Securities

Securities are primarily classified as AFS or trading. Securities classified as trading are discussed in Note 3 on pages 114–127 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 June 30, 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 June 30,						Six months ended June 30,
(in millions)	2013			2012			2013			2012
Realized gains	$	143		$	1,148		$	664		$	1,887
Realized losses	(13		)	(78		)	(25		)	(274		)
Net realized gains^(a)	130			1,070			639			1,613
Other-than-temporary impairment losses:
Credit-related^(b)	—			(19		)	—			(26		)
Securities the Firm intends to sell^(c)	(6		)	(37		)	(6		)	(37		)
Total OTTI losses recognized in income	(6		)	(56		)	(6		)	(63		)
Net securities gains	$	124		$	1,014		$	633		$	1,550


(a)	Proceeds from securities sold were within approximately 1% and 3% of amortized cost for the three and six months ended June 30, 2013, respectively and within 4% of amortized cost for both the three and six months ended June 30, 2012.


(b)	Includes OTTI losses recognized in income on certain prime mortgage-backed securities for the three months ended June 30, 2012; and certain obligations of U.S. states and municipalities and prime mortgage-backed securities for the six months ended June 30, 2012.


(c)	Represents the excess of the amortized cost over the fair value of certain non-U.S. corporate debt securities and non-U.S. government debt securities for the three and six months ended June 30, 2013, and certain non-U.S. corporate debt securities for the three and six months ended for June 30, 2012, that the firm intends to sell.

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



	June 30, 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)	$	99,742	$	2,689	$	1,117	$	101,314	$	93,693	$	4,708	$	13	$	98,388
Residential:
Prime and Alt-A	1,927		49		32		1,944		1,853		83		3		1,933
Subprime	709		23		—		732		825		28		—		853
Non-U.S.	61,597		1,299		8		62,888		70,358		1,524		29		71,853
Commercial	12,404		620		40		12,984		12,268		948		13		13,203
Total mortgage-backed securities	176,379		4,680		1,197		179,862		178,997		7,291		58		186,230
U.S. Treasury and government agencies^(a)	22,804		302		208		22,898		12,022		116		8		12,130
Obligations of U.S. states and municipalities	24,509		782		758		24,533		19,876		1,845		10		21,711
Certificates of deposit	1,582		7		1		1,588		2,781		4		2		2,783
Non-U.S. government debt securities	55,214		822		62		55,974		65,168		901		25		66,044
Corporate debt securities^(b)	27,937		401		99		28,239		37,999		694		84		38,609
Asset-backed securities:
Collateralized loan obligations	27,039		326		47		27,318		27,483		465		52		27,896
Other	11,503		197		3		11,697		12,816		166		11		12,971
Total available-for-sale debt securities	346,967		7,517		2,375		352,109		357,142		11,482		250		368,374
Available-for-sale equity securities	2,595		15		—		2,610		2,750		21		—		2,771
Total available-for-sale securities	$	349,562	$	7,532	$	2,375	$	354,719	$	359,892	$	11,503	$	250	$	371,145
Total held-to-maturity securities	$	6	$	—	$	—	$	6	$	7	$	1	$	—	$	8


(a)	Included total U.S. government-sponsored enterprise obligations with fair values of $90.0 billion and $84.0 billion at June 30, 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 June 30, 2013, and December 31, 2012.



	Securities with gross unrealized losses
	Less than 12 months				12 months or more
June 30, 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	$	34,624	$	1,117	$	—	$	—	$	34,624	$	1,117
Residential:
Prime and Alt-A	1,229		31		61		1		1,290		32
Subprime	—		—		—		—		—		—
Non-U.S.	154		1		249		7		403		8
Commercial	1,776		40		—		—		1,776		40
Total mortgage-backed securities	37,783		1,189		310		8		38,093		1,197
U.S. Treasury and government agencies	14,128		208		—		—		14,128		208
Obligations of U.S. states and municipalities	11,969		758		—		—		11,969		758
Certificates of deposit	286		1		—		—		286		1
Non-U.S. government debt securities	8,023		62		—		—		8,023		62
Corporate debt securities	5,267		72		1,628		27		6,895		99
Asset-backed securities:
Collateralized loan obligations	6,820		34		906		13		7,726		47
Other	1,320		2		142		1		1,462		3
Total available-for-sale debt securities	85,596		2,326		2,986		49		88,582		2,375
Available-for-sale equity securities	—		—		—		—		—		—
Total securities with gross unrealized losses	$	85,596	$	2,326	$	2,986	$	49	$	88,582	$	2,375



	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 June 30,						Six months ended June 30,
(in millions)	2013			2012			2013			2012
Debt securities the Firm does not intend to sell that have credit losses
Total OTTI^(a)	$	—		$	(103	)	$	—		$	(113	)
Losses recorded in/(reclassified from) AOCI	—			84			—			87
Total credit-related losses recognized in income^(b)(c)	—			(19		)	—			(26		)
Securities the Firm intends to sell^(d)	(6		)	(37		)	(6		)	(37		)
Total OTTI losses recognized in income	$	(6	)	$	(56	)	$	(6	)	$	(63	)


(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 prime mortgage-backed securities for the three months ended June 30, 2012; and certain obligations of U. S. states and municipalities and prime mortgage-backed securities for the six months ended June 30, 2012.


(d)	Represents the excess of the amortized cost over the fair value of certain non-U.S. corporate debt securities and non-U.S. government debt securities for the three and six months ended June 30, 2013, and certain non-U.S. corporate debt securities for the three and six months ended for June 30, 2012, that the firm intends to sell.

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

The following table presents a rollforward for the three and six months ended June 30, 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 June 30,				Six months ended June 30,
(in millions)	2013		2012		2013			2012
Balance, beginning of period	$	519	$	715	$	522		$	708
Additions:
Newly credit-impaired securities	—		14		—			20
Losses reclassified from other comprehensive income on previously credit-impaired securities	—		5		—			6
Reductions:
Sales of credit-impaired securities	—		—		(3		)	—
Balance, end of period	$	519	$	734	$	519		$	734

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. The Firm has recognized the unrealized losses on securities it intends to sell. As of June 30, 2013, the Firm does not intend to sell any 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 June 30, 2013.

Contractual maturities and yields

The following table presents the amortized cost and estimated fair value at June 30, 2013, of JPMorgan Chase’s AFS and HTM securities by contractual maturity.



By remaining maturity June 30, 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	$	293		$	14,218		$	9,652		$	152,216		$	176,379
Fair value	295			14,662			9,942			154,963			179,862
Average yield^(b)	2.08		%	2.08		%	3.09		%	3.17		%	3.07		%
U.S. Treasury and government agencies^(a)
Amortized cost	$	7,432		$	12,497		$	1,931		$	944		$	22,804
Fair value	7,455			12,496			1,950			997			22,898
Average yield^(b)	0.65		%	0.41		%	0.83		%	0.78		%	0.54		%
Obligations of U.S. states and municipalities
Amortized cost	$	32		$	466		$	1,335		$	22,676		$	24,509
Fair value	32			493			1,357			22,651			24,533
Average yield^(b)	2.95		%	5.27		%	4.02		%	5.91		%	5.79		%
Certificates of deposit
Amortized cost	$	1,531		$	51		$	—		$	—		$	1,582
Fair value	1,535			53			—			—			1,588
Average yield^(b)	7.67		%	3.28		%	—		%	—		%	7.53		%
Non-U.S. government debt securities
Amortized cost	$	11,112		$	16,429		$	25,469		$	2,204		$	55,214
Fair value	11,145			16,616			25,915			2,298			55,974
Average yield^(b)	1.90		%	2.32		%	1.20		%	1.67		%	1.69		%
Corporate debt securities
Amortized cost	$	4,170		$	16,790		$	6,924		$	53		$	27,937
Fair value	4,173			17,042			6,969			55			28,239
Average yield^(b)	2.19		%	2.40		%	2.57		%	2.34		%	2.41		%
Asset-backed securities
Amortized cost	$	—		$	2,756		$	14,009		$	21,777		$	38,542
Fair value	—			2,783			14,202			22,030			39,015
Average yield^(b)	—		%	1.86		%	1.76		%	1.90		%	1.85		%
Total available-for-sale debt securities
Amortized cost	$	24,570		$	63,207		$	59,320		$	199,870		$	346,967
Fair value	24,635			64,145			60,335			202,994			352,109
Average yield^(b)	1.93		%	1.91		%	1.85		%	3.31		%	2.71		%
Available-for-sale equity securities
Amortized cost	$	—		$	—		$	—		$	2,595		$	2,595
Fair value	—			—			—			2,610			2,610
Average yield^(b)	—		%	—		%	—		%	0.25		%	0.25		%
Total available-for-sale securities
Amortized cost	$	24,570		$	63,207		$	59,320		$	202,465		$	349,562
Fair value	24,635			64,145			60,335			205,604			354,719
Average yield^(b)	1.93		%	1.91		%	1.85		%	3.27		%	2.69		%
Total held-to-maturity securities
Amortized cost	$	—		$	5		$	1		$	—		$	6
Fair value	—			5			1			—			6
Average yield^(b)	—		%	6.84		%	6.64		%	—		%	6.81		%


(a)	U.S. government-sponsored enterprises were the only issuers whose securities exceeded 10% of JPMorgan Chase’s total stockholders’ equity at June 30, 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 five years for agency residential mortgage-backed securities, two years for agency residential collateralized mortgage obligations and three years for nonagency residential collateralized mortgage obligations.