Securities

Securities are classified as trading, AFS or HTM. Securities classified as trading assets are discussed in Note 2. Predominantly all of the Firm’s AFS and HTM securities are held by Treasury and CIO in connection with its asset-liability management activities. At December 31, 2017, the investment securities portfolio consisted of debt securities with an average credit rating of AA+ (based upon external ratings where available, and where not available, based primarily upon internal ratings which correspond to ratings as defined by S&P and Moody’s). AFS securities are carried at fair value on the Consolidated balance sheets. Unrealized gains and losses, after any applicable hedge accounting adjustments, are reported as net increases or decreases to AOCI. The specific identification method is used to determine realized gains and losses on AFS securities, which are included in securities gains/(losses) on the Consolidated statements of income. HTM debt securities, which management has the intent and ability to hold until maturity, are carried at amortized cost on the Consolidated balance sheets. For both AFS and HTM debt securities, purchase discounts or premiums are generally amortized into interest income over the contractual life of the security.

The amortized cost and estimated fair value of the investment securities portfolio were as follows for the dates indicated.



	2017								2016
December 31, (in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Available-for-sale debt securities
Mortgage-backed securities:
U.S. government agencies^(a)	$	69,879	$	736	$	335	$	70,280	$	63,367	$	1,112	$	474	$	64,005
Residential:
U.S^(b)	8,193		185		14		8,364		8,171		100		28		8,243
Non-U.S.	2,882		122		1		3,003		6,049		158		7		6,200
Commercial	4,932		98		5		5,025		9,002		122		20		9,104
Total mortgage-backed securities	85,886		1,141		355		86,672		86,589		1,492		529		87,552
U.S. Treasury and government agencies^(a)	22,510		266		31		22,745		44,822		75		796		44,101
Obligations of U.S. states and municipalities	30,490		1,881		33		32,338		30,284		1,492		184		31,592
Certificates of deposit	59		—		—		59		106		—		—		106
Non-U.S. government debt securities	26,900		426		32		27,294		34,497		836		45		35,288
Corporate debt securities	2,657		101		1		2,757		4,916		64		22		4,958
Asset-backed securities:
Collateralized loan obligations	20,928		69		1		20,996		27,352		75		26		27,401
Other	8,764		77		24		8,817		6,950		62		45		6,967
Total available-for-sale debt securities	198,194		3,961		477		201,678		235,516		4,096		1,647		237,965
Available-for-sale equity securities	547		—		—		547		914		12		—		926
Total available-for-sale securities	198,741		3,961		477		202,225		236,430		4,108		1,647		238,891
Held-to-maturity debt securities
Mortgage-backed securities
U.S. government agencies^(c)	27,577		558		40		28,095		29,910		638		37		30,511
Commercial	5,783		1		74		5,710		5,783		—		129		5,654
Total mortgage-backed securities	33,360		559		114		33,805		35,693		638		166		36,165
Obligations of U.S. states and municipalities	14,373		554		80		14,847		14,475		374		125		14,724
Total held-to-maturity debt securities	47,733		1,113		194		48,652		50,168		1,012		291		50,889
Total securities	$	246,474	$	5,074	$	671	$	250,877	$	286,598	$	5,120	$	1,938	$	289,780


(a)	Includes total U.S. government-sponsored enterprise obligations with a fair value of $45.8 billion for the years ended December 31, 2017 and 2016, which were predominantly mortgage-related.


(b)	Prior period amounts have been revised to conform with the current period presentation.


(c)	Included total U.S. government-sponsored enterprise obligations with amortized cost of $22.0 billion and $25.6 billion at December 31, 2017 and 2016, respectively, which were mortgage-related.

Securities impairment

The following tables present the fair value and gross unrealized losses for the investment securities portfolio by aging category at December 31, 2017 and 2016.



	Securities with gross unrealized losses
	Less than 12 months				12 months or more
December 31, 2017 (in millions)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Total fair value		Total gross unrealized losses
Available-for-sale debt securities
Mortgage-backed securities:
U.S. government agencies	$	36,037	$	139	$	7,711	$	196	$	43,748	$	335
Residential:
U.S	1,112		5		596		9		1,708		14
Non-U.S.	—		—		266		1		266		1
Commercial	528		4		335		1		863		5
Total mortgage-backed securities	37,677		148		8,908		207		46,585		355
U.S. Treasury and government agencies	1,834		11		373		20		2,207		31
Obligations of U.S. states and municipalities	949		7		1,652		26		2,601		33
Certificates of deposit	—		—		—		—		—		—
Non-U.S. government debt securities	6,500		15		811		17		7,311		32
Corporate debt securities	—		—		52		1		52		1
Asset-backed securities:
Collateralized loan obligations	—		—		276		1		276		1
Other	3,521		20		720		4		4,241		24
Total available-for-sale debt securities	50,481		201		12,792		276		63,273		477
Available-for-sale equity securities	—		—		—		—		—		—
Held-to-maturity securities
Mortgage-backed securities
U.S. government securities	4,070		38		205		2		4,275		40
Commercial	3,706		41		1,882		33		5,588		74
Total mortgage-backed securities	7,776		79		2,087		35		9,863		114
Obligations of U.S. states and municipalities	584		9		2,131		71		2,715		80
Total held-to-maturity securities	8,360		88		4,218		106		12,578		194
Total securities with gross unrealized losses	$	58,841	$	289	$	17,010	$	382	$	75,851	$	671



	Securities with gross unrealized losses
	Less than 12 months				12 months or more
December 31, 2016 (in millions)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Total fair value		Total gross unrealized losses
Available-for-sale debt securities
Mortgage-backed securities:
U.S. government agencies	$	29,856	$	463	$	506	$	11	$	30,362	$	474
Residential:
U.S.^(a)	1,373		6		1,073		22		2,446		28
Non-U.S.	—		—		886		7		886		7
Commercial	2,328		17		1,078		3		3,406		20
Total mortgage-backed securities	33,557		486		3,543		43		37,100		529
U.S. Treasury and government agencies	23,543		796		—		—		23,543		796
Obligations of U.S. states and municipalities	7,215		181		55		3		7,270		184
Certificates of deposit	—		—		—		—		—		—
Non-U.S. government debt securities	4,436		36		421		9		4,857		45
Corporate debt securities	797		2		829		20		1,626		22
Asset-backed securities:
Collateralized loan obligations	766		2		5,263		24		6,029		26
Other	739		6		1,992		39		2,731		45
Total available-for-sale debt securities	71,053		1,509		12,103		138		83,156		1,647
Available-for-sale equity securities	—		—		—		—		—		—
Held-to-maturity debt securities
Mortgage-backed securities
U.S. government agencies	3,129		37		—		—		3,129		37
Commercial	5,163		114		441		15		5,604		129
Total mortgage-backed securities	8,292		151		441		15		8,733		166
Obligations of U.S. states and municipalities	4,702		125		—		—		4,702		125
Total held-to-maturity securities	12,994		276		441		15		13,435		291
Total securities with gross unrealized losses	$	84,047	$	1,785	$	12,544	$	153	$	96,591	$	1,938


(a)	Prior period amounts have been revised to conform with the current period presentation.

Gross unrealized losses

The Firm has recognized unrealized losses on securities that it intends to sell as OTTI. The Firm does not intend to sell any of the remaining securities with an unrealized loss in AOCI as of December 31, 2017, and it is not likely that the Firm will be required to sell these securities before recovery of their amortized cost basis. Except for the securities for which credit losses have been recognized in income, the Firm believes that the securities with an unrealized loss in AOCI are not other-than-temporarily impaired as of December 31, 2017.

Other-than-temporary impairment

AFS debt and equity securities and HTM debt securities in unrealized loss positions are analyzed as part of the Firm’s ongoing assessment of OTTI. For most types of debt securities, the Firm considers a decline in fair value to be other-than-temporary when the Firm does not expect to recover the entire amortized cost basis of the security. For beneficial interests in securitizations that are rated below “AA” at their acquisition, or that can be contractually prepaid or otherwise settled in such a way that the Firm would not recover substantially all of its recorded investment, the Firm considers an impairment to be other-than-temporary when there is an adverse change in expected cash flows. For AFS equity securities, the Firm considers a decline in fair value to be other-than-temporary if it is probable that the Firm will not recover its cost basis.

Potential OTTI is considered using a variety of factors, including the length of time and extent to which the market value has been less than cost; adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a security; payment structure of the security; changes to the rating of the security by a rating agency; the volatility of the fair value changes; and the Firm’s intent and ability to hold the security until recovery.

For AFS debt securities, the Firm recognizes OTTI losses in earnings if the Firm has the intent to sell the debt security, or if it is more likely than not that the Firm will be required to sell the debt security before recovery of its amortized cost basis. In these circumstances the impairment loss is equal to the full difference between the amortized cost basis and the fair value of the securities. For debt securities in an unrealized loss position that the Firm has the intent and ability to hold, the expected cash flows to be received from the securities are evaluated to determine if a credit loss exists. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized in income. Amounts relating to factors other than credit losses are recorded in OCI.

The Firm’s cash flow evaluations take into account the factors noted above and expectations of relevant market and economic data as of the end of the reporting period. For securities issued in a securitization, the Firm estimates cash flows considering underlying loan-level data and structural features of the securitization, such as subordination, excess spread, overcollateralization or other forms of credit enhancement, and compares the losses projected for the underlying collateral (“pool losses”) against the level of credit enhancement in the securitization structure to determine whether these features are sufficient to absorb the pool losses, or whether a credit loss exists. The Firm also performs other analyses to support its cash flow projections, such as first-loss analyses or stress scenarios.

For equity securities, OTTI losses are recognized in earnings if the Firm intends to sell the security. In other cases the Firm considers the relevant factors noted above, as well as the Firm’s intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in market value, and whether evidence exists to support a realizable value equal to or greater than the cost basis. Any impairment loss on an equity security is equal to the full difference between the cost basis and the fair value of the security.

Securities gains and losses

The following table presents realized gains and losses and OTTI from AFS securities that were recognized in income.



Year ended December 31, (in millions)	2017			2016			2015
Realized gains	$	1,013		$	401		$	351
Realized losses	(1,072		)	(232		)	(127		)
OTTI losses^(a)	(7		)	(28		)	(22		)
Net securities gains/(losses)	(66		)	141			202

OTTI losses
Credit losses recognized in income	—			(1		)	(1		)
Securities the Firm intends to sell^(a)	(7		)	(27		)	(21		)
Total OTTI losses recognized in income	$	(7	)	$	(28	)	$	(22	)


(a)	Excludes realized losses on securities sold of $6 million, $24 million and $5 million for the years ended December 31, 2017, 2016 and 2015, respectively that had been previously reported as an OTTI loss due to the intention to sell the securities.

Changes in the credit loss component of credit-impaired debt securities

The cumulative credit loss component, including any changes therein, of OTTI losses that have been recognized in income related to AFS debt securities was not material as of and during the years ended December 31, 2017, 2016 and 2015.

Contractual maturities and yields

The following table presents the amortized cost and estimated fair value at December 31, 2017, of JPMorgan Chase’s investment securities portfolio by contractual maturity.



By remaining maturity December 31, 2017 (in millions)	Due in one year or less			Due after one year through five years			Due after five years through 10 years			Due after 10 years^(c)			Total
Available-for-sale debt securities
Mortgage-backed securities^(a)
Amortized cost	$	3		$	698		$	6,134		$	79,051		$	85,886
Fair value	3			708			6,294			79,667			86,672
Average yield^(b)	4.76		%	2.10		%	3.10		%	3.35		%	3.32		%
U.S. Treasury and government agencies
Amortized cost	$	60		$	—		$	17,437		$	5,013		$	22,510
Fair value	60			—			17,542			5,143			22,745
Average yield^(b)	1.72		%	—		%	1.96		%	1.76		%	1.91		%
Obligations of U.S. states and municipalities
Amortized cost	$	73		$	750		$	1,265		$	28,402		$	30,490
Fair value	72			765			1,324			30,177			32,338
Average yield^(b)	1.78		%	3.28		%	5.40		%	5.50		%	5.43		%
Certificates of deposit
Amortized cost	$	59		$	—		$	—		$	—		$	59
Fair value	59			—			—			—			59
Average yield^(b)	0.50		%	—		%	—		%	—		%	0.50		%
Non-U.S. government debt securities
Amortized cost	$	5,020		$	13,665		$	8,215		$	—		$	26,900
Fair value	5,022			13,845			8,427			—			27,294
Average yield^(b)	3.09		%	1.55		%	1.19		%	—		%	1.73		%
Corporate debt securities
Amortized cost	$	150		$	1,159		$	1,203		$	145		$	2,657
Fair value	151			1,197			1,255			154			2,757
Average yield^(b)	3.07		%	3.60		%	3.58		%	3.22		%	3.54		%
Asset-backed securities
Amortized cost	$	—		$	3,372		$	13,046		$	13,274		$	29,692
Fair value	—			3,353			13,080			13,380			29,813
Average yield^(b)	—		%	2.14		%	2.58		%	2.36		%	2.43		%
Total available-for-sale debt securities
Amortized cost	$	5,365		$	19,644		$	47,300		$	125,885		$	198,194
Fair value	5,367			19,868			47,922			128,521			201,678
Average yield^(b)	3.03		%	1.86		%	2.28		%	3.66		%	3.14		%
Available-for-sale equity securities
Amortized cost	$	—		$	—		$	—		$	547		$	547
Fair value	—			—			—			547			547
Average yield^(b)	—		%	—		%	—		%	0.71		%	0.71		%
Total available-for-sale securities
Amortized cost	$	5,365		$	19,644		$	47,300		$	126,432		$	198,741
Fair value	5,367			19,868			47,922			129,068			202,225
Average yield^(b)	3.03		%	1.86		%	2.28		%	3.65		%	3.13		%
Held-to-maturity debt securities
Mortgage-backed securities^(a)
Amortized Cost	$	—		$	—		$	49		$	33,311		$	33,360
Fair value	—			—			49			33,756			33,805
Average yield^(b)	—		%	—		%	2.88		%	3.27		%	3.27		%
Obligations of U.S. states and municipalities
Amortized cost	$	—		$	66		$	2,019		$	12,288		$	14,373
Fair value	—			65			2,067			12,715			14,847
Average yield^(b)	—		%	4.74		%	4.30		%	4.72		%	4.66		%
Total held-to-maturity securities
Amortized cost	$	—		$	66		$	2,068		$	45,599		$	47,733
Fair value	—			65			2,116			46,471			48,652
Average yield^(b)	—		%	4.75		%	4.26		%	3.66		%	3.69		%


(a)	As of December 31, 2017, mortgage-backed securities issued by Fannie Mae exceeded 10% of JPMorgan Chase’s total stockholders’ equity; the amortized cost and fair value of such securities was $55.1 billion and $56.0 billion, respectively.

(b)

Average yield is computed using the effective yield of each security owned at the end of the period, weighted based on the amortized cost of each security. The effective yield considers the contractual coupon, amortization of premiums and accretion of discounts, and the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable and reflect the estimated impact of the enactment of the Tax Cuts and Jobs Act (“TCJA”). The effective yield excludes unscheduled principal prepayments; and accordingly, actual maturities of securities may differ from their contractual or expected maturities as certain securities may be prepaid.

(c)

Includes securities with no stated maturity. Substantially all of the Firm’s U.S. residential MBS and collateralized mortgage obligations are due in 10 years or more, based on contractual maturity. The estimated weighted-average life, which reflects anticipated future prepayments, is approximately six years for agency residential MBS, three years for agency residential collateralized mortgage obligations and three years for nonagency residential collateralized mortgage obligations.