JP Morgan Chase 2015 Annual Report Download - page 141

JPMorgan Chase & Co./2015 Annual Report 131
Summary of changes in the allowance for credit losses
2015 2014
Year ended December 31, Consumer,
excluding
credit card Credit card Wholesale Total
Consumer,
excluding
credit card Credit card Wholesale Total(in millions, except ratios)
Allowance for loan losses
Beginning balance at January 1, $ 7,050 $ 3,439 $ 3,696 $ 14,185 $ 8,456 $ 3,795 $ 4,013 $ 16,264
Gross charge-offs 1,658 3,488 95 5,241 2,132 3,831 151 6,114
Gross recoveries (704) (366) (85) (1,155) (814) (402) (139) (1,355)
Net charge-offs 954 3,122 10 4,086 1,318 3,429 12 4,759
Write-offs of PCI loans(a) 208 — — 208 533 — — 533
Provision for loan losses (82) 3,122 623 3,663 414 3,079 (269) 3,224
Other —(5)6 1 31 (6) (36) (11)
Ending balance at December 31, $ 5,806 $ 3,434 $ 4,315 $ 13,555 $ 7,050 $ 3,439 $ 3,696 $ 14,185
Impairment methodology
Asset-specific(b) $ 364 $ 460 $ 274 $ 1,098 $ 539 $ 500 $ 87 $ 1,126
Formula-based 2,700 2,974 4,041 9,715 3,186 2,939 3,609 9,734
PCI 2,742 — — 2,742 3,325 — — 3,325
Total allowance for loan losses $ 5,806 $ 3,434 $ 4,315 $ 13,555 $ 7,050 $ 3,439 $ 3,696 $ 14,185
Allowance for lending-related commitments
Beginning balance at January 1, $ 13 $ — $ 609 $ 622 $ 8 $ — $ 697 $ 705
Provision for lending-related commitments 1 — 163 164 5 — (90) (85)
Other ———— ——22
Ending balance at December 31, $ 14 $ — $ 772 $ 786 $ 13 $ — $ 609 $ 622
Impairment methodology
Asset-specific $—$—$73$73$—$—$60$60
Formula-based 14 — 699 713 13 — 549 562
Total allowance for lending-related
commitments(c) $ 14 $ — $ 772 $ 786 $ 13 $ — $ 609 $ 622
Total allowance for credit losses $ 5,820 $ 3,434 $ 5,087 $ 14,341 $ 7,063 $ 3,439 $ 4,305 $ 14,807
Memo:
Retained loans, end of period $ 344,355 $ 131,387 $ 357,050 $ 832,792 $ 294,979 $ 128,027 $ 324,502 $ 747,508
Retained loans, average 318,612 124,274 337,407 780,293 289,212 124,604 316,060 729,876
PCI loans, end of period 40,998 — 4 41,002 46,696 — 4 46,700
Credit ratios
Allowance for loan losses to retained loans 1.69% 2.61% 1.21% 1.63% 2.39% 2.69% 1.14% 1.90%
Allowance for loan losses to retained nonaccrual
loans(d) 109 NM 437 215 110 NM 617 202
Allowance for loan losses to retained nonaccrual
loans excluding credit card 109 NM 437 161 110 NM 617 153
Net charge-off rates 0.30 2.51 — 0.52 0.46 2.75 — 0.65
Credit ratios, excluding residential real estate
PCI loans
Allowance for loan losses to
retained loans 1.01 2.61 1.21 1.37 1.50 2.69 1.14 1.55
Allowance for loan losses to
retained nonaccrual loans(d) 58 NM 437 172 58 NM 617 155
Allowance for loan losses to
retained nonaccrual loans excluding credit
card 58 NM 437 117 58 NM 617 106
Net charge-off rates 0.35% 2.51% —% 0.55% 0.55% 2.75% —% 0.70%
Note: In the table above, the financial measures which exclude the impact of PCI loans are non-GAAP financial measures. For additional information, see
Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 80–82.
(a) Write-offs of PCI loans are recorded against the allowance for loan losses when actual losses for a pool exceed estimated losses that were recorded as
purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan is recognized when the underlying loan is removed from a pool (e.g.,
upon liquidation). During the fourth quarter of 2014, the Firm recorded a $291 million adjustment to reduce the PCI allowance and the recorded
investment in the Firm’s PCI loan portfolio, primarily reflecting the cumulative effect of interest forgiveness modifications. This adjustment had no impact
to the Firm’s Consolidated statements of income.
(b) Includes risk-rated loans that have been placed on nonaccrual status and loans that have been modified in a TDR. The asset-specific credit card allowance
for loan losses modified in a TDR is calculated based on the loans’ original contractual interest rates and does not consider any incremental penalty rates.
(c) The allowance for lending-related commitments is reported in other liabilities on the Consolidated balance sheets.
(d) The Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance.