Securities

Securities are classified as trading, AFS or held-to-maturity (“HTM”). Securities classified as trading assets are discussed in Note 3. Predominantly all of the Firm’s AFS and HTM investment securities (the “investment securities portfolio”) are held by CIO in connection with its asset-liability management objectives. At December 31, 2014, the average credit rating of the debt securities comprising the investment securities 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). 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 accumulated other comprehensive income/(loss). 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.

During the first quarter of 2014, the Firm transferred U.S. government agency mortgage-backed securities and obligations of U.S. states and municipalities with a fair value of $19.3 billion from AFS to HTM. These securities were transferred at fair value, and the transfer was a non-cash transaction. AOCI included net pretax unrealized losses of $9 million on the securities at the date of transfer. The transfer reflected the Firm’s intent to hold the securities to maturity in order to reduce the impact of price volatility on AOCI and certain capital measures under Basel III.

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 other-than-temporary impairment (“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 OTTI to have occurred 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.

Realized gains and losses

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



Year ended December 31, (in millions)	2014			2013			2012
Realized gains	$	314		$	1,302		$	2,610
Realized losses	(233		)	(614		)	(457		)
Net realized gains	81			688			2,153
OTTI losses
Credit-related	(2		)	(1		)	(28		)
Securities the Firm intends to sell^(a)	(2		)	(20		)	(15		)
Total OTTI losses recognized in income	(4		)	(21		)	(43		)
Net securities gains	$	77		$	667		$	2,110


(a)	Excludes realized losses on securities sold of $3 million, $12 million and $24 million for the years ended December 31, 2014, 2013 and 2012, respectively that had been previously reported as an OTTI loss due to the intention to sell the securities.

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



	2014								2013
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)	$	63,089	$	2,302	$	72	$	65,319	$	76,428	$	2,364	$	977	$	77,815
Residential:
Prime and Alt-A	5,595		78		29		5,644		2,744		61		27		2,778
Subprime	677		14		—		691		908		23		1		930
Non-U.S.	43,550		1,010		—		44,560		57,448		1,314		1		58,761
Commercial	20,687		438		17		21,108		15,891		560		26		16,425
Total mortgage-backed securities	133,598		3,842		118		137,322		153,419		4,322		1,032		156,709
U.S. Treasury and government agencies^(a)	13,603		56		14		13,645		21,310		385		306		21,389
Obligations of U.S. states and municipalities	27,841		2,243		16		30,068		29,741		707		987		29,461
Certificates of deposit	1,103		1		1		1,103		1,041		1		1		1,041
Non-U.S. government debt securities	51,492		1,272		21		52,743		55,507		863		122		56,248
Corporate debt securities	18,158		398		24		18,532		21,043		498		29		21,512
Asset-backed securities:
Collateralized loan obligations	30,229		147		182		30,194		28,130		236		136		28,230
Other	12,442		184		11		12,615		12,062		186		3		12,245
Total available-for-sale debt securities	288,466		8,143		387		296,222		322,253		7,198		2,616		326,835
Available-for-sale equity securities	2,513		17		—		2,530		3,125		17		—		3,142
Total available-for-sale securities	$	290,979	$	8,160	$	387	$	298,752	$	325,378	$	7,215	$	2,616	$	329,977
Total held-to-maturity securities^(b)	$	49,252	$	1,902	$	—	$	51,154	$	24,026	$	22	$	317	$	23,731


(a)	Includes total U.S. government-sponsored enterprise obligations with fair values of $59.3 billion and $67.0 billion at December 31, 2014 and 2013, respectively, which were predominantly mortgage-related.

(b)

As of December 31, 2014, consists of MBS issued by U.S. government-sponsored enterprises with an amortized cost of $35.3 billion, MBS issued by U.S. government agencies with an amortized cost of $3.7 billion and obligations of U.S. states and municipalities with an amortized cost of $10.2 billion. As of December 31, 2013, consists of MBS issued by U.S. government-sponsored enterprises with an amortized cost of $23.1 billion and obligations of U.S. states and municipalities with an amortized cost of $920 million.

Securities impairment

The following tables present the fair value and gross unrealized losses for the investment securities portfolio by aging category at December 31, 2014 and 2013.



	Securities with gross unrealized losses
	Less than 12 months				12 months or more
December 31, 2014 (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	$	1,118	$	5	$	4,989	$	67	$	6,107	$	72
Residential:
Prime and Alt-A	1,840		10		405		19		2,245		29
Subprime	—		—		—		—		—		—
Non-U.S.	—		—		—		—		—		—
Commercial	4,803		15		92		2		4,895		17
Total mortgage-backed securities	7,761		30		5,486		88		13,247		118
U.S. Treasury and government agencies	8,412		14		—		—		8,412		14
Obligations of U.S. states and municipalities	1,405		15		130		1		1,535		16
Certificates of deposit	1,050		1		—		—		1,050		1
Non-U.S. government debt securities	4,433		4		906		17		5,339		21
Corporate debt securities	2,492		22		80		2		2,572		24
Asset-backed securities:
Collateralized loan obligations	13,909		76		9,012		106		22,921		182
Other	2,258		11		—		—		2,258		11
Total available-for-sale debt securities	41,720		173		15,614		214		57,334		387
Available-for-sale equity securities	—		—		—		—		—		—
Held-to-maturity securities	—		—		—		—		—		—
Total securities with gross unrealized losses	$	41,720	$	173	$	15,614	$	214	$	57,334	$	387



	Securities with gross unrealized losses
	Less than 12 months				12 months or more
December 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	$	20,293	$	895	$	1,150	$	82	$	21,443	$	977
Residential:
Prime and Alt-A	1,061		27		—		—		1,061		27
Subprime	152		1		—		—		152		1
Non-U.S.	—		—		158		1		158		1
Commercial	3,980		26		—		—		3,980		26
Total mortgage-backed securities	25,486		949		1,308		83		26,794		1,032
U.S. Treasury and government agencies	6,293		250		237		56		6,530		306
Obligations of U.S. states and municipalities	15,387		975		55		12		15,442		987
Certificates of deposit	988		1		—		—		988		1
Non-U.S. government debt securities	11,286		110		821		12		12,107		122
Corporate debt securities	1,580		21		505		8		2,085		29
Asset-backed securities:
Collateralized loan obligations	18,369		129		393		7		18,762		136
Other	1,114		3		—		—		1,114		3
Total available-for-sale debt securities	80,503		2,438		3,319		178		83,822		2,616
Available-for-sale equity securities	—		—		—		—		—		—
Held-to-maturity securities	20,745		317		—		—		20,745		317
Total securities with gross unrealized losses	$	101,248	$	2,755	$	3,319	$	178	$	104,567	$	2,933

Other-than-temporary impairment

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



Year ended December 31, (in millions)	2014			2013			2012
Debt securities the Firm does not intend to sell that have credit losses
Total OTTI^(a)	$	(2	)	$	(1	)	$	(113	)
Losses recorded in/(reclassified from) AOCI	—			—			85
Total credit losses recognized in income	(2		)	(1		)	(28		)
Securities the Firm intends to sell^(b)	(2		)	(20		)	(15		)
Total OTTI losses recognized in income	$	(4	)	$	(21	)	$	(43	)


(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, if applicable.


(b)	Excludes realized losses on securities sold of $3 million, $12 million and $24 million for the years ended December 31, 2014, 2013 and 2012, 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 following table presents a rollforward for the years ended December 31, 2014, 2013 and 2012, of the credit loss component of OTTI losses that have been recognized in income, related to AFS debt securities that the Firm does not intend to sell.



Year ended December 31, (in millions)	2014		2013			2012
Balance, beginning of period	$	1	$	522		$	708
Additions:
Newly credit-impaired securities	2		1			21
Losses reclassified from other comprehensive income on previously credit-impaired securities	—		—			7
Reductions:
Sales and redemptions of credit-impaired securities	—		(522		)	(214		)
Balance, end of period	$	3	$	1		$	522

Gross unrealized losses

Gross unrealized losses have generally decreased since December 31, 2013. Though losses on securities that have been in an unrealized loss position for 12 months or more have increased, the increase is not material. The Firm has recognized the unrealized losses on securities it intends to sell. As of December 31, 2014, 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 December 31, 2014.

Contractual maturities and yields

The following table presents the amortized cost and estimated fair value at December 31, 2014, of JPMorgan Chase’s investment securities portfolio by contractual maturity.



By remaining maturity December 31, 2014 (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	$	996		$	14,132		$	5,768		$	112,702		$	133,598
Fair value	1,003			14,467			5,974			115,878			137,322
Average yield^(b)	2.65		%	1.85		%	3.12		%	2.93		%	2.82		%
U.S. Treasury and government agencies^(a)
Amortized cost	$	2,209		$	—		$	10,284		$	1,110		$	13,603
Fair value	2,215			—			10,275			1,155			13,645
Average yield^(b)	0.80		%	—		%	0.62		%	0.35		%	0.63		%
Obligations of U.S. states and municipalities
Amortized cost	$	65		$	498		$	1,432		$	25,846		$	27,841
Fair value	66			515			1,508			27,979			30,068
Average yield^(b)	2.13		%	4.00		%	4.93		%	6.78		%	6.63		%
Certificates of deposit
Amortized cost	$	1,052		$	51		$	—		$	—		$	1,103
Fair value	1,050			53			—			—			1,103
Average yield^(b)	0.84		%	3.28		%	—		%	—		%	0.95		%
Non-U.S. government debt securities
Amortized cost	$	13,559		$	14,276		$	21,220		$	2,437		$	51,492
Fair value	13,588			14,610			21,957			2,588			52,743
Average yield^(b)	3.31		%	2.04		%	1.04		%	1.19		%	1.90		%
Corporate debt securities
Amortized cost	$	3,830		$	9,619		$	4,523		$	186		$	18,158
Fair value	3,845			9,852			4,651			184			18,532
Average yield^(b)	2.39		%	2.40		%	2.56		%	3.43		%	2.45		%
Asset-backed securities
Amortized cost	$	—		$	2,240		$	17,439		$	22,992		$	42,671
Fair value	—			2,254			17,541			23,014			42,809
Average yield^(b)	—		%	1.66		%	1.75		%	1.73		%	1.73		%
Total available-for-sale debt securities
Amortized cost	$	21,711		$	40,816		$	60,666		$	165,273		$	288,466
Fair value	21,767			41,751			61,906			170,798			296,222
Average yield^(b)	2.74		%	2.06		%	1.58		%	3.32		%	2.73		%
Available-for-sale equity securities
Amortized cost	$	—		$	—		$	—		$	2,513		$	2,513
Fair value	—			—			—			2,530			2,530
Average yield^(b)	—		%	—		%	—		%	0.25		%	0.25		%
Total available-for-sale securities
Amortized cost	$	21,711		$	40,816		$	60,666		$	167,786		$	290,979
Fair value	21,767			41,751			61,906			173,328			298,752
Average yield^(b)	2.74		%	2.06		%	1.58		%	3.28		%	2.71		%
Total held-to-maturity securities
Amortized cost	$	—		$	54		$	487		$	48,711		$	49,252
Fair value	—			54			512			50,588			51,154
Average yield^(b)	—		%	4.33		%	4.81		%	3.98		%	3.98		%


(a)	U.S. government-sponsored enterprises were the only issuers whose securities exceeded 10% of JPMorgan Chase’s total stockholders’ equity at December 31, 2014.

(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, is approximately five years for agency residential mortgage-backed securities, three years for agency residential collateralized mortgage obligations and four years for nonagency residential collateralized mortgage obligations.