Investment securities

Investment securities consist of debt securities that are classified as AFS or HTM. Debt securities classified as trading assets are discussed in Note 2. Predominantly all of the Firm’s AFS and HTM securities are held by Treasury and CIO in connection with its asset-liability management activities. At June 30, 2018, 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). For additional information regarding the investment securities portfolio, refer to Note 10 of JPMorgan Chase’s 2017 Annual Report.

As a result of the adoption of the premium amortization accounting guidance in the first quarter of 2018, premiums on purchased callable debt securities must be amortized to the earliest call date for debt securities with call features that are explicit, noncontingent and callable at fixed prices and on preset dates. The guidance primarily impacts obligations of U.S. states and municipalities held in the Firm’s investment securities portfolio. For additional information, refer to Note 17.

As permitted by the new hedge accounting guidance, the Firm also elected to transfer U.S. government agency MBS, commercial MBS, and obligations of U.S. states and municipalities with a carrying value of $22.4 billion from HTM to AFS in the first quarter of 2018. This transfer was a non-cash transaction. For additional information, refer to Note 17.

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



	June 30, 2018								December 31, 2017
(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 securities
Mortgage-backed securities:
U.S. government agencies^(a)	$	62,595	$	521	$	1,194	$	61,922	$	69,879	$	736	$	335	$	70,280
Residential:
U.S.	6,996		152		30		7,118		8,193		185		14		8,364
Non-U.S.	2,457		107		2		2,562		2,882		122		1		3,003
Commercial	7,961		75		209		7,827		4,932		98		5		5,025
Total mortgage-backed securities	80,009		855		1,435		79,429		85,886		1,141		355		86,672
U.S. Treasury and government agencies	24,962		524		142		25,344		22,510		266		31		22,745
Obligations of U.S. states and municipalities	37,459		1,926		55		39,330		30,490		1,881		33		32,338
Certificates of deposit	75		—		—		75		59		—		—		59
Non-U.S. government debt securities	25,307		413		34		25,686		26,900		426		32		27,294
Corporate debt securities	2,078		58		3		2,133		2,657		101		1		2,757
Asset-backed securities:
Collateralized loan obligations	21,145		22		21		21,146		20,928		69		1		20,996
Other	8,819		74		27		8,866		8,764		77		24		8,817
Total available-for-sale debt securities	199,854		3,872		1,717		202,009		198,194		3,961		477		201,678
Available-for-sale equity securities^(b)	—		—		—		—		547		—		—		547
Total available-for-sale securities	199,854		3,872		1,717		202,009		198,741		3,961		477		202,225
Held-to-maturity securities
Mortgage-backed securities:
U.S. government agencies^(c)	26,168		60		269		25,959		27,577		558		40		28,095
Commercial	—		—		—		—		5,783		1		74		5,710
Total mortgage-backed securities	26,168		60		269		25,959		33,360		559		114		33,805
Obligations of U.S. states and municipalities	4,838		96		20		4,914		14,373		554		80		14,847
Total held-to-maturity securities	31,006		156		289		30,873		47,733		1,113		194		48,652
Total investment securities	$	230,860	$	4,028	$	2,006	$	232,882	$	246,474	$	5,074	$	671	$	250,877


(a)	Includes total U.S. government-sponsored enterprise obligations with fair values of $39.1 billion and $45.8 billion at June 30, 2018, and December 31, 2017, respectively.


(b)	Effective January 1, 2018, the Firm adopted the recognition and measurement guidance. Equity securities that were previously reported as AFS securities were reclassified to other assets upon adoption.


(c)	Included total U.S. government-sponsored enterprise obligations with amortized cost of $20.1 billion and $22.0 billion at June 30, 2018, and December 31, 2017, respectively.

Investment securities impairment

The following tables present the fair value and gross unrealized losses for investment securities by aging category at June 30, 2018, and December 31, 2017.



	Investment securities with gross unrealized losses
	Less than 12 months				12 months or more
June 30, 2018 (in millions)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Total fair value		Total gross unrealized losses
Available-for-sale securities
Mortgage-backed securities:
U.S. government agencies	$	36,060	$	868	$	6,309	$	326	$	42,369	$	1,194
Residential:
U.S.	1,345		23		455		7		1,800		30
Non-U.S.	513		1		157		1		670		2
Commercial	3,248		124		1,463		85		4,711		209
Total mortgage-backed securities	41,166		1,016		8,384		419		49,550		1,435
U.S. Treasury and government agencies	3,761		118		294		24		4,055		142
Obligations of U.S. states and municipalities	2,217		21		1,220		34		3,437		55
Certificates of deposit	—		—		—		—		—		—
Non-U.S. government debt securities	3,786		13		1,308		21		5,094		34
Corporate debt securities	191		3		—		—		191		3
Asset-backed securities:
Collateralized loan obligations	7,379		21		—		—		7,379		21
Other	4,650		24		482		3		5,132		27
Total available-for-sale securities	63,150		1,216		11,688		501		74,838		1,717
Held-to-maturity securities
Mortgage-backed securities
U.S. government agencies	15,887		201		1,607		68		17,494		269
Commercial	—		—		—		—		—		—
Total mortgage-backed securities	15,887		201		1,607		68		17,494		269
Obligations of U.S. states and municipalities	546		4		683		16		1,229		20
Total held-to-maturity securities	16,433		205		2,290		84		18,723		289
Total investment securities with gross unrealized losses	$	79,583	$	1,421	$	13,978	$	585	$	93,561	$	2,006



	Investment securities with gross unrealized losses
	Less than 12 months				12 months or more
December 31, 2017 (in millions)	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Total fair value		Total gross unrealized losses
Available-for-sale securities
Mortgage-backed securities:
U.S. government agencies	$	36,037	$	139	$	7,711	$	196	$	43,748	$	335
Residential:
U.S.	1,112		5		596		9		$	1,708	14
Non-U.S.	—		—		266		1		266		1
Commercial	528		4		335		1		863		5
Total mortgage-backed securities	37,677		148		8,908		207		46,585		355
U.S. Treasury and government agencies	1,834		11		373		20		2,207		31
Obligations of U.S. states and municipalities	949		7		1,652		26		2,601		33
Certificates of deposit	—		—		—		—		—		—
Non-U.S. government debt securities	6,500		15		811		17		7,311		32
Corporate debt securities	—		—		52		1		52		1
Asset-backed securities:
Collateralized loan obligations	—		—		276		1		276		1
Other	3,521		20		720		4		4,241		24
Total available-for-sale securities	50,481		201		12,792		276		63,273		477
Held-to-maturity securities
Mortgage-backed securities
U.S. government agencies	4,070		38		205		2		4,275		40
Commercial	3,706		41		1,882		33		5,588		74
Total mortgage-backed securities	7,776		79		2,087		35		9,863		114
Obligations of U.S. states and municipalities	584		9		2,131		71		2,715		80
Total held-to-maturity securities	8,360		88		4,218		106		12,578		194
Total investment securities with gross unrealized losses	$	58,841	$	289	$	17,010	$	382	$	75,851	$	671

Gross unrealized losses

The Firm has recognized unrealized losses on investment securities that it intends to sell as OTTI. The Firm does not intend to sell any of the remaining investment securities with an unrealized loss in AOCI as of June 30, 2018, 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 investment securities with an unrealized loss in AOCI as of June 30, 2018, are not other-than-temporarily impaired. For additional information on other-than-temporary impairment, refer to Note 10 of the JPMorgan Chase’s 2017 Annual Report.

Investment securities gains and losses

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



	Three months ended June 30,						Six months ended June 30,
(in millions)	2018			2017			2018			2017
Realized gains	$	9		$	393		$	79		$	542
Realized losses	(88		)	(427		)	(403		)	(572		)
OTTI losses	(1		)	—			(1		)	(7		)
Net investment securities gains/(losses)	$	(80	)	$	(34	)	$	(325	)	$	(37	)

OTTI losses
Credit-related losses recognized in income	$	—		$	—		$	—		$	—
Investment securities the Firm intends to sell^(a)	(1		)	—			(1		)	(7		)
Total OTTI losses recognized in income	$	(1	)	$	—		$	(1	)	$	(7	)


(a)	Excludes realized losses on securities sold of $20 million and $5 million for the six months ended June 30, 2018 and 2017 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 securities that the Firm does not intend to sell was not material as of and during the six month periods ended June 30, 2018 and 2017.

Contractual maturities and yields

The following table presents the amortized cost and estimated fair value at June 30, 2018, of JPMorgan Chase’s investment securities portfolio by contractual maturity.



By remaining maturity June 30, 2018 (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 securities
Mortgage-backed securities^(a)
Amortized cost	$	261		$	429		$	5,664		$	73,655		$	80,009
Fair value	264			433			5,742			72,990			79,429
Average yield^(b)	1.81		%	2.49		%	3.49		%	3.48		%	3.47		%
U.S. Treasury and government agencies
Amortized cost	$	79		$	—		$	19,446		$	5,437		$	24,962
Fair value	79			—			19,516			5,749			25,344
Average yield^(b)	1.99		%	—		%	3.53		%	2.91		%	3.39		%
Obligations of U.S. states and municipalities
Amortized cost	$	148		$	701		$	2,501		$	34,109		$	37,459
Fair value	149			716			2,597			35,868			39,330
Average yield^(b)	1.94		%	3.39		%	4.98		%	4.91		%	4.87		%
Certificates of deposit
Amortized cost	$	75		$	—		$	—		$	—		$	75
Fair value	75			—			—			—			75
Average yield^(b)	0.49		%	—		%	—		%	—		%	0.49		%
Non-U.S. government debt securities
Amortized cost	$	4,745		$	14,565		$	5,997		$	—		$	25,307
Fair value	4,745			14,782			6,159			—			25,686
Average yield^(b)	3.27		%	1.61		%	1.37		%	—		%	1.86		%
Corporate debt securities
Amortized cost	$	70		$	968		$	901		$	139		$	2,078
Fair value	70			989			929			145			2,133
Average yield^(b)	3.98		%	4.34		%	4.52		%	3.45		%	4.34		%
Asset-backed securities
Amortized cost	$	—		$	4,295		$	7,785		$	17,884		$	29,964
Fair value	—			4,271			7,790			17,951			30,012
Average yield^(b)	—		%	2.61		%	3.25		%	2.98		%	3.00		%
Total available-for-sale securities
Amortized cost	$	5,378		$	20,958		$	42,294		$	131,224		$	199,854
Fair value	5,382			21,191			42,733			132,703			202,009
Average yield^(b)	3.11		%	2.02		%	3.28		%	3.76		%	3.46		%
Held-to-maturity securities
Mortgage-backed securities^(a)
Amortized cost	$	—		$	—		$	2,083		$	24,085		$	26,168
Fair value	—			—			2,068			23,891			25,959
Average yield^(b)	—		%	—		%	3.52		%	3.33		%	3.34		%
Obligations of U.S. states and municipalities
Amortized cost	$	—		$	—		$	—		$	4,838		$	4,838
Fair value	—			—			—			4,914			4,914
Average yield^(b)	—		%	—		%	—		%	4.12		%	4.12		%
Total held-to-maturity securities
Amortized cost	$	—		$	—		$	2,083		$	28,923		$	31,006
Fair value	—			—			2,068			28,805			30,873
Average yield^(b)	—		%	—		%	3.52		%	3.46		%	3.46		%


(a)	As of June 30, 2018, mortgage-backed securities issued by Fannie Mae exceeded 10% of JPMorgan Chase’s total stockholders’ equity; the amortized cost and fair value of such securities was $51.3 billion and $51.1 billion, respectively.

(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 investment securities with no stated maturity. Substantially all of the Firm’s U.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 7 years for agency residential MBS, 3 years for agency residential collateralized mortgage obligations and 3 years for nonagency residential collateralized mortgage obligations.