JP Morgan Chase 2015 Annual Report Download - page 98

Management’s discussion and analysis
88 JPMorgan Chase & Co./2015 Annual Report
Mortgage Banking
Selected Financial statement data
As of or for the year ended
December 31,
(in millions, except ratios) 2015 2014 2013
Revenue
Mortgage fees and related
income(a) $ 2,511 $ 3,560 $ 5,195
All other income (65) 37 283
Noninterest revenue 2,446 3,597 5,478
Net interest income 4,371 4,229 4,758
Total net revenue 6,817 7,826 10,236
Provision for credit losses (690) (217) (2,681)
Noninterest expense 4,607 5,284 7,602
Income before income tax
expense 2,900 2,759 5,315
Net income $ 1,778 $ 1,668 $ 3,211
Return on common equity 10% 9% 16%
Overhead ratio 68 68 74
Equity (period-end and
average) $ 16,000 $ 18,000 $ 19,500
(a) For further information on mortgage fees and related income, see Note 17.
2015 compared with 2014
Mortgage Banking net income was $1.8 billion, an increase
of 7% from the prior year, driven by lower noninterest
expense and a higher benefit from the provision for credit
losses, predominantly offset by lower net revenue.
Net revenue was $6.8 billion, a decrease of 13% compared
with the prior year. Net interest income was $4.4 billion, an
increase of 3% from the prior year, due to higher loan
balances resulting from originations of high-quality loans that
have been retained, partially offset by spread compression.
Noninterest revenue was $2.4 billion, a decrease of 32%
from the prior year. This decrease was 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.
The provision for credit losses was a benefit of $690 million,
compared to a benefit of $217 million in the prior year,
reflecting a larger reduction in the allowance for loan losses
and lower net charge-offs. The current-year provision
reflected a $600 million reduction in the non credit-impaired
allowance for loan losses and a $375 million reduction in the
purchased credit-impaired allowance for loan losses; the
prior-year provision included a $400 million reduction in the
non credit-impaired allowance for loan losses and a $300
million reduction in the purchased credit-impaired allowance
for loan losses. These reductions were due to continued
improvement in home prices and delinquencies in both
periods, as well as increased granularity in the impairment
estimates in the current year.
Noninterest expense was $4.6 billion, a decrease of 13%
from the prior year, reflecting lower headcount-related
expense and lower professional fees.
2014 compared with 2013
Mortgage Banking net income was $1.7 billion, a decrease
of 48%, from the prior year, driven by a lower benefit from
the provision for credit losses and lower net revenue,
partially offset by lower noninterest expense.
Net revenue was $7.8 billion, a decrease of 24%, compared
with the prior year. Net interest income was $4.2 billion, a
decrease of 11%, driven by spread compression and lower
loan balances due to portfolio runoff and lower warehouse
balances. Noninterest revenue was $3.6 billion, a decrease of
34%, driven by lower net production revenue, largely
reflecting lower volumes, lower servicing revenue, largely as
a result of lower average third-party loans serviced, and
lower revenue from an exited non-core product, largely offset
by higher MSR risk management income and lower MSR asset
amortization expense as a result of lower MSR asset value.
See Note 17 for further information regarding changes in
value of the MSR asset and related hedges, and mortgage
fees and related income.
The provision for credit losses was a benefit of $217 million,
compared to a benefit of $2.7 billion in the prior year,
reflecting a smaller reduction in the allowance for loan
losses, partially offset by lower net charge-offs. The current-
year provision reflected a $400 million reduction in the non
credit-impaired allowance for loan losses and $300 million
reduction in the purchased credit-impaired allowance for loan
losses; the prior-year provision included a $2.3 billion
reduction in the non credit-impaired allowance for loan losses
and a $1.5 billion reduction in the purchased credit-impaired
allowance for loan losses. These reductions were due to
continued improvement in home prices and delinquencies.
Noninterest expense was $5.3 billion, a decrease of 30%,
from the prior year, reflecting lower headcount-related
expense, the absence of non-mortgage-backed securities
(“MBS”) related legal expense, lower expense on foreclosure-
related matters, and lower FDIC-related expense.
Supplemental information
For the year ended December
31,
(in millions) 2015 2014 2013
Net interest income:
Mortgage Production and
Mortgage Servicing $ 575 $ 736 $ 887
Real Estate Portfolios 3,796 3,493 3,871
Total net interest income $ 4,371 $ 4,229 $ 4,758
Noninterest expense:
Mortgage Production $ 1,491 $ 1,644 3,083
Mortgage Servicing 2,041 2,267 2,966
Real Estate Portfolios 1,075 1,373 1,553
Total noninterest expense $ 4,607 $ 5,284 $ 7,602