Edgar Filing: JPMORGAN CHASE & CO

CORP Q2 2015

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
June 30, 2015	number 1-5805

JPMorgan Chase & Co.

(Exact name of registrant as specified in its charter)



Delaware	13-2624428
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

270 Park Avenue, New York, New York	10017
(Address of principal executive offices)	(Zip Code)

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

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



x Yes	o No

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



x Yes	o No

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



Large accelerated filer x	Accelerated filer o

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

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



o Yes	x No

Number of shares of common stock outstanding as of June 30, 2015: 3,698,067,361

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 six months ended June 30, 2015, and 2014	84
	Consolidated statements of comprehensive income (unaudited) for the three and six months ended June 30, 2015, and 2014	85
	Consolidated balance sheets (unaudited) at June 30, 2015, and December 31, 2014	86
	Consolidated statements of changes in stockholders’ equity (unaudited) for the six months ended June 30, 2015, and 2014	87
	Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2015, and 2014	88
	Notes to Consolidated Financial Statements (unaudited)	89
	Report of Independent Registered Public Accounting Firm	173
	Consolidated Average Balance Sheets, Interest and Rates (unaudited) for the three and six months ended June 30, 2015, and 2014	174
	Glossary of Terms and Line of Business Metrics	176
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations:
	Consolidated Financial Highlights	3
	Introduction	4
	Executive Overview	5
	Consolidated Results of Operations	7
	Consolidated Balance Sheets Analysis	10
	Off-Balance Sheet Arrangements	12
	Consolidated Cash Flows Analysis	13
	Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures	14
	Business Segment Results	16
	Enterprise-Wide Risk Management	44
	Credit Risk Management	45
	Market Risk Management	61
	Country Risk Management	65
	Operational Risk Management	66
	Capital Management	67
	Liquidity Risk Management	74
	Supervision and Regulation	78
	Critical Accounting Estimates Used by the Firm	79
	Accounting and Reporting Developments	82
	Forward-Looking Statements	83
Item 3	Quantitative and Qualitative Disclosures About Market Risk	183
Item 4	Controls and Procedures	183
Part II - Other information
Item 1	Legal Proceedings	183
Item 1A	Risk Factors	183
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	183
Item 3	Defaults Upon Senior Securities	184
Item 4	Mine Safety Disclosure	184
Item 5	Other Information	184
Item 6	Exhibits	184

JPMorgan Chase & Co.

Consolidated financial highlights



(unaudited) As of or for the period ended,																Six months ended June 30,
(in millions, except per share, ratio, headcount data and where otherwise noted)	2Q15			1Q15			4Q14			3Q14			2Q14			2015			2014
Selected income statement data
Total net revenue	$	23,812		$	24,066		$	22,750		$	24,469		$	24,678		$	47,878		$	47,893
Total noninterest expense	14,500			14,883			15,409			15,798			15,431			29,383			30,067
Pre-provision profit	9,312			9,183			7,341			8,671			9,247			18,495			17,826
Provision for credit losses	935			959			840			757			692			1,894			1,542
Income before income tax expense	8,377			8,224			6,501			7,914			8,555			16,601			16,284
Income tax expense	2,087			2,310			1,570			2,349			2,575			4,397			5,035
Net income	$	6,290		$	5,914		$	4,931		$	5,565		$	5,980		$	12,204		$	11,249
Earnings per share data
Net income: Basic	$	1.56		$	1.46		$	1.20		$	1.37		$	1.47		$	3.02		$	2.76
Diluted	1.54			1.45			1.19			1.35			1.46			2.99			2.74
Average shares: Basic	3,707.8			3,725.3			3,730.9			3,755.4			3,780.6			3,716.6			3,783.9
Diluted	3,743.6			3,757.5			3,765.2			3,788.7			3,812.5			3,750.5			3,818.1
Market and per common share data
Market capitalization	250,581			224,818			232,472			225,188			216,725			250,581			216,725
Common shares at period-end	3,698.1			3,711.1			3,714.8			3,738.2			3,761.3			3,698.1			3,761.3
Share price^(a):
High	$	69.82		$	62.96		$	63.49		$	61.85		$	61.29		$	69.82		$	61.48
Low	59.65			54.27			54.26			54.96			52.97			54.27			52.97
Close	67.76			60.58			62.58			60.24			57.62			67.76			57.62
Book value per share	58.49			57.77			56.98			56.41			55.44			58.49			55.44
Tangible book value per share (“TBVPS”)^(b)	46.13			45.45			44.60			44.04			43.08			46.13			43.08
Cash dividends declared per share	0.44			0.40			0.40			0.40			0.40			0.84			0.78
Selected ratios and metrics
Return on common equity (“ROE”)	11		%	11		%	9		%	10		%	11		%	11		%	11		%
Return on tangible common equity (“ROTCE”)^(b)	14			14			11			13			14			14			14
Return on assets (“ROA”)	1.01			0.94			0.78			0.90			0.99			0.97			0.94
Overhead ratio	61			62			68			65			63			61			63
Loans-to-deposits ratio	61			56			56			56			57			61			57
High quality liquid assets (“HQLA”) (in billions)^(c)	$	532		$	614		$	600		$	572		$	576		$	532		$	576
Common equity Tier 1 (“CET1”) capital ratio^(d)	11.2		%	10.7		%	10.2%			10.2		%	9.8		%	11.2		%	9.8		%
Tier 1 capital ratio^(d)	12.8			12.1			11.6			11.5			11.0			12.8			11.0
Total capital ratio^(d)	14.4			13.7			13.1			12.8			12.5			14.4			12.5
Tier 1 leverage ratio^(d)	8.0			7.5			7.6			7.6			7.6			8.0			7.6
Selected balance sheet data (period-end)
Trading assets	$	377,870		$	398,981		$	398,988		$	410,657		$	392,543		$	377,870		$	392,543
Securities^(e)	317,795			331,136			348,004			366,358			361,918			317,795			361,918
Loans	791,247			764,185			757,336			743,257			746,983			791,247			746,983
Core loans	674,767			641,285			628,785			607,617			603,440			674,767			603,440
Total assets	2,449,599			2,577,148			2,572,773			2,526,655			2,519,995			2,449,599			2,519,995
Deposits	1,287,332			1,367,887			1,363,427			1,334,534			1,319,751			1,287,332			1,319,751
Long-term debt^(f)	286,693			280,608			276,836			268,721			269,929			286,693			269,929
Common stockholders’ equity	216,287			214,371			211,664			210,876			208,520			216,287			208,520
Total stockholders’ equity	241,205			235,864			231,727			230,939			226,983			241,205			226,983
Headcount	237,459			241,145			241,359			242,388			245,192			237,459			245,192
Credit quality metrics
Allowance for credit losses	$	14,535		$	14,658		$	14,807		$	15,526		$	15,974		$	14,535		$	15,974
Allowance for loan losses to total retained loans	1.78%			1.86%			1.90%			2.02%			2.08%			1.78		%	2.08		%
Allowance for loan losses to retained loans excluding purchased credit-impaired loans^(g)	1.45			1.52			1.55			1.63			1.69			1.45			1.69
Nonperforming assets	$	7,588		$	7,714		$	7,967		$	8,390		$	9,017		$	7,588		$	9,017
Net charge-offs	1,007			1,052			1,218			1,114			1,158			2,059			2,427
Net charge-off rate	0.53%			0.57%			0.65%			0.60%			0.64%			0.55%			0.68%

Note: Effective January 1, 2015, the Firm adopted new accounting guidance for investments in affordable housing projects that qualify for the low-income housing tax credit. The guidance was required to be applied retrospectively and accordingly, certain prior period amounts have been revised to conform with the current period presentation. For additional information, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 14–15, as well as Accounting and Reporting Developments on page 82 and Note 1.


(a)	Share prices shown for JPMorgan Chase’s common stock are from the New York Stock Exchange.


(b)	TBVPS and ROTCE are non-GAAP financial measures. For further discussion of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 14–15.


(c)	HQLA represents the amount of assets that qualify for inclusion in the liquidity coverage ratio under the final U.S. rule (“U.S. LCR”) for 2Q15 and 1Q15, the estimated amount as of 4Q14 and 3Q14, and the amount included under the Basel III Liquidity Coverage Ratio (“Basel III LCR”) for 2Q14; for additional information, see HQLA on page 74.


(d)	The ratios presented are calculated under Basel III Advanced Transitional. See Regulatory capital on pages 67–71 for additional information on Basel III.


(e)	Included held-to-maturity (“HTM”) securities of $51.6 billion, $49.3 billion, $49.3 billion, $48.8 billion, and $47.8 billion at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014, respectively.


(f)	Included unsecured long-term debt of $209.6 billion, $209.5 billion, $207.5 billion, $204.7 billion, and $205.6 billion at June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, and June 30, 2014, respectively.


(g)	Excluded the impact of residential real estate PCI loans. For further discussion, see Allowance for credit losses on pages 58–60.



INTRODUCTION

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

This Form 10-Q should be read in conjunction with JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission (“2014 Annual Report” or “2014 Form 10-K”), to which reference is hereby made. See the Glossary of terms on pages 176–179 for definitions of terms used throughout this Form 10-Q.

The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause JPMorgan Chase’s actual results to differ materially because of those risks and uncertainties, see Forward-looking Statements on page 83 of this Form 10-Q and Part I, Item 1A, Risk Factors, on pages 8–17 of JPMorgan Chase’s 2014 Annual Report.

JPMorgan Chase & Co., a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States of America (“U.S.”), with operations worldwide; the Firm had $2.4 trillion in assets and $241.2 billion in stockholders’ equity as of June 30, 2015. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial

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

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

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



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 June 30,								Six months ended June 30,
(in millions, except per share data and ratios)	2015			2014			Change		2015			2014			Change
Selected income statement data
Total net revenue	$	23,812		$	24,678		(4	)%	$	47,878		$	47,893		—
Total noninterest expense	14,500			15,431			(6	)	29,383			30,067			(2	)
Pre-provision profit	9,312			9,247			1		18,495			17,826			4
Provision for credit losses	935			692			35		1,894			1,542			23
Net income	6,290			5,980			5		12,204			11,249			8
Diluted earnings per share	$	1.54		$	1.46		5	%	$	2.99		$	2.74		9	%
Return on common equity	11		%	11		%			11		%	11		%
Capital ratios^(a)
CET1	11.2			9.8					11.2			9.8
Tier 1 capital	12.8			11.0					12.8			11.0


(a)	The ratios presented are calculated under Basel III Advanced Transitional. See Regulatory capital on pages 67–71 for additional information on Basel III.

Business Overview

JPMorgan Chase reported second-quarter 2015 net income of $6.3 billion, or $1.54 per share, on net revenue of $23.8 billion. The Firm delivered strong performance in the second quarter and reported a return on equity of 11%.

Net income increased 5% compared with the second quarter of 2014, reflecting lower noninterest expense and lower taxes, predominantly offset by lower net revenue and a higher provision for credit losses. Net revenue was $23.8 billion, down 4% compared with the prior year. Net interest income was $10.7 billion, relatively flat compared with the prior year, reflecting lower loan yields and lower investment securities balances, predominantly offset by higher average loan balances and lower deposit and long-term debt interest expense. Noninterest revenue was $13.1 billion, down 5% compared with the prior year, driven by lower Mortgage Banking revenue and lower CIB Markets revenue related to business simplification, partially offset by higher revenue in Asset Management.

The provision for credit losses was $935 million, up 35% compared with the prior year, as a result of higher wholesale provision for credit losses, reflecting the impact of select downgrades, including within the Oil & Gas portfolio. The consumer provision for credit losses decreased, driven by lower net charge-offs, partially offset by a lower reduction in the allowance for loan losses, reflecting stabilization of the credit environment. Consumer net charge-offs were $1.0 billion, compared with $1.2 billion in the prior year, resulting in net charge-off rates, excluding purchased credit-impaired (“PCI”) loans, of 1.06% and 1.34%, respectively.

The Firm’s allowance for loan losses to period-end loans retained, excluding PCI loans, was 1.45%, compared with

1.69% in the prior year. The Firm’s allowance for loan losses to retained nonaccrual loans, excluding PCI loans, was 161%, compared with 152% in the prior year. The Firm’s nonperforming assets totaled $7.6 billion, down from the prior quarter and prior year levels of $7.7 billion and $9.0 billion, respectively.

Noninterest expense was $14.5 billion, down 6% compared with the prior year, driven by business simplification, lower legal expense, and lower Mortgage Banking noninterest expense.

Firmwide core loans increased 12% compared with the prior year and 5% compared with the first quarter of 2015. Within Consumer & Community Banking, Consumer & Business Banking (“CBB”) average deposits were up 9%, client investment assets were a record $221.5 billion, up 8%, and credit card sales volume was $125.7 billion, up 7%, from the prior year. CIB maintained its #1 ranking for Global Investment Banking fees with an 8.2% fee share for the second quarter of 2015. CB average loan balances were up 11% from the prior year and up 4% from the first quarter of 2015. Gross investment banking revenue from CB clients was up 22% from the prior year. AM reported positive net long-term flows for the twenty-fifth consecutive quarter, assets under management were up 4%, and average loan balances were up 9% over the prior year.

For a detailed discussion of results by line of business,

refer to the Business Segment Results section beginning on page 16.

The Firm maintained its fortress balance sheet and added to its capital, ending the second quarter with estimated Basel III Advanced Fully Phased-In CET1 capital and ratio of $168.9 billion and 11.0%, respectively. The Firm’s supplementary leverage ratio (“SLR”) was 6.0% and

JPMorgan Chase Bank, N.A.’s SLR was 6.1%. The Firm also had $532 billion of high quality liquid assets (“HQLA”) as of June 30, 2015. The CET1 and SLR measures under the Basel III Advanced Fully Phased-In rules are each 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 67–71.

JPMorgan Chase continued to support consumers, businesses and communities around the globe. The Firm provided credit and raised capital of $1.0 trillion for commercial and consumer clients during the first six months of 2015. This included providing $314 billion of credit to corporations, $115 billion to consumers, and $11 billion to U.S. small businesses. During the first half of 2015, the Firm also raised $556 billion of capital for clients and $35 billion of credit was provided to, and capital was raised for, nonprofit and government entities, including states, municipalities, hospitals and universities.

2015 Business outlook

These current expectations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. These risks and uncertainties could cause the Firm’s actual results to differ materially from those set forth in such forward-looking statements. See Forward-Looking Statements on page 83 of this Form 10-Q and Risk Factors on pages 8-17 of JPMorgan Chase’s 2014 Annual Report. There is no assurance that actual results for the third quarter or full year of 2015 will be in line with the outlook set forth below, and the Firm does not undertake to update any of these forward-looking statements to reflect the impact of circumstances or events that arise after the date hereof.

JPMorgan Chase’s outlook for the third quarter and for the remainder of 2015 should be viewed against the backdrop of the global and U.S. economies, financial markets activity, the geopolitical environment, the competitive environment, client activity levels, and regulatory and legislative developments in the U.S. and other countries where the Firm does business. Each of these inter-related factors will affect the performance of the Firm and its lines of business.

Management expects core loan growth of approximately 10% in the second half of 2015. The Firm continues to experience charge-offs at levels lower than its through-the-cycle expectations; if stable credit quality trends continue, management expects the Firm’s total net charge-offs for the second half of 2015 to be consistent with the first half of 2015.

Firmwide adjusted expense in 2015 is expected to be approximately $57 billion, excluding firmwide legal expense.

In Mortgage Banking within CCB, management expects noninterest revenue for 2015 to decline by approximately $1 billion compared with 2014 driven by lower servicing revenue as well as lower repurchase benefits. In Card Services within CCB, management expects the revenue rate in 2015 to remain at the low end of the target range of 12% to 12.5% and the full year net charge-off rate to be slightly less than 2.5%.

In CIB, Markets revenue in the third quarter of 2015 is expected to be impacted by the Firm’s business simplification, which was completed in 2014, resulting in a decline of approximately 9%, as well as a decline in noninterest expense, compared with the prior year third quarter. In Treasury Services within CIB, management expects revenue to be approximately $875 million in each of the remaining quarters of 2015 which reflects the transfer of Trade Finance revenue to Lending. In Securities Services within CIB, management expects revenue to be in the range of $950 million to $1 billion in each of the remaining quarters of 2015, depending on seasonality.

In CB, management expects noninterest expense to be approximately $720 million in each of the remaining quarters of 2015.

In AM, management expects the 2015 pretax margin and ROE to be at the low end of the business’s through-the-cycle targets of 30-35%, and 25% or higher, respectively.

Business events and subsequent events

For a discussion of business events during the six months ended June 30, 2015, and subsequent events, see Note 2.



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 six months ended June 30, 2015 and 2014. Factors that relate primarily to a single business segment are discussed in more detail

within that business segment. For a discussion of the Critical Accounting Estimates Used by the Firm that affect the Consolidated Results of Operations, see pages 79–81 of this Form 10-Q and pages 161–165 of JPMorgan Chase’s 2014 Annual Report.



Revenue
	Three months ended June 30,						Six months ended June 30,
(in millions)	2015		2014		Change		2015		2014		Change
Investment banking fees	$	1,833	$	1,751	5	%	$	3,627	$	3,171	14	%
Principal transactions	2,834		2,908		(3	)	6,489		6,230		4
Lending- and deposit-related fees	1,418		1,463		(3	)	2,781		2,868		(3	)
Asset management, administration and commissions	4,015		4,007		—		7,822		7,843		—
Securities gains	44		12		267		96		42		129
Mortgage fees and related income	783		1,291		(39	)	1,488		1,805		(18	)
Card income	1,615		1,549		4		3,046		2,957		3
Other income^(a)	586		899		(35	)	1,168		1,512		(23	)
Noninterest revenue	13,128		13,880		(5	)	26,517		26,428		—
Net interest income	10,684		10,798		(1	)	21,361		21,465		—
Total net revenue	$	23,812	$	24,678	(4)%		$	47,878	$	47,893	—


(a)	Included operating lease income of $504 million and $422 million for the three months ended June 30, 2015 and 2014, respectively, and $973 million and $820 million for the six months ended June 30, 2015 and 2014, respectively.

Total net revenue for the three months ended June 30, 2015 was down by 4% compared with the prior year, predominantly due to lower revenues in Fixed Income Markets, lower mortgage-related revenue, the absence in the current period of a benefit recognized in the prior year from a franchise tax settlement, and certain losses in Corporate. These items were partially offset by higher revenues in Equity Markets, and higher asset management fees on continued net long-term inflows. For the six months ended June 30, 2015, total net revenue was flat compared with the prior year, predominantly reflecting the net reduction from the aforementioned factors, partially offset by higher investment banking fees.

Investment banking fees increased from the three months ended June 30, 2014, reflecting higher advisory and debt underwriting fees. For the six months ended June 30, 2015, investment banking fees increased across products due to strong relative performance and an increased share of fees compared with the prior year. The increase in advisory fees for both periods was driven by the combined impact of a greater share of fees for completed transactions and growth in industry-wide fee levels; the increase in debt underwriting fees for both periods was attributable to a higher share of fees for high grade bond issuance and growth in industry-wide fee levels; and the increase in equity underwriting fees for the six months ended June 30, 2015 was due to a greater share of fees. Investment banking fee share and industry-wide data are sourced from Dealogic. For additional information on investment banking fees, see CIB segment results on pages 29–33, CB segment results on pages 34–37, and Note 6.

Principal transactions revenue decreased in the three months ended June 30, 2015 compared with the prior year, largely reflecting CIB’s lower Fixed Income Markets revenue, driven by the impact of business simplification, continued weakness in Credit and Securitized Products and lower revenue in Currencies & Emerging Markets, partially offset by strength in Rates. The decline in Fixed Income Markets was partially offset by higher Equity Markets revenue, primarily on higher derivatives and cash revenue. For the six months ended June 30, 2015, principal transactions revenue increased compared with the prior year, due to higher Equity Markets revenue on higher derivative and cash revenue, partially offset by lower Fixed Income Markets revenue, as well as lower private equity gains in Corporate. The decline in Fixed Income Markets revenue was driven by the impact of business simplification and weakness in Credit and Securitized Products, largely offset by higher revenue in Rates and Currencies & Emerging Markets. For additional information on principal transactions revenue, see CIB and Corporate segment results on pages 29–33 and pages 42–43, respectively, and

Note 6.

Asset management, administration and commissions revenue for the three and six months ended June 30, 2015, was relatively flat compared with the prior year, with higher asset management fees in AM and CCB reflecting higher market levels and net client inflows, offset by lower commissions and other fees in CIB. For additional information on these fees and commissions, see the segment discussions of CCB on pages 17–28, AM on pages 38–41, and Note 6.

Mortgage fees and related income decreased compared with the three months ended June 30, 2014, driven by lower MSR risk management income, reflecting the absence in 2015 of a positive $220 million model assumption update in the prior year, lower servicing revenue and lower repurchase benefit. Compared with the six months ended June 30, 2014, mortgage fees and related income decreased, driven by lower servicing revenue and lower repurchase benefit. For further information on mortgage fees and related income, see the segment discussion of CCB on pages 17–28 and Note 16.

For additional information on lending- and deposit-related fees, see the segment results for CCB on pages 17–28, CIB on pages 29–33 and CB on pages 34–37; securities gains, see the Corporate segment discussion on pages 42–43 and Note 11; and card income, see CCB segment results on pages 17–28.

Other income for the three and six months ended June 30, 2015 decreased compared with the prior year, as a result of the absence in the current period of a benefit recognized in the second quarter of 2014 from a franchise tax settlement, the impact of business simplification in CIB, and a loss recognized on the early redemption of trust preferred securities in Corporate. These factors were partially offset

by higher auto lease income as a result of growth in auto operating lease assets in CCB. The decrease during the six months ended June 30, 2015, also reflected losses related to the accelerated amortization of cash flow hedges associated with the exit of certain non-operational deposits, and a loss recognized on the early redemption of long-term debt that was recognized in the first quarter of 2015 in Corporate.

Net interest income was relatively flat in the three and six months ended June 30, 2015 compared with the prior year, predominantly reflecting lower loan yields due to the runoff of higher-yielding loans, new originations of lower- yielding loans, and lower average investment securities balances, offset by higher average loan balances and the impact of lower deposit and long-term debt interest expense. The Firm’s average interest-earning assets were $2.1 trillion in the three months ended June 30, 2015, and the net interest yield on these assets, on a fully taxable-equivalent (“FTE”) basis, was 2.09%, a decrease of 10 basis points from the prior year. For the six months ended June 30, 2015, the Firm’s average interest-earning assets were $2.1 trillion, and the net interest yield on these assets, on a FTE basis, was 2.08%, a decrease of 12 basis points from the prior year.



Provision for credit losses
	Three months ended June 30,								Six months ended June 30,
(in millions)	2015			2014			Change		2015		2014			Change
Consumer, excluding credit card	$	(98	)	$	(37	)	(165	)%	$	44	$	82		(46	)%
Credit card	800			885			(10	)%	1,589		1,573			1	%
Total consumer	702			848			(17	)%	1,633		1,655			(1	)%
Wholesale	233			(156		)	NM		261		(113		)	NM
Total provision for credit losses	$	935		$	692		35	%	$	1,894	$	1,542		23	%

The provision for credit losses in the three and six months ended June 30, 2015 increased from the prior year as a result of higher wholesale provision for credit losses, reflecting the impact of select downgrades, including within the Oil & Gas portfolio. The total consumer provision for credit losses decreased in the three months ended June 30, 2015, driven by lower net charge-offs, partially offset by a lower reduction in the allowance for loan losses. For the six months ended June 30, 2015, the total consumer provision

for credit losses reflected lower net charge-offs offset by a lower reduction in the allowance for loan losses. The lower reduction in the allowance for loan losses reflected the stabilization of the credit environment compared with the prior year. For a more detailed discussion of the credit portfolio and the allowance for credit losses, see the segment discussions of CCB on pages 17–28, CIB on pages 29–33 and CB on pages 34–37, and the Allowance for credit losses on pages 58–60.



Noninterest expense
	Three months ended June 30,						Six months ended June 30,
(in millions)	2015		2014		Change		2015		2014		Change
Compensation expense	$	7,694	$	7,610	1	%	$	15,737	$	15,469	2	%
Noncompensation expense:
Occupancy	923		973		(5	)	1,856		1,925		(4	)
Technology, communications and equipment	1,499		1,433		5		2,990		2,844		5
Professional and outside services	1,768		1,932		(8	)	3,402		3,718		(8	)
Marketing	642		650		(1	)	1,233		1,214		2
Other expense^(a)(b)	1,974		2,833		(30	)	4,165		4,897		(15	)
Total noncompensation expense	6,806		7,821		(13	)	13,646		14,598		(7	)
Total noninterest expense	$	14,500	$	15,431	(6	)%	$	29,383	$	30,067	(2	)%


(a)	Included firmwide legal expense of $291 million and $669 million for the three months ended June 30, 2015 and 2014, respectively, and $978 million and $707 million for the six months ended June 30, 2015 and 2014, respectively


(b)	Included Federal Deposit Insurance Corporation-related (“FDIC”) expense of $300 million and $266 million for the three months ended June 30, 2015, and 2014, respectively, and $618 million and $559 million for the six months ended June 30, 2015 and 2014, respectively.

Total noninterest expense for the three months ended June 30, 2015 decreased by 6% from the prior year, driven by the impact of business simplification, lower legal expense and lower professional services expense. For the six months ended June 30, 2015, total noninterest expense decreased by 2% reflecting the impact of business simplification and lower professional services expense, partially offset by higher legal expense.

Compensation expense increased compared with the three and six months ended June 30, 2014, predominantly driven by the impact of investments in the businesses, including headcount for controls, and higher postretirement benefit costs, partially offset by lower headcount in CCB.

Noncompensation expense in the three and six months ended June 30, 2015 decreased compared with the prior year, due to lower other expense, reflecting the impact of business simplification in CIB, and lower amortization of intangibles, partially offset by the impact of a loss from a held-for-sale asset in AM. Lower professional and outside services expense, largely reflecting lower legal services expense and the impact of a reduced number of contractors in several businesses, also contributed to the decrease in both periods. Legal expense (which is included in other expense) was lower in the three months ended June 30, 2015, but higher in the six months ended June 30, 2015, compared with the respective prior year periods. For a further discussion of legal expense, see Note 23.



Income tax expense
(in millions, except rate)	Three months ended June 30,								Six months ended June 30,
(in millions, except rate)	2015			2014			Change		2015			2014			Change
Income before income tax expense	$	8,377		$	8,555		(2	)%	$	16,601		$	16,284		2	%
Income tax expense	2,087			2,575			(19	)	4,397			5,035			(13	)
Effective tax rate	24.9		%	30.1		%			26.5		%	30.9		%

The effective tax rate in the three and six months ended June 30, 2015 decreased compared with the respective prior year periods, predominantly due to higher tax benefits associated with the settlement of certain tax audits (which reduced the Firm’s gross unrecognized tax benefits), as well as due to lower nondeductible legal-related expense in the current period and the change in mix of income and expense subject to U.S. federal and state and local taxes. Tax audits of the Firm that were being conducted by a number of taxing authorities, most notably the Internal Revenue Service, New York State and City, and the State of California, continue to be resolved. Based upon the current status of such audits, it is reasonably possible that over the next three to six months the resolution of these audits could result in a further reduction in the gross balance of the Firm’s unrecognized tax benefits; the Firm currently estimates the expected reduction to be in the range of $0 to approximately $2 billion for full year 2015. For further information, see Note 26 of JPMorgan Chase’s 2014 Annual Report.



CONSOLIDATED BALANCE SHEETS ANALYSIS



Selected Consolidated Balance Sheets data
(in millions)	Jun 30, 2015			Dec 31, 2014			Change
Assets
Cash and due from banks	$	24,095		$	27,831		(13	)%
Deposits with banks	398,807			484,477			(18	)
Federal funds sold and securities purchased under resale agreements	212,850			215,803			(1	)
Securities borrowed	98,528			110,435			(11	)
Trading assets:
Debt and equity instruments	310,419			320,013			(3	)
Derivative receivables	67,451			78,975			(15	)
Securities	317,795			348,004			(9	)
Loans	791,247			757,336			4
Allowance for loan losses	(13,915		)	(14,185		)	(2	)
Loans, net of allowance for loan losses	777,332			743,151			5
Accrued interest and accounts receivable	69,642			70,079			(1	)
Premises and equipment	15,073			15,133			—
Goodwill	47,476			47,647			—
Mortgage servicing rights	7,571			7,436			2
Other intangible assets	1,091			1,192			(8	)
Other assets	101,469			102,597			(1	)
Total assets	$	2,449,599		$	2,572,773		(5	)
Liabilities
Deposits	$	1,287,332		$	1,363,427		(6	)
Federal funds purchased and securities loaned or sold under repurchase agreements	180,897			192,101			(6	)
Commercial paper	42,238			66,344			(36	)
Other borrowed funds	30,061			30,222			(1	)
Trading liabilities:
Debt and equity instruments	80,396			81,699			(2	)
Derivative payables	59,026			71,116			(17	)
Accounts payable and other liabilities	191,749			206,939			(7	)
Beneficial interests issued by consolidated VIEs	50,002			52,362			(5	)
Long-term debt	286,693			276,836			4
Total liabilities	2,208,394			2,341,046			(6	)
Stockholders’ equity	241,205			231,727			4
Total liabilities and stockholders’ equity	$	2,449,599		$	2,572,773		(5	)%

Consolidated Balance Sheets overview

JPMorgan Chase’s total assets and total liabilities decreased by 5% and 6%, respectively, compared with December 31, 2014.

The following is a discussion of the significant changes.

Cash and due from banks and deposits with banks

The net decrease was attributable to lower wholesale non-operating deposits. The Firm’s excess cash was placed with various central banks, predominantly Federal Reserve Banks.

Securities borrowed

The decrease was predominantly driven by lower demand for securities to cover customer short positions in CIB, and a shift in the deployment of excess cash from securities borrowed to deposits with banks.

Trading assets and liabilities–derivative receivables and payables

The decrease in both receivables and payables was predominantly due to client-driven market-making activities in CIB, as a result of market movements and maturities. For additional information, refer to Derivative contracts on pages 56–57, and Notes 3 and 5.

Securities

The decrease was largely due to paydowns and maturities

of non-U.S. residential mortgage-backed securities (“MBS”) and non-U.S. government debt securities. For additional information related to securities, refer to the discussion

in the Corporate segment on pages 42–43, and Notes 3

and 11.

Loans and allowance for loan losses

The increase in loans reflects higher consumer and wholesale balances. The increase in consumer loans was due to originations and retention of high-quality prime mortgages in Mortgage Banking (“MB”) and AM, partially offset by lower credit card loans due to seasonality and non-core loan portfolio sales. The increase in wholesale loans reflected higher originations and utilization of existing commitments, particularly in CB. For a more detailed discussion of loans and the allowance for loan losses, refer to Credit Risk Management on pages 45–60, and Notes 3, 4, 13 and 14.

Mortgage servicing rights

For additional information on MSRs, see Note 16.

Other assets

Other assets was relatively flat, due to lower private equity investments reflecting the sale of a portion of the One Equity Partners (“OEP”) portfolio and other portfolio sales, partially offset by higher auto operating lease assets from growth in business volume.

Deposits

The decrease was attributable to lower wholesale deposits, partially offset by higher consumer deposits. The decrease in wholesale deposits reflects the impact of the previously announced plan to reduce non-operating deposits, as well as the normalization of deposit levels from year-end seasonal inflows. The increase in consumer deposits reflected a continuing positive growth trend, resulting from strong customer retention, maturing of recent branch builds, and net new business. For more information on deposits, refer to the CCB segment discussion on pages 17–28; the Liquidity Risk Management discussion on pages 74–78; and Notes 3 and 17. For more information on wholesale client deposits, refer to the AM, CB and CIB segment discussions on pages 38–41, pages 34–37, and pages 29–33, respectively.

Federal funds purchased and securities loaned or sold under repurchase agreements

The decrease reflects lower secured financing of trading assets-debt and equity instruments and the investment securities portfolio. For additional information on the Firm’s Liquidity Risk Management, see pages 74–78.

Commercial paper

The decrease was due to the discontinuation of a cash management product, currently in process, that offered customers the option of sweeping their deposits into commercial paper (“customer sweeps”), and lower issuances in the wholesale markets consistent with Treasury’s liquidity and short-term funding plans. For additional information on the Firm’s other borrowed funds, see Liquidity Risk Management on pages 74–78.

Accounts payable and other liabilities

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

Beneficial interests issued by consolidated VIEs

For further information on Firm-sponsored variable interest entities (“VIEs”) and loan securitization trusts, see Off-Balance Sheet Arrangements on page 12 and Note 15.

Long-term debt

The increase was due to net issuances, consistent with Treasury’s long-term funding plans. For additional information on the Firm’s long-term debt activities, see Liquidity Risk Management on pages 74–78.

Stockholders’ equity

The increase was due to net income and preferred stock issuance, partially offset by the declaration of cash dividends on common and preferred stock, and repurchases of common stock. For additional information on accumulated other comprehensive income/(loss) (“AOCI”), see Note 19; for the Firm’s capital actions, see Capital actions on pages 72–73.



OFF-BALANCE SHEET ARRANGEMENTS

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

Special-purpose entities

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

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

For certain liquidity commitments to SPEs, JPMorgan Chase Bank, N.A., could be required to provide funding if its short-term credit rating were downgraded below specific levels, primarily “P-1,” “A-1” and “F1” for Moody’s, 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 June 30, 2015, and December 31, 2014, was $13.0 billion and $12.1 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 $9.9 billion at both June 30, 2015, and December 31, 2014. The Firm could facilitate the refinancing of some of the clients’ assets in order to reduce the funding obligation. For further information, see the discussion of Firm-administered multiseller conduits in

Note 15.

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

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

JPMorgan Chase provides lending-related financial instruments (e.g., commitments and guarantees) to meet the financing needs of its customers. The contractual amount of these financial instruments represents the maximum possible credit risk to the Firm should the counterparty draw upon the commitment or the Firm be required to fulfill its obligation under the guarantee, and should the counterparty subsequently fail to perform according to the terms of the contract. Most of these commitments and guarantees expire without being drawn or a default occurring. As a result, the total contractual amount of these instruments is not, in the Firm’s view, representative of its actual future credit exposure or funding requirements. For further discussion of lending-related financial instruments, guarantees and other commitments, and the Firm’s accounting for them, see Lending-related commitments on page 56 and Note 21 (including the table that presents the related amounts by contractual maturity as of June 30, 2015). For a discussion of liabilities associated with loan sales- and securitization-related indemnifications, see Note 21.



CONSOLIDATED CASH FLOWS ANALYSIS

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



(in millions)	Six months ended June 30,
(in millions)	2015			2014
Net cash provided by/(used in)
Operating activities	$	32,175		$	10,296
Investing activities	77,471			(97,938		)
Financing activities	(113,429		)	75,436
Effect of exchange rate changes on cash	47			(42		)
Net decrease in cash and due from banks	$	(3,736	)	$	(12,248	)

Operating activities

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

Cash provided by operating activities in 2015 and 2014 resulted from net income after noncash operating adjustments. Additionally in 2015, cash was provided by a decrease in trading assets which more than offset cash used by a decrease in trading liabilities predominantly due to client-driven market-making activities in CIB; and a decrease in securities borrowed resulting from lower demand for securities to cover customer short positions in CIB. In 2014, cash was provided by a decrease in other assets driven by lower cash margin balances placed with exchanges and clearing houses; and higher net proceeds from loan sales activities.

Investing activities

Cash provided by investing activities during 2015 predominantly resulted from a net decrease in deposits with banks which was attributable to lower wholesale non-operating deposits; and net proceeds from paydowns, maturities and sales of investment securities. Partially offsetting these inflows was cash used for net originations of consumer and wholesale loans. Cash used in investing activities during 2014 predominantly resulted from increases in deposits with banks, reflecting higher levels of excess funds; and net purchases of investment securities. Additionally in 2014, loans increased due to net originations of wholesale loans.

Financing activities

Cash used in financing activities in 2015 resulted from lower wholesale deposits, partially offset by higher consumer 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. Offsetting these outflows were net proceeds from long-term borrowings. Cash provided by financing activities in 2014 resulted predominantly from higher consumer and wholesale deposits and an increase in securities loaned or sold under repurchase agreements due to higher financing of the Firm’s trading assets-debt and equity instruments. For both periods, cash was provided by the issuance of preferred stock and used for repurchases of common stock and dividends on common and preferred stock.

* * *

For a further discussion of the activities affecting the Firm’s cash flows, see Balance Sheet Analysis on pages 10–11.

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 84–88. That presentation, which is referred to as “reported” basis, provides the reader with an understanding of the Firm’s results that can be tracked consistently from year-to-year and enables a comparison of the Firm’s performance with other companies’ U.S. GAAP financial statements.

In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s results, including the overhead ratio, and the results of the lines of business on a “managed” basis, which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications to present total net revenue for the Firm (and each of the reportable business segments) on an FTE basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable investments and securities. This non-GAAP financial measure allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The corresponding income tax impact related to tax-exempt items is recorded within income tax expense. These adjustments have no impact on net income as reported by the Firm as a whole or by the lines of business.

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

Management also uses certain non-GAAP financial measures at the business-segment level, because it believes these other non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the particular business segment and, therefore, facilitate a comparison of the business segment with the performance of its competitors. Non-GAAP financial measures used by the Firm may not be comparable to similarly named non-GAAP financial measures used by other companies.

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



	Three months ended June 30,
	2015								2014
(in millions, except ratios)	Reported results			Fully taxable-equivalent adjustments^(a)		Managed basis			Reported results			Fully taxable-equivalent adjustments^(a)		Managed basis
Other income	$	586		$	447	$	1,033		$	899		$	415	$	1,314
Total noninterest revenue	13,128			447		13,575			13,880			415		14,295
Net interest income	10,684			272		10,956			10,798			244		11,042
Total net revenue	23,812			719		24,531			24,678			659		25,337
Pre-provision profit	9,312			719		10,031			9,247			659		9,906
Income before income tax expense	8,377			719		9,096			8,555			659		9,214
Income tax expense	$	2,087		$	719	$	2,806		$	2,575		$	659	$	3,234
Overhead ratio	61		%	NM		59		%	63		%	NM		61		%



	Six months ended June 30,
	2015								2014
(in millions, except ratios)	Reported results			Fully taxable-equivalent adjustments^(a)		Managed basis			Reported results			Fully taxable-equivalent adjustments^(a)		Managed basis
Other income	$	1,168		$	928	$	2,096		$	1,512		$	827	$	2,339
Total noninterest revenue	26,517			928		27,445			26,428			827		27,255
Net interest income	21,361			545		21,906			21,465			470		21,935
Total net revenue	47,878			1,473		49,351			47,893			1,297		49,190
Pre-provision profit	18,495			1,473		19,968			17,826			1,297		19,123
Income before income tax expense	16,601			1,473		18,074			16,284			1,297		17,581
Income tax expense	$	4,397		$	1,473	$	5,870		$	5,035		$	1,297	$	6,332
Overhead ratio	61		%	NM		60		%	63		%	NM		61		%

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

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

at period-end divided by common shares at period-end. TCE, ROTCE, and TBVPS are meaningful to the Firm, as well as investors and analysts, in assessing the Firm’s use of equity. Additionally, certain capital ratios disclosed by the Firm are non-GAAP measures. For additional information on these non-GAAP measures, see Regulatory capital on pages 67–71.



Tangible common equity	Period-end				Average
	Period-end				Three months ended June 30,						Six months ended June 30,
(in millions, except per share and ratio data)	Jun 30, 2015		Dec 31, 2014		Three months ended June 30,						Six months ended June 30,
(in millions, except per share and ratio data)	Jun 30, 2015		Dec 31, 2014		2015			2014			2015			2014
Common stockholders’ equity	$	216,287	$	211,664	$	213,738		$	206,159		$	213,049		$	203,989
Less: Goodwill	47,476		47,647		47,485			48,084			47,488			48,069
Less: Certain identifiable intangible assets	1,091		1,192		1,113			1,416			1,138			1,482
Add: Deferred tax liabilities^(a)	2,876		2,853		2,873			2,952			2,868			2,948
Tangible common equity	$	170,596	$	165,678	$	168,013		$	159,611		$	167,291		$	157,386

Return on tangible common equity	NA		NA		14		%	14		%	14		%	14		%
Tangible book value per share	$	46.13	$	44.60	NA			NA			NA			NA


(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.

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

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

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



Net interest income excluding CIB markets-based activities data
	Three months ended June 30,								Six months ended June 30,
(in millions, except rates)	2015			2014			Change		2015			2014			Change
Net interest income – managed basis^(a)(b)	$	10,956		$	11,042		(1	)%	$	21,906		$	21,935		—
Less: Markets-based net interest income	1,238			1,291			(4	)	2,497			2,560			(2	)
Net interest income excluding markets^(a)	$	9,718		$	9,751		—		$	19,409		$	19,375		—

Average interest-earning assets	$	2,097,637		$	2,023,945		4		$	2,123,078		$	2,014,846		5
Less: Average markets-based interest earning assets	500,915			502,413			—		505,290			504,942			—
Average interest-earning assets excluding markets	$	1,596,722		$	1,521,532		5	%	$	1,617,788		$	1,509,904		7	%
Net interest yield on interest-earning assets – managed basis	2.09		%	2.19		%			2.08		%	2.20		%
Net interest yield on markets-based activities	0.99			1.03					1.00			1.02
Net interest yield on average interest-earning assets excluding markets	2.44		%	2.57		%			2.42		%	2.59		%


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


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

Quarterly and year-to-date results

Net interest income excluding CIB’s markets-based activities was flat at $9.7 billion and $19.4 billion, respectively, for the three and six months ended June 30, 2015, when compared with the prior year periods. Results in 2015 reflected lower loan yields due to the runoff of higher yielding loans, new originations of lower yielding loans and lower average investment securities balances, offset by higher average loan balances and the impact of lower deposits and long-term debt interest expense. Average

interest-earning assets excluding assets related to CIB’s markets-based activities increased by $75.2 billion to $1.6 trillion and by $107.9 billion to $1.6 trillion, respectively, for the three and six months ended June 30, 2015, when compared with the prior year periods; these increases primarily reflected the impact of higher average deposits with banks. The net interest yield excluding CIB’s markets-based activities decreased by 13 basis points to 2.44% and by 17 basis points to 2.42%, respectively, for the three and six months ended June 30, 2015.



BUSINESS SEGMENT RESULTS

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

The business segments are determined based on the products and services provided, or the type of customer served, and they reflect the manner in which financial information is currently evaluated by management. Results of these lines of business are presented on a managed basis. For a definition of managed basis, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures, on pages 14–15.

Description of business segment reporting methodology

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

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

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

Business segment capital allocation changes

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. On at least an annual basis, the Firm assesses the level of capital required for each line of business as well as the assumptions and methodologies used to allocate capital to its lines of business and updates the equity allocations to its lines of business as refinements are implemented. For further information about these capital changes, see Line of business equity on page 72.

Segment Results – Managed basis

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



Three months ended June 30,	Total net revenue								Total noninterest expense						Pre-provision profit/(loss)
(in millions)	2015			2014			Change		2015		2014		Change		2015			2014			Change
Consumer & Community Banking	$	11,015		$	11,518		(4)%		$	6,210	$	6,456	(4)%		$	4,805		$	5,062		(5)%
Corporate & Investment Bank	8,723			9,265			(6	)	5,137		6,058		(15	)	3,586			3,207			12
Commercial Banking	1,739			1,731			—		703		675		4		1,036			1,056			(2	)
Asset Management	3,175			2,982			6		2,406		2,062		17		769			920			(16	)
Corporate	(121		)	(159		)	24		44		180		(76	)	(165		)	(339		)	51
Total	$	24,531		$	25,337		(3)%		$	14,500	$	15,431	(6)%		$	10,031		$	9,906		1%



Three months ended June 30,	Provision for credit losses							Net income						Return on common equity
(in millions, except ratios)	2015		2014			Change		2015		2014		Change		2015		2014
Consumer & Community Banking	$	702	$	852		(18	)%	$	2,533	$	2,496	1%		19	%	19	%
Corporate & Investment Bank	50		(84		)	NM		2,341		2,131		10		14		13
Commercial Banking	182		(67		)	NM		525		677		(22	)	14		19
Asset Management	—		1			(100	)	451		569		(21	)	19		25
Corporate	1		(10		)	NM		440		107		311		NM		NM
Total	$	935	$	692		35	%	$	6,290	$	5,980	5%		11%		11	%



Six months ended June 30,	Total net revenue								Total noninterest expense						Pre-provision profit/(loss)
(in millions)	2015			2014			Change		2015		2014		Change		2015			2014			Change
Consumer & Community Banking	$	21,719		$	22,052		(2)%		$	12,400	$	12,893	(4	)%	$	9,319		$	9,159		2	%
Corporate & Investment Bank	18,305			18,107			1		10,794		11,662		(7	)	7,511			6,445			17
Commercial Banking	3,481			3,409			2		1,412		1,361		4		2,069			2,048			1
Asset Management	6,180			5,782			7		4,581		4,137		11		1,599			1,645			(3	)
Corporate	(334		)	(160		)	(109	)	196		14		NM		(530		)	(174		)	(205	)
Total	$	49,351		$	49,190		—		$	29,383	$	30,067	(2	)%	$	19,968		$	19,123		4	%



Six months ended June 30,	Provision for credit losses							Net income						Return on common equity
(in millions, except ratios)	2015			2014			Change	2015		2014		Change		2015		2014
Consumer & Community Banking	$	1,632		$	1,668		(2)%	$	4,752	$	4,477	6%		18	%	17	%
Corporate & Investment Bank	19			(35		)	NM	4,878		4,256		15		15		13
Commercial Banking	243			(62		)	NM	1,123		1,271		(12	)	15		18
Asset Management	4			(8		)	NM	953		1,023		(7	)	21		22
Corporate	(4		)	(21		)	81	498		222		124		NM		NM
Total	$	1,894		$	1,542		23%	$	12,204	$	11,249	8%		11%		11	%



CONSUMER & COMMUNITY BANKING

For a discussion of the business profile of CCB, see pages 81–91 of JPMorgan Chase’s 2014 Annual Report and Line of Business Metrics on page 180.



Selected income statement data
	Three months ended June 30,								Six months ended June 30,
(in millions, except ratios)	2015			2014			Change		2015			2014			Change
Revenue
Lending- and deposit-related fees	$	766		$	750		2	%	$	1,484		$	1,453		2	%
Asset management, administration and commissions	553			521			6		1,083			1,024			6
Mortgage fees and related income	782			1,290			(39	)	1,486			1,804			(18	)
Card income	1,506			1,486			1		2,830			2,834			—
All other income	482			421			14		942			787			20
Noninterest revenue	4,089			4,468			(8	)	7,825			7,902			(1	)
Net interest income	6,926			7,050			(2	)	13,894			14,150			(2	)
Total net revenue	11,015			11,518			(4	)	21,719			22,052			(2	)

Provision for credit losses	702			852			(18	)	1,632			1,668			(2	)

Noninterest expense
Compensation expense	2,478			2,637			(6	)	5,008			5,376			(7	)
Noncompensation expense	3,732			3,819			(2	)	7,392			7,517			(2	)
Total noninterest expense	6,210			6,456			(4	)	12,400			12,893			(4	)
Income before income tax expense	4,103			4,210			(3	)	7,687			7,491			3
Income tax expense	1,570			1,714			(8	)	2,935			3,014			(3	)
Net income	$	2,533		$	2,496		1	%	$	4,752		$	4,477		6	%

Financial ratios
Return on common equity	19		%	19		%			18		%	17		%
Overhead ratio	56			56					57			58

Note: In the discussion and the tables which follow, CCB presents certain financial measures which exclude the impact of PCI loans; these are non-GAAP financial measures. For additional information, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 14–15.

Quarterly results

Consumer & Community Banking net income was $2.5 billion, an increase of 1% compared with the prior year.

Net revenue was $11.0 billion, a decrease of 4% compared with the prior year. Net interest income was $6.9 billion, down 2%, driven by spread compression, largely offset by higher deposit balances, higher loan balances and lower reversals of interest and fees due to lower net charge-offs in Credit Card. Noninterest revenue was $4.1 billion, down 8%, driven by lower mortgage fees and related income, partially offset by higher Auto lease income and higher net interchange income in Credit Card.

The provision for credit losses was $702 million, a decrease of 18% compared with the prior year, reflecting lower net charge-offs, partially offset by a lower reduction in the allowance for loan losses. The current-quarter provision reflected a $326 million reduction in the allowance for loan losses. The prior year included a $357 million reduction in the allowance for loan losses. For more information, including net charge-off amounts and rates, see Consumer Credit Portfolio on pages 46–51.

Noninterest expense was $6.2 billion, a decrease of 4% from the prior year, predominantly driven by lower Mortgage Banking expense.

Year-to-date results

Consumer & Community Banking net income was $4.8 billion, an increase of 6% compared with the prior year, driven by lower noninterest expense, largely offset by lower net revenue.

Net revenue was $21.7 billion, a decrease of 2% compared with the prior year. Net interest income was $13.9 billion, down 2%, driven by spread compression, largely offset by higher deposit and loan balances. Noninterest revenue was $7.8 billion, down 1%, driven by lower mortgage fees and related income, predominantly offset by higher Auto lease income and higher net interchange income in Credit Card.

The provision for credit losses was $1.6 billion, a decrease of 2% from the prior year, reflecting lower net charge-offs, predominantly offset by a lower reduction in the allowance for loan losses. The current-year provision reflected a $451 million reduction in the allowance for loan losses. The prior year included a $807 million reduction in the allowance for loan losses. For more information, including net charge-off amounts and rates, see Consumer Credit Portfolio on pages 46–51.

Noninterest expense was $12.4 billion, a decrease of 4% from the prior year, predominantly driven by lower Mortgage Banking expense.



Selected metrics
	As of or for the three months ended June 30,						As of or for the six months ended June 30,
(in millions, except headcount)	2015		2014		Change		2015		2014		Change
Selected balance sheet data (period-end)
Total assets	$	472,181	$	447,277	6	%	$	472,181	$	447,277	6	%
Trading assets – loans^(a)	6,700		7,409		(10	)	6,700		7,409		(10	)
Loans:
Loans retained	413,363		390,211		6		413,363		390,211		6
Loans held-for-sale^(b)	2,825		1,472		92		2,825		1,472		92
Total loans	416,188		391,683		6		416,188		391,683		6
Core loans	301,154		253,817		19		301,154		253,817		19
Deposits	530,767		488,681		9		530,767		488,681		9
Equity^(c)	51,000		51,000		—		51,000		51,000		—
Selected balance sheet data (average)
Total assets	$	463,404	$	443,204	5		$	459,108	$	446,794	3
Trading assets – loans^(a)	7,068		6,593		7		7,528		7,017		7
Loans:
Loans retained	406,029		388,252		5		400,587		388,464		3
Loans held-for-sale^(d)	2,100		710