Document

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, 2017
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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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
 
 
 
 
Emerging growth company
o
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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, 2017: 3,469,725,577
 


FORM 10-Q
TABLE OF CONTENTS
Page
Item 1.
 
 
 
 
83
 
84
 
85
 
86
 
87
 
88
 
165
 
166
 
168
Item 2.
 
 
3
 
4
 
5
 
7
 
11
 
13
 
14
 
15
 
18
 
41
 
42
 
49
 
67
 
68
 
73
 
78
 
80
 
82
Item 3.
176
Item 4.
176
 
Item 1.
176
Item 1A.
176
Item 2.
176
Item 3.
177
Item 4.
177
Item 5.
177
Item 6.
178

2


JPMorgan Chase & Co.
Consolidated financial highlights
(unaudited)
As of or for the period ended, (in millions, except per share, ratio, headcount data and where otherwise noted)
 
 
 
 
 
Nine months ended Sept. 30,
3Q17

2Q17

1Q17

4Q16

3Q16

2017

2016

Selected income statement data
 
 
 
 
 
 
 
Total net revenue
$
25,326

$
25,470

$
24,675

$
23,376

$
24,673

$
75,471

$
72,292

Total noninterest expense
14,318

14,506

15,019

13,833

14,463

43,843

41,938

Pre-provision profit
11,008

10,964

9,656

9,543

10,210

31,628

30,354

Provision for credit losses
1,452

1,215

1,315

864

1,271

3,982

4,497

Income before income tax expense
9,556

9,749

8,341

8,679

8,939

27,646

25,857

Income tax expense
2,824

2,720

1,893

1,952

2,653

7,437

7,851

Net income
$
6,732

$
7,029

$
6,448

$
6,727

$
6,286

$
20,209

$
18,006

Earnings per share data
 
 
 
 
 
 
 
Net income:    Basic
$
1.77

$
1.83

$
1.66

$
1.73

$
1.60

$
5.26

$
4.51

 Diluted
1.76

1.82

1.65

1.71

1.58

5.22

4.48

Average shares: Basic
3,534.7

3,574.1

3,601.7

3,611.3

3,637.7

3,570.9

3,674.6

 Diluted
3,559.6

3,599.0

3,630.4

3,646.6

3,669.8

3,597.0

3,704.5

Market and per common share data
 
 
 
 
 
 
 
Market capitalization
331,393

321,633

312,078

307,295

238,277

331,393

238,277

Common shares at period-end
3,469.7

3,519.0

3,552.8

3,561.2

3,578.3

3,469.7

3,578.3

Share price:(a)
 
 
 
 
 
 
 
High
$
95.88

$
92.65

$
93.98

$
87.39

$
67.90

$
95.88

$
67.90

Low
88.08

81.64

83.03

66.10

58.76

81.64

52.50

Close
95.51

91.40

87.84

86.29

66.59

95.51

66.59

Book value per share
66.95

66.05

64.68

64.06

63.79

66.95

63.79

Tangible book value per share (“TBVPS”)(b)
54.03

53.29

52.04

51.44

51.23

54.03

51.23

Cash dividends declared per share
0.56

0.50

0.50

0.48

0.48

1.56

1.40

Selected ratios and metrics
 
 
 
 
 
 
 
Return on common equity (“ROE”)
11
%
12
%
11
%
11
%
10
%
11
%
10
%
Return on tangible common equity (“ROTCE”)(b)
13

14

13

14

13

14

13

Return on assets
1.04

1.10

1.03

1.06

1.01

1.06

0.99

Overhead ratio
57

57

61

59

59

58

58

Loans-to-deposits ratio
63

63

63

65

65

63

65

High quality liquid assets (“HQLA”) (in billions)(c)
$
568

$
541

$
528

$
524

$
539

   NA

$
539

Liquidity coverage ratio (“LCR”) (average)
120
%
115
%
NA%

NA%

NA%

NA%

NA%

Common equity Tier 1 (“CET1”) capital ratio(d)
12.6

12.6

12.5

12.4

12.0

12.6

12.0

Tier 1 capital ratio(d)
14.3

14.4

14.3

14.1

13.6

14.3

13.6

Total capital ratio(d)
16.1

16.0

15.6

15.5

15.1

16.1

15.1

Tier 1 leverage ratio(d)
8.4

8.5

8.4

8.4

8.5

8.4

8.5

Selected balance sheet data (period-end)
 
 
 
 
 
 
 
Trading assets
$
420,418

$
407,064

$
402,513

$
372,130

$
374,837

$
420,418

$
374,837

Securities
263,288

263,458

281,850

289,059

272,401

263,288

272,401

Loans
913,761

908,767

895,974

894,765

888,054

913,761

888,054

Core loans
843,432

834,935

812,119

806,152

795,077

843,432

795,077

Average core loans
837,522

824,583

805,382

799,698

779,383

822,611

759,207

Total assets
2,563,074

2,563,174

2,546,290

2,490,972

2,521,029

2,563,074

2,521,029

Deposits
1,439,027

1,439,473

1,422,999

1,375,179

1,376,138

1,439,027

1,376,138

Long-term debt(e)
288,582

292,973

289,492

295,245

309,418

288,582

309,418

Common stockholders’ equity
232,314

232,415

229,795

228,122

228,263

232,314

228,263

Total stockholders’ equity
258,382

258,483

255,863

254,190

254,331

258,382

254,331

Headcount
251,503

249,257

246,345

243,355

242,315

251,503

242,315

Credit quality metrics
 
 
 
 
 
 
 
Allowance for credit losses
$
14,648

$
14,480

$
14,490

$
14,854

$
15,304

$
14,648

$
15,304

Allowance for loan losses to total retained loans
1.49
%
1.49
%
1.52
%
1.55
%
1.61
%
1.49
%
1.61
%
Allowance for loan losses to retained loans excluding purchased credit-impaired loans(f)
1.29

1.28

1.31

1.34

1.37

1.29

1.37

Nonperforming assets
$
6,154

$
6,432

$
6,826

$
7,535

$
7,779

$
6,154

$
7,779

Net charge-offs(g)
1,265

1,204

1,654

1,280

1,121

4,123

3,412

Net charge-off rate(g)
0.56
%
0.54
%
0.76
%
0.58
%
0.51
%
0.62
%
0.53
%
(a)
Share prices 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 and Key Financial Performance Measures on pages 15–17.
(c)
HQLA represents the amount of assets that qualify for inclusion in the LCR. The amounts represent quarterly average balances for September 30, 2017 and June 30, 2017, and period-end balances for the remaining periods. For additional information, see HQLA on page 68.
(d)
Ratios presented are calculated under the Basel III Transitional capital rules and for the capital ratios represent the lower of the Standardized or Advanced approach as required by the Collins Amendment of the Dodd-Frank Act (the “Collins Floor”). See Capital Risk Management on pages 42–48 for additional information on Basel III and the Collins Floor.
(e)
Included unsecured long-term debt of $221.7 billion, $221.0 billion, $212.0 billion, $212.6 billion and $226.8 billion at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016 respectively.    
(f)
Excluded the impact of residential real estate purchased credit-impaired (“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 and Key Performance Measures on pages 15–17. For further discussion, see Allowance for credit losses on pages 64–66.
(g)
Excluding net charge-offs of $467 million related to the student loan portfolio transfer, the net charge-off rates for the three months ended March 31, 2017 and nine months ended September 30, 2017 would have been 0.54% and 0.55%, respectively.

3

INTRODUCTION
The following is management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) for the third quarter of 2017.
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, 2016, filed with the U.S. Securities and Exchange Commission (“2016 Annual Report” or 2016 “Form 10-K”), to which reference is hereby made. See the Glossary of terms and acronyms on pages 168–175 for definitions of terms and acronyms 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 certain 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 82 of this Form 10-Q and Part I, Item 1A, Risk Factors, on pages 8–21 of JPMorgan Chase’s 2016 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 $2.6 trillion in assets and $258.4 billion in stockholders’ equity as of September 30, 2017. 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. The Firm’s principal operating subsidiary 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 Firm’s wholesale business segments are Corporate & Investment Bank (“CIB”), Commercial Banking (“CB”), and Asset & Wealth Management (“AWM”). 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 2016 Annual Report.



4

EXECUTIVE OVERVIEW
This executive overview of the MD&A highlights selected information and does 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 lines of business, this Form 10-Q and incorporated documents should be read in their entirety.
Financial performance of JPMorgan Chase
 
 
 
 
 
 
 
 
(unaudited)
As of or for the period ended,
(in millions, except per share data and ratios)
Three months ended September 30,
 
Nine months ended September 30,
2017

 
2016

 
Change

 
2017

 
2016

 
Change

Selected income statement data
 
 
 
 
 
 
 
 
 
 
 
Total net revenue
$
25,326

 
$
24,673

 
3
 %
 
$
75,471

 
$
72,292

 
4
 %
Total noninterest expense
14,318

 
14,463

 
(1
)
 
43,843

 
41,938

 
5

Pre-provision profit
11,008

 
10,210

 
8

 
31,628

 
30,354

 
4

Provision for credit losses
1,452

 
1,271

 
14

 
3,982

 
4,497

 
(11
)
Net income
6,732

 
6,286

 
7

 
20,209

 
18,006

 
12

Diluted earnings per share
$
1.76

 
$
1.58

 
11

 
$
5.22

 
$
4.48

 
17

Selected ratios and metrics
 
 
 
 
 
 
 
 
 
 
 
Return on common equity
11
%
 
10
%
 
 
 
11
%
 
10
%
 
 
Return on tangible common equity
13

 
13

 
 
 
14

 
13

 
 
Book value per share
$
66.95

 
$
63.79

 
5

 
$
66.95

 
$
63.79

 
5

Tangible book value per share
54.03

 
51.23

 
5

 
54.03

 
51.23

 
5

Capital ratios(a)
 
 
 
 
 
 
 
 
 
 
 
CET1
12.6
%
 
12.0
%
 
 
 
12.6
%
 
12.0
%
 
 
Tier 1 capital
14.3

 
13.6

 
 
 
14.3

 
13.6

 
 
Total capital
16.1

 
15.1

 
 
 
16.1

 
15.1

 
 
(a)
Ratios presented are calculated under the Basel III Transitional capital rules and represent the Collins Floor. See Capital Risk Management on pages 42–48 for additional information on Basel III.
Comparisons noted in the sections below are calculated for the third quarter of 2017 versus the prior-year third quarter, unless otherwise specified.
Firmwide overview
JPMorgan Chase reported strong results in the third quarter of 2017 with net income of $6.7 billion, or $1.76 per share, on net revenue of $25.3 billion. The Firm reported ROE of 11% and ROTCE of 13%.
•
Net income increased 7%, reflecting higher net revenue, partially offset by a higher provision for credit losses.
•
Total net revenue increased 3%. Net interest income was $12.8 billion, up 10%, primarily driven by the net impact of higher interest rates and loan growth, partially offset by declines in Markets net interest income. Noninterest revenue was $12.5 billion, down 4%, driven by lower Markets revenue in the CIB.
•
Noninterest expense was $14.3 billion, down 1%. The prior year included two items in Consumer & Community Banking totaling $175 million related to liabilities from a merchant in bankruptcy and mortgage servicing reserves.
•
The provision for credit losses was $1.5 billion, an increase from $1.3 billion in the prior year. The increase reflected a net addition to the allowance for credit losses in the Consumer portfolio of $303 million, driven by Card, and higher net charge-offs of $148 million (including $63 million of incremental charge-offs recorded in accordance with regulatory guidance), partially offset by a net reduction to the allowance for credit losses in the
 
Wholesale portfolio of $116 million, primarily driven by Oil & Gas and Real Estate.
•
The total allowance for credit losses was $14.6 billion at September 30, 2017, and the Firm had a loan loss coverage ratio, excluding the PCI portfolio, of 1.29%, compared with 1.37% in the prior year. The Firm’s nonperforming assets totaled $6.2 billion at September 30, 2017, a decrease from $7.8 billion in the prior year.
•
Firmwide average core loans increased 7%.
Selected capital-related metrics
•
The Firm’s Basel III Fully Phased-In CET1 capital was $187 billion, and the Standardized and Advanced CET1 ratios were 12.5% and 12.9%, respectively.
•
The Fully Phased-In supplementary leverage ratio (“SLR”) was 6.6% for the Firm.
•
The Firm continued to grow tangible book value per share (“TBVPS”), ending the third quarter of 2017 at $54.03, up 5%.
ROTCE and TBVPS are considered non-GAAP financial measures. Core loans and each of the Fully Phased-In capital and leverage measures are considered key performance measures. For a further discussion of each of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 15–17, and Capital Risk Management on pages 42–48.

5

Lines of business highlights
Selected business metrics for each of the Firm’s four lines of business are presented below for the third quarter of 2017.
CCB
ROE 19%
 
•
Average core loans up 8%; average deposits of $646 billion, up 9%
•
29.3 million active mobile customers, up 12%
•
Credit card sales volume and merchant processing volume each up 13%
CIB
ROE 13%
 
•
Maintained #1 ranking for Global Investment Banking fees with 8.2% wallet share YTD
•
Banking revenue up 5%; Markets revenue down 21%
CB
ROE 17%
 
•
Record revenue of $2.1 billion, up 15%; net income of $881 million, up 13%
•
Average loan balances of $200 billion, up 10%
AWM
ROE 29%
 
•
Record net income of $674 million, up 21%; revenue of $3.2 billion, up 6%
•
Average loan balances of $125 billion, up 10%
•
Record assets under management (“AUM”) of $1.9 trillion, up 10%; 81% of mutual fund AUM ranked in the 1st or 2nd quartile over 5 years
For a detailed discussion of results by line of business, refer to the Business Segment Results on pages 18–40.
Credit provided and capital raised
JPMorgan Chase continues to support consumers, businesses and communities around the globe. The Firm provided credit and raised capital of $1.7 trillion for wholesale and consumer clients during the first nine months of 2017:
•
$197 billion of credit for consumers
•
$17 billion of credit for U.S. small businesses
•
$601 billion of credit for corporations
•
$820 billion of capital raised for corporate clients and non-U.S. government entities
•
$65 billion of credit and capital raised for U.S. government and nonprofit entities, including states, municipalities, hospitals and universities.
Recent events
During the second half of 2017, natural disasters caused significant disruptions to individuals and businesses, and damage to homes and communities in several regions where the Firm conducts business. The Firm continues to provide assistance to customers, clients, communities and employees who have been affected by these disasters. These events did not have a material impact on the Firm’s third quarter 2017 financial results.
2017 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 82 of this Form 10-Q and Risk Factors on pages 8–21 of JPMorgan Chase’s 2016 Annual Report. There is no assurance that actual results for the full year of 2017 will be in line with the outlook set forth below, and the Firm does not undertake to update any 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 2017 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. The Firm expects it will continue to make appropriate adjustments to its businesses and operations in response to ongoing developments in the legal, regulatory, business and economic environments in which it operates.
Firmwide
•
Management expects 2017 net interest income to increase by approximately $4 billion compared with the prior year, depending on market conditions.
•
The Firm continues to take a disciplined approach to managing its expenses, while investing in growth and innovation. As a result, Firmwide adjusted expense in 2017 is expected to be approximately $58 billion (excluding Firmwide legal expense).
•
The Firm continues to experience charge-off rates at or near historically low levels, reflecting favorable credit conditions across the consumer and wholesale portfolios. Management expects total net charge-offs of approximately $5 billion in 2017, excluding net charge-offs of $467 million related to the write-down of the student loan portfolio in the first quarter of 2017.
•
Management expects average core loan growth of approximately 8% in 2017.
CCB
•
Management expects Card, Commerce Solutions & Auto (“CCSA”) revenue for the fourth quarter of 2017 to be approximately flat compared to the third quarter of 2017.
•
In Card, management expects the portfolio average net charge-off rate in 2017 to remain below 3% for the year, reflecting continued loan growth and the seasoning of newer vintages, with quarterly net charge-off rates reflecting normal seasonal trends.
CIB
•
Management expects Markets revenue in the fourth quarter of 2017 to be lower compared to a strong prior-year period.
CB
•
Management expects expense in the fourth quarter of 2017 to be approximately flat compared to the third quarter of 2017.

6

CONSOLIDATED RESULTS OF OPERATIONS
This section 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, 2017 and 2016, unless otherwise specified. 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 78–79 of this Form 10-Q and pages 132–134 of JPMorgan Chase’s 2016 Annual Report.
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
2017

 
2016

 
Change

 
2017

 
2016

 
Change

Investment banking fees
$
1,843

 
$
1,866

 
(1
)%
 
$
5,470

 
$
4,843

 
13
 %
Principal transactions
2,721

 
3,451

 
(21
)
 
9,440

 
9,106

 
4

Lending- and deposit-related fees
1,497

 
1,484

 
1

 
4,427

 
4,290

 
3

Asset management, administration and commissions
3,846

 
3,597

 
7

 
11,347

 
10,902

 
4

Securities gains/(losses)
(1
)
 
64

 
NM

 
(38
)
 
136

 
NM

Mortgage fees and related income
429

 
624

 
(31
)
 
1,239

 
1,980

 
(37
)
Card income
1,242

 
1,202

 
3

 
3,323

 
3,861

 
(14
)
Other income(a)
951

 
782

 
22

 
3,193

 
2,844

 
12

Noninterest revenue
12,528

 
13,070

 
(4
)
 
38,401

 
37,962

 
1

Net interest income
12,798

 
11,603

 
10

 
37,070

 
34,330

 
8

Total net revenue
$
25,326

 
$
24,673

 
3
 %
 
$
75,471

 
$
72,292

 
4
 %
(a)
Included operating lease income of $928 million and $708 million for the three months ended September 30, 2017 and 2016, respectively and $2.6 billion and $2.0 billion for the nine months ended September 30, 2017 and 2016, respectively.
Quarterly results
Investment banking fees remained relatively flat, as declines in equity underwriting fees driven by a lower share of fees, and debt underwriting fees driven by lower industry-wide fees were offset by higher advisory fees driven by a higher number of completed transactions in CIB. For additional information, see CIB segment results on pages 25–30 and Note 5.
Principal transactions revenue decreased compared with a strong prior year in CIB’s Markets business, primarily reflecting:
•
lower Fixed Income-related revenue across products driven by sustained low volatility and tighter credit spreads
partially offset by
•
higher Equity-related revenue primarily in Prime Services.
The decrease also reflected lower gains on private equity investments in several businesses. For additional information, see CIB, Corporate and CCB segment results
on pages 25–30 , page 39 and pages 20–24 , respectively, and Note 5.
Asset management, administration and commissions revenue increased as a result of higher asset management fees in AWM and CCB, and higher asset-based fees in CIB, both driven by higher market levels, as well as higher brokerage commissions driven by higher volumes. For additional information, see AWM, CCB and CIB segment results on pages 35–38, pages 20–24 and pages 25–30, respectively, and Note 5.
 
Mortgage fees and related income decreased driven by lower net production revenue on lower margins and volumes, lower mortgage servicing rights (“MSR”) risk management results, and lower servicing revenue on lower average third-party loans serviced. For further information, see CCB segment results on pages 20–24 and Note 14.
Card income increased predominantly driven by higher credit card-related fees, largely annual fees, predominantly offset by higher credit card new account origination costs. For further information, see CCB segment results on pages 20–24.
Other income increased primarily driven by higher operating lease income reflecting growth in auto operating lease volume in CCB.
For further information, see Note 5.
Net interest income increased primarily driven by the net impact of higher rates and loan growth, partially offset by declines in Markets net interest income in CIB. The Firm’s average interest-earning assets were $2.2 trillion, and the net interest yield on these assets, on a fully taxable-equivalent (“FTE”) basis, was 2.37%, an increase of 13 basis points from the prior year.
For additional information on lending- and deposit-related fees, see the segment results for CCB on pages 20–24, CIB on pages 25–30, and CB on pages 31–34 and Note 5; and on securities gains, see the Corporate segment discussion on page 39.

7

Year-to-date results
Investment banking fees increased reflecting higher debt and equity underwriting fees in CIB. The increase in debt underwriting fees was driven by a higher share of fees and an overall increase in industry-wide fees; and the increase in equity underwriting fees was driven by growth in industry-wide issuance, including a stronger IPO market.
Principal transactions revenue increased primarily as a result of higher client-driven market-making revenue in CIB, primarily reflecting:
•
higher Equity-related revenue primarily in Prime Services, and
•
higher Lending-related revenue reflecting lower fair value losses on hedges of accrual loans
partially offset by
•
lower Fixed Income-related revenue driven by sustained low volatility and tighter credit spreads.
Asset management, administration and commissions revenue increased as a result of higher asset management fees in AWM and CCB, and higher asset-based fees in CIB, both driven by higher market levels, as well as higher brokerage commissions driven by higher volumes in CIB and AWM.
Mortgage fees and related income decreased driven by lower MSR risk management results, lower net production revenue on lower margins and volumes, and lower servicing revenue on lower average third-party loans serviced.
 
Card income decreased predominantly driven by higher credit card new account origination costs, partially offset
by higher credit card-related fees, largely annual fees.
Other income increased primarily due to the following:
•
higher operating lease income reflecting growth in auto operating lease volume in CCB
•
a legal benefit of $645 million recorded in the second quarter of 2017 in Corporate related to a settlement with the FDIC receivership for Washington Mutual and with Deutsche Bank as trustee to certain Washington Mutual trusts
partially offset by
•
the absence in the current year of both gains on the sale of Visa Europe interests in CCB, as well as on the disposal of an asset in AWM, and
•
lower other income in CIB.
Net interest income increased primarily driven by the net impact of higher rates and loan growth across the businesses, partially offset by declines in Markets net interest income in CIB. The Firm’s average interest-earning assets were $2.2 trillion, and the net interest yield on these assets, on a FTE basis, was 2.34%, an increase of 8 basis points from the prior year.
Provision for credit losses
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)

2017

 
2016

 
Change

 
2017

 
2016

 
Change

Consumer, excluding credit card
$
206

 
$
262

 
(21
)%
 
$
660

 
$
578

 
14
 %
Credit card
1,319

 
1,038

 
27

 
3,699

 
2,978

 
24

Total consumer
1,525

 
1,300

 
17

 
4,359

 
3,556

 
23

Wholesale
(73
)
 
(29
)
 
(152
)
 
(377
)
 
941

 
NM

Total provision for credit losses
$
1,452

 
$
1,271

 
14
 %
 
$
3,982

 
$
4,497

 
(11
)%
Quarterly results
The provision for credit losses increased as a result of:
•
a higher consumer provision driven by:
–
$148 million of higher net charge-offs, primarily in the credit card portfolio due to seasoning of newer vintages in line with expectations, partially offset by a decrease in net charge-offs in the residential real estate portfolio reflecting continued improvement in home prices and delinquencies. The higher net charge-offs included $63 million of incremental charge-offs recorded in accordance with regulatory guidance, and
–
a $300 million addition to the allowance for credit losses in the credit card portfolio, due to higher loss rates and loan growth, compared to a $200 million addition in the prior year
 
the increase was partially offset by
•
a higher net benefit of $44 million due to a net reduction of $116 million in the wholesale allowance for credit losses, primarily driven by paydowns and loan sales in the Oil & Gas portfolio, and improvements in the overall quality of the Real Estate portfolio.
For a more detailed discussion of the credit portfolio and the allowance for credit losses, see the segment discussions of CCB on pages 20–24, CIB on pages 25–30, CB on pages 31–34, the Allowance for Credit Losses on pages 64–66 and
Note 12.

8

Year-to-date results
The provision for credit losses decreased as a result of:
•
a net $450 million reduction in the wholesale allowance for credit losses, reflecting credit quality improvements in Oil & Gas, Natural Gas Pipelines and Metals & Mining portfolios, compared with an addition of $680 million in the prior year driven by downgrades in the same portfolios
the decrease was partially offset by
•
a higher consumer provision driven by:
–
$432 million of higher net charge-offs, primarily in the credit card portfolio due to seasoning of newer vintages in line with expectations, partially offset by a decrease
 
in net charge-offs in the residential real estate portfolio reflecting continued improvement in home prices and delinquencies,
–
a $218 million impact related to the transfer of the student loan portfolio to held-for-sale, and
–
a $153 million higher addition to the allowance for credit losses, which included current year additions to the allowance in the credit card, business banking and auto portfolios, partially offset by a reduction in the allowance in the residential real estate portfolio.
For a more detailed discussion of the student loan sale, see CCB segment results on pages 20–24.
Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)

2017

 
2016

 
Change

 
2017

 
2016

 
Change
Compensation expense
$
7,646

 
$
7,669

 
—

 
$
23,553

 
$
23,107

 
2
 %
Noncompensation expense:
 
 
 
 
 
 
 
 
 
 
 
Occupancy
930

 
899

 
3

 
2,803

 
2,681

 
5

Technology, communications and equipment
1,972

 
1,741

 
13

 
5,670

 
5,024

 
13

Professional and outside services
1,705

 
1,665

 
2

 
4,892

 
4,913

 
—

Marketing
710

 
825

 
(14
)
 
2,179

 
2,200

 
(1
)
Other expense(a)(b)
1,355

 
1,664

 
(19
)
 
4,746

 
4,013

 
18

Total noncompensation expense
6,672

 
6,794

 
(2
)
 
20,290

 
18,831

 
8

Total noninterest expense
$
14,318

 
$
14,463

 
(1
)%
 
$
43,843

 
$
41,938

 
5
 %
(a)
Included Firmwide legal expense/(benefit) of $(107) million and $(71) million for the three months ended September 30, 2017 and 2016, respectively and $172 million and $(547) million for the nine months ended September 30, 2017 and 2016, respectively.
(b)
Included FDIC-related expense of $353 million and $360 million for the three months ended September 30, 2017 and 2016, respectively and $1.1 billion and $912 million for the nine months ended September 30, 2017 and 2016, respectively.
Quarterly results
Compensation expense decreased predominantly driven by lower performance-based compensation expense in CIB, partially offset by investments in certain businesses, including bankers and support staff.
Noncompensation expense decreased as a result of:
•
two items totaling $175 million included in the prior year in CCB related to liabilities from a merchant in bankruptcy and mortgage servicing reserves, and
•
lower marketing expense in CCB
partially offset by
•
higher depreciation expense from growth in auto operating lease volume in CCB.
For a discussion of legal expense, see Note 21.

 
Year-to-date results
Compensation expense increased predominantly driven by investments in certain businesses, including bankers and support staff, partially offset by lower performance-based compensation expense particularly in CIB.
Noncompensation expense increased as a result of:
•
higher legal expense as the prior year was a legal benefit
•
higher depreciation expense from growth in auto operating lease volume in CCB
•
higher FDIC-related expenses and
•
contributions to the Firm’s Foundation,
partially offset by
•
two items totaling $175 million included in the prior year in CCB related to liabilities from a merchant in bankruptcy and mortgage servicing reserves.

9

Income tax expense
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)

2017

 
2016

 
Change

 
2017

 
2016

 
Change
Income before income tax expense
$
9,556

 
$
8,939

 
7
%
 
$
27,646

 
$
25,857

 
7
 %
Income tax expense
2,824

 
2,653

 
6

 
7,437

 
7,851

 
(5
)
Effective tax rate
29.6
%
 
29.7
%
 
 
 
26.9
%
 
30.4
%
 


Quarterly results
The effective tax rate was relatively flat compared to the prior period.
 
Year-to-date results
The effective tax rate decreased predominantly due to larger tax benefits resulting from the vesting of employee-based stock awards and the release of a valuation allowance. The tax benefits resulting from employee-based stock awards were related to the appreciation of the Firm’s stock price upon vesting of these awards above their original grant price.


10

CONSOLIDATED BALANCE SHEETS ANALYSIS
Consolidated balance sheets overview
The following is a discussion of the significant changes between September 30, 2017, and December 31, 2016.
Selected Consolidated balance sheets data
(in millions)
Sep 30,
2017

 
Dec 31,
2016

Change

Assets
 
 
 
 
Cash and due from banks
$
21,994

 
$
23,873

(8
)%
Deposits with banks
435,810

 
365,762

19

Federal funds sold and securities purchased under resale agreements
185,454

 
229,967

(19
)
Securities borrowed
101,680

 
96,409

5

Trading assets:
 
 
 
 
Debt and equity instruments
362,158

 
308,052

18

Derivative receivables
58,260

 
64,078

(9
)
Securities
263,288

 
289,059

(9
)
Loans
913,761

 
894,765

2

Allowance for loan losses
(13,539
)
 
(13,776
)
(2
)
Loans, net of allowance for loan losses
900,222

 
880,989

2

Accrued interest and accounts receivable
61,757

 
52,330

18

Premises and equipment
14,218

 
14,131

1

Goodwill
47,309

 
47,288

—

Mortgage servicing rights
5,738

 
6,096

(6
)
Other intangible assets
808

 
862

(6
)
Other assets
104,378

 
112,076

(7
)
Total assets
$
2,563,074

 
$
2,490,972

3
 %
Cash and due from banks and deposits with banks increased primarily driven by deposit growth and a shift in the deployment of excess cash from securities purchased under resale agreements and investment securities into deposits with banks. The Firm’s excess cash is placed with various central banks, predominantly Federal Reserve Banks.
Federal funds sold and securities purchased under resale agreements decreased primarily due to the shift in the deployment of excess cash to deposits with banks. For additional information on the Firm’s Liquidity Risk Management, see pages 68–72.
Trading assets and trading liabilities–debt and equity instruments increased predominantly related to client-driven market-making activities in CIB.
•
The increase in trading assets was driven by higher debt and equity instruments in Prime Services reflecting client demand, and in Rates reflecting higher levels of client activity when compared to lower levels at year-end
•
The increase in trading liabilities was driven by higher levels of client-driven short positions in equity instruments in Prime Services, partially offset by reductions in debt instruments in Securitized products.
For additional information, refer to Note 2.
 
Trading assets and trading liabilities–derivative receivables and payables decreased predominantly related to client-driven market-making activities in CIB Markets, reflecting lower foreign exchange and interest rate derivative receivables and payables, driven by maturities and market movements. The decrease in derivative receivables was partially offset by higher equity derivative receivables driven by higher market levels. For additional information, refer to Derivative contracts on pages 62–63, and Notes 2 and 4.
Securities decreased primarily reflecting net sales of
U.S. Treasuries. For information on Securities, see Notes 2
and 9.
Loans increased reflecting the following:
•
higher wholesale loans driven by new originations in CB and higher loans to Private Banking clients in AWM, partially offset by paydowns in CIB
•
higher consumer loans as a result of higher retention of originated high-quality prime mortgages in CCB and AWM,  largely offset by the sale of the student loan portfolio, lower home equity loans and the run-off of PCI loans.
The allowance for loan losses decreased reflecting the following:
•
a net reduction in the wholesale allowance, reflecting credit quality improvements in the Oil & Gas, Natural Gas Pipelines and Metals & Mining portfolios
partially offset by
•
an increase in the consumer allowance, reflecting additions to the allowance for the credit card, business banking and auto portfolios, predominantly driven by

11

higher loss rates and loan growth in credit card, largely offset by the utilization of the allowance in connection with the transfer of the student loan portfolio to held-for-sale, and a reduction in the allowance for the residential real estate portfolio predominantly driven by continued improvement in home prices and delinquencies.
For detailed discussion of loans and the allowance for loan losses, refer to Credit Risk Management on pages 49–66, and Notes 2, 3, 11 and 12.
 
Accrued interest and accounts receivable increased reflecting higher client receivables related to client-driven market-making activities in CIB.
Other assets decreased as a result of a shift in the collateral pledged by CIB from cash to securities (which are classified within trading assets).
For information on MSRs, see Note 14.
Selected Consolidated balance sheets data (continued)
 
(in millions)
Sep 30,
2017

 
Dec 31,
2016

Change

Liabilities
 
 
 
 
Deposits
$
1,439,027

 
$
1,375,179

5
 %
Federal funds purchased and securities loaned or sold under repurchase agreements
169,393

 
165,666

2

Commercial paper
24,248

 
11,738

107

Other borrowed funds
29,719

 
22,705

31

Trading liabilities:
 
 
 
 
Debt and equity instruments
89,089

 
87,428

2

Derivative payables
39,446

 
49,231

(20
)
Accounts payable and other liabilities
196,764

 
190,543

3

Beneficial interests issued by consolidated variable interest entities (“VIEs”)
28,424

 
39,047

(27
)
Long-term debt
288,582

 
295,245

(2
)
Total liabilities
2,304,692

 
2,236,782

3

Stockholders’ equity
258,382

 
254,190

2

Total liabilities and stockholders’ equity
$
2,563,074

 
$
2,490,972

3
 %
Deposits increased due to the following:
•
higher consumer deposits reflecting the continuation of strong growth from new and existing customers, and low attrition rates
•
higher wholesale deposits driven by growth in client cash management activity in CIB’s Securities Services and Treasury Services businesses, partially offset by lower balances in AWM reflecting balance migration into investment-related products (retained predominantly within the Firm), and the impact of seasonality in both CB and AWM.
For more information on deposits, refer to the Liquidity Risk Management discussion on pages 68–72; and Notes 2
and 15.
Federal funds purchased and securities loaned or sold under repurchase agreements increased reflecting on-going client activity in CIB, partially offset by a change in the mix of funding to commercial paper and other borrowed funds.
Commercial paper increased due to higher issuance in the wholesale market, reflecting a change in the mix of funding from securities sold under repurchase agreements for CIB Markets activities. For additional information, see Liquidity Risk Management on pages 68–72.
 
Other borrowed funds increased driven by a change in the mix of funding from securities sold under repurchase agreements in CIB.
Beneficial interests issued by consolidated VIEs decreased due to net maturities of credit card securitizations and the deconsolidation of the student loan securitization entities. For further information on Firm-sponsored VIEs and loan securitization trusts, see Off-Balance Sheet Arrangements on page 14 and Notes 13 and 19; and for a more detailed discussion of the student loan sale, see CCB segment results on pages 20–24 and Note 23.
For information on the Firm’s long-term debt activities, see Liquidity Risk Management on pages 68–72; on changes in stockholders’ equity, see page 86, and on the Firm’s capital actions, see Capital actions on page 47.


12

CONSOLIDATED CASH FLOWS ANALYSIS
Consolidated cash flows overview
The following is a discussion of cash flow activities during
the nine months ended September 30, 2017 and 2016.
(in millions)
 
Nine months ended September 30,
 
2017

 
2016

Net cash provided by/(used in)
 
 
 
 
Operating activities
 
$
(16,038
)
 
$
(18,715
)
Investing activities
 
(22,342
)
 
(112,102
)
Financing activities
 
36,405

 
131,699

Effect of exchange rate changes on cash
 
96

 
18

Net increase/(decrease) in cash and due from banks
 
$
(1,879
)
 
$
900

Operating activities
Cash used in operating activities for the nine month period ending September 30, 2017 resulted from:
Client-driven market-making activities in CIB
•
an increase in trading assets was driven by higher debt and equity instruments in Prime Services reflecting client demand, and in Rates reflecting higher levels of client activity when compared to lower levels at year-end
•
a decrease in trading liabilities predominantly reflecting lower foreign exchange and interest rate derivative payables
•
an increase in accrued interest and accounts receivable due to higher client receivables.
Partially offsetting these outflows was a decrease in other assets as a result of a shift in the collateral pledged in CIB from cash to securities.
Cash used in operating activities for the nine month period ending September 30, 2016 resulted from:
Client-driven market-making activities in CIB
•
an increase in trading assets, which was largely offset by an increase in trading liabilities
•
an increase in accrued interest and accounts receivable driven by higher client receivables
•
an increase in securities borrowed driven by higher demand for securities to cover short positions.
Investing activities
Cash used in investing activities during 2017 resulted from:
•
an increase in deposits with banks, primarily driven by growth in deposits and a shift in the deployment of excess cash from securities purchased under resale agreements and investment securities into deposits with banks
•
higher wholesale loans driven by new originations in CB and higher loans to Private Banking clients in AWM, partially offset by paydowns in CIB
•
higher consumer loans as a result of higher retention of originated high-quality prime mortgages in CCB and AWM,  largely offset by the sale of the student loan portfolio, lower home equity loans and the run-off of PCI loans
 
Cash used in investing activities during 2016 resulted from:
•
net originations of consumer and wholesale loans
•
an increase in deposits with banks primarily due to growth in deposits and an increase in long-term debt
•
an increase in securities purchased under resale agreements due to the deployment of excess cash by Treasury and higher demand for securities to cover short positions related to client-driven market-making activities in CIB.
For both periods, partially offsetting these cash outflows were net proceeds from paydowns, maturities, sales and purchases of investment securities.
Financing activities
Cash provided by financing activities in 2017 resulted from:
•
higher wholesale deposits driven by growth in client cash management activity in CIB’s Securities Services and Treasury Services businesses, partially offset by lower balances in AWM reflecting balance migration predominantly into the Firm’s investment-related products, and the impact of seasonality in both CB and AWM
•
higher consumer deposits reflecting the continuation of strong growth from new and existing customers, and low attrition rates
•
an increase in commercial paper due to higher issuance in the wholesale market, reflecting a change in the mix of funding from securities sold under repurchase agreements for CIB Markets activities
Partially offsetting these inflows were net payments of long-term borrowings.
Cash provided by financing activities in 2016 resulted from:
•
higher consumer and wholesale deposits
•
an increase in securities loaned or sold under repurchase agreements predominantly due to higher client-driven market-making activities in CIB
•
higher net proceeds from long-term borrowings consistent with Treasury’s long-term funding plans.
For both periods, cash was 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 11–12, Capital Risk Management on pages 42–48, and Liquidity Risk Management on pages 68–72 of this Form 10-Q, and pages 110–115 of JPMorgan Chase’s 2016 Annual Report.



13

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 accounting principles generally accepted in the U.S. (“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 19 of this Form 10-Q and Off–Balance Sheet Arrangements and Contractual Cash Obligations on pages 45–46 and Note 29 of JPMorgan Chase’s 2016 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 13 of this Form 10-Q, and Note 1 and Note 16 of JPMorgan Chase’s 2016 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, 2017, and December 31, 2016, was $2.9 billion and $2.7 billion, respectively. The aggregate amounts of commercial paper issued by these SPEs 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 $7.3 billion and $7.4 billion at September 30, 2017, and December 31, 2016, 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 13.
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 13 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 are refinanced, extended, cancelled, or expire without being drawn upon or a default occurring. As a result, the total contractual amount of these instruments is not, in the Firm’s view, representative of its expected future credit exposure or funding requirements. For further discussion of lending-related financial instruments, guarantees and other commitments, and the Firm’s accounting for them, see Lending-related commitments on page 62 and Note 19. For a discussion of liabilities associated with loan sales and securitization-related indemnifications, see Note 19.

14

EXPLANATION AND RECONCILIATION OF THE FIRM’S USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE MEASURES
Non-GAAP financial measures
The Firm prepares its Consolidated Financial Statements using U.S. GAAP; these financial statements appear on pages 83–87. 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 Firmwide results, including the overhead ratio, on a “managed” basis; these Firmwide managed basis results are considered non-GAAP financial measures. The Firm also reviews the results of the lines of business on a managed basis. The Firm’s definition of managed basis starts, in each case, 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 a FTE basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable investments and securities. These financial measures allow management to assess the comparability of revenue from year-to-year arising from
 
both taxable and tax-exempt sources. The corresponding income tax impact related to tax-exempt items is recorded within income tax expense. These adjustments have no impact on net income as reported by the Firm as a whole or by the lines of business.
Management also uses certain non-GAAP financial measures at the Firm and business-segment level, because these other non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Firm or of the particular business segment, as the case may be, and, therefore, facilitate a comparison of the Firm or the business segment with the performance of its relevant competitors. For additional information on these non-GAAP measures, see Business Segment Results on pages 18–40.
Additionally, certain credit metrics and ratios disclosed by the Firm exclude PCI loans, and are therefore non-GAAP measures. For additional information on these non-GAAP measures, see Credit Risk Management on pages 49–66.
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,
 
2017
 
2016
(in millions, except ratios)
Reported
results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
 
Reported
results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
Other income
$
951

 
$
555

 
 
$
1,506

 
$
782

 
$
540

 
 
$
1,322

Total noninterest revenue
12,528

 
555

 
 
13,083

 
13,070

 
540

 
 
13,610

Net interest income
12,798

 
319

 
 
13,117

 
11,603

 
299

 
 
11,902

Total net revenue
25,326

 
874

 
 
26,200

 
24,673

 
839

 
 
25,512

Pre-provision profit
11,008

 
874

 
 
11,882

 
10,210

 
839

 
 
11,049

Income before income tax expense
9,556

 
874

 
 
10,430

 
8,939

 
839

 
 
9,778

Income tax expense
$
2,824

 
$
874

 
 
$
3,698

 
$
2,653

 
$
839

 
 
$
3,492

Overhead ratio
57
%
 
NM

 
 
55
%
 
59
%
 
NM

 
 
57
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
2017
 
2016
(in millions, except ratios)
Reported
results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
 
Reported
results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
Other income
$
3,193

 
$
1,733

 
 
$
4,926

 
$
2,844

 
$
1,620

 
 
$
4,464

Total noninterest revenue
38,401

 
1,733

 
 
40,134

 
37,962

 
1,620

 
 
39,582

Net interest income
37,070

 
987

 
 
38,057

 
34,330

 
897

 
 
35,227

Total net revenue
75,471

 
2,720

 
 
78,191

 
72,292

 
2,517

 
 
74,809

Pre-provision profit
31,628

 
2,720

 
 
34,348

 
30,354

 
2,517

 
 
32,871

Income before income tax expense
27,646

 
2,720

 
 
30,366

 
25,857

 
2,517

 
 
28,374

Income tax expense
$
7,437

 
$
2,720

 
 
$
10,157

 
$
7,851

 
$
2,517

 
 
$
10,368

Overhead ratio
58
%
 
NM

 
 
56
%
 
58
%
 
NM

 
 
56
%
(a) Predominantly recognized in CIB and CB business segments and Corporate.

15

Net interest income excluding CIB’s Markets businesses
In addition to reviewing net interest income on a managed basis, management also reviews net interest income excluding net interest income arising from CIB’s Markets businesses to assess the performance of the Firm’s lending, investing (including asset-liability management) and deposit-raising activities. This net interest income is referred to as non-markets related net interest income. CIB’s Markets businesses represent both Fixed Income Markets and Equity Markets. Management believes that disclosure of non-markets related net interest income
 
provides investors and analysts with another measure by which to analyze the non-markets-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.
The data presented below are non-GAAP financial measures due to the exclusion of markets-related net interest income arising from CIB.


(in millions, except rates)
Three months ended September 30,
 
Nine months ended September 30,
2017

2016

 
Change

 
2017
2016
 
Change
Net interest income – managed basis(a)(b)
$
13,117

$
11,902

 
10
 %
 
$
38,057

$
35,227

 
8
 %
Less: CIB Markets net interest income(c)
1,070

1,625

 
(34
)
 
3,509

4,703

 
(25
)
Net interest income excluding CIB Markets(a)
$
12,047

$
10,277

 
17

 
$
34,548

$
30,524

 
13

 
 
 
 
 
 
 
 
 
 
Average interest-earning assets
$
2,194,174

$
2,116,493

 
4

 
$
2,177,520

$
2,080,133

 
5

Less: Average CIB Markets interest-earning assets(c)
544,867

518,862

 
5

 
535,044

518,989

 
3

Average interest-earning assets excluding CIB Markets
$
1,649,307

$
1,597,631

 
3
 %
 
$
1,642,476

$
1,561,144

 
5
 %
Net interest yield on average interest-earning assets – managed basis
2.37
%
2.24
%
 
 
 
2.34
%
2.26
%
 
 
Net interest yield on average CIB Markets interest-earning assets(c)
0.78

1.25

 
 
 
0.88

1.21

 
 
Net interest yield on average interest-earning assets excluding
CIB Markets
2.90
%
2.56
%
 
 
 
2.81
%
2.61
%
 
 
(a)
Interest includes the effect of related hedges. 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 15.
(c)
The amounts in this table differ from the prior-period to align with CIB’s Markets businesses. For further information on CIB’s Markets businesses, see page 29.

16

Tangible common equity, ROTCE and TBVPS
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 net income
 
applicable to common equity 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 utilized by the Firm, as well as investors and analysts, in assessing the Firm’s use of equity.
The following summary table provides a reconciliation from the Firm’s common stockholders’ equity to TCE.
 
Period-end
 
Average
(in millions, except per share and ratio data)
Sep 30,
2017

Dec 31,
2016

 
Three months ended September 30,
 
Nine months ended September 30,
 
2017

2016

 
2017

2016

Common stockholders’ equity
$
232,314

$
228,122

 
$
231,861

$
226,089

 
$
229,937

$
224,034

Less: Goodwill
47,309

47,288

 
47,309

47,302

 
47,297

47,314

Less: Certain identifiable intangible assets
808

862

 
818

903

 
836

938

Add: Deferred tax liabilities(a)
3,271

3,230

 
3,262

3,226

 
3,243

3,205

Tangible common equity
$
187,468

$
183,202

 
$
186,996

$
181,110

 
$
185,047

$
178,987

 
 
 
 
 
 
 
 
 
Return on tangible common equity
NA

NA

 
13
%
13
%
 
14
%
13
%
Tangible book value per share
$
54.03

$
51.44

 
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.
Key performance measures
The Firm considers the following to be key regulatory capital measures:
▪
Capital, risk-weighted assets (“RWA”), and capital and leverage ratios presented under Basel III Standardized and Advanced Fully Phased-In rules and
▪
SLR calculated under Basel III Advanced Fully Phased-In rules.
The Firm, as well as banking regulators, investors and analysts use these measures to assess the Firm’s regulatory capital position and to compare the Firm’s regulatory capital to that of other financial services companies.
For additional information on these measures, see Capital Risk Management on pages 42–48.
 
Core loans are also considered a key performance measure. Core loans represent loans considered central to the Firm’s ongoing businesses; and exclude loans classified as trading assets, runoff portfolios, discontinued portfolios and portfolios the Firm has an intent to exit. Core loans is a measure utilized by the Firm and its investors and analysts in assessing actual growth in the loan portfolio.

17

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 & Wealth 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 and Key Performance Measures on pages 15–17.
Description of business segment reporting methodology
Results of the business segments are intended to reflect each segment as if it were a stand-alone business. The management reporting process that derives business segment results allocates income and expense using market-based methodologies. For further information about line of business capital, see Line of business equity
on page 46.
The Firm periodically assesses the assumptions, methodologies and reporting classifications used for segment reporting, and further refinements may be implemented in future periods.
 
Business segment capital allocation changes
Effective January 1, 2017, the Firm’s methodology used to allocate capital to the business segments was updated. Under the new methodology, capital is no longer allocated to each line of business for goodwill and other intangibles associated with acquisitions effected by the line of business. In addition, the new methodology incorporates Basel III Standardized Fully Phased-In RWA (as well as Basel III Advanced Fully Phased-In RWA), leverage, the global systemically important banks (“GSIB”) surcharge, and a simulation of capital in a severe stress environment. The methodology will continue to be weighted towards Basel III Advanced Fully Phased-In RWA because the Firm believes it to be the best proxy for economic risk.
For a further discussion of those methodologies, see Business Segment Results – Description of business segment reporting methodology on pages 51–52 of JPMorgan Chase’s 2016 Annual Report.

18

The following discussions of the business segment results are based on a comparison of the three and nine months ended September 30, 2017 versus the corresponding period in the prior year, unless otherwise specified.
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)
2017

2016

Change

 
2017

2016

Change

 
2017

2016

Change

Consumer & Community Banking
$
12,033

$
11,328

6
 %
 
$
6,495

$
6,510

—

 
$
5,538

$
4,818

15
 %
Corporate & Investment Bank
8,590

9,455

(9
)
 
4,768

4,934

(3
)
 
3,822

4,521

(15
)
Commercial Banking
2,146

1,870

15

 
800

746

7

 
1,346

1,124

20

Asset & Wealth Management
3,245

3,047

6

 
2,181

2,130

2

 
1,064

917

16

Corporate
186

(188
)
NM

 
74

143

(48
)
 
112

(331
)
NM

Total
$
26,200

$
25,512

3
 %
 
$
14,318

$
14,463

(1
)%
 
$
11,882

$
11,049

8
 %
Three months ended September 30,
Provision for credit losses
 
 
Net income/(loss)
 
Return on equity
(in millions, except ratios)
2017

2016

Change

 
2017

2016

Change

 
2017

2016

Consumer & Community Banking
$
1,517

$
1,294

17
 %
 
$
2,553

$
2,204

16
 %
 
19
%
16
%
Corporate & Investment Bank
(26
)
67

NM

 
2,546

2,912

(13
)
 
13

17

Commercial Banking
(47
)
(121
)
61

 
881

778

13

 
17

18

Asset & Wealth Management
8

32

(75
)
 
674

557

21

 
29

24

Corporate
—

(1
)
100

 
78

(165
)
NM

 
NM

NM

Total
$
1,452

$
1,271

14
 %
 
$
6,732

$
6,286

7
 %
 
11
%
10
%
Nine months ended September 30,
Total net revenue
 
Total noninterest expense
 
Pre-provision profit/(loss)
(in millions)
2017

2016

Change
 
2017

2016

Change

 
2017

2016

Change

Consumer & Community Banking
$
34,415

$
33,896

2
 
$
19,390

$
18,602

4
 %
 
$
15,025

$
15,294

(2
)%
Corporate & Investment Bank
27,015

26,755

1
 
14,730

14,820

(1
)
 
12,285

11,935

3

Commercial Banking
6,252

5,490

14
 
2,415

2,190

10

 
3,837

3,300

16

Asset & Wealth Management
9,544

8,958

7
 
6,953

6,303

10

 
2,591

2,655

(2
)
Corporate
965

(290
)
NM
 
355

23

NM

 
610

(313
)
NM

Total
$
78,191

$
74,809

5
 
$
43,843

$
41,938

5
 %
 
$
34,348

$
32,871

4
 %
Nine months ended September 30,
Provision for credit losses
 
Net income/(loss)
 
Return on equity
(in millions, except ratios)
2017

2016

Change

 
2017

2016

Change

 
2017

2016

Consumer & Community Banking
$
4,341

$
3,545

22
 %
 
$
6,764

$
7,350

(8
)%
 
17
%
18
%
Corporate & Investment Bank
(175
)
761

NM

 
8,497

7,384

15

 
15

14

Commercial Banking
(214
)
158

NM

 
2,582

1,970

31

 
16

15

Asset & Wealth Management
30

37

(19
)
 
1,683

1,665

1

 
24

24

Corporate
—

(4
)
100

 
683

(363
)
NM

 
NM

NM

Total
$
3,982

$
4,497

(11
)%
 
$
20,209

$
18,006

12
 %
 
11
%
10
%


19


CONSUMER & COMMUNITY BANKING
For a discussion of the business profile of CCB, see pages 53–57 of JPMorgan Chase’s 2016 Annual Report and Line of Business Metrics on page 173.
Selected income statement data
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except ratios)
2017

 
2016

 
Change
 
2017

 
2016

 
Change
Revenue
 
 
 
 
 
 
 
 
 
 
 
Lending- and deposit-related fees
$
885

 
$
841

 
5
 %
 
$
2,547

 
$
2,390

 
7
 %
Asset management, administration and commissions
543

 
531

 
2

 
1,644

 
1,596

 
3

Mortgage fees and related income
428

 
624

 
(31
)
 
1,235

 
1,980

 
(38
)
Card income
1,141

 
1,099

 
4

 
3,019

 
3,543

 
(15
)
All other income
901

 
773

 
17

 
2,454

 
2,303

 
7

Noninterest revenue
3,898

 
3,868

 
1

 
10,899

 
11,812

 
(8
)
Net interest income
8,135

 
7,460

 
9

 
23,516