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 Treasury and CIO in connection with its asset-liability management objectives. At December 31, 2015, 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 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 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.

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



	2015								2014
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)	$	53,689	$	1,483	$	106	$	55,066	$	63,089	$	2,302	$	72	$	65,319
Residential:
Prime and Alt-A	7,462		40		57		7,445		5,595		78		29		5,644
Subprime	210		7		—		217		677		14		—		691
Non-U.S.	19,629		341		13		19,957		43,550		1,010		—		44,560
Commercial	22,990		150		243		22,897		20,687		438		17		21,108
Total mortgage-backed securities	103,980		2,021		419		105,582		133,598		3,842		118		137,322
U.S. Treasury and government agencies^(a)	11,202		—		166		11,036		13,603		56		14		13,645
Obligations of U.S. states and municipalities	31,328		2,245		23		33,550		27,841		2,243		16		30,068
Certificates of deposit	282		1		—		283		1,103		1		1		1,103
Non-U.S. government debt securities	35,864		853		41		36,676		51,492		1,272		21		52,743
Corporate debt securities	12,464		142		170		12,436		18,158		398		24		18,532
Asset-backed securities:
Collateralized loan obligations	31,146		52		191		31,007		30,229		147		182		30,194
Other	9,125		72		100		9,097		12,442		184		11		12,615
Total available-for-sale debt securities	235,391		5,386		1,110		239,667		288,466		8,143		387		296,222
Available-for-sale equity securities	2,067		20		—		2,087		2,513		17		—		2,530
Total available-for-sale securities	237,458		5,406		1,110		241,754		290,979		8,160		387		298,752
Total held-to-maturity securities^(b)	$	49,073	$	1,560	$	46	$	50,587	$	49,252	$	1,902	$	—	$	51,154


(a)	Includes total U.S. government-sponsored enterprise obligations with fair values of $42.3 billion and $59.3 billion at December 31, 2015 and 2014, respectively, which were predominantly mortgage-related.

(b)

As of December 31, 2015, consists of mortgage backed securities (“MBS”) issued by U.S. government-sponsored enterprises with an amortized cost of $30.8 billion, MBS issued by U.S. government agencies with an amortized cost of $5.5 billion and obligations of U.S. states and municipalities with an amortized cost of $12.8 billion. 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.

Securities impairment

The following tables present the fair value and gross unrealized losses for the investment securities portfolio by aging category at December 31, 2015 and 2014.



	Securities with gross unrealized losses
	Less than 12 months				12 months or more
December 31, 2015 (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	$	13,002	$	95	$	697	$	11	$	13,699	$	106
Residential:
Prime and Alt-A	5,147		51		238		6		5,385		57
Subprime	—		—		—		—		—		—
Non-U.S.	2,021		12		167		1		2,188		13
Commercial	13,779		239		658		4		14,437		243
Total mortgage-backed securities	33,949		397		1,760		22		35,709		419
U.S. Treasury and government agencies	10,998		166		—		—		10,998		166
Obligations of U.S. states and municipalities	1,676		18		205		5		1,881		23
Certificates of deposit	—		—		—		—		—		—
Non-U.S. government debt securities	3,267		26		367		15		3,634		41
Corporate debt securities	3,198		125		848		45		4,046		170
Asset-backed securities:
Collateralized loan obligations	15,340		67		10,692		124		26,032		191
Other	4,284		60		1,005		40		5,289		100
Total available-for-sale debt securities	72,712		859		14,877		251		87,589		1,110
Available-for-sale equity securities	—		—		—		—		—		—
Held-to-maturity securities	3,763		46		—		—		3,763		46
Total securities with gross unrealized losses	$	76,475	$	905	$	14,877	$	251	$	91,352	$	1,156



	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

Gross unrealized losses

The Firm has recognized the unrealized losses on securities it intends to sell. As of December 31, 2015, 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 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, 2015.

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 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)	2015			2014			2013
Realized gains	$	351		$	314		$	1,302
Realized losses	(127		)	(233		)	(614		)
OTTI losses	(22		)	(4		)	(21		)
Net securities gains	202			77			667

OTTI losses
Credit losses recognized in income	(1		)	(2		)	(1		)
Securities the Firm intends to sell^(a)	(21		)	(2		)	(20		)
Total OTTI losses recognized in income	$	(22	)	$	(4	)	$	(21	)


(a)	Excludes realized losses on securities sold of $5 million, $3 million and $12 million for the years ended December 31, 2015, 2014 and 2013, 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, 2015, 2014 and 2013, 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)	2015		2014		2013
Balance, beginning of period	$	3	$	1	$	522
Additions:
Newly credit-impaired securities	1		2		1
Losses reclassified from other comprehensive income on previously credit-impaired securities	—		—		—
Reductions:
Sales and redemptions of credit-impaired securities	—		—		(522		)
Balance, end of period	$	4	$	3	$	1

Contractual maturities and yields

The following table presents the amortized cost and estimated fair value at December 31, 2015, of JPMorgan Chase’s investment securities portfolio by contractual maturity.



By remaining maturity December 31, 2015 (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	$	2,415		$	9,728		$	6,562		$	85,275		$	103,980
Fair value	2,421			9,886			6,756			86,519			105,582
Average yield^(b)	1.48		%	1.86		%	3.15		%	3.08		%	2.93		%
U.S. Treasury and government agencies^(a)
Amortized cost	$	—		$	—		$	10,069		$	1,133		$	11,202
Fair value	—			—			9,932			1,104			11,036
Average yield^(b)	—		%	—		%	0.31		%	0.48		%	0.33		%
Obligations of U.S. states and municipalities
Amortized cost	$	184		$	754		$	1,520		$	28,870		$	31,328
Fair value	187			774			1,600			30,989			33,550
Average yield^(b)	5.21		%	3.50		%	5.57		%	6.68		%	6.54		%
Certificates of deposit
Amortized cost	$	230		$	52		$	—		$	—		$	282
Fair value	231			52			—			—			283
Average yield^(b)	8.66		%	3.28		%	—		%	—		%	7.68		%
Non-U.S. government debt securities
Amortized cost	$	6,126		$	11,177		$	16,575		$	1,986		$	35,864
Fair value	6,422			11,429			16,747			2,078			36,676
Average yield^(b)	3.11		%	1.84		%	1.06		%	0.67		%	1.63		%
Corporate debt securities
Amortized cost	$	2,761		$	7,175		$	2,385		$	143		$	12,464
Fair value	2,776			7,179			2,347			134			12,436
Average yield^(b)	2.87		%	2.32		%	3.09		%	4.46		%	2.61		%
Asset-backed securities
Amortized cost	$	39		$	442		$	20,501		$	19,289		$	40,271
Fair value	40			449			20,421			19,194			40,104
Average yield^(b)	0.71		%	1.72		%	1.79		%	1.84		%	1.81		%
Total available-for-sale debt securities
Amortized cost	$	11,755		$	29,328		$	57,612		$	136,696		$	235,391
Fair value	12,077			29,769			57,803			140,018			239,667
Average yield^(b)	2.85		%	2.00		%	1.63		%	3.61		%	2.89		%
Available-for-sale equity securities
Amortized cost	$	—		$	—		$	—		$	2,067		$	2,067
Fair value	—			—			—			2,087			2,087
Average yield^(b)	—		%	—		%	—		%	0.30		%	0.30		%
Total available-for-sale securities
Amortized cost	$	11,755		$	29,328		$	57,612		$	138,763		$	237,458
Fair value	12,077			29,769			57,803			142,105			241,754
Average yield^(b)	2.85		%	2.00		%	1.63		%	3.56		%	2.87		%
Total held-to-maturity securities
Amortized cost	$	51		$	—		$	931		$	48,091		$	49,073
Fair value	50			—			976			49,561			50,587
Average yield^(b)	4.42		%	—		%	5.01		%	3.98		%	4.00		%


(a)	U.S. government-sponsored enterprises were the only issuers whose securities exceeded 10% of JPMorgan Chase’s total stockholders’ equity at December 31, 2015.

(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 weighted-average life, which reflects anticipated future prepayments, is approximately five years for agency residential mortgage-backed securities, two years for agency residential collateralized mortgage obligations and four years for nonagency residential collateralized mortgage obligations.