JP Morgan Chase 2014 Annual Report Download - page 87

JPMorgan Chase & Co./2014 Annual Report 85
Functional results
Year ended December 31,
(in millions, except ratios) 2014 2013 2012
Mortgage Production
Production revenue and other
Income(a) $ 1,060 $ 2,973 $ 5,877
Production-related net interest
income(a) 422 635 705
Production-related revenue,
excluding repurchase
(losses)/benefits 1,482 3,608 6,582
Production expense(b) 1,646 3,088 2,747
Income, excluding
repurchase (losses)/
benefits (164) 520 3,835
Repurchase (losses)/benefits 458 331 (272)
Income before income tax
expense 294 851 3,563
Mortgage Servicing
Loan servicing revenue and
other income(a) 3,294 3,744 4,110
Servicing-related net interest
income(a) 314 253 93
Servicing-related revenue 3,608 3,997 4,203
Changes in MSR asset fair value
due to collection/realization of
expected cash flows (905) (1,094) (1,222)
Net servicing-related
revenue 2,703 2,903 2,981
Default servicing expense 1,406 2,069 3,707
Core servicing expense(b) 865 904 1,033
Servicing Expense 2,271 2,973 4,740
Income/(loss), excluding MSR
risk management 432 (70) (1,759)
MSR risk management,
including related net interest
income/(expense) (28) (268) 616
Income/(loss) before income
tax expense/(benefit) 404 (338) (1,143)
Real Estate Portfolios
Noninterest revenue (282) (209) 43
Net interest income 3,493 3,871 4,221
Total net revenue 3,211 3,662 4,264
Provision for credit losses (223) (2,693) (509)
Noninterest expense 1,373 1,553 1,653
Income before income tax
expense 2,061 4,802 3,120
Mortgage Banking income before
income tax expense $ 2,759 $ 5,315 $ 5,540
Mortgage Banking net income $ 1,668 $ 3,211 $ 3,468
Overhead ratios
Mortgage Production 85% 78% 43%
Mortgage Servicing 85 113 132
Real Estate Portfolios 43 42 39
(a) Prior periods were revised to conform with the current presentation.
(b) Includes provision for credit losses.
2014 compared with 2013
Mortgage Production pretax income was $294 million, a
decrease of $557 million, or 65%, from the prior year,
reflecting lower revenue, largely offset by lower expense
and higher benefit from repurchase losses. Mortgage
production-related revenue, excluding repurchase losses,
was $1.5 billion, a decrease of $2.1 billion, from the prior
year, driven by lower volumes due to higher levels of
mortgage interest rates and tighter margins. Production
expense was $1.6 billion, a decrease of $1.4 billion, or
47%, from the prior year, driven by lower headcount-
related expense and the absence of non-MBS related legal
expense.
Mortgage Servicing pretax income was $404 million,
compared with a loss of $338 million in the prior year,
reflecting lower expenses and lower MSR risk management
loss, partially offset by lower net revenue. Mortgage net
servicing-related revenue was $2.7 billion, a decrease of
$200 million, or 7%, from the prior year, driven by lower
average third-party loans serviced and lower revenue from
an exited non-core product, partially offset by lower MSR
asset amortization expense as a result of lower MSR asset
value. MSR risk management was a loss of $28 million,
compared with a loss of $268 million in the prior year. See
Note 17 for further information regarding changes in value
of the MSR asset and related hedges. Servicing expense was
$2.3 billion, a decrease of $702 million, or 24%, from the
prior year, reflecting lower headcount-related expense and
lower expense for foreclosure related matters.
Real Estate Portfolios pretax income was $2.1 billion,
down $2.7 billion, or 57%, from the prior year, due to a
lower benefit from the provision for credit losses and lower
net revenue, partially offset by lower noninterest expense.
Net revenue was $3.2 billion, a decrease of $451 million, or
12%, from the prior year, driven by lower net interest
income as a result of spread compression and lower loan
balances due to portfolio runoff. The provision for credit
losses was a benefit of $223 million, compared with a
benefit of $2.7 billion in the prior year. The current-year
provision reflected a $700 million reduction in the
allowance for loan losses, $400 million from the non credit-
impaired allowance and $300 million from the purchased
credit-impaired allowance, due to continued improvement
in home prices and delinquencies. The prior-year provision
reflected a $3.8 billion reduction in the allowance for loan
losses, $2.3 billion from the non credit-impaired allowance
and $1.5 billion from the purchased credit-impaired
allowance. Net charge-offs were $477 million, compared
with $1.1 billion in the prior year. See Consumer Credit
Portfolio on pages 113–119 for the net charge-off amounts
and rates. Noninterest expense was $1.4 billion, a decrease
of $180 million, or 12%, compared with the prior year,
driven by lower FDIC-related expense and lower foreclosed
asset expense due to lower foreclosure inventory.