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Goodwill and Other Intangible Assets
 3 Months Ended
Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
Goodwill and other intangible assets
For a discussion of the accounting policies related to goodwill and other intangible assets, see Note 17 of JPMorgan Chase’s 2015 Annual Report.
The following table presents goodwill attributed to the business segments.
(in millions)
March 31,
2016
December 31,
2015
Consumer & Community Banking
$
30,814

$
30,769

Corporate & Investment Bank
6,775

6,772

Commercial Banking
2,861

2,861

Asset Management
6,860

6,923

Total goodwill
$
47,310

$
47,325



The following table presents changes in the carrying amount of goodwill.
 
Three months ended March 31,
(in millions)
2016
2015
Balance at beginning of period
$
47,325

$
47,647

Changes during the period from:
 
 
Business combinations
—

8

Dispositions(a)
(71
)
(101
)
Other(b)
56

(101
)
Balance at March 31,
$
47,310

$
47,453

(a)
During the three months ended March 31, 2016, represents Asset Management goodwill, which was disposed of as part of Asset Management sales completed in March 2016. During the three months ended March 31, 2015, represents Private Equity goodwill, which was disposed of as part of a Private Equity sale completed in January 2015.
(b)
Includes foreign currency translation adjustments and other tax-related adjustments.
Goodwill Impairment testing
For further description of the Firm’s goodwill impairment testing process, including the primary method used to estimate the fair value of the reporting units, and the assumptions used in the goodwill impairment test, see Impairment testing on pages 274–275 of JPMorgan Chase’s 2015 Annual Report.
Goodwill was not impaired at March 31, 2016, or December 31, 2015, nor was goodwill written off due to impairment during the three months ended March 31, 2016 or 2015.
Declines in business performance, increases in credit losses, increases in equity capital requirements, as well as deterioration in economic or market conditions, adverse estimates of the impact of regulatory or legislative changes or increases in the estimated cost of equity, could cause the estimated fair values of the Firm’s reporting units or their associated goodwill to decline in the future, which could result in a material impairment charge to earnings in a future period related to some portion of the associated goodwill.
Mortgage servicing rights
MSRs represent the fair value of expected future cash flows for performing servicing activities for others. The fair value considers estimated future servicing fees and ancillary revenue, offset by estimated costs to service the loans, and generally declines over time as net servicing cash flows are received, effectively amortizing the MSR asset against contractual servicing and ancillary fee income. MSRs are either purchased from third parties or recognized upon sale or securitization of mortgage loans if servicing is retained. For a further description of the MSR asset, interest rate risk management, and the valuation of MSRs, see Note 17 of JPMorgan Chase’s 2015 Annual Report and Note 3 of this Form 10-Q.
The following table summarizes MSR activity for the three months ended March 31, 2016 and 2015.
 
As of or for the three months
ended March 31,
(in millions, except where otherwise noted)
2016
 
2015
Fair value at beginning of period
$
6,608

 
$
7,436

MSR activity:
 
 
 
Originations of MSRs
107

 
155

Purchase of MSRs
—

 
1

Disposition of MSRs(a)
(64
)
 
(157
)
Net additions
43

 
(1
)
 
 
 
 
Changes due to collection/realization of expected cash flows
(241
)
 
(215
)
 
 
 
 
Changes in valuation due to inputs and assumptions:
 
 
 
Changes due to market interest rates and other(b)
(762
)
 
(477
)
Changes in valuation due to other inputs and assumptions:
 
 
 
Projected cash flows (e.g., cost to service)
7

 
(10
)
Discount rates
7

 
(10
)
Prepayment model changes and other(c)
(4
)
 
(82
)
Total changes in valuation due to other inputs and assumptions
10

 
(102
)
Total changes in valuation due to inputs and assumptions
(752
)
 
(579
)
Fair value at March 31,
$
5,658

 
$
6,641

 
 
 
 
Change in unrealized gains/(losses) included in income related to MSRs held at March 31,
$
(752
)
 
$
(579
)
Contractual service fees, late fees and other ancillary fees included in income
$
561

 
$
667

Third-party mortgage loans serviced at March 31, (in billions)
$
658

 
$
728

Net servicer advances at March 31, (in billions)(d)
$
6.1

 
$
7.9

(a)
For the three months ended March 31, 2016, predominantly represents excess MSRs transferred to agency-sponsored trusts in exchange for stripped mortgage-backed securities (“SMBS”). In each transaction, a portion of the SMBS was acquired by third parties at the transaction date; the Firm acquired and has retained the remaining balance of those SMBS as trading securities. Also includes sales of MSRs for the three months ended March 31, 2016 and 2015.
(b)
Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments.
(c)
Represents changes in prepayments other than those attributable to changes in market interest rates.
(d)
Represents amounts the Firm pays as the servicer (e.g., scheduled principal and interest, taxes and insurance), which will generally be reimbursed within a short period of time after the advance from future cash flows from the trust or the underlying loans. The Firm’s credit risk associated with these servicer advances is minimal because reimbursement of the advances is typically senior to all cash payments to investors. In addition, the Firm maintains the right to stop payment to investors if the collateral is insufficient to cover the advance. However, certain of these servicer advances may not be recoverable if they were not made in accordance with applicable rules and agreements.
The following table presents the components of mortgage fees and related income (including the impact of MSR risk management activities) for the three months ended March 31, 2016 and 2015.
 
 
Three months ended March 31,
(in millions)
 
2016
 
2015
CCB mortgage fees and related income
 
 
 
 
 
 
 
 
 
Net production revenue
 
$
162

 
$
237

 
 
 
 
 
Net mortgage servicing revenue:
 
 
 
 
Operating revenue:
 
 
 
 
Loan servicing revenue
 
616

 
749

Changes in MSR asset fair value due to collection/realization of expected cash flows
 
(240
)
 
(214
)
Total operating revenue
 
376

 
535

Risk management:
 
 
 
 
Changes in MSR asset fair value due to market interest rates and other(a)
 
(762
)
 
(476
)
Other changes in MSR asset fair value due to other inputs and assumptions in model(b)
 
10

 
(102
)
Change in derivative fair value and other
 
881

 
510

Total risk management
 
129

 
(68
)
Total net mortgage servicing revenue
 
505

 
467

 
 
 
 
 
Total CCB mortgage fees and related income
 
667

 
704

 
 
 
 
 
All other
 
—

 
1

Mortgage fees and related income
 
$
667

 
$
705

(a)
Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments.
(b)
Represents the aggregate impact of changes in model inputs and assumptions such as projected cash flows (e.g., cost to service), discount rates and changes in prepayments other than those attributable to changes in market interest rates (e.g., changes in prepayments due to changes in home prices).
The table below outlines the key economic assumptions used to determine the fair value of the Firm’s MSRs at March 31, 2016, and December 31, 2015, and outlines the sensitivities of those fair values to immediate adverse changes in those assumptions, as defined below.
(in millions, except rates)
Mar 31,
2016
 
Dec 31,
2015
Weighted-average prepayment speed assumption (“CPR”)
12.07
%
 
9.81
%
Impact on fair value of 10% adverse change
$
(275
)
 
$
(275
)
Impact on fair value of 20% adverse change
(534
)
 
(529
)
Weighted-average option adjusted spread
9.85
%
 
9.54
%
Impact on fair value of 100 basis points adverse change
$
(213
)
 
$
(258
)
Impact on fair value of 200 basis points adverse change
(410
)
 
(498
)
CPR: Constant prepayment rate.
The sensitivity analysis in the preceding table is hypothetical and should be used with caution. Changes in fair value based on variation in assumptions generally cannot be easily extrapolated, because the relationship of the change in the assumptions to the change in fair value are often highly interrelated and may not be linear. In this table, the effect that a change in a particular assumption may have on the fair value is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which would either magnify or counteract the impact of the initial change.