Edgar Filing: JPMORGAN CHASE & CO

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

the Securities Exchange Act of 1934



For the quarterly period ended	Commission file
September 30, 2015	number 1-5805

JPMorgan Chase & Co.

(Exact name of registrant as specified in its charter)



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

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

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

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



x Yes	o No

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



x Yes	o No

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



Large accelerated filer x	Accelerated filer o

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

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



o Yes	x No

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

FORM 10-Q

TABLE OF CONTENTS



Part I - Financial information		Page
Item 1	Consolidated Financial Statements – JPMorgan Chase & Co.:
	Consolidated statements of income (unaudited) for the three and nine months ended September 30, 2015 and 2014	86
	Consolidated statements of comprehensive income (unaudited) for the three and nine months ended September 30, 2015 and 2014	87
	Consolidated balance sheets (unaudited) at September 30, 2015, and December 31, 2014	88
	Consolidated statements of changes in stockholders’ equity (unaudited) for the nine months ended September 30, 2015 and 2014	89
	Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2015, and 2014	90
	Notes to Consolidated Financial Statements (unaudited)	91
	Report of Independent Registered Public Accounting Firm	175
	Consolidated Average Balance Sheets, Interest and Rates (unaudited) for the three and nine months ended September 30, 2015 and 2014	176
	Glossary of Terms and Line of Business Metrics	178
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations:
	Consolidated Financial Highlights	3
	Introduction	4
	Executive Overview	5
	Consolidated Results of Operations	7
	Consolidated Balance Sheets Analysis	10
	Off-Balance Sheet Arrangements	12
	Consolidated Cash Flows Analysis	13
	Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures	14
	Business Segment Results	17
	Enterprise-Wide Risk Management	46
	Credit Risk Management	47
	Market Risk Management	63
	Country Risk Management	67
	Operational Risk Management	68
	Capital Management	69
	Liquidity Risk Management	76
	Supervision and Regulation	80
	Critical Accounting Estimates Used by the Firm	81
	Accounting and Reporting Developments	84
	Forward-Looking Statements	85
Item 3	Quantitative and Qualitative Disclosures About Market Risk	185
Item 4	Controls and Procedures	185
Part II - Other information
Item 1	Legal Proceedings	185
Item 1A	Risk Factors	185
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	185
Item 3	Defaults Upon Senior Securities	186
Item 4	Mine Safety Disclosure	186
Item 5	Other Information	186
Item 6	Exhibits	186

JPMorgan Chase & Co.

Consolidated financial highlights



(unaudited) As of or for the period ended, (in millions, except share, ratio, headcount data and where otherwise noted)																Nine months ended September 30,
	3Q15			2Q15			1Q15			4Q14			3Q14			2015			2014
Selected income statement data
Total net revenue	$	22,780		$	23,812		$	24,066		$	22,750		$	24,469		$	70,658		$	72,362
Total noninterest expense	15,368			14,500			14,883			15,409			15,798			44,751			45,865
Pre-provision profit	7,412			9,312			9,183			7,341			8,671			25,907			26,497
Provision for credit losses	682			935			959			840			757			2,576			2,299
Income before income tax expense	6,730			8,377			8,224			6,501			7,914			23,331			24,198
Income tax expense/(benefit)	(74		)	2,087			2,310			1,570			2,349			4,323			7,384
Net income	$	6,804		$	6,290		$	5,914		$	4,931		$	5,565		$	19,008		$	16,814
Earnings per share data
Net income: Basic	$	1.70		$	1.56		$	1.46		$	1.20		$	1.37		$	4.72		$	4.13
Diluted	1.68			1.54			1.45			1.19			1.35			4.68			4.09
Average shares: Basic	3,694.4			3,707.8			3,725.3			3,730.9			3,755.4			3,709.2			3,774.4
Diluted	3,725.6			3,743.6			3,757.5			3,765.2			3,788.7			3,742.2			3,808.3
Market and per common share data
Market capitalization	224,438			250,581			224,818			232,472			225,188			224,438			225,188
Common shares at period-end	3,681.1			3,698.1			3,711.1			3,714.8			3,738.2			3,681.1			3,738.2
Share price^(a):
High	$	70.61		$	69.82		$	62.96		$	63.49		$	61.85		$	70.61		$	61.85
Low	50.07			59.65			54.27			54.26			54.96			50.07			52.97
Close	60.97			67.76			60.58			62.58			60.24			60.97			60.24
Book value per share	59.67			58.49			57.77			56.98			56.41			59.67			56.41
Tangible book value per share (“TBVPS”)^(b)	47.36			46.13			45.45			44.60			44.04			47.36			44.04
Cash dividends declared per share	0.44			0.44			0.40			0.40			0.40			1.28			1.18
Selected ratios and metrics
Return on common equity (“ROE”)	12		%	11		%	11		%	9		%	10		%	11		%	10		%
Return on tangible common equity (“ROTCE”)^(b)	15			14			14			11			13			14			13
Return on assets (“ROA”)	1.11			1.01			0.94			0.78			0.90			1.02			0.93
Overhead ratio	67			61			62			68			65			63			63
Loans-to-deposits ratio	64			61			56			56			56			64			56
High quality liquid assets (“HQLA”) (in billions)^(c)	$	505		$	532		$	614		$	600		$	572		$	505		$	572
Common equity Tier 1 (“CET1”) capital ratio^(d)	11.5		%	11.2		%	10.7%			10.2		%	10.2		%	11.5		%	10.2		%
Tier 1 capital ratio^(d)	13.3			12.8			12.1			11.6			11.5			13.3			11.5
Total capital ratio^(d)	14.9			14.4			13.7			13.1			12.8			14.9			12.8
Tier 1 leverage ratio^(d)	8.4			8.0			7.5			7.6			7.6			8.4			7.6
Selected balance sheet data (period-end)
Trading assets	$	361,708		$	377,870		$	398,981		$	398,988		$	410,657		$	361,708		$	410,657
Securities^(e)	306,660			317,795			331,136			348,004			366,358			306,660			366,358
Loans	809,457			791,247			764,185			757,336			743,257			809,457			743,257
Core loans	698,988			674,767			641,285			628,785			607,617			698,988			607,617
Total assets	2,417,121			2,449,599			2,577,148			2,572,773			2,526,655			2,417,121			2,526,655
Deposits	1,273,106			1,287,332			1,367,887			1,363,427			1,334,534			1,273,106			1,334,534
Long-term debt^(f)	292,945			286,693			280,608			276,836			268,721			292,945			268,721
Common stockholders’ equity	219,660			216,287			214,371			211,664			210,876			219,660			210,876
Total stockholders’ equity	245,728			241,205			235,864			231,727			230,939			245,728			230,939
Headcount	235,678			237,459			241,145			241,359			242,388			235,678			242,388
Credit quality metrics
Allowance for credit losses	$	14,201		$	14,535		$	14,658		$	14,807		$	15,526		$	14,201		$	15,526
Allowance for loan losses to total retained loans	1.67%			1.78%			1.86%			1.90%			2.02%			1.67		%	2.02		%
Allowance for loan losses to retained loans excluding purchased credit-impaired loans^(g)	1.40			1.45			1.52			1.55			1.63			1.40			1.63
Nonperforming assets	$	7,294		$	7,588		$	7,714		$	7,967		$	8,390		$	7,294		$	8,390
Net charge-offs	963			1,007			1,052			1,218			1,114			3,022			3,541
Net charge-off rate	0.49%			0.53%			0.57%			0.65%			0.60%			0.53%			0.65%

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


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


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


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


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


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


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


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



INTRODUCTION

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

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

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

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

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

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

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



EXECUTIVE OVERVIEW

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



Financial performance of JPMorgan Chase
(unaudited) As of or for the period ended,	Three months ended September 30,								Nine months ended September 30,
(in millions, except per share data and ratios)	2015			2014			Change		2015			2014			Change
Selected income statement data
Total net revenue	$	22,780		$	24,469		(7	)%	$	70,658		$	72,362		(2)%
Total noninterest expense	15,368			15,798			(3	)	44,751			45,865			(2	)
Pre-provision profit	7,412			8,671			(15	)	25,907			26,497			(2	)
Provision for credit losses	682			757			(10	)	2,576			2,299			12
Net income	6,804			5,565			22		19,008			16,814			13
Diluted earnings per share	$	1.68		$	1.35		24	%	$	4.68		$	4.09		14	%
Return on common equity	12		%	10		%			11		%	10		%
Capital ratios^(a)
CET1	11.5			10.2					11.5			10.2
Tier 1 capital	13.3			11.5					13.3			11.5


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

Business Overview

JPMorgan Chase reported third-quarter 2015 net income

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

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

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

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

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

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

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

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

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

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

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

2015 Business outlook

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

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

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

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

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

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

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

Business events

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



CONSOLIDATED RESULTS OF OPERATIONS

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

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



Revenue
	Three months ended September 30,						Nine months ended September 30,
(in millions)	2015		2014		Change		2015		2014		Change
Investment banking fees	$	1,604	$	1,538	4	%	$	5,231	$	4,709	11	%
Principal transactions	2,367		2,966		(20	)	8,856		9,196		(4	)
Lending- and deposit-related fees	1,463		1,479		(1	)	4,244		4,347		(2	)
Asset management, administration and commissions	3,845		3,978		(3	)	11,667		11,821		(1	)
Securities gains	33		6		450		129		48		169
Mortgage fees and related income	469		903		(48	)	1,957		2,708		(28	)
Card income	1,447		1,537		(6	)	4,493		4,494		—
Other income^(a)	628		955		(34	)	1,796		2,467		(27	)
Noninterest revenue	11,856		13,362		(11	)	38,373		39,790		(4	)
Net interest income	10,924		11,107		(2	)	32,285		32,572		(1	)
Total net revenue	$	22,780	$	24,469	(7)%		$	70,658	$	72,362	(2)%


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

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

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

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

Note 6.

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

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

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

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

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

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

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

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

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

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

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

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



Provision for credit losses
	Three months ended September 30,								Nine months ended September 30,
(in millions)	2015			2014			Change		2015			2014			Change
Consumer, excluding credit card	$	(389	)	$	99		NM		$	(345	)	$	181		NM
Credit card	759			798			(5	)%	2,348			2,371			(1	)%
Total consumer	370			897			(59	)%	2,003			2,552			(22	)%
Wholesale	312			(140		)	NM		573			(253		)	NM
Total provision for credit losses	$	682		$	757		(10	)%	$	2,576		$	2,299		12	%

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

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

and the allowance for credit losses, see the segment

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

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



Noninterest expense
	Three months ended September 30,						Nine months ended September 30,
(in millions)	2015		2014		Change		2015		2014		Change
Compensation expense	$	7,320	$	7,831	(7	)%	$	23,057	$	23,300	(1	)%
Noncompensation expense:
Occupancy	965		978		(1	)	2,821		2,903		(3	)
Technology, communications and equipment	1,546		1,465		6		4,536		4,309		5
Professional and outside services	1,776		1,907		(7	)	5,178		5,625		(8	)
Marketing	704		610		15		1,937		1,824		6
Other expense^(a)(b)	3,057		3,007		2		7,222		7,904		(9	)
Total noncompensation expense	8,048		7,967		1		21,694		22,565		(4	)
Total noninterest expense	$	15,368	$	15,798	(3	)%	$	44,751	$	45,865	(2	)%


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


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

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

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

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

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



Income tax expense
(in millions, except rate)	Three months ended September 30,								Nine months ended September 30,
(in millions, except rate)	2015			2014			Change		2015			2014			Change
Income before income tax expense	$	6,730		$	7,914		(15	)%	$	23,331		$	24,198		(4	)%
Income tax expense/(benefit)	(74		)	2,349			NM		4,323			7,384			(41	)
Effective tax rate	(1.1		)%	29.7		%			18.5		%	30.5		%

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



CONSOLIDATED BALANCE SHEETS ANALYSIS

Consolidated balance sheets overview

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



Selected Consolidated balance sheets data
(in millions)	Sep 30, 2015			Dec 31, 2014			Change
Assets
Cash and due from banks	$	21,258		$	27,831		(24	)%
Deposits with banks	376,196			484,477			(22	)
Federal funds sold and securities purchased under resale agreements	218,467			215,803			1
Securities borrowed	105,668			110,435			(4	)
Trading assets:
Debt and equity instruments	293,040			320,013			(8	)
Derivative receivables	68,668			78,975			(13	)
Securities	306,660			348,004			(12	)
Loans	809,457			757,336			7
Allowance for loan losses	(13,466		)	(14,185		)	(5	)
Loans, net of allowance for loan losses	795,991			743,151			7
Accrued interest and accounts receivable	57,926			70,079			(17	)
Premises and equipment	14,709			15,133			(3	)
Goodwill	47,405			47,647			(1	)
Mortgage servicing rights	6,716			7,436			(10	)
Other intangible assets	1,036			1,192			(13	)
Other assets	103,381			102,597			1
Total assets	$	2,417,121		$	2,572,773		(6	)

Cash and due from banks and deposits with banks

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

Trading assets–debt and equity instruments

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

Trading assets and liabilities–derivative receivables and payables

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

Securities

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

Loans and allowance for loan losses

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

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

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

Accrued interest and accounts receivable

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

Mortgage servicing rights

For additional information on MSRs, see Note 16.

Other assets

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



Selected Consolidated balance sheets data (continued)
(in millions)	Sep 30, 2015		Dec 31, 2014		Change
Liabilities
Deposits	$	1,273,106	$	1,363,427	(7	)
Federal funds purchased and securities loaned or sold under repurchase agreements	180,319		192,101		(6	)
Commercial paper	19,656		66,344		(70	)
Other borrowed funds	27,174		30,222		(10	)
Trading liabilities:
Debt and equity instruments	84,334		81,699		3
Derivative payables	57,140		71,116		(20	)
Accounts payable and other liabilities	187,986		206,939		(9	)
Beneficial interests issued by consolidated VIEs	48,733		52,362		(7	)
Long-term debt	292,945		276,836		6
Total liabilities	2,171,393		2,341,046		(7	)
Stockholders’ equity	245,728		231,727		6
Total liabilities and stockholders’ equity	$	2,417,121	$	2,572,773	(6	)%

Deposits

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

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

Federal funds purchased and securities loaned or sold under repurchase agreements

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

Commercial paper

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

Accounts payable and other liabilities

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

Beneficial interests issued by consolidated VIEs

For further information on Firm-sponsored variable interest

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

Balance Sheet Arrangements on page 12 and Note 15.

Long-term debt

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

Stockholders’ equity

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



OFF-BALANCE SHEET ARRANGEMENTS

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

Special-purpose entities

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

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

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

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

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

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



CONSOLIDATED CASH FLOWS ANALYSIS

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



(in millions)	Nine months ended September 30,
(in millions)	2015			2014
Net cash provided by/(used in)
Operating activities	$	57,299		$	7,847
Investing activities	79,722			(95,630		)
Financing activities	(143,513		)	74,061
Effect of exchange rate changes on cash	(81		)	(677		)
Net decrease in cash and due from banks	$	(6,573	)	$	(14,399	)

Operating activities

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

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

Investing activities

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

Financing activities

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

* * *

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

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

The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the U.S. (“U.S. GAAP”); these financial statements appear on pages 86–90. That presentation, which is referred to as “reported” basis, provides the reader with an understanding of the Firm’s results that can be tracked consistently from year-to-year and enables a comparison of the Firm’s performance with other companies’ U.S. GAAP financial statements.

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

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

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

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



	Three months ended September 30,
	2015								2014
(in millions, except ratios)	Reported results			Fully taxable-equivalent adjustments^(a)		Managed basis			Reported results			Fully taxable-equivalent adjustments^(a)		Managed basis
Other income	$	628		$	477	$	1,105		$	955		$	424	$	1,379
Total noninterest revenue	11,856			477		12,333			13,362			424		13,786
Net interest income	10,924			278		11,202			11,107			253		11,360
Total net revenue	22,780			755		23,535			24,469			677		25,146
Pre-provision profit	7,412			755		8,167			8,671			677		9,348
Income before income tax expense	6,730			755		7,485			7,914			677		8,591
Income tax expense/(benefit)	$	(74	)	$	755	$	681		$	2,349		$	677	$	3,026
Overhead ratio	67		%	NM		65		%	65		%	NM		63		%



	Nine months ended September 30,
	2015								2014
(in millions, except ratios)	Reported results			Fully taxable-equivalent adjustments^(a)		Managed basis			Reported results			Fully taxable-equivalent adjustments^(a)		Managed basis
Other income	$	1,796		$	1,405	$	3,201		$	2,467		$	1,251	$	3,718
Total noninterest revenue	38,373			1,405		39,778			39,790			1,251		41,041
Net interest income	32,285			823		33,108			32,572			723		33,295
Total net revenue	70,658			2,228		72,886			72,362			1,974		74,336
Pre-provision profit	25,907			2,228		28,135			26,497			1,974		28,471
Income before income tax expense	23,331			2,228		25,559			24,198			1,974		26,172
Income tax expense/(benefit)	$	4,323		$	2,228	$	6,551		$	7,384		$	1,974	$	9,358
Overhead ratio	63		%	NM		61		%	63		%	NM		62		%

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

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

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



Tangible common equity	Period-end				Average
	Period-end				Three months ended September 30,						Nine months ended September 30,
(in millions, except per share and ratio data)	Sep 30, 2015		Dec 31, 2014		Three months ended September 30,						Nine months ended September 30,
(in millions, except per share and ratio data)	Sep 30, 2015		Dec 31, 2014		2015			2014			2015			2014
Common stockholders’ equity	$	219,660	$	211,664	$	217,023		$	209,621		$	214,389		$	205,888
Less: Goodwill	47,405		47,647		47,428			48,081			47,468			48,073
Less: Certain identifiable intangible assets	1,036		1,192		1,064			1,308			1,112			1,423
Add: Deferred tax liabilities^(a)	3,105		2,853		2,991			2,980			2,909			2,959
Tangible common equity	$	174,324	$	165,678	$	171,522		$	163,212		$	168,718		$	159,351

Return on tangible common equity	NA		NA		15		%	13		%	14		%	13		%
Tangible book value per share	$	47.36	$	44.60	NA			NA			NA			NA


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

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

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

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



Net interest income excluding CIB markets-based activities data
	Three months ended September 30,								Nine months ended September 30,
(in millions, except rates)	2015			2014			Change		2015			2014			Change
Net interest income – managed basis^(a)(b)	$	11,202		$	11,360		(1	)%	$	33,108		$	33,295		(1	)%
Less: Markets-based net interest income	1,164			1,542			(25	)	3,661			4,102			(11	)
Net interest income excluding markets^(a)	$	10,038		$	9,818		2		$	29,447		$	29,193		1

Average interest-earning assets	$	2,056,890		$	2,061,785		—		$	2,100,773		$	2,030,665		3
Less: Average markets-based interest-earning assets	476,120			513,051			(7	)	495,460			507,675			(2	)
Average interest-earning assets excluding markets	$	1,580,770		$	1,548,734		2	%	$	1,605,313		$	1,522,990		5	%
Net interest yield on average interest-earning assets – managed basis	2.16		%	2.19		%			2.11		%	2.19		%
Net interest yield on average markets-based interest-earning assets	0.97			1.19					0.99			1.08
Net interest yield on average interest-earning assets excluding markets	2.52		%	2.52		%			2.45		%	2.56		%


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


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

Quarterly and year-to-date results

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

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

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



Reconciliation of reported to adjusted results

Three months ended September 30, 2015 (in millions, except per share)	Income before income tax expense			Net income			Earnings per share


Reported results	$	6,730		$	6,804		$	1.68

Adjustments:
Firmwide legal expense	1,347			973			0.26
Firmwide tax benefits	—			(2,164		)	(0.57		)
Consumer credit reserve releases	(591		)	(366		)	(0.10		)
Wholesale credit reserve builds	310			192			0.05
Total adjustments	1,066			(1,365		)	(0.36		)
Adjusted results	$	7,796		$	5,439		$	1.32



BUSINESS SEGMENT RESULTS

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

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

Description of business segment reporting methodology

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

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

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

Business segment capital allocation changes

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

Segment Results – Managed basis

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



Three months ended September 30,	Total net revenue								Total noninterest expense						Pre-provision profit/(loss)
(in millions)	2015			2014			Change		2015		2014		Change		2015			2014			Change
Consumer & Community Banking	$	10,879		$	11,367		(4)%		$	6,237	$	6,305	(1)%		$	4,642		$	5,062		(8)%
Corporate & Investment Bank	8,168			9,105			(10	)	6,131		6,035		2		2,037			3,070			(34	)
Commercial Banking	1,644			1,703			(3	)	719		668		8		925			1,035			(11	)
Asset Management	2,894			3,046			(5	)	2,109		2,081		1		785			965			(19	)
Corporate	(50		)	(75		)	33		172		709		(76	)	(222		)	(784		)	72
Total	$	23,535		$	25,146		(6)%		$	15,368	$	15,798	(3)%		$	8,167		$	9,348		(13)%



Three months ended September 30,	Provision for credit losses								Net income						Return on common equity
(in millions, except ratios)	2015			2014			Change		2015		2014		Change		2015		2014
Consumer & Community Banking	$	389		$	902		(57	)%	$	2,630	$	2,529	4%		20	%	19	%
Corporate & Investment Bank	232			(67		)	NM		1,464		1,680		(13	)	8		10
Commercial Banking	82			(79		)	NM		518		671		(23	)	14		18
Asset Management	(17		)	9			NM		475		590		(19	)	20		25
Corporate	(4		)	(8		)	50		1,717		95		NM		NM		NM
Total	$	682		$	757		(10	)%	$	6,804	$	5,565	22%		12	%	10	%



Nine months ended September 30,	Total net revenue								Total noninterest expense						Pre-provision profit/(loss)
(in millions)	2015			2014			Change		2015		2014		Change		2015			2014			Change
Consumer & Community Banking	$	32,598		$	33,419		(2)%		$	18,637	$	19,198	(3	)%	$	13,961		$	14,221		(2	)%
Corporate & Investment Bank	26,473			27,212			(3	)	16,925		17,697		(4	)	9,548			9,515			—
Commercial Banking	5,125			5,112			—		2,131		2,029		5		2,994			3,083			(3	)
Asset Management	9,074			8,828			3		6,690		6,218		8		2,384			2,610			(9	)
Corporate	(384		)	(235		)	(63	)	368		723		(49	)	(752		)	(958		)	22
Total	$	72,886		$	74,336		(2)%		$	44,751	$	45,865	(2	)%	$	28,135		$	28,471		(1	)%



Nine months ended September 30,	Provision for credit losses							Net income						Return on common equity
(in millions, except ratios)	2015			2014			Change	2015		2014		Change		2015		2014
Consumer & Community Banking	$	2,021		$	2,570		(21)%	$	7,382	$	7,006	5%		18	%	18	%
Corporate & Investment Bank	251			(102		)	NM	6,342		5,936		7		13		12
Commercial Banking	325			(141		)	NM	1,641		1,942		(15	)	15		18
Asset Management	(13		)	1			NM	1,428		1,613		(11	)	20		23
Corporate	(8		)	(29		)	72	2,215		317		NM		NM		NM
Total	$	2,576		$	2,299		12%	$	19,008	$	16,814	13%		11%		10	%



CONSUMER & COMMUNITY BANKING

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



Selected income statement data
	Three months ended September 30,								Nine months ended September 30,
(in millions, except ratios)	2015			2014			Change		2015			2014			Change
Revenue
Lending- and deposit-related fees	$	836		$	804		4	%	$	2,320		$	2,257		3	%
Asset management, administration and commissions	565			534			6		1,648			1,558			6
Mortgage fees and related income	469			902			(48	)	1,955			2,706			(28	)
Card income	1,335			1,478			(10	)	4,165			4,312			(3	)
All other income	524			496			6		1,466			1,283			14
Noninterest revenue	3,729			4,214			(12	)	11,554			12,116			(5	)
Net interest income	7,150			7,153			—		21,044			21,303			(1	)
Total net revenue	10,879			11,367			(4	)	32,598			33,419			(2	)

Provision for credit losses	389			902			(57	)	2,021			2,570			(21	)

Noninterest expense
Compensation expense	2,413			2,627			(8	)	7,421			8,003			(7	)
Noncompensation expense	3,824			3,678			4		11,216			11,195			—
Total noninterest expense	6,237			6,305			(1	)	18,637			19,198			(3	)
Income before income tax expense	4,253			4,160			2		11,940			11,651			2
Income tax expense	1,623			1,631			—		4,558			4,645			(2	)
Net income	$	2,630		$	2,529		4	%	$	7,382		$	7,006		5	%

Financial ratios
Return on common equity	20		%	19		%			18		%	18		%
Overhead ratio	57			55					57			57

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

Quarterly results

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

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

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

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

Year-to-date results

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

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

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

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



Selected metrics
	As of or for the three months ended September 30,						As of or for the nine months ended September 30,
(in millions, except headcount)	2015		2014		Change		2015		2014		Change
Selected balance sheet data (period-end)
Total assets	$	484,253	$	448,033	8	%	$	484,253	$	448,033	8	%
Trading assets – loans^(a)	6,633		10,750		(38	)	6,633		10,750		(38	)
Loans: