FAIR VALUE MEASUREMENT |
Fair value measurement For a discussion of the Firm’s valuation methodologies for assets, liabilities and lending-related commitments measured at fair value and the fair value hierarchy, see Note 3 on pages 196–214 of JPMorgan Chase’s 2012 Annual Report. The following table presents the asset and liabilities reported at fair value as of June 30, 2013, and December 31, 2012, by major product category and fair value hierarchy. | | | | | | | | | | | | | | | | | | | Assets and liabilities measured at fair value on a recurring basis | | | | | | | | Fair value hierarchy | | Netting adjustments | | June 30, 2013 (in millions) | Level 1 | Level 2 | | Level 3 | | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | — |
| $ | 25,306 |
| | $ | — |
| | $ | — |
| $ | 25,306 |
| Securities borrowed | — |
| 5,295 |
| | — |
| | — |
| 5,295 |
| Trading assets: | | | | | | | | Debt instruments: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies(a) | — |
| 29,100 |
| | 901 |
| | — |
| 30,001 |
| Residential – nonagency | — |
| 1,783 |
| | 615 |
| | — |
| 2,398 |
| Commercial – nonagency | — |
| 1,271 |
| | 1,271 |
| | — |
| 2,542 |
| Total mortgage-backed securities | — |
| 32,154 |
| | 2,787 |
| | — |
| 34,941 |
| U.S. Treasury and government agencies(a) | 25,932 |
| 11,528 |
| | — |
| | — |
| 37,460 |
| Obligations of U.S. states and municipalities | — |
| 11,266 |
| | 1,221 |
| | — |
| 12,487 |
| Certificates of deposit, bankers’ acceptances and commercial paper | — |
| 2,471 |
| | — |
| | — |
| 2,471 |
| Non-U.S. government debt securities | 28,603 |
| 29,784 |
| | 136 |
| | — |
| 58,523 |
| Corporate debt securities | — |
| 26,160 |
| | 5,735 |
| | — |
| 31,895 |
| Loans(b) | — |
| 27,686 |
| | 10,940 |
| | — |
| 38,626 |
| Asset-backed securities | — |
| 3,886 |
| | 1,428 |
| | — |
| 5,314 |
| Total debt instruments | 54,535 |
| 144,935 |
| | 22,247 |
| | — |
| 221,717 |
| Equity securities | 86,358 |
| 1,547 |
| | 1,039 |
| | — |
| 88,944 |
| Physical commodities(c) | 7,016 |
| 4,909 |
| | 16 |
| | — |
| 11,941 |
| Other | — |
| 4,012 |
| | 1,105 |
| | — |
| 5,117 |
| Total debt and equity instruments(d) | 147,909 |
| 155,403 |
| | 24,407 |
| | — |
| 327,719 |
| Derivative receivables: | | | | | | | | Interest rate | 2,875 |
| 963,223 |
| | 5,114 |
| | (939,515 | ) | 31,697 |
| Credit | — |
| 89,247 |
| | 4,414 |
| | (91,297 | ) | 2,364 |
| Foreign exchange | 966 |
| 174,239 |
| | 2,052 |
| | (162,940 | ) | 14,317 |
| Equity | — |
| 46,990 |
| | 5,069 |
| | (38,490 | ) | 13,569 |
| Commodity | 541 |
| 53,802 |
| | 780 |
| | (43,319 | ) | 11,804 |
| Total derivative receivables(e) | 4,382 |
| 1,327,501 |
| | 17,429 |
| | (1,275,561 | ) | 73,751 |
| Total trading assets | 152,291 |
| 1,482,904 |
| | 41,836 |
| | (1,275,561 | ) | 401,470 |
| Available-for-sale securities: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies(a) | — |
| 101,314 |
| | — |
| | — |
| 101,314 |
| Residential – nonagency | — |
| 65,179 |
| | 385 |
| | — |
| 65,564 |
| Commercial – nonagency | — |
| 12,732 |
| | 252 |
| | — |
| 12,984 |
| Total mortgage-backed securities | — |
| 179,225 |
| | 637 |
| | — |
| 179,862 |
| U.S. Treasury and government agencies(a) | 22,115 |
| 783 |
| | — |
| | — |
| 22,898 |
| Obligations of U.S. states and municipalities | 71 |
| 24,275 |
| | 187 |
| | — |
| 24,533 |
| Certificates of deposit | — |
| 1,588 |
| | — |
| | — |
| 1,588 |
| Non-U.S. government debt securities | 28,637 |
| 27,337 |
| | — |
| | — |
| 55,974 |
| Corporate debt securities | — |
| 28,239 |
| | — |
| | — |
| 28,239 |
| Asset-backed securities: | | | | | | | | Collateralized loan obligations | — |
| 26,330 |
| | 988 |
| | — |
| 27,318 |
| Other | — |
| 11,560 |
| | 137 |
| | — |
| 11,697 |
| Equity securities | 2,610 |
| — |
| | — |
| | — |
| 2,610 |
| Total available-for-sale securities | 53,433 |
| 299,337 |
| | 1,949 |
| | — |
| 354,719 |
| Loans | — |
| 80 |
| | 1,843 |
| | — |
| 1,923 |
| Mortgage servicing rights | — |
| — |
| | 9,335 |
| | — |
| 9,335 |
| Other assets: | | | | | | | | Private equity investments(f) | 550 |
| — |
| | 7,105 |
| | — |
| 7,655 |
| All other | 3,894 |
| 432 |
| | 3,680 |
| | — |
| 8,006 |
| Total other assets | 4,444 |
| 432 |
| | 10,785 |
| | — |
| 15,661 |
| Total assets measured at fair value on a recurring basis | $ | 210,168 |
| $ | 1,813,354 |
| (g) | $ | 65,748 |
| (g) | $ | (1,275,561 | ) | $ | 813,709 |
| Deposits | $ | — |
| $ | 3,648 |
| | $ | 2,190 |
| | $ | — |
| $ | 5,838 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| 4,661 |
| | — |
| | — |
| 4,661 |
| Other borrowed funds | — |
| 9,899 |
| | 2,673 |
| | — |
| 12,572 |
| Trading liabilities: | | | | | | |
|
| Debt and equity instruments(d) | 62,868 |
| 21,236 |
| | 104 |
| | — |
| 84,208 |
| Derivative payables: | | | | | | |
|
| Interest rate | 2,266 |
| 932,906 |
| | 3,013 |
| | (919,769 | ) | 18,416 |
| Credit | — |
| 88,150 |
| | 3,493 |
| | (89,032 | ) | 2,611 |
| Foreign exchange | 932 |
| 188,858 |
| | 3,270 |
| | (176,350 | ) | 16,710 |
| Equity | — |
| 46,044 |
| | 7,360 |
| | (38,676 | ) | 14,728 |
| Commodity | 625 |
| 54,493 |
| | 709 |
| | (43,907 | ) | 11,920 |
| Total derivative payables(e) | 3,823 |
| 1,310,451 |
| | 17,845 |
| | (1,267,734 | ) | 64,385 |
| Total trading liabilities | 66,691 |
| 1,331,687 |
| | 17,949 |
| | (1,267,734 | ) | 148,593 |
| Accounts payable and other liabilities | — |
| — |
| | 32 |
| | — |
| 32 |
| Beneficial interests issued by consolidated VIEs | — |
| 180 |
| | 863 |
| | — |
| 1,043 |
| Long-term debt | — |
| 20,018 |
| | 9,202 |
| | — |
| 29,220 |
| Total liabilities measured at fair value on a recurring basis | $ | 66,691 |
| $ | 1,370,093 |
| | $ | 32,909 |
| | $ | (1,267,734 | ) | $ | 201,959 |
|
| | | | | | | | | | | | | | | | | | | | Fair value hierarchy | | Netting adjustments | | December 31, 2012 (in millions) | Level 1 | Level 2 | | Level 3 | | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | — |
| $ | 24,258 |
| | $ | — |
| | $ | — |
| $ | 24,258 |
| Securities borrowed | — |
| 10,177 |
| | — |
| | — |
| 10,177 |
| Trading assets: | | | | | | | | Debt instruments: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies(a) | — |
| 36,240 |
| | 498 |
| | — |
| 36,738 |
| Residential – nonagency | — |
| 1,509 |
| | 663 |
| | — |
| 2,172 |
| Commercial – nonagency | — |
| 1,565 |
| | 1,207 |
| | — |
| 2,772 |
| Total mortgage-backed securities | — |
| 39,314 |
| | 2,368 |
| | — |
| 41,682 |
| U.S. Treasury and government agencies(a)(h) | 15,170 |
| 7,255 |
| | — |
| | — |
| 22,425 |
| Obligations of U.S. states and municipalities | — |
| 16,726 |
| | 1,436 |
| | — |
| 18,162 |
| Certificates of deposit, bankers’ acceptances and commercial paper | — |
| 4,759 |
| | — |
| | — |
| 4,759 |
| Non-U.S. government debt securities(h) | 26,095 |
| 44,028 |
| | 67 |
| | — |
| 70,190 |
| Corporate debt securities(h) | — |
| 31,882 |
| | 5,308 |
| | — |
| 37,190 |
| Loans(b) | — |
| 30,754 |
| | 10,787 |
| | — |
| 41,541 |
| Asset-backed securities | — |
| 4,182 |
| | 3,696 |
| | — |
| 7,878 |
| Total debt instruments | 41,265 |
| 178,900 |
| | 23,662 |
| | — |
| 243,827 |
| Equity securities | 106,898 |
| 2,687 |
| | 1,114 |
| | — |
| 110,699 |
| Physical commodities(c) | 10,107 |
| 6,066 |
| | — |
| | — |
| 16,173 |
| Other | — |
| 3,483 |
| | 863 |
| | — |
| 4,346 |
| Total debt and equity instruments(d) | 158,270 |
| 191,136 |
| | 25,639 |
| | — |
| 375,045 |
| Derivative receivables: | | | | | | | | Interest rate(h) | 476 |
| 1,295,474 |
| | 6,617 |
| | (1,263,362 | ) | 39,205 |
| Credit | — |
| 93,821 |
| | 6,489 |
| | (98,575 | ) | 1,735 |
| Foreign exchange(h) | 450 |
| 171,439 |
| | 3,051 |
| | (160,798 | ) | 14,142 |
| Equity(h) | — |
| 37,741 |
| | 4,921 |
| | (33,396 | ) | 9,266 |
| Commodity(h) | 316 |
| 42,331 |
| | 1,155 |
| | (33,167 | ) | 10,635 |
| Total derivative receivables(e) | 1,242 |
| 1,640,806 |
| | 22,233 |
| | (1,589,298 | ) | 74,983 |
| Total trading assets | 159,512 |
| 1,831,942 |
| | 47,872 |
| | (1,589,298 | ) | 450,028 |
| Available-for-sale securities: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies(a) | — |
| 98,388 |
| | — |
| | — |
| 98,388 |
| Residential – nonagency | — |
| 74,189 |
| | 450 |
| | — |
| 74,639 |
| Commercial – nonagency | — |
| 12,948 |
| | 255 |
| | — |
| 13,203 |
| Total mortgage-backed securities | — |
| 185,525 |
| | 705 |
| | — |
| 186,230 |
| U.S. Treasury and government agencies(a)(h) | 11,089 |
| 1,041 |
| | — |
| | — |
| 12,130 |
| Obligations of U.S. states and municipalities | 35 |
| 21,489 |
| | 187 |
| | — |
| 21,711 |
| Certificates of deposit | — |
| 2,783 |
| | — |
| | — |
| 2,783 |
| Non-U.S. government debt securities(h) | 29,556 |
| 36,488 |
| | — |
| | — |
| 66,044 |
| Corporate debt securities | — |
| 38,609 |
| | — |
| | — |
| 38,609 |
| Asset-backed securities: | | | | | | | | Collateralized loan obligations | — |
| — |
| | 27,896 |
| | — |
| 27,896 |
| Other | — |
| 12,843 |
| | 128 |
| | — |
| 12,971 |
| Equity securities | 2,733 |
| 38 |
| | — |
| | — |
| 2,771 |
| Total available-for-sale securities | 43,413 |
| 298,816 |
| | 28,916 |
| | — |
| 371,145 |
| Loans | — |
| 273 |
| | 2,282 |
| | — |
| 2,555 |
| Mortgage servicing rights | — |
| — |
| | 7,614 |
| | — |
| 7,614 |
| Other assets: | | | | | | | | Private equity investments(f) | 578 |
| — |
| | 7,181 |
| | — |
| 7,759 |
| All other | 4,188 |
| 253 |
| | 4,258 |
| | — |
| 8,699 |
| Total other assets | 4,766 |
| 253 |
| | 11,439 |
| | — |
| 16,458 |
| Total assets measured at fair value on a recurring basis | $ | 207,691 |
| $ | 2,165,719 |
| (g) | $ | 98,123 |
| (g) | $ | (1,589,298 | ) | $ | 882,235 |
| Deposits | $ | — |
| $ | 3,750 |
| | $ | 1,983 |
| | $ | — |
| $ | 5,733 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| 4,388 |
| | — |
| | — |
| 4,388 |
| Other borrowed funds | — |
| 9,972 |
| | 1,619 |
| | — |
| 11,591 |
| Trading liabilities: | | | | | | | | Debt and equity instruments(d)(h) | 47,469 |
| 13,588 |
| | 205 |
| | — |
| 61,262 |
| Derivative payables: | | | | | | | | Interest rate(h) | 490 |
| 1,256,934 |
| | 3,295 |
| | (1,235,813 | ) | 24,906 |
| Credit | — |
| 95,411 |
| | 4,616 |
| | (97,523 | ) | 2,504 |
| Foreign exchange(h) | 428 |
| 183,308 |
| | 4,801 |
| | (169,936 | ) | 18,601 |
| Equity(h) | — |
| 37,807 |
| | 6,727 |
| | (32,715 | ) | 11,819 |
| Commodity(h) | 176 |
| 46,565 |
| | 901 |
| | (34,816 | ) | 12,826 |
| Total derivative payables(e) | 1,094 |
| 1,620,025 |
| | 20,340 |
| | (1,570,803 | ) | 70,656 |
| Total trading liabilities | 48,563 |
| 1,633,613 |
| | 20,545 |
| | (1,570,803 | ) | 131,918 |
| Accounts payable and other liabilities | — |
| — |
| | 36 |
| | — |
| 36 |
| Beneficial interests issued by consolidated VIEs | — |
| 245 |
| | 925 |
| | — |
| 1,170 |
| Long-term debt | — |
| 22,312 |
| | 8,476 |
| | — |
| 30,788 |
| Total liabilities measured at fair value on a recurring basis | $ | 48,563 |
| $ | 1,674,280 |
| | $ | 33,584 |
| | $ | (1,570,803 | ) | $ | 185,624 |
|
| | (a) | At June 30, 2013, and December 31, 2012, included total U.S. government-sponsored enterprise obligations of $113.8 billion and $119.4 billion, respectively, which were predominantly mortgage-related. |
| | (b) | At June 30, 2013, and December 31, 2012, included within trading loans were $21.4 billion and $26.4 billion, respectively, of residential first-lien mortgages, and $1.9 billion and $2.2 billion, respectively, of commercial first-lien mortgages. Residential mortgage loans include conforming mortgage loans originated with the intent to sell to U.S. government agencies of $13.5 billion and $17.4 billion, respectively, and reverse mortgages of $3.5 billion and $4.0 billion, respectively. |
| | (c) | Physical commodities inventories are generally accounted for at the lower of cost or market. “Market” is a term defined in U.S. GAAP as not exceeding fair value less costs to sell (“transaction costs”). Transaction costs for the Firm’s physical commodities inventories are either not applicable or immaterial to the value of the inventory. Therefore, market approximates fair value for the Firm’s physical commodities inventories. When fair value hedging has been applied (or when market is below cost), the carrying value of physical commodities approximates fair value, because under fair value hedge accounting, the cost basis is adjusted for changes in fair value. For a further discussion of the Firm’s hedge accounting relationships, see Note 5 on pages 131–142 of this Form 10-Q. To provide consistent fair value disclosure information, all physical commodities inventories have been included in each period presented. |
| | (d) | Balances reflect the reduction of securities owned (long positions) by the amount of securities sold but not yet purchased (short positions) when the long and short positions have identical Committee on Uniform Security Identification Procedures numbers (“CUSIPs”). |
| | (e) | As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists. For purposes of the tables above, the Firm does not reduce derivative receivables and derivative payables balances for this netting adjustment, either within or across the levels of the fair value hierarchy, as such netting is not relevant to a presentation based on the transparency of inputs to the valuation of an asset or liability. Therefore, the balances reported in the fair value hierarchy table are gross of any counterparty netting adjustments. However, if the Firm were to net such balances within level 3, the reduction in the level 3 derivative receivables and payables balances would be $7.0 billion and $7.4 billion at June 30, 2013, and December 31, 2012, respectively; this is exclusive of the netting benefit associated with cash collateral, which would further reduce the level 3 balances. |
| | (f) | Private equity instruments represent investments within the Corporate/Private Equity line of business. The cost basis of the private equity investment portfolio totaled $8.6 billion and $8.4 billion at June 30, 2013, and December 31, 2012, respectively. |
| | (g) | Includes investments in hedge funds, private equity funds, real estate and other funds that do not have readily determinable fair values. The Firm uses net asset value per share when measuring the fair value of these investments. At June 30, 2013, and December 31, 2012, the fair values of these investments were $3.9 billion and $4.9 billion, respectively, of which $1.0 billion and $1.1 billion, respectively were classified in level 2, and $2.9 billion and $3.8 billion, respectively, in level 3. |
| | (h) | The prior period amounts have been revised. This revision had no impact on the Firm’s Consolidated Balance Sheets or its results of operations. |
Transfers between levels for instruments carried at fair value on a recurring basis For the three and six months ended June 30, 2013 and 2012, there were no significant transfers between levels 1 and 2, and from level 2 into level 3. During the three months ended March 31, 2013, certain highly rated CLOs, including $27.3 billion held in the AFS securities portfolio and $1.3 billion held in the trading portfolio, were transferred from Level 3 to Level 2, based on increased liquidity and price transparency. For the six months ended June 30, 2012, transfers from level 3 into level 2 included $1.2 billion of derivative payables based on increased observability of certain structured equity derivatives and $1.3 billion of long-term debt due to increased observability of certain equity structured notes. All transfers are assumed to occur at the beginning of the quarterly reporting period in which they occur. Level 3 valuations The Firm has established well-documented processes for determining fair value, including for instruments where fair value is estimated using significant unobservable inputs (level 3). For further information on the Firm’s valuation process and a detailed discussion of the determination of fair value for individual financial instruments, see Note 3 on pages 196–214 of JPMorgan Chase’s 2012 Annual Report. Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available to the Firm. For instruments valued using internally developed models that use significant unobservable inputs and are therefore classified within level 3 of the fair value hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2. In arriving at an estimate of fair value for an instrument within level 3, management must first determine the appropriate model to use. Second, due to the lack of observability of significant inputs, management must assess all relevant empirical data in deriving valuation inputs — including, but not limited to, transaction details, yield curves, interest rates, prepayment speed, default rates, volatilities, correlations, equity or debt prices, valuations of comparable instruments, foreign exchange rates and credit curves. Finally, management judgment must be applied to assess the appropriate level of valuation adjustments to reflect counterparty credit quality, the Firm’s creditworthiness, constraints on liquidity and unobservable parameters, where relevant. The judgments made are typically affected by the type of product and its specific contractual terms, and the level of liquidity for the product or within the market as a whole. The following table presents the Firm’s primary level 3 financial instruments, the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, the range of values for those inputs and, for certain instruments, the weighted averages of such inputs. While the determination to classify an instrument within level 3 is based on the significance of the unobservable inputs to the overall fair value measurement, level 3 financial instruments typically include observable components (that is, components that are actively quoted and can be validated to external sources) in addition to the unobservable components. The level 1 and/or level 2 inputs are not included in the table. In addition, the Firm manages the risk of the observable components of level 3 financial instruments using securities and derivative positions that are classified within levels 1 or 2 of the fair value hierarchy. The range of values presented in the table is representative of the highest and lowest level input used to value the significant groups of instruments within a product/instrument classification. The input range does not reflect the level of input uncertainty, instead it is driven by the different underlying characteristics of the various instruments within the classification. For example, two option contracts may have similar levels of market risk exposure and valuation uncertainty, but may have significantly different implied volatility levels because the option contracts have different underlyings, tenors, or strike prices. Where provided, the weighted averages of the input values presented in the table are calculated based on the fair value of the instruments that the input is being used to value. In the Firm’s view, the input range and the weighted average value do not reflect the degree of input uncertainty or an assessment of the reasonableness of the Firm’s estimates and assumptions. Rather, they reflect the characteristics of the various instruments held by the Firm and the relative distribution of instruments within the range of characteristics. The input range and weighted average values will therefore vary from period to period and parameter to parameter based on the characteristics of the instruments held by the Firm at each balance sheet date. For the Firm’s derivatives and structured notes positions classified within level 3, the equity and interest rate correlation inputs used in estimating fair value were concentrated at the upper end of the range presented, while the credit correlation inputs were distributed across the range presented and the foreign exchange correlation inputs were concentrated at the lower end of the range presented. In addition, the equity and interest rate volatility inputs used in estimating fair value were concentrated at the upper end of the range presented, while commodities volatilities were concentrated at the lower end of the range. | | | | | | | | | | | | | Level 3 inputs(a) | | June 30, 2013 (in millions, except for ratios and basis points) | | | | | | Product/Instrument | Fair value | | Principal valuation technique | Unobservable inputs | Range of input values | Weighted average | Residential mortgage-backed securities and loans | $ | 9,678 |
| | Discounted cash flows | Yield | 2 | % | - | 24% | 7% | | | | Prepayment speed | 0 | % | - | 28% | 7% | | | | | Conditional default rate | 0 | % | - | 100% | 12% | | | | | Loss severity | 0 | % | - | 76% | 11% | Commercial mortgage-backed securities and loans(b) | 2,006 |
| | Discounted cash flows | Yield | 2 | % | - | 25% | 6% | | | | Conditional default rate | 0 | % | - | 16% | 1% | | | | | Loss severity | 0 | % | - | 40% | 11% | Corporate debt securities, obligations of U.S. states and municipalities, and other | 13,644 |
| | Discounted cash flows | Credit spread | 115 bps |
| - | 187 bps | 139 bps | | | | Yield | 1 | % | - | 35% | 10% | 5,156 |
| | Market comparables | Price | 3 |
| - | 135 | 93 | Net interest rate derivatives | 2,101 |
| | Option pricing | Interest rate correlation | (75 | )% | - | 95% | | | | | | Interest rate spread volatility | 0 | % | - | 60% | | Net credit derivatives(b) | 921 |
| | Discounted cash flows | Credit correlation | 40 | % | - | 90% | | Net foreign exchange derivatives | (1,218 | ) | | Option pricing | Foreign exchange correlation | 40 | % | - | 75% | | Net equity derivatives | (2,291 | ) | | Option pricing | Equity volatility | 15 | % | - | 50% | | Net commodity derivatives | 71 |
| | Option pricing | Commodity volatility | 24 | % | - | 40% | | Collateralized loan obligations | 988 |
| | Discounted cash flows | Credit spread | 140 bps |
| - | 700 bps | 245 bps | | | | | Prepayment speed | 15 | % | - | 20% | 19% | | | | | Conditional default rate | 2% | 2% | | | | | Loss severity | 40% | 40% | | 407 |
| | Market comparables | Price | 0 |
| - | 128 | 84 | Mortgage servicing rights (“MSRs”) | 9,335 |
| | Discounted cash flows | Refer to Note 16 on pages 184–187 of this Form 10-Q. | | Private equity direct investments | 5,307 |
| | Market comparables | EBITDA multiple | 3.7x |
| - | 13.2x | 8.3x | | | | Liquidity adjustment | 0 | % | - | 30% | 12% | Private equity fund investments(c) | 1,798 |
| | Net asset value | Net asset value(e) | | | Long-term debt, other borrowed funds, and deposits(d) | 12,880 |
| | Option pricing | Interest rate correlation | (75 | )% | - | 95% | | | | | Foreign exchange correlation | 0 | % | - | 75% | | | | | Equity correlation | (55 | )% | - | 85% | | | 1,185 |
| | Discounted cash flows | Credit correlation | 40 | % | - | 86% | |
| | (a) | The categories presented in the table have been aggregated based upon the product type, which may differ from their classification on the Consolidated Balance Sheets. |
| | (b) | The unobservable inputs and associated input ranges for approximately $1.0 billion of credit derivative receivables and $910 million of credit derivative payables with underlying mortgage risk have been included in the inputs and ranges provided for commercial mortgage-backed securities and loans. |
| | (c) | As of June 30, 2013, $731 million of private equity fund exposure was carried at a discount to net asset value per share. |
| | (d) | Long-term debt, other borrowed funds and deposits include structured notes issued by the Firm that are predominantly financial instruments containing embedded derivatives. The estimation of the fair value of structured notes is predominantly based on the derivative features embedded within the instruments. The significant unobservable inputs are broadly consistent with those presented for derivative receivables. |
| | (e) | The range has not been disclosed due to the wide range of possible values given the diverse nature of the underlying investments. |
Changes in and ranges of unobservable inputs For a discussion of the impact on fair value of changes in unobservable inputs and the relationships between unobservable inputs as well as a description of attributes of the underlying instruments and external market factors that affect the range of inputs used in the valuation of the Firm’s positions see Note 3 on pages 196–214 of JPMorgan Chase’s 2012 Annual Report. Changes in level 3 recurring fair value measurements The following tables include a rollforward of the Consolidated Balance Sheets amounts (including changes in fair value) for financial instruments classified by the Firm within level 3 of the fair value hierarchy for the three and six months ended June 30, 2013 and 2012. When a determination is made to classify a financial instrument within level 3, the determination is based on the significance of the unobservable parameters to the overall fair value measurement. However, level 3 financial instruments typically include, in addition to the unobservable or level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources); accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology. Also, the Firm risk-manages the observable components of level 3 financial instruments using securities and derivative positions that are classified within level 1 or 2 of the fair value hierarchy; as these level 1 and level 2 risk management instruments are not included below, the gains or losses in the following tables do not reflect the effect of the Firm’s risk management activities related to such level 3 instruments. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Three months ended June 30, 2013 (in millions) | Fair value at April 1, 2013 | Total realized/unrealized gains/(losses) | | | | | Transfers into and/or out of level 3(h) | Fair value at June 30, 2013 | Change in unrealized gains/(losses) related to financial instruments held at June 30, 2013 | Purchases(g) | Sales | | Settlements | Assets: | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | U.S. government agencies | $ | 819 |
| $ | 106 |
| | $ | 2 |
| $ | — |
| | $ | (26 | ) | $ | — |
| | $ | 901 |
| | $ | 114 |
| | Residential – nonagency | 633 |
| 203 |
| | 135 |
| (336 | ) | | (20 | ) | — |
| | 615 |
| | 135 |
| | Commercial – nonagency | 1,151 |
| (39 | ) | | 302 |
| (113 | ) | | (30 | ) | — |
| | 1,271 |
| | (49 | ) | | Total mortgage-backed securities | 2,603 |
| 270 |
| | 439 |
| (449 | ) | | (76 | ) | — |
| | 2,787 |
| | 200 |
| | Obligations of U.S. states and municipalities | 1,432 |
| (23 | ) | | 52 |
| (37 | ) | | (203 | ) | — |
| | 1,221 |
| | (22 | ) | | Non-U.S. government debt securities | 85 |
| 9 |
| | 333 |
| (397 | ) | | (4 | ) | 110 |
| | 136 |
| | 11 |
| | Corporate debt securities | 4,852 |
| (41 | ) | | 2,251 |
| (955 | ) | | (822 | ) | 450 |
| | 5,735 |
| | 28 |
| | Loans | 10,032 |
| 41 |
| | 3,782 |
| (2,265 | ) | | (688 | ) | 38 |
| | 10,940 |
| | 21 |
| | Asset-backed securities | 1,579 |
| 95 |
| | 444 |
| (557 | ) | | (12 | ) | (121 | ) | | 1,428 |
| | 56 |
| | Total debt instruments | 20,583 |
| 351 |
| | 7,301 |
| (4,660 | ) | | (1,805 | ) | 477 |
| | 22,247 |
| | 294 |
| | Equity securities | 1,172 |
| (10 | ) | | 111 |
| (57 | ) | | (56 | ) | (121 | ) | | 1,039 |
| | (8 | ) | | Physical commodities | — |
| — |
| | — |
| — |
| | — |
| 16 |
|
| 16 |
|
| — |
| | Other | 948 |
| 43 |
| | 54 |
| (18 | ) | | (52 | ) | 130 |
| | 1,105 |
| | 38 |
| | Total trading assets – debt and equity instruments | 22,703 |
| 384 |
| (c) | 7,466 |
| (4,735 | ) | | (1,913 | ) | 502 |
| | 24,407 |
| | 324 |
| (c) | Net derivative receivables:(a) | | | | | | | | | | | | | | Interest rate | 2,791 |
| 125 |
| | 46 |
| (63 | ) | | (989 | ) | 191 |
| | 2,101 |
| | 156 |
| | Credit | 1,317 |
| (335 | ) | | 3 |
| (1 | ) | | (76 | ) | 13 |
| | 921 |
| | (360 | ) | | Foreign exchange | (1,516 | ) | 161 |
| | 8 |
| — |
| | 137 |
| (8 | ) | | (1,218 | ) | | 71 |
| | Equity | (1,000 | ) | (350 | ) | | 1,024 |
| (1,100 | ) | | (588 | ) | (277 | ) | | (2,291 | ) | | 654 |
| | Commodity | 182 |
| 295 |
| | — |
| — |
| | (412 | ) | 6 |
| | 71 |
| | 63 |
| | Total net derivative receivables | 1,774 |
| (104 | ) | (c) | 1,081 |
| (1,164 | ) | | (1,928 | ) | (75 | ) | | (416 | ) | | 584 |
| (c) | Available-for-sale securities: | | | | | | | | | | | | | | Asset-backed securities | 1,130 |
| — |
| | — |
| — |
| | (5 | ) | — |
| | 1,125 |
| | — |
| | Other | 837 |
| — |
| | 7 |
| — |
| | (20 | ) | — |
| | 824 |
| | — |
| | Total available-for-sale securities | 1,967 |
| — |
| (d) | 7 |
| — |
| | (25 | ) | — |
| | 1,949 |
| | — |
| (d) | Loans | 2,064 |
| 6 |
| (c) | 103 |
| (7 | ) | | (323 | ) | — |
| | 1,843 |
| | 9 |
| (c) | Mortgage servicing rights | 7,949 |
| 1,038 |
| (e) | 655 |
| (19 | ) | | (288 | ) | — |
| | 9,335 |
| | 1,038 |
| (e) | Other assets: | | | | | | | | | | | | | | Private equity investments | 6,831 |
| 434 |
| (c) | 122 |
| (7 | ) | | (275 | ) | — |
| | 7,105 |
| | 206 |
| (c) | All other | 3,985 |
| 1 |
| (f) | 83 |
| (292 | ) | | (97 | ) | — |
| | 3,680 |
| | (11 | ) | (f) | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Three months ended June 30, 2013 (in millions) | Fair value at April 1, 2013 | Total realized/unrealized (gains)/losses | | | | | Transfers into and/or out of level 3(h) | Fair value at June 30, 2013 | Change in unrealized (gains)/losses related to financial instruments held at June 30, 2013 | Purchases(g) | Sales | Issuances | Settlements | Liabilities:(b) | | | | | | | | | | | | | | Deposits | $ | 2,015 |
| $ | (110 | ) | (c) | $ | — |
| $ | — |
| $ | 316 |
| $ | (44 | ) | $ | 13 |
| | $ | 2,190 |
| | $ | (110 | ) | (c) | Other borrowed funds | 2,137 |
| (243 | ) | (c) | — |
| — |
| 2,389 |
| (1,695 | ) | 85 |
| | 2,673 |
| | 33 |
| (c) | Trading liabilities – debt and equity instruments | 251 |
| (60 | ) | (c) | (374 | ) | 454 |
| — |
| (21 | ) | (146 | ) | | 104 |
| | (48 | ) | (c) | Accounts payable and other liabilities | 33 |
| — |
| | — |
| — |
| — |
| (1 | ) | — |
| | 32 |
| | — |
| | Beneficial interests issued by consolidated VIEs | 818 |
| 59 |
| (c) | — |
| — |
| 30 |
| (44 | ) | — |
| | 863 |
| | 54 |
| (c) | Long-term debt | 9,084 |
| (430 | ) | (c) | — |
| — |
| 1,878 |
| (1,246 | ) | (84 | ) | | 9,202 |
| | (292 | ) | (c) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Three months ended June 30, 2012 (in millions) | Fair value at April 1, 2012 | Total realized/unrealized gains/(losses) | | | | | Transfers into and/or out of level 3(h) | Fair value at June 30, 2012 | Change in unrealized gains/(losses) related to financial instruments held at June 30, 2012 | Purchases(g) | Sales | | Settlements | Assets: | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | U.S. government agencies | $ | 79 |
| $ | (9 | ) | | $ | — |
| $ | — |
| | $ | — |
| $ | — |
| | $ | 70 |
| | $ | (4 | ) | | Residential – nonagency | 699 |
| 19 |
| | 87 |
| (95 | ) | | (39 | ) | — |
| | 671 |
| | 3 |
| | Commercial – nonagency | 1,451 |
| 30 |
| | 18 |
| (89 | ) | | (44 | ) | (9 | ) | | 1,357 |
| | 21 |
| | Total mortgage-backed securities | 2,229 |
| 40 |
| | 105 |
| (184 | ) | | (83 | ) | (9 | ) | | 2,098 |
| | 20 |
| | Obligations of U.S. states and municipalities | 1,747 |
| 6 |
| | 9 |
| (303 | ) | | — |
| — |
| | 1,459 |
| | — |
| | Non-U.S. government debt securities | 81 |
| (5 | ) | | 138 |
| (129 | ) | | (15 | ) | — |
| | 70 |
| | — |
| | Corporate debt securities | 5,463 |
| (53 | ) | | 1,620 |
| (1,436 | ) | | (238 | ) | (122 | ) | | 5,234 |
| | 92 |
| | Loans | 11,144 |
| 139 |
| | 1,312 |
| (619 | ) | | (985 | ) | (76 | ) | | 10,915 |
| | 36 |
| | Asset-backed securities | 7,434 |
| (218 | ) | | 454 |
| (673 | ) | | (187 | ) | (1 | ) | | 6,809 |
| | (235 | ) | | Total debt instruments | 28,098 |
| (91 | ) | | 3,638 |
| (3,344 | ) | | (1,508 | ) | (208 | ) | | 26,585 |
| | (87 | ) | | Equity securities | 1,248 |
| (70 | ) | | 90 |
| (30 | ) | | — |
| (2 | ) | | 1,236 |
| | (32 | ) | | Other | 993 |
| 1 |
| | 15 |
| (4 | ) | | (50 | ) | — |
| | 955 |
| | 1 |
| | Total trading assets – debt and equity instruments | 30,339 |
| (160 | ) | (c) | 3,743 |
| (3,378 | ) | | (1,558 | ) | (210 | ) | | 28,776 |
| | (118 | ) | (c) | Net derivative receivables:(a) | | | | | | | | | | | | | | Interest rate | 3,238 |
| 2,027 |
| | 191 |
| (30 | ) | | (1,711 | ) | (23 | ) | | 3,692 |
| | 845 |
| | Credit | 4,808 |
| 168 |
| | 26 |
| (25 | ) | | (530 | ) | 1 |
| | 4,448 |
| | 249 |
| | Foreign exchange | (1,060 | ) | (632 | ) | | 26 |
| (20 | ) | | 201 |
| (3 | ) | | (1,488 | ) | | (594 | ) | | Equity | (2,829 | ) | 885 |
| | 520 |
| (695 | ) | | 108 |
| 28 |
| | (1,983 | ) | | 479 |
| | Commodity | (600 | ) | (86 | ) | | (14 | ) | 71 |
| | 622 |
| 24 |
| | 17 |
| | (31 | ) | | Total net derivative receivables | 3,557 |
| 2,362 |
| (c) | 749 |
| (699 | ) | | (1,310 | ) | 27 |
| | 4,686 |
| | 948 |
| (c) | Available-for-sale securities: | | | | | | | | | | | | | | Asset-backed securities | 25,448 |
| (339 | ) | | 1,849 |
| (649 | ) | | (617 | ) | — |
| | 25,692 |
| | (354 | ) | | Other | 469 |
| 24 |
| | 233 |
| (93 | ) | | (11 | ) | — |
| | 622 |
| | 2 |
| | Total available-for-sale securities | 25,917 |
| (315 | ) | (d) | 2,082 |
| (742 | ) | | (628 | ) | — |
| | 26,314 |
| | (352 | ) | (d) | Loans | 1,766 |
| 546 |
| (c) | 580 |
| — |
| | (372 | ) | — |
| | 2,520 |
| | 536 |
| (c) | Mortgage servicing rights | 8,039 |
| (1,119 | ) | (e) | 526 |
| — |
| | (328 | ) | — |
| | 7,118 |
| | (1,119 | ) | (e) | Other assets: | | | | | | | | | | | | | | Private equity investments | 6,739 |
| 35 |
| (c) | 348 |
| (6 | ) | | (368 | ) | (46 | ) | | 6,702 |
| | 305 |
| (c) | All other | 4,397 |
| (59 | ) | (f) | 276 |
| (73 | ) | | (93 | ) | — |
| | 4,448 |
| | (52 | ) | (f) | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Three months ended June 30, 2012 (in millions) | Fair value at April 1, 2012 | Total realized/unrealized (gains)/losses | | | | | Transfers into and/or out of level 3(h) | Fair value at June 30, 2012 | Change in unrealized (gains)/losses related to financial instruments held at June 30, 2012 | Purchases(g) | Sales | Issuances | Settlements | Liabilities:(b) | | | | | | | | | | | | | | Deposits | $ | 1,651 |
| $ | 35 |
| (c) | $ | — |
| $ | — |
| $ | 357 |
| $ | (96 | ) | $ | (71 | ) | | $ | 1,876 |
| | $ | 34 |
| (c) | Other borrowed funds | 1,233 |
| (205 | ) | (c) | — |
| — |
| 425 |
| (333 | ) | (13 | ) | | 1,107 |
| | (161 | ) | (c) | Trading liabilities – debt and equity instruments | 273 |
| (2 | ) | (c) | (695 | ) | 806 |
| — |
| (17 | ) | (5 | ) | | 360 |
| | (3 | ) | (c) | Accounts payable and other liabilities | 46 |
| — |
| | — |
| — |
| — |
| (4 | ) | — |
| | 42 |
| | — |
| | Beneficial interests issued by consolidated VIEs | 841 |
| 2 |
| (c) | — |
| — |
| 18 |
| (116 | ) | — |
| | 745 |
| | 3 |
| (c) | Long-term debt | 9,553 |
| (191 | ) | (c) | — |
| — |
| 750 |
| (779 | ) | (477 | ) | | 8,856 |
| | (133 | ) | (c) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Six months ended June 30, 2013 (in millions) | Fair value at January 1, 2013 | Total realized/unrealized gains/(losses) | | | | | Transfers into and/or out of level 3(h) | Fair value at June 30, 2013 | Change in unrealized gains/(losses) related to financial instruments held at June 30, 2013 | Purchases(g) | Sales | | Settlements | Assets: | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | U.S. government agencies | $ | 498 |
| $ | 140 |
| | $ | 393 |
| $ | (79 | ) | | $ | (51 | ) | $ | — |
| | $ | 901 |
| | $ | 153 |
| | Residential – nonagency | 663 |
| 312 |
| | 434 |
| (740 | ) | | (49 | ) | (5 | ) | | 615 |
| | 177 |
| | Commercial – nonagency | 1,207 |
| (125 | ) | | 439 |
| (178 | ) | | (72 | ) | — |
| | 1,271 |
| | (142 | ) | | Total mortgage-backed securities | 2,368 |
| 327 |
| | 1,266 |
| (997 | ) | | (172 | ) | (5 | ) | | 2,787 |
| | 188 |
| | Obligations of U.S. states and municipalities | 1,436 |
| 18 |
| | 53 |
| (83 | ) | | (203 | ) | — |
| | 1,221 |
| | 17 |
| | Non-U.S. government debt securities | 67 |
| 11 |
| | 634 |
| (682 | ) | | (4 | ) | 110 |
| | 136 |
| | 11 |
| | Corporate debt securities | 5,308 |
| (124 | ) | | 5,178 |
| (3,518 | ) | | (1,447 | ) | 338 |
| | 5,735 |
| | 30 |
| | Loans | 10,787 |
| (131 | ) | | 5,408 |
| (3,750 | ) | | (1,391 | ) | 17 |
| | 10,940 |
| | (229 | ) | | Asset-backed securities | 3,696 |
| 159 |
| | 1,040 |
| (1,534 | ) | | (147 | ) | (1,786 | ) | | 1,428 |
| | 74 |
| | Total debt instruments | 23,662 |
| 260 |
| | 13,579 |
| (10,564 | ) | | (3,364 | ) | (1,326 | ) | | 22,247 |
| | 91 |
| | Equity securities | 1,114 |
| (9 | ) | | 204 |
| (148 | ) | | (65 | ) | (57 | ) | | 1,039 |
| | (28 | ) | | Physical commodities | — |
| — |
| | — |
| — |
| | — |
| 16 |
| | 16 |
| | — |
| | Other | 863 |
| 87 |
| | 126 |
| (20 | ) | | (81 | ) | 130 |
| | 1,105 |
| | 139 |
| | Total trading assets – debt and equity instruments | 25,639 |
| 338 |
| (c) | 13,909 |
| (10,732 | ) | | (3,510 | ) | (1,237 | ) | | 24,407 |
| | 202 |
| (c) | Net derivative receivables(a): | | | | | | | | | | | | | | Interest rate | 3,322 |
| 431 |
| | 115 |
| (125 | ) | | (1,847 | ) | 205 |
| | 2,101 |
| | 45 |
| | Credit | 1,873 |
| (824 | ) | | 50 |
| (1 | ) | | (189 | ) | 12 |
| | 921 |
| | (836 | ) | | Foreign exchange | (1,750 | ) | 45 |
| | (7 | ) | (3 | ) | | 513 |
| (16 | ) | | (1,218 | ) | | (5 | ) | | Equity | (1,806 | ) | 513 |
| | 1,221 |
| (1,306 | ) | | (810 | ) | (103 | ) | | (2,291 | ) | | 604 |
| | Commodity | 254 |
| 653 |
| | 11 |
| (3 | ) | | (854 | ) | 10 |
| | 71 |
| | 240 |
| | Total net derivative receivables | 1,893 |
| 818 |
| (c) | 1,390 |
| (1,438 | ) | | (3,187 | ) | 108 |
| | (416 | ) | | 48 |
| (c) | Available-for-sale securities: | | | | | | | | | | | | | | Asset-backed securities | 28,024 |
| 5 |
| | 400 |
| — |
| | (44 | ) | (27,260 | ) | | 1,125 |
| | 5 |
| | Other | 892 |
| (9 | ) | | 7 |
| (13 | ) | | (53 | ) | — |
| | 824 |
| | 3 |
| | Total available-for-sale securities | 28,916 |
| (4 | ) | (d) | 407 |
| (13 | ) | | (97 | ) | (27,260 | ) | | 1,949 |
| | 8 |
| (d) | Loans | 2,282 |
| (29 | ) | (c) | 328 |
| (56 | ) | | (682 | ) | — |
| | 1,843 |
| | (43 | ) | (c) | Mortgage servicing rights | 7,614 |
| 1,347 |
| (e) | 1,339 |
| (418 | ) | | (547 | ) | — |
| | 9,335 |
| | 1,347 |
| (e) | Other assets: | | | | | | | | | | | | | | Private equity investments | 7,181 |
| 165 |
| (c) | 203 |
| (103 | ) | | (341 | ) | — |
| | 7,105 |
| | (188 | ) | (c) | All other | 4,258 |
| (25 | ) | (f) | 135 |
| (295 | ) | | (393 | ) | — |
| | 3,680 |
| | (41 | ) | (f) | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Six months ended June 30, 2013 (in millions) | Fair value at January 1, 2013 | Total realized/unrealized (gains)/losses | | | | | Transfers into and/or out of level 3(h) | Fair value at June 30, 2013 | Change in unrealized (gains)/losses related to financial instruments held at June 30, 2013 | Purchases(g) | Sales | Issuances | Settlements | Liabilities:(b) | | | | | | | | | | | | | | Deposits | $ | 1,983 |
| $ | (105 | ) | (c) | $ | — |
| $ | — |
| $ | 612 |
| $ | (157 | ) | $ | (143 | ) | | $ | 2,190 |
| | $ | (97 | ) | (c) | Other borrowed funds | 1,619 |
| (269 | ) | (c) | — |
| — |
| 4,151 |
| (2,919 | ) | 91 |
| | 2,673 |
| | 74 |
| (c) | Trading liabilities – debt and equity instruments | 205 |
| (68 | ) | (c) | (1,859 | ) | 2,006 |
| — |
| (34 | ) | (146 | ) | | 104 |
| | (78 | ) | (c) | Accounts payable and other liabilities | 36 |
| 1 |
| (f) | — |
| — |
| — |
| (5 | ) | — |
| | 32 |
| | 1 |
| (f) | Beneficial interests issued by consolidated VIEs | 925 |
| 25 |
| (c) | — |
| — |
| 51 |
| (138 | ) | — |
| | 863 |
| | 26 |
| (c) | Long-term debt | 8,476 |
| (905 | ) | (c) | — |
| — |
| 3,733 |
| (1,603 | ) | (499 | ) | | 9,202 |
| | (321 | ) | (c) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Six months ended June 30, 2012 (in millions) | Fair value at January 1, 2012 | Total realized/unrealized gains/(losses) | | | | | Transfers into and/or out of level 3(h) | Fair value at June 30, 2012 | Change in unrealized gains/(losses) related to financial instruments held at June 30, 2012 | Purchases(g) | Sales | | Settlements | Assets: | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | U.S. government agencies | $ | 86 |
| $ | (21 | ) | | $ | 5 |
| $ | — |
| | $ | — |
| $ | — |
| | $ | 70 |
| | $ | (8 | ) | | Residential – nonagency | 796 |
| 51 |
| | 179 |
| (258 | ) | | (75 | ) | (22 | ) | | 671 |
| | 27 |
| | Commercial – nonagency | 1,758 |
| (47 | ) | | 130 |
| (329 | ) | | (55 | ) | (100 | ) | | 1,357 |
| | (55 | ) | | Total mortgage-backed securities | 2,640 |
| (17 | ) | | 314 |
| (587 | ) | | (130 | ) | (122 | ) | | 2,098 |
| | (36 | ) | | Obligations of U.S. states and municipalities | 1,619 |
| (1 | ) | | 329 |
| (484 | ) | | (4 | ) | — |
| | 1,459 |
| | — |
| | Non-U.S. government debt securities | 104 |
| 3 |
| | 343 |
| (360 | ) | | (20 | ) | — |
| | 70 |
| | 4 |
| | Corporate debt securities | 6,373 |
| 205 |
| | 3,936 |
| (2,705 | ) | | (2,205 | ) | (370 | ) | | 5,234 |
| | 187 |
| | Loans | 12,209 |
| 295 |
| | 2,213 |
| (1,292 | ) | | (1,930 | ) | (580 | ) | | 10,915 |
| | 189 |
| | Asset-backed securities | 7,965 |
| 12 |
| | 1,278 |
| (1,934 | ) | | (513 | ) | 1 |
| | 6,809 |
| | (52 | ) | | Total debt instruments | 30,910 |
| 497 |
| | 8,413 |
| (7,362 | ) | | (4,802 | ) | (1,071 | ) | | 26,585 |
| | 292 |
| | Equity securities | 1,177 |
| (77 | ) | | 112 |
| (57 | ) | | (13 | ) | 94 |
| | 1,236 |
| | (54 | ) | | Other | 880 |
| 154 |
| | 50 |
| (48 | ) | | (81 | ) | — |
| | 955 |
| | 158 |
| | Total trading assets – debt and equity instruments | 32,967 |
| 574 |
| (c) | 8,575 |
| (7,467 | ) | | (4,896 | ) | (977 | ) | | 28,776 |
| | 396 |
| (c) | Net derivative receivables(a): | | | | | | | | | | | | | | Interest rate | 3,561 |
| 3,355 |
| | 300 |
| (98 | ) | | (3,055 | ) | (371 | ) | | 3,692 |
| | 828 |
| | Credit | 7,732 |
| (2,186 | ) | | 104 |
| (43 | ) | | (1,160 | ) | 1 |
| | 4,448 |
| | (1,880 | ) | | Foreign exchange | (1,263 | ) | (505 | ) | | 45 |
| (178 | ) | | 419 |
| (6 | ) | | (1,488 | ) | | (505 | ) | | Equity | (3,105 | ) | 165 |
| | 853 |
| (1,078 | ) | | 99 |
| 1,083 |
| | (1,983 | ) | | (405 | ) | | Commodity | (687 | ) | (80 | ) | | 39 |
| 65 |
| | 645 |
| 35 |
| | 17 |
| | (124 | ) | | Total net derivative receivables | 6,238 |
| 749 |
| (c) | 1,341 |
| (1,332 | ) | | (3,052 | ) | 742 |
| | 4,686 |
| | (2,086 | ) | (c) | Available-for-sale securities: | | | | | | | | | | | | | | Asset-backed securities | 24,958 |
| (336 | ) | | 3,170 |
| (1,147 | ) | | (1,069 | ) | 116 |
| | 25,692 |
| | (355 | ) | | Other | 528 |
| 32 |
| | 261 |
| (113 | ) | | (86 | ) | — |
| | 622 |
| | 7 |
| | Total available-for-sale securities | 25,486 |
| (304 | ) | (d) | 3,431 |
| (1,260 | ) | | (1,155 | ) | 116 |
| | 26,314 |
| | (348 | ) | (d) | Loans | 1,647 |
| 576 |
| (c) | 707 |
| — |
| | (491 | ) | 81 |
| | 2,520 |
| | 563 |
| (c) | Mortgage servicing rights | 7,223 |
| (523 | ) | (e) | 1,099 |
| — |
| | (681 | ) | — |
| | 7,118 |
| | (523 | ) | (e) | Other assets: | | | | | | | | | | | | | | Private equity investments | 6,751 |
| 287 |
| (c) | 459 |
| (242 | ) | | (507 | ) | (46 | ) | | 6,702 |
| | 436 |
| (c) | All other | 4,374 |
| (223 | ) | (f) | 632 |
| (92 | ) | | (243 | ) | — |
| | 4,448 |
| | (218 | ) | (f) | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Six months ended June 30, 2012 (in millions) | Fair value at January 1, 2012 | Total realized/unrealized (gains)/losses | | | | | Transfers into and/or out of level 3(h) | Fair value at June 30, 2012 | Change in unrealized (gains)/losses related to financial instruments held at June 30, 2012 | Purchases(g) | Sales | Issuances | Settlements | Liabilities:(b) | | | | | | | | | | | | | | Deposits | $ | 1,418 |
| $ | 166 |
| (c) | $ | — |
| $ | — |
| $ | 708 |
| $ | (232 | ) | $ | (184 | ) | | $ | 1,876 |
| | $ | 155 |
| (c) | Other borrowed funds | 1,507 |
| (9 | ) | (c) | — |
| — |
| 809 |
| (1,178 | ) | (22 | ) | | 1,107 |
| | (38 | ) | (c) | Trading liabilities – debt and equity instruments | 211 |
| (17 | ) | (c) | (1,400 | ) | 1,599 |
| — |
| (28 | ) | (5 | ) | | 360 |
| | (3 | ) | (c) | Accounts payable and other liabilities | 51 |
| — |
| | — |
| — |
| — |
| (9 | ) | — |
| | 42 |
| | — |
| | Beneficial interests issued by consolidated VIEs | 791 |
| 47 |
| (c) | — |
| — |
| 54 |
| (147 | ) | — |
| | 745 |
| | 12 |
| (c) | Long-term debt | 10,310 |
| (52 | ) | (c) | — |
| — |
| 1,874 |
| (2,166 | ) | (1,110 | ) | | 8,856 |
| | 20 |
| (c) |
| | (a) | All level 3 derivatives are presented on a net basis, irrespective of the underlying counterparty. |
| | (b) | Level 3 liabilities as a percentage of total Firm liabilities accounted for at fair value (including liabilities measured at fair value on a nonrecurring basis) were 16% and 18% at June 30, 2013, and December 31, 2012, respectively. |
| | (c) | Predominantly reported in principal transactions revenue, except for changes in fair value for Consumer & Community Banking (“CCB”) mortgage loans and lending-related commitments originated with the intent to sell, which are reported in mortgage fees and related income. |
| | (d) | Realized gains/(losses) on available-for-sale (“AFS”) securities, as well as other-than-temporary impairment losses that are recorded in earnings, are reported in securities gains. Unrealized gains/(losses) are reported in OCI. Realized gains/(losses) and foreign exchange remeasurement adjustments recorded in income on AFS securities were $3 million and $(260) million for the three months ended June 30, 2013 and 2012, and $(15) million and $(164) million for the six months ended June 30, 2013 and 2012, respectively. Unrealized gains/(losses) recorded on AFS securities in OCI were $(3) million and $(55) million for the three months ended June 30, 2013 and 2012, and $11 million and $(140) million for the six months ended June 30, 2013 and 2012, respectively. |
| | (e) | Changes in fair value for CCB mortgage servicing rights are reported in mortgage fees and related income. |
| | (f) | Predominantly reported in other income. |
| | (g) | Loan originations are included in purchases. |
| | (h) | All transfers into and/or out of level 3 are assumed to occur at the beginning of the quarterly reporting period in which they occur. |
Level 3 analysis Consolidated Balance Sheets changes Level 3 assets (including assets measured at fair value on a nonrecurring basis) were 2.8% of total Firm assets at June 30, 2013. The following describes significant changes to level 3 assets since December 31, 2012, for those items measured at fair value on a recurring basis. For further information on changes impacting items measured at fair value on a nonrecurring basis, see Assets and liabilities measured at fair value on a nonrecurring basis on page 125 of this Form 10-Q. Three months ended June 30, 2013 Level 3 assets were $65.7 billion at June 30, 2013, reflecting a decrease of $728 million from March 31, 2013, due to the following: | | • | $3.5 billion decrease in derivative receivables largely driven by a $1.1 billion decrease in interest rate derivatives due to the increase in interest rates and a $1.0 billion decrease in equity derivatives due to settlements; |
| | • | $1.7 billion increase in trading assets - debt and equity instruments, largely driven by net purchases of trading loans and corporate debt securities; |
| | • | $1.4 billion increase in MSRs. For further discussion of the change, refer to Note 16 on pages 184–187 of this Form 10-Q. |
Six months ended June 30, 2013 Level 3 assets decreased by $32.4 billion in the first six months of 2013, due to the following: | | • | $26.9 billion decrease in asset-backed AFS securities and a $2.3 billion decrease in asset-backed trading securities largely driven by transfers of highly rated CLOs from level 3 into level 2 during the first quarter of 2013, based on increased liquidity and price transparency; |
| | • | $4.8 billion decrease in derivative receivables largely driven by a $2.1 billion decrease from the impact of tightening reference entity credit spreads and risk reductions in credit derivatives, a $1.5 billion decrease in interest rate derivatives due to the increase in interest rates, and $1.0 billion decrease in foreign exchange derivatives due to market movements; |
| | • | $1.7 billion increase in MSRs. For further discussion of the change, refer to Note 16 on pages 184–187 of this Form 10-Q. |
Gains and losses The following describes significant components of total realized/unrealized gains/(losses) for instruments measured at fair value on a recurring basis for the periods indicated. For further information on these instruments, see Changes in level 3 recurring fair value measurements rollforward tables on pages 120–123 of this Form 10-Q. Three months ended June 30, 2013 | | • | $1.0 billion of gains on MSRs. For further discussion of the change, refer to Note 16 on pages 184–187 of this Form 10-Q. |
Three months ended June 30, 2012 | | • | $2.4 billion of net gains on derivatives, largely related to gains in interest rate lock commitments due to increased volumes and declining interest rates; and |
| | • | $1.1 billion of losses on MSRs. For further discussion of the change, refer to Note 16 on pages 184–187 of this Form 10-Q. |
Six months ended June 30, 2013 | | • | $1.3 billion of gains on MSRs. For further discussion of the change, refer to Note 16 on pages 184–187 of this Form 10-Q. |
| | • | $905 million of gains on long-term debt, due to market movements. |
Six months ended June 30, 2012 | | • | $749 million of net gains on derivatives, driven by $3.4 billion of gains predominantly on interest rate lock commitments due to increased volumes and declining interest rates, partially offset by $2.2 billion of losses on credit derivatives largely as a result of tightening of reference entity credit spreads. |
Credit adjustments When determining the fair value of an instrument, it may be necessary to record adjustments to the Firm’s estimates of fair value in order to reflect the counterparty credit quality and Firm’s own creditworthiness: | | • | Credit valuation adjustments (“CVA”) are taken to reflect the credit quality of a counterparty in the valuation of derivatives. CVA adjustments are necessary when the market price (or parameter) is not indicative of the credit quality of the counterparty. As few classes of derivative contracts are listed on an exchange, derivative positions are predominantly valued using models that use as their basis observable market parameters. An adjustment therefore may be necessary to reflect the credit quality of each derivative counterparty to arrive at fair value. |
The Firm estimates derivatives CVA using a scenario analysis to estimate the expected credit exposure across all of the Firm’s positions with each counterparty, and then estimates losses as a result of a counterparty credit event. The key inputs to this methodology are (i) the expected positive exposure to each counterparty based on a simulation that assumes the current population of existing derivatives with each counterparty remains unchanged and considers contractual factors designed to mitigate the Firm’s credit exposure, such as collateral and legal rights of offset, (ii) the probability of a default event occurring for each counterparty, as derived from observed or estimated credit default swap (“CDS”) spreads, and (iii) estimated recovery rates implied by CDS, adjusted to consider the differences in recovery rates as a derivative creditor relative to those reflected in CDS spreads, which generally reflect senior unsecured creditor risk. | | • | Debit valuation adjustments (“DVA”) are taken to reflect the credit quality of the Firm in the valuation of liabilities measured at fair value. The DVA calculation methodology is generally consistent with the CVA methodology described above and incorporates JPMorgan Chase’s credit spread as observed through the CDS market to estimate the probability of default and loss given default as a result of a systemic event affecting the Firm. Structured notes DVA is estimated using the current fair value of the structured note as the exposure amount, and is otherwise consistent with the derivative DVA methodology. |
The following table provides the credit adjustments, excluding the effect of any hedging activity, reflected within the Consolidated Balance Sheets as of the dates indicated. | | | | | | | | | (in millions) | Jun 30, 2013 | | Dec 31, 2012 | Derivative receivables balance (net of derivatives CVA) | $ | 73,751 |
| | $ | 74,983 |
| Derivatives CVA(a) | (3,357 | ) | | (4,238 | ) | Derivative payables balance (net of derivatives DVA) | 64,385 |
| | 70,656 |
| Derivatives DVA | (929 | ) | | (830 | ) | Structured notes balance (net of structured notes DVA)(b)(c)(d) | 47,630 |
| | 48,112 |
| Structured notes DVA | (2,094 | ) | | (1,712 | ) |
| | (a) | Derivatives CVA, gross of hedges, includes results managed by the credit portfolio and other lines of business within the Corporate & Investment Bank (“CIB”). |
| | (b) | Structured notes are predominantly financial instruments containing embedded derivatives. At June 30, 2013, and December 31, 2012, included within the balances above are $871 million and $1.1 billion, respectively, of plain vanilla financial instruments with fixed or floating rate coupons that are not indexed to an underlying that have been elected under the fair value option. For further information on fair value option see Note 4 on pages of 214–216 of JPMorgan Chase’s 2012 Annual Report. |
| | (c) | Structured notes are recorded within long-term debt, other borrowed funds or deposits on the Consolidated Balance Sheets, depending upon their tenor and legal form. |
| | (d) | Structured notes are measured at fair value based on the Firm’s election under the fair value option. For further information on these elections, see Note 4 on pages 128–130 of this Form 10-Q. |
The following table provides the impact of credit adjustments on earnings in the respective periods, excluding the effect of any hedging activity. | | | | | | | | | | | | | | | | | | Three months ended June 30, | | Six months ended June 30, | (in millions) | 2013 | | 2012 | | 2013 | | 2012 | Credit adjustments: | | | | | | | | Derivative CVA(a) | $ | 549 |
| | $ | (410 | ) | | $ | 881 |
| | $ | 1,051 |
| Derivative DVA | 104 |
| | 340 |
| | 99 |
| | (99 | ) | Structured note DVA(b) | 251 |
| | 415 |
| | 382 |
| | (53 | ) |
| | (a) | Derivatives CVA, gross of hedges, includes results managed by the credit portfolio and other lines of business within the CIB. |
| | (b) | Structured notes are measured at fair value based on the Firm’s election under the fair value option. For further information on these elections, see Note 4 on pages 128–130 of this Form 10-Q. |
Assets and liabilities measured at fair value on a nonrecurring basis At June 30, 2013, assets measured at fair value on a nonrecurring basis were $1.6 billion and predominantly consisted of loans that had fair value adjustments in the first six months of 2013. At December 31, 2012, assets measured at fair value on a nonrecurring basis were $5.1 billion, comprised predominantly of loans that had fair value adjustments in the twelve months of 2012. At June 30, 2013, $95 million and $1.5 billion of these assets were classified in levels 2 and 3 of the fair value hierarchy, respectively. At December 31, 2012, $667 million and $4.4 billion of these assets were classified in levels 2 and 3 of the fair value hierarchy, respectively. Liabilities measured at fair value on a nonrecurring basis were not significant at June 30, 2013, and December 31, 2012. For the three and six months ended June 30, 2013 and 2012, there were no significant transfers between levels 1, 2, and 3. Of the $1.6 billion of assets measured at fair value on a nonrecurring basis, $1.2 billion related to residential real estate loans measured at the net realizable value of the underlying collateral (i.e., collateral-dependent loans and other loans charged off in accordance with regulatory guidance). These amounts are classified as level 3, as they are valued using a broker’s price opinion and discounted based upon the Firm’s experience with actual liquidation values. These discounts to the broker price opinions ranged from 18% to 59%, with a weighted average of 29%. The total change in the recorded value of assets and liabilities for which a fair value adjustment has been included in the Consolidated Statements of Income for the three months ended June 30, 2013 and 2012, related to financial instruments held at those dates, was a reduction of $293 million and $514 million, respectively; and for the six months ended June 30, 2013 and 2012, were losses of $521 million and $881 million, these reductions in recorded value were predominantly associated with loans. For information about the measurement of impaired collateral-dependent loans, and other loans where the carrying value is based on the fair value of the underlying collateral (e.g., residential mortgage loans charged off in accordance with regulatory guidance), see Note 14 on pages 250–275 of JPMorgan Chase’s 2012 Annual Report. Additional disclosures about the fair value of financial instruments that are not carried on the Consolidated Balance Sheets at fair value The following table presents the carrying values and estimated fair values at June 30, 2013, and December 31, 2012, of financial assets and liabilities, excluding financial instruments which are carried at fair value on a recurring basis, and information is provided on their classification within the fair value hierarchy. For additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value, see Note 3 on pages 196–214 of JPMorgan Chase’s 2012 Annual Report. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2013 | | December 31, 2012 | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | (in billions) | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | Financial assets | | | | | | | | | | | | Cash and due from banks | $ | 29.2 |
| $ | 29.2 |
| $ | — |
| $ | — |
| $ | 29.2 |
| | $ | 53.7 |
| $ | 53.7 |
| $ | — |
| $ | — |
| $ | 53.7 |
| Deposits with banks | 311.3 |
| 303.9 |
| 7.4 |
| — |
| 311.3 |
| | 121.8 |
| 114.1 |
| 7.7 |
| — |
| 121.8 |
| Accrued interest and accounts receivable | 81.6 |
| — |
| 81.3 |
| 0.3 |
| 81.6 |
| | 60.9 |
| — |
| 60.3 |
| 0.6 |
| 60.9 |
| Federal funds sold and securities purchased under resale agreements | 227.2 |
| — |
| 227.2 |
| — |
| 227.2 |
| | 272.0 |
| — |
| 272.0 |
| — |
| 272.0 |
| Securities borrowed | 111.9 |
| — |
| 111.9 |
| — |
| 111.9 |
| | 108.8 |
| — |
| 108.8 |
| — |
| 108.8 |
| Loans, net of allowance for loan losses(a) | 704.3 |
| — |
| 19.5 |
| 686.8 |
| 706.3 |
| | 709.3 |
| — |
| 26.4 |
| 685.4 |
| 711.8 |
| Other | 57.2 |
| — |
| 53.1 |
| 4.7 |
| 57.8 |
| | 49.7 |
| — |
| 42.7 |
| 7.4 |
| 50.1 |
| Financial liabilities | | | | | | | | | | | | Deposits | $ | 1,197.1 |
| $ | — |
| $ | 1,196.2 |
| $ | 1.2 |
| $ | 1,197.4 |
| | $ | 1,187.9 |
| $ | — |
| $ | 1,187.2 |
| $ | 1.2 |
| $ | 1,188.4 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | 254.3 |
| — |
| 254.3 |
| — |
| 254.3 |
| | 235.7 |
| — |
| 235.7 |
| — |
| 235.7 |
| Commercial paper | 56.6 |
| — |
| 56.6 |
| — |
| 56.6 |
| | 55.4 |
| — |
| 55.4 |
| — |
| 55.4 |
| Other borrowed funds | 17.8 |
| — |
| 17.8 |
| — |
| 17.8 |
| | 15.0 |
| — |
| 15.0 |
| — |
| 15.0 |
| Accounts payable and other liabilities | 178.0 |
| — |
| 176.4 |
| 1.7 |
| 178.1 |
| | 156.5 |
| — |
| 153.8 |
| 2.5 |
| 156.3 |
| Beneficial interests issued by consolidated VIEs | 54.0 |
| — |
| 49.9 |
| 4.0 |
| 53.9 |
| | 62.0 |
| — |
| 57.7 |
| 4.4 |
| 62.1 |
| Long-term debt and junior subordinated deferrable interest debentures | 237.0 |
| — |
| 238.2 |
| 5.5 |
| 243.7 |
| | 218.2 |
| — |
| 220.0 |
| 5.4 |
| 225.4 |
|
| | (a) | Fair value is typically estimated using a discounted cash flow model that incorporates the characteristics of the underlying loans (including principal, contractual interest rate and contractual fees) and other key inputs, including expected lifetime credit losses, interest rates, prepayment rates, and primary origination or secondary market spreads. For certain loans, the fair value is measured based on the value of the underlying collateral. The difference between the estimated fair value and carrying value of a financial asset or liability is the result of the different methodologies used to determine fair value as compared with carrying value. For example, credit losses are estimated for a financial asset’s remaining life in a fair value calculation but are estimated for a loss emergence period in the allowance for loan loss calculation; future loan income (interest and fees) is incorporated in a fair value calculation but is generally not considered in the allowance for loan losses. For a further discussion of the Firm’s methodologies for estimating the fair value of loans and lending-related commitments, see pages 196–214 of JPMorgan Chase’s 2012 Annual Report and pages 114–127 of this Note. |
The majority of the Firm’s lending-related commitments are not carried at fair value on a recurring basis on the Consolidated Balance Sheets, nor are they actively traded. The carrying value and estimated fair value of the Firm’s wholesale lending-related commitments were as follows for the periods indicated. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2013 | | December 31, 2012 | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | (in billions) | Carrying value(a) | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value(a) | Level 1 | Level 2 | Level 3 | Total estimated fair value | Wholesale lending-related commitments | $ | 0.7 |
| $ | — |
| $ | — |
| $ | 1.4 |
| $ | 1.4 |
| | $ | 0.7 |
| $ | — |
| $ | — |
| $ | 1.9 |
| $ | 1.9 |
|
| | (a) | Represents the allowance for wholesale lending-related commitments. Excludes the current carrying values of the guarantee liability and the offsetting asset, each of which are recognized at fair value at the inception of guarantees. |
The Firm does not estimate the fair value of consumer lending-related commitments. In many cases, the Firm can reduce or cancel these commitments by providing the borrower notice or, in some cases, without notice as permitted by law. For a further discussion of the valuation of lending-related commitments, see page 198 of JPMorgan Chase’s 2012 Annual Report. Trading assets and liabilities – average balances Average trading assets and liabilities were as follows for the periods indicated. | | | | | | | | | | | | | | | | | | | | Three months ended June 30, | | Six months ended June 30, | (in millions) | | 2013 | | 2012 | | 2013 | | 2012 | Trading assets – debt and equity instruments(a) | | $ | 357,285 |
| | $ | 346,708 |
| | $ | 363,952 |
| | $ | 351,021 |
| Trading assets – derivative receivables | | 75,310 |
| | 89,345 |
| | 75,115 |
| | 89,896 |
| Trading liabilities – debt and equity instruments(a)(b) | | 75,671 |
| | 69,763 |
| | 73,103 |
| | 69,374 |
| Trading liabilities – derivative payables | | 66,246 |
| | 78,704 |
| | 67,458 |
| | 77,387 |
|
| | (a) | Balances reflect the reduction of securities owned (long positions) by the amount of securities sold, but not yet purchased (short positions) when the long and short positions have identical CUSIP numbers. |
| | (b) | Primarily represent securities sold, not yet purchased. |
|