Securities

Securities are primarily classified as AFS or trading. Securities classified as trading are discussed in Note 3 on pages 96–107 of this Form 10-Q. Predominantly all of the AFS securities portfolio is held by CIO in connection with its asset-liability management objectives. At both March 31, 2013, and December 31, 2012, the average credit rating of the debt securities comprising the AFS portfolio was 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). For additional information regarding AFS securities, see Note 12 on pages 244–248 of JPMorgan Chase’s 2012 Annual Report.

Realized gains and losses

The following table presents realized gains and losses and other-than-temporary impairment losses (“OTTI”) from AFS securities that were recognized in income.



Three months ended March 31, (in millions)	2013			2012
Realized gains	$	531		$	739
Realized losses	(22		)	(196		)
Net realized gains^(a)	509			543
Other-than-temporary impairment losses:
Credit-related	—			(7		)	^(b)
Total OTTI losses recognized in income	—			(7		)
Net securities gains	$	509		$	536


(a)	Proceeds from securities sold were within approximately 4% of amortized cost for both the three months ended March 31, 2013 and 2012.


(b)	Included OTTI losses recognized in income on certain obligations of U.S. states and municipalities and prime mortgage-backed securities for the three months ended March 31, 2012.

The amortized costs and estimated fair values of AFS and held-to-maturity (“HTM”) securities were as follows for the dates indicated.



	March 31, 2013								December 31, 2012
(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)	$	100,298	$	4,097	$	131	$	104,264	$	93,693	$	4,708	$	13	$	98,388
Residential:
Prime and Alt-A	1,591		66		4		1,653		1,853		83		3		1,933
Subprime	738		19		—		757		825		28		—		853
Non-U.S.	63,844		1,493		11		65,326		70,358		1,524		29		71,853
Commercial	11,976		868		7		12,837		12,268		948		13		13,203
Total mortgage-backed securities	178,447		6,543		153		184,837		178,997		7,291		58		186,230
U.S. Treasury and government agencies^(a)	11,804		173		47		11,930		12,022		116		8		12,130
Obligations of U.S. states and municipalities	19,401		1,630		53		20,978		19,876		1,845		10		21,711
Certificates of deposit	2,373		7		1		2,379		2,781		4		2		2,783
Non-U.S. government debt securities	69,445		948		26		70,367		65,168		901		25		66,044
Corporate debt securities^(b)	32,616		686		63		33,239		37,999		694		84		38,609
Asset-backed securities:
Collateralized loan obligations	26,997		381		19		27,359		27,483		465		52		27,896
Other	11,968		211		5		12,174		12,816		166		11		12,971
Total available-for-sale debt securities	353,051		10,579		367		363,263		357,142		11,482		250		368,374
Available-for-sale equity securities	2,458		16		—		2,474		2,750		21		—		2,771
Total available-for-sale securities	$	355,509	$	10,595	$	367	$	365,737	$	359,892	$	11,503	$	250	$	371,145
Total held-to-maturity securities	$	7	$	—	$	—	$	7	$	7	$	1	$	—	$	8


(a)	Included total U.S. government-sponsored enterprise obligations with fair values of $90.3 billion and $84.0 billion at March 31, 2013, and December 31, 2012, respectively.


(b)	Consists primarily of bank debt including sovereign government-guaranteed bank debt.

Securities impairment

The following tables present the fair value and gross unrealized losses for AFS securities by aging category at March 31, 2013, and December 31, 2012.



	Securities with gross unrealized losses
	Less than 12 months				12 months or more
March 31, 2013 (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	$	18,800	$	131	$	—	$	—	$	18,800	$	131
Residential:
Prime and Alt-A	194		4		—		—		194		4
Subprime	—		—		—		—		—		—
Non-U.S.	1,175		1		266		10		1,441		11
Commercial	502		7		—		—		502		7
Total mortgage-backed securities	20,671		143		266		10		20,937		153
U.S. Treasury and government agencies	2,070		47		—		—		2,070		47
Obligations of U.S. states and municipalities	3,164		53		—		—		3,164		53
Certificates of deposit	917		1		—		—		917		1
Non-U.S. government debt securities	13,279		23		1,511		3		14,790		26
Corporate debt securities	3,966		24		1,798		39		5,764		63
Asset-backed securities:
Collateralized loan obligations	2,348		6		942		13		3,290		19
Other	1,535		3		257		2		1,792		5
Total available-for-sale debt securities	47,950		300		4,774		67		52,724		367
Available-for-sale equity securities	—		—		—		—		—		—
Total securities with gross unrealized losses	$	47,950	$	300	$	4,774	$	67	$	52,724	$	367



	Securities with gross unrealized losses
	Less than 12 months				12 months or more
December 31, 2012 (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	$	2,440	$	13	$	—	$	—	$	2,440	$	13
Residential:
Prime and Alt-A	218		2		76		1		294		3
Subprime	—		—		—		—		—		—
Non-U.S.	2,442		6		734		23		3,176		29
Commercial	1,159		8		312		5		1,471		13
Total mortgage-backed securities	6,259		29		1,122		29		7,381		58
U.S. Treasury and government agencies	4,198		8		—		—		4,198		8
Obligations of U.S. states and municipalities	907		10		—		—		907		10
Certificates of deposit	741		2		—		—		741		2
Non-U.S. government debt securities	14,527		21		1,927		4		16,454		25
Corporate debt securities	2,651		10		5,641		74		8,292		84
Asset-backed securities:
Collateralized loan obligations	6,328		17		2,063		35		8,391		52
Other	2,076		7		275		4		2,351		11
Total available-for-sale debt securities	37,687		104		11,028		146		48,715		250
Available-for-sale equity securities	—		—		—		—		—		—
Total securities with gross unrealized losses	$	37,687	$	104	$	11,028	$	146	$	48,715	$	250

Other-than-temporary impairment

The following table presents OTTI losses that are included in the securities gains and losses table above.



Three months ended March 31, (in millions)	2013		2012
Debt securities the Firm does not intend to sell that have credit losses
Total OTTI^(a)	$	—	$	(10	)
Losses recorded in/(reclassified from) AOCI	—		3
Total credit-related losses recognized in income^(b)	$	—	$	(7	)	^(c)
Total OTTI losses recognized in income	$	—	$	(7	)


(a)	For initial OTTI, represents the excess of the amortized cost over the fair value of AFS debt securities. For subsequent impairments of the same security, represents additional declines in fair value subsequent to previously recorded OTTI.


(b)	Subsequent credit losses may be recorded on securities without a corresponding further decline in fair value if there has been a decline in expected cash flows.


(c)	Represents the credit loss component on certain obligations of U. S. states and municipalities and prime mortgage-backed securities for the three months ended March 31, 2012, that the Firm does not intend to sell.

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

The following table presents a rollforward for the three months ended March 31, 2013 and 2012, of the credit loss component of OTTI losses that have been recognized in income related to debt securities that the Firm does not intend to sell.



Three months ended March 31, (in millions)	2013			2012
Balance, beginning of period	$	522		$	708
Additions:
Newly credit-impaired securities	—			6
Losses reclassified from other comprehensive income on previously credit-impaired securities	—			1
Reductions:
Sales of credit-impaired securities	(3		)	—
Balance, end of period	$	519		$	715

Gross unrealized losses

Gross unrealized losses have generally increased since December 31, 2012; however, losses on securities that have been in an unrealized loss position for 12 months or more have decreased. Except for certain securities that the Firm intends to sell for which the unrealized losses have been recognized in income, as of March 31, 2013, the Firm does not intend to sell the securities with a loss position in AOCI, 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 reported in the table above 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 March 31, 2013.

Contractual maturities and yields

The following table presents the amortized cost and estimated fair value at March 31, 2013, of JPMorgan Chase’s AFS and HTM securities by contractual maturity.



By remaining maturity March 31, 2013 (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	$	142		$	13,090		$	11,304		$	153,911		$	178,447
Fair value	142			13,542			11,798			159,355			184,837
Average yield^(b)	2.40		%	1.98		%	3.19		%	3.24		%	3.15		%
U.S. Treasury and government agencies^(a)
Amortized cost	$	6,133		$	1,804		$	2,832		$	1,035		$	11,804
Fair value	6,152			1,854			2,853			1,071			11,930
Average yield^(b)	0.57		%	1.91		%	0.75		%	0.72		%	0.83		%
Obligations of U.S. states and municipalities
Amortized cost	$	23		$	435		$	1,088		$	17,855		$	19,401
Fair value	23			470			1,161			19,324			20,978
Average yield^(b)	3.35		%	5.43		%	3.69		%	5.85		%	5.72		%
Certificates of deposit
Amortized cost	$	2,322		$	51		$	—		$	—		$	2,373
Fair value	2,325			54			—			—			2,379
Average yield^(b)	6.23		%	3.28		%	—		%	—		%	6.17		%
Non-U.S. government debt securities
Amortized cost	$	18,728		$	21,971		$	26,319		$	2,427		$	69,445
Fair value	18,771			22,209			26,844			2,543			70,367
Average yield^(b)	1.09		%	2.13		%	1.46		%	1.77		%	1.58		%
Corporate debt securities
Amortized cost	$	3,927		$	20,617		$	7,936		$	136		$	32,616
Fair value	3,942			21,016			8,147			134			33,239
Average yield^(b)	2.73		%	2.30		%	2.54		%	2.87		%	2.41		%
Asset-backed securities
Amortized cost	$	—		$	2,975		$	12,411		$	23,579		$	38,965
Fair value	—			3,008			12,621			23,904			39,533
Average yield^(b)	—		%	1.92		%	1.85		%	1.95		%	1.92		%
Total available-for-sale debt securities
Amortized cost	$	31,275		$	60,943		$	61,890		$	198,943		$	353,051
Fair value	31,355			62,153			63,424			206,331			363,263
Average yield^(b)	1.58		%	2.16		%	2.00		%	3.29		%	2.72		%
Available-for-sale equity securities
Amortized cost	$	—		$	—		$	—		$	2,458		$	2,458
Fair value	—			—			—			2,474			2,474
Average yield^(b)	—		%	—		%	—		%	0.18		%	0.18		%
Total available-for-sale securities
Amortized cost	$	31,275		$	60,943		$	61,890		$	201,401		$	355,509
Fair value	31,355			62,153			63,424			208,805			365,737
Average yield^(b)	1.58		%	2.16		%	2.00		%	3.26		%	2.70		%
Total held-to-maturity securities
Amortized cost	$	—		$	6		$	1		$	—		$	7
Fair value	—			6			1			—			7
Average yield^(b)	—		%	6.85		%	6.64		%	—		%	6.84		%


(a)	U.S. government-sponsored enterprises were the only issuers whose securities exceeded 10% of JPMorgan Chase’s total stockholders’ equity at March 31, 2013.

(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. 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 residential mortgage-backed securities and collateralized mortgage obligations are due in 10 years or more, based on contractual maturity. The estimated duration, which reflects anticipated future prepayments based on a consensus of dealers in the market, is approximately three years for agency residential mortgage-backed securities, two years for agency residential collateralized mortgage obligations and three years for nonagency residential collateralized mortgage obligations.