Securities

Securities are classified as trading, AFS or 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, 2016, 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.

During 2016, the Firm transferred commercial MBS and obligations of U.S. states and municipalities with a fair value of $7.5 billion from AFS to HTM. These securities were transferred at fair value. AOCI included net pretax unrealized gains of $78 million on the securities at the date of transfer. The transfers reflect the Firm’s intent to hold the securities to maturity in order to reduce the impact of price volatility on AOCI. This transfer was a non-cash transaction.

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



	2016								2015
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)	$	63,367	$	1,112	$	474	$	64,005	$	53,689	$	1,483	$	106	$	55,066
Residential:
Prime and Alt-A^(b)	4,256		38		22		4,272		6,594		38		49		6,583
Subprime^(b)	3,915		62		6		3,971		1,078		9		8		1,079
Non-U.S.	6,049		158		7		6,200		19,629		341		13		19,957
Commercial	9,002		122		20		9,104		22,990		150		243		22,897
Total mortgage-backed securities	86,589		1,492		529		87,552		103,980		2,021		419		105,582
U.S. Treasury and government agencies^(a)	44,822		75		796		44,101		11,202		—		166		11,036
Obligations of U.S. states and municipalities	30,284		1,492		184		31,592		31,328		2,245		23		33,550
Certificates of deposit	106		—		—		106		282		1		—		283
Non-U.S. government debt securities	34,497		836		45		35,288		35,864		853		41		36,676
Corporate debt securities	4,916		64		22		4,958		12,464		142		170		12,436
Asset-backed securities:
Collateralized loan obligations	27,352		75		26		27,401		31,146		52		191		31,007
Other	6,950		62		45		6,967		9,125		72		100		9,097
Total available-for-sale debt securities	235,516		4,096		1,647		237,965		235,391		5,386		1,110		239,667
Available-for-sale equity securities	914		12		—		926		2,067		20		—		2,087
Total available-for-sale securities	236,430		4,108		1,647		238,891		237,458		5,406		1,110		241,754
Held-to-maturity debt securities
Mortgage-backed securities
U.S. government agencies^(c)	29,910		638		37		30,511		36,271		852		42		37,081
Commercial	5,783		—		129		5,654		—		—		—		—
Total mortgage-backed securities	35,693		638		166		36,165		36,271		852		42		37,081
Obligations of U.S. states and municipalities	14,475		374		125		14,724		12,802		708		4		13,506
Total held-to-maturity debt securities	50,168		1,012		291		50,889		49,073		1,560		46		50,587
Total securities	$	286,598	$	5,120	$	1,938	$	289,780	$	286,531	$	6,966	$	1,156	$	292,341


(a)	Includes total U.S. government-sponsored enterprise obligations with fair values of $45.8 billion and $42.3 billion at December 31, 2016 and 2015, respectively, which were predominantly mortgage-related.


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


(c)	Included total U.S. government-sponsored enterprise obligations with amortized cost of $25.6 billion and $30.8 billion at December 31, 2016 and 2015, 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, 2016 and 2015.



	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:
Prime and Alt-A	977		2		1,018		20		1,995		22
Subprime	396		4		55		2		451		6
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 securities
Mortgage-backed securities
U.S. government securities	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



	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^(a)	4,455		43		238		6		4,693		49
Subprime^(a)	692		8		—		—		692		8
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 debt securities
Mortgage-backed securities
U.S. government agencies	3,294		42		—		—		3,294		42
Commercial	—		—		—		—		—		—
Total mortgage-backed securities	3,294		42		—		—		3,294		42
Obligations of U.S. states and municipalities	469		4		—		—		469		4
Total 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


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

Gross unrealized losses

The Firm has recognized unrealized losses on securities 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, 2016, 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, 2016.

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)	2016			2015			2014
Realized gains	$	401		$	351		$	314
Realized losses	(232		)	(127		)	(233		)
OTTI losses	(28		)	(22		)	(4		)
Net securities gains	141			202			77

OTTI losses
Credit losses recognized in income	(1		)	(1		)	(2		)
Securities the Firm intends to sell^(a)	(27		)	(21		)	(2		)
Total OTTI losses recognized in income	$	(28	)	$	(22	)	$	(4	)


(a)	Excludes realized losses on securities sold of $24 million, $5 million and $3 million for the years ended December 31, 2016, 2015 and 2014, 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, 2016, 2015 and 2014.

Contractual maturities and yields

The following table presents the amortized cost and estimated fair value at December 31, 2016, of JPMorgan Chase’s investment securities portfolio by contractual maturity.



By remaining maturity December 31, 2016 (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	$	2,012		$	2,393		$	7,574		$	74,610		$	86,589
Fair value	2,022			2,449			7,756			75,325			87,552
Average yield^(b)	2.04		%	2.36		%	3.03		%	3.26		%	3.19		%
U.S. Treasury and government agencies^(a)
Amortized cost	$	132		$	4,573		$	38,976		$	1,141		$	44,822
Fair value	132			4,561			38,317			1,091			44,101
Average yield^(b)	0.42		%	0.86		%	1.27		%	1.13		%	1.22		%
Obligations of U.S. states and municipalities
Amortized cost	$	134		$	752		$	1,096		$	28,302		$	30,284
Fair value	135			767			1,148			29,542			31,592
Average yield^(b)	5.85		%	3.58		%	6.29		%	6.63		%	6.54		%
Certificates of deposit
Amortized cost	$	106		$	—		$	—		$	—		$	106
Fair value	106			—			—			—			106
Average yield^(b)	1.78		%	—		%	—		%	—		%	1.78		%
Non-U.S. government debt securities
Amortized cost	$	5,831		$	14,109		$	13,503		$	1,054		$	34,497
Fair value	5,838			14,444			13,944			1,062			35,288
Average yield^(b)	2.92		%	1.55		%	0.93		%	0.58		%	1.51		%
Corporate debt securities
Amortized cost	$	2,059		$	1,312		$	1,424		$	121		$	4,916
Fair value	2,070			1,332			1,433			123			4,958
Average yield^(b)	2.88		%	3.11		%	3.24		%	3.52		%	3.06		%
Asset-backed securities
Amortized cost	$	—		$	444		$	21,551		$	12,307		$	34,302
Fair value	—			446			21,577			12,345			34,368
Average yield^(b)	—		%	0.49		%	2.33		%	2.21		%	2.26		%
Total available-for-sale debt securities
Amortized cost	$	10,274		$	23,583		$	84,124		$	117,535		$	235,516
Fair value	10,303			23,999			84,175			119,488			237,965
Average yield^(b)	2.73		%	1.63		%	1.74		%	3.92		%	2.86		%
Available-for-sale equity securities
Amortized cost	$	—		$	—		$	—		$	914		$	914
Fair value	—			—			—			926			926
Average yield^(b)	—		%	—		%	—		%	0.58		%	0.58		%
Total available-for-sale securities
Amortized cost	$	10,274		$	23,583		$	84,124		$	118,449		$	236,430
Fair value	10,303			23,999			84,175			120,414			238,891
Average yield^(b)	2.73		%	1.63		%	1.74		%	3.89		%	2.85		%
Held-to-maturity debt securities
Mortgage-backed securities^(a)
Amortized Cost	$	—		$	—		$	—		$	35,693		$	35,693
Fair value	—			—			—			36,165			36,165
Average yield^(b)	—		%	—		%	—		%	3.30		%	3.30		%
Obligations of U.S. states and municipalities
Amortized cost	$	—		$	29		$	1,439		$	13,007		$	14,475
Fair value	—			29			1,467			13,228			14,724
Average yield^(b)	—		%	6.61		%	5.11		%	5.68		%	5.63		%
Total held-to-maturity securities
Amortized cost	$	—		$	29		$	1,439		$	48,700		$	50,168
Fair value	—			29			1,467			49,393			50,889
Average yield^(b)	—		%	6.61		%	5.11		%	3.94		%	3.97		%


(a)	U.S. government-sponsored enterprises were the only issuers whose securities exceeded 10% of JPMorgan Chase’s total stockholders’ equity at December 31, 2016.

(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 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 seven years for agency residential MBS, three years for agency residential collateralized mortgage obligations and three years for nonagency residential collateralized mortgage obligations.