2014
 
2013
Net cash provided by/(used in)
 
 
 
 
Operating activities
 
$
7,847

 
$
114,867

Investing activities
 
(95,630
)
 
(189,101
)
Financing activities
 
74,061

 
51,243

Effect of exchange rate changes on cash
 
(677
)
 
(68
)
Net decrease in cash and due from banks
 
$
(14,399
)
 
$
(23,059
)
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 ability to generate cash through short- and long-term borrowings are sufficient to fund the Firm’s operating liquidity needs.
Cash provided by operating activities in 2014 predominantly resulted from 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; partially offset by net cash outflows from higher trading assets, predominantly debt and equity instruments related to client-driven market-making activities in CIB. Cash provided during 2013 predominantly resulted from lower trading assets, largely debt and equity instruments, driven by client-driven market-making activities in CIB; and an increase in accounts payable and other liabilities predominantly due to higher CIB brokerage payables. Cash proceeds from sales and paydowns of loans were slightly higher than the cash used to acquire loans.
 
Investing activities
Cash used in investing activities during 2014 and 2013, predominantly resulted from increases in deposits with banks, attributable to higher levels of excess funds, which the Firm placed with various central banks, predominantly Federal Reserve banks; and increases in wholesale loans due to net originations. Partially offsetting these cash outflows in both periods 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. Cash outflows in 2014 also reflected net purchases of investment securities, while 2013 reflected cash proceeds from net maturities and sales of investment securities.
Financing activities
Cash provided by financing activities in 2014 predominantly resulted from higher consumer and wholesale deposits. The increase in consumer deposits reflected a continuing positive growth trend resulting from strong customer retention, maturing of recent branch builds, and net new business; the increase in wholesale deposits reflected strong client deposit inflows. Cash provided also resulted from an increase in securities loaned or sold under repurchase agreements due to higher financing of the Firm’s trading assets–debt and equity instruments; and proceeds from preferred stock issuances. Further, issuances of long-term borrowings were predominantly offset by maturities and redemptions. Cash provided in 2013 was driven by growth in both wholesale and consumer deposits, net proceeds from long-term borrowings, and issuance of preferred stock; partially offset by a decrease in securities loaned or sold under repurchase agreements, predominantly due to changes in the mix of the Firm’s funding sources. In both periods these cash inflows were partially offset by repurchases of common stock and payments of dividends on common and preferred stock.



14


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 90–94. 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 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 business segments) on a 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.
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,
 
2014
 
2013
(in millions, except ratios)
Reported
results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
 
Reported
results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
Other income
$
732

 
$
660

 
$
1,392

 
$
602

 
$
582

 
$
1,184

Total noninterest revenue
13,139

 
660

 
13,799

 
12,342

 
582

 
12,924

Net interest income
11,107

 
253

 
11,360

 
10,775

 
181

 
10,956

Total net revenue
24,246

 
913

 
25,159

 
23,117

 
763

 
23,880

Pre-provision profit/(loss)
8,448

 
913

 
9,361

 
(509
)
 
763

 
254

Income before income tax expense
7,691

 
913

 
8,604

 
34

 
763

 
797

Income tax expense
$
2,119

 
$
913

 
$
3,032

 
$
414

 
$
763

 
$
1,177

Overhead ratio
65
%
 
NM

 
63
%
 
102
%
 
NM

 
99
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
2014
 
2013
(in millions, except ratios)
Reported
results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
 
Reported
results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
Other income
$
1,798

 
$
1,955

 
$
3,753

 
$
1,364

 
$
1,728

 
$
3,092

Total noninterest revenue
39,121

 
1,955

 
41,076

 
41,038

 
1,728

 
42,766

Net interest income
32,572

 
723

 
33,295

 
32,412

 
508

 
32,920

Total net revenue
71,693

 
2,678

 
74,371

 
73,450

 
2,236

 
75,686

Pre-provision profit
25,828

 
2,678

 
28,506

 
18,535

 
2,236

 
20,771

Income before income tax expense
23,529

 
2,678

 
26,207

 
18,414

 
2,236

 
20,650

Income tax expense
$
6,698

 
$
2,678

 
$
9,376

 
$
5,769

 
$
2,236

 
$
8,005

Overhead ratio
64
%
 
NM

 
62
%
 
75
%
 
NM

 
73
%
(a)
Predominantly recognized in CIB and CB business segments and Corporate/Private Equity.
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 tangible common equity 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.



15


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,
2014
 
Dec 31,
2013
 
 
 
 
2014
 
2013
 
2014
 
2013
Common stockholders’ equity
$
211,214

 
$
200,020

 
$
209,621

 
$
197,232

 
$
205,888

 
$
196,425

Less: Goodwill
47,970

 
48,081

 
48,081

 
48,073

 
48,073

 
48,106

Less: Certain identifiable intangible assets
1,274

 
1,618

 
1,308

 
1,878

 
1,423

 
2,021

Add: Deferred tax liabilities(a)
2,991

 
2,953

 
2,980

 
2,904

 
2,959

 
2,867

Tangible common equity
$
164,961

 
$
153,274

 
$
163,212

 
$
150,185

 
$
159,351

 
$
149,165

 
 
 
 
 
 
 
 
 
 
 
 
Return on tangible common equity
NM

 
NM

 
13
%
 
(2
)%
 
13
%
 
11
%
Tangible book value per share
$
44.13

 
$
40.81

 
NM

 
NM

 
NM

 
NM

(a)
Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable intangibles created in non-taxable transactions, which are netted against goodwill and other intangibles when calculating TCE.
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 73–77.
Core net interest income
In addition to reviewing net interest income on a managed basis, management also reviews core net interest income to assess the performance of its core lending, investing (including asset-liability management) and deposit-raising activities. Core net interest income excludes the impact of
 
CIB’s market-based activities. Because of the exclusion of CIB’s market-based net interest income and the related assets, the core data presented below are non-GAAP financial measures. Management believes this exclusion provides investors and analysts 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 core lending, investing and deposit-raising activities.



Core net interest income data(a)
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except rates)
2014
2013
 
Change
 
2014
2013
 
Change
Net interest income – managed basis(b)(c)
$
11,360

$
10,956

 
4
%
 
$
33,295

$
32,920

 
1
%
Less: Market-based net interest income
1,239

1,109

 
12

 
3,325

3,886

 
(14
)
Core net interest income(b)
$
10,121

$
9,847

 
3

 
$
29,970

$
29,034

 
3

 
 
 
 
 
 
 
 
 
 
Average interest-earning assets
$
2,061,785

$
1,997,413

 
3

 
$
2,030,665

$
1,958,359

 
4

Less: Average market-based earning assets
513,051

493,780

 
4

 
507,675

505,062

 
1

Core average interest-earning assets
$
1,548,734

$
1,503,633

 
3
%
 
$
1,522,990

$
1,453,297

 
5
%
Net interest yield on interest-earning assets – managed basis
2.19
%
2.18
%
 
 
 
2.19
%
2.25
%
 
 
Net interest yield on market-based activities
0.96

0.89

 
 
 
0.88

1.03

 
 
Core net interest yield on core average interest-earning assets
2.59
%
2.60
%
 
 
 
2.63
%
2.67
%
 
 
(a)
Includes core lending, investing and deposit-raising activities on a managed basis across each of the business segments and Corporate/Private Equity; excludes the market-based activities within the CIB.
(b)
Interest includes the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable.
(c)
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 15.
Quarterly and year-to-date results
Core net interest income increased by $274 million to $10.1 billion and by $936 million to $30.0 billion for the three and nine months ended September 30, 2014, respectively, compared with the prior year periods. Core average interest-earning assets increased by $45.1 billion to $1.5 trillion, and by $69.7 billion to $1.5 trillion for the three and nine months ended September 30, 2014, respectively, compared with the prior year periods. The increase in net interest income predominantly reflected the impact of higher yields on investment securities, lower
 
interest expense, and higher average loan balances, partially offset by lower yields on loans due to run-off of higher yielding loans and new originations of lower yielding loans. The increase in average interest-earning assets largely reflected the impact of higher average balance of deposits with banks. These changes in net interest income and interest-earning assets resulted in the core net interest yield decreasing by 1 basis point to 2.59% for the three months ended September 30, 2014, and 4 basis points to 2.63% for the nine months ended September 30, 2014.



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/Private Equity 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 15–16.
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 84–85 of JPMorgan Chase’s 2013 Annual Report.
Business segment capital allocation changes
Each business segment is allocated capital by taking into consideration stand-alone peer comparisons, regulatory capital requirements (as estimated under Basel III Advanced Fully Phased-In) and economic risk measures. The amount of capital assigned to each business is referred to as equity. Effective January 1, 2014, the Firm revised the capital allocated to certain businesses. For further information about these capital changes, see Line of business equity on pages 77–78.


Segment Results – Managed Basis
The following table summarizes 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)
2014
2013
Change

 
2014
2013
Change
 
2014
2013
Change
Consumer & Community Banking
$
11,267

$
11,082

2
%
 
$
6,305

$
6,867

(8
)%
 
$
4,962

$
4,215

18
%
Corporate & Investment Bank
8,787

8,189

7

 
6,035

4,999

21

 
2,752

3,190

(14
)
Commercial Banking
1,667

1,725

(3
)
 
668

661

1

 
999

1,064

(6
)
Asset Management
3,016

2,763

9

 
2,081

2,003

4

 
935

760

23

Corporate/Private Equity
422

121

249

 
709

9,096

(92
)
 
(287
)
(8,975
)
97

Total
$
25,159

$
23,880

5
%
 
$
15,798

$
23,626

(33
)%
 
$
9,361

$
254

NM
Three months ended September 30,
Provision for credit losses
 
Net income/(loss)
 
Return on common equity
(in millions, except ratios)
2014
2013
Change
 
2014
2013
Change
 
2014
2013
Consumer & Community Banking
$
902

$
(267
)
NM
 
$
2,468

$
2,702

(9
)%
 
19
%
23
%
Corporate & Investment Bank
(67
)
(218
)
(69
)%
 
1,485

2,240

(34
)
 
10

16

Commercial Banking
(79
)
(41
)
93

 
649

665

(2
)
 
18

20

Asset Management
9


NM
 
572

476

20
%
 
25

21

Corporate/Private Equity 
(8
)
(17
)
53
%
 
398

(6,463
)
NM
 
NM
NM
Total
$
757

$
(543
)
NM
 
$
5,572

$
(380
)
NM
 
10
%
(1
)%
Nine months ended September 30,
Total net revenue
 
Total Noninterest expense
 
Pre-provision profit/(loss)
(in millions)
2014
2013
Change

 
2014
2013
Change
 
2014
2013
Change
Consumer & Community Banking
$
33,158

$
34,712

(4
)%
 
$
19,198

$
20,521

(6
)%
 
$
13,960

$
14,191

(2
)%
Corporate & Investment Bank
26,384

28,205

(6
)
 
17,697

16,852

5

 
8,687

11,353

(23
)
Commercial Banking
5,019

5,126

(2
)
 
2,029

1,957

4

 
2,990

3,169

(6
)
Asset Management
8,750

8,141

7

 
6,218

5,771

8

 
2,532

2,370

7

Corporate/Private Equity
1,060

(498
)
NM 
 
723

9,814

(93
)
 
337

(10,312
)
NM 
Total
$
74,371

$
75,686

(2
)%
 
$
45,865

$
54,915

(16
)%
 
$
28,506

$
20,771

37
%
Nine months ended September 30,
Provision for credit losses
 
Net income/(loss)
 
Return on common equity
(in millions, except ratios)
2014
2013
Change
 
2014
2013
Change
 
2014
2013
Consumer & Community Banking
$
2,570

$
263

NM 
 
$
6,847

$
8,377

(18
)%
 
18
%
24
%
Corporate & Investment Bank
(102
)
(213
)
(52
)%
 
5,427

7,688

(29
)
 
12

18

Commercial Banking
(141
)
42

NM 
 
1,885

1,882


 
18

19

Asset Management
1

44

(98
)
 
1,565

1,463

7

 
23

22

Corporate/Private Equity
(29
)
(15
)
(93
)%
 
1,107

(6,765
)
NM 
 
NM
NM
Total
$
2,299

$
121

NM 
 
$
16,831

$
12,645

33
%
 
10
%
8
%

17



CONSUMER & COMMUNITY BANKING
For a discussion of the business profile of CCB, see pages 86–97 of JPMorgan Chase’s 2013 Annual Report.
Selected income statement data
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except ratios)
2014
 
2013
 
Change
 
2014
 
2013
 
 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Lending- and deposit-related fees
$
804

 
$
780

 
3
%
 
$
2,257

 
$
2,230

 
 
1
%
Asset management, administration and commissions
534

 
515

 
4

 
1,558

 
1,609

 
 
(3
)
Mortgage fees and related income
902

 
839

 
8

 
2,706

 
4,108

 
 
(34
)
Card income
1,478

 
1,460

 
1

 
4,312

 
4,267

 
 
1

All other income
496

 
367

 
35

 
1,283

 
1,074

 
 
19

Noninterest revenue
4,214

 
3,961

 
6

 
12,116

 
13,288

 
 
(9
)
Net interest income
7,053

 
7,121

 
(1
)
 
21,042

 
21,424

 
 
(2
)
Total net revenue
11,267

 
11,082

 
2

 
33,158

 
34,712

 
 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
902

 
(267
)
 
NM

 
2,570

 
263

 
 
NM 

 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
 
Compensation expense
2,627

 
2,949

 
(11
)
 
8,003

 
8,921

 
 
(10
)
Noncompensation expense
3,656

 
3,817

 
(4
)
 
10,985

 
11,282

 
 
(3
)
Amortization of intangibles
22

 
101

 
(78
)
 
210

 
318

 
 
(34
)
Total noninterest expense
6,305

 
6,867

 
(8
)
 
19,198

 
20,521

 
 
(6
)
Income before income tax expense
4,060

 
4,482

 
(9
)
 
11,390

 
13,928

 
 
(18
)
Income tax expense
1,592

 
1,780

 
(11
)
 
4,543

 
5,551

 
 
(18
)
Net income
$
2,468

 
$
2,702

 
(9
)%
 
$
6,847

 
$
8,377

 
 
(18
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial ratios
 
 
 
 
 
 
 
 
 
 
 
 
Return on common equity
19
%
 
23
%
 
 
 
18
%
 
24
%
 
 
 
Overhead ratio
56

 
62

 
 
 
58

 
59

 
 
 
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 15–16
Quarterly results
Consumer & Community Banking net income was $2.5 billion, a decrease of $234 million, or 9%, compared with the prior year, due to higher provision for credit losses, largely offset by lower noninterest expense and higher net revenue.
Net revenue was $11.3 billion, an increase of $185 million, or 2%, compared with the prior year. Net interest income was $7.1 billion, down $68 million, or 1%, driven by spread compression and lower mortgage warehouse balances, predominantly offset by higher deposit balances. Noninterest revenue was $4.2 billion, an increase of $253 million, or 6%, driven by a non-recurring gain in Mortgage Banking, higher mortgage fees and related income and higher investment revenue in Consumer & Business Banking.
The provision for credit losses was $902 million, compared with a benefit of $267 million in the prior year. The current-quarter provision reflected a $200 million reduction in the allowance for loan losses and total net charge-offs of $1.1 billion. The prior-year provision reflected a $1.6 billion reduction in the allowance for loan losses and total net charge-offs of $1.3 billion. For more information, including net charge-off amounts and rates, see Consumer Credit Portfolio on pages 50–57.
Noninterest expense was $6.3 billion, a decrease of $562 million, or 8%, from the prior year, driven by lower Mortgage Banking expense, partially offset by an accrual
 
related to Home Depot fraud and higher Auto lease depreciation expense.
Year-to-date results
Consumer & Community Banking net income was $6.8 billion, a decrease of $1.5 billion, or 18%, compared with the prior year, due to higher provision for credit losses and lower net revenue, partially offset by lower noninterest expense.
Net revenue was $33.2 billion, a decrease of $1.6 billion, or 4%, compared with the prior year. Net interest income was $21.0 billion, down $382 million, or 2%, driven by spread compression and lower mortgage warehouse balances, largely offset by higher deposit balances. Noninterest revenue was $12.1 billion, a decrease of $1.2 billion, or 9%, driven by lower mortgage fees and related income.
The provision for credit losses was $2.6 billion, compared with $263 million in the prior year. The current-year provision reflected a $1.0 billion reduction in the allowance for loan losses and total net charge-offs of $3.6 billion. The prior-year provision reflected a $4.2 billion reduction in the allowance for loan losses and total net charge-offs of $4.5 billion. For more information, including net charge-off amounts and rates, see Consumer Credit Portfolio on pages 50–57.
Noninterest expense was $19.2 billion, a decrease of $1.3 billion, or 6%, from the prior year, driven by lower Mortgage Banking expense, partially offset by higher Auto and Credit Card 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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Selected balance sheet data (period-end)
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
448,033

 
$
451,166

 
(1
)%
 
$
448,033

 
$
451,166

 
(1
)%
Trading assets - loans(a)
10,750

 
10,309

 
4

 
10,750

 
10,309

 
4

Loans:
 
 
 
 
 
 
 
 
 
 
 
Loans retained
390,709

 
390,345

 

 
390,709

 
390,345

 

Loans held-for-sale
876

 
449

 
95

 
876

 
449

 
95

Total loans
391,585

 
390,794

 

 
391,585

 
390,794

 

Deposits
493,249

 
458,867

 
7

 
493,249

 
458,867

 
7

Equity(b)
51,000

 
46,000

 
11

 
51,000

 
46,000

 
11

Selected balance sheet data (average)
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
447,121

 
$
453,881

 
(1
)
 
$
446,904

 
$
458,315

 
(2
)
Trading assets - loans(a)
9,346

 
13,888

 
(33
)
 
7,802

 
17,727

 
(56
)
Loans:
 
 
 
 
 
 
 
 
 
 
 
Loans retained
390,129

 
390,865

 

 
389,024

 
393,616

 
(1
)
Loans held-for-sale
876

 
239

 
267

 
749

 
83

 
NM 
Total loans
391,005

 
391,104

 

 
389,773

 
393,699

 
(1
)
Deposits
492,022

 
456,940

 
8

 
483,297

 
450,677

 
7

Equity(b)
51,000

 
46,000

 
11

 
51,000

 
46,000

 
11

 
 
 
 
 
 
 
 
 
 
 
 
Headcount
138,686

 
156,064

 
(11
)%
 
138,686

 
156,064

 
(11
)%
(a)
Predominantly consists of prime mortgages originated with the intent to sell that are accounted for at fair value.
(b)
2014 includes $3.0 billion of capital held at the CCB level related to legacy mortgage servicing matters.

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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Credit data and quality statistics
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs(a)
$
1,102

 
$
1,330

 
(17
)%
 
$
3,576

 
$
4,510

 
(21
)%
Nonaccrual loans(b)(c)
6,639

 
8,029

 
(17
)
 
6,639

 
8,029

 
(17
)
Nonperforming assets(b)(c)(d)
7,138

 
8,673

 
(18
)
 
7,138

 
8,673

 
(18
)
Allowance for loan losses(a)
10,993

 
13,500

 
(19
)
 
10,993

 
13,500

 
(19
)
Net charge-off rate(a)
1.12
%
 
1.35
%
 
 
 
1.23
%
 
1.53
%
 
 
Net charge-off rate, excluding PCI loans
1.28

 
1.57

 
 
 
1.41

 
1.79

 
 
Allowance for loan losses to period-end loans retained
2.81

 
3.46

 
 
 
2.81

 
3.46

 
 
Allowance for loan losses to period-end loans retained, excluding PCI loans(e)
2.14

 
2.54

 
 
 
2.14

 
2.54

 
 
Allowance for loan losses to nonaccrual loans retained, excluding credit card(b)(e)
57

 
55

 
 
 
57

 
55

 
 
Nonaccrual loans to total period-end loans, excluding credit card (d)
2.51

 
3.01

 
 
 
2.51

 
3.01

 
 
Nonaccrual loans to total period-end loans, excluding credit card and PCI loans (b)(d)
3.07

 
3.79

 
 
 
3.07

 
3.79

 
 
Business metrics
 
 
 
 
 
 
 
 
 
 
 
Number of:
 
 
 
 
 
 
 
 
 
 
 
Branches
5,613

 
5,652

 
(1
)
 
5,613

 
5,652

 
(1
)
ATMs(f)
20,513

 
20,041

 
2

 
20,513

 
20,041

 
2

Active online customers (in thousands)
35,957

 
32,916

 
9

 
35,957

 
32,916

 
9

Active mobile customers (in thousands)
18,351

 
14,993

 
22
%
 
18,351

 
14,993

 
22
%
(a)
Net charge-offs and the net charge-off rates excluded $87 million and $196 million of write-offs in the PCI portfolio for the three and nine months ended September 30, 2014, respectively. These write-offs decreased the allowance for loan losses for PCI loans. For further information, see Consumer Credit Portfolio on pages 120–129 of JPMorgan Chase’s 2013 Annual Report.
(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, 2014 and 2013, nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $7.8 billion and $8.9 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 $354 million and $456 million, respectively, that are 90 or more days past due; (3) real estate owned (“REO”) insured by U.S. government agencies of $464 million and $1.9 billion, respectively. These amounts have been excluded based upon the government guarantee. For further discussion, see Accounting and reporting developments on page 88 which summarizes the new accounting guidance for certain REO insured by U.S. government agencies.
(d)
Prior periods were revised to conform with the current presentation.
(e)
The allowance for loan losses for PCI loans was $3.7 billion and $5.0 billion at September 30, 2014 and 2013, respectively; these amounts were also excluded from the applicable ratios.
(f)
Includes eATMs, formerly Express Banking Kiosks (“EBK”). Prior periods were revised to conform with the current presentation.


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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
Lending- and deposit-related fees
$
796

 
$
770

 
3
%
 
$
2,234

 
$
2,198

 
2
%
Asset management, administration and commissions
522

 
465

 
12

 
1,512

 
1,345

 
12

Card income
409

 
384

 
7

 
1,191

 
1,111

 
7

All other income
127

 
127

 

 
411

 
370

 
11

Noninterest revenue
1,854

 
1,746

 
6

 
5,348

 
5,024

 
6

Net interest income
2,786

 
2,684

 
4

 
8,264

 
7,870

 
5

Total net revenue
4,640

 
4,430

 
5

 
13,612

 
12,894

 
6

 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
75

 
104

 
(28
)
 
217

 
239

 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
3,032

 
3,050

 
(1
)
 
9,123

 
9,133

 

Income before income tax expense
1,533

 
1,276

 
20

 
4,272

 
3,522

 
21

Net income
$
914

 
$
762

 
20

 
$
2,548

 
$
2,101

 
21

 
 
 
 
 
 
 
 
 
 
 
 
Return on common equity
33
%
 
27
%
 
 
 
31
%
 
26
%
 
 
Overhead ratio
65

 
69

 
 
 
67

 
71

 
 
Equity (period-end and average)
$
11,000

 
$
11,000

 
%
 
$
11,000

 
$
11,000

 


Quarterly results
Consumer & Business Banking net income was $914 million, an increase of $152 million, or 20%, compared with the prior year, predominantly due to higher net revenue.
Net revenue was $4.6 billion, up 5% compared with the prior year. Net interest income was $2.8 billion, up 4% compared with the prior year, driven by higher deposit balances, largely offset by deposit spread compression. Noninterest revenue was $1.9 billion, an increase of 6%, driven by higher investment revenue, reflecting record client investment assets, higher deposit-related fees and higher debit card revenue.
Noninterest expense was $3.0 billion, down 1% from the prior year, reflecting lower costs driven by efficiencies implemented in the business, offset by increased cost of controls.
 
Year-to-date results
Consumer & Business Banking net income was $2.5 billion, an increase of $447 million, or 21%, compared with the prior year, due to higher net revenue.
Net revenue was $13.6 billion, up 6% compared with the prior year. Net interest income was $8.3 billion, up 5% compared with the prior year, driven by higher deposit balances, partially offset by deposit spread compression. Noninterest revenue was $5.3 billion, an increase of 6%, driven by higher investment revenue, reflecting record client investment assets and higher debit card revenue.
Noninterest expense was $9.1 billion, flat from the prior year, reflecting lower costs driven by efficiencies implemented in the business, offset by increased cost of controls.


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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Business metrics
 
 
 
 
 
 
 
 
 
 
 
Business banking origination volume
$
1,649

 
$
1,299

 
27
%
 
$
5,070

 
$
3,850

 
32
%
Period-end loans
20,644

 
19,029

 
8

 
20,644

 
19,029

 
8

Period-end deposits:
 
 
 
 
 
 
 
 
 
 
 
Checking
203,839

 
180,858

 
13

 
203,839

 
180,858

 
13

Savings
251,661

 
234,315

 
7

 
251,661

 
234,315

 
7

Time and other
23,304

 
28,277

 
(18
)
 
23,304

 
28,277

 
(18
)
Total period-end deposits
478,804

 
443,450

 
8

 
478,804

 
443,450

 
8

Average loans
20,382

 
18,884

 
8

 
19,923

 
18,785

 
6

Average deposits:
 
 
 
 
 
 
 
 
 
 
 
Checking
201,473

 
177,392

 
14

 
196,194

 
173,894

 
13

Savings
250,845

 
231,982

 
8

 
247,889

 
226,982

 
9

Time and other
23,845

 
28,728

 
(17
)
 
24,712

 
29,856

 
(17
)
Total average deposits
476,163

 
438,102

 
9

 
468,795

 
430,732

 
9

Deposit margin
2.20
%
 
2.32
%
 
 
 
2.24
%
 
2.33
%
 
 
Average assets
$
38,089

 
$
37,308

 
2

 
$
38,006

 
$
36,956

 
3

Credit data and quality statistics
 
 
 
 
 
 
 
 
 
 
Net charge-offs
$
75

 
$
100

 
(25
)
 
$
220

 
$
235

 
(6
)
Net charge-off rate
1.46
%
 
2.10
%
 
 
 
1.48
%
 
1.67
%
 
 
Allowance for loan losses
$
703

 
$
701

 

 
$
703

 
$
701

 

Nonperforming assets
304

 
419

 
(27
)
 
304

 
419

 
(27
)
Retail branch business metrics
 
 
 
 
 
 
 
 
 
 
Net new investment assets
$
4,269

 
$
3,199

 
33

 
$
12,834

 
$
12,400

 
4

Client investment assets
207,790

 
178,989

 
16

 
207,790

 
178,989

 
16

% managed accounts
39
%
 
34
%
 
 
 
39
%
 
34
%
 
 
Number of:
 
 
 
 
 
 
 
 
 
 
 
Chase Private Client locations
2,461

 
1,948

 
26

 
2,461

 
1,948

 
26

Personal bankers
20,965

 
22,961

 
(9
)
 
20,965

 
22,961

 
(9
)
Sales specialists
4,155

 
6,269

 
(34
)
 
4,155

 
6,269

 
(34
)
Client advisors
3,099

 
3,028

 
2

 
3,099

 
3,028

 
2

Chase Private Clients
290,662

 
192,358

 
51

 
290,662

 
192,358

 
51

Accounts (in thousands)(a)
30,424

 
29,301

 
4

 
30,424

 
29,301

 
4

Households (in millions)
25.6

 
24.9

 
3
%
 
25.6

 
24.9

 
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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
Mortgage fees and related income
$
902

 
$
839

 
8
%
 
$
2,706

 
$
4,108

 
(34
)%
All other income
66

 
38

 
74

 
46

 
232

 
(80
)
Noninterest revenue
968

 
877

 
10

 
2,752

 
4,340

 
(37
)
Net interest income
1,016

 
1,143

 
(11
)
 
3,087

 
3,456

 
(11
)
Total net revenue
1,984

 
2,020

 
(2
)
 
5,839

 
7,796

 
(25
)
 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
(19
)
 
(1,044
)
 
98

 
(230
)
 
(1,899
)
 
88

 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
1,279

 
1,900

 
(33
)
 
3,988

 
5,540

 
(28
)
Income before income tax expense
724

 
1,164

 
(38
)
 
2,081

 
4,155

 
(50
)
Net income
$
439

 
$
705

 
(38
)
 
$
1,262

 
$
2,520

 
(50
)
 
 
 
 
 
 
 
 
 
 
 
 
Return on common equity
10
%
 
14
%
 
 
 
9
%
 
17
%
 
 
Overhead ratio
64
   
 
94
   
 
 
 
68
   
 
71
   
 
 
Equity (period-end and average)
$
18,000

 
$
19,500

 
(8
)%
 
$
18,000

 
$
19,500

 
(8
)%

Quarterly results
Mortgage Banking net income was $439 million, a decrease of $266 million from the prior year, driven by a lower benefit from the provision for credit losses, largely offset by lower noninterest expense.
Net revenue was $2.0 billion, a decrease of $36 million compared with the prior year. Net interest income was $1.0 billion, a decrease of $127 million, or 11%, driven by lower warehouse balances, spread compression and lower loan balances due to portfolio runoff. Noninterest revenue was $968 million, an increase of $91 million, driven by a non-recurring gain and higher mortgage fees and related income, partially offset by lower revenue from an exited non-core product.
The provision for credit losses was a benefit of $19 million, compared with a benefit of $1.0 billion in the prior year. The current quarter reflected a $100 million reduction in the allowance for loan losses, reflecting continued improvement in home prices and delinquencies. The prior year included a $1.3 billion reduction in the allowance for loan losses. Net charge-offs were $81 million, compared with $206 million in the prior year.
Noninterest expense was $1.3 billion, a decrease of $621 million, or 33%, from the prior year, due to lower expense in production and servicing reflecting lower headcount.
 
Year-to-date results
Mortgage Banking net income was $1.3 billion, a decrease of $1.3 billion from the prior year, driven by lower net revenue, a lower benefit from the provision for credit losses, partially offset by lower noninterest expense.
Net revenue was $5.8 billion, a decrease of $2.0 billion compared with the prior year. Net interest income was $3.1 billion, a decrease of $369 million, or 11%, driven by lower warehouse balances. Noninterest revenue was $2.8 billion, a decrease of $1.6 billion, driven by lower mortgage fees and related income.
The provision for credit losses was a benefit of $230 million, compared with a benefit of $1.9 billion in the prior year. The current year reflected a $600 million reduction in the allowance for loan losses, reflecting continued improvement in home prices and delinquencies. The prior year included a $2.9 billion reduction in the allowance for loan losses. Net charge-offs were $370 million, compared with $951 million in the prior year.
Noninterest expense was $4.0 billion, a decrease of $1.6 billion, or 28%, from the prior year, due to lower expense in production and servicing reflecting lower headcount-related expense and lower expense for foreclosure related matters.


23


Functional results
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except ratios)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Mortgage Production
 
 
 
 
 
 
 
 
 
 
 
Production revenue and other income(a)
$
275

 
$
438

 
(37
)%
 
$
728

 
$
2,590

 
(72
)%
Production-related net interest income(a)
118

 
146

 
(19
)
 
296

 
498

 
(41
)
Production-related revenue, excluding repurchase (losses)/benefits
393

 
584

 
(33
)
 
1,024

 
3,088

 
(67
)
Production expense(b)
381

 
669

 
(43
)
 
1,272

 
2,099

 
(39
)
Income, excluding repurchase (losses)/benefits
12

 
(85
)
 
NM

 
(248
)
 
989

 
NM 

Repurchase (losses)/benefits
62

 
175

 
(65
)
 
327

 
110

 
197

Income before income tax expense
74

 
90

 
(18
)
 
79

 
1,099

 
(93
)
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage Servicing
 
 
 
 
 
 
 
 
 
 
 
Loan servicing revenue and other income(a)
783

 
841

 
(7
)
 
2,518

 
2,874

 
(12
)
Servicing-related net interest income(a)
70

 
75

 
(7
)
 
223

 
133

 
68

Servicing-related revenue
853

 
916

 
(7
)
 
2,741

 
3,007

 
(9
)
Changes in MSR asset fair value due to collection/realization of expected cash flows
(214
)
 
(284
)
 
25

 
(696
)
 
(827
)
 
16

Net servicing-related revenue
639

 
632

 
1

 
2,045

 
2,180

 
(6
)
Default servicing expense
349

 
623

 
(44
)
 
1,053

 
1,595

 
(34
)
Core servicing expense(b)
228

 
235

 
(3
)
 
658

 
715

 
(8
)
Servicing expense
577

 
858

 
(33
)
 
1,711

 
2,310

 
(26
)
Income/(loss), excluding MSR risk management
62

 
(226
)
 
NM

 
334

 
(130
)
 
NM 

MSR risk management, including related net interest income/(expense)
76

 
(180
)
 
NM

 
13

 
(244
)
 
NM 

Income/(loss) before income tax expense
138

 
(406
)
 
NM

 
347

 
(374
)
 
NM 

 
 
 
 
 
 
 
 
 
 
 
 
Real Estate Portfolios
 
 
 
 
 
 
 
 
 
 
 
Noninterest revenue
(14
)
 
(113
)
 
88

 
(138
)
 
(164
)
 
16

Net interest income
828

 
922

 
(10
)
 
2,568

 
2,826

 
(9
)
Total net revenue
814

 
809

 
1

 
2,430

 
2,662

 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
(19
)
 
(1,046
)
 
98

 
(234
)
 
(1,910
)
 
88

 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
321

 
375

 
(14
)
 
1,009

 
1,142

 
(12
)
Income before income tax expense
512

 
1,480

 
(65
)
 
1,655

 
3,430

 
(52
)
Mortgage Banking income before income tax expense
$
724

 
$
1,164

 
(38
)
 
$
2,081

 
$
4,155

 
(50
)
Mortgage Banking net income
$
439

 
$
705

 
(38
)%
 
$
1,262

 
$
2,520

 
(50
)%
 
 
 
 
 
 
 
 
 
 
 
 
Overhead ratios
 
 
 
 
 
 
 
 
 
 
 
Mortgage Production
84
%
 
88
%
 
 
 
94
%
 
65
%
 
 
Mortgage Servicing
81

 
190

 
 
 
83

 
119

 
 
Real Estate Portfolios
39

 
46

 
 
 
42

 
43

 
 
(a)
Prior periods were revised to conform with the current presentation.
(b)
Includes provision for credit losses.

24


Quarterly results
Mortgage Production pretax income was $74 million, a decrease of $16 million from the prior year, reflecting lower revenue and lower benefit from repurchase losses, predominantly offset by lower expense. Mortgage production-related revenue, excluding repurchase losses, was $393 million, a decrease of $191 million, from the prior year, primarily on lower volumes. Production expense was $381 million, a decrease of $288 million from the prior year, largely due to lower headcount-related expense.
Mortgage Servicing pretax income was $138 million, compared with a loss of $406 million in the prior year, reflecting lower expenses and higher MSR risk management income. Mortgage net servicing-related revenue was $639 million, an increase of $7 million from the prior year. MSR risk management income was $76 million, compared with a loss of $180 million in the prior year. See Note 16 for further information regarding changes in value of the MSR asset and related hedges. Servicing expense was $577 million, a decrease of $281 million from the prior year due to lower expense for foreclosure related matters and lower headcount-related expense.
Real Estate Portfolios pretax income was $512 million, down $968 million from the prior year, driven by a lower benefit from the provision for credit losses. Net revenue was $814 million, an increase of $5 million from the prior year, driven by higher noninterest revenue resulting from a non-recurring gain, offset by lower net interest income resulting from spread compression and lower loan balances due to portfolio runoff. The provision for credit losses was a benefit of $19 million, compared with a benefit of $1.0 billion in the prior year. The current-quarter provision reflected a $100 million reduction in the non credit-impaired allowance for loan losses, reflecting continued improvement in home prices and delinquencies. The prior-year provision included a $750 million reduction in the purchased credit-impaired allowance for loan losses and $500 million reduction in the non credit-impaired allowance for loan losses. Net charge-offs were $81 million, compared with $204 million in the prior year. See Consumer Credit Portfolio on pages 50–57 for the net charge-off amounts and rates. Noninterest expense was $321 million, a decrease of $54 million, or 14%, compared with the prior year, driven by lower foreclosed asset expense and lower servicing expense on lower default volumes.
 
Year-to-date results
Mortgage Production pretax income was $79 million, a decrease of $1.0 billion from the prior year, reflecting lower revenue, largely offset by lower expense and higher benefit from repurchase losses. Mortgage production-related revenue, excluding repurchase losses, was $1.0 billion, a decrease of $2.1 billion, from the prior year, primarily on lower volumes. Production expense was $1.3 billion, a decrease of $827 million from the prior year, driven by lower headcount-related expense.
Mortgage Servicing pretax income was $347 million, compared with a loss of $374 million in the prior year, reflecting lower expenses and higher MSR risk management income, partially offset by lower net revenue. Mortgage net servicing-related revenue was $2.0 billion, a decrease of $135 million from the prior year, driven by lower average third-party loans serviced and lower revenue from an exited non-core product, largely offset by lower MSR asset amortization expense as a result of lower MSR asset value and higher gains on excess interest only securities. MSR risk management income was $13 million, compared with a loss of $244 million in the prior year. See Note 16 for further information regarding changes in value of the MSR asset and related hedges. Servicing expense was $1.7 billion, a decrease of $599 million from the prior year, reflecting lower headcount-related expense and lower expense for foreclosure related matters.
Real Estate Portfolios pretax income was $1.7 billion, down $1.8 billion from the prior year, due to a lower benefit from the provision for credit losses and lower net revenue. Net revenue was $2.4 billion, a decrease of $232 million, or 9%, from the prior year, driven by lower net interest income as a result of lower loan balances due to portfolio runoff and spread compression. The provision for credit losses was a benefit of $234 million, compared with a benefit of $1.9 billion in the prior year. The current-year provision reflected a $300 million reduction in the purchased credit-impaired allowance for loan losses and $300 million in the non credit-impaired allowance for loan losses, reflecting continued improvement in home prices and delinquencies. The prior-year provision included a $2.1 billion reduction in the non credit-impaired allowance for loan losses and $750 million reduction in the purchased credit-impaired allowance for loan losses. Net charge-offs were $366 million, compared with $940 million in the prior year. See Consumer Credit Portfolio on pages 50–57 for the net charge-off amounts and rates. Noninterest expense was $1.0 billion, a decrease of $133 million, or 12%, compared with the prior year, driven by lower foreclosed asset expense.


25


Mortgage Production and Mortgage Servicing
 
 
 
 
 
 
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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Selected balance sheet data (period-end)
 
 
 
 
 
 
 
 
 
 
 
Trading assets - loans(a)
$
10,750

 
$
10,309

 
4
%
 
$
10,750

 
$
10,309

 
4
%
Loans:
 
 
 
 
 
 
 
 
 
 
 
Prime mortgage, including option ARMs(b)
14,625

 
15,571

 
(6
)
 
14,625

 
15,571

 
(6
)
Loans held-for-sale
370

 
138

 
168

 
370

 
138

 
168

Selected balance sheet data (average)
 
 
 
 
 
 
 
 
 
 
 
Trading assets - loans(a)
9,346

 
13,888

 
(33
)
 
7,802

 
17,727

 
(56
)
Loans:
 
 
 
 
 
 
 
 
 
 
 
Prime mortgage, including option ARMs(b)
15,166

 
15,878

 
(4
)
 
15,347

 
16,782

 
(9
)
Loans held-for-sale
525

 
172

 
205

 
390

 
60

 
NM 
Average assets
42,750

 
54,870

 
(22
)
 
43,236

 
59,622

 
(27
)
Repurchase liability (period-end)
362

 
1,945

 
(81
)
 
362

 
1,945

 
(81
)
Credit data and quality statistics
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs:
 
 
 
 
 
 
 
 
 
 
 
Prime mortgage, including option ARMs

 
2

 
NM
 
4

 
11

 
(64
)
Net charge-off rate:
 
 
 
 
 
 
 
 
 
 
 
Prime mortgage, including option ARMs

 
0.05
%
 
 
 
0.03
%
 
0.09
%
 
 
30+ day delinquency rate(c)
2.06

 
3.16

 
 
 
2.06

 
3.16

 
 
Nonperforming assets(d)(e)
$
424

 
$
630

 
(33
)%
 
$
424

 
$
630

 
(33
)%
(a)
Predominantly consists of prime mortgages originated with the intent to sell that are accounted for at fair value.
(b)
Predominantly represents prime mortgage loans repurchased from Government National Mortgage Association (“Ginnie Mae”) pools, which are insured by U.S. government agencies.
(c)
At September 30, 2014 and 2013, excluded mortgage loans insured by U.S. government agencies of $9.6 billion and $10.0 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.
(d)
At September 30, 2014 and 2013, nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $7.8 billion and $8.9 billion, respectively, that are 90 or more days past due; and (2) real estate owned (“REO”) insured by U.S. government agencies of $464 million and $1.9 billion, respectively. These amounts have been excluded based upon the government guarantee. For further discussion, see Accounting and reporting developments on page 88 which summarizes the new accounting guidance for certain REO insured by U.S. government agencies and Note 13 which summarizes loan delinquency information.
(e)
Prior periods were revised to conform with the current presentation.
Selected 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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Business metrics
 
 
 
 
 
 
 
 
 
 
 
Mortgage origination volume by channel
 
 
 
 
 
 
 
 
 
 
 
Retail
$
7.9

 
$
17.7

 
(55
)%
 
$
21.8

 
$
67.2

 
(68
)%
Correspondent(a)
13.3

 
22.8

 
(42
)
 
33.2

 
75.0

 
(56
)
Total mortgage origination volume(b)
$
21.2

 
$
40.5

 
(48
)
 
$
55.0

 
$
142.2

 
(61
)
Mortgage application volume by channel
 
 
 
 
 
 
 
 
 
 
 
Retail
$
12.8

 
$
20.7

 
(38
)
 
$
43.1

 
$
92.2

 
(53
)
Correspondent(a)
17.1

 
19.7

 
(13
)
 
43.0

 
73.7

 
(42
)
Total mortgage application volume
$
29.9

 
$
40.4

 
(26
)
 
$
86.1

 
$
165.9

 
(48
)
Third-party mortgage loans serviced (period-end)
$
766.3

 
$
831.1

 
(8
)
 
$
766.3

 
$
831.1

 
(8
)
Third-party mortgage loans serviced (average)
776.3

 
831.5

 
(7
)
 
793.3

 
842.0

 
(6
)
MSR carrying value (period-end)
8.2

 
9.5

 
(14
)%
 
8.2

 
9.5

 
(14
)%
Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end)
1.07
%
 
1.14
%
 
 
 
1.07
%
 
1.14
%
 
 
Ratio of annualized loan servicing-related revenue to third-party mortgage loans serviced (average)
0.34

 
0.38

 
 
 
0.36

 
0.40

 
 
MSR revenue multiple(c)
3.15
x
 
3.00
x
 
 
 
2.97
x
 
2.85
x
 
 
(a)
Includes rural housing loans sourced through correspondents, and prior to November 2013, through both brokers and correspondents, which are underwritten and closed with pre-funding loan approval from the U.S. Department of Agriculture Rural Development, which acts as the guarantor in the transaction.

26


(b)
Firmwide mortgage origination volume was $22.7 billion and $44.2 billion for the three months ended September 30, 2014 and 2013, respectively, and $58.9 billion and $151.3 billion for the nine months ended September 30, 2014 and 2013, respectively.
(c)
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).
Real Estate Portfolios
 
 
 
 
 
 
 
 
Selected metrics
 
 
 
 
 
 
 
 
 
 
 
 
As of or for the three months
ended September 30,
 
As of or for the nine months
ended September 30,
(in millions)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Loans, excluding PCI
 
 
 
 
 
 
 
 
 
 
 
Period-end loans owned:
 
 
 
 
 
 
 
 
 
 
 
Home equity
$
52,679

 
$
59,825

 
(12
)%
 
$
52,679

 
$
59,825

 
(12
)%
Prime mortgage, including option ARMs
59,343

 
47,958

 
24

 
59,343

 
47,958

 
24

Subprime mortgage
5,547

 
7,376

 
(25
)
 
5,547

 
7,376

 
(25
)
Other
492

 
568

 
(13
)
 
492

 
568

 
(13
)
Total period-end loans owned
$
118,061

 
$
115,727

 
2

 
$
118,061

 
$
115,727

 
2

Average loans owned:
 
 
 
 
 
 
 
 
 
 
 
Home equity
$
53,560

 
$
61,005

 
(12
)
 
$
55,288

 
$
63,558

 
(13
)
Prime mortgage, including option ARMs
57,083

 
46,177

 
24

 
53,673

 
43,680

 
23

Subprime mortgage
5,922

 
7,529

 
(21
)
 
6,558

 
7,834

 
(16
)
Other
502

 
579

 
(13
)
 
521

 
598

 
(13
)
Total average loans owned
$
117,067

 
$
115,290

 
2

 
$
116,040

 
$
115,670

 

PCI loans
 
 
 
 
 
 
 
 
 
 
 
Period-end loans owned:
 
 
 
 
 
 
 
 
 
 
 
Home equity
$
17,572

 
$
19,411

 
(9
)
 
$
17,572

 
$
19,411

 
(9
)
Prime mortgage
10,887

 
12,487

 
(13
)
 
10,887

 
12,487

 
(13
)
Subprime mortgage
3,790

 
4,297

 
(12
)
 
3,790

 
4,297

 
(12
)
Option ARMs
16,238

 
18,564

 
(13
)
 
16,238

 
18,564

 
(13
)
Total period-end loans owned
$
48,487

 
$
54,759

 
(11
)
 
$
48,487

 
$
54,759

 
(11
)
Average loans owned:
 
 
 
 
 
 
 
 
 
 
 
Home equity
$
17,806

 
$
19,677

 
(10
)
 
$
18,270

 
$
20,218

 
(10
)
Prime mortgage
11,103

 
12,705

 
(13
)
 
11,484

 
13,124

 
(12
)
Subprime mortgage
3,843

 
4,357

 
(12
)
 
3,989

 
4,478

 
(11
)
Option ARMs
16,503

 
18,890

 
(13
)
 
17,084

 
19,573

 
(13
)
Total average loans owned
$
49,255

 
$
55,629

 
(11
)
 
$
50,827

 
$
57,393

 
(11
)
Total Real Estate Portfolios
 
 
 
 
 
 
 
 
 
 
 
Period-end loans owned:
 
 
 
 
 
 
 
 
 
 
 
Home equity
$
70,251

 
$
79,236

 
(11
)
 
$
70,251

 
$
79,236

 
(11
)
Prime mortgage, including option ARMs
86,468

 
79,009

 
9

 
86,468

 
79,009

 
9

Subprime mortgage
9,337

 
11,673

 
(20
)
 
9,337

 
11,673

 
(20
)
Other
492

 
568

 
(13
)
 
492

 
568

 
(13
)
Total period-end loans owned
$
166,548

 
$
170,486

 
(2
)
 
$
166,548

 
$
170,486

 
(2
)
Average loans owned:
 
 
 
 
 
 
 
 
 
 
 
Home equity
$
71,366

 
$
80,682

 
(12
)
 
$
73,558

 
$
83,776

 
(12
)
Prime mortgage, including option ARMs
84,689

 
77,772

 
9

 
82,241

 
76,377

 
8

Subprime mortgage
9,765

 
11,886

 
(18
)
 
10,547

 
12,312

 
(14
)
Other
502

 
579

 
(13
)
 
521

 
598

 
(13
)
Total average loans owned
$
166,322

 
$
170,919

 
(3
)
 
$
166,867

 
$
173,063

 
(4
)
Average assets
$
163,449

 
$
163,001

 

 
$
163,887

 
$
164,310

 

Home equity origination volume
789

 
580

 
36
%
 
2,246

 
1,481

 
52
%

27


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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Net charge-offs/(recoveries), excluding PCI loans:(a)
 
 
 
 
 
 
 
 
 
 
 
Home equity
$
95

 
$
218

 
(56
)%
 
$
386

 
$
787

 
(51
)%
Prime mortgage, including option ARMs
9

 
(11
)
 
NM
 
(10
)
 
49

 
NM 

Subprime mortgage
(25
)
 
(4
)
 
NM
 
(17
)
 
96

 
NM 

Other
2

 
1

 
100

 
7

 
8

 
(13
)
Total net charge-offs/(recoveries), excluding PCI loans
$
81

 
$
204

 
(60
)
 
$
366

 
$
940

 
(61
)
Net charge-off/(recovery) rate, excluding PCI loans:
 
 
 
 
 
 
 
 
 
 
 
Home equity
0.70
%
 
1.42
%
 
 
 
0.93
%
 
1.66
%
 
 
Prime mortgage, including option ARMs
0.06

 
(0.09
)
 
 
 
(0.02
)
 
0.15

 
 
Subprime mortgage
(1.68
)
 
(0.21
)
 
 
 
(0.35
)
 
1.64

 
 
Other
1.58

 
0.69

 
 
 
1.80

 
1.79

 
 
Total net charge-off/(recovery) rate, excluding PCI loans
0.27

 
0.70

 
 
 
0.42

 
1.09

 
 
Net charge-off/(recovery) rate – reported:(a)
 
 
 
 
 
 
 
 
 
 
 
Home equity
0.53
%
 
1.07
%
 
 
 
0.70
%
 
1.26
%
 
 
Prime mortgage, including option ARMs
0.04

 
(0.06
)
 
 
 
(0.02
)
 
0.09

 
 
Subprime mortgage
(1.02
)
 
(0.13
)
 
 
 
(0.22
)
 
1.04

 
 
Other
1.58

 
0.69

 
 
 
1.80

 
1.79

 
 
Total net charge-off/(recovery) rate – reported
0.19

 
0.47

 
 
 
0.29

 
0.73

 
 
30+ day delinquency rate, excluding PCI loans(b)
2.85
%
 
3.81
%
 
 
 
2.85
%
 
3.81
%
 
 
Allowance for loan losses, excluding PCI loans
$
2,268

 
$
2,768

 
(18
)
 
$
2,268

 
$
2,768

 
(18
)
Allowance for PCI loans(a)
3,662

 
4,961

 
(26
)
 
3,662

 
4,961

 
(26
)
Allowance for loan losses
$
5,930

 
$
7,729

 
(23
)
 
$
5,930

 
$
7,729

 
(23
)
Nonperforming assets(c)
6,031

 
7,385

 
(18
)%
 
6,031

 
7,385

 
(18
)%
Allowance for loan losses to period-end loans retained
3.56
%
 
4.53
%
 
 
 
3.56
%
 
4.53
%
 
 
Allowance for loan losses to period-end loans retained, excluding PCI loans
1.92

 
2.39

 
 
 
1.92

 
2.39

 
 
(a)
Net charge-offs and the net charge-off rates excluded $87 million and $196 million of write-offs in the PCI portfolio for the three and nine months ended September 30, 2014, respectively. These write-offs decreased the allowance for loan losses for PCI loans. For further information, see Consumer Credit Portfolio on pages 120–129 of JPMorgan Chase’s 2013 Annual Report.
(b)
The 30+ day delinquency rate for PCI loans was 13.69% and 16.19% at September 30, 2014 and 2013, respectively.
(c)
Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as they are all performing.

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”, that may include principal reductions, 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. The Firm has satisfied or is committed to satisfying these obligations within the mandated timeframes.
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 the Global Settlement and the RMBS Settlement are detailed in periodic reports published by the independent overseers.
For further information on these settlements and Consent Orders, see Note 2 and Note 31 of JPMorgan Chase’s 2013 Annual Report.





28


Card, Merchant Services & 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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
Card income
$
1,068

 
$
1,075

 
(1
)%
 
$
3,120

 
$
3,155

 
(1
)%
All other income
324

 
263

 
23

 
896

 
769

 
17

Noninterest revenue
1,392

 
1,338

 
4

 
4,016

 
3,924

 
2

Net interest income
3,251

 
3,294

 
(1
)
 
9,691

 
10,098

 
(4
)
Total net revenue
4,643

 
4,632

 

 
13,707

 
14,022

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
846

 
673

 
26

 
2,583

 
1,923

 
34

 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
1,994

 
1,917

 
4

 
6,087

 
5,848

 
4

Income before income tax expense
1,803

 
2,042

 
(12
)
 
5,037

 
6,251

 
(19
)
Net income
$
1,115

 
$
1,235

 
(10
)
 
$
3,037

 
$
3,756

 
(19
)
 
 
 
 
 
 
 
 
 
 
 
 
Return on common equity
23
%
 
32
%
 
 
 
21
%
 
32
%
 
 
Overhead ratio
43

 
41

 
 
 
44

 
42

 
 
Equity (period-end and average)
$
19,000

 
$
15,500

 
23
%
 
$
19,000

 
$
15,500

 
23
%
Quarterly results
Card net income was $1.1 billion, a decrease of $120 million, or 10%, compared with the prior year, predominantly driven by higher provision for credit losses.
Net revenue was $4.6 billion, flat compared with the prior year. Net interest income was $3.3 billion, down $43 million compared with the prior year, driven by spread compression, partially offset by higher loan balances. Noninterest revenue was $1.4 billion, up $54 million compared with the prior year, driven by higher Auto lease income, higher net interchange income and higher annual fee income, predominantly offset by higher amortization of new account origination costs.
The provision for credit losses was $846 million, compared with $673 million in the prior year. The current-quarter provision reflected lower net charge-offs and a $100 million reduction in the allowance for loan losses in Auto and Student. The prior-year provision reflected a $351 million reduction in the allowance for loan losses in Credit Card.
Noninterest expense was $2.0 billion, up $77 million, or 4%, from the prior year, predominantly driven by an accrual related to Home Depot fraud and higher Auto lease depreciation expense.
 
Year-to-date results
Card net income was $3.0 billion, a decrease of $719 million, or 19%, compared with the prior year, driven by higher provision for credit losses, lower net revenue and higher noninterest expense.
Net revenue was $13.7 billion, down $315 million, or 2%, compared with the prior year. Net interest income was $9.7 billion, down $407 million compared with the prior year, predominantly driven by spread compression. Noninterest revenue was $4.0 billion, up $92 million compared with the prior year, primarily driven by higher net interchange income, higher Auto lease income and higher annual fee income, predominately offset by higher amortization of new account origination costs and lower revenue from an exited non-core product.
The provision for credit losses was $2.6 billion, compared with $1.9 billion in the prior year. The current-year provision reflects lower net charge-offs and a $403 million reduction in the allowance for loan losses. The reduction in the allowance for loan losses is 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, run-off in the student loan portfolio and lower estimated losses in auto loans. The prior-year provision included a $1.4 billion reduction in the allowance for loan losses.
Noninterest expense was $6.1 billion, up $239 million, or 4%, from the prior year primarily driven by higher Auto lease depreciation expense and investments in controls.


29


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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Selected balance sheet data (period-end)
 
 
 
 
 
 
 
 
 
 
 
Loans:
 
 
 
 
 
 
 
 
 
 
 
Credit Card
$
126,959

 
$
123,982

 
2
%
 
$
126,959

 
$
123,982

 
2
%
Auto
52,778

 
50,810

 
4

 
52,778

 
50,810

 
4

Student
9,661

 
10,777

 
(10
)
 
9,661

 
10,777

 
(10
)
Total loans
$
189,398

 
$
185,569

 
2

 
$
189,398

 
$
185,569

 
2

Selected balance sheet data (average)
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
202,833

 
$
198,702

 
2

 
$
201,775

 
$
197,427

 
2

Loans:
 
 
 
 
 
 
 
 
 
 
 
Credit Card
126,107

 
123,912

 
2

 
124,360

 
123,445

 
1

Auto
52,666

 
50,432

 
4

 
52,741

 
50,386

 
5

Student
9,837

 
10,907

 
(10
)
 
10,145

 
11,178

 
(9
)
Total loans
$
188,610

 
$
185,251

 
2

 
$
187,246

 
$
185,009

 
1

Business metrics
 
 
 
 
 
 
 
 
 
 
 
Credit Card, excluding Commercial Card
 
 
 
 
 
 
 
 
 
 
 
Sales volume (in billions)
$
119.5

 
$
107.0

 
12

 
$
342.0

 
$
306.9

 
11

New accounts opened
2.2

 
1.7

 
29

 
6.4

 
4.9

 
31

Open accounts
65.5

 
65.0

 
1

 
65.5

 
65.0

 
1

Accounts with sales activity
32.1

 
30.0

 
7

 
32.1

 
30.0

 
7

% of accounts acquired online
56
%
 
53
%
 
 
 
54
%
 
53
%
 
 
Merchant Services (Chase Paymentech Solutions)
 
 
 
 
 
 
 
 
 
 
 
Merchant processing volume (in billions)
$
213.3

 
$
185.9

 
15

 
$
617.7

 
$
546.7

 
13

Total transactions (in billions)
9.4

 
8.9

 
6

 
27.8

 
26.0

 
7

Auto
 
 
 
 
 
 
 
 
 
 
 
Origination volume (in billions)
$
6.8

 
$
6.4

 
6
%
 
$
20.6

 
$
19.7

 
5
%

30


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)
 
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Credit data and quality statistics
 
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs:
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card
 
$
798

 
$
892

 
(11
)%
 
$
2,571

 
$
2,988

 
(14
)%
Auto
 
50

 
44

 
14

 
120

 
107

 
12

Student
 
98

 
88

 
11

 
295

 
229

 
29

Total net charge-offs
 
$
946

 
$
1,024

 
(8
)
 
$
2,986

 
$
3,324

 
(10
)
Net charge-off rate:
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card(a)
 
2.52
%
 
2.86
%
 
 
 
2.77
%
 
3.24
%
 
 
Auto
 
0.38

 
0.35

 
 
 
0.30

 
0.28

 
 
Student
 
3.95

 
3.20

 
 
 
3.89

 
2.74

 
 
Total net charge-off rate
 
1.99

 
2.19

 
 
 
2.14

 
2.40

 
 
Delinquency rates
 
 
 
 
 
 
 
 
 
 
 
 
30+ day delinquency rate:
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card(b)
 
1.43

 
1.69

 
 
 
1.43

 
1.69

 
 
Auto
 
0.97

 
0.93

 
 
 
0.97

 
0.93

 
 
Student(c)
 
2.43

 
2.60

 
 
 
2.43

 
2.60

 
 
Total 30+ day delinquency rate
 
1.35

 
1.53

 
 
 
1.35

 
1.53

 
 
90+ day delinquency rate – Credit Card(b)
 
0.67

 
0.79

 
 
 
0.67

 
0.79

 
 
Nonperforming assets(d)
 
$
379

 
$
239

 
59

 
$
379

 
$
239

 
59

Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card
 
$
3,590

 
$
4,097

 
(12
)
 
$
3,590

 
$
4,097

 
(12
)
Auto & Student
 
750

 
953

 
(21
)
 
750

 
953

 
(21
)
Total allowance for loan losses
 
$
4,340

 
$
5,050

 
(14
)%
 
$
4,340

 
$
5,050

 
(14
)%
Allowance for loan losses to period-end loans:
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card(b)
 
2.84
%
 
3.31
%
 
 
 
2.84
%
 
3.31
%
 
 
Auto & Student
 
1.20

 
1.55

 
 
 
1.20

 
1.55

 
 
Total allowance for loan losses to period-end loans
 
2.30

 
2.73

 
 
 
2.30

 
2.73

 
 
(a)
Average credit card loans included loans held-for-sale of $335 million for the three months ended September 30, 2014 and $352 million for the nine months ended September 30, 2014. Average credit card loans included loans held-for-sale of $67 million for the three months ended September 30, 2013 and $23 million for the nine months ended September 30, 2013. These amounts are excluded when calculating the net charge-off rate.
(b)
Period-end credit card loans included loans held-for-sale of $395 million and $310 million at September 30, 2014 and 2013, 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 $640 million and $769 million at September 30, 2014 and 2013, 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 $354 million and $456 million at September 30, 2014 and 2013, 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)
 
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest revenue
 
$
991

 
$
994

 

 
$
2,857

 
$
2,926

 
(2)%
Net interest income
 
2,846

 
2,824

 
1

 
8,439

 
8,657

 
(3)
Total net revenue
 
3,837

 
3,818

 

 
11,296

 
11,583

 
(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
 
798

 
542

 
47

 
2,371

 
1,588

 
49
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
 
1,494

 
1,458

 
2

 
4,584

 
4,496

 
2
Income before income tax expense
 
1,545

 
1,818

 
(15
)
 
4,341

 
5,499

 
(21)
Net income
 
$
961

 
$
1,102

 
(13
)%
 
$
2,622

 
$
3,308

 
(21)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of average loans:
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest revenue
 
3.12
%
 
3.18
%
 
 
 
3.07
%
 
3.17
%
 
 
Net interest income
 
8.95

 
9.04

 
 
 
9.07

 
9.38

 
 
Total net revenue
 
12.07

 
12.22

 
 
 
12.14

 
12.55

 
 

31


CORPORATE & INVESTMENT BANK
For a discussion of the business profile of CIB, see pages 98–102 of JPMorgan Chase’s 2013 Annual Report.
Selected income statement data
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except ratios)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
Investment banking fees
$
1,542

 
$
1,510

 
2
%
 
$
4,759

 
$
4,660

 
2
%
Principal transactions(a)
2,567

 
2,202

 
17

 
8,235

 
9,451

 
(13
)
Lending- and deposit-related fees
424

 
471

 
(10
)
 
1,317

 
1,430

 
(8
)
Asset management, administration and commissions
1,141

 
1,128

 
1

 
3,506

 
3,584

 
(2
)
All other income
468

 
392

 
19

 
1,092

 
1,106

 
(1
)
Noninterest revenue
6,142

 
5,703

 
8

 
18,909

 
20,231

 
(7
)
Net interest income
2,645

 
2,486

 
6

 
7,475

 
7,974

 
(6
)
Total net revenue(b)
8,787

 
8,189

 
7

 
26,384

 
28,205

 
(6
)
 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
(67
)
 
(218
)
 
(69)
 
(102
)
 
(213
)
 
(52)
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
Compensation expense
2,805

 
2,330

 
20

 
8,432

 
8,694

 
(3
)
Noncompensation expense
3,230

 
2,669

 
21

 
9,265

 
8,158

 
14

Total noninterest expense
6,035

 
4,999

 
21

 
17,697

 
16,852

 
5

Income before income tax expense
2,819

 
3,408

 
(17
)
 
8,789

 
11,566

 
(24
)
Income tax expense
1,334

 
1,168

 
14

 
3,362

 
3,878

 
(13
)
Net income
$
1,485

 
$
2,240

 
(34
)%
 
$
5,427

 
$
7,688

 
(29
)%
Financial ratios
 
 
 
 
 
 
 
 
 
 
 
Return on common equity(c)
10
%
 
16
%
 
 
 
12
%
 
18
%
 
 
Overhead ratio(d)
69

 
61

 
 
 
67

 
60

 
 
Compensation expense as a percentage of total net revenue(e)
32

 
28

 
 
 
32

 
31

 
 
(a)
Included FVA (effective fourth quarter 2013) and debt valuation adjustments ("DVA") on OTC derivatives and structured notes, measured at fair value. Net FVA and DVA gains were $373 million for the three months ended September 30, 2014, and $516 million for the nine months ended September 30, 2014. DVA gains/(losses) were $(397) million for the three months ended September 30, 2013, and $84 million for the nine months ended September 30, 2013. Results are presented net of associated hedging activities.
(b)
Included tax-equivalent adjustments, predominantly due to income tax credits related to affordable housing and alternative energy investments, as well as tax-exempt income from municipal bond investments of $611 million and $537 million for the three months ended September 30, 2014 and 2013, respectively, and $1.8 billion and $1.6 billion for the nine months ended September 30, 2014 and 2013, respectively.
(c)
Return on equity excluding DVA, a non-GAAP financial measure, was 17% and 18% for the three and nine months ended September 30, 2013, respectively.
(d)
Overhead ratio excluding DVA, a non-GAAP financial measure, was 58% and 60% for the three and nine months ended September 30, 2013, respectively.
(e)
Compensation expense as a percentage of total net revenue excluding DVA, a non-GAAP financial measure, was 27% and 31% for the three and nine months ended September 30, 2013, respectively.
















Note: Prior to January 1, 2014, CIB provided several non-GAAP financial measures excluding the impact of implementing the funding valuation adjustment (“FVA”) framework (effective fourth quarter 2013) and DVA on: net revenue, net income, overhead ratio, compensation ratio and return on equity. Beginning in the first quarter 2014, the Firm did not exclude FVA and DVA from its assessment of business performance; however, the Firm continues to present these non-GAAP measures for the periods prior to January 1, 2014, as they reflected how management assessed the underlying business performance of the CIB in those prior periods.

32


Selected income statement data
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Revenue by business
 
 
 
 
 
 
 
 
 
 
 
Advisory
$
413

 
$
322

 
28
%
 
$
1,193

 
$
881

 
35
%
Equity underwriting
414

 
333

 
24

 
1,244

 
1,063

 
17

Debt underwriting
715

 
855

 
(16
)
 
2,322

 
2,716

 
(15
)
Total investment banking fees
1,542

 
1,510

 
2

 
4,759

 
4,660

 
2

Treasury Services
1,037

 
1,053

 
(2
)
 
3,058

 
3,148

 
(3
)
Lending
147

 
351

 
(58
)
 
728

 
1,222

 
(40
)
Total Banking
2,726

 
2,914

 
(6
)
 
8,545

 
9,030

 
(5
)
Fixed Income Markets
3,512

 
3,439

 
2

 
10,754

 
12,269

 
(12
)
Equity Markets
1,231

 
1,249

 
(1
)
 
3,691

 
3,885

 
(5
)
Securities Services
1,078

 
996

 
8

 
3,226

 
3,057

 
6

Credit Adjustments & Other(a)
240

 
(409
)
 
NM
 
168

 
(36
)
 
NM 
Total Markets & Investor Services
6,061

 
5,275

 
15

 
17,839

 
19,175

 
(7
)
Total net revenue
$
8,787

 
$
8,189

 
7
%
 
$
26,384

 
$
28,205

 
(6
)%
(a)
Consists primarily of credit valuation adjustments (“CVA”) managed by the credit portfolio group, and FVA (effective fourth quarter 2013) and 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.
Quarterly results
Net income was $1.5 billion, down 34%, compared with $2.2 billion in the prior year reflecting higher noninterest expense and a lower benefit from the provision for credit losses, largely offset by higher net revenue. Net revenue was $8.8 billion compared with $8.2 billion in the prior year. Excluding the impact of a DVA loss of $397 million in the prior year, net revenue was up 2% from $8.6 billion and net income was down 40% from $2.5 billion.
Banking revenue was $2.7 billion, down 6% from the prior year. Investment banking fees were $1.5 billion, up 2% from the prior year, driven by higher advisory fees of $413 million, up 28% from the prior year, and by higher equity underwriting fees of $414 million, up 24% from the prior year, on higher levels of industry-wide activity. These increases were predominantly offset by lower debt underwriting fees of $715 million, down 16% from a strong prior year. Treasury Services revenue was $1.0 billion, down 2% compared with the prior year, driven by lower trade finance revenue and the impact of business simplification initiatives, predominantly offset by higher net interest income on increased deposits. Lending revenue was $147 million, down from $351 million in the prior year, primarily driven by losses of over $100 million on securities received from restructured loans, compared to modest gains in the prior period.
Markets & Investor Services revenue was $6.1 billion, up 15% from the prior year. Fixed Income Markets revenue of $3.5 billion was up 2% from the prior year with particularly strong performance in currencies and emerging markets. Equity Markets revenue of $1.2 billion was down 1% compared with the prior year, primarily on lower derivatives revenue compared to a strong prior year largely offset by higher prime services revenue. Securities Services revenue was $1.1 billion, up 8% from the prior year primarily driven
 
by higher net interest income on increased deposits and higher fees and commissions. Credit Adjustments & Other revenue was a gain of $240 million, primarily driven by DVA/FVA as a result of credit spread widening and refinements to certain funding assumptions, compared with a loss of $409 million in the prior year which was primarily driven by DVA.
Noninterest expense was $6.0 billion, up 21% from the prior year, driven by higher legal expense and higher compensation expense. The ratio of compensation expense to total net revenue was 32%.
Return on equity was 10% on $61.0 billion of average allocated capital.
Year-to-date results
Net income was $5.4 billion, down 29% compared with $7.7 billion in the prior year. These results primarily reflected lower revenue, higher noninterest expense as well as a lower benefit from the provision for credit losses. Net revenue was $26.4 billion compared with $28.2 billion in the prior year.
Banking revenue was $8.5 billion, down 5% from the prior year. Investment banking fees were $4.8 billion, up 2% from the prior year. The increase was driven by higher advisory and equity underwriting fees, predominantly offset by lower debt underwriting fees. Advisory fees of $1.2 billion were up 35% on stronger revenue wallet share of completed transactions as well as growth in the industry-wide revenue wallet. Equity underwriting fees of $1.2 billion were up 17% on stronger industry-wide issuance. Debt underwriting fees were $2.3 billion, down 15%, primarily related to lower loan syndication fees on lower industry-wide revenue wallet levels and lower bond underwriting revenues compared with a stronger prior period. Treasury Services revenue was $3.1 billion, down


33


3% compared with the prior year, primarily driven by lower trade finance revenue as well as the impact of business simplification initiatives, partially offset by higher net interest income from increased deposits. Lending revenue was $728 million, down from $1.2 billion in the prior year, driven by losses on securities received from restructured loans compared to gains in the prior period, as well as lower net interest income.
Markets & Investor Services revenue was $17.8 billion, down 7% from the prior year. Fixed income Markets revenue of $10.8 billion was down 12% from the prior year on lower client activity across most products compared to a stronger prior period. Equity Markets revenue of $3.7 billion was down 5% primarily on lower derivatives revenue, partially offset by higher prime services revenue. Securities Services revenue was $3.2 billion, up 6% from
 
the prior year, primarily driven by higher net interest income on increased deposits and higher fees and commissions. Credit Adjustments & Other revenue was a gain of $168 million driven by gains, net of hedges, related to FVA/DVA, partially offset by net CVA losses, compared with a loss of $36 million in the prior year.
Noninterest expense was $17.7 billion, up 5% versus the prior year driven by higher noncompensation expense, predominantly driven by higher legal expense and investment in controls. This was partially offset by lower compensation expense. The compensation expense to net revenue ratio was 32%.
Return on equity was 12% on $61.0 billion of average allocated capital.



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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Selected balance sheet data (period-end)
 
 
 
 
 
 
 
 
 
 
 
Assets
$
874,321

 
$
867,474

 
1
%
 
$
874,321

 
$
867,474

 
1
%
Loans:
 
 
 
 
 
 
 
 
 
 
 
Loans retained(a)
95,608

 
104,269

 
(8
)
 
95,608

 
104,269

 
(8
)
Loans held-for-sale and loans at fair value
6,724

 
3,687

 
82

 
6,724

 
3,687

 
82

Total loans
102,332

 
107,956

 
(5
)
 
102,332

 
107,956

 
(5
)
Equity
61,000

 
56,500

 
8

 
61,000

 
56,500

 
8

Selected balance sheet data (average)
 
 
 
 
 
 
 
 
 
 
 
Assets
$
853,453

 
$
838,158

 
2

 
$
850,362

 
$
862,357

 
(1
)
Trading assets-debt and equity instruments
320,380

 
300,135

 
7

 
314,577

 
326,037

 
(4
)
Trading assets-derivative receivables
63,068

 
70,814

 
(11
)
 
62,235

 
71,319

 
(13
)
Loans:
 
 
 
 
 
 
 
 
 
 
 
Loans retained(a)
95,373

 
103,179

 
(8
)
 
95,972

 
105,862

 
(9
)
Loans held-for-sale and loans at fair value
8,018

 
5,113

 
57

 
8,331

 
5,438

 
53

Total loans
103,391

 
108,292

 
(5
)
 
104,303

 
111,300

 
(6
)
Equity
61,000

 
56,500

 
8

 
61,000

 
56,500

 
8

Headcount
51,597

 
52,445

 
(2
)%
 
51,597

 
52,445

 
(2
)%
(a)
Loans retained includes credit portfolio loans, trade finance loans, other held-for-investment loans and overdrafts.

34


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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Credit data and quality statistics
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs/(recoveries)
$
(3
)
 
$
(4
)
 
25
%
 
$
(8
)
 
$
(67
)
 
88
%
Nonperforming assets:
 
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans:
 
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans retained(a)(b)
112

 
176

 
(36
)
 
112

 
176

 
(36
)
Nonaccrual loans held-for-sale and loans at fair value
119

 
210

 
(43
)
 
119

 
210

 
(43
)
Total nonaccrual loans
231

 
386

 
(40
)
 
231

 
386

 
(40
)
Derivative receivables
312

 
431

 
(28
)
 
312

 
431

 
(28
)
Assets acquired in loan satisfactions
67

 
38

 
76

 
67

 
38

 
76

Total nonperforming assets
610

 
855

 
(29
)
 
610

 
855

 
(29
)
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
1,083

 
1,138

 
(5
)
 
1,083

 
1,138

 
(5
)
Allowance for lending-related commitments
445

 
490

 
(9
)
 
445

 
490

 
(9
)
Total allowance for credit losses
1,528

 
1,628

 
(6
)
 
1,528

 
1,628

 
(6
)
Net charge-off/(recovery) rate(a)
(0.01
)%
 
(0.02
)%
 
 
 
(0.01
)%
 
(0.08
)%
 
 
Allowance for loan losses to period-end loans retained(a)
1.13

 
1.09

 
 
 
1.13

 
1.09

 
 
Allowance for loan losses to period-end loans retained, excluding trade finance and conduits(c)
1.88

 
2.01

 
 
 
1.88

 
2.01

 
 
Allowance for loan losses to nonaccrual loans retained(a)(b)
967

 
647

 
 
 
967

 
647

 
 
Nonaccrual loans to total period-end loans
0.23

 
0.36

 
 
 
0.23

 
0.36

 
 
Business metrics
 
 
 
 
 
 
 
 
 
 
 
Assets under custody (“AUC”) by asset class (period-end)
  (in billions):
 
 
 
 
 
 
 
 
 
 
 
Fixed Income
$
12,525

 
$
11,691

 
7

 
$
12,525

 
$
11,691

 
7

Equity
7,037

 
6,473

 
9

 
7,037

 
6,473

 
9

Other(d)
1,683

 
1,572

 
7

 
1,683

 
1,572

 
7

Total AUC
$
21,245

 
$
19,736

 
8

 
$
21,245

 
$
19,736

 
8

Client deposits and other third party liabilities (average)
$
419,576

 
$
385,952

 
9

 
$
411,824

 
$
370,879

 
11

Trade finance loans (period-end)
27,510

 
34,356

 
(20
)%
 
27,510

 
34,356

 
(20
)%
(a)
Loans retained includes credit portfolio loans, trade finance loans, other held-for-investment loans and overdrafts.
(b)
Allowance for loan losses of $19 million and $56 million were held against these nonaccrual loans at September 30, 2014 and 2013, 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.
(d)
Consists of mutual funds, unit investment trusts, currencies, annuities, insurance contracts, options and other contracts.

35


League table results – revenue wallet(a)
 
 
 
 
 
 
Nine months ended
September 30, 2014
 
Full-year 2013
 
Share
Rank
 
Share
Rank
Debt, equity and equity-related
 
 
 
 
 
 
 
 
Global
7.5
%
 
1
 
 
8.3
%
 
#1

U.S.
10.5

 
1
 
 
11.5

 
1

Long-term debt(b)
 
 
 
 
 
 
 
 
Global
7.7

 
1
 
 
8.2

 
1

U.S.
11.3

 
2
 
 
11.6

 
1

Equity and equity-related
 
 
 
 
 
 
 
 
Global(c)
7.2

 
3
 
 
8.4

 
2

U.S.
9.7

 
2
 
 
11.3

 
1

M&A(d)
 
 
 
 
 
 
 
 
Global
8.1

 
2
 
 
7.6

 
2

U.S.
10.1

 
2
 
 
8.8

 
2

Loan syndications
 
 
 
 
 
 
 
 
Global
9.5

 
1
 
 
9.9

 
1

U.S.
13.2

 
1
 
 
13.8

 
1

Global investment banking revenue wallet(e)
8.0

 
1
 
 
8.5

 
1

 
League table results – volumes(f)
 
 
 
 
 
 
Nine months ended
September 30, 2014
 
Full-year 2013
 
Share
Rank
 
Share
Rank
Debt, equity and equity-related
 
 
 
 
 
 
 
 
Global
6.7
%
 
1
 
 
7.3
%
 
#1

U.S.
11.4

 
1
 
 
11.9

 
1

Long-term debt(b)
 
 
 
 
 
 
 
 
Global
6.5

 
1
 
 
7.2

 
1

U.S.
10.9

 
1
 
 
11.7

 
1

Equity and
equity-related
 
 
 
 
 
 
 
 
Global(c)
7.9

 
2
 
 
8.2

 
2

U.S.
11.3

 
2
 
 
12.1

 
2

M&A announced(d)
 
 
 
 
 
 
 
 
Global
20.8

 
4
 
 
23.2

 
2

U.S.
27.8

 
3
 
 
35.5

 
2

Loan syndications
 
 
 
 
 
 
 
 
Global
10.7

 
1
 
 
9.9

 
1

U.S.
19.6

 
1
 
 
17.6

 
1



(a)
Source: Dealogic. Reflects the ranking of revenue wallet 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 revenue wallet rankings 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.

36


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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Total net revenue(a)
 
 
 
 
 
 
 
 
 
 
 
Europe/Middle East/Africa
$
2,955

 
$
2,550

 
16
%
 
$
9,309

 
$
8,888

 
5
%
Asia/Pacific
1,215

 
1,295

 
(6
)
 
3,346

 
3,863

 
(13
)
Latin America/Caribbean
333

 
264

 
26

 
887

 
1,061

 
(16
)
Total international net revenue
4,503

 
4,109

 
10

 
13,542

 
13,812

 
(2
)
North America
4,284

 
4,080

 
5

 
12,842

 
14,393

 
(11
)
Total net revenue
$
8,787

 
$
8,189

 
7

 
$
26,384

 
$
28,205

 
(6
)
 
 
 
 
 
 
 
 
 
 
 
 
Loans (period-end)(a)
 
 
 
 
 
 
 
 
 
 
 
Europe/Middle East/Africa
$
25,742

 
$
30,495

 
(16
)
 
$
25,742

 
$
30,495

 
(16
)
Asia/Pacific
22,960

 
26,653

 
(14
)
 
22,960

 
26,653

 
(14
)
Latin America/Caribbean
9,508

 
9,172

 
4

 
9,508

 
9,172

 
4

Total international loans
58,210

 
66,320

 
(12
)
 
58,210

 
66,320

 
(12
)
North America
37,398

 
37,949

 
(1
)
 
37,398

 
37,949

 
(1
)
Total loans
$
95,608

 
$
104,269

 
(8
)
 
$
95,608

 
$
104,269

 
(8
)
 
 
 
 
 
 
 
 
 
 
 
 
Client deposits and other third-party liabilities (average)(a)
 
 
 
 
 
 
 
 
 
 
 
Europe/Middle East/Africa
$
157,436

 
$
146,685

 
7

 
$
150,653

 
$
140,320

 
7

Asia/Pacific
70,840

 
51,895

 
37

 
65,751

 
51,852

 
27

Latin America/Caribbean
21,438

 
15,760

 
36

 
22,364

 
14,331

 
56

Total international
$
249,714

 
$
214,340

 
17

 
$
238,768

 
$
206,503

 
16

North America
169,862

 
171,612

 
(1
)
 
173,056

 
164,376

 
5

Total client deposits and other third-party liabilities
$
419,576

 
$
385,952

 
9

 
$
411,824

 
$
370,879

 
11

 
 
 
 
 
 
 
 
 
 
 
 
AUC (period-end) (in billions)(a)
 
 
 
 
 
 
 
 
 
 
 
North America
$
11,690

 
$
10,939

 
7

 
$
11,690

 
$
10,939

 
7

All other regions
9,555

 
8,797

 
9

 
9,555

 
8,797

 
9

Total AUC
$
21,245

 
$
19,736

 
8
%
 
$
21,245

 
$
19,736

 
8
%
(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.

37


COMMERCIAL BANKING
For a discussion of the business profile of CB, see pages 103–105 of JPMorgan Chase’s 2013 Annual Report.
Selected income statement data
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except ratios)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
Lending- and deposit-related fees
$
241

 
$
256

 
(6
)%
 
$
739

 
$
780

 
(5
)%
Asset management, administration and commissions
21

 
28

 
(25
)
 
70

 
90

 
(22
)
All other income(a)
309

 
304

 
2

 
897

 
804

 
12

Noninterest revenue
571

 
588

 
(3
)
 
1,706

 
1,674

 
2

Net interest income
1,096

 
1,137

 
(4
)
 
3,313

 
3,452

 
(4
)
Total net revenue(b)
1,667

 
1,725

 
(3
)
 
5,019

 
5,126

 
(2
)
Provision for credit losses
(79
)
 
(41
)
 
93

 
(141
)
 
42

 
NM 
Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
Compensation expense
301

 
288

 
5

 
900

 
863

 
4

Noncompensation expense
366

 
367

 

 
1,118

 
1,076

 
4

Amortization of intangibles
1

 
6

 
(83
)
 
11

 
18

 
(39
)
Total noninterest expense
668

 
661

 
1

 
2,029

 
1,957

 
4

Income before income tax expense
1,078

 
1,105

 
(2
)
 
3,131

 
3,127

 

Income tax expense
429

 
440

 
(3
)
 
1,246

 
1,245

 

Net income
$
649

 
$
665

 
(2
)
 
$
1,885

 
$
1,882

 

Revenue by product
 
 
 
 
 
 
 
 
 
 
 
Lending
$
847

 
$
922

 
(8
)
 
$
2,587

 
$
2,817

 
(8
)
Treasury services
612

 
605

 
1

 
1,849

 
1,817

 
2

Investment banking
166

 
155

 
7

 
478

 
405

 
18

Other
42

 
43

 
(2
)
 
105

 
87

 
21

Total Commercial Banking net revenue
$
1,667

 
$
1,725

 
(3
)
 
$
5,019

 
$
5,126

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
Investment banking revenue, gross(c)
$
501

 
$
448

 
12

 
$
1,429

 
$
1,174

 
22

 
 
 
 
 
 
 
 
 
 
 
 
Revenue by client segment
 
 
 
 
 
 
 
 
 
 
 
Middle Market Banking
$
684

 
$
745

 
(8
)
 
$
2,091

 
$
2,275

 
(8
)
Corporate Client Banking
480

 
459

 
5

 
1,403

 
1,336

 
5

Commercial Term Lending
303

 
311

 
(3
)
 
918

 
917

 

Real Estate Banking
121

 
118

 
3

 
366

 
343

 
7

Other
79

 
92

 
(14
)
 
241

 
255

 
(5
)
Total Commercial Banking net revenue
$
1,667

 
$
1,725

 
(3
)%
 
$
5,019

 
$
5,126

 
(2
)%
Financial ratios
 
 
 
 
 
 
 
 
 
 
 
Return on common equity
18%

 
20
%
 
 
 
18
%
 
19
%
 
 
Overhead ratio
40

 
38

 
 
 
40

 
38

 
 
(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 $108 million and $95 million for the three months ended September 30, 2014 and 2013, respectively, and $317 million and $278 million for the nine months ended September 30, 2014 and 2013, respectively.
(c)
Represents the total revenue related to investment banking products sold to CB clients.

38


Quarterly results
Net income was $649 million, down 2% compared with the prior year, reflecting lower net revenue, largely offset by a lower provision for credit losses.
Net revenue was $1.7 billion, a decrease of $58 million, or 3%, compared with the prior year. Net interest income was $1.1 billion, a decrease of $41 million, or 4%, compared with the prior year, reflecting yield compression and lower purchase discounts recognized on loan repayments, largely offset by higher loan balances. Noninterest revenue was $571 million, a decrease of $17 million, or 3%, compared with the prior year, driven by business simplification and lower fees related to loans and deposits, partially offset by higher investment banking revenue.
Noninterest expense was $668 million, flat compared with the prior year.
 
Year-to-date results
Net income was $1.9 billion, flat compared with the prior year, reflecting lower net revenue and higher noninterest expense, offset by a lower provision for credit losses.
Net revenue was $5.0 billion, a decrease of $107 million, or 2%, compared with the prior year. Net interest income was $3.3 billion, a decrease of $139 million, or 4%, reflecting yield compression and lower purchase discounts recognized on loan repayments, partially offset by higher loan balances. Noninterest revenue was $1.7 billion, up $32 million, or 2%, reflecting higher investment banking revenue, largely offset by business simplification, and lower fees related to loans and deposits.
Noninterest expense was $2.0 billion, an increase of $72 million, or 4%, from the prior year, largely reflecting higher investments in controls.

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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Selected balance sheet data (period-end)
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
191,563

 
$
192,194

 

 
$
191,563

 
$
192,194

 

Loans:
 
 
 
 
 
 
 
 
 
 
 
Loans retained
143,490

 
133,090

 
8

 
143,490

 
133,090

 
8

Loans held-for-sale and loans at fair value
353

 
2,071

 
(83
)
 
353

 
2,071

 
(83
)
Total loans
$
143,843

 
$
135,161

 
6

 
$
143,843

 
$
135,161

 
6

Equity
14,000

 
13,500

 
4

 
14,000

 
13,500

 
4

 
 
 
 
 
 
 
 
 
 
 
 
Period-end loans by client segment
 
 
 
 
 
 
 
 
 
 
 
Middle Market Banking
$
53,015

 
$
52,214

 
2

 
$
53,015

 
$
52,214

 
2

Corporate Client Banking
21,138

 
21,425

 
(1
)
 
21,138

 
21,425

 
(1
)
Commercial Term Lending
52,235

 
47,612

 
10

 
52,235

 
47,612

 
10

Real Estate Banking
12,818

 
10,057

 
27

 
12,818

 
10,057

 
27

Other
4,637

 
3,853

 
20

 
4,637

 
3,853

 
20

Total Commercial Banking loans
$
143,843

 
$
135,161

 
6

 
$
143,843

 
$
135,161

 
6

 
 
 
 
 
 
 
 
 
 
 
 
Selected balance sheet data (average)
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
190,678

 
$
185,744

 
3

 
$
191,922

 
$
184,450

 
4

Loans:
 
 
 
 
 
 
 
 
 
 
 
Loans retained
142,139

 
131,019

 
8

 
139,566

 
129,958

 
7

Loans held-for-sale and loans at fair value
649

 
599

 
8

 
889

 
883

 
1

Total loans
$
142,788

 
$
131,618

 
8

 
$
140,455

 
$
130,841

 
7

Client deposits and other third-party liabilities
204,654

 
196,802

 
4

 
202,532

 
196,004

 
3

Equity
14,000

 
13,500

 
4

 
14,000

 
13,500

 
4

Average loans by client segment
 
 
 
 
 
 
 
 
 
 
 
Middle Market Banking
$
52,704

 
$
51,379

 
3

 
$
52,407

 
$
51,863

 
1

Corporate Client Banking
21,752

 
20,261

 
7

 
21,345

 
20,886

 
2

Commercial Term Lending
51,567

 
46,656

 
11

 
50,479

 
45,206

 
12

Real Estate Banking
12,268

 
9,675

 
27

 
11,803

 
9,213

 
28

Other
4,497

 
3,647

 
23

 
4,421

 
3,673

 
20

Total Commercial Banking loans
$
142,788

 
$
131,618

 
8

 
$
140,455

 
$
130,841

 
7

 
 
 
 
 
 
 
 
 
 
 
 
Headcount
7,253

 
6,761

 
7
%
 
7,253

 
6,761

 
7
%

39


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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Credit data and quality statistics
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs/(recoveries)
$
5

 
$
16

 
(69
)%
 
$
(35
)
 
$
18

 
NM 
Nonperforming assets
 
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans:
 
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans retained(a)
361

 
558

 
(35
)
 
361

 
558

 
(35
)%
Nonaccrual loans held-for-sale and loans at fair value
14

 
8

 
75

 
14

 
8

 
75

Total nonaccrual loans
375

 
566

 
(34
)
 
375

 
566

 
(34
)
Assets acquired in loan satisfactions
11

 
19

 
(42
)
 
11

 
19

 
(42
)
Total nonperforming assets
386

 
585

 
(34
)
 
386

 
585

 
(34
)
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
2,529

 
2,647

 
(4
)
 
2,529

 
2,647

 
(4
)
Allowance for lending-related commitments
178

 
171

 
4

 
178

 
171

 
4

Total allowance for credit losses
2,707

 
2,818

 
(4
)%
 
2,707

 
2,818

 
(4
)%
Net charge-off/(recovery) rate(b)
0.01
%
 
0.05
%
 
 
 
(0.03
)%
 
0.02
%
 
 
Allowance for loan losses to period-end loans retained
1.76

 
1.99

 
 
 
1.76

 
1.99

 
 
Allowance for loan losses to nonaccrual loans retained(a)
701

 
474

 
 
 
701

 
474

 
 
Nonaccrual loans to total period-end loans
0.26

 
0.42

 
 
 
0.26

 
0.42

 
 
(a)
Allowance for loan losses of $71 million and $102 million was held against nonaccrual loans retained at September 30, 2014 and 2013, respectively.
(b)
Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.

40


ASSET MANAGEMENT
For a discussion of the business profile of AM, see pages 106–108 of JPMorgan Chase’s 2013 Annual Report.
Selected income statement data
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except ratios)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
Asset management, administration and commissions
$
2,263

 
$
2,017

 
12
%
 
$
6,605

 
$
5,918

 
12
%
All other income
159

 
168

 
(5
)
 
415

 
517

 
(20
)
Noninterest revenue
2,422

 
2,185

 
11

 
7,020

 
6,435

 
9

Net interest income
594

 
578

 
3

 
1,730

 
1,706

 
1

Total net revenue
3,016

 
2,763

 
9

 
8,750

 
8,141

 
7

 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
9

 

 
NM
 
1

 
44

 
(98
)
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
Compensation expense
1,278

 
1,207

 
6

 
3,765

 
3,532

 
7

Noncompensation expense
784

 
774

 
1

 
2,394

 
2,174

 
10

Amortization of intangibles
19

 
22

 
(14
)
 
59

 
65

 
(9
)
Total noninterest expense
2,081

 
2,003

 
4

 
6,218

 
5,771

 
8

Income before income tax expense
926

 
760

 
22

 
2,531

 
2,326

 
9

Income tax expense
354

 
284

 
25

 
966

 
863

 
12

Net income
$
572

 
$
476

 
20

 
$
1,565

 
$
1,463

 
7

 
 
 
 
 
 
 
 
 
 
 
 
Revenue by line of business
 
 
 
 
 
 
 
 
 
 
 
Global Investment Management
$
1,595

 
$
1,409

 
13

 
$
4,550

 
$
4,128

 
10

Global Wealth Management
1,421

 
1,354

 
5

 
4,200

 
4,013

 
5

Total net revenue
$
3,016

 
$
2,763

 
9
%
 
$
8,750

 
$
8,141

 
7
%
 
 
 
 
 
 
 
 
 
 
 
 
Financial ratios
 
 
 
 
 
 
 
 
 
 
 
Return on common equity
25
%
 
21
%
 
 
 
23
%
 
22
%
 
 
Overhead ratio
69

 
72

 
 
 
71

 
71

 
 
Pretax margin ratio:
 
 
 
 
 
 
 
 
 
 
 
Global Investment Management
35

 
30

 
 
 
31

 
30

 
 
Global Wealth Management
26

 
25

 
 
 
27

 
27

 
 
Asset Management
31

 
28

 
 
 
29

 
29

 
 

Quarterly results
Net income was $572 million, an increase of $96 million, or 20%, from the prior year, reflecting higher net revenue, partially offset by higher noninterest expense.
Net revenue was $3.0 billion, an increase of $253 million , or 9%, from the prior year. Noninterest revenue was $2.4 billion, up $237 million, or 11%, from the prior year, due to net client inflows and the effect of higher market levels. Net interest income was $594 million, up $16 million, or 3%, from the prior year, due to higher loan and deposit balances, partially offset by spread compression.
Noninterest expense was $2.1 billion, an increase of $78 million, or 4%, from the prior year, as the business continues to invest in both infrastructure and controls.
 
Year-to-date results
Net income was $1.6 billion, an increase of $102 million, or 7%, from the prior year, reflecting higher noninterest revenue and lower provision for credit losses, largely offset by higher noninterest expense.
Net revenue was $8.8 billion, an increase of $609 million, or 7%, from the prior year. Noninterest revenue was $7.0 billion, up $585 million, or 9%, from the prior year, due to net client inflows and the effect of higher market levels, partially offset by lower valuations of seed capital investments. Net interest income was $1.7 billion, up $24 million, or 1%, from the prior year, due to higher deposit and loan balances, largely offset by spread compression.
Noninterest expense was $6.2 billion, an increase of $447 million, or 8%, from the prior year, as the business continues to invest in both infrastructure and controls.


41


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, ranking data and where otherwise noted)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Number of:
 
 
 
 
 
 
 
 
 
 
 
Client advisors
2,873

 
2,995

 
(4
)%
 
2,873

 
2,995

 
(4
)%
% of customer assets in 4 & 5 Star Funds(a)
49
%
 
55
%
 
 
 
49
%
 
55
%
 
 
% of AUM in 1st and 2nd quartiles:(b)
 
 
 
 
 
 
 
 
 
 
 
1 year
54

 
73

 
 
 
54

 
73

 
 
3 years
69

 
74

 
 
 
69

 
74

 
 
5 years
71

 
74

 
 
 
71

 
74

 
 
Selected balance sheet data (period-end)
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
130,296

 
$
117,475

 
11

 
$
130,296

 
$
117,475

 
11

Loans(c)
102,411

 
90,538

 
13

 
102,411

 
90,538

 
13

Deposits
150,268

 
139,553

 
8

 
150,268

 
139,553

 
8

Equity
9,000

 
9,000

 

 
9,000

 
9,000

 

Selected balance sheet data (average)
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
128,477

 
$
114,275

 
12

 
$
125,567

 
$
111,229

 
13

Loans
101,427

 
87,770

 
16

 
98,615

 
83,826

 
18

Deposits
151,240

 
138,742

 
9

 
149,480

 
138,251

 
8

Equity
9,000

 
9,000

 

 
9,000

 
9,000

 

 
 
 
 
 
 
 
 
 
 
 
 
Headcount
19,653

 
19,928

 
(1
)%
 
19,653

 
19,928

 
(1
)%
(a)
Derived from Morningstar for the U.S., the U.K., Luxembourg, France, Hong Kong and Taiwan; and Nomura for Japan.
(b)
Quartile ranking sourced from: Lipper for the U.S. and Taiwan; Morningstar for the U.K., Luxembourg, France and Hong Kong; and Nomura for Japan.
(c)
Included $21.3 billion and $17.5 billion of prime mortgage loans reported in the Consumer, excluding credit card, loan portfolio at September 30, 2014 and 2013, respectively. For the same periods, excluded $3.0 billion and $4.0 billion of prime mortgage loans reported in the Chief Investment Office (“CIO”) portfolio within the Corporate/Private Equity segment, respectively.

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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Credit data and quality statistics
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs
$
11

 
$
9

 
22
%
 
$
3

 
$
36

 
(92
)%
Nonaccrual loans
184

 
202

 
(9
)
 
184

 
202

 
(9
)
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
273

 
260

 
5

 
273

 
260

 
5

Allowance for lending-related commitments
4

 
7

 
(43
)
 
4

 
7

 
(43
)
Total allowance for credit losses
277

 
267

 
4

 
277

 
267

 
4

Net charge-off rate
0.04
%
 
0.04
%
 
 
 

 
0.06
%
 
 
Allowance for loan losses to period-end loans
0.27

 
0.29

 
 
 
0.27

 
0.29

 
 
Allowance for loan losses to nonaccrual loans
148

 
129

 
 
 
148

 
129

 
 
Nonaccrual loans to period-end loans
0.18

 
0.22

 
 
 
0.18

 
0.22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
AM firmwide disclosures(a)
 
 
 
 
 
 
 
 
 
 
 
Total net revenue
$
3,695

 
$
3,300

 
12

 
$
10,688

 
$
9,638

 
11

Client assets (in billions)(b)
2,554

 
2,423

 
5

 
2,554

 
2,423

 
5

Number of client advisors
5,972

 
6,023

 
(1
)%
 
5,972

 
6,023

 
(1
)%
(a)
Includes Chase Wealth Management (“CWM”), which is a unit of Consumer & Business Banking. The firmwide metrics are presented in order to capture AM’s partnership with CWM.
(b)
Excludes CWM client assets that are managed by AM.

42


Client assets
Client assets were $2.3 trillion, an increase of $98 billion, or 4%, compared with the prior year. Excluding the sale of Retirement Plan Services, client assets were up 10% compared with the prior year. Assets under management
 
were $1.7 trillion, an increase of $171 billion, or 11%, from the prior year, due to the effect of higher market levels and net inflows to long-term products.

Client assets
September 30,
(in billions)
2014
 
2013
 
Change
Assets by asset class
 
 
 
 
 
Liquidity
$
440

 
$
446

 
(1
)%
Fixed income
359

 
328

 
9

Equity
372

 
346

 
8

Multi-asset and alternatives
540

 
420

 
29

Total assets under management
1,711

 
1,540

 
11

Custody/brokerage/administration/deposits
633

 
706

 
(10
)
Total client assets
$
2,344

 
$
2,246

 
4

 
 
 
 
 
 
Memo:
 
 
 
 
 
Alternative client assets(a)
$
166

 
$
151

 
10

 
 
 
 
 
 
Assets by client segment
 
 
 
 
 
Private Banking
$
429

 
$
352

 
22

Institutional
799

 
752

 
6

Retail
483

 
436

 
11

Total assets under management
$
1,711

 
$
1,540

 
11

Private Banking
$
1,052

 
$
935

 
13

Institutional
803

 
752

 
7

Retail
489

 
559

 
(13
)
Total client assets
$
2,344

 
$
2,246

 
4

Mutual fund assets by asset class
 
 
 
 
 
Liquidity
$
382

 
$
396

 
(4
)
Fixed income
147

 
140

 
5

Equity
209

 
183

 
14

Multi-asset and alternatives
96

 
68

 
41

Total mutual fund assets
$
834

 
$
787

 
6
%
(a) Represents assets under management, as well as client balances in brokerage accounts.

 
Three months ended September 30,
 
Nine months ended September 30,
(in billions)
2014
 
2013
 
2014
 
2013
Assets under management rollforward
 
 
 
 
 
 
 
Beginning balance
$
1,707

 
$
1,470

 
$
1,598

 
$
1,426

Net asset flows:
 
 
 
 
 
 
 
Liquidity
8

 
13

 
(9
)
 
(11
)
Fixed income
4

 
1

 
29

 
7

Equity

 
7

 
3

 
29

Multi-asset and alternatives
12

 
11

 
38

 
38

Market/performance/other impacts
(20
)
 
38

 
52

 
51

Ending balance, September 30
$
1,711

 
$
1,540

 
$
1,711

 
$
1,540

Client assets rollforward
 
 
 
 
 
 
 
Beginning balance
$
2,473

 
$
2,157

 
$
2,343

 
$
2,095

Net asset flows
35

 
39

 
71

 
55

Market/performance/other impacts
(164
)
 
50

 
(70
)
 
96

Ending balance, September 30
$
2,344

 
$
2,246

 
$
2,344

 
$
2,246


43


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)
2014
 
2013
 
Change
 
2014
 
2013
 
Change
Total net revenue
(in millions)(a)
 
 
 
 
 
 
 
 
 
 
 
Europe/Middle East/Africa
$
549

 
$
465

 
18
%
 
$
1,544

 
$
1,337

 
15
%
Asia/Pacific
296

 
295

 

 
861

 
863

 

Latin America/Caribbean
207

 
202

 
2

 
620

 
638

 
(3
)
North America
1,964

 
1,801

 
9

 
5,725

 
5,303

 
8

Total net revenue
$
3,016

 
$
2,763

 
9

 
$
8,750

 
$
8,141

 
7

Assets under management
 
 
 
 
 
 
 
 
 
 
 
Europe/Middle East/Africa
$
324

 
$
271

 
20

 
$
324

 
$
271

 
20

Asia/Pacific
132

 
132

 

 
132

 
132

 

Latin America/Caribbean
48

 
42

 
14

 
48

 
42

 
14

North America
1,207

 
1,095

 
10

 
1,207

 
1,095

 
10

Total assets under management
$
1,711

 
$
1,540

 
11

 
$
1,711

 
$
1,540

 
11

Client assets
 
 
 
 
 
 
 
 
 
 
 
Europe/Middle East/Africa
$
385

 
$
330

 
17

 
$
385

 
$
330

 
17

Asia/Pacific
181

 
179

 
1

 
181

 
179

 
1

Latin America/Caribbean
119

 
109

 
9

 
119

 
109

 
9

North America
1,659

 
1,628

 
2

 
1,659

 
1,628

 
2

Total client assets
$
2,344

 
$
2,246

 
4
%
 
$
2,344

 
$
2,246

 
4
%
(a) Regional revenue is based on the domicile of the client.



44


CORPORATE/PRIVATE EQUITY
For a discussion of Corporate/Private Equity, see pages 109–111 of JPMorgan Chase’s 2013 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)
2014

2013

 
Change

 
2014

 
2013

 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
Principal transactions
$
310

$
378

 
(18
)%
 
$
688

 
$
509

 
35
%
Securities gains
6

26

 
(77
)
 
43

 
659

 
(93
)
All other income
134

83

 
61

 
594

 
(30
)
 
NM 
Noninterest revenue
450

487

 
(8
)
 
1,325

 
1,138

 
16

Net interest income
(28
)
(366
)
 
92

 
(265
)
 
(1,636
)
 
84

Total net revenue(a)
422

121

 
249

 
1,060

 
(498
)
 
NM 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses
(8
)
(17
)
 
53

 
(29
)
 
(15
)
 
(93
)
 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
 
 
 
 
 
 
 
 
 
 
Compensation expense
820

551

 
49

 
2,200

 
1,748

 
26

Noncompensation expense(b)
1,468

9,890

 
(85
)
 
3,242

 
11,877

 
(73
)
Subtotal
2,288

10,441

 
(78
)
 
5,442

 
13,625

 
(60
)
Net expense allocated to other businesses
(1,579
)
(1,345
)
 
(17
)
 
(4,719
)
 
(3,811
)
 
(24
)
Total noninterest expense
709

9,096

 
(92
)
 
723

 
9,814

 
(93
)
Income/(loss) before income tax expense/(benefit)
(279
)
(8,958
)
 
97

 
366

 
(10,297
)
 
NM 
Income tax expense/(benefit)
(677
)
(2,495
)
 
73

 
(741
)
 
(3,532
)
 
79

Net income/(loss)
$
398

$
(6,463
)
 
NM
 
$
1,107

 
$
(6,765
)
 
NM 
Total net revenue
 
 
 
 
 
 
 
 
 
 
Private equity
$
281

$
398

 
(29
)
 
$
680

 
$
532

 
28

Treasury and CIO
132

(232
)
 
NM
 
221

 
(767
)
 
NM 
Other Corporate
9

(45
)
 
NM
 
159

 
(263
)
 
NM 
Total net revenue
$
422

$
121

 
249

 
$
1,060

 
$
(498
)
 
NM 
Net income/(loss)
 
 
 
 
 
 
 
 
 
 
Private equity
$
71

$
242

 
(71
)
 
$
293

 
$
272

 
8

Treasury and CIO
(30
)
(193
)
 
84

 
(170
)
 
(598
)
 
72

Other Corporate
357

(6,512
)
 
NM
 
984

 
(6,439
)
 
NM 
Total net income/(loss)
$
398

$
(6,463
)
 
NM
 
$
1,107

 
$
(6,765
)
 
NM 
Total assets (period-end)
$
882,792

$
835,000

 
6

 
$
882,792

 
$
835,000

 
6

Headcount
25,199

19,843

 
27
%
 
25,199

 
19,843

 
27
%
(a)
Included tax-equivalent adjustments, predominantly due to tax-exempt income from municipal bond investments of $190 million and $128 million for the three months ended September 30, 2014 and 2013, respectively, and $534 million and $336 million for the nine months ended September 30, 2014 and 2013, respectively.
(b)
Included legal expense of $512 million and $9.15 billion for the three months ended September 30, 2014 and 2013, respectively, and $737 million and $9.8 billion for the nine months ended September 30, 2014 and 2013.

45


Quarterly results
Net income was $398 million, compared with a net loss of $6.5 billion in the prior year.
Private Equity reported net income of $71 million, compared with $242 million in the prior year, primarily due to lower net valuation gains on investments and higher expenses.
Treasury and CIO reported a net loss of $30 million, compared with a net loss of $193 million in the prior year. Net revenue was a gain of $132 million, compared with a loss of $232 million in the prior year. Net interest income was a gain of $36 million, compared with a loss of $261 million in the prior year, primarily reflecting the benefit of higher re-investment yields and higher investment securities balances.
Other Corporate reported net income of $357 million, compared with a net loss of $6.5 billion in the prior year. The current quarter included $512 million of legal expense, compared with $9.15 billion of legal expense, including reserves for litigation and regulatory proceedings in the prior year. The current quarter included an after-tax benefit of approximately $400 million for tax adjustments.
Year-to-date results
Net income was $1.1 billion, compared with a net loss of $6.8 billion in the prior year.
Private Equity reported net income of $293 million, compared with $272 million in the prior year, primarily due to higher net gains on sales largely offset by higher expenses.
Treasury and CIO reported a net loss of $170 million, compared with a net loss of $598 million in the prior year. Net revenue was a gain of $221 million, compared with a loss of $767 million in the prior year. Net interest income was a loss of $61 million compared with a loss of $1.3 billion in the prior year, primarily reflecting the benefit of higher re-investment yields. Securities gains were $43 million, compared to $652 million in the prior year, reflecting lower repositioning activity of the investment securities portfolio in the current period.
 
Other Corporate reported net income of $984 million, compared with a net loss of $6.4 billion in the prior year. The current year included $736 million of legal expense compared with $9.8 billion of legal expense, including reserves for litigation and regulatory proceedings, in the prior year. The current year included an after-tax benefit of approximately $550 million for tax adjustments.
Treasury and CIO overview
Treasury and CIO are predominantly responsible for measuring, monitoring, reporting and managing the Firm’s liquidity, funding and structural interest rate and foreign exchange risks, as well as executing the Firm’s capital plan. For further discussion of Treasury and CIO, see page 110 of the Firm’s 2013 Annual Report.
At September 30, 2014, the total Treasury and CIO investment securities portfolio was $358.5 billion; the average credit rating of the securities comprising the Treasury and CIO investment securities portfolio was AA+ (based on 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 details of the Firm’s investment securities portfolio.
For further information on liquidity and funding risk, see Liquidity Risk Management on pages 80–84. For information on interest rate, foreign exchange and other risks, Treasury and CIO Value-at-risk (“VaR”) and the Firm’s structural interest rate-sensitive revenue at risk (“Earnings-at-risk”), see Market Risk Management on pages 67–69.










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)
2014

 
2013

 
Change

 
2014

 
2013

 
Change

Securities gains
$
6

 
$
26

 
(77
)%
 
$
43

 
$
652

 
(93
)%
Investment securities portfolio (average)(a)
355,577

 
348,622

 
2

 
349,893

 
356,665

 
(2
)
Investment securities portfolio (period-end)(b)
358,516

 
350,527

 
2

 
358,516

 
350,527

 
2

Mortgage loans (average)
3,183

 
4,562

 
(30
)
 
3,424

 
5,538

 
(38
)
Mortgage loans (period-end)
3,048

 
4,161

 
(27
)%
 
3,048

 
4,161

 
(27
)%
(a)
Average investment securities included held-to-maturity balances of $48.3 billion for the three months ended September 30, 2014 and $46.6 billion for the nine months ended September 30, 2014. Held-to-maturity average balances for the three and nine months ended September 30, 2013 were not material.
(b)
Period-end investment securities included held-to-maturity balance of $48.8 billion and $4.5 billion at September 30, 2014, and September 30, 2013, respectively.

46


Private Equity Portfolio
 
 
 
 
 
 
Selected income statement and balance sheet data
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
2014

 
2013

 
Change

 
2014

 
2013

 
Change

Private equity gains/(losses)
 
 
 
 
 
 
 
 
 
 
 
Realized gains/(losses)
$
(70
)
 
$
(142
)
 
51
%
 
$
902

 
$
(54
)
 
NM 
Unrealized gains/(losses)(a)
365

 
487

 
(25
)
 
(162
)
 
535

 
NM 
Total direct investments
295

 
345

 
(14
)
 
740

 
481

 
54
%
Third-party fund investments
28

 
83

 
(66
)
 
46

 
127

 
(64
)
Total private equity gains/(losses)(b)
$
323

 
$
428

 
(25
)%
 
$
786

 
$
608

 
29
%
(a)
Unrealized gains/(losses) contain reversals of unrealized gains and losses that were recognized in prior periods and have now been realized.
(b)
Included in principal transactions revenue in the Consolidated Statements of Income.
Private equity portfolio information(a)
 
 
(in millions)
September 30, 2014
 
December 31, 2013
 
Change

Publicly held securities
 
 
 
 
 
Carrying value
$
617

 
$
1,035

 
(40
)%
Cost
479

 
672

 
(29
)
Quoted public value
617

 
1,077

 
(43
)
Privately held direct securities
 
 
 
 
 
Carrying value
4,275

 
5,065

 
(16
)
Cost
5,049

 
6,022

 
(16
)
Third-party fund investments(b)
 
 
 
 
 
Carrying value
496

 
1,768

 
(72
)
Cost
484

 
1,797

 
(73
)
Total private equity portfolio
 
 
 
 
 
Carrying value
$
5,388

 
$
7,868

 
(32
)
Cost
6,012

 
8,491

 
(29)%

(a)
For more information on the Firm’s methodologies regarding the valuation of the private equity portfolio, see Note 3 of JPMorgan Chase’s 2013 Annual Report.
(b)
Unfunded commitments to third-party private equity funds were $117 million and $215 million at September 30, 2014, and December 31, 2013, respectively.
The carrying value of the private equity portfolio at September 30, 2014 was $5.4 billion, down from $7.9 billion at December 31, 2013. The decrease in the portfolio was predominantly driven by sales.

47


ENTERPRISE-WIDE RISK MANAGEMENT
Risk is an inherent part of JPMorgan Chase’s business activities. The Firm employs a holistic approach to risk management that is intended to ensure the broad spectrum of risk types inherent in the Firm’s business activities are considered in managing its business activities.
The Firm believes effective risk management requires:
Personal responsibility for risk management, including identification and escalation of risk issues by all individuals within the Firm;
Ownership of risk management within each line of business; and
Firmwide structures for risk governance and oversight.
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 designed to create a culture of risk transparency and awareness and personal responsibility throughout the Firm where collaboration, discussion, escalation and sharing of information are encouraged. The CEO, CFO, CRO and COO are ultimately responsible and accountable to the Firm’s Board of Directors.
Employees are expected to operate with the highest standards of integrity and identify, escalate, and actively manage risk issues. 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 Firm’s overall objective in managing risk is to protect the safety and soundness of the Firm, and avoid excessive risk taking.


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 2013 Annual Report.
Risk disclosure
Form 10-Q page reference
Annual Report page reference
Enterprise- Wide Risk Management
48
113–116
Risk governance
 
114–116
Credit Risk Management
49-66
117–141
Credit Portfolio
 
119
Consumer Credit Portfolio
50-57
120–129
Wholesale Credit Portfolio
58-63
130–138
Community Reinvestment Act Exposure
64
138
Allowance For Credit Losses
64-66
139–141
Market Risk Management
67-69
142–148
Risk identification and classification
 
142–143
Value-at-risk
67-69
144–146
Economic-value stress testing
 
147
Earnings-at-risk
69
147–148
Risk monitoring and control: Limits
 
148
Country Risk Management
70
149–152
Model risk
 
153
Principal Risk Management
 
154
Operational Risk Management
71-72
155–157
Operational Risk Capital Measurement
71
 
Cybersecurity
71-72
156
Business resiliency
 
157
Legal Risk, Regulatory Risk, and Compliance Risk Management
 
158
Fiduciary Risk management
 
159
Reputation Risk Management
 
159
Capital Management
73-79
160–167
Liquidity Risk Management
80-84
168–173
Funding
80-83
168–172
HQLA
83
172
Contingency funding plan
84
172
Credit ratings
84
173


48


CREDIT RISK MANAGEMENT
Credit risk is the risk of loss from obligor or counterparty default. 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 117–141 of JPMorgan Chase’s 2013 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 of this Form 10-Q. For additional information on the Firm’s loans and derivative receivables, including the Firm’s accounting policies, see Note 13 and Note 5 of this Form 10-Q.
For further information regarding the credit risk inherent in the Firm’s investment securities portfolio, see Note 11 of this Form 10-Q and Note 12 of JPMorgan Chase’s 2013 Annual Report.
For information on the changes in the credit portfolio, see Consumer Credit Portfolio on pages 50–57, and Wholesale Credit Portfolio on pages 58–63 of this Form 10-Q.
Total credit portfolio
 
 
 
 
 
Credit exposure
 
Nonperforming(b)(c)(d)
(in millions)
Sep 30,
2014
Dec 31,
2013
 
Sep 30,
2014
Dec 31,
2013
Loans retained
$
735,304

$
724,177

 
$
7,241

$
8,317

Loans held-for-sale
4,339

12,230

 
125

26

Loans at fair value
3,614

2,011

 
128

197

Total loans – reported
743,257

738,418

 
7,494

8,540

Derivative receivables
72,453

65,759

 
312

415

Receivables from customers and other
29,466

26,883

 


Total credit-related assets
845,176

831,060

 
7,806

8,955

Assets acquired in loan satisfactions
 
 
 
 
 
Real estate owned
NA

NA

 
545

710

Other
NA

NA

 
39

41

Total assets acquired in loan satisfactions
NA

NA

 
584

751

Total assets
845,176

831,060

 
8,390

9,706

Lending-related commitments
1,057,204

1,031,672

 
134

206

Total credit portfolio
$
1,902,380

$
1,862,732

 
$
8,524

$
9,912

Credit portfolio management derivatives notional, net(a)
$
(30,526
)
$
(27,996
)
 
$

$
(5
)
Liquid securities and other cash collateral held against derivatives
(17,617
)
(14,435
)
 
NA

NA


 
(in millions,
except ratios)
Three months
ended September 30,
 
Nine months
ended September 30,
2014
2013
 
2014
2013
Net charge-offs
$
1,114

$
1,346

 
$
3,541

$
4,474

Average retained loans
 
 
 
 
 
Loans – reported
732,288

717,582

 
726,659

718,976

Loans – reported, excluding residential real estate PCI loans
683,028

661,941

 
675,827

661,570

Net charge-off rates
 
 
 
 
 
Loans – reported
0.60
%
0.74
%
 
0.65
%
0.83
%
Loans – reported, excluding PCI
0.65

0.81

 
0.70

0.90

(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 63 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, 2014, and December 31, 2013, nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $7.8 billion and $8.4 billion, respectively, that are 90 or more days past due; (2) student loans insured by U.S. government agencies under the FFELP of $354 million and $428 million, respectively, that are 90 or more days past due; and (3) real estate owned (“REO”) insured by U.S. government agencies of $464 million and $2.0 billion, respectively. These amounts have been excluded based upon the government guarantee. For further discussion, see Accounting and reporting developments on page 88 which summarizes the new accounting guidance for certain REO insured by U.S. government agencies. 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, 2014, and December 31, 2013, total nonaccrual loans represented 1.01% and 1.16%, respectively, of total loans.




49


CONSUMER CREDIT PORTFOLIO
JPMorgan Chase’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 120–129 and Note 14 of JPMorgan Chase’s 2013 Annual Report.
 
The credit performance of the consumer portfolio continues to benefit from the improvement in the economy and home prices. Both early-stage delinquencies (30–89 days delinquent) and late-stage delinquencies (150+ days delinquent) for residential real estate, excluding government guaranteed loans, declined from December 31, 2013. Although late-stage delinquencies declined, they remain elevated due to loss mitigation activities and to elongated foreclosure processing timelines. Losses related to these loans continue to be recognized in accordance with the Firm’s standard charge-off practices, but some delinquent loans that would otherwise have been foreclosed upon remain in the mortgage and home equity loan portfolios. The Credit Card 30+ day delinquency rate remains near historic lows.


50


The following table presents consumer credit-related information with respect to the credit portfolio held by CCB as well as for prime mortgage loans held in the Asset Management and the Corporate/Private Equity segments for the dates indicated.

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,
2014
 
Dec 31,
2013
 
Sep 30,
2014
Dec 31,
2013
 
2014
2013
 
2014
2013
 
2014
2013
 
2014
2013
Consumer, excluding credit card
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, excluding PCI loans and loans held-for-sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity – senior lien
$
15,760

 
$
17,113

 
$
910

$
932

 
$
19

$
29

 
0.47
 %
0.64
 %
 
$
65

$
104

 
0.53
 %
0.74
%
Home equity – junior lien
36,919

 
40,750

 
1,585

1,876

 
76

189

 
0.80

1.74

 
321

683

 
1.11

2.04

Prime mortgage, including option ARMs
98,140

 
87,162

 
2,341

2,666

 
13

(7
)
 
0.05

(0.03
)
 
4

65

 
0.01

0.11

Subprime mortgage
5,498

 
7,104

 
1,100

1,390

 
(25
)
(4
)
 
(1.68
)
(0.21
)
 
(17
)
96

 
(0.35
)
1.64

Auto(a)
52,778

 
52,757

 
107

161

 
50

44

 
0.38

0.35

 
120

107

 
0.30

0.28

Business banking
19,648

 
18,951

 
297

385

 
75

100

 
1.53

2.13

 
220

235

 
1.53

1.68

Student and other
11,149

 
11,557

 
242

86

 
91

77

 
3.21

2.60

 
271

202

 
3.18

2.27

Total loans, excluding PCI loans and loans held-for-sale
239,892

 
235,394

 
6,582

7,496

 
299

428

 
0.50

0.73

 
984

1,492

 
0.55

0.86

Loans – PCI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
17,572

 
18,927

 
NA

NA

 
NA

NA

 
NA
NA
 
NA

NA

 
NA
NA
Prime mortgage
10,887

 
12,038

 
NA

NA

 
NA

NA

 
NA
NA
 
NA

NA

 
NA
NA
Subprime mortgage
3,790

 
4,175

 
NA

NA

 
NA

NA

 
NA
NA
 
NA

NA

 
NA
NA
Option ARMs
16,238

 
17,915

 
NA

NA

 
NA

NA

 
NA
NA
 
NA

NA

 
NA
NA
Total loans – PCI
48,487

 
53,055

 
NA

NA

 
NA

NA

 
NA
NA
 
NA

NA

 
NA
NA
Total loans – retained
288,379

 
288,449

 
6,582

7,496

 
299

428

 
0.41

0.59

 
984

1,492

 
0.46

0.69

Loans held-for-sale
481

(e) 
614

(e) 
120


 


 


 


 


Total consumer, excluding
credit card loans
288,860

 
289,063

 
6,702

7,496

 
299

428

 
0.41

0.59

 
984

1,492

 
0.46

0.69

Lending-related commitments(b)
54,912

 
56,057

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Receivables from customers(c)
104

 
139

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total consumer exposure, excluding credit card
343,876

 
345,259

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit card
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans retained(d)
126,564

 
127,465

 


 
798

892

 
2.52

2.86

 
2,571

2,988

 
2.77

3.24

Loans held-for-sale
395

 
326

 


 


 


 


 


Total credit card loans
126,959

 
127,791

 


 
798

892

 
2.52

2.86

 
2,571

2,988

 
2.77

3.24

Lending-related commitments(b)
531,301

 
529,383

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total credit card exposure
658,260

 
657,174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total consumer credit portfolio
$
1,002,136

 
$
1,002,433

 
$
6,702

$
7,496

 
$
1,097

$
1,320

 
1.05
 %
1.27
 %
 
$
3,555

$
4,480

 
1.15
 %
1.45
%
Memo: Total consumer credit portfolio, excluding PCI
$
953,649

 
$
949,378

 
$
6,702

$
7,496

 
$
1,097

$
1,320

 
1.19
 %
1.47
 %
 
$
3,555

$
4,480

 
1.31
 %
1.68
%
(a)
At September 30, 2014, and December 31, 2013, excluded operating lease-related assets of $6.4 billion and $5.5 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.
(f)
At September 30, 2014, and December 31, 2013, nonaccrual loans excluded: (1) mortgage loans insured by U.S. government agencies of $7.8 billion and $8.4 billion, respectively, that are 90 or more days past due; and (2) student loans insured by U.S. government agencies under the FFELP of $354 million and $428 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, the Firm’s policy is generally to exempt credit card loans 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 $87 million and $196 million of write-offs in the PCI portfolio for the three and nine months ended September 30, 2014, respectively. These write-offs decreased the allowance for loan losses for PCI loans. See Consumer Credit Portfolio on pages 120–129 of JPMorgan Chase’s 2013 Annual Report for further details.
(i)
Average consumer loans held-for-sale were $876 million and $239 million for the three months ended September 30, 2014, and 2013, respectively, and $749 million and $83 million, for the nine months ended September 30, 2014, and 2013, respectively. These amounts were excluded when calculating net charge-off rates.


51


Consumer, excluding credit card
Portfolio analysis
Consumer loan balances decreased during the nine months ended September 30, 2014, due to paydowns and the charge-off or liquidation of delinquent loans primarily offset by prime mortgage originations. Credit performance has improved across most portfolios but delinquent residential real estate loans and home equity charge-offs remain elevated compared with pre-recessionary levels.
In the following discussion of loan and lending-related categories, PCI loans are excluded from individual loan product discussions 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 2013 Annual Report.
Home equity: The home equity portfolio declined from the 2013 year-end primarily reflecting loan paydowns and charge-offs. Early-stage delinquencies showed improvement from December 31, 2013. Late-stage delinquencies continue to be elevated as improvement in the number of loans becoming severely delinquent was offset by higher average carrying values on these delinquent loans, reflecting improving collateral values. Both senior and junior lien nonaccrual loans decreased from December 31, 2013. Net charge-offs for the three and nine months ended September 30, 2014 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.
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 half 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 120–129 of JPMorgan Chase’s 2013 Annual Report.
 
The unpaid principal balance of non-PCI HELOCs outstanding was $46 billion at September 30, 2014. Of the $46 billion, approximately $28 billion have recently recast or are scheduled to recast from interest-only to fully amortizing payments, with $4 billion recasting in 2014 and $6 billion, $7 billion, and $6 billion scheduled to recast in 2015, 2016, and 2017, respectively. However, of the total $28 billion, $3 billion have already recast in 2014 and $15 billion are expected to recast. The remaining $10 billion represents loans to borrowers who are expected either to pre-pay or charge-off prior to recast. In the third quarter of 2014, the Firm refined its approach for estimating the number of HELOCs expected to voluntarily pre-pay prior to recast, reducing the number of loans expected to pre-pay, resulting in an increase in the number of loans expected 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.


52


High-risk second liens are loans where the borrower has a first mortgage loan that is either delinquent or has been modified. At September 30, 2014, the Firm estimated that its home equity portfolio contained approximately $1.8 billion of current junior lien loans that were considered high risk seconds, compared with $2.3 billion at December 31, 2013. 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. 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.
Current high risk junior liens
(in billions)
 
September 30,
2014
December 31,
2013
Junior liens subordinate to:
 
 
 
 
 
Modified current senior lien
 
 
$
0.7

 
$
0.9

Senior lien 30 – 89 days delinquent
 
 
0.5

 
0.6

Senior lien 90 days or more delinquent(a)
 
 
0.6

 
0.8

Total current high risk junior liens
 
 
$
1.8

 
$
2.3

(a)
Junior liens subordinate to senior liens that are 90 days or more past due are classified as nonaccrual loans. At September 30, 2014, and December 31, 2013, excluded approximately $50 million and approximately $100 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 $1.8 billion of high-risk junior liens at September 30, 2014, the Firm owns approximately 10% and services approximately 25% 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, 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, 2013 as retained originations exceeded paydowns, the run-off of option ARM loans and the charge-off or liquidation of delinquent loans. Excluding loans insured by U.S. government agencies, both early-stage and late-stage delinquencies showed improvement from December 31, 2013. Nonaccrual loans decreased from the prior year but remain elevated primarily as a result of loss mitigation activities and to elongated foreclosure processing timelines. Net charge-offs remain low, reflecting continued improvement in home prices and delinquencies.
 
At September 30, 2014, and December 31, 2013, the Firm’s prime mortgage portfolio included $13.5 billion and $14.3 billion, respectively, of mortgage loans insured and/or guaranteed by U.S. government agencies, of which $9.6 billion were, at each such date, 30 days or more past due (of which $7.8 billion and $8.4 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 FHA, HUD, and 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 2013 Annual Report.
At September 30, 2014, and December 31, 2013, the Firm’s prime mortgage portfolio included $16.0 billion and $15.6 billion, respectively, of interest-only loans, which represented 16% and 18%, 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, 2013, but remain at elevated levels. Net charge-offs continued to improve as a result of improvement in home prices and delinquencies.
Auto: Auto loans were flat compared to December 31, 2013 as new originations were largely offset by paydowns and payoffs. Nonaccrual loans improved compared with December 31, 2013. Net charge-offs for the three and nine months ended September 30, 2014 increased compared with the same periods of the prior year, but are consistent with expectations. The auto loan portfolio reflects a high concentration of prime-quality credits.
Business banking: Business banking loans increased compared with December 31, 2013 due to an increase in loan originations. Nonaccrual loans improved compared with December 31, 2013. Net charge-offs for the three and nine months ended September 30, 2014 decreased from the same periods of the prior year.


53


Student and other: Student and other loans decreased from December 31, 2013 due primarily to the run-off of the student loan portfolio. Student nonaccrual loans increased from December 31, 2013 due to a modification program the Firm began in May 2014 extending the deferment period for up to 24 months for certain student loans, which resulted in extending the maturity of the loans at their original contractual interest rates.
Purchased credit-impaired loans: PCI loans acquired in the Washington Mutual transaction decreased as the portfolio continues to run off.
As of September 30, 2014, approximately 17% of the option ARM PCI loans were delinquent and approximately 56% of the portfolio have 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 are 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.
 
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 lifetime principal loss estimates
 
Lifetime loss
 estimates(a)
 
LTD liquidation
 losses(b)
(in billions)
Sep 30,
2014
 
Dec 31,
2013
 
Sep 30,
2014
 
Dec 31,
2013
Home equity
$
14.6

 
$
14.7

 
$
12.3

 
$
12.1

Prime mortgage
3.8

 
3.8

 
3.5

 
3.3

Subprime mortgage
3.3

 
3.3

 
2.8

 
2.6

Option ARMs
9.9

 
10.2

 
9.2

 
8.8

Total
$
31.6

 
$
32.0

 
$
27.8

 
$
26.8

(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 $2.9 billion and $3.8 billion at September 30, 2014, and December 31, 2013, respectively.
(b)
Life-to-date (“LTD”) liquidation losses represent both realization of loss upon loan resolution and any principal forgiven upon modification. LTD liquidation losses included $249 million and $53 million of write-offs of prime mortgages at September 30, 2014, and December 31, 2013, respectively.



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 70% at September 30, 2014, compared with 75% at December 31, 2013.
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, 2014
 
 
December 31, 2013
 
(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
 
$
18,262

82
%
(b) 
$
15,814

71
%
 
 
$
19,830

90
%
(b) 
$
17,169

78
%
 
Prime mortgage
 
10,646

75

 
9,357

66

 
 
11,876

83

 
10,312

72

 
Subprime mortgage
 
4,832

82

 
3,610

61

 
 
5,471

91

 
3,995

66

 
Option ARMs
 
17,128

73

 
16,044

69

 
 
19,223

82

 
17,421

74

 
(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, 2014, and December 31, 2013 of $1.5 billion and $1.7 billion for prime mortgage, respectively, $194 million and $494 million for option ARMs, respectively, and $1.8 billion for home equity and $180 million for subprime mortgage for both periods.


54


The current estimated average LTV ratios were 76% and 88% for California and Florida PCI loans, respectively, at September 30, 2014, compared with 85% and 103%, respectively, at December 31, 2013. 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 contribute to 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 of 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 six months show weighted-average redefault rates of 19% for senior lien home equity, 21% for junior lien home equity, 16% for prime mortgages including option ARMs, and 28% for subprime mortgages. The cumulative performance metrics for modifications to the PCI residential real estate portfolio seasoned more than six months show weighted average redefault rates of 19% for home equity, 17% for prime mortgages, 15% for option ARMs and 31% for subprime mortgages. The favorable performance of the PCI option ARM modifications is the result of a targeted proactive program which fixes the borrower’s payment at the current level. 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 from October 1, 2009, through September 30, 2014.
Certain loans that were modified under HAMP and the Firm’s proprietary modification programs (primarily the Firm’s modification program that was modeled after HAMP) have interest rate reset provisions (“step-rate modifications”). Interest rates on these loans will generally increase beginning in 2014 by 1% per year 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 $5 billion at September 30, 2014, with $1 billion scheduled to experience the initial interest rate increase in each of 2015 and 2016. The unpaid principal balance of PCI loans modified in step-rate modifications was $10 billion at September 30, 2014, with $2 billion and $3 billion scheduled to experience the initial interest rate increase in 2015 and 2016, respectively. The impact of these potential interest rate increases is
 
considered in the Firm’s allowance for loan losses. The Firm will continue to monitor this risk exposure to ensure that it is appropriately considered in the Firm’s allowance for loan losses.
The following table presents information as of September 30, 2014, and December 31, 2013, 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, 2014 and 2013, see Note 13.
Modified residential real estate loans
 
September 30, 2014
 
December 31, 2013
(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
$
1,109

$
627

 
$
1,146

$
641

Home equity – junior lien
1,304

627

 
1,319

666

Prime mortgage, including option ARMs
6,570

1,626

 
7,004

1,737

Subprime mortgage
3,190

972

 
3,698

1,127

Total modified residential real estate loans, excluding PCI loans
$
12,173

$
3,852

 
$
13,167

$
4,171

Modified PCI loans(c)
 
 
 
 
 
Home equity
$
2,595

NA

 
$
2,619

NA

Prime mortgage
6,468

NA

 
6,977

NA

Subprime mortgage
3,764

NA

 
4,168

NA

Option ARMs
12,062

NA

 
13,131

NA

Total modified PCI loans
$
24,889

NA

 
$
26,895

NA

(a)
Amounts represent the carrying value of modified residential real estate loans.
(b)
At September 30, 2014, and December 31, 2013, $6.1 billion and $7.6 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 both September 30, 2014, and December 31, 2013, nonaccrual loans included $3.0 billion of 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.


55


Nonperforming assets
The following table presents information as of September 30, 2014, and December 31, 2013, about consumer, excluding credit card, nonperforming assets.
Nonperforming assets(a)
 
 
 
(in millions)
September 30,
2014
 
December 31,
2013
Nonaccrual loans(b)
 
 
 
Residential real estate
$
6,056

 
$
6,864

Other consumer
646

 
632

Total nonaccrual loans
6,702

 
7,496

Assets acquired in loan satisfactions
 
 
 
Real estate owned
460

 
614

Other
39

 
41

Total assets acquired in loan satisfactions
499

 
655

Total nonperforming assets
$
7,201

 
$
8,151

(a)
At September 30, 2014, and December 31, 2013, nonperforming assets excluded: (1) mortgage loans insured by U.S. government agencies of $7.8 billion and $8.4 billion, respectively, that are 90 or more days past due; (2) student loans insured by U.S. government agencies under the FFELP of $354 million and $428 million, respectively, that are 90 or more days past due; and (3) REO insured by U.S. government agencies of $464 million and $2.0 billion, respectively. These amounts have been excluded based upon the government guarantee. For further discussion, see Accounting and reporting developments on page 88 which summarizes the new accounting guidance for certain REO insured by U.S. government agencies.
(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 $6.1 billion at September 30, 2014, of which 32% were greater than 150 days past due, compared with nonaccrual residential real estate loans of $6.9 billion at December 31, 2013, of which 34% 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 50% to the estimated net realizable value of the collateral at both September 30, 2014, and December 31, 2013. Loss mitigation activities and the elongated foreclosure processing timelines are expected to continue to result in elevated levels of nonaccrual loans in the residential real estate portfolios.
 
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, 2014 and 2013.
Nonaccrual loans
 
 
Nine months ended September 30,
 
 
 
(in millions)
 
2014
2013
Beginning balance
 
$
7,496

$
9,174

Additions
 
3,811

5,481

Reductions:
 
 
 
Principal payments and other(a)
 
1,378

1,099

Charge-offs
 
1,061

1,465

Returned to performing status
 
1,691

3,162

Foreclosures and other liquidations
 
475

853

Total reductions
 
4,605

6,579

Net additions/(reductions)
 
(794
)
(1,098
)
Ending balance
 
$
6,702

$
8,076

(a)
Other reductions includes loan sales.



56


Credit Card
Total credit card loans decreased from December 31, 2013 due to seasonality. The 30+ day delinquency rate decreased to 1.43% at September 30, 2014, from 1.67% at December 31, 2013. For the three months ended September 30, 2014 and 2013, the net charge-off rates were 2.52% and 2.86%, respectively. For the nine months ended September 30, 2014 and 2013, the net charge-off rates were 2.77% and 3.24%, respectively. Charge-offs have improved compared with a year ago as a result of improvement in 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, 2014, and December 31, 2013, the Firm had $2.2 billion and $3.1 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, 2013, 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 50–57 and Note 13.


57


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, 2014, wholesale credit exposure (primarily CIB, CB, and AM) continued to experience a generally favorable credit environment and 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,
2014
Dec 31,
2013
 
Sep 30,
2014
Dec 31,
2013
Loans retained
$
320,361

$
308,263

 
$
659

$
821

Loans held-for-sale
3,463

11,290

 
5

26

Loans at fair value
3,614

2,011

 
128

197

Loans – reported
327,438

321,564

 
792

1,044

Derivative receivables
72,453

65,759

 
312

415

Receivables from customers and other(a)
29,362

26,744

 


Total wholesale credit-related assets
429,253

414,067

 
1,104

1,459

Lending-related commitments
470,991

446,232

 
134

206

Total wholesale credit exposure
$
900,244

$
860,299

 
$
1,238

$
1,665

Credit portfolio management derivatives notional, net(b)
$
(30,526
)
$
(27,996
)
 
$

$
(5
)
Liquid securities and other cash collateral held against derivatives
(17,617
)
(14,435
)
 
NA

NA

(a)
Receivables from customers and other include $29.3 billion and $26.5 billion of margin loans at September 30, 2014, and December 31, 2013, 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 63, and Note 5.
(c)
Excludes assets acquired in loan satisfactions.


58


The following tables present the maturity and ratings profiles of the wholesale credit portfolio as of September 30, 2014, and December 31, 2013. 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, 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
$
114,326

$
128,529

$
77,506

$
320,361

 
 
$
235,911

 
 
$
84,450

 
$
320,361

74
%
Derivative receivables
 
 
 
72,453

 
 
 
 
 
 
 
72,453

 
Less: Liquid securities and other cash collateral held against derivatives
 
 
 
(17,617
)
 
 
 
 
 
 
 
(17,617
)
 
Total derivative receivables, net of all collateral
15,132

14,933

24,771

54,836

 
 
46,804

 
 
8,032

 
54,836

85

Lending-related commitments
189,366

270,128

11,497

470,991

 
 
367,049

 
 
103,942

 
470,991

78

Subtotal
318,824

413,590

113,774

846,188

 
 
649,764

 
 
196,424

 
846,188

77

Loans held-for-sale and loans at fair value(a)
 
 
 
7,077

 
 
 
 
 
 
 
7,077

 
Receivables from customers and other
 
 
 
29,362

 
 
 
 
 
 
 
29,362

 
Total exposure – net of liquid securities and other cash collateral held against derivatives
 
 
 
$
882,627

 
 
 
 
 
 
 
$
882,627

 
Credit Portfolio Management derivatives net notional by reference entity ratings profile(b)(c)(d)
$
(1,518
)
$
(22,927
)
$
(6,081
)
$
(30,526
)
 
 
$
(27,265
)
 
 
$
(3,261
)
 
$
(30,526
)
89
%
 
Maturity profile(e)
 
Ratings profile
December 31, 2013
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
$
108,392

$
124,111

$
75,760

$
308,263

 
 
$
226,070

 
 
$
82,193

 
$
308,263

73
%
Derivative receivables
 
 
 
65,759

 
 
 
 
 
 
 
65,759

 
Less: Liquid securities and other cash collateral held against derivatives
 
 
 
(14,435
)
 
 
 
 
 
 
 
(14,435
)
 
Total derivative receivables, net of all collateral
13,550

15,935

21,839

51,324

 
 
41,104

(f) 
 
10,220

(f) 
51,324

80

Lending-related commitments
179,301

255,426

11,505

446,232

 
 
353,974

 
 
92,258

 
446,232

79

Subtotal
301,243

395,472

109,104

805,819

 
 
621,148

 
 
184,671

 
805,819

77

Loans held-for-sale and loans at fair value(a)
 
 
 
13,301

 
 
 
 
 
 
 
13,301

 
Receivables from customers and other
 
 
 
26,744

 
 
 
 
 
 
 
26,744

 
Total exposure – net of liquid securities and other cash collateral held against derivatives
 
 
 
$
845,864

 
 
 
 
 
 
 
$
845,864

 
Credit Portfolio Management derivatives net notional by reference entity ratings profile(b)(c)(d)
$
(1,149
)
$
(19,516
)
$
(7,331
)
$
(27,996
)
 
 
$
(24,649
)
 
 
$
(3,347
)
 
$
(27,996
)
88
%
(a)
Represents loans held-for-sale, primarily related to syndicated loans and loans transferred from the retained portfolio, and loans at fair value.
(b)
These derivatives do not qualify for hedge accounting under U.S. GAAP.
(c)
The notional amounts are presented on a net basis by underlying reference entity and the ratings profile shown is based on the ratings of the reference entity on which protection has been purchased.
(d)
Predominantly all of the credit derivatives entered into by the Firm where it has purchased protection, including Credit Portfolio Management derivatives, are executed with investment grade counterparties.
(e)
The maturity profile of retained loans, lending-related commitments and derivative receivables is based on the remaining contractual maturity. Derivative contracts that are in a receivable position at September 30, 2014, may become payable prior to maturity based on their cash flow profile or changes in market conditions.
(f)
The prior period amounts have been revised to conform with the current period presentation.
Wholesale credit exposure – selected industry exposures
The Firm focuses on the management and diversification of its industry exposures, paying particular attention to industries with actual or potential credit concerns. Exposures deemed criticized align with the U.S. banking regulators’ definition of criticized exposures, which consist
 
of the special mention, substandard and doubtful categories. The total criticized component of the portfolio, excluding loans held-for-sale and loans at fair value, decreased by 13% to $10.6 billion at September 30, 2014, from $12.2 billion at December 31, 2013.


59


Below are summaries of the top 25 industry exposures as of September 30, 2014, and December 31, 2013. For additional information on industry concentrations, see Note 5 of JPMorgan Chase’s 2013 Annual Report.
 
 
 
 
 
 
 
 
Selected metrics
 
 
 
 
 
 
 
 
30 days or more past due and accruing
loans
Year-to-date net charge-offs/
(recoveries)
Credit portfolio manage-ment credit derivative hedges(e)
Liquid securities
and other cash collateral held against derivative
receivables
 
 
 
 
Noninvestment-grade
As of or for the nine months ended
Credit exposure(d)
Investment- grade
 
Noncriticized
 
Criticized performing
Criticized nonperforming
September 30, 2014
(in millions)
Top 25 industries(a)
 
 
 
 
 
 
 
 
 
 
 
Real Estate
$
94,816

$
69,506

 
$
23,455

 
$
1,596

$
259

$
244

$
(12
)
$
(32
)
$
(9
)
Banks & Finance Cos
62,800

53,338

 
8,817

 
580

65

41

(4
)
(1,826
)
(8,431
)
Healthcare
57,594

47,402

 
9,625

 
546

21

16


(92
)
(207
)
Oil & Gas
47,546

31,889

 
15,373

 
275

9

12

2

(165
)
(92
)
Asset Managers
39,773

33,635

 
6,072

 
66


35

(12
)
(9
)
(3,514
)
Consumer Products
37,597

24,714

 
12,293

 
567

23

34

(1
)
(20
)
(1
)
Retail & Consumer Services
36,832

19,897

 
15,824

 
1,080

31

34

4

(53
)

State & Municipal Govt(b)
32,317

31,470

 
746

 
101


20

24

(149
)
(98
)
Utilities
27,170

23,964

 
2,919

 
260

27


(1
)
(330
)
(195
)
Technology
22,707

13,302

 
8,832

 
553

20

1


(235
)

Central Govt
22,451

22,247

 
166

 
38




(11,525
)
(1,841
)
Machinery & Equipment Mfg
19,672

11,502

 
7,904

 
266


7

(2
)
(131
)
(5
)
Transportation
16,465

11,534

 
4,825

 
100

6

1

(3
)
(64
)
(107
)
Metals/Mining
15,980

8,246

 
7,178

 
555

1

8

18

(422
)
(16
)
Business Services
15,030

8,081

 
6,684

 
243

22

9

1

(9
)

Media
14,056

8,519

 
5,157

 
343

37

12

(5
)
(69
)
(6
)
Insurance
13,572

10,661

 
2,655

 
77

179

1


(76
)
(2,272
)
Building Materials/Construction
13,377

5,906

 
6,806

 
659

6

14


(136
)

Telecom Services
13,194

9,734

 
3,251

 
199

10


(1
)
(827
)
(74
)
Chemicals/Plastics
12,721

8,707

 
3,990

 
24


3

(2
)
(11
)

Automotive
12,588

8,019

 
4,431

 
138


27

(1
)
(188
)

Leisure
8,733

2,899

 
5,290

 
408

136

2


(5
)
(19
)
Securities Firms & Exchanges
7,996

5,871

 
2,111

 
12

2

23

4

(122
)
(228
)
Agriculture/Paper Mfg
7,265

4,846

 
2,272

 
144

3

27


(4
)
(4
)
Aerospace/Defense
5,888

5,007

 
857

 
24




(70
)
(4
)
All other(c)
205,665

185,016

 
19,784

 
617

248

1,392

(23
)
(13,956
)
(494
)
Subtotal
$
863,805

$
665,912

 
$
187,317

 
$
9,471

$
1,105

$
1,963

$
(14
)
$
(30,526
)
$
(17,617
)
Loans held-for-sale and loans at fair value
7,077

 
 
 
 
 
 
 
 
 
 
Receivables from customers and other
29,362

 
 
 
 
 
 
 
 
 
 
Total
$
900,244

 
 
 
 
 
 
 
 
 
 

60












Selected metrics








30 days or more past due and accruing loans
Full year net charge-offs/
(recoveries)
Credit portfolio manage- ment credit derivative hedges(e)
Liquid securities
and other cash collateral held against derivative
receivables




Noninvestment-grade
As of or for the year ended
Credit
exposure(d)
Investment-
grade

Noncriticized

Criticized performing
Criticized nonperforming
December 31, 2013
(in millions)
Top 25 industries(a)




















Real Estate
$
87,102

$
62,964


$
21,505


$
2,286

$
347

$
178

$
6

$
(66
)
$
(125
)
Banks & Finance Cos
66,881

56,675


9,707


431

68

14

(22
)
(2,692
)
(6,227
)
Healthcare
45,910

37,635


7,952


317

6

49

3

(198
)
(195
)
Oil & Gas
46,934

34,708


11,779


436

11

34

13

(227
)
(67
)
Asset Managers
33,506

26,991


6,477


38


217

(7
)
(5
)
(3,191
)
Consumer Products
34,145

21,100


12,505


537

3

4

11

(149
)
(1
)
Retail & Consumer Services
25,068

16,101


8,453


492

22

6


(91
)

State & Municipal Govt(b)
35,666

34,563


826


157

120

40

1

(161
)
(144
)
Utilities
28,983

25,521


3,045


411

6

2

28

(445
)
(306
)
Technology
21,403

13,787


6,771


825

20



(512
)

Central Govt
21,049

20,633


345


71




(10,088
)
(1,541
)
Machinery & Equipment Mfg
19,078

11,154


7,549


368

7

20

(18
)
(257
)
(8
)
Transportation
13,975

9,683


4,165


100

27

10

8

(68
)

Metals/Mining
17,434

9,266


7,508


594

66

1

16

(621
)
(36
)
Business Services
14,601

7,838


6,447


286

30

9

10

(10
)
(2
)
Media
13,858

7,783


5,658


315

102

6

36

(26
)
(5
)
Insurance
13,761

10,681


2,757


84

239


(2
)
(98
)
(1,935
)
Building Materials/Construction
12,901

5,701


6,354


839

7

15

3

(132
)

Telecom Services
13,906

9,130


4,284


482

10


7

(272
)
(8
)
Chemicals/Plastics
10,637

7,189


3,211


222

15



(13
)
(83
)
Automotive
12,532

7,881


4,490


159

2

3

(3
)
(472
)

Leisure
5,331

2,950


1,797


495

89

5


(10
)
(14
)
Securities Firms & Exchanges
10,035

4,208

(f) 
5,806

(f) 
14

7

1

(68
)
(4,169
)
(175
)
Agriculture/Paper Mfg
7,387

4,238


3,064


82

3

31


(4
)
(4
)
Aerospace/Defense
6,873

5,447


1,426






(142
)
(1
)
All other(c)
201,298

180,460


19,911


692

235

1,249

(6
)
(7,068
)
(367
)
Subtotal
$
820,254

$
634,287


$
173,792


$
10,733

$
1,442

$
1,894

$
16

$
(27,996
)
$
(14,435
)
Loans held-for-sale and loans at fair value
13,301



















Receivables from customers and other
26,744



















Total
$
860,299



















(a)
The industry rankings presented in the table as of December 31, 2013, are based on the industry rankings of the corresponding exposures at September 30, 2014, not actual rankings of such exposures at December 31, 2013.
(b)
In addition to the credit risk exposure to states and municipal governments (both U.S. and non-U.S.) at September 30, 2014, and December 31, 2013, noted above, the Firm held: $9.0 billion and $7.9 billion, respectively, of trading securities; $29.5 billion of available-for-sale (“AFS”) securities at both periods; and $9.2 billion and $920 million, respectively, of HTM securities, issued by U.S. state and municipal governments. For further information, see Note 3 and Note 11.
(c)
All other includes: individuals, private education and civic organizations; SPEs; and holding companies, representing approximately 66%, 20% and 5%, respectively, at September 30, 2014, and 64%, 22% and 5%, respectively, at December 31, 2013.
(d)
Credit exposure is net of risk participations and excludes the benefit of “Credit Portfolio Management derivatives net notional” held against derivative receivables or loans and “Liquid securities and other cash collateral held against derivative receivables”.
(e)
Represents the net notional amounts of protection purchased and sold through credit derivatives used to manage the credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. The all other category includes purchased credit protection on certain credit indices.
(f)
The prior period amounts have been revised to conform with the current period presentation.

61


Loans
In the normal course of its wholesale business, the Firm provides loans to a variety of customers, ranging from large corporate and institutional clients to high-net-worth individuals. For further discussion on loans, including information on credit quality indicators, see Note 13.
The Firm actively manages its wholesale credit exposure. One way of managing credit risk is through secondary market sales of loans and lending-related commitments. During the nine months ended September 30, 2014 and 2013, the Firm sold $19.1 billion and $11.5 billion, respectively, of loans and lending-related commitments.
The following table presents the change in the nonaccrual loan portfolio for the nine months ended September 30, 2014 and 2013.
Wholesale nonaccrual loan activity
 
 
Nine months ended September 30,
 
 
 
(in millions)
 
2014
2013(a)
Beginning balance
 
$
1,044

$
1,717

Additions
 
633

1,039

Reductions:
 
 
 
Paydowns and other
 
557

911

Gross charge-offs
 
106

190

Returned to performing status
 
156

176

Sales
 
66

311

Total reductions
 
885

1,588

Net reductions
 
(252
)
(549
)
Ending balance
 
$
792

$
1,168

(a)
During 2013, certain loans that resulted from restructurings that were previously classified as performing were reclassified as nonperforming loans. The prior period amounts have been revised to conform with the current period presentation.
The following table presents net charge-offs/recoveries, which are defined as gross charge-offs less recoveries, for the three and nine months ended September 30, 2014 and 2013. The amounts in the table below do not include gains or losses from sales of nonaccrual loans.
Wholesale net charge-offs
(in millions, except ratios)
Three months
ended September 30,
 
Nine months
ended September 30,
2014
2013
 
2014
2013
Loans – reported
 
 
 
 
 
Average loans retained
$
318,207

$
306,008

 
$
314,253

$
306,076

Gross
  charge-offs
29

74

 
106

190

Gross recoveries
(12
)
(48
)
 
(120
)
(196
)
Net charge-offs/(recoveries)
17

26

 
(14
)
(6
)
Net charge-off/(recovery rate)
0.02
%
0.03
%
 
(0.01
)%
%
 
Lending-related commitments
JPMorgan Chase uses lending-related financial instruments, such as commitments (including revolving credit facilities) and guarantees, to meet the financing needs of its customers. The contractual amounts of these financial instruments represent the maximum possible credit risk should the counterparties draw down on these commitments or the Firm fulfills its obligations under these guarantees, and the counterparties subsequently fail to perform according to the terms of these contracts.
In the Firm’s view, the total contractual amount of these wholesale lending-related commitments is not representative of the Firm’s likely actual future credit exposure or funding requirements. In determining the amount of credit risk exposure the Firm has to wholesale lending-related commitments, which is used as the basis for allocating credit risk capital to these commitments, the Firm has established a “loan-equivalent” amount for each commitment; this amount represents the portion of the unused commitment or other contingent exposure that is expected, based on average portfolio historical experience, to become drawn upon in an event of a default by an obligor. The loan-equivalent amount of the Firm’s lending-related commitments was $230.7 billion and $218.9 billion as of September 30, 2014, and December 31, 2013, respectively.
Derivative contracts
In the normal course of business, the Firm uses derivative instruments predominantly for market-making activities. Derivatives enable clients to manage exposures to fluctuations in interest rates, currencies and other markets. The Firm also uses derivative instruments to manage its own credit exposure. For further discussion of derivative contracts, see Note 5.
The following table summarizes the net derivative receivables for the periods presented.
Derivative receivables
 
 
(in millions)
Derivative receivables
September 30,
2014
December 31,
2013
Interest rate
$
30,749

$
25,782

Credit derivatives
1,239

1,516

Foreign exchange
21,730

16,790

Equity
9,465

12,227

Commodity
9,270

9,444

Total, net of cash collateral
72,453

65,759

Liquid securities and other cash collateral held against derivative receivables
(17,617
)
(14,435
)
Total, net of collateral
$
54,836

$
51,324



62


Derivative receivables reported on the Consolidated Balance Sheets were $72.5 billion and $65.8 billion at September 30, 2014, and December 31, 2013, respectively. These amounts represent the fair value of the derivative contracts after giving effect to legally enforceable master netting agreements and cash collateral held by the Firm. However, in management’s view, the appropriate measure of current credit risk should also take into consideration additional liquid securities (primarily U.S. government and agency securities and other G7 government bonds) and other cash collateral held by the Firm aggregating $17.6 billion and $14.4 billion at September 30, 2014, and December 31, 2013, respectively, that may be used as security when the fair value of the client’s exposure is in the Firm’s favor.
In addition to the collateral described in the preceding paragraph, the Firm also holds additional collateral
 
(primarily cash, G7 government securities, other liquid government-agency and guaranteed securities, and corporate debt and equity securities) delivered by clients at the initiation of transactions, as well as collateral related to contracts that have a non-daily call frequency and collateral that the Firm has agreed to return but has not yet settled as of the reporting date. Although this collateral does not reduce the balances and is not included in the table above, it is available as security against potential exposure that could arise should the fair value of the client’s derivative transactions move in the Firm’s favor. As of September 30, 2014, and December 31, 2013, the Firm held $31.1 billion and $29.0 billion, respectively, of this additional collateral. The derivative receivables fair value, net of all collateral, also does not include other credit enhancements, such as letters of credit. For additional information on the Firm’s use of collateral agreements, see Note 5.

The following table summarizes the ratings profile by derivative counterparty of the Firm’s derivative receivables, including credit derivatives, net of other liquid securities collateral, for the dates indicated.
Ratings profile of derivative receivables
 
 
 
 
 
Rating equivalent
September 30, 2014
 
December 31, 2013(a)

(in millions, except ratios)
Exposure net of collateral
% of exposure net of collateral
 
Exposure net of collateral
% of exposure net of collateral
AAA/Aaa to AA-/Aa3
$
15,529

28
%
 
$
12,953

25
%
A+/A1 to A-/A3
13,801

25

 
12,930

25

BBB+/Baa1 to BBB-/Baa3
17,474

32

 
15,220

30

BB+/Ba1 to B-/B3
7,164

13

 
6,806

13

CCC+/Caa1 and below
868

2

 
3,415

7

Total
$
54,836

100
%
 
$
51,324

100
%
(a)
The prior period amounts have been revised to conform with the current period presentation.
As noted above, the Firm uses collateral agreements to mitigate counterparty credit risk. The percentage of the Firm’s derivatives transactions subject to collateral agreements – excluding foreign exchange spot trades, which are not typically covered by collateral agreements due to their short maturity – was 87% as of September 30, 2014, largely unchanged compared with 86% as of December 31, 2013.
Credit derivatives
The Firm uses credit derivatives for two primary purposes: first, in its capacity as a market-maker; and second, as an end-user, to manage the Firm’s own credit risk associated with various exposures. For a detailed description of credit derivatives, see Credit derivatives in Note 5 of this Form
10-Q, and Note 6 of JPMorgan Chase’s 2013 Annual Report.
Credit portfolio management activities
Included in the Firm’s end-user activities are credit derivatives used to mitigate the credit risk associated with traditional lending activities (loans and unfunded commitments) and derivatives counterparty exposure in the Firm’s wholesale businesses (collectively, “credit portfolio management” activities). Information on credit portfolio management activities is provided in the table below. For further information on derivatives used in credit portfolio
 
management activities, see Credit derivatives in Note 5 of this Form 10-Q, and Note 6 of JPMorgan Chase’s 2013 Annual Report.
Credit derivatives used in credit portfolio management activities
 
Notional amount of protection
purchased and sold (a)
(in millions)
September 30, 2014
 
December 31,
2013
Credit derivatives used to manage:
 
 
 
Loans and lending-related commitments
$
2,728

 
$
2,764

Derivative receivables
27,798

 
25,328

Total net protection purchased
30,526

 
28,092

Total net protection sold

 
96

Credit portfolio management derivatives notional, net
$
30,526

 
$
27,996

(a)
Amounts are presented net, considering the Firm’s net protection purchased or sold with respect to each underlying reference entity or index.



63


COMMUNITY REINVESTMENT ACT EXPOSURE
The Community Reinvestment Act (“CRA”) encourages banks to meet the credit needs of borrowers in all segments of their communities, including neighborhoods with low or moderate incomes. The Firm is a national leader in community development by providing loans, investments and community development services in communities across the United States.
At September 30, 2014, and December 31, 2013, the Firm’s CRA loan portfolio was approximately $21 billion and $18 billion, respectively. At September 30, 2014, and December 31, 2013, 44% and 50%, respectively, of the CRA portfolio were residential mortgage loans; 33% and
 
26%, respectively, were commercial real estate loans; 14% and 16%, respectively, were business banking loans; and 9% and 8%, respectively, were other loans. CRA nonaccrual loans were 3% of the Firm’s total nonaccrual loans for both September 30, 2014, and December 31, 2013. As a percentage of the Firm’s net charge-offs, net charge-offs in the CRA portfolio were 2% and 1% for each of the three months ended September 30, 2014 and 2013, and 1% and 2%, respectively, for the nine months ended September 30, 2014 and 2013.


ALLOWANCE FOR CREDIT LOSSES
JPMorgan Chase’s allowance for loan losses covers both the consumer (primarily scored) portfolio and wholesale (risk-rated) portfolio. The allowance represents management’s estimate of probable credit losses inherent in the Firm’s loan portfolio. Management also determines an allowance for wholesale and certain consumer lending-related commitments.
For a further discussion of the components of the allowance for credit losses and related management judgments, see Critical Accounting Estimates Used by the Firm on pages 85–87 of this Form 10-Q and Note 15 of JPMorgan Chase’s 2013 Annual Report.
At least quarterly, the allowance for credit losses is reviewed by the CRO, the CFO and the Controller of the Firm, and discussed with the Risk Policy and Audit Committees of the Board of Directors of the Firm. As of September 30, 2014, JPMorgan Chase deemed the allowance for credit losses to be appropriate and sufficient to absorb probable credit losses inherent in the portfolio.
 
The consumer, excluding credit card, allowance for loan losses reflected a reduction from December 31, 2013, primarily due to the continued improvement in home prices and delinquencies in the residential real estate portfolio and the run-off of the student loan portfolio. For additional information about delinquencies and nonaccrual loans in the consumer, excluding credit card, loan portfolio, see Consumer Credit Portfolio on pages 50–57 and Note 13.
The credit card allowance for loan losses reflected a reduction from December 31, 2013, 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. For additional information about delinquencies in the credit card loan portfolio, see Consumer Credit Portfolio on pages 50–57 and Note 13.
The wholesale allowance was relatively unchanged, reflecting a generally favorable credit environment and stable credit quality trends.


64


Summary of changes in the allowance for credit losses
 
 
 
 
 
 
 
 
2014
 
2013
 
Nine months ended September 30,
Consumer, excluding
credit card
Credit card
Wholesale
Total
 
Consumer, excluding
credit card
 
Credit card
Wholesale
Total
 
(in millions, except ratios)
 
 
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
Beginning balance at January 1,
$
8,456

$
3,795

$
4,013

$
16,264

 
$
12,292

 
$
5,501

$
4,143

$
21,936

 
Gross charge-offs
1,613

2,882

106

4,601

 
2,129

(e) 
3,461

190

5,780

(e) 
Gross recoveries
(629
)
(311
)
(120
)
(1,060
)
 
(637
)
(e) 
(473
)
(196
)
(1,306
)
(e) 
Net charge-offs/(recoveries)
984

2,571

(14
)
3,541

 
1,492

 
2,988

(6
)
4,474

 
Write-offs of PCI loans(a)
196



196

 

 



 
Provision for loan losses
180

2,371

(183
)
2,368

 
(1,346
)
 
1,588

(130
)
112

 
Other
2

(5
)
(3
)
(6
)
 
(6
)
 
(4
)
7

(3
)
 
Ending balance at September 30,
$
7,458

$
3,590

$
3,841

$
14,889

 
$
9,448

 
$
4,097

$
4,026

$
17,571

 
Impairment methodology
 
 
 
 
 
 
 
 
 
 
 
Asset-specific(b)
$
618

$
500

$
124

$
1,242

 
$
689

 
$
1,080

$
209

$
1,978

 
Formula-based
3,178

3,090

3,717

9,985

 
3,798

 
3,017

3,817

10,632

 
PCI
3,662



3,662

 
4,961

 


4,961

 
Total allowance for loan losses
$
7,458

$
3,590

$
3,841

$
14,889

 
$
9,448

 
$
4,097

$
4,026

$
17,571

 
Allowance for lending-related commitments
 
 
 
 
 
 
 
 
 
 
 
Beginning balance at January 1,
$
8

$

$
697

$
705

 
$
7

 
$

$
661

$
668

 
Provision for lending-related commitments
1


(70
)
(69
)
 
1

 

8

9

 
Other


1

1

 
1

 

(1
)

 
Ending balance at September 30,
$
9

$

$
628

$
637

 
$
9

 
$

$
668

$
677

 
Impairment methodology
 
 
 
 
 
 
 
 
 
 
 
Asset-specific
$

$

$
68

$
68

 
$

 
$

$
71

$
71

 
Formula-based
9


560

569

 
9

 

597

606

 
Total allowance for lending-related commitments(c)
$
9

$

$
628

$
637

 
$
9

 
$

$
668

$
677

 
Total allowance for credit losses
$
7,467

$
3,590

$
4,469

$
15,526

 
$
9,457

 
$
4,097

$
4,694

$
18,248

 
Memo:
 
 
 
 
 
 
 
 
 
 
 
Retained loans, end of period
$
288,379

$
126,564

$
320,361

$
735,304

 
$
288,211

 
$
123,672

$
310,588

$
722,471

 
Retained loans, average
288,398

124,008

314,253

726,659

 
289,478

 
123,422

306,076

718,976

 
PCI loans, end of period
48,487


5

48,492

 
54,759

 

11

54,770

 
Credit ratios
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses to retained loans
2.59
%
2.84
%
1.20
 %
2.02
%
 
3.28
%
 
3.31
%
1.30
%
2.43
%
 
Allowance for loan losses to retained nonaccrual loans(d)
113

NM
583

206

 
117

 
NM
424

195

 
Allowance for loan losses to retained nonaccrual loans excluding credit card
113

NM
583

156

 
117

 
NM
424

149

 
Net charge-off/(recovery) rates
0.46

2.77

(0.01
)
0.65

 
0.69

 
3.24


0.83

 
Credit ratios, excluding residential real estate PCI loans
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses to
retained loans
1.58

2.84

1.20

1.63

 
1.92

 
3.31

1.30

1.89

 
Allowance for loan losses to
retained nonaccrual loans
(d)
58

NM
583

155

 
56

 
NM
424

140

 
Allowance for loan losses to
retained nonaccrual loans excluding credit card
58

NM
583

105

 
56

 
NM
424

94

 
Net charge-off/(recovery) rates
0.55
%
2.77
%
(0.01
)%
0.70
%
 
0.86
%
 
3.24
%
%
0.90
%
 
Note: In the table above, the financial measures which exclude the impact of PCI loans are non-GAAP financial measures. For additional information, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 15–16.
(a)
Write-offs of PCI loans are recorded against the allowance for loan losses when actual losses for a pool exceed estimated losses that were recorded as purchase accounting adjustments at the time of acquisition. A write-off of PCI loans is recognized when the underlying loan is removed from a pool (e.g., upon liquidation).
(b)
Includes risk-rated loans that have been placed on nonaccrual status and loans that have been modified in a TDR.
(c)
The allowance for lending-related commitments is reported in other liabilities on the Consolidated Balance Sheets.
(d)
The Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance.
(e)
The prior period amounts have been revised to conform with the current period presentation.

65


Provision for credit losses
For the three and nine months ended September 30, 2014, the provision for credit losses was $757 million and $2.3 billion respectively, compared with a benefit of $543 million and an expense of $121 million respectively, in the prior year periods. The consumer provision for the nine months ended September 30, 2014 reflected a $1.0 billion reduction in the allowance for loan losses, compared with a
 
$4.2 billion reduction in the prior year period. The decrease in the consumer allowance for loan loss reduction from the prior year was partially offset by lower charge-offs. The wholesale provision for credit losses reflected a generally favorable credit environment and stable credit quality trends.

 
Three months ended September 30,
 
Nine months ended September 30,
 
Provision for loan losses
 
Provision for lending-related commitments
 
Total provision for credit losses
 
Provision for loan losses
 
Provision for lending-related commitments
 
Total provision for credit losses
(in millions)
2014

2013

 
2014

2013

 
2014

2013

 
2014

2013

 
2014

2013

 
2014

2013

Consumer, excluding credit card
$
99

$
(815
)
 
$