JP Morgan Chase 2015 Annual Report Download - page 323

Glossary of Terms
JPMorgan Chase & Co./2015 Annual Report 313
deferred and added to the principal balance of the loan.
Option ARM loans are subject to payment recast, which
converts the loan to a variable-rate fully amortizing loan
upon meeting specified loan balance and anniversary date
triggers.
Prime
Prime mortgage loans are made to borrowers with good
credit records who meet specific underwriting
requirements, including prescriptive requirements related
to income and overall debt levels. New prime mortgage
borrowers provide full documentation and generally have
reliable payment histories.
Subprime
Subprime loans are loans that, prior to mid-2008, were
offered to certain customers with one or more high risk
characteristics, including but not limited to: (i) unreliable or
poor payment histories; (ii) a high LTV ratio of greater than
80% (without borrower-paid mortgage insurance); (iii) a
high debt-to-income ratio; (iv) an occupancy type for the
loan is other than the borrower’s primary residence; or (v) a
history of delinquencies or late payments on the loan.
Multi-asset: Any fund or account that allocates assets under
management to more than one asset class.
N/A: Data is not applicable or available for the period
presented.
Net charge-off/(recovery) rate: Represents net charge-
offs/(recoveries) (annualized) divided by average retained
loans for the reporting period.
Net production revenue: Includes net gains or losses on
originations and sales of mortgage loans, other production-
related fees and losses related to the repurchase of
previously-sold loans.
Net mortgage servicing revenue includes the following
components:
Operating revenue predominantly represents the return on
Mortgage Servicing’s MSR asset and includes:
– Actual gross income earned from servicing third-party
mortgage loans, such as contractually specified
servicing fees and ancillary income; and
– The change in the fair value of the MSR asset due to
the collection or realization of expected cash flows.
Risk management represents the components of
Mortgage Servicing’s MSR asset that are subject to ongoing
risk management activities, together with derivatives and
other instruments used in those risk management activities.
Net yield on interest-earning assets: The average rate for
interest-earning assets less the average rate paid for all
sources of funds.
NM: Not meaningful.
Nonaccrual loans: Loans for which interest income is not
recognized on an accrual basis. Loans (other than credit
card loans and certain consumer loans insured by U.S.
government agencies) are placed on nonaccrual status
when full payment of principal and interest is not expected
or when principal and interest has been in default for a
period of 90 days or more unless the loan is both well-
secured and in the process of collection. Collateral-
dependent loans are typically maintained on nonaccrual
status.
Nonperforming assets: Nonperforming assets include
nonaccrual loans, nonperforming derivatives and certain
assets acquired in loan satisfaction, predominantly real
estate owned and other commercial and personal property.
Over-the-counter (“OTC”) derivatives: Derivative contracts
that are negotiated, executed and settled bilaterally
between two derivative counterparties, where one or both
counterparties is a derivatives dealer.
Over-the-counter cleared (“OTC-cleared”) derivatives:
Derivative contracts that are negotiated and executed
bilaterally, but subsequently settled via a central clearing
house, such that each derivative counterparty is only
exposed to the default of that clearing house.
Overhead ratio: Noninterest expense as a percentage of
total net revenue.
Participating securities: Represents unvested stock-based
compensation awards containing nonforfeitable rights to
dividends or dividend equivalents (collectively, “dividends”),
which are included in the earnings per share calculation
using the two-class method. JPMorgan Chase grants
restricted stock and RSUs to certain employees under its
stock-based compensation programs, which entitle the
recipients to receive nonforfeitable dividends during the
vesting period on a basis equivalent to the dividends paid to
holders of common stock. These unvested awards meet the
definition of participating securities. Under the two-class
method, all earnings (distributed and undistributed) are
allocated to each class of common stock and participating
securities, based on their respective rights to receive
dividends.
Personal bankers: Retail branch office personnel who
acquire, retain and expand new and existing customer
relationships by assessing customer needs and
recommending and selling appropriate banking products
and services.