JPMorgan Chase Reports Fourth-Quarter 2012 Net Income Of $5.7 Billion, Or $1.39 Per Share, On Revenue1 Of $24.4 Billion

The provision for credit losses reflected a benefit of $269 million ², compared with provision expense of $647 million in the prior year. The current quarter reflected a $700 million reduction in the allowance for loan losses.

Noninterest expense was $2.9 billion, an increase of $1.0 billion from the prior year. The current quarter included approximately $900 million of expense for mortgage-related matters, including approximately $700 million for the impact of the Independent Foreclosure Review settlement.

Mortgage Production reported pretax income of $789 million, an increase of $628 million from the prior year. Mortgage production-related revenue, excluding repurchase losses, was $1.6 billion, an increase of $543 million, or 51%, from the prior year. These results reflected wider margins, driven by favorable market conditions, and higher volumes due to historically low interest rates and the Home Affordable Refinance Programs (“HARP”). Production expense ² was $876 million, an increase of $358 million from the prior year, reflecting higher volumes and an expense for additional litigation reserves. Repurchase losses for the current quarter reflected a benefit of $53 million, compared with a loss of $390 million in the prior year and a loss of $13 million in the prior quarter. The current quarter reflected a $249 million reduction in the repurchase liability and lower realized repurchase losses compared with prior year and prior quarter, primarily driven by improved cure rates on Agency repurchase demands.

Mortgage Servicing reported a pretax loss of $913 million, compared with a pretax loss of $586 million in the prior year. Mortgage servicing revenue, including amortization, was $618 million, a decrease of $98 million, or 14%, from the prior year. Mortgage servicing rights (“MSR”) risk management income was $42 million, compared with a loss of $377 million in the prior year. Servicing expense was $1.6 billion, an increase of $648 million from the prior year. The current quarter included approximately $700 million of expense for the impact of the Independent Foreclosure Review settlement.

Key Metrics and Business Updates: (All comparisons refer to the prior-year quarter except as noted)

• Mortgage loan originations were $51.2 billion, up 33% from the prior year and 8% from the prior quarter; Retail channel originations (branch and direct-to-consumer) were $26.4 billion, up 14% from the prior year and 4% from the prior quarter.
• Mortgage loan application volumes were $65.7 billion, up 25% from the prior year and down 10% from the prior quarter.
• Total third-party mortgage loans serviced were $859.4 billion, down 5% from the prior year and up 6% from the prior quarter, including the impact of a portfolio acquisition in the fourth quarter of 2012.

Real Estate Portfolios reported pretax income of $812 million, compared with a pretax loss of $18 million in the prior year. The increase was driven by a benefit from the provision for credit losses, reflecting the continued improvement in credit trends.

Net revenue was $965 million, a decrease of $95 million, or 9%, from the prior year. The decrease was driven by a decline in net interest income, resulting from lower loan balances due to portfolio runoff.

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