• | Credit and investment risk is the risk associated with the default or change in credit profile of a client, counterparty or customer; or loss of principal or a reduction in expected returns on investments, including consumer credit risk, wholesale credit risk, and investment portfolio risk. Market risk is the risk associated with the effect of changes in market factors, such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term.
Operational risk is the risk associated with inadequate or failed internal processes, people and systems, or from external events and includes compliance risk, conduct risk, legal risk, and estimations and model risk.
There may be many consequences of risks manifesting, including quantitative impacts such as reduction in earnings and capital, liquidity outflows, and fines or penalties, or qualitative impacts, such as reputation damage, loss of clients, and regulatory and enforcement actions.
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Management’s discussion and analysis
The Firm has established Firmwide risk management functions to manage different risk types. The scope of a particular risk management function may include multiple risk types. For example, the Firm’s Country Risk Management function oversees country risk which may be a driver of risk or an aggregation of exposures that could give rise to multiple risk types such as credit or market risk. The following sections discuss how the Firm manages the key risks that are inherent in its business activities.
| | | | Risk Oversight | Definition | Page
references
| Strategic risk
| The risk associated with the Firm’s current and future business plans and objectives.
| 81 | Capital risk | The risk that the Firm has an insufficient level and composition of capital to support the Firm’s business activities and associated risks during normal economic environments and under stressed conditions.
| 82–91 | Liquidity risk | The risk that the Firm will be unable to meet its contractual and contingent financial obligations as they arise or that it does not have the appropriate amount, composition and tenor of funding and liquidity to support its assets and liabilities.
| 92–97 | Reputation risk | The potential that an action, inaction, transaction, investment or event will reduce trust in the Firm’s integrity or competence by its various constituents, including clients, counterparties, investors, regulators, employees and the broader public.
| 98 | Consumer credit risk
| The risk associated with the default or change in credit profile of a customer.
| 102–107 | Wholesale credit risk | The risk associated with the default or change in credit profile of a client, counterparty or counterparty.
| 108–116 | Investment portfolio risk | The risk associated with thecustomer; or loss of principal or a reduction in expected returns on investments, arising from theincluding consumer credit risk, wholesale credit risk, and investment securities portfolio held by Treasury and CIO in connection with the Firm’s balance sheet or asset-liability management objectives or from principal investments managed in various lines of business in predominantly privately-held financial assets and instruments.
risk.
|
120 | | • | Market risk | The is the risk associated with the effect of changes in market factors, such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term.
| 121–128 | Country risk | The framework for monitoring and assessing how financial, economic, political or other significant developments adversely affect the value of the Firm’s exposures related to a particular country or set of countries.
| 129–130 | Operational risk | The risk associated with inadequate or failed internal processes, people and systems, or from external events.
| 131–133 | Compliance risk
| The risk of failure to comply with applicable laws, rules, and regulations.
| 134 | Conduct risk | The risk that any action or inaction by an employee of the Firm could lead to unfair client/customer outcomes, compromise the Firm’s reputation, impact the integrity of the markets in which the Firm operates, or reflect poorly on the Firm’s culture.
| 135 | Legal risk | The risk of loss primarily caused by the actual or alleged failure to meet legal obligations that arise from the rule of law in jurisdictions in which the Firm operates, agreements with clients and customers, and products and services offered by the Firm.
| 136 | Estimations and Model risk | The risk of the potential for adverse consequences from decisions based on incorrect or misused estimation outputs.
| 137 |
Operational risk is the risk associated with an adverse outcome resulting from inadequate or failed internal processes or systems; human factors; or external events impacting the Firm’s processes or systems; it includes compliance, conduct, legal, and estimations and model risk. Impacts of Risks are consequences of risks, both quantitative and qualitative. There may be many consequences of risks manifesting, such as a reduction in earnings and capital, liquidity outflows, and fines or penalties, or qualitative impacts such as reputation damage, loss of clients and customers, and regulatory and enforcement actions.
The Firm’s risk governance and oversight framework is managed on a Firmwide basis. The Firm has an Independent Risk Management (“IRM”) function, which consists of the Risk Management and Compliance organizations. The Chief Executive Officer (“CEO”) appoints, subject to approval bythe Risk Committee of the Board (“Board Risk Committee”), the Firm’s Chief Risk Officer (“CRO”) to lead the IRM organization and manage the risk governance structure of the Firm. The framework is subject to approval by the Board Risk Committee in the form of the primary risk management policies. The Firm’s CRO oversees and delegates authorities to LOB CROs, Firmwide Risk Executives (“FREs”), and the Firm’s Chief Compliance Officer (“CCO”), who each establish Risk Management and Compliance organizations, set the Firm’s risk governance policies and standards, and define and oversee the implementation of the Firm’s risk governance. The LOB CROs are responsible for risks that arise in their LOBs, while FREs oversee risk areas that span across the individual LOB, functions and regions.
Three lines of defense The Firm relies upon each of its LOBs and Corporate areas giving rise to risk to operate within the parameters identified by the IRM function, and within its own management-identified risk and control standards. Each LOB and Treasury & CIO, including their aligned Operations, Technology and Control Management are the Firm’s “first line of defense” and own the identification of risks, as well as the design and execution of controls to manage those risks. The first line of defense is responsible for adherence
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Management’s discussion and analysis Governance and oversight
to applicable laws, rules and regulations and for the implementation of the risk management structure (which may include policy, standards, limits, thresholds and controls) established by IRM.
The IRM function is independent of the businesses and is the Firm’s “second line of defense.” The IRM function sets and oversees the risk management structure for Firmwide risk governance, and independently assesses and challenges the first line of defense risk management practices. IRM is also responsible for its own adherence to applicable laws, rules and regulations and for the implementation of policies and standards established by IRM with respect to its own processes.
The Internal Audit function operates independently from other parts of the Firm and performs independent testing and evaluation of processes and controls across the Firm as the “third line of defense.” The Internal Audit Function is headed by the General Auditor, who reports to the Audit Committee and administratively to the CEO.
In addition, there are other functions that contribute to the Firmwide control environment including Finance, Human Resources, Legal and Control Management. Risk identification and ownership Each LOB and Corporate area owns the ongoing identification of risks, as well as the design and execution of controls, inclusive of IRM-specified controls, to manage those risks. To support this activity, the Firm has a risk identification process designed to facilitate their responsibility to identify material risks inherent to the Firm, catalog them in a central repository and review the most material risks on a regular basis. The IRM function reviews and challenges the LOB and Corporate’s identification of risks, maintains the central repository and provides the consolidated Firmwide results to the Firmwide Risk Committee (“FRC”) and Board Risk Committee.
Risk appetite The Firm’s overall appetite for risk is governed by a “Risk Appetite” framework. The framework and the Firm’s risk appetite are set and approved by the Firm’s Chief Executive Officer (“CEO”),CEO, Chief Financial Officer (“CFO”) and Chief Risk Officer (“CRO”). LOB-level risk appetite is set by the respective LOB CEO, CFO and CRO and is approved by the Firm’s CEO, CFO and CRO. Quantitative parameters and qualitative factors are used to monitor and measure the Firm’s capacity to take risk consistent with its stated risk appetite. Quantitative parametersQualitative factors have been established to assess select strategic risks, credit risks and market risks. Qualitative factors have been established for select operational risks and for reputation risks.that impact the Firm’s reputation. Risk Appetite results are reported quarterly to the Board of Directors’ Risk Policy Committee (“DRPC”). The Firm has an Independent Risk Management (“IRM”) function, which consists of the Risk Management and Compliance organizations. The CEO appoints, subject to DRPC approval, the Firm’s CRO to lead the IRM organization and manage the risk governance framework of the Firm. The framework is subject to approval by the DRPC in the form of the primary risk management policies. The Chief Compliance Officer (“CCO”), who reports to the CRO, is also responsible for reporting to the Audit Committee for the Global Compliance Program. The Firm’s Global Compliance Program focuses on overseeing compliance with laws, rules and regulations applicable to the Firm’s products and services to clients and counterparties.
The Firm places reliance on each of its LOBs and other functional areas giving rise to risk. Each LOB and other functional area giving rise to risk is expected to operate within the parameters identified by the IRM function, and within its own management-identified risk and control standards. The LOBs, inclusive of LOB aligned Operations, Technology and Oversight & Controls, are the “first line of defense” in identifying and managing the risk in their activities, including but not limited to applicable laws, rules and regulations.
The IRM function is independent of the businesses and forms “the second line of defense”. The IRM function sets and oversees various standards for the risk governance framework, including risk policy, identification, measurement, assessment, testing, limit setting, monitoring and reporting, and conducts independent challenge of adherence to such standards.
The Internal Audit function operates independently from other parts of the Firm and performs independent testing and evaluation of firmwide processes and controls across the entire enterprise as the Firm’s “third line of defense” in managing risk. The Internal Audit Function is headed by the General Auditor, who reports to the Audit Committee.
In addition, there are other functions that contribute to the firmwide control environment including Finance, Human Resources, Legal, and Corporate Oversight & Control.
| | | | 80 | | JPMorgan Chase & Co./2017 Annual Report | | 772019 Form 10-K |
Management’s discussionRisk governance and analysis
oversight structure
The independent status of the IRM function is supported by a governance structure that provides for escalation of risk issues to senior management, the Firmwide Risk Committee,FRC, and the Board of Directors, as appropriate. The chart below illustrates the Board of DirectorsDirectors’ and key senior management levelmanagement-level committees in the Firm’s risk governance structure. In addition, there are other committees, forums and paths of escalation that support the oversight of risk which are not shown in the chart below. below or described in this Form 10-K. The Firm’s Operating Committee, which consists of the Firm’s CEO, CRO, CFO and other senior executives, is the ultimate management escalation point in the Firmaccountable to and may refer matters to the Firm’s Board of Directors. The Operating Committee is accountableresponsible for escalating to the Firm’s Board the information necessary to facilitate the Board’s exercise of Directors.its duties. Board oversight The Firm’s Board of Directors provides oversight of risk. The Board Risk Committee is the principal committee that oversees risk principally through the DRPC, thematters. The Audit Committee oversees the control environment, and with respect to compensation and other management-related matters, the Compensation & Management Development Committee.Committee oversees compensation and other management-related matters. Each committee of the Board oversees reputation riskreputational risks and conduct risk issuesrisks within its scope of responsibility. The Directors’ Risk Policy Committee of the Board oversees the Firm’s global risk management framework and approves the primary risk management policies of the Firm. The Committee’s responsibilities include oversight of management’s exercise of its responsibility to assess and manage the Firm’s risks, and its capital and liquidity planning and analysis. Breaches in risk appetite, liquidity issues that may have a material adverse impact on the Firm and other significant risk-related matters are escalated to the DRPC.
| | | | 78 | | JPMorgan Chase & Co./2017 Annual Report |
The Audit Committee of the Board assists the Board in its oversight of management’s responsibilities to assure that there is an effective system of controls reasonably designed to safeguard the assets and income of the Firm, assure the integrity of the Firm’s financial statements and maintain compliance with the Firm’s ethical standards, policies, plans and procedures, and with laws and regulations. In addition, the Audit Committee assists the Board in its oversight of the Firm’s independent registered public accounting firm’s qualifications, independence and performance, and of the performance of the Firm’s Internal Audit function.
The Compensation & Management Development Committee(“CMDC”) assists the Board in its oversight of the Firm’s compensation programs and reviews and approves the Firm’s overall compensation philosophy, incentive compensation pools, and compensation practices consistent with key business objectives and safety and soundness. The CMDC reviews Operating Committee members’ performance against their goals, and approves their compensation awards. The CMDC also periodically reviews the Firm’s diversity programs and management development and succession planning, and provides oversight of the Firm’s culture and conduct programs.
Among the Firm’s senior management-level committees that are primarily responsible for key risk-related functions are:
The Firmwide Risk Committee (“FRC”) is the Firm’s highest management-level risk committee. It provides oversight of the risks inherent in the Firm’s businesses. The FRC is co-chaired by the Firm’s CEO and CRO. The FRC serves as an escalation point for risk topics and issues raised by its members, the Line of Business Risk Committees, Firmwide Control Committee, Firmwide Fiduciary Risk Governance Committee, Firmwide Estimations Risk Committee, Culture and Conduct Risk Committee and regional Risk Committees, as appropriate. The FRC escalates significant issues to the DRPC, as appropriate.
The Firmwide Control Committee (“FCC”) provides a forum for senior management to review and discuss firmwide operational risks, including existing and emerging issues and operational risk metrics, and to review operational risk management execution in the contextof the Operational Risk Management Framework (“ORMF”). The ORMF provides the framework for the governance, risk identification and assessment, measurement, monitoring and reporting of operational risk.The FCC is co-chaired by the Chief Control Officer and the Firmwide Risk Executive for Operational Risk Governance. The FCC relies on the prompt escalation of operational risk and control issues from businesses and functions as the primary owners of the operational risk. Operational risk and control issues may be escalated by business or function control committees to the FCC, which in turn, may escalate to the FRC, as appropriate.
The Firmwide Fiduciary Risk Governance Committee (“FFRGC”) is a forum for risk matters related to the Firm’s fiduciary activities. The FFRGC oversees the firmwide fiduciary risk governance framework, which supports the consistent identification and escalation of fiduciary risk issues by the relevant lines of business; approves risk or compliance policy exceptions requiring FFRGC approval; approves the scope and/or expansion of the Firm’s fiduciary framework; and reviews metrics to track fiduciary activity and issue resolution Firmwide. The FFRGC is co-chaired by the Asset Management CEO and the Asset & Wealth Management CRO. The FFRGC escalates significant fiduciary issues to the FRC,the DRPC and the Audit Committee, as appropriate.
The Firmwide Estimations Risk Committee (“FERC”) reviews and oversees governance and execution activities related to models and certain analytical and judgment based estimations, such as those used in risk management, budget forecasting and capital planning and analysis. The FERC is chaired by the Firmwide Risk Executive for Model Risk Governance and Review. The FERC serves as an escalation channel for relevant topics and issues raised by its members and the Line of Business Estimation Risk Committees. The FERC escalates significant issues to the FRC, as appropriate.
The Culture and Conduct Risk Committee (“CCRC”) provides oversight of culture and conduct initiatives to develop a more holistic view of conduct risks and to connect key programs across the Firm to identify opportunities and emerging areas for focus. The CCRC is co-chaired by the Chief Culture & Conduct Officer and the Conduct Risk Compliance Executive. The CCRC escalates significant issues to the FRC, as appropriate.
Line of Business and Regional Risk Committees review the ways in which the particular line of business or the business operating in a particular region could be exposed to adverse outcomes with a focus on identifying, accepting, escalating and/or requiring remediation of matters brought to these committees. These committees may escalate to the FRC, as appropriate. LOB risk committees are co-chaired by the LOB CEO and the LOB CRO. Each LOB risk committee may create sub-committees with requirements for escalation. The regional committees are established similarly, as appropriate, for the region.
In addition, each line of business and function is required to have a Control Committee. These control committees oversee the control environment of their respective business or function. As part of that mandate, they are responsible for reviewing data which indicates the quality and stability of the processes in a business or function, reviewing key operational risk issues and focusing on processes with shortcomings and overseeing process remediation. These committees escalate issues to the FCC, as appropriate.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 79 |
Management’s discussion and analysis
The Firmwide Asset Liability Committee (“ALCO”), chaired by the Firm’s Treasurer and Chief Investment Officer under the direction of the CFO, monitors the Firm’s balance sheet, liquidity risk and structural interest rate risk. ALCO reviews the Firm’s overall structural interest rate risk position, and the Firm’s funding requirements and strategy. ALCO is responsible for reviewing and approving the Firm’s Funds Transfer Pricing Policy (through which lines of business “transfer” interest rate risk and liquidity risk to Treasury and CIO), the Firm’s Intercompany Funding and Liquidity Policy and the Firm’s Contingency Funding Plan.
The Firmwide Capital Governance Committee, chaired by the Head of the Regulatory Capital Management Office, is responsible for reviewing the Firm’s Capital Management Policy and the principles underlying capital issuance and distribution alternativesand decisions. The Committee overseesthe capital adequacy assessment process, including the overall design, scenario development and macro assumptions, and ensures that capital stress test programs are designed to adequately capture the risks specific to the Firm’s businesses.
The Firmwide Valuation Governance Forum (“VGF”) is composed of senior finance and risk executives and is responsible for overseeing the management of risks arising from valuation activities conducted across the Firm. The VGF is chaired by the Firmwide head of the Valuation Control Group (“VCG”) under the direction of the Firm’s Controller, and includes sub-forums covering the Corporate & Investment Bank, Consumer & Community Banking, Commercial Banking, Asset & Wealth Management and certain corporate functions, including Treasury and CIO.
In addition, the JPMorgan Chase Bank, N.A. Board of Directors is responsible for the oversight of management of the Bank.bank. The JPMorgan Chase Bank, N.A. Board accomplishes this function acting directly and through the principal standing committees of the Firm’s Board of Directors. Risk and control oversight on behalf of JPMorgan Chase Bank N.A. is primarily the responsibility of the DRPCRisk Committee and the Audit Committee, of the Firm’s Board of Directors, respectively, and, with respect to compensation and other management-related matters, the Compensation & Management Development Committee of the Firm’s Board of Directors.
Risk Identification
The Firm has a Risk Identification process in which the first line of defense identifies material risks inherent to the Firm, catalogs them in a central repository and reviews the most material risks on a regular basis. The second line of defense, at a firmwide level, establishes the risk identification framework, coordinates the process, maintains the central repository and reviews and challenges the first line’s identification of risks.
Committee.
| | | | 80JPMorgan Chase & Co./2019 Form 10-K | | 81 |
Management’s discussion and analysis
The Board Risk Committee assists the Board in its oversight of management’s responsibility to implement a global risk management framework reasonably designed to identify, assess and manage the Firm’s risks. The Board Risk Committee’s responsibilities include approval of applicable primary risk policies and review of certain associated frameworks, analysis and reporting established by management. Breaches in risk appetite and parameters, issues that may have a material adverse impact on the Firm, including capital and liquidity issues, and other significant risk-related matters are escalated to the Board Risk Committee, as appropriate. The Audit Committee assists the Board in its oversight of management’s responsibility to ensure that there is an effective system of controls reasonably designed to safeguard the Firm’s assets and income, ensure the integrity of the Firm’s financial statements, and maintain compliance with the Firm’s ethical standards, policies, plans and procedures, and with laws and regulations. It also assists the Board in its oversight of the Firm’s independent registered public accounting firm’s qualifications, independence and performance, and of the performance of the Firm’s Internal Audit function. The Compensation & Management Development Committee(“CMDC”) assists the Board in its oversight of the Firm’s compensation principles and practices. The CMDC reviews and approves the Firm’s compensation and benefits programs. In addition, the Committee reviews Operating Committee members’ performance against their goals, and approves their compensation awards. The CMDC also reviews the development of and succession for key executives, and provides oversight of the Firm’s culture, including reviewing updates from management regarding significant conduct issues and any related employee actions, including compensation actions. The Public Responsibility Committee assists the Board in its oversight of the Firm's positions and practices on public responsibility matters such as community investment, fair lending, sustainability, consumer practices and other public policy issues that reflect the Firm's values and character and could impact the Firm's reputation among all of its stakeholders. The Committee also provides guidance on these matters to management and the Board, as appropriate. The Corporate Governance & Nominating Committee exercises general oversight with respect to the governance of the Board. The Committee evaluates and recommends to the Board corporate governance practices applicable to the Firm. It also appraises the framework for assessing the Board’s performance and self-evaluation. Management oversight The Firm’s senior management-level committees that are primarily responsible for key risk-related functions include: The Firmwide Risk Committee (“FRC”) is the Firm’s highest management-level risk committee. It provides oversight of the risks inherent in the Firm’s businesses and serves as an escalation point for risk topics and issues raised by underlying committees and/or FRC members. The Firmwide Control Committee (“FCC”) is an escalation committee for senior management to review and discuss the Firmwide operational risk environment including identified issues, operational risk metrics and significant events that have been escalated. The Firmwide Fiduciary Risk Governance Committee (“FFRGC”) provides oversight of the governance framework for fiduciary risk or fiduciary-related conflict of interest risk inherent in each of the Firm’s LOBs. The FFRGC approves risk or compliance policy exceptions and reviews periodic reports from the LOBs and control functions including fiduciary metrics and control trends. The Firmwide Estimations Risk Committee (“FERC”) provides oversight of the governance framework for quantitative and qualitative estimations and models as specified in the Estimations and Model Risk Management Policy. The FERC also has responsibility to set the prioritization of estimations and model risk activities and drive consistency through review of LOB activities and escalated issues. The Conduct Risk Steering Committee (“CRSC”) is responsible for reviewing, calibrating and consolidating Firmwide Conduct Risk Appetite and setting overall direction for the Firm’s Conduct Risk Program. Line of Business and Regional Risk Committees are responsible for providing oversight of the governance, limits, and controls that are in place through the scope of their activities. These committeesreview the ways in which the particular LOB or the business operating in a particular region could be exposed to adverse outcomes with a focus on identifying, accepting, escalating and/or requiring remediation of matters brought to these committees. Line of Business and Corporate Control Committees oversee the control environment of their respective business or function. As part of that mandate, they are responsible for reviewing indicators of elevated or emerging risks and other data that may impact the quality and stability of the processes in a business or function, addressing key operational risk issues, focusing on processes with control concerns and overseeing control remediation. Line of Business Reputation Risk Committees review and assess transactions, activities and clients that have the potential for material reputation risk to the Firm.
| | | | 82 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The Firmwide Asset and Liability Committee (“ALCO”) is responsible for overseeing the Firm’s asset and liability management (“ALM”) activities and the management of liquidity risk, balance sheet, interest rate risk, and capital risk. The ALCO is supported by the Treasurer Committee and the Capital Governance Committee. The Treasurer Committee is responsible for monitoring the Firm’s overall balance sheet, liquidity risk and interest rate risk. The Capital Governance Committee is responsible for overseeing and providing guidance concerning the effectiveness of the Firm’s capital framework, capital policies and regulatory capital implementation. The Firmwide Valuation Governance Forum (“VGF”) is composed of senior finance and risk executives and is responsible for overseeing the management of fair value risks arising from valuation activities conducted across the Firm. Risk governance and oversight functions The Firm manages its risk through risk governance and oversight functions. The scope of a particular function may include one or more drivers, types and/or impacts of risk. For example, Country Risk Management oversees country risk which may be a driver of risk or an aggregation of exposures that could give rise to multiple risk types such as credit or market risk. The following sections discuss the risk governance and oversight functions in place to manage the risks inherent in the Firms business activities. | | | Risk governance and oversight functions | Page | Strategic risk
| 84 | Capital risk | 85–92 | Liquidity risk | 93–98 | Reputation risk | 99 | Consumer credit risk
| 103–107 | Wholesale credit risk | 108–115 | Investment portfolio risk | 118 | Market risk | 119–126 | Country risk | 127–128 | Operational risk | 129–135 | Compliance risk
| 132 | Conduct risk | 133 | Legal risk | 134 | Estimations and Model risk | 135 |
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Management’s discussion and analysis
| | | | | | STRATEGIC RISK MANAGEMENT |
Strategic risk is the risk associated with the Firm’s current and future business plans and objectives. Strategic risk includes the risk to current or anticipated earnings, capital, liquidity enterprise value, or the Firm’s reputation arising from adverseassociated with poorly designed or failed business decisions, poor implementation of business decisions,plans or lack of responsivenessinadequate response to changes in the industry or externaloperating environment. OverviewManagement and oversight
The Operating Committee and the senior leadership of each LOB and Corporate are responsible for managing the Firm’s most significant strategic risks. Strategic risks are overseen by IRM through participation in business reviews, LOB and Corporate senior management committees ongoing management of the Firm’s risk appetite and limit framework, and other relevant governance forums.forums and ongoing discussions. The Board of Directors oversees management’s strategic decisions, and the DRPCBoard Risk Committee oversees IRM and the Firm’s risk management framework. The Firm’s strategic planning process, which includes the development and execution of strategic priorities and initiatives by the Operating Committee and the management teams of the lines of business, is an important process for managing the Firm’s strategic risk. Guided by the Firm’s How We Do Business (“HWDB”) principles, the strategic priorities and initiatives are updated annually and include evaluating performance against prior year initiatives, assessment of the operating environment, refinement of existing strategies and development of new strategies.
These strategic priorities and initiatives are then incorporated in the Firm’s budget, and are reviewed by the Board of Directors.
In the process of developing thebusiness plans and strategic initiatives, line of businessLOB and Corporate leadership identify the strategicassociated risks associated with their strategic initiatives and those risksthat are incorporated into the Firmwide Risk Identification process and monitored and assessed as part of the Firmwide Risk Appetite framework. For further information on Risk Identification, see Enterprise-Wide Risk Management on page 75. For further information In addition, IRM conducts a qualitative assessment of the LOB and Corporate strategic initiatives to assess their impact on the Risk Appetite framework see, Enterprise-Wide Risk Management on page 77.
risk profile of the Firm.
The Firm’s strategic planning process, which includes the development and execution of strategic initiatives, is one component of managing the Firm’s strategic risk. Guided by the Firm’s How We Do Business Principles (the “Principles”), the Operating Committee and management teams in each LOB and Corporate review and update the strategic plan periodically. The process includes evaluating the high-level strategic framework and performance against prior-year initiatives, assessing the operating environment, refining existing strategies and developing new strategies. These strategic initiatives, along with IRM’s assessment, are incorporated in the Firm’s budget and provided to the Board for review. The Firm’s balance sheet strategy, which focuses on risk-adjusted returns, strong capital and robust liquidity, is key toalso a component in the management of strategic risk. For further information on capital risk, seeRefer to Capital Risk Management on pages 82–91. For85–92 for further information on liquidity risk see,capital risk. Refer to Liquidity Risk Management on pages 92–97 For93–98 for further information on liquidity risk. In addition, for further information on reputation risk, seerefer to Reputation Risk Management on page 98.
Governance and oversight
The Firm’s Operating Committee defines the most significant strategic priorities and initiatives, including those of the Firm, the LOBs and the Corporate functions, for the coming year and evaluates performance against the prior year. As part of the strategic planning process, IRM conducts a qualitative assessment of those significant initiatives to determine the impact on the risk profile of the Firm. The Firm’s priorities, initiatives and IRM’s assessment are provided to the Board for its review.
As part of its ongoing oversight and management of risk across the Firm, IRM is regularly engaged in significant discussions and decision-making across the Firm, including decisions to pursue new business opportunities or modify or exit existing businesses.
99.
| | | | 84 | | JPMorgan Chase & Co./2017 Annual Report | | 812019 Form 10-K |
Management’s discussion and analysis
Capital risk is the risk the Firm has an insufficient level andor composition of capital to support the Firm’s business activities and associated risks during normal economic environments and under stressed conditions. A strong capital position is essential to the Firm’s business strategy and competitive position. Maintaining a strong balance sheet to manage through economic volatility is considered a strategic imperative of the Firm’s Board of Directors, CEO and Operating Committee. The Firm’s fortress balance sheet philosophy focuses on risk-adjusted returns, strong capital and robust liquidity. The Firm’s capital risk management strategy focuses on maintaining long-term stability to enable itthe Firm to build and invest in market-leading businesses, evenincluding in a highly stressed environment.environments. Senior management considers the implications on the Firm’s capital prior to making any significant decisions that could impact future business activities. In addition to considering the Firm’s earnings outlook, senior management evaluates all sources and uses of capital with a view to preservingensuring the Firm’s capital strength. Capital management oversight The Firm has a Capital Management Oversight function whose primary objective is to provide independent assessment, measuring, monitoring and control of capital risk across the Firm. Capital Management Oversight’s responsibilities include: Defining, monitoring and reporting capital risk metrics; Establishing, calibrating and monitoring capital risk limits and indicators, including capital risk appetite; Developing a process to classify, monitor and report limit breaches; and Performing an independent assessment of the Firm’s capital risk management objectivesactivities, including changes made to the contingency capital plan described below. In addition, the Basel Independent Review function (“BIR”), which is a part of the IRM function, conducts independent assessments of the Firm’s regulatory capital framework. These assessments are intended to holdensure compliance with the applicable regulatory capital sufficient to: Maintain “well-capitalized” statusrules in support of senior management’s responsibility for managing capital and for the Firm and its insured depository institution (“IDI”) subsidiaries;Board Risk Committee’s oversight of management in executing that responsibility.
Support risks underlying business activities;Capital management
Treasury & CIO is responsible for capital management. The primary objectives of effective capital management are to: Maintain sufficient capital in order to continue to build and invest in itsthe Firm’s businesses through the cycle and in stressed environments; Retain flexibility to take advantage of future investment opportunities; Serve
Promote the Firm’s ability to serve as a source of strength to its subsidiaries; Ensure the Firm operates above the minimum regulatory capital ratios as well as maintain “well-capitalized” status for the Firm and its insured depository institution (“IDI”) subsidiaries at all times under applicable regulatory capital requirements; Meet capital distribution objectives; and Maintain sufficient capital resources to operate throughout a resolution period in accordance with the Firm’s preferred resolution strategy. TheseThe Firm addresses these objectives are achieved through the establishment ofestablishing internal minimum capital targetsrequirements and a strong capital management governance framework. framework, both in business as usual conditions and in the event of stress.
Capital risk management is intended to be flexible in order to react to a range of potential events. In its management of capital, the Firm takes into consideration economic risk and all applicable regulatory capital requirements to determine the level of capital needed. The Firm’s minimumFirm considers regulatory capital targets are based on the most binding of three pillars:requirements as well as an internal assessment of the Firm’s capital needs; an estimate of requiredadequacy, in normal economic cycles and in stress events, when setting its minimum capital under the CCAR and Dodd-Frank Act stress testing requirements; and Basel III Fully Phased-In regulatory minimums. Where necessary, each pillar may include a management-established buffer.levels. The capital governance framework requires regular monitoring of the Firm’s capital positions, stress testing and defining escalation protocols, both at the Firm and material legal entity levels.
Governance
| | | | 82 | | JPMorgan Chase & Co./2017 Annual Report |
The following tables presentCommittees responsible for overseeing the Firm’s Transitional and Fully Phased-In risk-based and leverage-based capital metrics under both the Basel III Standardized and Advanced Approaches. The Firm’s Basel III ratios exceed both the Transitional and Fully Phased-In regulatory minimums as of December 31, 2017 and 2016. For further discussion of these capital metrics, including regulatory minimums, and the Standardized and Advanced Approaches, refer to Strategy and Governance on pages 84–88.
| | | | | | | | | | | | | | | | | | | | | | | | | Transitional | Fully Phased-In | | December 31, 2017 (in millions, except ratios) | Standardized | | Advanced | | Minimum capital ratios | | Standardized | | Advanced | | Minimum capital ratios | | Risk-based capital metrics: | | | | | | | | | | | | | CET1 capital | $ | 183,300 |
| | $ | 183,300 |
| | | | $ | 183,244 |
| | $ | 183,244 |
| | | | Tier 1 capital | 208,644 |
| | 208,644 |
| | | | 208,564 |
| | 208,564 |
| | | | Total capital | 238,395 |
| | 227,933 |
| | | | 237,960 |
| | 227,498 |
| | | | Risk-weighted assets | 1,499,506 |
| | 1,435,825 |
| | | | 1,509,762 |
| | 1,446,696 |
| | | | CET1 capital ratio | 12.2 | % | | 12.8 | % | | 7.5 | % | | 12.1 | % | | 12.7 | % | | 10.5 | % | | Tier 1 capital ratio | 13.9 |
| | 14.5 |
| | 9.0 |
| | 13.8 |
| | 14.4 |
| | 12.0 |
| | Total capital ratio | 15.9 |
| | 15.9 |
| | 11.0 |
| | 15.8 |
| | 15.7 |
| | 14.0 |
| | Leverage-based capital metrics: | | | | | | | | | | | | | Adjusted average assets(a) | $ | 2,514,270 |
| | $ | 2,514,270 |
| | | | $ | 2,514,822 |
| | $ | 2,514,822 |
| | | | Tier 1 leverage ratio(b) | 8.3 | % | | 8.3 | % | | 4.0 | % | | 8.3 | % | | 8.3 | % | | 4.0 | % | | Total leverage exposure | NA |
| | $ | 3,204,463 |
| | | | NA |
| | $ | 3,205,015 |
| | | | SLR(c) | NA |
| | 6.5 | % | | NA |
| | NA |
| | 6.5 | % | | 5.0 | % | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | Transitional | Fully Phased-In | | December 31, 2016 (in millions, except ratios) | Standardized | | Advanced | | Minimum capital ratios | | Standardized | | Advanced | | Minimum capital ratios | | Risk-based capital metrics: | | | | | | | | | | | | | CET1 capital | $ | 182,967 |
| | $ | 182,967 |
| | | | $ | 181,734 |
| | $ | 181,734 |
| | | | Tier 1 capital | 208,112 |
| | 208,112 |
| | | | 207,474 |
| | 207,474 |
| | | | Total capital | 239,553 |
| | 228,592 |
| | | | 237,487 |
| | 226,526 |
| | | | Risk-weighted assets | 1,483,132 |
| (d) | 1,476,915 |
| | | | 1,492,816 |
| (d) | 1,487,180 |
| | | | CET1 capital ratio | 12.3 | % | (d) | 12.4 | % | | 6.25 | % | | 12.2 | % | (d) | 12.2 | % | | 10.5 | % | | Tier 1 capital ratio | 14.0 |
| (d) | 14.1 |
| | 7.75 |
| | 13.9 |
| (d) | 14.0 |
| | 12.0 |
| | Total capital ratio | 16.2 |
| (d) | 15.5 |
| | 9.75 |
| | 15.9 |
| (d) | 15.2 |
| | 14.0 |
| | Leverage based capital metrics: | | | | | | | | | | | | | Adjusted average assets(a) | $ | 2,484,631 |
| | $ | 2,484,631 |
| | | | $ | 2,485,480 |
| | $ | 2,485,480 |
| | | | Tier 1 leverage ratio(b) | 8.4 | % | | 8.4 | % | | 4.0 | % | | 8.3 | % | | 8.3 | % | | 4.0 | % | | Total leverage exposure | NA |
| | $ | 3,191,990 |
| | | | NA |
| | $ | 3,192,839 |
| | | | SLR(c) | NA |
| | 6.5 | % | | NA |
| | NA |
| | 6.5 | % | | 5.0 | % | (e) |
Note: As of December 31, 2017 and 2016, the lower of the Standardized or Advanced capital ratios under each of the Transitional and Fully Phased-In Approaches in the table above represents the Firm’s Collins Floor, as discussed in Risk-based capital regulatory minimums on page 85.
| | (a) | Adjusted average assets, for purposes of calculating the Tier 1 leverage ratio, includes total quarterly average assets adjusted for unrealized gains/(losses) on available-for-sale (“AFS”) securities, less deductions for goodwill and other intangible assets, defined benefit pension plan assets, and deferred tax assets related to tax attributes, including net operating losses (“NOLs”). |
| | (b) | The Tier 1 leverage ratio is calculated by dividing Tier 1 capital by adjusted total average assets. |
| | (c) | The SLR leverage ratio is calculated by dividing Tier 1 capital by total leverage exposure. For additional information on total leverage exposure, see SLR on page 88. |
| | (d) | The prior period amounts have been revised to conform with the current period presentation. |
| | (e) | In the case of the SLR, the Fully Phased-In minimum ratio is effective January 1, 2018. |
| | | | JPMorgan Chase & Co./2017 Annual Report | | 83 |
Management’s discussion and analysis
Strategy and governance
The Firm’s CEO, together with the Board of Directors and the Operating Committee, establishes principles and guidelines for capital planning, issuance, usage and distributions, and minimum capital targets for the level and composition of capital in business-as-usual and highly stressed environments. The DRPC reviews and approves the capital management and governance policy ofinclude the Firm. The Firm’s Audit Committee is responsible for reviewing and approving the capital stress testing control framework.
The Capital Governance Committee, the Treasurer Committee and the RegulatoryFirmwide ALCO. Capital Management Officemanagement oversight is governed through the CIO, Treasury and Corporate (“RCMO”CTC”) supportrisk committee. In addition, the Board Risk Committee periodically reviews the Firm’s strategic capital decision-making. The Capital Governance Committee overseesthe capital adequacy assessment process, including the overall design, scenario development and macro assumptions, and ensures that capital stress test programs are designedrisk tolerance. Refer to adequately capture the risks specific to the Firm’s businesses. RCMO, which reports to the Firm’s CFO, is responsibleFirmwide Risk Management on pages 79–83 for designing and monitoring the Firm’s execution of its capital policies and strategies once approved by the Board, as well as reviewing and monitoring the execution of its capital adequacy assessment process. The Basel Independent Review function (“BIR”), which reports to the RCMO, conducts independent assessments of the Firm’s regulatory capital framework to ensure compliance with the applicable U.S. Basel rules in support of senior management’s responsibility for assessing and managing capital and for the DRPC’s oversight of management in executing that responsibility. For additional discussion on the DRPC, see Enterprise-wideBoard Risk Management on pages 75–137.
Monitoring and management of capital
In its monitoring and management of capital, the Firm takes into consideration an assessment of economic risk and all regulatory capital requirements to determine the level of capital needed to meet and maintain the objectives discussed above, as well as to support the framework for allocating capital to its business segments. While economic risk is considered prior to making decisions on future business activities, in most cases the Firm considers risk-based regulatory capital to be a proxy for economic risk capital.
Regulatory capital
The Federal Reserve establishes capital requirements, including well-capitalized standards, for the consolidated financial holding company. The OCC establishes similar minimum capital requirements for the Firm’s national banks, including JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. The U.S. capital requirements generally follow the Capital Accord of the Basel Committee as amended from time to time.
Basel III overview
Capital rules under Basel III establish minimum capital ratios and overall capital adequacy standards for large and internationally active U.S. bank holding companies (“BHC”) and banks, including the Firm and its IDI subsidiaries. Basel III sets forth two comprehensive approaches for calculating RWA: a standardized approach (“Basel III Standardized”), and an advanced approach (“Basel III Advanced”). Certain of the requirements of Basel III are subject to phase-in periods that began on January 1, 2014 and continue through the end of 2018 (“transitional period”).
Basel III establishes capital requirements for calculating credit risk RWA and market risk RWA, and in the case of Basel III Advanced, operational risk RWA. Key differences in the calculation of credit risk RWA between the Standardized and Advanced approaches are that for Basel III Advanced, credit risk RWA is based on risk-sensitive approaches which largely rely on the use of internal credit models and parameters, whereas for Basel III Standardized, credit risk RWA is generally based on supervisory risk-weightings which vary primarily by counterparty type and asset class. Market risk RWA is calculated on a generally consistent basis between Basel III Standardized and Basel III Advanced. In addition to the RWA calculated under these methodologies, the Firm may supplement such amounts to incorporate management judgment and feedback from its regulators.
Basel III also includes a requirement for Advanced Approach banking organizations, including the Firm, to calculate the SLR. For additional information on the SLR, see page 88.
On December 7, 2017, the Basel Committee issued the Basel III Reforms. Potential changes to the requirements for U.S. financial institutions are being considered by the U.S. banking regulators. For additional information on Basel III reforms, refer to Supervision & Regulation on pages 1–8.
Basel III Fully Phased-In
The Basel III transitional period will end on December 31, 2018, at which point the Firm will calculate its capital ratios under both the Basel III Standardized and Advanced Approaches on a Fully Phased–In basis. In the case of the SLR, the Fully Phased-In well-capitalized ratio is effective January 1, 2018. The Firm manages each of its lines of business, as well as the corporate functions, primarily on a Basel III Fully Phased-In basis.
For additional information on the Firm, JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A.’s capital, RWA and capital ratios under Basel III Standardized and Advanced Fully Phased-In rules and the SLR calculated under the Basel III Advanced Fully Phased-In rules, all of which are considered key regulatory capital measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 52–54.ALCO.
| | | | 84 | | JPMorgan Chase & Co./2017 Annual Report |
The Basel III Standardized and Advanced Fully Phased-In capital, RWA and capital ratios, and SLRs for the Firm, JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. are based on the current published U.S. Basel III rules.
Risk-based capital regulatory minimums
The following chart presents the Basel III minimum CET1 capital ratio during the transitional periods and on a fully phased-in basis under the Basel III rules currently in effect.The Basel III rules include minimum capital ratio requirements that are subject to phase-in periods through the end of 2018. The capital adequacy of the Firm and its IDI subsidiaries, both during the transitional period and upon full phase-in, is evaluated against the Basel III approach (Standardized or Advanced) which, for each quarter, results in the lower ratio as required by the Collins Amendment of the Dodd-Frank Act (the “Collins Floor”). The Basel III Standardized Fully Phased-In CET1 ratio is the Firm’s current binding constraint, and the Firm expects that this will remain its binding constraint for the foreseeable future.
Additional information regarding the Firm’s capital ratios, as well as the U.S. federal regulatory capital standards to which the Firm is subject, is presented in Note 26. For further information on the Firm’s Basel III measures, see the Firm’s Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website (http://investor.shareholder.com/jpmorganchase/basel.cfm).
All banking institutions are currently required to have a minimum capital ratio of 4.5% of risk weighted assets. Certain banking organizations, including the Firm, are required to hold additional amounts of capital to serve as a “capital conservation buffer”. The capital conservation buffer is intended to be used to absorb potential losses in times of financial or economic stress. If not maintained, the Firm could be limited in the amount of capital that may be distributed, including dividends and common equity repurchases. The capital conservation buffer is subject to a
phase-in period that began January 1, 2016 and continues through the end of 2018.
As an expansion of the capital conservation buffer, the Firm is also required to hold additional levels of capital in the form of a GSIB surcharge and a countercyclical capital buffer.
Under the Federal Reserve’s final rule, the Firm is required to calculate its GSIB surcharge on an annual basis under two separately prescribed methods, and is subject to the higher of the two. The first (“Method 1”), reflects the GSIB surcharge as prescribed by the Basel Committee’s assessment methodology, and is calculated across five criteria: size, cross-jurisdictional activity, interconnectedness, complexity and substitutability. The second (“Method 2”), modifies the Method 1 requirements to include a measure of short-term wholesale funding in place of substitutability, and introduces a GSIB score “multiplication factor”. The following table represents the Firm’s GSIB surcharge. | | | | | | | 2017 |
| 2016 |
| Fully Phased-In: | | | Method 1 | 2.50 | % | 2.50 | % | Method 2 | 3.50 | % | 4.50 | % | | | | Transitional(a) | 1.75 | % | 1.125 | % |
| | (a) | The GSIB surcharge is subject to transition provisions (in 25% increments) through the end of 2018. |
| | | | JPMorgan Chase & Co./2017 Annual Report | | 85 |
Management’s discussion and analysis
The Firm’s effective GSIB surcharge for 2018 is anticipated to be 3.5%.
The countercyclical capital buffer takes into account the macro financial environment in which large, internationally active banks function. On September 8, 2016 the Federal Reserve published the framework that will apply to the setting of the countercyclical capital buffer. As of December 1, 2017, the Federal Reserve reaffirmed setting the U.S. countercyclical capital buffer at 0%, and stated that it will review the amount at least annually. The countercyclical capital buffer can be increased if the Federal Reserve, FDIC and OCC determine that credit growth in the economy has become excessive and can be set at up to an additional 2.5% of RWA subject to a 12-month implementation period.
The Firm believes that it will operate with a Basel III CET1 capital ratio between 11% and 12% over the medium term. It is the Firm’s intention that its capital ratios will continue to meet regulatory minimums as they are fully phased in 2019 and thereafter.
In addition to meeting the capital ratio requirements of Basel III, the Firm also must maintain minimum capital and leverage ratios in order to be “well-capitalized.” The following table represents the ratios that the Firm and its IDI subsidiaries must maintain in order to meet the definition of “well-capitalized” under the regulations issued by the Federal Reserve and the Prompt Corrective Action (“PCA”) requirements of the FDIC Improvement Act (“FDICIA”), respectively.
| | | | | | | | | | Well-capitalized ratios | | BHC | | IDI | Capital ratios | | | | | | CET1 | — | % | | | 6.5 | % | | Tier 1 capital | 6.0 |
| | | 8.0 |
| | Total capital | 10.0 |
| | | 10.0 |
| | Tier 1 leverage | — |
| | | 5.0 |
| | SLR(a) | 5.0 |
| | | 6.0 |
| |
| | (a) | In the case of the SLR, the Fully Phased-In well-capitalized ratio is effective January 1, 2018. |
Capital
The following table presents reconciliations of total stockholders’ equity to Basel III Fully Phased-In CET1 capital, Tier 1 capital and Basel III Advanced and Standardized Fully Phased-In Total capital as of December 31, 2017 and 2016. For additional information on the components of regulatory capital, see Note 26.
| | | | | | | | Capital components | | | (in millions) | December 31, 2017 |
| December 31, 2016 |
| Total stockholders’ equity | $ | 255,693 |
| $ | 254,190 |
| Less: Preferred stock | 26,068 |
| 26,068 |
| Common stockholders’ equity | 229,625 |
| 228,122 |
| Less: | | | Goodwill | 47,507 |
| 47,288 |
| Other intangible assets | 855 |
| 862 |
| Add: | | | Certain Deferred tax liabilities(a)(b) | 2,204 |
| 3,230 |
| Less: Other CET1 capital adjustments(b) | 223 |
| 1,468 |
| Standardized/Advanced Fully Phased-In CET1 capital | 183,244 |
| 181,734 |
| Preferred stock | 26,068 |
| 26,068 |
| Less: | | | Other Tier 1 adjustments(c) | 748 |
| 328 |
| Standardized/Advanced Fully Phased-In Tier 1 capital | $ | 208,564 |
| $ | 207,474 |
| Long-term debt and other instruments qualifying as Tier 2 capital | $ | 14,827 |
| $ | 15,253 |
| Qualifying allowance for credit losses | 14,672 |
| 14,854 |
| Other | (103 | ) | (94 | ) | Standardized Fully Phased-In Tier 2 capital | $ | 29,396 |
| $ | 30,013 |
| Standardized Fully Phased-in Total capital | $ | 237,960 |
| $ | 237,487 |
| Adjustment in qualifying allowance for credit losses for Advanced Tier 2 capital | (10,462 | ) | (10,961 | ) | Advanced Fully Phased-In Tier 2 capital | $ | 18,934 |
| $ | 19,052 |
| Advanced Fully Phased-In Total capital | $ | 227,498 |
| $ | 226,526 |
|
| | (a) | Represents deferred tax liabilities related to tax-deductible goodwill and identifiable intangibles created in nontaxable transactions, which are netted against goodwill and other intangibles when calculating TCE. |
| | (b) | Includes the effect from the revaluation of the Firm’s net deferred tax liability as a result of the enactment of the TCJA. |
| | (c) | Includes the deduction associated with the permissible holdings of covered funds (as defined by the Volcker Rule). The deduction was not material as of December 31, 2017 and 2016. |
| | | | 86 | | JPMorgan Chase & Co./2017 Annual Report |
The following table presents reconciliations of the Firm’s Basel III Transitional CET1 capital to the Firm’s Basel III Fully Phased-In CET1 capital as of December 31, 2017 and 2016.
| | | | | | | | (in millions) | December 31, 2017 |
| December 31, 2016 |
| Transitional CET1 capital | $ | 183,300 |
| $ | 182,967 |
| AOCI phase-in(a) | 128 |
| (156 | ) | CET1 capital deduction phase-in(b) | (20 | ) | (695 | ) | Intangible assets deduction phase-in(c) | (160 | ) | (312 | ) | Other adjustments to CET1 capital(d) | (4 | ) | (70 | ) | Fully Phased-In CET1 capital | $ | 183,244 |
| $ | 181,734 |
|
| | (a) | Includes the remaining balance of accumulated other comprehensive income (“AOCI”) related to AFS debt securities and defined benefit pension and other postretirement employee benefit (“OPEB”) plans that will qualify as Basel III CET1 capital upon full phase-in. |
| | (b) | Predominantly includes regulatory adjustments related to changes in DVA, as well as CET1 deductions for defined benefit pension plan assets and deferred tax assets related to tax attributes, including NOLs. |
| | (c) | Relates to intangible assets, other than goodwill and MSRs, that are required to be deducted from CET1 capital upon full phase-in. |
| | (d) | Includes minority interest and the Firm’s investments in its own CET1 capital instruments. |
Capital rollforward The following table presents the changes in Basel III Fully Phased-In CET1 capital, Tier 1 capital and Tier 2 capital for the year ended December 31, 2017.
| | | | | Year Ended December 31, (in millions) | 2017 |
| Standardized/Advanced CET1 capital at December 31, 2016 | $ | 181,734 |
| Net income applicable to common equity(a) | 22,778 |
| Dividends declared on common stock | (7,542 | ) | Net purchase of treasury stock | (13,741 | ) | Changes in additional paid-in capital | (1,048 | ) | Changes related to AOCI | 536 |
| Adjustment related to DVA(b) | 468 |
| Changes related to other CET1 capital adjustments(c) | 59 |
| Increase in Standardized/Advanced CET1 capital | 1,510 |
| Standardized/Advanced CET1 capital at December 31, 2017 | $ | 183,244 |
| | | Standardized/Advanced Tier 1 capital at December 31, 2016 | $ | 207,474 |
| Change in CET1 capital | 1,510 |
| Net issuance of noncumulative perpetual preferred stock | — |
| Other | (420 | ) | Increase in Standardized/Advanced Tier 1 capital | 1,090 |
| Standardized/Advanced Tier 1 capital at December 31, 2017 | $ | 208,564 |
| | | Standardized Tier 2 capital at December 31, 2016 | $ | 30,013 |
| Change in long-term debt and other instruments qualifying as Tier 2 | (426 | ) | Change in qualifying allowance for credit losses | (182 | ) | Other | (9 | ) | Decrease in Standardized Tier 2 capital | (617 | ) | Standardized Tier 2 capital at December 31, 2017 | $ | 29,396 |
| Standardized Total capital at December 31, 2017 | $ | 237,960 |
| Advanced Tier 2 capital at December 31, 2016 | $ | 19,052 |
| Change in long-term debt and other instruments qualifying as Tier 2 | (426 | ) | Change in qualifying allowance for credit losses | 317 |
| Other | (9 | ) | Decrease in Advanced Tier 2 capital | (118 | ) | Advanced Tier 2 capital at December 31, 2017 | $ | 18,934 |
| Advanced Total capital at December 31, 2017 | $ | 227,498 |
|
| | (a) | Includes a $2.4 billion decrease to net income as a result of the enactment of the TCJA. For additional information related to the impact of the TCJA, see Note 24. |
| | (b) | Includes DVA related to structured notes recorded in AOCI. |
| | (c) | Includes the effect from the revaluation of the Firm’s net deferred tax liability as a result of the enactment of the TCJA.
|
| | | | JPMorgan Chase & Co./2017 Annual Report | | 87 |
Management’s discussion and analysis
RWA rollforward
The following table presents changes in the components of RWA under Basel III Standardized and Advanced Fully Phased-In for the year ended December 31, 2017. The amounts in the rollforward categories are estimates, based on the predominant driver of the change.
| | | | | | | | | | | | | | | | | | | | | | | | | | Standardized | | Advanced | Year ended December 31, 2017 (in millions) | Credit risk RWA | | Market risk RWA | Total RWA | | Credit risk RWA | Market risk RWA | Operational risk RWA | Total RWA | December 31, 2016 | $ | 1,365,137 |
| (d) | $ | 127,679 |
| $ | 1,492,816 |
| (d) | $ | 959,523 |
| $ | 127,657 |
| $ | 400,000 |
| $ | 1,487,180 |
| Model & data changes(a) | (8,214 | ) | | 1,739 |
| (6,475 | ) | | (14,189 | ) | 1,739 |
| — |
| (12,450 | ) | Portfolio runoff(b) | (13,600 | ) | | — |
| (13,600 | ) | | (16,100 | ) | — |
| — |
| (16,100 | ) | Movement in portfolio levels(c) | 42,737 |
| | (5,716 | ) | 37,021 |
| | (6,329 | ) | (5,605 | ) | — |
| (11,934 | ) | Changes in RWA | 20,923 |
| | (3,977 | ) | 16,946 |
| | (36,618 | ) | (3,866 | ) | — |
| (40,484 | ) | December 31, 2017 | $ | 1,386,060 |
| | $ | 123,702 |
| $ | 1,509,762 |
| | $ | 922,905 |
| $ | 123,791 |
| $ | 400,000 |
| $ | 1,446,696 |
|
| | (a) | Model & data changes refer to material movements in levels of RWA as a result of revised methodologies and/or treatment per regulatory guidance (exclusive of rule changes).
|
| | (b) | Portfolio runoff for credit risk RWA primarily reflects (under both the Standardized and Advanced approaches) reduced risk from position rolloffs in legacy portfolios in Home Lending, the sale of the student loan portfolio during the second quarter of 2017, and the sale of reverse mortgages in CIB during the third quarter of 2017. |
| | (c) | Movement in portfolio levels for credit risk RWA refers to changes primarily in book size, composition, credit quality, and market movements; and for market risk RWA refers to changes in position and market movements. |
| | (d) | The prior period amounts have been revised to conform with the current period presentation. |
Supplementary leverage ratio
The SLR is defined as Tier 1 capital under Basel III divided by the Firm’s total leverage exposure. Total leverage exposure is calculated by taking the Firm’s total average on-balance sheet assets, less amounts permitted to be deducted for Tier 1 capital, and adding certain off-balance sheet exposures, such as undrawn commitments and derivatives potential future exposure.
The following table presents the components of the Firm’s Fully Phased-In SLR as of December 31, 2017 and 2016.
| | | | | | | | (in millions, except ratio) | December 31, 2017 |
| December 31, 2016 |
| Tier 1 capital | $ | 208,564 |
| $ | 207,474 |
| Total average assets | 2,562,155 |
| 2,532,457 |
| Less: Adjustments for deductions from Tier 1 capital | 47,333 |
| 46,977 |
| Total adjusted average assets(a) | 2,514,822 |
| 2,485,480 |
| Off-balance sheet exposures(b) | 690,193 |
| 707,359 |
| Total leverage exposure | $ | 3,205,015 |
| $ | 3,192,839 |
| SLR | 6.5 | % | 6.5 | % |
| | (a) | Adjusted average assets, for purposes of calculating the SLR, includes total quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets.
|
| | (b) | Off-balance sheet exposures are calculated as the average of the three month-end spot balances during the reporting quarter.
|
As of December 31, 2017, JPMorgan Chase Bank, N.A.’s and Chase Bank USA, N.A.’s Fully Phased-In SLRs are approximately 6.7% and 11.8%, respectively.
Line of business equity
Each business segment is allocated capital by taking into consideration stand-alone peer comparisons and regulatory capital requirements. For 2016, capital was allocated to each business segment for, among other things, goodwill and other intangibles associated with acquisitions effected by the line of business. ROE is measured and internal targets for expected returns are established as key measures of a business segment’s performance.
On at least an annual basis, the Firm assesses the level of capital required for each line of business as well as the assumptions and methodologies used to allocate capital. Through the end of 2016, capital was allocated to the lines of business based on a single measure, Basel III Advanced Fully Phased-In RWA. Effective January 1, 2017, the Firm’s methodology used to allocate capital to the Firm’s business segments was updated. The new methodology incorporates Basel III Standardized Fully Phased-In RWA (as well as Basel III Advanced Fully Phased-In RWA), leverage, the GSIB surcharge, and a simulation of capital in a severe stress environment. The methodology will continue to be weighted towards Basel III Advanced Fully Phased-In RWA because the Firm believes it to be the best proxy for economic risk. The Firm will consider further changes to its capital allocation methodology as the regulatory framework evolves. In addition, under the new methodology, capital is no longer allocated to each line of business for goodwill and other intangibles associated with acquisitions effected by the line of business. The Firm will continue to establish internal ROE targets for its business segments, against which they will be measured, as a key performance indicator.
| | | | 88 | | JPMorgan Chase & Co./2017 Annual Report |
The table below reflects the Firm’s assessed level of capital allocated to each line of business as of the dates indicated.
| | | | | | | | | | | | Line of business equity (Allocated capital) | | | | | December 31, | (in billions) | January 1, 2018 | | 2017 | 2016 | Consumer & Community Banking | $ | 51.0 |
| | $ | 51.0 |
| $ | 51.0 |
| Corporate & Investment Bank | 70.0 |
| | 70.0 |
| 64.0 |
| Commercial Banking | 20.0 |
| | 20.0 |
| 16.0 |
| Asset & Wealth Management | 9.0 |
| | 9.0 |
| 9.0 |
| Corporate | 79.6 |
| | 79.6 |
| 88.1 |
| Total common stockholders’ equity | $ | 229.6 |
| | $ | 229.6 |
| $ | 228.1 |
|
Planningplanning and stress testing
Comprehensive Capital Analysis and Review The Federal Reserve requires large bank holding companies, including the Firm, to submit on an annual basis a capital plan on an annual basis.that has been reviewed and approved by the Board of Directors. The Federal Reserve uses the CCARComprehensive Capital Analysis and Dodd-Frank ActReview (“CCAR”) and other stress testtesting processes to ensure that large BHCsbank holding companies (“BHC”) have sufficient capital during periods of economic and financial stress, and have robust, forward-looking capital assessment and planning processes in place that address each BHC’s unique risks to enable it to absorb losses under certain stress scenarios.Through the CCAR, the Federal Reserve evaluates each BHC’s capital adequacy and internal capital adequacy assessment processes (“ICAAP”ICAAP”), as well as its plans to make capital distributions, such as dividend payments or stock repurchases.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 85 |
Management’s discussion and analysis
On June 28, 2017,27, 2019, the Federal Reserve informed the Firm that it did not object on either a quantitative or qualitative basis, to the Firm’s 20172019 capital plan. ForRefer to Capital actions on pages 90-91 for information on actions taken by the Firm’s Board of Directors following the 20172019 CCAR results, see Capital actions on pages 89-90.results. The Firm’s CCAR process is integrated into and employs the same methodologies utilized in the Firm’s ICAAP process, as discussed below.
Internal Capital Adequacy Assessment Process Semiannually,Annually, the Firm completesprepares the ICAAP, which provides management with a viewinforms the Board of Directors of the impactongoing assessment of severethe Firm’s processes for managing the sources and unexpected events on earnings, balance sheet positions, reservesuses of capital as well as compliance with supervisory expectations for capital planning and capital.capital adequacy. The Firm’s ICAAP integrates stress testing protocols with capital planning.
The process assessesCCAR and other stress testing processes assess the potential impact of alternative economic and business scenarios on the Firm’s earnings and capital. Economic scenarios, and the parameters underlying those scenarios, are defined centrally and applied uniformly across the businesses. These scenarios are articulated in terms of macroeconomic factors, which are key drivers of business results; global market shocks, which generate short-term but severe trading losses; and idiosyncratic operational risk events. The scenarios are intended to capture and stress key vulnerabilities and idiosyncratic risks facing the Firm. However, when defining a broad range of scenarios, actual events can always be worse. Accordingly, management considers additional stresses outside these scenarios, as necessary. ICAAPThese results are reviewed by management and the Audit Committee.Board of Directors. Contingency capital plan The Firm’s contingency capital plan establishes the capital management framework for the Firm and specifies the principles underlying the Firm’s approach towards capital management in normal economic conditions and during stress. The contingency capital plan defines how the Firm calibrates its targeted capital levels and meets minimum capital requirements, monitors the ongoing appropriateness of planned capital distributions, and sets out the capital contingency actions that are expected to be taken or considered at various levels of capital depletion during a period of stress. Regulatory capital The Federal Reserve establishes capital requirements, including well-capitalized standards, for the consolidated financial holding company. The Office of the Comptroller of the Currency (“OCC”) establishes similar minimum capital requirements for the Firm’s IDI subsidiaries, including JPMorgan Chase Bank, N.A. The U.S. capital requirements generally follow the Capital Accord of the Basel Committee, as amended from time to time. Basel III Overview The capital rules under Basel III establish minimum capital ratios and overall capital adequacy standards for large and internationally active U.S. BHCs and banks, including the Firm and its IDIsubsidiaries, including JPMorgan Chase Bank, N.A.The minimum amount of regulatory capital that must be held by BHCs and banks is determined by calculating risk-weighted assets (“RWA”), which are on- balance sheet assets and off-balance sheet exposures, weighted according to risk.Two comprehensive approaches are prescribed for calculating RWA: a standardized approach (“Basel III Standardized”), and an advanced approach (“Basel III Advanced”). Effective January 1, 2019, the capital adequacy of the Firm is evaluated against the fully phased-in measures under Basel III and represents the lower of the Standardized or Advanced approaches. During2018, the required capital measures were subject to the transitional rules and as of December 31, 2018 the results were the same on a fully phased-in and on a transitional basis. Basel III establishes capital requirements for calculating credit risk RWA and market risk RWA, and in the case of Basel III Advanced, operational risk RWA. Key differences in the calculation of credit risk RWA between the Standardized and Advanced approaches are that for Basel III Advanced, credit risk RWA is based on risk-sensitive approaches which largely rely on the use of internal credit models and parameters, whereas for Basel III Standardized, credit risk RWA is generally based on supervisory risk-weightings which vary primarily by counterparty type and asset class. Market risk RWA is calculated on a generally consistent basis between Basel III Standardized and Basel III Advanced. In addition to the RWA calculated under these approaches, the Firm may supplement such amounts to incorporate management judgment and feedback from its regulators. Basel III also includes a requirement for Advanced Approach banking organizations, including the Firm, to calculate theSLR. Refer to SLR on page 90 for additional information. Key Regulatory Developments Effective January 1, 2020, the Firm adopted the Financial Instruments – Credit Losses (“CECL”) guidance under U.S. GAAP. As provided by the U.S. banking agencies, the Firm elected to phase-in the impact to retained earnings of $2.7 billion to regulatory capital, at 25 percent per year in each of 2020 to 2023 (“CECL transitional period”). Based on the Firm’s capital as of December 31, 2019, the estimated impact to the Standardized CET1 capital ratio will be a reduction of approximately 4 bps for each transitional year. Refer to Accounting and Reporting Developments on pages 139-140 and Note 1 for further information.
| | | | 86 | | JPMorgan Chase & Co./2019 Form 10-K |
Risk-based Capital Regulatory Minimums The following chart presents the Firm’s Basel III minimum CET1 capital ratio during the Basel III transitional periods and on a fully phased-in basis under the Basel III rules currently in effect. The Firm’s Basel III Standardized risk-based ratios are currently more binding than the Basel III Advanced risk-based ratios, and the Firm expects that this will remain the case for the foreseeable future. Additional information regarding the Firm’s capital ratios, as well as the U.S. federal regulatory capital standards to which the Firm is subject, is presented in Note 27. Refer to the Firm’s Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website, for further information on the Firm’s Basel III measures. All banking institutions are currently required to have a minimum CET1 capital ratio of 4.5% of risk-weighted assets. Certain banking organizations, including the Firm, are also required to hold additional amounts of capital to serve as a “capital conservation buffer”. The capital conservation buffer is intended to be used to absorb losses in times of financial or economic stress.The capital conservation buffer was subject to a phase-in period that began January 1, 2016 and continued through the end of 2018. As an expansion of the capital conservation buffer, the Firm is also required to hold additional levels of capital in the form of a global systemically important bank (“GSIB”) surcharge and a countercyclical capital buffer. Under the Federal Reserve’s GSIB rule, the Firm is required to calculate its GSIB surcharge on an annual basis under two separately prescribed methods, and is subject to the higher of the two. The first (“Method 1”), reflects the GSIB surcharge as prescribed by the Basel Committee’s assessment methodology, and is calculated across five criteria: size, cross-jurisdictional activity, interconnectedness, complexity and substitutability. The second (“Method 2”), modifies the Method 1 requirements to include a measure of short-term wholesale funding in place of substitutability, and introduces a GSIB score “multiplication factor”. The following table presents the Firm’s GSIB surcharge. | | | | | | | 2019 |
| 2018 |
| Fully Phased-In: | | | Method 1 | 2.50 | % | 2.50 | % | Method 2 | 3.50 | % | 3.50 | % | | | | Transitional(a) | N/A |
| 2.625 | % |
| | (a) | The GSIB surcharge was subject to transition provisions (in 25% increments) through the end of 2018. |
The Firm’s effective regulatory minimum GSIB surcharge calculated under Method 2 remains unchanged at 3.5% for 2020. The Federal Reserve's framework for setting the countercyclical capital buffer takes into account the macro financial environment in which large, internationally active banks function. As of December 31, 2019, the U.S. countercyclical capital buffer remained at 0%. The Federal Reserve will continue to review the buffer at least annually. The buffer can be increased if the Federal Reserve, FDIC and OCC determine that systemic risks are meaningfully above normal and can be calibrated up to an additional 2.5% of RWA subject to a 12-month implementation period. Failure to maintain regulatory capital equal to or in excess of the risk-based regulatory capital minimum plus the capital conservation buffer (inclusive of the GSIB surcharge) and any countercyclical buffer may result in limitations to the amount of capital that the Firm may distribute, such as through dividends and common equity repurchases. Leverage-based Capital Regulatory Minimums Supplementary leverage ratio The SLR is defined as Tier 1 capital under Basel III divided by the Firm’s total leverage exposure. Total leverage exposure is calculated by taking the Firm’s total average on-balance sheet assets, less amounts permitted to be
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 87 |
Management’s discussion and analysis
deducted for Tier 1 capital, and adding certain off-balance sheet exposures, such as undrawn commitments and derivatives potential future exposure. Failure to maintain an SLR ratio equal to or greater than the regulatory minimum may result in limitations on the amount of capital that the Firm may distribute such as through dividends and common equity repurchases. Other regulatory capital In addition to meeting the capital ratio requirements of Basel III, the Firm and its IDI subsidiaries also must maintain minimum capital and leverage ratios in order to be “well-capitalized” under the regulations issued by the Federal Reserve and the Prompt Corrective Action (“PCA”) requirements of the FDIC Improvement Act (“FDICIA”), respectively. Refer to Note 27 for additional information.
The following tables present the Firm’s risk-based and leverage-based capital measures under both the Basel III Standardized and Advanced approaches. | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | | (in millions) | Standardized | | Advanced | | Minimum capital ratios | | Standardized(b) | | Advanced(b) | | Minimum capital ratios | | Risk-based capital metrics: | | | | | | | | | | | | | CET1 capital | $ | 187,753 |
| | $ | 187,753 |
| | | | $ | 183,474 |
| | $ | 183,474 |
| | | | Tier 1 capital | 214,432 |
| | 214,432 |
| | | | 209,093 |
| | 209,093 |
| | | | Total capital | 242,589 |
| | 232,112 |
| | | | 237,511 |
| | 227,435 |
| | | | Risk-weighted assets | 1,515,869 |
| | 1,397,878 |
| | | | 1,528,916 |
| | 1,421,205 |
| | | | CET1 capital ratio | 12.4 | % | | 13.4 | % | | 10.5 | % | | 12.0 | % | | 12.9 | % | | 9.0 | % | | Tier 1 capital ratio | 14.1 |
| | 15.3 |
| | 12.0 |
| | 13.7 |
| | 14.7 |
| | 10.5 |
| | Total capital ratio | 16.0 |
| | 16.6 |
| | 14.0 |
| | 15.5 |
| | 16.0 |
| | 12.5 |
| | Leverage-based capital metrics: | | | | | | | | | | | | | Adjusted average assets(a) | $ | 2,730,239 |
| | $ | 2,730,239 |
| | | | $ | 2,589,887 |
| | $ | 2,589,887 |
| | | | Tier 1 leverage ratio | 7.9 | % | | 7.9 | % | | 4.0 | % | | 8.1 | % | | 8.1 | % | | 4.0 | % | | Total leverage exposure | NA |
| | $ | 3,423,431 |
| | | | NA |
| | $ | 3,269,988 |
| | | | SLR | NA |
| | 6.3 | % | | 5.0 | % | (c) | NA |
| | 6.4 | % | | 5.0 | % | (c) |
| | (a) | Adjusted average assets, for purposes of calculating the Tier 1 leverage ratio, includes total quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets. |
| | (b) | The Firm’s capital ratios as of December 31, 2018 were equivalent whether calculated on a transitional or fully phased-in basis. |
| | (c) | Represents minimum SLR requirement of 3.0%, as well as supplementary leverage buffer of 2.0%. |
The Firm believes that it will operate with a Basel III CET1 capital ratio between 11.5% and 12% over the medium term.
| | | | 88 | | JPMorgan Chase & Co./2019 Form 10-K |
Capital components The following table presents reconciliations of total stockholders’ equity to Basel III CET1 capital, Tier 1 capital and Total capital as of December 31, 2019 and 2018. | | | | | | | | (in millions) | December 31, 2019 |
| December 31, 2018 |
| Total stockholders’ equity | $ | 261,330 |
| $ | 256,515 |
| Less: Preferred stock | 26,993 |
| 26,068 |
| Common stockholders’ equity | 234,337 |
| 230,447 |
| Less: | | | Goodwill | 47,823 |
| 47,471 |
| Other intangible assets | 819 |
| 748 |
| Other CET1 capital adjustments | 323 |
| 1,034 |
| Add: | | | Certain deferred tax liabilities(a) | 2,381 |
| 2,280 |
| Standardized/Advanced CET1 capital | 187,753 |
| 183,474 |
| Preferred stock | 26,993 |
| 26,068 |
| Less: Other Tier 1 adjustments | 314 |
| 449 |
| Standardized/Advanced Tier 1 capital | 214,432 |
| 209,093 |
| Long-term debt and other instruments qualifying as Tier 2 capital | 13,733 |
| 13,772 |
| Qualifying allowance for credit losses | 14,314 |
| 14,500 |
| Other | 110 |
| 146 |
| Standardized Tier 2 capital | 28,157 |
| 28,418 |
| Standardized Total capital | 242,589 |
| 237,511 |
| Adjustment in qualifying allowance for credit losses for Advanced Tier 2 capital | (10,477 | ) | (10,076 | ) | Advanced Tier 2 capital | 17,680 |
| 18,342 |
| Advanced Total capital | $ | 232,112 |
| $ | 227,435 |
|
| | (a) | Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable intangibles created in nontaxable transactions, which are netted against goodwill and other intangibles when calculating CET1 capital. |
Capital rollforward The following table presents the changes in Basel III CET1 capital, Tier 1 capital and Tier 2 capital for the year ended December 31, 2019. | | | | | Year Ended December 31, (in millions) | 2019 |
| Standardized/Advanced CET1 capital at December 31, 2018 | $ | 183,474 |
| Net income applicable to common equity | 34,844 |
| Dividends declared on common stock | (10,897 | ) | Net purchase of treasury stock | (22,555 | ) | Changes in additional paid-in capital | (640 | ) | Changes related to AOCI | 2,904 |
| Adjustment related to DVA(a) | 1,103 |
| Changes related to other CET1 capital adjustments | (480 | ) | Change in Standardized/Advanced CET1 capital | 4,279 |
| Standardized/Advanced CET1 capital at December 31, 2019 | 187,753 |
| | | Standardized/Advanced Tier 1 capital at December 31, 2018 | 209,093 |
| Change in CET1 capital | 4,279 |
| Net issuance of noncumulative perpetual preferred stock | 925 |
| Other | 135 |
| Change in Standardized/Advanced Tier 1 capital | 5,339 |
| Standardized/Advanced Tier 1 capital at December 31, 2019 | 214,432 |
| | | Standardized Tier 2 capital at December 31, 2018 | 28,418 |
| Change in long-term debt and other instruments qualifying as Tier 2 | (39 | ) | Change in qualifying allowance for credit losses | (186 | ) | Other | (36 | ) | Change in Standardized Tier 2 capital | (261 | ) | Standardized Tier 2 capital at December 31, 2019 | 28,157 |
| Standardized Total capital at December 31, 2019 | 242,589 |
| Advanced Tier 2 capital at December 31, 2018 | 18,342 |
| Change in long-term debt and other instruments qualifying as Tier 2 | (39 | ) | Change in qualifying allowance for credit losses | (587 | ) | Other | (36 | ) | Change in Advanced Tier 2 capital | (662 | ) | Advanced Tier 2 capital at December 31, 2019 | 17,680 |
| Advanced Total capital at December 31, 2019 | $ | 232,112 |
|
| | (a) | Includes DVA related to structured notes recorded in AOCI. |
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 89 |
Management’s discussion and analysis
RWA rollforward The following table presents changes in the components of RWA under Basel III Standardized and Advanced approaches for the year ended December 31, 2019. The amounts in the rollforward categories are estimates, based on the predominant driver of the change. | | | | | | | | | | | | | | | | | | | | | | | | | Standardized | | Advanced | Year ended December 31, 2019 (in millions) | Credit risk RWA | Market risk RWA | Total RWA | | Credit risk RWA | Market risk RWA | Operational risk RWA | Total RWA | December 31, 2018 | $ | 1,423,053 |
| $ | 105,863 |
| $ | 1,528,916 |
| | $ | 926,647 |
| $ | 105,976 |
| $ | 388,582 |
| $ | 1,421,205 |
| Model & data changes(a) | (6,406 | ) | (24,433 | ) | (30,839 | ) | | (34,584 | ) | (24,433 | ) | — |
| (59,017 | ) | Portfolio runoff(b) | (5,800 | ) | — |
| (5,800 | ) | | (5,500 | ) | — |
| — |
| (5,500 | ) | Movement in portfolio levels(c) | 29,373 |
| (5,781 | ) | 23,592 |
| | 46,385 |
| (5,891 | ) | 696 |
| 41,190 |
| Changes in RWA | 17,167 |
| (30,214 | ) | (13,047 | ) | | 6,301 |
| (30,324 | ) | 696 |
| (23,327 | ) | December 31, 2019 | $ | 1,440,220 |
| $ | 75,649 |
| $ | 1,515,869 |
| | $ | 932,948 |
| $ | 75,652 |
| $ | 389,278 |
| $ | 1,397,878 |
|
| | (a) | Model & data changes refer to material movements in levels of RWA as a result of revised methodologies and/or treatment per regulatory guidance (exclusive of rule changes); and an update to the wholesale credit risk Advanced Approach parameters. |
| | (b) | Portfolio runoff for credit risk RWA primarily reflects reduced risk from position rolloffs in legacy portfolios in Home Lending. |
| | (c) | Movement in portfolio levels (inclusive of rule changes) refers to: changes in book size, composition, credit quality, and market movements for credit risk RWA; changes in position and market movements for market risk RWA; and updates to cumulative losses for operational risk RWA. |
Supplementary leverage ratio The following table presents the components of the Firm’s SLR as of December 31, 2019 and 2018. | | | | | | | | (in millions, except ratio) | December 31, 2019 |
| December 31, 2018 |
| Tier 1 capital | $ | 214,432 |
| $ | 209,093 |
| Total average assets | 2,777,270 |
| $ | 2,636,505 |
| Less: Adjustments for deductions from Tier 1 capital | 47,031 |
| 46,618 |
| Total adjusted average assets(a) | 2,730,239 |
| 2,589,887 |
| Off-balance sheet exposures(b) | 693,192 |
| 680,101 |
| Total leverage exposure | $ | 3,423,431 |
| $ | 3,269,988 |
| SLR | 6.3 | % | 6.4 | % |
| | (a) | Adjusted average assets, for purposes of calculating the SLR, includes total quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets. |
| | (b) | Off-balance sheet exposures are calculated as the average of the three month-end spot balances during the reporting quarter. |
Refer to Note 27 for JPMorgan Chase Bank, N.A.’s SLR ratios. Line of business equity Each business segment is allocated capital by taking into consideration a variety of factors including capital levels of similarly rated peers and applicable regulatory capital requirements. ROE is measured and internal targets for expected returns are established as key measures of a business segment’s performance. The Firm’s allocation methodology incorporates Basel III Standardized RWA, Basel III Advanced RWA, leverage, the GSIB surcharge, and a simulation of capital in a severe stress environment. Periodically, the assumptions and methodologies used to allocate capital are assessed and as a result, the capital allocated to the LOBs may change. The Firm will assess impacts from any regulatory changes to the capital framework as changes are finalized. The table below presents the Firm’s assessed level of capital allocated to each LOB as of the dates indicated. | | | | | | | | | | | | Line of business equity (Allocated capital) | | | | December 31, | (in billions) | January 1, 2020 |
| | 2019 |
| 2018 |
| Consumer & Community Banking | $ | 52.0 |
| | $ | 52.0 |
| $ | 51.0 |
| Corporate & Investment Bank | 80.0 |
| | 80.0 |
| 70.0 |
| Commercial Banking | 22.0 |
| | 22.0 |
| 20.0 |
| Asset & Wealth Management | 10.5 |
| | 10.5 |
| 9.0 |
| Corporate(a) | 67.1 |
| | 69.8 |
| 80.4 |
| Total common stockholders’ equity | $ | 231.6 |
| | $ | 234.3 |
| $ | 230.4 |
|
| | (a) | Includes the $2.7 billion (after-tax) impact to retained earnings upon the adoption of CECL on January 1, 2020. |
Capital actions Preferred stock Preferred stock dividends declared were $1.7$1.6 billion for the year ended December 31, 2017.2019. On October 20, 2017,During the year ended December 31, 2019 and through the date of filing of the 2019 Form 10-K, the Firm issued $1.3 billionand redeemed several series of fixed-to-floating rate non-cumulative preferred stock, Series CC, with an initial dividend rate of 4.625%. On December 1, 2017, the Firm redeemed all $1.3 billion of its outstanding 5.50% non-cumulative preferred stock, Series O.
Forstock. Refer to Note 21 for additional information on the Firm’s preferred stock, see Note 20.
Trust preferred securities
On December 18, 2017, the Delaware trusts that issued seven series of outstanding trust preferred securities were liquidated, $1.6 billion of trust preferredincluding issuances and $56 million of common securities originally issued by those trusts were cancelled, and the junior subordinated debentures previously held by each trust issuer were distributed pro rata to the holders of the corresponding series of trust preferred and common securities.
The Firm redeemed $1.6 billion of trust preferred securities in the year ended December 31, 2016.redemptions.
Common stock dividends The Firm’s common stock dividend policy reflects JPMorgan Chase’s earnings outlook, desired dividend payout ratio,dividends are planned as part of the Capital Management governance framework in line with the Firm’s capital objectives, and alternative investment opportunities.management objectives. On September 19, 2017,17, 2019, the Firm announced that its Board of Directors increased thehad declared a quarterly common stock dividend to $0.56of $0.90 per share, an increase from $0.80 per share, effective with the dividend paid on October 31, 2017.2019. The Firm’s dividends are subject to the Board of Directors’ approval on a quarterly basis. ForRefer to Note 21 and Note 26 for information regarding dividend restrictions, see Note 20 and Note 25.restrictions.
| | | | 90 | | JPMorgan Chase & Co./2017 Annual Report | | 892019 Form 10-K |
Management’s discussion and analysis
The following table shows the common dividend payout ratio based on net income applicable to common equity. | | Year ended December 31, | 2017 |
| | 2016 |
| | 2015 |
| 2019 |
| | 2018 |
| | 2017 |
| Common dividend payout ratio | 33 | % | | 30 | % | | 28 | % | 31 | % | | 30 | % | | 33 | % |
Common equity During the year ended December 31, 2017, warrant holders exercised their right to purchase 9.9 million shares of the Firm’s common stock. The Firm issued from treasury stock 5.4 million shares of its common stock as a result of these exercises. As of December 31, 2017, 15.0 million warrants remained outstanding, compared with 24.9 million outstanding as of December 31, 2016.
Effective June 28, 2017, the Firm’s Board of Directors has authorized the repurchase of up to $19.4$29.4 billion of gross common equity (common stock and warrants) between July 1, 20172019 and June 30, 2018,2020 as part of itsthe Firm’s annual capital plan.
As of December 31, 2017, $9.82019, $15.6 billion of authorized repurchase capacity remained under thethis common equity repurchase program. The following table sets forth the Firm’s repurchases of common equity for the years ended December 31, 2017, 20162019, 2018 and 2015. There were no repurchases of warrants during the years ended December 31, 2017, 2016 and 2015.2017. | | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| | 2019 |
| | 2018 |
| | 2017 |
| Total number of shares of common stock repurchased | | 166.6 |
| | 140.4 |
| | 89.8 |
| | 213.0 |
| | 181.5 |
| | 166.6 |
| Aggregate purchase price of common stock repurchases | | $ | 15,410 |
| | $ | 9,082 |
| | $ | 5,616 |
| | $ | 24,121 |
| | $ | 19,983 |
| | $ | 15,410 |
|
The Firm may, from time to time enterenters into written trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934 to facilitate repurchases in accordance with the common equity repurchase program. A Rule 10b5-1 repurchase plan allows the Firm to repurchase its equity during periods when it wouldmay otherwise not otherwise be repurchasing common equity — for example, during internal trading blackout periods. All purchases under Rule 10b5-1 plans must be made according to predefined schedules established when the Firm is not aware of material nonpublic information. The authorization to repurchase common equity will beis utilized at management’s discretion, and the timing of purchases and the exact amount of common equity that may be repurchased is subject to various factors, including market conditions; legal and regulatory considerations affecting the amount and timing of repurchase activity; the Firm’s capital position (taking into account goodwill and intangibles); internal capital generation; and alternative investment opportunities. The repurchase program does not include specific price targets or timetables; may be executed through open market purchases or privately negotiated transactions, or utilizing Rule 10b5-1 plans; and may be suspended by management at any time. For additional information regarding repurchases of the Firm’s equity securities, seeRefer to Part II, Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities on page 28.30 of the 2019 Form 10-K for additional information regarding repurchases of the Firm’s equity securities.
Other capital requirements TLACTotal Loss-Absorbing Capacity (“TLAC”)
On December 15, 2016,Effective January 1, 2019, the Federal Reserve issued its finalReserve’s TLAC rule which requires the U.S. GSIB top-tier holding companies, of eight U.S. GSIB holding companies, including the Firm,JPMorgan Chase & Co., to maintain minimum levels of external TLAC and externaleligible long-term debt that satisfies certain eligibility criteria (“eligible LTD”), effective January 1, 2019..
The minimum external TLAC and the minimum level of eligible long-term debt requirements are shown below: (a) RWA is the greater of Standardized and Advanced.
The finalFailure to maintain TLAC rule permanently grandfathered all long-term debt issued before December 31, 2016,equal to or in excess of the regulatory minimum plus applicable buffers may result in limitations to the extent these securities would be ineligible because they contained impermissible acceleration rights or were governed by non-U.S. law. Asamount of December 31, 2017,capital that the Firm was compliant withmay distribute, such as through dividends and common equity repurchases.
The following table presents the requirements undereligible external TLAC and LTD amounts, as well as a representation of the current ruleamounts as a percentage of the Firm’s total RWA and total leverage exposure. | | | | | | | | December 31, 2019 | | (in billions, except ratio) | Eligible external TLAC | Eligible LTD | Total eligible TLAC & LTD | $ | 386.4 |
| $ | 161.8 |
| % of RWA | 25.5 | % | 10.7 | % | Minimum requirement | 23.0 |
| 9.5 |
| Surplus/(shortfall) | $ | 37.7 |
| $ | 17.8 |
| | | | % of total leverage exposure | 11.3 | % | 4.7 | % | Minimum requirement | 9.5 |
| 4.5 |
| Surplus/(shortfall) | $ | 61.2 |
| $ | 7.8 |
|
Refer to which it will be subjectPart I, Item 1A: Risk Factors on January 1, 2019.pages 6–28 of the 2019 Form 10-K for information on the financial consequences to holders of the Firm’s debt and equity securities in a resolution scenario.
| | | | 90 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 91 |
Management’s discussion and analysis
Broker-dealer regulatory capital JPMorganJ.P. Morgan Securities
JPMorgan Chase’s principal U.S. broker-dealer subsidiary is JPMorganJ.P. Morgan Securities. JPMorganJ.P. Morgan Securities is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the “Net Capital Rule”). JPMorganJ.P. Morgan Securities is also registered as a futures commission merchant and subject to Rule 1.17the Rules of the CFTC.Commodity Futures Trading Commission (“CFTC”). JPMorganJ.P. Morgan Securities has elected to compute its minimum net capital requirements in accordance with the “Alternative Net Capital Requirements” of the Net Capital Rule.
The following table presents J.P. Morgan Securities’ net capital: | | | | | | | | December 31, 2019 | | (in millions) | Actual |
| Minimum |
| Net Capital | $ | 21,050 |
| $ | 3,751 |
|
In accordance with the market and credit risk standards of Appendix E of the Net Capital Rule, JPMorgan Securities is eligible to use the alternative method of computing net capital if, in addition to meeting its alternative minimum net capital requirements, it maintains tentativeJ.P. Morgan Securities is required to hold “tentative net capitalcapital” in excess of at least $1.0 billion and is also required to notify the SEC in the event that its tentative net capital is less than $5.0 billion. Tentative net capital is net capital before deducting market and credit risk charges as defined by the Net Capital Rule. As of December 31, 2017, JPMorgan2019, J.P. Morgan Securities hadmaintained tentative net capital in excess of the minimum and notification requirements. The following table presents JPMorgan Securities’ net capital information: | | | | | | | | December 31, 2017 | Net capital | (in billions) | Actual |
| Minimum |
| JPMorgan Securities | $ | 13.6 |
| $ | 2.8 |
|
J.P. Morgan Securities plc J.P. Morgan Securities plc is a wholly ownedwholly-owned subsidiary of JPMorgan Chase Bank, N.A. and is the Firm’s principal operating subsidiary in the U.K. It has authority to engage in banking, investment banking and broker-dealer activities. J.P. Morgan Securities plc is jointly regulated by the U.K. PRAPrudential Regulation Authority (“PRA”) and the FCA.Financial Conduct Authority (“FCA”). J.P. Morgan Securities plc is subject to the European Union Capital Requirements Regulation and the U.K. PRA capital rules, each of which implemented Basel III and thereby subject J.P. Morgan Securities plc to its requirements. The Bank of England requires, on a transitional basis, that U.K. banks, including U.K. regulated subsidiaries of overseas groups, maintain a minimum requirement for own funds and eligible liabilities (“MREL”). As of December 31, 2019, J.P. Morgan Securities plc was compliant with the requirements of the MREL rule. The following table presents J.P. Morgan Securities plc’s capital information:metrics: | | | | | | | | | | | December 31, 2017 | Total capital | | CET1 ratio | | Total capital ratio | (in billions, except ratios) | Estimated | | Estimated | Minimum | | Estimated | Minimum | J.P. Morgan Securities plc | $ | 39.6 |
| | 15.9 | 4.5 | | 15.9 | 8.0 |
| | | | | | | December 31, 2019 | | | (in millions, except ratios) | Estimated |
| Minimum ratios |
| Total capital | $ | 52,983 |
| | CET1 ratio | 16.5 | % | 4.5 | % | Total capital ratio | 21.3 | % | 8.0 | % |
| | | | 92 | | JPMorgan Chase & Co./2017 Annual Report | | 912019 Form 10-K |
Management’s discussion and analysis
| | | | | | LIQUIDITY RISK MANAGEMENT |
Liquidity risk is the risk that the Firm will be unable to meet its contractual and contingent financial obligations as they arise or that it does not have the appropriate amount, composition and tenor of funding and liquidity to support its assets and liabilities. Liquidity risk oversight The Firm has a liquidity risk oversight function whose primary objective is to provide independent assessment, measurement, monitoring, and control of liquidity risk across the Firm. Liquidity risk oversight is managed through a dedicated firmwide Liquidity Risk Oversight group. The CIO, Treasury and Corporate (“CTC”) CRO, who reports to the Firm’s CRO, as part of the IRM function, is responsible for firmwide Liquidity Risk Oversight. Liquidity Risk Oversight’s responsibilities include: | | • | Defining, monitoring and reporting liquidity risk metrics; |
| | • | Establishing and monitoring limits and indicators, including Liquidity Risk Appetite; |
| | • | Developing a process to classify, monitor and report limit breaches; |
| | • | Performing an independent review of liquidity risk management processes; |
| | • | Monitoring and reporting internal firmwide and legal entity liquidity stress tests as well as regulatory defined liquidity stress tests; |
| | • | Approving or escalating for review new or updated liquidity stress assumptions; and |
Establishing and monitoring limits, indicators, and thresholds, including liquidity risk appetite tolerances;
Monitoring internal firmwide and material legal entity liquidity stress tests, and monitoring and reporting regulatory defined liquidity stress testing;
Approving or escalating for review liquidity stress assumptions;
Monitoring liquidity positions, balance sheet variances and funding activities, and Conducting ad hoc analysis to identify potential emerging liquidity risks. activities;Liquidity management Treasury and CIO is responsible for liquidity management. The primary objectives of effective liquidity management are to: | | • | Ensure that the Firm’s core businesses and material legal entities are able to operate in support of client needs and meet contractual and contingent financial obligations through normal economic cycles as well as during stress events, and |
| | • | Manage an optimal funding mix and availability of liquidity sources. |
As part of the Firm’s core businesses and material legal entities are able to operate in support of client needs and meet contractual and contingent financial obligations through normal economic cycles as well as during stress events, and Manage an optimal funding mix and availability ofoverall liquidity sources.
Themanagement strategy, the Firm manages liquidity and funding using a centralized, global approach across its entities, taking into consideration both their current liquidity profile and any potential changes over time, in order to optimize liquidity sources and uses.to:
| | • | Optimize liquidity sources and uses; |
| | • | Identify constraints on the transfer of liquidity between the Firm’s legal entities; and |
| | • | Maintain the appropriate amount of surplus liquidity at a firmwide and legal entity level, where relevant. |
In the context of the Firm’s liquidity management, Treasury and CIO is responsible for: Analyzing and understanding the liquidity characteristics of the assets and liabilities of the Firm, lines of business and legal entities, taking into account legal, regulatory, and operational restrictions;
Developing internal liquidity stress testing assumptions;
Defining and monitoring firmwide and legal entity-specific liquidity strategies, policies, guidelines, reporting and contingency funding plans;
| | • | Analyzing and understanding the liquidity characteristics of the assets and liabilities of the Firm, LOBs and legal entities, taking into account legal, regulatory, and operational restrictions; |
| | • | Developing internal liquidity stress testing assumptions; |
| | • | Defining and monitoring firmwide and legal entity-specific liquidity strategies, policies, reporting and contingency funding plans; |
| | • | Managing liquidity within the Firm’s approved liquidity risk appetite tolerances and limits; |
| | • | Managing compliance with regulatory requirements related to funding and liquidity risk; and |
| | • | Setting transfer pricing in accordance with underlying liquidity characteristics of balance sheet assets and liabilities as well as certain off-balance sheet items. |
Managing liquidity within the Firm’s approved liquidity risk appetite tolerances and limits; GovernanceManaging compliance with regulatory requirements related to funding and liquidity risk, and
Setting transfer pricing in accordance with underlying liquidity characteristics of balance sheet assets and liabilities as well as certain off-balance sheet items.
Risk governance and measurement
Specific committeesCommittees responsible for liquidity governance include the firmwide ALCO as well as line of business LOB and regional ALCOs, the Treasurer Committee, and the CTC Risk Committee. In addition, the DRPCBoard Risk Committee reviews and recommends to the Board of Directors, for formal approval, the Firm’s liquidity risk tolerances, liquidity strategy, and liquidity policy at least annually. Forpolicy. Refer to Firmwide Risk Management on pages 79–83 for further discussion of ALCO and other risk-related committees, see Enterprise-wide Risk Management on pages 75–137.committees.
Internal stress testing Liquidity stress tests are intended to ensure that the Firm has sufficient liquidity under a variety of adverse scenarios, including scenarios analyzed as part of the Firm’s resolution and recovery planning. Stress scenarios are produced for JPMorgan Chase & Co. (“Parent Company”) and the Firm’s material legal entities on a regular basis, and ad hocother stress tests are performed as needed, in response to specific market events or concerns. Liquidity stress tests assume all of the Firm’s contractual financial obligations are met and take into consideration: | | • | Varying levels of access to unsecured and secured funding markets, |
| | • | Estimated non-contractual and contingent cash outflows, and |
| | • | Potential impediments to the availability and transferability of liquidity between jurisdictions and material legal entities such as regulatory, legal or other restrictions. |
Varying levels of access to unsecured and secured funding markets,
Estimated non-contractual and contingent cash outflows, and
Potential impediments to the availability and transferability of liquidity between jurisdictions and material legal entities such as regulatory, legal or other restrictions.
Liquidity outflow assumptions are modeled across a range of time horizons and currency dimensions and contemplate both market and idiosyncratic stresses. Results of stress tests are considered in the formulation of the Firm’s funding plan and assessment of its liquidity position. The Parent Company acts as a source of funding for the Firm through equity and long-term debt issuances, and the IHCits intermediate holding company, JPMorgan Chase Holdings LLC (the “IHC”) provides funding support to the ongoing operations of the Parent Company and its subsidiaries, as necessary.subsidiaries. The Firm maintains liquidity at the Parent Company, and the IHC, in addition to liquidity held at theand operating subsidiaries at levels sufficient to comply with liquidity risk tolerances and minimum liquidity requirements, and to manage through periods of stress where access to normal funding sources is disrupted.
| | | | 92 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 93 |
Management’s discussion and analysis
liquidity requirements, and to manage through periods of stress when access to normal funding sources may be disrupted. Contingency funding plan The Firm’s contingency funding plan (“CFP”), which is approved by the firmwide ALCO and the DRPC,Board Risk Committee, is a compilation of procedures and action plans for managing liquidity through stress events. The CFP incorporates the limits and indicators set by the Liquidity Risk Oversight group. These limits and indicators are reviewed regularly to identify the emergence ofemerging risks or vulnerabilities in the Firm’s liquidity position. The CFP identifies the alternative contingent funding and liquidity resources available to the Firm and its legal entities in a period of stress. LCR and HQLALiquidity Coverage Ratio
The LCR rule requires that the Firm to maintain an amount of unencumbered HQLAHigh Quality Liquid Assets (“HQLA”) that is sufficient to meet its estimated total net cash outflows over a prospective 30 calendar-day period of significant stress. HQLA is the amount of liquid assets that qualify for inclusion in the LCR. HQLA primarily consist of unencumbered cash and certain high qualityhigh-quality liquid securities as defined in the LCR rule. Under the LCR rule, the amount of HQLA held by JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A that areis in excess of each entity’s standaloneits stand-alone 100% minimum LCR requirement, and that areis not transferable to non-bank affiliates, must be excluded from the Firm’s reported HQLA. Effective January 1, 2017, Estimated net cash outflows are based on standardized stress outflow and inflow rates prescribed in the LCR rule, which are applied to the balances of the Firm’s assets, sources of funds, and obligations. The LCR is required to be a minimum of 100%. On December 19, 2016, the Federal Reserve published final LCR public disclosure requirements for certain BHCs and non-bank financial companies. Beginning with the second quarter of 2017, the Firm disclosed its average LCR for the quarter and the key quantitative components of the average LCR, along with a qualitative discussion of material drivers of the ratio, changes over time, and causes of such changes. The Firm will continue to make available its U.S. LCR Disclosure report on a quarterly basis on the Firm’s website at: (https://investor.shareholder.com/jpmorganchase/basel.cfm)
The following table summarizes the Firm’s average LCR for the three months ended December 31, 20172019, September 30, 2019 and December 31, 2018 based on the Firm’s current interpretation of the finalized LCR framework. | | | | | | Three months ended | Average amount (in millions) | Three months ended December 31, 2017 |
| December 31, 2019 | September 30, 2019 | December 31, 2018 | HQLA | | | Eligible cash(a) | $ | 370,126 |
| $ | 203,296 |
| $ | 199,757 |
| $ | 297,069 |
| Eligible securities(b)(c) | 189,955 |
| 341,990 |
| 337,704 |
| 232,201 |
| Total HQLA(d) | $ | 560,081 |
| $ | 545,286 |
| $ | 537,461 |
| $ | 529,270 |
| Net cash outflows | $ | 472,078 |
| $ | 469,402 |
| $ | 468,452 |
| $ | 467,704 |
| LCR | 119 | % | 116 | % | 115 | % | 113 | % | Net excess HQLA (d) | $ | 88,003 |
| $ | 75,884 |
| $ | 69,009 |
| $ | 61,566 |
|
| | (a) | Represents cash on deposit at central banks, primarily the Federal Reserve Banks. |
| | (b) | Predominantly U.S. AgencyTreasuries, U.S. GSE and government agency MBS, U.S. Treasuries, and sovereign bonds net of applicable haircuts under the LCR rulesrule. |
| | (c) | HQLA eligible securities may be reported in securities borrowed or purchased under resale agreements, trading assets, or investment securities on the Firm’s Consolidated balance sheets. |
| | (d) | Excludes average excess HQLA at JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. that are not transferable to non-bank affiliates. |
ForThe Firm’s average LCR increased during the three months ended December 31, 2017, the Firm’s average LCR was 119%,2019, compared with an average of 120% forboth the three monthsthree-month periods ended September 30, 2017. The decrease2019 and December 31, 2018, due to an increase in the ratio was largely attributable to a decrease in average HQLA driven primarily byfrom unsecured long-term debt maturities. issuances. Additionally, liquidity in JPMorgan Chase Bank, N.A. increased during the fourth quarter and from the prior year period primarily due to growth in stable deposits. This increase in excess liquidity is excluded from the Firm’s reported LCR under the LCR rule.
The Firm’s average LCR may fluctuatefluctuates from period to period, due to changes in its HQLA and estimated net cash outflows under the LCR as a result of ongoing business activity. The Refer to the Firm’s HQLAU.S. LCR Disclosure reports, which are expected to be available to meet its liquidity needs inon the Firm’s website for a timefurther discussion of stress.the Firm’s LCR. Other liquidity sources As of December 31, 2017, inIn addition to the assets reported in the Firm’s HQLA under the LCR rule,above, the Firm had approximately $208 billion of unencumbered marketable securities, such as equity securities and fixed income debt securities, that the Firm believes would be available to raise liquidity if required. of approximately $315 billion and $226 billion as of December 31, 2019 and 2018, respectively. This includes HQLA-eligible securities included as part of the excess liquidity at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates. affiliates, as described above. The amount of such securities increased from the prior year.
As of December 31, 2017, theThe Firm also had approximately $277 billion of available borrowing capacity at various Federal Home Loan Banks (“FHLBs”),FHLBs and the discount windowswindow at the Federal Reserve Banks and various other central banksBank as a result of collateral pledged by the Firm to such banks. banks of approximately $322 billion and $276 billion as of December 31, 2019 and 2018, respectively. This borrowing capacity excludes the benefit of cash and securities reported in the Firm’s HQLA or other unencumbered securities that are currently pledged at the Federal Reserve Bank discount windows. window and other central banks. Available borrowing capacity increased from the prior year primarily as a result of an increase in collateral available to be pledged as a result of the merger of Chase Bank USA, N.A. with and into JPMorgan Chase Bank, N.A., and an increase in available collateral as a result of maturities of borrowings from FHLBs. Although available, the Firm does not view thethis borrowing capacity at the Federal Reserve Bank discount windowswindow and the various other central banks as a primary source of liquidity.
NSFR
The net stable funding ratio (“NSFR”) is intended to measure the adequacy of “available” and “required” amounts of stable funding over a one-year horizon. On April 26, 2016, the U.S. NSFR proposal was released for large banks and BHCs and was largely consistent with the Basel Committee’s final standard.
While the final U.S. NSFR rule has yet to be released, as of December 31, 2017 the Firm estimates that it was compliant with the proposed 100% minimum NSFR based on its current understanding of the proposed rule.
| | | | 94 | | JPMorgan Chase & Co./2017 Annual Report | | 932019 Form 10-K |
Management’s discussion and analysis
Funding Sources of funds Management believes that the Firm’s unsecured and secured funding capacity is sufficient to meet its on- and off-balance sheet obligations. The Firm funds its global balance sheet through diverse sources of funding including a stable deposit franchise as well asdeposits, secured and unsecured funding in the capital markets. The Firm’s loan portfolio is funded with a portionmarkets and stockholders’ equity. Deposits are the primary funding source for JPMorgan Chase Bank, N.A. Additionally, JPMorgan Chase Bank, N.A. may also access funding through short- or long-term secured borrowings, through the issuance of the Firm’s deposits, through securitizations and, with respect to a portion of the Firm’s real estate-related loans, with securedunsecured long-term debt, or from borrowings from the FHLBs. Deposits in excess ofParent company or the amount utilized to fund loansIHC. The Firm’s non-bank subsidiaries are primarily funded from long-term unsecured borrowings and short-term secured borrowings, primarily securities loaned or sold under repurchase agreements. Excess funding is invested by Treasury and CIO in the Firm’s investment securities portfolio or deployed in cash or other short-term liquid investments based on their interest rate and liquidity risk characteristics. Securities borrowed or purchased under resale agreements and trading assets-debt and equity instruments are primarily funded by the Firm’s securities loaned or sold under agreements to repurchase, trading liabilities–debt and equity instruments, and a portion of the Firm’s long-term debt and stockholders’ equity. In addition to funding securities borrowed or purchased under resale agreements and trading assets-debt andequity instruments, proceeds from the Firm’s debt and equity issuances are used to fund certain loans and other financial and non-financial assets, or may be invested in the Firm’s investment securities portfolio. See the discussion below for additional information relating to Deposits, Short-term funding, and Long-term funding and issuance.
Deposits The table below summarizes, by line of business,LOB, the period-end and average deposit balances as of and for the years ended December 31, 20172019 and 2016.2018. | | Deposits | | | Year ended December 31, | | As of or for the year ended December 31, | | | Average | | | Average | (in millions) | 2017 | 2016 | | 2017 | 2016 | 2019 | 2018 | | 2019 | 2018 | Consumer & Community Banking | $ | 659,885 |
| $ | 618,337 |
| | $ | 640,219 |
| $ | 586,637 |
| $ | 718,416 |
| $ | 678,854 |
| | $ | 693,550 |
| $ | 670,388 |
| Corporate & Investment Bank | 455,883 |
| 412,434 |
| | 447,697 |
| 409,680 |
| 511,843 |
| 482,084 |
| | 515,913 |
| 477,250 |
| Commercial Banking | 181,512 |
| 179,532 |
| | 176,884 |
| 172,835 |
| 184,115 |
| 170,859 |
| | 172,666 |
| 170,822 |
| Asset & Wealth Management | 146,407 |
| 161,577 |
| | 148,982 |
| 153,334 |
| 147,804 |
| 138,546 |
| | 140,118 |
| 137,272 |
| Corporate | 295 |
| 3,299 |
| | 3,604 |
| 5,482 |
| 253 |
| 323 |
| | 820 |
| 729 |
| Total Firm | $ | 1,443,982 |
| $ | 1,375,179 |
| | $ | 1,417,386 |
| $ | 1,327,968 |
| $ | 1,562,431 |
| $ | 1,470,666 |
| | $ | 1,523,067 |
| $ | 1,456,461 |
|
A key strength of the Firm is its diversified deposit franchise, through each of its lines of business, which providesDeposits provide a stable source of funding and limitsreduce the Firm’s reliance on the wholesale funding markets. A significant portion of the Firm’s deposits are consumer deposits and wholesale operating deposits, which are both considered to be stable sources of liquidity. Wholesale operating deposits are considered to be stable sources of liquidity because they are generated from customers that maintain operating service relationships with the Firm.
The table below shows the loan and deposit balances, the loans-to-deposits ratios, and deposits as a percentage of total liabilities, as of December 31, 20172019 and 2016.2018. | | As of December 31, (in billions except ratios) | | | 2017 | 2016 | 2019 | 2018 | Deposits | $ | 1,444.0 |
| $ | 1,375.2 |
| $ | 1,562.4 |
| $ | 1,470.7 |
| Deposits as a % of total liabilities | 63 | % | 61 | % | 64 | % | 62 | % | Loans | 930.7 |
| 894.8 |
| 959.8 |
| 984.6 |
| Loans-to-deposits ratio | 64 | % | 65 | % | 61 | % | 67 | % |
Deposits increased due to both higher consumer and wholesale deposits. The higher consumer deposits reflect the continuation of strong growth from new and existing customers, and low attrition rates. The higher wholesale deposits largely were driven by growth in client cash management activity in CIB’s Securities Services business, partially offset by lower balances in AWM reflecting balance migration predominantly into the Firm’s investment-related products.
The Firm believes that average deposit balances are generally more representative of deposit trends than period-end deposit balances. The increase in average Average deposits across the Firm increased for the year ended December 31, 2017 compared with the year ended December 31, 2016,2019. The increase in CIB reflects growth in operating deposits driven by client activity, primarily in Treasury Services, and an increase in client-driven net issuances of structured notes in Markets. The increase in CCB was driven by an increasecontinued growth in both consumernew accounts. The increases in AWM and wholesale deposits. For further discussions of deposit and liability balance trends, seeCB were primarily driven by growth in interest-bearing deposits; for AWM, the growth was partially offset by migration, predominantly into the Firm’s investment-related products. Refer to the discussion of the Firm’s business segments resultsBusiness Segment Results and the Consolidated Balance SheetSheets Analysis on pages 55–7460–78 and pages 47-48, respectively.52–53, respectively, for further information on deposit and liability balance trends.
| | | | 94 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 95 |
Management’s discussion and analysis
The following table summarizes short-term and long-term funding, excluding deposits, as of December 31, 20172019 and 2016,2018, and average balances for the years ended December 31, 20172019 and 2016. For additional information, see2018. Refer to the Consolidated Balance Sheets Analysis on pages 47-4852–53 and Note 19.20 for additional information. | | | | | | | | | | | | | | | Sources of funds (excluding deposits) | | | | | As of or for the year ended December 31, | | | | Average | (in millions) | 2017 | 2016 | | 2017 | 2016 | Commercial paper | $ | 24,186 |
| $ | 11,738 |
| | $ | 19,920 |
| $ | 15,001 |
| Other borrowed funds | 27,616 |
| 22,705 |
| | 26,612 |
| 21,139 |
| Total short-term borrowings | $ | 51,802 |
| $ | 34,443 |
| | $ | 46,532 |
| $ | 36,140 |
| | | | | | | Obligations of Firm-administered multi-seller conduits(a) | $ | 3,045 |
| $ | 2,719 |
| | $ | 3,206 |
| $ | 5,153 |
| | | | | | | Securities loaned or sold under agreements to repurchase: | | | | | | Securities sold under agreements to repurchase(b) | $ | 146,432 |
| $ | 149,826 |
| | $ | 171,973 |
| $ | 160,458 |
| Securities loaned(c) | 7,910 |
| 12,137 |
| | 11,526 |
| 13,195 |
| Total securities loaned or sold under agreements to repurchase(d) | $ | 154,342 |
| $ | 161,963 |
| | $ | 183,499 |
| $ | 173,653 |
| | | | | | | Senior notes | $ | 155,852 |
| $ | 151,042 |
| | $ | 154,352 |
| $ | 153,768 |
| Trust preferred securities(e) | 690 |
| 2,345 |
| | 2,276 |
| 3,724 |
| Subordinated debt(e) | 16,553 |
| 21,940 |
| | 18,832 |
| 24,224 |
| Structured notes | 45,727 |
| 37,292 |
| | 42,918 |
| 35,978 |
| Total long-term unsecured funding | $ | 218,822 |
| $ | 212,619 |
| | $ | 218,378 |
| $ | 217,694 |
| | | | | | | Credit card securitization(a) | $ | 21,278 |
| $ | 31,181 |
| | $ | 25,933 |
| $ | 29,428 |
| Other securitizations(a)(f) | — |
| 1,527 |
| | 626 |
| 1,669 |
| FHLB advances | 60,617 |
| 79,519 |
| | 69,916 |
| 73,260 |
| Other long-term secured funding(g) | 4,641 |
| 3,107 |
| | 3,195 |
| 4,619 |
| Total long-term secured funding | $ | 86,536 |
| $ | 115,334 |
| | $ | 99,670 |
| $ | 108,976 |
| | | | | | | Preferred stock(h) | $ | 26,068 |
| $ | 26,068 |
| | 26,212 |
| $ | 26,068 |
| Common stockholders’ equity(h) | $ | 229,625 |
| $ | 228,122 |
| | 230,350 |
| $ | 224,631 |
|
| | | | | | | | | | | | | | | Sources of funds (excluding deposits) | | | | | As of or for the year ended December 31, | | | | Average | (in millions) | 2019 | 2018 | | 2019 | 2018 | Commercial paper | $ | 14,754 |
| $ | 30,059 |
| | $ | 22,977 |
| $ | 27,834 |
| Other borrowed funds | 7,544 |
| 8,789 |
| | 10,369 |
| 11,369 |
| Total short-term unsecured funding | $ | 22,298 |
| $ | 38,848 |
| | $ | 33,346 |
| $ | 39,203 |
| | | | | | | Securities sold under agreements to repurchase(a) | $ | 175,709 |
| $ | 171,975 |
| | $ | 217,807 |
| $ | 177,629 |
| Securities loaned(a) | 5,983 |
| 9,481 |
| | 8,816 |
| 10,692 |
| Other borrowed funds(b) | 18,622 |
| 30,428 |
| | 26,050 |
| 24,320 |
| Obligations of Firm-administered multi-seller conduits(c) | 9,223 |
| 4,843 |
| | 10,929 |
| 3,396 |
| Total short-term secured funding | $ | 209,537 |
| $ | 216,727 |
| | $ | 263,602 |
| $ | 216,037 |
| | | | | | | Senior notes | $ | 166,185 |
| $ | 162,733 |
| | $ | 168,546 |
| $ | 153,162 |
| Trust preferred securities | — |
| — |
| | — |
| 471 |
| Subordinated debt | 17,591 |
| 16,743 |
| | 17,387 |
| 16,178 |
| Structured notes(d) | 74,724 |
| 53,090 |
| | 65,487 |
| 49,640 |
| Total long-term unsecured funding | $ | 258,500 |
| $ | 232,566 |
| | $ | 251,420 |
| $ | 219,451 |
| | | | | | | Credit card securitization(c) | $ | 6,461 |
| $ | 13,404 |
| | $ | 9,707 |
| $ | 15,900 |
| FHLB advances | 28,635 |
| 44,455 |
| | 34,143 |
| 52,121 |
| Other long-term secured funding(e) | 4,363 |
| 5,010 |
| | 4,643 |
| 4,842 |
| Total long-term secured funding | $ | 39,459 |
| $ | 62,869 |
| | $ | 48,493 |
| $ | 72,863 |
| | | | | | | Preferred stock(f) | $ | 26,993 |
| $ | 26,068 |
| | $ | 27,511 |
| $ | 26,249 |
| Common stockholders’ equity(f) | $ | 234,337 |
| $ | 230,447 |
| | $ | 232,907 |
| $ | 229,222 |
|
| | (a) | Primarily consists of short-term securities loaned or sold under agreements to repurchase. |
| | (b) | There were no FHLB advances with original maturities of less than one year as of December 31, 2019. As of December 31, 2018, includes FHLB advances with original maturities of less than one year of $11.4 billion. |
| | (c) | Included in beneficial interestinterests issued by consolidated variable interest entities on the Firm’s Consolidated balance sheets. |
| | (b) | Excludes long-term structured repurchase agreements of $1.3 billion and $1.8 billion as of December 31, 2017 and 2016, respectively, and average balances of $1.5 billion and $2.9 billion for the years ended December 31, 2017 and 2016, respectively. |
| | (c) | Excludes long-term securities loaned of $1.3 billion and $1.2 billion as of December 31, 2017 and 2016, respectively, and average balances of $1.3 billion for both the years ended December 31, 2017 and 2016. |
| | (d) | Excludes federal funds purchased.Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company. |
| | (e) | Subordinated debt includes $1.6 billion of junior subordinated debentures distributed pro rata to the holders of the $1.6 billion of trust preferred securities which were cancelled on December 18, 2017. For further information see Note 19 . |
| | (f) | Other securitizations includes securitizations of student loans. The Firm deconsolidated the student loan securitization entities in the second quarter of 2017 as it no longer had a controlling financial interest in these entities as a result of the sale of the student loan portfolio. The Firm’s wholesale businesses also securitize loans for client-driven transactions, which are not considered to be a source of funding for the Firm and are not included in the table. |
| | (g) | Includes long-term structured notes which are secured. |
| | (h)(f) | ForRefer to Capital Risk Management on pages 85–92, Consolidated statements of changes in stockholders’ equity on page 149, and Note 21 and Note 22 for additional information on preferred stock and common stockholders’ equity see Capital Risk Management on pages 82–91, Consolidated statements of changes in stockholders’ equity, Note 20 and Note 21.equity. |
Short-term funding The Firm’s sources of short-term secured funding primarily consist of securities loaned or sold under agreements to repurchase. These instruments are secured predominantly by high-quality securities collateral, including government-issued debt, U.S. GSE and government agency MBS, and constitute a significant portion of the federal funds purchased and securities loaned or sold under repurchase agreements on the Consolidated balance sheets. The increase in the average balance of securitiesMBS. Securities loaned or sold under agreements to repurchase for the year endedwere relatively flat at December 31, 2017,2019, compared towith December 31, 2016,2018, as the net increase from the Firm’s participation in the Federal Reserve’s open market operations was largely due to clientoffset by client-driven activities, and lower secured financing of trading assets-debt instruments, all in CIB. The balances associated with securities loaned or sold under agreements to repurchase fluctuate over time due to customers’ investment and financing activities;activities, the Firm’s demand for financing;financing, the ongoing management of the mix of the Firm’s liabilities, including its secured and unsecured financing (for both the investment securities and market-making portfolios);, and other market and portfolio factors. The Firm’s sources of short-term unsecured funding primarily consist of issuancesissuance of wholesale commercial paper. The increasedecrease in short-term unsecured fundingcommercial paper at December 31, 2019, from December 31, 2018, was primarily due to higherlower net issuance of commercial paper reflecting in part a change in the mix of funding from securities sold under repurchase agreementsprimarily for CIB Markets activities.short-term liquidity management. Long-term funding and issuance Long-term funding provides additional sources of stable funding and liquidity for the Firm. The Firm’s long-term funding plan is driven primarily by expected client activity, liquidity considerations, and regulatory requirements, including TLAC. Long-term funding objectives include maintaining diversification, maximizing market access and
| | | | JPMorgan Chase & Co./2017 Annual Report | | 95 |
Management’s discussion and analysis
optimizing funding costs. The Firm evaluates various funding markets, tenors and currencies in creating its optimal long-term funding plan.
| | | | 96 | | JPMorgan Chase & Co./2019 Form 10-K |
The significant majority of the Firm’s long-term unsecured funding is issued by the Parent Company to provide maximum flexibility in support of both bank and non-bank subsidiary funding needs.The Parent Company advances substantially all net funding proceeds to its subsidiary, the IHC. The IHC does not issue debt to external counterparties. The following table summarizes long-term unsecured issuance and maturities or redemptions for the years ended December 31, 20172019 and 2016. For2018. Refer to Note 20 for additional information see Note 19.on long-term debt. | | Long-term unsecured funding | | | | | Year ended December 31, (in millions) | 2017 | 2016 | | Year ended December 31, | | 2019 | 2018 | | 2019 | 2018 | (Notional in millions) | | Parent Company | | Subsidiaries | Issuance | | | | | Senior notes issued in the U.S. market | $ | 21,192 |
| $ | 25,639 |
| $ | 14,000 |
| $ | 22,000 |
| | $ | 1,750 |
| $ | 9,562 |
| Senior notes issued in non-U.S. markets | 2,210 |
| 7,063 |
| 5,867 |
| 1,502 |
| | — |
| — |
| Total senior notes | 23,402 |
| 32,702 |
| 19,867 |
| 23,502 |
| | 1,750 |
| 9,562 |
| Subordinated debt | — |
| 1,093 |
| | Structured notes | 29,040 |
| 22,865 |
| | Structured notes(a) | | 5,844 |
| 2,444 |
| | 33,563 |
| 25,410 |
| Total long-term unsecured funding – issuance | $ | 52,442 |
| $ | 56,660 |
| $ | 25,711 |
| $ | 25,946 |
| | $ | 35,313 |
| $ | 34,972 |
| | | | | | Maturities/redemptions | | | | | Senior notes | $ | 22,337 |
| $ | 29,989 |
| $ | 18,098 |
| $ | 19,141 |
| | $ | 5,367 |
| $ | 4,466 |
| Trust preferred securities | — |
| 1,630 |
| | Subordinated debt | 6,901 |
| 3,596 |
| 183 |
| 136 |
| | — |
| — |
| Structured notes | 22,581 |
| 15,925 |
| 2,944 |
| 2,678 |
| | 19,271 |
| 15,049 |
| Total long-term unsecured funding – maturities/redemptions | $ | 51,819 |
| $ | 51,140 |
| $ | 21,225 |
| $ | 21,955 |
| | $ | 24,638 |
| $ | 19,515 |
|
| | (a) | Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company. |
The Firm raises can also raise secured long-term funding through securitization of consumer credit card loans and advances from the FHLBs. The following table summarizes the securitization issuance and FHLB advances and their respective maturities or redemptionredemptions for the years ended December 31, 20172019 and 2016.2018. | | Long-term secured funding | Long-term secured funding | | | Long-term secured funding | | | Year ended December 31, | Issuance | | Maturities/Redemptions | Issuance | | Maturities/Redemptions | (in millions) | 2017 | 2016 | | 2017 | 2016 | 2019 | 2018 | | 2019 | 2018 | Credit card securitization | $ | 1,545 |
| $ | 8,277 |
| | $ | 11,470 |
| $ | 5,025 |
| $ | — |
| $ | 1,396 |
| | $ | 6,975 |
| $ | 9,250 |
| Other securitizations(a) |
| — |
| | 55 |
| 233 |
| | FHLB advances | — |
| 17,150 |
| | 18,900 |
| 9,209 |
| — |
| 9,000 |
| | 15,817 |
| 25,159 |
| Other long-term secured funding(b) | 2,354 |
| 455 |
| | 731 |
| 2,645 |
| | Other long-term secured funding(a) | | 204 |
| 377 |
| | 927 |
| 289 |
| Total long-term secured funding | $ | 3,899 |
| $ | 25,882 |
| | $ | 31,156 |
| $ | 17,112 |
| $ | 204 |
| $ | 10,773 |
| | $ | 23,719 |
| $ | 34,698 |
|
| | (a) | Other securitizations includes securitizations of student loans. The Firm deconsolidated the student loan securitization entities in the second quarter of 2017 as it no longer had a controlling financial interest in these entities as a result of the sale of the student loan portfolio. |
| | (b) | Includes long-term structured notes which are secured. |
The Firm’s wholesale businesses also securitize loans for client-driven transactions; those client-driven loan securitizations are not considered to be a source of funding for the Firm and are not included in the table above. ForRefer to Note 14 for further description of the client-driven loan securitizations, see Note 14.securitizations.
| | | | 96 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 97 |
Management’s discussion and analysis
Credit ratings The cost and availability of financing are influenced by credit ratings. Reductions in these ratings could have an adverse effect on the Firm’s access to liquidity sources, increase the cost of funds, trigger additional collateral or funding requirements and decrease the number of investors and counterparties willing to lend to the Firm. The nature and magnitude of the impact of ratings downgrades depends on numerous contractual and behavioral factors, which the Firm believes are incorporated in its liquidity risk and stress testing metrics. The Firm believes that it maintains sufficient liquidity to withstand a potential decrease in funding capacity due to ratings downgrades.
Additionally, the Firm’s funding requirements for VIEs and other third- party commitments may be adversely affected by a decline in credit ratings. For additional information on the impact of a credit ratings downgrade on the funding requirements for VIEs, and on derivatives and collateral agreements, see SPEs on page 50, and credit risk, liquidity risk and credit-related contingent features in Note 5 on page 186.
The credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries as of December 31, 2017,2019, were as follows. | | | | | | | | | | | | | | JPMorgan Chase & Co. | | JPMorgan Chase Bank, N.A. Chase Bank USA, N.A.(a)
| | J.P. Morgan Securities LLC J.P. Morgan Securities plc | December 31, 20172019 | Long-term issuer | Short-term issuer | Outlook | | Long-term issuer | Short-term issuer | Outlook | | Long-term issuer | Short-term issuer | Outlook | Moody’s Investors Service | A3 | P-2 | Stable | | Aa3A2 | P-1 | Stable | | A1Aa2 | P-1 | Stable | | Aa3 | P-1 | Stable | Standard & Poor’s | A- | A-2 | Stable | | A+ | A-1 | Stable | | A+ | A-1 | Stable | Fitch Ratings | A+ | F1 | Stable | | AA- | F1+ | Stable | | AA-AA | F1+ | Stable | | AA | F1+ | Stable |
| | (a) | On May 18, 2019, Chase Bank USA, N.A. merged with and into JPMorgan Chase Bank, N.A., with JPMorgan Chase Bank, N.A. as the surviving bank. The credit rating for JPMorgan Chase Bank, N.A. reflects the credit rating of the merged entity. |
On February 22, 2017, Moody’s published its updated rating methodologies for securities firms. As a result of this methodology change, J.P. Morgan Securities LLC’s long-term issuer rating was downgraded by one notch from Aa3 to A1; the short-term issuer rating was unchanged and the outlook remained stable.
On June 1, 2017, JPMorgan Chase Bank, N.A. terminated its guarantee of the payment of all obligations of J.P. Morgan Securities plc arising after such termination. J.P. Morgan Securities plc, whose credit ratings previously reflected the benefit of this guarantee, is now rated on a stand-alone, non-guaranteed basis.
Downgrades of the Firm’s long-term ratings by one or two notches could result in an increase in its cost of funds, and access to certain funding markets could be reduced as noted above. The nature and magnitude of the impact of ratings downgrades depends on numerous contractual andbehavioral factors which the Firm believes are incorporated in its liquidity risk and stress testing metrics. The Firm believes that it maintains sufficient liquidity to withstand a
potential decrease in funding capacity due to ratings downgrades.
JPMorgan Chase’s unsecured debt does not contain requirements that would call for an acceleration of payments, maturities or changes in the structure of the existing debt, provide any limitations on future borrowings or require additional collateral, based on unfavorable changes in the Firm’s credit ratings, financial ratios, earnings, or stock price. Critical factors in maintaining high credit ratings include a stable and diverse earnings stream, strong capital and liquidity ratios, strong credit quality and risk management controls, and diverse funding sources, and disciplined liquidity monitoring procedures.sources. Rating agencies continue to evaluate economic and geopolitical trends, regulatory developments, future profitability, risk management practices, and litigation matters, as well as their broader ratings methodologies. Changes in any of these factors could lead to changes in the Firm’s credit ratings.
| | | | 98 | | JPMorgan Chase & Co./2017 Annual Report | | 972019 Form 10-K |
| | | | | | REPUTATION RISK MANAGEMENT |
Reputation risk is the potentialrisk that an action or inaction transaction, investment or event willmay negatively impact the Firm’s integrity and reduce trustconfidence in the Firm’s integrity or competence held by its various constituents, including clients, counterparties, customers, investors, regulators, employees, andcommunities or the broader public.Maintaining Organization and management Reputation Risk Management is an independent risk management function that establishes the governance framework for managing reputation risk across the Firm. As reputation risk is inherently difficult to identify, manage, and quantify, an independent reputation risk management governance function is critical. The Firm’s reputation isrisk management function includes the responsibility of each individual employee of the Firm. The Firm’sfollowing activities: Establishing a Firmwide Reputation Risk Governance policy explicitly vests each employeeand standards consistent with the responsibility to consider the reputation of the Firm when engaging in any activity. Because the types of events that could harm the Firm’s reputation are so varied across the Firm’s lines of business, each line of business has a separate reputation risk governance infrastructure in place, which consists of frameworkthree key elements: clear, documented escalation criteria appropriate to the business; a designated primary discussion forum — in most cases, one or more dedicated reputation risk committees; and a list of designated contacts to whom questions relating to reputation risk should be referred. Any matter giving rise to reputation risk that originates in a corporate function is required to be escalated directly to Firmwide Reputation Risk Governance (“FRRG”) or to the relevant Risk Committee. Reputation risk governance is overseen by FRRG, which provides oversight ofManaging the governance infrastructure and process toprocesses that support the consistent identification, escalation, management and monitoring of reputation risk issues firmwide.Firmwide
Providing guidance to LOB Reputation Risk Offices (“RRO”), as appropriate The types of events that give rise to reputation risk are broad and could be introduced in various ways, including by the Firm’s employees and the clients, customers and counterparties with which the Firm does business. These events could result in financial losses, litigation and regulatory fines, as well as other damages to the Firm. Governance and oversight The Firm’s Reputation Risk Governance policy establishes the principles for managing reputation risk for the Firm. It is the responsibility of employees in each LOB and Corporate to consider the reputation of the Firm when deciding whether to offer a new product, engage in a transaction or client relationship, enter a new jurisdiction, initiate a business process or other matters. Increasingly, sustainability, social responsibility and environmental impacts are important considerations in assessing the Firm’s reputation risk, and are considered as part of reputation risk governance. Reputation risk issues deemed materialare escalated as appropriate.
| | | | 98 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 99 |
Management’s discussion and analysis
| | | | | | CREDIT AND INVESTMENT RISK MANAGEMENT |
Credit and investment risk is the risk associated with the default or change in credit profile of a client, counterparty or customer; or loss of principal or a reduction in expected returns on investments.investments, including consumer credit risk, wholesale credit risk, and investment portfolio risk. Credit risk management Credit risk is the risk associated with the default or change in credit profile of a client, counterparty or customer. The Firm provides credit to a variety of customers, ranging from large corporate and institutional clients to individual consumers and small businesses. In its consumer businesses, the Firm is exposed to credit risk primarily through its home lending, credit card, auto, and business banking businesses. In its wholesale businesses, the Firm is exposed to credit risk through its underwriting, lending, market-making, and hedging activities with and for clients and counterparties, as well as through its operating services activities (such as cash management and clearing activities), securities financing activities, investment securities portfolio, and cash placed with banks. Credit risk managementRisk Management is an independent risk management function that monitors, measures and manages credit risk throughout the Firm and defines credit risk policies and procedures. The credit risk function reports to the Firm’s CRO. The Firm’s credit risk management governance includes the following activities: Establishing a comprehensive credit risk policy framework Monitoring, measuring and managing credit risk across all portfolio segments, including transaction and exposure approval Setting industry and geographic concentration limits, as appropriate, and establishing underwriting guidelines Assigning and managing credit authorities in connection with the approval of all credit exposure Managing criticized exposures and delinquent loans Estimating credit losses and ensuring appropriate credit risk-based capital management Risk identification and measurement The Credit Risk Management function monitors, measures, manages and limits credit risk across the Firm’s businesses. To measure credit risk, the Firm employs several methodologies for estimating the likelihood of obligor or counterparty default. Methodologies for measuring credit risk vary depending on several factors, including type of asset (e.g., consumer versus wholesale), risk measurement parameters (e.g., delinquency status and borrower’s credit score versus wholesale risk-rating) and risk management and collection processes (e.g., retail collection center versus centrally managed workout groups). Credit risk measurement is based on the probability of default of an obligor or counterparty, the loss severity given a default event and the exposure at default. Based on these factors and related market-based inputs,the methodology and estimates described in Note 13, the Firm estimates credit losses for its exposures. ProbableThe allowance for loan losses reflects credit losses inherent inrelated to the consumer and wholesale held-for-investment loan portfolios, are reflected in the allowance for loan losses, and probable credit losses inherent in lending-related commitments are reflected in the allowance for lending-related commitments reflects credit losses related to the Firm’s lending-related commitments. These losses are estimated using statistical analysesRefer to Note 13 and other factors as described in Note 13. Critical Accounting Estimates used by the Firm on pages 136-138 for further information. In addition, potential and unexpected credit losses are reflected in the allocation of credit risk capital and represent the potential volatility of actual losses relative to the established allowances for loan losses and lending-related commitments. The analyses for these losses include stress testing that considers alternative economic scenarios as described in the Stress testing section below. For further information, see Critical Accounting Estimates used by the Firm on pages 138–140. The methodologies used to estimate credit losses depend on the characteristics of the credit exposure, as described below.
Scored exposure
The scored portfolio is generally held in CCB and predominantly includes residential real estate loans, credit card loans, and certain auto and business banking loans. For the scored portfolio, credit loss estimates are based on statistical analysis of credit losses over discrete periods of time. The statistical analysis uses portfolio modeling, credit scoring, and decision-support tools, which consider loan-level factors such as delinquency status, credit scores, collateral values, and other risk factors. Credit loss analyses also consider, as appropriate, uncertainties and other factors, including those related to current macroeconomic and political conditions, the quality of underwriting standards, and other internal and external factors. The factors and analysis are updated on a quarterly basis or more frequently as market conditions dictate.
Risk-rated exposure
Risk-rated portfolios are generally held in CIB, CB and AWM, but also include certain business banking and auto dealer loans held in CCB that are risk-rated because they have characteristics similar to commercial loans. For the risk-rated portfolio, credit loss estimates are based on estimates of the probability of default (“PD”) and loss severity given a default. The probability of default is the likelihood that a borrower will default on its obligation; the loss given default (“LGD”) is the estimated loss on the loan that would be realized upon the default and takes into consideration collateral and structural support for each credit facility. The estimation process includes assigning risk ratings to each borrower and credit facility to differentiate risk within the portfolio. These risk ratings are reviewed regularly by Credit Risk Management and revised as needed to reflect the borrower’s current financial position, risk profile and related collateral. The calculations and assumptions are
| | | | JPMorgan Chase & Co./2017 Annual Report | | 99 |
Management’s discussion and analysis
based on both internal and external historical experience and management judgment and are reviewed regularly.
Stress testing Stress testing is important in measuring and managing credit risk in the Firm’s credit portfolio. The process assesses the potential impact of alternative economic and business scenarios on estimated credit losses for the Firm. Economic scenarios and the underlying parameters are defined centrally, articulated in terms of macroeconomic factors and applied across the businesses. The stress test results may indicate credit migration, changes in delinquency trends and potential losses in the credit portfolio. In addition to the periodic stress testing processes, management also considers additional stresses outside these scenarios, including industry and country- specific stress scenarios, as necessary. The Firm uses stress testing to inform decisions on setting risk appetite both at a Firm and LOB level, as well as to assess the impact of stress on individual counterparties.
| | | | 100 | | JPMorgan Chase & Co./2019 Form 10-K |
Risk monitoring and management The Firm has developed policies and practices that are designed to preserve the independence and integrity of the approval and decision-making process of extending credit to ensure credit risks are assessed accurately, approved properly, monitored regularly and managed actively at both the transaction and portfolio levels. The policy framework establishes credit approval authorities, concentration limits, risk-rating methodologies, portfolio review parameters and guidelines for management of distressed exposures. In addition, certain models, assumptions and inputs used in evaluating and monitoring credit risk are independently validated by groups that are separate from the line of businesses.LOBs. Consumer credit risk is monitored for delinquency and other trends, including any concentrations at the portfolio level, as certain of these trends can be modified through changes in underwriting policies and portfolio guidelines. Consumer Risk Management evaluates delinquency and other trends against business expectations, current and forecasted economic conditions, and industry benchmarks. Historical and forecasted economic performance and trends are incorporated into the modeling of estimated consumer credit losses and are part of the monitoring of the credit risk profile of the portfolio. Wholesale credit risk is monitored regularly at an aggregate portfolio, industry, and individual client and counterparty level with established concentration limits that are reviewed and revised periodically as deemed appropriate by management, typically on an annual basis.management. Industry and counterparty limits, as measured in terms of exposure and economic risk appetite, are subject to stress-based loss constraints. In addition, wrong-way risk, —that is the risk that exposure to a counterparty is positively correlated with the impact of a default by the same counterparty, which could cause exposure to increase at the same time as the counterparty’s capacity to meet its obligations is decreasing —- is actively monitored as this risk could result in greater exposure at default compared with a transaction with another counterparty that does not have this risk. Management of the Firm’s wholesale credit risk exposure is accomplished through a number of means, including: Loan underwriting and credit approval process Loan syndications and participations Loan sales and securitizations Credit derivatives Master netting agreements Collateral and other risk-reduction techniques In addition to Credit Risk Management, an independent Credit Review function is responsible for: I | | • | Independently validating or changing the risk grades assigned to exposures in the Firm’s wholesale and commercial-oriented retail credit portfolios, and assessing the timeliness of risk grade changes initiated by responsible business units; and |
| | • | Evaluating the effectiveness of business units’ credit management processes, including the adequacy of credit analyses and risk grading/LGDrationales, proper monitoring and management of credit exposures, and compliance with applicable grading policies and underwriting guidelines. |
Refer to exposures in the Firm’s wholesale and commercial-oriented retail credit portfolios, and assessing the timeliness of risk grade changes initiated by responsible business units; and Evaluating the effectiveness of business units’ credit management processes, including the adequacy of credit analyses and risk grading/LGDrationales, proper monitoring and management of credit exposures, and compliance with applicable grading policies and underwriting guidelines.
ForNote 12 for further discussion of consumer and wholesale loans, see Note 12.loans.
Risk reporting To enable monitoring of credit risk and effective decision-making, aggregate credit exposure, credit quality forecasts, concentration levels and risk profile changes are reported regularly to senior members of Credit Risk Management. Detailed portfolio reporting of industry;industry, clients, counterparties and customers;customers, product and geographic concentrations occurs monthly,geography are prepared, and the appropriateness of the allowance for credit losses is reviewed by senior management at least on a quarterly basis. Through the risk reporting and governance structure, credit risk trends and limit exceptions are provided regularly to, and discussed with, risk committees, senior management and the Board of Directors as appropriate.
| | | | 100 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 101 |
Management’s discussion and analysis
Credit risk is the risk associated with the default or change in credit profile of a client, counterparty or customer. In the following tables, reported loans include loans retained (i.e., held-for-investment); loans held-for-sale; and certain loans accounted for at fair value. The following tables do not include certain loans which the Firm accounts for at fair value and classifies as trading assets. Forassets; refer to Notes 2 and 3 for further information regarding these loans, see Note 2loans. Refer to Notes 12, 28, and Note 3. For5 for additional information on the Firm’s loans, lending-related commitments and derivative receivables, including the Firm’s accounting policies, seepolicies. Refer to Note 12, Note 27, and Note 5, respectively. For further10 for information regarding the credit risk inherent in the Firm’s cash placed with banks, investment securities portfolio,portfolio; and refer to Note 11 for information regarding credit risk inherent in the securities financing portfolio, see Note 4, Note 10,portfolio. Refer to Consumer Credit Portfolio on pages 103–107 and Note 11, respectively.
For12 for a further discussion of the consumer credit environment and consumer loans, see Consumerloans. Refer to Wholesale Credit Portfolio on pages 102-107108–115 and Note 12. For12 for a further discussion of the wholesale credit environment and wholesale loans, see Wholesale Credit Portfolio on pages 108–116 and Note 12.
loans.
| | Total credit portfolio | Total credit portfolio | | | | Total credit portfolio | | | | December 31, (in millions) | Credit exposure | | Nonperforming(e)(f) | Credit exposure | | Nonperforming(d)(e) | 2017 | 2016 | | 2017 | 2016 | 2019 | 2018 | | 2019 | 2018 | Loans retained | $ | 924,838 |
| $ | 889,907 |
| | $ | 5,943 |
| $ | 6,721 |
| $ | 945,601 |
| $ | 969,415 |
| | $ | 3,983 |
| $ | 4,611 |
| Loans held-for-sale | 3,351 |
| 2,628 |
| | — |
| 162 |
| 7,064 |
| 11,988 |
| | 7 |
| — |
| Loans at fair value | 2,508 |
| 2,230 |
| | — |
| — |
| 7,104 |
| 3,151 |
| | 90 |
| 220 |
| Total loans – reported | 930,697 |
| 894,765 |
| | 5,943 |
| 6,883 |
| 959,769 |
| 984,554 |
| | 4,080 |
| 4,831 |
| Derivative receivables | 56,523 |
| 64,078 |
| | 130 |
| 223 |
| 49,766 |
| 54,213 |
| | 30 |
| 60 |
| Receivables from customers and other (a) | 26,272 |
| 17,560 |
| | — |
| — |
| 33,706 |
| 30,217 |
| | — |
| — |
| Total credit-related assets | 1,013,492 |
| 976,403 |
| | 6,073 |
| 7,106 |
| 1,043,241 |
| 1,068,984 |
| | 4,110 |
| 4,891 |
| Assets acquired in loan satisfactions | | | | | | | Real estate owned | NA |
| NA |
| | 311 |
| 370 |
| NA |
| NA |
| | 344 |
| 269 |
| Other | NA |
| NA |
| | 42 |
| 59 |
| NA |
| NA |
| | 43 |
| 30 |
| Total assets acquired in loan satisfactions | NA |
| NA |
| | 353 |
| 429 |
| NA |
| NA |
| | 387 |
| 299 |
| Lending-related commitments | 991,482 |
| 975,152 |
| (d) | 731 |
| 506 |
| 1,106,247 |
| 1,039,258 |
| | 474 |
| 469 |
| Total credit portfolio | $ | 2,004,974 |
| $ | 1,951,555 |
| (d) | $ | 7,157 |
| $ | 8,041 |
| $ | 2,149,488 |
| $ | 2,108,242 |
| | $ | 4,971 |
| $ | 5,659 |
| Credit derivatives used in credit portfolio management activities(b) | $ | (17,609 | ) | $ | (22,114 | ) | | $ | — |
| $ | — |
| $ | (18,030 | ) | $ | (12,682 | ) | | $ | — |
| $ | — |
| Liquid securities and other cash collateral held against derivatives(c) | (16,108 | ) | (22,705 | ) | | NA |
| NA |
| (16,009 | ) | (15,322 | ) | | NA |
| NA |
|
| | Year ended December 31, (in millions, except ratios) | | 2017 | 2016 | | 2019 | 2018 | Net charge-offs(g) | | $ | 5,387 |
| $ | 4,692 |
| | $ | 5,629 |
| $ | 4,856 |
| Average retained loans | | | | | Loans | | 898,979 |
| 861,345 |
| | 941,919 |
| 936,829 |
| Loans – reported, excluding residential real estate PCI loans | | 865,887 |
| 822,973 |
| | 919,702 |
| 909,386 |
| Net charge-off rates(g) | | | | | Loans | | 0.60 | % | 0.54 | % | | 0.60 | % | 0.52 | % | Loans – excluding PCI | | 0.62 |
| 0.57 |
| | 0.61 |
| 0.53 |
|
| | (a) | Receivables from customers and other primarily represents brokerage-related held-for-investment margin loans to brokerage customers.customer receivables. |
| | (b) | Represents the net notional amount of protection purchased and sold through credit derivatives used to manage both performing and nonperforming wholesale credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For additional information, seeRefer to Credit derivatives on pages 115–116page 115 and Note 5.5 for additional information. |
| | (c) | Includes collateral related to derivative instruments where an appropriate legal opinion hasopinions have not been either sought or obtained.obtained with respect to master netting agreements. |
| | (d) | The prior period amounts have been revised to conform with the current period presentation. |
| | (e) | Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as each of the pools is performing. |
| | (f)(e) | At December 31, 20172019 and 2016,2018, nonperforming assets excluded: (1)excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $4.3 billion$961 million and $5.0$2.6 billion, respectively, that are 90 or more days past due; (2) student loans insured by U.S. government agencies under the FFELP of zero and $263 million, respectively, that are 90 or more days past due; and (3) Realreal estate owned (“REO”) insured by U.S. government agencies of $95$41 million and $142$75 million, respectively. These amounts have been excluded based upon the government guarantee. In addition, the Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance issued by the Federal Financial Institutions Examination Council (“FFIEC”). |
| | (g) | For the year ended December 31, 2017, excluding net charge-offs of $467 million related to the student loan portfolio sale, the net charge-off rate for loans would have been 0.55% and for loans - excluding PCI would have been 0.57%. |
| | | | 102 | | JPMorgan Chase & Co./2017 Annual Report | | 1012019 Form 10-K |
Management’s discussion and analysis
| | | | | | CONSUMER CREDIT PORTFOLIO |
The Firm’s retained consumer portfolio consists primarily of residential real estate loans, credit card loans, auto loans, and business banking loans, as well as associated lending-related commitments. The Firm’s focus is on serving primarily the prime segment of the consumer credit market. Originated mortgage loans are retained in the mortgage portfolio, securitized or sold to U.S. government agencies and U.S. government-sponsored enterprises; other types of consumer loans are typically retained on the balance sheet. The credit performance of the consumer portfolio continues to benefit from discipline in credit underwriting as well as improvement in the economy driven by low unemployment and increasing home prices and low unemployment. The total amount of residential real estate loans delinquent 30+ days, excluding government guaranteed and purchased credit impaired loans, increased from December 31, 2016 dueprices. Refer to the impact of recent hurricanes; however, the 30+ day delinquency rate decreased due to growth in the portfolio. The Credit Card 30+ day delinquency rate and the net charge-off rate increased from the prior year, in line with expectations. ForNote 12 for further information on the consumer loans, seeloan portfolio. Refer to Note 12. For28 for further information on lending-related commitments, see Note 27.commitments.
| | | | 102 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 103 |
Management’s discussion and analysis
The following table presents consumer credit-related information with respect to the credit portfolio held by CCB, scored prime mortgage and scored home equity loans held by AWM, and scored prime mortgage loans held by Corporate. For Refer to Note 12 for further information about the Firm’s nonaccrual and charge-off accounting policies, see Note 12.policies. | | Consumer credit portfolio | As of or for the year ended December 31, (in millions, except ratios) | Credit exposure | | Nonaccrual loans(k)(l) | | Net charge-offs/(recoveries)(e)(m)(n) | | Average annual net charge-off rate(e)(m)(n) | Credit exposure | | Nonaccrual loans(f)(g) | | Net charge-offs/(recoveries)(h) | | Net charge-off/(recovery) rate(h)(i) | 2017 | | 2016 | | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | 2019 | | 2018 | | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | Consumer, excluding credit card | | | | | | | | | | | | | | | | | | | | | Loans, excluding PCI loans and loans held-for-sale | | | | | | | | | | | | | | | | | | | Residential mortgage(a) | $ | 216,496 |
| | $ | 192,486 |
| | $ | 2,175 |
| $ | 2,256 |
| | $ | (10 | ) | $ | 16 |
| | — | % | 0.01 | % | $ | 199,037 |
| | $ | 231,078 |
| | $ | 1,618 |
| $ | 1,765 |
| | $ | (44 | ) | $ | (291 | ) | | (0.02 | )% | (0.13 | )% | Home equity | 33,450 |
| | 39,063 |
| | 1,610 |
| 1,845 |
| | 69 |
| 189 |
| | 0.19 |
| 0.45 |
| 23,917 |
| | 28,340 |
| | 1,162 |
| 1,323 |
| | (46 | ) | (5 | ) | | (0.18 | ) | (0.02 | ) | Auto(c)(b) | 66,242 |
| | 65,814 |
| | 141 |
| 214 |
| | 331 |
| 285 |
| | 0.51 |
| 0.45 |
| 61,522 |
| | 63,573 |
| | 113 |
| 128 |
| | 206 |
| 243 |
| | 0.33 |
| 0.38 |
| Consumer & Business Banking(d)(c) | 25,789 |
| | 24,307 |
| | 283 |
| 287 |
| | 257 |
| 257 |
| | 1.03 |
| 1.10 |
| 27,199 |
| | 26,612 |
| | 247 |
| 245 |
| | 296 |
| 236 |
| | 1.11 |
| 0.90 |
| Student(a)(e) | — |
| | 7,057 |
| | — |
| 165 |
| | 498 |
| 162 |
| | NM |
| 2.13 |
| | Total loans, excluding PCI loans and loans held-for-sale | 341,977 |
| | 328,727 |
| | 4,209 |
| 4,767 |
| | 1,145 |
| 909 |
| | 0.34 |
| 0.28 |
| 311,675 |
| | 349,603 |
| | 3,140 |
| 3,461 |
| | 412 |
| 183 |
| | 0.13 |
| 0.05 |
| Loans – PCI | | | | | | | | | | | | | | | | | | | Home equity | 10,799 |
| | 12,902 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| 7,377 |
| | 8,963 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Prime mortgage | 6,479 |
| | 7,602 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| 3,965 |
| | 4,690 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Subprime mortgage | 2,609 |
| | 2,941 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| 1,740 |
| | 1,945 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Option ARMs(f) | 10,689 |
| | 12,234 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| | Option ARMs | | 7,281 |
| | 8,436 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Total loans – PCI | 30,576 |
| | 35,679 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| 20,363 |
| | 24,034 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Total loans – retained | 372,553 |
| | 364,406 |
| | 4,209 |
| 4,767 |
| | 1,145 |
| 909 |
| | 0.31 |
| 0.25 |
| 332,038 |
| | 373,637 |
| | 3,140 |
| 3,461 |
| | 412 |
| 183 |
| | 0.12 |
| 0.05 |
| Loans held-for-sale | 128 |
| | 238 |
| | — |
| 53 |
| | — |
| — |
| | — |
| — |
| 3,002 |
| | 95 |
| | 2 |
| — |
| | NA |
| NA |
| | NA |
| NA |
| Total consumer, excluding credit card loans | 372,681 |
| | 364,644 |
| | 4,209 |
| 4,820 |
| | 1,145 |
| 909 |
| | 0.31 |
| 0.25 |
| 335,040 |
| | 373,732 |
| | 3,142 |
| 3,461 |
| | 412 |
| 183 |
| | 0.12 |
| 0.05 |
| Lending-related commitments(g) | 48,553 |
| | 53,247 |
| (j) | | | | | | | Receivables from customers(h) | 133 |
| | 120 |
| | | | | | | | Lending-related commitments(d) | | 51,412 |
| | 46,066 |
| | | | | | | Receivables from customers | | — |
| | 154 |
| | | | | | | Total consumer exposure, excluding credit card | 421,367 |
| | 418,011 |
| (j) | | | | | | 386,452 |
| | 419,952 |
| | | | | | | Credit Card | | | | | | | | | | | | | | | | | | | Loans retained(i) | 149,387 |
| | 141,711 |
| | — |
| — |
| | 4,123 |
| 3,442 |
| | 2.95 |
| 2.63 |
| | Loans retained(e) | | 168,924 |
| | 156,616 |
| | — |
| — |
| | 4,848 |
| 4,518 |
| | 3.10 |
| 3.10 |
| Loans held-for-sale | 124 |
| | 105 |
| | — |
| — |
| | — |
| — |
| | — |
| — |
| — |
| | 16 |
| | — |
| — |
| | NA |
| NA |
| | NA |
| NA |
| Total credit card loans | 149,511 |
| | 141,816 |
| | — |
| — |
| | 4,123 |
| 3,442 |
| | 2.95 |
| 2.63 |
| 168,924 |
| | 156,632 |
| | — |
| — |
| | 4,848 |
| 4,518 |
| | 3.10 |
| 3.10 |
| Lending-related commitments(g) | 572,831 |
| | 553,891 |
| | | | | | | | Lending-related commitments(d) | | 650,720 |
| | 605,379 |
| | | | | | | Total credit card exposure | 722,342 |
| | 695,707 |
| | | | | | | 819,644 |
| | 762,011 |
| | | | | | | Total consumer credit portfolio | $ | 1,143,709 |
| | $ | 1,113,718 |
| (j) | $ | 4,209 |
| $ | 4,820 |
| | $ | 5,268 |
| $ | 4,351 |
| | 1.04 | % | 0.89 | % | $ | 1,206,096 |
| | $ | 1,181,963 |
| | $ | 3,142 |
| $ | 3,461 |
| | $ | 5,260 |
| $ | 4,701 |
| | 1.04 | % | 0.90 | % | Memo: Total consumer credit portfolio, excluding PCI | $ | 1,113,133 |
| | $ | 1,078,039 |
| (j) | $ | 4,209 |
| $ | 4,820 |
| | $ | 5,268 |
| $ | 4,351 |
| | 1.11 | % | 0.96 | % | $ | 1,185,733 |
| | $ | 1,157,929 |
| | $ | 3,142 |
| $ | 3,461 |
| | $ | 5,260 |
| $ | 4,701 |
| | 1.09 | % | 0.95 | % |
| | (a) | Certain loan portfolios have been reclassified. The prior period amounts have been revised to conform with the current period presentation. |
| | (b) | At December 31, 20172019 and 2016,2018, excluded operating lease assets of $17.1$22.8 billion and $13.2$20.5 billion, respectively. These operating lease assets are included in other assets on the Firm’s Consolidated balance sheets. The risk of loss on these assets relatesRefer to the residual value of the leased vehicles, which is managed through projection of the lease residual value at lease origination, periodic review of residual values, and through arrangements with certain auto manufacturers that mitigates this risk.Note 18 for further information. |
| | (c)(b) | Includes certain business banking and auto dealer risk-rated loans that applyfor which the wholesale methodology is applied for determining the allowance for loan losses; these loans are managed by CCB, and therefore, for consistency in presentation, are included within the consumer portfolio. |
| | (d)(c) | Predominantly includes Business Banking loans. |
| | (e) | For the year ended December 31, 2017, excluding net charge-offs of $467 million related to the student loan portfolio sale, the net charge-off rate for Total consumer, excluding credit card and PCI loans and loans held-for-sale would have been 0.20%; Total consumer - retained excluding credit card loans would have been 0.18%; Total consumer credit portfolio would have been 0.95%; and Total consumer credit portfolio, excluding PCI loans would have been 1.01%. |
| | (f) | At December 31, 2017 and 2016, approximately 68% and 66%, respectively, of the PCI option adjustable rate mortgages (“ARMs”) portfolio has been modified into fixed-rate, fully amortizing loans. |
| | (g)(d) | Credit card and home equity lending-related commitments represent the total available lines of credit for these products. The Firm has not experienced, and does not anticipate, that all available lines of credit would be used at the same time. For credit card commitments, and if certain conditions are met, home equity commitments, (if certain conditions are met), the Firm can reduce or cancel these lines of credit by providing the borrower notice or, in some cases as permitted by law, without notice. ForRefer to Note 28 for further information, see Note 27.information. |
| | (h) | Receivables from customers represent held-for-investment margin loans to brokerage customers that are collateralized through assets maintained in the clients’ brokerage accounts. These receivables are reported within accrued interest and accounts receivable on the Firm’s Consolidated balance sheets. |
| | (i)(e) | Includes billed interest and fees net of an allowance for uncollectible interest and fees. |
| | (j) | The prior period amounts have been revised to conform with the current period presentation. |
| | (k)(f) | At December 31, 20172019 and 2016,2018, nonaccrual loans excluded mortgage loans 90 or more days past due as follows: (1) mortgage loansand insured by U.S. government agencies of $4.3$961 million and $2.6 billion, and $5.0 billion, respectively; and (2) student loans insured by U.S. government agencies under the FFELP of zero and $263 million, respectively. These amounts have been excluded from nonaccrual loans based upon the government guarantee. In addition, the Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status, as permitted by regulatory guidance issued by the FFIEC. |
| | (l)(g) | Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as each of the pools is performing. |
| | (m)(h) | Net charge-offscharge-offs/(recoveries) and net charge-offcharge-off/(recovery) rates excluded write-offs in the PCI portfolio of $86$151 million and $156$187 million for the years ended December 31, 20172019 and 2016.2018, respectively. These write-offs decreased the allowance for loan losses for PCI loans. SeeRefer to Allowance for Credit Losses on pages 117–119116–117 for further details.information. |
| | (n)(i) | Average consumer loans held-for-sale were $1.5$2.9 billion and $496$387 million for the years ended December 31, 20172019 and 2016,2018, respectively. These amounts were excluded when calculating net charge-offcharge-off/(recovery) rates. |
| | | | 104 | | JPMorgan Chase & Co./2017 Annual Report | | 1032019 Form 10-K |
Management’s discussion and analysis
Consumer, excluding credit card Portfolio analysis Consumer loanLoan balances increaseddecreased from December 31, 2016 predominantly2018 due to originations of high-quality prime mortgagelower residential real estate loans, that have been retained on the balance sheet, partially offsetpredominantly driven by the sale of the student loan portfolio as well as paydowns and the charge-off or liquidation of delinquent loans.sales.
PCI loans are excluded from theThe following discussions ofprovide information concerning individual loan products, andexcluding PCI loans which are addressed separately below. Forseparately. Refer to Note 12 for further information about the Firm’s consumerthis portfolio, including information about delinquencies, loan modifications and other credit quality indicators, seeindicators.
Note 12.
Residential mortgage: The residential mortgage portfolio predominantly consists of high-quality prime mortgage loans with a small component (approximately 1%) of subprime mortgage loans. These subprime mortgage loans continue to run-off and are performing in line with expectations. The residential mortgage portfolio, including loans held-for-sale, increasedpredominantly consists of prime mortgage loans. The portfolio decreased from December 31, 2016 due to retained2018 driven by paydowns as well as loan sales in Home Lending, largely offset by originations of primarily high-quality fixed rate prime mortgage loans partially offset by paydowns. Residential mortgage 30+ day delinquencies increased from December 31, 2016 due tothat have been retained on the impact of recent hurricanes. Nonaccrual loans decreased from the prior year primarily as a result of loss mitigation activities. There was a net recoverybalance sheet. Net recoveries for the year ended December 31, 20172019 were lower when compared to a net charge-off forwith the prior year ended December 31, 2016, reflecting continued improvement in home prices and delinquencies.as the prior year benefited from larger recoveries on loan sales. At December 31, 20172019 and 2016, the Firm’s residential mortgage portfolio, including loans held-for-sale, included $8.6 billion and $9.5 billion, respectively, of mortgage loans insured and/or guaranteed by U.S. government agencies, of which $6.2 billion and $7.0 billion, respectively, were 30 days or more past due (of these past due loans, $4.3 billion and $5.0 billion, respectively, were 90 days or more past due). The Firm monitors its exposure to certain potential unrecoverable claim payments related to government insured loans and considers this exposure in estimating the allowance for loan losses. At December 31, 2017 and 2016,2018, the Firm’s residential mortgage portfolio included $20.2$22.4 billion and $19.1$21.6 billion, respectively, of interest-only loans. These loans have an interest-only payment period generally followed by an adjustable-rate or fixed-rate fully amortizing payment period to maturity and are typically originated as higher-balance loans to higher-income borrowers. To date, losses onborrowers, predominantly in AWM. Performance of this portfolio generally have beenfor the year ended December 31, 2019 was consistent with the performance of the broader residential mortgage portfolio. portfolio for the same period.
The following table provides a summary of the Firm’s residential mortgage portfolio insured and/or guaranteed by U.S. government agencies, including loans held-for-sale. The Firm continuesmonitors its exposure to monitorcertain potential unrecoverable claim payments related to government insured loans and considers this exposure in estimating the risks associated with these loans.allowance for loan losses. | | | | | | | | (in millions) | December 31, 2019 |
| December 31, 2018 |
| Current | $ | 1,280 |
| $ | 2,884 |
| 30-89 days past due | 695 |
| 1,528 |
| 90 or more days past due | 961 |
| 2,600 |
| Total government guaranteed loans | $ | 2,936 |
| $ | 7,012 |
|
Home equity: The home equity portfolio declined from December 31, 20162018 primarily reflecting loan paydowns. The amount of 30+ day delinquencies decreased from December 31, 2016 but was impacted by recent hurricanes. Nonaccrual loans decreased from December 31, 2016 primarily as a result of loss mitigation activities. Net charge-offs for the year ended December 31, 2017 declined when compared with the prior year, partially as a result of lower loan balances. At December 31, 2017,2019, approximately 90% of the Firm’s home equity portfolio consists of home equity lines of credit (“HELOCs”) and the remainder consistsconsisted of home equity loans (“HELOANs”). HELOANs are generally fixed-rate, closed-end, amortizing loans, with terms ranging from 3–30 years. In general, HELOCs originated by the Firm are revolving loans for a 10-year period, after which time the HELOC recasts into a loan with a 20-year amortization period. The carrying value of HELOCs outstanding was $30$22 billion at December 31, 2017. Of such amounts, $142019. This amount included $10 billion of HELOCs that have recast from interest-only to fully amortizing payments or have been modified and $5$3 billion areof interest-only balloon HELOCs, which primarily mature after 2030. The Firm manages the risk of HELOCs during their revolving period by closing or reducing the undrawn line to the extent permitted by law when borrowers are exhibiting a material deterioration in their credit risk profile.
| | | | 104 | | JPMorgan Chase & Co./2017 Annual Report |
The Firm monitors risks associated with junior lien loans where the borrower has a senior lien loan that is more than 90 days delinquent or has been modified. These loans are considered “high-risk seconds” and are classified as nonaccrual as they are considered to pose a higher risk of default than other junior lien loans. At December 31, 2017, the Firm estimated that the carrying value of its home equity portfolio contained approximately $725 million of current junior lien loans that were considered high-risk seconds, compared with $1.1 billion at December 31, 2016. For further information, see Note 12.
Auto: The auto loan portfolio which predominantly consists of prime-quality loans, was relatively flatloans. The portfolio declined when compared with December 31, 2016,2018, as paydowns and charge-offs or liquidation of delinquent loans were predominantly offset by new originations. Consumer & Business Banking: Consumer & Business Banking loans increased when compared with December 31, 2018 as loan originations were largelypredominantly offset by paydowns and the charge-off or liquidationcharge-offs of delinquent loans. Nonaccrual loans decreased compared with December 31, 2016. Net charge-offs for the year ended December 31, 20172019 increased when compared with the prior year primarily as a result of an incremental adjustment recorded in accordance with regulatory guidance regarding the timing of loss recognition for certain loans in bankruptcy and loans where assets were acquired in loan satisfaction. Consumer & Business banking: Consumer & Business Banking loans increased compared with December 31, 2016 as growth due to loan originations was partially offset by paydowns and the charge-off or liquidation of delinquent loans. Nonaccrual loans and net charge-offs were relatively flat compared with prior year.higher deposit overdraft losses.
Student: The Firm wrote down and subsequently sold the student loan portfolio during 2017. Net charge-offs for the year ended December 31, 2017 increased as a result of the write-down.
Purchased credit-impaired loans: PCI loans represent certain loans that were acquired and deemed to be credit-impaired on the acquisition date. PCI loans decreased as thefrom December 31, 2018 due to portfolio continues to run off.run-off. As of December 31, 2017,2019, approximately 11%9% of the option ARM PCI loans were delinquent and approximately 68%71% of the portfolio hadhas been modified into fixed-rate, fully amortizing loans. The borrowers for substantially all of the remaining option ARM loans are making amortizing payments, although such payments are not necessarily fully amortizing. This latter group of loans is subject to the risk of payment shock due to future payment recast. Default rates generally increase on option ARM loans when payment recast results in a payment increase. The expected increase in default rates is considered in the Firm’s quarterly impairment assessment.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 105 |
Management’s discussion and analysis
The following table provides a summary of lifetime principal loss estimates included in either the nonaccretable difference or the allowance for loan losses. | | Summary of PCI loans lifetime principal loss estimates | | Lifetime loss estimates(a) | | Life-to-date liquidation losses(b) | Lifetime loss estimates(a) | | Life-to-date liquidation losses(b) | December 31, (in billions) | 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 | | 2019 | | 2018 | Home equity | $ | 14.2 |
| | $ | 14.4 |
| | $ | 12.9 |
| | $ | 12.8 |
| $ | 13.9 |
| | $ | 14.1 |
| | $ | 13.0 |
| | $ | 13.0 |
| Prime mortgage | 4.0 |
| | 4.0 |
| | 3.8 |
| | 3.7 |
| 4.1 |
| | 4.1 |
| | 3.9 |
| | 3.9 |
| Subprime mortgage | 3.3 |
| | 3.2 |
| | 3.1 |
| | 3.1 |
| 3.4 |
| | 3.3 |
| | 3.2 |
| | 3.2 |
| Option ARMs | 10.0 |
| | 10.0 |
| | 9.7 |
| | 9.7 |
| 10.3 |
| | 10.3 |
| | 10.0 |
| | 9.9 |
| Total | $ | 31.5 |
| | $ | 31.6 |
| | $ | 29.5 |
| | $ | 29.3 |
| $ | 31.7 |
| | $ | 31.8 |
| | $ | 30.1 |
| | $ | 30.0 |
|
| | (a) | Includes the original nonaccretable difference established in purchase accounting of $30.5 billion for principal losses plus additional principal losses recognized subsequent to acquisition through the provision and allowance for loan losses. The remaining nonaccretable difference for principal losses was $842$466 million and $1.1 billion$512 million at December 31, 20172019 and 2016,2018, respectively. |
| | (b) | Represents both realization of loss upon loan resolution and any principal forgiven upon modification. |
ForRefer to Note 12 for further information on the Firm’s PCI loans, including write-offs, see Note 12.write-offs.
Geographic composition of residential real estate loans At December 31, 2017, $152.82019, $142.7 billion, or 63%64% of the total retained residential real estate loan portfolio, excluding mortgage loans insured by U.S. government agencies and PCI loans, were concentrated in California, New York, Illinois, Texas and Florida, compared with $139.9$160.3 billion, or 63%, at December 31, 2016. For2018. Refer to Note 12 for additional information on the geographic composition of the Firm’s residential real estate loans, see Note 12.loans. Current estimated loan-to-values of residential real estate loans Average current estimated loan-to-value (“LTV”) ratios have declined consistent with recent improvements in home prices, customer pay downs,pay-downs, and charge-offs or liquidations of higher LTV loans. ForRefer to Note 12 for further information on current estimated LTVs of residential real estate loans, see Note 12.loans.
Loan modification activities forModified residential real estate loans
The performance of modified loans generally differs by product type due to differences in both the credit quality and the types of modifications provided. Performance metrics for modifications to the residential real estate portfolio, excluding PCI loans, that have been seasoned more than six months show weighted-average redefault rates of 24% for residential mortgages and 21% for home equity. The cumulative performance metrics for modifications to the PCI residential real estate portfolio that have been seasoned more than six months show weighted average redefault rates of 20% for home equity, 19% for prime mortgages, 16% for option ARMs and 34% for subprime mortgages. The cumulative redefault rates reflect the performance of modifications completed under both the U.S. Government’s Home Affordable Modification Program (“HAMP”) and the Firm’s proprietary modification programs
| | | | JPMorgan Chase & Co./2017 Annual Report | | 105 |
Management’s discussion and analysis
(primarily the Firm’s modification program that was modeled after HAMP) from October 1, 2009, through December 31, 2017.
Certain loans that were modified under HAMP and the Firm’s proprietary modification programs have interest rate reset provisions (“step-rate modifications”). Interest rates on these loans generally began to increase commencing in 2014 by 1% per year, and will continue to do so until the rate reaches a specified cap. The cap on these loans is typically at a prevailing market interest rate for a fixed-rate mortgage loan as of the modification date. At December 31, 2017, the carrying value of non-PCI loans and the unpaid principal balance of PCI loans modified in step-rate modifications, which have not yet met their specified caps, were $3 billion and $7 billion, respectively. The Firm continues to monitor this risk exposure and the impact of these potential interest rate increases is considered in the Firm’s allowance for loan losses.
The following table presents information as of December 31, 20172019 and 2016,2018, relating to modified retained residential real estate loans for which concessions have been granted to borrowers experiencing financial difficulty. ForRefer to Note 12 for further information on modifications for the years ended December 31, 20172019 and 2016, see Note 12.2018. | | | | | | | | | | | | | | | 2019 | 2018 | December 31, (in millions) | Retained loans | Nonaccrual retained loans(d) | Retained loans | Nonaccrual retained loans(d) | Modified residential real estate loans, excluding PCI loans(a)(b) | | | | | Residential mortgage | $ | 4,005 |
| $ | 1,367 |
| $ | 4,565 |
| $ | 1,459 |
| Home equity | 1,921 |
| 965 |
| 2,058 |
| 963 |
| Total modified residential real estate loans, excluding PCI loans | $ | 5,926 |
| $ | 2,332 |
| $ | 6,623 |
| $ | 2,422 |
| Modified PCI loans(c) | | | | | Home equity | $ | 1,986 |
| NA |
| $ | 2,086 |
| NA |
| Prime mortgage | 2,825 |
| NA |
| 3,179 |
| NA |
| Subprime mortgage | 1,869 |
| NA |
| 2,041 |
| NA |
| Option ARMs | 5,692 |
| NA |
| 6,410 |
| NA |
| Total modified PCI loans | $ | 12,372 |
| NA |
| $ | 13,716 |
| NA |
|
| | | | | | | | | | | | | | Modified residential real estate loans | | 2017 | 2016 | December 31, (in millions) | Retained loans | Nonaccrual retained loans(d) | Retained loans | Nonaccrual retained loans(d) | Modified residential real estate loans, excluding PCI loans(a)(b) | | | | | Residential mortgage | 5,620 |
| 1,743 |
| 6,032 |
| 1,755 |
| Home equity | $ | 2,118 |
| $ | 1,032 |
| $ | 2,264 |
| $ | 1,116 |
| Total modified residential real estate loans, excluding PCI loans | $ | 7,738 |
| $ | 2,775 |
| $ | 8,296 |
| $ | 2,871 |
| Modified PCI loans(c) | | | | | Home equity | $ | 2,277 |
| NA |
| $ | 2,447 |
| NA |
| Prime mortgage | 4,490 |
| NA |
| 5,052 |
| NA |
| Subprime mortgage | 2,678 |
| NA |
| 2,951 |
| NA |
| Option ARMs | 8,276 |
| NA |
| 9,295 |
| NA |
| Total modified PCI loans | $ | 17,721 |
| NA |
| $ | 19,745 |
| NA |
|
| | (a) | Amounts represent the carrying value of modified residential real estate loans. |
| | (b) | At December 31, 20172019 and 2016, $3.8 billion2018, $14 million and $3.4$4.1 billion, respectively, of loans modified subsequent to repurchase from Ginnie Mae in accordance with the standards of the appropriate government agency (i.e., Federal Housing Administration (“FHA”), U.S. Department of Veterans Affairs (“VA”), Rural Housing Service of the U.S. Department of Agriculture (“RHS”)) are not included in the table above. When such loans perform subsequent to modification in accordance with Ginnie Mae guidelines, they are generally sold back into Ginnie Mae loan pools. Modified loans that do not re-perform become subject to foreclosure. ForRefer to Note 14 for additional information about sales of loans in securitization transactions with Ginnie Mae, see Note 14.Mae. |
| | (c) | Amounts represent the unpaid principal balance of modified PCI loans. |
| | (d) | As of December 31, 20172019 and 2016,2018, nonaccrual loans included $2.2$1.9 billion and $2.3$2.0 billion, respectively, of troubled debt restructuringrestructurings (“TDRs”) for which the borrowers were less than 90 days past due. ForRefer to Note 12 for additional information about loans modified in a TDR that are on nonaccrual status, see Note 12.status. |
| | | | 106 | | JPMorgan Chase & Co./2019 Form 10-K |
Nonperforming assets The following table presents information as of December 31, 20172019 and 2016,2018, about consumer, excluding credit card, nonperforming assets. | | Nonperforming assets(a) | | | | | | | December 31, (in millions) | 2017 |
| | 2016 |
| 2019 |
|
| 2018 |
| Nonaccrual loans(b) | | | |
|
|
|
|
| Residential real estate(c) | $ | 3,785 |
| | $ | 4,154 |
| $ | 2,782 |
|
| $ | 3,088 |
| Other consumer(c) | 424 |
| | 666 |
| 360 |
|
| 373 |
| Total nonaccrual loans | 4,209 |
| | 4,820 |
| 3,142 |
|
| 3,461 |
| Assets acquired in loan satisfactions | | | |
|
|
|
|
| Real estate owned(c) | 225 |
| | 292 |
| 214 |
|
| 196 |
| Other | 40 |
| | 57 |
| 24 |
|
| 30 |
| Total assets acquired in loan satisfactions | 265 |
| | 349 |
| 238 |
|
| 226 |
| Total nonperforming assets | $ | 4,474 |
| | $ | 5,169 |
| $ | 3,380 |
|
| $ | 3,687 |
|
| | (a) | At December 31, 20172019 and 2016,2018, nonperforming assets excluded: (1)excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $4.3 billion$961 million and $5.0$2.6 billion, respectively, that are 90 or more days past due; (2) student loans insured by U.S. government agencies under the FFELP of zero and $263 million, respectively, that are 90 or more days past due; and (3) real estate owned (“REO”) insured by U.S. government agencies of $95$41 million and $142$75 million, respectively. These amounts have been excluded based upon the government guarantee. |
| | (b) | Excludes PCI loans, which are accounted for on a pool basis. Since each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, the past-due status of the pools, or that of individual loans within the pools, is not meaningful. The Firm is recognizing interest income on each pool of loans as each of the pools is performing. |
| | (c) | Certain loan portfolios have been reclassified. The prior period amounts haveamount has been revised to conform with the current period presentation. |
Nonaccrual loans in the residential real estate portfolio at December 31, 2017 decreased to $3.8 billion from $4.2 billion at December 31, 2016, of which 26% and 29% were greater than 150 days past due, respectively. In the aggregate, the unpaid principal balance of residential real estate loans greater than 150 days past due was charged down by approximately 40% and 43% to the estimated net realizable value of the collateral at December 31, 2017 and 2016, respectively.
Active and suspended foreclosure: For information on loans that were in the process of active or suspended foreclosure, see Note 12.
Nonaccrual loans: The following table presents changes in the consumer, excluding credit card, nonaccrual loans for the years ended December 31, 20172019 and 2016.2018. | | | | | | | | | Nonaccrual loan activity | | | Year ended December 31, | | | | (in millions) | | 2019 |
| 2018 |
| Beginning balance | | $ | 3,461 |
| $ | 4,209 |
| Additions | | 2,210 |
| 2,799 |
| Reductions: | | | | Principal payments and other(a) | | 1,026 |
| 1,407 |
| Charge-offs | | 421 |
| 468 |
| Returned to performing status | | 834 |
| 1,399 |
| Foreclosures and other liquidations | | 248 |
| 273 |
| Total reductions | | 2,529 |
| 3,547 |
| Net changes | | (319 | ) | (748 | ) | Ending balance | | $ | 3,142 |
| $ | 3,461 |
|
| | | | | | | | | Nonaccrual loan activity | | | Year ended December 31, | | | | (in millions) | | 2017 |
| 2016 |
| Beginning balance | | $ | 4,820 |
| $ | 5,413 |
| Additions | | 3,525 |
| 3,858 |
| Reductions: | | | | Principal payments and other(a) | | 1,577 |
| 1,437 |
| Charge-offs | | 699 |
| 843 |
| Returned to performing status | | 1,509 |
| 1,589 |
| Foreclosures and other liquidations | | 351 |
| 582 |
| Total reductions | | 4,136 |
| 4,451 |
| Net changes | | (611 | ) | (593 | ) | Ending balance | | $ | 4,209 |
| $ | 4,820 |
|
| | (a) | Other reductions includes loan sales. |
Active and suspended foreclosure: Refer to Note 12 for information on loans that were in the process of active or suspended foreclosure.
| | | | 106 | | JPMorgan Chase & Co./2017 Annual Report |
Credit card Total credit card loans increased from December 31, 20162018 due to stronghigher sales volume from existing customers and new account growth and higher sales volume. The December 31, 2017 30+ day delinquency rate increased to 1.80% from 1.61% at December 31, 2016, while the December 31, 2017 90+ day delinquency rate increased to 0.92% from 0.81% at December 31, 2016, in line with expectations.growth. Net charge-offs increased for the year ended December 31, 2017 primarily2019 when compared with the prior year, due to loan growth, in newer vintages which, as anticipated, have higher loss rates than the more seasoned portion of the portfolio. The credit card portfolio continues to reflect a largely well-seasoned portfolio that has strong U.S. geographic diversification. Loans outstanding in the top five states of California, Texas, New York, Florida and Illinois consisted of $67.2 billion in receivables, or 45% of the retained loan portfolio, at December 31, 2017, comparedline with $62.8 billion, or 44%, at December 31, 2016. For more information on the geographic and FICO composition of the Firm’s credit card loans, see Note 12.
Modifications of credit card loans
At both December 31, 2017 and 2016, the Firm had $1.2 billion of credit card loans outstanding that have been modified in TDRs. These balances included both credit card loans with modified payment terms and credit card loans that reverted back to their pre-modification payment terms because the cardholder did not comply with the modified payment terms.expectations.
Consistent with the Firm’s policy, all credit card loans typically remain on accrual status until charged off. However, the Firm establishes an allowance, which is offset against loans and charged toreduces interest income, for the estimated uncollectible portion of accrued and billed interest and fee income. Refer to Note 12 for further information about this portfolio, including information about delinquencies. ForGeographic and FICO composition of credit card loans
At December 31, 2019, $77.5 billion, or 46% of the total retained credit card loan portfolio, was concentrated in California, Texas, New York, Florida and Illinois, compared with $71.2 billion, or 45%, at December 31, 2018. Refer to Note 12 for additional information on the geographic and FICO composition of the Firm’s credit card loans. Modifications of credit card loans At December 31, 2019 and 2018, the Firm had $1.5 billion and $1.3 billion, respectively, of credit card loans outstanding that have been modified in TDRs. Refer to Note 12 for additional information about loan modification programs to borrowers, see Note 12.for borrowers.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 107 |
Management’s discussion and analysis
| | | | | | WHOLESALE CREDIT PORTFOLIO |
In its wholesale businesses, the Firm is exposed to credit risk primarily through its underwriting, lending, market-making, and hedging activities with and for clients and counterparties, as well as through itsvarious operating services activities (such as cash management and clearing activities), securities financing activities investment securities portfolio, and cash placed with banks. A portion of the loans originated or acquired by the Firm’s wholesale businesses is generally retained on the balance sheet. The Firm distributes a significant percentage of the loans that it originates into the market as part of its syndicated loan business and to manage portfolio concentrations and credit risk.
The credit performance of the wholesale credit portfolio was stableremained favorable for the year ended December 31, 2017,2019, characterized by continued low levels of criticized exposure, nonaccrual loans and charge-offs. SeeRefer to the industry discussion on pages 109–112111 for further information. The increase in retained loans wasLoans held-for-sale decreased, driven by new originationsa loan syndication in CB and higher loans to Private Banking clients in AWM, which was partially offset by paydowns in CIB. Discipline in underwriting across all areas of lending continues to be a key point of focus. The wholesale portfolio is actively managed, in part by conducting ongoing, in-depth reviews of client credit quality and transaction structure inclusive of collateral where applicable, and of industry, product and client concentrations. In the following tables, the Firm’s wholesale credit portfolio includes exposure held in CIB, CB, AWM and Corporate, andCorporate. It excludes all exposure managed by CCB.CCB, scored prime mortgage and scored home equity loans held in AWM and scored prime mortgage loans held in Corporate. | | Wholesale credit portfolio | December 31, (in millions) | Credit exposure | | Nonperforming(c) | Credit exposure | | Nonperforming | 2017 | 2016 | | 2017 | 2016 | 2019 | 2018 | | 2019 | 2018 | Loans retained | $ | 402,898 |
| $ | 383,790 |
| | $ | 1,734 |
| $ | 1,954 |
| $ | 444,639 |
| $ | 439,162 |
| | $ | 843 |
| $ | 1,150 |
| Loans held-for-sale | 3,099 |
| 2,285 |
| | — |
| 109 |
| 4,062 |
| 11,877 |
| | 5 |
| — |
| Loans at fair value | 2,508 |
| 2,230 |
| | — |
| — |
| 7,104 |
| 3,151 |
| | 90 |
| 220 |
| Loans – reported | 408,505 |
| 388,305 |
| | 1,734 |
| 2,063 |
| 455,805 |
| 454,190 |
| | 938 |
| 1,370 |
| Derivative receivables | 56,523 |
| 64,078 |
| | 130 |
| 223 |
| 49,766 |
| 54,213 |
| | 30 |
| 60 |
| Receivables from customers and other(a) | 26,139 |
| 17,440 |
| | — |
| — |
| 33,706 |
| 30,063 |
| | — |
| — |
| Total wholesale credit-related assets | 491,167 |
| 469,823 |
| | 1,864 |
| 2,286 |
| 539,277 |
| 538,466 |
| | 968 |
| 1,430 |
| Assets acquired in loan satisfactions | | | | | Real estate owned | | NA |
| NA |
| | 130 |
| 73 |
| Other | | NA |
| NA |
| | 19 |
| — |
| Total assets acquired in loan satisfactions | | NA |
| NA |
| | 149 |
| 73 |
| Lending-related commitments | 370,098 |
| 368,014 |
| | 731 |
| 506 |
| 404,115 |
| 387,813 |
| | 474 |
| 469 |
| Total wholesale credit exposure | $ | 861,265 |
| $ | 837,837 |
| | $ | 2,595 |
| $ | 2,792 |
| | Total wholesale credit portfolio | | $ | 943,392 |
| $ | 926,279 |
| | $ | 1,591 |
| $ | 1,972 |
| Credit derivatives used in credit portfolio management activities(b) | $ | (17,609 | ) | $ | (22,114 | ) | | $ | — |
| $ | — |
| $ | (18,030 | ) | $ | (12,682 | ) | | $ | — |
| $ | — |
| Liquid securities and other cash collateral held against derivatives | (16,108 | ) | (22,705 | ) | | NA |
| NA |
| (16,009 | ) | (15,322 | ) | | NA |
| NA |
|
| | (a) | Receivables from customers and other include $26.0$33.7 billion and $17.3$30.1 billion of brokerage-related held-for-investment margin loanscustomer receivables at December 31, 20172019 and 2016,2018, respectively, to brokerage customersclients in CIB Prime Services and in AWM; these are classified in accrued interest and accounts receivable on the Consolidated balance sheets. |
| | (b) | Represents the net notional amount of protection purchased and sold through credit derivatives used to manage both performing and nonperforming wholesale credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. For additional information, seeRefer to Credit derivatives on pages 115–116,page 115 and Note 5. for additional information. |
| | (c) | Excludes assets acquired in loan satisfactions. |
| | | | 108 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The following tables present the maturity and internal risk ratings profiles of the wholesale credit portfolio as of December 31, 20172019 and 2016.2018. The Firm considers internal ratings scale is basedequivalent to BBB-/Baa3 or higher as investment grade. Refer to Note 12 for further information on the Firm’s internal risk ratings, which generally correspond to the ratings assigned by S&P and Moody’s. For additional information on wholesale loan portfolio risk ratings, see Note 12.ratings. | | Wholesale credit exposure – maturity and ratings profile | Wholesale credit exposure – maturity and ratings profile | | | | | | | | Wholesale credit exposure – maturity and ratings profile | | | | | | | | | Maturity profile(d) | | Ratings profile | | | Maturity profile(d) | | Ratings profile | | | | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years | Total | | Investment-grade | | Noninvestment-grade | | Total | Total % of IG | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years | Total | | | | | | Total | Total % of IG | December 31, 2017 (in millions, except ratios) | | AAA/Aaa to BBB-/Baa3 | | BB+/Ba1 & below | | | December 31, 2019 (in millions, except ratios) | | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years | Total | | Investment-grade | | Noninvestment-grade | | Total | Total % of IG | Loans retained | $ | 121,643 |
| $ | 177,033 |
| $ | 104,222 |
| $ | 402,898 |
| | $ | 311,681 |
| | $ | 91,217 |
| | $ | 402,898 |
| 77 | % | | $ | 344,199 |
| | $ | 100,440 |
| | Derivative receivables | | 56,523 |
| | | | | | 56,523 |
| | | 49,766 |
| | | | | | 49,766 |
| | Less: Liquid securities and other cash collateral held against derivatives | | (16,108 | ) | | | | | | (16,108 | ) | | | (16,009 | ) | | | | | | (16,009 | ) | | Total derivative receivables, net of all collateral | 9,882 |
| 10,463 |
| 20,070 |
| 40,415 |
| | 32,373 |
| | 8,042 |
| | 40,415 |
| 80 |
| 6,561 |
| 6,960 |
| 20,236 |
| 33,757 |
| | 26,966 |
| | 6,791 |
| | 33,757 |
| 80 |
| Lending-related commitments | 80,273 |
| 275,317 |
| 14,508 |
| 370,098 |
| | 274,127 |
| | 95,971 |
| | 370,098 |
| 74 |
| 77,298 |
| 314,281 |
| 12,536 |
| 404,115 |
| | 288,864 |
| | 115,251 |
| | 404,115 |
| 71 |
| Subtotal | 211,798 |
| 462,813 |
| 138,800 |
| 813,411 |
| | 618,181 |
| | 195,230 |
| | 813,411 |
| 76 |
| 212,289 |
| 530,638 |
| 139,584 |
| 882,511 |
| | 660,029 |
| | 222,482 |
| | 882,511 |
| 75 |
| Loans held-for-sale and loans at fair value(a) | | 5,607 |
| | | | | | 5,607 |
| | | 11,166 |
| | | | | | 11,166 |
| | Receivables from customers and other | | 26,139 |
| | | | | | 26,139 |
| | | 33,706 |
| | | | | | 33,706 |
| | Total exposure – net of liquid securities and other cash collateral held against derivatives | | $ | 845,157 |
| | | | | | $ | 845,157 |
| | | $ | 927,383 |
| | | | | | $ | 927,383 |
| | Credit derivatives used in credit portfolio management activities(b)(c) | $ | (1,807 | ) | $ | (11,011 | ) | $ | (4,791 | ) | $ | (17,609 | ) | | $ | (14,984 | ) | | $ | (2,625 | ) | | $ | (17,609 | ) | 85 | % | $ | (4,912 | ) | $ | (10,031 | ) | $ | (3,087 | ) | $ | (18,030 | ) | | $ | (16,276 | ) | | $ | (1,754 | ) | | $ | (18,030 | ) | 90 | % |
| | | Maturity profile(d) | | Ratings profile | Maturity profile(d) | | Ratings profile | | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years | Total | | Investment-grade | | Noninvestment-grade | | Total | Total % of IG | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years | Total | | | | | | Total | Total % of IG | December 31, 2016 (in millions, except ratios) | | AAA/Aaa to BBB-/Baa3 | | BB+/Ba1 & below | | | December 31, 2018 (in millions, except ratios) | | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years | Total | | Investment-grade | | Noninvestment-grade | | Total | Total % of IG | Loans retained | $ | 117,238 |
| $ | 167,235 |
| $ | 99,317 |
| $ | 383,790 |
| | $ | 289,923 |
| | $ | 93,867 |
| | $ | 383,790 |
| 76 | % | | $ | 339,729 |
| | $ | 99,433 |
| | Derivative receivables | | 64,078 |
| | | | | | 64,078 |
| | | 54,213 |
| | | | | | 54,213 |
| | Less: Liquid securities and other cash collateral held against derivatives | | (22,705 | ) | | | | | | (22,705 | ) | | | (15,322 | ) | | | | | | (15,322 | ) | | Total derivative receivables, net of all collateral | 14,019 |
| 8,510 |
| 18,844 |
| 41,373 |
| | 33,081 |
| | 8,292 |
| | 41,373 |
| 80 |
| 11,038 |
| 9,169 |
| 18,684 |
| 38,891 |
| | 31,794 |
| | 7,097 |
| | 38,891 |
| 82 |
| Lending-related commitments | 88,399 |
| 271,825 |
| 7,790 |
| 368,014 |
| | 269,820 |
| | 98,194 |
| | 368,014 |
| 73 |
| 79,400 |
| 294,855 |
| 13,558 |
| 387,813 |
| | 288,724 |
| | 99,089 |
| | 387,813 |
| 74 |
| Subtotal | 219,656 |
| 447,570 |
| 125,951 |
| 793,177 |
| | 592,824 |
| | 200,353 |
| | 793,177 |
| 75 |
| 228,896 |
| 500,998 |
| 135,972 |
| 865,866 |
| | 660,247 |
| | 205,619 |
| | 865,866 |
| 76 |
| Loans held-for-sale and loans at fair value(a) | | 4,515 |
| | | | | | 4,515 |
| | | 15,028 |
| | | | | | 15,028 |
| | Receivables from customers and other | | 17,440 |
| | | | | | 17,440 |
| | | 30,063 |
| | | | | | 30,063 |
| | Total exposure – net of liquid securities and other cash collateral held against derivatives | | $ | 815,132 |
| | | | | | $ | 815,132 |
| | | $ | 910,957 |
| | | | | | $ | 910,957 |
| | Credit derivatives used in credit portfolio management activities (b)(c) | $ | (1,354 | ) | $ | (16,537 | ) | $ | (4,223 | ) | $ | (22,114 | ) | | $ | (18,710 | ) | | $ | (3,404 | ) | | $ | (22,114 | ) | 85 | % | $ | (447 | ) | $ | (9,318 | ) | $ | (2,917 | ) | $ | (12,682 | ) | | $ | (11,213 | ) | | $ | (1,469 | ) | | $ | (12,682 | ) | 88 | % |
| | (a) | Represents loans held-for-sale, primarily related to syndicated loans and loans transferred from the retained portfolio, and loans at fair value. |
| | (b) | These derivatives do not qualify for hedge accounting under U.S. GAAP. |
| | (c) | The notional amounts are presented on a net basis by underlying reference entity and the ratings profile shown is based on the ratings of the reference entity on which protection has been purchased. Predominantly all of the credit derivatives entered into by the Firm where it has purchased protection used in credit portfolio management activities are executed with investment-grade counterparties. |
| | (d) | The maturity profile of retained loans, lending-related commitments and derivative receivables is based on remaining contractual maturity. Derivative contracts that are in a receivable position at December 31, 2017,2019, may become payable prior to maturity based on their cash flow profile or changes in market conditions. |
Wholesale credit exposure – industry exposures The Firm focuses on the management and diversification of its industry exposures, and pays particular attention to industries with actual or potential credit concerns. Exposures deemed criticized align with the U.S. banking regulators’ definition of criticized exposures, which consist of the special mention, substandard and doubtful
categories. The total criticized component of the portfolio, excluding loans held-for-sale and loans at fair value, was $15.6$14.3 billion at December 31, 2017,2019, compared with $19.8$12.1 billion at December 31, 2016,2018. The increase was driven by a 47% decrease in the Oil & Gas portfolio.select client downgrades.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 109 |
Management’s discussion and analysis
In 2017, the Firm revised its methodology for the assignment of industry classifications, to better monitor and manage concentrations. This largely resulted in the re-assignment of holding companies from All other to the industry of risk category based on the primary business activity of the holding company’s underlying entities. In the tables and industry discussions below, the prior period amounts have been revised to conform with the current period presentation.
Below are summaries of the Firm’s exposures as of December 31, 20172019 and 2016. For2018. The industry of risk category is generally based on the client or counterparty’s primary business activity. Refer to Note 4 for additional information on industry concentrations, see Note 4.concentrations. | | Wholesale credit exposure – industries(a) | Wholesale credit exposure – industries(a) | | Wholesale credit exposure – industries(a) | | | | | Selected metrics | | | Selected metrics | | | 30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges(f) | Liquid securities and other cash collateral held against derivative receivables | | 30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges(g) | Liquid securities and other cash collateral held against derivative receivables | | | Noninvestment-grade | | Noninvestment-grade | | Credit exposure(e) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | Credit exposure(f) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | As of or for the year ended December 31, 2017 (in millions) | As of or for the year ended December 31, 2019 (in millions) | | Credit exposure(f) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | 30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges(g) | Liquid securities and other cash collateral held against derivative receivables | Real Estate | $ | 139,409 |
| $ | 115,401 |
| $ | 23,012 |
| $ | 859 |
| $ | 137 |
| $ | 254 |
| $ | (4 | ) | $ | — |
| $ | (2 | ) | Individuals and Individual Entities(b) | | 102,292 |
| 90,865 |
| 11,219 |
| 171 |
| 37 |
| Consumer & Retail | 87,679 |
| 55,737 |
| 29,619 |
| 1,791 |
| 532 |
| 30 |
| 34 |
| (275 | ) | (9 | ) | 99,331 |
| 57,587 |
| 39,524 |
| 2,062 |
| 158 |
| Technology, Media & Telecommunications | 59,274 |
| 36,510 |
| 20,453 |
| 2,258 |
| 53 |
| 14 |
| (12 | ) | (910 | ) | (19 | ) | 59,021 |
| 35,602 |
| 20,368 |
| 2,923 |
| 128 |
| 13 |
| 26 |
| (658 | ) | (17 | ) | Industrials | | 58,250 |
| 38,760 |
| 18,264 |
| 1,050 |
| 176 |
| 161 |
| 41 |
| (746 | ) | (9 | ) | Asset Managers | | 51,775 |
| 45,208 |
| 6,550 |
| 4 |
| 13 |
| 18 |
| — |
| — |
| (4,785 | ) | Banks & Finance Cos | | 50,091 |
| 34,599 |
| 14,692 |
| 795 |
| 5 |
| — |
| — |
| (834 | ) | (2,112 | ) | Healthcare | 55,997 |
| 42,643 |
| 12,731 |
| 585 |
| 38 |
| 82 |
| (1 | ) | — |
| (207 | ) | 46,638 |
| 36,231 |
| 9,248 |
| 1,074 |
| 85 |
| 79 |
| 6 |
| (405 | ) | (145 | ) | Industrials | 55,272 |
| 37,198 |
| 16,770 |
| 1,159 |
| 145 |
| 150 |
| (1 | ) | (196 | ) | (21 | ) | | Banks & Finance Cos | 49,037 |
| 34,654 |
| 13,767 |
| 612 |
| 4 |
| 1 |
| 6 |
| (1,216 | ) | (3,174 | ) | | Oil & Gas | 41,317 |
| 21,430 |
| 14,854 |
| 4,046 |
| 987 |
| 22 |
| 71 |
| (747 | ) | (1 | ) | 41,570 |
| 22,221 |
| 17,780 |
| 992 |
| 577 |
| — |
| 98 |
| (429 | ) | (10 | ) | Asset Managers | 32,531 |
| 28,029 |
| 4,484 |
| 4 |
| 14 |
| 27 |
| — |
| — |
| (5,290 | ) | | Utilities | 29,317 |
| 24,486 |
| 4,383 |
| 227 |
| 221 |
| — |
| 11 |
| (160 | ) | (56 | ) | 34,753 |
| 22,196 |
| 12,246 |
| 301 |
| 10 |
| 1 |
| 39 |
| (414 | ) | (50 | ) | State & Municipal Govt(b) | 28,633 |
| 27,977 |
| 656 |
| — |
| — |
| 12 |
| 5 |
| (130 | ) | (524 | ) | | State & Municipal Govt(c) | | 26,697 |
| 26,195 |
| 502 |
| — |
| — |
| 29 |
| — |
| — |
| (46 | ) | Automotive | | 17,317 |
| 10,000 |
| 6,759 |
| 558 |
| — |
| 5 |
| — |
| (194 | ) | — |
| Chemicals & Plastics | | 17,276 |
| 11,984 |
| 5,080 |
| 212 |
| — |
| 3 |
| — |
| (10 | ) | (13 | ) | Metals & Mining | | 15,337 |
| 7,020 |
| 7,620 |
| 658 |
| 39 |
| 1 |
| (1 | ) | (33 | ) | (6 | ) | Central Govt | 19,182 |
| 18,741 |
| 376 |
| 65 |
| — |
| 4 |
| — |
| (10,095 | ) | (2,520 | ) | 14,843 |
| 14,502 |
| 341 |
| — |
| — |
| — |
| — |
| (9,018 | ) | (1,963 | ) | Chemicals & Plastics | 15,945 |
| 11,107 |
| 4,764 |
| 74 |
| — |
| 4 |
| — |
| — |
| — |
| | Transportation | 15,797 |
| 9,870 |
| 5,302 |
| 527 |
| 98 |
| 9 |
| 14 |
| (32 | ) | (131 | ) | 13,917 |
| 8,644 |
| 4,863 |
| 347 |
| 63 |
| 29 |
| 7 |
| (37 | ) | (37 | ) | Automotive | 14,820 |
| 9,321 |
| 5,278 |
| 221 |
| — |
| 10 |
| 1 |
| (284 | ) | — |
| | Metals & Mining | 14,171 |
| 6,989 |
| 6,822 |
| 321 |
| 39 |
| 3 |
| (13 | ) | (316 | ) | (1 | ) | | Insurance | 14,089 |
| 11,028 |
| 2,981 |
| — |
| 80 |
| 1 |
| — |
| (157 | ) | (2,195 | ) | 12,202 |
| 9,413 |
| 2,768 |
| 17 |
| 4 |
| 3 |
| — |
| (36 | ) | (1,998 | ) | Securities Firms | | 7,335 |
| 5,969 |
| 1,339 |
| 27 |
| — |
| — |
| — |
| (48 | ) | (3,201 | ) | Financial Markets Infrastructure | 5,036 |
| 4,775 |
| 261 |
| — |
| — |
| — |
| — |
| — |
| (23 | ) | 4,116 |
| 3,969 |
| 147 |
| — |
| — |
| — |
| — |
| — |
| (6 | ) | Securities Firms | 4,113 |
| 2,559 |
| 1,553 |
| 1 |
| — |
| — |
| — |
| (274 | ) | (335 | ) | | All other(c) | 147,900 |
| 134,110 |
| 13,283 |
| 260 |
| 247 |
| 901 |
| 8 |
| (2,817 | ) | (1,600 | ) | | All other(d) | | 76,492 |
| 72,565 |
| 3,548 |
| 376 |
| 3 |
| 4 |
| 1 |
| (4,833 | ) | (959 | ) | Subtotal | $ | 829,519 |
| $ | 632,565 |
| $ | 181,349 |
| $ | 13,010 |
| $ | 2,595 |
| $ | 1,524 |
| $ | 119 |
| $ | (17,609 | ) | $ | (16,108 | ) | $ | 898,520 |
| $ | 674,813 |
| $ | 209,392 |
| $ | 12,968 |
| $ | 1,347 |
| $ | 910 |
| $ | 369 |
| $ | (18,030 | ) | $ | (16,009 | ) | Loans held-for-sale and loans at fair value | 5,607 |
| | | 11,166 |
| | | Receivables from customers and other | 26,139 |
| | 33,706 |
| | Total(d) | $ | 861,265 |
| | | Total(e) | | $ | 943,392 |
| |
| | | | 110 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | | | | | Selected metrics | | Selected metrics | | | 30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges(f) | Liquid securities and other cash collateral held against derivative receivables(g) | | 30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges(g) | Liquid securities and other cash collateral held against derivative receivables | | | Noninvestment-grade | | Noninvestment-grade | | Credit exposure(e) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | Credit exposure(f) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | As of or for the year ended December 31, 2016 (in millions) | As of or for the year ended December 31, 2018 (in millions) | | Credit exposure(f) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | 30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges(g) | Liquid securities and other cash collateral held against derivative receivables | Real Estate | $ | 134,287 |
| $ | 104,869 |
| $ | 28,281 |
| $ | 937 |
| $ | 200 |
| $ | 206 |
| $ | (7 | ) | $ | (54 | ) | $ | (11 | ) | Individuals and Individual Entities(b) | | 97,077 |
| 86,581 |
| 10,164 |
| 174 |
| 158 |
| Consumer & Retail | 84,804 |
| 54,730 |
| 28,255 |
| 1,571 |
| 248 |
| 75 |
| 24 |
| (424 | ) | (69 | ) | 94,815 |
| 60,678 |
| 31,901 |
| 2,033 |
| 203 |
| Technology, Media & Telecommunications | 63,324 |
| 39,998 |
| 21,751 |
| 1,559 |
| 16 |
| 9 |
| 2 |
| (589 | ) | (30 | ) | 72,646 |
| 46,334 |
| 24,081 |
| 2,170 |
| 61 |
| 8 |
| 12 |
| (1,011 | ) | (12 | ) | Industrials | | 58,528 |
| 38,487 |
| 18,594 |
| 1,311 |
| 136 |
| 171 |
| 20 |
| (207 | ) | (29 | ) | Asset Managers | | 42,807 |
| 36,722 |
| 6,067 |
| 4 |
| 14 |
| 10 |
| — |
| — |
| (5,829 | ) | Banks & Finance Cos | | 49,920 |
| 34,120 |
| 15,496 |
| 299 |
| 5 |
| 11 |
| — |
| (575 | ) | (2,290 | ) | Healthcare | 49,445 |
| 39,244 |
| 9,279 |
| 882 |
| 40 |
| 86 |
| 37 |
| (286 | ) | (246 | ) | 48,142 |
| 36,687 |
| 10,625 |
| 761 |
| 69 |
| 23 |
| (5 | ) | (150 | ) | (133 | ) | Industrials | 55,733 |
| 36,710 |
| 17,854 |
| 1,033 |
| 136 |
| 128 |
| 3 |
| (434 | ) | (40 | ) | | Banks & Finance Cos | 48,393 |
| 35,385 |
| 12,560 |
| 438 |
| 10 |
| 21 |
| (2 | ) | (1,336 | ) | (7,337 | ) | | Oil & Gas | 40,367 |
| 18,629 |
| 12,274 |
| 8,069 |
| 1,395 |
| 31 |
| 233 |
| (1,532 | ) | (18 | ) | 42,600 |
| 23,356 |
| 17,451 |
| 1,158 |
| 635 |
| 6 |
| 36 |
| (248 | ) | — |
| Asset Managers | 33,201 |
| 29,194 |
| 4,006 |
| 1 |
| — |
| 17 |
| — |
| — |
| (5,737 | ) | | Utilities | 29,672 |
| 24,203 |
| 4,959 |
| 424 |
| 86 |
| 8 |
| — |
| (306 | ) | — |
| 28,172 |
| 23,558 |
| 4,326 |
| 138 |
| 150 |
| — |
| 38 |
| (142 | ) | (60 | ) | State & Municipal Govt(b) | 28,263 |
| 27,603 |
| 624 |
| 6 |
| 30 |
| 107 |
| (1 | ) | (130 | ) | — |
| | State & Municipal Govt(c) | | 27,351 |
| 26,746 |
| 603 |
| 2 |
| — |
| 18 |
| (1 | ) | — |
| (42 | ) | Automotive | | 17,339 |
| 9,637 |
| 7,310 |
| 392 |
| — |
| 1 |
| — |
| (125 | ) | — |
| Chemicals & Plastics | | 16,035 |
| 11,490 |
| 4,427 |
| 118 |
| — |
| 4 |
| — |
| — |
| — |
| Metals & Mining | | 15,359 |
| 8,188 |
| 6,767 |
| 385 |
| 19 |
| 1 |
| — |
| (174 | ) | (22 | ) | Central Govt | 20,408 |
| 20,123 |
| 276 |
| 9 |
| — |
| 4 |
| — |
| (11,691 | ) | (4,183 | ) | 18,456 |
| 18,251 |
| 124 |
| 81 |
| — |
| 4 |
| — |
| (7,994 | ) | (2,130 | ) | Chemicals & Plastics | 15,043 |
| 10,405 |
| 4,452 |
| 156 |
| 30 |
| 3 |
| — |
| (35 | ) | (3 | ) | | Transportation | 19,096 |
| 12,178 |
| 6,421 |
| 444 |
| 53 |
| 9 |
| 10 |
| (93 | ) | (188 | ) | 15,660 |
| 10,508 |
| 4,699 |
| 393 |
| 60 |
| 21 |
| 6 |
| (31 | ) | (112 | ) | Automotive | 16,736 |
| 9,235 |
| 7,299 |
| 201 |
| 1 |
| 7 |
| — |
| (401 | ) | (14 | ) | | Metals & Mining | 13,419 |
| 5,523 |
| 6,744 |
| 1,133 |
| 19 |
| — |
| 36 |
| (621 | ) | (62 | ) | | Insurance | 13,510 |
| 10,918 |
| 2,459 |
| — |
| 133 |
| 9 |
| — |
| (275 | ) | (2,538 | ) | 12,639 |
| 9,777 |
| 2,830 |
| — |
| 32 |
| — |
| — |
| (36 | ) | (2,080 | ) | Securities Firms | | 4,558 |
| 3,099 |
| 1,459 |
| — |
| — |
| — |
| — |
| (158 | ) | (823 | ) | Financial Markets Infrastructure | 8,732 |
| 7,980 |
| 752 |
| — |
| — |
| — |
| — |
| — |
| (390 | ) | 7,484 |
| 6,746 |
| 738 |
| — |
| — |
| — |
| — |
| — |
| (26 | ) | Securities Firms | 4,211 |
| 1,812 |
| 2,399 |
| — |
| — |
| — |
| — |
| (273 | ) | (491 | ) | | All other(c) | 137,238 |
| 124,661 |
| 11,988 |
| 303 |
| 286 |
| 598 |
| 6 |
| (3,634 | ) | (1,348 | ) | | All other(d) | | 68,284 |
| 64,664 |
| 3,606 |
| 12 |
| 2 |
| 2 |
| 2 |
| (1,581 | ) | (804 | ) | Subtotal | $ | 815,882 |
| $ | 613,400 |
| $ | 182,633 |
| $ | 17,166 |
| $ | 2,683 |
| $ | 1,318 |
| $ | 341 |
| $ | (22,114 | ) | $ | (22,705 | ) | $ | 881,188 |
| $ | 673,617 |
| $ | 195,442 |
| $ | 10,450 |
| $ | 1,679 |
| $ | 1,096 |
| $ | 155 |
| $ | (12,682 | ) | $ | (15,322 | ) | Loans held-for-sale and loans at fair value | 4,515 |
| | | 15,028 |
| | | Receivables from customers and other | 17,440 |
| | 30,063 |
| | Total(d) | $ | 837,837 |
| | | Total(e) | | $ | 926,279 |
| |
| | (a) | TheThe industry rankings presented in the table as of December 31, 2016,2018, are based on the industry rankings of the corresponding exposures at December 31, 2017,2019, not actual rankings of such exposures at December 31, 2016.2018. |
| | (b) | Individuals and Individual Entities predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies and personal and testamentary trusts. |
| | (c) | In addition to the credit risk exposure to states and municipal governments (both U.S. and non-U.S.) at December 31, 20172019 and 2016,2018, noted above, the Firm held: $9.8$6.5 billion and $9.1$7.8 billion, respectively, of trading securities; $32.3assets; $29.8 billion and $31.6$37.7 billion, respectively, of AFS securities; and $14.4$4.8 billion and $14.5 billion, respectively,at both periods of HTMheld-to-maturity (“HTM”) securities, issued by U.S. state and municipal governments. For further information, see NoteRefer to Note 2 and Note 10. |
| | (c) | All other includes: individuals; SPEs; and private education and civic organizations, representing approximately 59%, 37% and 4%, respectively, at both December 31, 2017 and December 31, 2016. for further information. |
| | (d) | All other includes: SPEs and Private education and civic organizations, representing approximately 92% and 8%, respectively, at both December 31, 2019 and 2018. |
| | (e) | Excludes cash placed with banks of $421.0$254.0 billion and $380.2$268.1 billion, at December 31, 20172019 and 2016,2018, respectively, which is predominantly placed with various central banks, primarily Federal Reserve Banks. |
| | (e)(f) | Credit exposure is net of risk participations and excludes the benefit of credit derivatives used in credit portfolio management activities held against derivative receivables or loans and liquid securities and other cash collateral held against derivative receivables. |
| | (f)(g) | Represents the net notional amounts of protection purchased and sold through credit derivatives used to manage the credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. The All other category includes purchased credit protection on certain credit indices. |
| | (g) | Prior period amounts have been revised to conform with the current period presentation. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 111 |
Management’s discussion and analysis
Real Estate Presented below is additional detailinformation on certain industriesthe Real Estate industry, to which the Firm has significant exposure. Real Estate Exposure exposure increased $6.0 billion to the Real Estate industry increased $5.1$149.3 billion during the year ended December 31, 2017, to $139.4 billion predominantly driven by multifamily lending within CB. For2019, and the year ended December 31, 2017, the investment-gradeinvestment grade percentage of the portfolio was 83%, up from 78%remained relatively flat at 81%. Refer to Note 12 for the year ended December 31, 2016. For further information on Real Estate loans, see Note 12.loans.
| | | December 31, 2017 | | December 31, 2019 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment-grade | % Drawn(c) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment-grade | % Drawn(c) | Multifamily(a) | $ | 84,635 |
| | $ | 34 |
| | $ | 84,669 |
| | 89 | % | | 92 | % | | $ | 86,326 |
| | $ | 58 |
| | $ | 86,384 |
| | 91 | % | | 92 | % | | Other | 54,620 |
| | 120 |
| | 54,740 |
| | 74 |
| | 66 |
| | 62,322 |
| | 561 |
| | 62,883 |
| | 68 |
| | 59 |
| | Total Real Estate Exposure(b) | 139,255 |
| | 154 |
| | 139,409 |
| | 83 |
| | 82 |
| | 148,648 |
| | 619 |
| | 149,267 |
| | 81 |
| | 78 |
| | | | | | | | | | | | | | | | | | | | | | | | December 31, 2016 | | December 31, 2018 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment- grade | % Drawn(c) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment- grade | % Drawn(c) | Multifamily(a) | $ | 80,280 |
| | $ | 34 |
| | $ | 80,314 |
| | 82 | % | | 90 | % | | $ | 85,683 |
| | $ | 33 |
| | $ | 85,716 |
| | 89 | % | | 92 | % | | Other | 53,801 |
| | 172 |
| | 53,973 |
| | 72 |
| | 62 |
| | 57,469 |
| | 131 |
| | 57,600 |
| | 72 |
| | 63 |
| | Total Real Estate Exposure(b) | 134,081 |
| | 207 |
| | 134,287 |
| | 78 |
| | 79 |
| | 143,152 |
| | 164 |
| | 143,316 |
| | 82 |
| | 81 |
| |
| | (a) | Multifamily exposure is largely in California. |
| | (b) | Real Estate exposure is predominantly secured; unsecured exposure is largely investment-grade. |
| | (c) | Represents drawn exposure as a percentage of credit exposure. |
Oil & Gas and Natural Gas Pipelines
Exposure to the Oil & Gas and Natural Gas Pipeline portfolios increased by $1.1 billion during the year ended December 31, 2017 to $45.9 billion. During the year ended December 31, 2017, the credit quality of this exposure continued to improve, with the investment-grade percentage increasing from 48% to 53% and criticized exposure decreasing by $4.5 billion.
| | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment-grade | % Drawn(d) | Exploration & Production (“E&P”) and Oilfield Services | $ | 20,558 |
| | $ | 1,175 |
| | $ | 21,733 |
| | 34 | % | | 33 | % | | Other Oil & Gas(a) | 19,032 |
| | 552 |
| | 19,584 |
| | 72 |
| | 28 |
| | Total Oil & Gas | 39,590 |
| | 1,727 |
| | 41,317 |
| | 52 |
| | 31 |
| | Natural Gas Pipelines(b) | 4,507 |
| | 38 |
| | 4,545 |
| | 66 |
| | 14 |
| | Total Oil & Gas and Natural Gas Pipelines(c) | $ | 44,097 |
| | $ | 1,765 |
| | $ | 45,862 |
| | 53 |
| | 29 |
| | | | | | | | | | | | | | December 31, 2016 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment-grade | % Drawn(d) | E&P and Oilfield Services | $ | 20,971 |
| | $ | 1,256 |
| | $ | 22,227 |
| | 27 | % | | 35 | % | | Other Oil & Gas(a) | 17,518 |
| | 622 |
| | 18,140 |
| | 70 |
| | 31 |
| | Total Oil & Gas | 38,489 |
| | 1,878 |
| | 40,367 |
| | 46 |
| | 33 |
| | Natural Gas Pipelines(b) | 4,253 |
| | 106 |
| | 4,359 |
| | 66 |
| | 30 |
| | Total Oil & Gas and Natural Gas Pipelines(c) | $ | 42,742 |
| | $ | 1,984 |
| | $ | 44,726 |
| | 48 |
| | 33 |
| |
(a) Other Oil & Gas includes Integrated Oil & Gas companies, Midstream/Oil Pipeline companies and refineries.
(b) Natural Gas Pipelines is reported within the Utilities Industry.
(c) Secured lending is $14.0 billion and $14.3 billion at December 31, 2017 and December 31, 2016, respectively, approximately half of which is reserve-based lending to the Exploration & Production sub-sector; unsecured exposure is largely investment-grade.
(d) Represents drawn exposure as a percentage of credit exposure.
| | | | 112 | | JPMorgan Chase & Co./2017 Annual Report |
Loans In the normal course of its wholesale business,businesses, the Firm provides loans to a variety of clients, ranging from large corporate and institutional clients to high-net-worth individuals. ForRefer to Note 12 for a further discussion on loans, including information onabout delinquencies, loan modifications and other credit quality indicators and sales of loans, see Note 12.indicators. The following table presents the change in the nonaccrual loan portfolio for the years ended December 31, 20172019 and 2016.2018. | | Wholesale nonaccrual loan activity(a) | | | | | Year ended December 31, (in millions) | | 2017 | 2016 | | 2019 | 2018 | Beginning balance | | $ | 2,063 |
| $ | 1,016 |
| | $ | 1,370 |
| $ | 1,734 |
| Additions | | 1,482 |
| 2,981 |
| | 2,141 |
| 1,188 |
| Reductions: | | | | | Paydowns and other | | 1,137 |
| 1,148 |
| | 1,435 |
| 692 |
| Gross charge-offs | | 200 |
| 385 |
| | 376 |
| 299 |
| Returned to performing status | | 189 |
| 242 |
| | 556 |
| 234 |
| Sales | | 285 |
| 159 |
| | 206 |
| 327 |
| Total reductions | | 1,811 |
| 1,934 |
| | 2,573 |
| 1,552 |
| Net changes | | (329 | ) | 1,047 |
| | (432 | ) | (364 | ) | Ending balance | | $ | 1,734 |
| $ | 2,063 |
| | $ | 938 |
| $ | 1,370 |
|
(a) Loans are placed on nonaccrual status when management believes full payment of principal or interest is not expected, regardless of delinquency status, or when principal or interest have been in default for a period of 90 days or more unless the loan is both well-secured and in the process of collection.
The following table presents net charge-offs/recoveries, which are defined as gross charge-offs less recoveries, for the years ended December 31, 20172019 and 2016.2018. The amounts in the table below do not include gains or losses from sales of nonaccrual loans. | | | | | | | | Wholesale net charge-offs/(recoveries) | Year ended December 31, (in millions, except ratios) | 2019 | 2018 | Loans – reported | | | Average loans retained | $ | 435,876 |
| $ | 416,828 |
| Gross charge-offs | 411 |
| 313 |
| Gross recoveries | (42 | ) | (158 | ) | Net charge-offs/(recoveries) | 369 |
| 155 |
| Net charge-off/(recovery) rate | 0.08 | % | 0.04 | % |
| | | | | | | | Wholesale net charge-offs/(recoveries) | Year ended December 31, (in millions, except ratios) | 2017 | 2016 | Loans – reported | | | Average loans retained | $ | 392,263 |
| $ | 371,778 |
| Gross charge-offs | 212 |
| 398 |
| Gross recoveries | (93 | ) | (57 | ) | Net charge-offs | 119 |
| 341 |
| Net charge-off rate | 0.03 | % | 0.09 | % |
| | | | 112 | | JPMorgan Chase & Co./2019 Form 10-K |
Lending-related commitments The Firm uses lending-related financial instruments, such as commitments (including revolving credit facilities) and guarantees, to meetaddress the financing needs of its clients. The contractual amounts of these financial instruments represent the maximum possible credit risk should the counterpartiesclients draw down on these commitments or when the Firm fulfillfulfills its obligations under these guarantees, and the counterpartiesclients subsequently fail to perform according to the terms of these contracts. Most of these commitments and guarantees are refinanced, extended, cancelled, or expire without being drawn upon or a default occurring. InAs a result, the Firm’s view,Firm does not believe that the total contractual amount of these wholesale lending-related commitments is not representative of the Firm’s expected future credit exposure or funding requirements. ForRefer to Note 28 for further information on wholesale lending-related commitments, see Note 27.commitments. Receivables from Customers Receivables from customers primarily represent held-for-investment margin loans to brokerage clients in CIB and AWM that are collateralized by assets maintained in the clients’ brokerage accounts (e.g., cash on deposit, liquid and readily marketable debt or equity securities), as such no allowance is held against these receivables. To manage its credit risk the Firm establishes margin requirements and monitors the required margin levels on an ongoing basis, and requires clients to deposit additional cash or other collateral, or to reduce positions, when appropriate. These receivables are reported within accrued interest and accounts receivable on the Firm’s Consolidated balance sheets. Clearing services The Firm provides clearing services for clients entering into certain securities and derivative transactions.contracts. Through the provision of these services the Firm is exposed to the risk of non-performance by its clients and may be required to share in losses incurred by central counterparties.CCPs. Where possible, the Firm seeks to mitigate its credit risk to its clients through the collection of adequate margin at inception and throughout the life of the transactions and can also cease the provision of clearing services if clients do not adhere to their obligations under the clearing agreement. ForRefer to Note 28 for a further discussion of clearing services, see Note 27.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 113 |
Management’s discussion and analysis
services.
Derivative contracts In the normal course of business, the Firm uses derivative instruments predominantly for market-making activities. Derivatives enable clients and counterparties to manage exposures torisks including credit risk and risks arising from fluctuations in interest rates, currenciesforeign exchange, equities, and other markets.commodities. The Firm makes markets in derivatives in order to meet these needs and uses derivatives to manage certain risks associated with net open risk positions from its market-making activities, including the counterparty credit risk arising from derivative receivables. The Firm also uses derivative instruments to manage its own credit and other market risk exposure. The nature of the counterparty and the settlement mechanism of the derivative affect the credit risk to which the Firm is exposed. For OTC derivatives the Firm is exposed to the credit risk of the derivative
counterparty. For exchange-traded derivatives (“ETD”), such as futures and options, and “cleared”cleared over-the-counter (“OTC-cleared”) derivatives, the Firm is generally exposed to the credit risk of the relevant CCP. Where possible, the Firm seeks to mitigate its credit risk exposures arising from derivative transactionscontracts through the use of legally enforceable master netting arrangements and collateral agreements. ForRefer to Note 5 for a further discussion of derivative contracts, counterparties and settlement types, see Note 5.types. The following table summarizes the net derivative receivables for the periods presented. | | Derivative receivables | | | December 31, (in millions) | 2017 |
| 2016 |
| 2019 | 2018 | Interest rate | $ | 24,673 |
| $ | 28,302 |
| | Credit derivatives | 869 |
| 1,294 |
| | Foreign exchange | 16,151 |
| 23,271 |
| | Equity | 7,882 |
| 4,939 |
| | Commodity | 6,948 |
| 6,272 |
| | Total, net of cash collateral | 56,523 |
| 64,078 |
| $ | 49,766 |
| $ | 54,213 |
| Liquid securities and other cash collateral held against derivative receivables(a) | (16,108 | ) | (22,705 | ) | (16,009 | ) | (15,322 | ) | Total, net of all collateral | $ | 40,415 |
| $ | 41,373 |
| $ | 33,757 |
| $ | 38,891 |
|
| | (a) | Includes collateral related to derivative instruments where an appropriate legal opinion hasopinions have not been either sought or obtained.obtained with respect to master netting agreements. |
DerivativeThe fair value of derivative receivables reported on the Consolidated balance sheets were $56.5$49.8 billion and $64.1$54.2 billion at December 31, 20172019 and 2016,2018, respectively. Derivative receivables decreased predominantly as a result of client-driven market-making activities in CIB Markets, which reduced foreign exchange and interest rate derivative receivables, and increased equity derivative receivables, driven by market movements.
Derivative receivables amounts represent the fair value of the derivative contracts after giving effect to legally enforceable master netting agreements and cash collateral held by the Firm. However, in management’s view, the appropriate measure of current credit risk should also take into consideration additional liquid securities (primarily U.S. government and agency securities and other group of seven nations (“G7”) government bonds)securities) and other cash collateral held by the Firm aggregating $16.1$16.0 billion and $22.7$15.3 billion at December 31, 20172019 and 2016,2018, respectively, that may be used as security when the fair value of the client’s exposure is in the Firm’s favor. In addition to the collateral described in the preceding paragraph, theThe Firm also holds additional collateral (primarily cash, G7 government securities, other liquid government-agencygovernment agency and guaranteed securities, and corporate debt and equity securities) delivered by clients at the initiation of transactions, as well as collateral related to contracts that have a non-daily call frequency and collateral that the Firm has agreed to return but has not yet settled as of the reporting date. Although this collateral does not reduce the balances and is not included in the table above, it is available as security against potential exposure that could arise should the fair value of the client’s derivative transactionscontracts move in the Firm’s favor. The derivative receivables fair value, net of all collateral, also does not include other credit enhancements, such as letters of credit. ForRefer to Note 5 for additional information on the Firm’s use of collateral agreements, see Note 5.agreements.
While useful as a current view of credit exposure, the net fair value of the derivative receivables does not capture the potential future variability of that credit exposure. To capture the potential future variability of credit exposure, the Firm calculates, on a client-by-client basis, three measures of potential derivatives-related credit loss: Peak, Derivative Risk Equivalent (“DRE”), and Average exposure
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 113 |
Management’s discussion and analysis
(“AVG”). These measures all incorporate netting and collateral benefits, where applicable. Peak represents a conservative measure of potential exposure to a counterparty calculated in a manner that is broadly equivalent to a 97.5% confidence level over the life of the transaction. Peak is the primary measure used by the Firm for setting of credit limits for derivative transactions,contracts, senior management reporting and derivatives exposure management. DRE exposure is a measure that expresses the risk of derivative exposure on a basis intended to be equivalent to the risk of loan exposures. DRE is a less extreme measure of potential credit loss than Peak and is used as an input for aggregating derivative credit risk exposures with loans and other credit risk. Finally, AVG is a measure of the expected fair value of the Firm’s derivative receivables at future time periods, including the benefit of collateral. AVG exposure over the total life of the derivative contract is used as the primary metric for pricing purposes and is used to calculate credit risk capital and the CVA, as further described below. The three year AVG exposure was $29.0 billion and $31.1 billion at December 31, 2017 and 2016, respectively, compared with derivative receivables, net of all collateral, of $40.4 billion and $41.4 billion at December 31, 2017 and 2016, respectively. The fair value of the Firm’s derivative receivables incorporates CVA to reflect the credit quality of counterparties. CVA is based on the Firm’s AVG to a counterparty and the counterparty’s credit spread in the credit derivatives market. The Firm believes that active risk management is essential to controlling the dynamic credit risk in the derivatives portfolio. In addition, the Firm’s risk management process takes into consideration the potential
| | | | 114 | | JPMorgan Chase & Co./2017 Annual Report |
impact of wrong-way risk, which is broadly defined as the potential for increased correlation between the Firm’s exposure to a counterparty (AVG) and the counterparty’s credit quality. Many factors may influence the nature and magnitude of these correlations over time. To the extent that these correlations are identified, the Firm may adjust the CVA associated with that counterparty’s AVG. The Firm risk manages exposure to changes in CVA by entering into credit derivative transactions,contracts, as well as interest rate, foreign exchange, equity and commodity derivative transactions.contracts. The accompanyingbelow graph shows exposure profiles to the Firm’s current derivatives portfolio over the next 10 years as calculated by the Peak, DRE and AVG metrics. The three measures generally show that exposure will decline after the first year, if no new trades are added to the portfolio. Exposure profile of derivatives measures December 31, 20172019 (in billions)
The following table summarizes the ratings profile by derivative counterparty of the Firm’s derivative receivables, including credit derivatives, net of all collateral, at the dates indicated. The ratings scale is based on the Firm’sFirm considers internal ratings which generally correspondequivalent to the ratingsBBB-/Baa3 or higher as assigned by S&P and Moody’s.investment grade. Refer to Note 12 for further information on internal risk ratings. | | Ratings profile of derivative receivables | | | | | | | | | | | Rating equivalent | 2017 | | 2016 | | Internal rating equivalent | | 2019 | | 2018 | December 31, (in millions, except ratios) | Exposure net of all collateral | % of exposure net of all collateral | | Exposure net of all collateral | % of exposure net of all collateral | Exposure net of all collateral | % of exposure net of all collateral | | Exposure net of all collateral | % of exposure net of all collateral | AAA/Aaa to AA-/Aa3 | $ | 11,529 |
| 29 | % | | $ | 11,449 |
| 28 | % | $ | 8,347 |
| 25 | % | | $ | 11,831 |
| 31 | % | A+/A1 to A-/A3 | 6,919 |
| 17 |
| | 8,505 |
| 20 |
| 5,471 |
| 16 |
| | 7,428 |
| 19 |
| BBB+/Baa1 to BBB-/Baa3 | 13,925 |
| 34 |
| | 13,127 |
| 32 |
| 13,148 |
| 39 |
| | 12,536 |
| 32 |
| BB+/Ba1 to B-/B3 | 7,397 |
| 18 |
| | 7,308 |
| 18 |
| 6,225 |
| 18 |
| | 6,373 |
| 16 |
| CCC+/Caa1 and below | 645 |
| 2 |
| | 984 |
| 2 |
| 566 |
| 2 |
| | 723 |
| 2 |
| Total | $ | 40,415 |
| 100 | % | | $ | 41,373 |
| 100 | % | $ | 33,757 |
| 100 | % | | $ | 38,891 |
| 100 | % |
As previously noted, the Firm uses collateral agreements to mitigate counterparty credit risk. The percentage of the Firm’s over-the-counter derivativesderivative transactions subject to collateral agreements — excluding foreign exchange spot trades, which are not typically covered by collateral agreements due to their short maturity and centrally cleared trades that are settled daily — was approximately 90% as ofat both December 31, 2017, largely unchanged compared with December 31, 2016.2019 and 2018.
| | | | 114 | | JPMorgan Chase & Co./2019 Form 10-K |
Credit derivatives The Firm uses credit derivatives for two primary purposes: first, in its capacity as a market-maker, and second, as an end-user, to manage the Firm’s own credit risk associated with various exposures. For a detailed description of credit derivatives, see Credit derivatives in Note 5. Credit portfolio management activities Included in the Firm’s end-user activities are credit derivatives used to mitigate the credit risk associated with traditional lending activities (loans and unfunded commitments) and derivatives counterparty exposure in the Firm’s wholesale businesses (collectively, “credit portfolio management” activities). Information on credit portfolio management activities is provided in the table below. For further information on derivatives used in credit portfolio management activities, see Credit derivatives in Note 5. The Firm also uses credit derivatives as an end-user to manage other exposures, including credit risk arising from certain securities held in the Firm’s market-making businesses. These credit derivatives are not included in credit portfolio management activities; for further information on these credit derivatives as well as credit derivatives used in the Firm’s capacity as a market-maker in credit derivatives, see Credit derivatives in Note 5. activities.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 115 |
Management’s discussion and analysis
| | Credit derivatives used in credit portfolio management activities | | Notional amount of protection purchased (a) | Notional amount of protection purchased and sold (a) | December 31, (in millions) | 2017 | 2016 | 2019 | 2018 | Credit derivatives used to manage: | | | | | | | Loans and lending-related commitments | $ | 1,867 |
| | $ | 2,430 |
| $ | 2,047 |
| | $ | 1,272 |
| Derivative receivables | 15,742 |
| | 19,684 |
| 15,983 |
| | 11,410 |
| Credit derivatives used in credit portfolio management activities | $ | 17,609 |
| | $ | 22,114 |
| $ | 18,030 |
| | $ | 12,682 |
|
| | (a) | Amounts are presented net, considering the Firm’s net protection purchased or sold with respect to each underlying reference entity or index. |
The credit derivatives used in credit portfolio management activities do not qualify for hedge accounting under U.S. GAAP; these derivatives are reported at fair value, with gains and losses recognized in principal transactions revenue. In contrast, the loans and lending-related commitments being risk-managed are accounted for on an accrual basis. This asymmetry in accounting treatment, between loans and lending-related commitments and the credit derivatives used in credit portfolio management activities, causes earnings volatility that is not representative, in the Firm’s view, of the true changes in value of the Firm’s overall credit exposure. The effectiveness of credit default swaps (“CDS”) as a hedge against the Firm’s exposures may vary depending on a number of factors, including the named reference entity (i.e., the Firm may experience losses on specific exposures that are different than the named reference entities in the purchased CDS); the contractual terms of the CDS (which may have a defined credit event that does not align with an actual loss realized by the Firm); and the maturity of the Firm’s CDS protection (which in some cases may be shorter than the Firm’s exposures). However, the Firm generally seeks to purchase credit protection with a maturity date that is the same or similar to the maturity date of the exposure for which the protection was purchased, and remaining differences in maturity are actively monitored and managed by the Firm. Refer to Credit derivatives in Note 5 for a detailed description of credit derivatives.
| | | | 116 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 115 |
Management’s discussion and analysis
| | | | | | ALLOWANCE FOR CREDIT LOSSES |
JPMorgan Chase’sThe Firm’s allowance for credit losses covers the retained consumer and wholesale loan portfolios, as well as the Firm’s wholesale and certain consumer lending-related commitments.
For aRefer to Critical Accounting Estimates Used by the Firm on pages 136–138 and Note 13 for further discussion ofinformation on the components of the allowance for credit losses and related management judgments, see Critical Accounting Estimates Used by the Firm on pages 138–140 and Note 13.judgments.
At least quarterly, the allowance for credit losses is reviewed by the CRO, the CFO and the Controller of the Firm, and discussed with the Board of Directors’ Risk Policy Committee (“DRPC”) and the Audit Committee.Firm. As of December 31, 2017,2019, JPMorgan Chase deemed the allowance for credit losses to be appropriate and sufficient to absorb probable credit losses inherent in the portfolio. The allowance for credit losses decreased as ofcompared with December 31, 2017,2018 driven by: a netan $800 million reduction in the wholesaleCCB allowance reflecting credit quality improvementsfor loan losses, which included $650 million in the Oil & Gas, Natural Gas Pipelines,PCI residential real estate portfolio, reflecting continued improvement in home prices and Metals & Mining portfolios (compared with additions to the allowancedelinquencies; $100 million in the prior year driven by downgradesnon credit-impaired residential real estate portfolio; and $50 million in the same portfolios)
largely offset bybusiness banking portfolio; as well as
a net increase in the consumer allowance, reflecting$151 million reduction for write-offs of PCI loans, | | – | additions to the allowance for the credit card and business banking portfolios, driven by loan growth in both of these portfolios and higher loss rates in the credit card portfolio, |
largelypredominantly offset by
| | –• | a reduction in$500 million addition to the allowance for loan losses in the residential real estatecredit card portfolio predominantly driven by continued improvement in home pricesreflecting loan growth and delinquencies,higher loss rates as newer vintages season and |
| | – | the utilization become a larger part of the allowance in connection with the sale of the student loan portfolio.portfolio, and |
Fora $251 million addition in the wholesale allowance for credit losses driven by select client downgrades.
Refer to Consumer Credit Portfolio on pages 103–107, Wholesale Credit Portfolio on pages 108–115 and Note 12 for additional information on the consumer and wholesale credit portfolios, see Consumer Credit Portfolio on pages 102-107, Wholesale Credit Portfolio on pages 108–116 and Note 12.portfolios.
| | | | 116 | | JPMorgan Chase & Co./2017 Annual Report | | 1172019 Form 10-K |
Management’s discussion and analysis
| | Summary of changes in the allowance for credit losses | Summary of changes in the allowance for credit losses | | | Summary of changes in the allowance for credit losses | | | | 2017 | | 2016 | 2019 | | 2018 | Year ended December 31, | Consumer, excluding credit card | Credit card | Wholesale | Total | | Consumer, excluding credit card | Credit card | Wholesale | Total | Consumer, excluding credit card | Credit card | Wholesale | Total | | Consumer, excluding credit card | Credit card | Wholesale | Total | (in millions, except ratios) | Allowance for loan losses | | | | | | | Beginning balance at January 1, | $ | 5,198 |
| $ | 4,034 |
| $ | 4,544 |
| $ | 13,776 |
| | $ | 5,806 |
| $ | 3,434 |
| $ | 4,315 |
| $ | 13,555 |
| $ | 4,146 |
| $ | 5,184 |
| $ | 4,115 |
| $ | 13,445 |
| | $ | 4,579 |
| $ | 4,884 |
| $ | 4,141 |
| $ | 13,604 |
| Gross charge-offs | 1,779 |
| 4,521 |
| 212 |
| 6,512 |
| | 1,500 |
| 3,799 |
| 398 |
| 5,697 |
| 963 |
| 5,436 |
| 411 |
| 6,810 |
| | 1,025 |
| 5,011 |
| 313 |
| 6,349 |
| Gross recoveries | (634 | ) | (398 | ) | (93 | ) | (1,125 | ) | | (591 | ) | (357 | ) | (57 | ) | (1,005 | ) | (551 | ) | (588 | ) | (42 | ) | (1,181 | ) | | (842 | ) | (493 | ) | (158 | ) | (1,493 | ) | Net charge-offs(a) | 1,145 |
| 4,123 |
| 119 |
| 5,387 |
| | 909 |
| 3,442 |
| 341 |
| 4,692 |
| 412 |
| 4,848 |
| 369 |
| 5,629 |
| | 183 |
| 4,518 |
| 155 |
| 4,856 |
| Write-offs of PCI loans(b)(a) | 86 |
| — |
| — |
| 86 |
| | 156 |
| — |
| — |
| 156 |
| 151 |
| — |
| — |
| 151 |
| | 187 |
| — |
| — |
| 187 |
| Provision for loan losses | 613 |
| 4,973 |
| (286 | ) | 5,300 |
| | 467 |
| 4,042 |
| 571 |
| 5,080 |
| (383 | ) | 5,348 |
| 484 |
| 5,449 |
| | (63 | ) | 4,818 |
| 130 |
| 4,885 |
| Other | (1 | ) | — |
| 2 |
| 1 |
| | (10 | ) | — |
| (1 | ) | (11 | ) | (1 | ) | (1 | ) | 11 |
| 9 |
| | — |
| — |
| (1 | ) | (1 | ) | Ending balance at December 31, | $ | 4,579 |
| $ | 4,884 |
| $ | 4,141 |
| $ | 13,604 |
| | $ | 5,198 |
| $ | 4,034 |
| $ | 4,544 |
| $ | 13,776 |
| $ | 3,199 |
| $ | 5,683 |
| $ | 4,241 |
| $ | 13,123 |
| | $ | 4,146 |
| $ | 5,184 |
| $ | 4,115 |
| $ | 13,445 |
| Impairment methodology | | | | | | | Asset-specific(c)(b) | $ | 246 |
| $ | 383 |
| $ | 461 |
| $ | 1,090 |
| | $ | 308 |
| $ | 358 |
| $ | 342 |
| $ | 1,008 |
| $ | 136 |
| $ | 477 |
| $ | 234 |
| $ | 847 |
| | $ | 196 |
| $ | 440 |
| $ | 297 |
| $ | 933 |
| Formula-based | 2,108 |
| 4,501 |
| 3,680 |
| 10,289 |
| | 2,579 |
| 3,676 |
| 4,202 |
| 10,457 |
| 2,076 |
| 5,206 |
| 4,007 |
| 11,289 |
| | 2,162 |
| 4,744 |
| 3,818 |
| 10,724 |
| PCI | 2,225 |
| — |
| — |
| 2,225 |
| | 2,311 |
| — |
| — |
| 2,311 |
| 987 |
| — |
| — |
| 987 |
| | 1,788 |
| — |
| — |
| 1,788 |
| Total allowance for loan losses | $ | 4,579 |
| $ | 4,884 |
| $ | 4,141 |
| $ | 13,604 |
| | $ | 5,198 |
| $ | 4,034 |
| $ | 4,544 |
| $ | 13,776 |
| $ | 3,199 |
| $ | 5,683 |
| $ | 4,241 |
| $ | 13,123 |
| | $ | 4,146 |
| $ | 5,184 |
| $ | 4,115 |
| $ | 13,445 |
| Allowance for lending-related commitments | | | | | | | Beginning balance at January 1, | $ | 26 |
| $ | — |
| $ | 1,052 |
| $ | 1,078 |
| | $ | 14 |
| $ | — |
| $ | 772 |
| $ | 786 |
| $ | 33 |
| $ | — |
| $ | 1,022 |
| $ | 1,055 |
| | $ | 33 |
| $ | — |
| $ | 1,035 |
| $ | 1,068 |
| Provision for lending-related commitments | 7 |
| — |
| (17 | ) | (10 | ) | | — |
| — |
| 281 |
| 281 |
| — |
| — |
| 136 |
| 136 |
| | — |
| — |
| (14 | ) | (14 | ) | Other | — |
| — |
| — |
| — |
| | 12 |
| — |
| (1 | ) | 11 |
| — |
| — |
| — |
| — |
| | — |
| — |
| 1 |
| 1 |
| Ending balance at December 31, | $ | 33 |
| $ | — |
| $ | 1,035 |
| $ | 1,068 |
| | $ | 26 |
| $ | — |
| $ | 1,052 |
| $ | 1,078 |
| $ | 33 |
| $ | — |
| $ | 1,158 |
| $ | 1,191 |
| | $ | 33 |
| $ | — |
| $ | 1,022 |
| $ | 1,055 |
| Impairment methodology | | | | | | | Asset-specific | $ | — |
| $ | — |
| $ | 187 |
| $ | 187 |
| | $ | — |
| $ | — |
| $ | 169 |
| $ | 169 |
| $ | — |
| $ | — |
| $ | 102 |
| $ | 102 |
| | $ | — |
| $ | — |
| $ | 99 |
| $ | 99 |
| Formula-based | 33 |
| — |
| 848 |
| 881 |
| | 26 |
| — |
| 883 |
| 909 |
| 33 |
| — |
| 1,056 |
| 1,089 |
| | 33 |
| — |
| 923 |
| 956 |
| Total allowance for lending-related commitments(d)(c) | $ | 33 |
| $ | — |
| $ | 1,035 |
| $ | 1,068 |
| | $ | 26 |
| $ | — |
| $ | 1,052 |
| $ | 1,078 |
| $ | 33 |
| $ | — |
| $ | 1,158 |
| $ | 1,191 |
| | $ | 33 |
| $ | — |
| $ | 1,022 |
| $ | 1,055 |
| Total allowance for credit losses | $ | 4,612 |
| $ | 4,884 |
| $ | 5,176 |
| $ | 14,672 |
| | $ | 5,224 |
| $ | 4,034 |
| $ | 5,596 |
| $ | 14,854 |
| $ | 3,232 |
| $ | 5,683 |
| $ | 5,399 |
| $ | 14,314 |
| | $ | 4,179 |
| $ | 5,184 |
| $ | 5,137 |
| $ | 14,500 |
| Memo: | | | | | | | Retained loans, end of period | $ | 372,553 |
| $ | 149,387 |
| $ | 402,898 |
| $ | 924,838 |
| | $ | 364,406 |
| $ | 141,711 |
| $ | 383,790 |
| $ | 889,907 |
| $ | 332,038 |
| $ | 168,924 |
| $ | 444,639 |
| $ | 945,601 |
| | $ | 373,637 |
| $ | 156,616 |
| $ | 439,162 |
| $ | 969,415 |
| Retained loans, average | 366,798 |
| 139,918 |
| 392,263 |
| 898,979 |
| | 358,486 |
| 131,081 |
| 371,778 |
| 861,345 |
| 349,724 |
| 156,319 |
| 435,876 |
| 941,919 |
| | 374,395 |
| 145,606 |
| 416,828 |
| 936,829 |
| PCI loans, end of period | 30,576 |
| — |
| 3 |
| 30,579 |
| | 35,679 |
| — |
| 3 |
| 35,682 |
| 20,363 |
| — |
| — |
| 20,363 |
| | 24,034 |
| — |
| 3 |
| 24,037 |
| Credit ratios | | | | | | | Allowance for loan losses to retained loans | 1.23 | % | 3.27 | % | 1.03 | % | 1.47 | % | | 1.43 | % | 2.85 | % | 1.18 | % | 1.55 | % | 0.96 | % | 3.36 | % | 0.95 | % | 1.39 | % | | 1.11 | % | 3.31 | % | 0.94 | % | 1.39 | % | Allowance for loan losses to retained nonaccrual loans(e)(d) | 109 |
| NM | 239 |
| 229 |
| | 109 |
| NM | 233 |
| 205 |
| 102 |
| NM | 503 |
| 329 |
| | 120 |
| NM | 358 |
| 292 |
| Allowance for loan losses to retained nonaccrual loans excluding credit card | 109 |
| NM | 239 |
| 147 |
| | 109 |
| NM | 233 |
| 145 |
| 102 |
| NM | 503 |
| 187 |
| | 120 |
| NM | 358 |
| 179 |
| Net charge-off rate(a) | 0.31 |
| 2.95 |
| 0.03 |
| 0.60 |
| | 0.25 |
| 2.63 |
| 0.09 |
| 0.54 |
| | Net charge-off rates | | 0.12 |
| 3.10 |
| 0.08 |
| 0.60 |
| | 0.05 |
| 3.10 |
| 0.04 |
| 0.52 |
| Credit ratios, excluding residential real estate PCI loans | | | | | | | Allowance for loan losses to retained loans | 0.69 |
| 3.27 |
| 1.03 |
| 1.27 |
| | 0.88 |
| 2.85 |
| 1.18 |
| 1.34 |
| 0.71 |
| 3.36 |
| 0.95 |
| 1.31 |
| | 0.67 |
| 3.31 |
| 0.94 |
| 1.23 |
| Allowance for loan losses to retained nonaccrual loans(e)(d) | 56 |
| NM | 239 |
| 191 |
| | 61 |
| NM | 233 |
| 171 |
| 70 |
| NM | 503 |
| 305 |
| | 68 |
| NM | 358 |
| 253 |
| Allowance for loan losses to retained nonaccrual loans excluding credit card | 56 |
| NM | 239 |
| 109 |
| | 61 |
| NM | 233 |
| 111 |
| 70 |
| NM | 503 |
| 162 |
| | 68 |
| NM | 358 |
| 140 |
| Net charge-off rate(a) | 0.34 | % | 2.95 | % | 0.03 | % | 0.62 | % | | 0.28 | % | 2.63 | % | 0.09 | % | 0.57 | % | | Net charge-off rates | | 0.13 | % | 3.10 | % | 0.08 | % | 0.61 | % | | 0.05 | % | 3.10 | % | 0.04 | % | 0.53 | % |
| | Note: | In the table above, the financial measures which exclude the impact of PCI loans are non-GAAP financial measures. |
| | (a) | For the year ended December 31, 2017, excluding net charge-offs of $467 million related to the student loan portfolio sale, the net charge-off rate for Consumer, excluding credit card would have been 0.18%; total Firm would have been 0.55%; Consumer, excluding credit card and PCI loans would have been 0.20%; and total Firm, excluding PCI would have been 0.57%. |
| | (b) | Write-offs of PCI loans are recorded against the allowance for loan losses when actual losses for a pool exceed estimated losses that were recorded as purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan is recognized when the underlying loan is removed from a pool (e.g., upon liquidation).pool. |
| | (c)(b) | Includes risk-rated loans that have been placed on nonaccrual status and loans that have been modified in a TDR. The asset-specific credit card allowance for loan losses modified in a TDR is calculated based on the loans’ original contractual interest rates and does not consider any incremental penalty rates. |
| | (d)(c) | The allowance for lending-related commitments is reported in accounts payable and other liabilities on the Consolidated balance sheets. |
| | (e)(d) | The Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance. |
| | | | 118 | | JPMorgan Chase & Co./2017 Annual Report |
Provision for credit losses
The following table presents the components of the Firm’s provision for credit losses:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | Provision for loan losses | | Provision for lending-related commitments | | Total provision for credit losses | 2017 |
| 2016 |
| 2015 | | 2017 |
| 2016 |
| 2015 |
| | 2017 |
| 2016 |
| 2015 |
| Consumer, excluding credit card | $ | 613 |
| $ | 467 |
| $ | (82 | ) | | $ | 7 |
| $ | — |
| $ | 1 |
| | $ | 620 |
| $ | 467 |
| $ | (81 | ) | Credit card | 4,973 |
| 4,042 |
| 3,122 |
| | — |
| — |
| — |
| | 4,973 |
| 4,042 |
| 3,122 |
| Total consumer | 5,586 |
| 4,509 |
| 3,040 |
| | 7 |
| — |
| 1 |
| | 5,593 |
| 4,509 |
| 3,041 |
| Wholesale | (286 | ) | 571 |
| 623 |
| | (17 | ) | 281 |
| 163 |
| | (303 | ) | 852 |
| 786 |
| Total | $ | 5,300 |
| $ | 5,080 |
| $ | 3,663 |
| | $ | (10 | ) | $ | 281 |
| $ | 164 |
| | $ | 5,290 |
| $ | 5,361 |
| $ | 3,827 |
|
Provision for credit losses
The provision for credit losses decreased as of December 31, 2017 as a result of:
a net $422 million reduction in the wholesale allowance for credit losses, reflecting credit quality improvements in the Oil & Gas, Natural Gas Pipelines, and Metals & Mining portfolios, compared with an addition of $511 million in the prior year driven by downgrades in the same portfolios.
The decrease was predominantly offset by
a higher consumer provision driven by
| | – | $450 million of higher net charge-offs, primarily in the credit card portfolio due to growth in newer vintages which, as anticipated, have higher loss rates than the more seasoned portion of the portfolio, partially offset by a decrease in net charge-offs in the residential real estate portfolio reflecting continued improvement in home prices and delinquencies, |
| | – | a $218 million impact in connection with the sale of the student loan portfolio, and |
| | – | a $416 million higher addition to the allowance for credit losses. |
Current year additions to the consumer allowance included:
| | ◦ | an $850 million addition to the allowance for credit losses in the credit card portfolio, compared to a $600 million addition in the prior year, due to higher loss rates and loan growth in both years, and |
| | ◦ | a $50 million addition to the allowance for credit losses in the business banking portfolio, driven by loan growth |
the additions were partially offset by
| | ◦ | a $316 million net reduction in the allowance for credit losses in the residential real estate portfolio, compared to a $517 million net reduction in the prior year, reflecting continued improvement in home prices and delinquencies in both years. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 119117 |
Management’s discussion and analysis
| | | | | | INVESTMENT PORTFOLIO RISK MANAGEMENT |
Investment portfolio risk is the risk associated with the loss of principal or a reduction in expected returns on investments arising from the investment securities portfolio or from principal investments. The investment securities portfolio is predominantly held by Treasury and CIO in connection with the Firm’sFirm's balance sheet or asset-liability management objectives or from principalobjectives. Principal investments managed in various LOBs inare predominantly privately-held financial assetsinstruments and instruments.are managed in the LOBs and Corporate. Investments are typically intended to be held over extended periods and, accordingly, the Firm has no expectation for short-term realized gains with respect to these investments. Investment securities risk Investment securities risk includes the exposure associated with a default in the defaultpayment of principal plus coupon payments.and interest. This risk is minimizedmitigated given that the investment securities portfolio held by Treasury and CIO generally investis predominantly invested in high-quality securities. At December 31, 2017,2019, the Treasury and CIO investment securities portfolio was $248.0$396.4 billion, and the average credit rating of the securities comprising the portfolio was AA+ (based upon external ratings where available and where not available, based primarily upon internal ratings that correspondrisk ratings. Refer to ratings as defined by S&PCorporate segment results on pages 77–78 and Moody’s). ForNote 10 for further information on the investment securities portfolio see Note 10and internal risk ratings. Refer to Market Risk Management on pages 203-208. For119–126 for further information on the market risk inherent in the portfolio, see Marketportfolio. Refer to Liquidity Risk Management on pages 121-128. For93–98 for further information on related liquidity risk, see Liquidity Risk on pages 92–97.risk. Governance and oversight Investment securities risks are governed by the Firm’s Risk Appetite framework, and discussedreviewed at the CIO, Treasury and Corporate (CTC)CTC Risk Committee with regular updates to the DRPC.Board Risk Committee. The Firm’s independent control functions are responsible for reviewing the appropriateness of the carrying value of investment securities in accordance with relevant policies. Approved levels for investment securities are established for each risk category, including capital and credit risks. Principal investment risk Principal investments are typically private non-traded financial instruments representing ownership or other forms of junior capital. Principal investments coverspan multiple asset classes and are made either in stand-alone investing businesses or as part of a broader business platform.In general, new principal investments include tax-oriented investments, as well as investments made to enhance or accelerate LOB and Corporate strategic business initiatives. The Firm’s principal investments are managed by the LOBs and Corporate and are reflected within their respective financial results. As of December 31, 2017,2019 and 2018, the aggregate carrying valuevalues of the principal investment portfolios were $24.2 billion and $22.2 billion, respectively, which included tax-oriented investments (e.g., affordable housing and alternative energy investments) of $14.0$18.2 billion and $16.6 billion, respectively, and private equity, and various debt and equity instruments, and real assets of $5.5 billion. Increasingly, new principal investment activity seeks to enhance or accelerate LOB strategic business initiatives. The Firm’s principal investments are managed under various LOBs$6.0 billion and are reflected within the respective LOB financial results.$5.6 billion, respectively. Governance and oversight The Firm’s approach to managing principal risk is consistent with the Firm’s general risk governance structure. A Firmwide risk policy framework exists for all principal investing activities. All investments are approvedactivities and includes approval by investment committees that include executives who are independent from the investing businesses.businesses, as appropriate. The Firm’s independent control functionsare responsible for reviewing the appropriateness of the carrying value of investments in accordance with relevant policies. ApprovedAs part of the risk governance structure, approved levels for investments are established and monitored for each relevant business or segment in order to manage the overall size of the portfolios. Industry, geographic and position level concentration limits have been set and are intended to ensure diversification of the portfolios. The Firm also conducts stress testing on these portfolios using specific scenarios that estimate losses based on significant market moves and/or other risk events.
| | | | 120118 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Market risk is the risk associated with the effect of changes in market factors, such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term. Market Risk Management Market Risk Management monitors market risks throughout the Firm and defines market risk policies and procedures. The Market Risk Management function reports to the Firm’s CRO. Market Risk Management seeks to manage risk, facilitate efficient risk/return decisions, reduce volatility in operating performance and provide transparency into the Firm’s market risk profile for senior management, the Board of Directors and regulators. Market Risk Management is responsible for the following functions: Establishment ofEstablishing a market risk policy framework
Independent measurement,Independently measuring, monitoring and control of line of businesscontrolling LOB, Corporate, and firmwideFirmwide market risk
Definition, approvalDefining, approving and monitoring of limits
Performance ofPerforming stress testing and qualitative risk assessments
Risk measurement ToolsMeasures used to measurecapture market risk
There is no single measure to capture market risk and therefore the FirmMarket Risk Management uses various metrics, both statistical and nonstatistical, to assess risk including: VaRValue-at-risk (VaR)
Economic-value stressStress testing
Nonstatistical risk measures
Loss advisories
Profit and loss drawdowns Earnings-at-risk Other sensitivitiessensitivity-based measures Risk monitoring and control Market risk exposure is managed primarily through a series of limits set in the context of the market environment and business strategy. In setting limits, the FirmMarket Risk Management takes into consideration factors such as market volatility, product liquidity, and accommodation of client business, and management experience. The FirmMarket Risk Management maintains different levels of limits. CorporateFirm level limits include VaR and stress limits. Similarly, line of businessLOB and Corporate limits include VaR and stress limits and may be supplemented by loss advisories,certain nonstatistical measurements andrisk measures such as profit and loss drawdowns. Limits may also be set within the lines of business,LOBs and Corporate, as well as at the portfolio or legal entity level. Market Risk Management sets limits and regularly reviews and updates them as appropriate, with any changes approved by line of business management and Market Risk Management.appropriate. Senior management including the Firm’s CEO and CRO, areis responsible for reviewing and approving certain of these risk limits on an ongoing basis. All limitsLimits that have not been reviewed within specified time periods by Market Risk Management are escalated to senior management. The lines of businessLOBs and Corporate are responsible for adhering to established limits against which exposures are monitored and reported. Limit breaches are required to be reported in a timely manner to limit approvers, which include Market Risk Management and senior management. In the event of a breach, Market Risk Management consults with senior managementappropriate members of the Firm and the line of business senior management to determine the appropriatesuitable course of action required to return the applicable positions to compliance, which may include a reduction in risk in order to remedy the breach.breach or granting a temporary increase in limits to accommodate an expected increase in client activity and/or market volatility. Certain Firm, Corporate or line of business-level limits that have been breached for three business days or longer, or by more than 30%,LOB-level limit breaches are escalated to senior management and the Firmwide Risk Committee.as appropriate.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 121119 |
Management’s discussion and analysis
The following table summarizes by line of business the predominant business activities thatand related market risks, as well as positions which give rise to market risk and certain measures used to capture those risks, for each LOB and Corporate. In addition to the predominant business activities, each LOB and Corporate may engage in principal investing activities. To the extent principal investments are deemed market risk tools usedsensitive, they are reflected in relevant risk measures (i.e., VaR or Other sensitivity-based measures) and captured in the table below. Refer to measure those risks.Investment Portfolio Risk Management on page 118 for additional discussion on principal investments. | | | | | | Risk identification and classification by line of business | Line of BusinessLOBs and Corporate | Predominant business activities and related | Related market risks | Positions included in Risk Management VaR | Positions included in earnings-at-risk | Positions included in other sensitivity-based measures | CCB | • Services mortgage loans which give rise to complex, non-linear interest rate• Originates loans and basis risktakes deposits | • Non-linear risk arises primarily Risk from prepayment options embedded in mortgages and changes in the probability of newly originated mortgage commitments actually closing• Basis risk results from differences in the relative movements of the rate indices underlying mortgage exposure and other interest rates
• Originates loansInterest rate risk and takes depositsprepayment risk | • Mortgage pipeline loans,commitments, classified as derivatives• Warehouse loans, classified as trading assets – debt instruments• Hedges of pipeline loans,mortgage commitments, warehouse loans and MSRs, classified as derivatives • Interest-only securities, classified as trading assets - debt instruments, and related hedges, classified as derivatives• Fair value option elected liabilities | | | CIB
| • Makes markets and services clients across fixed income, foreign exchange, equities and commodities• Market risk arises from changes in market prices (e.g., rates and credit spreads) resulting in a potential decline in net income• Originates loans and takes deposits | • Risk of loss from adverse movements in market prices and implied volatilities across interest rate, foreign exchange, credit, commodity and equity instruments• Basis and correlation risk from changes in the way asset values move relative to one another• Interest rate risk and prepayment risk
| • Trading assets/liabilities – debt and marketable equity instruments, and derivatives, including hedges of the retained loan portfolio• Certain securities purchased, loaned or sold under resale agreements and securities borrowed• Fair value option elected liabilities• Derivative CVA and associated hedges• Marketable equity investments | | • Private Privately held equity and other investments measured at fair value• Derivatives FVA and fair value option elected liabilities DVA | CB | • Engages in traditional wholesale banking activities which include extensions ofOriginates loans and credit facilities and takingtakes deposits•
Risk arises from changes in interest rates and prepayment risk with potential for adverse impact on net interest income and interest-rate sensitive fees | | • Interest rate risk and prepayment risk | • Marketable equity investments(a)
| | | AWM | • Provides initial capital investments in products such as mutual funds which give rise to market risk arising from changes in market prices in such productsand capital invested alongside third-party investors• Originates loans and takes deposits
| • Risk from adverse movements in market factors (e.g., rates and credit spreads)• Interest rate risk and prepayment risk | • Debt securities held in advance of distribution to clients, classified as trading assets - debt instruments | | | • Initial seed capital investments and related hedges, classified as derivatives• Capital invested alongside third-party investors, typically in privately distributed collective vehicles managed by AWM (i.e., co-investments) | Corporate | • Manages the Firm’s liquidity, funding, capital, structural interest rate and foreign exchange risks arising from activities undertaken by the Firm’s four major reportable business segments | • Structural interest rate risk from the Firm’s traditional banking activities• Structural non-USD foreign exchange risks | • Derivative positions measured at fair value through noninterest revenue in earnings• Marketable equity investments measured at fair value through noninterest revenue in earnings | • Investment securities portfolio and related interest rate hedges• Long-term debt and related interest rate hedges | • Private Privately held equity and other investments measured at fair value• Foreign exchange exposure related to Firm-issued non-USD long-term debt (“LTD”) and related hedges |
| | (a) | The AWM and CB contributions to Firmwide average VaR were not material for the year ended December 31, 2019 and 2018. |
| | | | 122120 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Value-at-risk JPMorgan Chase utilizes VaR, a statistical risk measure, to estimate the potential loss from adverse market moves in a normalthe current market environment. The Firm has a single VaR framework used as a basis for calculatingRisk Management VaRandRegulatory VaR.VaR. The framework is employed across the Firm using historical simulation based on data for the previous 12 months. The framework’s approach assumes that historical changes in market values are representative of the distribution of potential outcomes in the immediate future. The Firm believes the use of Risk Management VaR provides a stabledaily measure of VaRrisk that is closely aligned to the day-to-day risk management decisions made by the lines of business,LOBs and Corporate and, along with other market risk measures, provides the appropriate information needed to respond to risk events on a daily basis.events. The Firm’s Risk Management VaR is calculated assuming a one-day holding period and an expected tail-loss methodology which approximates a 95% confidence level. Risk Management VaR provides a consistent framework to measure risk profiles and levels of diversification across product types and is used for aggregating risks and monitoring limits across businesses. VaR results are reported to senior management, the Board of Directors and regulators. Under the Firm’s Risk Management VaR methodology, assuming current changes in market values are consistent with the historical changes used in the simulation, the Firm would expect to incur VaR “back-testing exceptions,” defined as losses greater than that predicted by VaR estimates, an average of five times every 100 trading days. The number of VaR back-testing exceptions observed can differ from the statistically expected number of back-testing exceptions if the current level of market volatility is materially different from the level of market volatility during the 12 months of historical data used in the VaR calculation. Underlying the overall VaR model framework are individual VaR models that simulate historical market returns for individual productsrisk factors and/or risk factors.product types. To capture material market risks as part of the Firm’s risk management framework, comprehensive VaR model calculations are performed daily for businesses whose activities give rise to market risk. These VaR models are granular and incorporate numerous risk factors and inputs to simulate daily changes in market values over the historical period; inputs are selected based on the risk profile of each portfolio, as sensitivities and historical time series used to generate daily market values may be different across product types or risk management systems. The VaR model results across all portfolios are aggregated at the Firm level. As VaR is based on historical data, it is an imperfect measure of market risk exposure and potential losses, and it is not used to estimate the impact of stressed market conditions or to manage any impact from potential stress events. future losses.In addition, based on their reliance on available historical data, limited time horizons, and other factors, VaR measures are inherently limited in their ability to measure certain risks and to predict losses, particularly those associated with market illiquidity and sudden or severe shifts in market conditions. For certain products, specific risk parameters are not captured in VaR due to the lack of inherent liquidity and availability of appropriate historical data. The Firm uses proxies to estimate the VaR for these and other products when daily time series are not available. It is likely that using an actual price-based time series for these products, if available, would affect the VaR results presented. The Firm therefore considers other nonstatistical measures such as stress testing, and nonstatistical measures, in addition to VaR, to capture and manage its market risk positions. The daily market data used in VaR models may be different than the independent third-party data collected for VCG price testing in its monthly valuation process. For example, in cases where market prices are not observable, or where proxies are used in VaR historical time series, the data sources may differ (seediffer. Refer to Valuation process in Note 2 for further information on the Firm’s valuation process). Becauseprocess. As VaR model calculations require daily data and a consistent source for valuation, it may not be practical to use the data collected in the VCG monthly valuation process for VaR model calculations. The Firm’s VaR model calculations are periodically evaluated and enhanced in response to changes in the composition of the Firm’s portfolios, changes in market conditions, improvements in the Firm’s modeling techniques and measurements, and other factors. Such changes may affect historical comparisons of VaR results. ForRefer to Estimations and Model Risk Management on page 135 for information regarding model reviews and approvals, see Model Risk Management on page 137.approvals. The Firm calculates separately a daily aggregated VaR in accordance with regulatory rules (“Regulatory VaR”), which is used to derive the Firm’s regulatory VaR-based capital requirements under Basel III. This Regulatory VaR model framework currently assumes a ten business-day holding period and an expected tail loss methodology which approximates a 99% confidence level. Regulatory VaR is applied to “covered” positions as defined by Basel III, which may be different than the positions included in the Firm’s Risk Management VaR. For example, credit derivative hedges of accrual loans are included in the Firm’s Risk Management VaR, while Regulatory VaR excludes these credit derivative hedges. In addition, in contrast to the Firm’s Risk Management VaR, Regulatory VaR currently excludes the diversification benefit for certain VaR models.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 123121 |
Management’s discussion and analysis
ForRefer to JPMorgan Chase’s Basel III Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website, for additional information on Regulatory
VaR and the other components of market risk regulatory capital for the Firm (e.g., VaR-based measure, stressed VaR-based measure and the respective backtesting), see JPMorgan Chase’s Basel III Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website at: (http://investor.shareholder.com/jpmorganchase/basel.cfm).
The table below shows the results of the Firm’s Risk Management VaR measure using a 95% confidence level. VaR can vary significantly as positions change, market volatility fluctuates, and diversification benefits change. | | Total VaR | Total VaR | | | | | Total VaR | | | | | As of or for the year ended December 31, | 2017 | | 2016 | 2019 | | 2018 | (in millions) | Avg. | Min | Max | | Avg. | Min | Max | Avg. | Min | Max | | Avg. | Min | Max | CIB trading VaR by risk type | | | | | | | | | | | | | | | | | | | | | | | | | | | Fixed income | $ | 28 |
| | $ | 20 |
| | $ | 40 |
| | $ | 45 |
| | $ | 33 |
| | $ | 65 |
| | $ | 40 |
| | $ | 31 |
| | $ | 50 |
| | $ | 33 |
| | $ | 25 |
| | $ | 46 |
| | Foreign exchange | 10 |
| | 4 |
| | 20 |
| | 12 |
| | 7 |
| | 27 |
| | 7 |
| | 4 |
| | 15 |
| | 6 |
| | 3 |
| | 15 |
| | Equities | 12 |
| | 8 |
| | 19 |
| | 13 |
| | 5 |
| | 32 |
| | 20 |
| | 13 |
| | 31 |
| | 17 |
| | 13 |
| | 26 |
| | Commodities and other | 7 |
| | 4 |
| | 10 |
| | 9 |
| | 7 |
| | 11 |
| | 8 |
| | 6 |
| | 12 |
| | 8 |
| | 4 |
| | 13 |
| | Diversification benefit to CIB trading VaR | (30 | ) | (a) | NM |
| (b) | NM |
| (b) | | (36 | ) | (a) | NM |
| (b) | NM |
| (b) | (33 | ) | (a) | NM |
| (b) | NM |
| (b) | | (26 | ) | (a) | NM |
| (b) | NM |
| (b) | CIB trading VaR | 27 |
| | 14 |
| (b) | 38 |
| (b) | | 43 |
| | 28 |
| (b) | 79 |
| (b) | 42 |
| | 29 |
| (b) | 61 |
| (b) | | 38 |
| | 26 |
| (b) | 58 |
| (b) | Credit portfolio VaR | 7 |
| | 3 |
| | 12 |
| | 12 |
| | 10 |
| | 16 |
| | 5 |
| | 3 |
| | 7 |
| | 3 |
| | 3 |
| | 4 |
| | Diversification benefit to CIB VaR | (6 | ) | (a) | NM |
| (b) | NM |
| (b) | | (10 | ) | (a) | NM |
| (b) | NM |
| (b) | (5 | ) | (a) | NM |
| (b) | NM |
| (b) | | (2 | ) | (a) | NM |
| (b) | NM |
| (b) | CIB VaR | 28 |
| | 17 |
| (b) | 39 |
| (b) | | 45 |
| | 32 |
| (b) | 81 |
| (b) | 42 |
| | 29 |
| (b) | 63 |
| (b) | | 39 |
| | 26 |
| (b) | 59 |
| (b) | | | | | | | | | | | | | | | | | | | | | | | | | | CCB VaR | 2 |
| | 1 |
| | 4 |
| | 3 |
| | 1 |
| | 6 |
| | 5 |
| | 1 |
| | 11 |
| | 1 |
| | — |
| | 3 |
| | Corporate VaR | 4 |
| | 1 |
| | 16 |
| (c) | | 6 |
| | 3 |
| | 13 |
| (c) | | AWM VaR | — |
| | — |
| | — |
| | 2 |
| | — |
| | 4 |
| | | Corporate and other LOB VaR | | 10 |
| | 9 |
| | 13 |
| | 12 |
| | 9 |
| | 14 |
| | Diversification benefit to other VaR | (1 | ) | (a) | NM |
| (b) | NM |
| (b) | | (3 | ) | (a) | NM |
| (b) | NM |
| (b) | (4 | ) | (a) | NM |
| (b) | NM |
| (b) | | (1 | ) | (a) | NM |
| (b) | NM |
| (b) | Other VaR | 5 |
| | 2 |
| (b) | 16 |
| (b) | | 8 |
| | 4 |
| (b) | 16 |
| (b) | 11 |
| | 8 |
| (b) | 17 |
| (b) | | 12 |
| | 9 |
| (b) | 14 |
| (b) | Diversification benefit to CIB and other VaR | (4 | ) | (a) | NM |
| (b) | NM |
| (b) | | (8 | ) | (a) | NM |
| (b) | NM |
| (b) | (10 | ) | (a) | NM |
| (b) | NM |
| (b) | | (10 | ) | (a) | NM |
| (b) | NM |
| (b) | Total VaR | $ | 29 |
| | $ | 17 |
| (b) | $ | 42 |
| (b) | | $ | 45 |
| | $ | 33 |
| (b) | $ | 78 |
| (b) | $ | 43 |
| | $ | 30 |
| (b) | $ | 65 |
| (b) | | $ | 41 |
| | $ | 28 |
| (b) | $ | 62 |
| (b) |
| | (a) | Average portfolio VaR is less than the sum of the VaR of the components described above, which is due to portfolio diversification. The diversification effect reflects that the risks are not perfectly correlated. |
| | (b) | Diversification benefit represents the difference between the total VaR and each reported level and the sum of its individual components. Diversification benefit reflects the non-additive nature of VaR due to imperfect correlation across lines of businessLOBs, Corporate, and risk types. The maximum and minimum VaR for each portfolio may have occurred on different trading days than the components and consequently diversification benefit is not meaningful. |
| | (c) | Maximum Corporate VaR was higher than the prior year, due to a Private Equity position that became publicly traded in the fourth quarter of 2017. Previously, this position was included in other sensitivity-based measures. |
Average Total VaR decreased $16increased $2 million for the year-ended December 31, 20172019 as compared with the prior year. The reduction is a result of refinements madeThis was predominantly due to VaR models for certain asset-backed products, changes made to the scope of positions included in VaRincreased exposure in the thirdFixed Income risk type, increases in the Equities risk type driven by the inclusion of Tradeweb following its IPO in the second quarter of 2016,2019, and lowerincreased volatility in the one-year historical look-back period.period, partially offset by increases in diversification benefit. In addition, Credit Portfolioaverage CCB VaR declined by $5 million reflecting the sale of select positions and lower volatility in the one-year historical look-back period. In the first quarter of 2017, the Firm refined the historical proxy time series inputs to certain VaR models. These refinements are intended to more appropriately reflect the risk exposure from certain asset-backed products. In the absence of this refinement, the average Total VaR, CIB fixed income VaR, CIB trading VaR and CIB VaR would have each been higherincreased by $4 million, for the year ended December 31, 2017.
VaR can vary significantly as positions change, market volatility fluctuates, and diversification benefits change.
driven by MSR risk management activities.
VaR back-testing The Firm evaluates the effectiveness of itsperforms daily VaR methodology bymodel back-testing, which compares the daily Risk Management VaR results with the daily gains and losses actually recognized on market-risk related revenue. The Firm’s definition, of market risk-related gains and losses is consistent with the definition used by the banking regulators under Basel III. Under this definition, market risk-related gains and losses are defined as: gains and losses on the positions included in the Firm’s Risk Management VaR excluding select components of revenue such as fees, commissions, certain valuation adjustments, (e.g., liquidity and FVA), net interest income, and gains and losses arising from intraday trading.
| | | | 124122 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The following chart compares actual daily market risk-related gains and losses with the Firm’s Risk Management VaR for the year ended December 31, 2017.2019. As the chart presents market risk-related gains and losses related to those positions included in the Firm’s Risk Management VaR, the results in the table below differ from the results of back-testing disclosed in the Market Risk section of the Firm’s BaselFirm’s Basel III Pillar 3 Regulatory Capital Disclosures reports, which are based on Regulatory VaR applied to the Firm’s covered positions. The chart shows that forFor the year ended December 31, 20172019 the Firm observed 15eight VaR back-testing exceptions and posted market risk-related gains on 145141 of the 258259 days.
Daily Market Risk-Related Gains and Losses vs. Risk Management VaR (1-day, 95% Confidence level) Year endedDecember 31, 20172019 Market Risk-Related Gains and LossesRisk Management VaR | | | | | First Quarter 20172019
| Second Quarter 20172019
| Third Quarter 20172019
| Fourth Quarter 20172019
|
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 125123 |
Management’s discussion and analysis
Other risk measures Economic-value stressStress testing
Along with VaR, stress testing is an important tool in measuring and controllingused to assess risk. While VaR reflects the risk of loss due to adverse changes in markets using recent historical market behavior, as an indicator of losses, stress testing is intended to capturereflects the risk of loss from hypothetical changes in the value of market risk sensitive positions applied simultaneously. Stress testing measures the Firm’s exposurevulnerability to unlikelylosses under a range of stressed but plausible events in abnormal markets.possible economic and market scenarios. The Firm runs weeklyresults are used to understand the exposures responsible for those potential losses and are measured against limits. The Firm’s stress tests on market-related risks across the linesframework covers Corporate and all LOBs with market risk sensitive positions. The framework is used to calculate multiple magnitudes of business using multiple scenarios that assumepotential stress for both market rallies and market sell-offs, assuming significant changes in riskmarket factors such as credit spreads, equity prices, interest rates, currency rates and commodity prices. The Firm uses a number of standard scenarios that capture different risk factors across asset classes including geographical factors, specific idiosyncratic factors and extreme tail events. The stress framework calculates multiple magnitudes of potential stress for both market rallies and market sell-offs for each risk factorprices, and combines them in multiple ways to capture differentan array of hypothetical economic and market scenarios. For example, certain
The Firm generates a number of scenarios assessthat focus on tail events in specific asset classes and geographies, including how the potential loss arising from current exposures held by the Firm due to a broad sell-off in bond markets or an extreme widening in corporate credit spreads.event may impact multiple market factors simultaneously. Scenarios also incorporate specific idiosyncratic risks and stress basis risk between different products. The flexibility ofin the stress testing framework allows risk managersthe Firm to construct new specific scenarios that can be used to form decisions abouttest the outcomes against possible future possible stress events. Stress testing complements VaR by allowing risk managersresults are reported on a regular basis to senior management of the Firm, as appropriate. to shock current market prices to more extreme levels relative to those historically realized, and to stress test the relationships between market prices under extreme scenarios. Stress scenarios are definedgoverned by an overall stress framework and reviewed by Market Risk Management, and significantare subject to the standards outlined in the Firm’s policies related to model risk management. Significant changes to the framework are reviewed by the relevant LOB Risk Committees and may be redefined on a periodic basis to reflect current market conditions.as appropriate.
Stress-test results, trends and qualitative explanations based on current market risk positions are reported to the respective LOBs and the Firm’s senior management to allow them to better understand the sensitivity of positions to certain defined events and to enable them to manage their risks with more transparency. Results are also reported to the Board of Directors.
The Firm’s stress testing framework is utilized in calculating results for the Firm’s CCAR and ICAAP processes.other stress test results, which are reported to the Board of Directors. In addition, thestress testing results are incorporated into the quarterly assessment of the Firm’s Risk Appetite Frameworkframework, and are also presentedreported periodically to the DRPC. Board Risk Committee.Nonstatistical risk measures
Nonstatistical risk measures include sensitivities to variables used to value positions, such as credit spread sensitivities, interest rate basis point values and market values. These measures provide granular information on the Firm’s market risk exposure. They are aggregated by line of business and by risk type, and are also used for monitoring internal market risk limits.
Loss advisories and profitProfit and loss drawdowns
Loss advisories and profitProfit and loss drawdowns are tools used to highlight trading losses above certain levels of risk tolerance. Profit and loss drawdowns are defined as the decline in netA profit and loss since thedrawdown is a decline in revenue from its year-to-date peak revenue level.
Earnings-at-risk
The VaR and sensitivity measures illustrate the economic sensitivity of the Firm’s Consolidated balance sheets to changes in market variables.
Earnings-at-risk The effect of interest rate exposure on the Firm’s reported net income is also important as interest rate risk represents one of the Firm’s significant market risks. Interest rate risk arises not only from trading activities but also from the Firm’s traditional banking activities, which include extension of loans and credit facilities, taking deposits and issuing debt. The Firm evaluates its structural interest rate risk exposure through earnings-at-risk, which measuresdebt as well as from the extentinvestment securities portfolio. Refer to which changes in interest rates will affect the Firm’s net interest income and interest rate-sensitive fees. Fortable on page 120 for a summary by line of business,LOB and Corporate, identifying positions included in earnings-at-risk see the table on page 122.. The CTC Risk Committee establishes the Firm’s structural interest rate risk policiespolicy and market riskrelated limits, which are subject to approval by the DRPC.Board Risk Committee. Treasury and CIO, working in partnership with the lines of business,LOBs, calculates the Firm’s structural interest rate risk profile and reviews it with senior management, including the CTC Risk Committee and the Firm’s ALCO. Committee.In addition, oversight of structural interest rate risk is managed through a dedicated risk function reporting to the CTC CRO.CTC. This risk function is responsible for providing independent oversight and governance around assumptions and establishing and monitoring limits for structural interest rate risk. The Firm manages structural interest rate risk generally through its investment securities portfolio and interest rate derivatives.
| | | | 126 | | JPMorgan Chase & Co./2017 Annual Report |
Structural interest rate risk can occur due to a variety of factors, including: Differences in the timing among the maturity or repricing of assets, liabilities and off-balance sheet instruments Differences in the amounts of assets, liabilities and off-balance sheet instruments that are maturing or repricing at the same time Differences in the amounts by which short-term and long-term market interest rates change (for example, changes in the slope of the yield curve) The impact of changes in the maturity of various assets, liabilities or off-balance sheet instruments as interest rates change The Firm manages interest rate exposure related to its assets and liabilities on a consolidated, firmwideFirmwide basis. Business units transfer their interest rate risk to Treasury and CIO through funds transfer pricing, which takes into account the elements of interest rate exposure that can be risk-managed in financial markets. These elements include asset and liability balances and contractual rates of interest, contractual principal payment schedules, expected prepayment experience, interest rate reset dates and maturities, rate indices used for repricing, and any interest rate ceilings or floors for adjustable rate products. All transfer-pricing assumptions are dynamically reviewed. The
| | | | 124 | | JPMorgan Chase & Co./2019 Form 10-K |
One way the Firm generatesevaluates its structural interest rate risk is through earnings-at-risk. Earnings-at-risk estimates the Firm’s interest rate exposure for a given interest rate scenario. It is presented as a sensitivity to a baseline, forwhich includes net interest income and certain interest rate-sensitive fees,rate sensitive fees. The baseline uses market interest rates and thenin the case of deposits, pricing assumptions. The Firm conducts simulations of changes to this baseline for interest rate-sensitive assets and liabilities denominated in U.S. dollars and other currencies (“non-U.S. dollar” currencies). This simulationThese simulations primarily includes,include retained loans, deposits, deposits with banks, investment securities, long termlong-term debt and any related interest rate hedges, and excludesexclude other positions in risk management VaR and other sensitivity-based measures as described on page 122.120. Earnings-at-risk scenarios estimate the potential change in thisto a net interest income baseline, over the following 12 months, utilizing multiple assumptions.These scenarios include a parallel shift involving changes to both short-term and long-term rates by an equal amount; a steeper yield curve involving holding short-term rates constant and increasing long-term rates or decreasing short-term rates and holding long-term rates constant; and a flatter yield curve involving increasing short-term rates and holding long-term rates constant or holding short-term rates constant and decreasing long-term rates. These scenarios consider the impact on exposures as a result of changes in interest rates from baseline rates, as well as pricing sensitivities of deposits, optionality and changes in product mix. The scenarios include forecasted balance sheet changes, as well as modeled prepayment and reinvestment behavior, but do not include assumptions about actions that could be taken by the Firm in response to any such instantaneous rate changes. Mortgage prepayment assumptions are based on scenario interest rates compared with underlying contractual rates, the time since origination, and othermany different factors, which are updated periodically based on historical experience. The pricing sensitivity of deposits in the baseline and scenarios use assumed rates paid which may differ from actual rates paid due to timing lags and other factors. including: | | • | The impact on exposures as a result of instantaneous changes in interest rates from baseline rates. |
| | • | Forecasted balance sheet, as well as modeled prepayment and reinvestment behavior, but do not include assumptions about actions that could be taken by the Firm in response to any such instantaneous rate changes. Mortgage prepayment assumptions are based on the interest rates used in the scenarios compared with underlying contractual rates, the time since origination, and other factors which are updated periodically based on historical experience. |
| | • | The pricing sensitivity of deposits, using normalized deposit betas which represent the amount by which deposit rates paid could change upon a given change in market interest rates over the cycle. The deposit rates paid in these scenarios differ from actual deposit rates paid, particularly for retail deposits, due to repricing lags and other factors. |
The Firm’s earnings-at-risk scenarios are periodically evaluated and enhanced in response to changes in the composition of the Firm’s balance sheet, changes in market conditions, improvements in the Firm’s simulation and other factors. While a relevant measure of the Firm’s interest rate exposure, the earnings at risk analysis does not represent a forecast of the Firm’s net interest income (Refer to the 2020 Outlook on page 45 for additional information). The Firm’s U.S. dollar sensitivities are presented in the table below. | | | | | | | | | | | | | | | JPMorgan Chase’s 12-month earnings-at-risk sensitivity profiles | U.S. dollar | Instantaneous change in rates |
| (in billions) | +200 bps | +100 bps | -100 bps | -200 bps | December 31, 2017 | $ | 2.4 |
| | $ | 1.7 |
| | (3.6 | ) | (a) | NM | (b) | December 31, 2016 | $ | 4.0 |
| | $ | 2.4 |
| | NM |
| (b) | NM | (b) |
| | | | | | | | | December 31, (in billions) | 2019 |
| 2018 | Parallel shift: |
|
|
|
|
| +100 bps shift in rates | $ | 0.3 |
| | $ | 0.9 |
| -100 bps shift in rates | (2.0 | ) | | (2.1 | ) | Steeper yield curve: | | | | +100 bps shift in long-term rates | 1.2 |
| | 0.5 |
| -100 bps shift in short-term rates | (0.2 | ) | | (1.2 | ) | Flatter yield curve: | | | | +100 bps shift in short-term rates | (0.9 | ) | | 0.4 |
| -100 bps shift in long-term rates | (1.8 | ) | | (0.9 | ) |
| | (a) | As a result of the 2017 increase in the Fed Funds target rate to between 1.25% and 1.50%, the -100 bps sensitivity has been included.
|
| | (b) | Given the level of market interest rates, these downward parallel earnings-at-risk scenarios are not considered to be meaningful.
|
The non-U.S.change in the Firm’s U.S. dollar sensitivities for an instantaneous increase in rates by 200 and 100 basis points results in a 12-month benefit to net interest incomeas of approximately $800 million and $500 million, respectively, at December 31, 2017 and were not material at2019 compared to December 31, 2016. The non-U.S. dollar sensitivities for an instantaneous decrease in rates by 200 and 100 basis points were not material2018 reflected updates to the Firm’s earnings-at-risk at December 31, 2017baseline for lower short-term and 2016. long-term rates as well as the impact of changes in the Firm’s balance sheet.The Firm’s sensitivity to short-term rates is largelyreflected updates to the Firm’s baseline for lower rates but changes in the Firm’s balance sheet more than offset the impacts of the lower rates. The Firm’s sensitivity to long-term rates increased as a result of assets repricing at a faster pace than deposits. The Firm’s net U.S. dollar sensitivities for an instantaneous increase in rates by 200 and 100 basis points decreased by approximately $1.6 billion and $700 million, respectively, when comparedupdates to December 31, 2016. The primary driver of that decrease was the updating of the Firm’s baseline to reflect higher interest rates. As higher interestlower rates are reflectedin addition to changes in the Firm’s baselines,balance sheet. The increased sensitivity to long-term rates is more impactful to the magnitudedownward scenario due to the Firm’s sensitivity to mortgage prepayments.
The Firm’s non-U.S. dollar sensitivities are presented in the table below. | | | | | | | | | December 31, (in billions) | 2019 |
| 2018 | Parallel shift: |
|
|
|
|
| +100 bps shift in rates | $ | 0.5 |
| | $ | 0.5 |
| Flatter yield curve: | | | | +100 bps shift in short-term rates | 0.5 |
| | 0.5 |
|
The results of the sensitivity to further increases in rates would be expected to be less significant. Separately, another U.S.non-U.S. dollar interest rate scenario used by the Firm — involving a steeper yield curve with long-term rates rising by 100 basis points and short-term rates staying at current levels — results in a 12-month benefit to net interest income of approximately $700 million and $800 million at December 31, 2017 and 2016, respectively. The increase in net interest income under this scenario reflects the Firm reinvesting at the higher long-term rates, with funding costs remaining unchanged. The results of the comparable non-U.S. dollar scenarios were not material to the FirmFirm’s earnings-at-risk at December 31, 20172019 and 2016.2018.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 127125 |
Non-U.S. dollar foreign exchange risk Non-U.S. dollar FX risk is the risk that changes in foreign exchange rates affect the value of the Firm’s assets or liabilities or future results. The Firm has structural non-U.S. dollar FX exposures arising from capital investments, forecasted expense and revenue, the investment securities portfolio and non-U.S. dollar-denominated debt issuance. Treasury and CIO, working in partnership with the lines of business,LOBs, primarily manage these risks on behalf of the Firm. Treasury and CIO may hedge certain of these risks using derivatives within risk limits governed by the CTC Risk Committee.derivatives. Other sensitivity-based measures The Firm quantifies the market risk of certain investment and funding activities by assessing the potential impact on net revenue and OCIother comprehensive income (“OCI”) due to changes in relevant market variables. ForRefer to the table Predominant business activities that give rise to market risk on page 120 for additional information on the positions captured in other sensitivity-based measures, please refer to the Risk identification and classification table on page 122.measures. The table below represents the potential impact to net revenue or OCI for market risk sensitive instruments that are not included in VaR or earnings-at-risk. Where appropriate, instruments used for hedging purposes are reported along with the positions being hedged. The sensitivities disclosed in the table below may not be representative of the actual gain or loss that would have been realized at December 31, 2017,2019 and 2018, as the movement in market parameters across maturities may vary and are not intended to imply management’s expectation of future deteriorationchanges in these sensitivities. | | Gain/(loss) (in millions) | | | | Year ended December 31, Gain/(loss) (in millions) | | | | Activity | | Description | | Sensitivity measure | December 31, 2017 | December 31, 2016 | | Description | | Sensitivity measure | | 2019 | 2018 | | | | | | | Investment activities(a) | | | | | Investment management activities | | Consists of seed capital and related hedges; and fund co-investments | | 10% decline in market value | | $ | (110 | ) | $ | (166 | ) | | Consists of seed capital and related hedges; and fund co-investments | | 10% decline in market value | | $ | (68 | ) | $ | (102 | ) | Other investments | | Consists of private equity and other investments held at fair value | | 10% decline in market value | | (338 | ) | (358 | ) | | Consists of privately held equity and other investments held at fair value | | 10% decline in market value | | (192 | ) | (218 | ) | | | | | | Funding activities | | | | | Non-USD LTD cross-currency basis | | Represents the basis risk on derivatives used to hedge the foreign exchange risk on the non-USD LTD | | 1 basis point parallel tightening of cross currency basis | | (10 | ) | (7 | ) | | Represents the basis risk on derivatives used to hedge the foreign exchange risk on the non-USD LTD(b) | | 1 basis point parallel tightening of cross currency basis | | (17 | ) | (13 | ) | Non-USD LTD hedges foreign currency (“FX”) exposure | | Primarily represents the foreign exchange revaluation on the fair value of the derivative hedges | | 10% depreciation of currency | | (13 | ) | (23 | ) | | Primarily represents the foreign exchange revaluation on the fair value of the derivative hedges(b) | | 10% depreciation of currency | | 15 |
| 17 |
| Derivatives – funding spread risk | | Impact of changes in the spread related to derivatives FVA | | 1 basis point parallel increase in spread | | (6 | ) | (4 | ) | | Impact of changes in the spread related to derivatives FVA | | 1 basis point parallel increase in spread | | (5 | ) | (4 | ) | Fair value option elected liabilities – funding spread risk | | Impact of changes in the spread related to fair value option elected liabilities DVA(a) | | 1 basis point parallel increase in spread | | 22 |
| 17 |
| | Impact of changes in the spread related to fair value option elected liabilities DVA(b) | | 1 basis point parallel increase in spread | | 29 |
| 30 |
| Fair value option elected liabilities –interest rate sensitivity | | Interest rate sensitivity on fair value option liabilities resulting from a change in the Firm’s own credit spread(a) | | 1 basis point parallel increase in spread | | (1 | ) | NA |
| | Interest rate sensitivity on fair value option liabilities resulting from a change in the Firm’s own credit spread(b) | | 1 basis point parallel increase in spread | | (2 | ) | 1 |
|
| | (a) | Excludes equity securities without readily determinable fair values that are measured under the measurement alternative. Refer to Note 2 for additional information. |
| | (b) | Impact recognized through OCI. |
| | | | 126 | | JPMorgan Chase & Co./2017 Annual Report | | 1282019 Form 10-K |
The Firm, has athrough its LOBs and Corporate, may be exposed to country risk management framework for monitoring and assessing howresulting from financial, economic, political or other significant developments which adversely affect the value of the Firm’s exposures related to a particular country or set of countries. The Country Risk Management group actively monitors the various portfolios which may be impacted by these developments and measures the extent to ensure whichthe Firm’s exposures are diversified and that exposure levels are appropriate given the Firm’s strategy and risk tolerance relative to a country. Organization and management Country Risk Management is an independent risk management function that assesses, manages and monitors country risk originated across the Firm. The Firmwide Risk Executive for Country Risk reports to the Firm’s CRO. The Firm’s country risk management function includes the following activities: Establishing policies, procedures and standards consistent with a comprehensive country risk framework Assigning sovereign ratings, and assessing country risks and establishing risk tolerance relative to a country Measuring and monitoring country risk exposure and stress across the Firm Managing and approving country limits and reporting trends and limit breaches to senior management Developing surveillance tools, such as signaling models and ratings indicators, for early identification of potential country risk concerns Providing country risk scenario analysis Sources and measurement The Firm is exposed to country risk through its lending and deposits, investing, and market-making activities, whether cross-border or locally funded. Country exposure includes activity with both government and private-sector entities in a country. Under the Firm’s internal country risk management approach, attribution of exposure to a specific country exposure is reported based on the country where the majoritylargest proportion of the assets of the obligor, counterparty, issuer, obligor or guarantor are located or where the majoritylargest proportion of its revenue is derived, which may be different than the domicile (legal(i.e. legal residence) or country of incorporation of the obligor, counterparty, issuer, obligor or guarantor. Country exposures are generally measured by considering the Firm’s risk to an immediate default of the counterparty, issuer, obligor or obligor,guarantor, with zero recovery. Assumptions are sometimes required in determining the measurement and allocation of country exposure, particularly in the case of certain non-linear or index exposures. The use of different measurement approaches or assumptions could affect the amount of reported country exposure. Under the Firm’s internal country risk measurement framework: Lending exposures are measured at the total committed amount (funded and unfunded), net of the allowance for credit losses and eligible cash and marketable securities collateral received receivedDeposits are measured as the cash balances placed with central and commercial banks Securities financing exposures are measured at their receivable balance, net of eligible collateral received Debt and equity securities are measured at the fair value of all positions, including both long and short positions Counterparty exposure on derivative receivables is measured at the derivative’s fair value, net of the fair value of the related collateral. Counterparty exposure on derivatives can change significantly because of market movementseligible collateral received Credit derivatives protection purchased and sold is reported based on the underlying reference entity and is measured at the notional amount of protection purchased or sold, net of the fair value of the recognized derivative receivable or payable. Credit derivatives protection purchased and sold in the Firm’s market-making activities is measured on a net basis, as such activities often result in selling and purchasing protection related to the same underlying reference entity; this reflects the manner in which the Firm manages these exposures Some activities may create contingent or indirect exposure related to a country (for example, providing clearing services or secondary exposure to collateral on securities financing receivables). These exposures are managed in the normal course of business through the Firm’s credit, market, and operational risk governance, rather than through Country Risk Management. The Firm’s internal country risk reporting differs from the reporting provided under the FFIEC bank regulatory requirements. ForRefer to Cross-border outstandings on page 306 of the 2019 Form 10-K for further information on the FFIEC’s reporting methodology, see Cross-border outstandings on page 296 of the 2017 Form 10-K.methodology.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 127 |
Management’s discussion and analysis
Stress testing Stress testing is an important component of the Firm’s country risk management framework, which aims to estimate and limit losses arising from a country crisis by measuring the impact of adverse asset price movements to a country based on market shocks combined with counterparty specific assumptions. Country Risk Management periodically designs and runs tailored stress scenarios to test vulnerabilities to individual countries or groups setsof countries in response to specific or potential market events, sector performance concerns, sovereign actions and geopolitical risks. These tailored stress results are used to assessinform potential risk reduction across the Firm, as necessary.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 129 |
Management’s discussion and analysis
Risk Reportingreporting To enable effective risk management of country risk to the Firm, country nominalCountry exposure and stress are measured and reported weekly,regularly, and used by Country Risk Management to identify trends, and monitor high usages and breaches against limits.
For country risk management purposes, the Firm may report exposure to jurisdictions that are not fully autonomous, including Special Administrative Regions (“SAR”) and dependent territories, separately from the independent sovereign states with which they are associated. The following table presents the Firm’s top 20 exposures by country (excluding the U.S.) as of December 31, 2017.2019, and their comparative exposures as of December 31, 2018. The selection of countries represents the Firm’s largest total exposures by country, based on the Firm’s internal country risk management approach, and does not represent the Firm’s view of any actual or potentially adverse credit conditions. Countryexposures may fluctuatefluctuate from period to period due to client activity and market flows.flows. The increase in exposure in Japan is largely due to increased cash balances placed with the central bank of Japan, driven by client activity. | | | | | | | | | | | | | | | | | | Top 20 country exposures (excluding the U.S.)(a) | | December 31, (in billions) | 2019 | | 2018(e) | | Lending and deposits(b) | Trading and investing(c) | Other(d) | Total exposure | | Total exposure | Germany | $ | 45.8 |
| $ | 5.4 |
| $ | 0.4 |
| $ | 51.6 |
| | $ | 62.1 |
| Japan | 35.5 |
| 8.0 |
| 0.3 |
| 43.8 |
| | 29.1 |
| United Kingdom | 31.0 |
| 9.9 |
| 1.5 |
| 42.4 |
| | 40.7 |
| China | 11.3 |
| 6.5 |
| 1.4 |
| 19.2 |
| | 19.3 |
| Switzerland | 10.9 |
| 0.8 |
| 6.6 |
| 18.3 |
| | 12.8 |
| France | 10.7 |
| 6.5 |
| 0.9 |
| 18.1 |
| | 17.9 |
| Canada | 12.0 |
| 1.1 |
| 0.1 |
| 13.2 |
| | 14.3 |
| Luxembourg | 12.1 |
| 0.8 |
| — |
| 12.9 |
| | 11.0 |
| Australia | 6.9 |
| 4.8 |
| — |
| 11.7 |
| | 13.0 |
| India | 4.6 |
| 3.6 |
| 3.1 |
| 11.3 |
| | 11.8 |
| Netherlands | 4.4 |
| 0.8 |
| 3.8 |
| 9.0 |
| | 5.8 |
| Brazil | 4.8 |
| 2.4 |
| — |
| 7.2 |
| | 7.3 |
| Singapore | 4.3 |
| 1.6 |
| 0.9 |
| 6.8 |
| | 6.8 |
| Italy | 2.4 |
| 4.2 |
| 0.2 |
| 6.8 |
| | 6.4 |
| South Korea | 4.5 |
| 1.8 |
| 0.1 |
| 6.4 |
| | 7.6 |
| Spain | 3.2 |
| 2.6 |
| — |
| 5.8 |
| | 5.1 |
| Saudi Arabia | 4.7 |
| 0.5 |
| — |
| 5.2 |
| | 5.3 |
| Hong Kong SAR | 2.6 |
| 1.7 |
| 0.8 |
| 5.1 |
| | 5.4 |
| Mexico | 3.9 |
| 0.8 |
| — |
| 4.7 |
| | 5.5 |
| Malaysia | 1.8 |
| 0.8 |
| 0.8 |
| 3.4 |
| | 4.3 |
|
| | | | | | | | | | | | | | | Top 20 country exposures (excluding the U.S.)(a) | | | December 31, 2017 |
(in billions) | | Lending and deposits(b) | Trading and investing(c)(d) | Other(e) | Total exposure | Germany | | $ | 43.3 |
| $ | 13.8 |
| $ | 0.3 |
| $ | 57.4 |
| United Kingdom | | 32.0 |
| 11.5 |
| 2.8 |
| 46.3 |
| Japan | | 24.7 |
| 5.7 |
| 0.4 |
| 30.8 |
| France | | 12.5 |
| 6.6 |
| 0.3 |
| 19.4 |
| China | | 9.6 |
| 5.5 |
| 1.2 |
| 16.3 |
| Canada | | 12.2 |
| 2.5 |
| 0.2 |
| 14.9 |
| Switzerland | | 8.5 |
| 1.5 |
| 3.9 |
| 13.9 |
| India | | 5.3 |
| 6.1 |
| 0.9 |
| 12.3 |
| Australia | | 5.8 |
| 5.6 |
| — |
| 11.4 |
| Luxembourg | | 8.7 |
| 0.8 |
| — |
| 9.5 |
| Netherlands | | 6.6 |
| 0.8 |
| 0.6 |
| 8.0 |
| Spain | | 4.7 |
| 2.1 |
| 0.1 |
| 6.9 |
| South Korea | | 4.6 |
| 1.9 |
| 0.3 |
| 6.8 |
| Italy | | 3.5 |
| 3.1 |
| 0.1 |
| 6.7 |
| Singapore | | 4.0 |
| 1.2 |
| 1.1 |
| 6.3 |
| Mexico | | 4.0 |
| 1.2 |
| — |
| 5.2 |
| Brazil | | 3.2 |
| 1.4 |
| 0.5 |
| 5.1 |
| Hong Kong | | 2.3 |
| 0.9 |
| 1.6 |
| 4.8 |
| Saudi Arabia | | 3.8 |
| 0.7 |
| — |
| 4.5 |
| Belgium | | 2.7 |
| 1.5 |
| — |
| 4.2 |
|
| | (a) | CountryTop 20 country exposures above reflect 86%approximately 88% and 87% of total firmwide non U.S. exposure.Firmwide non-U.S. exposure,where exposure is attributed to a specific country, at December 31, 2019 and 2018, respectively. |
| | (b) | Lending and deposits includes loans and accrued interest receivable (net of eligible collateral and the allowance for loan losses), deposits with banks (including central banks), acceptances, other monetary assets, issued letters of credit net of participations, and unused commitments to extend credit. Excludes intra-day and operating exposures, such as those from settlement and clearing activities. |
| | (c) | Includes market-making inventory, AFS securities, and counterparty exposure on derivative and securities financings net of eligible collateral and hedging. |
| | (d) | Includes exposure from single reference entity (“single-name”), index and other multiple reference entity transactions for which one or more of the underlying reference entities is in a country listed in the above table. |
| | (e)(d) | Includes capital invested in local entities andPredominantly includes physical commodity inventory. |
| | (e) | The country rankings presented in the table as of December 31, 2018, are based on the country rankings of the corresponding exposures at December 31, 2019, not actual rankings of such exposures at December 31, 2018. |
| | | | 130128 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | | | | OPERATIONAL RISK MANAGEMENT |
Operational riskisthe risk associated with an adverse outcome resulting from inadequate or failed internal processes peopleor systems; human factors; or external events impacting the Firm’s processes or systems;it includes compliance, conduct, legal, and systems, or from external events; operational risk includes cybersecurity risk, businessestimations and technology resiliency risk, payment fraud risk, and third-party outsourcingmodel risk.Operational risk is inherent in the Firm’s activities and can manifest itself in various ways, including fraudulent acts, business interruptions, cybersecurity attacks, inappropriate employee behavior, failure to comply with applicable laws and regulations or failure of vendors to perform in accordance with their arrangements. These events could result in financial losses, litigation and regulatory fines, as well as other damagesagreements. Operational Risk Management attempts to the Firm. The goal is to keepmanage operational risk at appropriate levels in light of the Firm’s financial position, the characteristics of its businesses, and the markets and regulatory environments in which it operates. Operational Risk Management Framework To monitorThe Firm’s Compliance, Conduct, and control operational risk, the Firm has an Operational Risk (“CCOR”) Management Framework (“ORMF”) which is designed to enable the Firm to maintain a soundgovern, identify, measure, monitor and well-controlledtest, manage and report on the Firm’s operational environment. The ORMF has four main components: Governance,risk.
Operational Risk Identification and Assessment, Measurement, and Monitoring and Reporting. Governance The linesLOBs and Corporate hold ownership, responsibility and accountability for the management of business and corporate functions are responsible for owning and managing their operational risks.risk. The Firmwide Oversight and Control Group,Management Organization, which consists of control officersmanagers within each line of businessLOB and corporate function,Corporate, is responsible for the day-to-day execution of the ORMF.CCOR Framework and the evaluation of the effectiveness of their control environments to determine where targeted remediation efforts may be required. Line of businessLOBs and corporate functionCorporate control committees overseeare responsible for reviewing data that indicates the operational riskquality and control environmentsstability of their respective businesses and functions. These committees escalateprocesses, addressing key operational risk issues, to the FCC, as appropriate. For additional informationfocusing on the FCC, see Enterprise-wide Risk Management on pages 75–137.processes with control concerns, and overseeing control remediation.
The Firmwide Risk ExecutiveFirm’s Global Chief Compliance Officer (“CCO”) and FRE for Operational Risk Governance (“ORG”), a direct report to the CRO, is responsible for defining the ORMFCCOR Management Framework and establishing minimum standards for its execution. Operational Risk Officers (“OROs”) report to both the line of businessLOB CROs and to the FirmwideFRE for Operational Risk, Executive for ORG, and are independent of the respective businesses or corporate functions they oversee. The Firm’s Operational Risk Governance Policy is approved by the DRPC. ThisCCOR Management policy establishes the Operational RiskCCOR Management Framework for the Firm. The CCOR Management Framework is articulated in the Risk Governance and Oversight Policy which is reviewed and approved by the Board Risk Committee periodically.Operational Risk identification and assessment The Firm utilizes several tools to identify, assess, mitigatea structured risk and manage its operational risk. One such tool is the Risk and Control Self-Assessment (“RCSA”) program whichcontrol self-assessment process that is executed by the LOBs and corporate functions in accordance with the minimum standards established by ORG.Corporate. As part of this process, the RCSA program, lines of businessLOBs and corporate functions identify key operational risks inherent in their activities, evaluate the effectiveness of relevant controls in place to mitigate identified risks, and define actions to reduce residual risk. Action plans are developed for identified control issues and businesses and corporate functions are held accountable for tracking and resolving issues in a timely manner. Operational Risk Officers independently challenge the execution of the RCSA program and evaluate the appropriateness of the residual risk results. In addition to the RCSA program, the Firm tracks and monitors events that have led to or could lead to actual operational risk losses, including litigation-related events. Responsible businesses and corporate functions analyze their losses toCorporate evaluate the effectiveness of their control environment to assess where controls have failed, and to determine where targeted remediation efforts may be required. ORG CCOR Management
provides oversight of these activities and may also perform independent assessments of significant operational risk events and areas of concentrated or emerging risk. Operational Risk Measurement CCOR Management performs independent risk assessments of the Firm’s operational risks, which includes assessing the effectiveness of the control environment and reporting the results to senior management. In addition, to the level of actual operational risk losses, operationaloperational risk measurement includes operational risk-based capital and operational risk loss projections under both baseline and stressed conditions. The primary component of the operational risk capital estimate is the Loss Distribution Approach (“LDA”) statistical model, which simulates the frequency and severity of future operational risk loss projections based on historical data. The LDA model is used to estimate an aggregate operational risk loss over a one-year time horizon, at a 99.9% confidence level. The LDA model incorporates actual internal operational risk losses in the quarter following the period in which those losses were realized, and the calculation generally continues to reflect such losses even after the issues or business activities giving rise to the losses have been remediated or reduced. As required under the Basel III capital framework, the Firm’s operational risk-based capital methodology, which uses the Advanced Measurement Approach (“AMA”), incorporates internal and external losses as well as management’s view of tail risk captured through operational risk scenario analysis, and evaluation of key business environment and internal control metrics. The Firm does not reflect the impact of insurance in its AMA estimate of operational risk capital.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 131 |
Management’s discussion and analysis
The Firm considers the impact of stressed economic conditions on operational risk losses and develops a forward looking view of material operational risk events that may occur in a stressed environment. The Firm’s operational risk stress testing framework is utilized in calculating results for the Firm’s CCAR and ICAAPother stress testing processes. ForRefer to Capital Risk Management section, on pages 85–92 for information related to operational risk RWA, CCAR or ICAAP, see Capitaland CCAR.
Operational Risk Management section, pages 82–91. Monitoring and reportingtesting ORGThe results of risk assessments performed by CCOR Management are leveraged as one of the key criteria in the independent monitoring and testing of the LOBs and Corporate’s compliance with laws and regulation. Through monitoring and testing, CCOR Management independently identifies areas of operational risk and tests the effectiveness of controls within the LOBs and Corporate.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 129 |
Management’s discussion and analysis
Management of Operational Risk The operational risk areas or issues identified through monitoring and testing are escalated to the LOBs and Corporate to be remediated through action plans, as needed, to mitigate operational risk. CCOR Management may advise the LOBs and Corporate in the development and implementation of action plans. Operational Risk Reporting Escalation of risks is a fundamental expectation for employees at the Firm. Risks identified by CCOR Management are escalated to the appropriate LOB and Corporate Control Committees, as needed. CCOR Management has established standards forto ensure that consistent operational risk monitoringreporting and reporting.operational risk reports are produced on a Firmwide basis as well as by LOBs and Corporate. Reporting includes the evaluation of key risk indicators and key performance indicators against established thresholds as well as the assessment of different types of operational risk against stated risk appetite. The standards also reinforce escalation protocols to senior management and to the Board of Directors. Operational risk reports are produced on a firmwide basis as well as by line of business and corporate function. Subcategories and examples of operational risks As mentioned previously, operationalOperational risk can manifest itself in various ways. Operational risk subcategories such as Compliance risk, Conduct risk, Legal risk, and Estimations and Model risk as well as other operational risks, can lead to losses which are captured through the Firm’s operational risk measurement processes. Moreprocesses. Refer to pages 132, 133, and 134, respectively for more information on Compliance, risk, Conduct, risk, Legal, risk and Estimations and Model risk subcategories are discussed on pages 134, 135, 136 and 137, respectively.risk. Details on other select examples of operational risks are provided below.
Cybersecurity risk Cybersecurity risk is an important, continuous and evolving focus for the Firm. The Firm devotes significant resources to protecting and continuing to improve the security of the Firm’sits computer systems, software, networks and other technology assets. The Firm’s security efforts are intendeddesigned to protect against, among other things, cybersecurity attacks by unauthorized parties attempting to obtain access to confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage. The Firm continues to make significant investments in enhancing its cyberdefense capabilities and to strengthen its partnerships with the appropriate government and law enforcement agencies and other businesses in order to understand the full spectrum of cybersecurity risks in the operating environment, enhance defenses and improve resiliency against cybersecurity threats. The Firm actively participates in discussions of cybersecurity risks with law enforcement, government officials, peer and industry groups, and has significantly increased efforts to educate employees and certain clients on the topic. Third parties with which the Firm does business or that facilitate the Firm’s business activities (e.g., vendors, exchanges, clearing houses, central depositories, and financial intermediaries) couldare also be sources of cybersecurity risk to the Firm. Third party cybersecurity incidents such as system breakdowns or failures, misconduct by the employees of such parties, or cyberattacks could affect their ability to deliver a product or service to the Firm or result in lost or compromised information of the Firm or its clients. Clients canare also be sources of cybersecurity risk to the Firm, particularly when their activities and systems are beyond the Firm’s own security and control systems. As a result, the Firm engages in regular and ongoing discussions with certain vendors and clients regarding cybersecurity risks and opportunities to improve security. However, where cybersecurity incidents are due tooccur as a result of client failurefailures to maintain the security of their own systems and processes, clients will generally beare responsible for losses incurred. To protect the confidentiality, integrity and availability of the Firm’s infrastructure, resources and information, the Firm leverages the ORMFmaintains a cybersecurity program designed to ensure risks are identifiedprevent, detect, and managed within defined corporate tolerances.respond to cyberattacks. The Firm’s Board of Directors and the Audit Committee are regularly briefedis updated periodically on the Firm’s Information Security Program, recommended changes, cybersecurity policies and practices, and ongoing efforts to improve security, as well as its efforts regarding significant cybersecurity events. In addition, the Firm has a cybersecurity incident response plan (“IRP”) designed to enable the Firm to respond to attempted cybersecurity incidents, coordinate such responses with law enforcement and other government agencies, and notify clients and customers, as applicable. Among other key focus areas, the IRP is designed to mitigate the risk of insider trading connected to a cybersecurity incident, and includes various escalation points. The Cybersecurity and Technology Control functions are responsible for governance and oversight of the Firm’s Information Security Program. In partnership with the Firm’s LOBs and Corporate, the Cybersecurity and Technology Control organization identifies information security risk issues and oversees programs for the technological protection of the Firm’s information resources including applications, infrastructure as well as confidential and personal information related to the Firm’s customers. The Cybersecurity and Technology organization is comprised of business aligned information security managers that are supported within the organization by the following products that execute the Information Security Program for the Firm: Cyber Defense & Fraud Data Management, Protection & Privacy Identity & Access Management Governance & Controls Production Management & Resiliency Software & Platform Enablement The Global Cybersecurity and Technology Control governance structure is designed to identify, escalate, and mitigate information security risks. This structure uses key governance forums to disseminate information and monitor
| | | | 130 | | JPMorgan Chase & Co./2019 Form 10-K |
technology efforts. These forums are established at multiple levels throughout the Firm and include representatives from each LOB and Corporate. Reports containing overviews of key technology risks and efforts to enhance related controls are produced for these forums, and are reviewed by management at multiple levels. The forums are used to escalate information security risks or other matters as appropriate. The IRM function provides oversight of the activities designed to identify, assess, measure, and mitigate cybersecurity risk. The Firm’s Security Awareness Program includes training that reinforces the Firm's Information Technology Risk and Security Management policies, standards and practices, as well as the expectation that employees comply with these policies. The Security Awareness Program engages personnel through training on how to identify potential cybersecurity risks and protect the Firm’s resources and information. This training is mandatory for all employees globally on a periodic basis, and it is supplemented by Firmwide testing initiatives, including periodic phishing tests. Finally, the Firm’s Global Privacy Program requires all employees to take periodic awareness training on data privacy. This privacy-focused training includes information about confidentiality and security, as well as responding to unauthorized access to or use of information. Business and technology resiliency risk Business disruptions can occur due to forces beyond the Firm’s control such as severe weather, power or telecommunications loss, accidents, failure of a third party to provide expected services, cyberattack, flooding, transit strikes, terrorist threatsterrorism, health emergencies, the spread of infectious diseases or infectious disease.pandemics. The safety of the Firm’s employees and customers is of the highest priority. The Firm’s globalFirmwide resiliency program is intended to enable the Firm to recover its critical business functions and supporting assets (i.e., staff, technology and facilities) in the event of a business interruption. The program includes corporate governance, awareness training, and training,testing of recovery strategies, as well as strategic and tactical initiatives to identify, assess, and manage business interruption and public safety risks. The strength and proficiency of the Firm’s globalFirmwide resiliency program has played an integral role in maintaining the Firm’s business operations during and after various events.
Payment fraud risk Payment fraud risk is the risk of external and internal parties unlawfully obtaining personal monetary benefit through misdirected or otherwise improper payment, and exposing the Firm to financial or reputational harm. Over the past year, thepayment. The risk of payment fraud remainedremains at a heightened level across the industry. The complexities of these attacks along with perpetrators’incidents and the strategies used by perpetrators continue to evolve. AUnder the Payments Control Program, has been established that includes Cybersecurity, Operations, Technology, Risk and the lines of business to managemethods are developed for managing the risk, implementimplementing controls, and provideproviding employee and client education and awareness training. In addition, a new wholesale fraud detection solution has been introduced which monitors high value payments for certain anomalies.trainings. The Firm’s monitoring of customer behavior is periodically evaluated and enhanced and attemptsin an effort to detect and mitigate new strategies implemented by fraud perpetrators. The Firm’s consumer and wholesale businesses collaborate closely to deploy risk mitigation controls across their businesses.
| | | | 132 | | JPMorgan Chase & Co./2017 Annual Report |
Third-party outsourcing risk To identify and manage the operational risk inherent in its outsourcing activities, the Firm has aThe Firm‘s Third-Party Oversight (“TPO”) and Inter-affiliates Oversight (“IAO”) framework to assist lines of businessthe LOBs and corporate functionsCorporate in selecting, documenting, onboarding, monitoring and managing their supplier relationships.relationships including services provided by affiliates. The objectiveobjectives of the TPO framework is to hold third partiessuppliers to the samea high level of operational performance as is expected of the Firm’s internal operations.and to mitigate key risks including data loss and business disruption. The Corporate Third-Party Oversight group is responsible for Firmwide TPO training, monitoring, reporting and standards.
Insurance One of the ways in which operational risk may be mitigated is through insurance maintained by the Firm. The Firm purchases insurance from commercial insurers and utilizesmaintains a wholly-owned captive insurer, Park Assurance Company, to ensure compliance with local laws and regulations (e.g., workers compensation), as well as to serve other needs (e.g., property loss and public liability).Company. Insurance may also be required by third parties with whom the Firm does business. The insurance purchased is reviewed and approved by senior management.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 133131 |
Management’s discussion and analysis
| | | | | | COMPLIANCE RISK MANAGEMENT |
Compliance risk, a subcategory of operational risk, is the risk of failurefailing to comply with applicable laws, rules, regulations or codes of conduct and regulations.standards of self-regulatory organizations. Overview Each lineLOB and Corporate hold primary ownership of business and function is accountableaccountability for managing its compliance risk. The Firm’s Compliance Organization (“Compliance”), which is independent of the lines of business, works closely with senior management to provideLOBs, provides independent review, monitoring and oversight of business operations with a focus on compliance with the legal and regulatory obligations applicable to the delivery of the Firm’s products and services to clients and customers. These compliance risks relate to a wide variety of legal and regulatory obligations, depending on the line of businessLOB and the jurisdiction, and include thoserisks related to financial products and services, relationships and interactions with clients and customers, and employee activities. For example, compliance risks include those associated with anti-money laundering compliance, trading activities, market conduct, and complying with the rules and regulations related to the offering of products and services across jurisdictional borders, among others.borders. Compliance risk is also inherent in the Firm’s fiduciary activities, including the failure to exercise the applicable high standard of care (such as the duties of loyalty or care), to act in the best interest of clients and customers or to treat clients and customers fairly. Other Functionsfunctions provide oversight of significant regulatory obligations that are specific to their respective areas of responsibility. ComplianceCCOR Management implements various practicespolicies and standards designed to govern, identify, measure, monitor and mitigatetest, manage, and report compliance risk by establishing policies, testing, monitoring, training and providing guidance.risk.
Governance and oversight Compliance is led by the Firms’Firm’s Global CCO who reports to the Firm’s CRO.and FRE for Operational Risk. The Firm maintains oversight and coordination of its Compliancecompliance risk through the implementation of the CCOR Risk Management practices through the Firm’s CCO, lines of business CCOs and regional CCOs to implement the Compliance program globally across the lines of business and regions. The Firm’s CCO is a member of the FCC and the FRC.Framework. The Firm’s CCO also provides regular updates to the Audit Committee and DRPC.the Board Risk Committee. In addition, certain Special Purpose Committees of the Board have previously been established to oversee the Firm’s compliance with regulatory Consent Orders.
Code of Conduct The Firm has a Code of Conduct (the “Code”). Each employee is given annual training on the Code and is required annually to affirm his or her compliance with the Code. All new hires must complete Code training shortly after their start date with the Firm. The Code that sets forth the Firm’s expectation that employees will conduct themselves with integrity at all times and provides the principles that govern employee conduct with clients, customers, shareholders and one another, as well as with the markets and communities in which the Firm does business.The Code requires employees to promptly report any known or suspected violation of the Code, any internal Firm policy, or any law or regulation applicable to the Firm’s business. It also requires employees to report any illegal conduct, or conduct that violates the underlying principles of the Code, by any of the Firm’s employees, clients, customers, suppliers, contract workers, business partners, or agents. TheAll newly hired employees are assigned Code prohibits retaliation against anyone who raisestraining and current employees are periodically assigned Code training on an issue or concern in good faith. Specifiedongoing basis. Employees are required to affirm their compliance officers are specially trained and designated as “code specialists” who act as a resource to employees on questions related towith the Code. Code periodically. Employees can report any knownpotential or suspectedactual violations of the Code through the Code Reporting Hotline by phone or the internet. The Hotline is anonymous, except in certain non-U.S. jurisdictions where laws prohibit anonymous reporting, and is available 24/7at all times globally, with translation services. It is maintainedadministered by an outside service provider. Annually, the Chief Compliance Office and Human Resources report toThe Code prohibits retaliation against anyone who raises an issue or concern in good faith. Periodically, the Audit Committee receives reports on the Code of Conduct program and provide an update on the employee completion rate for Code of Conduct training and affirmation.program.
| | | | 132 | | JPMorgan Chase & Co./2017 Annual Report | | 1342019 Form 10-K |
Conduct risk, a subcategory of operational risk, is the risk that any action or inaction by an employee of the Firmor employees could lead to unfair client/client or customer outcomes, compromise the Firm’s reputation, impact the integrity of the markets in which the Firm operates, or reflect poorly oncompromise the Firm’s culture.reputation. Overview Each line of business or functionLOB and Corporate is accountable for identifying and managing its conduct risk to provide appropriate engagement, ownership and sustainability of a culture consistent with the Firm’s How We Do Business Principles (“Principles”(the “Principles”). The Principles serve as a guide for how employees are expected to conduct themselves. With the Principles serving as a guide, the Firm’s Code sets out the Firm’s expectations for each employee and provides information and resources to help employeesemployees conduct business ethically and in compliance with the lawlaws everywhere the Firm operates. ForRefer to Compliance Risk Management on page 132 for further discussion of the Code, see Compliance Risk Management on page 134.Code. Governance and oversight The CMDCConduct Risk Program is governed by the Board-levelCCOR Management policy, which establishes the framework for governance, identification, measurement, monitoring and testing, management and reporting conduct risk in the Firm. The Conduct Risk Steering Committee with primary(CRSC) provides oversight of the firm’s CultureFirm’s conduct initiatives to develop a more holistic view of conduct risks and Conduct Program. The Audit Committee is responsible for reviewingto connect key programs across the program established by managementFirm in order to monitor compliance withidentify opportunities and emerging areas of focus. Each committee of the Code. Additionally,Board oversees conduct risks within its scope of responsibilities, and the DRPC reviews, at least annually, the Firm’s qualitative factors included in the Risk Appetite Framework, including conduct risk. The DRPC also meets annually with the CMDCCRSC may escalate to review and discuss aspects of the Firm’s compensation practices. Finally, the Culture & Conduct Risk Committee provides oversight of certain culture and conduct risk initiatives at the Firm.such committees as appropriate.
Conduct risk management is incorporated intoencompasses various aspects of people management practices throughout the employee life cycle, including recruiting, onboarding, training and development, performance management, promotion and compensation processes. Businesses undertake annual RCSA assessments,Each LOB, Treasury and as part of these reviews, identify their respective key inherent operational risks (including conduct risks), evaluate the design and effectiveness of their controls, identify control gaps and develop associated action plans. Each LOBCIO, and designated corporate functionfunctions completes an assessment of conduct risk quarterly,periodically, reviews metrics and issues which may involve conduct risk, and provides business conduct training as appropriate.
The Firm’s Know Your Employee framework generally addresses how the Firm manages, oversees and responds to workforce conduct related matters that may otherwise expose the Firm to financial, reputational, compliance and other operating risks. The Firm also has a HR Control Forum, the primary purpose of which is to discuss conduct and accountability for more significant risk and control issues and review, when appropriate, employee actions including but not limited to promotion and compensation actions.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 135133 |
Management’s discussion and analysis
Legal risk, a subcategory of operational risk, is the risk of loss primarily caused by the actual or alleged failure to meet legal obligations that arise from the rule of law in jurisdictions in which the Firm operates, agreements with clients and customers, and products and services offered by the Firm. Overview The global Legal function (“Legal”) provides legal services and advice to the Firm. Legal is responsible for managing the Firm’s exposure to Legallegal risk by: managing actual and potential litigation and enforcement matters, including internal reviews and investigations related to such matters advising on products and services, including contract negotiation and documentation advising on offering and marketing documents and new business initiatives managing dispute resolution interpreting existing laws, rules and regulations, and advising on changes thereto advising on advocacy in connection with contemplated and proposed laws, rules and regulations, and providing legal advice to the LOBs and corporate functions,Corporate, in alignment with the lines of defense described under Enterprise-wideFirmwide Risk Management.Management on pages 79–83. Legal selects, engages and manages outside counsel for the Firm on all matters in which outside counsel is engaged. In addition, Legal advises the Firm’s Conflicts Office which reviews the Firm’s wholesale transactions that may have the potential to create conflicts of interest for the Firm. Governance and oversight The Firm’s General Counsel reports to the CEO and is a member of the Operating Committee, the Firmwide Risk Committee and the Firmwide Control Committee. The General Counsel’s leadership team includes a General Counsel for each line of business, the heads of the Litigation and Corporate & Regulatory practices, as well as the Firm’s Corporate Secretary. Each region (e.g., Latin America, Asia Pacific) has a General Counsel who is responsible for managing legal risk across all lines of business and functions in the region. The Firm’s General Counsel and other members of Legal report on significant legal matters at each meeting ofto the Firm’s Board of Directors at least quarterly to the Audit Committee, and periodically to the DRPC.Audit Committee.
Legal serves on and advises various committees (including new business initiative and reputation risk committees) and advises the Firm’s businesses to protect the Firm’sLOBs and Corporate on potential reputation beyond any particular legal requirements.risk issues.
| | | | 136134 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | | | | ESTIMATIONS AND MODEL RISK MANAGEMENT |
Estimations and Model risk, a subcategory of operational risk, is the potential for adverse consequences from decisions based on incorrect or misused estimation outputs. The Firm uses models and other analytical and judgment-based estimations across various businesses and functions. The estimation methods are of varying levels of sophistication and are used for many purposes, such as the valuation of positions and measurement of risk, assessing regulatory capital requirements, conducting stress testing, and making business decisions. A dedicated independent function, Model Risk Governance and Review (“MRGR”), defines and governs the Firm’s policies relating to the management of model risk management policies and risks associated with certain analytical and judgment-based estimations, such as those used in risk management, budget forecasting and capital planning and analysis. MRGR reports The governance of analytical and judgment-based estimations within MRGR’s scope follows a consistent approach to the Firm’s CRO.approach used for models, which is described in detail below. Model risks are owned by the users of the models within the various businesses and functions in the Firm based on the specific purposes of such models. Users and developers of models are responsible for developing, implementing and testing their models, as well as referring models to the Model Risk function for review and approval. Once models have been approved, model users and developers are responsible for maintaining a robust operating environment, and must monitor and evaluate the performance of the models on an ongoing basis. Model users and developers may seek to enhance models in response to changes in the portfolios and in product and market developments, as well as to capture improvements in available modeling techniques and systems capabilities. Models are tiered based on an internal standard according to their complexity, the exposure associated with the model and the Firm’s reliance on the model. This tiering is subject to the approval of the Model Risk function. AIn its review of a model, review conducted by the Model Risk function considers whether the model’s suitabilitymodel is suitable for the specific uses topurposes for which it will be put. The factors considered in reviewing a model include whether the model accurately reflects the characteristics of the product and its significant risks, the selection and reliability of model inputs, consistency with models for similar products, the appropriateness of any model-related adjustments, and sensitivity to input parameters and assumptions that cannot be observed from the market.used. When reviewing a model, the Model Risk function analyzes and challenges the model methodology and the reasonableness of model assumptions, and may perform or require additional testing, including back-testing of model outcomes. Model reviews are approved by the appropriate level of management within the Model Risk function based on the relevant model tier. Under the Firm’s Estimations and Model Risk Management Policy, the Model Risk function reviews and approves new models, as well as material changes to existing models, prior to implementation in the operating environment. In certain circumstances the head of the Model Risk functionexceptions may grant exceptionsbe granted to the Firm’s policy to allow a model to be used prior to review or approval. The Model Risk function may also require the user to take appropriate actions to mitigate the model risk if it is to be used in the interim. These actions will depend on the model and may include, for example, limitation of trading activity. The governance of analytical and judgment-based estimations, such as those used in risk management, budget forecasting, and capital planning and analysis, within MRGR’s scope, follows a consistent approachRefer to the governance of models.
For a summary of valuations based on valuation models and other valuation techniques, see Critical Accounting Estimates Used by the Firm on pages 138–140136–138 and Note 2.2 for a summary of model-based valuations and other valuation techniques.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 137135 |
Management’s discussion and analysis
| | | | | | CRITICAL ACCOUNTING ESTIMATES USED BY THE FIRM |
JPMorgan Chase’s accounting policies and use of estimates are integral to understanding its reported results. The Firm’s most complex accounting estimates require management’s judgment to ascertain the appropriate carrying value of assets and liabilities. The Firm has established policies and control procedures intended to ensure that estimation methods, including any judgments made as part of such methods, are well-controlled, independently reviewed and applied consistently from period to period. The methods used and judgments made reflect, among other factors, the nature of the assets or liabilities and the related business and risk management strategies, which may vary across the Firm’s businesses and portfolios. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The Firm believes its estimates for determining the carrying value of its assets and liabilities are appropriate. The following is a brief description of the Firm’s critical accounting estimates involving significant judgments. Allowance for credit losses JPMorgan Chase’sThe Firm’s allowance for credit losses covers the retained consumer and wholesale loan portfolios, as well as the Firm’s wholesale and certain consumer lending-related commitments. The allowance for loan losses is intended to adjust the carrying value of the Firm’s loan assetsloans to reflect probable credit losses inherent in the loan portfolio as of the balance sheet date. Similarly, the allowance for lending-related commitments is established to cover probable credit losses inherent in the lending-related commitments portfolio as of the balance sheet date.
The allowance for credit losses includes a formula-based component, an asset-specific component, and a component related to PCI loans. The determination of each of these components involves significant judgment on a number of matters. ForRefer to Allowance for credit losses on pages 116–117 and Note 13 for further discussion ofinformation on these components, areas of judgment and methodologies used in establishing the Firm’s allowance for credit losses, see Note 13.losses. Allowance for credit losses sensitivity The Firm’s allowance for credit losses is sensitive to numerous factors, which may differ depending on the portfolio. Changes in economic conditions or in the Firm’s assumptions and estimates could affect its estimate of probable credit losses inherent in the portfolio at the balance sheet date. The Firm uses its best judgment to assess these economic conditions and loss data in estimating the allowance for credit losses and these estimates are subject to periodic refinement based on changes to underlying external or Firm-specific historical data. The use of alternate estimates, data sources, adjustmentsRefer to modeled loss estimates for model imprecision and other factors would result in a different estimated allowance for credit losses, as well as impact any related sensitivities described below. During the second quarter of 2017, the Firm refined its loss estimates relating to the wholesale credit portfolio. See Note 13 for further discussion. To illustrate the potential magnitude of certain alternate judgments, the Firm estimates that changes in the following inputs would have the following effects on the Firm’s modeled credit loss estimates as of December 31, 2017,2019, without consideration of any offsetting or correlated effects of other inputs in the Firm’s allowance for loan losses: A combined 5% decline in housing prices and a 100 basis point increase in unemployment rates from current levelsexpectations could imply: | | ◦ | an increase to modeled credit loss estimates of approximately $525$250 million for PCI loans. |
| | ◦ | an increase to modeled annual credit loss estimates of approximately $100$50 million for residential real estate loans, excluding PCI loans. |
For credit card loans, a 100 basis point increase in unemployment rates from current levelsexpectations could imply an increase to modeled annual credit loss estimates of approximately $1.0 billion.$850 million. An increase in PDprobability of default (“PD”) factors consistent with a one-notch downgrade in the Firm’s internal risk ratings for its entire wholesale loan portfolio could imply an increase in the Firm’s modeled credit loss estimates of approximately $1.4$1.6 billion. A 100 basis point increase in estimated loss given default (“LGD”) for the Firm’s entire wholesale loan portfolio could imply an increase in the Firm’s modeled credit loss estimates of approximately $175$200 million. The purpose of these sensitivity analyses is to provide an indication of the isolated impacts of hypothetical alternative assumptions on modeled loss estimates. The changes in the inputs presented above are not intended to imply management’s expectation of future deterioration of those risk factors. In addition, these analyses are not intended to estimate changes in the overall allowance for loan losses, which would also be influenced by the judgment management applies to the modeled loss estimates to reflect the uncertainty and imprecision of these modeled loss estimates based on then-current circumstances and conditions. It is difficult to estimate how potential changes in specific factors might affect the overall allowance for credit losses because management considers a variety of factors and inputs in estimating the allowance for credit losses. Changes in these factors and inputs may not occur at the same rate and may not be consistent across all geographies or product types, and changes in factors may be directionally inconsistent, such that improvement in one factor may offset deterioration in other factors. In addition, it is difficult to predict how changes in specific economic conditions or assumptions could affect borrower behavior or other factors considered by management in estimating the allowance for credit losses. Given the process the Firm follows and the judgments made in evaluating the risk factors related to its loss estimates, management believes that its current estimate of the allowance for credit losses is appropriate.
| | | | 138 | | JPMorgan Chase & Co./2017 Annual Report |
Fair value of financial instruments, MSRs and commodities inventory JPMorgan Chase carries a portion of its assets and liabilities at fair value. The majority of such assets and liabilities are measured at fair value on a recurring basis.basis, including, derivatives and structured note products. Certain assets and liabilities are measured at fair value on a nonrecurring basis, including certain mortgage, home equity and other
| | | | 136 | | JPMorgan Chase & Co./2019 Form 10-K |
loans, where the carrying value is based on the fair value of the underlying collateral. Assets measured at fair value The following table includes the Firm’s assets measured at fair value and the portion of such assets that are classified within level 3 of the valuation hierarchy. ForRefer to Note 2 for further information, see Note 2.information. | | December 31, 2017 (in billions, except ratio data) | Total assets at fair value | Total level 3 assets | | December 31, 2019 (in billions, except ratios) | | Total assets at fair value | Total level 3 assets | Trading debt and equity instruments | $ | 325.3 |
| | $ | 5.4 |
| $ | 361.3 |
| | $ | 3.4 |
| Derivative receivables(a) | 56.5 |
| | 6.0 |
| 49.7 |
| | 4.7 |
| Trading assets | 381.8 |
| | 11.4 |
| 411.0 |
| | 8.1 |
| AFS securities | 202.2 |
| | 0.3 |
| 350.7 |
| | — |
| Loans | 2.5 |
| | 0.3 |
| 7.1 |
| | — |
| MSRs | 6.0 |
| | 6.0 |
| 4.7 |
| | 4.7 |
| Other | 33.2 |
| | 1.2 |
| 29.3 |
| | 0.7 |
| Total assets measured at fair value on a recurring basis | 625.7 |
| | 19.2 |
| 802.8 |
| | 13.5 |
| Total assets measured at fair value on a nonrecurring basis | 1.3 |
| | 0.8 |
| 4.8 |
| | 1.3 |
| Total assets measured at fair value | $ | 627.0 |
| | $ | 20.0 |
| $ | 807.6 |
| | $ | 14.8 |
| Total Firm assets | $ | 2,533.6 |
| | | $ | 2,687.4 |
| | | Level 3 assets as a percentage of total Firm assets(a) | | | 0.8 | % | | | 0.6 | % | Level 3 assets as a percentage of total Firm assets at fair value(a) | | | 3.2 | % | | | 1.8 | % |
| | (a) | For purposes of the table above, the derivative receivables total reflects the impact of netting adjustments; however, the $6.0$4.7 billion of derivative receivables classified as level 3 does not reflect the netting adjustment as such netting is not relevant to a presentation based on the transparency of inputs to the valuation of an asset. The level 3 balances would be reduced if netting were applied, including the netting benefit associated with cash collateral. |
Valuation Details of the Firm’s processes for determining fair value are set out in Note 2. Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available to the Firm. For instruments valued using internally developed valuation models and other valuation techniques that use significant unobservable inputs and are therefore classified within level 3 of the valuation hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2. In arriving at an estimate of fair value for an instrument within level 3, management must first determine the appropriate valuation technique to use. Second, the lack of observability of certain significant inputs requires management to assess all relevant empirical data in deriving valuation inputs including, for example, transaction details, yield curves, interest rates, prepayment rates, default rates, volatilities, correlations, equity or debt prices, valuations of comparable instruments, foreign exchange rates and credit curves. ForRefer to Note 2 for a further discussion of the valuation of level 3 instruments, including unobservable inputs used, see Note 2.used. For instruments classified in levels 2 and 3, management judgment must be applied to assess the appropriate level of valuation adjustments to reflect counterparty credit quality, the Firm’s creditworthiness, market funding rates, liquidity considerations, unobservable parameters, and for portfolios that meet specified criteria, the size of the net open risk position. The judgments made are typically affected by the type of product and its specific contractual terms, and the level of liquidity for the product or within the market as a whole. ForRefer to Note 2 for a further discussion of valuation adjustments applied by the Firm see Note 2.Firm. Imprecision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. Furthermore, while the Firm believes its valuation methods are appropriate and consistent with those of other market participants, the methods and assumptions used reflect management judgment and may vary across the Firm’s businesses and portfolios. The Firm uses various methodologies and assumptions in the determination of fair value. The use of methodologies or assumptions different than those used by the Firm could result in a different estimate of fair value at the reporting date. ForRefer to Note 2 for a detailed discussion of the Firm’s valuation process and hierarchy, and its determination of fair value for individual financial instruments, see Note 2.instruments. Goodwill impairment Under U.S. GAAP, goodwill must be allocated to reporting units and tested for impairment at least annually. The Firm’s process and methodology used to conduct goodwill impairment testing is described in Note 15. Management applies significant judgment when estimatingtesting goodwill for impairment. The goodwill associated with each business combination is allocated to the fair value of its reporting units. Estimates of fair value are dependent upon estimates of the future earnings potential of the Firm’srelated reporting units long-term growth rates andfor goodwill impairment testing. For the year ended December 31, 2019, the Firm reviewed current economic conditions, estimated market cost of equity. Imprecision in estimating these factors can affect the estimated fair valueequity, as well as actual and projections of the reporting units. business performance for all its businesses. Based upon the updated valuations for all of its reporting units,such reviews, the Firm concluded that the goodwill allocated to its reporting units was not impaired atas of December 31, 2017.2019. The fair values of these reporting units exceeded their carrying values by approximately 15% or higher and did not indicate a significant risk of goodwill impairment based on current projections and valuations. Such valuations do not reflect the impact of the TCJA that was enacted in December 2017 as such impact would not alter the conclusion that goodwill is not impaired. The projections for all of the Firm’s reporting units are consistent with management’s current short-term business outlook assumptions, and in the longer term, incorporate a set of macroeconomic assumptions and the Firm’s best estimates of long-term growth and returns on equity of its
| | | | JPMorgan Chase & Co./2017 Annual Report | | 139 |
Management’s discussion and analysis
businesses. Where possible, the Firm uses third-party and peer data to benchmark its assumptions and estimates. Declines in business performance, increases in credit losses, increases in capital requirements, as well as deterioration in economic or market conditions, adverse estimates of regulatory or legislative changes or increases in the estimated market cost of equity, could cause the estimated fair values of the Firm’s reporting units or their associated goodwillRefer to decline in the future, which could result in a material impairment charge to earnings in a future period related to some portion of the associated goodwill.
ForNote 15 for additional information on goodwill, see Note 15.including the goodwill impairment assessment as of December 31, 2019.
Credit card rewards liability JPMorgan Chase offers credit cards with various rewardrewards programs which allow cardholders to earn rewardrewards points based on their account activity and the terms and conditions of the rewards program. Generally, there are no limits on the points that an eligible cardholder can earn, nor
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 137 |
Management’s discussion and analysis
do theythe points expire, and thesethe points can be redeemed for a variety of rewards, including cash (predominantly in the form of account credits), gift cards and travel. The Firm maintains a rewards liability which represents the estimated cost of rewardrewards points earned and expected to be redeemed by cardholders. The rewards liability is sensitive to various assumptions, including cost per point and redemption rates for each of the various rewardrewards programs, which are evaluated periodically. The liability is accrued as the cardholder earns the benefit and is reduced when the cardholder redeems points. This liability was $4.9$6.4 billion and $3.8$5.8 billion at December 31, 20172019 and 2016,2018, respectively, and is recorded in accounts payable and other liabilities on the Consolidated balance sheets. Income taxes JPMorgan Chase is subject to the income tax laws of the various jurisdictions in which it operates, including U.S. federal, state and local, and non-U.S. jurisdictions. These laws are often complex and may be subject to different interpretations. To determine the financial statement impact of accounting for income taxes, including the provision for income tax expense and unrecognized tax benefits, JPMorgan Chase must make assumptions and judgments about how to interpret and apply these complex tax laws to numerous transactions and business events, as well as make judgments regarding the timing of when certain items may affect taxable income in the U.S. and non-U.S. tax jurisdictions. JPMorgan Chase’s interpretations of tax laws around the world are subject to review and examination by the various taxing authorities in the jurisdictions where the Firm operates, and disputes may occur regarding its view on a tax position. These disputes over interpretations with the various taxing authorities may be settled by audit, administrative appeals or adjudication in the court systems of the tax jurisdictions in which the Firm operates. JPMorgan Chase regularly reviews whether it may be assessed additional income taxes as a result of the resolution of these matters, and the Firm records additional reserves as appropriate. In addition, the Firm may revise its estimate of income taxes due to changes in income tax laws, legal interpretations, and business strategies. It is possible that revisions in the Firm’s estimate of income taxes may materially affect the Firm’s results of operations in any reporting period. The Firm’s provision for income taxes is composed of current and deferred taxes. Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes. Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not. The Firm has also recognized deferred tax assets in connection with certain tax attributes, including NOLs.net operating loss (“NOL”) carryforwards and foreign tax credit (“FTC”) carryforwards. The Firm performs regular reviews to ascertain whether its deferred tax assets are realizable. These reviews include management’s estimates and assumptions regarding future taxable income, which also incorporates various tax planning strategies, including strategies that may be available to utilize NOLs before they expire. In connection with these reviews, if it is determined that a deferred tax asset is not realizable, a valuation allowance is established. The valuation allowance may be reversed in a subsequent reporting period if the Firm determines that, based on revised estimates of future taxable income or changes in tax planning strategies, it is more likely than not that all or part of the deferred tax asset will become realizable. As of December 31, 2017,2019, management has determined it is more likely than not that the Firm will realize its deferred tax assets, net of the existing valuation allowance. Prior to December 31, 2017, U.S. federal income taxes had not been provided on the undistributed earnings of certain non-U.S. subsidiaries, to the extent that such earnings had been reinvested abroad for an indefinite period of time. The Firm will no longer maintain the indefinite reinvestment assertion on the undistributed earnings of those non-U.S. subsidiaries in light of the enactment of the TCJA. The U.S. federal and state and local income taxes associated with the undistributed and previously untaxed earnings of those non-U.S. subsidiaries was included in the deemed repatriation charge recorded as of December 31, 2017.
The Firm adjusts its unrecognized tax benefits as necessary when additional information becomes available. Uncertain tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of benefit to recognize. An uncertain tax position is measured at the largest amount of benefit that management believes is more likely than not to be realized upon settlement. It is possible that the reassessment of JPMorgan Chase’s unrecognized tax benefits may have a material impact on its effective income tax rate in the period in which the reassessment occurs. The income tax expenseRefer to Note 25 for the current year includes a reasonable estimate recorded under SEC Staff Accounting Bulletin No. 118 resulting from the enactment of the TCJA.
For additional information on income taxes, see Note 24.taxes.
Litigation reserves ForRefer to Note 30 for a description of the significant estimates and judgments associated with establishing litigation reserves, see
Note 29.reserves.
| | | | 140138 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | | | | ACCOUNTING AND REPORTING DEVELOPMENTS |
| | | | | | SEC StaffFinancial Accounting Bulletin adoptedStandards Board (“FASB”) Standards Adopted during 2017 | | | | | | Bulletin | | Summary of guidance | | Effects on financial statements | Application of U.S. GAAP related to the Tax Cuts and Jobs Act (“TCJA”) (SEC Staff Accounting Bulletin No. 118)
Issued December 2017
| | • Provides guidance on the accounting for income taxes in the context of the TCJA.
• For impacts of the tax law changes that are reasonably estimable, requires the recognition of provisional amounts in year-end 2017 financial statements.
• Provides a 1-year measurement period in which to refine previously recorded provisional amounts based on new information or interpretations.
| | • The TCJA resulted in a $2.4 billion decrease in net income driven by a deemed repatriation charge and adjustments to the value of the Firm’s tax oriented investments, partially offset by a benefit from the revaluation of the Firm’s net deferred tax liability. Certain of these amounts may be refined in accordance with SEC Staff Accounting Bulletin No. 118.
• Refer to Note 24 for additional information related to the impacts of the TCJA.
| | | | | | FASB Standards issued but not adopted as of December 31, 20172019 | | | | | | Standard | | Summary of guidance | | Effects on financial statements | Revenue recognition – revenue from contracts with customers
Issued May 2014
| | • Requires that revenue from contracts with customers be recognized upon transfer of control of a good or service in the amount of consideration expected to be received.
• Changes the accounting for certain contract costs, including whether they may be offset against revenue in the Consolidated statements of income, and requires additional disclosures about revenue and contract costs.
• May be adopted using a full retrospective approach or a modified, cumulative effect approach wherein the guidance is applied only to existing contracts as of the date of initial application, and to new contracts transacted after that date.
| | • Adopted January 1, 2018.
• The Firm adopted the revenue recognition guidance using the full retrospective method of adoption.
• The adoption of the guidance did not result in any material changes in the timing of the Firm’s revenue recognition, but will require gross presentation of certain costs currently offset against revenue. This change in presentation will be reflected in the first quarter of 2018 and will increase both noninterest revenue and noninterest expense for the Firm by $1.1 billion and $900 million for the years ended December 31, 2017 and 2016, respectively. The increase is predominantly associated with certain distribution costs in AWM (currently offset against Asset management, administration and commissions), with the remainder of the increase associated with certain underwriting costs in CIB (currently offset against Investment banking fees).
• The Firm’s Note 6 qualitative disclosures are consistent with the guidance.
| Recognition and
measurement of financial assets and financial liabilities
Issued January 2016
| | • Requires that certain equity instruments be measured at fair value, with changes in fair value recognized in earnings.
• Provides a measurement alternative for equity securities without readily determinable fair values to be measured at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer. Any such price changes will be reflected in earnings beginning in the period of adoption.
• Generally requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption, except for those equity securities that are eligible for the measurement alternative.
| | • The Firm early adopted the provisions of this guidance related to presenting DVA in OCI for financial liabilities where the fair value option has been elected, effective January 1, 2016. The Firm adopted the portions of the guidance that were not eligible for early adoption on January 1, 2018.
• Upon adoption, the Firm elected the measurement alternative for its equity securities that do not have readily determinable fair values, and the Firm did not record a cumulative-effect adjustment related to the adoption of this guidance.
|
| | | | JPMorgan Chase & Co./2017 Annual Report | | 141 |
Management’s discussion and analysis
| | | | | | FASB Standards issued but not adopted as of December 31, 2017 (continued) | | | | | | Standard | | Summary of guidance | | Effects on financial statements | Classification of certain cash receipts and cash payments in the statement of cash flows
Issued August 2016
| | • Provides targeted amendments to the classification of certain cash flows, including treatment of cash payments for settlement of zero-coupon debt instruments and distributions received from equity method investments.
• Requires retrospective application to all periods presented.
| | • Adopted January 1, 2018.
• No material impact upon adoption as the Firm was either in compliance with the amendments or the amounts to which it is applied are immaterial.
| Treatment of restricted cash on the statement of cash flows
Issued November 2016
| | • Requires inclusion of restricted cash in the cash and cash equivalents balances in the Consolidated statements of cash flows.
• Requires additional disclosures to supplement the Consolidated statements of cash flows.
• Requires retrospective application to all periods presented.
| | • Adopted January 1, 2018.
• The adoption of the guidance will result in reclassification of restricted cash balances into Cash and restricted cash on the Consolidated statements of cash flows in the first quarter of 2018. The Firm will include Cash and due from banks and Deposits with banks in Cash and restricted cash in the Consolidated statements of cash flows, resulting in Deposits with banks no longer being reflected in Investing activities.
• In addition, to align with the presentation of Cash and restricted cash on the Consolidated statements of cash flows, the Firm will reclassify restricted cash balances to Cash and due from banks and to Deposits with banks from Other assets and disclose the total for Cash and restricted cash on the Firm’s Consolidated balance sheets in the first quarter of 2018.
| Definition of a business
Issued January 2017
| | • Narrows the definition of a business and clarifies that, to be considered a business, the fair value of the gross assets acquired (or disposed of) may not be substantially all concentrated in a single identifiable asset or a group of similar assets.
• In addition, in order to be considered a business, a set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
| | • Adopted January 1, 2018.
• No impact upon adoption because the guidance is to be applied prospectively. Subsequent to adoption, fewer transactions will be treated as acquisitions or dispositions of a business.
| Presentation of net periodic pension cost and net periodic postretirement benefit cost
Issued March 2017
| | • Requires the service cost component of net periodic pension and postretirement benefit cost to be reported separately in the consolidated results of operations from the other components (e.g., expected return on assets, interest costs, amortization of gains/losses and prior service costs).
• Requires retrospective application and presentation in the consolidated results of operations of the service cost component in the same line item as other employee compensation costs and presentation of the other components in a different line item from the service cost component.
| | • Adopted January 1, 2018.
• The adoption of the guidance in the first quarter of 2018 will result in an increase in compensation expense and a reduction in other expense of $223 million and $250 million for the years ended December 31, 2017 and 2016, respectively.
| Premium amortization on purchased callable debt securities
Issued March 2017
| | • Requires amortization of premiums to the earliest call date on debt securities with call features that are explicit, noncontingent and callable at fixed prices and on preset dates.
• Does not impact securities held at a discount; the discount continues to be amortized to the contractual maturity.
• Requires adoption on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.
| | • The Firm early adopted the new guidance on January 1, 2018.
• The new guidance primarily impacts obligations of U.S. states and municipalities
held in the Firm’s investment securities portfolio.
• The adoption of this guidance resulted in a cumulative-effect adjustment that
reduced retained earnings by approximately $505 million as of January 1, 2018, with a corresponding increase of $261 million (after tax) in AOCI and related adjustments to securities and tax liabilities.
• Subsequent to adoption, although the guidance will reduce the interest income
recognized prior to the earliest call date for callable debt securities held at a premium, the effect of this guidance on the Firm’s net interest income is not expected to be material.
|
| | | | 142 | | JPMorgan Chase & Co./2017 Annual Report |
| | | | | | FASB Standards issued but not adopted as of December 31, 2017 (continued)
| | | | | | Standard | | Summary of guidance | | Effects on financial statements | Hedge accounting
Issued August 2017
| | • Reduces earnings volatility by better aligning the accounting with the economics of the risk management activities.
• Expands the ability for certain hedges of interest rate risk to qualify for hedge accounting.
• Allows recognition of ineffectiveness in cash flow hedges and net investment hedges in OCI.
• Allows a one-time election at adoption to transfer certain securities classified as held-to-maturity to available-for-sale.
• Simplifies hedge documentation requirements.
| | • The Firm early adopted the new guidance on January 1, 2018.
• The adoption of the guidance resulted in a cumulative-effect adjustment that increased retained earnings in the amount of $34 million, with related adjustments to debt carrying values and AOCI.
• The Firm will also amend its qualitative and quantitative disclosures within its derivative instruments note to the Consolidated Financial Statements in the first quarter of 2018.
• In accordance with the new guidance, the Firm elected to transfer certain securities from HTM to AFS. The amendments provide the Firm with additional hedge accounting alternatives for its AFS securities (including those transferred under the election) to be considered as the Firm manages it structural interest rate risk and regulatory capital. The Firm is currently evaluating those risk management alternatives and intends to manage the transferred securities in a manner consistent with its existing AFS securities. This transfer is a non-cash transaction at fair value.
| Reclassification of Certain Tax Effects from AOCI
Issued February 2018
| | •
Provides an election to reclassify from AOCI to retained earnings stranded tax effects due to the revaluation of deferred tax assets and liabilities as a result of changes in applicable tax rates under the TCJA.•
Requires additional disclosures related to the Firm’s election to reclassify amounts from AOCI to retained earnings and the Firm’s policy for releasing income tax effects from AOCI. • The guidance may be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.
| | •
The Firm early adopted the new guidance on January 1, 2018.•
The adoption of the guidance resulted in a cumulative-effect adjustment that increased retained earnings in the amount of $288 million in the first quarter of 2018. This amount is an estimate that may be refined in accordance with SEC Staff Accounting Bulletin No. 118, and represents the removal of the stranded tax effects from AOCI, thereby allowing the tax effects within AOCI to reflect the new respective corporate income tax rates. • Refer to Note 24 for additional information related to the impacts of the TCJA.
| Leases Issued February 2016 | | • Requires lessees to recognize all leases longer than twelve months on the Consolidated balance sheets as a lease liabilitiesliability with a corresponding right-of-use assets.asset. • Requires lessees and lessors to classify most leases using principles similar to existing lease accounting, but eliminates the “bright line” classification tests. • Permits the Firm to generally account for its existing leases consistent with current guidance, except for the incremental balance sheet recognition. • Expands qualitative and quantitative disclosures regarding leasing arrangements.disclosures.
• May be adopted using a modified cumulative effect approach wherein the guidance is applied only to existing contracts as of the date of initial application, and to new contracts transacted after that date.
| | • Required effective date: Adopted January 1, 2019.(a)• The Firm is inelected the process of its implementation which has included anavailable practical expedient to not reassess whether existing contracts contain a lease or whether classification or unamortized initial evaluation of its leasing contracts and activities. As a lessee,lease costs would be different under the Firm is developing its methodology to estimate the right-of-use assets andnew lease liabilities, which is based on the present value of lease payments.guidance. The Firm expectselected the modified retrospective transition method, through a cumulative-effect adjustment to recognize lease liabilities and corresponding right-of-use assets (at their present value) relatedretained earnings without revising prior periods.• Refer to predominantly all of the $10 billion of future minimum payments required under operating leases as disclosed in Note 28. However, the population of contracts subject to balance sheet recognition and their initial measurement remains under evaluation. The Firm does not expect material changes to the recognition of operating lease expense in its Consolidated statements of income.18 for further information. • The Firm plans to adopt the new guidance in the first quarter of 2019.
|
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 143139 |
Management’s discussion and analysis
| | | | | | FASB Standards issuedIssued but not adopted as of December 31, 2017 (continued)
2019 | | | | | | Standard | | Summary of guidance | | Effects on financial statements | | | | | | Financial instrumentsInstruments – credit lossesCredit Losses (“CECL”)
Issued June 2016 | | • Replaces existing incurred loss impairment guidance and establishesEstablishes a single allowance framework for all financial assets carried at amortized cost (including HTM securities), which will reflectand certain off-balance sheet credit exposures. This framework requires that management’s estimate ofreflects credit losses over the full remaining expected life of the financial assets.and considers expected future changes in macroeconomic conditions. • Eliminates existing guidance for PCI loans, and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination.origination, with a corresponding increase in the recorded investment of the related loans. • Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral dependent assets). • Amends existing impairment guidance for AFS securities to incorporate an allowance, which will allow for reversals of impairment lossescredit impairments in the event that the credit of an issuer improves. • Requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. | | • Required effective date: Adopted January 1, 2020.(a)• The Firm has begun its implementation efforts by establishingadoption of this guidance resulted in a Firmwide, cross-discipline governance structure. The Firm is currently identifying key interpretive issues, and is assessing existing credit loss forecasting models and processes againstnet increase to the new guidance to determine what modifications may be required. • The Firm expects that the new guidance will result in an increase in its allowance for credit losses dueof $4.3 billion and a decrease to several factors, including:retained earnings of $2.7 billion, primarily driven by Card. Under the CECL framework, the Firm estimates losses over a two-year forecast period using the weighted-average of a range of macroeconomic scenarios (established on a Firmwide basis), and then reverts to longer term historical loss experience to estimate losses over more extended periods.
1.• The allowance relatedFirm elected to phase-in the impact to retained earnings of $2.7 billion to regulatory capital, at 25 percent per year in each of 2020 to 2023 (“CECL transitional period”). Based on the Firm’s capital as of December 31, 2019, the estimated impact to the Firm’s loans and commitments will increase to cover credit losses over the full remaining expected life of the portfolio, and will consider expected future changes in macroeconomic conditions2.
The nonaccretable difference on PCI loansStandardized CET1 capital ratio will be recognizeda reduction of approximately 4 bps for each transitional year.• As permitted by the guidance, the Firm elected the fair value option for certain securities financing agreements. The difference between their carrying amount and fair value was immaterial and was recorded as an allowance, offset by an increase in the carrying value of the related loans3.
An allowance will be established for estimated credit losses on HTM securities • The extent of the increase is under evaluation, but will depend upon the nature and characteristicspart of the Firm’s portfolio at the adoption date, and the macroeconomic conditions and forecasts at that date.cumulative-effect adjustment.
• Refer to Note 1 for further information. | Goodwill Issued January 2017 | | • Requires recognition of an impairment loss to be recognized when the estimated fair value of a reporting unit falls below its carrying value. • Eliminates the second condition in the current guidancerequirement that requires an impairment loss to be recognized only if the estimated implied fair value of the goodwill is below its carrying value. | | • Required effective date: Adopted January 1, 2020.(a)• Based on current impairment test results, the Firm does not expect a material effect on the Consolidated Financial Statements. • AfterNo impact upon adoption as the guidance may result in more frequent goodwill impairment losses dueis to the removal of the second condition.
• The Firm is evaluating the timing of adoption.be applied prospectively.
|
| | (a) | Early adoption is permitted. |
| | | | 144140 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | | | | FORWARD-LOOKING STATEMENTS |
From time to time, the Firm has made and will make forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” or other words of similar meaning. Forward-looking statements provide JPMorgan Chase’s current expectations or forecasts of future events, circumstances, results or aspirations. JPMorgan Chase’s disclosures in this Annual Report2019 Form 10-K contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Firm also may make forward-looking statements in its other documents filed or furnished with the SEC. In addition, the Firm’s senior management may make forward-looking statements orally to investors, analysts, representatives of the media and others. All forward-looking statements are, by their nature, subject to risks and uncertainties, many of which are beyond the Firm’s control. JPMorgan Chase’s actual future results may differ materially from those set forth in its forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ from those in the forward-looking statements: Local, regional and global business, economic and political conditions and geopolitical events; Changes in laws and regulatory requirements, including capital and liquidity requirements affecting the Firm’s businesses, and the ability of the Firm to address those requirements; Heightened regulatory and governmental oversight and scrutiny of JPMorgan Chase’s business practices, including dealings with retail customers; Changes in trade, monetary and fiscal policies and laws; Changes in income tax laws and regulations; Securities and capital markets behavior, including changes in market liquidity and volatility; Changes in investor sentiment or consumer spending or savings behavior; Ability of the Firm to manage effectively its capital and liquidity, including approval of its capital plans by banking regulators; Changes in credit ratings assigned to the Firm or its subsidiaries; Damage to the Firm’s reputation; Ability of the Firm to appropriately address social, environmental and sustainability concerns that may arise from its business activities; Ability of the Firm to deal effectively with an economic slowdown or other economic or market disruption;disruption, including, but not limited to, in the interest rate environment; Technology changes instituted by the Firm, its counterparties or competitors; The successeffectiveness of the Firm’s business simplification initiatives and the effectiveness of its control agenda; Ability of the Firm to develop newor discontinue products and services, and the extent to which products or services previously sold by the Firm (including but not limited to mortgages and asset-backed securities) require the Firm to incur liabilities or absorb losses not contemplated at their initiation or origination; Acceptance of the Firm’s new and existing products and services by the marketplace and the ability of the Firm to innovate and to increase market share; Ability of the Firm to attract and retain qualified employees; Ability of the Firm to control expenses; Competitive pressures; Changes in the credit quality of the Firm’s clients, customers and counterparties; Adequacy of the Firm’s risk management framework, disclosure controls and procedures and internal control over financial reporting; Adverse judicial or regulatory proceedings; Changes in applicable accounting policies, including the introduction of new accounting standards; Ability of the Firm to determine accurate values of certain assets and liabilities; Occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, pandemics or conflictsoutbreaks of hostilities, or the effects of climate change, and the Firm’s ability to deal effectively with disruptions caused by the foregoing; Ability of the Firm to maintain the security of its financial, accounting, technology, data processing and other operational systems and facilities; Ability of the Firm to withstand disruptions that may be caused by any failure of its operational systems or those of third parties; Ability of the Firm to effectively defend itself against cyberattacks and other attempts by unauthorized parties to access information of the Firm or its customers or to disrupt the Firm’s systems; and The other risks and uncertainties detailed in Part I, Item 1A: Risk Factors in the Firm’s Annual Report onJPMorgan Chase’s 2019 Form 10-K for the year ended December 31, 2017.10-K. Any forward-looking statements made by or on behalf of the Firm speak only as of the date they are made, and JPMorgan Chase does not undertake to update any forward-looking statements. The reader should, however, consult any further disclosures of a forward-looking nature the Firm may make in any subsequent Annual Reports on Form 10-K,10-Ks, Quarterly Reports on Form 10-Q,10-Qs, or Current Reports on Form 8-K.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 145141 |
Management’s report on internal control over financial reporting
Management of JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Firm’s principal executive and principal financial officers, or persons performing similar functions, and effected by JPMorgan Chase’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.America (“U.S. GAAP”). JPMorgan Chase’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Firm’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,U.S. GAAP, and that receipts and expenditures of the Firm are being made only in accordance with authorizations of JPMorgan Chase’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Firm’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has completed an assessment of the effectiveness of the Firm’s internal control over financial reporting as of December 31, 2017.2019. In making the assessment, management used the “Internal Control — Integrated Framework” (“COSO 2013”) promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon the assessment performed, management concluded that as of December 31, 2017,2019, JPMorgan Chase’s internal control over financial reporting was effective based upon the COSO 2013 framework. Additionally, based upon management’s assessment, the Firm determined that there were no material weaknesses in its internal control over financial reporting as of December 31, 2017.2019. The effectiveness of the Firm’s internal control over financial reporting as of December 31, 2017,2019, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
James Dimon Chairman and Chief Executive Officer
Marianne LakeJennifer Piepszak
Executive Vice President and Chief Financial Officer
February 27, 201825, 2020
| | | | 146142 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Report of independent registered public accounting firmIndependent Registered Public Accounting Firm
To the Board of Directors and StockholdersShareholders of JPMorgan Chase & Co.: Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of JPMorgan Chase & Co. and its subsidiaries (the “Firm”) as of December 31, 20172019 and 2016,2018, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2017,2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Firm’s internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Firm as ofDecember 31, 20172019 and 2016,2018, and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 20172019in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Firm maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO. Basis for Opinions The Firm’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s report on internal control over financial reporting. Our responsibility is to express opinions on the Firm’s consolidated financial statements and on the Firm’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Firm in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. February 27, 2018
We have served as the Firm’s auditor since 1965.
| | PricewaterhouseCoopers LLP Ÿ 300 Madison Avenue Ÿ New York, NY 10017 |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 147143 |
Consolidated statementsReport of income
Independent Registered Public Accounting Firm
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Fair Value of Certain Level 3 Financial Instruments As described in Notes 2 and 3 to the consolidated financial statements, the Firm carries $802.8 billion of its assets and $233.8 billion of its liabilities at fair value on a recurring basis. Included in these balances are $8.1 billion of trading assets and $37.7 billion of liabilities measured at fair value on a recurring basis, collectively financial instruments, which are classified as level 3 as they contain one or more inputs to valuation which are unobservable and significant to their fair value measurement. The Firm utilized internally developed valuation models and unobservable inputs to estimate fair value of the level 3 financial instruments. The unobservable inputs used by management to estimate the fair value of certain of these financial instruments include volatility relating to interest rates and correlation relating to interest rates, equity prices and foreign exchange rates. The principal considerations for our determination that performing procedures relating to the fair value of certain level 3 financial instruments is a critical audit matter are (i) there was significant judgment and estimation by management in determining the inputs to estimate fair value, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures related to the fair value of these financial instruments, and (ii) the audit effort involved professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the Firm’s processes for determining fair value which include controls over models, inputs, and data. These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate of fair value for a sample of these financial instruments. Developing the independent estimate involved testing the completeness and accuracy of data provided by management, developing independent inputs and, as appropriate, evaluating and utilizing management’s aforementioned unobservable inputs; and comparing management’s estimate to the independently developed estimate of fair value.
Fair Value of Mortgage Servicing Rights Assets As described in Note 15 to the consolidated financial statements, the Firm has elected to account for the Firm’s mortgage servicing rights assets at fair value, with balances of $4.7 billion as of December 31, 2019. Management estimates the fair value of mortgage servicing rights using an option-adjusted spread model, which projects cash flows over multiple interest rate scenarios in conjunction with the Firm’s prepayment model, and then discounts these cash flows at risk-adjusted rates. The key economic assumptions used to determine the fair value of mortgage servicing rights are prepayment speeds and option adjusted spread. The principal considerations for our determination that performing procedures relating to the fair value of mortgage servicing rights assets is a critical audit matter are (i) there was significant judgment and estimation by management in determining the fair value of mortgage servicing rights, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating the audit evidence obtained related to the prepayment speed and option adjusted spread assumptions, and (ii) the audit effort involved professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of mortgage servicing rights, including controls over the Firm’s models, assumptions, and data. These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in testing management’s process including testing and evaluating the reasonableness of prepayment speed and option adjusted spread assumptions used in the model. Allowance for Loan Losses - Wholesale Loan, Credit Card Loan and Consumer Loan Portfolios As described in Note 13 to the consolidated financial statements, the Firm’s allowance for loan losses represents management’s estimate of probable credit losses inherent in the Firm’s retained loan portfolios, which primarily consists of wholesale loans, credit card loans and consumer loans. As of December 31, 2019, the allowance for loan losses was $13.1 billion on total retained loans of $945.6 billion. The Firm’s allowance for loan losses is determined for each of the retained loan portfolios utilizing a statistical credit loss estimate. These statistical credit loss estimates are calculated using statistical credit loss factors, specifically the probability of default and loss severity for the credit card and consumer loans and the probability of default and loss given default for the wholesale loans. Management then applies judgment to adjust these statistical loss estimates to take into consideration model imprecision, external factors and economic events that have occurred but are not yet reflected in the loss factors. The principal considerations for our determination that performing procedures relating to the allowance for loan losses for the wholesale loan, credit card loan, and consumer loan portfolios is a critical audit matter are (i) there was | | | | | | | | | | | | | Year ended December 31, (in millions, except per share data) | 2017 |
| | 2016 |
| | 2015 |
| Revenue | | | | | | Investment banking fees | $ | 7,248 |
| | $ | 6,448 |
| | $ | 6,751 |
| Principal transactions | 11,347 |
| | 11,566 |
| | 10,408 |
| Lending- and deposit-related fees | 5,933 |
| | 5,774 |
| | 5,694 |
| Asset management, administration and commissions | 15,377 |
| | 14,591 |
| | 15,509 |
| Securities gains/(losses) | (66 | ) | | 141 |
| | 202 |
| Mortgage fees and related income | 1,616 |
| | 2,491 |
| | 2,513 |
| Card income | 4,433 |
| | 4,779 |
| | 5,924 |
| Other income | 3,639 |
| | 3,795 |
| | 3,032 |
| Noninterest revenue | 49,527 |
| | 49,585 |
| | 50,033 |
| Interest income | 64,372 |
| | 55,901 |
| | 50,973 |
| Interest expense | 14,275 |
| | 9,818 |
| | 7,463 |
| Net interest income | 50,097 |
| | 46,083 |
| | 43,510 |
| Total net revenue | 99,624 |
| | 95,668 |
| | 93,543 |
| | | | | | | Provision for credit losses | 5,290 |
| | 5,361 |
| | 3,827 |
| | | | | | | Noninterest expense | | | | | | Compensation expense | 31,009 |
| | 29,979 |
| | 29,750 |
| Occupancy expense | 3,723 |
| | 3,638 |
| | 3,768 |
| Technology, communications and equipment expense | 7,706 |
| | 6,846 |
| | 6,193 |
| Professional and outside services | 6,840 |
| | 6,655 |
| | 7,002 |
| Marketing | 2,900 |
| | 2,897 |
| | 2,708 |
| Other expense | 6,256 |
| | 5,756 |
| | 9,593 |
| Total noninterest expense | 58,434 |
| | 55,771 |
| | 59,014 |
| Income before income tax expense | 35,900 |
| | 34,536 |
| | 30,702 |
| Income tax expense | 11,459 |
| | 9,803 |
| | 6,260 |
| Net income | $ | 24,441 |
| | $ | 24,733 |
| | $ | 24,442 |
| Net income applicable to common stockholders(a) | $ | 22,567 |
| | $ | 22,834 |
| | $ | 22,651 |
| Net income per common share data | | | | | | Basic earnings per share | $ | 6.35 |
| | $ | 6.24 |
| | $ | 6.05 |
| Diluted earnings per share | 6.31 |
| | 6.19 |
| | 6.00 |
| | | | | | | Weighted-average basic shares(a) | 3,551.6 |
| | 3,658.8 |
| | 3,741.2 |
| Weighted-average diluted shares(a) | 3,576.8 |
| | 3,690.0 |
| | 3,773.6 |
| Cash dividends declared per common share | $ | 2.12 |
| | $ | 1.88 |
| | $ | 1.72 |
|
| | (a) | The prior period amounts have been revised to conform with the current period presentation. The revision had no impact on the Firm’s reported earnings per share. |
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | 148144 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Report of Independent Registered Public Accounting Firm
significant judgment and estimation by management in determining the modeling techniques utilized in their statistical credit loss estimates, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained relating to the statistical credit loss estimates and the appropriateness of the adjustments to the statistical loss estimates, and (ii) the audit effort involved professionals with specialized skill and knowledge to assist in evaluating the audit evidence. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the Firm’s allowance for loan losses estimation processes. These procedures also included, among others, testing management’s process for estimating the allowance for loan losses, which included evaluating the appropriateness of the models and methodologies used in the statistical credit loss estimates for the wholesale, credit card and consumer loan portfolios; testing the completeness and accuracy of data; and evaluating the reasonableness of assumptions and judgments used in the statistical credit loss estimate and the adjustments to the statistical credit loss estimates. This included, as relevant, evaluating the reasonableness of probabilities of default, loss severities and loss given default. Evaluating management’s adjustment to the statistical credit loss estimate included evaluating the reasonableness of the impacts of model imprecision and external factors and economic events which have occurred but are not yet otherwise reflected in the statistical credit loss estimate. The procedures included the use of professionals with specialized skill and knowledge to assist in evaluating the appropriateness of certain models, methodologies and inputs into the statistical credit loss estimates.
February 25, 2020
We have served as the Firm’s auditor since 1965.
Consolidated statements of comprehensive income
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| Net income | | $ | 24,441 |
| | $ | 24,733 |
| | $ | 24,442 |
| Other comprehensive income/(loss), after–tax | | | | | | | Unrealized gains/(losses) on investment securities | | 640 |
| | (1,105 | ) | | (2,144 | ) | Translation adjustments, net of hedges | | (306 | ) | | (2 | ) | | (15 | ) | Cash flow hedges | | 176 |
| | (56 | ) | | 51 |
| Defined benefit pension and OPEB plans | | 738 |
| | (28 | ) | | 111 |
| DVA on fair value option elected liabilities | | (192 | ) | | (330 | ) | | — |
| Total other comprehensive income/(loss), after–tax | | 1,056 |
| | (1,521 | ) | | (1,997 | ) | Comprehensive income | | $ | 25,497 |
| | $ | 23,212 |
| | $ | 22,445 |
|
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 149145 |
Consolidated statements of income
| | | | | | | | | | | | | Year ended December 31, (in millions, except per share data) | 2019 |
| | 2018 |
| | 2017 |
| Revenue | | | | | | Investment banking fees | $ | 7,501 |
| | $ | 7,550 |
| | $ | 7,412 |
| Principal transactions | 14,018 |
| | 12,059 |
| | 11,347 |
| Lending- and deposit-related fees | 6,369 |
| | 6,052 |
| | 5,933 |
| Asset management, administration and commissions | 17,165 |
| | 17,118 |
| | 16,287 |
| Investment securities gains/(losses) | 258 |
| | (395 | ) | | (66 | ) | Mortgage fees and related income | 2,036 |
| | 1,254 |
| | 1,616 |
| Card income | 5,304 |
| | 4,989 |
| | 4,433 |
| Other income | 5,731 |
| | 5,343 |
| | 3,646 |
| Noninterest revenue | 58,382 |
| | 53,970 |
| | 50,608 |
| Interest income(a) | 84,040 |
| | 76,100 |
| | 63,971 |
| Interest expense(a) | 26,795 |
| | 21,041 |
| | 13,874 |
| Net interest income | 57,245 |
| | 55,059 |
| | 50,097 |
| Total net revenue | 115,627 |
| | 109,029 |
| | 100,705 |
| | | | | | | Provision for credit losses | 5,585 |
| | 4,871 |
| | 5,290 |
| | | | | | | Noninterest expense | | | | | | Compensation expense | 34,155 |
| | 33,117 |
| | 31,208 |
| Occupancy expense | 4,322 |
| | 3,952 |
| | 3,723 |
| Technology, communications and equipment expense | 9,821 |
| | 8,802 |
| | 7,715 |
| Professional and outside services | 8,533 |
| | 8,502 |
| | 7,890 |
| Marketing | 3,579 |
| | 3,290 |
| | 2,900 |
| Other expense | 5,087 |
| | 5,731 |
| | 6,079 |
| Total noninterest expense | 65,497 |
| | 63,394 |
| | 59,515 |
| Income before income tax expense | 44,545 |
| | 40,764 |
| | 35,900 |
| Income tax expense | 8,114 |
| | 8,290 |
| | 11,459 |
| Net income | $ | 36,431 |
| | $ | 32,474 |
| | $ | 24,441 |
| Net income applicable to common stockholders | $ | 34,642 |
| | $ | 30,709 |
| | $ | 22,567 |
| Net income per common share data | | | | | | Basic earnings per share | $ | 10.75 |
| | $ | 9.04 |
| | $ | 6.35 |
| Diluted earnings per share | 10.72 |
| | 9.00 |
| | 6.31 |
| | | | | | | Weighted-average basic shares | 3,221.5 |
| | 3,396.4 |
| | 3,551.6 |
| Weighted-average diluted shares | 3,230.4 |
| | 3,414.0 |
| | 3,576.8 |
|
| | (a) | In the second quarter of 2019, the Firm implemented certain presentation changes that impacted interest income and interest expense, but had no effect on net interest income. These changes were applied retrospectively and, accordingly, prior period amounts were revised to conform with the current presentation. Refer to Note 7 for additional information. |
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | 146 | | JPMorgan Chase & Co./2019 Form 10-K |
Consolidated statements of comprehensive income
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2019 |
| | 2018 |
| | 2017 |
| Net income | | $ | 36,431 |
| | $ | 32,474 |
| | $ | 24,441 |
| Other comprehensive income/(loss), after–tax | | | | | | | Unrealized gains/(losses) on investment securities | | 2,855 |
| | (1,858 | ) | | 640 |
| Translation adjustments, net of hedges | | 20 |
| | 20 |
| | (306 | ) | Fair value hedges | | 30 |
| | (107 | ) | | NA |
| Cash flow hedges | | 172 |
| | (201 | ) | | 176 |
| Defined benefit pension and OPEB plans | | 964 |
| | (373 | ) | | 738 |
| DVA on fair value option elected liabilities | | (965 | ) | | 1,043 |
| | (192 | ) | Total other comprehensive income/(loss), after–tax | | 3,076 |
| | (1,476 | ) | | 1,056 |
| Comprehensive income | | $ | 39,507 |
| | $ | 30,998 |
| | $ | 25,497 |
|
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 147 |
Consolidated balance sheets
| | December 31, (in millions, except share data) | 2017 | | 2016 | 2019 | | 2018 | Assets | | | | | | | Cash and due from banks | $ | 25,827 |
| | $ | 23,873 |
| $ | 21,704 |
| | $ | 22,324 |
| Deposits with banks | 404,294 |
| | 365,762 |
| 241,927 |
| | 256,469 |
| Federal funds sold and securities purchased under resale agreements (included $14,732 and $21,506 at fair value) | 198,422 |
| | 229,967 |
| | Securities borrowed (included $3,049 and $0 at fair value) | 105,112 |
| | 96,409 |
| | Trading assets (included assets pledged of $110,061 and $115,847) | 381,844 |
| | 372,130 |
| | Securities (included $202,225 and $238,891 at fair value and assets pledged of $17,969 and $16,115) | 249,958 |
| | 289,059 |
| | Loans (included $2,508 and $2,230 at fair value) | 930,697 |
| | 894,765 |
| | Federal funds sold and securities purchased under resale agreements (included $14,561 and $13,235 at fair value) | | 249,157 |
| | 321,588 |
| Securities borrowed (included $6,237 and $5,105 at fair value) | | 139,758 |
| | 111,995 |
| Trading assets (included assets pledged of $111,522 and $89,073) | | 411,103 |
| | 413,714 |
| Investment securities (included $350,699 and $230,394 at fair value and assets pledged of $10,325 and $11,432) | | 398,239 |
| | 261,828 |
| Loans (included $7,104 and $3,151 at fair value) | | 959,769 |
| | 984,554 |
| Allowance for loan losses | (13,604 | ) | | (13,776 | ) | (13,123 | ) | | (13,445 | ) | Loans, net of allowance for loan losses | 917,093 |
| | 880,989 |
| 946,646 |
| | 971,109 |
| Accrued interest and accounts receivable | 67,729 |
| | 52,330 |
| 72,861 |
| | 73,200 |
| Premises and equipment | 14,159 |
| | 14,131 |
| 25,813 |
| | 14,934 |
| Goodwill, MSRs and other intangible assets
| 54,392 |
| | 54,246 |
| 53,341 |
| | 54,349 |
| Other assets (included $16,128 and $7,557 at fair value and assets pledged of $1,526 and $1,603) | 114,770 |
| | 112,076 |
| | Other assets (included $9,111 and $9,630 at fair value and assets pledged of $3,349 and $3,457) | | 126,830 |
| | 121,022 |
| Total assets(a) | $ | 2,533,600 |
| | $ | 2,490,972 |
| $ | 2,687,379 |
| | $ | 2,622,532 |
| Liabilities | | | | | | | Deposits (included $21,321 and $13,912 at fair value) | $ | 1,443,982 |
| | $ | 1,375,179 |
| | Federal funds purchased and securities loaned or sold under repurchase agreements (included $697 and $687 at fair value) | 158,916 |
| | 165,666 |
| | Short-term borrowings (included $9,191 and $9,105 at fair value) | 51,802 |
| | 34,443 |
| | Deposits (included $28,589 and $23,217 at fair value) | | $ | 1,562,431 |
| | $ | 1,470,666 |
| Federal funds purchased and securities loaned or sold under repurchase agreements (included $549 and $935 at fair value) | | 183,675 |
| | 182,320 |
| Short-term borrowings (included $5,920 and $7,130 at fair value) | | 40,920 |
| | 69,276 |
| Trading liabilities | 123,663 |
| | 136,659 |
| 119,277 |
| | 144,773 |
| Accounts payable and other liabilities (included $9,208 and $9,120 at fair value) | 189,383 |
| | 190,543 |
| | Beneficial interests issued by consolidated VIEs (included $45 and $120 at fair value) | 26,081 |
| | 39,047 |
| | Long-term debt (included $47,519 and $37,686 at fair value) | 284,080 |
| | 295,245 |
| | Accounts payable and other liabilities (included $3,728 and $3,269 at fair value) | | 210,407 |
| | 196,710 |
| Beneficial interests issued by consolidated VIEs (included $36 and $28 at fair value) | | 17,841 |
| | 20,241 |
| Long-term debt (included $75,745 and $54,886 at fair value) | | 291,498 |
| | 282,031 |
| Total liabilities(a) | 2,277,907 |
| | 2,236,782 |
| 2,426,049 |
| | 2,366,017 |
| Commitments and contingencies (see Notes 27, 28 and 29) |
|
| |
|
| | Commitments and contingencies (refer to Notes 28, 29 and 30) | |
|
| |
|
| Stockholders’ equity | | | | | | | Preferred stock ($1 par value; authorized 200,000,000 shares: issued 2,606,750 shares) | 26,068 |
| | 26,068 |
| | Preferred stock ($1 par value; authorized 200,000,000 shares: issued 2,699,250 and 2,606,750 shares) | | 26,993 |
| | 26,068 |
| Common stock ($1 par value; authorized 9,000,000,000 shares; issued 4,104,933,895 shares) | 4,105 |
| | 4,105 |
| 4,105 |
| | 4,105 |
| Additional paid-in capital | 90,579 |
| | 91,627 |
| 88,522 |
| | 89,162 |
| Retained earnings | 177,676 |
| | 162,440 |
| 223,211 |
| | 199,202 |
| Accumulated other comprehensive income | (119 | ) | | (1,175 | ) | | Accumulated other comprehensive income/loss | | 1,569 |
| | (1,507 | ) | Shares held in restricted stock units (“RSU”) trust, at cost (472,953 shares) | (21 | ) | | (21 | ) | (21 | ) | | (21 | ) | Treasury stock, at cost (679,635,064 and 543,744,003 shares) | (42,595 | ) | | (28,854 | ) | | Treasury stock, at cost (1,020,912,567 and 829,167,674 shares) | | (83,049 | ) | | (60,494 | ) | Total stockholders’ equity | 255,693 |
| | 254,190 |
| 261,330 |
| | 256,515 |
| Total liabilities and stockholders’ equity | $ | 2,533,600 |
| | $ | 2,490,972 |
| $ | 2,687,379 |
| | $ | 2,622,532 |
|
| | (a) | The following table presents information on assets and liabilities related to VIEs that are consolidated by the Firm at December 31, 20172019 and 2016.2018. The difference between total VIEassets of the consolidated VIEs are used to settle the liabilities of those entities. The holders of the beneficial interests do not have recourse to the general credit of JPMorgan Chase. The assets and liabilities representsin the Firm’s intereststable below include third-party assets and liabilities of consolidated VIEs and exclude intercompany balances that eliminate in those entities, which were eliminated in consolidation. Refer to Note 14 for a further discussion. |
| | | | | | | | | December 31, (in millions) | 2019 | | 2018 | Assets | | | | Trading assets | $ | 2,633 |
| | $ | 1,966 |
| Loans | 42,931 |
| | 59,456 |
| All other assets | 881 |
| | 1,013 |
| Total assets | $ | 46,445 |
| | $ | 62,435 |
| Liabilities | | | | Beneficial interests issued by consolidated VIEs | $ | 17,841 |
| | $ | 20,241 |
| All other liabilities | 447 |
| | 312 |
| Total liabilities | $ | 18,288 |
| | $ | 20,553 |
|
| | | | | | | | | December 31, (in millions) | 2017 | | 2016 | Assets | | | | Trading assets | $ | 1,449 |
| | $ | 3,185 |
| Loans | 68,995 |
| | 75,614 |
| All other assets | 2,674 |
| | 3,321 |
| Total assets | $ | 73,118 |
| | $ | 82,120 |
| Liabilities | | | | Beneficial interests issued by consolidated VIEs | $ | 26,081 |
| | $ | 39,047 |
| All other liabilities | 349 |
| | 490 |
| Total liabilities | $ | 26,430 |
| | $ | 39,537 |
|
The assets of the consolidated VIEs are used to settle the liabilities of those entities. The holders of the beneficial interests do not have recourse to the general credit of JPMorgan Chase. At December 31, 2017 and 2016, the Firm provided limited program-wide credit enhancement of $2.7 billion and $2.4 billion, respectively, related to its Firm-administered multi-seller conduits, which are eliminated in consolidation. For further discussion, see Note 14.
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | 148 | | JPMorgan Chase & Co./2019 Form 10-K |
Consolidated statements of changes in stockholders’ equity
| | | | | | | | | | | | | | Year ended December 31, (in millions, except per share data) | | 2019 |
| 2018 | | 2017 | Preferred stock | | | | | | | Balance at January 1 | | $ | 26,068 |
| | $ | 26,068 |
| | $ | 26,068 |
| Issuance | | 5,000 |
| | 1,696 |
| | 1,258 |
| Redemption | | (4,075 | ) | | (1,696 | ) | | (1,258 | ) | Balance at December 31 | | 26,993 |
| | 26,068 |
| | 26,068 |
| Common stock | | | | | | | Balance at January 1 and December 31 | | 4,105 |
| | 4,105 |
| | 4,105 |
| Additional paid-in capital | | | | | | | Balance at January 1 | | 89,162 |
| | 90,579 |
| | 91,627 |
| Shares issued and commitments to issue common stock for employee share-based compensation awards, and related tax effects | | (591 | ) | | (738 | ) | | (734 | ) | Other | | (49 | ) | | (679 | ) | | (314 | ) | Balance at December 31 | | 88,522 |
| | 89,162 |
| | 90,579 |
| Retained earnings | | | | | | | Balance at January 1 | | 199,202 |
| | 177,676 |
| | 162,440 |
| Cumulative effect of change in accounting principles | | 62 |
| | (183 | ) | | — |
| Net income | | 36,431 |
| | 32,474 |
| | 24,441 |
| Dividends declared: | | | | | | | Preferred stock | | (1,587 | ) | | (1,551 | ) | | (1,663 | ) | Common stock ($3.40, $2.72 and $2.12 per share for 2019, 2018 and 2017, respectively) | | (10,897 | ) | | (9,214 | ) | | (7,542 | ) | Balance at December 31 | | 223,211 |
| | 199,202 |
| | 177,676 |
| Accumulated other comprehensive income | | | | | | | Balance at January 1 | | (1,507 | ) | | (119 | ) | | (1,175 | ) | Cumulative effect of change in accounting principles | | — |
| | 88 |
| | — |
| Other comprehensive income/(loss), after-tax | | 3,076 |
| | (1,476 | ) | | 1,056 |
| Balance at December 31 | | 1,569 |
| | (1,507 | ) | | (119 | ) | Shares held in RSU Trust, at cost | | | | | | | Balance at January 1 and December 31 | | (21 | ) | | (21 | ) | | (21 | ) | Treasury stock, at cost | | | | | | | Balance at January 1 | | (60,494 | ) | | (42,595 | ) | | (28,854 | ) | Repurchase | | (24,121 | ) | | (19,983 | ) | | (15,410 | ) | Reissuance | | 1,566 |
| | 2,084 |
| | 1,669 |
| Balance at December 31 | | (83,049 | ) | | (60,494 | ) | | (42,595 | ) | Total stockholders’ equity | | $ | 261,330 |
| | $ | 256,515 |
| | $ | 255,693 |
|
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 149 |
Consolidated statements of cash flows
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Operating activities | | | | | | Net income | $ | 36,431 |
| | $ | 32,474 |
| | $ | 24,441 |
| Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | | | | | Provision for credit losses | 5,585 |
| | 4,871 |
| | 5,290 |
| Depreciation and amortization | 8,368 |
| | 7,791 |
| | 6,179 |
| Deferred tax expense | 949 |
| | 1,721 |
| | 2,312 |
| Other | 1,996 |
| | 2,717 |
| | 2,136 |
| Originations and purchases of loans held-for-sale | (70,980 | ) | | (102,141 | ) | | (94,628 | ) | Proceeds from sales, securitizations and paydowns of loans held-for-sale | 79,182 |
| | 93,453 |
| | 93,270 |
| Net change in: | | | | | | Trading assets | (652 | ) | | (38,371 | ) | | 5,673 |
| Securities borrowed | (27,631 | ) | | (6,861 | ) | | (8,653 | ) | Accrued interest and accounts receivable | (78 | ) | | (5,849 | ) | | (15,868 | ) | Other assets | (17,949 | ) | | (8,833 | ) | | 3,982 |
| Trading liabilities | (14,516 | ) | | 18,290 |
| | (26,256 | ) | Accounts payable and other liabilities | (352 | ) | | 14,630 |
| | (16,508 | ) | Other operating adjustments | 5,693 |
| | 295 |
| | 7,803 |
| Net cash provided by/(used in) operating activities | 6,046 |
| | 14,187 |
| | (10,827 | ) | Investing activities | | | | | | Net change in: | | | | | | Federal funds sold and securities purchased under resale agreements | 72,396 |
| | (123,201 | ) | | 31,448 |
| Held-to-maturity securities: | | | | | | Proceeds from paydowns and maturities | 3,423 |
| | 2,945 |
| | 4,563 |
| Purchases | (13,427 | ) | | (9,368 | ) | | (2,349 | ) | Available-for-sale securities: | | | | | | Proceeds from paydowns and maturities | 52,200 |
| | 37,401 |
| | 56,117 |
| Proceeds from sales | 70,181 |
| | 46,067 |
| | 90,201 |
| Purchases | (242,149 | ) | | (95,091 | ) | | (105,309 | ) | Proceeds from sales and securitizations of loans held-for-investment | 62,095 |
| | 29,826 |
| | 15,791 |
| Other changes in loans, net | (53,697 | ) | | (81,586 | ) | | (61,650 | ) | All other investing activities, net | (5,035 | ) | | (4,986 | ) | | (563 | ) | Net cash provided by/(used in) investing activities | (54,013 | ) | | (197,993 | ) | | 28,249 |
| Financing activities | | | | | | Net change in: | | | | | | Deposits | 101,002 |
| | 26,728 |
| | 57,022 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | 1,347 |
| | 23,415 |
| | (6,739 | ) | Short-term borrowings | (28,561 | ) | | 18,476 |
| | 16,540 |
| Beneficial interests issued by consolidated VIEs | 4,289 |
| | 1,712 |
| | (1,377 | ) | Proceeds from long-term borrowings | 61,085 |
| | 71,662 |
| | 56,271 |
| Payments of long-term borrowings | (69,610 | ) | | (76,313 | ) | | (83,079 | ) | Proceeds from issuance of preferred stock | 5,000 |
| | 1,696 |
| | 1,258 |
| Redemption of preferred stock | (4,075 | ) | | (1,696 | ) | | (1,258 | ) | Treasury stock repurchased | (24,001 | ) | | (19,983 | ) | | (15,410 | ) | Dividends paid | (12,343 | ) | | (10,109 | ) | | (8,993 | ) | All other financing activities, net | (1,146 | ) | | (1,430 | ) | | 407 |
| Net cash provided by financing activities | 32,987 |
| | 34,158 |
| | 14,642 |
| Effect of exchange rate changes on cash and due from banks and deposits with banks | (182 | ) | | (2,863 | ) | | 8,086 |
| Net increase/(decrease) in cash and due from banks and deposits with banks | (15,162 | ) | | (152,511 | ) | | 40,150 |
| Cash and due from banks and deposits with banks at the beginning of the period | 278,793 |
| | 431,304 |
| | 391,154 |
| Cash and due from banks and deposits with banks at the end of the period | $ | 263,631 |
| | $ | 278,793 |
| | $ | 431,304 |
| Cash interest paid | $ | 29,918 |
| | $ | 21,152 |
| | $ | 14,153 |
| Cash income taxes paid, net | 5,624 |
| | 3,542 |
| | 4,325 |
|
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | 150 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Consolidated statements of changes in stockholders’ equity
| | | | | | | | | | | | | | Year ended December 31, (in millions, except per share data) | | 2017 |
| 2016 | | 2015 | Preferred stock | | | | | | | Balance at January 1 | | $ | 26,068 |
| | $ | 26,068 |
| | $ | 20,063 |
| Issuance | | 1,258 |
| | — |
| | 6,005 |
| Redemption | | (1,258 | ) | | — |
| | — |
| Balance at December 31 | | 26,068 |
| | 26,068 |
| | 26,068 |
| Common stock | | | | | | | Balance at January 1 and December 31 | | 4,105 |
| | 4,105 |
| | 4,105 |
| Additional paid-in capital | | | | | | | Balance at January 1 | | 91,627 |
| | 92,500 |
| | 93,270 |
| Shares issued and commitments to issue common stock for employee share-based compensation awards | | (734 | ) | | (334 | ) | | (436 | ) | Other | | (314 | ) | | (539 | ) | | (334 | ) | Balance at December 31 | | 90,579 |
| | 91,627 |
| | 92,500 |
| Retained earnings | | | | | | | Balance at January 1 | | 162,440 |
| | 146,420 |
| | 129,977 |
| Cumulative effect of change in accounting principle | | — |
| | (154 | ) | | — |
| Net income | | 24,441 |
| | 24,733 |
| | 24,442 |
| Dividends declared: | | | | | | | Preferred stock | | (1,663 | ) | | (1,647 | ) | | (1,515 | ) | Common stock ($2.12, $1.88 and $1.72 per share for 2017, 2016 and 2015, respectively) | | (7,542 | ) | | (6,912 | ) | | (6,484 | ) | Balance at December 31 | | 177,676 |
| | 162,440 |
| | 146,420 |
| Accumulated other comprehensive income | | | | | | | Balance at January 1 | | (1,175 | ) | | 192 |
| | 2,189 |
| Cumulative effect of change in accounting principle | | — |
| | 154 |
| | — |
| Other comprehensive income/(loss) | | 1,056 |
| | (1,521 | ) | | (1,997 | ) | Balance at December 31 | | (119 | ) | | (1,175 | ) | | 192 |
| Shares held in RSU Trust, at cost | | | | | | | Balance at January 1 and December 31 | | (21 | ) | | (21 | ) | | (21 | ) | Treasury stock, at cost | | | | | | | Balance at January 1 | | (28,854 | ) | | (21,691 | ) | | (17,856 | ) | Repurchase | | (15,410 | ) | | (9,082 | ) | | (5,616 | ) | Reissuance | | 1,669 |
| | 1,919 |
| | 1,781 |
| Balance at December 31 | | (42,595 | ) | | (28,854 | ) | | (21,691 | ) | Total stockholders’ equity | | $ | 255,693 |
| | $ | 254,190 |
| | $ | 247,573 |
|
The Notes to Consolidated Financial Statements are an integral part of these statements.consolidated financial statements
| | | | JPMorgan Chase & Co./2017 Annual Report | | 151 |
Consolidated statements of cash flows
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Operating activities | | | | | | Net income | $ | 24,441 |
| | $ | 24,733 |
| | $ | 24,442 |
| Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | | | | | Provision for credit losses | 5,290 |
| | 5,361 |
| | 3,827 |
| Depreciation and amortization | 6,179 |
| | 5,478 |
| | 4,940 |
| Deferred tax expense | 2,312 |
| | 4,651 |
| | 1,333 |
| Other | 2,136 |
| | 1,799 |
| | 1,785 |
| Originations and purchases of loans held-for-sale | (94,628 | ) | | (61,107 | ) | | (48,109 | ) | Proceeds from sales, securitizations and paydowns of loans held-for-sale | 93,270 |
| | 60,196 |
| | 49,363 |
| Net change in: | | | | | | Trading assets | 5,673 |
| | (20,007 | ) | | 62,212 |
| Securities borrowed | (8,653 | ) | | 2,313 |
| | 12,165 |
| Accrued interest and accounts receivable | (15,868 | ) | | (5,815 | ) | | 22,664 |
| Other assets | 4,318 |
| | (4,517 | ) | | (3,701 | ) | Trading liabilities | (26,256 | ) | | 5,198 |
| | (28,972 | ) | Accounts payable and other liabilities | (8,518 | ) | | 3,740 |
| | (23,361 | ) | Other operating adjustments | 7,803 |
| | (1,827 | ) | | (5,122 | ) | Net cash provided by/(used in) operating activities | (2,501 | ) | | 20,196 |
| | 73,466 |
| Investing activities | | | | | | Net change in: | | | | | | Deposits with banks | (38,532 | ) | | (25,747 | ) | | 144,462 |
| Federal funds sold and securities purchased under resale agreements | 31,448 |
| | (17,468 | ) | | 3,190 |
| Held-to-maturity securities: | | | | | | Proceeds from paydowns and maturities | 4,563 |
| | 6,218 |
| | 6,099 |
| Purchases | (2,349 | ) | | (143 | ) | | (6,204 | ) | Available-for-sale securities: | | | | | | Proceeds from paydowns and maturities | 56,117 |
| | 65,950 |
| | 76,448 |
| Proceeds from sales | 90,201 |
| | 48,592 |
| | 40,444 |
| Purchases | (105,309 | ) | | (123,959 | ) | | (70,804 | ) | Proceeds from sales and securitizations of loans held-for-investment | 15,791 |
| | 15,429 |
| | 18,604 |
| Other changes in loans, net | (61,650 | ) | | (80,996 | ) | | (108,962 | ) | All other investing activities, net | (563 | ) | | (2,825 | ) | | 3,703 |
| Net cash provided by/(used in) investing activities | (10,283 | ) | | (114,949 | ) | | 106,980 |
| Financing activities | | | | | | Net change in: | | | | | | Deposits | 57,022 |
| | 97,336 |
| | (88,678 | ) | Federal funds purchased and securities loaned or sold under repurchase agreements | (6,739 | ) | | 13,007 |
| | (39,415 | ) | Short-term borrowings | 16,540 |
| | (2,461 | ) | | (57,828 | ) | Beneficial interests issued by consolidated VIEs | (1,377 | ) | | (5,707 | ) | | (5,632 | ) | Proceeds from long-term borrowings | 56,271 |
| | 83,070 |
| | 79,611 |
| Payments of long-term borrowings | (83,079 | ) | | (68,949 | ) | | (67,247 | ) | Proceeds from issuance of preferred stock | 1,258 |
| | — |
| | 5,893 |
| Redemption of preferred stock | (1,258 | ) | | — |
| | — |
| Treasury stock repurchased | (15,410 | ) | | (9,082 | ) | | (5,616 | ) | Dividends paid | (8,993 | ) | | (8,476 | ) | | (7,873 | ) | All other financing activities, net | 407 |
| | (467 | ) | | (726 | ) | Net cash provided by/(used in) financing activities | 14,642 |
| | 98,271 |
| | (187,511 | ) | Effect of exchange rate changes on cash and due from banks | 96 |
| | (135 | ) | | (276 | ) | Net increase/(decrease) in cash and due from banks | 1,954 |
| | 3,383 |
| | (7,341 | ) | Cash and due from banks at the beginning of the period | 23,873 |
| | 20,490 |
| | 27,831 |
| Cash and due from banks at the end of the period | $ | 25,827 |
| | $ | 23,873 |
| | $ | 20,490 |
| Cash interest paid | $ | 14,153 |
| | $ | 9,508 |
| | $ | 7,220 |
| Cash income taxes paid, net | 4,325 |
| | 2,405 |
| | 9,423 |
|
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | 152 | | JPMorgan Chase & Co./2017 Annual Report |
Note 1 – Basis of presentation JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”), a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the U.S., with operations worldwide. The Firm is a leader in investment banking, financial services for consumers and small business, commercial banking, financial transaction processing and asset management. ForRefer to Note 32 for a discussion of the Firm’s business segments, see Note 31.segments. The accounting and financial reporting policies of JPMorgan Chase and its subsidiaries conform to U.S. GAAP. Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by regulatory authorities. Certain amounts reported in prior periods have been reclassified to conform with the current presentation. Consolidation The Consolidated Financial Statements include the accounts ofJPMorgan Chaseand other entities in which the Firm has a controlling financial interest. All material intercompany balances and transactions have been eliminated. Assets held for clients in an agency or fiduciary capacity by the Firm are not assets of JPMorgan Chase and are not included on the Consolidated balance sheets. The Firm determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity. Voting Interest Entitiesinterest entities Voting interest entities are entities that have sufficient equity and provide the equity investors voting rights that enable them to make significant decisions relating to the entity’s operations. For these types of entities, the Firm’s determination of whether it has a controlling interest is primarily based on the amount of voting equity interests held. Entities in which the Firm has a controlling financial interest, through ownership of the majority of the entities’ voting equity interests, or through other contractual rights that give the Firm control, are consolidated by the Firm. Investments in companies in which the Firm has significant influence over operating and financing decisions (but does not own a majority of the voting equity interests) are accounted for (i) in accordance with the equity method of accounting (which requires the Firm to recognize its proportionate share of the entity’s net earnings), or (ii) at fair value if the fair value option was elected. These investments are generally included in other assets, with income or loss included in other income.noninterest revenue. Certain Firm-sponsored Firm-sponsored asset management funds are structured as limited partnerships or certain limited liability companies. For many of these entities, the Firm is the general partner or managing member, but the non-affiliated partners or members have the ability to remove the Firm as the general partner or managing member without cause (i.e. (i.e., kick-out rights), based on a simple majority vote, or the non-affiliated partners or members have rights to participate in important decisions. Accordingly, the Firm does not consolidate these voting interest entities. However, in the limited cases where the non-managing partners or members do not have substantive kick-out or participating rights, the Firm evaluates the funds as VIEs and consolidates the funds if it the Firm is thethe general partner or managing member and has a potentially significant interest.
The Firm’s investment companies and asset management funds have investments in both publicly-held and privately-held entities, including investments in buyouts, growth equity and venture opportunities. These investments are accounted for under investment company guidelines and, accordingly, irrespective of the percentage of equity ownership interests held, are carried on the Consolidated balance sheets at fair value, and are recorded in other assets, with income or loss included in noninterest revenue. If consolidated, the Firm retains such specialized investment company guidelines. Variable Interest Entitiesinterest entities VIEs are entities that, by design, either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The most common type of VIE is anan SPE. SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. The basic SPE structure involves a company selling assets to the SPE; the SPE funds the purchase of those assets by issuing securities to investors. The legal documents that govern the transaction specify how the cash earned on the assets must be allocated to the SPE’s investors and other parties that have rights to those cash flows. SPEs are generally structured to insulate investors from claims on the SPE’s assets by creditors of other entities, including the creditors of the seller of the assets. The primary beneficiary of a VIE (i.e., the party that has a controlling financial interest) is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (2) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. To assess whether the Firm has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Firm considers all the facts and
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 151 |
Notes to consolidated financial statements
circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and
| | | | JPMorgan Chase & Co./2017 Annual Report | | 153 |
Notes to consolidated financial statements
second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (such as asset managers, collateral managers, servicers, or owners of call options or liquidation rights over the VIE’s assets) or have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE. To assess whether the Firm has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Firm considers all of its economic interests, including debt and equity investments, servicing fees, and derivatives or other arrangements deemed to be variable interests in the VIE. This assessment requires that the Firm apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Firm. The Firm performs on-going reassessments of: (1) whether entities previously evaluated under the majority voting-interest framework have become VIEs, based on certain events, and are therefore subject to the VIE consolidation framework; and (2) whether changes in the facts and circumstances regarding the Firm’s involvement with a VIE cause the Firm’s consolidation conclusion to change. Refer to Note 14 for further discussion of the Firm’s VIEs. Revenue recognition Interest income The Firm recognizes interest income on loans, debt securities, and other debt instruments, generally on a level-yield basis, based on the underlying contractual rate. Refer to Note 7 for further discussion of interest income. Revenue from contracts with customers JPMorgan Chase recognizes noninterest revenue from certain contracts with customers, in investment banking fees, deposit-related fees, asset management administration and commissions, and components of card income, when the Firm’s related performance obligations are satisfied. Refer to Note 6 for further discussion of the Firm’s revenue from contracts with customers. Principal transactions revenue JPMorgan Chase carries a portion of its assets and liabilities at fair value. Changes in fair value are reported primarily in principal transactions revenue. Refer to Notes 2 and 3 for further discussion of fair value measurement. Refer to Note 6 for further discussion of principal transactions revenue. Use of estimates in the preparation of consolidated financial statements The preparation of the Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expense, and disclosures of contingent assets and liabilities. Actual results could be different from these estimates. Foreign currency translation JPMorgan Chase revalues assets, liabilities, revenue and expense denominated in non-U.S. currencies into U.S. dollars using applicable exchange rates. Gains and losses relating to translating functional currency financial statements for U.S. reporting are included in OCI within stockholders’ equity. the Consolidated statements of comprehensive income.Gains and losses relating to nonfunctional currency transactions, including non-U.S. operations where the functional currency is the U.S. dollar, are reported in the Consolidated statements of income. Offsetting assets and liabilities U.S. GAAP permits entities to present derivative receivables and derivative payables with the same counterparty and the related cash collateral receivables and payables on a net basis on the Consolidated balance sheets when a legally enforceable master netting agreement exists. U.S. GAAP also permits securities sold and purchased under repurchase agreements and securities borrowed or loaned under securities loan agreements to be presented net when specified conditions are met, including the existence of a legally enforceable master netting agreement. The Firm has elected to net such balances when the specified conditions are met. The Firm uses master netting agreementsto mitigate counterparty credit risk in certain transactions, including derivative contracts, resale, repurchase, securities repurchase and reverse repurchase,borrowed and securities loaned and borrow transactions.agreements. A master netting agreement is a single agreement with a counterparty that permits multiple transactions governed by that agreement to be terminated or accelerated and settled through a single payment in a single currency in the event of a default (e.g., bankruptcy, failure to make a required payment or securities transfer or deliver collateral or margin when due). Upon the exercise of derivatives termination rights by the non-defaulting party (i) all transactions are terminated, (ii) all transactions are valued and the positive values of “in the money” transactions are netted against the negative values of “out of the money” transactions and (iii) the only remaining payment obligation is of one of the parties to pay the netted termination amount. Upon exercise of default rights under repurchase agreements and securities loan agreements in general (i) all transactions are terminated and accelerated, (ii) all values of securities or cash held or to be delivered are calculated, and all such sums are netted against each other and (iii) the only remaining payment obligation is of one of the parties to pay the netted termination amount.
| | | | 152 | | JPMorgan Chase & Co./2019 Form 10-K |
Typical master netting agreements for these types of transactions also often contain a collateral/margin agreement that provides for a security interest in, or title transfer of, securities or cash collateral/margin to the party that has the right to demand margin (the “demanding party”). The collateral/margin agreement typically requires a party to transfer collateral/margin to the demanding party with a value equal to the amount of the margin deficit on a net basis across all transactions governed by the master netting agreement, less any threshold. The collateral/margin agreement grants to the demanding party, upon default by the counterparty, the right to set-off any amounts payable by the counterparty against any posted collateral or the cash equivalent of any posted collateral/margin. It also grants to the demanding party the right to liquidate collateral/margin and to apply the proceeds to an amount payable by the counterparty. ForRefer to Note 5 for further discussion of the Firm’s derivative instruments, seeinstruments. Refer to Note 5. For11 for further discussion of the Firm’s repurchase and reverse repurchase agreements, and securities borrowing and lending agreements, see Note 11.financing agreements.
Statements of cash flows For JPMorgan Chase’s Consolidated statements of cash flows, cash is defined as those amounts included in cash and due from banks and deposits with banks. Accounting standard adopted January 1, 2020
Financial Instruments – Credit Losses (“CECL”) The adoption of this guidance established a single allowance framework for all financial assets carried at amortized cost and certain off-balance sheet credit exposures. This framework requires that management’s estimate reflects credit losses over the full remaining expected life and considers expected future changes in macroeconomic conditions. The following table presents the impacts to the allowance for credit losses and retained earnings upon adoption of this guidance on January 1, 2020: | | | | | | | | | | | (in billions) | December 31, 2019 | CECL adoption impact | January 1, 2020 | Allowance for credit losses | | | | Consumer, excluding credit card | $ | 3.2 |
| $ | 0.2 |
| $ | 3.4 |
| Credit card | 5.7 |
| 5.5 |
| 11.2 |
| Wholesale | 5.4 |
| (1.4 | ) | 4.0 |
| Firmwide | $ | 14.3 |
| $ | 4.3 |
| $ | 18.6 |
| | | | | Retained earnings | | | | Firmwide allowance increase | | $ | 4.3 |
| | Balance sheet reclassification(a) | | (0.8 | ) | | Total pre-tax impact | | 3.5 |
| | Tax effect | | (0.8 | ) | | Decrease to retained earnings | | $ | 2.7 |
| |
| | | | 154(a) | | JPMorgan Chase & Co./2017 Annual ReportRepresents the recognition of the nonaccretable difference on purchased credit deteriorated assets and the Firm's election to recognize the reserve for uncollectible accrued interest on credit card loans in the allowance, both of which resulted in a corresponding increase to loans. |
Accounting standards adopted January 1, 2018 Effective January 1, 2018, the Firm adopted several accounting standards resulting in a net decrease of $183 million to retained earnings and a net increase of $88 million to AOCI. Certain of these standards were adopted retrospectively and, accordingly, prior period amounts were revised. The adoption of the recognition and measurement guidance resulted in $505 million of fair value gains in the first quarter of 2018, recorded in total net revenue, on certain equity investments that were previously held at cost. Significant accounting policies The following table identifies JPMorgan Chase’s other significant accounting policies and the Note and page where a detailed description of each policy can be found. | | | | | Fair value measurement | Note 2 | | Page 155page 154 | Fair value option | Note 3 | | Page 174page 175 | Derivative instruments | Note 5 | | Page 179page 180 | Noninterest revenue and noninterest expense | Note 6 | | Page 192page 195 | Interest income and interestInterest expense | Note 7 | | Page 195page 198 | Pension and other postretirement employee benefit plans | Note 8 | | Page 195page 199 | Employee share-based incentives | Note 9 | | Page 201page 206 | SecuritiesInvestment securities | Note 10 | | Page 203page 208 | Securities financing activities | Note 11 | | Page 208page 214 | Loans | Note 12 | | Page 211page 217 | Allowance for credit losses | Note 13 | | Page 231page 237 | Variable interest entities | Note 14 | | Page 236page 242 | Goodwill and Mortgage servicing rights | Note 15 | | page 244250 | Premises and equipment | Note 16 | | page 248254 | Leases | Note 18 | | page 254 | Long-term debt | Note 1920 | | page 249257 | Income taxes | Note 2425 | | page 255265 | Off–balance sheet lending-related financial instruments, guarantees and other commitments | Note 2728 | | page 261272 | Litigation | Note 2930 | | page 268279 |
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 153 |
Notes to consolidated financial statements
Note 2 – Fair value measurement JPMorgan Chase carries a portion of its assets and liabilities at fair value. These assets and liabilities are predominantly carried at fair value on a recurring basis (i.e., assets and liabilities that are measured and reported at fair value on the Firm’s Consolidated balance sheets). Certain assets, (e.g., held-for-sale loans), liabilities and unfunded lending-related commitments are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on quoted market prices or inputs, where available. If prices or quotes are not available, fair value is based on valuation models and other valuation techniques that consider relevant transaction characteristics (such as maturity) and use, as inputs, observable or unobservable market parameters, including yield curves, interest rates, volatilities, prices (such as commodity, equity or debt prices,prices), correlations, foreign exchange rates and credit curves. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value, as described below. The level of precision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. Furthermore, while the Firm believes its valuation methods are appropriate and consistent with those of other market participants, the methods and assumptions used reflect management judgment and may vary across the Firm’s businesses and portfolios. The Firm uses various methodologies and assumptions in the determination of fair value. The use of different methodologies or assumptions by other market participants compared with those used by the Firm could result in the Firm deriving a different estimate of fair value at the reporting date. Valuation process Risk-taking functions are responsible for providing fair value estimates for assets and liabilities carried on the Consolidated balance sheets at fair value.The Firm’sVCG, which is part of the Firm’s Finance function and independent of the risk-taking functions, is responsible for verifying these estimates and determining any fair value adjustments that may be required to ensure thatthe Firm’spositions are recorded at fair value. The VGFis composed of senior finance and risk executives and is responsible for overseeing the management of risks arising from valuation activities conducted acrossthe Firm.The Firmwide VGF is chaired by the Firmwide head of the VCG (under the direction ofthe Firm’s Controller), and includes sub-forums covering the CIB, CCB, CB, AWM and certain corporate functions including Treasury and CIO.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 155 |
Notes to consolidated financial statements
Price verification process The VCG verifies fair value estimates provided by the risk-taking functions by leveraging independently derived prices, valuation inputs and other market data, where available. Where independent prices or inputs are not available, the VCG performs additional review to ensure the reasonableness of the estimates. The additional review may include evaluating the limited market activity including client unwinds, benchmarking valuation inputs to those used for similar instruments, decomposing the valuation of structured instruments into individual components, comparing expected to actual cash flows, reviewing profit and loss trends, and reviewing trends in collateral valuation. There are also additional levels of management review for more significant or complex positions. The VCG determines any valuation adjustments that may be required to the estimates provided by the risk-taking functions. No adjustments to quoted prices are applied for instruments classified within level 1 of the fair value hierarchy (see(refer to the discussion below for further information on the fair value hierarchy). For other positions, judgment is required to assess the need for valuation adjustments to appropriately reflect liquidity considerations, unobservable parameters, and, for certain portfolios that meet specified criteria, the size of the net open risk position. The determination of such adjustments follows a consistent framework across the Firm: | | • | Liquidity valuation adjustments are considered where an observable external price or valuation parameter exists but is of lower reliability, potentially due to lower market activity. Liquidity valuation adjustments are made based on current market conditions. Factors that may be considered in determining the liquidity adjustment include analysis of: (1) the estimated bid-offer spread for the instrument being traded; (2) alternative pricing points for similar instruments in active markets; and (3) the range of reasonable values that the price or parameter could take. |
| | • | The Firmmanages certain portfolios of financial instruments on the basis of net open risk exposure and, as permitted by U.S. GAAP, has elected to estimate the fair value of such portfolios on the basis of a transfer of the entire net open risk position in an orderly transaction. Where this is the case, valuation adjustments may be necessary to reflect the cost of exiting a larger-than-normal market-size net open risk position. Where applied, such adjustments are based on factors that a relevant market participant would consider in the transfer of the net open risk position, including the size of the adverse market move that is likely to occur during the period required to reduce the net open risk position to a normal market-size. |
Uncertainty adjustments are considered where an observable external price or valuation parameter exists but is of lower reliability, potentially duerelated to lower market activity. Liquidity valuation adjustments are applied and determined based on current market conditions. Factors that may be considered in determining the liquidity adjustment include analysis of: (1) the estimated bid-offer spread for the instrument being traded; (2) alternative pricing points for similar instruments in active markets; and (3) the range of reasonable values that the price or parameter could take. The Firmmanages certain portfolios of financial instruments on the basis of net open risk exposure and, as permitted by U.S. GAAP, has elected to estimate the fair value of such portfolios on the basis of a transfer of the entire net open risk position in an orderly transaction. Where this is the case, valuation adjustments may be necessary to reflect the cost of exiting a larger-than-normal market-size net open risk position. Where applied, such adjustments are based on factors that a relevant market participant would consider in the transfer of the net open risk position, including the size of the adverse market move that is likely to occur during the period required to reduce the net open risk position to a normal market-size.
Unobservable parameter valuation adjustmentsunobservable parameters may be made when positions are valued using prices or input parameters to valuation models that are unobservable due to a lack of market activity or because they cannot be implied from observable market data. Such prices or parameters must be estimated and are, therefore, subject to management judgment. Unobservable
parameter valuation adjustments | | | | 154 | | JPMorgan Chase & Co./2019 Form 10-K |
Adjustments are appliedmade to reflect the uncertainty inherent in the resulting valuation estimate. | | • | Where appropriate,the Firmalso applies adjustments to its estimates of fair value in order to appropriately reflect counterparty credit quality(CVA), the Firm’sown creditworthiness(DVA)and the impact of funding (FVA), using a consistent framework acrossthe Firm. Refer to Credit and funding adjustments on page 171 of this Note for more information on such adjustments. |
Where appropriate,the Firmalso applies adjustments to its estimates of fair value in order to appropriately reflect counterparty credit quality(CVA), the Firm’sown creditworthiness(DVA)and the impact of funding (FVA), using a consistent framework acrossthe Firm. For more information on such adjustments see Credit and funding adjustments on page 171 of this Note.
Valuation model review and approval If prices or quotes are not available for an instrument or a similar instrument, fair value is generally determined using valuation models that consider relevant transaction dataterms such as maturity and use as inputs market-based or independently sourced parameters. Where this is the case the price verification process described above is applied to the inputs toin those models. Underthe Firm’sEstimations and Model Risk Management Policy, the Model Risk function reviews and approves new models, as well as material changes to existing models, prior to implementation in the operating environment. In certain circumstances the head of the Model Risk functionexceptions may grant exceptionsbe granted tothe Firm’spolicy to allow a model to be used prior to review or approval. The Model Risk function may also require the user to take appropriate actions to mitigate the model risk if it is to be used in the interim. These actions will depend on the model and may include, for example, limitation of trading activity. Valuation hierarchy A three-level valuation hierarchy has been established under U.S. GAAP for disclosure of fair value measurements. The valuation hierarchy is based on the transparencyobservability of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows. Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
| | • | Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 – one or more inputs to the valuation methodology are unobservable and significant to the fair value measurement.
| | • | Level 3 – one or more inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.
| | | | 156 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 155 |
Notes to consolidated financial statements
The following table describes the valuation methodologies generally used by the Firm to measure its significant products/instruments at fair value, including the general classification of such instruments pursuant to the valuation hierarchy. | | | | | | Product/instrument | Valuation methodology | Classifications in the valuation hierarchy | | Securities financing agreements | Valuations are based on discounted cash flows, which consider: | Predominantly level 2 | | • Derivative features: for further information refer to the discussion of derivatives below.below for further information. | | • Market rates for the respective maturity | | • Collateral characteristics | | Loans and lending-related commitments — wholesale | | | Loans carried at fair value (e.g. (e.g., trading loans and non-trading loans) and associated lending-related commitments
| Where observable market data is available, valuations are based on: | Level 2 or 3 | | • Observed market prices (circumstances are infrequent) | | | • Relevant broker quotes | | | | • Observed market prices for similar instruments | | | | Where observable market data is unavailable or limited, valuations are based on discounted cash flows, which consider the following: | | | | • Credit spreads derived from the cost of CDS; or benchmark credit curves developed by the Firm, by industry and credit rating | | | | • Prepayment speed | | | | • Collateral characteristics | | | Loans held-for-investment and associated lending-related commitments | Valuations are based on discounted cash flows, which consider: | Predominantly level 3 | | • Credit spreads, derived from the cost of CDS; or benchmark credit curves developed by the Firm, by industry and credit rating | | | | | • Prepayment speed | | | | Lending-related commitments are valued similarly to loans and reflect the portion of an unused commitment expected, based on the Firm’s average portfolio historical experience, to become funded prior to an obligor default. | | | | | | | | | | For information regarding the valuation of loans measured at collateral value, see Note 12. | | | | | | Loans — consumer | | | | Held-for-investment consumer loans, excluding credit card | Valuations are based on discounted cash flows, which consider: | Predominantly level 2 | | • Credit losses – which consider expected and current default rates, and loss severity | | | | | | | | | | | | | | | | | For information regarding the valuation of loans measured at collateral value, see Note 12. | | | | | | Held-for-investment credit card receivables | Valuations are based on discounted cash flows, which consider: | Level 3 | | • Credit costs - the allowance for loan losses is considered a reasonable proxy for the credit cost | | | | | • Projected interest income, late-fee revenue and loan repayment rates | | | • Discount rates | | | | • Servicing costs | | | Trading loans — conforming residential mortgage loans expected to be sold (CCB, CIB) | Fair value is based on observable prices for mortgage-backed securities with similar collateral and incorporates adjustments to these prices to account for differences between the securities and the value of the underlying loans, which include credit characteristics, portfolio composition, and liquidity. | Predominantly level 2 | | | | | | |
| | | | JPMorgan Chase & Co./2017 Annual Report | | 157 |
Notes to consolidated financial statements
| | | | Product/instrument | Valuation methodology, inputs and assumptions | Classifications in the valuation hierarchy | Investment and trading securities | Quoted market prices are used where available. | Level 1 | | | In the absence of quoted market prices, securities are valued based on: | Level 2 or 3 | | | • Observable market prices for similar securities | | | | | | | | | | | | In addition, the following inputs to discounted cash flows are used for the following products: | | | | Mortgage- and asset-backed securities specific inputs: | | | | • Collateral characteristics | | | | • Deal-specific payment and loss allocations | | | | • Current market assumptions related to yield, prepayment speed, conditional default rates and loss severity | | | | Collateralized loan obligations (“CLOs”) specific inputs: | | | | • Collateral characteristics | | | | • Deal-specific payment and loss allocations | | | | • Expected prepayment speed, conditional default rates, loss severity | | | | | | | | • Credit rating data | | | Physical commodities | Valued using observable market prices or data. | Predominantly levelLevel 1 andor 2 |
| | | | 156 | | JPMorgan Chase & Co./2019 Form 10-K |
| | | | Product/instrument | Valuation methodology | Classifications in the valuation hierarchy | Derivatives | Exchange-traded derivatives that are actively traded and valued using the exchange price. | Level 1 | | Derivatives that are valued using models such as the Black-Scholes option pricing model, simulation models, or a combination of models that may use observable or unobservable valuation inputs as well as considering the contractual terms. The key valuation inputs used will depend on the type of derivative and the nature of the underlying instruments and may include equity prices, commodity prices, interest rate yield curves, foreign exchange rates, volatilities, correlations, CDS spreads and recovery rates. Additionally, the credit quality of the counterparty and of the Firm as well as market funding levels may also be considered. | Level 2 or 3 | | In addition, specific inputs used for derivatives that are valued based on models with significant unobservable inputs are as follows:
| | | Structured credit derivatives specific inputs include: | | | • CDS spreads and recovery rates | | | • Credit correlation between the underlying debt instruments | | | Equity option specific inputs include: | | | • Equity volatilities Forward equity price | | | • Equity correlationvolatility | | | • Equity-FX Equity correlation | | | | | | | | | Interest rate and FX exotic options specific inputs include: | | | • Interest rate spread volatility | | | • Interest rate correlationspread volatility | | | • Foreign exchange Interest rate correlation | | | • Foreign exchange correlation | | | • Interest rate-FX correlation | | | Commodity derivatives specific inputs include: | | | | | | • Forward commodity price | | | Additionally, adjustments are made to reflect counterparty credit quality (CVA) and the impact of funding (FVA). SeeRefer to page 171 of this Note. | | | | | | | |
| | | | 158 | | JPMorgan Chase & Co./2017 Annual Report |
| | | | | | Product/instrument | Valuation methodology, inputs and assumptions | Classification in the valuation hierarchy | | Mortgage servicing rights | SeeRefer to Mortgage servicing rights in Note 15. | Level 3 | | | | Private equity direct investments | Fair value is estimated using all available information; the range of potential inputs include: | Level 2 or 3 | | • Transaction prices | | | • Trading multiples of comparable public companies | | | | • Operating performance of the underlying portfolio company | | | | • Adjustments as required, since comparable public companies are not identical to the company being valued, and for company-specific issues and lack of liquidity. | | | | • Additional available inputs relevant to the investment. | | | Fund investments (e.g., mutual/collective investment funds, private equity funds, hedge funds, and real estate funds) | Net asset value | | | • NAV is supported by the ability to redeem and purchase at the NAV level. | Level 1 | | | | • Adjustments to the NAV as required, for restrictions on redemption (e.g., lock-up periods or withdrawal limitations) or where observable activity is limited. | Level 2 or 3(a) | | | | | Beneficial interests issued by consolidated VIEs | Valued using observable market information, where available. | Level 2 or 3 | | In the absence of observable market information, valuations are based on the fair value of the underlying assets held by the VIE. | |
| Long-term debt, not carried | (a) | Excludes certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient. |
| | Valuations are based on discounted cash flows, which consider: | Predominantly level 2 | JPMorgan Chase & Co./2019 Form 10-K | | 157 |
Notes to consolidated financial statements
| | | | | | •
Market rates for respective maturity Product/instrument | Valuation methodology | Classification in the valuation hierarchy | | Structured notes (included in deposits, short-term borrowings and long-term debt) | • Valuations are based on discounted cash flow analyses that consider the embedded derivative and the terms and payment structure of the note.
• The embedded derivative features are considered using models such as the Black-Scholes option pricing model, simulation models, or a combination of models that may use observable or unobservable valuation inputs, depending on the embedded derivative. The specific inputs used vary according to the nature of the embedded derivative features, as described in the discussion above regarding derivatives valuation. Adjustments are then made to this base valuation to reflect the Firm’s own credit risk (DVA). SeeRefer to page 171 of this Note. | Level 2 or 3 | | | | |
| | | | (a)158 | Excludes certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient. | JPMorgan Chase & Co./2019 Form 10-K |
The following table presents the assets and liabilities reported at fair value as of December 31, 2019 and 2018, by major product category and fair value hierarchy. | | | | | | | | | | | | | | | | | | | Assets and liabilities measured at fair value on a recurring basis | | | | | | | Fair value hierarchy | | | | December 31, 2019 (in millions) | Level 1 | Level 2 | | Level 3 | | Derivative netting adjustments(f) | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | — |
| $ | 14,561 |
| | $ | — |
| | $ | — |
| $ | 14,561 |
| Securities borrowed | — |
| 6,237 |
| | — |
| | — |
| 6,237 |
| Trading assets: | | | | | | | | Debt instruments: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. GSEs and government agencies(a) | — |
| 44,510 |
| | 797 |
| | — |
| 45,307 |
| Residential – nonagency | — |
| 1,977 |
| | 23 |
| | — |
| 2,000 |
| Commercial – nonagency | — |
| 1,486 |
| | 4 |
| | — |
| 1,490 |
| Total mortgage-backed securities | — |
| 47,973 |
| | 824 |
| | — |
| 48,797 |
| U.S. Treasury, GSEs and government agencies(a) | 78,289 |
| 10,295 |
| | — |
| | — |
| 88,584 |
| Obligations of U.S. states and municipalities | — |
| 6,468 |
| | 10 |
| | — |
| 6,478 |
| Certificates of deposit, bankers’ acceptances and commercial paper | — |
| 252 |
| | — |
| | — |
| 252 |
| Non-U.S. government debt securities | 26,600 |
| 27,169 |
| | 155 |
| | — |
| 53,924 |
| Corporate debt securities | — |
| 17,956 |
| | 558 |
| | — |
| 18,514 |
| Loans(b) | — |
| 47,047 |
| | 1,382 |
| | — |
| 48,429 |
| Asset-backed securities | — |
| 2,593 |
| | 37 |
| | — |
| 2,630 |
| Total debt instruments | 104,889 |
| 159,753 |
| | 2,966 |
| | — |
| 267,608 |
| Equity securities | 71,890 |
| 244 |
| | 196 |
| | — |
| 72,330 |
| Physical commodities(c) | 3,638 |
| 3,579 |
| | — |
| | — |
| 7,217 |
| Other | — |
| 13,896 |
| | 232 |
| | — |
| 14,128 |
| Total debt and equity instruments(d) | 180,417 |
| 177,472 |
| | 3,394 |
| | — |
| 361,283 |
| Derivative receivables: | | | | | | | | Interest rate | 721 |
| 311,173 |
| | 1,400 |
| | (285,873 | ) | 27,421 |
| Credit | — |
| 14,252 |
| | 624 |
| | (14,175 | ) | 701 |
| Foreign exchange | 117 |
| 137,938 |
| | 432 |
| | (129,482 | ) | 9,005 |
| Equity | — |
| 43,642 |
| | 2,085 |
| | (39,250 | ) | 6,477 |
| Commodity | — |
| 17,058 |
| | 184 |
| | (11,080 | ) | 6,162 |
| Total derivative receivables | 838 |
| 524,063 |
| | 4,725 |
| | (479,860 | ) | 49,766 |
| Total trading assets(e) | 181,255 |
| 701,535 |
| | 8,119 |
| | (479,860 | ) | 411,049 |
| Available-for-sale securities: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. GSEs and government agencies(a) | — |
| 110,117 |
| | — |
| | — |
| 110,117 |
| Residential – nonagency | — |
| 12,989 |
| | 1 |
| | — |
| 12,990 |
| Commercial – nonagency | — |
| 5,188 |
| | — |
| | — |
| 5,188 |
| Total mortgage-backed securities | — |
| 128,294 |
| | 1 |
| | — |
| 128,295 |
| U.S. Treasury and government agencies | 139,436 |
| — |
| | — |
| | — |
| 139,436 |
| Obligations of U.S. states and municipalities | — |
| 29,810 |
| | — |
| | — |
| 29,810 |
| Certificates of deposit | — |
| 77 |
| | — |
| | — |
| 77 |
| Non-U.S. government debt securities | 12,966 |
| 8,821 |
| | — |
| | — |
| 21,787 |
| Corporate debt securities | — |
| 845 |
| | — |
| | — |
| 845 |
| Asset-backed securities: | | | | | | | | Collateralized loan obligations | — |
| 24,991 |
| | — |
| | — |
| 24,991 |
| Other | — |
| 5,458 |
| | — |
| | — |
| 5,458 |
| Total available-for-sale securities | 152,402 |
| 198,296 |
| | 1 |
| | — |
| 350,699 |
| Loans | — |
| 7,104 |
| | — |
| | — |
| 7,104 |
| Mortgage servicing rights | — |
| — |
| | 4,699 |
| | — |
| 4,699 |
| Other assets(e) | 7,305 |
| 452 |
| | 724 |
| | — |
| 8,481 |
| Total assets measured at fair value on a recurring basis | $ | 340,962 |
| $ | 928,185 |
| | $ | 13,543 |
| | $ | (479,860 | ) | $ | 802,830 |
| Deposits | $ | — |
| $ | 25,229 |
| | $ | 3,360 |
| | $ | — |
| $ | 28,589 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| 549 |
| | — |
| | — |
| 549 |
| Short-term borrowings | — |
| 4,246 |
| | 1,674 |
| | — |
| 5,920 |
| Trading liabilities: | | | | | | |
|
| Debt and equity instruments(d) | 59,047 |
| 16,481 |
| | 41 |
| | — |
| 75,569 |
| Derivative payables: | | | | | | |
|
| Interest rate | 795 |
| 276,746 |
| | 1,732 |
| | (270,670 | ) | 8,603 |
| Credit | — |
| 14,358 |
| | 763 |
| | (13,469 | ) | 1,652 |
| Foreign exchange | 109 |
| 143,960 |
| | 1,039 |
| | (131,950 | ) | 13,158 |
| Equity | — |
| 47,261 |
| | 5,480 |
| | (40,204 | ) | 12,537 |
| Commodity | — |
| 19,685 |
| | 200 |
| | (12,127 | ) | 7,758 |
| Total derivative payables | 904 |
| 502,010 |
| | 9,214 |
| | (468,420 | ) | 43,708 |
| Total trading liabilities | 59,951 |
| 518,491 |
| | 9,255 |
| | (468,420 | ) | 119,277 |
| Accounts payable and other liabilities | 3,231 |
| 452 |
| | 45 |
| | — |
| 3,728 |
| Beneficial interests issued by consolidated VIEs | — |
| 36 |
| | — |
| | — |
| 36 |
| Long-term debt | — |
| 52,406 |
| | 23,339 |
| | — |
| 75,745 |
| Total liabilities measured at fair value on a recurring basis | $ | 63,182 |
| $ | 601,409 |
| | $ | 37,673 |
| | $ | (468,420 | ) | $ | 233,844 |
|
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 159 |
Notes to consolidated financial statements
The following table presents the assets and liabilities reported at fair value as of December 31, 2017 and 2016, by major product category and fair value hierarchy. | | | | | | | | | | | | | | | | | | | Assets and liabilities measured at fair value on a recurring basis | | | | | | | Fair value hierarchy | | | | December 31, 2017 (in millions) | Level 1 | Level 2 | | Level 3 | | Derivative netting adjustments | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | — |
| $ | 14,732 |
| | $ | — |
| | $ | — |
| $ | 14,732 |
| Securities borrowed | — |
| 3,049 |
| | — |
| | — |
| 3,049 |
| Trading assets: | | | | | | | | Debt instruments: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies(a) | — |
| 41,515 |
| | 307 |
| | — |
| 41,822 |
| Residential – nonagency | — |
| 1,835 |
| | 60 |
| | — |
| 1,895 |
| Commercial – nonagency | — |
| 1,645 |
| | 11 |
| | — |
| 1,656 |
| Total mortgage-backed securities | — |
| 44,995 |
| | 378 |
| | — |
| 45,373 |
| U.S. Treasury and government agencies(a) | 30,758 |
| 6,475 |
| | 1 |
| | — |
| 37,234 |
| Obligations of U.S. states and municipalities | — |
| 9,067 |
| | 744 |
| | — |
| 9,811 |
| Certificates of deposit, bankers’ acceptances and commercial paper | — |
| 226 |
| | — |
| | — |
| 226 |
| Non-U.S. government debt securities | 28,887 |
| 28,831 |
| | 78 |
| | — |
| 57,796 |
| Corporate debt securities | — |
| 24,146 |
| | 312 |
| | — |
| 24,458 |
| Loans(b) | — |
| 35,242 |
| | 2,719 |
| | — |
| 37,961 |
| Asset-backed securities | — |
| 3,284 |
| | 153 |
| | — |
| 3,437 |
| Total debt instruments | 59,645 |
| 152,266 |
| | 4,385 |
| | — |
| 216,296 |
| Equity securities | 87,346 |
| 197 |
| | 295 |
| | — |
| 87,838 |
| Physical commodities(c) | 4,924 |
| 1,322 |
| | — |
| | — |
| 6,246 |
| Other | — |
| 14,197 |
| | 690 |
| | — |
| 14,887 |
| Total debt and equity instruments(d) | 151,915 |
| 167,982 |
| | 5,370 |
| | — |
| 325,267 |
| Derivative receivables: | | | | | | | | Interest rate | 181 |
| 314,107 |
| | 1,704 |
| | (291,319 | ) | 24,673 |
| Credit | — |
| 21,995 |
| | 1,209 |
| | (22,335 | ) | 869 |
| Foreign exchange | 841 |
| 158,834 |
| | 557 |
| | (144,081 | ) | 16,151 |
| Equity | — |
| 37,722 |
| | 2,318 |
| | (32,158 | ) | 7,882 |
| Commodity | — |
| 19,875 |
| | 210 |
| | (13,137 | ) | 6,948 |
| Total derivative receivables(e)(f) | 1,022 |
| 552,533 |
| | 5,998 |
| | (503,030 | ) | 56,523 |
| Total trading assets(g) | 152,937 |
| 720,515 |
| | 11,368 |
| | (503,030 | ) | 381,790 |
| Available-for-sale securities: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies(a) | — |
| 70,280 |
| | — |
| | — |
| 70,280 |
| Residential – nonagency | — |
| 11,366 |
| | 1 |
| | — |
| 11,367 |
| Commercial – nonagency | — |
| 5,025 |
| | — |
| | — |
| 5,025 |
| Total mortgage-backed securities | — |
| 86,671 |
| | 1 |
| | — |
| 86,672 |
| U.S. Treasury and government agencies(a) | 22,745 |
| — |
| | — |
| | — |
| 22,745 |
| Obligations of U.S. states and municipalities | — |
| 32,338 |
| | — |
| | — |
| 32,338 |
| Certificates of deposit | — |
| 59 |
| | — |
| | — |
| 59 |
| Non-U.S. government debt securities | 18,140 |
| 9,154 |
| | — |
| | — |
| 27,294 |
| Corporate debt securities | — |
| 2,757 |
| | — |
| | — |
| 2,757 |
| Asset-backed securities: | | | | | | | | Collateralized loan obligations | — |
| 20,720 |
| | 276 |
| | — |
| 20,996 |
| Other | — |
| 8,817 |
| | — |
| | — |
| 8,817 |
| Equity securities | 547 |
| — |
| | — |
| | — |
| 547 |
| Total available-for-sale securities | 41,432 |
| 160,516 |
| | 277 |
| | — |
| 202,225 |
| Loans | — |
| 2,232 |
| | 276 |
| | — |
| 2,508 |
| Mortgage servicing rights | — |
| — |
| | 6,030 |
| | — |
| 6,030 |
| Other assets(g) | 13,795 |
| 343 |
| | 1,265 |
| | — |
| 15,403 |
| Total assets measured at fair value on a recurring basis | $ | 208,164 |
| $ | 901,387 |
| | $ | 19,216 |
| | $ | (503,030 | ) | $ | 625,737 |
| Deposits | $ | — |
| $ | 17,179 |
| | $ | 4,142 |
| | $ | — |
| $ | 21,321 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| 697 |
| | — |
| | — |
| 697 |
| Short-term borrowings | — |
| 7,526 |
| | 1,665 |
| | — |
| 9,191 |
| Trading liabilities: | | | | | | |
|
| Debt and equity instruments(d) | 64,664 |
| 21,183 |
| | 39 |
| | — |
| 85,886 |
| Derivative payables: | | | | | | |
|
| Interest rate | 170 |
| 282,825 |
| | 1,440 |
| | (277,306 | ) | 7,129 |
| Credit | — |
| 22,009 |
| | 1,244 |
| | (21,954 | ) | 1,299 |
| Foreign exchange | 794 |
| 154,075 |
| | 953 |
| | (143,349 | ) | 12,473 |
| Equity | — |
| 39,668 |
| | 5,727 |
| | (36,203 | ) | 9,192 |
| Commodity | — |
| 21,017 |
| | 884 |
| | (14,217 | ) | 7,684 |
| Total derivative payables(e)(f) | 964 |
| 519,594 |
| | 10,248 |
| | (493,029 | ) | 37,777 |
| Total trading liabilities | 65,628 |
| 540,777 |
| | 10,287 |
| | (493,029 | ) | 123,663 |
| Accounts payable and other liabilities | 9,074 |
| 121 |
| | 13 |
| | — |
| 9,208 |
| Beneficial interests issued by consolidated VIEs | — |
| 6 |
| | 39 |
| | — |
| 45 |
| Long-term debt | — |
| 31,394 |
| | 16,125 |
| | — |
| 47,519 |
| Total liabilities measured at fair value on a recurring basis | $ | 74,702 |
| $ | 597,700 |
| | $ | 32,271 |
| | $ | (493,029 | ) | $ | 211,644 |
|
| | | | 160 | | JPMorgan Chase & Co./2017 Annual Report |
| | | Fair value hierarchy | | | | | Fair value hierarchy | | | | | December 31, 2016 (in millions) | Level 1 | Level 2 | | Level 3 | | Derivative netting adjustments | | Total fair value | | December 31, 2018 (in millions) | | Level 1 | Level 2 | | Level 3 | | Derivative netting adjustments(f) | | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | — |
| $ | 21,506 |
| | $ | — |
| | $ | — |
| | $ | 21,506 |
| $ | — |
| $ | 13,235 |
| | $ | — |
| | $ | — |
| | $ | 13,235 |
| Securities borrowed | — |
| — |
| | — |
| | — |
| | — |
| — |
| 5,105 |
| | — |
| | — |
| | 5,105 |
| Trading assets: | | | | | | | | | |
|
| |
|
| |
|
| Debt instruments: | | | | | | | | | |
|
| |
|
| |
|
| Mortgage-backed securities: | | | | | | | | | |
|
| |
|
| |
|
| U.S. government agencies(a) | 13 |
| 40,586 |
| | 392 |
| | — |
| | 40,991 |
| | U.S. GSEs and government agencies(a) | | — |
| 76,249 |
| | 549 |
| | — |
| | 76,798 |
| Residential – nonagency | — |
| 1,552 |
| | 83 |
| | — |
| | 1,635 |
| — |
| 1,798 |
| | 64 |
| | — |
| | 1,862 |
| Commercial – nonagency | — |
| 1,321 |
| | 17 |
| | — |
| | 1,338 |
| — |
| 1,501 |
| | 11 |
| | — |
| | 1,512 |
| Total mortgage-backed securities | 13 |
| 43,459 |
| | 492 |
| | — |
| | 43,964 |
| — |
| 79,548 |
| | 624 |
| | — |
| | 80,172 |
| U.S. Treasury and government agencies(a) | 19,554 |
| 5,201 |
| | — |
| | — |
| | 24,755 |
| | U.S. Treasury, GSEs and government agencies(a) | | 51,477 |
| 7,702 |
| | — |
| | — |
| | 59,179 |
| Obligations of U.S. states and municipalities | — |
| 8,403 |
| | 649 |
| | — |
| | 9,052 |
| — |
| 7,121 |
| | 689 |
| | — |
| | 7,810 |
| Certificates of deposit, bankers’ acceptances and commercial paper | — |
| 1,649 |
| | — |
| | — |
| | 1,649 |
| — |
| 1,214 |
| | — |
| | — |
| | 1,214 |
| Non-U.S. government debt securities | 28,443 |
| 23,076 |
| | 46 |
| | — |
| | 51,565 |
| 27,878 |
| 27,056 |
| | 155 |
| | — |
| | 55,089 |
| Corporate debt securities | — |
| 22,751 |
| | 576 |
| | — |
| | 23,327 |
| — |
| 18,655 |
| | 334 |
| | — |
| | 18,989 |
| Loans(b) | — |
| 28,965 |
| | 4,837 |
| | — |
| | 33,802 |
| — |
| 40,047 |
| | 1,706 |
| | — |
| | 41,753 |
| Asset-backed securities | — |
| 5,250 |
| | 302 |
| | — |
| | 5,552 |
| — |
| 2,756 |
| | 127 |
| | — |
| | 2,883 |
| Total debt instruments | 48,010 |
| 138,754 |
| | 6,902 |
| | — |
| | 193,666 |
| 79,355 |
| 184,099 |
| | 3,635 |
| | — |
| | 267,089 |
| Equity securities | 96,759 |
| 281 |
| | 231 |
| | — |
| | 97,271 |
| 71,119 |
| 482 |
| | 232 |
| | — |
| | 71,833 |
| Physical commodities(c) | 5,341 |
| 1,620 |
| | — |
| | — |
| | 6,961 |
| 5,182 |
| 1,855 |
| | — |
| | — |
| | 7,037 |
| Other | — |
| 9,341 |
| | 761 |
| | — |
| | 10,102 |
| — |
| 13,192 |
| | 301 |
| | — |
| | 13,493 |
| Total debt and equity instruments(d) | 150,110 |
| 149,996 |
| | 7,894 |
| | — |
| | 308,000 |
| 155,656 |
| 199,628 |
| | 4,168 |
| | — |
| | 359,452 |
| Derivative receivables: | | | | | | | |
|
|
|
| |
|
| |
|
| |
|
| Interest rate | 715 |
| 602,747 |
| | 2,501 |
| | (577,661 | ) | | 28,302 |
| 682 |
| 266,380 |
| | 1,642 |
| | (245,490 | ) | | 23,214 |
| Credit | — |
| 28,256 |
| | 1,389 |
| | (28,351 | ) | | 1,294 |
| — |
| 19,235 |
| | 860 |
| | (19,483 | ) | | 612 |
| Foreign exchange | 812 |
| 231,743 |
| | 870 |
| | (210,154 | ) | | 23,271 |
| 771 |
| 166,238 |
| | 676 |
| | (154,235 | ) | | 13,450 |
| Equity | — |
| 34,032 |
| | 908 |
| | (30,001 | ) | | 4,939 |
| — |
| 46,777 |
| | 2,508 |
| | (39,339 | ) | | 9,946 |
| Commodity | 158 |
| 18,360 |
| | 125 |
| | (12,371 | ) | | 6,272 |
| — |
| 20,339 |
| | 131 |
| | (13,479 | ) | | 6,991 |
| Total derivative receivables(e) | 1,685 |
| 915,138 |
| | 5,793 |
| | (858,538 | ) | | 64,078 |
| 1,453 |
| 518,969 |
| | 5,817 |
| | (472,026 | ) | | 54,213 |
| Total trading assets(g)(e) | 151,795 |
| 1,065,134 |
| | 13,687 |
| | (858,538 | ) | | 372,078 |
| 157,109 |
| 718,597 |
| | 9,985 |
| | (472,026 | ) | | 413,665 |
| Available-for-sale securities: | | | | | | | |
|
|
|
| |
|
| |
|
| |
|
| Mortgage-backed securities: | | | | | | | |
|
|
|
| |
|
| |
|
| |
|
| U.S. government agencies(a) | — |
| 64,005 |
| | — |
| | — |
| | 64,005 |
| | U.S. GSEs and government agencies(a) | | — |
| 68,646 |
| | — |
| | — |
| | 68,646 |
| Residential – nonagency | — |
| 14,442 |
| | 1 |
| | — |
| | 14,443 |
| — |
| 8,519 |
| | 1 |
| | — |
| | 8,520 |
| Commercial – nonagency | — |
| 9,104 |
| | — |
| | — |
| | 9,104 |
| — |
| 6,654 |
| | — |
| | — |
| | 6,654 |
| Total mortgage-backed securities | — |
| 87,551 |
| | 1 |
| | — |
| | 87,552 |
| — |
| 83,819 |
| | 1 |
| | — |
| | 83,820 |
| U.S. Treasury and government agencies(a) | 44,072 |
| 29 |
| | — |
| | — |
| | 44,101 |
| 56,059 |
| — |
| | — |
| | — |
| | 56,059 |
| Obligations of U.S. states and municipalities | — |
| 31,592 |
| | — |
| | — |
| | 31,592 |
| — |
| 37,723 |
| | — |
| | — |
| | 37,723 |
| Certificates of deposit | — |
| 106 |
| | — |
| | — |
| | 106 |
| — |
| 75 |
| | — |
| | — |
| | 75 |
| Non-U.S. government debt securities | 22,793 |
| 12,495 |
| | — |
| | — |
| | 35,288 |
| 15,313 |
| 8,789 |
| | — |
| | — |
| | 24,102 |
| Corporate debt securities | — |
| 4,958 |
| | — |
| | — |
| | 4,958 |
| — |
| 1,918 |
| | — |
| | — |
| | 1,918 |
| Asset-backed securities: | | | | | | | | — |
| — |
| | — |
| | — |
| | — |
| Collateralized loan obligations | — |
| 26,738 |
| | 663 |
| | — |
| | 27,401 |
| — |
| 19,437 |
| | — |
| | — |
| | 19,437 |
| Other | — |
| 6,967 |
| | — |
| | — |
| | 6,967 |
| — |
| 7,260 |
| | — |
| | — |
| | 7,260 |
| Equity securities | 926 |
| — |
| | — |
| | — |
| | 926 |
| | Total available-for-sale securities | 67,791 |
| 170,436 |
| | 664 |
| | — |
| | 238,891 |
| 71,372 |
| 159,021 |
| | 1 |
| | — |
| | 230,394 |
| Loans | — |
| 1,660 |
| | 570 |
| | — |
| | 2,230 |
| — |
| 3,029 |
| | 122 |
| | — |
| | 3,151 |
| Mortgage servicing rights | — |
| — |
| | 6,096 |
| | — |
| | 6,096 |
| — |
| — |
| | 6,130 |
| | — |
| | 6,130 |
| Other assets(g) | 4,357 |
| — |
| | 2,223 |
| | — |
| | 6,580 |
| | Other assets(e) | | 7,810 |
| 195 |
| | 927 |
| | — |
| | 8,932 |
| Total assets measured at fair value on a recurring basis | $ | 223,943 |
| $ | 1,258,736 |
| | $ | 23,240 |
| | $ | (858,538 | ) | | $ | 647,381 |
| $ | 236,291 |
| $ | 899,182 |
| | $ | 17,165 |
| | $ | (472,026 | ) | | $ | 680,612 |
| Deposits | $ | — |
| $ | 11,795 |
| | $ | 2,117 |
| | $ | — |
| | $ | 13,912 |
| $ | — |
| $ | 19,048 |
| | $ | 4,169 |
| | $ | — |
| | $ | 23,217 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| 687 |
| | — |
| | — |
| | 687 |
| — |
| 935 |
| | — |
| | — |
| | 935 |
| Short-term borrowings | — |
| 7,971 |
| | 1,134 |
| | — |
| | 9,105 |
| — |
| 5,607 |
| | 1,523 |
| | — |
| | 7,130 |
| Trading liabilities: | | | | | | | |
|
|
|
| |
|
| |
|
| |
|
| Debt and equity instruments(d) | 68,304 |
| 19,081 |
| | 43 |
| | — |
| | 87,428 |
| 80,199 |
| 22,755 |
| | 50 |
| | — |
| | 103,004 |
| Derivative payables: | | | | | | | |
|
|
|
| |
|
| |
|
| |
|
| Interest rate | 539 |
| 569,001 |
| | 1,238 |
| | (559,963 | ) | | 10,815 |
| 1,526 |
| 239,576 |
| | 1,680 |
| | (234,998 | ) | | 7,784 |
| Credit | — |
| 27,375 |
| | 1,291 |
| | (27,255 | ) | | 1,411 |
| — |
| 19,309 |
| | 967 |
| | (18,609 | ) | | 1,667 |
| Foreign exchange | 902 |
| 231,815 |
| | 2,254 |
| | (214,463 | ) | | 20,508 |
| 695 |
| 163,549 |
| | 973 |
| | (152,432 | ) | | 12,785 |
| Equity | — |
| 35,202 |
| | 3,160 |
| | (30,222 | ) | | 8,140 |
| — |
| 46,462 |
| | 4,733 |
| | (41,034 | ) | | 10,161 |
| Commodity | 173 |
| 20,079 |
| | 210 |
| | (12,105 | ) | | 8,357 |
| — |
| 21,158 |
| | 1,260 |
| | (13,046 | ) | | 9,372 |
| Total derivative payables(e) | 1,614 |
| 883,472 |
| | 8,153 |
| | (844,008 | ) | | 49,231 |
| | Total derivative payables | | 2,221 |
| 490,054 |
| | 9,613 |
| | (460,119 | ) | | 41,769 |
| Total trading liabilities | 69,918 |
| 902,553 |
| | 8,196 |
| | (844,008 | ) | | 136,659 |
| 82,420 |
| 512,809 |
| | 9,663 |
| | (460,119 | ) | | 144,773 |
| Accounts payable and other liabilities | 9,107 |
| — |
| | 13 |
| | — |
| | 9,120 |
| 3,063 |
| 196 |
| | 10 |
| | — |
| | 3,269 |
| Beneficial interests issued by consolidated VIEs | — |
| 72 |
| | 48 |
| | — |
| | 120 |
| — |
| 27 |
| | 1 |
| | — |
| | 28 |
| Long-term debt | — |
| 24,836 |
| (h) | 12,850 |
| (h) | — |
| | 37,686 |
| — |
| 35,468 |
| | 19,418 |
| | — |
| | 54,886 |
| Total liabilities measured at fair value on a recurring basis | $ | 79,025 |
| $ | 947,914 |
| (h) | $ | 24,358 |
| (h) | $ | (844,008 | ) | | $ | 207,289 |
| $ | 85,483 |
| $ | 574,090 |
| | $ | 34,784 |
| | $ | (460,119 | ) | | $ | 234,238 |
|
| | (a) | At December 31, 20172019 and 2016,2018, included total U.S. government-sponsored enterpriseGSE obligations of $78.0$104.5 billion and $80.6$92.3 billion, respectively, which were predominantly mortgage-related. |
| | (b) | At December 31, 20172019 and 2016,2018, included within trading loans were $11.4$19.8 billion and $16.5$13.2 billion, respectively, of residential first-lien mortgages, and $4.2$3.4 billion and $3.3$2.3 billion, respectively, of commercial first-lien mortgages. Residential mortgage loans include conforming mortgage loans originated with the intent to sell to U.S. GSEs and government agencies of $5.7$13.6 billion and $11.0 billion, respectively, and reverse mortgages of $836 million and $2.0$7.6 billion, respectively. |
| | (c) | Physical commodities inventories are generally accounted for at the lower of cost or net realizable value. “Net realizable value” is a term defined in U.S. GAAP as not exceeding fair value less costs to sell (“transaction costs”). Transaction costs for the Firm’s physical commodities inventories are either not applicable or immaterial to the value of the inventory. Therefore, net realizable value approximates fair value for the Firm’s physical commodities inventories. When fair value hedging has been applied (or when net realizable value is below cost), the carrying value of physical commodities |
| | | | 160 | | JPMorgan Chase & Co./2017 Annual Report | | 1612019 Form 10-K |
Notes to consolidated financial statements
realizable value is below cost), the carrying value of physical commodities approximates fair value, because under fair value hedge accounting, the cost basis is adjusted for changes in fair value. ForRefer to Note 5 for a further discussion of the Firm’s hedge accounting relationships, see Note 5.relationships. To provide consistent fair value disclosure information, all physical commodities inventories have been included in each period presented.
| | (d) | Balances reflect the reduction of securities owned (long positions) by the amount of identical securities sold but not yet purchased (short positions). |
| | (e) | As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists. For purposes of the tables above, the Firm does not reduce derivative receivables and derivative payables balances for this netting adjustment, either within or across the levels of the fair value hierarchy, as such netting is not relevant to a presentation based on the transparency of inputs to the valuation of an asset or liability. The level 3 balances would be reduced if netting were applied, including the netting benefit associated with cash collateral. |
| | (f) | Reflects the Firm’s adoption of rulebook changes made by two CCPs that require or allow the Firm to treat certain OTC-cleared derivative transactions as daily settled. For further information, see Note 5. |
| | (g) | Certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not required to be classified in the fair value hierarchy. At December 31, 20172019 and 2016,2018, the fair values of these investments, which include certain hedge funds, private equity funds, real estate and other funds, were $779$684 million and $1.0 billion,$747 million, respectively. Included in these balances at December 31, 20172019 and 2016,2018, were trading assets of $54 million and $52$49 million, respectively, and other assets of $725$630 million and $977$698 million, respectively. |
| | (h)(f) | As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists. The prior period amounts have been revised to conformlevel 3 balances would be reduced if netting were applied, including the netting benefit associated with the current period presentation.cash collateral. |
Transfers between levels for instruments carried at
fair value on a recurring basis
For the years ended December 31, 2017 and 2016, there were no significant transfers between levels 1 and 2.
During the year ended December 31, 2017, transfers from level 3 to level 2 included the following:
$1.5 billion of trading loans driven by an increase in observability.
$1.2 billion of gross equity derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs.
During the year ended December 31, 2017, transfers from level 2 to level 3 included the following:
$1.0 billion of gross equity derivative receivables and $2.5 billion of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs.
$1.7 billion of long-term debt driven by a decrease in observability and an increase in the significance of unobservable inputs for certain structured notes.
During the year ended December 31, 2016, transfers from level 3 to level 2 included the following:
$1.4 billion of long-term debt driven by an increase in observability and a reduction in the significance of unobservable inputs for certain structured notes.
During the year ended December 31, 2016, transfers from level 2 to level 3 included the following:
$1.1 billion of gross equity derivative receivables and $1.0 billion of gross equity derivative payables as a result of an decrease in observability and an increase in the significance of unobservable inputs.
$1.0 billion of trading loans driven by a decrease in observability.
During the year ended December 31, 2015, transfers from level 3 to level 2 included the following:
$3.1 billion of long-term debt and $1.0 billion of deposits driven by an increase in observability on certain structured notes with embedded interest rate and FX derivatives and a reduction in the significance of unobservable inputs for certain structured notes with embedded equity derivatives.
$2.1 billion of gross equity derivatives for both receivables and payables as a result of an increase in observability and a decrease in the significance of unobservable inputs; partially offset by transfers into level 3 resulting in net transfers of approximately $1.2 billion for both receivables and payables.
$2.8 billion of trading loans driven by an increase in observability of certain collateralized financing transactions.
$2.4 billion of corporate debt driven by a decrease in the significance of unobservable inputs and an increase in observability for certain structured products.
During the year ended December 31, 2015, there were no significant transfers from level 2 to level 3.
All transfers are assumed to occur at the beginning of the quarterly reporting period in which they occur.
| | | | 162 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 161 |
Notes to consolidated financial statements
Level 3 valuations The Firm has established well-structured processes for determining fair value, including for instruments where fair value is estimated using significant unobservable inputs (level 3). ForRefer to pages 154–158 of this Note for further information on the Firm’s valuation process and a detailed discussion of the determination of fair value for individual financial instruments, see pages 155–159 of this Note.instruments. Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available to the Firm. For instruments valued using internally developed valuation models and other valuation techniques that use significant unobservable inputs and are therefore classified within level 3 of the fair value hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2. In arriving at an estimate of fair value for an instrument within level 3, management must first determine the appropriate valuation model or other valuation technique to use. Second, due to the lack of observability of significant inputs, management must assess all relevant empirical data in deriving valuation inputs including transaction details, yield curves, interest rates, prepayment speed, default rates, volatilities, correlations, prices (such as commodity, equity or debt prices,prices), valuations of comparable instruments, foreign exchange rates and credit curves. The following table presents the Firm’s primary level 3 financial instruments, the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, the range of values for those inputs and, for certain instruments, the weighted averages of such inputs. While the determination to classify an instrument within level 3 is based on the significance of the unobservable inputs to the overall fair value measurement, level 3 financial instruments typically include observable components (that is, components that are actively quoted and can be validated to external sources) in addition to the unobservable components. The level 1 and/or level 2 inputs are not included in the table. In addition, the Firm manages the risk of the observable components of level 3 financial instruments using securities and derivative positions that are classified within levels 1 or 2 of the fair value hierarchy. The range of values presented in the table is representative of the highest and lowest level input used to value the significant groups of instruments within a product/instrument classification. Where provided, the weighted averages of the input values presented in the table are calculated based on the fair value of the instruments that the input is being used to value. In the Firm’s view, the input range and the weighted average value do not reflect the degree of input uncertainty or an assessment of the reasonableness of the Firm’s estimates and assumptions. Rather, they reflect the characteristics of the various instruments held by the Firm and the relative distribution of instruments within the range of characteristics. For example, two option contracts may have similar levels of market risk exposure and valuation uncertainty, but may have significantly different implied volatility levels because the option contracts have different underlyings, tenors, or strike prices. The input range and weighted average values will therefore vary from period-to-period and parameter-to-parameter based on the characteristics of the instruments held by the Firm at each balance sheet date. For the Firm’s derivatives and structured notes positions classified within level 3 at December 31, 2017, 2019, interest rate correlation inputs used in estimating fair value were concentrated towards the upper end ofdistributed across the range; equity correlation, equity-FX and equity-IR correlation inputs were concentrated in the middle of the range; commodity correlation inputs were concentrated in the middle of the range; credit correlation inputs were concentrated towards the lower end of the range; and forward equity prices and the interest rate-foreign exchange (“IR-FX”) correlation inputs were concentrated towards the lower end ofdistributed across the range. In addition, the interest rate volatility and interest rate spread volatility inputs used in estimating fair value were distributed across the range; equity volatilities and commodity volatilities were concentrated towards the lower end of the range; and forward commodity prices used in estimating the fair value of commodity derivatives were concentrated in the middle of the range. Prepayment speed inputs used in estimating the fair value of interest rate derivatives were concentrated towards the lower end of the range. Recovery rate yield, prepayment speed, conditional default rate, loss severity and price inputs used in estimating the fair value of credit derivatives were distributed across the range; and credit spreads were concentrated towards the lower end of the range; conditional default rates and loss severity inputs were concentrated towards the upper end of the range and price inputs were concentrated towards the lower end of the range.
| | | | 162 | | JPMorgan Chase & Co./2017 Annual Report | | 1632019 Form 10-K |
Notes to consolidated financial statements
| | Level 3 inputs(a) | Level 3 inputs(a) | | Level 3 inputs(a) | | December 31, 2017 | | | | | December 31, 2019 | | December 31, 2019 | | Product/Instrument | Fair value (in millions) | | Principal valuation technique | Unobservable inputs(g) | Range of input values | Weighted average | Fair value (in millions) | | Principal valuation technique | Unobservable inputs(g) | Range of input values | Weighted average | Residential mortgage-backed securities and loans(b) | $ | 1,418 |
| | Discounted cash flows | Yield | 3 | % | – | 16% | 6% | $ | 976 |
|
| Discounted cash flows | Yield | 2% | – | 18% | 6% | | | Prepayment speed | 0 | % | – | 13% | 9% |
|
| Prepayment speed | 0% | – | 26% | 13% | | | | Conditional default rate | 0 | % | – | 5% | 1% |
|
| Conditional default rate | 0% | – | 5% | 0% | | | | Loss severity | 0 | % | – | 84% | 3% |
|
| Loss severity | 0% | – | 100% | 5% | Commercial mortgage-backed securities and loans(c) | 714 |
| | Market comparables | Price | $ | 0 |
| – | $100 | $94 | 99 |
|
| Market comparables | Price | $0 | – | $100 | $79 | Obligations of U.S. states and municipalities | 744 |
| | Market comparables | Price | $ | 59 |
| – | $100 | $98 | 10 |
|
| Market comparables | Price | $71 | – | $100 | $95 | Corporate debt securities | 312 |
| | Market comparables | Price | $ | 3 |
| – | $111 | $82 | 558 |
|
| Market comparables | Price | $4 | – | $112 | $72 | Loans(d)
| 1,242 |
| | Market comparables | Price | $ | 4 |
| – | $103 | $84 | 193 |
|
| Discounted cash flows | Yield | 5% | – | 28% | 8% | | | 939 |
|
| Market comparables | Price | $2 | – | $116 | $70 | Asset-backed securities | 276 |
| | Discounted cash flows | Credit spread | 204 | bps | – | 205bps | 205bps | 37 |
|
| Market comparables | Price | $1 | – | $102 | $71 | Net interest rate derivatives | | (395 | ) |
| Option pricing | Interest rate volatility | 6% | – | 44% |
| | | | Prepayment speed | 20% | 20% |
|
| Interest rate spread volatility | 20bps | – | 30bps |
| | | | Conditional default rate | 2% | 2% | | | | | Loss severity | 30% | 30% | | | 153 |
| | Market comparables | Price | $ | 2 |
| – | $160 | $79 | | Net interest rate derivatives | 28 |
| | Option pricing | Interest rate spread volatility | 27 | bps | – | 38bps | | | | | | Interest rate correlation | (50 | )% | – | 98% | |
|
| Interest rate correlation | (65)% | – | 94% |
| | | | IR-FX correlation | 60 | % | – | 70% | |
|
| IR-FX correlation | (58)% | – | 40% |
| | 236 |
| | Discounted cash flows | Prepayment speed | 0 | % | – | 30% | | 63 |
|
| Discounted cash flows | Prepayment speed | 4% | – | 30% |
| Net credit derivatives | (37 | ) | | Discounted cash flows | Credit correlation | 40 | % | – | 75% | | (174 | ) |
| Discounted cash flows | Credit correlation | 31% | – | 59% |
| | | | Credit spread | 6 | bps | – | 1,489bps | |
|
|
|
| Credit spread | 3bps | – | 1,308bps |
| | | | Recovery rate | 20 | % | – | 70% | |
|
|
|
| Recovery rate | 15% | – | 70% |
| | | | Yield | 1 | % | – | 20% | |
|
|
|
| Conditional default rate | 2% | – | 18% |
| | | | Prepayment speed | 4 | % | – | 21% | |
|
| Loss severity | 100% |
| | | | Conditional default rate | 0 | % | – | 100% | | 35 |
|
| Market comparables | Price | $1 | – | $115 |
| | | | Loss severity | 4 | % | – | 100% | | | | 2 |
| | Market comparables | Price | $ | 10 |
|
| $98 | | | Net foreign exchange derivatives | (200 | ) | | Option pricing | IR-FX correlation | (50 | )% | – | 70% | | (469 | ) |
| Option pricing | IR-FX correlation | (58)% | – | 65% |
| | (196 | ) | | Discounted cash flows | Prepayment speed | 7% | | (138 | ) |
| Discounted cash flows | Prepayment speed | 9% |
| Net equity derivatives | (3,409 | ) | | Option pricing | Equity volatility | 20 | % | – | 55% | | (3,395 | ) |
| Option pricing | Forward equity price(h) | 92% | – | 105% |
|
| |
|
|
|
| Equity volatility | 9% | – | 93% |
| | | | Equity correlation | 0 | % | –
| 85% | |
|
|
|
| Equity correlation | 10% | – | 97% |
| | | | Equity-FX correlation | (50 | )% | –
| 30% | |
|
|
|
| Equity-FX correlation | (81)% | – | 60% |
| | | | Equity-IR correlation | 10 | % | – | 40% | |
|
|
|
| Equity-IR correlation | 25% | – | 35% |
| Net commodity derivatives | (674 | ) | | Option pricing | Forward commodity price | $ | 54 |
| – | $68 per barrel | (16 | ) |
| Option pricing | Forward commodity price | $39 | – | $ 76 per barrel | | | | Commodity volatility | 5 | % |
| 46% | |
|
|
|
| Commodity volatility | 5% | – | 105% |
| | | | Commodity correlation | (40 | )% | –
| 70% | |
|
|
|
| Commodity correlation | (48)% | – | 95% |
| MSRs | 6,030 |
| | Discounted cash flows | Refer to Note 15 | | | 4,699 |
|
| Discounted cash flows | Refer to Note 15 |
|
|
|
| Other assets | 984 |
| | Discounted cash flows | Credit spread | 40bps | – | 70bps | 55bps | 222 |
|
| Discounted cash flows | Credit spread | 45bps | 45bps | | | | Yield | 8% | –
| 60% | 47% |
|
|
|
| Yield | 12% | 12% | | 971 |
| | Market comparables | EBITDA multiple | 4.7x | –
| 10.6x | 8.9x | 734 |
|
| Market comparables | Price | $17 | – | $117 | $37 | Long-term debt, short-term borrowings, and deposits(e) | 21,932 |
| | Option pricing | Interest rate spread volatility | 27 | bps | – | 38bps | | 28,373 |
|
| Option pricing | Interest rate volatility | 6% | – | 44% |
| | | Interest rate correlation | (50 | )% | – | 98% | |
|
| Interest rate correlation | (65)% | – | 94% |
| | | IR-FX correlation | (50 | )% | – | 70% | |
|
| IR-FX correlation | (58)% | – | 40% |
| | | Equity correlation | 0 | % | – | 85% | |
|
| Equity correlation | 10% | – | 97% |
| | | Equity-FX correlation | (50 | )% | – | 30% | |
|
| Equity-FX correlation | (81)% | – | 60% |
| | | Equity-IR correlation | 10 | % | – | 40% | |
|
| Equity-IR correlation | 25% | – | 35% |
| Other level 3 assets and liabilities, net(f)
| 283 |
| | | | 265 |
|
|
|
|
|
| | (a) | The categories presented in the table have been aggregated based upon the product type, which may differ from their classification on the Consolidated balance sheets. Furthermore, the inputs presented for each valuation technique in the table are, in some cases, not applicable to every instrument valued using the technique as the characteristics of the instruments can differ. |
| | | | 164 | | JPMorgan Chase & Co./2017 Annual Report |
| | (b) | IncludesComprises U.S. GSEs and government agency securities of $297$797 million, nonagency securities of $61$24 million and trading loans of $1.1 billion.$155 million. |
| | (c) | Includes U.S. government agency securities of $10 million,Comprises nonagency securities of $11$4 million and trading loans of $417 million and non-trading loans of $276$95 million. |
| | (d) | IncludesComprises trading loans of $1.2 billion.loans. |
| | (e) | Long-term debt, short-term borrowings and deposits include structured notes issued by the Firm that are predominantly financial instruments containingthat typically contain embedded derivatives. The estimation of the fair value of structured notes includes the derivative features embedded within the instrument. The significant unobservable inputs are broadly consistent with those presented for derivative receivables. |
| | (f) | Includes level 3 assets and liabilities that are insignificant both individually and in aggregate. |
| | (g) | Price is a significant unobservable input for certain instruments. When quoted market prices are not readily available, reliance is generally placed on price-based internal valuation techniques. The price input is expressed assuming a par value of $100. |
| | (h) | Forward equity price is expressed as a percentage of the current equity price. |
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 163 |
Notes to consolidated financial statements
Changes in and ranges of unobservable inputs The following discussion provides a description of the impact on a fair value measurement of a change in each unobservable input in isolation, and the interrelationship between unobservable inputs, where relevant and significant. The impact of changes in inputs may not be independent, as a change in one unobservable input may give rise to a change in another unobservable input. Where relationships do exist between two unobservable inputs, those relationships are discussed below. Relationships may also exist between observable and unobservable inputs (for example, as observable interest rates rise, unobservable prepayment rates decline); such relationships have not been included in the discussion below. In addition, for each of the individual relationships described below, the inverse relationship would also generally apply. The following discussion also provides a description of attributes of the underlying instruments and external market factors that affect the range of inputs used in the valuation of the Firm’s positions. Yield – The yield of an asset is the interest rate used to discount future cash flows in a discounted cash flow calculation. An increase in the yield, in isolation, would result in a decrease in a fair value measurement. Credit spread – The credit spread is the amount of additional annualized return over the market interest rate that a market participant would demand for taking exposure to the credit risk of an instrument. The credit spread for an instrument forms part of the discount rate used in a discounted cash flow calculation. Generally, an increase in the credit spread would result in a decrease in a fair value measurement. The yield and the credit spread of a particular mortgage-backed security primarily reflect the risk inherent in the instrument. The yield is also impacted by the absolute level of the coupon paid by the instrument (which may not correspond directly to the level of inherent risk). Therefore, the range of yield and credit spreads reflects the range of risk inherent in various instruments owned by the Firm. The risk inherent in mortgage-backed securities is driven by the subordination of the security being valued and the characteristics of the underlying mortgages within the collateralized pool, including borrower FICO scores, LTV ratios for residential mortgages and the nature of the property and/or any tenants for commercial mortgages. For corporate debt securities, obligations of U.S. states and municipalities and other similar instruments, credit spreads reflect the credit quality of the obligor and the tenor of the obligation.
Prepayment speed – The prepayment speed is a measure of the voluntary unscheduled principal repayments of a prepayable obligation in a collateralized pool. Prepayment speeds generally decline as borrower delinquencies rise. An increase in prepayment speeds, in isolation, would result in a decrease in a fair value measurement of assets valued at a premium to par and an increase in a fair value measurement of assets valued at a discount to par. Prepayment speeds may vary from collateral pool to collateral pool, and are driven by the type and location of the underlying borrower, and the remaining tenor of the obligation as well as the level and type (e.g., fixed or floating) of interest rate being paid by the borrower. Typically collateral pools with higher borrower credit quality have a higher prepayment rate than those with lower borrower credit quality, all other factors being equal. Conditional default rate – The conditional default rate is a measure of the reduction in the outstanding collateral balance underlying a collateralized obligation as a result of defaults. While there is typically no direct relationship between conditional default rates and prepayment speeds, collateralized obligations for which the underlying collateral has high prepayment speeds will tend to have lower conditional default rates. An increase in conditional default rates would generally be accompanied by an increase in loss severity and an increase in credit spreads. An increase in the conditional default rate, in isolation, would result in a decrease in a fair value measurement. Conditional default rates reflect the quality of the collateral underlying a securitization and the structure of the securitization itself. Based on the types of securities owned in the Firm’s market-making portfolios, conditional default rates are most typically at the lower end of the range presented. Loss severity – The loss severity (the inverse concept is the recovery rate) is the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding loan balance. An increase in loss severity is generally accompanied by an increase in conditional default rates. An increase in the loss severity, in isolation, would result in a decrease in a fair value measurement. The loss severity applied in valuing a mortgage-backed security investment depends on factors relating to the underlying mortgages, including the LTV ratio, the nature of the lender’s lien on the property and other instrument-specific factors.
| | | | 164 | | JPMorgan Chase & Co./2017 Annual Report | | 1652019 Form 10-K |
Notes to consolidated financial statements
Correlation – Correlation is a measure of the relationship between the movements of two variables (e.g., how the change in one variable influences the change in the other).variables. Correlation is a pricing input for a derivative product where the payoff is driven by one or more underlying risks. Correlation inputs are related to the type of derivative (e.g.(e.g., interest rate, credit, equity, foreign exchange and foreign exchange) commodity) due to the nature of the underlying risks. When parameters are positively correlated, an increase in one parameter will result in an increase in the other parameter. When parameters are negatively correlated, an increase in one parameter will result in a decrease in the other parameter. An increase in correlation can result in an increase or a decrease in a fair value measurement. Given a short correlation position, an increase in correlation, in isolation, would generally result in a decrease in a fair value measurement. The range of correlation inputs between risks within the same asset class are generally narrower than those between underlying risks across asset classes. In addition, the ranges of credit correlation inputs tend to be narrower than those affecting other asset classes. The level of correlation used in the valuation of derivatives with multiple underlying risks depends on a number of factors including the nature of those risks. For example, the correlation between two credit risk exposures would be different than that between two interest rate risk exposures. Similarly, the tenor of the transaction may also impact the correlation input, as the relationship between the underlying risks may be different over different time periods. Furthermore, correlation levels are very much dependent on market conditions and could have a relatively wide range of levels within or across asset classes over time, particularly in volatile market conditions. Volatility – Volatility is a measure of the variability in possible returns for an instrument, parameter or market index given how much the particular instrument, parameter or index changes in value over time. Volatility is a pricing input for options, including equity options, commodity options, and interest rate options. Generally, the higher the volatility of the underlying, the riskier the instrument. Given a long position in an option, an increase in volatility, in isolation, would generally result in an increase in a fair value measurement. The level of volatility used in the valuation of a particular option-based derivative depends on a number of factors, including the nature of the risk underlying the option (e.g., the volatility of a particular equity security may be significantly different from that of a particular commodity index), the tenor of the derivative as well as the strike price of the option. EBITDA multiple – EBITDA multiples referForward price - Forward price is the price at which the buyer agrees to purchase the input (often derived fromasset underlying a forward contract on the predetermined future delivery date, and is such that the value of the contract is zero at inception.
The forward price is used as an input in the valuation of certain derivatives and depends on a comparable company) that is multipliednumber of factors including interest rates, the current price of the underlying asset, and the expected income to be received and costs to be incurred by the historic and/or expected earnings before interest, taxes, depreciation and amortization (“EBITDA”)seller as a result of a company in order to estimateholding that asset until the company’s value.delivery date. An increase in the EBITDA multiple, in isolation, net of adjustments, wouldforward can result in an increase or a decrease in a fair value measurement. Changes in level 3 recurring fair value measurements The following tables include a rollforward of the Consolidated balance sheets amounts (including changes in fair value) for financial instruments classified by the Firm within level 3 of the fair value hierarchy for the years endedDecember 31, 2017, 20162019, 2018 and 2015. 2017. When a determination is made to classify a financial instrument within level 3, the determination is based on the significance of the unobservable parametersinputs to the overall fair value measurement. However, level 3 financial instruments typically include, in addition to the unobservable or level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources); accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology. Also, the Firm risk-manages the observable components of level 3 financial instruments using securities and derivative positions that are classified within level 1 or 2 of the fair value hierarchy; as these level 1 and level 2 risk management instruments are not included below, the gains or losses in the following tables do not reflect the effect of the Firm’s risk management activities related to such level 3 instruments.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 165 |
Notes to consolidated financial statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2019 (in millions) | Fair value at January 1, 2019 | Total realized/unrealized gains/(losses) | | | | | Transfers into level 3(h) | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2019 |
| Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2019 | Purchases(f) | Sales | | Settlements(g) | Assets:(a) | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | U.S. GSEs and government agencies | $ | 549 |
| $ | (62 | ) | | $ | 773 |
| $ | (310 | ) |
|
| $ | (134 | ) | $ | 1 |
| $ | (20 | ) | $ | 797 |
| | $ | (58 | ) | | Residential – nonagency | 64 |
| 25 |
| | 83 |
| (86 | ) |
|
| (20 | ) | 15 |
| (58 | ) | 23 |
| | 2 |
| | Commercial – nonagency | 11 |
| 2 |
| | 20 |
| (26 | ) |
|
| (14 | ) | 15 |
| (4 | ) | 4 |
| | 1 |
| | Total mortgage-backed securities | 624 |
| (35 | ) | | 876 |
| (422 | ) |
|
| (168 | ) | 31 |
| (82 | ) | 824 |
| | (55 | ) | | U.S. Treasury, GSEs and government agencies | — |
| — |
| | — |
| — |
|
|
| — |
| — |
| — |
| — |
| | — |
| | Obligations of U.S. states and municipalities | 689 |
| 13 |
| | 85 |
| (159 | ) |
|
| (8 | ) | — |
| (610 | ) | 10 |
| | 13 |
| | Non-U.S. government debt securities | 155 |
| 1 |
| | 290 |
| (287 | ) |
|
| — |
| 14 |
| (18 | ) | 155 |
| | 4 |
| | Corporate debt securities | 334 |
| 47 |
| | 437 |
| (247 | ) |
|
| (52 | ) | 112 |
| (73 | ) | 558 |
| | 40 |
| | Loans | 1,706 |
| 132 |
| | 727 |
| (708 | ) |
|
| (562 | ) | 625 |
| (538 | ) | 1,382 |
| | 51 |
| | Asset-backed securities | 127 |
| — |
| | 37 |
| (93 | ) |
|
| (40 | ) | 28 |
| (22 | ) | 37 |
| | (3 | ) | | Total debt instruments | 3,635 |
| 158 |
| | 2,452 |
| (1,916 | ) |
|
| (830 | ) | 810 |
| (1,343 | ) | 2,966 |
| | 50 |
| | Equity securities | 232 |
| (41 | ) | | 58 |
| (103 | ) |
|
| (22 | ) | 181 |
| (109 | ) | 196 |
| | (18 | ) | | Other | 301 |
| (36 | ) | | 50 |
| (26 | ) |
|
| (54 | ) | 2 |
| (5 | ) | 232 |
| | 91 |
| | Total trading assets – debt and equity instruments | 4,168 |
| 81 |
| (c) | 2,560 |
| (2,045 | ) |
|
| (906 | ) | 993 |
| (1,457 | ) | 3,394 |
| | 123 |
| (c) | Net derivative receivables:(b) | | | | | | | |
|
| | | | | | Interest rate | (38 | ) | (394 | ) | | 109 |
| (125 | ) |
|
| 5 |
| (7 | ) | 118 |
| (332 | ) | | (599 | ) | | Credit | (107 | ) | (36 | ) | | 20 |
| (9 | ) |
|
| 8 |
| 29 |
| (44 | ) | (139 | ) | | (127 | ) | | Foreign exchange | (297 | ) | (551 | ) | | 17 |
| (67 | ) |
|
| 312 |
| (22 | ) | 1 |
| (607 | ) | | (380 | ) | | Equity | (2,225 | ) | (310 | ) | | 397 |
| (573 | ) |
|
| (503 | ) | (405 | ) | 224 |
| (3,395 | ) | | (1,608 | ) | | Commodity | (1,129 | ) | 497 |
| | 36 |
| (348 | ) |
|
| 89 |
| (6 | ) | 845 |
| (16 | ) | | 130 |
| | Total net derivative receivables | (3,796 | ) | (794 | ) | (c) | 579 |
| (1,122 | ) |
|
| (89 | ) | (411 | ) | 1,144 |
| (4,489 | ) | | (2,584 | ) | (c) | Available-for-sale securities: | | | | | |
|
| |
|
| | | | | | Mortgage-backed securities | 1 |
| — |
| | — |
| — |
|
|
| — |
| — |
| — |
| 1 |
| | — |
| | Asset-backed securities | — |
| — |
| | — |
| — |
|
|
| — |
| — |
| — |
| — |
| | — |
| | Total available-for-sale securities | 1 |
| — |
| | — |
| — |
|
|
| — |
| — |
| — |
| 1 |
| | — |
| | Loans | 122 |
| 4 |
| (c) | — |
| — |
|
|
| (125 | ) | — |
| (1 | ) | — |
| | — |
| | Mortgage servicing rights | 6,130 |
| (1,180 | ) | (d) | 1,489 |
| (789 | ) |
|
| (951 | ) | — |
| — |
| 4,699 |
| | (1,180 | ) | (d) | Other assets | 927 |
| (198 | ) | (c) | 194 |
| (165 | ) |
|
| (33 | ) | 6 |
| (7 | ) | 724 |
| | (180 | ) | (c) | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2019 (in millions) | Fair value at January 1, 2019 | Total realized/unrealized (gains)/losses | | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2019 |
| Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2019 | Purchases | Sales | Issuances | Settlements(g) | Transfers into level 3(h) | Liabilities:(a) | | | | | | | | | | | | | | Deposits | $ | 4,169 |
| $ | 278 |
| (c)(e) | $ | — |
| $ | — |
| $ | 916 |
| $ | (806 | ) | $ | 12 |
| $ | (1,209 | ) | $ | 3,360 |
| | $ | 307 |
| (c)(e) | Short-term borrowings | 1,523 |
| 229 |
| (c)(e) | — |
| — |
| 3,441 |
| (3,356 | ) | 85 |
| (248 | ) | 1,674 |
| | 155 |
| (c)(e) | Trading liabilities – debt and equity instruments | 50 |
| 2 |
| (c) | (22 | ) | 41 |
| — |
| 1 |
| 16 |
| (47 | ) | 41 |
| | 3 |
| (c) | Accounts payable and other liabilities | 10 |
| (2 | ) | (c) | (84 | ) | 115 |
| — |
| — |
| 6 |
| — |
| 45 |
| | 29 |
| (c) | Beneficial interests issued by consolidated VIEs | 1 |
| (1 | ) | (c) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| | — |
| | Long-term debt | 19,418 |
| 2,815 |
| (c)(e) | — |
| — |
| 10,441 |
| (8,538 | ) | 651 |
| (1,448 | ) | 23,339 |
| | 2,822 |
| (c)(e) |
| | | | 166 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | Fair value measurements using significant unobservable inputs | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2017 (in millions) | Fair value at January 1, 2017 | Total realized/unrealized gains/(losses) | | Transfers into level 3(h) | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2017 | | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2017 | | Purchases(f) | Sales | | Settlements(g) | | Year ended December 31, 2018 (in millions) | | Fair value at January 1, 2018 | Total realized/unrealized gains/(losses) | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2018 | | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2018 | | Purchases(f) | Sales | | Settlements(g) | Transfers into level 3(h) | Assets:(a) | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | U.S. government agencies | $ | 392 |
| $ | (11 | ) | | $ | 161 |
| $ | (171 | ) | | $ | (70 | ) | $ | 49 |
| $ | (43 | ) | $ | 307 |
| | $ | (20 | ) | | | U.S. GSEs and government agencies | | $ | 307 |
| $ | (23 | ) | | $ | 478 |
| $ | (164 | ) |
|
| $ | (73 | ) | $ | 94 |
| $ | (70 | ) | $ | 549 |
| | $ | (21 | ) | | Residential – nonagency | 83 |
| 19 |
| | 53 |
| (30 | ) | | (64 | ) | 132 |
| (133 | ) | 60 |
| | 11 |
| | 60 |
| (2 | ) | | 78 |
| (50 | ) |
|
| (7 | ) | 59 |
| (74 | ) | 64 |
| | 1 |
| | Commercial – nonagency | 17 |
| 9 |
| | 27 |
| (44 | ) | | (13 | ) | 64 |
| (49 | ) | 11 |
| | 1 |
| | 11 |
| 2 |
| | 18 |
| (18 | ) |
|
| (17 | ) | 36 |
| (21 | ) | 11 |
| | (2 | ) | | Total mortgage-backed securities | 492 |
| 17 |
| | 241 |
| (245 | ) | | (147 | ) | 245 |
| (225 | ) | 378 |
| | (8 | ) | | 378 |
| (23 | ) | | 574 |
| (232 | ) |
|
| (97 | ) | 189 |
| (165 | ) | 624 |
| | (22 | ) | | U.S. Treasury and government agencies | — |
| — |
| | — |
| — |
| | — |
| 1 |
| — |
| 1 |
| | — |
| | | U.S. Treasury, GSEs and government agencies | | 1 |
| — |
| | — |
| — |
|
|
| — |
| — |
| (1 | ) | — |
| | — |
| | Obligations of U.S. states and municipalities | 649 |
| 18 |
| | 152 |
| (70 | ) | | (5 | ) | — |
| — |
| 744 |
| | 15 |
| | 744 |
| (17 | ) | | 112 |
| (70 | ) |
|
| (80 | ) | — |
| — |
| 689 |
| | (17 | ) | | Non-U.S. government debt securities | 46 |
| — |
| | 559 |
| (518 | ) | | — |
| 62 |
| (71 | ) | 78 |
| | — |
| | 78 |
| (22 | ) | | 459 |
| (277 | ) |
|
| (12 | ) | 23 |
| (94 | ) | 155 |
| | (9 | ) | | Corporate debt securities | 576 |
| 11 |
| | 872 |
| (612 | ) | | (497 | ) | 157 |
| (195 | ) | 312 |
| | 18 |
| | 312 |
| (18 | ) | | 364 |
| (309 | ) |
|
| (48 | ) | 262 |
| (229 | ) | 334 |
| | (1 | ) | | Loans | 4,837 |
| 333 |
| | 2,389 |
| (2,832 | ) | | (1,323 | ) | 806 |
| (1,491 | ) | 2,719 |
| | 43 |
| | 2,719 |
| 26 |
| | 1,364 |
| (1,793 | ) |
|
| (658 | ) | 813 |
| (765 | ) | 1,706 |
| | (1 | ) | | Asset-backed securities | 302 |
| 32 |
| | 354 |
| (356 | ) | | (56 | ) | 75 |
| (198 | ) | 153 |
| | — |
| | 153 |
| 28 |
| | 98 |
| (41 | ) |
|
| (55 | ) | 45 |
| (101 | ) | 127 |
| | 22 |
| | Total debt instruments | 6,902 |
| 411 |
| | 4,567 |
| (4,633 | ) | | (2,028 | ) | 1,346 |
| (2,180 | ) | 4,385 |
| | 68 |
| | 4,385 |
| (26 | ) | | 2,971 |
| (2,722 | ) |
|
| (950 | ) | 1,332 |
| (1,355 | ) | 3,635 |
| | (28 | ) | | Equity securities | 231 |
| 39 |
| | 176 |
| (148 | ) | | (4 | ) | 59 |
| (58 | ) | 295 |
| | 21 |
| | 295 |
| (40 | ) | | 118 |
| (120 | ) |
|
| (1 | ) | 107 |
| (127 | ) | 232 |
| | 9 |
| | Other | 761 |
| 100 |
| | 30 |
| (46 | ) | | (162 | ) | 17 |
| (10 | ) | 690 |
| | 39 |
| | 690 |
| (285 | ) | | 55 |
| (40 | ) |
|
| (118 | ) | 3 |
| (4 | ) | 301 |
| | (301 | ) | | Total trading assets – debt and equity instruments | 7,894 |
| 550 |
| (c) | 4,773 |
| (4,827 | ) | | (2,194 | ) | 1,422 |
| (2,248 | ) | 5,370 |
| | 128 |
| (c) | 5,370 |
| (351 | ) | (c) | 3,144 |
| (2,882 | ) |
|
| (1,069 | ) | 1,442 |
| (1,486 | ) | 4,168 |
| | (320 | ) | (c) | Net derivative receivables:(a)(b) | | | |
|
| | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| | Interest rate | 1,263 |
| 72 |
| | 60 |
| (82 | ) | | (1,040 | ) | (8 | ) | (1 | ) | 264 |
| | (473 | ) | | 264 |
| 150 |
| | 107 |
| (133 | ) |
|
| (430 | ) | (15 | ) | 19 |
| (38 | ) | | 187 |
| | Credit | 98 |
| (164 | ) | | 1 |
| (6 | ) | | — |
| 77 |
| (41 | ) | (35 | ) | | 32 |
| | (35 | ) | (40 | ) | | 5 |
| (7 | ) |
|
| (57 | ) | 4 |
| 23 |
| (107 | ) | | (28 | ) | | Foreign exchange | (1,384 | ) | 43 |
| | 13 |
| (10 | ) | | 854 |
| (61 | ) | 149 |
| (396 | ) | | 42 |
| | (396 | ) | 103 |
| | 52 |
| (20 | ) |
|
| 30 |
| (108 | ) | 42 |
| (297 | ) | | (63 | ) | | Equity | (2,252 | ) | (417 | ) | | 1,116 |
| (551 | ) | | (245 | ) | (1,482 | ) | 422 |
| (3,409 | ) | | (161 | ) | | (3,409 | ) | 198 |
| | 1,676 |
| (2,208 | ) |
|
| 1,805 |
| (617 | ) | 330 |
| (2,225 | ) | | 561 |
| | Commodity | (85 | ) | (149 | ) | | — |
| — |
| | (433 | ) | (6 | ) | (1 | ) | (674 | ) | | (718 | ) | | (674 | ) | (73 | ) | | 1 |
| (72 | ) |
|
| (301 | ) | 7 |
| (17 | ) | (1,129 | ) | | 146 |
| | Total net derivative receivables | (2,360 | ) | (615 | ) | (c) | 1,190 |
| (649 | ) | | (864 | ) | (1,480 | ) | 528 |
| (4,250 | ) | | (1,278 | ) | (c) | (4,250 | ) | 338 |
| (c) | 1,841 |
| (2,440 | ) |
|
| 1,047 |
| (729 | ) | 397 |
| (3,796 | ) | | 803 |
| (c) | Available-for-sale securities: | | | |
|
| | | | | | |
|
|
|
|
|
|
|
|
|
|
|
| | |
|
| | Mortgage-backed securities | | 1 |
| — |
| | — |
| — |
|
|
| — |
| — |
| — |
| 1 |
| | — |
| | Asset-backed securities | 663 |
| 15 |
| | — |
| (50 | ) | | (352 | ) | — |
| — |
| 276 |
| | 14 |
| | 276 |
| 1 |
| | — |
| — |
|
|
| (277 | ) | — |
| — |
| — |
| | — |
| | Other | 1 |
| — |
| | — |
| — |
| | — |
| — |
| — |
| 1 |
| | — |
| | | Total available-for-sale securities | 664 |
| 15 |
| (d) | — |
| (50 | ) | | (352 | ) | — |
| — |
| 277 |
| | 14 |
| (d) | 277 |
| 1 |
| (i) | — |
| — |
|
|
| (277 | ) | — |
| — |
| 1 |
| | — |
| | Loans | 570 |
| 35 |
| (c) | — |
| (26 | ) | | (303 | ) | — |
| — |
| 276 |
| | 3 |
| (c) | 276 |
| (7 | ) | (c) | 123 |
| — |
|
|
| (196 | ) | — |
| (74 | ) | 122 |
| | (7 | ) | (c) | Mortgage servicing rights | 6,096 |
| (232 | ) | (e) | 1,103 |
| (140 | ) | | (797 | ) | — |
| — |
| 6,030 |
| | (232 | ) | (e) | 6,030 |
| 230 |
| (d) | 1,246 |
| (636 | ) |
|
| (740 | ) | — |
| — |
| 6,130 |
| | 230 |
| (d) | Other assets | 2,223 |
| 244 |
| (c) | 66 |
| (177 | ) | | (870 | ) | — |
| (221 | ) | 1,265 |
| | 74 |
| (c) | 1,265 |
| (328 | ) | (c) | 61 |
| (37 | ) |
|
| (37 | ) | 4 |
| (1 | ) | 927 |
| | (340 | ) | (c) | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2017 (in millions) | Fair value at January 1, 2017 | Total realized/unrealized (gains)/losses | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2017 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2017 | | Purchases | Sales | Issuances | Settlements(g) | Transfers into level 3(h) | | Year ended December 31, 2018 (in millions) | | Fair value at January 1, 2018 | Total realized/unrealized (gains)/losses | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2018 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2018 | | Purchases | Sales | Issuances | Settlements(g) | Transfers into level 3(h) | Liabilities:(b)(a) | | | | | | | | | | | | | Deposits | $ | 2,117 |
| $ | 152 |
| (c)(i) | $ | — |
| $ | — |
| $ | 3,027 |
| $ | (291 | ) | $ | 11 |
| $ | (874 | ) | $ | 4,142 |
| | $ | 198 |
| (c)(i) | $ | 4,142 |
| $ | (136 | ) | (c)(e) | $ | — |
| $ | — |
| $ | 1,437 |
| $ | (736 | ) | $ | 2 |
| $ | (540 | ) | $ | 4,169 |
| | $ | (204 | ) | (c)(e) | Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| — |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
| | — |
| | | Short-term borrowings | 1,134 |
| 42 |
| (c)(i) | — |
| — |
| 3,289 |
| (2,748 | ) | 150 |
| (202 | ) | 1,665 |
| | 7 |
| (c)(i) | 1,665 |
| (329 | ) | (c)(e) | — |
| — |
| 3,455 |
| (3,388 | ) | 272 |
| (152 | ) | 1,523 |
| | (131 | ) | (c)(e) | Trading liabilities – debt and equity instruments | 43 |
| (3 | ) | (c) | (46 | ) | 48 |
| — |
| 3 |
| 3 |
| (9 | ) | 39 |
| | — |
| (c) | 39 |
| 19 |
| (c) | (99 | ) | 114 |
| — |
| (1 | ) | 14 |
| (36 | ) | 50 |
| | 16 |
| (c) | Accounts payable and other liabilities | 13 |
| (2 | ) | | (1 | ) | — |
| — |
| 3 |
| — |
| — |
| 13 |
| | (2 | ) | | 13 |
| — |
| | (12 | ) | 5 |
| — |
| — |
| 4 |
| — |
| 10 |
| | — |
| | Beneficial interests issued by consolidated VIEs | 48 |
| 2 |
| (c) | (122 | ) | 39 |
| — |
| (6 | ) | 78 |
| — |
| 39 |
| | — |
| (c) | 39 |
| — |
| | — |
| 1 |
| — |
| (39 | ) | — |
| — |
| 1 |
| | — |
| | Long-term debt | 12,850 |
| 1,067 |
| (c)(i) | — |
| — |
| 12,458 |
| (10,985 | ) | 1,660 |
| (925 | ) | 16,125 |
| | 552 |
| (c)(i) | 16,125 |
| (1,169 | ) | (c)(e) | — |
| — |
| 11,919 |
| (7,769 | ) | 1,143 |
| (831 | ) | 19,418 |
| | (1,385 | ) | (c)(e) |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 167 |
Notes to consolidated financial statements
| | | Fair value measurements using significant unobservable inputs | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2016 (in millions) | Fair value at January 1, 2016 | Total realized/unrealized gains/(losses) | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2016 | | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2016 | | Purchases(f) | Sales | | | Settlements(g) | Transfers into level 3(h) | | Year ended December 31, 2017 (in millions) | | Fair value at January 1, 2017 | Total realized/unrealized gains/(losses) | | | | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2017 | | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2017 | | Purchases(f) | | Sales | | | Settlements(g) | | Transfers into level 3(h) | Assets:(a) | | | | | | | | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | | | | | | | | | | U.S. government agencies | $ | 715 |
| | $ | (20 | ) | | $ | 135 |
| $ | (295 | ) | | | $ | (115 | ) | $ | 111 |
| $ | (139 | ) | $ | 392 |
| | $ | (36 | ) | | | U.S. GSEs and government agencies | | $ | 392 |
| $ | (11 | ) | | $ | 161 |
| | $ | (171 | ) |
|
| | $ | (70 | ) | | $ | 49 |
| $ | (43 | ) | $ | 307 |
| | $ | (20 | ) | | Residential – nonagency | 194 |
| | 4 |
| | 252 |
| (319 | ) | | | (20 | ) | 67 |
| (95 | ) | 83 |
| | 5 |
| | 83 |
| 19 |
| | 53 |
| | (30 | ) |
|
| | (64 | ) | | 132 |
| (133 | ) | 60 |
| | 11 |
| | Commercial – nonagency | 115 |
| | (11 | ) | | 69 |
| (29 | ) | | | (3 | ) | 173 |
| (297 | ) | 17 |
| | 3 |
| | 17 |
| 9 |
| | 27 |
| | (44 | ) |
|
| | (13 | ) | | 64 |
| (49 | ) | 11 |
| | 1 |
| | Total mortgage-backed securities | 1,024 |
| | (27 | ) | | 456 |
| (643 | ) | | | (138 | ) | 351 |
| (531 | ) | 492 |
| | (28 | ) | | 492 |
| 17 |
| | 241 |
| | (245 | ) |
|
| | (147 | ) | | 245 |
| (225 | ) | 378 |
| | (8 | ) | | U.S. Treasury, GSEs and government agencies | | — |
| — |
| | — |
| | — |
|
|
| | — |
| | 1 |
| — |
| 1 |
| | — |
| | Obligations of U.S. states and municipalities | 651 |
| | 19 |
| | 149 |
| (132 | ) | | | (38 | ) | — |
| — |
| 649 |
| | — |
| | 649 |
| 18 |
| | 152 |
| | (70 | ) |
|
| | (5 | ) | | — |
| — |
| 744 |
| | 15 |
| | Non-U.S. government debt securities | 74 |
| | (4 | ) | | 91 |
| (97 | ) | | | (7 | ) | 19 |
| (30 | ) | 46 |
| | (7 | ) | | 46 |
| — |
| | 559 |
| | (518 | ) |
|
| | — |
| | 62 |
| (71 | ) | 78 |
| | — |
| | Corporate debt securities | 736 |
| | 2 |
| | 445 |
| (359 | ) | | | (189 | ) | 148 |
| (207 | ) | 576 |
| | (22 | ) | | 576 |
| 11 |
| | 872 |
| | (612 | ) |
|
| | (497 | ) | | 157 |
| (195 | ) | 312 |
| | 18 |
| | Loans | 6,604 |
| | (343 | ) | | 2,228 |
| (2,598 | ) | | | (1,311 | ) | 1,044 |
| (787 | ) | 4,837 |
| | (169 | ) | | 4,837 |
| 333 |
| | 2,389 |
| | (2,832 | ) |
|
| | (1,323 | ) | | 806 |
| (1,491 | ) | 2,719 |
| | 43 |
| | Asset-backed securities | 1,832 |
| | 39 |
| | 655 |
| (712 | ) | | | (968 | ) | 288 |
| (832 | ) | 302 |
| | 19 |
| | 302 |
| 32 |
| | 354 |
| | (356 | ) |
|
| | (56 | ) | | 75 |
| (198 | ) | 153 |
| | — |
| | Total debt instruments | 10,921 |
| | (314 | ) | | 4,024 |
| (4,541 | ) | | | (2,651 | ) | 1,850 |
| (2,387 | ) | 6,902 |
| | (207 | ) | | 6,902 |
| 411 |
| | 4,567 |
| | (4,633 | ) |
|
| | (2,028 | ) | | 1,346 |
| (2,180 | ) | 4,385 |
| | 68 |
| | Equity securities | 265 |
| | — |
| | 90 |
| (108 | ) | | | (40 | ) | 29 |
| (5 | ) | 231 |
| | 7 |
| | 231 |
| 39 |
| | 176 |
| | (148 | ) |
|
| | (4 | ) | | 59 |
| (58 | ) | 295 |
| | 21 |
| | Other | 744 |
| | 79 |
| | 649 |
| (287 | ) | | | (360 | ) | 26 |
| (90 | ) | 761 |
| | 28 |
| | 761 |
| 100 |
| | 30 |
| | (46 | ) |
|
| | (162 | ) | | 17 |
| (10 | ) | 690 |
| | 39 |
| | Total trading assets – debt and equity instruments | 11,930 |
| | (235 | ) | (c) | 4,763 |
| (4,936 | ) | | | (3,051 | ) | 1,905 |
| (2,482 | ) | 7,894 |
| | (172 | ) | (c) | 7,894 |
| 550 |
| (c) | 4,773 |
| | (4,827 | ) |
|
| | (2,194 | ) | | 1,422 |
| (2,248 | ) | 5,370 |
| | 128 |
| (c) | Net derivative receivables:(a) | — |
| | | |
|
|
|
| | |
|
|
|
| — |
| — |
| |
|
| | | Net derivative receivables:(b) | | | |
|
| |
|
|
|
| |
|
| |
|
|
|
|
|
| |
|
| | Interest rate | 876 |
| | 756 |
| | 193 |
| (57 | ) | | | (713 | ) | (14 | ) | 222 |
| 1,263 |
| | (144 | ) | | 1,263 |
| 72 |
| | 60 |
| | (82 | ) |
|
| | (1,040 | ) | | (8 | ) | (1 | ) | 264 |
| | (473 | ) | | Credit | 549 |
| | (742 | ) | | 10 |
| (2 | ) | | | 211 |
| 36 |
| 36 |
| 98 |
| | (622 | ) | | 98 |
| (164 | ) | | 1 |
| | (6 | ) |
|
| | — |
| | 77 |
| (41 | ) | (35 | ) | | 32 |
| | Foreign exchange | (725 | ) | | 67 |
| | 64 |
| (124 | ) | | | (649 | ) | (48 | ) | 31 |
| (1,384 | ) | | (350 | ) | | (1,384 | ) | 43 |
| | 13 |
| | (10 | ) |
|
| | 854 |
| | (61 | ) | 149 |
| (396 | ) | | 42 |
| | Equity | (1,514 | ) | | (145 | ) | | 277 |
| (852 | ) | | | 213 |
| 94 |
| (325 | ) | (2,252 | ) | | (86 | ) | | (2,252 | ) | (417 | ) | | 1,116 |
| | (551 | ) |
|
| | (245 | ) | | (1,482 | ) | 422 |
| (3,409 | ) | | (161 | ) | | Commodity | (935 | ) | | 194 |
| | 1 |
| 10 |
| | | 645 |
| 8 |
| (8 | ) | (85 | ) | | (36 | ) | | (85 | ) | (149 | ) | | — |
| | — |
|
|
| | (433 | ) | | (6 | ) | (1 | ) | (674 | ) | | (718 | ) | | Total net derivative receivables | (1,749 | ) | | 130 |
| (c) | 545 |
| (1,025 | ) | | | (293 | ) | 76 |
| (44 | ) | (2,360 | ) | | (1,238 | ) | (c) | (2,360 | ) | (615 | ) | (c) | 1,190 |
| | (649 | ) |
|
| | (864 | ) | | (1,480 | ) | 528 |
| (4,250 | ) | | (1,278 | ) | (c) | Available-for-sale securities: | | | | |
|
|
|
| | |
|
|
|
|
|
|
|
| |
|
| | |
|
| |
|
| |
|
|
|
| |
|
| |
|
|
|
|
|
| |
|
| | Mortgage-backed securities | | 1 |
| — |
| | — |
| | — |
|
|
| | — |
| | — |
| — |
| 1 |
| | — |
| | Asset-backed securities | 823 |
| | 1 |
| | — |
| — |
| | | (119 | ) | — |
| (42 | ) | 663 |
| | 1 |
| | 663 |
| 15 |
| | — |
| | (50 | ) |
|
| | (352 | ) | | — |
| — |
| 276 |
| | 14 |
| | Other | 1 |
| | — |
| | — |
| — |
| | | — |
| — |
| — |
| 1 |
| | — |
| | | Total available-for-sale securities | 824 |
| | 1 |
| (d) | — |
| — |
| | | (119 | ) | — |
| (42 | ) | 664 |
| | 1 |
| (d) | 664 |
| 15 |
| (i) | — |
| | (50 | ) |
|
| | (352 | ) | | — |
| — |
| 277 |
| | 14 |
| (i) | Loans | 1,518 |
| | (49 | ) | (c) | 259 |
| (7 | ) | | | (838 | ) | — |
| (313 | ) | 570 |
| | — |
| (c) | 570 |
| 35 |
| (c) | — |
| | (26 | ) |
|
| | (303 | ) | | — |
| — |
| 276 |
| | 3 |
| (c) | Mortgage servicing rights | 6,608 |
| | (163 | ) | (e) | 679 |
| (109 | ) | | | (919 | ) | — |
| — |
| 6,096 |
| | (163 | ) | (e) | 6,096 |
| (232 | ) | (d) | 1,103 |
| | (140 | ) |
|
| | (797 | ) | | — |
| — |
| 6,030 |
| | (232 | ) | (d) | Other assets | 2,401 |
| | 130 |
| (c) | 487 |
| (496 | ) | | | (299 | ) | — |
| — |
| 2,223 |
| | 48 |
| (c) | 2,223 |
| 244 |
| (c) | 66 |
| | (177 | ) |
|
| | (870 | ) | | — |
| (221 | ) | 1,265 |
| | 74 |
| (c) | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2016 (in millions) | Fair value at January 1, 2016 | | Total realized/unrealized (gains)/losses | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2016 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2016 | | Purchases | Sales | Issuances | | Settlements(g) | Transfers into level 3(h) | | Liabilities:(b) | | | | | | | | | | | | Year ended December 31, 2017 (in millions) | | Fair value at January 1, 2017 | Total realized/unrealized (gains)/losses | | | | | | | Transfers into level 3(h) | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2017 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2017 | | Purchases | | Sales | Issuances | | Settlements(g) | | Liabilities:(a) | | | | | | | | | | | | | | Deposits | $ | 2,950 |
| | $ | (56 | ) | (c) | $ | — |
| $ | — |
| $ | 1,375 |
| | $ | (1,283 | ) | $ | — |
| $ | (869 | ) | $ | 2,117 |
| | $ | 23 |
| (c) | $ | 2,117 |
| $ | 152 |
| (c)(e) | $ | — |
| | $ | — |
| $ | 3,027 |
| | $ | (291 | ) | | $ | 11 |
| $ | (874 | ) | $ | 4,142 |
| | $ | 198 |
| (c)(e) | Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| | — |
| | — |
| — |
| — |
| | (2 | ) | 6 |
| (4 | ) | — |
| | — |
| | | Short-term borrowings | 639 |
| | (230 | ) | (c) | — |
| — |
| 1,876 |
| | (1,210 | ) | 114 |
| (55 | ) | 1,134 |
| | (70 | ) | (c) | 1,134 |
| 42 |
| (c)(e) | — |
| | — |
| 3,289 |
| | (2,748 | ) | | 150 |
| (202 | ) | 1,665 |
| | 7 |
| (c)(e) | Trading liabilities – debt and equity instruments | 63 |
| | (12 | ) | (c) | (15 | ) | 23 |
| — |
| | (22 | ) | 13 |
| (7 | ) | 43 |
| | (18 | ) | (c) | 43 |
| (3 | ) | (c) | (46 | ) | | 48 |
| — |
| | 3 |
| | 3 |
| (9 | ) | 39 |
| | — |
| | Accounts payable and other liabilities | 19 |
| | — |
| | — |
| — |
| — |
| | (6 | ) | — |
| — |
| 13 |
| | — |
| | 13 |
| (2 | ) | (c) | (1 | ) | | — |
| — |
| | 3 |
| | — |
| — |
| 13 |
| | (2 | ) | (c) | Beneficial interests issued by consolidated VIEs | 549 |
| | (31 | ) | (c) | — |
| — |
| 143 |
| | (613 | ) | — |
| — |
| 48 |
| | 6 |
| (c) | 48 |
| 2 |
| (c) | (122 | ) | | 39 |
| — |
| | (6 | ) | | 78 |
| — |
| 39 |
| | — |
| | Long-term debt | 11,447 |
| (j) | 147 |
| (c)(j) | — |
| — |
| 8,140 |
| (j) | (5,810 | ) | 315 |
| (1,389 | ) | 12,850 |
| (j) | 639 |
| (c)(j) | 12,850 |
| 1,067 |
| (c)(e) | — |
| | — |
| 12,458 |
| | (10,985 | ) | | 1,660 |
| (925 | ) | 16,125 |
| | 552 |
| (c)(e) |
| | | | 168 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2015 (in millions) | Fair value at January 1, 2015 | Total realized/unrealized gains/(losses) | | | | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2015 | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2015 | Purchases(f) | | Sales | | Settlements(g) | | Transfers into level 3(h) | Assets: | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | | | U.S. government agencies | $ | 922 |
| $ | (28 | ) | | $ | 327 |
| | $ | (303 | ) | | $ | (132 | ) | | $ | 25 |
| $ | (96 | ) | $ | 715 |
| | $ | (27 | ) | | Residential – nonagency | 663 |
| 130 |
| | 253 |
| | (611 | ) | | (23 | ) | | 180 |
| (398 | ) | 194 |
| | 4 |
| | Commercial – nonagency | 306 |
| (14 | ) | | 246 |
| | (262 | ) | | (22 | ) | | 117 |
| (256 | ) | 115 |
| | (5 | ) | | Total mortgage-backed securities | 1,891 |
| 88 |
| | 826 |
| | (1,176 | ) | | (177 | ) | | 322 |
| (750 | ) | 1,024 |
| | (28 | ) | | Obligations of U.S. states and municipalities | 1,273 |
| 14 |
| | 352 |
| | (133 | ) | | (27 | ) | | 5 |
| (833 | ) | 651 |
| | (1 | ) | | Non-U.S. government debt securities | 302 |
| 9 |
| | 205 |
| | (123 | ) | | (64 | ) | | 16 |
| (271 | ) | 74 |
| | (16 | ) | | Corporate debt securities | 2,989 |
| (77 | ) | | 1,171 |
| | (1,038 | ) | | (125 | ) | | 179 |
| (2,363 | ) | 736 |
| | 2 |
| | Loans | 13,287 |
| (174 | ) | | 3,532 |
| | (4,661 | ) | | (3,112 | ) | | 509 |
| (2,777 | ) | 6,604 |
| | (181 | ) | | Asset-backed securities | 1,264 |
| (41 | ) | | 1,920 |
| | (1,229 | ) | | (35 | ) | | 205 |
| (252 | ) | 1,832 |
| | (32 | ) | | Total debt instruments | 21,006 |
| (181 | ) | | 8,006 |
| | (8,360 | ) | | (3,540 | ) | | 1,236 |
| (7,246 | ) | 10,921 |
| | (256 | ) | | Equity securities | 431 |
| 96 |
| | 89 |
| | (193 | ) | | (26 | ) | | 51 |
| (183 | ) | 265 |
| | 82 |
| | Physical commodities | 2 |
| (2 | ) | | — |
| | — |
| | — |
| | — |
| — |
| — |
| | — |
| | Other | 1,050 |
| 119 |
| | 1,581 |
| | (1,313 | ) | | 192 |
| | 33 |
| (918 | ) | 744 |
| | 85 |
| | Total trading assets – debt and equity instruments | 22,489 |
| 32 |
| (c) | 9,676 |
| | (9,866 | ) | | (3,374 | ) | | 1,320 |
| (8,347 | ) | 11,930 |
| | (89 | ) | (c) | Net derivative receivables:(a) | | | |
|
| |
|
| |
|
| |
|
|
|
|
|
| |
|
| | Interest rate | 626 |
| 962 |
| | 513 |
| | (173 | ) | | (732 | ) | | 6 |
| (326 | ) | 876 |
| | 263 |
| | Credit | 189 |
| 118 |
| | 129 |
| | (136 | ) | | 165 |
| | 29 |
| 55 |
| 549 |
| | 260 |
| | Foreign exchange | (526 | ) | 657 |
| | 19 |
| | (149 | ) | | (296 | ) | | 36 |
| (466 | ) | (725 | ) | | 49 |
| | Equity | (1,785 | ) | 731 |
| | 890 |
| | (1,262 | ) | | (158 | ) | | 17 |
| 53 |
| (1,514 | ) | | 5 |
| | Commodity | (565 | ) | (856 | ) | | 1 |
| | (24 | ) | | 512 |
| | (30 | ) | 27 |
| (935 | ) | | (41 | ) | | Total net derivative receivables | (2,061 | ) | 1,612 |
| (c) | 1,552 |
| | (1,744 | ) | | (509 | ) | | 58 |
| (657 | ) | (1,749 | ) | | 536 |
| (c) | Available-for-sale securities: | — |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
| |
|
| | Asset-backed securities | 908 |
| (32 | ) | | 51 |
| | (43 | ) | | (61 | ) | | — |
| — |
| 823 |
| | (28 | ) | | Other | 129 |
| — |
| | — |
| | — |
| | (29 | ) | | — |
| (99 | ) | 1 |
| | — |
| | Total available-for-sale securities | 1,037 |
| (32 | ) | (d) | 51 |
| | (43 | ) | | (90 | ) | | — |
| (99 | ) | 824 |
| | (28 | ) | (d) | Loans | 2,541 |
| (133 | ) | (c) | 1,290 |
| | (92 | ) | | (1,241 | ) | | — |
| (847 | ) | 1,518 |
| | (32 | ) | (c) | Mortgage servicing rights | 7,436 |
| (405 | ) | (e) | 985 |
| | (486 | ) | | (922 | ) | | — |
| — |
| 6,608 |
| | (405 | ) | (e) | Other assets | 3,184 |
| (29 | ) | (c) | 346 |
| | (509 | ) | | (411 | ) | | — |
| (180 | ) | 2,401 |
| | (289 | ) | (c) | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2015 (in millions) | Fair value at January 1, 2015 | Total realized/unrealized (gains)/losses | | | | | | | Transfers into level 3(h) | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2015 | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2015 | Purchases | | Sales | Issuances | Settlements(g) | | Liabilities:(b) | | | | | | | | | | | | | | | | Deposits | $ | 2,859 |
| $ | (39 | ) | (c) | $ | — |
| | $ | — |
| $ | 1,993 |
| $ | (850 | ) | | $ | — |
| $ | (1,013 | ) | $ | 2,950 |
| | $ | (29 | ) | (c) | Short-term borrowings | 1,453 |
| (697 | ) | (c) | — |
| | — |
| 3,334 |
| (2,963 | ) | | 243 |
| (731 | ) | 639 |
| | (57 | ) | (c) | Trading liabilities – debt and equity instruments | 72 |
| 15 |
| (c) | (163 | ) | | 160 |
| — |
| (17 | ) | | 12 |
| (16 | ) | 63 |
| | (4 | ) | (c) | Accounts payable and other liabilities | 26 |
| — |
| (c) | — |
| | — |
| — |
| (7 | ) | | — |
| — |
| 19 |
| | — |
|
| Beneficial interests issued by consolidated VIEs | 1,146 |
| (82 | ) | (c) | — |
| | — |
| 286 |
| (574 | ) | | — |
| (227 | ) | 549 |
| | (63 | ) | (c) | Long-term debt | 11,877 |
| (480 | ) | (c) | (58 | ) | | — |
| 9,359 |
| (6,465 | ) | (j) | 315 |
| (3,101 | ) | 11,447 |
| (j) | 385 |
| (c)(j) |
| | (a) | All levelLevel 3 derivatives are presentedassets as a percentage of total Firm assets accounted for at fair value (including assets measured at fair value on a net basis, irrespective of underlying counterparty. |
| | | | JPMorgan Chase & Co./nonrecurring basis) were 2%, 3% and 3% at December 31, 2019, 2018 and 2017, Annual Report | | 169 |
Notes to consolidated financial statements
| | (b) | respectively. Level 3 liabilities as a percentage of total Firm liabilities accounted for at fair value (including liabilities measured at fair value on a nonrecurring basis) were 15%16%, 12%15% and 13%15% at December 31, 2019, 2018 and 2017, 2016 and 2015, respectively. |
| | (b) | All level 3 derivatives are presented on a net basis, irrespective of underlying counterparty. |
| | (c) | Predominantly reported in principal transactions revenue, except for changes in fair value for CCB mortgage loans, and lending-related commitments originated with the intent to sell, and mortgage loan purchase commitments, which are reported in mortgage fees and related income. |
| | (d) | Realized gains/(losses) on AFSsecurities, as well as other-than-temporary impairment (“OTTI”) losses that are recorded in earnings, are reported in securities gains. Unrealized gains/(losses) are reported in OCI. Realized gains/(losses) and foreign exchange hedge accounting adjustments recorded in income on AFS securities were zero, zero, and $(7) million for the years ended December 31, 2017, 2016 and 2015, respectively. Unrealized gains/(losses) recorded on AFS securities in OCI were $15 million, $1 million and $(25) million for the years ended December 31, 2017, 2016 and 2015, respectively.
|
| | (e) | Changes in fair value for CCB MSRs are reported in mortgage fees and related income. |
| | (e) | Realized (gains)/losses due to DVA for fair value option elected liabilities are reported in principal transactions revenue, and they were not material for the years ended December 31, 2019, 2018 and 2017, respectively. Unrealized (gains)/losses are reported in OCI, and they were $319 million, $(277) million and $(48) million for the years ended December 31, 2019, 2018 and 2017, respectively. |
| | (f) | Loan originations are included in purchasespurchases. |
| | (g) | Includes financial assets and liabilities that have matured, been partially or fully repaid, impacts of modifications, and deconsolidation associated with beneficial interests in VIEs and other items. |
| | (h) | All transfers into and/or out of level 3 are based on changes in the observability and/or significance of the valuation inputs and are assumed to occur at the beginning of the quarterly reporting period in which they occur. |
| | (i) | Realized (gains)/gains/(losses) on AFSsecurities, as well as other-than-temporary impairment (“OTTI”) losses due to DVA for fair value option elected liabilitiesthat are recorded in earnings, are reported in principal transactions revenue.investment securities gains/(losses). Unrealized (gains)/lossesgains/(losses) are reported in OCI. Unrealized gainsThere were $480 realized gains/(losses) and foreign exchange hedge accounting adjustments recorded in income on AFS securities for the years ended December 31, 2019 and 2017, respectively and $1 million recorded for the year ended December 31, 2017.2018. There were no realized gains0 unrealized gains/(losses) recorded on AFS securities in OCI for the years ended December 31, 2019 and 2018, respectively and $15 million recorded for the year ended December 31, 2017. |
| | (j) | The prior period amounts have been revised to conform with the current period presentation. |
Level 3 analysis Consolidated balance sheets changes Level 3 assets (including assets measured at fair value on a nonrecurring basis) were 0.8% 0.6% of total Firm assets at December 31, 2017. 2019. The following describes significant changes to level 3 assets since December 31, 2016, 2018, for those items measured at fair value on a recurring basis. ForRefer to Assets and liabilities measured at fair value on a nonrecurring basis on page 172 for further information on changes impacting items measured at fair value on a nonrecurring basis, see Assets and liabilities measured at fair value on a nonrecurring basis on page 172.basis. For the year ended December 31, 20172019 Level 3 assets were $19.2$13.5 billion at December 31, 2017,2019, reflecting a decrease of $4.0$3.6 billion from December 31, 2016, largely2018, partially due to a $1.4 billion decrease in MSRs. Refer to the Gains and losses section below for additional information. Transfers between levels for instruments carried at fair value on a recurring basis During the year ended December 31, 2019, significant transfers from level 2 into level 3 included the following: $2.5 billion decrease in trading assets —993 million of total debt and equity instruments, was predominantlythe majority of which were trading loans, driven by a decrease in observability. $904 million of $2.1 billion in trading loans largely due to settlements, andgross equity derivative payables as a $1.0 billionresult of a decrease in other assets due to settlementsobservability and an increase in the significance of unobservable inputs. During the year ended December 31, 2019, significant transfers from level 3 tointo level 2 included the following: $1.5 billion of total debt and equity instruments, the majority of which were obligations of U.S. states and municipalities and trading loans, driven by an increase in observability. $1.1 billion of gross equity derivative receivables and $1.3 billion of gross equity derivative payables as a result of increasedan increase in observability and a decrease in certain valuation inputsthe significance of unobservable inputs. $962 million of gross commodities derivative payables as a result of an increase in observability. $1.2 billion of deposits as a result of an increase in observability and a decrease in the significance of unobservable inputs. $1.4 billion of long-term debt as a result of an increase in observability and a decrease in the significance of unobservable inputs. During the year ended December 31, 2018, significant transfers from level 2 into level 3 included the following: $1.4 billion of total debt and equity instruments, the majority of which were trading loans, driven by a decrease in observability. $1.0 billion of gross equity derivative receivables and $1.6 billion of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs. $1.1 billion of long-term debt driven by a decrease in observability and an increase in the significance of unobservable inputs for certain structured notes. During the year ended December 31, 2018, significant transfers from level 3 into level 2 included the following: $1.5 billion of total debt and equity instruments, the majority of which were trading loans, driven by an increase in observability. $1.2 billion of gross equity derivative receivables and $1.5 billion of gross equity derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs. During the year ended December 31, 2017, significant transfers from level 2 into level 3 included the following: $1.0 billion of gross equity derivative receivables and $2.5 billion of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs. $1.7 billion of long-term debt driven by a decrease in observability and an increase in the significance of unobservable inputs for certain structured notes. During the year ended December 31, 2017, significant transfers from level 3 into level 2 included the following: $1.5 billion of trading loans driven by an increase in observability. $1.2 billion of gross equity derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 169 |
Notes to consolidated financial statements
All transfers are based on changes in the observability and/or significance of the valuation inputs and are assumed to occur at the beginning of the quarterly reporting period in which they occur. Gains and losses The following describes significant components of total realized/unrealized gains/(losses) for instruments measured at fair value on a recurring basis for the years ended December 31, 2017, 20162019, 2018 and 2015. For further information on these2017. These amounts exclude any effects of the Firm’s risk management activities where the financial instruments seeare classified as level 1 and 2 of the fair value hierarchy.Refer to Changes in level 3 recurring fair value measurements rollforward tables on pages 166–170.165–169 for further information on these instruments. 2019 | | • | $2.1 billion of net losses on assets largely due to MSRs reflecting faster prepayment speeds on lower rates. Refer to Note 15 for additional information on MSRs. |
$3.3 billion of net losses on liabilities predominantly driven by market movements in long-term debt. 2018 $1.6 billion of net gains on liabilities largely driven by market movements in long-term debt. 2017 $1.3 billion of net losses on liabilities largelypredominantly driven by market movements in long-term debt 2016
There were no individually significant movements for the year ended December 31, 2016.
2015
$1.6 billion of net gains in interest rate, foreign exchange and equity derivative receivables largely due to market movements; partially offset by losses on commodity derivatives due to market movements
$1.3 billion of net gains in liabilities due to market movementsdebt.
| | | | 170 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Credit and funding adjustments – derivatives Derivatives are generally valued using models that use as their basis observable market parameters. These market parameters generally do not consider factors such as counterparty nonperformance risk, the Firm’s own credit quality, and funding costs. Therefore, it is generally necessary to make adjustments to the base estimate of fair value to reflect these factors. CVA represents the adjustment, relative to the relevant benchmark interest rate, necessary to reflect counterparty nonperformance risk. The Firm estimates CVA using a scenario analysis to estimate the expected positive credit exposure across all of the Firm’s existing positions with each counterparty, and then estimates losses based on the probability of default and estimated recovery rate as a result of a counterparty credit event considering contractual factors designed to mitigate the Firm’s credit exposure, such as collateral and legal rights of offset. The key inputs to this methodology are (i) the probability of a default event occurring for each counterparty, as derived from observed or estimated CDS spreads; and (ii) estimated recovery rates implied by CDS spreads, adjusted to consider the differences in recovery rates as a derivative creditor relative to those reflected in CDS spreads, which generally reflect senior unsecured creditor risk. FVA represents the adjustment to reflect the impact of funding and is recognized where there is evidence that a market participant in the principal market would incorporate it in a transfer of the instrument. The Firm’s FVA framework, applied to uncollateralized (including partially collateralized) over-the-counter (“OTC”) derivatives incorporates key inputs such as: (i) the expected funding requirements arising from the Firm’s positions with each counterparty and collateral arrangements; and (ii) the estimated market funding cost in the principal market which, for derivative liabilities, considers the Firm’s credit risk (DVA). For collateralized derivatives, the fair value is estimated by discounting expected future cash flows at the relevant overnight indexed swap rate given the underlying collateral agreement with the counterparty, and therefore a separate FVA is not necessary. The following table provides the impact of credit and funding adjustments on principal transactions revenue in the respective periods, excluding the effect of any associated hedging activities. The FVA reportedpresented below includeincludes the impact of the Firm’s own credit quality on the inception value of liabilities as well as the impact of changes in the Firm’s own credit quality over time. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Credit and funding adjustments: | | | | | | Derivatives CVA | $ | 241 |
| | $ | 193 |
| | $ | 802 |
| Derivatives FVA | 199 |
| | (74 | ) | | (295 | ) |
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Credit and funding adjustments: | | | | | | Derivatives CVA | $ | 802 |
| | $ | (84 | ) | | $ | 620 |
| Derivatives FVA | (295 | ) | | 7 |
| | 73 |
|
Valuation adjustments on fair value option elected liabilities The valuation of the Firm’s liabilities for which the fair value option has been elected requires consideration of the Firm’s own credit risk. DVA on fair value option elected liabilities reflects changes (subsequent to the issuance of the liability) in the Firm’s probability of default and LGD, which are estimated based on changes in the Firm’s credit spread observed in the bond market. Effective January 1, 2016, the effect ofRealized (gains)/losses due to DVA onfor fair value option elected liabilities is recognizedare reported in principal transactions revenue. Unrealized (gains)/losses are reported in OCI. SeeRefer to page 169 in this Note 23and Note 24 for further information.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 171 |
Notes to consolidated financial statements
Assets and liabilities measured at fair value on a nonrecurring basis The following tables present the assets reported on a nonrecurring basis at fair valueheld as of December 31, 20172019 and 2016,2018, respectively, for which a nonrecurring fair value adjustment was recorded during the years ended December 31, 2019 and 2018, respectively, by major product category and fair value hierarchy. | | | Fair value hierarchy | | Total fair value | Fair value hierarchy | | Total fair value | December 31, 2017 (in millions) | Level 1 |
| Level 2 |
| | Level 3 |
| | | December 31, 2019 (in millions) | | Level 1 |
| Level 2 |
| | Level 3 |
| | Total fair value | Loans | $ | — |
| $ | 238 |
| | $ | 596 |
| (a) | $ | 834 |
| $ | — |
| $ | 3,462 |
| (b) | $ | 269 |
| (c) | Other assets(a) | — |
| 283 |
| | 183 |
| | 466 |
| — |
| 14 |
| | 1,029 |
| | 1,043 |
| Total assets measured at fair value on a nonrecurring basis | $ | — |
| $ | 521 |
| | $ | 779 |
| (a) | $ | 1,300 |
| $ | — |
| $ | 3,476 |
| | $ | 1,298 |
| | $ | 4,774 |
|
| | | Fair value hierarchy | | Total fair value | Fair value hierarchy | | Total fair value | December 31, 2016 (in millions) | Level 1 |
| Level 2 |
| | Level 3 |
| | | December 31, 2018 (in millions) | | Level 1 |
| Level 2 |
| | Level 3 |
| | Total fair value | Loans | $ | — |
| $ | 730 |
| | $ | 590 |
| | $ | 1,320 |
| $ | — |
| $ | 273 |
| | $ | 264 |
| | Other assets | — |
| 5 |
| | 232 |
| | 237 |
| — |
| 8 |
| | 815 |
| | 823 |
| Total assets measured at fair value on a nonrecurring basis | $ | — |
| $ | 735 |
| | $ | 822 |
| | $ | 1,557 |
| $ | — |
| $ | 281 |
| | $ | 1,079 |
| | $ | 1,360 |
|
(a) Primarily includes equity securities without readily determinable fair values that were adjusted based on observable price changes in orderly transactions from an identical or similar investment of the same issuer (measurement alternative). Of the $779$1.0 billion in level 3 assets measured at fair value on a nonrecurring basis as of December 31, 2019, $787 million related to such equity securities. These equity securities are classified as level 3 due to the infrequency of the observable prices and/or the restrictions on the shares. (b) Primarily includes certain mortgage loans that were reclassified to held-for-sale. (c) Of the $269 million in level 3 assets measured at fair value on a nonrecurring basis as of December 31, 2017, $4422019, $248 million related to residential real estate loans carried at the net realizable value of the underlying collateral (e.g., collateral-dependent loans and other loans charged off in accordance with regulatory guidance). These amounts are classified as level 3 as they are valued using ainformation from broker’s price opinionopinions, appraisals and automated valuation models and discounted based upon the Firm’s experience with actual liquidation values. These discounts to the broker price opinions ranged from 13%14% to 48%49% with a weighted average of 27%28%.
There were no material0 liabilities measured at fair value on a nonrecurring basis at December 31, 20172019 and 2016.2018.
Nonrecurring fair value changes The following table presents the total change in value of assets and liabilities for which a fair value adjustment has been recognized for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, related to financial instrumentsassets and liabilities held at those dates. | | | | | | | | | | | | | | December 31, (in millions) | 2019 |
| | 2018 |
| | 2017 |
| | Loans | $ | (274 | ) | (a) | $ | (68 | ) | | $ | (159 | ) | | Other assets | 168 |
| (b) | 132 |
| (b) | (148 | ) | | Accounts payable and other liabilities | — |
| | — |
| | (1 | ) | | Total nonrecurring fair value gains/(losses) | $ | (106 | ) | | $ | 64 |
| | $ | (308 | ) | |
| | | | | | | | | | | | | December 31, (in millions) | 2017 |
| | 2016 |
| | 2015 |
| Loans | $ | (159 | ) | | $ | (209 | ) | | $ | (226 | ) | Other Assets | (148 | ) | | 37 |
| | (60 | ) | Accounts payable and other liabilities | (1 | ) | | — |
| | (8 | ) | Total nonrecurring fair value gains/(losses) | $ | (308 | ) | | $ | (172 | ) | | $ | (294 | ) |
(a)Primarily includes the impact of certain mortgage loans that were reclassified to held-for-sale.For(b)Included $187 million and $149 million for the years ended December 31, 2019 and 2018, respectively, of net gains as a result of the measurement alternative.
Refer to Note 12 for further information about the measurement of impaired collateral-dependent loans, and other loans where the carrying value is based on the fair value of the underlying collateral (e.g., residential mortgage loans charged off in accordance with regulatory guidance), see Note 12..
| | | | 172 | | JPMorgan Chase & Co./2019 Form 10-K |
Equity securities without readily determinable fair values The Firm measures certain equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer, with such changes recognized in other income. In its determination of the new carrying values upon observable price changes, the Firm may adjust the prices if deemed necessary to arrive at the Firm’s estimated fair values. Such adjustments may include adjustments to reflect the different rights and obligations of similar securities, and other adjustments that are consistent with the Firm’s valuation techniques for private equity direct investments. The following table presents the carrying value of equity securities without readily determinable fair values held as of December 31, 2019 and 2018, that are measured under the measurement alternative and the related adjustments recorded during the periods presented for those securities with observable price changes. These securities are included in the nonrecurring fair value tables when applicable price changes are observable. | | | | | | | | As of or for the year ended December 31, | | | (in millions) | 2019 | 2018 | Other assets | | | Carrying value | $ | 2,441 |
| $ | 1,510 |
| Upward carrying value changes(a) | 229 |
| 309 |
| Downward carrying value changes/impairment(b) | (42 | ) | (160 | ) |
| | (a) | The cumulative upward carrying value changes between January 1, 2018 and December 31, 2019 were $528 million. |
| | (b) | The cumulative downward carrying value changes/impairment between January 1, 2018 and December 31, 2019 were $(200) million. |
Included in other assets above is the Firm’s interest in approximately 40 million Visa Class B shares, recorded at a nominal carrying value. These shares are subject to certain transfer restrictions currently and will be convertible into Visa Class A shares upon final resolution of certain litigation matters involving Visa. The conversion rate of Visa Class B shares into Visa Class A shares is 1.6228 at December 31, 2019, and may be adjusted by Visa depending on developments related to the litigation matters. Additional disclosures about the fair value of financial instruments that are not carried on the Consolidated balance sheets at fair value U.S. GAAP requires disclosure of the estimated fair value of certain financial instruments, and the methods and significant assumptions used to estimate their fair value. Financial instruments within the scope of these disclosure requirementswhich are included in the following table. However, this table does not include other items, such as nonfinancial assets, intangible assets, certain financial instruments, and all nonfinancial instruments are excluded from the scope of these disclosure requirements. Accordingly, the fair value disclosures provided in the following table include only a partial estimate of the fair value of JPMorgan Chase’s assets and liabilities. For example, the Firm has developed long-term relationships with its customers through its deposit base and credit card accounts, commonly referred to as core deposit intangibles and credit cardcustomer relationships. In the opinion of management, these items, in the aggregate, add significant value to JPMorgan Chase, but their fair value is not disclosed in this Note.table.
Financial instruments for which carrying value approximates fair value Certain financial instruments that are not carried at fair value on the Consolidated balance sheets are carried at amounts that approximate fair value, due to their short-term nature and generally negligible credit risk. These instruments include cash and due from banks, deposits with banks, federal funds sold, securities purchased under resale agreements and securities borrowed, short-term receivables and accrued interest receivable, short-term borrowings, federal funds purchased, securities loaned and sold under repurchase agreements, accounts payable, and accrued liabilities. In addition, U.S. GAAP requires that the fair value of deposit liabilities with no stated maturity (i.e., demand, savings and certain money market deposits) be equal to their carrying value; recognition of the inherent funding value of these instruments is not permitted.
| | | | 172 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 173 |
Notes to consolidated financial statements
The following table presents by fair value hierarchy classification the carrying values and estimated fair values atDecember 31, 20172019 and 2016, 2018, of financial assets and liabilities, excluding financial instruments that are carried at fair value on a recurring basis, and their classification within the fair value hierarchy. For additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value, see pages 156–159 of this Note. | | | December 31, 2017 | | December 31, 2016 | December 31, 2019 | | December 31, 2018 | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | (in billions) | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | Financial assets | | | | | | | Cash and due from banks | $ | 25.8 |
| $ | 25.8 |
| $ | — |
| $ | — |
| $ | 25.8 |
| | $ | 23.9 |
| $ | 23.9 |
| $ | — |
| $ | — |
| $ | 23.9 |
| $ | 21.7 |
| $ | 21.7 |
| $ | — |
| $ | — |
| $ | 21.7 |
| | $ | 22.3 |
| $ | 22.3 |
| $ | — |
| $ | — |
| $ | 22.3 |
| Deposits with banks | 404.3 |
| 401.8 |
| 2.5 |
| — |
| 404.3 |
| | 365.8 |
| 362.0 |
| 3.8 |
| — |
| 365.8 |
| 241.9 |
| 241.9 |
| — |
| — |
| 241.9 |
| | 256.5 |
| 256.5 |
| — |
| — |
| 256.5 |
| Accrued interest and accounts receivable | 67.0 |
| — |
| 67.0 |
| — |
| 67.0 |
| | 52.3 |
| — |
| 52.2 |
| 0.1 |
| 52.3 |
| 71.3 |
| — |
| 71.2 |
| 0.1 |
| 71.3 |
| | 72.0 |
| — |
| 71.9 |
| 0.1 |
| 72.0 |
| Federal funds sold and securities purchased under resale agreements | 183.7 |
| — |
| 183.7 |
| — |
| 183.7 |
| | 208.5 |
| — |
| 208.3 |
| 0.2 |
| 208.5 |
| 234.6 |
| — |
| 234.6 |
| — |
| 234.6 |
| | 308.4 |
| — |
| 308.4 |
| — |
| 308.4 |
| Securities borrowed | 102.1 |
| — |
| 102.1 |
| — |
| 102.1 |
| | 96.4 |
| — |
| 96.4 |
| — |
| 96.4 |
| 133.5 |
| — |
| 133.5 |
| — |
| 133.5 |
| | 106.9 |
| — |
| 106.9 |
| — |
| 106.9 |
| Securities, held-to-maturity | 47.7 |
| — |
| 48.7 |
| — |
| 48.7 |
| | 50.2 |
| — |
| 50.9 |
| — |
| 50.9 |
| | Investment securities, held-to-maturity | | 47.5 |
| 0.1 |
| 48.8 |
| — |
| 48.9 |
| | 31.4 |
| — |
| 31.5 |
| — |
| 31.5 |
| Loans, net of allowance for loan losses(b)(a) | 914.6 |
| — |
| 213.2 |
| 707.1 |
| 920.3 |
| | 878.8 |
| — |
| 24.1 |
| 851.0 |
| 875.1 |
| 939.5 |
| — |
| 214.1 |
| 734.9 |
| 949.0 |
| | 968.0 |
| — |
| 241.5 |
| 728.5 |
| 970.0 |
| Other | 62.9 |
| — |
| 52.9 |
| 16.5 |
| 69.4 |
| | 71.4 |
| 0.1 |
| 60.8 |
| 14.3 |
| 75.2 |
| 61.3 |
| — |
| 60.6 |
| 0.8 |
| 61.4 |
| | 60.5 |
| — |
| 59.6 |
| 1.0 |
| 60.6 |
| Financial liabilities | | | | | | | Deposits | $ | 1,422.7 |
| $ | — |
| $ | 1,422.7 |
| $ | — |
| $ | 1,422.7 |
| | $ | 1,361.3 |
| $ | — |
| $ | 1,361.3 |
| $ | — |
| $ | 1,361.3 |
| $ | 1,533.8 |
| $ | — |
| $ | 1,534.1 |
| $ | — |
| $ | 1,534.1 |
| | $ | 1,447.4 |
| $ | — |
| $ | 1,447.5 |
| $ | — |
| $ | 1,447.5 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | 158.2 |
| — |
| 158.2 |
| — |
| 158.2 |
| | 165.0 |
| — |
| 165.0 |
| — |
| 165.0 |
| 183.1 |
| — |
| 183.1 |
| — |
| 183.1 |
| | 181.4 |
| — |
| 181.4 |
| — |
| 181.4 |
| Short-term borrowings | 42.6 |
| — |
| 42.4 |
| 0.2 |
| 42.6 |
| | 25.3 |
| — |
| 25.3 |
| — |
| 25.3 |
| 35.0 |
| — |
| 35.0 |
| — |
| 35.0 |
| | 62.1 |
| — |
| 62.1 |
| — |
| 62.1 |
| Accounts payable and other liabilities | 152.0 |
| — |
| 148.9 |
| 2.9 |
| 151.8 |
| | 148.0 |
| — |
| 144.8 |
| 3.4 |
| 148.2 |
| 164.0 |
| 0.1 |
| 160.0 |
| 3.5 |
| 163.6 |
| | 160.6 |
| 0.2 |
| 157.0 |
| 3.0 |
| 160.2 |
| Beneficial interests issued by consolidated VIEs | 26.0 |
| — |
| 26.0 |
| — |
| 26.0 |
| | 38.9 |
| — |
| 38.9 |
| — |
| 38.9 |
| 17.8 |
| — |
| 17.9 |
| — |
| 17.9 |
| | 20.2 |
| — |
| 20.2 |
| — |
| 20.2 |
| Long-term debt and junior subordinated deferrable interest debentures | 236.6 |
| — |
| 240.3 |
| 3.2 |
| 243.5 |
| | 257.5 |
| — |
| 260.0 |
| 2.0 |
| 262.0 |
| 215.5 |
| — |
| 218.3 |
| 3.5 |
| 221.8 |
| | 227.1 |
| — |
| 224.6 |
| 3.3 |
| 227.9 |
|
| | (a) | Fair value is typically estimated using a discounted cash flow model that incorporates the characteristics of the underlying loans (including principal, contractual interest rate and contractual fees) and other key inputs, including expected lifetime credit losses, interest rates, prepayment rates, and primary origination or secondary market spreads. For certain loans, the fair value is measured based on the value of the underlying collateral. The difference between the estimated fair value and carrying value of a financial asset or liability is the result of the different methodologies used to determine fair value as compared with carrying value. For example, credit losses are estimated for a financial asset’s remaining life in a fair value calculation but are estimated for a loss emergence period in the allowance for loan losslosses calculation; future loan income (interest and fees) is incorporated in a fair value calculation but is generally not considered in the allowance for loan losses. For a further discussion of the Firm’s methodologies for estimating the fair value of loans and lending-related commitments, see Valuation hierarchy on pages 156–159. |
| | (b) | For the year ended December 31, 2017, the Firm transferred certain residential mortgage loans from Level 3 to Level 2 as a result of an increase in observability. |
The majority of the Firm’s lending-related commitments are not carried at fair value on a recurring basis on the Consolidated balance sheets. The carrying value of the wholesale allowance for lending-related commitments and the estimated fair value of these wholesale lending-related commitments were as follows for the periods indicated. | | | December 31, 2017 | | December 31, 2016 | December 31, 2019 | | December 31, 2018 | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | (in billions) | Carrying value(a) | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value(a) | Level 1 | Level 2 | Level 3 | Total estimated fair value | Carrying value(a) | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value(a) | Level 1 | Level 2 | Level 3 | Total estimated fair value(b) | Wholesale lending-related commitments | $ | 1.1 |
| $ | — |
| $ | — |
| $ | 1.6 |
| $ | 1.6 |
| | $ | 1.1 |
| $ | — |
| $ | — |
| $ | 2.1 |
| $ | 2.1 |
| $ | 1.2 |
| $ | — |
| $ | — |
| $ | 1.9 |
| $ | 1.9 |
| | $ | 1.0 |
| $ | — |
| $ | — |
| $ | 2.2 |
| $ | 2.2 |
|
| | (a) | Excludes the current carrying values of the guarantee liability and the offsetting asset, each of which is recognized at fair value at the inception of the guarantees. |
| | (b) | The prior period amounts have been revised to conform with the current period presentation. |
The Firm does not estimate the fair value of consumer lending-related commitments. In many cases, the Firm can reduce or cancel these commitments by providing the borrower notice or, in some cases as permitted by law, without notice. ForRefer to page 156 of this Note for a further discussion of the valuation of lending-related commitments, see page 157 of this Note.commitments.
| | | | 174 | | JPMorgan Chase & Co./2017 Annual Report | | 1732019 Form 10-K |
Notes to consolidated financial statements
Note 3 – Fair value option The fair value option provides an option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments. The Firm has elected to measure certain instruments at fair value for several reasons including to mitigate income statement volatility caused by the differences between the measurement basis of elected instruments (e.g., certain instruments elected were previouslythat otherwise would be accounted for on an accrual basis) and the associated risk management arrangements that are accounted for on a fair value basis, as well as tobetter reflect those instruments that are managed on a fair value basis. The Firm’s election of fair value includes the following instruments: Loans purchased or originated as part of securitization warehousing activity, subject to bifurcation accounting, or managed on a fair value basis, including lending-related commitments Certain securities financing arrangements with an embedded derivative and/or a maturity of greater than one year | | • | Certain securities financing agreements, such as those with an embedded derivative and/or a maturity of greater than one year |
| | • | Owned beneficial interests in securitized financial assets that contain embedded credit derivatives, which would otherwise be required to be separately accounted for as a derivative instrument |
| | • | Structured notes, which are predominantly financial instruments that contain embedded derivatives, that are issued as part of client-driven activities |
| | • | Certain long-term beneficial interests issued by CIB’s consolidated securitization trusts where the underlying assets are carried at fair value |
Owned beneficial interests in securitized financial assets that contain embedded credit derivatives, which would otherwise be required to be separately accounted for as a derivative instrument
Structured notes, which are predominantly financial instruments that contain embedded derivatives, that are issued as part of CIB’s client-driven activities
Certain long-term beneficial interests issued by CIB’s consolidated securitization trusts where the underlying assets are carried at fair value
| | | | 174 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 175 |
Notes to consolidated financial statements
Changes in fair value under the fair value option election The following table presents the changes in fair value included in the Consolidated statements of income for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, for items for which the fair value option was elected. The profit and loss information presented below only includes the financial instruments that were elected to be measured at fair value; related risk management instruments, which are required to be measured at fair value, are not included in the table. | | | 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 | December 31, (in millions) | Principal transactions | All other income | Total changes in fair value recorded | | Principal transactions | All other income | Total changes in fair value recorded | | Principal transactions | All other income | Total changes in fair value recorded | Principal transactions | All other income | Total changes in fair value recorded(e) | | Principal transactions | All other income | Total changes in fair value recorded(e) | | Principal transactions | All other income | Total changes in fair value recorded(e) | Federal funds sold and securities purchased under resale agreements | $ | (97 | ) | $ | — |
| | $ | (97 | ) | | $ | (76 | ) | $ | — |
| | $ | (76 | ) | | $ | (38 | ) | $ | — |
| | $ | (38 | ) | $ | (36 | ) | $ | — |
| | $ | (36 | ) | | $ | (35 | ) | $ | — |
| | $ | (35 | ) | | $ | (97 | ) | $ | — |
| | $ | (97 | ) | Securities borrowed | 50 |
| — |
| | 50 |
| | 1 |
| — |
| | 1 |
| | (6 | ) | — |
| | (6 | ) | 133 |
| — |
| | 133 |
| | 22 |
| — |
| | 22 |
| | 50 |
| — |
| | 50 |
| Trading assets: | | | | | | |
|
| | | |
|
| | | | | | |
|
| | | |
|
| Debt and equity instruments, excluding loans | 1,943 |
| 2 |
| (c) | 1,945 |
| | 120 |
| (1 | ) | (c) | 119 |
| | 756 |
| (10 | ) | (c) | 746 |
| 2,482 |
| (1 | ) | (c) | 2,481 |
| | (1,680 | ) | 1 |
| (c) | (1,679 | ) | | 1,943 |
| 2 |
| (c) | 1,945 |
| Loans reported as trading assets: | | | | | | |
|
| | | |
|
| | | | | | |
|
| | | |
|
| Changes in instrument-specific credit risk | 330 |
| 14 |
| (c) | 344 |
| | 461 |
| 43 |
| (c) | 504 |
| | 138 |
| 41 |
| (c) | 179 |
| 763 |
| 2 |
| (c) | 765 |
| | 414 |
| 1 |
| (c) | 415 |
| | 330 |
| 14 |
| (c) | 344 |
| Other changes in fair value | 217 |
| 747 |
| (c) | 964 |
| | 79 |
| 684 |
| (c) | 763 |
| | 232 |
| 818 |
| (c) | 1,050 |
| 254 |
| 1,224 |
| (c) | 1,478 |
| | 160 |
| 185 |
| (c) | 345 |
| | 217 |
| 747 |
| (c) | 964 |
| Loans: | | | | | | |
|
| | | |
|
| | | | | | |
|
| | | |
|
| Changes in instrument-specific credit risk | (1 | ) | — |
| | (1 | ) | | 13 |
| — |
| | 13 |
| | 35 |
| — |
| | 35 |
| (26 | ) | — |
| | (26 | ) | | (1 | ) | — |
| | (1 | ) | | (1 | ) | — |
| | (1 | ) | Other changes in fair value | (12 | ) | 3 |
| (c) | (9 | ) | | (7 | ) | — |
| | (7 | ) | | 4 |
| — |
| | 4 |
| 1 |
| — |
| | 1 |
| | (1 | ) | — |
| | (1 | ) | | (12 | ) | 3 |
| (c) | (9 | ) | Other assets | 11 |
| (55 | ) | (d) | (44 | ) | | 20 |
| 62 |
| (d) | 82 |
| | 79 |
| (1 | ) | (d) | 78 |
| 5 |
| 6 |
| (d) | 11 |
| | 5 |
| (45 | ) | (d) | (40 | ) | | 11 |
| (55 | ) | (d) | (44 | ) | Deposits(a) | (533 | ) | — |
| | (533 | ) | | (134 | ) | — |
| | (134 | ) | | 93 |
| — |
| | 93 |
| (1,730 | ) | — |
| | (1,730 | ) | | 181 |
| — |
| | 181 |
| | (533 | ) | — |
| | (533 | ) | Federal funds purchased and securities loaned or sold under repurchase agreements | 11 |
| — |
| | 11 |
| | 19 |
| — |
| | 19 |
| | 8 |
| — |
| | 8 |
| (8 | ) | — |
| | (8 | ) | | 11 |
| — |
| | 11 |
| | 11 |
| — |
| | 11 |
| Short-term borrowings(a) | (747 | ) | — |
| | (747 | ) | | (236 | ) | — |
| | (236 | ) | | 1,996 |
| — |
| | 1,996 |
| (693 | ) | — |
| | (693 | ) | | 862 |
| — |
| | 862 |
| | (747 | ) | — |
| | (747 | ) | Trading liabilities | (1 | ) | — |
| | (1 | ) | | 6 |
| — |
| | 6 |
| | (20 | ) | — |
| | (20 | ) | 6 |
| — |
| | 6 |
| | 1 |
| — |
| | 1 |
| | (1 | ) | — |
| | (1 | ) | Beneficial interests issued by consolidated VIEs | — |
| — |
| | — |
| | 23 |
| — |
| | 23 |
| | 49 |
| — |
| | 49 |
| | Other liabilities | | (16 | ) | — |
| | (16 | ) | | — |
| — |
| | — |
| | — |
| — |
| | — |
| Long-term debt(a)(b) | (2,022 | ) | — |
| | (2,022 | ) | | (773 | ) | — |
| | (773 | ) | | 1,388 |
| — |
| | 1,388 |
| (6,173 | ) | 1 |
| (c) | (6,172 | ) | | 2,695 |
| — |
| | 2,695 |
| | (2,022 | ) | — |
| | (2,022 | ) |
| | (a) | Unrealized gains/(losses) due to instrument-specific credit risk (DVA) for liabilities for which the fair value option has been elected is recorded in OCI, while realized gains/(losses) are recorded in principal transactions revenue. DVA for 2015 was included in principal transactions revenue, and includes the impact of the Firm’s own credit quality on the inception value of liabilities as well as the impact of changes in the Firm’s own credit quality subsequent to issuance. See Notes 2 and 23 for further information. Realized gains/(losses) due to instrument-specific credit risk recorded in principal transactiontransactions revenue were not material for the years ended December 31, 20172019, 2018 and 2016.2017. |
| | (b) | Long-term debt measured at fair value predominantly relates to structured notes. Although the risk associated with the structured notes is actively managed, the gains/(losses) reported in this table do not include the income statement impact of the risk management instruments used to manage such risk. |
| | (c) | Reported in mortgage fees and related income. |
| | (d) | Reported in other income. |
| | (e) | Changes in fair value exclude contractual interest, which is included in interest income and interest expense for all instruments other than hybrid financial instruments. Refer to Note 7 for further information regarding interest income and interest expense. |
Determination of instrument-specific credit risk for items for which a fair value election was made The following describes how the gains and losses that are attributable to changes in instrument-specific credit risk, were determined. Loans and lending-related commitments: For floating-rate instruments, all changes in value are attributed to instrument-specific credit risk. For fixed-rate instruments, an allocation of the changes in value for the period is made between those changes in value that are interest rate-related and changes in value that are credit-related. Allocations are generally based on an analysis of borrower-specific credit spread and recovery information, where available, or benchmarking to similar entities or industries.
| | • | Loans and lending-related commitments: For floating-rate instruments, all changes in value are attributed to instrument-specific credit risk. For fixed-rate instruments, an allocation of the changes in value for the period is made between those changes in value that are interest rate-related and changes in value that are credit-related. Allocations are generally based on an analysis of borrower-specific credit spread and recovery information, where available, or benchmarking to similar entities or industries. |
Long-term debt: Changes in value attributable to instrument-specific credit risk were derived principally from observable changes in the Firm’s credit spread. | | • | Long-term debt: Changes in value attributable to instrument-specific credit risk were derived principally from observable changes in the Firm’s credit spread as observed in the bond market. |
| | • | Securities financing agreements: Generally, for these types of agreements, there is a requirement that collateral be maintained with a market value equal to or in excess of the principal amount loaned; as a result, there would be no adjustment or an immaterial adjustment for instrument-specific credit risk related to these agreements. |
Resale and repurchase agreements, securities borrowed agreements and securities lending agreements: Generally, for these types of agreements, there is a requirement that collateral be maintained with a market value equal to or in excess of the principal amount loaned; as a result, there would be no adjustment or an immaterial adjustment for instrument-specific credit risk related to these agreements.
| | | | 176 | | JPMorgan Chase & Co./2017 Annual Report | | 1752019 Form 10-K |
Notes to consolidated financial statements
Difference between aggregate fair value and aggregate remaining contractual principal balance outstanding The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as ofDecember 31, 20172019 and 20162018, for loans, long-term debt and long-term beneficial interests for which the fair value option has been elected. | | | 2017 | | 2016 | 2019 | | 2018 | December 31, (in millions) | Contractual principal outstanding | | Fair value | Fair value over/(under) contractual principal outstanding | | Contractual principal outstanding | | Fair value | Fair value over/(under) contractual principal outstanding | Contractual principal outstanding | | Fair value | Fair value over/(under) contractual principal outstanding | | Contractual principal outstanding | | Fair value | Fair value over/(under) contractual principal outstanding | Loans(a) | | | | | | | | | | | | | | | Nonaccrual loans | | | | | | | | | | | | | | | Loans reported as trading assets | $ | 4,219 |
| | $ | 1,371 |
| $ | (2,848 | ) | | $ | 3,338 |
| | $ | 748 |
| $ | (2,590 | ) | $ | 3,717 |
| | $ | 1,111 |
| $ | (2,606 | ) | | $ | 4,240 |
| | $ | 1,350 |
| $ | (2,890 | ) | Loans | 39 |
| | — |
| (39 | ) | | — |
| | — |
| — |
| 178 |
| | 139 |
| (39 | ) | | 39 |
| | — |
| (39 | ) | Subtotal | 4,258 |
| | 1,371 |
| (2,887 | ) | | 3,338 |
| | 748 |
| (2,590 | ) | 3,895 |
| | 1,250 |
| (2,645 | ) | | 4,279 |
| | 1,350 |
| (2,929 | ) | All other performing loans | | | | | | | | | | | | | | | Loans reported as trading assets | 38,157 |
| | 36,590 |
| (1,567 | ) | | 35,477 |
| | 33,054 |
| (2,423 | ) | 48,570 |
| | 47,318 |
| (1,252 | ) | | 42,215 |
| | 40,403 |
| (1,812 | ) | Loans | 2,539 |
| | 2,508 |
| (31 | ) | | 2,259 |
| | 2,228 |
| (31 | ) | 7,046 |
| | 6,965 |
| (81 | ) | | 3,186 |
| | 3,151 |
| (35 | ) | Total loans | $ | 44,954 |
| | $ | 40,469 |
| $ | (4,485 | ) | | $ | 41,074 |
| | $ | 36,030 |
| $ | (5,044 | ) | $ | 59,511 |
| | $ | 55,533 |
| $ | (3,978 | ) | | $ | 49,680 |
| | $ | 44,904 |
| $ | (4,776 | ) | Long-term debt | | | | | | | | | | | | | | | Principal-protected debt | $ | 26,297 |
| (c) | $ | 23,848 |
| $ | (2,449 | ) | | $ | 21,602 |
| (c) | $ | 19,195 |
| $ | (2,407 | ) | $ | 40,124 |
| (c) | $ | 39,246 |
| $ | (878 | ) | | $ | 32,674 |
| (c) | $ | 28,718 |
| $ | (3,956 | ) | Nonprincipal-protected debt(b) | NA |
| | 23,671 |
| NA |
| | NA |
| | 18,491 |
| NA |
| NA |
| | 36,499 |
| NA |
| | NA |
| | 26,168 |
| NA |
| Total long-term debt | NA |
| | $ | 47,519 |
| NA |
| | NA |
| | $ | 37,686 |
| NA |
| NA |
| | $ | 75,745 |
| NA |
| | NA |
| | $ | 54,886 |
| NA |
| Long-term beneficial interests | | | | | | | | | | | | | | | Nonprincipal-protected debt | NA |
| | $ | 45 |
| NA |
| | NA |
| | $ | 120 |
| NA |
| | Nonprincipal-protected debt(b) | | NA |
| | $ | 36 |
| NA |
| | NA |
| | $ | 28 |
| NA |
| Total long-term beneficial interests | NA |
|
| $ | 45 |
| NA |
| | NA |
| | $ | 120 |
| NA |
| NA |
|
| $ | 36 |
| NA |
| | NA |
| | $ | 28 |
| NA |
|
| | (a) | There were no0 performing loans that were ninety days or more past due as of December 31, 20172019 and 20162018. |
| | (b) | Remaining contractual principal is not applicable to nonprincipal-protected notes.structured notes and long-term beneficial interests. Unlike principal-protected structured notes and long-term beneficial interests, for which the Firm is obligated to return a stated amount of principal at the maturity, of the note, nonprincipal-protected structured notes and long-term beneficial interests do not obligate the Firm to return a stated amount of principal at maturity, but for structured notes to return an amount based on the performance of an underlying variable or derivative feature embedded in the note. However, investors are exposed to the credit risk of the Firm as issuer for both nonprincipal-protected and principal protectedprincipal-protected notes. |
| | (c) | Where the Firm issues principal-protected zero-coupon or discount notes, the balance reflects the contractual principal payment at maturity or, if applicable, the contractual principal payment at the Firm’s next call date. |
AtDecember 31, 20172019 and 20162018, the contractual amount of lending-related commitments for which the fair value option was elected was$7.44.6 billion and $4.6$6.9 billion, respectively, with a corresponding fair value of$(76)(94) million and $(118)(92) million, respectively. ForRefer to Note 28 for further information regarding off-balance sheet lending-related financial instruments, see Note 27.instruments.
| | | | 176 | | JPMorgan Chase & Co./2017 Annual Report |
Structured note products by balance sheet classification and risk component The following table presents the fair value of the structured notes, issued by the Firm, by balance sheet classification and the primary risk type. | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | (in millions) | Long-term debt | Short-term borrowings | Deposits | Total | | Long-term debt | Short-term borrowings | Deposits | Total | Risk exposure | | | | | | | | | | Interest rate | $ | 35,470 |
| $ | 34 |
| $ | 16,692 |
| $ | 52,196 |
| | $ | 24,137 |
| $ | 62 |
| $ | 12,372 |
| $ | 36,571 |
| Credit | 5,715 |
| 875 |
| — |
| 6,590 |
| | 4,009 |
| 995 |
| — |
| 5,004 |
| Foreign exchange | 3,862 |
| 48 |
| 5 |
| 3,915 |
| | 3,169 |
| 157 |
| 38 |
| 3,364 |
| Equity | 29,294 |
| 4,852 |
| 8,177 |
| 42,323 |
| | 21,382 |
| 5,422 |
| 7,368 |
| 34,172 |
| Commodity | 472 |
| 32 |
| 1,454 |
| 1,958 |
| | 372 |
| 34 |
| 1,207 |
| 1,613 |
| Total structured notes | $ | 74,813 |
| $ | 5,841 |
| $ | 26,328 |
| $ | 106,982 |
| | $ | 53,069 |
| $ | 6,670 |
| $ | 20,985 |
| $ | 80,724 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | (in millions) | Long-term debt | Short-term borrowings | Deposits | Total | | Long-term debt | Short-term borrowings | Deposits | Total | Risk exposure | | | | | | | | | | Interest rate | $ | 22,056 |
| $ | 69 |
| $ | 8,058 |
| $ | 30,183 |
| | $ | 16,296 |
| $ | 184 |
| $ | 4,296 |
| $ | 20,776 |
| Credit | 4,329 |
| 1,312 |
| — |
| 5,641 |
| | 3,267 |
| 225 |
| — |
| 3,492 |
| Foreign exchange | 2,841 |
| 147 |
| 38 |
| 3,026 |
| | 2,365 |
| 135 |
| 6 |
| 2,506 |
| Equity | 17,581 |
| 7,106 |
| 6,548 |
| 31,235 |
| | 14,831 |
| 8,234 |
| 5,481 |
| 28,546 |
| Commodity | 230 |
| 15 |
| 4,468 |
| 4,713 |
| | 488 |
| 37 |
| 1,811 |
| 2,336 |
| Total structured notes | $ | 47,037 |
| $ | 8,649 |
| $ | 19,112 |
| $ | 74,798 |
| | $ | 37,247 |
| $ | 8,815 |
| $ | 11,594 |
| $ | 57,656 |
|
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 177 |
Notes to consolidated financial statements
Note 4 – Credit risk concentrations Concentrations of credit risk arise when a number of clients, counterparties or customers are engaged in similar business activities or activities in the same geographic region, or when they have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. JPMorgan Chase regularly monitors various segments of its credit portfolios to assess potential credit risk concentrations and to obtain additional collateral when deemed necessary and permitted underthe Firm’sagreements. Senior management is significantly involved in the credit approval and review process, and risk levels are adjusted as needed to reflectthe Firm’srisk appetite. Inthe Firm’sconsumer portfolio, concentrations are evaluatedmanaged primarily by product and by U.S. geographic region, with a key focus on trends and concentrations at the portfolio level, where potential credit risk concentrations can be remedied through changes in underwriting policies and portfolio guidelines. Refer to Note12for additional information on the geographic composition ofthe Firm’sconsumer loan portfolios. In the wholesale portfolio, credit risk concentrations are evaluated primarily by industry and monitored regularly on both an aggregate portfolio level and on an individual client or counterparty basis. The Firm’swholesale exposure is managed through loan syndications and participations, loan sales, securitizations, credit derivatives, master netting agreements, collateral and other risk-reduction techniques. ForRefer to Note 12 for additional information on loans, see Note 12.loans. The Firmdoes not believe that its exposure to any particular loan product (e.g., option ARMs), or industry segment (e.g., real estate), or its exposure to residential real estate loans with high LTV ratios, results in a significant concentration of credit risk. Terms of loan products and collateral coverage are included in the Firm’s assessment when extending credit and establishing its allowance for loan losses.
| | | | 178 | | JPMorgan Chase & Co./2017 Annual Report | | 1772019 Form 10-K |
Notes to consolidated financial statements
The table below presents both on–balance sheet and off–balance sheet consumer and wholesale-related credit exposure by the Firm’s three credit portfolio segments as of December 31, 20172019 and 2016. In 2017 the Firm revised its methodology for the assignment of industry classifications, to better monitor and manage concentrations. This largely resulted in the re-assignment of holding companies from Other to the industry of risk category based on the primary business activity of the holding company's underlying entities. In the tables and industry discussions below, the prior period amounts have been revised to conform with the current period presentation.2018.
| | | 2017 | | 2016 | | 2019 | | 2018 | | | Credit exposure(f) | On-balance sheet | Off-balance sheet(g) | | Credit exposure | On-balance sheet | Off-balance sheet(g) | | Credit exposure(g) | On-balance sheet | Off-balance sheet(h) | | Credit exposure(g) | On-balance sheet | Off-balance sheet(h) | | December 31, (in millions) | Loans | Derivatives | | Loans | Derivatives | | Loans | Derivatives | | Loans | Derivatives | | Consumer, excluding credit card | $ | 421,234 |
| $ | 372,681 |
| $ | — |
| $ | 48,553 |
| | $ | 417,891 |
| $ | 364,644 |
| $ | — |
| $ | 53,247 |
| (h) | $ | 386,452 |
| $ | 335,040 |
| $ | — |
| $ | 51,412 |
| | $ | 419,798 |
| $ | 373,732 |
| $ | — |
| $ | 46,066 |
| | Receivables from customers(a) | 133 |
| — |
| — |
| — |
| | 120 |
| — |
| — |
| — |
| | — |
| — |
| — |
| — |
| | 154 |
| — |
| — |
| — |
| | Total Consumer, excluding credit card | 421,367 |
| 372,681 |
| — |
| 48,553 |
| | 418,011 |
| 364,644 |
| — |
| 53,247 |
| (h) | 386,452 |
| 335,040 |
| — |
| 51,412 |
| | 419,952 |
| 373,732 |
| — |
| 46,066 |
| | Credit Card | 722,342 |
| 149,511 |
| — |
| 572,831 |
| | 695,707 |
| 141,816 |
| — |
| 553,891 |
| | | Credit card | | 819,644 |
| 168,924 |
| — |
| 650,720 |
| | 762,011 |
| 156,632 |
| — |
| 605,379 |
| | Total consumer-related | 1,143,709 |
| 522,192 |
| — |
| 621,384 |
| | 1,113,718 |
| 506,460 |
| — |
| 607,138 |
| (h) | 1,206,096 |
| 503,964 |
| — |
| 702,132 |
| | 1,181,963 |
| 530,364 |
| — |
| 651,445 |
| | Wholesale-related(b)(a) | | | | | | | | | Real Estate | 139,409 |
| 113,648 |
| 153 |
| 25,608 |
| | 134,287 |
| 105,802 |
| 207 |
| 28,278 |
| | 149,267 |
| 116,244 |
| 619 |
| 32,404 |
| | 143,316 |
| 115,737 |
| 164 |
| 27,415 |
| | Individuals and Individual Entities(b) | | 102,292 |
| 91,980 |
| 694 |
| 9,618 |
| | 97,077 |
| 86,586 |
| 1,017 |
| 9,474 |
| | Consumer & Retail | 87,679 |
| 31,044 |
| 1,114 |
| 55,521 |
| | 84,804 |
| 29,929 |
| 1,082 |
| 53,793 |
| | 99,331 |
| 30,879 |
| 1,424 |
| 67,028 |
| | 94,815 |
| 36,921 |
| 1,093 |
| 56,801 |
| | Technology, Media & Telecommunications | 59,274 |
| 13,665 |
| 2,265 |
| 43,344 |
| | 63,324 |
| 14,063 |
| 1,293 |
| 47,968 |
| | 59,021 |
| 14,680 |
| 2,766 |
| 41,575 |
| | 72,646 |
| 16,980 |
| 2,667 |
| 52,999 |
| | Industrials | | 58,250 |
| 19,096 |
| 878 |
| 38,276 |
| | 58,528 |
| 19,126 |
| 958 |
| 38,444 |
| | Asset Managers | | 51,775 |
| 23,939 |
| 7,160 |
| 20,676 |
| | 42,807 |
| 16,806 |
| 9,033 |
| 16,968 |
| | Banks & Finance Cos | | 50,091 |
| 30,639 |
| 5,165 |
| 14,287 |
| | 49,920 |
| 28,825 |
| 5,903 |
| 15,192 |
| | Healthcare | 55,997 |
| 16,273 |
| 2,191 |
| 37,533 |
| | 49,445 |
| 15,545 |
| 2,280 |
| 31,620 |
| | 46,638 |
| 13,951 |
| 2,078 |
| 30,609 |
| | 48,142 |
| 16,347 |
| 1,874 |
| 29,921 |
| | Industrials | 55,272 |
| 18,161 |
| 1,163 |
| 35,948 |
| | 55,733 |
| 17,295 |
| 1,658 |
| 36,780 |
| | | Banks & Finance Cos | 49,037 |
| 25,879 |
| 6,816 |
| 16,342 |
| | 48,393 |
| 22,714 |
| 12,257 |
| 13,422 |
| | | Oil & Gas | 41,317 |
| 12,621 |
| 1,727 |
| 26,969 |
| | 40,367 |
| 13,253 |
| 1,878 |
| 25,236 |
| | 41,570 |
| 13,064 |
| 852 |
| 27,654 |
| | 42,600 |
| 13,008 |
| 559 |
| 29,033 |
| | Asset Managers | 32,531 |
| 11,480 |
| 7,998 |
| 13,053 |
| | 33,201 |
| 10,339 |
| 10,820 |
| 12,042 |
| | | Utilities | 29,317 |
| 6,187 |
| 2,084 |
| 21,046 |
| | 29,672 |
| 7,208 |
| 888 |
| 21,576 |
| | 34,753 |
| 5,085 |
| 2,573 |
| 27,095 |
| | 28,172 |
| 5,591 |
| 1,740 |
| 20,841 |
| | State & Municipal Govt(c) | 28,633 |
| 12,134 |
| 2,888 |
| 13,611 |
| | 28,263 |
| 12,416 |
| 2,096 |
| 13,751 |
| | 26,697 |
| 9,924 |
| 2,000 |
| 14,773 |
| | 27,351 |
| 10,319 |
| 2,000 |
| 15,032 |
| | Automotive | | 17,317 |
| 5,408 |
| 368 |
| 11,541 |
| | 17,339 |
| 5,170 |
| 399 |
| 11,770 |
| | Chemicals & Plastics | | 17,276 |
| 4,710 |
| 459 |
| 12,107 |
| | 16,035 |
| 4,902 |
| 181 |
| 10,952 |
| | Metals & Mining | | 15,337 |
| 5,202 |
| 402 |
| 9,733 |
| | 15,359 |
| 5,370 |
| 488 |
| 9,501 |
| | Central Govt | 19,182 |
| 3,375 |
| 13,937 |
| 1,870 |
| | 20,408 |
| 3,964 |
| 14,235 |
| 2,209 |
| | 14,843 |
| 2,818 |
| 10,477 |
| 1,548 |
| | 18,456 |
| 3,867 |
| 12,869 |
| 1,720 |
| | Chemicals & Plastics | 15,945 |
| 5,654 |
| 208 |
| 10,083 |
| | 15,043 |
| 5,292 |
| 271 |
| 9,480 |
| | | Transportation | 15,797 |
| 6,733 |
| 977 |
| 8,087 |
| | 19,096 |
| 8,996 |
| 751 |
| 9,349 |
| | 13,917 |
| 4,804 |
| 715 |
| 8,398 |
| | 15,660 |
| 6,391 |
| 1,102 |
| 8,167 |
| | Automotive | 14,820 |
| 4,903 |
| 342 |
| 9,575 |
| | 16,736 |
| 4,964 |
| 1,196 |
| 10,576 |
| | | Metals & Mining | 14,171 |
| 4,728 |
| 702 |
| 8,741 |
| | 13,419 |
| 4,350 |
| 439 |
| 8,630 |
| | | Insurance | 14,089 |
| 1,411 |
| 2,804 |
| 9,874 |
| | 13,510 |
| 1,119 |
| 3,382 |
| 9,009 |
| | 12,202 |
| 1,269 |
| 2,282 |
| 8,651 |
| | 12,639 |
| 1,356 |
| 2,569 |
| 8,714 |
| | Securities Firms | | 7,335 |
| 752 |
| 4,507 |
| 2,076 |
| | 4,558 |
| 645 |
| 2,029 |
| 1,884 |
| | Financial Markets Infrastructure | 5,036 |
| 351 |
| 3,499 |
| 1,186 |
| | 8,732 |
| 347 |
| 3,884 |
| 4,501 |
| | 4,116 |
| 9 |
| 2,482 |
| 1,625 |
| | 7,484 |
| 18 |
| 5,941 |
| 1,525 |
| | Securities Firms | 4,113 |
| 952 |
| 1,692 |
| 1,469 |
| | 4,211 |
| 1,059 |
| 1,913 |
| 1,239 |
| | | All other(d) | 147,900 |
| 113,699 |
| 3,963 |
| 30,238 |
| | 137,238 |
| 105,135 |
| 3,548 |
| 28,555 |
| | 76,492 |
| 50,186 |
| 1,865 |
| 24,441 |
| | 68,284 |
| 45,197 |
| 1,627 |
| 21,460 |
| | Subtotal | 829,519 |
| 402,898 |
| 56,523 |
| 370,098 |
| | 815,882 |
| 383,790 |
| 64,078 |
| 368,014 |
| | 898,520 |
| 444,639 |
| 49,766 |
| 404,115 |
| | 881,188 |
| 439,162 |
| 54,213 |
| 387,813 |
| | Loans held-for-sale and loans at fair value | 5,607 |
| 5,607 |
| — |
| — |
| | 4,515 |
| 4,515 |
| — |
| — |
| | 11,166 |
| 11,166 |
| — |
| — |
| | 15,028 |
| 15,028 |
| — |
| — |
| | Receivables from customers and other(a) | 26,139 |
| — |
| — |
| — |
| | 17,440 |
| — |
| — |
| — |
| | | Receivables from customers and other(e) | | 33,706 |
| — |
| — |
| — |
| | 30,063 |
| — |
| — |
| — |
| | Total wholesale-related | 861,265 |
| 408,505 |
| 56,523 |
| 370,098 |
| | 837,837 |
| 388,305 |
| 64,078 |
| 368,014 |
| | 943,392 |
| 455,805 |
| 49,766 |
| 404,115 |
| | 926,279 |
| 454,190 |
| 54,213 |
| 387,813 |
| | Total exposure(e)(f) | $ | 2,004,974 |
| $ | 930,697 |
| $ | 56,523 |
| $ | 991,482 |
| | $ | 1,951,555 |
| $ | 894,765 |
| $ | 64,078 |
| $ | 975,152 |
| (h) | | Total exposure(f)(g) | | $ | 2,149,488 |
| $ | 959,769 |
| $ | 49,766 |
| $ | 1,106,247 |
| | $ | 2,108,242 |
| $ | 984,554 |
| $ | 54,213 |
| $ | 1,039,258 |
| |
| | (a) | Receivables from customers primarily represent held-for-investment margin loans to brokerage customers (Prime Services in CIB, AWM and CCB) that are collateralized through assets maintained in the clients' brokerage accounts, as such no allowance is held against these receivables. These receivables are reported within accrued interest and accounts receivable on the Firm's Consolidated balance sheets. |
| | (b) | The industry rankings presented in the table as of December 31, 2016,2018, are based on the industry rankings of the corresponding exposures at December 31, 2017,2019, not actual rankings of such exposures at December 31, 2016.2018. |
| | (b) | Individuals and Individual Entities predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies and personal and testamentary trusts. |
| | (c) | In addition to the credit risk exposure to states and municipal governments (both U.S. and non-U.S.) at December 31, 20172019 and 2016,2018, noted above, the Firm held: $9.8$6.5 billion and $9.1$7.8 billion, respectively, of trading securities; $32.3assets; $29.8 billion and $31.6$37.7 billion, respectively, of AFS securities; and $14.4$4.8 billion and $14.5 billion, respectively,at both periods of HTMheld-to-maturity (“HTM”) securities, issued by U.S. state and municipal governments. For further information, seeRefer to Note 2 and Note 10.10 for further information. |
| | (d) | All other includes: individuals; SPEs;SPEs and privatePrivate education and civic organizations. Fororganizations, representing approximately 92% and 8%, respectively, at both December 31, 2019 and 2018. Refer to Note 14 for more information on exposures to SPEs, see Note 14.SPEs. |
| | (e) | Receivables from customers primarily represent held-for-investment margin loans to brokerage clients in CIB and AWM that are collateralized by assets maintained in the clients’ brokerage accounts (e.g., cash on deposit, liquid and readily marketable debt or equity securities), as such no allowance is held against these receivables. To manage its credit risk the Firm establishes margin requirements and monitors the required margin levels on an ongoing basis, and requires clients to deposit additional cash or other collateral, or to reduce positions, when appropriate. These receivables are reported within accrued interest and accounts receivable on the Firm’s Consolidated balance sheets. |
| | (f) | Excludes cash placed with banks of $421.0$254.0 billion and $380.2$268.1 billion, at December 31, 20172019 and 2016,2018, respectively, which is predominantly placed with various central banks, primarily Federal Reserve Banks. |
| | (f)(g) | Credit exposure is net of risk participations and excludes the benefit of credit derivatives used in credit portfolio management activities held against derivative receivables or loans and liquid securities and other cash collateral held against derivative receivables. |
| | (g)(h) | Represents lending-related financial instruments. |
| | (h) | The prior period amounts have been revised to conform with the current period presentation. |
| | | | 178 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 179 |
Notes to consolidated financial statements
Note 5 – Derivative instruments Derivative contracts derive their value from underlying asset prices, indices, reference rates, other inputs or a combination of these factors and may expose counterparties to risks and rewards of an underlying asset or liability without having to initially invest in, own or exchange the asset or liability. JPMorgan Chase makes markets in derivatives for clients and also uses derivatives to hedge or manage its own risk exposures. Predominantly all of the Firm’s derivatives are entered into for market-making or risk management purposes. Market-making derivatives The majority of the Firm’s derivatives are entered into for market-making purposes. Clients use derivatives to mitigate or modify interest rate, credit, foreign exchange, equity and commodity risks. The Firm actively manages the risks from its exposure to these derivatives by entering into other derivative transactionscontracts or by purchasing or selling other financial instruments that partially or fully offset the exposure from client derivatives. Risk management derivatives The Firm manages certain market and credit risk exposures using derivative instruments, including derivatives in hedge accounting relationships and other derivatives that are used to manage risks associated with specified assets and liabilities. InterestThe Firm generally uses interest rate contracts are usedderivatives to minimize fluctuations in earnings that are caused bymanage the risk associated with changes in interest rates. Fixed-rate assets and liabilities appreciate or depreciate in market value as interest rates change. Similarly, interest income and expense increasesincrease or decreasesdecrease as a result of variable-rate assets and liabilities resetting to current market rates, and as a result of the repayment and subsequent origination or issuance of fixed-rate assets and liabilities at current market rates.Gains orand losses on the derivative instruments that are related to suchthese assets and liabilities are expected to substantially offset this variability in earnings. The Firm generally uses interest rate swaps, forwards and futures to manage the impact of interest rate fluctuations on earnings.variability.
Foreign currency forward contractsderivatives are used to manage the foreign exchange risk associated with certain foreign currency–denominated (i.e., non-U.S. dollar) assets and liabilities and forecasted transactions, as well as the Firm’s net investments in certain non-U.S. subsidiaries or branches whose functional currencies are not the U.S. dollar. As a result of fluctuations in foreign currencies, the U.S. dollar–equivalent values of the foreign currency–denominated assets and liabilities or the forecasted revenues or expenses increase or decrease. Gains or losses on the derivative instruments related to these foreign currency–denominated assets or liabilities, or forecasted transactions, are expected to substantially offset this variability. Commodities contractsderivatives are used to manage the price risk of certain commodities inventories. Gains or losses on these derivative instruments are expected to substantially offset the depreciation or appreciation of the related inventory. Credit derivatives are used to manage the counterparty credit risk associated with loans and lending-related commitments. Credit derivatives compensate the purchaser when the entity referenced in the contract experiences a credit event, such as bankruptcy or a failure to pay an obligation when due. Credit derivatives primarily consist of CDS. For a further discussion of credit derivatives, seeRefer to the discussion in the Credit derivatives section onpages 189–191191–194of this Note.Note for a further discussion of credit derivatives. For more information about risk management derivatives, seeRefer to the risk management derivatives gains and losses table onpage 189191of this Note, and the hedge accounting gains and losses tables on pages 187–189 188–191 of this Note.Note for more information about risk management derivatives.
Derivative counterparties and settlement types The Firm enters into OTC derivatives, which are negotiated and settled bilaterally with the derivative counterparty. The Firm also enters into, as principal, certain ETD such as futures and options, and OTC-cleared derivative contracts with CCPs.ETD contracts are generally standardized contracts traded on an exchange and cleared by the CCP, which is the Firm’s counterparty from the inception of the transactions. OTC-cleared derivatives are traded on a bilateral basis and then novated to the CCP for clearing. Derivative clearing services The Firm provides clearing services for clients in which the Firm acts as a clearing member at certain derivative exchanges and clearing houses. The Firm does not reflect the clients’ derivative contracts in its Consolidated Financial Statements. ForRefer to Note 28 for further information on the Firm’s clearing services, see Note 27.services. Accounting for derivatives All free-standing derivatives that the Firm executes for its own account are required to be recorded on the Consolidated balance sheets at fair value. As permitted under U.S. GAAP, the Firm nets derivative assets and liabilities, and the related cash collateral receivables and payables, when a legally enforceable master netting agreement exists between the Firm and the derivative counterparty. ForRefer to Note 1for further discussion of the offsetting of assets and liabilities, see Note 1. liabilities.The accounting for changes in value of a derivative depends on whether or not the transaction has been designated and qualifies for hedge accounting. Derivatives that are not designated as hedges are reported and measured at fair value through earnings. The tabular disclosures on pages 183–189 184–191 of this Note provide additional information on the amount of, and reporting for, derivative assets, liabilities, gains and losses. ForRefer to Notes 2 and 3 for further discussion of derivatives embedded in structured notes, see Notes 2 and 3.notes.
| | | | 180 | | JPMorgan Chase & Co./2017 Annual Report | | 1792019 Form 10-K |
Notes to consolidated financial statements
Derivatives designated as hedges The Firm applies hedge accounting to certain derivatives executed for risk management purposes – generally interest rate, foreign exchange and commodity derivatives. However, JPMorgan Chase does not seek to apply hedge accounting to all of the derivatives involved in the Firm’s risk management activities. For example, the Firm does not apply hedge accounting to purchased CDS used to manage the credit risk of loans and lending-related commitments, because of the difficulties in qualifying such contracts as hedges. For the same reason, the Firm does not apply hedge accounting to certain interest rate, foreign exchange, and commodity derivatives used for risk management purposes. To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the exposure being hedged. In addition, for a derivative to be designated as a hedge, the risk management objective and strategy must be documented. Hedge documentation must identify the derivative hedging instrument, the asset or liability or forecasted transaction and type of risk to be hedged, and how the effectiveness of the derivative is assessed prospectively and retrospectively. To assess effectiveness, the Firm uses statistical methods such as regression analysis, as well as nonstatistical methods includingsuch as dollar-value comparisons of the change in the fair value of the derivative to the change in the fair value or cash flows of the hedged item.item, and qualitative comparisons of critical terms and the evaluation of any changes in those terms. The extent to which a derivative has been, and is expected to continue to be, highly effective at offsetting changes in the fair value or cash flows of the hedged item must be assessed and documented at least quarterly. Any hedge ineffectiveness (i.e., the amount by which the gain or loss on the designated derivative instrument does not exactly offset the change in the hedged item attributable to the hedged risk) must be reported in current-period earnings. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. There are three types of hedge accounting designations: fair value hedges, cash flow hedges and net investment hedges. JPMorgan Chase uses fair value hedges primarily to hedge fixed-rate long-term debt, AFS securities and certain commodities inventories. For qualifying fair value hedges, the changes in the fair value of the derivative, and in the value of the hedged item for the risk being hedged, are recognized in earnings. Certain amounts excluded from the assessment of effectiveness are recorded in OCI and recognized in earnings over the life of the derivative. If the hedge relationship is terminated, then the adjustment to the hedged item continues to be reported as part of the basis of the hedged item, and for benchmark interest rate hedges, is amortized to earnings as a yield adjustment. Derivative amounts affecting earnings are recognized consistent with the classification of the hedged item – primarily net interest income and principal transactions revenue. JPMorgan Chase uses cash flow hedges primarily to hedge the exposure to variability in forecasted cash flows from floating-rate assets and liabilities and foreign currency–denominated revenue and expense. For qualifying cash flow hedges, the effective portion of the changechanges in the fair value of the derivative isare recorded in OCI and recognized in the Consolidated statements of income whenearnings as the hedged cash flows affectitem affects earnings. Derivative amounts affecting earnings are recognized consistent with the classification of the hedged item – primarily noninterest revenue, net interest income interest expense, noninterest revenue and compensation expense. The ineffective portions of cash flow hedges are immediately recognized in earnings. If the hedge relationship is terminated, then the change in value of the derivative recorded in AOCI is recognized in earnings when the cash flows that were hedged affect earnings. For hedge relationships that are discontinued because a forecasted transaction is not expected to occur according to the original hedge forecast, any related derivative values recorded in AOCI are immediately recognized in earnings. JPMorgan Chase uses net investment hedges to protect the value of the Firm’s net investments in certain non-U.S. subsidiaries or branches whose functional currencies are not the U.S. dollar. For foreign currency qualifying net investment hedges, changes in the fair value of the derivatives due to changes in spot foreign exchange rates are recorded in OCI as translation adjustments. Amounts excluded from the translation adjustments account within AOCI.assessment of effectiveness are recorded directly in earnings.
| | | | 180 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 181 |
Notes to consolidated financial statements
The following table outlines the Firm’s primary uses of derivatives and the related hedge accounting designation or disclosure category. | | | | | | Type of Derivative | Use of Derivative | Designation and disclosure | Affected segment or unit | Page reference | Manage specifically identified risk exposures in qualifying hedge accounting relationships: | | | | | Hedge fixed rate assets and liabilities | Fair value hedge | Corporate | 187188 | | Hedge floating-rate assets and liabilities | Cash flow hedge | Corporate | 188190 | | Hedge foreign currency-denominated assets and liabilities | Fair value hedge | Corporate | 187188 | | Hedge foreign currency-denominated forecasted revenue and expense | Cash flow hedge | Corporate | 188190 | | Hedge the value of the Firm’s investments in non-U.S. dollar functional currency entities | Net investment hedge | Corporate | 189191 | | Hedge commodity inventory | Fair value hedge | CIB | 187188 | Manage specifically identified risk exposures not designated in qualifying hedge accounting relationships: | | | | | Manage the risk of theassociated with mortgage pipeline,commitments, warehouse loans and MSRs | Specified risk management | CCB | 189191 | | Manage the credit risk ofassociated with wholesale lending exposures | Specified risk management | CIB | 189191 | • CommodityInterest rate and foreign exchange | Manage the risk of certain commodities-related contracts and investments | Specified risk management | CIB | 189 | foreign exchange
| Manage the risk ofassociated with certain other specified assets and liabilities | Specified risk management | Corporate | 189191 | Market-making derivatives and other activities: | | | | | Market-making and related risk management | Market-making and other | CIB | 189191 | | Other derivatives | Market-making and other | CIB, AWM, Corporate | 189191 |
| | | | 182 | | JPMorgan Chase & Co./2017 Annual Report | | 1812019 Form 10-K |
Notes to consolidated financial statements
Notional amount of derivative contracts The following table summarizes the notional amount of derivative contracts outstanding as of December 31, 20172019 and 2016.2018. | | | Notional amounts(b) | Notional amounts(b) | December 31, (in billions) | 2017 | | 2016 | 2019 | | 2018 | Interest rate contracts | | | | | | | Swaps | $ | 21,043 |
| | $ | 22,000 |
| $ | 21,228 |
| | $ | 21,763 |
| Futures and forwards | 4,904 |
| | 5,289 |
| 3,152 |
| | 3,562 |
| Written options | 3,576 |
| | 3,091 |
| 3,938 |
| | 3,997 |
| Purchased options | 3,987 |
| | 3,482 |
| 4,361 |
| | 4,322 |
| Total interest rate contracts | 33,510 |
| | 33,862 |
| 32,679 |
| | 33,644 |
| Credit derivatives(a) | 1,522 |
| | 2,032 |
| 1,242 |
| | 1,501 |
| Foreign exchange contracts | | | |
| | | |
| Cross-currency swaps | 3,953 |
| | 3,359 |
| 3,604 |
| | 3,548 |
| Spot, futures and forwards | 5,923 |
| | 5,341 |
| 5,577 |
| | 5,871 |
| Written options | 786 |
| | 734 |
| 700 |
| | 835 |
| Purchased options | 776 |
| | 721 |
| 718 |
| | 830 |
| Total foreign exchange contracts | 11,438 |
| | 10,155 |
| 10,599 |
| | 11,084 |
| Equity contracts | | | | | | | Swaps | 367 |
| | 258 |
| 406 |
| | 346 |
| Futures and forwards | 90 |
| | 59 |
| 142 |
| | 101 |
| Written options | 531 |
| | 417 |
| 646 |
| | 528 |
| Purchased options | 453 |
| | 345 |
| 611 |
| | 490 |
| Total equity contracts | 1,441 |
| | 1,079 |
| 1,805 |
| | 1,465 |
| Commodity contracts | | | |
| | | |
| Swaps | 116 |
| | 102 |
| 147 |
| | 134 |
| Spot, futures and forwards | 168 |
| | 130 |
| 211 |
| | 156 |
| Written options | 98 |
| | 83 |
| 135 |
| | 135 |
| Purchased options | 93 |
| | 94 |
| 124 |
| | 120 |
| Total commodity contracts | 475 |
| | 409 |
| 617 |
| | 545 |
| Total derivative notional amounts | $ | 48,386 |
| | $ | 47,537 |
| $ | 46,942 |
| | $ | 48,239 |
|
| | (a) | ForRefer to the Credit derivatives discussion on pages 191–194 for more information on volumes and types of credit derivative contracts, see the Credit derivatives discussion on pages 189–191.contracts. |
| | (b) | Represents the sum of gross long and gross short third-party notional derivative contracts. |
While the notional amounts disclosed above give an indication of the volume of the Firm’s derivatives activity, the notional amounts significantly exceed, in the Firm’s view, the possible losses that could arise from such transactions. For most derivative transactions,contracts, the notional amount is not exchanged; it is used simply as a reference amount used to calculate payments.
| | | | 182 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 183 |
Notes to consolidated financial statements
Impact of derivatives on the Consolidated balance sheets The following table summarizes information on derivative receivables and payables (before and after netting adjustments) that are reflected on the Firm’s Consolidated balance sheets as ofDecember 31, 20172019 and 20162018, by accounting designation (e.g., whether the derivatives were designated in qualifying hedge accounting relationships or not) and contract type. Gross derivative balances as of December 31, 2017, reflect the Firm’s adoption of rulebook changes made by two CCPs, that require or allow the Firm to treat certain OTC-cleared derivative transactions with that CCP as settled each day. If such rulebook changes had been in effect as of December 31, 2016, the impact would have been a reduction in gross derivative receivables and payables of $227.1 billion and $224.7 billion, respectively, and a corresponding decrease in amounts netted, with no impact to the Consolidated balance sheets. | | Free-standing derivative receivables and payables(a) | Free-standing derivative receivables and payables(a) | | | | | | | | | Free-standing derivative receivables and payables(a) | | | | | | | | | | | | Gross derivative receivables | | | | Gross derivative payables | | | Gross derivative receivables | | | | Gross derivative payables | | | December 31, 2017 (in millions) | Not designated as hedges | | Designated as hedges | Total derivative receivables | | Net derivative receivables(b) | | Not designated as hedges | | Designated as hedges | Total derivative payables | | Net derivative payables(b) | | December 31, 2019 (in millions) | | Not designated as hedges | | Designated as hedges | Total derivative receivables | | Net derivative receivables(b) | | Not designated as hedges | | Designated as hedges | | Total derivative payables | | Net derivative payables(b) | Trading assets and liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate | $ | 313,276 |
| | $ | 2,716 |
| | $ | 315,992 |
| | $ | 24,673 |
| | $ | 283,092 |
| | $ | 1,344 |
| $ | 284,436 |
| | $ | 7,129 |
| $ | 312,451 |
| | $ | 843 |
| | $ | 313,294 |
| | $ | 27,421 |
| | $ | 279,272 |
| | $ | 1 |
| | $ | 279,273 |
| | $ | 8,603 |
| Credit | 23,205 |
| | — |
| | 23,205 |
| | 869 |
| | 23,252 |
| | — |
| 23,252 |
| | 1,299 |
| 14,876 |
| | — |
| | 14,876 |
| | 701 |
| | 15,121 |
| | — |
| | 15,121 |
| | 1,652 |
| Foreign exchange | 159,740 |
| | 491 |
| | 160,231 |
| | 16,151 |
| | 154,601 |
| | 1,221 |
| 155,822 |
| | 12,473 |
| 138,179 |
| | 308 |
| | 138,487 |
| | 9,005 |
| | 144,125 |
| | 983 |
| | 145,108 |
| | 13,158 |
| Equity | 40,040 |
| | — |
| | 40,040 |
| | 7,882 |
| | 45,395 |
| | — |
| 45,395 |
| | 9,192 |
| 45,727 |
| | — |
| | 45,727 |
| | 6,477 |
| | 52,741 |
| | — |
| | 52,741 |
| | 12,537 |
| Commodity | 20,066 |
| | 19 |
| | 20,085 |
| | 6,948 |
| | 21,498 |
| | 403 |
| 21,901 |
| | 7,684 |
| 16,914 |
| | 328 |
| | 17,242 |
| | 6,162 |
| | 19,736 |
| | 149 |
| | 19,885 |
| | 7,758 |
| Total fair value of trading assets and liabilities | $ | 556,327 |
| | $ | 3,226 |
| | $ | 559,553 |
| | $ | 56,523 |
| | $ | 527,838 |
| | $ | 2,968 |
| $ | 530,806 |
| | $ | 37,777 |
| $ | 528,147 |
| | $ | 1,479 |
| | $ | 529,626 |
| | $ | 49,766 |
| | $ | 510,995 |
| | $ | 1,133 |
| | $ | 512,128 |
| | $ | 43,708 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross derivative receivables | | | | Gross derivative payables | | | Gross derivative receivables | | | | Gross derivative payables | | | December 31, 2016 (in millions) | Not designated as hedges | | Designated as hedges | Total derivative receivables | | Net derivative receivables(b) | | Not designated as hedges | | Designated as hedges | Total derivative payables | | Net derivative payables(b) | | December 31, 2018 (in millions) | | Not designated as hedges | | Designated as hedges | Total derivative receivables | | Net derivative receivables(b) | | Not designated as hedges | | Designated as hedges | | Total derivative payables | | Net derivative payables(b) | Trading assets and liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate | $ | 601,557 |
| | $ | 4,406 |
| | $ | 605,963 |
| | $ | 28,302 |
| | $ | 567,894 |
| | $ | 2,884 |
| $ | 570,778 |
| | $ | 10,815 |
| $ | 267,871 |
| | $ | 833 |
| | $ | 268,704 |
| | $ | 23,214 |
| | $ | 242,782 |
| | $ | — |
| | $ | 242,782 |
| | $ | 7,784 |
| Credit | 29,645 |
| | — |
| | 29,645 |
| | 1,294 |
| | 28,666 |
| | — |
| 28,666 |
| | 1,411 |
| 20,095 |
| | — |
| | 20,095 |
| | 612 |
| | 20,276 |
| | — |
| | 20,276 |
| | 1,667 |
| Foreign exchange | 232,137 |
| | 1,289 |
| | 233,426 |
| | 23,271 |
| | 233,823 |
| | 1,148 |
| 234,971 |
| | 20,508 |
| 167,057 |
| | 628 |
| | 167,685 |
| | 13,450 |
| | 164,392 |
| | 825 |
| | 165,217 |
| | 12,785 |
| Equity | 34,940 |
| | — |
| | 34,940 |
| | 4,939 |
| | 38,362 |
| | — |
| 38,362 |
| | 8,140 |
| 49,285 |
| | — |
| | 49,285 |
| | 9,946 |
| | 51,195 |
| | — |
| | 51,195 |
| | 10,161 |
| Commodity | 18,505 |
| | 137 |
| | 18,642 |
| | 6,272 |
| | 20,283 |
| | 179 |
| 20,462 |
| | 8,357 |
| 20,223 |
| | 247 |
| | 20,470 |
| | 6,991 |
| | 22,297 |
| | 121 |
| | 22,418 |
| | 9,372 |
| Total fair value of trading assets and liabilities | $ | 916,784 |
| | $ | 5,832 |
| | $ | 922,616 |
| | $ | 64,078 |
| | $ | 889,028 |
| | $ | 4,211 |
| $ | 893,239 |
| | $ | 49,231 |
| $ | 524,531 |
| | $ | 1,708 |
| | $ | 526,239 |
| | $ | 54,213 |
| | $ | 500,942 |
| | $ | 946 |
| | $ | 501,888 |
| | $ | 41,769 |
|
| | (a) | Balances exclude structured notes for which the fair value option has been elected. SeeRefer to Note 3 for further information. |
| | (b) | As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral receivables and payables when a legally enforceable master netting agreement exists. |
| | | | 184 | | JPMorgan Chase & Co./2017 Annual Report | | 1832019 Form 10-K |
Notes to consolidated financial statements
Derivatives netting The following tables present, as of December 31, 20172019 and 2016,2018, gross and net derivative receivables and payables by contract and settlement type. Derivative receivables and payables, as well as the related cash collateral from the same counterparty, have been netted on the Consolidated balance sheets where the Firm has obtained an appropriate legal opinion with respect to the master netting agreement. Where such a legal opinion has not been either sought or obtained, amounts are not eligible for netting on the Consolidated balance sheets, and those derivative receivables and payables are shown separately in the tables below. In addition to the cash collateral received and transferred that is presented on a net basis with derivative receivables and payables, the Firm receives and transfers additional collateral (financial instruments and cash). These amounts mitigate counterparty credit risk associated with the Firm’s derivative instruments, but are not eligible for net presentation: | | • | collateral that consists of non-cash financial instruments (generally U.S. government and agency securities and other G7 government securities) and cash collateral held at third-party custodians, which are shown separately as “Collateral not nettable on the Consolidated balance sheets” in the tables below, up to the fair value exposure amount; |
| | • | the amount of collateral held or transferred that exceeds the fair value exposure at the individual counterparty level, as of the date presented, which is excluded from the tables below; and |
| | • | collateral held or transferred that relates to derivative receivables or payables where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement, which is excluded from the tables below. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 | | 2018 | December 31, (in millions) | Gross derivative receivables | Amounts netted on the Consolidated balance sheets | Net derivative receivables | | Gross derivative receivables | | Amounts netted on the Consolidated balance sheets | Net derivative receivables | U.S. GAAP nettable derivative receivables | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | OTC | $ | 299,205 |
| $ | (276,255 | ) | | $ | 22,950 |
| | $ | 258,227 |
| | $ | (239,498 | ) | | $ | 18,729 |
| | OTC–cleared | 9,442 |
| (9,360 | ) | | 82 |
| | 6,404 |
| | (5,856 | ) | | 548 |
| | Exchange-traded(a) | 347 |
| (258 | ) | | 89 |
| | 322 |
| | (136 | ) | | 186 |
| | Total interest rate contracts | 308,994 |
| (285,873 | ) | | 23,121 |
| | 264,953 |
| | (245,490 | ) | | 19,463 |
| | Credit contracts: | | | | | | | | | | | | OTC | 10,743 |
| (10,317 | ) | | 426 |
| | 12,648 |
| | (12,261 | ) | | 387 |
| | OTC–cleared | 3,864 |
| (3,858 | ) | | 6 |
| | 7,267 |
| | (7,222 | ) | | 45 |
| | Total credit contracts | 14,607 |
| (14,175 | ) | | 432 |
| | 19,915 |
| | (19,483 | ) | | 432 |
| | Foreign exchange contracts: | | | | | | | | | | | | OTC | 136,252 |
| (129,324 | ) | | 6,928 |
| | 163,862 |
| | (153,988 | ) | | 9,874 |
| | OTC–cleared | 185 |
| (152 | ) | | 33 |
| | 235 |
| | (226 | ) | | 9 |
| | Exchange-traded(a) | 10 |
| (6 | ) | | 4 |
| | 32 |
| | (21 | ) | | 11 |
| | Total foreign exchange contracts | 136,447 |
| (129,482 | ) | | 6,965 |
| | 164,129 |
| | (154,235 | ) | | 9,894 |
| | Equity contracts: | | | | | | | | | | | | OTC | 23,106 |
| (20,820 | ) | | 2,286 |
| | 26,178 |
| | (23,879 | ) | | 2,299 |
| | Exchange-traded(a) | 19,654 |
| (18,430 | ) | | 1,224 |
| | 18,876 |
| | (15,460 | ) | | 3,416 |
| | Total equity contracts | 42,760 |
| (39,250 | ) | | 3,510 |
| | 45,054 |
| | (39,339 | ) | | 5,715 |
| | Commodity contracts: | | | | | | | | | | | | OTC | 7,093 |
| (5,149 | ) | | 1,944 |
| | 7,448 |
| | (5,261 | ) | | 2,187 |
| | OTC–cleared | 28 |
| (28 | ) | | — |
| | — |
| | — |
| | — |
| | Exchange-traded(a) | 6,154 |
| (5,903 | ) | | 251 |
| | 8,815 |
| | (8,218 | ) | | 597 |
| | Total commodity contracts | 13,275 |
| (11,080 | ) | | 2,195 |
| | 16,263 |
| | (13,479 | ) | | 2,784 |
| | Derivative receivables with appropriate legal opinion | 516,083 |
| (479,860 | ) | | 36,223 |
| (d) | 510,314 |
| | (472,026 | ) | | 38,288 |
| (d) | Derivative receivables where an appropriate legal opinion has not been either sought or obtained | 13,543 |
| | | 13,543 |
| | 15,925 |
| | | | 15,925 |
| | Total derivative receivables recognized on the Consolidated balance sheets | $ | 529,626 |
| | | $ | 49,766 |
| | $ | 526,239 |
| | | | $ | 54,213 |
| | Collateral not nettable on the Consolidated balance sheets(b)(c) | | | | (14,226 | ) | | | | | | (13,046 | ) | | Net amounts | | | | $ | 35,540 |
| | | | | | $ | 41,167 |
| |
collateral that consists of non-cash financial instruments (generally U.S. government and agency securities and other G7 government securities) and cash collateral held at third party custodians, which are shown separately as “Collateral not nettable on the Consolidated balance sheets” in the tables below, up to the fair value exposure amount.
the amount of collateral held or transferred that exceeds the fair value exposure at the individual counterparty level, as of the date presented, which is excluded from the tables below; and
collateral held or transferred that relates to derivative receivables or payables where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement, which is excluded from the tables below.
| | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | 2016 | December 31, (in millions) | Gross derivative receivables | Amounts netted on the Consolidated balance sheets | Net derivative receivables | | Gross derivative receivables | | Amounts netted on the Consolidated balance sheets | Net derivative receivables | U.S. GAAP nettable derivative receivables | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | Over-the-counter (“OTC”) | $ | 305,569 |
| $ | (284,917 | ) | | $ | 20,652 |
| | $ | 365,227 |
| | $ | (342,173 | ) | | $ | 23,054 |
| OTC–cleared | 6,531 |
| (6,318 | ) | | 213 |
| | 235,399 |
| | (235,261 | ) | | 138 |
| Exchange-traded(a) | 185 |
| (84 | ) | | 101 |
| | 241 |
| | (227 | ) | | 14 |
| Total interest rate contracts | 312,285 |
| (291,319 | ) | | 20,966 |
| | 600,867 |
| | (577,661 | ) | | 23,206 |
| Credit contracts: | | | | | | | | | | | OTC | 15,390 |
| (15,165 | ) | | 225 |
| | 23,130 |
| | (22,612 | ) | | 518 |
| OTC–cleared | 7,225 |
| (7,170 | ) | | 55 |
| | 5,746 |
| | (5,739 | ) | | 7 |
| Total credit contracts | 22,615 |
| (22,335 | ) | | 280 |
| | 28,876 |
| | (28,351 | ) | | 525 |
| Foreign exchange contracts: | | | | | | | | | | | OTC | 155,289 |
| (142,420 | ) | | 12,869 |
| | 226,271 |
| | (208,962 | ) | | 17,309 |
| OTC–cleared | 1,696 |
| (1,654 | ) | | 42 |
| | 1,238 |
| | (1,165 | ) | | 73 |
| Exchange-traded(a) | 141 |
| (7 | ) | | 134 |
| | 104 |
| | (27 | ) | | 77 |
| Total foreign exchange contracts | 157,126 |
| (144,081 | ) | | 13,045 |
| | 227,613 |
| | (210,154 | ) | | 17,459 |
| Equity contracts: | | | | | | | | | | | OTC | 22,024 |
| (19,917 | ) | | 2,107 |
| | 20,868 |
| | (20,570 | ) | | 298 |
| Exchange-traded(a) | 14,188 |
| (12,241 | ) | | 1,947 |
| | 11,439 |
| | (9,431 | ) | | 2,008 |
| Total equity contracts | 36,212 |
| (32,158 | ) | | 4,054 |
| | 32,307 |
| | (30,001 | ) | | 2,306 |
| Commodity contracts: | | | | | | | | | | | OTC | 10,903 |
| (4,436 | ) | | 6,467 |
| | 11,571 |
| | (5,605 | ) | | 5,966 |
| Exchange-traded(a) | 8,854 |
| (8,701 | ) | | 153 |
| | 6,794 |
| | (6,766 | ) | | 28 |
| Total commodity contracts | 19,757 |
| (13,137 | ) | | 6,620 |
| | 18,365 |
| | (12,371 | ) | | 5,994 |
| Derivative receivables with appropriate legal opinion | 547,995 |
| (503,030 | ) | (b) | 44,965 |
| | 908,028 |
| | (858,538 | ) | (b) | 49,490 |
| Derivative receivables where an appropriate legal opinion has not been either sought or obtained | 11,558 |
| | | 11,558 |
| | 14,588 |
| | | | 14,588 |
| Total derivative receivables recognized on the Consolidated balance sheets | $ | 559,553 |
| | | $ | 56,523 |
| | $ | 922,616 |
| | | | $ | 64,078 |
| Collateral not nettable on the Consolidated balance sheets(c)(d) | | | | (13,363 | ) | | | | | | (18,638 | ) | Net amounts | | | | $ | 43,160 |
| | | | | | $ | 45,440 |
|
| | | | 184 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 185 |
Notes to consolidated financial statements
| | | | 2017 | | 2016 | | 2019 | | 2018 | December 31, (in millions) | December 31, (in millions) | Gross derivative payables | Amounts netted on the Consolidated balance sheets | Net derivative payables | | Gross derivative payables | | Amounts netted on the Consolidated balance sheets | Net derivative payables | December 31, (in millions) | Gross derivative payables | Amounts netted on the Consolidated balance sheets | Net derivative payables | | Gross derivative payables | | Amounts netted on the Consolidated balance sheets | Net derivative payables | U.S. GAAP nettable derivative payables | U.S. GAAP nettable derivative payables | | | | | | | | | | U.S. GAAP nettable derivative payables | | | | | | | | | | | Interest rate contracts: | Interest rate contracts: | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | OTC | OTC | $ | 276,960 |
| $ | (271,294 | ) | | $ | 5,666 |
| | $ | 338,502 |
| | $ | (329,325 | ) | | $ | 9,177 |
| OTC | $ | 267,311 |
| $ | (260,229 | ) | | $ | 7,082 |
| | $ | 233,404 |
| | $ | (228,369 | ) | | $ | 5,035 |
| | OTC–cleared | OTC–cleared | 6,004 |
| (5,928 | ) | | 76 |
| | 230,464 |
| | (230,463 | ) | | 1 |
| OTC–cleared | 10,217 |
| (10,138 | ) | | 79 |
| | 7,163 |
| | (6,494 | ) | | 669 |
| | Exchange-traded(a) | Exchange-traded(a) | 127 |
| (84 | ) | | 43 |
| | 196 |
| | (175 | ) | | 21 |
| Exchange-traded(a) | 365 |
| (303 | ) | | 62 |
| | 210 |
| | (135 | ) | | 75 |
| | Total interest rate contracts | Total interest rate contracts | 283,091 |
| (277,306 | ) | | 5,785 |
| | 569,162 |
| | (559,963 | ) | | 9,199 |
| Total interest rate contracts | 277,893 |
| (270,670 | ) | | 7,223 |
| | 240,777 |
| | (234,998 | ) | | 5,779 |
| | Credit contracts: | Credit contracts: | | | | | | | | | | Credit contracts: | | | | | | | | | | | OTC | OTC | 16,194 |
| (15,170 | ) | | 1,024 |
| | 22,366 |
| | (21,614 | ) | | 752 |
| OTC | 11,570 |
| (10,080 | ) | | 1,490 |
| | 13,412 |
| | (11,895 | ) | | 1,517 |
| | OTC–cleared | OTC–cleared | 6,801 |
| (6,784 | ) | | 17 |
| | 5,641 |
| | (5,641 | ) | | — |
| OTC–cleared | 3,390 |
| (3,389 | ) | | 1 |
| | 6,716 |
| | (6,714 | ) | | 2 |
| | Total credit contracts | Total credit contracts | 22,995 |
| (21,954 | ) | | 1,041 |
| | 28,007 |
| | (27,255 | ) | | 752 |
| Total credit contracts | 14,960 |
| (13,469 | ) | | 1,491 |
| | 20,128 |
| | (18,609 | ) | | 1,519 |
| | Foreign exchange contracts: | Foreign exchange contracts: | | | | | | | | | | Foreign exchange contracts: | | | | | | | | | | | OTC | OTC | 150,966 |
| (141,789 | ) | | 9,177 |
| | 228,300 |
| | (213,296 | ) | | 15,004 |
| OTC | 142,360 |
| (131,792 | ) | | 10,568 |
| | 160,930 |
| | (152,161 | ) | | 8,769 |
| | OTC–cleared | OTC–cleared | 1,555 |
| (1,553 | ) | | 2 |
| | 1,158 |
| | (1,158 | ) | | — |
| OTC–cleared | 186 |
| (152 | ) | | 34 |
| | 274 |
| | (268 | ) | | 6 |
| | Exchange-traded(a) | Exchange-traded(a) | 98 |
| (7 | ) | | 91 |
| | 328 |
| | (9 | ) | | 319 |
| Exchange-traded(a) | 12 |
| (6 | ) | | 6 |
| | 16 |
| | (3 | ) | | 13 |
| | Total foreign exchange contracts | Total foreign exchange contracts | 152,619 |
| (143,349 | ) | | 9,270 |
| | 229,786 |
| | (214,463 | ) | | 15,323 |
| Total foreign exchange contracts | 142,558 |
| (131,950 | ) | | 10,608 |
| | 161,220 |
| | (152,432 | ) | | 8,788 |
| | Equity contracts: | Equity contracts: | | | | | | | | | | Equity contracts: | | | | | | | | | | | OTC | OTC | 28,193 |
| (23,969 | ) | | 4,224 |
| | 24,688 |
| | (20,808 | ) | | 3,880 |
| OTC | 27,594 |
| (21,778 | ) | | 5,816 |
| | 29,437 |
| | (25,544 | ) | | 3,893 |
| | Exchange-traded(a) | Exchange-traded(a) | 12,720 |
| (12,234 | ) | | 486 |
| | 10,004 |
| | (9,414 | ) | | 590 |
| Exchange-traded(a) | 20,216 |
| (18,426 | ) | | 1,790 |
| | 16,285 |
| | (15,490 | ) | | 795 |
| | Total equity contracts | Total equity contracts | 40,913 |
| (36,203 | ) | | 4,710 |
| | 34,692 |
| | (30,222 | ) | | 4,470 |
| Total equity contracts | 47,810 |
| (40,204 | ) | | 7,606 |
| | 45,722 |
| | (41,034 | ) | | 4,688 |
| | Commodity contracts: | Commodity contracts: | | | | | | | | | | Commodity contracts: | | | | | | | | | | | OTC | OTC | 12,645 |
| (5,508 | ) | | 7,137 |
| | 12,885 |
| | (5,252 | ) | | 7,633 |
| OTC | 8,714 |
| (6,235 | ) | | 2,479 |
| | 8,930 |
| | (4,838 | ) | | 4,092 |
| | OTC–cleared | | OTC–cleared | 30 |
| (30 | ) | | — |
| | — |
| | — |
| | — |
| | Exchange-traded(a) | Exchange-traded(a) | 8,870 |
| (8,709 | ) | | 161 |
| | 7,099 |
| | (6,853 | ) | | 246 |
| Exchange-traded(a) | 6,012 |
| (5,862 | ) | | 150 |
| | 8,259 |
| | (8,208 | ) | | 51 |
| | Total commodity contracts | Total commodity contracts | 21,515 |
| (14,217 | ) | | 7,298 |
| | 19,984 |
| | (12,105 | ) | | 7,879 |
| Total commodity contracts | 14,756 |
| (12,127 | ) | | 2,629 |
| | 17,189 |
| | (13,046 | ) | | 4,143 |
| | Derivative payables with appropriate legal opinion | Derivative payables with appropriate legal opinion | 521,133 |
| (493,029 | ) | (b) | 28,104 |
| | 881,631 |
| | (844,008 | ) | (b) | 37,623 |
| Derivative payables with appropriate legal opinion | 497,977 |
| (468,420 | ) | | 29,557 |
| (d) | 485,036 |
| | (460,119 | ) | | 24,917 |
| (d) | Derivative payables where an appropriate legal opinion has not been either sought or obtained | Derivative payables where an appropriate legal opinion has not been either sought or obtained | 9,673 |
| | | 9,673 |
| | 11,608 |
| | | | 11,608 |
| Derivative payables where an appropriate legal opinion has not been either sought or obtained | 14,151 |
| | | 14,151 |
| | 16,852 |
| | | | 16,852 |
| | Total derivative payables recognized on the Consolidated balance sheets | Total derivative payables recognized on the Consolidated balance sheets | $ | 530,806 |
| | | $ | 37,777 |
| | $ | 893,239 |
| | | | $ | 49,231 |
| Total derivative payables recognized on the Consolidated balance sheets | $ | 512,128 |
| | | $ | 43,708 |
| | $ | 501,888 |
| | | | $ | 41,769 |
| | Collateral not nettable on the Consolidated balance sheets(c)(d) | | | (4,180 | ) | | | | | | (8,925 | ) | | Collateral not nettable on the Consolidated balance sheets(b)(c) | | Collateral not nettable on the Consolidated balance sheets(b)(c) | | | (7,896 | ) | | | | | | (4,449 | ) | | Net amounts | Net amounts | | | $ | 33,597 |
| | | | | | $ | 40,306 |
| Net amounts | | | $ | 35,812 |
| | | | | | $ | 37,320 |
| |
| | (a) | Exchange-traded derivative balances that relate to futures contracts are settled daily. |
| | (b) | Net derivatives receivable included cash collateral netted of $55.5 billion and $71.9 billion at December 31, 2017 and 2016, respectively. Net derivatives payable included cash collateral netted of $45.5 billion and $57.3 billion related to OTC and OTC-cleared derivatives at December 31, 2017 and 2016, respectively. |
| | (c) | Represents liquid security collateral as well as cash collateral held at third-party custodians related to derivative instruments where an appropriate legal opinion has been obtained. For some counterparties, the collateral amounts of financial instruments may exceed the derivative receivables and derivative payables balances. Where this is the case, the total amount reported is limited to the net derivative receivables and net derivative payables balances with that counterparty. |
| | (d)(c) | Derivative collateral relates only to OTC and OTC-cleared derivative instruments. |
| | (d) | Net derivatives receivable included cash collateral netted of $65.9 billion and $55.2 billion at December 31, 2019 and 2018, respectively. Net derivatives payable included cash collateral netted of $54.4 billion and $43.3 billion at December 31, 2019 and 2018, respectively. Derivative cash collateral relates to OTC and OTC-cleared derivative instruments. |
| | | | 186 | | JPMorgan Chase & Co./2017 Annual Report | | 1852019 Form 10-K |
Notes to consolidated financial statements
Liquidity risk and credit-related contingent features In addition to the specific market risks introduced by each derivative contract type, derivatives expose JPMorgan Chase to credit risk — the risk that derivative counterparties may fail to meet their payment obligations under the derivative contracts and the collateral, if any, held by the Firm proves to be of insufficient value to cover the payment obligation. It is the policy of JPMorgan Chase to actively pursue, where possible, the use of legally enforceable master netting arrangements and collateral agreements to mitigate derivative counterparty credit risk. The amount ofrisk inherent in derivative receivables reported on the Consolidated balance sheets is the fair value of the derivative contracts after giving effect to legally enforceable master netting agreements and cash collateral held by the Firm.receivables. While derivative receivables expose the Firm to credit risk, derivative payables expose the Firm to liquidity risk, as the derivative contracts typically require the Firm to post cash or securities collateral with counterparties as the fair value of the contracts moves in the counterparties’ favor or upon specified downgrades in the Firm’s and its subsidiaries’ respective credit ratings. Certain derivative contracts also provide for termination of the contract, generally upon a downgrade of either the Firm or the counterparty, at the fair value of the derivative contracts. The following table shows the aggregate fair value of net derivative payables related to OTC and OTC-cleared derivatives that contain contingent collateral or termination features that may be triggered upon a ratings downgrade, and the associated collateral the Firm has posted in the normal course of business, at December 31, 20172019 and 2016.2018. | | OTC and OTC-cleared derivative payables containing downgrade triggers | December 31, (in millions) | 2017 | 2016 | | 2019 |
| | 2018 |
| Aggregate fair value of net derivative payables | $ | 11,916 |
| $ | 21,550 |
| | $ | 14,819 |
| | $ | 9,396 |
| Collateral posted | 9,973 |
| 19,383 |
| | 13,329 |
| | 8,907 |
|
The following table shows the impact of a single-notch and two-notch downgrade of the long-term issuer ratings of JPMorgan Chase & Co. and its subsidiaries, predominantly JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank, N.A.”), at December 31, 20172019 and 2016, 2018, related to OTC and OTC-cleared derivative contracts with contingent collateral or termination features that may be triggered upon a ratings downgrade. Derivatives contracts generally require additional collateral to be posted or terminations to be triggered when the predefined threshold rating is breached. A downgrade by a single rating agency that does not result in a rating lower than a preexisting corresponding rating provided by another major rating agency will generally not result in additional collateral (except in certain instances in which additional initial margin may be required upon a ratings downgrade), nor in termination payments requirements. The liquidity impact in the table is calculated based upon a downgrade below the lowest current rating of the rating agencies referred to in the derivative contract. | | Liquidity impact of downgrade triggers on OTC and OTC-cleared derivatives | | 2017 | | 2016 | 2019 | | 2018 | December 31, (in millions) | Single-notch downgrade | Two-notch downgrade | | Single-notch downgrade | Two-notch downgrade | Single-notch downgrade | Two-notch downgrade | | Single-notch downgrade | Two-notch downgrade | Amount of additional collateral to be posted upon downgrade(a) | $ | 79 |
| $ | 1,989 |
| | $ | 560 |
| $ | 2,497 |
| $ | 189 |
| $ | 1,467 |
| | $ | 76 |
| $ | 947 |
| Amount required to settle contracts with termination triggers upon downgrade(b) | 320 |
| 650 |
| | 606 |
| 1,049 |
| 104 |
| 1,398 |
| | 172 |
| 764 |
|
| | (a) | Includes the additional collateral to be posted for initial margin. |
| | (b) | Amounts represent fair values of derivative payables, and do not reflect collateral posted. |
Derivatives executed in contemplation of a sale of the underlying financial asset In certain instances the Firm enters into transactions in which it transfers financial assets but maintains the economic exposure to the transferred assets by entering into a derivative with the same counterparty in contemplation of the initial transfer. The Firm generally accounts for such transfers as collateralized financing transactions as described in Note 11, but in limited circumstances they may qualify to be accounted for as a sale and a derivative under U.S. GAAP. There were noThe amount of such transfers accounted for as a sale where the associated derivative was outstanding was not material at both December 31, 2017, 2019 and such transfers at December 31, 2016 were not material. 2018.
| | | | 186 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 187 |
Notes to consolidated financial statements
Impact of derivatives on the Consolidated statements of income The following tables provide information related to gains and losses recorded on derivatives based on their hedge accounting designation or purpose. Fair value hedge gains and losses The following tables present derivative instruments, by contract type, used in fair value hedge accounting relationships, as well as pre-tax gains/(losses) recorded on such derivatives and the related hedged items for the years endedDecember 31, 20172019, 20162018 and 20152017, respectively. The Firm includes gains/(losses) on the hedging derivative and the related hedged item in the same line item in the Consolidated statements of income.income as the related hedged item. | | | | Gains/(losses) recorded in income | | Income statement impact of excluded components(f) |
| OCI impact | Year ended December 31, 2019 (in millions) | | Derivatives | Hedged items | Income statement impact | | Amortization approach | Changes in fair value |
| Derivatives - Gains/(losses) recorded in OCI(g) | Contract type | | | | | | | Interest rate(a)(b) | | $ | 3,204 |
| $ | (2,373 | ) | $ | 831 |
| | $ | — |
| $ | 828 |
| | $ | — |
| Foreign exchange(c) | | 154 |
| 328 |
| 482 |
| | (866 | ) | 482 |
| | 39 |
| Commodity(d) | | (77 | ) | 148 |
| 71 |
| | — |
| 63 |
| | — |
| Total | | $ | 3,281 |
| $ | (1,897 | ) | $ | 1,384 |
| | $ | (866 | ) | $ | 1,373 |
| | $ | 39 |
| | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact of excluded components(f) | | OCI impact | Year ended December 31, 2018 (in millions) | | Derivatives | Hedged items | Income statement impact | | Amortization approach | Changes in fair value | | Derivatives - Gains/(losses) recorded in OCI(g) | Contract type | | | | | | | | Interest rate(a)(b) | | $ | (1,145 | ) | $ | 1,782 |
| $ | 637 |
| | $ | — |
| $ | 623 |
| | $ | — |
| Foreign exchange(c) | | 1,092 |
| (616 | ) | 476 |
| | (566 | ) | 476 |
| | (140 | ) | Commodity(d) | | 789 |
| (754 | ) | 35 |
| | — |
| 26 |
| | — |
| Total | | $ | 736 |
| $ | 412 |
| $ | 1,148 |
| | $ | (566 | ) | $ | 1,125 |
| | $ | (140 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact due to: | Gains/(losses) recorded in income | | Income statement impact due to: | | | Year ended December 31, 2017 (in millions) | Derivatives | Hedged items | Total income statement impact | | Hedge ineffectiveness(e) | Excluded components(f) | Derivatives | Hedged items | Income statement impact | | Hedge ineffectiveness(e) | Excluded components(f) | | | Contract type | | | | | | | | | | | | | | | Interest rate(a)(b) | $ | (481 | ) | | $ | 1,359 |
| | $ | 878 |
| | $ | (18 | ) | | $ | 896 |
| $ | (481 | ) | $ | 1,359 |
| $ | 878 |
| | $ | (18 | ) | $ | 896 |
| | | Foreign exchange(c) | (3,509 | ) | | 3,507 |
| | (2 | ) | | — |
| | (2 | ) | (3,509 | ) | 3,507 |
| (2 | ) | | — |
| (2 | ) | | | Commodity(d) | (1,275 | ) | | 1,348 |
| | 73 |
| | 29 |
| | 44 |
| (1,275 | ) | 1,348 |
| 73 |
| | 29 |
| 44 |
| | | Total | $ | (5,265 | ) | | $ | 6,214 |
| | $ | 949 |
| | $ | 11 |
| | $ | 938 |
| $ | (5,265 | ) | $ | 6,214 |
| $ | 949 |
| | $ | 11 |
| $ | 938 |
| | | | | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact due to: | | Year ended December 31, 2016 (in millions) | Derivatives | Hedged items | Total income statement impact | | Hedge ineffectiveness(e) | Excluded components(f) | | Contract type | | | | | | | | | | | Interest rate(a)(b) | $ | (482 | ) | | $ | 1,338 |
| | $ | 856 |
| | $ | 6 |
| | $ | 850 |
| | Foreign exchange(c) | 2,435 |
| | (2,261 | ) | | 174 |
| | — |
| | 174 |
| | Commodity(d) | (536 | ) | | 586 |
| | 50 |
| | (9 | ) | | 59 |
| | Total | $ | 1,417 |
| | $ | (337 | ) | | $ | 1,080 |
| | $ | (3 | ) | | $ | 1,083 |
| | | | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact due to: | | Year ended December 31, 2015 (in millions) | Derivatives | Hedged items | Total income statement impact | | Hedge ineffectiveness(e) | Excluded components(f) | | Contract type | | | | | | | | | | | Interest rate(a)(b) | $ | 38 |
| | $ | 911 |
| | $ | 949 |
| | $ | 3 |
| | $ | 946 |
| | Foreign exchange(c) | 6,030 |
| | (6,006 | ) | | 24 |
| | — |
| | 24 |
| | Commodity(d) | 1,153 |
| | (1,142 | ) | | 11 |
| | (13 | ) | | 24 |
| | Total | $ | 7,221 |
| | $ | (6,237 | ) | | $ | 984 |
| | $ | (10 | ) | | $ | 994 |
| |
| | (a) | Primarily consists of hedges of the benchmark (e.g., London Interbank Offered Rate (“LIBOR”)) interest rate risk of fixed-rate long-term debt and AFS securities. Gains and losses were recorded in net interest income. |
| | (b) | Excludes the amortization expense associated with the inception hedge accounting adjustment applied to the hedged item. This expense is recorded in net interest income and substantially offsets the income statement impact of the excluded components. Also excludes the accrual of interest on interest rate swaps and the related hedged items. |
| | (c) | Primarily consists of hedges of the foreign currency risk of long-term debt and AFS securities for changes in spot foreign currency rates. Gains and losses related to the derivatives and the hedged items due to changes in foreign currency rates and the income statement impact of excluded components were recorded primarily in principal transactions revenue and net interest income. |
| | (d) | Consists of overall fair value hedges of physical commodities inventories that are generally carried at the lower of cost or net realizable value (net realizable value approximates fair value). Gains and losses were recorded in principal transactions revenue. |
| | (e) | Hedge ineffectiveness is the amount by which the gain or loss on the designated derivative instrument does not exactly offset the gain or loss on the hedged item attributable to the hedged risk. |
| | (f) | The assessment of hedge effectiveness excludes certain components of the changes in fair values of the derivatives and hedged items such as forward points on foreign exchange forward contracts, time values and time values.cross-currency basis spreads. Excluded components may impact earnings either through amortization of the initial amount over the life of the derivative or through fair value changes recognized in the current period. |
| | (g) | Represents the change in value of amounts excluded from the assessment of effectiveness under the amortization approach, predominantly cross-currency basis spreads. The amount excluded at inception of the hedge is recognized in earnings over the life of the derivative. |
| | | | 188 | | JPMorgan Chase & Co./2019 Form 10-K |
As of December 31, 2019, the following amounts were recorded on the Consolidated balance sheets related to certain cumulative fair value hedge basis adjustments that are expected to reverse through the income statement in future periods as an adjustment to yield. | | | | | | | | | | | | | | | | | | Carrying amount of the hedged items(a)(b) | | Cumulative amount of fair value hedging adjustments included in the carrying amount of hedged items: | December 31, 2019 (in millions) | | | Active hedging relationships | Discontinued hedging relationships(d) | Total | Assets | | | | | | | Investment securities - AFS | | $ | 125,860 |
| (c) | $ | 2,110 |
| $ | 278 |
| $ | 2,388 |
| Liabilities | | | | | | | Long-term debt | | $ | 157,545 |
| | $ | 6,719 |
| $ | 161 |
| $ | 6,880 |
| Beneficial interests issued by consolidated VIEs | | 2,365 |
| | — |
| (8 | ) | (8 | ) | | | | | | | | | | Carrying amount of the hedged items(a)(b) | | Cumulative amount of fair value hedging adjustments included in the carrying amount of hedged items: | December 31, 2018 (in millions) | | | Active hedging relationships | Discontinued hedging relationships(d) | Total | Assets | | | | | | | Investment securities - AFS | | $ | 55,313 |
| (c) | $ | (1,105 | ) | $ | 381 |
| $ | (724 | ) | Liabilities | | | | | | | Long-term debt | | $ | 139,915 |
| | $ | 141 |
| $ | 8 |
| $ | 149 |
| Beneficial interests issued by consolidated VIEs | | 6,987 |
| | — |
| (33 | ) | (33 | ) |
| | (a) | Excludes physical commodities with a carrying value of $6.5 billion and $6.8 billion at December 31, 2019 and 2018, respectively, to which the Firm applies fair value hedge accounting. As a result of the application of hedge accounting, these inventories are carried at fair value, thus recognizing unrealized gains and losses in current periods. Since the Firm exits these positions at fair value, there is no incremental impact to net income in future periods. |
| | (b) | Excludes hedged items where only foreign currency risk is the designated hedged risk, as basis adjustments related to foreign currency hedges will not reverse through the income statement in future periods. At December 31, 2019 and 2018, the carrying amount excluded for available-for-sale securities is $14.9 billion and $14.6 billion, respectively, and for long-term debt is $2.8 billion and $7.3 billion, respectively. |
| | (c) | Carrying amount represents the amortized cost. |
| | (d) | Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 187189 |
Notes to consolidated financial statements
Cash flow hedge gains and losses The following tables present derivative instruments, by contract type, used in cash flow hedge accounting relationships, and the pre-tax gains/(losses) recorded on such derivatives, for the years endedDecember 31, 20172019, 20162018 and 20152017, respectively. The Firm includes the gain/(loss) on the hedging derivative and the change in cash flows on the hedged item in the same line item in the Consolidated statements of income.income as the change in cash flows on the related hedged item. | | | | Gains/(losses) recorded in income and other comprehensive income/(loss) | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | Year ended December 31, 2017 (in millions) | Derivatives – effective portion reclassified from AOCI to income | Hedge ineffectiveness recorded directly in income(c) | Total income statement impact | Derivatives – effective portion recorded in OCI | | Total change in OCI for period | | Year ended December 31, 2019 (in millions) | | Amounts reclassified from AOCI to income | Amounts recorded in OCI | Total change in OCI for period | Contract type | | | | | | | | | | | | Interest rate(a) | | $ | (17 | ) | | $ | — |
| | $ | (17 | ) | | $ | 12 |
| | $ | 29 |
| $ | (28 | ) | $ | (3 | ) | $ | 25 |
| Foreign exchange(b) | | (117 | ) | | — |
| | (117 | ) | | 135 |
| | 252 |
| (75 | ) | 125 |
| 200 |
| Total | | $ | (134 | ) | | $ | — |
| | $ | (134 | ) | | $ | 147 |
| | $ | 281 |
| $ | (103 | ) | $ | 122 |
| $ | 225 |
|
| | | | Gains/(losses) recorded in income and other comprehensive income/(loss) | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | Year ended December 31, 2016 (in millions) | Derivatives – effective portion reclassified from AOCI to income | Hedge ineffectiveness recorded directly in income(c) | Total income statement impact | Derivatives – effective portion recorded in OCI | | Total change in OCI for period | | Year ended December 31, 2018 (in millions) | | Amounts reclassified from AOCI to income | Amounts recorded in OCI | Total change in OCI for period | Contract type | | | | | | | | | | | | Interest rate(a) | | $ | (74 | ) | | $ | — |
| | $ | (74 | ) | | $ | (55 | ) | | $ | 19 |
| $ | 44 |
| $ | (44 | ) | $ | (88 | ) | Foreign exchange(b) | | (286 | ) | | — |
| | (286 | ) | | (395 | ) | | (109 | ) | (26 | ) | (201 | ) | (175 | ) | Total | | $ | (360 | ) | | $ | — |
| | $ | (360 | ) | | $ | (450 | ) | | $ | (90 | ) | $ | 18 |
| $ | (245 | ) | $ | (263 | ) | | | | | | | | | | | | | | | Gains/(losses) recorded in income and other comprehensive income/(loss) | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | Year ended December 31, 2015 (in millions) | Derivatives – effective portion reclassified from AOCI to income | Hedge ineffectiveness recorded directly in income(c) | Total income statement impact | Derivatives – effective portion recorded in OCI | | Total change in OCI for period | | Year ended December 31, 2017 (in millions) | | Amounts reclassified from AOCI to income | Amounts recorded in OCI(c) | Total change in OCI for period | Contract type | | | | | | | | | | | | Interest rate(a) | | $ | (99 | ) | | $ | — |
| | $ | (99 | ) | | $ | (44 | ) | | $ | 55 |
| $ | (17 | ) | $ | 12 |
| $ | 29 |
| Foreign exchange(b) | | (81 | ) | | — |
| | (81 | ) | | (53 | ) | | 28 |
| (117 | ) | 135 |
| 252 |
| Total | | $ | (180 | ) | | $ | — |
| | $ | (180 | ) | | $ | (97 | ) | | $ | 83 |
| $ | (134 | ) | $ | 147 |
| $ | 281 |
|
| | (a) | Primarily consists of benchmark interest rate hedges of LIBOR-indexed floating-rate assets and floating-rate liabilities. Gains and losses were recorded in net interest income. |
| | (b) | Primarily consists of hedges of the foreign currency risk of non-U.S. dollar-denominated revenue and expense. The income statement classification of gains and losses follows the hedged item – primarily noninterest revenue and compensation expense. |
| | (c) | Represents the effective portion of changes in value of the related hedging derivative. Hedge ineffectiveness is the amount by which the cumulative gain or loss on the designated derivative instrument exceeds the present value of the cumulative expected change in cash flows on the hedged item attributable to the hedged risk. The Firm did not recognize any ineffectiveness on cash flow hedges during 2017. |
The Firm did not experience any forecasted transactions that failed to occur for the years ended 2017 2019, 2018 and 2016. In 2015, the Firm reclassified approximately $150 million of net losses from AOCI to other income because the Firm determined that it was probable that the forecasted interest payment cash flows would not occur as a result of the planned reduction in wholesale non-operating deposits.2017. Over the next 12 months, the Firm expects that approximately $96 $(8) million (after-tax) of net gainslosses recorded in AOCI at December 31, 2017, 2019, related to cash flow hedges will be recognized in income. For terminated cash flow hedges that have been terminated, the maximum length of time over which forecasted transactions are remainingthe derivative results recorded in AOCI will be recognized in earnings is approximately five years. years, corresponding to the timing of the originally hedged forecasted cash flows.For open cash flow hedges, the maximum length of time over which forecasted transactions are hedged is approximately seven years. The Firm’s longer-dated forecasted transactions relate to core lending and borrowing activities.
| | | | 188190 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Net investment hedge gains and losses The following table presents hedging instruments, by contract type, that were used in net investment hedge accounting relationships, and the pre-tax gains/(losses) recorded on such instruments for the years endedDecember 31, 20172019, 20162018 and 20152017. | | | Gains/(losses) recorded in income and other comprehensive income/(loss) | | | | | | | 2017 | | 2016 | | 2015 | 2019 | | 2018 | �� | 2017 | Year ended December 31, (in millions) | Excluded components recorded directly in income(a) | Effective portion recorded in OCI | | Excluded components recorded directly in income(a) | Effective portion recorded in OCI | | Excluded components recorded directly in income(a) | Effective portion recorded in OCI | Amounts recorded in income(a)(b) | Amounts recorded in OCI | | Amounts recorded in income(a)(b) | Amounts recorded in OCI | | Amounts recorded in income(a)(b) | Amounts recorded in OCI(c) | Foreign exchange derivatives | $(172) | $(1,294) | | $(282) | $262 | | $(379) | $1,885 | $72 | $64 | | $11 | $1,219 | | $(152) | $(1,244) |
| | (a) | Certain components of hedging derivatives are permitted to be excluded from the assessment of hedge effectiveness, such as forward points on foreign exchange forward contracts. AmountsThe Firm elects to record changes in fair value of these amounts directly in other income. |
| | (b) | Excludes amounts reclassified from AOCI to income on the sale or liquidation of hedged entities. The Firm reclassified net pre-tax gains/(losses) of $18 million to other income, $(17) million and $50 million to other expense related to excluded components are recordedthe liquidation of certain legal entities during the years ended December 31, 2019, 2018 and 2017, respectively. Refer to Note 24 for further information. |
| | (c) | Represents the effective portion of changes in other income.value of the related hedging derivative. The Firm measures thedid not recognize any ineffectiveness ofon net investment hedge accounting relationships based on changeshedges directly in spot foreign currency rates and, therefore, there was no significant ineffectiveness for net investment hedge accounting relationshipsincome during 2017, 2016 and 2015.2017. |
Gains and losses on derivatives used for specified risk management purposes The following table presents pre-tax gains/(losses) recorded on a limited number of derivatives, not designated in hedge accounting relationships, that are used to manage risks associated with certain specified assets and liabilities, including certain risks arising from the mortgage pipeline,commitments, warehouse loans, MSRs, wholesale lending exposures, and foreign currency denominated assets and liabilities, and commodities-related contracts and investments.liabilities. | | | Derivatives gains/(losses) recorded in income | Derivatives gains/(losses) recorded in income | Year ended December 31, (in millions) | 2017 |
| 2016 |
| 2015 |
| 2019 |
| | 2018 |
| | 2017 |
| Contract type | | | | | | | Interest rate(a) | $ | 331 |
| $ | 1,174 |
| $ | 853 |
| $ | 1,491 |
| | $ | 79 |
| | $ | 331 |
| Credit(b) | (74 | ) | (282 | ) | 70 |
| (30 | ) | | (21 | ) | | (74 | ) | Foreign exchange(c) | (33 | ) | 27 |
| 25 |
| (5 | ) | | 117 |
| | (107 | ) | Commodity(d) | — |
| — |
| (12 | ) | | Total | $ | 224 |
| $ | 919 |
| $ | 936 |
| $ | 1,456 |
| | $ | 175 |
| | $ | 150 |
|
| | (a) | Primarily represents interest rate derivatives used to hedge the interest rate risk inherent in the mortgage pipeline,commitments, warehouse loans and MSRs, as well as written commitments to originate warehouse loans. Gains and losses were recorded predominantly in mortgage fees and related income. |
| | (b) | Relates to credit derivatives used to mitigate credit risk associated with lending exposures in the Firm’s wholesale businesses. These derivatives do not include credit derivatives used to mitigate counterparty credit risk arising from derivative receivables, which is included in gains and losses on derivatives related to market-making activities and other derivatives. Gains and losses were recorded in principal transactions revenue. |
| | (c) | Primarily relates to derivatives used to mitigate foreign exchange risk of specified foreign currency-denominated assets and liabilities. Gains and losses were recorded in principal transactions revenue. |
| | (d) | Primarily relates to commodity derivatives used to mitigate energy |
price risk associated with energy-related contracts and investments.
Gains and losses were recorded in principal transactions revenue.
Gains and losses on derivatives related to market-making activities and other derivatives The Firm makes markets in derivatives in order to meet the needs of customers and uses derivatives to manage certain risks associated with net open risk positions from its market-making activities, including the counterparty credit risk arising from derivative receivables. All derivatives not included in the hedge accounting or specified risk management categories above are included in this category. Gains and losses on these derivatives are primarily recorded in principal transactions revenue. SeeRefer to Note6 for information on principal transactions revenue. Credit derivatives Credit derivatives are financial instruments whose value is derived from the credit risk associated with the debt of a third-party issuer (the reference entity) and which allow one party (the protection purchaser) to transfer that risk to another party (the protection seller). Credit derivatives expose the protection purchaser to the creditworthiness of the protection seller, as the protection seller is required to make payments under the contract when the reference entity experiences a credit event, such as a bankruptcy, a failure to pay its obligation or a restructuring. The seller of credit protection receives a premium for providing protection but has the risk that the underlying instrument referenced in the contract will be subject to a credit event. The Firm is both a purchaser and seller of protection in the credit derivatives market and uses these derivatives for two primary purposes. First, in its capacity as a market-maker, the Firm actively manages a portfolio of credit derivatives by purchasing and selling credit protection, predominantly on corporate debt obligations, to meet the needs of customers. Second, as an end-user, the Firm uses credit derivatives to manage credit risk associated with lending exposures (loans and unfunded commitments) and derivatives counterparty exposures in the Firm’s wholesale businesses, and to manage the credit risk arising from certain financial instruments in the Firm’s market-making businesses. Following is a summary of various types of credit derivatives.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 189191 |
Notes to consolidated financial statements
Credit default swaps Credit derivatives may reference the credit of either a single reference entity (“single-name”) or a broad-based index. The Firm purchases and sells protection on both single- name and index-reference obligations. Single-name CDS and index CDS contracts are either OTC or OTC-cleared derivative contracts. Single-name CDS are used to manage the default risk of a single reference entity, while index CDS contracts are used to manage the credit risk associated with the broader credit markets or credit market segments. Like the S&P 500 and other market indices, a CDS index consists of a portfolio of CDS across many reference entities. New series of CDS indices are periodically established with a new underlying portfolio of reference entities to reflect changes in the credit markets. If one of the reference entities in the index experiences a credit event, then the reference entity that defaulted is removed from the index. CDS can also be referenced against specific portfolios of reference names or against customized exposure levels based on specific client demands: for example, to provide protection against the first $1 million of realized credit losses in a $10 million portfolio of exposure. Such structures are commonly known as tranche CDS. For both single-name CDS contracts and index CDS contracts, upon the occurrence of a credit event, under the terms of a CDS contract neither party to the CDS contract has recourse to the reference entity. The protection purchaser has recourse to the protection seller for the difference between the face value of the CDS contract and the fair value of the reference obligation at settlement of the credit derivative contract, also known as the recovery value. The protection purchaser does not need to hold the debt instrument of the underlying reference entity in order to receive amounts due under the CDS contract when a credit event occurs. Credit-related notes A credit-related note is a funded credit derivative where the issuer of the credit-related note purchases from the note investor credit protection on a reference entity or an index. Under the contract, the investor pays the issuer the par value of the note at the inception of the transaction, and in return, the issuer pays periodic payments to the investor, based on the credit risk of the referenced entity. The issuer also repays the investor the par value of the note at maturity unless the reference entity (or one of the entities that makes up a reference index) experiences a specified credit event. If a credit event occurs, the issuer is not obligated to repay the par value of the note, but rather, the issuer pays the investor the difference between the par value of the note and the fair value of the defaulted reference obligation at the time of settlement. Neither party to the credit-related note has recourse to the defaulting reference entity. The following tables present a summary of the notional amounts of credit derivatives and credit-related notes the Firm sold and purchased as of December 31, 20172019 and 2016. 2018. Upon a credit event, the Firm as a seller of protection would typically pay out only a percentage of the full notional amount of net protection sold, as the amount actually required to be paid on the contracts takes into account the recovery value of the reference obligation at the time of settlement. The Firm manages the credit risk on contracts to sell protection by purchasing protection with identical or similar underlying reference entities. Other purchased protection referenced in the following tables includes credit derivatives bought on related, but not identical, reference positions (including indices, portfolio coverage and other reference points) as well as protection purchased through credit-related notes.
| | | | 190192 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The Firm does not use notional amounts of credit derivatives as the primary measure of risk management for such derivatives, because the notional amount does not take into account the probability of the occurrence of a credit event, the recovery value of the reference obligation, or related cash instruments and economic hedges, each of which reduces, in the Firm’s view, the risks associated with such derivatives. Total credit derivatives and credit-related notes
| | | | | | | | | | | | | | | | | Total credit derivatives and credit-related notes
| | | | | | | | | Maximum payout/Notional amount | | Protection sold | | Protection purchased with identical underlyings(b) | Net protection (sold)/purchased(c) | Other protection purchased(d) | December 31, 2019 (in millions) | Credit derivatives | | | | | | | | Credit default swaps | $ | (562,338 | ) | | | $ | 571,892 |
| | $ | 9,554 |
| $ | 3,936 |
| Other credit derivatives(a) | (44,929 | ) | | | 52,007 |
| | 7,078 |
| 7,364 |
| Total credit derivatives | (607,267 | ) | | | 623,899 |
| | 16,632 |
| 11,300 |
| Credit-related notes | — |
| | | — |
| | — |
| 9,606 |
| Total | $ | (607,267 | ) | | | $ | 623,899 |
| | $ | 16,632 |
| $ | 20,906 |
| | | | | | | | | | Maximum payout/Notional amount | | Protection sold | | Protection purchased with identical underlyings(b) | Net protection (sold)/purchased(c) | Other protection purchased(d) | December 31, 2018 (in millions) | Credit derivatives | | | | | | | | Credit default swaps | $ | (697,220 | ) | | | $ | 707,282 |
| | $ | 10,062 |
| $ | 4,053 |
| Other credit derivatives(a) | (41,244 | ) | | | 42,484 |
| | 1,240 |
| 8,488 |
| Total credit derivatives | (738,464 | ) | | | 749,766 |
| | 11,302 |
| 12,541 |
| Credit-related notes | — |
| | | — |
| | — |
| 8,425 |
| Total | $ | (738,464 | ) | | | $ | 749,766 |
| | $ | 11,302 |
| $ | 20,966 |
|
| | | | | | | | | | | | | | | | | | Maximum payout/Notional amount | | Protection sold | | Protection purchased with identical underlyings(b) | Net protection (sold)/purchased(c) | Other protection purchased(d) | December 31, 2017 (in millions) | Credit derivatives | | | | | | | | Credit default swaps | $ | (690,224 | ) | | | $ | 702,098 |
| | $ | 11,874 |
| $ | 5,045 |
| Other credit derivatives(a) | (54,157 | ) | | | 59,158 |
| | 5,001 |
| 11,747 |
| Total credit derivatives | (744,381 | ) | | | 761,256 |
| | 16,875 |
| 16,792 |
| Credit-related notes | (18 | ) | | | — |
| | (18 | ) | 7,915 |
| Total | $ | (744,399 | ) | | | $ | 761,256 |
| | $ | 16,857 |
| $ | 24,707 |
| | | | | | | | | | Maximum payout/Notional amount | | Protection sold | | Protection purchased with identical underlyings(b) | Net protection (sold)/purchased(c) | Other protection purchased(d) | December 31, 2016 (in millions) | Credit derivatives | | | | | | | | Credit default swaps | $ | (961,003 | ) | | | $ | 974,252 |
| | $ | 13,249 |
| $ | 7,935 |
| Other credit derivatives(a) | (36,829 | ) | | | 31,859 |
| | (4,970 | ) | 19,991 |
| Total credit derivatives | (997,832 | ) | | | 1,006,111 |
| | 8,279 |
| 27,926 |
| Credit-related notes | (41 | ) | | | — |
| | (41 | ) | 4,505 |
| Total | $ | (997,873 | ) | | | $ | 1,006,111 |
| | $ | 8,238 |
| $ | 32,431 |
|
| | (a) | Other credit derivatives largely consistspredominantly consist of credit swap options.options and total return swaps. |
| | (b) | Represents the total notional amount of protection purchased where the underlying reference instrument is identical to the reference instrument on protection sold; the notional amount of protection purchased for each individual identical underlying reference instrument may be greater or lower than the notional amount of protection sold. |
| | (c) | Does not take into account the fair value of the reference obligation at the time of settlement, which would generally reduce the amount the seller of protection pays to the buyer of protection in determining settlement value. |
| | (d) | Represents protection purchased by the Firm on referenced instruments (single-name, portfolio or index) where the Firm has not sold any protection on the identical reference instrument. |
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 193 |
Notes to consolidated financial statements
The following tables summarize the notional amounts by the ratings, maturity profile, and total fair value, of credit derivatives and credit-related notes as ofDecember 31, 20172019 and 20162018, whereJPMorgan Chaseis the seller of protection. The maturity profile is based on the remaining contractual maturity of the credit derivative contracts. The ratings profile is based on the rating of the reference entity on which the credit derivative contract is based. The ratings and maturity profile of credit derivatives and credit-related notes where JPMorgan Chase is the purchaser of protection are comparable to the profile reflected below. | | Protection sold – credit derivatives and credit-related notes ratings(a)/maturity profile | Protection sold – credit derivatives and credit-related notes ratings(a)/maturity profile | | | | | Protection sold – credit derivatives and credit-related notes ratings(a)/maturity profile | | | | | December 31, 2017 (in millions) | <1 year | | 1–5 years | | >5 years | | Total notional amount | | Fair value of receivables(b) | | Fair value of payables(b) | | Net fair value | | December 31, 2019 (in millions) | | <1 year | | 1–5 years | | >5 years | | Total notional amount | | Fair value of receivables(b) | | Fair value of payables(b) | | Net fair value | Risk rating of reference entity | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment-grade | $ | (159,286 | ) | | $ | (319,726 | ) | | $ | (39,429 | ) | | $ | (518,441 | ) | | $ | 8,516 |
| | $ | (1,134 | ) | | $ | 7,382 |
| $ | (114,460 | ) | | $ | (311,407 | ) | | $ | (42,129 | ) | | $ | (467,996 | ) | | $ | 6,153 |
| | $ | (911 | ) | | $ | 5,242 |
| Noninvestment-grade | (73,394 | ) | | (134,125 | ) | | (18,439 | ) | | (225,958 | ) | | 7,407 |
| | (5,313 | ) | | 2,094 |
| (41,661 | ) | | (87,769 | ) | | (9,841 | ) | | (139,271 | ) | | 4,281 |
| | (2,882 | ) | | 1,399 |
| Total | $ | (232,680 | ) | | $ | (453,851 | ) | | $ | (57,868 | ) | | $ | (744,399 | ) | | $ | 15,923 |
| | $ | (6,447 | ) | | $ | 9,476 |
| $ | (156,121 | ) | | $ | (399,176 | ) | | $ | (51,970 | ) | | $ | (607,267 | ) | | $ | 10,434 |
| | $ | (3,793 | ) | | $ | 6,641 |
|
| | December 31, 2016 (in millions) | <1 year | | 1–5 years | | >5 years | | Total notional amount | | Fair value of receivables(b) | | Fair value of payables(b) | | Net fair value | | December 31, 2018 (in millions) | | <1 year | | 1–5 years | | >5 years | | Total notional amount | | Fair value of receivables(b) | | Fair value of payables(b) | | Net fair value | Risk rating of reference entity | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment-grade | $ | (273,688 | ) | | $ | (383,586 | ) | | $ | (39,281 | ) | | $ | (696,555 | ) | | $ | 7,841 |
| | $ | (3,055 | ) | | $ | 4,786 |
| $ | (115,443 | ) | | $ | (402,325 | ) | | $ | (43,611 | ) | | $ | (561,379 | ) | | $ | 5,720 |
| | $ | (2,791 | ) | | $ | 2,929 |
| Noninvestment-grade | (107,955 | ) | | (170,046 | ) | | (23,317 | ) | | (301,318 | ) | | 8,184 |
| | (8,570 | ) | | (386 | ) | (45,897 | ) | | (119,348 | ) | | (11,840 | ) | | (177,085 | ) | | 4,719 |
| | (5,660 | ) | | (941 | ) | Total | $ | (381,643 | ) | | $ | (553,632 | ) | | $ | (62,598 | ) | | $ | (997,873 | ) | | $ | 16,025 |
| | $ | (11,625 | ) | | $ | 4,400 |
| $ | (161,340 | ) | | $ | (521,673 | ) | | $ | (55,451 | ) | | $ | (738,464 | ) | | $ | 10,439 |
| | $ | (8,451 | ) | | $ | 1,988 |
|
| | (a) | The ratings scale is primarily based on external credit ratings defined by S&P and Moody’s. |
| | (b) | Amounts are shown on a gross basis, before the benefit of legally enforceable master netting agreements and cash collateral received by the Firm. |
| | | | 194 | | JPMorgan Chase & Co./2017 Annual Report | | 1912019 Form 10-K |
Notes to consolidated financial statements
Note 6 – Noninterest revenue and noninterest expense Noninterest revenue The Firm records noninterest revenue from certain contracts with customers in investment banking fees, deposit-related fees, asset management, administration, and commissions, and components of card income. The related contracts are often terminable on demand and the Firm has no remaining obligation to deliver future services. For arrangements with a fixed term, the Firm may commit to deliver services in the future. Revenue associated with these remaining performance obligations typically depends on the occurrence of future events or underlying asset values, and is not recognized until the outcome of those events or values are known. Investment banking fees This revenue category includes debt and equity underwriting and advisory fees. As an underwriter, the Firm helps clients raise capital via public offering and private placement of various types of debt instruments and equity securities.instruments. Underwriting fees are primarily based on the issuance price and quantity of the underlying instruments, and are recognized as revenue typically upon execution of the client’s transaction. The Firm also manages and syndicates loan arrangements. Credit arrangement and syndication fees, included within debt underwriting fees, are recorded as revenue after satisfying certain retention, timing and yield criteria. The Firm also provides advisory services, by assisting its clients with mergers and acquisitions, divestitures, restructuring and other complex transactions. Advisory fees are recognized as revenue typically upon execution of the client’s transaction. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Underwriting | | | | | | Equity | $ | 1,394 |
| | $ | 1,146 |
| | $ | 1,408 |
| Debt | 3,710 |
| | 3,207 |
| | 3,232 |
| Total underwriting | 5,104 |
| | 4,353 |
| | 4,640 |
| Advisory | 2,144 |
| | 2,095 |
| | 2,111 |
| Total investment banking fees | $ | 7,248 |
| | $ | 6,448 |
| | $ | 6,751 |
|
The following table presents the components of investment banking fees. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Underwriting | | | | | | Equity | $ | 1,648 |
| | $ | 1,684 |
| | $ | 1,466 |
| Debt | 3,513 |
| | 3,347 |
| | 3,802 |
| Total underwriting | 5,161 |
| | 5,031 |
| | 5,268 |
| Advisory | 2,340 |
| | 2,519 |
| | 2,144 |
| Total investment banking fees | $ | 7,501 |
| | $ | 7,550 |
| | $ | 7,412 |
|
Investment banking fees are earned primarily by CIB. SeeRefer to Note 3132 for segment results. Principal transactions Principal transactions revenue is driven by many factors, including the bid-offer spread, which is the difference between the price at which the Firm is willing to buy a financial or other instrument and the price at which the Firm is willing to sell that instrument. It also consists of the realized (as a result of the sale of instruments, closing out or termination of transactions, or interim cash payments) and unrealized (as a result of changes in valuation) gains and losses on financial and other instruments (including those accounted for under the fair value option) primarily used in client-driven market-making activities and on private equity investments. including: | | • | the bid-offer spread, which is the difference between the price at which a market participant is willing and able to sell an instrument to the Firm and the price at which another market participant is willing and able to buy it from the Firm, and vice versa; and |
| | • | realized and unrealized gains and losses on financial instruments and commodities transactions, including those accounted for under the fair value option, primarily used in client-driven market-making activities, and on private equity investments. |
| | – | Realized gains and losses result from the sale of instruments, closing out or termination of transactions, or interim cash payments. |
| | – | Unrealized gains and losses result from changes in valuation. |
In connection with its client-driven market-making activities, the Firm transacts in debt and equity instruments, derivatives and commodities, (includingincluding physical commodities inventories and financial instruments that reference commodities).commodities. Principal transactions revenue also includes certain realized and unrealized gains and losses related to: | | • | derivatives designated in qualifying hedge accounting relationships, primarily fair value hedges of commodity and foreign exchange risk; |
| | • | derivatives used for specific risk management purposes, primarily to mitigate credit risk and foreign exchange risk. |
Refer to hedge accounting and specified risk-management activities, including: (a) certain derivatives designated in qualifying hedge accounting relationships (primarily fair value hedges of commodity and foreign exchange risk), (b) certain derivatives used Note 5 for specific risk management purposes, primarily to mitigate credit risk, foreign exchange risk and commodity risk, and (c) other derivatives. For further information on the income statement classification of gains and losses from derivatives activities, see Note 5. activities.In the financial commodity markets, the Firm transacts in OTC derivatives (e.g., swaps, forwards, options) and ETD that reference a wide range of underlying commodities. In the physical commodity markets, the Firm primarily purchases and sells precious and base metals and may hold other commodities inventories under financing and other arrangements with clients. The following table presents all realized and unrealized gains and losses recorded in principal transactions revenue. This table excludes interest income and interest expense on trading assets and liabilities, which are an integral part of the overall performance of the Firm’s client-driven market-making activities. Seeactivities in CIB and cash deployment activities in Treasury and CIO. Refer to Note 7 for further information on interest income and interest expense. Trading revenue is presented primarily by instrument type. The Firm’s client-driven market-making businesses generally utilize a variety of instrument types in connection with their market-making and related risk-management activities; accordingly, the trading revenue presented in the table below is not representative of the total revenue of any individual line of business.LOB.
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Trading revenue by instrument type | | | | | | Interest rate | $ | 2,479 |
| | $ | 2,325 |
| | $ | 1,933 |
| Credit | 1,329 |
| | 2,096 |
| | 1,735 |
| Foreign exchange | 2,746 |
| | 2,827 |
| | 2,557 |
| Equity | 3,873 |
| | 2,994 |
| | 2,990 |
| Commodity | 661 |
| | 1,067 |
| | 842 |
| Total trading revenue | 11,088 |
| | 11,309 |
| | 10,057 |
| Private equity gains | 259 |
| | 257 |
| | 351 |
| Principal transactions | $ | 11,347 |
| | $ | 11,566 |
| | $ | 10,408 |
|
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 195 |
Notes to consolidated financial statements
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Trading revenue by instrument type | | | | | | Interest rate | $ | 2,552 |
| | $ | 1,961 |
| | $ | 2,479 |
| Credit | 1,611 |
| | 1,395 |
| | 1,329 |
| Foreign exchange | 3,171 |
| | 3,222 |
| | 2,746 |
| Equity | 5,812 |
| | 4,924 |
| | 3,873 |
| Commodity | 1,122 |
| | 906 |
| | 661 |
| Total trading revenue | 14,268 |
| | 12,408 |
| | 11,088 |
| Private equity gains/(losses) | (250 | ) | | (349 | ) | | 259 |
| Principal transactions | $ | 14,018 |
| | $ | 12,059 |
| | $ | 11,347 |
|
Principal transactions revenue is earned primarily by CIB. SeeRefer to Note 3132 for segment results. Lending- and deposit-related fees Lending-related fees include fees earned from loan commitments, standby letters of credit, financial guarantees, and other loan-servicing activities. Deposit-related fees include fees earned in lieu of compensating balances, and fees earned from performing cash management activities and other deposit account services. Lending- and deposit-related fees in this revenue category are recognized over the period in which the related service is provided. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Lending-related fees | $ | 1,110 |
| | $ | 1,114 |
| | $ | 1,148 |
| Deposit-related fees | 4,823 |
| | 4,660 |
| | 4,546 |
| Total lending- and deposit-related fees | $ | 5,933 |
| | $ | 5,774 |
| | $ | 5,694 |
|
The following table presents the components of lending- and deposit-related fees. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Lending-related fees | $ | 1,184 |
| | $ | 1,117 |
| | $ | 1,110 |
| Deposit-related fees | 5,185 |
| | 4,935 |
| | 4,823 |
| Total lending- and deposit-related fees | $ | 6,369 |
| | $ | 6,052 |
| | $ | 5,933 |
|
Lending- and deposit-related fees are earned by CCB, CIB, CB, and AWM. SeeRefer to Note 3132 for segment results.
| | | | 192 | | JPMorgan Chase & Co./2017 Annual Report |
Asset management, administration and commissions This revenue category includes fees from investment management and related services, custody, brokerage services and other products. The Firm manages assets on behalf of its clients, including investors in Firm-sponsored Firm-sponsored funds and owners of separately managed investment accounts. Management fees are typically based on the value of assets under management and are collected and recognized at the end of each period over which the management services are provided and the value of the managed assets is known. The Firm also receives performance-based management fees, which are earned based on exceeding certain benchmarks or other performance targets and are accrued and recognized when the probability of reversal is remote, typically at the end of the related billing period. The Firm has contractual arrangements with third parties to provide distribution and other services in connection with its asset management activities. Amounts paid to these third-party service providers are generally recorded in professional and outside services expense. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Asset management fees | | | | | | Investment management fees | $ | 9,526 |
| | $ | 8,865 |
| | $ | 9,403 |
| All other asset management fees(a) | 294 |
| | 336 |
| | 352 |
| Total asset management fees | 9,820 |
| | 9,201 |
| | 9,755 |
| | | | | | | Total administration fees(b) | 2,029 |
| | 1,915 |
| | 2,015 |
| | | | | | | Commissions and other fees | | | | | | Brokerage commissions(c) | 2,239 |
| | 2,151 |
| | 2,304 |
| All other commissions and fees | 1,289 |
| | 1,324 |
| | 1,435 |
| Total commissions and fees | 3,528 |
| | 3,475 |
| | 3,739 |
| Total asset management, administration and commissions | $ | 15,377 |
| | $ | 14,591 |
| | $ | 15,509 |
|
The following table presents the components of Firmwide asset management, administration and commissions. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Asset management fees | | | | | | Investment management fees(a) | $ | 10,865 |
| | $ | 10,768 |
| | $ | 10,434 |
| All other asset management fees(b) | 315 |
| | 270 |
| | 296 |
| Total asset management fees | 11,180 |
| | 11,038 |
| | 10,730 |
| | | | | | | Total administration fees(c) | 2,197 |
| | 2,179 |
| | 2,029 |
| | | | | | | Commissions and other fees | | | | | | Brokerage commissions(d) | 2,439 |
| | 2,505 |
| | 2,239 |
| All other commissions and fees | 1,349 |
| | 1,396 |
| | 1,289 |
| Total commissions and fees | 3,788 |
| | 3,901 |
| | 3,528 |
| Total asset management, administration and commissions | $ | 17,165 |
| | $ | 17,118 |
| | $ | 16,287 |
|
| | (a) | The Firm receives other asset managementRepresents fees earned from managing assets on behalf of the Firm’s clients, including investors in Firm-sponsored funds and owners of separately managed investment accounts. |
| | (b) | Represents fees for services that are ancillary to investment management services, includingsuch as commissions earned on the sales or distribution of mutual funds to clients. These fees are recorded as revenue at the time the service is rendered or, in the case of certain distribution fees based on the underlying fund’s asset value and/or investor redemption, recorded over time as the investor remains in the fund or upon investor redemption. |
| | (b)(c) | The Firm receives administrativePredominantly includes fees predominantly fromfor custody, securities lending, fundfunds services and securities clearance fees.clearance. These fees are recorded as revenue over the period in which the related service is provided. |
| | (c)(d) | TheRepresents commissions earned when the Firm acts as a broker, by facilitating its clients’ purchasepurchases and salesales of securities and other financial instruments. It collectsBrokerage commissions are collected and recognizes brokerage commissionsrecognized as revenue upon occurrence of the client transaction. The Firm reports certain costs paid to third-party clearing houses and exchanges net against commission revenue. |
Asset management, administration and commissions are earned primarily by AWM, CIB, CCB, and CB. SeeRefer to Note 3132 for segment results. Mortgage fees and related income This revenue category primarily reflects CCB’s Home Lending net production and net mortgage servicing revenue. Net production revenue includingincludes fees and income derived from mortgagesrecognized as earned on mortgage loans originated with the intent to sell; mortgage salessell, and servicing including losses related to the repurchase of previously sold loans; the impact of risk-managementrisk management activities associated with the mortgage pipeline and warehouse loans and MSRs; andloans. Net production revenue related to any residual interests held from mortgage securitizations. This revenue category also includes gains and losses on sales and lower of cost or fair value adjustments foron mortgage loans held-for-sale as well as(excluding certain repurchased loans insured by U.S. government agencies), and changes in the fair value for mortgage loans originated with the intent to sell andof financial instruments measured at fair value under the fair value option. Changes
| | | | 196 | | JPMorgan Chase & Co./2019 Form 10-K |
Net mortgage servicing revenue includes operating revenue earned from servicing third-party mortgage loans, which is recognized over the period in which the service is provided; changes in the fair value of MSRs are reported inMSRs; the impact of risk management activities associated with MSRs; and gains and losses on securitization of excess mortgage feesservicing. Net mortgage servicing revenue also includes gains and related income. For alosses on sales and lower of cost or fair value adjustments of certain repurchased loans insured by U.S. government agencies. Refer to Note 15 for further discussion of MSRs, see Note 15. information on risk management activities and MSRs. Net interest income from mortgage loans is recorded in interest income. Card income This revenue category includes interchange and other income from credit and debit cardscard transactions, and fees earned from processing card transactions for merchants, both of which are recognized when purchases are made by a cardholder.cardholder and presented net of certain transaction-related costs. Card income also includes account origination costs and annual and other lending fees, and costs, which are deferred and recognized on a straight-line basis over a 12-month 12-month period. Certain Chase credit card products offer the cardholder the ability to earn points based on account activity, which the cardholder can choose to redeem for cash and non-cash rewards. The cost to the Firm related to these proprietary rewards programs varies based on multiple factors including the terms and conditions of the rewards programs, cardholder activity, cardholder reward redemption rates and cardholder reward selections. The Firm maintains a liability for its obligations under its rewards programs and reports the current-period cost as a reduction of card income. Credit card revenue sharing agreements The Firm has contractual agreements with numerous co-brand partners that grant the Firm exclusive rights to issue co-branded credit card products and market them to the customers of such partners. These partners endorse the co-brand credit card programs and provide their customer or member lists to the Firm. The partners may also conduct marketing activities and provide rewards redeemable under their own loyalty programs that the Firm will grant to co-brand credit cardholders based on account activity.The terms of these agreements generally range from five to ten years.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 193 |
Notes to consolidated financial statements
The Firm typically makes payments to the co-brand credit card partners based on the cost of partners'partners’ marketing activities and loyalty program rewards provided to credit cardholders, new account originations and sales volumes. Payments to partners based on marketing efforts undertaken by the partners are expensed by the Firm as incurred and reported as noninterestmarketing expense. Payments for partner loyalty program rewards are reported as a reduction of card income when incurred. Payments to partners based on new credit card account originations are accounted for as direct loan origination costs and are deferred and recognized as a reduction of card income on a straight-line basis over a 12-month 12-month period. Payments to partners based on sales volumes are reported as a reduction of card income when the related interchange income is earned. The following table presents the components of card income: | | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Interchange and merchant processing income | $ | 20,370 |
| | $ | 18,808 |
| | $ | 17,080 |
| Reward costs and partner payments | (14,312 | ) | | (13,074 | ) | (b) | (10,820 | ) | Other card income(a) | (754 | ) | | (745 | ) | | (1,827 | ) | Total card income | $ | 5,304 |
| | $ | 4,989 |
| | $ | 4,433 |
|
| | (a) | Predominantly represents account origination costs and annual fees, which are deferred and recognized on a straight-line basis over a 12-month period. |
| | (b) | Includes an adjustment to the credit card rewards liability of approximately $330 million, recorded in the second quarter of 2018. |
Card income is earned primarily by CCB and CB. SeeRefer to Note 3132 for segment results. Refer to Note 18 for information on operating lease income included within other income. Noninterest expense Other incomeexpense Other incomeexpense on the Firm’s Consolidated statements of income included the following: | | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 |
| | 2018 |
| | 2017 |
| Legal expense/(benefit) | $ | 239 |
| | $ | 72 |
| | $ | (35 | ) | FDIC-related expense | 457 |
| | 1,239 |
| | 1,492 |
|
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Operating lease income | $ | 3,613 |
| | $ | 2,724 |
| | $ | 2,081 |
|
Operating lease income is recognized on a straight–line basis over the lease term.
Noninterest expense
Other expense
Other expense on the Firm’s Consolidated statements of income included the following:
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 |
| | 2016 |
| | 2015 |
| Legal expense/(benefit) | $ | (35 | ) | | $ | (317 | ) | | $ | 2,969 |
| FDIC-related expense | 1,492 |
| | 1,296 |
| | 1,227 |
|
| | | | 194 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 197 |
Notes to consolidated financial statements
Note 7 – Interest income and Interest expense Interest income and interest expense are recorded in the Consolidated statements of income and classified based on the nature of the underlying asset or liability. The following table presents the components of interest income and interest expense: | | Year ended December 31, (in millions) | 2017 | 2016 | 2015 | 2019 | 2018 | 2017 | Interest Income | | | Interest income | | | Loans(a) | $ | 41,008 |
| $ | 36,634 |
| $ | 33,134 |
| $ | 50,375 |
| $ | 47,620 |
| $ | 41,008 |
| Taxable securities | 5,535 |
| 5,538 |
| 6,550 |
| 7,962 |
| 5,653 |
| 5,534 |
| Non-taxable securities(a)(b) | 1,847 |
| 1,766 |
| 1,706 |
| 1,329 |
| 1,595 |
| 1,848 |
| Total securities | 7,382 |
| 7,304 |
| 8,256 |
| | Trading assets | 7,610 |
| 7,292 |
| 6,621 |
| | Total investment securities(a) | | 9,291 |
| 7,248 |
| 7,382 |
| Trading assets - debt instruments | | 10,800 |
| 8,703 |
| 7,610 |
| Federal funds sold and securities purchased under resale agreements | 2,327 |
| 2,265 |
| 1,592 |
| 6,146 |
| 3,819 |
| 2,327 |
| Securities borrowed(b)(c) | (37 | ) | (332 | ) | (532 | ) | 1,574 |
| 913 |
| 94 |
| Deposits with banks | 4,219 |
| 1,863 |
| 1,250 |
| 3,887 |
| 5,907 |
| 4,238 |
| All other interest-earning assets(c)(d) | 1,863 |
| 875 |
| 652 |
| 1,967 |
| 1,890 |
| 1,312 |
| Total interest income(c) | $ | 64,372 |
| $ | 55,901 |
| $ | 50,973 |
| $ | 84,040 |
| $ | 76,100 |
| $ | 63,971 |
| Interest expense | | | Interest bearing deposits | $ | 2,857 |
| $ | 1,356 |
| $ | 1,252 |
| $ | 8,957 |
| $ | 5,973 |
| $ | 2,857 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | 1,611 |
| 1,089 |
| 609 |
| 4,630 |
| 3,066 |
| 1,611 |
| Short-term borrowings(d)(e) | 481 |
| 203 |
| 175 |
| 1,248 |
| 1,144 |
| 481 |
| Trading liabilities - debt and all other interest-bearing liabilities(e)(f) | 2,070 |
| 1,102 |
| 557 |
| 2,585 |
| 2,387 |
| 1,669 |
| Long-term debt | 6,753 |
| 5,564 |
| 4,435 |
| 8,807 |
| 7,978 |
| 6,753 |
| Beneficial interest issued by consolidated VIEs | 503 |
| 504 |
| 435 |
| 568 |
| 493 |
| 503 |
| Total interest expense(c) | $ | 14,275 |
| $ | 9,818 |
| $ | 7,463 |
| $ | 26,795 |
| $ | 21,041 |
| $ | 13,874 |
| Net interest income | $ | 50,097 |
| $ | 46,083 |
| $ | 43,510 |
| $ | 57,245 |
| $ | 55,059 |
| $ | 50,097 |
| Provision for credit losses | 5,290 |
| 5,361 |
| 3,827 |
| 5,585 |
| 4,871 |
| 5,290 |
| Net interest income after provision for credit losses | $ | 44,807 |
| $ | 40,722 |
| $ | 39,683 |
| $ | 51,660 |
| $ | 50,188 |
| $ | 44,807 |
|
| | (a) | Includes the amortization/accretion of unearned income (e.g., purchase premiums/discounts, net deferred fees/costs, etc.). |
| | (b) | Represents securities that are tax-exempt for U.S. federal income tax purposes. |
| | (b)(c) | NegativeIn the second quarter of 2019, the Firm implemented certain presentation changes that impacted interest income isand interest expense, but had no effect on net interest income. These changes were made to align the accounting treatment between the balance sheet and the related to client-driven demandinterest income or expense, primarily by offsetting interest income and expense for certain securities combinedprime brokerage-related held-for-investment customer receivables and payables that are currently presented as a single margin account on the balance sheet. These changes were applied retrospectively and, accordingly, prior period amounts were revised to conform with the impact of low interest rates. This is matched book activity and the negative interest expense on the corresponding securities loaned is recognized in interest expense.current presentation. |
| | (c)(d) | Includes interest earned on prime brokerage-related held-for-investment margin loans,customer receivables, which are classified in accrued interest and accounts receivable, and all other interest-earning assets, includedwhich are classified in other assets.assets on the Consolidated balance sheets. |
| | (d)(e) | Includes commercial paper. |
| | (e)(f) | Other interest-bearing liabilities include brokerageincludes interest expense on prime brokerage-related customer payables. |
Interest income and interest expense includes the current-period interest accruals for financial instruments measured at fair value, except for derivatives and financial instruments containing embedded derivatives that would be separately accounted for in accordance with U.S. GAAP, absent the fair value option election; for those instruments, all changes in fair value including any interest elements, are reported in principal transactions revenue. For financial instruments that are not measured at fair value, the related interest is included within interest income or interest expense, as applicable. ForRefer to Notes 12, 10, 11 and 20, for further information on accounting for interest income and interest expense related to loans, investment securities, securities financing activities (i.e., securities purchased or sold under resale or repurchase agreements; securities borrowed; and securities loaned) and long-term debt, see Notes 12, 10, 11 and 19, respectively.
| | | | 198 | | JPMorgan Chase & Co./2019 Form 10-K |
Note 8 – Pension and other postretirement employee benefit plans The Firm has various defined benefit pension plans and OPEB plans that provide benefits to its employees.employees in the U.S. and certain non-U.S. locations. The Firm hasalso provides a qualified noncontributorydefined contribution plan in the U.S. and maintains other similar arrangements in certain non-U.S. locations. The principal defined benefit pension plan in the U.S. is a qualified noncontributory plan that provides benefits to substantially all U.S. employees. employees. In connection with changes to the U.S. Retirement Savings Program during the fourth quarter of 2018, the Firm announced that it will freeze the U.S. defined benefit pension plan (the “Plan Freeze”). Commencing on January 1, 2020 (and January 1, 2019 for new hires), new pay credits are directed to the U.S. defined contribution plan. Interest credits on the U.S. defined benefit pension plan will continue to accrue. As a result, a curtailment was triggered and a remeasurement of the U.S. defined benefit pension obligation and plan assets occurred as of November 30, 2018. The plan design change did not have a material impact on the U.S. defined benefit pension plan or the Firm’s Consolidated Financial Statements. The Firm also has defined benefit pension plans that are offered in certain non-U.S. locations based on factors such as eligible compensation, age and/or years of service. It is the Firm’s policy to fund the pension plans in amounts sufficient to meet the requirements under applicable laws. The Firm does not anticipate at this time making any contribution to the U.S. defined benefit pension plan in 2018.2020. The 20182020 contributions to the non-U.S. defined benefit pension plans are expected to be $46 $49 million, of which $30 $34 million are contractually required. The Firm also has a number of nonqualified noncontributory defined benefit pension plans that are unfunded. These plans provide supplemental defined pension benefits to certain employees.
The Firm currently provides two qualified defined contribution plans in the U.S. and maintains other similar arrangements in certain non-U.S. locations. The Firm offers postretirement medical and life insurance benefits to certain U.S. retirees and postretirement medical benefits to certain qualifying U.S. and U.K. employees.employees.
The Firm partially defrays the cost of its U.S. OPEB obligation through corporate-owned life insurance (“COLI”) purchased on the lives of eligible employees and retirees. While the Firm owns the COLI policies, certain COLI proceeds (death benefits, withdrawals and other distributions) may be used only to reimburse the Firm for its net postretirement benefit claim payments and related administrative expense. The Firm has generally fundedprefunded its postretirement benefit obligations through contributions to the relevant trust on a pay-as-you go basis. On December 21, 2017, the Firm contributed $600 million of cash to the trust as a prefunding of a portion of itsU.S. postretirement benefit obligations. The U.K. OPEB plan is unfunded. Pension and OPEB accounting guidance generally requires that the difference between plan assets at fair value and the benefit obligation be measured and recorded on the balance sheet. Plans that are overfunded (excess of plan assets over benefit obligation) are recorded in other assets and plans that are underfunded (excess benefit obligation over plan assets) are recorded withinin other liabilities. Gains or losses resulting from changes in the benefit obligation and the value of plan assets are recorded in other comprehensive income (“OCI”)OCI and recognized as part of the net periodic
| | | | JPMorgan Chase & Co./2017 Annual Report | | 195 |
Notes to consolidated financial statements
benefit cost over subsequent periods as discussed in the Gains and losses section of this Note. Additionally, service cost, interest cost, and investment returns that would otherwise be classified separatelybenefits earned during the year are aggregated and reported in compensation expense; all other components of net within compensation expense.periodic defined benefit costs are reported in other expense in the Consolidated statements of income.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 199 |
Notes to consolidated financial statements
The following table presents the changes in benefit obligations, plan assets, the net funded status, and the pretax pension and OPEB amounts recorded in AOCI on the Consolidated balance sheets for the Firm’s defined benefit pension and OPEB plans, and the weighted-average actuarial annualized assumptions for the projected and accumulated postretirement benefit obligations. | | | | | | | | | | | | | | | | | As of or for the year ended December 31, | Defined benefit pension plans | OPEB plans | (in millions) | 2019 | | 2018 | | 2019 | | 2018 | Change in benefit obligation | | | | | | | | Benefit obligation, beginning of year | $ | (15,512 | ) | | $ | (16,700 | ) | | $ | (612 | ) | | $ | (684 | ) | Benefits earned during the year | (356 | ) | | (354 | ) | | — |
| | — |
| Interest cost on benefit obligations | (596 | ) | | (556 | ) | | (24 | ) | | (24 | ) | Plan amendments | (5 | ) | | (29 | ) | | — |
| | — |
| Plan curtailment | — |
| | 123 |
| | — |
| | — |
| Employee contributions | (8 | ) | | (7 | ) | | (14 | ) | | (15 | ) | Net gain/(loss) | (1,296 | ) | (g) | 938 |
| (g) | (51 | ) | | 40 |
| Benefits paid | 820 |
| | 873 |
| | 67 |
| | 69 |
| Plan settlements | — |
| | 15 |
| | — |
| | — |
| Foreign exchange impact and other | (116 | ) | | 185 |
| | (2 | ) | | 2 |
| Benefit obligation, end of year(a) | $ | (17,069 | ) | | $ | (15,512 | ) | | $ | (636 | ) | | $ | (612 | ) | Change in plan assets | | | | | | | | Fair value of plan assets, beginning of year | $ | 18,052 |
| | $ | 19,603 |
| | $ | 2,633 |
| | $ | 2,757 |
| Actual return on plan assets | 2,932 |
| | (548 | ) | | 454 |
| | (28 | ) | Firm contributions | 80 |
| | 75 |
| | 2 |
| | 2 |
| Employee contributions | 8 |
| | 7 |
| | 14 |
| | 15 |
| Benefits paid | (820 | ) | | (873 | ) | | (110 | ) | | (113 | ) | Plan settlements | — |
| | (15 | ) | | — |
| | — |
| Foreign exchange impact and other | 121 |
| | (197 | ) | | — |
| | — |
| Fair value of plan assets, end of year (a)(b) | $ | 20,373 |
| | $ | 18,052 |
| | $ | 2,993 |
| | $ | 2,633 |
| Net funded status (c)(d) | $ | 3,304 |
|
| $ | 2,540 |
| | $ | 2,357 |
| | $ | 2,021 |
| Accumulated benefit obligation, end of year | $ | (17,047 | ) | | $ | (15,494 | ) | | NA |
| | NA |
| Pretax pension and OPEB amounts recorded in AOCI | Net gain/(loss) | $ | (2,260 | ) |
| $ | (3,134 | ) | | $ | 470 |
|
| $ | 184 |
| Prior service credit/(cost) | (26 | ) |
| (23 | ) | | — |
|
| — |
| Accumulated other comprehensive income/(loss), pretax, end of year | $ | (2,286 | ) |
| $ | (3,157 | ) | | $ | 470 |
|
| $ | 184 |
| Weighted-average actuarial assumptions used to determine benefit obligations | Discount rate (e) | 0.20 - 3.30% |
| | 0.60 - 4.30 % |
| | 3.20 | % | | 4.20 | % | Rate of compensation increase (e) | 2.25 - 3.00 |
| | 2.25 – 3.00 |
| | NA |
| | NA | Interest crediting rate(e) | 1.78 - 4.65% |
| | 1.81 - 4.90% |
| | NA |
| | NA | Health care cost trend rate(f) | Assumed for next year | NA |
| | NA |
| | 5.00 |
| | 5.00 |
| Ultimate | NA |
| | NA |
| | 5.00 |
| | 5.00 |
| Year when rate will reach ultimate | NA |
| | NA |
| | 2020 | | 2019 |
| | | | | | | | | | | | | | | | | As of or for the year ended December 31, | Defined benefit pension plans | OPEB plans(f) | (in millions) | 2017 | | 2016 | | 2017 | | 2016 | Change in benefit obligation | | | | | | | | Benefit obligation, beginning of year | $ | (15,594 | ) | | $ | (15,259 | ) | | $ | (708 | ) | | $ | (744 | ) | Benefits earned during the year | (330 | ) | | (332 | ) | | — |
| | — |
| Interest cost on benefit obligations | (598 | ) | | (629 | ) | | (28 | ) | | (31 | ) | Employee contributions | (7 | ) | | (7 | ) | | (16 | ) | | (19 | ) | Net gain/(loss) | (721 | ) | | (743 | ) | | (4 | ) | | 4 |
| Benefits paid | 841 |
| | 851 |
| | 76 |
| | 76 |
| Plan settlements | 30 |
| | 21 |
| | — |
| | — |
| Expected Medicare Part D subsidy receipts | NA |
| | NA |
| | (1 | ) | | — |
| Foreign exchange impact and other | (321 | ) | | 504 |
| | (3 | ) | | 6 |
| Benefit obligation, end of year(a) | $ | (16,700 | ) | | $ | (15,594 | ) | | $ | (684 | ) | | $ | (708 | ) | Change in plan assets | | | | | | | | Fair value of plan assets, beginning of year | $ | 17,703 |
| | $ | 17,636 |
| | $ | 1,956 |
| | $ | 1,855 |
| Actual return on plan assets | 2,356 |
| | 1,375 |
| | 233 |
| | 131 |
| Firm contributions | 78 |
| | 86 |
| | 602 |
| | 2 |
| Employee contributions | 7 |
| | 7 |
| | — |
| | — |
| Benefits paid | (841 | ) | | (851 | ) | | (34 | ) | | (32 | ) | Plan settlements | (30 | ) | | (21 | ) | | — |
| | — |
| Foreign exchange impact and other | 330 |
| | (529 | ) | | — |
| | — |
| Fair value of plan assets, end of year (a)(b)(c) | $ | 19,603 |
| | $ | 17,703 |
| | $ | 2,757 |
| | $ | 1,956 |
| Net funded status (d) | $ | 2,903 |
|
| $ | 2,109 |
| | $ | 2,073 |
| | $ | 1,248 |
| Accumulated benefit obligation, end of year | $ | (16,530 | ) | | $ | (15,421 | ) | | NA |
| | NA |
| Pretax pension and OPEB amounts recorded in AOCI | Net gain/(loss) | $ | (2,800 | ) |
| $ | (3,667 | ) | | $ | 271 |
|
| $ | 138 |
| Prior service credit/(loss) | 6 |
|
| 42 |
| | — |
|
| — |
| Accumulated other comprehensive income/(loss), pretax, end of year | $ | (2,794 | ) |
| $ | (3,625 | ) | | $ | 271 |
|
| $ | 138 |
| Weighted-average actuarial assumptions used to determine benefit obligations | Discount Rate (e) | 0.60 - 3.70% |
| | 0.60 - 4.30% |
| | 3.70 | % | | 4.20 | % | Rate of compensation increase (e) | 2.25 – 3.00 |
| | 2.25 – 3.00 |
| | NA |
| | NA | Health care cost trend rate: | Assumed for next year | NA |
| | NA |
| | 5.00 |
| | 5.00 |
| Ultimate | NA |
| | NA |
| | 5.00 |
| | 5.00 |
| Year when rate will reach ultimate | NA |
| | NA |
| | 2018 | | 2017 |
| | (a) | At December 31, 20172019 and 2016,2018, included non-U.S. benefit obligations of $(3.8) billion and $(3.4)$(3.3) billion, and plan assets of $3.9$4.0 billion and $3.4$3.5 billion, respectively, predominantly in the U.K. |
| | (b) | At December 31, 20172019 and 2016, approximately $302 million and $390 million, respectively, of U.S. defined benefit pension plan assets included participation rights under participating annuity contracts. |
| | (c) | At December 31, 2017 and 2016,2018, defined benefit pension plan amounts that were not measured at fair value included $377 million$1.3 billion and $130$340 million, respectively, of accrued receivables, and $587 million$1.7 billion and $224$503 million, respectively, of accrued liabilities, for U.S. plans.liabilities. |
| | (d)(c) | Represents plans with an aggregate overfunded balance of $5.6$6.3 billion and $4.0$5.1 billion at December 31, 20172019 and 2016,2018, respectively, and plans with an aggregate underfunded balance of $612$618 million and $639$547 million at December 31, 20172019 and 2016,2018, respectively. |
| | (d) | For pension plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation and fair value of plan assets was $1.5 billion and $885 million at December 31, 2019, respectively and $1.3 billion and $762 million at December 31, 2018, respectively. For pension plans with an accumulated benefit obligation exceeding plan assets, the accumulated benefit obligation and fair value of plan assets was $1.4 billion and $885 million at December 31, 2019, respectively, and $1.3 billion and $762 million at December 31, 2018, respectively. For OPEB plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation was $43 million and $26 million at December 31, 2019 and 2018, respectively, and they had 0 plan assets. |
| | (e) | For the U.S. defined benefit pension plans, the discount rate assumption is 3.70%was 3.30% and 4.30%, and the interest crediting rate was 4.65% and 4.90%, for 2019 and 2018, respectively. The rate of compensation increase iswas not applicable to the U.S. plan in 2019 due to the Plan Freeze, and was 2.30% and 2.30%,in 2018. The rate of compensation increase presented in the table for 2017 and 2016 respectively.2019 applies to the non-U.S. plans. |
| | (f) | Includes an unfunded postretirement benefit obligation of $32 million and $35 million atExcludes participants whose benefits under the plan are capped. |
| | (g) | At December 31, 20172019 and 2016, respectively, for2018, the U.K. plan.gain/(loss) was primarily attributable to the change in the discount rate. |
| | | | 196200 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Gains and losses For the Firm’s defined benefit pension plans, fair value is used to determine the expected return on plan assets. Amortization of net gains and losses is included in annual net periodic benefit cost if, as of the beginning of the year, the net gain or loss exceeds 10% of the greater of the PBOprojected benefit obligation or the fair value of the plan assets. Any excess is amortized over the average future service period of defined benefit pension plan participants, which for the U.S. defined benefit pension plan is currently eight years and for the non-U.S. defined benefit pension plans is the period appropriate for the affected plan. As a result of the Plan Freeze, beginning in 2020, any excess for the U.S. defined benefit pension plan will be amortized over the average expected lifetime of plan participants which is currently 38 years. In addition, prior service costs are amortized over the average remaining service period of active employees expected to receive benefits under the plan when the prior service cost is first recognized. The average remaining amortization period for the U.S. defined benefit pension plan for current prior service costs is three years. For the Firm’s OPEB plans, a calculated value that recognizes changes in fair value over a five-year period is used to determine the expected return on plan assets. This value is referred to as the market-related value of assets. Amortization of net gains and losses, adjusted for gains and losses not yet recognized, is included in annual net periodic benefit cost if, as of the beginning of the year, the net gain or loss exceeds 10% of the greater of the accumulated postretirement benefit obligation or the market-related value of assets. Any excess net gain or loss is amortized over the average expected lifetime of retired participants, which is currently eleven years; however, prior service costs resulting from plan changes are amortized over the average years of service remainingyears.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 201 |
Notes to full eligibility age, which is currently two years.consolidated financial statements
The following table presents the components of net periodic benefit costs reported in the Consolidated statements of income for the Firm’s U.S. and non-U.S. defined benefit pension, defined contribution and OPEB plans, and in other comprehensive income for the defined benefit pension and OPEB plans, and the weighted-average annualized actuarial assumptions for the net periodic benefit cost. | | | | | | | | | | | | | | | | | | | | | | Pension plans | | OPEB plans | Year ended December 31, (in millions) | 2019 |
| 2018 |
| 2017 |
| | 2019 |
| 2018 |
| 2017 |
| Components of net periodic benefit cost | | | | | | | | Benefits earned during the year | $ | 356 |
| $ | 354 |
| $ | 330 |
| | $ | — |
| $ | — |
| $ | — |
| Interest cost on benefit obligations | 596 |
| 556 |
| 598 |
| | 24 |
| 24 |
| 28 |
| Expected return on plan assets | (915 | ) | (981 | ) | (968 | ) | | (112 | ) | (103 | ) | (97 | ) | Amortization: | | | | | | | | Net (gain)/loss | 167 |
| 103 |
| 250 |
| | — |
| — |
| — |
| Prior service (credit)/cost | 3 |
| (23 | ) | (36 | ) | | — |
| — |
| — |
| Curtailment (gain)/loss | — |
| 21 |
| — |
| | — |
| — |
| — |
| Settlement (gain)/loss | — |
| 2 |
| 2 |
| | — |
| — |
| — |
| Net periodic defined benefit cost(a) | $ | 207 |
| $ | 32 |
| $ | 176 |
| | $ | (88 | ) | $ | (79 | ) | $ | (69 | ) | Other defined benefit pension plans(b) | 25 |
| 20 |
| 24 |
| | NA |
| NA |
| NA |
| Total defined benefit plans | $ | 232 |
| $ | 52 |
| $ | 200 |
| | $ | (88 | ) | $ | (79 | ) | $ | (69 | ) | Total defined contribution plans | 952 |
| 872 |
| 814 |
| | NA |
| NA |
| NA |
| Total pension and OPEB cost included in noninterest expense | $ | 1,184 |
| $ | 924 |
| $ | 1,014 |
| | $ | (88 | ) | $ | (79 | ) | $ | (69 | ) | Changes in plan assets and benefit obligations recognized in other comprehensive income | | | | | Prior service (credit)/cost arising during the year | 5 |
| 29 |
| — |
| | — |
| — |
| — |
| Net (gain)/loss arising during the year | (719 | ) | 467 |
| (669 | ) | | (286 | ) | 91 |
| (133 | ) | Amortization of net loss | (167 | ) | (103 | ) | (250 | ) | | — |
| — |
| — |
| Amortization of prior service (cost)/credit | (3 | ) | 23 |
| 36 |
| | — |
| — |
| — |
| Curtailment gain/(loss) | — |
| (21 | ) | — |
| | — |
| — |
| — |
| Settlement gain/(loss) | — |
| (2 | ) | (2 | ) | | — |
| — |
| — |
| Foreign exchange impact and other | 13 |
| (30 | ) | 54 |
| | — |
| (4 | ) | — |
| Total recognized in other comprehensive income | $ | (871 | ) | $ | 363 |
| $ | (831 | ) | | $ | (286 | ) | $ | 87 |
| $ | (133 | ) | Total recognized in net periodic benefit cost and other comprehensive income | $ | (664 | ) | $ | 395 |
| $ | (655 | ) | | $ | (374 | ) | $ | 8 |
| $ | (202 | ) | Weighted-average assumptions used to determine net periodic benefit costs | | | | | Discount rate(c) | 0.60 - 4.30% |
| 0.60 - 4.50 % |
| 0.60 - 4.30 % |
| | 4.20 | % | 3.70 | % | 4.20 | % | Expected long-term rate of return on plan assets (c) | 0.00 - 5.50 | 0.70 - 5.50 | 0.70 - 6.00 | | 4.30 |
| 4.00 |
| 5.00 |
| Rate of compensation increase (c) | 2.25 - 3.00 | 2.25 - 3.00 | 2.25 - 3.00 | | NA |
| NA |
| NA |
| Interest crediting rate(c) | 1.81 - 4.90% |
| 1.81- 4.90% |
| 1.81- 4.90% |
| | NA |
| NA |
| NA |
| Health care cost trend rate(d) | | | | | | | | Assumed for next year | NA |
| NA |
| NA |
| | 5.00 |
| 5.00 |
| 5.00 |
| Ultimate | NA |
| NA |
| NA |
| | 5.00 |
| 5.00 |
| 5.00 |
| Year when rate will reach ultimate | NA |
| NA |
| NA |
| | 2019 | 2018 | 2017 |
| | | | | | | | | | | | | | | | | | | | | | Pension plans | | OPEB plans | Year ended December 31, (in millions) | 2017 |
| 2016 |
| 2015 |
| | 2017 |
| 2016 |
| 2015 |
| Components of net periodic benefit cost | | | | | | | | Benefits earned during the year | $ | 330 |
| $ | 332 |
| $ | 377 |
| | $ | — |
| $ | — |
| $ | 1 |
| Interest cost on benefit obligations | 598 |
| 629 |
| 610 |
| | 28 |
| 31 |
| 31 |
| Expected return on plan assets | (968 | ) | (1,030 | ) | (1,079 | ) | | (97 | ) | (105 | ) | (106 | ) | Amortization: | | | | | | | | Net (gain)/loss | 250 |
| 257 |
| 282 |
| | — |
| — |
| — |
| Prior service cost/(credit) | (36 | ) | (36 | ) | (36 | ) | | — |
| — |
| — |
| Special termination benefits | — |
| — |
| 1 |
| | — |
| — |
| — |
| Settlement loss | 2 |
| 4 |
| — |
| | — |
|
|
| Net periodic defined benefit cost | $ | 176 |
| $ | 156 |
| $ | 155 |
| | $ | (69 | ) | $ | (74 | ) | $ | (74 | ) | Other defined benefit pension plans(a) | 24 |
| 25 |
| 24 |
| | NA |
| NA |
| NA |
| Total defined benefit plans | $ | 200 |
| $ | 181 |
| $ | 179 |
| | $ | (69 | ) | $ | (74 | ) | $ | (74 | ) | Total defined contribution plans | 814 |
| 789 |
| 769 |
| | NA |
| NA |
| NA |
| Total pension and OPEB cost included in compensation expense | $ | 1,014 |
| $ | 970 |
| $ | 948 |
| | $ | (69 | ) | $ | (74 | ) | $ | (74 | ) | Changes in plan assets and benefit obligations recognized in other comprehensive income | | | | | Net (gain)/loss arising during the year | $ | (669 | ) | $ | 395 |
| $ | (50 | ) | | $ | (133 | ) | $ | (29 | ) | $ | 21 |
| Amortization of net loss | (250 | ) | (257 | ) | (282 | ) | | — |
| — |
| — |
| Amortization of prior service (cost)/credit | 36 |
| 36 |
| 36 |
| | — |
| — |
| — |
| Settlement loss | (2 | ) | (4 | ) | — |
| | — |
| — |
| — |
| Foreign exchange impact and other | 54 |
| (77 | ) | (33 | ) | | — |
| — |
| — |
| Total recognized in other comprehensive income | $ | (831 | ) | $ | 93 |
| $ | (329 | ) | | $ | (133 | ) | $ | (29 | ) | $ | 21 |
| Total recognized in net periodic benefit cost and other comprehensive income | $ | (655 | ) | $ | 249 |
| $ | (174 | ) | | $ | (202 | ) | $ | (103 | ) | $ | (53 | ) | Weighted-average assumptions used to determine net periodic benefit costs | | | | | Discount rate(b) | 0.60 - 4.30 % |
| 0.90 – 4.50% |
| 1.00 – 4.00% |
| | 4.20 | % | 4.40 | % | 4.10 | % | Expected long-term rate of return on plan assets (b) | 0.70 - 6.00 | 0.80 – 6.50 | 0.90 – 6.50 | | 5.00 |
| 5.75 |
| 6.00 |
| Rate of compensation increase (b) | 2.25 - 3.00 | 2.25 – 4.30 | 2.75 – 4.20 | | NA |
| NA |
| NA |
| Health care cost trend rate | | | | | | | | Assumed for next year | NA |
| NA |
| NA |
| | 5.00 |
| 5.50 |
| 6.00 |
| Ultimate | NA |
| NA |
| NA |
| | 5.00 |
| 5.00 |
| 5.00 |
| Year when rate will reach ultimate | NA |
| NA |
| NA |
| | 2017 | 2017 | 2017 |
| | (a) | Benefits earned during the year are reported in compensation expense; all other components of net periodic defined benefit costs are reported within other expense in the Consolidated statements of income. |
| | (b) | Includes various defined benefit pension plans which are individually immaterial. |
| | (b)(c) | The rate assumptions for the U.S. defined benefit pension plans are at the upper end of the range, except for the rate of compensation increase, which iswas 2.30% for 20172019, 2018 and 3.50% for 2016 and 2015,2017, respectively. |
| | | | JPMorgan Chase & Co./2017 Annual Report(d) | | 197Excludes participants whose benefits under the plan are capped. |
Notes to consolidated financial statements
The estimated pretax amounts that will be amortized from AOCI into net periodic benefit cost in 2018 are as follows.
| | | | | | | (in millions) | | Defined benefit pension plans | Net loss/(gain) | | $ | 106 |
| | Prior service cost/(credit) | | $ | (25 | ) | | Total | | $ | 81 |
| |
Plan assumptions JPMorgan Chase’s The Firm’s expected long-term rate of return for defined benefit pension and OPEB plan assets is a blended weighted average, by asset allocation of the projected long-term returns for the various asset classes, taking into consideration local market conditions and the specific allocation of plan assets. Returns on asset classes are developed using a forward-looking approach and are not strictly based on historical returns. Consideration is also given to current market conditions and the short-term portfolio mix of each plan.
The discount rate used in determining the benefit obligation under the U.S. defined benefit pension and OPEB plans was provided by the Firm’s actuaries. This rate was selected by reference to the yields on portfolios of bonds with maturity dates and coupons that closely match each of the plan’s projected cash flows. The discount rate for the U.K. defined benefit pension plan represents a rate of appropriate duration from the analysis of yield curves provided by the Firm’s actuaries. At December 31, 2017,2019, the Firm decreased the discount rates used to determine its benefit obligations for the U.S.
| | | | 202 | | JPMorgan Chase & Co./2019 Form 10-K |
defined benefit pension and OPEB plans in light of current market interest rates, which will increaseis expected to decrease expense by approximately $66 $69 million in 2018. 2020. The 20182020 expected long-term rate of return on U.S. defined benefit pension plan assets and U.S. OPEB plan assets are 5.50%4.00% and 4.00%4.11%, respectively. As of December 31, 2017, the interest crediting rate assumption remained at 5.00%. As of December 31, 2017, the effect of a one-percentage-point increase or decrease in the assumed health care cost trend rate is not material to the accumulated postretirement benefit obligation or total service and interest cost.
The following table represents the effect of a 25-basis point decline in the threetwo listed rates below on estimated 2018 2020 defined benefit pension and OPEB plan expense, as well as the effect on the postretirement benefit obligations. | | | | | | | | |
(in millions) | Defined benefit pension and OPEB plan expense | | Benefit obligation | Expected long-term rate of return | $ | 57 |
| | NA |
| Discount rate | $ | 6 |
| | $ | 544 |
|
| | | | | | | | |
(in millions) | Defined benefit pension and OPEB plan expense | | Benefit obligation | Expected long-term rate of return | $ | 54 |
| | NA |
| Discount rate | $ | 59 |
| | $ | 583 |
| Interest crediting rate for U.S. plans | $ | (41 | ) | | $ | (193 | ) |
Investment strategy and asset allocation The assets of the Firm’s defined benefit pension plans are held in various trusts and are invested in well-diversified portfolios of equity and fixed income securities, cash and cash equivalents, and alternative investments (e.g., hedge funds, private equity, real estate and real assets).investments. The trust-owned assets of the Firm'sFirm’s U.S. OPEB plan are invested primarily in cash and cash equivalents.fixed income securities. COLI policies used to partially defray the cost of the Firm'sFirm’s U.S. OPEB plan are invested in separate accounts of an insurance company and are allocated to investments intended to replicate equity and fixed income indices. The investment policies for the assets of the Firm’s defined benefit pension plans are to optimize the risk-return relationship as appropriate to the needs and goals of eachplan using a global portfolio of various asset classes diversified by market segment, economic sector, and issuer. Assets are managed by a combination of internal and external investment managers. The Firm regularly reviews the asset allocations and asset managers, as well as other factors that impact the portfolios, which are rebalanced when deemed necessary. Investments held by the plans include financial instruments which are exposed to various risks such as interest rate, market and credit risks. Exposure to a concentration of credit risk is mitigated by the broad diversification of both U.S. and non-U.S. investment instruments.investments. Additionally, the investments in each of the common/collective trustinvestment funds and/or registered investment companies are further diversified into various financial instruments. As of December 31, 2017,2019, assets held by the Firm's Firm’s defined benefit pension and OPEB plans do not include securities issued byJPMorgan Chase common stock, or its affiliates, except through indirect exposures through investments in third-party stock-index funds.ETFs, mutual funds and collective investment funds managed by third-parties. The plans hold investments in funds that are sponsored or managed by affiliates of JPMorgan Chase in the amount of $6.0 $3.1 billion and $4.6 $3.7 billion, as of December 31, 2017 2019 and 2016, 2018, respectively.
| | | | 198 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 203 |
The following table presents the weighted-average asset allocation of the fair values of total plan assets at December 31 for the years indicated, as well as the respective approved asset allocation ranges by asset class. | | Defined benefit pension plans(a) | Defined benefit pension plans(a) | OPEB plan(c) | Defined benefit pension plans(a) | OPEB plan(d) | | Asset | | % of plan assets | | Asset | | % of plan assets | Asset | | % of plan assets | | Asset | | % of plan assets | December 31, | Allocation | | 2017 | | 2016 | | Allocation | | 2017(d) | | 2016 | Allocation | | 2019 | | 2018 | | Allocation | | 2019 | | 2018 | Asset class | Asset class | | | | | | | | | | | Asset class | | | | | | | | | | | Debt securities(a)(b) | 0-80% |
| | 42 | % | | 35 | % | | 30-70% |
| | 61 | % | | 50 | % | 42-100% |
| | 74 | % | | 48 | % | | 30-70% |
| | 60 | % | | 61 | % | Equity securities | 0-85 |
| | 42 |
| | 47 |
| | 30-70 |
| | 39 |
| | 50 |
| 0-40 |
| | 16 |
| | 37 |
| | 30-70 |
| | 40 |
| | 39 |
| Real estate | 0-10 |
| | 3 |
| | 4 |
| | — |
| | — |
| | — |
| 0-6 |
| | 1 |
| | 2 |
| | — |
| | — |
| | — |
| Alternatives (b)(c) | 0-35 |
| | 13 |
| | 14 |
| | — |
| | — |
| | — |
| 0-24 |
| | 9 |
| | 13 |
| | — |
| | — |
| | — |
| Total | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
| | (a) | Represents the U.S. defined benefit pension plan only, as that is the most significant plan. |
| | (b) | Debt securities primarily includeincludes cash and cash equivalents, corporate debt, U.S. federal, state, local and non-U.S. government, asset-backed and mortgage-backed securities. |
| | (b)(c) | Alternatives primarily include limited partnerships. |
| | (c)(d) | Represents the U.S. OPEB plan only, as the U.K. OPEB plan is unfunded. |
| | (d) | Change in percentage of plan assets due to the contribution to the U.S. OPEB plan. |
Fair value measurement of the plans’ assets and liabilities ForRefer to Note 2 for information on fair value measurements, including descriptions of level 1, 2, and 3 of the fair value hierarchy and the valuation methods employed by the Firm, see Note 2.
Pension and OPEB plan assets and liabilities measured at fair valueFirm.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension and OPEB plan assets and liabilities measured at fair value | | | | | | | | | | Defined benefit pension plans | | 2019 | | 2018 | December 31, (in millions) | Level 1 | | Level 2 | | Level 3 | | Total fair value | | Level 1 | | Level 2 | | Level 3 | | Total fair value | Cash and cash equivalents | $ | 157 |
| | $ | 1 |
| | $ | — |
| | $ | 158 |
| | $ | 343 |
| | $ | 1 |
| | $ | — |
| | $ | 344 |
| Equity securities | 3,240 |
| | 184 |
| | 2 |
| | 3,426 |
| | 5,342 |
| | 162 |
| | 2 |
| | 5,506 |
| Collective investment funds(a) | 265 |
| | — |
| | — |
| | 265 |
| | 161 |
| | — |
| | — |
| | 161 |
| Limited partnerships(b) | 187 |
| | — |
| | — |
| | 187 |
| | 40 |
| | — |
| | — |
| | 40 |
| Corporate debt securities(c) | — |
| | 7,090 |
| | 2 |
| | 7,092 |
| | — |
| | 3,540 |
| | 3 |
| | 3,543 |
| U.S. federal, state, local and non-U.S. government debt securities | 1,790 |
| | 1,054 |
| | — |
| | 2,844 |
| | 1,191 |
| | 743 |
| | — |
| | 1,934 |
| Mortgage-backed securities | 314 |
| | 701 |
| | 4 |
| | 1,019 |
| | 82 |
| | 272 |
| | 3 |
| | 357 |
| Derivative receivables | — |
| | 337 |
| | — |
| | 337 |
| | — |
| | 143 |
| | — |
| | 143 |
| Other(d) | 785 |
| | 132 |
| | 250 |
| | 1,167 |
| | 885 |
| | 80 |
| | 302 |
| | 1,267 |
| Total assets measured at fair value(e) | $ | 6,738 |
| | $ | 9,499 |
| | $ | 258 |
| | $ | 16,495 |
| | $ | 8,044 |
| | $ | 4,941 |
| | $ | 310 |
| | $ | 13,295 |
| Derivative payables | $ | — |
| | $ | (118 | ) | | $ | — |
| | $ | (118 | ) | | $ | — |
| | $ | (96 | ) | | $ | — |
| | $ | (96 | ) | Total liabilities measured at fair value(e) | $ | — |
| | $ | (118 | ) | | $ | — |
| | $ | (118 | ) | | $ | — |
| | $ | (96 | ) | | $ | — |
| | $ | (96 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Defined benefit pension plans | | 2017 | | 2016 | December 31, (in millions) | Level 1 | | Level 2 | | Level 3 | | Total fair value | | Level 1 | | Level 2 | | Level 3 | | Total fair value | Cash and cash equivalents | $ | 173 |
| | $ | 1 |
| | $ | — |
| | $ | 174 |
| | $ | 196 |
| | $ | 2 |
| | $ | — |
| | $ | 198 |
| Equity securities | 6,407 |
| | 194 |
| | 2 |
| | 6,603 |
| | 6,158 |
| | 166 |
| | 2 |
| | 6,326 |
| Mutual funds | 325 |
| | — |
| | — |
| | 325 |
| | — |
| | — |
| | — |
| | — |
| Common/collective trust funds(a) | 778 |
| | — |
| | — |
| | 778 |
| | 384 |
| | — |
| | — |
| | 384 |
| Limited partnerships(b) | 60 |
| | — |
| | — |
| | 60 |
| | 62 |
| | — |
| | — |
| | 62 |
| Corporate debt securities(c) | — |
| | 2,644 |
| | 4 |
| | 2,648 |
| | — |
| | 2,506 |
| | 4 |
| | 2,510 |
| U.S. federal, state, local and non-U.S. government debt securities | 1,096 |
| | 784 |
| | — |
| | 1,880 |
| | 1,139 |
| | 804 |
| | — |
| | 1,943 |
| Mortgage-backed securities | 92 |
| | 100 |
| | 2 |
| | 194 |
| | 42 |
| | 75 |
| | — |
| | 117 |
| Derivative receivables | — |
| | 203 |
| | — |
| | 203 |
| | — |
| | 243 |
| | — |
| | 243 |
| Other(d) | 2,353 |
| | 60 |
| | 302 |
| | 2,715 |
| | 1,497 |
| | 53 |
| | 390 |
| | 1,940 |
| Total assets measured at fair value(e) | $ | 11,284 |
| | $ | 3,986 |
| | $ | 310 |
| | $ | 15,580 |
| | $ | 9,478 |
| | $ | 3,849 |
| | $ | 396 |
| | $ | 13,723 |
| Derivative payables | $ | — |
| | $ | (141 | ) | | $ | — |
| | $ | (141 | ) | | $ | — |
| | $ | (208 | ) | | $ | — |
| | $ | (208 | ) | Total liabilities measured at fair value(e) | $ | — |
| | $ | (141 | ) | | $ | — |
| | $ | (141 | ) | | $ | — |
| | $ | (208 | ) | | $ | — |
| | $ | (208 | ) |
| | (a) | At December 31, 20172019 and 2016, common/2018, collective trustinvestment funds primarily included a mix of short-term investment funds, domesticU.S. and internationalnon-U.S. equity investments (including index) and real estate funds. |
| | (b) | Unfunded commitments to purchase limited partnership investments for the plans were $605$451 million and $735$521 million for 20172019 and 2016,2018, respectively. |
| | (c) | Corporate debt securities include debt securities of U.S. and non-U.S. corporations. |
| | (d) | Other consists primarily of mutual funds, money market funds and participating and non-participating annuity contracts. MoneyMutual funds and money market funds are primarily classified within level 1 of the fair value hierarchy given they are valued using market observable prices. Participating and non-participating annuity contracts are classified within level 3 of the fair value hierarchy due to a lack of market mechanisms for transferring each policy and surrender restrictions. |
| | (e) | At December 31, 20172019 and 2016,2018, excludes $4.4 billion and $4.2$5.0 billion of certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient, which are not required to be classified in the fair value hierarchy, $377 million$1.3 billion and $130$340 million of defined benefit pension plan receivables for investments sold and dividends and interest receivables, $561 million$1.7 billion and $203$479 million of defined benefit pension plan payables for investments purchased, and $26$25 million and $21$24 million of other liabilities, respectively. |
TheAt December 31, 2019 and 2018, the assets of the U.S. OPEB plan consisted of $600$562 million and $0$561 million, respectively, in cash and cash equivalents, corporate debt securities, U.S. federal, state, local and non-U.S. government debt securities and other assets classified in level 1 and level 2 of the valuation hierarchy and $2.2$2.4 billion and $2.0$2.1 billion, respectively, of COLI policies classified in level 3 of the valuation hierarchy at December 31, 2017 and 2016, respectively.hierarchy.
| | | | 204 | | JPMorgan Chase & Co./2017 Annual Report | | 1992019 Form 10-K |
Notes to consolidated financial statements
| | Changes in level 3 fair value measurements using significant unobservable inputs | Changes in level 3 fair value measurements using significant unobservable inputs | | | | | Changes in level 3 fair value measurements using significant unobservable inputs | | | | |
(in millions) | | Fair value, Beginning balance | | Actual return on plan assets | | Purchases, sales and settlements, net | | Transfers in and/or out of level 3 | | Fair value, Ending balance | | Fair value, Beginning balance | | Actual return on plan assets | | Purchases, sales and settlements, net(b) | | Transfers in and/or out of level 3 | | Fair value, Ending balance | Realized gains/(losses) | | Unrealized gains/(losses) | Realized gains/(losses) | | Unrealized gains/(losses)(b) | Year ended December 31, 2017 U.S. defined benefit pension plan Annuity contracts and other (a) | | $ | 396 |
| | $ | — |
| | $ | 1 |
| | $ | (87 | ) | | $ | — |
| | $ | 310 |
| | Year ended December 31, 2019 U.S. defined benefit pension plan Annuity contracts and other (a) | | | $ | 310 |
| | $ | — |
| | $ | 31 |
| | $ | (85 | ) | | $ | 2 |
| | $ | 258 |
| U.S. OPEB plan COLI policies | | $ | 1,957 |
| | $ | — |
| | $ | 200 |
| | $ | — |
| | $ | — |
| | $ | 2,157 |
| | $ | 2,072 |
| | $ | — |
| | $ | 401 |
| | $ | (42 | ) | | $ | — |
| | $ | 2,431 |
| Year ended December 31, 2016 U.S. defined benefit pension plan Annuity contracts and other (a) | | $ | 539 |
| | $ | — |
| | $ | (157 | ) | | $ | — |
| | $ | 14 |
| | $ | 396 |
| | Year ended December 31, 2018 U.S. defined benefit pension plan Annuity contracts and other (a) | | | $ | 310 |
| | $ | — |
| | $ | — |
| | $ | (1 | ) | | $ | 1 |
| | $ | 310 |
| U.S. OPEB plan COLI policies | | $ | 1,855 |
| | $ | — |
| | $ | 102 |
| | $ | — |
| | $ | — |
| | $ | 1,957 |
| | $ | 2,157 |
| | $ | — |
| | $ | (42 | ) | | $ | (43 | ) | | $ | — |
| | $ | 2,072 |
|
| | (a) | Substantially all are participating and non-participating annuity contracts. |
| | (b) | The prior period amounts have been revised to conform with the current period presentation. |
Estimated future benefit payments The following table presents benefit payments expected to be paid, which include the effect of expected future service, for the years indicated. The OPEB medical and life insurance payments are net of expected retiree contributions. | | | | | | | | | | | | | | | Year ended December 31, (in millions) | | Defined benefit pension plans | | | OPEB before Medicare Part D subsidy | | Medicare Part D subsidy | 2020 | | $ | 1,030 |
| | | $ | 59 |
| | $ | 1 |
| 2021 | | 1,020 |
| | | 57 |
| | 1 |
| 2022 | | 1,020 |
| | | 54 |
| | — |
| 2023 | | 980 |
| | | 52 |
| | — |
| 2024 | | 970 |
| | | 50 |
| | — |
| Years 2025–2029 | | 4,613 |
| | | 211 |
| | 1 |
|
| | | | | | | | | | | | | | | Year ended December 31, (in millions) | | Defined benefit pension plans | | | OPEB before Medicare Part D subsidy | | Medicare Part D subsidy | 2018 | | $ | 926 |
| | | $ | 65 |
| | $ | 1 |
| 2019 | | 922 |
| | | 63 |
| | 1 |
| 2020 | | 927 |
| | | 60 |
| | 1 |
| 2021 | | 944 |
| | | 57 |
| | — |
| 2022 | | 960 |
| | | 55 |
| | — |
| Years 2023–2027 | | 4,925 |
| | | 235 |
| | 2 |
|
| | | | 200 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 205 |
Notes to consolidated financial statements
Note 9 – Employee share-based incentives Employee share-based awards In20172019, 20162018 and 20152017, JPMorgan Chasegranted long-term share-based awards to certain employees under its LTIP, as amended and restated effective May 19, 2015.15, 2018. Under the terms of the LTIP, as ofDecember 31, 20172019, 6775 million shares of common stock were available for issuance through May 2019.2022. The LTIP is the only active plan under which the Firm is currently granting share-based incentive awards. In the following discussion, the LTIP, plus prior Firm plans and plans assumed as the result of acquisitions, are referred to collectively as the “LTI Plans,” and such plans constitute the Firm’s share-based incentive plans. RSUs are awarded at no cost to the recipient upon their grant. Generally, RSUs are granted annually and vest at a rate of 50% after two years and 50% after three years and are converted into shares of common stock as of the vesting date. In addition, RSUs typically include full-career eligibility provisions, which allow employees to continue to vest upon voluntary termination based on age or service-related requirements, subject to post-employment and other restrictions. All RSU awards are subject to forfeiture until vested and contain clawback provisions that may result in cancellation under certain specified circumstances. Generally,Predominantly all RSUs entitle the recipient to receive cash payments equivalent to any dividends paid on the underlying common stock during the period the RSUs are outstanding. Performance share units (“PSUs”) are granted annually, and as such, are considered participating securities as discussed in Note 22. In January 2017 and 2016,approved by the Firm’s Board of Directors, approved the grant of performance share units (“PSUs”) to members of the Firm’s Operating Committee under the variable compensation program for performance years 2016 and 2015.program. PSUs are subject to the Firm’s achievement of specified performance criteria over a three-year period. The number of awards that vest can range from zero to 150% of the grant amount. The awards vestIn addition, dividends that accrue during the vesting period are reinvested in dividend equivalent share units. PSUs and the related dividend equivalent share units are converted into shares of common stock in the quarter after the end of the performance period, which is generally three years. In addition, dividends are notionally reinvested in the Firm’s common stock and will be delivered only in respect of any earned shares.vesting.
Once the PSUs and dividend equivalent share units have vested, the shares of common stock that are delivered, after applicable tax withholding, must be held for an additional two-year period, typically for a total combined vesting and holding period of approximately five to eight years from the grant date.date depending on regulations in certain countries. Under the LTI Plans, stock options and stock appreciation rights (“SARs”) and stock options have generally been granted with an exercise price equal to the fair value of JPMorgan Chase’s common stock on the grant date. The Firm periodically grants employeeSARs and stock options to individual employees. There were no material grants of stock options or SARs in 2017, 2016 and 2015. SARs generally expire ten years after the grant date. There were no material grants of employee SARs or stock optionsin 2019, 2018 and 2017.The Firm separately recognizes compensation expense for each tranche of each award, net of estimated forfeitures, as if it were a separate award with its own vesting date. Generally, for each tranche granted, compensation expense is recognized on a straight-line basis from the grant date until the vesting date of the respective tranche, provided that the employees will not become full-career eligible during the vesting period. For awards with full-career eligibility provisions and awards granted with no future substantive service requirement, the Firm accrues the estimated value of awards expected to be awarded to employees as of the grant date without giving consideration to the impact of post-employment restrictions. For each tranche granted to employees who will become full-career eligible during the vesting period, compensation expense is recognized on a straight-line basis from the grant date until the earlier of the employee’s full-career eligibility date or the vesting date of the respective tranche. The Firm’s policy for issuing shares upon settlement of employee share-based incentive awards is to issue either new shares of common stock or treasury shares. During 20172019, 20162018 and 20152017, the Firm settled all of its employee share-based awards by issuing treasury shares. In January 2008, the Firm awardedRefer to its Chairman and Chief Executive Officer up to 2 million SARs. The terms of this award are distinct from, and more restrictive than, other equity grants regularly awarded by the Firm. On July 15, 2014, the Compensation & Management Development Committee and Board of Directors determined that all requirementsNote 23 for the vesting of the 2 million SAR awards had been met and thus, the awards became exercisable. The SARs, which had an expiration date of January 2018, were exercised by Mr. Dimon in October 2017 at the exercise price of $39.83 per share (the price of JPMorgan Chase common stockfurther information on the dateclassification of grant).share-based awards for purposes of calculating earnings per share.
| | | | 206 | | JPMorgan Chase & Co./2017 Annual Report | | 2012019 Form 10-K |
Notes to consolidated financial statements
RSUs, PSUs, employee SARs and stock options and SARs activity Generally, compensation expense for RSUs and PSUs is measured based on the number of units granted multiplied by the stock price at the grant date, and for employee SARs and stock options, and SARs, is measured at the grant date using the Black-Scholes valuation model. Compensation expense for these awards is recognized in net income as described previously. The following table summarizes JPMorgan Chase’s RSUs, PSUs, employee SARs and stock options and SARs activity for 2017. 2019. | | | | | | | | | | | | | | | | | | | | | | RSUs/PSUs | | SARs/Options | Year ended December 31, 2019 | | Number of units | Weighted-average grant date fair value | | Number of awards | | Weighted-average exercise price | | Weighted-average remaining contractual life (in years) | Aggregate intrinsic value | (in thousands, except weighted-average data, and where otherwise stated) | | | | Outstanding, January 1 | | 58,809 |
| $ | 85.04 |
| | 12,463 |
| | $ | 41.46 |
| | | | Granted | | 23,811 |
| 99.79 |
| | 18 |
| | 111.01 |
| | | | Exercised or vested | | (28,754 | ) | 69.98 |
| | (6,923 | ) | | 41.50 |
| | | | Forfeited | | (1,627 | ) | 98.58 |
| | — |
| | — |
| | | | Canceled | | NA |
| NA |
| | (31 | ) | | 89.71 |
| | | | Outstanding, December 31 | | 52,239 |
| $ | 99.62 |
| | 5,527 |
| | $ | 41.36 |
| | 1.9 | $ | 539,071 |
| Exercisable, December 31 | | NA |
| NA |
| | 5,522 |
| | 41.29 |
| | 1.9 | 538,971 |
|
| | | | | | | | | | | | | | | | | | | | | | RSUs/PSUs | | Options/SARs | Year ended December 31, 2017 | | Number of units | Weighted-average grant date fair value | | Number of awards | | Weighted-average exercise price | | Weighted-average remaining contractual life (in years) | Aggregate intrinsic value | (in thousands, except weighted-average data, and where otherwise stated) | | | | Outstanding, January 1 | | 81,707 |
| $ | 57.15 |
| | 30,267 |
| | $ | 40.65 |
| | | | Granted | | 26,017 |
| 84.30 |
| | 109 |
| | 90.94 |
| | | | Exercised or vested | | (32,961 | ) | 57.80 |
| | (12,816 | ) | | 40.50 |
| | | | Forfeited | | (2,030 | ) | 63.34 |
| | (54 | ) | | 55.82 |
| | | | Canceled | | NA |
| NA |
| | (13 | ) | | 405.47 |
| | | | Outstanding, December 31 | | 72,733 |
| $ | 66.36 |
| | 17,493 |
| | $ | 40.76 |
| | 3.4 | $ | 1,169,470 |
| Exercisable, December 31 | | NA |
| NA |
| | 15,828 |
| | 40.00 |
| | 3.3 | 1,070,212 |
|
The total fair value of RSUs that vested during the years ended December 31, 2017, 20162019, 2018 and 2015,2017, was $2.9 billion, $2.2$3.6 billion and $2.8$2.9 billion, respectively. The total intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017, 2016was $503 million, $370 million and 2015, was $651 million, $338 million and $335 million, respectively. Compensation expense The Firm recognized the following noncash compensation expense related to its various employee share-based incentive plans in its Consolidated statements of income. | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2019 |
| | 2018 |
| | 2017 |
| Cost of prior grants of RSUs, PSUs, SARs and employee stock options that are amortized over their applicable vesting periods | | $ | 1,141 |
| | $ | 1,241 |
| | $ | 1,125 |
| Accrual of estimated costs of share-based awards to be granted in future periods including those to full-career eligible employees | | 1,115 |
| | 1,081 |
| | 945 |
| Total noncash compensation expense related to employee share-based incentive plans | | $ | 2,256 |
| | $ | 2,322 |
| | $ | 2,070 |
|
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| Cost of prior grants of RSUs, PSUs and SARs that are amortized over their applicable vesting periods | | $ | 1,125 |
| | $ | 1,046 |
| | $ | 1,109 |
| Accrual of estimated costs of share-based awards to be granted in future periods including those to full-career eligible employees | | 945 |
| | 894 |
| | 878 |
| Total noncash compensation expense related to employee share-based incentive plans | | $ | 2,070 |
| | $ | 1,940 |
| | $ | 1,987 |
|
At December 31, 2017, 2019, approximately $704 $693 million (pretax) of compensation expense related to unvested awards had not yet been charged to net income. That cost is expected to be amortized into compensation expense over a weighted-average period of 1 year. 1.6 years. The Firm does not capitalize any compensation expense related to share-based compensation awards to employees.
Cash flows and taxTax benefits
Effective January 1, 2016, the Firm adopted new accounting guidance related to employee share-based payments. As a result of the adoption of this new guidance, all excessExcess tax benefits (including tax benefits from dividends or dividend equivalents) on share-based payment awards are recognized within income tax expense in the Consolidated statements of income. In prior years these tax benefits were recorded as increases to additional paid-in capital. Income tax benefits related to share-based incentive arrangements recognized in the Firm’s Consolidated statements of income for the years ended December 31, 2019, 2018 and 2017, 2016were $895 million, $1.1 billion and 2015, were $1.0 billion, $916 million and $746 million, respectively.
The following table sets forth the cash received from the exercise of stock options under all share-based incentive arrangements, and the actual income tax benefit related to tax deductions from the exercise of the stock options.
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| Cash received for options exercised | | $ | 18 |
| | $ | 26 |
| | $ | 20 |
| Tax benefit | | 190 |
| | 70 |
| | 64 |
|
| | | | 202 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 207 |
Notes to consolidated financial statements
Note 10 – SecuritiesInvestment securities SecuritiesInvestment securities consist of debt securities that are classified as trading, AFS or HTM. SecuritiesDebt 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 December 31, 2017,2019, the investment securities portfolio consisted of debt securities with an average credit rating ofAA+ (based upon external ratings where available, and where not available, based primarily upon internal ratings).The Firm’s internal risk ratings which correspondgenerally align with the qualitative characteristics (e.g., borrower capacity to ratings asmeet financial commitments and vulnerability to changes in the economic environment) defined by S&P and Moody’s). Moody’s, however the quantitative characteristics (e.g., PDs and LGDs) may differ as they reflect internal historical experiences and assumptions.
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 managementthe Firm 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 on a level-yield basis over the contractual life of the security. However, premiums on certain callable debt securities are amortized to the earliest call date. During the fourth quarter of 2019, the Firm transferred $6.2 billion of collateralized loan obligations from AFS to HTM for capital management purposes. These securities were transferred at fair value in a non-cash transaction.
| | | | 208 | | JPMorgan Chase & Co./2019 Form 10-K |
The amortized costcosts and estimated fair valuevalues of the investment securities portfolio were as follows for the dates indicated. | | | 2017 | | 2016 | 2019 | | 2018 | December 31, (in millions) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | 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 | | | | | | | | | Available-for-sale securities | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | | U.S. government agencies(a) | $ | 69,879 |
| $ | 736 |
| $ | 335 |
| | $ | 70,280 |
| | $ | 63,367 |
| $ | 1,112 |
| $ | 474 |
| | $ | 64,005 |
| | U.S. GSEs and government agencies(a) | | $ | 107,811 |
| $ | 2,395 |
| $ | 89 |
| | $ | 110,117 |
| | $ | 69,026 |
| $ | 594 |
| $ | 974 |
| | $ | 68,646 |
| Residential: | | | | | | | | | | | | | | | U.S(b) | 8,193 |
| 185 |
| 14 |
| | 8,364 |
| | 8,171 |
| 100 |
| 28 |
| | 8,243 |
| 10,223 |
| 233 |
| 6 |
| | 10,450 |
| | 5,877 |
| 79 |
| 31 |
| | 5,925 |
| Non-U.S. | 2,882 |
| 122 |
| 1 |
| | 3,003 |
| | 6,049 |
| 158 |
| 7 |
| | 6,200 |
| 2,477 |
| 64 |
| 1 |
| | 2,540 |
| | 2,529 |
| 72 |
| 6 |
| | 2,595 |
| Commercial | 4,932 |
| 98 |
| 5 |
| | 5,025 |
| | 9,002 |
| 122 |
| 20 |
| | 9,104 |
| 5,137 |
| 64 |
| 13 |
| | 5,188 |
| | 6,758 |
| 43 |
| 147 |
| | 6,654 |
| Total mortgage-backed securities | 85,886 |
| 1,141 |
| 355 |
| | 86,672 |
| | 86,589 |
| 1,492 |
| 529 |
| | 87,552 |
| 125,648 |
| 2,756 |
| 109 |
| | 128,295 |
| | 84,190 |
| 788 |
| 1,158 |
| | 83,820 |
| U.S. Treasury and government agencies(a) | 22,510 |
| 266 |
| 31 |
| | 22,745 |
| | 44,822 |
| 75 |
| 796 |
| | 44,101 |
| 139,162 |
| 449 |
| 175 |
| | 139,436 |
| | 55,771 |
| 366 |
| 78 |
| | 56,059 |
| Obligations of U.S. states and municipalities | 30,490 |
| 1,881 |
| 33 |
| | 32,338 |
| | 30,284 |
| 1,492 |
| 184 |
| | 31,592 |
| 27,693 |
| 2,118 |
| 1 |
| | 29,810 |
| | 36,221 |
| 1,582 |
| 80 |
| | 37,723 |
| Certificates of deposit | 59 |
| — |
| — |
| | 59 |
| | 106 |
| — |
| — |
| | 106 |
| 77 |
| — |
| — |
| | 77 |
| | 75 |
| — |
| — |
| | 75 |
| Non-U.S. government debt securities | 26,900 |
| 426 |
| 32 |
| | 27,294 |
| | 34,497 |
| 836 |
| 45 |
| | 35,288 |
| 21,427 |
| 377 |
| 17 |
| | 21,787 |
| | 23,771 |
| 351 |
| 20 |
| | 24,102 |
| Corporate debt securities | 2,657 |
| 101 |
| 1 |
| | 2,757 |
| | 4,916 |
| 64 |
| 22 |
| | 4,958 |
| 823 |
| 22 |
| — |
| | 845 |
| | 1,904 |
| 23 |
| 9 |
| | 1,918 |
| Asset-backed securities: | | | | | | | | | | | | | | | Collateralized loan obligations | 20,928 |
| 69 |
| 1 |
| | 20,996 |
| | 27,352 |
| 75 |
| 26 |
| | 27,401 |
| 25,038 |
| 9 |
| 56 |
| | 24,991 |
| | 19,612 |
| 1 |
| 176 |
| | 19,437 |
| Other | 8,764 |
| 77 |
| 24 |
| | 8,817 |
| | 6,950 |
| 62 |
| 45 |
| | 6,967 |
| 5,438 |
| 40 |
| 20 |
| | 5,458 |
| | 7,225 |
| 57 |
| 22 |
| | 7,260 |
| Total available-for-sale debt securities | 198,194 |
| 3,961 |
| 477 |
| | 201,678 |
| | 235,516 |
| 4,096 |
| 1,647 |
| | 237,965 |
| | Available-for-sale equity securities | 547 |
| — |
| — |
| | 547 |
| | 914 |
| 12 |
| — |
| | 926 |
| | Total available-for-sale securities | 198,741 |
| 3,961 |
| 477 |
| | 202,225 |
| | 236,430 |
| 4,108 |
| 1,647 |
| | 238,891 |
| 345,306 |
| 5,771 |
| 378 |
| | 350,699 |
| | 228,769 |
| 3,168 |
| 1,543 |
| | 230,394 |
| Held-to-maturity debt securities | | | | | | | | | Mortgage-backed securities | | | | | | | | | U.S. government agencies(c) | 27,577 |
| 558 |
| 40 |
| | 28,095 |
| | 29,910 |
| 638 |
| 37 |
| | 30,511 |
| | Commercial | 5,783 |
| 1 |
| 74 |
| | 5,710 |
| | 5,783 |
| — |
| 129 |
| | 5,654 |
| | Held-to-maturity securities | | | | | | | | | Mortgage-backed securities: | | | | | | | | | U.S. GSEs and government agencies(a) | | 36,523 |
| 1,165 |
| 62 |
| | 37,626 |
| | 26,610 |
| 134 |
| 200 |
| | 26,544 |
| Total mortgage-backed securities | 33,360 |
| 559 |
| 114 |
| | 33,805 |
| | 35,693 |
| 638 |
| 166 |
| | 36,165 |
| 36,523 |
| 1,165 |
| 62 |
| | 37,626 |
| | 26,610 |
| 134 |
| 200 |
| | 26,544 |
| U.S. Treasury and government agencies
| | 51 |
| — |
| 1 |
| | 50 |
| | — |
| — |
| — |
| | — |
| Obligations of U.S. states and municipalities | 14,373 |
| 554 |
| 80 |
| | 14,847 |
| | 14,475 |
| 374 |
| 125 |
| | 14,724 |
| 4,797 |
| 299 |
| — |
| | 5,096 |
| | 4,824 |
| 105 |
| 15 |
| | 4,914 |
| Total held-to-maturity debt securities | 47,733 |
| 1,113 |
| 194 |
| | 48,652 |
| | 50,168 |
| 1,012 |
| 291 |
| | 50,889 |
| | Total securities | $ | 246,474 |
| $ | 5,074 |
| $ | 671 |
| | $ | 250,877 |
| | $ | 286,598 |
| $ | 5,120 |
| $ | 1,938 |
| | $ | 289,780 |
| | Asset-backed securities: | | | | | | | | | Collateralized loan obligations | | 6,169 |
| — |
| — |
| | 6,169 |
| | — |
| — |
| — |
| | — |
| Total held-to-maturity securities | | 47,540 |
| 1,464 |
| 63 |
| | 48,941 |
| | 31,434 |
| 239 |
| 215 |
| | 31,458 |
| Total investment securities | | $ | 392,846 |
| $ | 7,235 |
| $ | 441 |
| | $ | 399,640 |
| | $ | 260,203 |
| $ | 3,407 |
| $ | 1,758 |
| | $ | 261,852 |
|
| | (a) | Includes totalAFS U.S. government-sponsored enterpriseGSE obligations with a fair valuevalues of $45.8$78.5 billion for the years ended December 31, 2017 and 2016, which were predominantly mortgage-related. |
| | (b) | Prior period amounts have been revised to conform with the current period presentation. |
| | (c) | Included total$50.7 billion, and HTM U.S. government-sponsored enterpriseGSE obligations with amortized cost of $22.0$31.6 billion and $25.6$20.9 billion, at December 31, 20172019 and 2016, respectively, which2018, respectively. As of December 31, 2019, mortgage-backed securities issued by Fannie Mae and Freddie Mac each exceeded 10% of JPMorgan Chase’s total stockholders’ equity; the amortized cost and fair value of such securities were mortgage-related.$69.4 billion and $71.4 billion, and $38.7 billion and $39.6 billion, respectively. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 203209 |
Notes to consolidated financial statements
SecuritiesInvestment securities impairment
The following tables present the fair value and gross unrealized losses for the investment securities portfolio by aging category atDecember 31, 20172019 and 2016.2018. | | | Securities with gross unrealized losses | Investment securities with gross unrealized losses | | Less than 12 months | | 12 months or more | | 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 debt securities | | | | | December 31, 2019 (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 |
| | U.S. GSEs and government agencies | | $ | 16,966 |
| $ | 53 |
| | $ | 3,058 |
| $ | 36 |
| $ | 20,024 |
| $ | 89 |
| Residential: | | | | | | | U.S | 1,112 |
| 5 |
| | 596 |
| 9 |
| 1,708 |
| 14 |
| 1,072 |
| 3 |
| | 423 |
| 3 |
| 1,495 |
| 6 |
| Non-U.S. | — |
| — |
| | 266 |
| 1 |
| 266 |
| 1 |
| 13 |
| — |
| | 420 |
| 1 |
| 433 |
| 1 |
| Commercial | 528 |
| 4 |
| | 335 |
| 1 |
| 863 |
| 5 |
| 1,287 |
| 12 |
| | 199 |
| 1 |
| 1,486 |
| 13 |
| Total mortgage-backed securities | 37,677 |
| 148 |
| | 8,908 |
| 207 |
| 46,585 |
| 355 |
| 19,338 |
| 68 |
| | 4,100 |
| 41 |
| 23,438 |
| 109 |
| U.S. Treasury and government agencies | 1,834 |
| 11 |
| | 373 |
| 20 |
| 2,207 |
| 31 |
| 23,003 |
| 145 |
| | 5,695 |
| 30 |
| 28,698 |
| 175 |
| Obligations of U.S. states and municipalities | 949 |
| 7 |
| | 1,652 |
| 26 |
| 2,601 |
| 33 |
| 186 |
| 1 |
| | — |
| — |
| 186 |
| 1 |
| Certificates of deposit | — |
| — |
| | — |
| — |
| — |
| — |
| 77 |
| — |
| | — |
| — |
| 77 |
| — |
| Non-U.S. government debt securities | 6,500 |
| 15 |
| | 811 |
| 17 |
| 7,311 |
| 32 |
| 3,970 |
| 13 |
| | 1,406 |
| 4 |
| 5,376 |
| 17 |
| Corporate debt securities | — |
| — |
| | 52 |
| 1 |
| 52 |
| 1 |
| — |
| — |
| | — |
| — |
| — |
| — |
| Asset-backed securities: | | | | | | | Collateralized loan obligations | — |
| — |
| | 276 |
| 1 |
| 276 |
| 1 |
| 10,364 |
| 11 |
| | 7,756 |
| 45 |
| 18,120 |
| 56 |
| Other | 3,521 |
| 20 |
| | 720 |
| 4 |
| 4,241 |
| 24 |
| 1,639 |
| 9 |
| | 753 |
| 11 |
| 2,392 |
| 20 |
| Total available-for-sale debt securities | 50,481 |
| 201 |
| | 12,792 |
| 276 |
| 63,273 |
| 477 |
| | Available-for-sale equity securities | — |
| — |
| | — |
| — |
| — |
| — |
| | Total available-for-sale securities | | 58,577 |
| 247 |
| | 19,710 |
| 131 |
| 78,287 |
| 378 |
| Held-to-maturity securities | | | | | | | Mortgage-backed securities | | | | | U.S. government securities | 4,070 |
| 38 |
| | 205 |
| 2 |
| 4,275 |
| 40 |
| | Commercial | 3,706 |
| 41 |
| | 1,882 |
| 33 |
| 5,588 |
| 74 |
| | Mortgage-backed securities: | | | | | U.S. GSEs and government agencies | | 5,186 |
| 62 |
| | 81 |
| — |
| 5,267 |
| 62 |
| Total mortgage-backed securities | 7,776 |
| 79 |
| | 2,087 |
| 35 |
| 9,863 |
| 114 |
| 5,186 |
| 62 |
| | 81 |
| — |
| 5,267 |
| 62 |
| U.S. Treasury and government agencies
| | 50 |
| 1 |
| | — |
| — |
| 50 |
| 1 |
| Obligations of U.S. states and municipalities | 584 |
| 9 |
| | 2,131 |
| 71 |
| 2,715 |
| 80 |
| — |
| — |
| | — |
| — |
| — |
| — |
| Asset-backed securities: | | | | | Collateralized loan obligations | | 3,421 |
| — |
| | 1,375 |
| — |
| 4,796 |
| — |
| Total held-to-maturity securities | 8,360 |
| 88 |
| | 4,218 |
| 106 |
| 12,578 |
| 194 |
| 8,657 |
| 63 |
| | 1,456 |
| — |
| 10,113 |
| 63 |
| Total securities with gross unrealized losses | $ | 58,841 |
| $ | 289 |
| | $ | 17,010 |
| $ | 382 |
| $ | 75,851 |
| $ | 671 |
| | Total investment securities with gross unrealized losses | | $ | 67,234 |
| $ | 310 |
| | $ | 21,166 |
| $ | 131 |
| $ | 88,400 |
| $ | 441 |
|
| | | | 204210 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | | | | | | | | | | | | | | Investment securities with gross unrealized losses | | Less than 12 months | | 12 months or more | | | December 31, 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. GSEs and government agencies | 17,656 |
| 318 |
| | 22,728 |
| 656 |
| 40,384 |
| 974 |
| Residential: | | | | | | | | U.S. | 623 |
| 4 |
| | 1,445 |
| 27 |
| 2,068 |
| 31 |
| Non-U.S. | 907 |
| 5 |
| | 165 |
| 1 |
| 1,072 |
| 6 |
| Commercial | 974 |
| 6 |
| | 3,172 |
| 141 |
| 4,146 |
| 147 |
| Total mortgage-backed securities | 20,160 |
| 333 |
| | 27,510 |
| 825 |
| 47,670 |
| 1,158 |
| U.S. Treasury and government agencies | 4,792 |
| 7 |
| | 2,391 |
| 71 |
| 7,183 |
| 78 |
| Obligations of U.S. states and municipalities | 1,808 |
| 15 |
| | 2,477 |
| 65 |
| 4,285 |
| 80 |
| Certificates of deposit | 75 |
| — |
| | — |
| — |
| 75 |
| — |
| Non-U.S. government debt securities | 3,123 |
| 5 |
| | 1,937 |
| 15 |
| 5,060 |
| 20 |
| Corporate debt securities | 478 |
| 8 |
| | 37 |
| 1 |
| 515 |
| 9 |
| Asset-backed securities: | | | | | | | | Collateralized loan obligations | 18,681 |
| 176 |
| | — |
| — |
| 18,681 |
| 176 |
| Other | 1,208 |
| 6 |
| | 2,354 |
| 16 |
| 3,562 |
| 22 |
| Total available-for-sale securities | 50,325 |
| 550 |
| | 36,706 |
| 993 |
| 87,031 |
| 1,543 |
| Held-to-maturity securities | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. GSEs and government agencies | 4,385 |
| 23 |
| | 7,082 |
| 177 |
| 11,467 |
| 200 |
| Total mortgage-backed securities | 4,385 |
| 23 |
| | 7,082 |
| 177 |
| 11,467 |
| 200 |
| Obligations of U.S. states and municipalities | 12 |
| — |
| | 1,114 |
| 15 |
| 1,126 |
| 15 |
| Total held-to-maturity securities | 4,397 |
| 23 |
| | 8,196 |
| 192 |
| 12,593 |
| 215 |
| Total investment securities with gross unrealized losses | 54,722 |
| 573 |
| | 44,902 |
| 1,185 |
| 99,624 |
| 1,758 |
|
| | | | | | | | | | | | | | | | | | | | | | 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: | | | | | | | | U.S.(a) | 1,373 |
| 6 |
| | 1,073 |
| 22 |
| 2,446 |
| 28 |
| 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 debt securities | | | | | | | | Mortgage-backed securities | | | | | | | | U.S. government agencies | 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 |
|
| | (a) | Prior period amounts have been revised to conform with the current period presentation. |
Gross unrealized lossesOther-than-temporary impairment
The Firm has recognized unrealized losses on securities that 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, 2017, 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, 2017.
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 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
| | | | JPMorgan Chase & Co./2017 Annual Report | | 205 |
Notes to consolidated financial statements
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.
Factors considered in evaluating potential OTTI include adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a security; payment structure of thesecurity; 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. 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. ForWhen assessing securities issued in a securitization for OTTI,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 lossesbeneficial interests in securitizations that are recognizedrated below “AA” at their acquisition, or that can be contractually prepaid or otherwise settled in earnings ifsuch a way that the Firmwould 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.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 211 |
Notes to consolidated financial statements
The Firm recognizes unrealized losses on investment securities that it intends to sell as OTTI. The Firm does not intend to sell any of the security. In other casesremaining investment securities with an unrealized loss in AOCI as of December 31, 2019, and it is not likely that the Firm considers the relevant factors noted above, as well as the Firm’s intent and abilitywill be required to retain its investment for a periodsell these securities before recovery 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 thetheir amortized cost basis. Any impairmentFurther, the Firm did not recognize any credit-related OTTI losses during the year ended December 31, 2019. Based on its assessment, the Firm believes that the investment securities with an unrealized loss on an equity security is equal to the full difference between the cost basis and the fair valuein AOCI as of the security. December 31, 2019, are not other-than-temporarily impaired. SecuritiesInvestment 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) | 2017 |
| | 2016 |
| | 2015 |
| Realized gains | $ | 1,013 |
| | $ | 401 |
| | $ | 351 |
| Realized losses | (1,072 | ) | | (232 | ) | | (127 | ) | OTTI losses(a) | (7 | ) | | (28 | ) | | (22 | ) | Net securities gains/(losses) | (66 | ) | | 141 |
| | 202 |
| | | | | | | OTTI losses | | | | | | Credit losses recognized in income | — |
| | (1 | ) | | (1 | ) | Securities the Firm intends to sell(a) | (7 | ) | | (27 | ) | | (21 | ) | Total OTTI losses recognized in income | $ | (7 | ) | | $ | (28 | ) | | $ | (22 | ) |
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Realized gains | $ | 650 |
| | $ | 211 |
| | $ | 1,013 |
| Realized losses | (392 | ) | | (606 | ) | | (1,072 | ) | OTTI losses(a) | — |
| | — |
| | (7 | ) | Net investment securities gains/(losses) | 258 |
| | (395 | ) | | (66 | ) |
| | (a) | Represents OTTI losses recognized in income on investment securities the Firm intends to sell. Excludes realized losses on securities sold of $6 million, $24$22 million and $5$6 million for the years ended December 31, 2017, 20162018 and 2015,2017, 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, 2017, 2016 2019, 2018 and 2015. 2017.
| | | | 206212 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Contractual maturities and yields The following table presents the amortized cost and estimated fair value at December 31, 2017,2019, of JPMorgan Chase’s investment securities portfolio by contractual maturity. | | By remaining maturity December 31, 2017 (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) | | | | | | | | | | | By remaining maturity December 31, 2019 (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(b) | | Total | Available-for-sale securities | | | | | | | | | | | Mortgage-backed securities | | | | | | | | | | | Amortized cost | $ | 3 |
| | $ | 698 |
| | $ | 6,134 |
| | $ | 79,051 |
| | $ | 85,886 |
| $ | 1 |
| | $ | 58 |
| | $ | 11,073 |
| | $ | 114,516 |
| | $ | 125,648 |
| Fair value | 3 |
| | 708 |
| | 6,294 |
| | 79,667 |
| | 86,672 |
| 1 |
| | 58 |
| | 11,251 |
| | 116,985 |
| | 128,295 |
| Average yield(b) | 4.76 | % | | 2.10 | % | | 3.10 | % | | 3.35 | % | | 3.32 | % | | Average yield(a) | | 1.99 | % | | 2.78 | % | | 2.76 | % | | 3.40 | % | | 3.34 | % | U.S. Treasury and government agencies | | | | | | | | | | | | | | | | | | | Amortized cost | $ | 60 |
| | $ | — |
| | $ | 17,437 |
| | $ | 5,013 |
| | $ | 22,510 |
| $ | 10,687 |
| | $ | 92,805 |
| | $ | 26,353 |
| | $ | 9,317 |
| | $ | 139,162 |
| Fair value | 60 |
| | — |
| | 17,542 |
| | 5,143 |
| | 22,745 |
| 10,700 |
| | 93,039 |
| | 26,446 |
| | 9,251 |
| | 139,436 |
| Average yield(b) | 1.72 | % | | — | % | | 1.96 | % | | 1.76 | % | | 1.91 | % | | Average yield(a) | | 1.82 | % | | 1.84 | % | | 1.90 | % | | 1.98 | % | | 1.86 | % | Obligations of U.S. states and municipalities | | | | | | | | | | | | | | | | | | | Amortized cost | $ | 73 |
| | $ | 750 |
| | $ | 1,265 |
| | $ | 28,402 |
| | $ | 30,490 |
| $ | 123 |
| | $ | 193 |
| | $ | 825 |
| | $ | 26,552 |
| | $ | 27,693 |
| Fair value | 72 |
| | 765 |
| | 1,324 |
| | 30,177 |
| | 32,338 |
| 124 |
| | 202 |
| | 883 |
| | 28,601 |
| | 29,810 |
| Average yield(b) | 1.78 | % | | 3.28 | % | | 5.40 | % | | 5.50 | % | | 5.43 | % | | Average yield(a) | | 4.13 | % | | 4.68 | % | | 5.28 | % | | 4.86 | % | | 4.87 | % | Certificates of deposit | | | | | | | | | | | | | | | | | | | Amortized cost | $ | 59 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 59 |
| $ | 77 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 77 |
| Fair value | 59 |
| | — |
| | — |
| | — |
| | 59 |
| 77 |
| | — |
| | — |
| | — |
| | 77 |
| Average yield(b) | 0.50 | % | | — | % | | — | % | | — | % | | 0.50 | % | | Average yield(a) | | 0.50 | % | | — | % | | — | % | | — | % | | 0.50 | % | Non-U.S. government debt securities | | | | | | | | | | | | | | | | | | | Amortized cost | $ | 5,020 |
| | $ | 13,665 |
| | $ | 8,215 |
| | $ | — |
| | $ | 26,900 |
| $ | 6,672 |
| | $ | 11,544 |
| | $ | 2,898 |
| | $ | 313 |
| | $ | 21,427 |
| Fair value | 5,022 |
| | 13,845 |
| | 8,427 |
| | — |
| | 27,294 |
| 6,682 |
| | 11,791 |
| | 3,001 |
| | 313 |
| | 21,787 |
| Average yield(b) | 3.09 | % | | 1.55 | % | | 1.19 | % | | — | % | | 1.73 | % | | Average yield(a) | | 2.17 | % | | 1.84 | % | | 1.29 | % | | 1.67 | % | | 1.87 | % | Corporate debt securities | | | | | | | | | | | | | | | | | | | Amortized cost | $ | 150 |
| | $ | 1,159 |
| | $ | 1,203 |
| | $ | 145 |
| | $ | 2,657 |
| $ | 205 |
| | $ | 206 |
| | $ | 412 |
| | $ | — |
| | $ | 823 |
| Fair value | 151 |
| | 1,197 |
| | 1,255 |
| | 154 |
| | 2,757 |
| 207 |
| | 212 |
| | 426 |
| | — |
| | 845 |
| Average yield(b) | 3.07 | % | | 3.60 | % | | 3.58 | % | | 3.22 | % | | 3.54 | % | | Average yield(a) | | 4.49 | % | | 4.14 | % | | 3.50 | % | | — | % | | 3.91 | % | Asset-backed securities | | | | | | | | | | | | | | | | | | | Amortized cost | $ | — |
| | $ | 3,372 |
| | $ | 13,046 |
| | $ | 13,274 |
| | $ | 29,692 |
| $ | 17 |
| | $ | 2,352 |
| | $ | 7,184 |
| | $ | 20,923 |
| | $ | 30,476 |
| Fair value | — |
| | 3,353 |
| | 13,080 |
| | 13,380 |
| | 29,813 |
| 17 |
| | 2,353 |
| | 7,177 |
| | 20,902 |
| | 30,449 |
| Average yield(b) | — | % | | 2.14 | % | | 2.58 | % | | 2.36 | % | | 2.43 | % | | Total available-for-sale debt securities | | | | | | | | | | | Amortized cost | $ | 5,365 |
| | $ | 19,644 |
| | $ | 47,300 |
| | $ | 125,885 |
| | $ | 198,194 |
| | Fair value | 5,367 |
| | 19,868 |
| | 47,922 |
| | 128,521 |
| | 201,678 |
| | Average yield(b) | 3.03 | % | | 1.86 | % | | 2.28 | % | | 3.66 | % | | 3.14 | % | | Available-for-sale equity securities | | | | | | | | | | | Amortized cost | $ | — |
| | $ | — |
| | $ | — |
| | $ | 547 |
| | $ | 547 |
| | Fair value | — |
| | — |
| | — |
| | 547 |
| | 547 |
| | Average yield(b) | — | % | | — | % | | — | % | | 0.71 | % | | 0.71 | % | | Average yield(a) | | 0.62 | % | | 2.78 | % | | 2.86 | % | | 2.77 | % | | 2.79 | % | Total available-for-sale securities | | | | | | | | | | | | | | | | | | | Amortized cost | $ | 5,365 |
| | $ | 19,644 |
| | $ | 47,300 |
| | $ | 126,432 |
| | $ | 198,741 |
| $ | 17,782 |
| | $ | 107,158 |
| | $ | 48,745 |
| | $ | 171,621 |
| | $ | 345,306 |
| Fair value | 5,367 |
| | 19,868 |
| | 47,922 |
| | 129,068 |
| | 202,225 |
| 17,808 |
| | 107,655 |
| | 49,184 |
| | 176,052 |
| | 350,699 |
| Average yield(b) | 3.03 | % | | 1.86 | % | | 2.28 | % | | 3.65 | % | | 3.13 | % | | Held-to-maturity debt securities | | | | | | | | | | | Mortgage-backed securities(a) | | | | | | | | | | | Average yield(a) | | 1.99 | % | | 1.87 | % | | 2.27 | % | | 3.47 | % | | 2.73 | % | Held-to-maturity securities | | | | | | | | | | | Mortgage-backed securities | | | | | | | | | | | Amortized Cost | $ | — |
| | $ | — |
| | $ | 49 |
| | $ | 33,311 |
| | $ | 33,360 |
| $ | — |
| | $ | — |
| | $ | 5,850 |
| | $ | 30,673 |
| | $ | 36,523 |
| Fair value | — |
| | — |
| | 49 |
| | 33,756 |
| | 33,805 |
| — |
| | — |
| | 6,114 |
| | 31,512 |
| | 37,626 |
| Average yield(b) | — | % | | — | % | | 2.88 | % | | 3.27 | % | | 3.27 | % | | Average yield(a) | | — | % | | — | % | | 3.06 | % | | 3.10 | % | | 3.10 | % | U.S. Treasury and government agencies
| | | | | | | | | | | Amortized cost
| | $ | — |
| | $ | 51 |
| | $ | — |
| | $ | — |
| | $ | 51 |
| Fair value
| | — |
| | 50 |
| | — |
| | — |
| | 50 |
| Average yield(a)
| | — | % | | 1.47 | % | | — | % | | — | % | | 1.47 | % | Obligations of U.S. states and municipalities | | | | | | | | | | | | | | | | | | | Amortized cost | $ | — |
| | $ | 66 |
| | $ | 2,019 |
| | $ | 12,288 |
| | $ | 14,373 |
| $ | — |
| | $ | — |
| | $ | 99 |
| | $ | 4,698 |
| | $ | 4,797 |
| Fair value | — |
| | 65 |
| | 2,067 |
| | 12,715 |
| | 14,847 |
| — |
| | — |
| | 106 |
| | 4,990 |
| | 5,096 |
| Average yield(b) | — | % | | 4.74 | % | | 4.30 | % | | 4.72 | % | | 4.66 | % | | Average yield(a) | | — | % | | — | % | | 3.91 | % | | 4.04 | % | | 4.04 | % | Asset-backed securities | | | | | | | | | | | Amortized cost | | $ | — |
| | $ | — |
| | $ | 5,296 |
| | $ | 873 |
| | $ | 6,169 |
| Fair value | | — |
| | — |
| | 5,296 |
| | 873 |
| | 6,169 |
| Average yield(a) | | — | % | | — | % | | 3.19 | % | | 3.11 | % | | 3.18 | % | Total held-to-maturity securities | | | | | | | | | | | | | | | | | | | Amortized cost | $ | — |
| | $ | 66 |
| | $ | 2,068 |
| | $ | 45,599 |
| | $ | 47,733 |
| $ | — |
| | $ | 51 |
| | $ | 11,245 |
| | $ | 36,244 |
| | $ | 47,540 |
| Fair value | — |
| | 65 |
| | 2,116 |
| | 46,471 |
| | 48,652 |
| — |
| | 50 |
| | 11,516 |
| | 37,375 |
| | 48,941 |
| Average yield(b)(a) | — | % | | 4.75 | % | | 4.26 | % | | 3.66 | % | | 3.69 | % | — | % | | 1.47 | % | | 3.13 | % | | 3.23 | % | | 3.20 | % |
| | (a) | As of December 31, 2017, 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 $55.1 billion and $56.0 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. |
| | | | JPMorgan Chase & Co./2017 Annual Report | | 207 |
Notes to consolidated financial statements
where applicable and reflect the estimated impact of the enactment of the Tax Cuts and Jobs Act (“TCJA”). 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)(b) | Includes 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 six6 years for agency residential MBS, three3 years for agency residential collateralized mortgage obligations and three3 years for nonagency residential collateralized mortgage obligations. |
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 213 |
Notes to consolidated financial statements
Note 11 – Securities financing activities JPMorgan Chase enters into resale, agreements, repurchase, agreements, securities borrowed transactions and securities loaned transactionsagreements (collectively, “securities financing agreements”) primarily to finance the Firm’s inventory positions, acquire securities to cover short positions,sales, accommodate customers’ financing needs, and settle other securities obligations.obligationsand to deploy the Firm’s excess cash. Securities financing agreements are treated as collateralized financings on the Firm’s Consolidated balance sheets. Resale and repurchase agreements are generally carried at the amounts at which the securities will be subsequently sold or repurchased. Securities borrowed and securities loaned transactionsagreements are generally carried at the amount of cash collateral advanced or received. Where appropriate under applicable accounting guidance, resale and repurchasesecurities financing agreements with the same counterparty are reported on a net basis. ForRefer to Note 1 for further discussion of the offsetting of assets and liabilities, see Note 1.liabilities. Fees received and paid in connection with securities financing agreements are recorded over the life of the agreement in interest income and interest expense on the Consolidated statements of income. The Firm has elected the fair value option for certain securities financing agreements. ForRefer to Note 3 for further information regarding the fair value option, see Note3.option. The securities financing agreements for which the fair value option has been elected are reported within securities purchased under resale agreements, securities loaned or sold under repurchase agreements, and securities borrowed on the Consolidated balance sheets. Generally, for agreements carried at fair value, current-period interest accruals are recorded within interest income and interest expense, with changes in fair value reported in principal transactions revenue. However, for financial instruments containing embedded derivatives that would be separately accounted for in accordance with accounting guidance for hybrid instruments, all changes in fair value, including any interest elements, are reported in principal transactions revenue. Securities financing transactionsagreements expose the Firm primarily to credit and liquidity risk. To manage these risks, the Firm monitors the value of the underlying securities (predominantly high-quality securities collateral, including government-issued debt and agencyU.S. GSEs and government agencies MBS) that it has received from or provided to its counterparties compared to the value of cash proceeds and exchanged collateral, and either requests additional collateral or returns securities or collateral when appropriate. Margin levels are initially established based upon the counterparty, the type of underlying securities, and the permissible collateral, and are monitored on an ongoing basis. In resale agreements and securities borrowed transactions,agreements, the Firm is exposed to credit risk to the extent that the value of the securities received is less than initial cash principal advanced and any collateral amounts exchanged. In repurchase agreements and securities loaned transactions,agreements, credit risk exposure arises to the extent that the value of underlying securities advanced exceeds the value of the initial cash principal advanced,received, and any collateral amounts exchanged. Additionally, the Firm typically enters into master netting agreements and other similar arrangements with its counterparties, which provide for the right to liquidate the underlying securities and any collateral amounts exchanged in the event of a counterparty default.It is also the Firm’s policy to take possession, where possible, of the securities underlying resale agreements and securities borrowed transactions. Foragreements.Refer to Note 29 for further information regarding assets pledged and collateral received in securities financing agreements, see Note 28.agreements. As a result of the Firm’s credit risk mitigation practices with respect to resale and securities borrowed agreements as described above, the Firm did not hold any reserves for credit impairment with respect to these agreements as of December 31, 20172019 and 2016.2018.
| | | | 208214 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The table below summarizes the gross and net amounts of the Firm’s securities financing agreements, as of December 31, 2017,2019 and 2016. 2018. When the Firm has obtained an appropriate legal opinion with respect to thea master netting agreement with a counterparty and where other relevant netting criteria under U.S. GAAP are met, the Firm nets, on the Consolidated balance sheets, the balances outstanding under its securities financing agreements with the same counterparty. In addition, the Firm exchanges securities and/or cash collateral with its counterparties; this collateral also reducescounterparty to reduce the economic exposure withthe counterparty. Suchcounterparty, but such collateral is not eligible for net Consolidated balance sheet presentation. Where the Firm has obtained an appropriate legal opinion with respect to the counterparty master netting agreement, such collateral, along with securities financing balances that do not meet all these relevant netting criteria under U.S. GAAP, is presented in the table below as “Amounts not nettable on the Consolidated balance sheets,” and reduces the “Net amounts” presented below, if the Firm has an appropriate legal opinion with respect to the master netting agreement with the counterparty. presented.Where a legal opinion has not been either sought or obtained, the securities financing balances are presented gross in the “Net amounts” below, and related collateral does not reduce the amounts presented.below. | | | 2017 | 2019 | December 31, (in millions) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets(b) | Amounts not nettable on the Consolidated balance sheets(c) | Net amounts(d) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets | Amounts not nettable on the Consolidated balance sheets(b) | Net amounts(c) | Assets | | | Securities purchased under resale agreements | $ | 448,608 |
| $ | (250,505 | ) | $ | 198,103 |
| $ | (188,502 | ) | $ | 9,601 |
| $ | 628,609 |
| $ | (379,463 | ) | $ | 249,146 |
| $ | (233,818 | ) | $ | 15,328 |
| Securities borrowed | 113,926 |
| (8,814 | ) | 105,112 |
| (76,805 | ) | 28,307 |
| 166,718 |
| (26,960 | ) | 139,758 |
| (104,990 | ) | 34,768 |
| Liabilities | | | Securities sold under repurchase agreements | $ | 398,218 |
| $ | (250,505 | ) | $ | 147,713 |
| $ | (129,178 | ) | $ | 18,535 |
| $ | 555,172 |
| $ | (379,463 | ) | $ | 175,709 |
| $ | (151,566 | ) | $ | 24,143 |
| Securities loaned and other(a) | 27,228 |
| (8,814 | ) | 18,414 |
| (18,151 | ) | 263 |
| 36,649 |
| (26,960 | ) | 9,689 |
| (9,654 | ) | 35 |
|
| | | 2016 | 2018 | December 31, (in millions) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets(b) | Amounts not nettable on the Consolidated balance sheets(c) | Net amounts(d) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets | Amounts not nettable on the Consolidated balance sheets(b) | Net amounts(c) | Assets | | | Securities purchased under resale agreements | $ | 480,735 |
| $ | (250,832 | ) | $ | 229,903 |
| $ | (222,413 | ) | $ | 7,490 |
| $ | 691,116 |
| $ | (369,612 | ) | $ | 321,504 |
| $ | (308,854 | ) | $ | 12,650 |
| Securities borrowed | 96,409 |
| — |
| 96,409 |
| (66,822 | ) | 29,587 |
| 132,955 |
| (20,960 | ) | 111,995 |
| (79,747 | ) | 32,248 |
| Liabilities | | | Securities sold under repurchase agreements | $ | 402,465 |
| $ | (250,832 | ) | $ | 151,633 |
| $ | (133,300 | ) | $ | 18,333 |
| $ | 541,587 |
| $ | (369,612 | ) | $ | 171,975 |
| $ | (149,125 | ) | $ | 22,850 |
| Securities loaned and other(a) | 22,451 |
| — |
| 22,451 |
| (22,177 | ) | 274 |
| 33,700 |
| (20,960 | ) | 12,740 |
| (12,358 | ) | 382 |
|
| | (a) | Includes securities-for-securities lending transactionsagreements of $9.2$3.7 billion and $9.1$3.3 billion at December 31, 20172019 and 2016,2018, respectively, accounted for at fair value, where the Firm is acting as lender. These amounts are presentedIn the Consolidated balance sheets, the Firm recognizes the securities received at fair value within other assets and the obligation to return those securities within accounts payable and other liabilities in the Consolidated balance sheets.liabilities. |
| | (b) | Includes securities financing agreements accounted for at fair value. At December 31, 2017 and 2016, included securities purchased under resale agreements of $14.7 billion and $21.5 billion, respectively, and securities sold under agreements to repurchase of $697 million and $687 million, respectively. There were $3.0 billion of securities borrowed at December 31, 2017 and there were no securities borrowed at December 31, 2016. There were no securities loaned accounted for at fair value in either period. |
| | (c) | In some cases, collateral exchanged with a counterparty exceeds the net asset or liability balance with that counterparty. In such cases, the amounts reported in this column are limited to the related net asset or liability with that counterparty. |
| | (d)(c) | Includes securities financing agreements that provide collateral rights, but where an appropriate legal opinion with respect to the master netting agreement has not been either sought or obtained. At December 31, 20172019 and 2016,2018, included $7.5$11.0 billion and $4.8$7.9 billion, respectively, of securities purchased under resale agreements; $25.5$31.9 billion and $27.1$30.3 billion, respectively, of securities borrowed; $16.5$22.7 billion and $15.9$21.5 billion, respectively, of securities sold under agreements to repurchase;repurchase agreements; and $29$7 million and $90$25 million, respectively, of securities loaned and other. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 209215 |
Notes to consolidated financial statements
The tables below present as of December 31, 20172019 and 20162018 the types of financial assets pledged in securities financing agreements and the remaining contractual maturity of the securities financing agreements. | | | | | | | | | | | | | | | | Gross liability balance | | 2017 | | 2016 | December 31, (in millions) | Securities sold under repurchase agreements | Securities loaned and other(b) | | Securities sold under repurchase agreements | Securities loaned and other(b) | Mortgage-backed securities: | | | | | | U.S. government agencies(a) | $ | 13,100 |
| $ | — |
| | $ | 14,034 |
| $ | — |
| Residential - nonagency | 2,972 |
| — |
| | 6,224 |
| — |
| Commercial - nonagency | 1,594 |
| — |
| | 4,173 |
| — |
| U.S. Treasury and government agencies(a) | 177,581 |
| 14 |
| | 185,145 |
| — |
| Obligations of U.S. states and municipalities | 1,557 |
| — |
| | 2,491 |
| — |
| Non-U.S. government debt | 170,196 |
| 2,485 |
| | 149,008 |
| 1,279 |
| Corporate debt securities | 14,231 |
| 287 |
| | 18,140 |
| 108 |
| Asset-backed securities | 3,508 |
| — |
| | 7,721 |
| — |
| Equity securities | 13,479 |
| 24,442 |
| | 15,529 |
| 21,064 |
| Total | $ | 398,218 |
| $ | 27,228 |
| | $ | 402,465 |
| $ | 22,451 |
|
| | | | | | | | | | | | | | | | | | Remaining contractual maturity of the agreements | | Overnight and continuous | | | Greater than 90 days | | 2017 (in millions) | Up to 30 days | 30 – 90 days | Total | Total securities sold under repurchase agreements | $ | 166,425 |
| $ | 156,434 |
| $ | 41,611 |
| $ | 33,748 |
| $ | 398,218 |
| Total securities loaned and other(b) | 22,876 |
| 375 |
| 2,328 |
| 1,649 |
| 27,228 |
|
| | | | | | | | | | | | | | | | | | Remaining contractual maturity of the agreements | | Overnight and continuous | | | Greater than 90 days | | 2016 (in millions) | Up to 30 days | 30 – 90 days | Total | Total securities sold under repurchase agreements | $ | 140,318 |
| $ | 157,860 |
| $ | 55,621 |
| $ | 48,666 |
| $ | 402,465 |
| Total securities loaned and other(b) | 13,586 |
| 1,371 |
| 2,877 |
| 4,617 |
| 22,451 |
|
| | | | | | | | | | | | | | | | | | Gross liability balance | | 2019 | | 2018 | December 31, (in millions) | Securities sold under repurchase agreements | | Securities loaned and other | | Securities sold under repurchase agreements | | Securities loaned and other | Mortgage-backed securities: | | | | | | | | U.S. GSEs and government agencies | $ | 34,119 |
| | $ | — |
| | $ | 34,311 |
| (a) | $ | — |
| Residential - nonagency | 1,239 |
| | — |
| | 2,165 |
| | — |
| Commercial - nonagency | 1,612 |
| | — |
| | 1,390 |
| | — |
| U.S. Treasury, GSEs and government agencies | 334,398 |
| | 29 |
| | 317,578 |
| (a) | 69 |
| Obligations of U.S. states and municipalities | 1,181 |
| | — |
| | 1,150 |
| | — |
| Non-U.S. government debt | 145,548 |
| | 1,528 |
| | 154,900 |
| | 4,313 |
| Corporate debt securities | 13,826 |
| | 1,580 |
| | 13,898 |
| | 428 |
| Asset-backed securities | 1,794 |
| | — |
| | 3,867 |
| | — |
| Equity securities | 21,455 |
| | 33,512 |
| | 12,328 |
| | 28,890 |
| Total | $ | 555,172 |
| | $ | 36,649 |
| | $ | 541,587 |
| | $ | 33,700 |
|
| | (a) | PriorThe prior period amounts werehave been revised to conform with the current period presentation. |
| | (b) | Includes securities-for-securities lending transactions of $9.2 billion and $9.1 billion at December 31, 2017 and 2016, respectively, accounted for at fair value, where the Firm is acting as lender. These amounts are presented within accounts payable and other liabilities on the Consolidated balance sheets. |
| | | | | | | | | | | | | | | | | | | | Remaining contractual maturity of the agreements | | Overnight and continuous | | | | | Greater than 90 days | | 2019 (in millions) | | Up to 30 days | | 30 – 90 days | Total | Total securities sold under repurchase agreements | $ | 225,134 |
| | $ | 199,870 |
| | $ | 57,305 |
| $ | 72,863 |
| $ | 555,172 |
| Total securities loaned and other | 32,028 |
| | 1,706 |
| | 937 |
| 1,978 |
| 36,649 |
|
| | | | | | | | | | | | | | | | | | | | Remaining contractual maturity of the agreements | | Overnight and continuous | | | | | Greater than 90 days | | 2018 (in millions) | | Up to 30 days | | 30 – 90 days | Total | Total securities sold under repurchase agreements | $ | 247,579 |
| | $ | 174,971 |
| | $ | 71,637 |
| $ | 47,400 |
| $ | 541,587 |
| Total securities loaned and other | 28,402 |
| | 997 |
| | 2,132 |
| 2,169 |
| 33,700 |
|
Transfers not qualifying for sale accounting At December 31, 20172019 and 2016,2018, the Firm held $1.5 $743 million and $2.1 billion, and $5.9 billion, respectively, of financial assets for which the rights have been transferred to third parties; however, the transfers did not qualify as a sale in accordance with U.S. GAAP. These transfers have been recognized as collateralized financing transactions. The transferred assets are recorded in trading assets and loans, and the corresponding liabilities are recorded predominantly in short-term borrowings on the Consolidated balance sheets. The prior period amount has been revised to conform with the current period presentation.
| | | | 210216 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Note 12 – Loans Loan accounting framework The accounting for a loan depends on management’s strategy for the loan, and on whether the loan was credit-impaired at the date of acquisition. The Firm accounts for loans based on the following categories: Originated or purchased loans held-for-investment (i.e., “retained”), other than PCI loans Loans held-for-sale Loans at fair value PCI loans held-for-investment The following provides a detailed accounting discussion of these loan categories: Loans held-for-investment (other than PCI loans) Originated or purchased loans held-for-investment, other than PCI loans, are recorded at the principal amount outstanding, net of the following: charge-offs; interest applied to principal (for loans accounted for on the cost recovery method); unamortized discounts and premiums; and net deferred loan fees or costs. Credit card loans also include billed finance charges and fees net of an allowance for uncollectible amounts. Interest income Interest income on performing loans held-for-investment, other than PCI loans, is accrued and recognized as interest income at the contractual rate of interest. Purchase price discounts or premiums, as well as net deferred loan fees or costs, are amortized into interest income over the contractual life of the loan to produce a level rateas an adjustment of return.yield. Nonaccrual loans Nonaccrual loans are those on which the accrual of interest has been suspended. Loans (other than credit card loans and certain consumer loans insured by U.S. government agencies) are placed on nonaccrual status and considered nonperforming when full payment of principal and interest is not expected, regardless of delinquency status, or when principal and interest has been in default for a period of 90 days or more, unless the loan is both well-secured and in the process of collection. A loan is determined to be past due when the minimum payment is not received from the borrower by the contractually specified due date or for certain loans (e.g., residential real estate loans), when a monthly payment is due and unpaid for 30 days or more. Finally, collateral-dependent loans are typically maintained on nonaccrual status. On the date a loan is placed on nonaccrual status, all interest accrued but not collected is reversed against interest income. In addition, the amortization of deferred amounts is suspended. Interest income on nonaccrual loans may be recognized as cash interest payments are received (i.e., on a cash basis) if the recorded loan balance is deemed fully collectible; however, if there is doubt regarding the ultimate collectibility of the recorded loan balance, all interest cash receipts are applied to reduce the carrying value of the loan (the cost recovery method). For consumer loans, application of this policy typically results in the Firm recognizing interest income on nonaccrual consumer loans on a cash basis. A loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, the terms of the restructured loan. As permitted by regulatory guidance, credit card loans are generally exempt from being placed on nonaccrual status; accordingly, interest and fees related to credit card loans continue to accrue until the loan is charged off or paid in full. However, theThe Firm separately establishes an allowance, which is offset againstreduces loans and is charged to interest income, for the estimated uncollectible portion of accrued and billed interest and fee income on credit card loans. The allowance is established with a charge to interest income and is reported as an offset to loans. Allowance for loan losses The allowance for loan losses represents the estimated probable credit losses inherent in the held-for-investment loan portfolio at the balance sheet date and is recognized on the balance sheet as a contra asset, which brings the recorded investment to the net carrying value. Changes in the allowance for loan losses are recorded in the provision for credit losses on the Firm’s Consolidated statements of income. SeeRefer to Note 13 for further information on the Firm’s accounting policies for the allowance for loan losses. Charge-offs Consumer loans, other than risk-rated business banking and auto loans, and PCI loans, are generally charged off or charged down to the net realizable value of the underlying collateral (i.e., fair value less costs to sell), with an offset to the allowance for loan losses, upon reaching specified stages of delinquency in accordance with standards established by the FFIEC. Residential real estate loans and non-modified credit card loans are generally charged off no later than180 dayspast due.Scored auto student and modified credit card loans are charged off no later than120 dayspast due. Certain consumer loans will be charged off or charged down to their net realizable value earlier than the FFIEC charge-off standards in certain circumstances as follows: Loans modified in a TDR that are determined to be collateral-dependent.
| | • | Loans modified in a TDR that are determined to be collateral-dependent. |
Loans to borrowers who have experienced an event that suggests a loss is either known or highly certain are subject to accelerated charge-off standards (e.g., residential real estate and auto loans are charged off within 60 days of receiving notification of a bankruptcy filing). | | • | Auto loans upon repossession of the automobile. |
Other than in certain limited circumstances, the automobile. Firm typically does not recognize charge-offs on government-guaranteed loans.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 211217 |
Notes to consolidated financial statements
Other than in certain limited circumstances, the Firm typically does not recognize charge-offs on government-guaranteed loans.
Wholesale loans, risk-rated business banking loans and risk-rated auto loans are charged off when it is highly certain that a loss has been realized, including situations where a loan is determined to be both impaired and collateral-dependent. The determination of whether to recognize a charge-off includes many factors, including the prioritization of the Firm’s claim in bankruptcy, expectations of the workout/restructuring of the loan and valuation of the borrower’s equity or the loan collateral. When a loan is charged down to the estimated net realizable value, the determination of the fair value of the collateral depends on the type of collateral (e.g., securities, real estate). In cases where the collateral is in the form of liquid securities, the fair value is based on quoted market prices or broker quotes. For illiquid securities or other financial assets, the fair value of the collateral is generally estimated using a discounted cash flow model. For residential real estate loans, collateral values are based upon external valuation sources. When it becomes likely that a borrower is either unable or unwilling to pay, the Firm obtainsutilizes a broker’s price opinion, appraisal and/or an automated valuation model of the home based on an exterior-only valuation (“exterior opinions”), which is then updated at least everysixtwelve months thereafter., or more frequently depending on various market factors. As soon as practicable after the Firm receives the property in satisfaction of a debt (e.g., by taking legal title or physical possession), the Firm generally obtains an appraisal based on an inspection that includes the interior of the home (“interior appraisals”). Exterior opinions and interior appraisals are discounted based upon the Firm’s experience with actual liquidation values as compared with the estimated values provided by exterior opinions and interior appraisals, considering state-specific factors. For commercial real estate loans, collateral values are generally based on appraisals from internal and external valuation sources. Collateral values are typically updated everysixtotwelve months, either by obtaining a new appraisal or by performing an internal analysis, in accordance with the Firm’s policies. The Firm also considers both borrower- and market-specific factors, which may result in obtaining appraisal updates or broker price opinions at more frequent intervals. Loans held-for-sale Held-for-sale loansLoans held-for-sale are measured at the lower of cost or fair value, with valuation changes recorded in noninterest revenue. For consumer loans, the valuation is performed on a portfolio basis. For wholesale loans, the valuation is performed on an individual loan basis.
Interest income on loans held-for-sale is accrued and recognized based on the contractual rate of interest. Loan origination fees or costs and purchase price discounts or premiums are deferred in a contra loan account until the related loan is sold. The deferred fees or costs and discounts or premiums are an adjustment to the basis of the loan and therefore are included in the periodic determination of the lower of cost or fair value adjustments and/or the gain or loss recognized at the time of sale. Held-for-sale loans are subject to the nonaccrual policies described above.
Because held-for-salethese loans are recognized at the lower of cost or fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans. However, loans held-for-sale are subject to the nonaccrual policies described above. Loans at fair value Loans used in a market-making strategy or risk managed on a fair value basis are measured at fair value, with changes in fair value recorded in noninterest revenue. Interest income on these loans is accrued and recognized based on the contractual rate of interest. Changes in fair value are recognized in noninterest revenue. Loan origination fees are recognized upfront in noninterest revenue. Loan origination costs are recognized in the associated expense category as incurred. Because these loans are recognized at fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans.However, loans at fair value are subject to the nonaccrual policies described above. SeeRefer to Note 3 for further information on the Firm’s elections of fair value accounting under the fair value option. SeeRefer to Note 2 and Note 3 for further information on loans carried at fair value and classified as trading assets.
PCI loans PCI loans held-for-investment are initially measured at fair value. PCI loans have evidence of credit deterioration since the loan’s origination date and therefore it is probable, at acquisition, that all contractually required payments will not be collected. Because PCI loans are initially measured at fair value, which includes an estimate of future credit losses, no allowance for loan losses related to PCI loans is recorded at the acquisition date. SeeRefer to page 223 229 of this Note for information on accounting for PCI loans subsequent to their acquisition.
| | | | 212218 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Loan classification changes Loans in the held-for-investment portfolio that management decides to sell are transferred to the held-for-sale portfolio at the lower of cost or fair value on the date of transfer. Credit-related losses are charged against the allowance for loan losses; non-credit related losses such as those due to changes in interest rates or foreign currency exchange rates are recognized in noninterest revenue. In the event that management decides to retain a loan in the held-for-sale portfolio, the loan is transferred to the held-for-investment portfolio at the lower of cost or fair value on the date of transfer. These loans are subsequently assessed for impairment based on the Firm’s allowance methodology. ForRefer to Note 13 for a further discussion of the methodologies used in establishing the Firm’s allowance for loan losses, see Note 13.losses. Loan modifications The Firm seeks to modify certain loans in conjunction with its loss-mitigation activities. Through the modification, JPMorgan Chase grants one or more concessions to a borrower who is experiencing financial difficulty in order to minimize the Firm’s economic loss and avoid foreclosure or repossession of the collateral, and to ultimately maximize payments received by the Firm from the borrower. The concessions granted vary by program and by borrower-specific characteristics, and may include interest rate reductions, term extensions, payment deferrals, principal forgiveness, or the acceptance of equity or other assets in lieu of payments. Such modifications are accounted for and reported as TDRs. A loan that has been modified in a TDR is generally considered to be impaired until it matures, is repaid, or is otherwise liquidated, regardless of whether the borrower performs under the modified terms. In certain limited cases, the effective interest rate applicable to the modified loan is at or above the current market rate at the time of the restructuring. In such circumstances, and assuming that the loan subsequently performs under its modified terms and the Firm expects to collect all contractual principal and interest cash flows, the loan is disclosed as impaired and as a TDR only during the year of the modification; in subsequent years, the loan is not disclosed as an impaired loan or as a TDR so long as repayment of the restructured loan under its modified terms is reasonably assured. Loans, except for credit card loans, modified in a TDR are generally placed on nonaccrual status, although in many cases such loans were already on nonaccrual status prior to modification. These loans may be returned to performing status (the accrual of interest is resumed) if the following criteria are met: (i) the borrower has performed under the modified terms for a minimum of six months and/or six 6 payments, and (ii) the Firm has an expectation that repayment of the modified loan is reasonably assured based on, for example, the borrower’s debt capacity and level of future earnings, collateral values, LTV ratios, and other current market considerations. In certain limited and well-defined circumstances in which the loan is current at the modification date, such loans are not placed on nonaccrual status at the time of modification. Because loans modified in TDRs are considered to be impaired, these loans are measured for impairment using the Firm’s established asset-specific allowance methodology, which considers the expected re-default rates for the modified loans. A loan modified in a TDR generally remains subject to the asset-specific allowance methodology throughout its remaining life, regardless of whether the loan is performing and has been returned to accrual status and/or the loan has been removed from the impaired loans disclosures (i.e., loans restructured at market rates). ForRefer to Note 13 for further discussion of the methodology used to estimate the Firm’s asset-specific allowance, see Note 13.allowance. Foreclosed property The Firm acquires property from borrowers through loan restructurings, workouts, and foreclosures. Property acquired may include real property (e.g., residential real estate, land, and buildings) and commercial and personal property (e.g., automobiles, aircraft, railcars, and ships). The Firm recognizes foreclosed property upon receiving assets in satisfaction of a loan (e.g., by taking legal title or physical possession). For loans collateralized by real property, the Firm generally recognizes the asset received at foreclosure sale or upon the execution of a deed in lieu of foreclosure transaction with the borrower. Foreclosed assets are reported in other assets on the Consolidated balance sheets and initially recognized at fair value less costs to sell. Each quarter the fair value of the acquired property is reviewed and adjusted, if necessary, to the lower of cost or fair value. Subsequent adjustments to fair value are charged/credited to noninterest revenue. Operating expense, such as real estate taxes and maintenance, are charged to other expense.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 213219 |
Notes to consolidated financial statements
The Firm’s loan portfolio is divided into three portfolio segments, which are the same segments used by the Firm to determine the allowance for loan losses: Consumer, excluding credit card; Credit card; and Wholesale. Within each portfolio segment the Firm monitors and assesses the credit risk in the following classes of loans, based on the risk characteristics of each loan class. | | | | | | Consumer, excluding credit card(a) | | Credit card | | Wholesale(f) | Residential real estate – excluding PCI • Residential mortgage(b) • Home equity(c) Other consumer loans(d) • Auto(d) • Consumer & Business Banking(d)(e) • Student
Residential real estate – PCI • Home equity • Prime mortgage • Subprime mortgage • Option ARMs | | • Credit card loans | | • Commercial and industrial • Real estate • Financial institutions • Government agenciesGovernments & Agencies • Other(g) |
| | (a) | Includes loans held in CCB, scored prime mortgage and scored home equity loans held in AWM and scored prime mortgage loans held in Corporate. |
| | (b) | Predominantly includes prime loans (including option ARMs) and subprime loans.. |
| | (c) | Includes senior and junior lien home equity loans. |
| | (d) | Includes certain business banking and auto dealer risk-rated loans that applyfor which the wholesale methodology is applied for determining the allowance for loan losses; these loans are managed by CCB, and therefore, for consistency in presentation, are included with the other consumer loan classes. |
| | (e) | Predominantly includes Business Banking loans. |
| | (f) | Includes loans held in CIB, CB, AWM and Corporate. Excludes scored prime mortgage and scored home equity loans held in AWM and scored prime mortgage loans held in Corporate. Classes are internally defined and may not align with regulatory definitions. |
| | (g) | Includes loans to: individuals; SPEs;individuals and privateindividual entities (predominantly consists of Wealth Management clients within AWM and includes loans to personal investment companies and personal and testamentary trusts), SPEs and Private education and civic organizations. ForRefer to Note 14 for more information on SPEs, see Note 14.SPEs. |
The following tables summarize the Firm’s loan balances by portfolio segment. | | December 31, 2017 | Consumer, excluding credit card | Credit card(a) | Wholesale | Total | | | December 31, 2019 | | Consumer, excluding credit card | Credit card(a) | Wholesale | Total | | (in millions) | Consumer, excluding credit card | Credit card(a) | Wholesale | Total | | | Retained | (b) | | $ | 332,038 |
| | $ | 168,924 |
| | $ | 444,639 |
| | $ | 945,601 |
| (b) | Held-for-sale | | 128 |
| | 124 |
| | 3,099 |
| | 3,351 |
| | | 3,002 |
| | — |
| | 4,062 |
| | 7,064 |
| | At fair value | | — |
| | — |
| | 2,508 |
| | 2,508 |
| | | — |
| | — |
| | 7,104 |
| | 7,104 |
| | Total | | $ | 372,681 |
| | $ | 149,511 |
| | $ | 408,505 |
| | $ | 930,697 |
| | | $ | 335,040 |
| | $ | 168,924 |
| | $ | 455,805 |
| | $ | 959,769 |
| | | | | | | | | | | | | | | | | | | | | December 31, 2016 | Consumer, excluding credit card | | Credit card(a) | | Wholesale | | Total | | | December 31, 2018 | | Consumer, excluding credit card | | Credit card(a) | | Wholesale | | Total | | (in millions) | Consumer, excluding credit card | | Credit card(a) | | Wholesale | | Total | | | Retained | (b) | | $ | 373,637 |
| | $ | 156,616 |
| | $ | 439,162 |
| | $ | 969,415 |
| (b) | Held-for-sale | | 238 |
| | 105 |
| | 2,285 |
| | 2,628 |
| | | 95 |
| | 16 |
| | 11,877 |
| | 11,988 |
| | At fair value | | — |
| | — |
| | 2,230 |
| | 2,230 |
| | | — |
| | — |
| | 3,151 |
| | 3,151 |
| | Total | | $ | 364,644 |
| | $ | 141,816 |
| | $ | 388,305 |
| | $ | 894,765 |
| | | $ | 373,732 |
| | $ | 156,632 |
| | $ | 454,190 |
| | $ | 984,554 |
| |
| | (a) | Includes accrued interest and fees net of an allowance for the uncollectible portion of accrued interest and fee income. |
| | (b) | Loans (other than PCI loans and those for which the fair value option has been elected) are presented net of unamortized discounts and premiums and net deferred loan fees or costs. These amounts were not material as of December 31, 20172019 and 2016.2018. |
| | | | 214220 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The following table providestables provide information about the carrying value of retained loans purchased, sold and reclassified to held-for-sale during the periods indicated. This table excludesReclassifications of loans recorded at fair value.to held-for sale are non-cash transactions.The Firm manages its exposure to credit risk on an ongoing basis. Selling loans is one way that the Firm reduces its credit exposures. Loans that were reclassified to held-for-sale and sold in a subsequent period are excluded from the sales line of this table. | | | | | | | | | | | | | | | | | | | | | | | | | 2019 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 1,282 |
| (a)(b) | | $ | — |
| | | $ | 1,291 |
| | | $ | 2,573 |
| Sales | | | 30,484 |
| | | — |
| | | 23,435 |
| | | 53,919 |
| Retained loans reclassified to held-for-sale | | | 9,188 |
| | | — |
| | | 2,371 |
| | | 11,559 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | 2018 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 2,543 |
| (a)(b) | | $ | — |
| | | $ | 2,354 |
| | | $ | 4,897 |
| Sales | | | 9,984 |
| | | — |
| | | 16,741 |
| | | 26,725 |
| Retained loans reclassified to held-for-sale | | | 36 |
| | | — |
| | | 2,276 |
| | | 2,312 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | 2017 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 3,461 |
| (a)(b) | | $ | — |
| | | $ | 1,799 |
| | | $ | 5,260 |
| Sales | | | 3,405 |
| | | — |
| | | 11,063 |
| | | 14,468 |
| Retained loans reclassified to held-for-sale | | | 6,340 |
| (c)
| | — |
| | | 1,229 |
| | | 7,569 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | 2016 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 4,116 |
| (a)(b) | | $ | — |
| | | $ | 1,448 |
| | | $ | 5,564 |
| Sales | | | 6,368 |
| | | — |
| | | 8,739 |
| | | 15,107 |
| Retained loans reclassified to held-for-sale | | | 321 |
| | | — |
| | | 2,381 |
| | | 2,702 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | 2015 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 5,279 |
| (a)(b) | | $ | — |
| | | $ | 2,154 |
| | | $ | 7,433 |
| Sales | | | 5,099 |
| | | — |
| | | 9,188 |
| | | 14,287 |
| Retained loans reclassified to held-for-sale | | | 1,514 |
| | | 79 |
| | | 642 |
| | | 2,235 |
|
| | (a) | Purchases predominantly represent the Firm’s voluntary repurchase of certain delinquent loans from loan pools as permitted by Government National Mortgage Association (“Ginnie Mae”) guidelines. The Firm typically elects to repurchase these delinquent loans as it continues to service them and/or manage the foreclosure process in accordance with applicable requirements of Ginnie Mae, FHA, RHS, and/or VA. |
| | (b) | Excludes purchases of retained loans sourced through the correspondent origination channel and underwritten in accordance with the Firm’s standards. Such purchases were $23.5$16.6 billion, $30.4$18.6 billion and $50.3$23.5 billion for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively. |
| | (c) | Includes the Firm’s student loan portfolio which was sold in 2017. |
The following table provides information about gains
Gains and losses on loan sales includingof loans Net gains on sales of loans (including adjustments to record loans held-for-sale at the lower of cost or fair value adjustments,value) recognized in noninterest revenue was $394 million for the year ended December 31, 2019. Gains and losses on loan sales by portfolio segment.of loans were not material for the years ended December 31, 2018 and 2017. In addition, the sale of loans may also result in write downs, recoveries or changes in the allowance recognized in the provision for credit losses. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Net gains/(losses) on sales of loans (including lower of cost or fair value adjustments)(a) | | | | | | Consumer, excluding credit card(b) | $ | (126 | ) | | $ | 231 |
| | $ | 305 |
| Credit card | (8 | ) | | (12 | ) | | 1 |
| Wholesale | 41 |
| | 26 |
| | 34 |
| Total net gains/(losses) on sales of loans (including lower of cost or fair value adjustments) | $ | (93 | ) | | $ | 245 |
| | $ | 340 |
|
| | (a) | Excludes sales related to loans accounted for at fair value. |
| | (b) | Includes amounts related to the Firm’s student loan portfolio which was sold in 2017. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 215221 |
Notes to consolidated financial statements
Consumer, excluding credit card, loan portfolio Consumer loans, excluding credit card loans, consist primarily of residential mortgages, home equity loans and lines of credit, auto loans and consumer and business banking loans and student loans, with a focus on serving the prime consumer credit market. The portfolio also includes home equity loans secured by junior liens, prime mortgage loans with an interest-only payment period, and certain payment-option loans that may result in negative amortization. The following table below provides information about retained consumer loans, excluding credit card, by class. In 2017, the Firm sold its student loan portfolio. | | | | | | | | December 31, (in millions) | 2019 |
| 2018 |
| Residential real estate – excluding PCI | | | Residential mortgage | $ | 199,037 |
| $ | 231,078 |
| Home equity | 23,917 |
| 28,340 |
| Other consumer loans | | | Auto | 61,522 |
| 63,573 |
| Consumer & Business Banking | 27,199 |
| 26,612 |
| Residential real estate – PCI | | | Home equity | 7,377 |
| 8,963 |
| Prime mortgage | 3,965 |
| 4,690 |
| Subprime mortgage | 1,740 |
| 1,945 |
| Option ARMs | 7,281 |
| 8,436 |
| Total retained loans | $ | 332,038 |
| $ | 373,637 |
|
| | | | | | | | December 31, (in millions) | 2017 |
| 2016 |
| Residential real estate – excluding PCI | | | Residential mortgage(a) | $ | 216,496 |
| $ | 192,486 |
| Home equity | 33,450 |
| 39,063 |
| Other consumer loans | | | Auto | 66,242 |
| 65,814 |
| Consumer & Business Banking(a) | 25,789 |
| 24,307 |
| Student(a) | — |
| 7,057 |
| Residential real estate – PCI | | | Home equity | 10,799 |
| 12,902 |
| Prime mortgage | 6,479 |
| 7,602 |
| Subprime mortgage | 2,609 |
| 2,941 |
| Option ARMs | 10,689 |
| 12,234 |
| Total retained loans | $ | 372,553 |
| $ | 364,406 |
|
(a) Certain loan portfolios have been reclassified. The prior period amounts have been revised to conform with the current period presentation.
Delinquency rates are a primary credit quality indicator for consumer loans. Loans that are more than 30 days past due provide an early warning of borrowers who may be experiencing financial difficulties and/or who may be unable or unwilling to repay the loan. As the loan continues to age, it becomes more clear whether the borrower is likely either unable or unwilling to pay. In the case of residential real estate loans, late-stage delinquencies (greater than 150 days past due) are a strong indicator of loans that will ultimately result in a foreclosure or similar liquidation transaction. In addition to delinquency rates, other credit quality indicators for consumer loans vary based on the class of loan, as follows: For residential real estate loans, including both non-PCI and PCI portfolios, the current estimated LTV ratio, or the combined LTV ratio in the case of junior lien loans, is an indicator of the potential loss severity in the event of default. Additionally, LTV or combined LTV ratios can provide insight into a borrower’s continued willingness to pay, as the delinquency rate of high-LTV loans tends to be greater than that for loans where the borrower has equity in the collateral. The geographic distribution of the loan collateral also provides insight as to the credit quality of the portfolio, as factors such as the regional economy, home price changes and specific events such as natural disasters, will affect credit quality. The borrower’s current or “refreshed” FICO score is a secondary credit-quality indicator for certain loans, as FICO scores are an indication of the borrower’s credit payment history. Thus, a loan to a borrower with a low FICO score (less than 660 ) is considered to be of higher risk than a loan to a borrower with a higher FICO score. Further, a loan to a borrower with a high LTV ratio and a low FICO score is at greater risk of default than a loan to a borrower that has both a high LTV ratio and a high FICO score.
| | • | For residential real estate loans, including both non-PCI and PCI portfolios, the current estimated LTV ratio, or the combined LTV ratio in the case of junior lien loans, is an indicator of the potential loss severity in the event of default. Additionally, LTV or combined LTV ratios can provide insight into a borrower’s continued willingness to pay, as the delinquency rate of high-LTV loans tends to be greater than that for loans where the borrower has equity in the collateral. The geographic distribution of the loan collateral also provides insight as to the credit quality of the portfolio, as factors such as the regional economy, home price changes and specific events such as natural disasters, will affect credit quality. The borrower’s current or “refreshed” FICO score is a secondary credit quality indicator for certain loans, as FICO scores are an indication of the borrower’s credit payment history. Thus, a loan to a borrower with a low FICO score (less than 660 ) is considered to be of higher risk than a loan to a borrower with a higher FICO score. Further, a loan to a borrower with a high LTV ratio and a low FICO score is at greater risk of default than a loan to a borrower that has both a high LTV ratio and a high FICO score. |
For scored auto and scored business banking loans, geographic distribution is an indicator of the credit performance of the portfolio. Similar to residential real estate loans, geographic distribution provides insights into the portfolio performance based on regional economic activity and events. Risk-rated business banking and auto loans are similar to wholesale loans in that the primary credit quality indicators are the risk rating that is assigned to the loan and whether the loans are considered to be criticized and/or nonaccrual. Risk ratings are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary for updated information about borrowers’ ability to fulfill their obligations. For further information about risk-rated wholesale loan credit quality indicators, seepage 228of this Note.
| | • | Risk-rated business banking and auto loans are similar to wholesale loans in that the primary credit quality indicators are the internal risk ratings that are assigned to the loan and whether the loans are considered to be criticized and/or nonaccrual. Risk ratings are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary for updated information about borrowers’ ability to fulfill their obligations. Refer to page 234 of this Note for further information about risk-rated wholesale loan credit quality indicators. |
| | | | 216222 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Residential real estate — excluding PCI loans The following table provides information by class for retained residential real estate — excluding retained PCI loans. | | Residential real estate – excluding PCI loans | Residential real estate – excluding PCI loans | | | | | Residential real estate – excluding PCI loans | | | | | December 31, (in millions, except ratios) | Residential mortgage(g) | | Home equity | | Total residential real estate – excluding PCI | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | 2017 | 2016 |
| 2017 | 2016 |
| 2017 | 2016 | 2019 | 2018 |
| 2019 | 2018 |
| 2019 | 2018 | Loan delinquency(a) | | | | | | | | | | | Current | $ | 208,713 |
| $ | 184,133 |
| | $ | 32,391 |
| $ | 37,941 |
| | $ | 241,104 |
| $ | 222,074 |
| $ | 198,024 |
| $ | 225,899 |
| | $ | 23,385 |
| $ | 27,611 |
| | $ | 221,409 |
| $ | 253,510 |
| 30–149 days past due | 4,234 |
| 3,828 |
| | 671 |
| 646 |
| | 4,905 |
| 4,474 |
| 604 |
| 2,763 |
| | 336 |
| 453 |
| | 940 |
| 3,216 |
| 150 or more days past due | 3,549 |
| 4,525 |
| | 388 |
| 476 |
| | 3,937 |
| 5,001 |
| 409 |
| 2,416 |
| | 196 |
| 276 |
| | 605 |
| 2,692 |
| Total retained loans | $ | 216,496 |
| $ | 192,486 |
| | $ | 33,450 |
| $ | 39,063 |
| | $ | 249,946 |
| $ | 231,549 |
| $ | 199,037 |
| $ | 231,078 |
| | $ | 23,917 |
| $ | 28,340 |
| | $ | 222,954 |
| $ | 259,418 |
| % of 30+ days past due to total retained loans(b) | 0.77 | % | 0.75 | % | | 3.17 | % | 2.87 | % | | 1.09 | % | 1.11 | % | 0.49 | % | 0.48 | % | | 2.22 | % | 2.57 | % | | 0.67 | % | 0.71 | % | 90 or more days past due and government guaranteed(c) | $ | 4,172 |
| $ | 4,858 |
| | — |
| — |
| | $ | 4,172 |
| $ | 4,858 |
| $ | 38 |
| $ | 2,541 |
| | — |
| — |
| | $ | 38 |
| $ | 2,541 |
| Nonaccrual loans | 2,175 |
| 2,256 |
| | 1,610 |
| 1,845 |
| | 3,785 |
| 4,101 |
| 1,618 |
| 1,765 |
| | 1,162 |
| 1,323 |
| | 2,780 |
| 3,088 |
| Current estimated LTV ratios(d)(e) | | | | | | | | | | | Greater than 125% and refreshed FICO scores: | | | | | | | | | | | Equal to or greater than 660 | $ | 37 |
| $ | 30 |
| | $ | 10 |
| $ | 70 |
| | $ | 47 |
| $ | 100 |
| $ | 18 |
| $ | 25 |
| | $ | 4 |
| $ | 6 |
| | $ | 22 |
| $ | 31 |
| Less than 660 | 19 |
| 48 |
| | 3 |
| 15 |
| | 22 |
| 63 |
| 8 |
| 13 |
| | 1 |
| 1 |
| | 9 |
| 14 |
| 101% to 125% and refreshed FICO scores: | | | | | | | | | | | Equal to or greater than 660 | 36 |
| 135 |
| | 296 |
| 668 |
| | 332 |
| 803 |
| 31 |
| 37 |
| | 56 |
| 111 |
| | 87 |
| 148 |
| Less than 660 | 88 |
| 177 |
| | 95 |
| 221 |
| | 183 |
| 398 |
| 35 |
| 53 |
| | 19 |
| 38 |
| | 54 |
| 91 |
| 80% to 100% and refreshed FICO scores: | | | | | | | | | | | Equal to or greater than 660 | 4,369 |
| 4,026 |
| | 1,676 |
| 2,961 |
| | 6,045 |
| 6,987 |
| 5,013 |
| 3,977 |
| | 606 |
| 986 |
| | 5,619 |
| 4,963 |
| Less than 660 | 483 |
| 718 |
| | 569 |
| 945 |
| | 1,052 |
| 1,663 |
| 207 |
| 281 |
| | 191 |
| 326 |
| | 398 |
| 607 |
| Less than 80% and refreshed FICO scores: | | | | | | | | | | | Equal to or greater than 660 | 194,758 |
| 169,579 |
| | 25,262 |
| 27,317 |
| | 220,020 |
| 196,896 |
| 186,972 |
| 212,505 |
| | 19,597 |
| 22,632 |
| | 206,569 |
| 235,137 |
| Less than 660 | 6,952 |
| 6,759 |
| | 3,850 |
| 4,380 |
| | 10,802 |
| 11,139 |
| 6,001 |
| 6,457 |
| | 2,776 |
| 3,355 |
| | 8,777 |
| 9,812 |
| No FICO/LTV available | 1,259 |
| 1,650 |
| | 1,689 |
| 2,486 |
| | 2,948 |
| 4,136 |
| 689 |
| 813 |
| | 667 |
| 885 |
| | 1,356 |
| 1,698 |
| U.S. government-guaranteed | 8,495 |
| 9,364 |
| | — |
| — |
| | 8,495 |
| 9,364 |
| 63 |
| 6,917 |
| | — |
| — |
| | 63 |
| 6,917 |
| Total retained loans | $ | 216,496 |
| $ | 192,486 |
| | $ | 33,450 |
| $ | 39,063 |
| | $ | 249,946 |
| $ | 231,549 |
| $ | 199,037 |
| $ | 231,078 |
| | $ | 23,917 |
| $ | 28,340 |
| | $ | 222,954 |
| $ | 259,418 |
| Geographic region(f) | | | | | | | | | | | California | $ | 68,855 |
| $ | 59,802 |
| | $ | 6,582 |
| $ | 7,644 |
| | $ | 75,437 |
| $ | 67,446 |
| $ | 66,278 |
| $ | 74,759 |
| | $ | 4,831 |
| $ | 5,695 |
| | $ | 71,109 |
| $ | 80,454 |
| New York | 27,473 |
| 24,916 |
| | 6,866 |
| 7,978 |
| | 34,339 |
| 32,894 |
| 25,706 |
| 28,847 |
| | 4,885 |
| 5,769 |
| | 30,591 |
| 34,616 |
| Illinois | 14,501 |
| 13,126 |
| | 2,521 |
| 2,947 |
| | 17,022 |
| 16,073 |
| 13,204 |
| 15,249 |
| | 1,788 |
| 2,131 |
| | 14,992 |
| 17,380 |
| Texas | 12,508 |
| 10,772 |
| | 2,021 |
| 2,225 |
| | 14,529 |
| 12,997 |
| 12,601 |
| 13,769 |
| | 1,599 |
| 1,819 |
| | 14,200 |
| 15,588 |
| Florida | 9,598 |
| 8,395 |
| | 1,847 |
| 2,133 |
| | 11,445 |
| 10,528 |
| 10,454 |
| 10,704 |
| | 1,325 |
| 1,575 |
| | 11,779 |
| 12,279 |
| New Jersey | 7,142 |
| 6,374 |
| | 1,957 |
| 2,253 |
| | 9,099 |
| 8,627 |
| | Washington | 6,962 |
| 5,451 |
| | 1,026 |
| 1,229 |
| | 7,988 |
| 6,680 |
| 7,708 |
| 8,304 |
| | 720 |
| 869 |
| | 8,428 |
| 9,173 |
| Colorado | 7,335 |
| 6,306 |
| | 632 |
| 677 |
| | 7,967 |
| 6,983 |
| 7,777 |
| 8,140 |
| | 444 |
| 521 |
| | 8,221 |
| 8,661 |
| New Jersey | | 5,792 |
| 7,302 |
| | 1,394 |
| 1,642 |
| | 7,186 |
| 8,944 |
| Massachusetts | 6,323 |
| 5,834 |
| | 295 |
| 371 |
| | 6,618 |
| 6,205 |
| 5,596 |
| 6,574 |
| | 202 |
| 236 |
| | 5,798 |
| 6,810 |
| Arizona | 4,109 |
| 3,595 |
| | 1,439 |
| 1,772 |
| | 5,548 |
| 5,367 |
| 3,929 |
| 4,434 |
| | 932 |
| 1,158 |
| | 4,861 |
| 5,592 |
| All other(f)(g) | 51,690 |
| 47,915 |
| | 8,264 |
| 9,834 |
| | 59,954 |
| 57,749 |
| 39,992 |
| 52,996 |
| | 5,797 |
| 6,925 |
| | 45,789 |
| 59,921 |
| Total retained loans | $ | 216,496 |
| $ | 192,486 |
| | $ | 33,450 |
| $ | 39,063 |
| | $ | 249,946 |
| $ | 231,549 |
| $ | 199,037 |
| $ | 231,078 |
| | $ | 23,917 |
| $ | 28,340 |
| | $ | 222,954 |
| $ | 259,418 |
|
| | (a) | Individual delinquency classifications include mortgage loans insured by U.S. government agencies as follows: current included $2.4 billion$17 million and $2.5$2.8 billion; 30–149 days past due included $3.2 billion$20 million and $3.1$2.1 billion; and 150 or more days past due included $2.9 billion$26 million and $3.8$2.0 billion at December 31, 20172019 and 2016,2018, respectively. |
| | (b) | At December 31, 20172019 and 2016,2018, residential mortgage loans excluded mortgage loans insured by U.S. government agencies of $6.1 billion$46 million and $6.9$4.1 billion, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee. |
| | (c) | These balances which are 90 days or more past due, were excluded from nonaccrual loans as the loans are guaranteed by U.S government agencies. Typically the principal balance of the loans is insured and interest is guaranteed at a specified reimbursement rate subject to meeting agreed-upon servicing guidelines. At December 31, 20172019 and 2016,2018, these balances included $1.5 billion$34 million and $2.2 billion,$999 million, respectively, of loans that are no longer accruing interest based on the agreed-upon servicing guidelines. For the remaining balance, interest is being accrued at the guaranteed reimbursement rate. There were no0 loans that were not guaranteed by U.S. government agencies that are 90 or more days past due and still accruing interest at December 31, 20172019 and 2016.2018. |
| | (d) | Represents the aggregate unpaid principal balance of loans divided by the estimated current property value. Current property values are estimated, at a minimum, quarterly, based on home valuation models using nationally recognized home price index valuation estimates incorporating actual data to the extent available and forecasted data where actual data is not available. These property values do not represent actual appraised loan level collateral values; as such, the resulting ratios are necessarily imprecise and should be viewed as estimates. Current estimated combined LTV for junior lien home equity loans considers all available lien positions, as well as unused lines, related to the property. |
| | (e) | Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis. |
| | (f) | The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2019. |
| | (g) | At December 31, 20172019 and 2016,2018, included mortgage loans insured by U.S. government agencies of $8.5$63 million and $6.9 billion, and $9.4 billion, respectively. |
| | (g) | Certain loan portfolios have been reclassified. The prior period These amounts have been revised to conform withexcluded from the current period presentation.geographic regions presented based upon the government guarantee. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 217223 |
Notes to consolidated financial statements
Approximately 37% of the home equity portfolio are senior lien loans; the remaining balance are junior lien HELOANs or HELOCs. The following table representsprovides the Firm’s delinquency statistics for junior lien home equity loans and lines as ofDecember 31, 20172019 and 20162018. | | | | Total loans | | Total 30+ day delinquency rate | | Total loans | | Total 30+ day delinquency rate | December 31, (in millions except ratios) | | 2017 | 2016 | | 2017 | 2016 | | 2019 | 2018 | | 2019 | 2018 | HELOCs:(a) | | | | | | | | | Within the revolving period(b) | | $ | 6,363 |
| $ | 10,304 |
| | 0.50 | % | 1.27 | % | | $ | 5,488 |
| $ | 5,608 |
| | 0.35 | % | 0.25 | % | Beyond the revolving period | | 13,532 |
| 13,272 |
| | 3.56 |
| 3.05 |
| | 8,724 |
| 11,286 |
| | 2.48 |
| 2.80 |
| HELOANs | | 1,371 |
| 1,861 |
| | 3.50 |
| 2.85 |
| | 754 |
| 1,030 |
| | 2.52 |
| 2.82 |
| Total | | $ | 21,266 |
| $ | 25,437 |
| | 2.64 | % | 2.32 | % | | $ | 14,966 |
| $ | 17,924 |
| | 1.70 | % | 2.00 | % |
(a) These HELOCs are predominantly revolving loans for a 10-year period, after which time the HELOC converts to a loan with a 20-year amortization period, but also include HELOCs that allow interest-only payments beyond the revolving period. (b) The Firm manages the risk of HELOCs during their revolving period by closing or reducing the undrawn line to the extent permitted by law when borrowers are experiencing financial difficulty. HELOCs beyond the revolving period and HELOANs have higher delinquency rates than HELOCs within the revolving period. That is primarily because the fully-amortizing payment that is generally required for those products is higher than the minimum payment optionsavailable for HELOCs within the revolving period. The higher delinquency rates associated with amortizing HELOCs and HELOANs are factored into the Firm’s allowance for loan losses. Impaired loans The table below sets forthprovides information about the Firm’s residential real estate impaired loans, excluding PCI loans. These loans are considered to be impaired as they have been modified in a TDR. All impaired loans are evaluated for an asset-specific allowance as described in Note 13. | | December 31, (in millions) | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | | Impaired loans | | | | | | | | | | | | With an allowance | $ | 4,407 |
| $ | 4,689 |
| | $ | 1,236 |
| $ | 1,266 |
| | $ | 5,643 |
| $ | 5,955 |
| $ | 2,851 |
| $ | 3,381 |
| | $ | 1,042 |
| $ | 1,151 |
| | $ | 3,893 |
| $ | 4,532 |
| | Without an allowance(a) | 1,213 |
| 1,343 |
| | 882 |
| 998 |
| | 2,095 |
| 2,341 |
| 1,154 |
| 1,184 |
| | 879 |
| 907 |
| | 2,033 |
| 2,091 |
| | Total impaired loans(b)(c) | $ | 5,620 |
| $ | 6,032 |
| | $ | 2,118 |
| $ | 2,264 |
| | $ | 7,738 |
| $ | 8,296 |
| $ | 4,005 |
| $ | 4,565 |
| | $ | 1,921 |
| $ | 2,058 |
| | $ | 5,926 |
| $ | 6,623 |
| | Allowance for loan losses related to impaired loans | $ | 62 |
| $ | 68 |
| | $ | 111 |
| $ | 121 |
| | $ | 173 |
| $ | 189 |
| $ | 52 |
| $ | 88 |
| | $ | 13 |
| $ | 45 |
| | $ | 65 |
| $ | 133 |
| | Unpaid principal balance of impaired loans(d) | 7,741 |
| 8,285 |
| | 3,701 |
| 3,847 |
| | 11,442 |
| 12,132 |
| 5,438 |
| 6,207 |
| | 3,301 |
| 3,531 |
| | 8,739 |
| 9,738 |
| | Impaired loans on nonaccrual status(e) | 1,743 |
| 1,755 |
| | 1,032 |
| 1,116 |
| | 2,775 |
| 2,871 |
| 1,367 |
| 1,459 |
| | 965 |
| 963 |
| | 2,332 |
| 2,422 |
| |
| | (a) | Represents collateral-dependent residential real estate loans that are charged off to the fair value of the underlying collateral less costs to sell. The Firm reports, in accordance with regulatory guidance, residential real estate loans that have been discharged under Chapter 7 bankruptcy and not reaffirmed by the borrower (“Chapter 7 loans”) as collateral-dependent nonaccrual TDRs, regardless of their delinquency status. At December 31, 2017,2019, Chapter 7 residential real estate loans included approximately 12%9% of residential mortgages and approximately 7% of home equity and 15% of residential mortgages that were 30 days or more past due. |
| | (b) | At December 31, 20172019 and 2016, $3.8 billion2018, $14 million and $3.4$4.1 billion, respectively, of loans modified subsequent to repurchase from Ginnie Mae in accordance with the standards of the appropriate government agency (i.e., FHA, VA, RHS) are not included in the table above. When such loans perform subsequent to modification in accordance with Ginnie Mae guidelines, they are generally sold back into Ginnie Mae loan pools. Modified loans that do not re-perform become subject to foreclosure. |
| | (c) | Predominantly all residential real estate impaired loans excluding PCI loans,in the table above are in the U.S. |
| | (d) | Represents the contractual amount of principal owed at December 31, 20172019 and 2016.2018. The unpaid principal balance differs from the impaired loan balances due to various factors including charge-offs, net deferred loan fees or costs, and unamortized discounts or premiums on purchased loans. |
| | (e) | As of December 31, 20172019 and 2016,2018, nonaccrual loans included $2.2$1.9 billion and $2.3$2.0 billion, respectively, of TDRs for which the borrowers were less than 90 days past due. ForRefer to the Loan accounting framework on pages 217–219 of this Note for additional information about loans modified in a TDR that are on nonaccrual status refer to the Loan accounting framework on pages 211–213 of this Note.status. |
| | | | 218224 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The following table presents average impaired loans and the related interest income reported by the Firm. | | Year ended December 31, (in millions) | Average impaired loans | | Interest income on impaired loans(a) | | Interest income on impaired loans on a cash basis(a) | Average impaired loans | | Interest income on impaired loans(a) | | Interest income on impaired loans on a cash basis(a) | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 | Residential mortgage | $ | 5,797 |
| $ | 6,376 |
| $ | 7,697 |
| | $ | 287 |
| $ | 305 |
| $ | 348 |
| | $ | 75 |
| $ | 77 |
| $ | 87 |
| $ | 4,307 |
| $ | 5,082 |
| $ | 5,797 |
| | $ | 224 |
| $ | 257 |
| $ | 287 |
| | $ | 68 |
| $ | 75 |
| $ | 75 |
| Home equity | 2,189 |
| 2,311 |
| 2,369 |
| | 127 |
| 125 |
| 128 |
| | 80 |
| 80 |
| 85 |
| 2,007 |
| 2,123 |
| 2,222 |
| | 132 |
| 131 |
| 127 |
| | 83 |
| 84 |
| 80 |
| Total residential real estate – excluding PCI | $ | 7,986 |
| $ | 8,687 |
| $ | 10,066 |
| | $ | 414 |
| $ | 430 |
| $ | 476 |
| | $ | 155 |
| $ | 157 |
| $ | 172 |
| $ | 6,314 |
| $ | 7,205 |
| $ | 8,019 |
| | $ | 356 |
| $ | 388 |
| $ | 414 |
| | $ | 151 |
| $ | 159 |
| $ | 155 |
|
| | (a) | Generally, interest income on loans modified in TDRs is recognized on a cash basis until such time as the borrower has made a minimum of six6 payments under the new terms, unless the loan is deemed to be collateral-dependent. |
Loan modifications Modifications of residential real estate loans, excluding PCI loans, are generally accounted for and reported as TDRs. There were no additional commitments to lend to borrowers whose residential real estate loans, excluding PCI loans, have been modified in TDRs. The following table presents new TDRs reported by the Firm. | | Year ended December 31, (in millions) | 2017 |
| 2016 |
| 2015 |
| 2019 |
| 2018 |
| 2017 |
| Residential mortgage | $ | 373 |
| $ | 254 |
| $ | 267 |
| $ | 234 |
| $ | 401 |
| $ | 373 |
| Home equity | 321 |
| 385 |
| 401 |
| 256 |
| 335 |
| 383 |
| Total residential real estate – excluding PCI | $ | 694 |
| $ | 639 |
| $ | 668 |
| $ | 490 |
| $ | 736 |
| $ | 756 |
|
Nature and extent of modifications The U.S. Treasury’s Making Home AffordableFirm’s proprietary modification programs as well as the Firm’s proprietary modificationgovernment programs, including U.S. GSEs, generally provide various concessions to financially troubled borrowers including, but not limited to, interest rate reductions, term or payment extensions and deferral of principal and/or interest payments that would otherwise have been required under the terms of the original agreement. The following table provides information about how residential real estate loans, excluding PCI loans, were modified under the Firm’s loss mitigation programs described above during the periods presented. This table excludes Chapter 7 loans where the sole concession granted is the discharge of debt. | | Year ended December 31, | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | 2019 | 2018 | 2017 | | 2019 | 2018 | | 2017 | | 2019 | 2018 | | 2017 | | Number of loans approved for a trial modification | 1,283 |
| 1,945 |
| 2,711 |
| | 2,321 |
| 3,760 |
| 3,933 |
| | 3,604 |
| 5,705 |
| 6,644 |
| 2,105 |
| 2,570 |
| 1,283 |
| | 3,767 |
| 4,605 |
| (c) | 5,765 |
| (c) | 5,872 |
| 7,175 |
| (c) | 7,048 |
| (c) | Number of loans permanently modified | 2,628 |
| 3,338 |
| 3,145 |
| | 5,624 |
| 4,824 |
| 4,296 |
| | 8,252 |
| 8,162 |
| 7,441 |
| 1,448 |
| 2,907 |
| 2,628 |
| | 3,470 |
| 4,946 |
| | 5,624 |
| | 4,918 |
| 7,853 |
| | 8,252 |
| | Concession granted:(a) | | | | | | | | | | | | | | | | Interest rate reduction | 63 | % | 76 | % | 71 | % | | 59 | % | 75 | % | 66 | % | | 60 | % | 76 | % | 68 | % | 66 | % | 40 | % | 63 | % | | 81 | % | 62 | % | | 59 | % | | 77 | % | 54 | % | | 60 | % | | Term or payment extension | 72 |
| 90 |
| 81 |
| | 69 |
| 83 |
| 89 |
| | 70 |
| 86 |
| 86 |
| 90 |
| 55 |
| 72 |
| | 64 |
| 66 |
| | 69 |
| | 71 |
| 62 |
| | 70 |
| | Principal and/or interest deferred | 15 |
| 16 |
| 27 |
| | 10 |
| 19 |
| 23 |
| | 12 |
| 18 |
| 24 |
| 26 |
| 44 |
| 15 |
| | 7 |
| 20 |
| | 10 |
| | 13 |
| 29 |
| | 12 |
| | Principal forgiveness | 16 |
| 26 |
| 28 |
| | 13 |
| 9 |
| 7 |
| | 14 |
| 16 |
| 16 |
| 6 |
| 8 |
| 16 |
| | 5 |
| 7 |
| | 13 |
| | 5 |
| 7 |
| | 14 |
| | Other(b) | 33 |
| 25 |
| 11 |
| | 31 |
| 6 |
| — |
| | 32 |
| 14 |
| 5 |
| 45 |
| 38 |
| 33 |
| | 70 |
| 58 |
| | 31 |
| | 63 |
| 51 |
| | 32 |
| |
| | (a) | Represents concessions granted in permanent modifications as a percentage of the number of loans permanently modified. The sum of the percentages exceeds 100% because predominantly all of the modifications include more than one type of concession. A significant portion ofConcessions offered on trial modifications include interest rate reductions and/or term or payment extensions.are generally consistent with those granted on permanent modifications. |
| | (b) | Predominantly representsIncludes variable interest rate to fixed interest rate modifications.modifications for the years ended December 31, 2019, 2018 and 2017. Also includes forbearances that meet the definition of a TDR for the years ended December 31, 2019 and 2018. Forbearances suspend or reduce monthly payments for a specific period of time to address a temporary hardship. |
| | (c) | The prior period amounts have been revised to conform with the current period presentation. This revision also impacted home equity impaired loans and new TDRs in this note, as well as loans by impairment methodology in Note 13. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 219225 |
Notes to consolidated financial statements
Financial effects of modifications and redefaults The following table provides information about the financial effects of the various concessions granted in modifications of residential real estate loans, excluding PCI, under the loss mitigation programs described above and about redefaults of certain loans modified in TDRs for the periods presented. The following table presents only the final financial effects of permanent modifications and does not include temporary concessions offered through trial modifications. This table also excludes Chapter 7 loans where the sole concession granted is the discharge of debt. | | Year ended December 31, (in millions, except weighted-average data and number of loans) | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | | | | | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | | Year ended December 31, (in millions, except weighted-average data) | | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | | | | | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 | Weighted-average interest rate of loans with interest rate reductions – before TDR | 5.15 | % | 5.59 | % | 5.67 | % | | 4.94 | % | 4.99 | % | 5.20 | % | | 5.06 | % | 5.36 | % | 5.51 | % | 5.88 | % | 5.65 | % | 5.15 | % | | 5.53 | % | 5.39 | % | 4.94 | % | | 5.68 | % | 5.50 | % | 5.06 | % | Weighted-average interest rate of loans with interest rate reductions – after TDR | 2.99 |
| 2.93 |
| 2.79 |
| | 2.64 |
| 2.34 |
| 2.35 |
| | 2.83 |
| 2.70 |
| 2.64 |
| 4.21 |
| 3.80 |
| 2.99 |
| | 3.53 |
| 3.46 |
| 2.64 |
| | 3.81 |
| 3.60 |
| 2.83 |
| Weighted-average remaining contractual term (in years) of loans with term or payment extensions – before TDR | 24 |
| 24 |
| 25 |
| | 21 |
| 18 |
| 18 |
| | 23 |
| 22 |
| 22 |
| 21 |
| 24 |
| 24 |
| | 19 |
| 19 |
| 21 |
| | 20 |
| 21 |
| 23 |
| Weighted-average remaining contractual term (in years) of loans with term or payment extensions – after TDR | 38 |
| 38 |
| 37 |
| | 39 |
| 38 |
| 35 |
| | 38 |
| 38 |
| 36 |
| 39 |
| 38 |
| 38 |
| | 40 |
| 39 |
| 39 |
| | 39 |
| 38 |
| 38 |
| Charge-offs recognized upon permanent modification | $ | 2 |
| $ | 4 |
| $ | 11 |
| | $ | 1 |
| $ | 1 |
| $ | 4 |
| | $ | 3 |
| $ | 5 |
| $ | 15 |
| $ | 1 |
| $ | 1 |
| $ | 2 |
| | $ | — |
| $ | 1 |
| $ | 1 |
| | $ | 1 |
| $ | 2 |
| $ | 3 |
| Principal deferred | 12 |
| 30 |
| 58 |
| | 10 |
| 23 |
| 27 |
| | 22 |
| 53 |
| 85 |
| 15 |
| 21 |
| 12 |
| | 4 |
| 9 |
| 10 |
| | 19 |
| 30 |
| 22 |
| Principal forgiven | 20 |
| 44 |
| 66 |
| | 13 |
| 7 |
| 6 |
| | 33 |
| 51 |
| 72 |
| 4 |
| 10 |
| 20 |
| | 3 |
| 7 |
| 13 |
| | 7 |
| 17 |
| 33 |
| Balance of loans that redefaulted within one year of permanent modification(a) | $ | 124 |
| $ | 98 |
| $ | 133 |
| | $ | 56 |
| $ | 40 |
| $ | 21 |
| | $ | 180 |
| $ | 138 |
| $ | 154 |
| $ | 107 |
| $ | 97 |
| $ | 124 |
| | $ | 59 |
| $ | 64 |
| $ | 56 |
| | $ | 166 |
| $ | 161 |
| $ | 180 |
|
| | (a) | Represents loans permanently modified in TDRs that experienced a payment default in the periods presented, and for which the payment default occurred within one year of the modification. The dollar amounts presented represent the balance of such loans at the end of the reporting period in which such loans defaulted. For residential real estate loans modified in TDRs, payment default is deemed to occur when the loan becomes two2 contractual payments past due. In the event that a modified loan redefaults, it is probable that the loan will ultimately be liquidated through foreclosure or another similar type of liquidation transaction. Redefaults of loans modified within the last 12 months may not be representative of ultimate redefault levels. |
At December 31, 2017, 2019, the weighted-average estimated remaining lives of residential real estate loans, excluding PCI loans, permanently modified in TDRs were 14 9 years for residential mortgage and 10 8 years for home equity. The estimated remaining lives of these loans reflect estimated prepayments, both voluntary and involuntary (i.e., foreclosures and other forced liquidations). Active and suspended foreclosure At December 31, 20172019 and 2016,2018, the Firm had non-PCI residential real estate loans, excluding those insured by U.S. government agencies, with a carrying value of $787 $529 million and $932$653 million, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.
| | | | 220226 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Other consumer loans The table below provides information for other consumer retained loan classes, including auto and business banking loans. This table excludes student loans that were sold in 2017. | | December 31, (in millions, except ratios) | Auto | | Consumer & Business Banking(c) | Auto | | Consumer & Business Banking | | Total other consumer | 2017 | | 2016 | | 2017 | | 2016 | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | Loan delinquency | | | | | | | | | | | | | Current | $ | 65,651 |
| | $ | 65,029 |
| | $ | 25,454 |
| | $ | 23,920 |
| $ | 60,944 |
| $ | 62,984 |
| | $ | 26,842 |
| $ | 26,249 |
| | $ | 87,786 |
| $ | 89,233 |
| 30–119 days past due | 584 |
| | 773 |
| | 213 |
| | 247 |
| 578 |
| 589 |
| | 240 |
| 252 |
| | 818 |
| 841 |
| 120 or more days past due | 7 |
| | 12 |
| | 122 |
| | 140 |
| — |
| — |
| | 117 |
| 111 |
| | 117 |
| 111 |
| Total retained loans | $ | 66,242 |
| | $ | 65,814 |
| | $ | 25,789 |
| | $ | 24,307 |
| $ | 61,522 |
| $ | 63,573 |
| | $ | 27,199 |
| $ | 26,612 |
| | $ | 88,721 |
| $ | 90,185 |
| % of 30+ days past due to total retained loans | 0.89 | % | | 1.19 | % | | 1.30 | % | | 1.59 | % | 0.94 | % | 0.93 | % | | 1.31 | % | 1.36 | % | | 1.05 | % | 1.06 | % | Nonaccrual loans(a) | 141 |
| | 214 |
| | 283 |
| | 287 |
| 113 |
| 128 |
| | 247 |
| 245 |
| | 360 |
| 373 |
| Geographic region(b) | Geographic region(b) | Geographic region(b) | | | California | $ | 8,445 |
| | $ | 7,975 |
| | $ | 5,032 |
| | $ | 4,426 |
| $ | 8,081 |
| $ | 8,330 |
| | $ | 5,902 |
| $ | 5,520 |
| | $ | 13,983 |
| $ | 13,850 |
| Texas | 7,013 |
| | 7,041 |
| | 2,916 |
| | 2,954 |
| 6,804 |
| 6,531 |
| | 3,110 |
| 2,993 |
| | 9,914 |
| 9,524 |
| New York | 4,023 |
| | 4,078 |
| | 4,195 |
| | 3,979 |
| 3,639 |
| 3,863 |
| | 4,432 |
| 4,381 |
| | 8,071 |
| 8,244 |
| Illinois | 3,916 |
| | 3,984 |
| | 2,017 |
| | 1,758 |
| 3,360 |
| 3,716 |
| | 1,745 |
| 2,046 |
| | 5,105 |
| 5,762 |
| Florida | 3,350 |
| | 3,374 |
| | 1,424 |
| | 1,195 |
| 3,262 |
| 3,256 |
| | 1,609 |
| 1,502 |
| | 4,871 |
| 4,758 |
| Arizona | 2,221 |
| | 2,209 |
| | 1,383 |
| | 1,307 |
| 2,024 |
| 2,084 |
| | 1,276 |
| 1,491 |
| | 3,300 |
| 3,575 |
| Ohio | 2,105 |
| | 2,194 |
| | 1,380 |
| | 1,402 |
| 1,986 |
| 1,973 |
| | 1,139 |
| 1,305 |
| | 3,125 |
| 3,278 |
| New Jersey | | 1,905 |
| 1,981 |
| | 798 |
| 723 |
| | 2,703 |
| 2,704 |
| Michigan | 1,418 |
| | 1,567 |
| | 1,357 |
| | 1,343 |
| 1,215 |
| 1,357 |
| | 1,253 |
| 1,329 |
| | 2,468 |
| 2,686 |
| New Jersey | 2,044 |
| | 2,031 |
| | 721 |
| | 623 |
| | Louisiana | 1,656 |
| | 1,814 |
| | 849 |
| | 979 |
| 1,617 |
| 1,587 |
| | 741 |
| 860 |
| | 2,358 |
| 2,447 |
| All other | 30,051 |
| | 29,547 |
| | 4,515 |
| | 4,341 |
| 27,629 |
| 28,895 |
| | 5,194 |
| 4,462 |
| | 32,823 |
| 33,357 |
| Total retained loans | $ | 66,242 |
| | $ | 65,814 |
| | $ | 25,789 |
| | $ | 24,307 |
| $ | 61,522 |
| $ | 63,573 |
| | $ | 27,199 |
| $ | 26,612 |
| | $ | 88,721 |
| $ | 90,185 |
| Loans by risk ratings(b)(c) | | | | | | | | | | | | | Noncriticized | $ | 15,604 |
| | $ | 13,899 |
| | $ | 17,938 |
| | $ | 16,858 |
| $ | 14,178 |
| $ | 15,749 |
| | $ | 19,156 |
| $ | 18,743 |
| | $ | 33,334 |
| $ | 34,492 |
| Criticized performing | 93 |
| | 201 |
| | 791 |
| | 816 |
| 360 |
| 273 |
| | 727 |
| 751 |
| | 1,087 |
| 1,024 |
| Criticized nonaccrual | 9 |
| | 94 |
| | 213 |
| | 217 |
| — |
| — |
| | 198 |
| 191 |
| | 198 |
| 191 |
|
| | (a) | There were no0 loans that were 90 or more days past due and still accruing interest at December 31, 2017,2019 and December 31, 2016.2018. |
| | (b) | The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2019. |
| | (c) | For risk-rated business banking and auto loans, the primary credit quality indicator is the internal risk rating of the loan, including whether the loans are considered to be criticized and/or nonaccrual. |
| | (c) | Certain loan portfolios have been reclassified. The prior period amounts have been revised to conform with the current period presentation. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 221227 |
Notes to consolidated financial statements
Other consumer impaired loans and loan modifications The following table sets forthprovides information about the Firm’s other consumer impaired loans, including risk-rated business banking and auto loans that have been placed on nonaccrual status, and loans that have been modified in TDRs. | | December 31, (in millions) | 2017 |
| 2016 |
| 2019 |
| 2018 |
| Impaired loans | | | With an allowance | $ | 272 |
| $ | 614 |
| $ | 227 |
| $ | 222 |
| Without an allowance(a) | 26 |
| 30 |
| 19 |
| 29 |
| Total impaired loans(b)(c) | $ | 298 |
| $ | 644 |
| $ | 246 |
| $ | 251 |
| Allowance for loan losses related to impaired loans | $ | 73 |
| $ | 119 |
| $ | 71 |
| $ | 63 |
| Unpaid principal balance of impaired loans(d) | 402 |
| 753 |
| 342 |
| 355 |
| Impaired loans on nonaccrual status | 268 |
| 508 |
| 224 |
| 229 |
|
| | (a) | When discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, the loan does not require an allowance. This typically occurs when the impaired loans have been partially charged off and/or there have been interest payments received and applied to the loan balance. |
| | (b) | Predominantly all other consumer impaired loans are in the U.S. |
| | (c) | Other consumer average impaired loans were $427$246 million, $635$275 million and $566$427 million for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively. The related interest income on impaired loans, including those on a cash basis, was not material for the years ended December 31, 2017, 20162019, 2018 and 2015.2017. |
| | (d) | Represents the contractual amount of principal owed at December 31, 20172019 and 2016.2018. The unpaid principal balance differs from the impaired loan balances due to various factors, including charge-offs, interest payments received and applied to the principal balance, net deferred loan fees or costs and unamortized discounts or premiums on purchased loans. |
Loan modifications Certain other consumer loan modifications are considered to be TDRs as they provide various concessions to borrowers who are experiencing financial difficulty. All of these TDRs are reported as impaired loans.The following table provides information about the Firm’sAt December 31, 2019 and 2018, other consumer loans modified in TDRs. NewTDRs were $76 million and $79 million, respectively. The impact of these modifications, as well as new TDRs, were not material to the Firm for the years ended December 31, 20172019, 2018 and 2016.2017. Additional commitments to lend to borrowers whose loans have been modified in TDRs as of December 31, 2019 and 2018 were not material. TDRs on nonaccrual status were $54 million and $57 million at December 31, 2019 and 2018, respectively. | | | | | | | | December 31, (in millions) | 2017 | 2016 | Loans modified in TDRs(a)(b) | $ | 102 |
| $ | 362 |
| TDRs on nonaccrual status | 72 |
| 226 |
|
| | (a) | The impact of these modifications was not material to the Firm for the years ended December 31, 2017 and 2016. |
| | (b) | Additional commitments to lend to borrowers whose loans have been modified in TDRs as of December 31, 2017 and 2016 were immaterial. |
| | | | 222228 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Purchased credit-impaired loans PCI loans are initially recorded at fair value at acquisition. PCI loans acquired in the same fiscal quarter may be aggregated into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. With respect toAll of the Washington Mutual transaction, all of the consumerFirm’s residential real estate PCI loans were acquired in the same fiscal quarter and aggregated into pools of loans with common risk characteristics. On a quarterly basis, the Firm estimates the total cash flows (both principal and interest) expected to be collected over the remaining life of each pool. These estimates incorporate assumptions regarding default rates, loss severities, the amounts and timing of prepayments and other factors that reflect then-current market conditions. Probable decreases in expected cash flows (i.e., increased credit losses) trigger the recognition of impairment, which is then measured as the present value of the expected principal loss plus any related forgone interest cash flows, discounted at the pool’s effective interest rate. Impairments are recognized through the provision for credit losses and an increase in the allowance for loan losses. Probable and significant increases in expected cash flows (e.g., decreased credit losses, the net benefit of modifications) would first reverse any previously recorded allowance for loan losses with any remaining increases recognized prospectively as a yield adjustment over the remaining estimated lives of the underlying loans. The impacts of (i) prepayments, (ii) changes in variable interest rates, and (iii) any other changes in the timing of expected cash flows are generally recognized prospectively as adjustments to interest income. The Firm continues to modify certain PCI loans. The impact of these modifications is incorporated into the Firm’s quarterly assessment of whether a probable and significant change in expected cash flows has occurred, and the loans continue to be accounted for and reported as PCI loans. In evaluating the effect of modifications on expected cash flows, the Firm incorporates the effect of any forgone interest and also considers the potential for redefault. The Firm develops product-specific probability of default estimates, which are used to compute expected credit losses. In developing these probabilities of default, the Firm considers the relationship between the credit quality characteristics of the underlying loans and certain assumptions about home prices and unemployment based upon industry-wide data. The Firm also considers its own historical loss experience to-date based on actual redefaulted modified PCI loans. The excess of cash flows expected to be collected over the carrying value of the underlying loans is referred to as the accretable yield. This amount is not reported on the Firm’s Consolidated balance sheets but is accreted into interest income at a level rate of return over the remaining estimated lives of the underlying pools of loans. If the timing and/or amounts of expected cash flows on PCI loan pools were determined not to be reasonably estimable, no interest would be accreted and the loan pools would be reported as nonaccrual loans; however, sinceSince the timing and amounts of expected cash flows for the Firm’s PCI consumer loan pools are reasonably estimable, interest is being accreted and the loan pools are being reported as performing loans.No interest would be accreted and the PCI loan pools would be reported as nonaccrual loans if the timing and/or amounts of expected cash flows on the loan pools were determined not to be reasonably estimable.
The liquidation of PCI loans, which may include sales of loans, receipt of payment in full from the borrower, or foreclosure, results in removal of the loans from the underlying PCI pool. When the amount of the liquidation proceeds (e.g., cash, real estate), if any, is less than the unpaid principal balance of the loan, the difference is first applied against the PCI pool’s nonaccretable difference for principal losses (i.e., the lifetime credit loss estimate established as a purchase accounting adjustment at the acquisition date). When the nonaccretable difference for a particular loan pool has been fully depleted, any excess of the unpaid principal balance of the loan over the liquidation proceeds is written off against the PCI pool’s allowance for loan losses. Write-offs of PCI loans also include other adjustments, primarily related to interestprincipal forgiveness modifications. Because the Firm’s PCI loans are accounted for at a pool level, the Firm does not recognize charge-offs of PCI loans when they reach specified stages of delinquency (i.e., unlike non-PCI consumer loans, these loans are not charged off based on FFIEC standards). The PCI portfolio affects the Firm’s results of operations primarily through: (i) contribution to net interest margin; (ii) expense related to defaults and servicing resulting from the liquidation of the loans; and (iii) any provision for loan losses. The PCI loans acquired in the Washington Mutual transaction were funded based on the interest rate characteristics of the loans. For example, variable-rate loans were funded with variable-rate liabilities and fixed-rate loans were funded with fixed-rate liabilities with a similar maturity profile. A net spread will be earned on the declining balance of the portfolio, which is estimated as of December 31, 2017, to have a remaining weighted-average life of 9 years.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 223229 |
Notes to consolidated financial statements
Residential real estate – PCI loans The table below sets forthprovides information about the Firm’s consumer, excluding credit card, PCI loans. | | December 31, (in millions, except ratios) | Home equity | | Prime mortgage | | Subprime mortgage | | Option ARMs | | Total PCI | Home equity | | Prime mortgage | | Subprime mortgage | | Option ARMs | | Total PCI | 2017 | 2016 |
| 2017 | 2016 |
| 2017 | 2016 |
| 2017 | 2016 |
| 2017 | 2016 | 2019 | 2018 |
| 2019 | 2018 |
| 2019 | 2018 |
| 2019 | 2018 |
| 2019 | 2018 | Carrying value(a) | $ | 10,799 |
| $ | 12,902 |
| | $ | 6,479 |
| $ | 7,602 |
| | $ | 2,609 |
| $ | 2,941 |
| | $ | 10,689 |
| $ | 12,234 |
| | $ | 30,576 |
| $ | 35,679 |
| $ | 7,377 |
| $ | 8,963 |
| | $ | 3,965 |
| $ | 4,690 |
| | $ | 1,740 |
| $ | 1,945 |
| | $ | 7,281 |
| $ | 8,436 |
| | $ | 20,363 |
| $ | 24,034 |
| Related allowance for loan losses(b) | 1,133 |
| 1,433 |
| | 863 |
| 829 |
| | 150 |
| — |
| | 79 |
| 49 |
| | 2,225 |
| 2,311 |
| | Loan delinquency (based on unpaid principal balance) | Loan delinquency (based on unpaid principal balance) | | | | | | | | | | Loan delinquency (based on unpaid principal balance) | | | | | | | | | | Current | $ | 10,272 |
| $ | 12,423 |
| | $ | 5,839 |
| $ | 6,840 |
| | $ | 2,640 |
| $ | 3,005 |
| | $ | 9,662 |
| $ | 11,074 |
| | $ | 28,413 |
| $ | 33,342 |
| $ | 7,203 |
| $ | 8,624 |
| | $ | 3,593 |
| $ | 4,226 |
| | $ | 1,864 |
| $ | 2,033 |
| | $ | 6,606 |
| $ | 7,592 |
| | $ | 19,266 |
| $ | 22,475 |
| 30–149 days past due | 356 |
| 291 |
| | 336 |
| 336 |
| | 381 |
| 361 |
| | 547 |
| 555 |
| | 1,620 |
| 1,543 |
| 217 |
| 278 |
| | 219 |
| 259 |
| | 230 |
| 286 |
| | 356 |
| 398 |
| | 1,022 |
| 1,221 |
| 150 or more days past due | 392 |
| 478 |
| | 327 |
| 451 |
| | 176 |
| 240 |
| | 689 |
| 917 |
| | 1,584 |
| 2,086 |
| 148 |
| 242 |
| | 172 |
| 223 |
| | 101 |
| 123 |
| | 333 |
| 457 |
| | 754 |
| 1,045 |
| Total loans | $ | 11,020 |
| $ | 13,192 |
| | $ | 6,502 |
| $ | 7,627 |
| | $ | 3,197 |
| $ | 3,606 |
| | $ | 10,898 |
| $ | 12,546 |
| | $ | 31,617 |
| $ | 36,971 |
| $ | 7,568 |
| $ | 9,144 |
| | $ | 3,984 |
| $ | 4,708 |
| | $ | 2,195 |
| $ | 2,442 |
| | $ | 7,295 |
| $ | 8,447 |
| | $ | 21,042 |
| $ | 24,741 |
| % of 30+ days past due to total loans | 6.79 | % | 5.83 | % | | 10.20 | % | 10.32 | % | | 17.42 | % | 16.67 | % | | 11.34 | % | 11.73 | % | | 10.13 | % | 9.82 | % | 4.82 | % | 5.69 | % | | 9.81 | % | 10.24 | % | | 15.08 | % | 16.75 | % | | 9.44 | % | 10.12 | % | | 8.44 | % | 9.16 | % | | | | | | | | | | | | Current estimated LTV ratios (based on unpaid principal balance)(c)(d) | | | | | | | | | | Current estimated LTV ratios (based on unpaid principal balance)(b)(c) | | Current estimated LTV ratios (based on unpaid principal balance)(b)(c) | | | | | | | | | Greater than 125% and refreshed FICO scores: | | | | | | | | | | Greater than 125% and refreshed FICO scores: | | | | | | | | | Equal to or greater than 660 | $ | 33 |
| $ | 69 |
| | $ | 4 |
| $ | 6 |
| | $ | 2 |
| $ | 7 |
| | $ | 6 |
| $ | 12 |
| | $ | 45 |
| $ | 94 |
| $ | 12 |
| $ | 17 |
| | $ | 2 |
| $ | 1 |
| | $ | — |
| $ | — |
| | $ | 1 |
| $ | 3 |
| | $ | 15 |
| $ | 21 |
| Less than 660 | 21 |
| 39 |
| | 16 |
| 17 |
| | 20 |
| 31 |
| | 9 |
| 18 |
| | 66 |
| 105 |
| 9 |
| 13 |
| | 6 |
| 7 |
| | 7 |
| 9 |
| | 7 |
| 7 |
| | 29 |
| 36 |
| 101% to 125% and refreshed FICO scores: | | | | | | | | | | | | | | | | | | | Equal to or greater than 660 | 274 |
| 555 |
| | 16 |
| 52 |
| | 20 |
| 39 |
| | 43 |
| 83 |
| | 353 |
| 729 |
| 86 |
| 135 |
| | 3 |
| 6 |
| | 6 |
| 4 |
| | 14 |
| 17 |
| | 109 |
| 162 |
| Less than 660 | 132 |
| 256 |
| | 42 |
| 84 |
| | 75 |
| 135 |
| | 71 |
| 144 |
| | 320 |
| 619 |
| 39 |
| 65 |
| | 17 |
| 22 |
| | 20 |
| 35 |
| | 18 |
| 33 |
| | 94 |
| 155 |
| 80% to 100% and refreshed FICO scores: | | | | | | | | | | | | | | | | | | | Equal to or greater than 660 | 1,195 |
| 1,860 |
| | 221 |
| 442 |
| | 119 |
| 214 |
| | 316 |
| 558 |
| | 1,851 |
| 3,074 |
| 588 |
| 805 |
| | 47 |
| 75 |
| | 47 |
| 54 |
| | 85 |
| 119 |
| | 767 |
| 1,053 |
| Less than 660 | 559 |
| 804 |
| | 230 |
| 381 |
| | 309 |
| 439 |
| | 371 |
| 609 |
| | 1,469 |
| 2,233 |
| 261 |
| 388 |
| | 65 |
| 112 |
| | 100 |
| 161 |
| | 113 |
| 190 |
| | 539 |
| 851 |
| Lower than 80% and refreshed FICO scores: | | | | | | | | | | | | | | | | | | | Equal to or greater than 660 | 6,134 |
| 6,676 |
| | 3,551 |
| 3,967 |
| | 895 |
| 919 |
| | 6,113 |
| 6,754 |
| | 16,693 |
| 18,316 |
| 4,803 |
| 5,548 |
| | 2,429 |
| 2,689 |
| | 784 |
| 739 |
| | 4,710 |
| 5,111 |
| | 12,726 |
| 14,087 |
| Less than 660 | 2,095 |
| 2,183 |
| | 2,103 |
| 2,287 |
| | 1,608 |
| 1,645 |
| | 3,499 |
| 3,783 |
| | 9,305 |
| 9,898 |
| 1,562 |
| 1,908 |
| | 1,250 |
| 1,568 |
| | 1,136 |
| 1,327 |
| | 2,093 |
| 2,622 |
| | 6,041 |
| 7,425 |
| No FICO/LTV available | 577 |
| 750 |
| | 319 |
| 391 |
| | 149 |
| 177 |
| | 470 |
| 585 |
| | 1,515 |
| 1,903 |
| 208 |
| 265 |
| | 165 |
| 228 |
| | 95 |
| 113 |
| | 254 |
| 345 |
| | 722 |
| 951 |
| Total unpaid principal balance | $ | 11,020 |
| $ | 13,192 |
| | $ | 6,502 |
| $ | 7,627 |
| | $ | 3,197 |
| $ | 3,606 |
| | $ | 10,898 |
| $ | 12,546 |
| | $ | 31,617 |
| $ | 36,971 |
| $ | 7,568 |
| $ | 9,144 |
| | $ | 3,984 |
| $ | 4,708 |
| | $ | 2,195 |
| $ | 2,442 |
| | $ | 7,295 |
| $ | 8,447 |
| | $ | 21,042 |
| $ | 24,741 |
| | | | | | | | | | | | Geographic region (based on unpaid principal balance) | | | | | | | | | | | Geographic region (based on unpaid principal balance)(d) | | Geographic region (based on unpaid principal balance)(d) | | | | | | | | | | California | $ | 6,555 |
| $ | 7,899 |
| | $ | 3,716 |
| $ | 4,396 |
| | $ | 797 |
| $ | 899 |
| | $ | 6,225 |
| $ | 7,128 |
| | $ | 17,293 |
| $ | 20,322 |
| $ | 4,475 |
| $ | 5,420 |
| | $ | 2,166 |
| $ | 2,578 |
| | $ | 531 |
| $ | 593 |
| | $ | 4,189 |
| $ | 4,798 |
| | $ | 11,361 |
| $ | 13,389 |
| Florida | 1,137 |
| 1,306 |
| | 428 |
| 501 |
| | 296 |
| 332 |
| | 878 |
| 1,026 |
| | 2,739 |
| 3,165 |
| 833 |
| 976 |
| | 288 |
| 332 |
| | 212 |
| 234 |
| | 604 |
| 713 |
| | 1,937 |
| 2,255 |
| New York | 607 |
| 697 |
| | 457 |
| 515 |
| | 330 |
| 363 |
| | 628 |
| 711 |
| | 2,022 |
| 2,286 |
| 451 |
| 525 |
| | 324 |
| 365 |
| | 245 |
| 268 |
| | 441 |
| 502 |
| | 1,461 |
| 1,660 |
| Illinois | | 200 |
| 233 |
| | 134 |
| 154 |
| | 113 |
| 123 |
| | 175 |
| 199 |
| | 622 |
| 709 |
| Washington | 532 |
| 673 |
| | 135 |
| 167 |
| | 61 |
| 68 |
| | 238 |
| 290 |
| | 966 |
| 1,198 |
| 326 |
| 419 |
| | 80 |
| 98 |
| | 37 |
| 44 |
| | 143 |
| 177 |
| | 586 |
| 738 |
| Illinois | 273 |
| 314 |
| | 200 |
| 226 |
| | 161 |
| 178 |
| | 249 |
| 282 |
| | 883 |
| 1,000 |
| | New Jersey | 242 |
| 280 |
| | 178 |
| 210 |
| | 110 |
| 125 |
| | 336 |
| 401 |
| | 866 |
| 1,016 |
| 174 |
| 210 |
| | 112 |
| 134 |
| | 78 |
| 88 |
| | 219 |
| 258 |
| | 583 |
| 690 |
| Massachusetts | 79 |
| 94 |
| | 149 |
| 173 |
| | 98 |
| 110 |
| | 307 |
| 346 |
| | 633 |
| 723 |
| 53 |
| 65 |
| | 97 |
| 113 |
| | 67 |
| 73 |
| | 206 |
| 240 |
| | 423 |
| 491 |
| Maryland | 57 |
| 64 |
| | 129 |
| 144 |
| | 132 |
| 145 |
| | 232 |
| 267 |
| | 550 |
| 620 |
| 40 |
| 48 |
| | 86 |
| 95 |
| | 87 |
| 96 |
| | 157 |
| 178 |
| | 370 |
| 417 |
| Virginia | | 44 |
| 54 |
| | 77 |
| 91 |
| | 33 |
| 37 |
| | 180 |
| 211 |
| | 334 |
| 393 |
| Arizona | 203 |
| 241 |
| | 106 |
| 124 |
| | 60 |
| 68 |
| | 156 |
| 181 |
| | 525 |
| 614 |
| 130 |
| 165 |
| | 57 |
| 69 |
| | 37 |
| 43 |
| | 93 |
| 112 |
| | 317 |
| 389 |
| Virginia | 66 |
| 77 |
| | 123 |
| 142 |
| | 51 |
| 56 |
| | 280 |
| 314 |
| | 520 |
| 589 |
| | All other | 1,269 |
| 1,547 |
| | 881 |
| 1,029 |
| | 1,101 |
| 1,262 |
| | 1,369 |
| 1,600 |
| | 4,620 |
| 5,438 |
| 842 |
| 1,029 |
| | 563 |
| 679 |
| | 755 |
| 843 |
| | 888 |
| 1,059 |
| | 3,048 |
| 3,610 |
| Total unpaid principal balance | $ | 11,020 |
| $ | 13,192 |
| | $ | 6,502 |
| $ | 7,627 |
| | $ | 3,197 |
| $ | 3,606 |
| | $ | 10,898 |
| $ | 12,546 |
| | $ | 31,617 |
| $ | 36,971 |
| $ | 7,568 |
| $ | 9,144 |
| | $ | 3,984 |
| $ | 4,708 |
| | $ | 2,195 |
| $ | 2,442 |
| | $ | 7,295 |
| $ | 8,447 |
| | $ | 21,042 |
| $ | 24,741 |
|
| | (a) | Carrying value includes the effect of fair value adjustments that were applied to the consumer PCI portfolio at the date of acquisition. |
| | (b) | Management concluded, as part of the Firm’s regular assessment of the PCI loan pools, that it was probable that higher expected credit losses would result in a decrease in expected cash flows. As a result, an allowance for loan losses for impairment of these pools has been recognized. |
| | (c) | Represents the aggregate unpaid principal balance of loans divided by the estimated current property value. Current property values are estimated, at a minimum, quarterly, based on home valuation models using nationally recognized home price index valuation estimates incorporating actual data to the extent available and forecasted data where actual data is not available. These property values do not represent actual appraised loan level collateral values; as such, the resulting ratios are necessarily imprecise and should be viewed as estimates. Current estimated combined LTV for junior lien home equity loans considers all available lien positions, as well as unused lines, related to the property. |
| | (d)(c) | Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis. |
| | (d) | The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2019. |
| | | | 224230 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Approximately 25% 27% of the PCI home equity portfolio are senior lien loans; the remaining balance are junior lien HELOANs or HELOCs. The following table sets forthprovides delinquency statistics for PCI junior lien home equity loans and lines of credit based on the unpaid principal balance as ofDecember 31, 20172019 and 2016.2018. | | | | | | | | | | | | | | | | Total loans | | Total 30+ day delinquency rate | December 31, | | 2017 | 2016 | | 2017 | 2016 | (in millions, except ratios) | | | | | | | HELOCs:(a) | | | | | | | Within the revolving period(b) | | $ | 51 |
| $ | 2,126 |
| | 1.96 | % | 3.67 | % | Beyond the revolving period(c) | | 7,875 |
| 7,452 |
| | 4.63 |
| 4.03 |
| HELOANs | | 360 |
| 465 |
| | 5.28 |
| 5.38 |
| Total | | $ | 8,286 |
| $ | 10,043 |
| | 4.65 | % | 4.01 | % |
| | | | | | | | | | | | | | December 31, (in millions, except ratios) | | Total loans | | Total 30+ day delinquency rate | | 2019 | 2018 | | 2019 | 2018 | HELOCs:(a)(b) | | $ | 5,337 |
| $ | 6,531 |
| | 3.52 | % | 4.00 | % | HELOANs | | 220 |
| 280 |
| | 3.64 |
| 3.57 |
| Total | | $ | 5,557 |
| $ | 6,811 |
| | 3.53 | % | 3.98 | % |
| | (a) | In general, these HELOCs are revolving loans for a 10-year period, after which time the HELOC converts to an interest-only loan with a balloon payment at the end of the loan’s term. Substantially all HELOCs are beyond the revolving period. |
| | (b) | Substantially all undrawn HELOCs within the revolving period have been closed. |
| | (c) | Includes loans modified into fixed rate amortizing loans. |
The table below sets forthpresents the accretable yield activity for the Firm’s PCI consumer loans for the years endedDecember 31, 20172019, 20162018 and 20152017, and represents the Firm’s estimate of gross interest income expected to be earned over the remaining life of the PCI loan portfolios. The table excludes the cost to fund the PCI portfolios, and therefore the accretable yield does not represent net interest income expected to be earned on these portfolios. | | Year ended December 31, (in millions, except ratios) | Total PCI | Total PCI | 2017 | | 2016 | | 2015 | 2019 |
| | 2018 |
| | 2017 |
| Beginning balance | $ | 11,768 |
| | $ | 13,491 |
| | $ | 14,592 |
| $ | 8,422 |
| | $ | 11,159 |
| | $ | 11,768 |
| Accretion into interest income | (1,396 | ) | | (1,555 | ) | | (1,700 | ) | (1,093 | ) | | (1,249 | ) | | (1,396 | ) | Changes in interest rates on variable-rate loans | 503 |
| | 260 |
| | 279 |
| (575 | ) | | (109 | ) | | 503 |
| Other changes in expected cash flows(a) | 284 |
| | (428 | ) | | 230 |
| (589 | ) | | (1,379 | ) | | 284 |
| Reclassification from nonaccretable difference(b) | — |
| | — |
| | 90 |
| | Balance at December 31 | $ | 11,159 |
| | $ | 11,768 |
| | $ | 13,491 |
| $ | 6,165 |
| | $ | 8,422 |
| | $ | 11,159 |
| Accretable yield percentage | 4.53 | % | | 4.35 | % | | 4.20 | % | 5.28 | % | | 4.92 | % | | 4.53 | % |
| | (a) | Other changes in expected cash flows may vary from period to period as the Firm continues to refine its cash flow model, for example cash flows expected to be collected due to the impact of modifications and changes in prepayment assumptions. |
| | (b) | Reclassifications from the nonaccretable difference in the year ended December 31, 2015 were driven by continued improvement in home prices and delinquencies, as well as increased granularity in the impairment estimates. |
Active and suspended foreclosure At December 31, 20172019 and 2016,2018, the Firm had PCI residential real estate loans with an unpaid principal balance of $1.3 billion $721 million and $1.7 billion, $964 million, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 225231 |
Notes to consolidated financial statements
Credit card loan portfolio The credit card portfolio segment includes credit card loans originated and purchased by the Firm. Delinquency rates are the primary credit quality indicator for credit card loans as they provide an early warning that borrowers may be experiencing difficulties (30 days past due); information on those borrowers that have been delinquent for a longer period of time (90 days past due) is also considered. In addition to delinquency rates, the geographic distribution of the loans provides insight as to the credit quality of the portfolio based on the regional economy. While the borrower’s credit score is another general indicator of credit quality, the Firm does not view credit scores as a primary indicator of credit quality because the borrower’s credit score tends to be a lagging indicator. The distribution of such scores provides a general indicator of credit quality trends within the portfolio; however, the score does not capture all factors that would be predictive of future credit performance. Refreshed FICO score information, which is obtained at least quarterly, for a statistically significant random sample of the credit card portfolio is indicated in the following table. FICO is considered to be the industry benchmark for credit scores. The Firm generally originates new card accounts to prime consumer borrowers.However, certain cardholders’ FICO scores may decrease over time, depending on the performance of the cardholder and changes in the credit score calculation. The table below sets forthprovides information about the Firm’s credit card loans. | | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | 2017 | 2016 | Net charge-offs | $ | 4,123 |
| $ | 3,442 |
| % of net charge-offs to retained loans | 2.95 | % | 2.63 | % | Loan delinquency | | | Current and less than 30 days past due and still accruing | $ | 146,704 |
| $ | 139,434 |
| 30–89 days past due and still accruing | 1,305 |
| 1,134 |
| 90 or more days past due and still accruing | 1,378 |
| 1,143 |
| Total retained credit card loans | $ | 149,387 |
| $ | 141,711 |
| Loan delinquency ratios | | | % of 30+ days past due to total retained loans | 1.80 | % | 1.61 | % | % of 90+ days past due to total retained loans | 0.92 |
| 0.81 |
| Credit card loans by geographic region | | | California | $ | 22,245 |
| $ | 20,571 |
| Texas | 14,200 |
| 13,220 |
| New York | 13,021 |
| 12,249 |
| Florida | 9,138 |
| 8,585 |
| Illinois | 8,585 |
| 8,189 |
| New Jersey | 6,506 |
| 6,271 |
| Ohio | 4,997 |
| 4,906 |
| Pennsylvania | 4,883 |
| 4,787 |
| Colorado | 4,006 |
| 3,699 |
| Michigan | 3,826 |
| 3,741 |
| All other | 57,980 |
| 55,493 |
| Total retained credit card loans | $ | 149,387 |
| $ | 141,711 |
| Percentage of portfolio based on carrying value with estimated refreshed FICO scores | | | Equal to or greater than 660 | 84.0 | % | 84.4 | % | Less than 660 | 14.6 |
| 14.2 |
| No FICO available | 1.4 |
| 1.4 |
|
| | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | 2019 | 2018 | Net charge-offs | $ | 4,848 |
| $ | 4,518 |
| Net charge-off rate | 3.10 | % | 3.10 | % | Loan delinquency | | | Current and less than 30 days past due and still accruing | $ | 165,767 |
| $ | 153,746 |
| 30–89 days past due and still accruing | 1,550 |
| 1,426 |
| 90 or more days past due and still accruing | 1,607 |
| 1,444 |
| Total retained loans | $ | 168,924 |
| $ | 156,616 |
| Loan delinquency ratios | | | % of 30+ days past due to total retained loans | 1.87 | % | 1.83 | % | % of 90+ days past due to total retained loans | 0.95 |
| 0.92 |
| Geographic region(a) | | | California | $ | 25,783 |
| $ | 23,757 |
| Texas | 16,728 |
| 15,085 |
| New York | 14,544 |
| 13,601 |
| Florida | 10,830 |
| 9,770 |
| Illinois | 9,579 |
| 8,938 |
| New Jersey | 7,165 |
| 6,739 |
| Ohio | 5,406 |
| 5,094 |
| Pennsylvania | 5,245 |
| 4,996 |
| Colorado | 4,763 |
| 4,309 |
| Michigan | 4,164 |
| 3,912 |
| All other | 64,717 |
| 60,415 |
| Total retained loans | $ | 168,924 |
| $ | 156,616 |
| Percentage of portfolio based on carrying value with estimated refreshed FICO scores | | | Equal to or greater than 660 | 84.0 | % | 84.2 | % | Less than 660 | 15.4 |
| 15.0 |
| No FICO available | 0.6 |
| 0.8 |
|
| | (a) | The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2019. |
| | | | 226232 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Credit card impaired loans and loan modifications The table below sets forthprovides information about the Firm’s impaired credit card loans. All of these loans are considered to be impaired as they have been modified in TDRs. | | December 31, (in millions) | 2017 |
| 2016 |
| 2019 |
| 2018 |
| Impaired credit card loans with an allowance(b)(c) | | $ | 1,452 |
| $ | 1,319 |
| Credit card loans with modified payment terms(c) | $ | 1,135 |
| $ | 1,098 |
| | Modified credit card loans that have reverted to pre-modification payment terms(d) | 80 |
| 142 |
| | Total impaired credit card loans(e) | $ | 1,215 |
| $ | 1,240 |
| | Allowance for loan losses related to impaired credit card loans | $ | 383 |
| $ | 358 |
| 477 |
| 440 |
|
| | (a) | The carrying value and the unpaid principal balance are the same for credit card impaired loans. |
| | (b) | There were no impaired loans without an allowance. |
| | (c) | Represents credit card loans outstanding to borrowers enrolled in a credit card modification program as of the date presented. |
| | (d) | Represents credit card loans that were modified in TDRs but that have subsequently reverted back to the loans’ pre-modification payment terms. At December 31, 2017 and 2016, $43 million and $94 million, respectively, of loans have reverted back to the pre-modification payment terms of the loans due to noncompliance with the terms of the modified loans. The remaining $37 million and $48 million at December 31, 2017 and 2016, respectively, of these loans are to borrowers who have successfully completed a short-term modification program. The Firm continues to report these loans as TDRs since the borrowers’ credit lines remain closed. |
| | (e) | Predominantly all impaired credit card loans are in the U.S. |
The following table presents average balances of impaired credit card loans and interest income recognized on those loans. | | | | | | | | | | | Year ended December 31, (in millions) | 2019 |
| 2018 |
| 2017 |
| Average impaired credit card loans | $ | 1,389 |
| $ | 1,260 |
| $ | 1,214 |
| Interest income on impaired credit card loans | 72 |
| 65 |
| 59 |
|
| | | | | | | | | | | | Year ended December 31, (in millions) | | 2017 |
| 2016 |
| 2015 |
| Average impaired credit card loans | | $ | 1,214 |
| $ | 1,325 |
| $ | 1,710 |
| Interest income on impaired credit card loans | | 59 |
| 63 |
| 82 |
|
Loan modifications JPMorgan Chase The Firm may offer one of a number of loan modification programs to credit card borrowers who are experiencing financial difficulty. Most of the credit card loans have been modified under long-term programs for borrowers who are experiencing financial difficulties. Modifications under long-term programsThese modifications involve placing the customer on a fixed payment plan, generally for 60 months. The Firm may also offer short-term programs for borrowers who may be in need of temporary relief; however, none are currently being offered. Modifications under all short-months, and long-term programs typically include reducing the interest rate on the credit card.Substantially all modifications are considered to be TDRs.
If the cardholder does not comply with the modified payment terms, then the credit card loan continues to age and will ultimately be charged-off in accordance with the Firm’s standard charge-off policy. In most cases, the Firm does not reinstate the borrower’s line of credit. New enrollments in these loan modification programs for the years ended December 31, 2019, 2018 and 2017, 2016were $961 million, $866 million and 2015, were $756 million, $636 million and $638 million, respectively. For all periods disclosed, new enrollments were less than 1% of total retained credit card loans. Financial effects of modifications and redefaults The following table provides information about the financial effects of the concessions granted on credit card loans modified in TDRs and redefaults for the periods presented. | | Year ended December 31, (in millions, except weighted-average data) | | 2017 | 2016 | 2015 | | 2019 | 2018 | 2017 | Weighted-average interest rate of loans – before TDR | | 16.58 | % | 15.56 | % | 15.08 | % | | 19.07 | % | 17.98 | % | 16.58 | % | Weighted-average interest rate of loans – after TDR | | 4.88 |
| 4.76 |
| 4.40 |
| | 4.70 |
| 5.16 |
| 4.88 |
| Loans that redefaulted within one year of modification(a) | | $ | 75 |
| $ | 79 |
| $ | 85 |
| | $ | 148 |
| $ | 116 |
| $ | 93 |
|
| | (a) | Represents loans modified in TDRs that experienced a payment default in the periods presented, and for which the payment default occurred within one year of the modification. The amounts presented represent the balance of such loans as of the end of the quarter in which they defaulted. |
For credit card loans modified in TDRs, apayment default is deemed to have occurred when the borrower misses two consecutive contractual payments. A substantial portion of these loans are expected to be charged-off in accordance with the Firm’s standard charge-off policy. Based on historical experience, the estimated weighted-average default rate for modified credit card loans was expected to be 32.89%, 33.38% and 31.54%, 28.87% and 25.61% as ofDecember 31, 20172019, 20162018 and 20152017, respectively.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 227233 |
Notes to consolidated financial statements
Wholesale loan portfolio Wholesale loans include loans made to a variety of clients, ranging from large corporate and institutional clients to high-net-worth individuals. The primary credit quality indicator for wholesale loans is the internal risk rating assigned to each loan. Risk ratings are used to identify the credit quality of loans and differentiate risk within the portfolio. Risk ratings on loans consider the PD and the LGD. The PD is the likelihood that a loan will default. The LGD is the estimated loss on the loan that would be realized upon the default of the borrower and takes into consideration collateral and structural support for each credit facility. Management considers several factors to determine an appropriate internal risk rating, including the obligor’s debt capacity and financial flexibility, the level of the obligor’s earnings, the amount and sources for repayment, the level and nature of contingencies, management strength, and the industry and geography in which the obligor operates.The Firm’s definition of criticized alignsinternal risk ratings generally align with the banking regulatory definition of criticized exposures, which consist of special mention, substandardqualitative characteristics (e.g., borrower capacity to meet financial commitments and doubtful categories. Risk ratings generally represent ratings profiles similarvulnerability to thosechanges in the economic environment) defined by S&P and Moody’s. Investment-gradeMoody’s, however the quantitative characteristics (e.g., PDs and LGDs) may differ as they reflect internal historical experiences and assumptions. The Firm considers internal ratings range from “AAA/Aaa”equivalent to “BBB-BBB-/Baa3.” Baa3 or higher as investment grade, and these ratings have a lower PD and/or lower LGD than non-investment grade ratings. Noninvestment-grade ratings are further classified as noncriticized (“BB+/Ba1 and B-/B3”) and criticized, (“CCC+”/“Caa1 and below”), and the criticized portion is further subdivided into performing and nonaccrual loans, representing management’s assessment of the collectibility of principal and interest. Criticized loans have a higher probability of defaultPD than noncriticized loans. The Firm’s definition of criticized aligns with the U.S. banking regulatory definition of criticized exposures, which consist of special mention, substandard and doubtful categories. Risk ratings are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary for updated information affecting the obligor’s ability to fulfill its obligations. As noted above, the risk rating of a loan considers the industry in which the obligor conducts its operations. As part of the overall credit risk management framework, the Firm focuses on the management and diversification of its industry and client exposures, with particular attention paid to industries with actual or potential credit concern. SeeRefer to Note 4 for further detail on industry concentrations.
| | | | 228234 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The table below provides information by class of receivable for the retained loans in the Wholesale portfolio segment. In 2017 the Firm revised its methodology for the assignment of industry classifications, Refer to better monitor and manage concentrations. This largely resulted in the re-assignment of holding companies from Other to the industry of risk category based on the primary business activity of the holding company's underlying entities. In the tables and industry discussions below, the prior period amounts have been revised to conform with the current period presentation.
Below are summaries of the Firm’s exposures as of December 31, 2017 and 2016. ForNote 4 for additional information on industry concentrations, see Note 4.
| | As of or for the year ended December 31, (in millions, except ratios) | Commercial and industrial | | Real estate | | Financial institutions | | Government agencies | | Other(d) | | Total retained loans | Commercial and industrial | | Real estate | | Financial institutions | | Governments & Agencies | | Other(d) | | Total retained loans | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | Loans by risk ratings | | | | | | | | | | | | | | | | | | | | | | | Investment-grade | $ | 68,071 |
| $ | 65,687 |
| | $ | 98,467 |
| $ | 88,649 |
| | $ | 26,791 |
| $ | 24,294 |
| | $ | 15,140 |
| $ | 15,935 |
| | $ | 103,212 |
| $ | 95,358 |
| | $ | 311,681 |
| $ | 289,923 |
| $ | 60,700 |
| $ | 73,497 |
| | $ | 101,354 |
| $ | 100,107 |
| | $ | 40,263 |
| $ | 32,178 |
| | $ | 12,616 |
| $ | 13,984 |
| | $ | 129,266 |
| $ | 119,963 |
| | $ | 344,199 |
| $ | 339,729 |
| Noninvestment- grade: | | | | | | | | | | | | | | | | | | | | | | | Noncriticized | 46,558 |
| 47,531 |
| | 14,335 |
| 16,155 |
| | 13,071 |
| 11,075 |
| | 369 |
| 439 |
| | 9,988 |
| 9,360 |
| | 84,321 |
| 84,560 |
| 51,356 |
| 51,720 |
| | 13,841 |
| 14,876 |
| | 15,768 |
| 15,316 |
| | 126 |
| 201 |
| | 12,411 |
| 11,478 |
| | 93,502 |
| 93,591 |
| Criticized performing | 3,983 |
| 6,186 |
| | 710 |
| 798 |
| | 210 |
| 200 |
| | — |
| 6 |
| | 259 |
| 163 |
| | 5,162 |
| 7,353 |
| 4,071 |
| 3,738 |
| | 1,001 |
| 620 |
| | 574 |
| 150 |
| | — |
| 2 |
| | 449 |
| 182 |
| | 6,095 |
| 4,692 |
| Criticized nonaccrual | 1,357 |
| 1,491 |
| | 136 |
| 200 |
| | 2 |
| 9 |
| | — |
| — |
| | 239 |
| 254 |
| | 1,734 |
| 1,954 |
| 752 |
| 851 |
| | 48 |
| 134 |
| | 3 |
| 4 |
| | — |
| — |
| | 40 |
| 161 |
| | 843 |
| 1,150 |
| Total noninvestment- grade | 51,898 |
| 55,208 |
| | 15,181 |
| 17,153 |
| | 13,283 |
| 11,284 |
| | 369 |
| 445 |
| | 10,486 |
| 9,777 |
| | 91,217 |
| 93,867 |
| 56,179 |
| 56,309 |
| | 14,890 |
| 15,630 |
| | 16,345 |
| 15,470 |
| | 126 |
| 203 |
| | 12,900 |
| 11,821 |
| | 100,440 |
| 99,433 |
| Total retained loans | $ | 119,969 |
| $ | 120,895 |
| | $ | 113,648 |
| $ | 105,802 |
| | $ | 40,074 |
| $ | 35,578 |
| | $ | 15,509 |
| $ | 16,380 |
| | $ | 113,698 |
| $ | 105,135 |
| | $ | 402,898 |
| $ | 383,790 |
| $ | 116,879 |
| $ | 129,806 |
| | $ | 116,244 |
| $ | 115,737 |
| | $ | 56,608 |
| $ | 47,648 |
| | $ | 12,742 |
| $ | 14,187 |
| | $ | 142,166 |
| $ | 131,784 |
| | $ | 444,639 |
| $ | 439,162 |
| % of total criticized to total retained loans | 4.45 | % | 6.35 | % | | 0.74 | % | 0.94 | % | | 0.53 | % | 0.59 | % | | — |
| 0.04 | % | | 0.44 | % | 0.40 | % | | 1.71 | % | 2.43 | % | 4.13 | % | 3.54 | % | | 0.90 | % | 0.65 | % | | 1.02 | % | 0.32 | % | | — |
| 0.01 | % | | 0.34 | % | 0.26 | % | | 1.56 | % | 1.33 | % | % of nonaccrual loans to total retained loans | 1.13 |
| 1.23 |
| | 0.12 |
| 0.19 |
| | — |
| 0.03 |
| | — |
| — |
| | 0.21 |
| 0.24 |
| | 0.43 |
| 0.51 |
| | % of criticized nonaccrual to total retained loans | | 0.64 |
| 0.66 |
| | 0.04 |
| 0.12 |
| | 0.01 |
| 0.01 |
| | — |
| — |
| | 0.03 |
| 0.12 |
| | 0.19 |
| 0.26 |
| Loans by geographic distribution(a) | | | | | | | | | | | | | | | | | | | | | | | Total non-U.S. | $ | 28,470 |
| $ | 30,563 |
| | $ | 3,101 |
| $ | 3,302 |
| | $ | 16,790 |
| $ | 15,147 |
| | $ | 2,906 |
| $ | 3,726 |
| | $ | 44,112 |
| $ | 38,776 |
| | $ | 95,379 |
| $ | 91,514 |
| $ | 28,253 |
| $ | 29,572 |
| | $ | 4,123 |
| $ | 2,967 |
| | $ | 16,800 |
| $ | 18,524 |
| | $ | 2,232 |
| $ | 3,150 |
| | $ | 49,966 |
| $ | 48,433 |
| | $ | 101,374 |
| $ | 102,646 |
| Total U.S. | 91,499 |
| 90,332 |
| | 110,547 |
| 102,500 |
| | 23,284 |
| 20,431 |
| | 12,603 |
| 12,654 |
| | 69,586 |
| 66,359 |
| | 307,519 |
| 292,276 |
| 88,626 |
| 100,234 |
| | 112,121 |
| 112,770 |
| | 39,808 |
| 29,124 |
| | 10,510 |
| 11,037 |
| | 92,200 |
| 83,351 |
| | 343,265 |
| 336,516 |
| Total retained loans | $ | 119,969 |
| $ | 120,895 |
| | $ | 113,648 |
| $ | 105,802 |
| | $ | 40,074 |
| $ | 35,578 |
| | $ | 15,509 |
| $ | 16,380 |
| | $ | 113,698 |
| $ | 105,135 |
| | $ | 402,898 |
| $ | 383,790 |
| $ | 116,879 |
| $ | 129,806 |
| | $ | 116,244 |
| $ | 115,737 |
| | $ | 56,608 |
| $ | 47,648 |
| | $ | 12,742 |
| $ | 14,187 |
| | $ | 142,166 |
| $ | 131,784 |
| | $ | 444,639 |
| $ | 439,162 |
| | | | | | | | | | | | | | | | | | | | | | | | Net charge-offs/(recoveries) | $ | 117 |
| $ | 345 |
| | $ | (4 | ) | $ | (7 | ) | | $ | 6 |
| $ | (1 | ) | | $ | 5 |
| $ | (1 | ) | | $ | (5 | ) | $ | 5 |
| | $ | 119 |
| $ | 341 |
| $ | 329 |
| $ | 165 |
| | $ | 12 |
| $ | (20 | ) | | $ | — |
| $ | — |
| | $ | — |
| $ | — |
| | $ | 28 |
| $ | 10 |
| | $ | 369 |
| $ | 155 |
| % of net charge-offs/(recoveries) to end-of-period retained loans | 0.10 | % | 0.28 | % | | — | % | (0.01 | )% | | 0.01 | % | (0.01 | )% | | 0.03 | % | (0.01 | )% | | — | % | 0.01 | % | | 0.03 | % | 0.09 | % | 0.28 | % | 0.13 | % | | 0.01 | % | (0.02 | )% | | — | % | — |
| | — | % | — | % | | 0.02 | % | 0.01 | % | | 0.08 | % | 0.04 | % | | | | | | | | | | | | | | | | | | | | | | | | Loan delinquency(b) | | | | | | | | | | | | | | | | | | | | | | | Current and less than 30 days past due and still accruing | $ | 118,288 |
| $ | 119,050 |
| | $ | 113,258 |
| $ | 105,396 |
| | $ | 40,042 |
| $ | 35,523 |
| | $ | 15,493 |
| $ | 16,269 |
| | $ | 112,559 |
| $ | 104,280 |
| | $ | 399,640 |
| $ | 380,518 |
| $ | 115,753 |
| $ | 128,678 |
| | $ | 116,098 |
| $ | 115,533 |
| | $ | 56,583 |
| $ | 47,622 |
| | $ | 12,713 |
| $ | 14,165 |
| | $ | 141,739 |
| $ | 130,918 |
| | $ | 442,886 |
| $ | 436,916 |
| 30–89 days past due and still accruing | 216 |
| 268 |
| | 242 |
| 204 |
| | 15 |
| 25 |
| | 12 |
| 107 |
| | 898 |
| 582 |
| | 1,383 |
| 1,186 |
| 339 |
| 109 |
| | 94 |
| 67 |
| | 20 |
| 12 |
| | 28 |
| 18 |
| | 387 |
| 702 |
| | 868 |
| 908 |
| 90 or more days past due and still accruing(c) | 108 |
| 86 |
| | 12 |
| 2 |
| | 15 |
| 21 |
| | 4 |
| 4 |
| | 2 |
| 19 |
| | 141 |
| 132 |
| 35 |
| 168 |
| | 4 |
| 3 |
| | 2 |
| 10 |
| | 1 |
| 4 |
| | — |
| 3 |
| | 42 |
| 188 |
| Criticized nonaccrual | 1,357 |
| 1,491 |
| | 136 |
| 200 |
| | 2 |
| 9 |
| | — |
| — |
| | 239 |
| 254 |
| | 1,734 |
| 1,954 |
| 752 |
| 851 |
| | 48 |
| 134 |
| | 3 |
| 4 |
| | — |
| — |
| | 40 |
| 161 |
| | 843 |
| 1,150 |
| Total retained loans | $ | 119,969 |
| $ | 120,895 |
| | $ | 113,648 |
| $ | 105,802 |
| | $ | 40,074 |
| $ | 35,578 |
| | $ | 15,509 |
| $ | 16,380 |
| | $ | 113,698 |
| $ | 105,135 |
| | $ | 402,898 |
| $ | 383,790 |
| $ | 116,879 |
| $ | 129,806 |
| | $ | 116,244 |
| $ | 115,737 |
| | $ | 56,608 |
| $ | 47,648 |
| | $ | 12,742 |
| $ | 14,187 |
| | $ | 142,166 |
| $ | 131,784 |
| | $ | 444,639 |
| $ | 439,162 |
|
| | (a) | The U.S. and non-U.S. distribution is determined based predominantly on the domicile of the borrower. |
| | (b) | The credit quality of wholesale loans is assessed primarily through ongoing review and monitoring of an obligor’s ability to meet contractual obligations rather than relying on the past due status, which is generally a lagging indicator of credit quality. |
| | (c) | Represents loans that are considered well-collateralized and therefore still accruing interest. |
| | (d) | Other includes individuals SPEs, holdingand individual entities (predominantly consists of Wealth Management clients within AWM and includes loans to personal investment companies and privatepersonal and testamentary trusts), SPEs and Private education and civic organizations. ForRefer to Note 14 for more information on exposures to SPEs, see Note 14.SPEs. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 229235 |
Notes to consolidated financial statements
The following table presents additional information on the real estate class of loans within the Wholesale portfolio for the periods indicated. Exposureindicated, which consists primarily of secured commercial loans, of which multifamily is the largest segment. Multifamily lending finances acquisition, leasing and construction of apartment buildings, and includes exposureloans to real estate investment trusts (“REITs”). Other commercial lending largely includes financing for acquisition, leasing and construction, largely for office, retail and industrial real estate, and includes exposureloans to REITs. Included in real estate loans is $10.8 $8.2 billion and $9.2$10.5 billion as of December 31, 20172019 and 2016, 2018, respectively, of construction and development exposure consisting of loans originally purposed for construction and development, general purpose loans for builders, as well as loans for land subdivision and pre-development. | | | | | | | | | | | | | | | | | | | | | | December 31, (in millions, except ratios) | Multifamily | | Other Commercial | | Total real estate loans | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | Real estate retained loans | $ | 79,402 |
| $ | 79,184 |
| | $ | 36,842 |
| $ | 36,553 |
| | $ | 116,244 |
| $ | 115,737 |
| Criticized | 407 |
| 388 |
| | 642 |
| 366 |
| | 1,049 |
| 754 |
| % of total criticized to total real estate retained loans | 0.51 | % | 0.49 | % | | 1.74 | % | 1.00 | % | | 0.90 | % | 0.65 | % | Criticized nonaccrual | $ | 38 |
| $ | 57 |
| | $ | 10 |
| $ | 77 |
| | $ | 48 |
| $ | 134 |
| % of criticized nonaccrual loans to total real estate retained loans | 0.05 | % | 0.07 | % | | 0.03 | % | 0.21 | % | | 0.04 | % | 0.12 | % |
| | | | | | | | | | | | | | | | | | | | | | December 31, (in millions, except ratios) | Multifamily | | Other Commercial | | Total real estate loans | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | Real estate retained loans | $ | 77,597 |
| $ | 72,143 |
| | $ | 36,051 |
| $ | 33,659 |
| | $ | 113,648 |
| $ | 105,802 |
| Criticized | 491 |
| 539 |
| | 355 |
| 459 |
| | 846 |
| 998 |
| % of criticized to total real estate retained loans | 0.63 | % | 0.75 | % | | 0.98 | % | 1.36 | % | | 0.74 | % | 0.94 | % | Criticized nonaccrual | $ | 44 |
| $ | 57 |
| | $ | 92 |
| $ | 143 |
| | $ | 136 |
| $ | 200 |
| % of criticized nonaccrual to total real estate retained loans | 0.06 | % | 0.08 | % | | 0.26 | % | 0.42 | % | | 0.12 | % | 0.19 | % |
Wholesale impaired retained loans and loan modifications Wholesale impaired retained loans consist of loans that have been placed on nonaccrual status and/or that have been modified in a TDR. All impaired loans are evaluated for an asset-specific allowance as described in Note 13. The table below sets forth information about the Firm’s wholesale impaired retained loans. | | December 31, (in millions) | Commercial and industrial | | Real estate | | Financial institutions | | Government agencies | | Other | | Total retained loans | | Commercial and industrial | | Real estate | | Financial institutions | | Other | | Total retained loans | | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | | 2017 | | 2016 | | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | | 2019 | | 2018 | | Impaired loans | | | | | | | | | | | | | | | | | | | | | | | | | | | With an allowance | $ | 1,170 |
| $ | 1,127 |
| | $ | 78 |
| $ | 124 |
| | $ | 93 |
| $ | 9 |
| | $ | — |
| $ | — |
| | $ | 168 |
| $ | 180 |
| | $ | 1,509 |
| | $ | 1,440 |
| | $ | 637 |
| $ | 807 |
| | $ | 49 |
| $ | 107 |
| | $ | 3 |
| $ | 4 |
| | $ | 42 |
| $ | 152 |
| | $ | 731 |
| | $ | 1,070 |
| | Without an allowance(a) | 228 |
| 414 |
| | 60 |
| 87 |
| | — |
| — |
| | — |
| — |
| | 70 |
| 76 |
| | 358 |
| | 577 |
| | 177 |
| 140 |
| | — |
| 27 |
| | — |
| — |
| | 4 |
| 13 |
| | 181 |
| | 180 |
| | Total impaired loans | $ | 1,398 |
| $ | 1,541 |
| | $ | 138 |
| $ | 211 |
| | $ | 93 |
| $ | 9 |
| | $ | — |
| $ | — |
| | $ | 238 |
| $ | 256 |
| | $ | 1,867 |
| (c) | $ | 2,017 |
| (c) | $ | 814 |
| $ | 947 |
| | $ | 49 |
| $ | 134 |
| | $ | 3 |
| $ | 4 |
| | $ | 46 |
| $ | 165 |
| | $ | 912 |
| (c) | $ | 1,250 |
| (c) | Allowance for loan losses related to impaired loans | $ | 404 |
| $ | 258 |
| | $ | 11 |
| $ | 18 |
| | $ | 4 |
| $ | 3 |
| | $ | — |
| $ | — |
| | $ | 42 |
| $ | 63 |
| | $ | 461 |
| | $ | 342 |
| | $ | 221 |
| $ | 252 |
| | $ | 9 |
| $ | 25 |
| | $ | 1 |
| $ | 1 |
| | $ | 3 |
| $ | 19 |
| | $ | 234 |
| | $ | 297 |
| | Unpaid principal balance of impaired loans(b) | 1,604 |
| 1,754 |
| | 201 |
| 295 |
| | 94 |
| 12 |
| | — |
| — |
| | 255 |
| 284 |
| | 2,154 |
| | 2,345 |
| | 974 |
| 1,043 |
| | 72 |
| 203 |
| | 4 |
| 4 |
| | 54 |
| 473 |
| | 1,104 |
| | 1,723 |
| |
| | (a) | When the discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, the loan does not require an allowance. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied to the loan balance. |
| | (b) | Represents the contractual amount of principal owed at December 31, 20172019 and 2016.2018. The unpaid principal balance differs from the impaired loan balances due to various factors, including charge-offs; interest payments received and applied to the carrying value; net deferred loan fees or costs; and unamortized discount or premiums on purchased loans. |
| | (c) | Based upon the domicile of the borrower, largely consists of loans in the U.S. |
The following table presents the Firm’s average impaired retained loans for the years ended20172019, 20162018 and 20152017. | | Year ended December 31, (in millions) | 2017 | 2016 | 2015 | 2019 | 2018 | 2017 | Commercial and industrial | $ | 1,145 |
| $ | 1,480 |
| $ | 453 |
| $ | 1,086 |
| $ | 1,027 |
| $ | 1,256 |
| Real estate | 164 |
| 217 |
| 250 |
| 94 |
| 133 |
| 165 |
| Financial institutions | 20 |
| 13 |
| 13 |
| 11 |
| 57 |
| 48 |
| Government agencies | — |
| — |
| — |
| | Other | 231 |
| 213 |
| 129 |
| 168 |
| 199 |
| 241 |
| Total(a) | $ | 1,560 |
| $ | 1,923 |
| $ | 845 |
| $ | 1,359 |
| $ | 1,416 |
| $ | 1,710 |
|
| | (a) | The related interest income on accruing impaired loans and interest income recognized on a cash basis were not material for the years ended December 31, 2017, 20162019, 2018 and 2015.2017. |
Certain loan modifications are considered to be TDRs as they provide various concessions to borrowers who are experiencing financial difficulty. All TDRs are reported as impaired loans in the tables above. TDRs were $614 $460 million and $733$576 million as of December 31, 20172019 and 2016.2018, respectively. The impact of these modifications, as well as new TDRs, were not material to the Firm for the years ended December 31, 2019, 2018 and 2017.
| | | | 230236 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Note 13 – Allowance for credit losses JPMorgan Chase’s allowance for loan losses represents management’s estimate of probable credit losses inherent in the Firm’s retained loan portfolio, which consists of the two consumer portfolio segments (primarily scored) and the wholesale portfolio segment (risk-rated). The allowance for loan losses includes a formula-based component, an asset-specific component, and a component related to PCI loans, as described below. Management also estimates an allowance for wholesale and certain consumer lending-related commitments using methodologies similar to those used to estimate the allowance on the underlying loans. During the second quarter of 2017, the Firm refined its credit loss estimates relating to the wholesale portfolio by incorporating the use of internal historical data versus external credit rating agency default statistics to estimate PD. In addition, an adjustment to the statistical calculation for wholesale lending-related commitments was incorporated similar to the adjustment applied for wholesale loans. The impacts of these refinements were not material to the allowance for credit losses.
The Firm’s policies used to determine its allowance for credit losses are described in the following paragraphs. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the loan portfolio, in light of the factors then prevailing, may result in significant changes in the allowances for loan losses and lending-related commitments in future periods. At least quarterly, the allowance for credit losses is reviewed by the CRO, the CFO and the Controller of the Firm and discussed with the DRPC and the Audit Committee.Firm. As of December 31, 2017,2019, JPMorgan Chase deemed the allowance for credit losses to be appropriate (i.e.,and sufficient to absorb probable credit losses inherent in the portfolio).portfolio. Formula-based component The formula-based component is based on a statistical calculation to provide for incurred credit losses in all consumer loans and performing risk-rated loans. All loans restructured in TDRs as well as any impaired risk-rated loans have an allowance assessed as part of the asset-specific component, while PCI loans have an allowance assessed as part of the PCI component. SeeRefer to Note 12 for more information on TDRs, Impaired loans and PCI loans. Formula-based component - Consumer loans and certain lending-related commitments The formula-based allowance for credit losses for the consumer portfolio segments is calculated by applying statistical credit loss factors (estimated PD and loss severities) to the recorded investment balances or loan-equivalent amounts of pools of loan exposures with similar risk characteristics over a loss emergence period to arrive at an estimate of incurred credit losses. Estimated loss emergence periods may vary by product and may change over time; management applies judgment in estimating loss emergence periods, using available credit information and trends. In addition, management applies judgment to the statistical loss estimates for each loan portfolio category, using delinquency trends and other risk characteristics to estimate the total incurred credit losses in the portfolio. Management uses additional statistical methods and considers actual portfolio performance, including actual losses recognized on defaulted loans and collateral valuation trends, to review the appropriateness of the primary statistical loss estimate. The economic impact of potential modifications of residential real estate loans is not included in the statistical calculation because of the uncertainty regarding the type and results of such modifications. The statistical calculation is then adjusted to take into consideration model imprecision, external factors and current economic events that have occurred but that are not yet reflected in the factors used to derive the statistical calculation; these adjustments are accomplished in part by analyzing the historical loss experience for each major product segment. However, it is difficult to predict whether historical loss experience is indicative of future loss levels. Management applies judgment in making this adjustment, taking into account uncertainties associated with current macroeconomic and political conditions, quality of underwriting standards, borrower behavior, and other relevant internal and external factors affecting the credit quality of the portfolio. In certain instances, the interrelationships between these factors create further uncertainties. The application of different inputs into the statistical calculation, and the assumptions used by management to adjust the statistical calculation, are subject to management judgment, and emphasizing one input or assumption over another, or considering other inputs or assumptions, could affect the estimate of the allowance for credit losses for the consumer credit portfolio. Overall, the allowance for credit losses for consumer portfolios is sensitive to changes in the economic environment (e.g., unemployment rates), delinquency rates, the realizable value of collateral (e.g., housing prices), FICO scores, borrower behavior and other risk factors. While all of these factors are important determinants of overall allowance levels, changes in the various factors may not occur at the same time or at the same rate, or changes may be directionally inconsistent such that improvement in one factor may offset deterioration in another. In addition, changes in these factors would not necessarily be consistent across all geographies or product types. Finally, it is difficult to predict the extent to which changes in these factors would ultimately affect the frequency of losses, the severity of losses or both.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 231237 |
Notes to consolidated financial statements
Formula-based component - Wholesale loans and lending-related commitments The Firm’s methodology for determining the allowance for loan losses and the allowance for lending-related commitments involves the early identification of credits that are deteriorating. The formula-based component of the allowance for wholesale loans and lending-related commitments is calculated by applying statistical credit loss factors (estimated PD and LGD) to the recorded investment balances or loan-equivalent over a loss emergence period to arrive at an estimate of incurred credit losses in the portfolio. Estimated loss emergence periods may vary by the funded versus unfunded status of the instrument and may change over time. The Firm assesses the credit quality of itsa borrower or counterparty and assigns aan internal risk rating. Risk ratings are assigned at origination or acquisition, and if necessary, adjusted for changes in credit quality over the life of the exposure. In assessing the risk rating of a particular loan or lending-related commitment, among the factors considered are the obligor’s debt capacity and financial flexibility, the level of the obligor’s earnings, the amount and sources for repayment, the level and nature of contingencies, management strength, and the industry and geography in which the obligor operates. These factors are based on an evaluation of historical and current information and involve subjective assessment and interpretation. Determining risk ratings involves significant judgment; emphasizing one factor over another or considering additional factors could affect the risk rating assigned by the Firm. A PD estimate is determined based on the Firm’s history of defaults over more than one credit cycle. LGD estimate is a judgment-based estimate assigned to each loan or lending-related commitment. The estimate represents the amount of economic loss if the obligor were to default. The type of obligor, quality of collateral, and the seniority of the Firm’s lending exposure in the obligor’s capital structure affect LGD. The Firm applies judgment in estimating PD, LGD, loss emergence period and loan-equivalent used in calculating the allowance for credit losses.Estimates of PD, LGD, loss emergence period and loan-equivalent used are subject to periodic refinement based on any changes to underlying external or Firm-specific Firm-specific historical data. Changes to the time period used for PD and LGD estimates could also affect the allowance for credit losses. The use of different inputs, estimates or methodologies could change the amount of the allowance for credit losses determined appropriate by the Firm. In addition to the statistical credit loss estimates applied to the wholesale portfolio, management applies its judgment to adjust the statistical estimates for wholesale loans and lending-related commitments, taking into consideration model imprecision, external factors and economic events that have occurred but are not yet reflected in the loss factors. Historical experience of both LGD and PD are considered when estimating these adjustments. Factors related to concentrated and deteriorating industries also are incorporated where relevant. These estimates are based on management’s view of uncertainties that relate to current macroeconomic conditions, quality of underwriting standards and other relevant internal and external factors affecting the credit quality of the current portfolio. Asset-specific component The asset-specific component of the allowance relates to loans considered to be impaired, which includes loans that have been modified in TDRs as well as risk-rated loans that have been placed on nonaccrual status. To determine the asset-specific component of the allowance, larger risk-rated loans (primarily loans in the wholesale portfolio segment) are evaluated individually, while smaller loans (both risk-rated and scored) are evaluated as pools using historical loss experience for the respective class of assets. The Firm generally measures the asset-specific allowance as the difference between the recorded investment in the loan and the present value of the cash flows expected to be collected, discounted at the loan’s original effective interest rate. Subsequent changes in impairment are reported as an adjustment to the allowance for loan losses. In certain cases, the asset-specific allowance is determined using an observable market price, and the allowance is measured as the difference between the recorded investment in the loan and the loan’s fair value. Collateral-dependent loans are charged down to the fair value of collateral less costs to sell. For any of these impaired loans, the amount of the asset-specific allowance required to be recorded, if any, is dependent upon the recorded investment in the loan (including prior charge-offs), and either the expected cash flows or fair value of collateral. SeeRefer to Note 12 for more information about charge-offs and collateral-dependent loans. The asset-specific component of the allowance for impaired loans that have been modified in TDRs (including forgone interest, principal forgiveness, as well as other concessions) incorporates the effect of the modification on the loan’s expected cash flows, which considers the potential for redefault. For residential real estate loans modified in TDRs, the Firm develops product-specific probability of default estimates, which are applied at a loan level to compute expected losses. In developing these probabilities of default, the Firm considers the relationship between the credit quality characteristics of the underlying loans and certain assumptions about home prices and unemployment, based upon industry-wide data. The Firm also considers its own historical loss experience to-date based on actual redefaulted modified loans. For credit card loans modified in TDRs, expected losses incorporate projected redefaults based on the Firm’s historical experience by type of modification program. For wholesale loans modified in TDRs, expected losses incorporate management’s expectation of the borrower’s ability to repay under the modified terms.
| | | | 232238 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Estimating the timing and amounts of future cash flows is highly judgmental as these cash flow projections rely upon estimates such as loss severities, asset valuations, default rates (including redefault rates on modified loans), the amounts and timing of interest or principal payments (including any expected prepayments) or other factors that are reflective of current and expected market conditions. These estimates are, in turn, dependent on factors such as the duration of current overall economic conditions, industry-, portfolio-, or borrower-specific factors, the expected outcome of insolvency proceedings as well as, in certain circumstances, other economic factors, including the level of future home prices. All of these estimates and assumptions require significant management judgment and certain assumptions are highly subjective. PCI loans In connection with the acquisition of certain PCI loans, which are accounted for as described in Note 12, the allowance for loan losses for the PCI portfolio is based on quarterly estimates of the amount of principal and interest cash flows expected to be collected over the estimated remaining lives of the loans. These cash flow projections are based on estimates regarding default rates (including redefault rates on modified loans), loss severities, the amounts and timing of prepayments and other factors that are reflective of current and expected future market conditions. These estimates are dependent on assumptions regarding the level of future home prices, and the duration of current overall economic conditions, among other factors. These estimates and assumptions require significant management judgment and certain assumptions are highly subjective.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 233239 |
Notes to consolidated financial statements
Allowance for credit losses and related information The table below summarizes information about the allowances for loan losses and lending-relating commitments, and includes a breakdown of loans and lending-related commitments by impairment methodology. | | (Table continued on next page) | | | | | | | | | | | 2017 | | 2019 | | Year ended December 31, (in millions) | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | Allowance for loan losses | | | | | | | | | | | | | | | | | Beginning balance at January 1, | $ | 5,198 |
| | $ | 4,034 |
| | $ | 4,544 |
| | $ | 13,776 |
| | $ | 4,146 |
| | $ | 5,184 |
| | $ | 4,115 |
| | $ | 13,445 |
| | Gross charge-offs | 1,779 |
|
| 4,521 |
| | 212 |
| | 6,512 |
| | 963 |
|
| 5,436 |
| | 411 |
| | 6,810 |
| | Gross recoveries | (634 | ) | | (398 | ) | | (93 | ) | | (1,125 | ) | | (551 | ) | | (588 | ) | | (42 | ) | | (1,181 | ) | | Net charge-offs | 1,145 |
|
| 4,123 |
| | 119 |
| | 5,387 |
| | 412 |
|
| 4,848 |
| | 369 |
| | 5,629 |
| | Write-offs of PCI loans(a) | 86 |
| | — |
| | — |
| | 86 |
| | 151 |
| | — |
| | — |
| | 151 |
| | Provision for loan losses | 613 |
| | 4,973 |
| | (286 | ) | | 5,300 |
| | (383 | ) | | 5,348 |
| | 484 |
| | 5,449 |
| | Other | (1 | ) |
| — |
| | 2 |
| | 1 |
| | (1 | ) |
| (1 | ) | | 11 |
| | 9 |
| | Ending balance at December 31, | $ | 4,579 |
| | $ | 4,884 |
| | $ | 4,141 |
| | $ | 13,604 |
| | $ | 3,199 |
| | $ | 5,683 |
| | $ | 4,241 |
| | $ | 13,123 |
| | | | | | | | | | | | | | | | | | | Allowance for loan losses by impairment methodology | | | | | | | | | | | | | | | | | Asset-specific(b) | $ | 246 |
| | $ | 383 |
| (c) | $ | 461 |
| | $ | 1,090 |
| | $ | 136 |
| | $ | 477 |
| (c) | $ | 234 |
| | $ | 847 |
| | Formula-based | 2,108 |
| | 4,501 |
| | 3,680 |
| | 10,289 |
| | 2,076 |
| | 5,206 |
| | 4,007 |
| | 11,289 |
| | PCI | 2,225 |
| | — |
| | — |
| | 2,225 |
| | 987 |
| | — |
| | — |
| | 987 |
| | Total allowance for loan losses | $ | 4,579 |
| | $ | 4,884 |
| | $ | 4,141 |
| | $ | 13,604 |
| | $ | 3,199 |
| | $ | 5,683 |
| | $ | 4,241 |
| | $ | 13,123 |
| | | | | | | | | | | | | | | | | | | Loans by impairment methodology | | | | | | | | | | | | | | | | | Asset-specific | $ | 8,036 |
| | $ | 1,215 |
| | $ | 1,867 |
| | $ | 11,118 |
| | $ | 6,172 |
| | $ | 1,452 |
| | $ | 912 |
| | $ | 8,536 |
| | Formula-based | 333,941 |
| | 148,172 |
| | 401,028 |
| | 883,141 |
| | 305,503 |
| | 167,472 |
| | 443,727 |
| | 916,702 |
| | PCI | 30,576 |
| | — |
| | 3 |
| | 30,579 |
| | 20,363 |
| | — |
| | — |
| | 20,363 |
| | Total retained loans | $ | 372,553 |
| | $ | 149,387 |
| | $ | 402,898 |
| | $ | 924,838 |
| | $ | 332,038 |
| | $ | 168,924 |
| | $ | 444,639 |
| | $ | 945,601 |
| | | | | | | | | | | | | | | | | | | Impaired collateral-dependent loans | | | | | | | | | | | | | | | | | Net charge-offs | $ | 64 |
|
| $ | — |
| | $ | 31 |
| | $ | 95 |
| | $ | 57 |
|
| $ | — |
| | $ | 25 |
| | $ | 82 |
| | Loans measured at fair value of collateral less cost to sell | 2,133 |
| | — |
| | 233 |
| | 2,366 |
| | 2,059 |
| | — |
| | 81 |
| | 2,140 |
| | | | | | | | | | | | | | | | | | | Allowance for lending-related commitments | | | | | | | | | | | | | | | | | Beginning balance at January 1, | $ | 26 |
| | $ | — |
| | $ | 1,052 |
| | $ | 1,078 |
| | $ | 33 |
| | $ | — |
| | $ | 1,022 |
| | $ | 1,055 |
| | Provision for lending-related commitments | 7 |
| | — |
| | (17 | ) | | (10 | ) | | — |
| | — |
| | 136 |
| | 136 |
| | Other | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | Ending balance at December 31, | $ | 33 |
| | $ | — |
| | $ | 1,035 |
| | $ | 1,068 |
| | $ | 33 |
| | $ | — |
| | $ | 1,158 |
| | $ | 1,191 |
| | | | | | | | | | | | | | | | | | | Allowance for lending-related commitments by impairment methodology | | | | | | | | | | | | | | | | | Asset-specific | $ | — |
| | $ | — |
| | $ | 187 |
| | $ | 187 |
| | $ | — |
| | $ | — |
| | $ | 102 |
| | $ | 102 |
| | Formula-based | 33 |
| | — |
| | 848 |
| | 881 |
| | 33 |
| | — |
| | 1,056 |
| | 1,089 |
| | Total allowance for lending-related commitments | $ | 33 |
| | $ | — |
| | $ | 1,035 |
| | $ | 1,068 |
| | $ | 33 |
| | $ | — |
| | $ | 1,158 |
| | $ | 1,191 |
| | | | | | | | | | | | | | | �� | | | | Lending-related commitments by impairment methodology | | | | | | | | | | | | | | | | | Asset-specific | $ | — |
| | $ | — |
| | $ | 731 |
| | $ | 731 |
| | $ | — |
| | $ | — |
| | $ | 474 |
| | $ | 474 |
| | Formula-based | 48,553 |
| | 572,831 |
| | 369,367 |
| | 990,751 |
| | 51,412 |
| | 650,720 |
| | 403,641 |
| | 1,105,773 |
| | Total lending-related commitments | $ | 48,553 |
| | $ | 572,831 |
| | $ | 370,098 |
| | $ | 991,482 |
| | $ | 51,412 |
| | $ | 650,720 |
| | $ | 404,115 |
| | $ | 1,106,247 |
| |
| | (a) | Write-offs of PCI loans are recorded against the allowance for loan losses when actual losses for a pool exceed estimated losses that were recorded as purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan is recognized when the underlying loan is removed from a pool. |
| | (b) | Includes risk-rated loans that have been placed on nonaccrual status and all loans that have been modified in a TDR. |
| | (c) | The asset-specific credit card allowance for loan losses is related to loans that have been modified in a TDR; such allowance is calculated based on the loans’ original contractual interest rates and does not consider any incremental penalty rates. |
| | (d) | The prior period amounts have been revised to conform with the current period presentation. |
| | | | 234240 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (table continued from previous page) | | | | | | | | | | | | 2018 | | 2017 | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | | | | | | | | | | | | | | | | | $ | 4,579 |
| | $ | 4,884 |
| | $ | 4,141 |
| | $ | 13,604 |
| | $ | 5,198 |
| | $ | 4,034 |
| | $ | 4,544 |
| | $ | 13,776 |
| | 1,025 |
| | 5,011 |
| | 313 |
| | 6,349 |
| | 1,779 |
| | 4,521 |
| | 212 |
| | 6,512 |
| | (842 | ) | | (493 | ) | | (158 | ) | | (1,493 | ) | | (634 | ) | | (398 | ) | | (93 | ) | | (1,125 | ) | | 183 |
| | 4,518 |
| | 155 |
| | 4,856 |
| | 1,145 |
| | 4,123 |
| | 119 |
| | 5,387 |
| | 187 |
| | — |
| | — |
| | 187 |
| | 86 |
| | — |
| | — |
| | 86 |
| | (63 | ) | | 4,818 |
| | 130 |
| | 4,885 |
| | 613 |
| | 4,973 |
| | (286 | ) | | 5,300 |
| | — |
| | — |
| | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | 2 |
| | 1 |
| | $ | 4,146 |
| | $ | 5,184 |
| | $ | 4,115 |
| | $ | 13,445 |
| | $ | 4,579 |
| | $ | 4,884 |
| | $ | 4,141 |
| | $ | 13,604 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 196 |
| | $ | 440 |
| (c) | $ | 297 |
| | $ | 933 |
| | $ | 246 |
| | $ | 383 |
| (c) | $ | 461 |
| | $ | 1,090 |
| | 2,162 |
| | 4,744 |
| | 3,818 |
| | 10,724 |
| | 2,108 |
| | 4,501 |
| | 3,680 |
| | 10,289 |
| | 1,788 |
| | — |
| | — |
| | 1,788 |
| | 2,225 |
| | — |
| | — |
| | 2,225 |
| | $ | 4,146 |
| | $ | 5,184 |
| | $ | 4,115 |
| | $ | 13,445 |
| | $ | 4,579 |
| | $ | 4,884 |
| | $ | 4,141 |
| | $ | 13,604 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 6,874 |
| | $ | 1,319 |
| | $ | 1,250 |
| | $ | 9,443 |
| | $ | 8,078 |
| | $ | 1,215 |
| | $ | 1,867 |
| | $ | 11,160 |
| | 342,729 |
| | 155,297 |
| | 437,909 |
| | 935,935 |
| | 333,899 |
| | 148,172 |
| | 401,028 |
| | 883,099 |
| | 24,034 |
| | — |
| | 3 |
| | 24,037 |
| | 30,576 |
| | — |
| | 3 |
| | 30,579 |
| | $ | 373,637 |
| | $ | 156,616 |
| | $ | 439,162 |
| | $ | 969,415 |
| | $ | 372,553 |
| | $ | 149,387 |
| | $ | 402,898 |
| | $ | 924,838 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 24 |
| | $ | — |
| | $ | 21 |
| | $ | 45 |
| | $ | 64 |
| | $ | — |
| | $ | 31 |
| | $ | 95 |
| | 2,080 |
| | — |
| | 202 |
| | 2,282 |
| | 2,133 |
| | — |
| | 233 |
| | 2,366 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 33 |
| | $ | — |
| | $ | 1,035 |
| | $ | 1,068 |
| | $ | 26 |
| | $ | — |
| | $ | 1,052 |
| | $ | 1,078 |
| | — |
| | — |
| | (14 | ) | | (14 | ) | | 7 |
| | — |
| | (17 | ) | | (10 | ) | | — |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | $ | 33 |
| | $ | — |
| | $ | 1,022 |
| | $ | 1,055 |
| | $ | 33 |
| | $ | — |
| | $ | 1,035 |
| | $ | 1,068 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | — |
| | $ | — |
| | $ | 99 |
| | $ | 99 |
| | $ | — |
| | $ | — |
| | $ | 187 |
| | $ | 187 |
| | 33 |
| | — |
| | 923 |
| | 956 |
| | 33 |
| | — |
| | 848 |
| | 881 |
| | $ | 33 |
| | $ | — |
| | $ | 1,022 |
| | $ | 1,055 |
| | $ | 33 |
| | $ | — |
| | $ | 1,035 |
| | $ | 1,068 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | — |
| | $ | — |
| | $ | 469 |
| | $ | 469 |
| | $ | — |
| | $ | — |
| | $ | 731 |
| | $ | 731 |
| | 46,066 |
| | 605,379 |
| | 387,344 |
| | 1,038,789 |
| | 48,553 |
| | 572,831 |
| | 369,367 |
| | 990,751 |
| | $ | 46,066 |
| | $ | 605,379 |
| | $ | 387,813 |
| | $ | 1,039,258 |
| | $ | 48,553 |
| | $ | 572,831 |
| | $ | 370,098 |
| | $ | 991,482 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (table continued from previous page) | | | | | | | | | | | | 2016 | | 2015 | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | | | | | | | | | | | | | | | | | $ | 5,806 |
| | $ | 3,434 |
| | $ | 4,315 |
| | $ | 13,555 |
| | $ | 7,050 |
| | $ | 3,439 |
| | $ | 3,696 |
| | $ | 14,185 |
| | 1,500 |
| | 3,799 |
| | 398 |
| | 5,697 |
| | 1,658 |
| | 3,488 |
| | 95 |
| | 5,241 |
| | (591 | ) | | (357 | ) | | (57 | ) | | (1,005 | ) | | (704 | ) | | (366 | ) | | (85 | ) | | (1,155 | ) | | 909 |
| | 3,442 |
| | 341 |
| | 4,692 |
| | 954 |
| | 3,122 |
| | 10 |
| | 4,086 |
| | 156 |
| | — |
| | — |
| | 156 |
| | 208 |
| | — |
| | — |
| | 208 |
| | 467 |
| | 4,042 |
| | 571 |
| | 5,080 |
| | (82 | ) | | 3,122 |
| | 623 |
| | 3,663 |
| | (10 | ) | | — |
| | (1 | ) | | (11 | ) | | — |
| | (5 | ) | | 6 |
| | 1 |
| | $ | 5,198 |
| | $ | 4,034 |
| | $ | 4,544 |
| | $ | 13,776 |
| | $ | 5,806 |
| | $ | 3,434 |
| | $ | 4,315 |
| | $ | 13,555 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 308 |
| | $ | 358 |
| (c) | $ | 342 |
| | $ | 1,008 |
| | $ | 364 |
| | $ | 460 |
| (c) | $ | 274 |
| | $ | 1,098 |
| | 2,579 |
| | 3,676 |
| | 4,202 |
| | 10,457 |
| | 2,700 |
| | 2,974 |
| | 4,041 |
| | 9,715 |
| | 2,311 |
| | — |
| | — |
| | 2,311 |
| | 2,742 |
| | — |
| | — |
| | 2,742 |
| | $ | 5,198 |
| | $ | 4,034 |
| | $ | 4,544 |
| | $ | 13,776 |
| | $ | 5,806 |
| | $ | 3,434 |
| | $ | 4,315 |
| | $ | 13,555 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 8,940 |
| | $ | 1,240 |
| | $ | 2,017 |
| | $ | 12,197 |
| | $ | 9,606 |
| | $ | 1,465 |
| | $ | 1,024 |
| | $ | 12,095 |
| | 319,787 |
| | 140,471 |
| | 381,770 |
| | 842,028 |
| | 293,751 |
| | 129,922 |
| | 356,022 |
| | 779,695 |
| | 35,679 |
| | — |
| | 3 |
| | 35,682 |
| | 40,998 |
| | — |
| | 4 |
| | 41,002 |
| | $ | 364,406 |
| | $ | 141,711 |
| | $ | 383,790 |
| | $ | 889,907 |
| | $ | 344,355 |
| | $ | 131,387 |
| | $ | 357,050 |
| | $ | 832,792 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 98 |
| | $ | — |
| | $ | 7 |
| | $ | 105 |
| | $ | 104 |
| | $ | — |
| | $ | 16 |
| | $ | 120 |
| | 2,391 |
| | — |
| | 300 |
| | 2,691 |
| | 2,566 |
| | — |
| | 283 |
| | 2,849 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 14 |
| | $ | — |
| | $ | 772 |
| | $ | 786 |
| | $ | 13 |
| | $ | — |
| | $ | 609 |
| | $ | 622 |
| | — |
| | — |
| | 281 |
| | 281 |
| | 1 |
| | — |
| | 163 |
| | 164 |
| | 12 |
| | — |
| | (1 | ) | | 11 |
| | — |
| | — |
| | — |
| | — |
| | $ | 26 |
| | $ | — |
| | $ | 1,052 |
| | $ | 1,078 |
| | $ | 14 |
| | $ | — |
| | $ | 772 |
| | $ | 786 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | — |
| | $ | — |
| | $ | 169 |
| | $ | 169 |
| | $ | — |
| | $ | — |
| | $ | 73 |
| | $ | 73 |
| | 26 |
| | — |
| | 883 |
| | 909 |
| | 14 |
| | — |
| | 699 |
| | 713 |
| | $ | 26 |
| | $ | — |
| | $ | 1,052 |
| | $ | 1,078 |
| | $ | 14 |
| | $ | — |
| | $ | 772 |
| | $ | 786 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | — |
| | $ | — |
| | $ | 506 |
| | $ | 506 |
| | $ | — |
| | $ | — |
| | $ | 193 |
| | $ | 193 |
| | 53,247 |
| (d) | 553,891 |
| | 367,508 |
| | 974,646 |
| (d) | 56,865 |
| (d) | 515,518 |
| | 366,206 |
| | 938,589 |
| (d) | $ | 53,247 |
| (d) | $ | 553,891 |
| | $ | 368,014 |
| | $ | 975,152 |
| (d) | $ | 56,865 |
| (d) | $ | 515,518 |
| | $ | 366,399 |
| | $ | 938,782 |
| (d) |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 235241 |
Notes to consolidated financial statements
Note 14 – Variable interest entities ForRefer to Note 1 on page 151for a further description of JPMorgan Chase’s accounting policies regarding consolidation of VIEs, see Note 1.VIEs.
The following table summarizes the most significant types of Firm-sponsored Firm-sponsored VIEs by business segment. The Firm considers a “sponsored” VIE to include any entity where: (1) JPMorgan Chase is the primary beneficiary of the structure; (2) the VIE is used by JPMorgan Chase to securitize Firm assets; (3) the VIE issues financial instruments with the JPMorgan Chase name; or (4) the entity is a JPMorgan Chase–Chase–administered asset-backed commercial paper conduit. | | | | | Line of Business | Transaction Type | Activity | Annual Report2019 Form 10-K
page references | CCB | Credit card securitization trusts | Securitization of originated credit card receivables | 236-237242–243 | Mortgage securitization trusts | Servicing and securitization of both originated and purchased residential mortgages | 237-239243–245 | CIB | Mortgage and other securitization trusts | Securitization of both originated and purchased residential and commercial mortgages, and other consumer loans | 237-239243–245 | Multi-seller conduits | Assist clients in accessing the financial markets in a cost-efficient manner and structures transactions to meet investor needs | 239245 | Municipal bond vehicles | Financing of municipal bond investments | 239-240245–246 |
The Firm’s other business segments are also involved with VIEs (both third-party and Firm-sponsored) Firm-sponsored), but to a lesser extent, as follows: Asset & Wealth Management: AWM sponsors and manages certain funds that are deemed VIEs. As asset manager of the funds, AWM earns a fee based on assets managed; the fee varies with each fund’s investment objective and is competitively priced. For fund entities that qualify as VIEs, AWM’s interests are, in certain cases, considered to be significant variable interests that result in consolidation of the financial results of these entities. Commercial Banking: CB provides financing and lending-related services to a wide spectrum of clients, including certain third party-sponsored entities that may meet the definition of a VIE. CB does not control the activities of these entities and does not consolidate these entities. CB’s maximum loss exposure, regardless of whether the entity is a VIE, is generally limited to loans and lending-related commitments which are reported and disclosed in the same manner as any other third-party transaction.
Corporate: | | • | Commercial Banking: CB provides financing and lending-related services to a wide spectrum of clients, including certain third-party-sponsored entities that may meet the definition of a VIE. CB does not control the activities of these entities and does not consolidate these entities. CB’s maximum loss exposure, regardless of whether the entity is a VIE, is generally limited to loans and lending-related commitments which are reported and disclosed in the same manner as any other third-party transaction. |
| | • | Corporate: Corporate is involved with entities that may meet the definition of VIEs; however these entities are generally subject to specialized investment company accounting, which does not require the consolidation of investments, including VIEs. In addition, Treasury and CIO invest in securities generally issued by third parties which may meet the definition of VIEs (e.g., issuers of asset-backed securities). In general, the Firm does not have the power to direct the significant activities of these entities and therefore does not consolidate these entities. Refer to Note 10 for further information on the Firm’s investment securities portfolio. |
In addition, Treasury and CIO invest in securities generally issued by third parties which may meet the definition of VIEs (e.g., issuers of asset-backed securities). In general, the Firm does not have the power to direct the significant activities of these entities and therefore does not consolidate these entities. See Note 10 for further information on the Firm’s investment securities portfolio. In addition, CIB also invests in and provides financing and other services to VIEs sponsored by third parties. See pages 241-242 Refer to page 247 of this Notefor more information on the VIEs sponsored by third parties.
Significant Firm-sponsored variable interest entities Credit card securitizations CCB’s Card business securitizesmay securitize originated credit card loans, primarily through the Chase Issuance Trust (the “Trust”). The Firm’s continuing involvement in credit card securitizations includes servicing the receivables, retaining an undivided seller’s interest in the receivables, retaining certain senior and subordinated securities and maintaining escrow accounts. The Firm is considered to be the primary beneficiary of these Firm-sponsored Firm-sponsored credit card securitization trusts based on the Firm’s ability to direct the activities of these VIEs through its servicing responsibilities and other duties, including making decisions as to the receivables that are transferred into those trusts and as to any related modifications and workouts. Additionally, the nature and extent of the Firm’s other continuing involvement with the trusts, as indicated above, obligates the Firm to absorb losses and gives the Firm the right to receive certain benefits from these VIEs that could potentially be significant. The underlying securitized credit card receivables and other assets of the securitization trusts are available only for payment of the beneficial interests issued by the securitization trusts; they are not available to pay the Firm’s other obligations or the claims of the Firm’s creditors. The agreements with the credit card securitization trusts require the Firm to maintain a minimum undivided interest in the credit card trusts (generally 5%). As of December 31, 20172019 and 2016,2018, the Firm held undivided interests in Firm-sponsored Firm-sponsored credit card securitization trusts of $15.8 $5.3 billion and $8.9$15.1 billion, respectively. The Firm maintained an average undivided interest in principal receivables owned by those trusts of approximately 26% 50% and 16% 37% for the years ended December 31, 20172019 and 2016. As of both2018. The Firm did
| | | | 236242 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
December 31, 2017 and 2016, the Firm did not retain any senior securities and retained $4.5 $3.0 billion and $5.3 billion of subordinated securities in certain of its credit card securitization trusts as of both December 31, 20172019 and 2016, 2018, respectively. The Firm’s undivided interests in the credit card trusts and securities retained are eliminated in consolidation.
Firm-sponsored mortgage and other securitization trusts The Firm securitizes (or has securitized) originated and purchased residential mortgages, commercial mortgages and other consumer loans primarily in its CCB and CIB businesses. Depending on the particular transaction, as well asthe respective business involved, the Firm may act as the servicer of the loans and/or retain certain beneficial interests in the securitization trusts.
The following table presents the total unpaid principal amount of assets held in Firm-sponsored Firm-sponsored private-label securitization entities, including those in which the Firm has continuing involvement, and those that are consolidated by the Firm. Continuing involvement includes servicing the loans, holding senior interests or subordinated interests (including amounts required to be held pursuant to credit risk retention rules), recourse or guarantee arrangements, and derivative transactions.contracts. In certain instances, the Firm’s only continuing involvement is servicing the loans. See The Firm’s maximum loss exposure from retained and purchased interests is the carrying value of these interests. Refer to Securitization activity on page 242 248 of this Note for further information regarding the Firm’s cash flows associated with and interests retained in nonconsolidated VIEs, and page 243 pages 248–249 of this Note for information on the Firm’s loan sales and securitization activity related to U.S. GSEs and government agencies. | | | Principal amount outstanding | | JPMorgan Chase interest in securitized assets in nonconsolidated VIEs(c)(d)(e) | Principal amount outstanding | | JPMorgan Chase interest in securitized assets in nonconsolidated VIEs(c)(d)(e) | December 31, 2017 (in millions) | Total assets held by securitization VIEs | Assets held in consolidated securitization VIEs | Assets held in nonconsolidated securitization VIEs with continuing involvement | | Trading assets | Securities | Other financial assets | Total interests held by JPMorgan Chase | | December 31, 2019 (in millions) | | Total assets held by securitization VIEs | Assets held in consolidated securitization VIEs | Assets held in nonconsolidated securitization VIEs with continuing involvement | | Trading assets | Investment securities | Other financial assets | Total interests held by JPMorgan Chase | Securitization-related(a) | | | | | | | Residential mortgage: | | | | | | | Prime/Alt-A and option ARMs | $ | 68,874 |
| $ | 3,615 |
| $ | 52,280 |
| | $ | 410 |
| $ | 943 |
| $ | — |
| $ | 1,353 |
| $ | 60,348 |
| $ | 2,796 |
| $ | 48,734 |
| | $ | 535 |
| $ | 625 |
| $ | — |
| $ | 1,160 |
| Subprime | 18,984 |
| 7 |
| 17,612 |
| | 93 |
| — |
| — |
| 93 |
| 14,661 |
| — |
| 13,490 |
| | 7 |
| — |
| — |
| 7 |
| Commercial and other(b) | 94,905 |
| 63 |
| 63,411 |
| | 745 |
| 1,133 |
| 157 |
| 2,035 |
| 111,903 |
| — |
| 80,878 |
| | 785 |
| 773 |
| 241 |
| 1,799 |
| Total | $ | 182,763 |
| $ | 3,685 |
| $ | 133,303 |
| | $ | 1,248 |
| $ | 2,076 |
| $ | 157 |
| $ | 3,481 |
| $ | 186,912 |
| $ | 2,796 |
| $ | 143,102 |
| | $ | 1,327 |
| $ | 1,398 |
| $ | 241 |
| $ | 2,966 |
|
| | | Principal amount outstanding | | JPMorgan Chase interest in securitized assets in nonconsolidated VIEs(c)(d)(e) | Principal amount outstanding | | JPMorgan Chase interest in securitized assets in nonconsolidated VIEs(c)(d)(e) | December 31, 2016(in millions) | Total assets held by securitization VIEs | Assets held in consolidated securitization VIEs | Assets held in nonconsolidated securitization VIEs with continuing involvement | | Trading assets | Securities | Other financial assets | Total interests held by JPMorgan Chase | | December 31, 2018 (in millions) | | Total assets held by securitization VIEs | Assets held in consolidated securitization VIEs | Assets held in nonconsolidated securitization VIEs with continuing involvement | | Trading assets | Investment securities | Other financial assets | Total interests held by JPMorgan Chase | Securitization-related(a) | | | | | | | Residential mortgage: | | | | | | | Prime/Alt-A and option ARMs | $ | 76,789 |
| $ | 4,209 |
| $ | 57,543 |
| | $ | 226 |
| $ | 1,334 |
| $ | — |
| $ | 1,560 |
| $ | 63,350 |
| $ | 3,237 |
| $ | 50,679 |
| | $ | 623 |
| $ | 647 |
| $ | — |
| $ | 1,270 |
| Subprime | 21,542 |
| — |
| 19,903 |
| | 76 |
| — |
| — |
| 76 |
| 16,729 |
| 32 |
| 15,434 |
| | 53 |
| — |
| — |
| 53 |
| Commercial and other(b) | 101,265 |
| 107 |
| 71,464 |
| | 509 |
| 2,064 |
| — |
| 2,573 |
| 102,961 |
| — |
| 79,387 |
| | 783 |
| 801 |
| 210 |
| 1,794 |
| Total | $ | 199,596 |
| $ | 4,316 |
| $ | 148,910 |
| | $ | 811 |
| $ | 3,398 |
| $ | — |
| $ | 4,209 |
| $ | 183,040 |
| $ | 3,269 |
| $ | 145,500 |
| | $ | 1,459 |
| $ | 1,448 |
| $ | 210 |
| $ | 3,117 |
|
| | (a) | Excludes U.S. GSEs and government agency securitizations and re-securitizations, which are not Firm-sponsored. See page 243Refer to pages 248–249 of this Note for information on the Firm’s loan sales and securitization activity related to U.S. GSEs and government agencies. |
| | (b) | Consists of securities backed by commercial loans (predominantly real estate)estate loans and non-mortgage-related consumer receivables purchased from third parties. |
| | (c) | Excludes the following: retained servicing (see(refer to Note 15 for a discussion of MSRs); securities retained from loan sales and securitization activity related to U.S. GSEs and government agencies; interest rate and foreign exchange derivatives primarily used to manage interest rate and foreign exchange risks of securitization entities (See(refer to Note 5 for further information on derivatives); senior and subordinated securities of $88106 million and $4894 million, respectively, at December 31, 20172019, and $18087 million and $4928 million, respectively, at December 31, 20162018, which the Firm purchased in connection with CIB’s secondary market-making activities. |
| | (d) | Includes interests held in re-securitization transactions. |
| | (e) | As of December 31, 20172019 and 20162018, 61%63% and 61%60%, respectively, of the Firm’s retained securitization interests, which are predominantly carried at fair value and include amounts required to be held pursuant to credit risk retention rules, were risk-rated “A” or better, on an S&P-equivalent basis. The retained interests in prime residential mortgages consisted of $1.31.1 billion and $1.5$1.3 billion of investment-grade, and $4872 million and $7716 million of noninvestment-grade retained interests at December 31, 20172019 and 2016,2018, respectively. The retained interests in commercial and other securitizations trusts consisted of $1.61.2 billion and $2.4 billion of investment-grade for both periods, and $412575 million and $210623 million of noninvestment-grade retained interests at December 31, 20172019 and 20162018, respectively. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 237243 |
Notes to consolidated financial statements
Residential mortgage The Firm securitizes residential mortgage loans originated by CCB, as well as residential mortgage loans purchased from third parties by either CCB or CIB. CCB generally retains servicing for all residential mortgage loans it originated or purchased, and for certain mortgage loans purchased by CIB. For securitizations of loans serviced by CCB, the Firm has the power to direct the significant activities of the VIE because it is responsible for decisions related to loan modifications and workouts. CCB may also retain an interest upon securitization. In addition, CIB engages in underwriting and trading activities involving securities issued by Firm-sponsored Firm-sponsored securitization trusts. As a result, CIB at times retains senior and/or subordinated interests (including residual interests and amounts required to be held pursuant to credit risk retention rules) in residential mortgage securitizations at the time of securitization, and/or reacquires positions in the secondary market in the normal course of business. In certain instances, as a result of the positions retained or reacquired by CIB or held by CCB, when considered together with the servicing arrangements entered into by CCB, the Firm is deemed to be the primary beneficiary of certain securitization trusts. SeeRefer to the table on page 241 246 of this Note for more information on consolidated residential mortgage securitizations. The Firm does not consolidate a residential mortgage securitization (Firm-sponsoredsecuritizations (Firm-sponsored or third-party-sponsored) when it is not the servicer (and therefore does not have the power to direct the most significant activities of the trust) or does not hold a beneficial interest in the trust that could potentially be significant to the trust. SeeRefer to the table on page 241 246 of this Note for more information on the consolidated residential mortgage securitizations, and the table on the previous page of this Note for further information on interests held in nonconsolidated residential mortgage securitizations. Commercial mortgages and other consumer securitizations CIB originates and securitizes commercial mortgage loans, and engages in underwriting and trading activities involving the securities issued by securitization trusts. CIB may retain unsold senior and/or subordinated interests (including amounts required to be held pursuant to credit risk retention rules) in commercial mortgage securitizations at the time of securitization but, generally, the Firm does not service commercial loan securitizations. For commercial mortgage securitizations the power to direct the significant activities of the VIE generally is held by the servicer or investors in a specified class of securities (“controlling class”). The Firm generally does not retain an interest in the controlling class in its sponsored commercial mortgage securitization transactions. SeeRefer to the table on page 241 246 of this Note for more information on the consolidated commercial mortgage securitizations,and the table on the previous page of this Note for further information on interests held in nonconsolidated securitizations. Re-securitizations The Firm engages in certain re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. These transfers occur in connection with both agency (Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”)U.S. GSEs and Government National Mortgage Association (“Ginnie Mae”)) and nonagency (private-label)government agency sponsored VIEs, which may beare backed by either residential or commercial mortgages. The Firm’s consolidation analysis is largely dependent on the Firm’s role and interest in the re-securitization trusts. The following table presents the principal amount of securities transferred to re-securitization VIEs. | | | | | | | | | | Year ended December 31, (in millions) | 2019 | | 2018 | | 2017 | Transfers of securities to VIEs | | | | | | U.S. GSEs and government agencies | 25,852 |
| | 15,532 |
| | 12,617 |
|
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | Transfers of securities to VIEs | | | | | | Firm-sponsored private-label | $ | — |
| | $ | 647 |
| | $ | 777 |
| Agency | $ | 12,617 |
| | $ | 11,241 |
| | $ | 21,908 |
|
Most re-securitizations with which the Firm is involved are client-driven transactions in which a specific client or group of clients is seeking a specific return or risk profile. For these transactions, the Firm has concluded that the decision-making power of the entity is shared between the Firm and its clients, considering the joint effort and decisions in establishing the re-securitization trust and its assets, as well as the significant economic interest the client holds in the re-securitization trust; therefore the Firm does not consolidate the re-securitization VIE. In more limited circumstances, theThe Firm creates a nonagencydid 0t transfer any private label securities to re-securitization trust independentlyVIEs during 2019, 2018 and not2017, respectively, and retained interests in conjunction with specific clients. In these circumstances, the Firm is deemed to have the unilateral ability to direct the most significant activitiesany such Firm-sponsored VIEs as of the re-securitization trust because of the decisions made during the establishmentDecember 31, 2019 and design of the trust; therefore, the Firm consolidates the re-securitization VIE if the Firm holds an interest that could potentially be significant.2018 were immaterial.
Additionally, the Firm may invest in beneficial interests of third-partythird-party-sponsored re-securitizations and generally purchases these interests in the secondary market. In these circumstances, the Firm does not have the unilateral ability to direct the most significant activities of the re-securitization trust, either because it was not involved in the initial design of the trust, or the Firm is involved with an independent third-party sponsor and demonstrates shared power over the creation of the trust; therefore, the Firm does not consolidate the re-securitization VIE.
| | | | 238244 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The following table presents information on nonconsolidated re-securitization VIEs. | | | | | | | | Nonconsolidated re-securitization VIEs | December 31, (in millions) | 2019 | | 2018 | U.S. GSEs and government agencies | | | | Interest in VIEs | 2,928 |
| | 3,058 |
|
| | | | | | | Year ended December 31, (in millions) | 2017 |
| | 2016 |
| Firm-sponsored private-label | | | | Assets held in VIEs with continuing involvement(a) | 783 |
| | 875 |
| Interest in VIEs | 29 |
| | 43 |
| Agency | | | | Interest in VIEs | 2,250 |
| | 1,986 |
|
| | (a) | Represents the principal amount and includes the notional amount of interest-only securities. |
As of December 31, 20172019 and 2016,2018, the Firm did not consolidate any U.S. GSE and government agency re-securitizationsre-securitization VIEs or any Firm-sponsored private-label re-securitizations.re-securitization VIEs. Multi-seller conduits Multi-seller conduit entities are separate bankruptcy remote entities that provide secured financing, collateralized by pools of receivables and other financial assets, to customers of the Firm. The conduits fund their financing facilities through the issuance of highly rated commercial paper. The primary source of repayment of the commercial paper is the cash flows from the pools of assets. In most instances, the assets are structured with deal-specific credit enhancements provided to the conduits by the customers (i.e., sellers) or other third parties. Deal-specific credit enhancements are generally structured to cover a multiple of historical losses expected on the pool of assets, and are typically in the form of overcollateralization provided by the seller. The deal-specific credit enhancements mitigate the Firm’s potential losses on its agreements with the conduits. To ensure timely repayment of the commercial paper, and to provide the conduits with funding to provide financing to customers in the event that the conduits do not obtain funding in the commercial paper market, each asset pool financed by the conduits has a minimum 100% deal-specific liquidity facility associated with it provided by JPMorgan Chase Bank, N.A. JPMorgan Chase Bank, N.A. also provides the multi-seller conduit vehicles with uncommitted program-wide liquidity facilities and program-wide credit enhancement in the form of standby letters of credit. The amount of program-wide credit enhancement required is based upon commercial paper issuance and approximates 10% of the outstanding balance of commercial paper. The Firm consolidates its Firm-administered Firm-administered multi-seller conduits, as the Firm has both the power to direct the significant activities of the conduits and a potentially significant economic interest in the conduits. As administrative agent and in its role in structuring transactions, the Firm makes decisions regarding asset types and credit quality, and manages the commercial paper funding needs of the conduits. The Firm’s interests that could potentially be significant to the VIEs include the fees received as administrative agent and liquidity and program-wide credit enhancement provider, as well as the potential exposure created by the liquidity and credit enhancement facilities provided to the conduits. SeeRefer to page 241 246 of this Note for further information on consolidated VIE assets and liabilities. In the normal course of business, JPMorgan Chase makes markets in and invests in commercial paper issued by the Firm-administeredFirm-administered multi-seller conduits. The Firm held $20.4 $16.3 billion and $21.2$20.1 billion of the commercial paper issued by the Firm-administeredFirm-administered multi-seller conduits at December 31, 20172019 and 2016, 2018, respectively, which have been eliminated in consolidation. The Firm’s investments reflect the Firm’s funding needs and capacity and were not driven by market illiquidity.Other than the amounts required to be held pursuant to credit risk retention rules, the Firm is not obligated under any agreement to purchase the commercial paper issued by the Firm-administeredFirm-administered multi-seller conduits. Deal-specific liquidity facilities, program-wide liquidity and credit enhancement provided by the Firm have been eliminated in consolidation. The Firm or the Firm-administered multi-seller conduits provide lending-related commitments to certain clients of the Firm-administered multi-seller conduits. The unfunded commitments were $8.8 $8.9 billion and $7.4$8.0 billion at December 31, 20172019 and 2016, 2018, respectively, and are reported as off-balance sheet lending-related commitments. Forcommitments in other unfunded commitments to extend credit.Refer to Note 28 for more information on off-balance sheet lending-related commitments, see Note 27.commitments. Municipal bond vehicles Municipal bond vehicles or tender option bond (“TOB”) trusts allow institutions to finance their municipal bond investments at short-term rates. In a typical TOB transaction, the trust purchases highly rated municipal bond(s) of a single issuer and funds the purchase by issuing two types of securities: (1) puttable floating-rate certificates (“Floaters”floaters”) and (2) inverse floating-rate residual interests (“Residuals”residuals”). The Floatersfloaters are typically purchased by money market funds or other short-term investors and may be tendered, with requisite notice, to the TOB trust. The Residualsresiduals are retained by the investor seeking to finance its municipal bond investment.TOB transactions where the Residualresidual is held by a third partythird-party investor are typically known as Customercustomer TOB trusts, and Non-Customernon-customer TOB trusts are transactions where the Residual is retained by the Firm. Customer TOB trusts are sponsored by a third party; seerefer to page 242 on 247 of this Note for further information. The Firm serves as sponsor for all Non-Customernon-customer TOB transactions. The Firm may provide various services to a TOB trust, including remarketing agent, liquidity or tender option provider, and/or sponsor. J.P. Morgan Securities LLC may serve as a remarketing agent on the Floatersfloaters for TOB trusts. The remarketing agent is responsible for establishing the periodic variable rate on the Floaters,floaters, conducting the initial placement and remarketing tendered Floaters.floaters. The remarketing agent may, but is not obligated to, make markets in Floaters. Thefloaters. Floaters held by the Firm held an insignificant amount of Floaterswere not material during 2017 2019 and 2016. 2018.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 239 |
Notes to consolidated financial statements
JPMorgan Chase Bank, N.A. or J.P. Morgan Securities LLC often serves as the sole liquidity or tender option provider for the TOB trusts. The liquidity provider’s obligation to
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 245 |
Notes to consolidated financial statements
perform is conditional and is limited by certain events (“Termination Events”), which include bankruptcy or failure to pay by the municipal bond issuer or credit enhancement provider, an event of taxability on the municipal bonds or the immediate downgrade of the municipal bond to below investment grade. In addition, the liquidity provider’s exposure is typically further limited by the high credit quality of the underlying municipal bonds, the excess collateralization in the vehicle, or, in certain transactions, the reimbursement agreements with the Residual holders. Holders of the Floatersfloaters may “put,” or tender, their Floatersfloaters to the TOB trust. If the remarketing agent cannot successfully remarket the Floatersfloaters to another investor, the liquidity provider either provides a loan to the TOB trust for the TOB trust’s purchase of the Floaters,floaters, or it directly purchases the tendered Floaters.floaters. TOB trusts are considered to be variable interest entities. The Firm consolidates Non-Customernon-customer TOB trusts because as the Residual holder, the Firm has the right to make decisions that significantly impact the economic performance of the municipal bond vehicle, and it has the right to receive benefits and bear losses that could potentially be significant to the municipal bond vehicle. See page 241 of this Note for further information on consolidated municipal bond vehicles.
| | | | 240 | | JPMorgan Chase & Co./2017 Annual Report |
Consolidated VIE assets and liabilities The following table presents information on assets and liabilities related to VIEs consolidated by the Firm as of December 31, 20172019 and 2016.2018. | | | Assets | | Liabilities | Assets | | Liabilities | December 31, 2017 (in millions) | Trading assets | Loans | Other(d) | Total assets(e) | | Beneficial interests in VIE assets(f) | Other(g) | Total liabilities | | VIE program type(a) | | | | | December 31, 2019 (in millions) | | Trading assets | Loans | Other(b) | Total assets(c) | | Beneficial interests in VIE assets(d) | Other(e) | Total liabilities | VIE program type | | | | | Firm-sponsored credit card trusts | $ | — |
| $ | 41,923 |
| $ | 652 |
| $ | 42,575 |
| | $ | 21,278 |
| $ | 16 |
| $ | 21,294 |
| $ | — |
| $ | 14,986 |
| $ | 266 |
| $ | 15,252 |
| | $ | 6,461 |
| $ | 6 |
| $ | 6,467 |
| Firm-administered multi-seller conduits | — |
| 23,411 |
| 48 |
| 23,459 |
| | 3,045 |
| 28 |
| 3,073 |
| 1 |
| 25,183 |
| 355 |
| 25,539 |
| | 9,223 |
| 36 |
| 9,259 |
| Municipal bond vehicles | 1,278 |
| — |
| 3 |
| 1,281 |
| | 1,265 |
| 2 |
| 1,267 |
| 1,903 |
| — |
| 4 |
| 1,907 |
| | 1,881 |
| 3 |
| 1,884 |
| Mortgage securitization entities(b) | 66 |
| 3,661 |
| 55 |
| 3,782 |
| | 359 |
| 199 |
| 558 |
| | Student loan securitization entities(c) | — |
| — |
| — |
| — |
| | — |
| — |
| — |
| | Mortgage securitization entities(a) | | 66 |
| 2,762 |
| 64 |
| 2,892 |
| | 276 |
| 130 |
| 406 |
| Other | 105 |
| — |
| 1,916 |
| 2,021 |
| | 134 |
| 104 |
| 238 |
| 663 |
| — |
| 192 |
| 855 |
| | — |
| 272 |
| 272 |
| Total | $ | 1,449 |
| $ | 68,995 |
| $ | 2,674 |
| $ | 73,118 |
| | $ | 26,081 |
| $ | 349 |
| $ | 26,430 |
| $ | 2,633 |
| $ | 42,931 |
| $ | 881 |
| $ | 46,445 |
| | $ | 17,841 |
| $ | 447 |
| $ | 18,288 |
| | | | | | | | | Assets | | Liabilities | Assets | | Liabilities | December 31, 2016 (in millions) | Trading assets | Loans | Other(d) | Total assets(e) | | Beneficial interests in VIE assets(f) | Other(g) | Total liabilities | | VIE program type(a) | | | | | December 31, 2018 (in millions) | | Trading assets | Loans | Other(b) | Total assets(c) | | Beneficial interests in VIE assets(d) | Other(e) | Total liabilities | VIE program type | | | | | Firm-sponsored credit card trusts | $ | — |
| $ | 45,919 |
| $ | 790 |
| $ | 46,709 |
| | $ | 31,181 |
| $ | 18 |
| $ | 31,199 |
| $ | — |
| $ | 31,760 |
| $ | 491 |
| $ | 32,251 |
| | $ | 13,404 |
| $ | 12 |
| $ | 13,416 |
| Firm-administered multi-seller conduits | — |
| 23,760 |
| 43 |
| 23,803 |
| | 2,719 |
| 33 |
| 2,752 |
| — |
| 24,411 |
| 300 |
| 24,711 |
| | 4,842 |
| 33 |
| 4,875 |
| Municipal bond vehicles | 2,897 |
| — |
| 8 |
| 2,905 |
| | 2,969 |
| 2 |
| 2,971 |
| 1,779 |
| — |
| 4 |
| 1,783 |
| | 1,685 |
| 3 |
| 1,688 |
| Mortgage securitization entities(b) | 143 |
| 4,246 |
| 103 |
| 4,492 |
| | 468 |
| 313 |
| 781 |
| | Student loan securitization entities (c) | — |
| 1,689 |
| 59 |
| 1,748 |
| | 1,527 |
| 4 |
| 1,531 |
| | Mortgage securitization entities(a) | | 53 |
| 3,285 |
| 40 |
| 3,378 |
| | 308 |
| 161 |
| 469 |
| Other | 145 |
| — |
| 2,318 |
| 2,463 |
| | 183 |
| 120 |
| 303 |
| 134 |
| — |
| 178 |
| 312 |
| | 2 |
| 103 |
| 105 |
| Total | $ | 3,185 |
| $ | 75,614 |
| $ | 3,321 |
| $ | 82,120 |
| | $ | 39,047 |
| $ | 490 |
| $ | 39,537 |
| $ | 1,966 |
| $ | 59,456 |
| $ | 1,013 |
| $ | 62,435 |
| | $ | 20,241 |
| $ | 312 |
| $ | 20,553 |
|
| | (a) | Excludes intercompany transactions, which are eliminated in consolidation. |
| | (b) | Includes residential and commercial mortgage securitizations. |
| | (c) | The Firm deconsolidated the student loan securitization entities in the second quarter of 2017 as it no longer had a controlling financial interest in these entities as a result of the sale of the student loan portfolio. |
| | (d)(b) | Includes assets classified as cash and other assets on the Consolidated balance sheets. |
| | (e)(c) | The assets of the consolidated VIEs included in the program types above are used to settle the liabilities of those entities. The difference between total assets and total liabilities recognized forinclude third-party assets and liabilities of consolidated VIEs represents the Firm’s interestand exclude intercompany balances that eliminate in the consolidated VIEs for each program type.consolidation. |
| | (f)(d) | The interest-bearing beneficial interest liabilities issued by consolidated VIEs are classified in the line item on the Consolidated balance sheets titled, “Beneficial interests issued by consolidated variable interest entities.” The holders of these beneficial interests generally do not have recourse to the general credit of JPMorgan Chase. Included in beneficial interests in VIE assets are long-term beneficial interests of $21.8$6.7 billion and $33.4$13.7 billion at December 31, 20172019 and 2016,2018, respectively. ForRefer to Note 20 for additional information on interest bearinginterest-bearing long-term beneficial interest, see Note 19.interests. |
| | (g)(e) | Includes liabilities classified as accounts payable and other liabilities on the Consolidated balance sheets. |
| | | | 246 | | JPMorgan Chase & Co./2019 Form 10-K |
VIEs sponsored by third parties The Firm enters into transactions with VIEs structured by other parties. These include, for example, acting as a derivative counterparty, liquidity provider, investor, underwriter, placement agent, remarketing agent, trustee or custodian. These transactions are conducted at arm’s-length, and individual credit decisions are based on the analysis of the specific VIE, taking into consideration the quality of the underlying assets. Where the Firm does not have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, or a variable interest that could potentially be significant, the Firm generally does not consolidate the VIE, but it records and reports these positions on its Consolidated balance sheets in the same manner it would record and report positions in respect of any other third-party transaction. Tax credit vehicles The Firm holds investments in unconsolidated tax credit vehicles, which are limited partnerships and similar entities that construct, own and operate affordable housing, wind, solarenergy, and other alternative energy projects.These entities are primarily considered VIEs. A third party is typically the general partner or managing member and has control over the significant activities of the tax credit vehicles, and accordingly the Firm does not consolidate tax credit vehicles. The Firm generally invests in these partnerships as a limited partner and earns a return primarily through the receipt of tax credits allocated to the projects. The maximum loss exposure, represented by equity investments and funding commitments, was $13.4 $19.1 billion and $14.8$16.5 billion, of which $3.2 $5.5 billion and $3.8$4.0 billion was unfunded at December 31, 20172019 and 20162018, respectively. In order to reduce the risk of loss, the Firm assesses each project and withholds varying amounts of its capital investment until qualification of the project qualifies for tax credits. SeeRefer to Note 24 25 for
| | | | JPMorgan Chase & Co./2017 Annual Report | | 241 |
Notes to consolidated financial statements
further information on affordable housing tax credits. ForRefer to Note 28 for more information on off-balance sheet lending-related commitments, see Note 27.commitments. Customer municipal bond vehicles (TOB trusts) The Firm may provide various services to Customercustomer TOB trusts, including remarketing agent, liquidity or tender option provider. In certain Customercustomer TOB transactions, the Firm, as liquidity provider, has entered into a reimbursement agreement with the Residual holder. In those transactions, upon the termination of the vehicle, the Firm has recourse to the third partythird-party Residual holders for any shortfall. The Firm does not have any intent to protect Residual holders from potential losses on any of the underlying municipal bonds. The Firm does not consolidate Customercustomer TOB trusts, since the Firm does not have the power to make decisions that significantly impact the economic performance of the municipal bond vehicle. The Firm’s maximum exposure as a liquidity provider to Customercustomer TOB trusts at December 31, 20172019 and 2016,2018, was $5.3$5.5 billion and $5.0$4.8 billion, respectively. The fair value of assets held by such VIEs at December 31, 20172019 and 20162018 was $9.2$8.6 billion and $8.9$7.7 billion, respectively. ForRefer to Note 28 for more information on off-balance sheet lending-related commitments, see Note 27.commitments. Loan securitizations The Firm has securitized and sold a variety of loans, including residential mortgage, credit card, student and commercial (primarily related to real estate) loans, as well as debt securities.mortgage. The purposes of these securitization transactions were to satisfy investor demand and to generate liquidity for the Firm. For loan securitizations in which the Firm is not required to consolidate the trust, the Firm records the transfer of the loan receivable to the trust as a sale when all of the following accounting criteria for a sale are met: (1) the transferred financial assets are legally isolated from the Firm’s creditors; (2) the transferee or beneficial interest holder can pledge or exchange the transferred financial assets; and (3) the Firm does not maintain effective control over the transferred financial assets (e.g., the Firm cannot repurchase the transferred assets before their maturity and it does not have the ability to unilaterally cause the holder to return the transferred assets). For loan securitizations accounted for as a sale, the Firm recognizes a gain or loss based on the difference between the value of proceeds received (including cash, beneficial interests, or servicing assets received) and the carrying value of the assets sold. Gains and losses on securitizations are reported in noninterest revenue.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 247 |
Notes to consolidated financial statements
Securitization activity The following table provides information related to the Firm’s securitization activities for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, related to assets held in Firm-sponsored Firm-sponsored securitization entities that were not consolidated by the Firm, and where sale accounting was achieved at the time of the securitization. | | | 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 | Year ended December 31, (in millions, except rates) | Residential mortgage(d) | Commercial and other(e) | | Residential mortgage(d) | Commercial and other(e) | | Residential mortgage(d) | Commercial and other(e) | | Year ended December 31, (in millions) | | Residential mortgage(e) | Commercial and other(f) | | Residential mortgage(e) | Commercial and other(f) | | Residential mortgage(e) | Commercial and other(f) | Principal securitized | $ | 5,532 |
| $ | 10,252 |
| | $ | 1,817 |
| $ | 8,964 |
| | $ | 3,008 |
| $ | 11,933 |
| $ | 9,957 |
| $ | 9,390 |
| | $ | 6,431 |
| $ | 10,159 |
| | $ | 5,532 |
| $ | 10,252 |
| All cash flows during the period:(a) | | | | | | | | | | | Proceeds received from loan sales as financial instruments(b)(c) | $ | 5,661 |
| $ | 10,340 |
| | $ | 1,831 |
| $ | 9,094 |
| | $ | 3,022 |
| $ | 12,011 |
| $ | 10,238 |
| $ | 9,544 |
| | $ | 6,449 |
| $ | 10,218 |
| | $ | 5,661 |
| $ | 10,340 |
| Servicing fees collected(d) | 525 |
| 3 |
| | 477 |
| 3 |
| | 528 |
| 3 |
| 287 |
| 2 |
| | 319 |
| 2 |
| | 338 |
| 3 |
| Purchases of previously transferred financial assets (or the underlying collateral)(c) | 1 |
| — |
| | 37 |
| — |
| | 3 |
| — |
| | Cash flows received on interests | 463 |
| 918 |
| | 482 |
| 1,441 |
| | 407 |
| 597 |
| 507 |
| 237 |
| | 411 |
| 301 |
| | 463 |
| 918 |
|
| | (a) | Excludes re-securitization transactions. |
| | (b) | Predominantly includes Level 2 assets. |
| | (c) | Includes cash paid byThe carrying value of the Firm to reacquire assets from off–balance sheet, nonconsolidated entities –loans accounted for example,at fair value approximated the proceeds received upon loan repurchases due to representation and warranties and servicer “clean-up” calls.sale. |
| | (d) | Includes prime/Alt-A, subprime, and option ARMs. Excludes certain loan securitization transactions entered intoThe prior period amounts have been revised to conform with Ginnie Mae, Fannie Mae and Freddie Mac.the current period presentation. |
| | (e) | Includes prime mortgages only. Excludes loan securitization activity related to U.S. GSEs and government agencies. |
| | (f) | Includes commercial mortgage and other consumer loans. |
Key assumptions used to value retained interests originated during the year are shown in the table below. | | Year ended December 31, | | 2017 | | 2016 | | 2015 | | 2019 | | 2018 | | 2017 | Residential mortgage retained interest: | Weighted-average life (in years) | | 4.8 |
| | 4.5 |
| | 4.2 |
| | 4.8 |
| | 7.6 |
| | 4.8 |
| Weighted-average discount rate | | 2.9 | % | | 4.2 | % | | 2.9 | % | | 7.4 | % | | 3.6 | % | | 2.9 | % | Commercial mortgage retained interest: | Commercial mortgage retained interest: | | | Commercial mortgage retained interest: | | | Weighted-average life (in years) | | 7.1 |
| | 6.2 |
| | 6.2 |
| | 6.4 |
| | 5.3 |
| | 7.1 |
| Weighted-average discount rate | | 4.4 | % | | 5.8 | % | | 4.1 | % | | 4.1 | % | | 4.0 | % | | 4.4 | % |
| | | | 242 | | JPMorgan Chase & Co./2017 Annual Report |
Loans and excess MSRs sold to U.S. government-sponsored enterprises and loans in securitization transactions pursuant to Ginnie Mae guidelines and other third-party-sponsored securitization entities In addition to the amounts reported in the securitization activity tables above, the Firm, in the normal course of business, sells originated and purchased mortgage loans and certain originated excess MSRs on a nonrecourse basis, predominantly to U.S. government sponsored enterprises (“U.S. GSEs”).GSEs. These loans and excess MSRs are sold primarily for the purpose of securitization by the U.S. GSEs, who provide certain guarantee provisions (e.g., credit enhancement of the loans). The Firm also sells loans into securitization transactions pursuant to Ginnie Mae guidelines; these loans are typically insured or guaranteed by another U.S. government agency. The Firm does not consolidate the securitization vehicles underlying these transactions as it is not the primary beneficiary. For a limited number of loan sales, the Firm is obligated to share a portion of the credit risk associated with the sold loans with the purchaser. SeeRefer to Note 27 28 for additional information about the Firm’s loan sales- and securitization-related indemnifications. SeeRefer to Note 15 for additional information about the impact of the Firm’s sale of certain excess MSRs.
| | | | 248 | | JPMorgan Chase & Co./2019 Form 10-K |
The following table summarizes the activities related to loans sold to the U.S. GSEs, and loans in securitization transactions pursuant to Ginnie Mae guidelines, and other third-party-sponsored securitization entities.guidelines. | | Year ended December 31, (in millions) | 2017 | 2016 | 2015 | 2019 | 2018 | 2017 | Carrying value of loans sold | $ | 64,542 |
| $ | 52,869 |
| $ | 42,161 |
| $ | 92,349 |
| $ | 44,609 |
| $ | 64,542 |
| Proceeds received from loan sales as cash | $ | 117 |
| $ | 592 |
| $ | 313 |
| $ | 73 |
| $ | 9 |
| $ | 117 |
| Proceeds from loans sales as securities(a) | 63,542 |
| 51,852 |
| 41,615 |
| | Proceeds from loan sales as securities(a)(b) | | 91,422 |
| 43,671 |
| 63,542 |
| Total proceeds received from loan sales(b)(c) | $ | 63,659 |
| $ | 52,444 |
| $ | 41,928 |
| $ | 91,495 |
| $ | 43,680 |
| $ | 63,659 |
| Gains on loan sales(c)(d) | $ | 163 |
| $ | 222 |
| $ | 299 |
| | Gains/(losses) on loan sales(d)(e) | | $ | 499 |
| $ | (93 | ) | $ | 163 |
|
| | (a) | Predominantly includesIncludes securities from U.S. GSEs and Ginnie Mae that are generally sold shortly after receipt.receipt or retained as part of the Firm’s investment securities portfolio. |
| | (b) | Included in level 2 assets. |
| | (c) | Excludes the value of MSRs retained upon the sale of loans. |
| | (c)(d) | GainsGains/(losses) on loan sales include the value of MSRs. |
| | (d)(e) | The carrying value of the loans accounted for at fair value approximated the proceeds received upon loan sale. |
Options to repurchase delinquent loans In addition to the Firm’s obligation to repurchase certain loans due to material breaches of representations and warranties as discussed in Note 27, 28, the Firm also has the option to repurchase delinquent loans that it services for Ginnie Mae loan pools, as well as for other U.S. government agencies under certain arrangements. The Firm typically elects to repurchase delinquent loans from Ginnie Mae loan pools as it continues to service them and/or manage the foreclosure process in accordance with the applicable requirements, and such loans continue to be insured or guaranteed. When the Firm’s repurchase option becomes exercisable, such loans must be reported on the Consolidated balance sheets as a loan with a corresponding liability.Refer to Note 12 for additional information. The following table presents loans the Firm repurchased or had an option to repurchase, real estate owned, and foreclosed government-guaranteed residential mortgage loans recognized on the Firm’s Consolidated balance sheets as of December 31, 20172019 and 2016. 2018. Substantially all of these loans and real estate are insured or guaranteed by U.S. government agencies. For additional information, refer to Note 12. | | December 31, (in millions) | 2017 |
| 2016 |
| 2019 |
| 2018 |
| Loans repurchased or option to repurchase(a) | $ | 8,629 |
| $ | 9,556 |
| $ | 2,941 |
| $ | 7,021 |
| Real estate owned | 95 |
| 142 |
| 41 |
| 75 |
| Foreclosed government-guaranteed residential mortgage loans(b) | 527 |
| 1,007 |
| 198 |
| 361 |
|
| | (a) | Predominantly all of these amounts relate to loans that have been repurchased from Ginnie Mae loan pools. |
| | (b) | Relates to voluntary repurchases of loans, which are included in accrued interest and accounts receivable. |
Loan delinquencies and liquidation losses The table below includes information about components of nonconsolidated securitized financial assets held in Firm-sponsored Firm-sponsored private-label securitization entities, in which the Firm has continuing involvement, and delinquencies as of December 31, 20172019 and 2016.2018. | | | Securitized assets | | 90 days past due | | Liquidation losses | Securitized assets | | 90 days past due | | Net liquidation losses(a) | As of or for the year ended December 31, (in millions) | 2017 | 2016 | | 2017 | 2016 | | 2017 | 2016 | 2019 | 2018 | | 2019 | 2018 | | 2019 | 2018 | Securitized loans | | | | | | | | | | | Residential mortgage: | | | | | | | | | | | Prime/ Alt-A & option ARMs | $ | 52,280 |
| $ | 57,543 |
| | $ | 4,870 |
| $ | 6,169 |
| | $ | 790 |
| $ | 1,160 |
| $ | 48,734 |
| $ | 50,679 |
| | $ | 2,449 |
| $ | 3,354 |
| | $ | 579 |
| $ | 610 |
| Subprime | 17,612 |
| 19,903 |
| | 3,276 |
| 4,186 |
| | 719 |
| 1,087 |
| 13,490 |
| 15,434 |
| | 1,813 |
| 2,478 |
| | 532 |
| (169 | ) | Commercial and other | 63,411 |
| 71,464 |
| | 957 |
| 1,755 |
| | 114 |
| 643 |
| 80,878 |
| 79,387 |
| | 187 |
| 225 |
| | 445 |
| 280 |
| Total loans securitized | $ | 133,303 |
| $ | 148,910 |
| | $ | 9,103 |
| $ | 12,110 |
| | $ | 1,623 |
| $ | 2,890 |
| $ | 143,102 |
| $ | 145,500 |
| | $ | 4,449 |
| $ | 6,057 |
| | $ | 1,556 |
| $ | 721 |
|
| | (a) | Includes liquidation gains as a result of private label mortgage settlement payments during the first quarter of 2018, which were reflected as asset recoveries by trustees. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 243249 |
Notes to consolidated financial statements
Note 15 – Goodwill and Mortgage servicing rights Goodwill Goodwill is recorded upon completion of a business combination as the difference between the purchase price and the fair value of the net assets acquired. Subsequent to initial recognition, goodwill is not amortized but is tested for impairment during the fourth quarter of each fiscal year, or more often if events or circumstances, such as adverse changes in the business climate, indicate there may be impairment. The goodwill associated with each business combination is allocated to the related reporting units, which are determined based on how the Firm’s businesses are managed and how they are reviewed by the Firm’s Operating Committee. The following table presents goodwill attributed to the business segments. | | | | | | | | | | | December 31, (in millions) | 2019 | 2018 | 2017 | Consumer & Community Banking | $ | 31,041 |
| $ | 30,984 |
| $ | 31,013 |
| Corporate & Investment Bank | 6,942 |
| 6,770 |
| 6,776 |
| Commercial Banking | 2,982 |
| 2,860 |
| 2,860 |
| Asset & Wealth Management | 6,858 |
| 6,857 |
| 6,858 |
| Total goodwill | $ | 47,823 |
| $ | 47,471 |
| $ | 47,507 |
|
| | | | | | | | | | | December 31, (in millions) | 2017 | 2016 | 2015 | Consumer & Community Banking | $ | 31,013 |
| $ | 30,797 |
| $ | 30,769 |
| Corporate & Investment Bank | 6,776 |
| 6,772 |
| 6,772 |
| Commercial Banking | 2,860 |
| 2,861 |
| 2,861 |
| Asset & Wealth Management | 6,858 |
| 6,858 |
| 6,923 |
| Total goodwill | $ | 47,507 |
| $ | 47,288 |
| $ | 47,325 |
|
The following table presents changes in the carrying amount of goodwill. | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 | Balance at beginning of period | $ | 47,288 |
| | $ | 47,325 |
| | $ | 47,647 |
| $ | 47,471 |
| | $ | 47,507 |
| | $ | 47,288 |
| Changes during the period from: | | | | | | | | | | | Business combinations(a) | 199 |
| | — |
| | 28 |
| 349 |
| | — |
| | 199 |
| Dispositions(b) | — |
| | (72 | ) | | (160 | ) | | Other(c) | 20 |
| | 35 |
| | (190 | ) | | Other(b) | | 3 |
| | (36 | ) | | 20 |
| Balance at December 31, | $ | 47,507 |
| | $ | 47,288 |
| | $ | 47,325 |
| $ | 47,823 |
| | $ | 47,471 |
| | $ | 47,507 |
|
| | (a) | For 2019, represents goodwill associated with the acquisition of InstaMed. This goodwill was allocated to CIB, CB and CCB. For 2017, represents CCB goodwill in connection with an acquisition. |
| | (b) | For 2016, represents AWM goodwill, which was disposed of as part of an AWM sales transaction. For 2015 includes $101 million of Private Equity goodwill, which was disposed of as part of the Private Equity sale. |
| | (c) | IncludesPrimarily relates to foreign currency translation adjustments and other tax-related adjustments. |
ImpairmentGoodwill impairment testing
The Firm’s goodwill was not0t impaired at December 31, 20172019, 2016,2018, and 2015.2017. The goodwill impairment test is performed in two steps. In the first step, the current fair value of each reporting unit is compared with its carrying value, including goodwill and other intangible assets.value. If the fair value is in excess of the carrying value, then the reporting unit’s goodwill is considered not to be not impaired. If the fair value is less than the carrying value, then a second step is performed. In the second step, the implied current fair value of the reporting unit’s goodwill is determined by comparing the fair value of the reporting unit (as(as determined in step one) to the fair value of the net assets of the reporting unit, as if the reporting unit were being acquired in a business combination. The resulting implied current fair value of goodwill is then compared with the carrying value of the reporting unit’s goodwill.If the carrying value of the goodwill exceeds its implied current fair value, then an impairment charge is recognized for the excess. If the carrying value of goodwill is less than its implied current fair value, then no goodwill impairment is recognized. The Firm uses the reporting units’ allocated capital plus goodwill and other intangible assets capital as a proxy for the carrying values of equity for the reporting units in the goodwill impairment testing. Reporting unit equity is determined on a similar basis as the allocation of capital to the Firm’s lines of business,LOBs which takes into consideration thea variety of factors including capital the business segment would require if it were operating independently, incorporating sufficient capital to addresslevels of similarly rated peers and applicable regulatory capital requirements (including Basel III) and capital levels for similarly rated peers.requirements. Proposed line of businessLOB equity levels are incorporated into the Firm’s annual budget process, which is reviewed by the Firm’s Board of Directors. Allocated capital is further reviewed on a periodic basisperiodically and updated as needed.
| | | | 244250 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The primary method the Firm uses to estimate the fair value of its reporting units is the income approach. This approach projects cash flows for the forecast period and uses the perpetuity growth method to calculate terminal values. These cash flows and terminal values are then discounted using an appropriate discount rate. Projections of cash flows are based on the reporting units’ earnings forecasts which are reviewed with senior management of the Firm. The discount rate used for each reporting unit represents an estimate of the cost of equity for that reporting unit and is determined considering the Firm’s overall estimated cost of equity (estimated using the Capital Asset Pricing Model), as adjusted for the risk characteristics specific to each reporting unit (for example, for higher levels of risk or uncertainty associated with the business or management’s forecasts and assumptions). To assess the reasonableness of the discount rates used for each reporting unit management compares the discount rate to the estimated cost of equity for publicly traded institutions with similar businesses and risk characteristics. In addition, the weighted average cost of equity (aggregating the various reporting units) is compared with the Firms’Firm’s overall estimated cost of equity to ensure reasonableness. The valuations derived from the discounted cash flow analysis are then compared with market-based trading and transaction multiples for relevant competitors. Trading and transaction comparables are used as general indicators to assess the general reasonableness of the estimated fair values, although precise conclusions generally cannot be drawn due to the differences that naturally exist between the Firm’s businesses and competitor institutions. Management also takes into consideration a comparison between the aggregate fair values of the Firm’s reporting units and JPMorgan Chase’s market capitalization. In evaluating this comparison, management considers several factors, including (i) a control premium that would exist in a market transaction, (ii) factors related to the level of execution risk that would exist at the firmwide level that do not exist at the reporting unit level and (iii) short-term market volatility and other factors that do not directly affect the value of individual reporting units. Declines in business performance, increases in credit losses, increases in capital requirements, as well as deterioration in economic or market conditions, estimates of adverse regulatory or legislative changes or increases in the estimated market cost of equity, could cause the estimated fair values of the Firm’s reporting units or their associated goodwill to decline in the future, which could result in a material impairment charge to earnings in a future period related to some portion of the associated goodwill. Mortgage servicing rights MSRs represent the fair value of expected future cash flows for performing servicing activities for others. The fair value considers estimated future servicing fees and ancillary revenue, offset by estimated costs to service the loans, and generally declines over time as net servicing cash flows are received, effectively amortizing the MSR asset against contractual servicing and ancillary fee income. MSRs are either purchased from third parties or recognized upon sale or securitization of mortgage loans if servicing is retained. As permitted by U.S. GAAP, the Firm has elected to account for its MSRs at fair value. The Firm treats its MSRs as a single class of servicing assets based on the availability of market inputs used to measure the fair value of its MSR asset and its treatment of MSRs as one aggregate pool for risk management purposes. The Firm estimates the fair value of MSRs using an option-adjusted spread (“OAS”) model, which projects MSR cash flows over multiple interest rate scenarios in conjunction with the Firm’s prepayment model, and then discounts these cash flows at risk-adjusted rates. The model considers portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, costs to service, late charges and other ancillary revenue, and other economic factors. The Firm compares fair value estimates and assumptions to observable market data where available, and also considers recent market activity and actual portfolio experience.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 245251 |
Notes to consolidated financial statements
The fair value of MSRs is sensitive to changes in interest rates, including their effect on prepayment speeds. MSRs typically decrease in value when interest rates decline because declining interest rates tend to increase prepayments and therefore reduce the expected life of the net servicing cash flows that comprise the MSR asset. Conversely, securities (e.g., mortgage-backed securities), principal-only certificates and certain derivatives (i.e., those for which the Firm receives fixed-rate interest payments) increase in value when interest rates decline. JPMorgan Chase uses combinations of derivatives and securities to manage the risk of changes in the fair value of MSRs. The intent is to offset any interest-rate related changes in the fair value of MSRs with changes in the fair value of the related risk management instruments.
The following table summarizes MSR activity for the years endedDecember 31, 20172019, 20162018 and 20152017. | | As of or for the year ended December 31, (in millions, except where otherwise noted) | 2017 |
| | 2016 |
| | 2015 |
| | 2019 |
| | 2018 |
| | 2017 |
| | Fair value at beginning of period | $ | 6,096 |
| | $ | 6,608 |
| | $ | 7,436 |
| | $ | 6,130 |
| | $ | 6,030 |
| | $ | 6,096 |
| | MSR activity: | | | | | | | | | | | | | Originations of MSRs | 1,103 |
| | 679 |
| | 550 |
| | 1,384 |
| | 931 |
| | 1,103 |
| | Purchase of MSRs | — |
| | — |
| | 435 |
| | 105 |
| | 315 |
| | — |
| | Disposition of MSRs(a) | (140 | ) | | (109 | ) | | (486 | ) | | (789 | ) | | (636 | ) | | (140 | ) | | Net additions | 963 |
| | 570 |
| | 499 |
| | 700 |
| | 610 |
| | 963 |
| | | | | | | | | | | | | | | Changes due to collection/realization of expected cash flows | (797 | ) | | (919 | ) | | (922 | ) | | (951 | ) | | (740 | ) | | (797 | ) | | | | | | | | | | | | | | | Changes in valuation due to inputs and assumptions: | | | | | | | | | | | | | Changes due to market interest rates and other(b) | (202 | ) | | (72 | ) | | (160 | ) | | (893 | ) | | 300 |
| | (202 | ) | | Changes in valuation due to other inputs and assumptions: | | | | | | | | | | | | | Projected cash flows (e.g., cost to service) | (102 | ) | | (35 | ) | | (112 | ) | | (333 | ) | (e) | 15 |
| | (102 | ) | | Discount rates | (19 | ) | | 7 |
| | (10 | ) | | 153 |
| | 24 |
| | (19 | ) | | Prepayment model changes and other(c) | 91 |
| | (63 | ) | | (123 | ) | | (107 | ) | | (109 | ) | | 91 |
| | Total changes in valuation due to other inputs and assumptions | (30 | ) | | (91 | ) | | (245 | ) | | (287 | ) | | (70 | ) | | (30 | ) | | Total changes in valuation due to inputs and assumptions | (232 | ) | | (163 | ) | | (405 | ) | | (1,180 | ) | | 230 |
| | (232 | ) | | Fair value at December 31, | $ | 6,030 |
| | $ | 6,096 |
| | $ | 6,608 |
| | $ | 4,699 |
| | $ | 6,130 |
| | $ | 6,030 |
| | Change in unrealized gains/(losses) included in income related to MSRs held at December 31, | $ | (232 | ) | | $ | (163 | ) | | $ | (405 | ) | | $ | (1,180 | ) | | $ | 230 |
| | $ | (232 | ) | | Contractual service fees, late fees and other ancillary fees included in income | 1,886 |
| | 2,124 |
| | 2,533 |
| | 1,639 |
| | 1,778 |
| | 1,886 |
| | Third-party mortgage loans serviced at December 31, (in billions) | 555.0 |
| | 593.3 |
| | 677.0 |
| | 522.0 |
| | 521.0 |
| | 555.0 |
| | Servicer advances, net of an allowance for uncollectible amounts, at December 31, (in billions)(d) | 4.0 |
| | 4.7 |
| | 6.5 |
| | 2.0 |
| | 3.0 |
| | 4.0 |
| |
| | (a) | Includes excess MSRs transferred to agency-sponsored trusts in exchange for stripped mortgage backed securities (“SMBS”). In each transaction, a portion of the SMBS was acquired by third parties at the transaction date; the Firm acquired the remaining balance of those SMBS as trading securities. |
| | (b) | Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments. |
| | (c) | Represents changes in prepayments other than those attributable to changes in market interest rates. |
| | (d) | Represents amounts the Firm pays as the servicer (e.g., scheduled principal and interest, taxes and insurance), which will generally be reimbursed within a short period of time after the advance from future cash flows from the trust or the underlying loans. The Firm’s credit risk associated with these servicer advances is minimal because reimbursement of the advances is typically senior to all cash payments to investors. In addition, the Firm maintains the right to stop payment to investors if the collateral is insufficient to cover the advance. However, certain of these servicer advances may not be recoverable if they were not made in accordance with applicable rules and agreements. |
| | (e) | The decrease in projected cash flows was largely related to default servicing assumption updates. |
| | | | 246252 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
The following table presents the components of mortgage fees and related income (including the impact of MSR risk management activities) for the years ended December 31, 2017, 20162019, 2018 and 2015.2017. | | Year ended December 31, (in millions) | 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 | CCB mortgage fees and related income | | | | | | | | | | | Net production revenue | $ | 636 |
| | $ | 853 |
| | $ | 769 |
| $ | 1,618 |
| | $ | 268 |
| | $ | 636 |
| | | | | | | | | | | | Net mortgage servicing revenue: | | | | | |
| | | | | |
| Operating revenue: | | | | | |
| | | | | |
| Loan servicing revenue | 2,014 |
| | 2,336 |
| | 2,776 |
| 1,533 |
| | 1,835 |
| | 2,014 |
| Changes in MSR asset fair value due to collection/realization of expected cash flows | (795 | ) | | (916 | ) | | (917 | ) | (951 | ) | | (740 | ) | | (795 | ) | Total operating revenue | 1,219 |
| | 1,420 |
| | 1,859 |
| 582 |
| | 1,095 |
| | 1,219 |
| Risk management: | | | | | |
| | | | | |
| Changes in MSR asset fair value due to market interest rates and other(a) | (202 | ) | | (72 | ) | | (160 | ) | (893 | ) | | 300 |
| | (202 | ) | Other changes in MSR asset fair value due to other inputs and assumptions in model(b) | (30 | ) | | (91 | ) | | (245 | ) | (287 | ) | | (70 | ) | | (30 | ) | Change in derivative fair value and other | (10 | ) | | 380 |
| | 288 |
| 1,015 |
| | (341 | ) | | (10 | ) | Total risk management | (242 | ) | | 217 |
| | (117 | ) | (165 | ) | | (111 | ) | | (242 | ) | Total net mortgage servicing revenue | 977 |
| | 1,637 |
| | 1,742 |
| 417 |
| | 984 |
| | 977 |
| | | | | | | | | | | | Total CCB mortgage fees and related income | 1,613 |
| | 2,490 |
| | 2,511 |
| 2,035 |
| | 1,252 |
| | 1,613 |
| | | | | | | | | | | | All other | 3 |
| | 1 |
| | 2 |
| 1 |
| | 2 |
| | 3 |
| Mortgage fees and related income | $ | 1,616 |
| | $ | 2,491 |
| | $ | 2,513 |
| $ | 2,036 |
| | $ | 1,254 |
| | $ | 1,616 |
|
| | (a) | Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments. |
| | (b) | Represents the aggregate impact of changes in model inputs and assumptions such as projected cash flows (e.g., cost to service), discount rates and changes in prepayments other than those attributable to changes in market interest rates (e.g., changes in prepayments due to changes in home prices). |
The table below outlines the key economic assumptions used to determine the fair value of the Firm’s MSRs at December 31, 20172019 and 2016, 2018, and outlines the sensitivities of those fair values to immediate adverse changes in those assumptions, as defined below. | | December 31, (in millions, except rates) | 2017 | | 2016 | 2019 | | 2018 | Weighted-average prepayment speed assumption (“CPR”) | 9.35 | % | | 9.41 | % | | Weighted-average prepayment speed assumption (constant prepayment rate) | | 11.67 | % | | 8.78 | % | Impact on fair value of 10% adverse change | $ | (221 | ) | | $ | (231 | ) | $ | (200 | ) | | $ | (205 | ) | Impact on fair value of 20% adverse change | (427 | ) | | (445 | ) | (384 | ) | | (397 | ) | Weighted-average option adjusted spread(b) | 9.04 | % | | 8.55 | % | 7.93 | % | | 7.87 | % | Impact on fair value of 100 basis points adverse change | $ | (250 | ) | | $ | (248 | ) | $ | (169 | ) | | $ | (235 | ) | Impact on fair value of 200 basis points adverse change | (481 | ) | | (477 | ) | (326 | ) | | (452 | ) |
CPR: Constant prepayment rate.
| | (a) | Includes the impact of operational risk and regulatory capital. |
| | (b) | The prior period amount has been revised to conform with the current period presentation. |
Changes in fair value based on variationvariations in assumptions generally cannot be easily extrapolated, because the relationship of the change in the assumptions to the change in fair value are often highly interrelated and may not be linear. In this table, the effect that a change in a particular assumption may have on the fair value is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which would either magnify or counteract the impact of the initial change.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 247253 |
Notes to consolidated financial statements
Note 16 – Premises and equipment Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation and amortization. JPMorgan Chase computes depreciation using the straight-line method over the estimated useful life of an asset. For leasehold improvements, the Firm uses the straight-line method computed over the lesser of the remaining term of the leased facility or the estimated useful life of the leased asset. JPMorgan Chase capitalizes certain costs associated with the acquisition or development of internal-use software. Once the software is ready for its intended use, these costs are amortized on a straight-line basis over the software’s expected useful life and reviewed for impairment on an ongoing basis. Note 17 – Deposits At December 31, 20172019 and 2016, 2018, noninterest-bearing and interest-bearing deposits were as follows. | | December 31, (in millions) | 2017 |
|
| 2016 |
| | 2019 |
|
| 2018 |
| | U.S. offices | | | | | | | | | Noninterest-bearing | $ | 393,645 |
| | $ | 400,831 |
| | | Interest-bearing (included $14,947, and $12,245 at fair value)(a) | 793,618 |
| | 737,949 |
| | | Noninterest-bearing (included $22,637 and $17,204 at fair value)(a)(b) | | $ | 395,667 |
| | $ | 386,709 |
| | Interest-bearing (included $2,534 and $2,487 at fair value)(a)(b) | | 876,156 |
| | 813,881 |
| | Total deposits in U.S. offices | 1,187,263 |
| | 1,138,780 |
| | 1,271,823 |
| | 1,200,590 |
| | Non-U.S. offices | | | | | | | | | Noninterest-bearing | 15,576 |
| | 14,764 |
| | | Interest-bearing (included $6,374 and $1,667 at fair value)(a) | 241,143 |
| | 221,635 |
| | | Noninterest-bearing (included $1,980 and $2,367 at fair value)(a)(b) | | 20,087 |
| | 21,459 |
| | Interest-bearing (included $1,438 and $1,159 at fair value)(a)(b) | | 270,521 |
| | 248,617 |
| | Total deposits in non-U.S. offices | 256,719 |
| | 236,399 |
| | 290,608 |
| | 270,076 |
| | Total deposits | $ | 1,443,982 |
| | $ | 1,375,179 |
| | $ | 1,562,431 |
| | $ | 1,470,666 |
| |
| | (a) | Includes structured notes classified as deposits for which the fair value option has been elected. ForRefer to Note 3 for further discussion, see Note 3.discussion. |
| | (b) | In the second quarter of 2019, the Firm reclassified balances related to certain structured notes from interest-bearing to noninterest-bearing deposits as the associated returns are recorded in principal transactions revenue and not in net interest income. This change was applied retrospectively and, accordingly, prior period amounts were revised to conform with the current presentation. |
At December 31, 20172019 and 2016, 2018, time deposits in denominations of $250,000 or more were as follows. | | | | | | | | | | December 31, (in millions) |
| 2019 |
|
| 2018 |
| U.S. offices |
| $ | 44,127 |
|
| $ | 25,119 |
| Non-U.S. offices |
| 50,840 |
|
| 41,661 |
| Total |
| $ | 94,967 |
|
| $ | 66,780 |
|
| | | | | | | | | | December 31, (in millions) |
| 2017 |
|
| 2016 |
| U.S. offices |
| $ | 30,671 |
|
| $ | 26,180 |
| Non-U.S. offices(a) |
| 29,049 |
|
| 29,652 |
| Total(a) |
| $ | 59,720 |
|
| $ | 55,832 |
|
(a) The prior period amounts have been revised to conform with the current period presentation.
At December 31, 2017, 2019, the maturities of interest-bearing time deposits were as follows. | | December 31, 2017 (in millions) | | |
| | |
| | |
| | | U.S. | | Non-U.S. |
| | Total |
| | 2018 | | $ | 37,645 |
| | $ | 27,621 |
| | $ | 65,266 |
| | 2019 | | 3,487 |
| | 349 |
| | 3,836 |
| | December 31, 2019 (in millions) | | | |
| | |
| | |
| | | U.S. | | Non-U.S. |
| | Total |
| 2020 | | 2,332 |
| | 22 |
| | 2,354 |
| | $ | 60,614 |
| | $ | 49,443 |
| | $ | 110,057 |
| 2021 | | 4,275 |
| | 26 |
| | 4,301 |
| | 3,700 |
| | 123 |
| | 3,823 |
| 2022 | | 2,297 |
| | 443 |
| | 2,740 |
| | 709 |
| | 89 |
| | 798 |
| 2023 | | | 175 |
| | 13 |
| | 188 |
| 2024 | | | 534 |
| | 357 |
| | 891 |
| After 5 years | | 3,391 |
| | 1,697 |
| | 5,088 |
| | 301 |
| | 39 |
| | 340 |
| Total | | $ | 53,427 |
| | $ | 30,158 |
| | $ | 83,585 |
| | $ | 66,033 |
| | $ | 50,064 |
| | $ | 116,097 |
|
Note 18 - Leases Lease commitments Effective January 1, 2019, the Firm adopted new guidance that requires lessees to recognize on the Consolidated balance sheets all leases with lease terms greater than twelve months as a lease liability with a corresponding right-of-use (“ROU”) asset. Accordingly, the Firm recognized operating lease liabilities and ROU assets of $8.2 billion and $8.1 billion, respectively. The adoption of the new lease guidance did not have a material impact on the Firm’s Consolidated statements of income. The change in accounting due to the adoption of the new lease guidance did not result in a material change to the future net minimum rental payments/receivables or to the net rental expense when compared to December 31, 2018. Firm as lessee At December 31, 2019, JPMorgan Chase and its subsidiaries were obligated under a number of noncancelable leases, predominantly operating leases for premises and equipment used primarily for business purposes. These leases generally have terms of 20 years or less, determined based on the contractual maturity of the lease, and include periods covered by options to extend or terminate the lease when the Firm is reasonably certain that it will exercise those options. None of these lease agreements impose restrictions on the Firm’s ability to pay dividends, engage in debt or equity financing transactions or enter into further lease agreements. Certain of these leases contain escalation clauses that will increase rental payments based on maintenance, utility and tax increases, which are non-lease components. The Firm elected not to separate lease and non-lease components of a contract for its real estate leases. As such, real estate lease payments represent payments on both lease and non-lease components.
| | | | 254 | | JPMorgan Chase & Co./2019 Form 10-K |
Operating lease liabilities and ROU assets are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. The future lease payments are discounted at a rate that represents the Firm’s collateralized borrowing rate for financing instruments of a similar term and are included in accounts payable and other liabilities. The operating lease ROU asset, included in premises and equipment, also includes any lease prepayments made, plus initial direct costs incurred, less any lease incentives received. Rental expense associated with operating leases is recognized on a straight-line basis over the lease term, and generally included in occupancy expense in the Consolidated statements of income.The following tables provide information related to the Firm’s operating leases: | | | | | December 31, (in millions, except where otherwise noted) | | 2019 | Right-of-use assets | $ | 8,190 |
| Lease liabilities | 8,505 |
| | | Weighted average remaining lease term (in years) | 8.8 |
| Weighted average discount rate | 3.68 | % | | | Supplemental cash flow information | | Cash paid for amounts included in the measurement of lease liabilities - operating cash flows | $ | 1,572 |
| Supplemental non-cash information | | Right-of-use assets obtained in exchange for operating lease obligations | $ | 1,413 |
| | |
| | | | | Year ended December 31, (in millions) | 2019 | Rental expense | | Gross rental expense | $ | 2,057 |
| Sublease rental income | (184 | ) | Net rental expense | $ | 1,873 |
|
The following table presents future payments under operating leases as of December 31, 2019: | | | | | Year ended December 31, (in millions) | | 2020 | $ | 1,604 |
| 2021 | 1,447 |
| 2022 | 1,257 |
| 2023 | 1,081 |
| 2024 | 944 |
| After 2024 | 3,757 |
| Total future minimum lease payments | 10,090 |
| Less: Imputed interest | (1,585 | ) | Total | $ | 8,505 |
|
In addition to the table above, as of December 31, 2019, the Firm had additional future operating lease commitments of $1.2 billion that were signed but had not yet commenced. These operating leases will commence between 2020 and 2022 with lease terms up to 25 years.
Firm as lessor The Firm provides auto and equipment lease financing to its customers through lease arrangements with lease terms that may contain renewal, termination and/or purchase options. Generally, the Firm’s lease financings are operating leases. These assets are recognized in other assets on the Firm’s Consolidated balance sheets and are depreciated on a straight-line basis over the lease term to reduce the asset to its estimated residual value. Depreciation expense is included in technology, communications and equipment expense in the Consolidated statements of income. The Firm’s lease income is generally recognized on a straight-line basis over the lease term and is included in other income in the Consolidated statements of income. On a periodic basis, the Firm assesses leased assets for impairment, and if the carrying amount of the leased asset exceeds the undiscounted cash flows from the lease payments and the estimated residual value upon disposition of the leased asset, an impairment loss is recognized. The risk of loss on auto and equipment leased assets relating to the residual value of the leased assets is monitored through projections of the asset residual values at lease origination and periodic review of residual values, and is mitigated through arrangements with certain manufacturers or lessees. The following table presents the carrying value of assets subject to leases reported on the Consolidated balance sheets: | | | | | | | | | December 31, (in millions) | | 2019 | 2018 | Carrying value of assets subject to operating leases, net of accumulated depreciation | | $ | 23,587 |
| $ | 21,428 |
| Accumulated depreciation | | 6,121 |
| 5,303 |
|
The following table presents the Firm’s operating lease income and the related depreciation expense on the Consolidated statements of income: | | | | | | | | | | | |
Year ended December 31, (in millions) | | 2019 |
| 2018 |
| 2017 |
| Operating lease income | | $ | 5,455 |
| $ | 4,540 |
| $ | 3,611 |
| Depreciation expense | | 4,157 |
| 3,522 |
| 2,808 |
|
The following table presents future receipts under operating leases as of December 31, 2019: | | | | | Year ended December 31, (in millions) | | 2020 | $ | 4,168 |
| 2021 | 2,733 |
| 2022 | 1,025 |
| 2023 | 86 |
| 2024 | 37 |
| After 2024 | 52 |
| Total future minimum lease receipts | $ | 8,101 |
|
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 255 |
Notes to consolidated financial statements
Note 19 – Accounts payable and other liabilities Accounts payable and other liabilities consist of brokerage payables, which includes payables to customers, dealers and clearing organizations, and payables from security purchases that did not settle; accrued expenses, including income tax payables and credit card rewards liability; and all other liabilities, including obligations to return securities received as collateral and litigation reserves. The following table details the components of accounts payable and other liabilities. | | December 31, (in millions) | | 2017 |
| | 2016 |
| | 2019 |
| | 2018 |
| Brokerage payables | | $ | 102,727 |
| | $ | 109,842 |
| | $ | 118,375 |
| | $ | 114,794 |
| Other payables and liabilities(a) | | 86,656 |
| | 80,701 |
| | 92,032 |
| | 81,916 |
| Total accounts payable and other liabilities | | $ | 189,383 |
| | $ | 190,543 |
| | $ | 210,407 |
| | $ | 196,710 |
|
| | (a) | Includes credit card rewards liability of $4.9$6.4 billion and $3.8$5.8 billion at December 31, 20172019 and 2016,2018, respectively. |
| | | | 248256 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Note 1920 – Long-term debt JPMorgan Chase issues long-term debt denominated in various currencies, predominantly U.S. dollars, with both fixed and variable interest rates. Included in senior and subordinated debt below are various equity-linked or other indexed instruments, which the Firm has elected to measure at fair value. Changes in fair value are recorded in principal transactions revenue in the Consolidated statements of income, except for unrealized gains/(losses) due to DVA which are recorded in OCI. The following table is a summary of long-term debt carrying values (including unamortized premiums and discounts, issuance costs, valuation adjustments and fair value adjustments, where applicable) by remaining contractual maturity as of December 31, 2017.2019. | | By remaining maturity at December 31, (in millions, except rates) | | 2017 | | 2016 | | 2019 | | 2018 | | | Under 1 year |
| | 1-5 years |
| | After 5 years |
| | Total | | Total | | Under 1 year |
| | 1-5 years |
| | After 5 years |
| | Total | | Total | | Parent company | | | | | | | | | | | | | | | | | | | | | | Senior debt: | Fixed rate | $ | 15,084 |
| | $ | 53,939 |
| | $ | 72,528 |
| | $ | 141,551 |
| | $ | 128,967 |
| Fixed rate | $ | 13,580 |
| | $ | 51,982 |
| | $ | 95,636 |
| | $ | 161,198 |
| | $ | 145,820 |
| | | Variable rate | 5,547 |
| | 12,802 |
| | 8,112 |
| | 26,461 |
| | 34,766 |
| Variable rate | 2,788 |
| | 12,708 |
| | 3,119 |
| | 18,615 |
| | 22,978 |
| | | Interest rates(a) | 0.38-7.25% | | 0.16-6.30% | | 0.45-6.40% | | 0.16-7.25% | | 0.09-7.25% | Interest rates(a) | 0.15-4.95% |
| | 0.50-4.63% |
| | 0.45-6.40% |
| | 0.15-6.40% |
| | 0.17-6.40% |
| | Subordinated debt: | Fixed rate | $ | — |
| | $ | 149 |
| | $ | 14,497 |
| | $ | 14,646 |
| | $ | 16,811 |
| Fixed rate | $ | — |
| | $ | 5,109 |
| | $ | 10,046 |
| | $ | 15,155 |
| | $ | 14,308 |
| | | Variable rate | — |
| | — |
| | 9 |
| | 9 |
| | 1,245 |
| Variable rate | — |
| | — |
| | 9 |
| | 9 |
| | 9 |
| | | Interest rates(a) | — | % | | 8.53% | | 3.38-8.00% | | 3.38-8.53% | | 0.82-8.53% |
| Interest rates(a) | — | % | | 3.38-3.88% |
| | 3.63-8.00% |
| | 3.38-8.00% |
| | 3.38-8.53% |
| | | Subtotal | $ | 20,631 |
| | $ | 66,890 |
| | $ | 95,146 |
| | $ | 182,667 |
| | $ | 181,789 |
| Subtotal | $ | 16,368 |
| | $ | 69,799 |
| | $ | 108,810 |
| | $ | 194,977 |
| | $ | 183,115 |
| | Subsidiaries | | | | | | | | | | | | | | | | | | | | | | Federal Home Loan Banks advances: | Fixed rate | $ | 4 |
| | $ | 34 |
| | $ | 129 |
| | $ | 167 |
| | $ | 179 |
| Fixed rate | $ | 4 |
| | $ | 35 |
| | $ | 96 |
| | $ | 135 |
| | $ | 155 |
| | | Variable rate | 12,450 |
| | 37,000 |
| | 11,000 |
| | 60,450 |
| | 79,340 |
| Variable rate | 9,500 |
| | 19,000 |
| | — |
| | 28,500 |
| | 44,300 |
| | | Interest rates(a) | 1.58-1.75% | | 1.46-2.00% | | 1.18-1.47% | | 1.18-2.00% | | 0.41-1.21% |
| Interest rates(a) | 1.88-2.18% |
| | 1.67-2.24% |
| | — | % | | 1.67-2.24% |
| | 2.36-2.96% |
| | Senior debt: | Fixed rate | $ | 1,122 |
| | $ | 3,970 |
| | $ | 6,898 |
| | $ | 11,990 |
| | $ | 8,329 |
| Fixed rate | $ | 761 |
| | $ | 6,955 |
| | $ | 11,881 |
| | $ | 19,597 |
| | $ | 16,434 |
| | | Variable rate | 8,967 |
| | 13,287 |
| | 3,964 |
| | 26,218 |
| | 19,379 |
| Variable rate | 11,650 |
| | 24,938 |
| | 9,273 |
| | 45,861 |
| | 35,601 |
| | | Interest rates(a) | 0.22-7.50% | | 1.65-7.50% | | 1.00-7.50% |
| | 0.22-7.50% | | 0.00-7.50% |
| Interest rates(a) | 7.50 | % | | 2.15-9.43% |
| | 1.00-7.50% |
| | 1.00-9.43% |
| | 1.00-7.50% |
| | Subordinated debt: | Fixed rate | $ | — |
| | $ | — |
| | $ | 313 |
| | $ | 313 |
| | $ | 3,884 |
| Fixed rate | $ | — |
| | $ | 305 |
| | $ | — |
| | $ | 305 |
| | $ | 301 |
| | | Variable rate | — |
| | — |
| |
|
| | — |
| | — |
| Variable rate | — |
| | — |
| | — |
| | — |
| | — |
| | | Interest rates(a) | — | % | | — | % | | 8.25% | | 8.25% | | 6.00-8.25% |
| Interest rates(a) | — | % | | 8.25 | % | | — | % | | 8.25 | % | | 8.25 | % | | | Subtotal | $ | 22,543 |
| | $ | 54,291 |
| | $ | 22,304 |
| | $ | 99,138 |
| | $ | 111,111 |
| Subtotal | $ | 21,915 |
| | $ | 51,233 |
| | $ | 21,250 |
| | $ | 94,398 |
| | $ | 96,791 |
| | Junior subordinated debt (b): | Fixed rate | $ | — |
| | $ | — |
| | $ | 690 |
| | $ | 690 |
| | $ | 706 |
| | Junior subordinated debt: | | Fixed rate | $ | — |
| | $ | — |
| | $ | 693 |
| | $ | 693 |
| | $ | 659 |
| | | Variable rate | — |
| | — |
| | 1,585 |
| | 1,585 |
| | 1,639 |
| Variable rate | — |
| | — |
| | 1,430 |
| | 1,430 |
| | 1,466 |
| | | Interest rates(a) | — | % | | — | % | | 1.88-8.75% | | 1.88-8.75% | | 1.39-8.75% |
| Interest rates(a) | — | % | | — | % | | 2.41-8.75% |
| | 2.41-8.75% |
| | 3.04-8.75% |
| | | Subtotal | $ | — |
| | $ | — |
| | $ | 2,275 |
| | $ | 2,275 |
| | $ | 2,345 |
| Subtotal | $ | — |
| | $ | — |
| | $ | 2,123 |
| | $ | 2,123 |
| | $ | 2,125 |
| | Total long-term debt(e)(d) | | $ | 43,174 |
| | $ | 121,181 |
| | $ | 119,725 |
| | $ | 284,080 |
| (g)(h) | $ | 295,245 |
| | $ | 38,283 |
| | $ | 121,032 |
| | $ | 132,183 |
| | $ | 291,498 |
| (f)(g) | $ | 282,031 |
| | Long-term beneficial interests: | | | | | | | | | | | | | | | | | | | | | | Fixed rate | $ | 5,927 |
| | $ | 7,652 |
| | $ | — |
| | $ | 13,579 |
| | $ | 18,678 |
| Fixed rate | $ | 1,621 |
| | $ | 1,369 |
| | $ | — |
| | $ | 2,990 |
| | $ | 7,611 |
| | | Variable rate | 3,399 |
| | 4,472 |
| | 321 |
| | 8,192 |
| | 14,681 |
| Variable rate | 900 |
| | 2,572 |
| | 276 |
| | 3,748 |
| | 6,103 |
| | | Interest rates | 1.10-2.50% | | 1.27-6.54% | | 0.00-3.75% | | 0.00-6.54% | | 0.39-7.87% | Interest rates | 1.49-2.19% |
| | 0.00-2.77% |
| | 0.84-4.06% |
| | 0.00-4.06% |
| | 0.00-4.62% |
| | Total long-term beneficial interests(f)(e) | | $ | 9,326 |
| | $ | 12,124 |
| | $ | 321 |
| | $ | 21,771 |
| | $ | 33,359 |
| | $ | 2,521 |
| | $ | 3,941 |
| | $ | 276 |
| | $ | 6,738 |
| | $ | 13,714 |
| |
| | (a) | The interest rates shown are the range of contractual rates in effect at December 31, 20172019 and 2016,2018, respectively, including non-U.S. dollar fixed- and variable-rate issuances, which excludes the effects of the associated derivative instruments used in hedge accounting relationships, if applicable. The use of these derivative instruments modifies the Firm’s exposure to the contractual interest rates disclosed in the table above. Including the effects of the hedge accounting derivatives, the range of modified rates in effect at December 31, 2017,2019, for total long-term debt was (0.19)(0.02)% to 8.88%9.43%, versus the contractual range of 0.16%0.15% to 8.75%9.43% presented in the table above. The interest rate ranges shown exclude structured notes accounted for at fair value. |
| | (b) | As of December 31, 2017, includes $0.7 billion of fixed rate junior subordinated debentures issued to an issuer trust and $1.6 billion of variable rate junior subordinated debentures distributed pro rata to the holders of the $1.6 billion of trust preferred securities which were cancelled on December 18, 2017. |
| | (c) | Included long-term debt of $63.5$32.0 billion and $82.2$47.7 billion secured by assets totaling $208.4$186.1 billion and $205.6$207.0 billion at December 31, 20172019 and 2016,2018, respectively. The amount of long-term debt secured by assets does not include amounts related to hybrid instruments. |
| | (d)(c) | Included $47.5$75.7 billion and $37.7$54.9 billion of long-term debt accounted for at fair value at December 31, 20172019 and 2016,2018, respectively. |
| | (e)(d) | Included $10.3$13.6 billion and $7.5$11.2 billion of outstanding zero-coupon notes at December 31, 20172019 and 2016,2018, respectively. The aggregate principal amount of these notes at their respective maturities is $33.5$39.3 billion and $25.1$37.4 billion, respectively. The aggregate principal amount reflects the contractual principal payment at maturity, which may exceed the contractual principal payment at the Firm’s next call date, if applicable. |
| | (f)(e) | Included on the Consolidated balance sheets in beneficial interests issued by consolidated VIEs. Also included $45$36 million and $120$28 million accounted for at fair value at December 31, 20172019 and 2016,2018, respectively. Excluded short-term commercial paper and other short-term beneficial interests of $4.3$11.1 billion and $5.7$6.5 billion at December 31, 20172019 and 2016,2018, respectively. |
| | (g)(f) | At December 31, 2017,2019, long-term debt in the aggregate of $111.2$141.3 billion was redeemable at the option of JPMorgan Chase, in whole or in part, prior to maturity, based on the terms specified in the respective instruments. |
| | (h)(g) | The aggregate carrying values of debt that matures in each of the five years subsequent to 20172019 is $43.2 billion in 2018, $34.7 billion in 2019, $39.3$38.3 billion in 2020, $33.8$45.8 billion in 2021, and $13.4$19.6 billion in 2022.2022, $29.7 billion in 2023 and $25.9 billion in 2024. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 249257 |
Notes to consolidated financial statements
The weighted-average contractual interest rates for total long-term debt excluding structured notes accounted for at fair value were 2.87% 3.13% and 2.49% 3.28% as of December 31, 20172019 and 2016, 2018, respectively. In order to modify exposure to interest rate and currency exchange rate movements, JPMorgan Chase utilizes derivative instruments, primarily interest rate and cross-currency interest rate swaps, in conjunction with some of its debt issuances. The use of these instruments modifies the Firm’s interest expense on the associated debt. The modified weighted-average interest rates for total long-term debt, including the effects of related derivative instruments, were 2.56% 3.19% and 2.01% 3.64% as of December 31, 20172019 and 2016, 2018, respectively. JPMorgan Chase & Co. has guaranteed certain long-term debt of its subsidiaries, including both long-term debt and structured notes. notes. These guarantees rank on parity with the Firm’s other unsecured and unsubordinated indebtedness. The amount of such guaranteed long-term debt and structured notes was $7.9$14.4 billion and $3.9$10.9 billion at December 31, 20172019 and 2016, 2018, respectively. The Firm’s unsecured debt does not contain requirements that would call for an acceleration of payments, maturities or changes in the structure of the existing debt, provide any limitations on future borrowings or require additional collateral, based on unfavorable changes in the Firm’s credit ratings, financial ratios, earnings or stock price.
Junior subordinated deferrable interest debentures
At December 31, 2016, the Firm had outstanding eight wholly-owned Delaware statutory business trusts (“issuer trusts”) that had issued trust preferred securities. On December 18, 2017, seven of the eight issuer trusts were liquidated, $1.6 billion of trust preferred and $56 million of common securities originally issued by those trusts were cancelled, and the junior subordinated debentures previously held by each trust issuer were distributed pro rata to the holders of the corresponding series of trust preferred and common securities.
Beginning in 2014, the junior subordinated debentures issued to the issuer trusts by the Firm, less the common capital securities of the issuer trusts, began being phased out from inclusion as Tier 1 capital under Basel III and they were fully phased out as of December 31, 2016. As of December 31, 2017 and 2016, $300 million and $1.4 billion, respectively, qualified as Tier 2 capital.
The Firm redeemed $1.6 billion of trust preferred securities in the year ended December 31, 2016.
| | | | 250258 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Note 2021 – Preferred stock At December 31, 20172019 and 20162018, JPMorgan Chase was authorized to issue 200 million shares of preferred stock, in one or more series, with a par value of $1 per share.
In the event of a liquidation or dissolution of the Firm, JPMorgan Chase’s preferred stock then outstanding takes precedence over the Firm’s common stock with respect to the payment of dividends and the distribution of assets. The following is a summary of JPMorgan Chase’s non-cumulative preferred stock outstanding as of December 31, 20172019 and 2016.2018. | | | | | | | | | | | | | | | | | Shares(a) | | Carrying value (in millions) | | Issue date | Contractual rate in effect at December 31, 2019 | Earliest redemption date(b) | Floating annualized rate of three-month LIBOR/Term SOFR plus: | Dividend declared per share(c) | | | Shares at December 31,(a) | | Carrying value (in millions) at December 31,
| | Issue date | Contractual rate in effect at December 31, 2017 | | Earliest redemption date | Date at which dividend rate becomes floating | Floating annual rate of three-month LIBOR plus: | December 31, | | December 31, | | Year ended December 31, | | | 2017 | 2016 | | 2017 | 2016 | | 2019 | 2018 | | 2019 | 2018 | Floating annualized rate of three-month LIBOR/Term SOFR plus: | 2018 | 2017 | | Fixed-rate: | | | | | | | | | | | | | Series O | — |
| 125,750 |
| | $ | — |
| $ | 1,258 |
| | 8/27/2012 | N/A |
| | 9/1/2017 | NA | | Series P | 90,000 |
| 90,000 |
| | 900 |
| 900 |
| | 2/5/2013 | 5.450 | % | | 3/1/2018 | NA | — |
| 90,000 |
| | $ | — |
| $ | 900 |
| | 2/5/2013 | — | % | 3/1/2018 | NA | $545.00 | | Series T | 92,500 |
| 92,500 |
| | 925 |
| 925 |
| | 1/30/2014 | 6.700 |
| | 3/1/2019 | NA | — |
| 92,500 |
| | — |
| 925 |
| | 1/30/2014 | — |
| 3/1/2019 | NA | 167.50 | 670.00 | | Series W | 88,000 |
| 88,000 |
| | 880 |
| 880 |
| | 6/23/2014 | 6.300 |
| | 9/1/2019 | NA | — |
| 88,000 |
| | — |
| 880 |
| | 6/23/2014 | — |
| 9/1/2019 | NA | 472.50 | 630.00 | | Series Y | 143,000 |
| 143,000 |
| | 1,430 |
| 1,430 |
| | 2/12/2015 | 6.125 |
| | 3/1/2020 | NA | 143,000 |
| 143,000 |
| | 1,430 |
| 1,430 |
| | 2/12/2015 | 6.125 |
| 3/1/2020 | NA | 612.52 | | Series AA | 142,500 |
| 142,500 |
| | 1,425 |
| 1,425 |
| | 6/4/2015 | 6.100 |
| | 9/1/2020 | NA | 142,500 |
| 142,500 |
| | 1,425 |
| 1,425 |
| | 6/4/2015 | 6.100 |
| 9/1/2020 | NA | 610.00 | | Series BB | 115,000 |
| 115,000 |
| | 1,150 |
| 1,150 |
| | 7/29/2015 | 6.150 |
| | 9/1/2020 | NA | 115,000 |
| 115,000 |
| | 1,150 |
| 1,150 |
| | 7/29/2015 | 6.150 |
| 9/1/2020 | NA | 615.00 | | | | | | | | | | Series DD | | 169,625 |
| 169,625 |
| | 1,696 |
| 1,696 |
| | 9/21/2018 | 5.750 |
| 12/1/2023 | NA | 575.00 | 111.81 | — | | Series EE | | 185,000 |
| — |
| | 1,850 |
| — |
| | 1/24/2019 | 6.000 |
| 3/1/2024 | NA | 511.67 | — | (d) | Series GG | | 90,000 |
| — |
| | 900 |
| — |
| | 11/7/2019 | 4.750 |
| 12/1/2024 | NA | — | (e) | | | | | | | | | | | | | | Fixed-to-floating-rate: | | | | | | | Fixed-to-floating-rate: | | | | | | | Series I | 600,000 |
| 600,000 |
| | 6,000 |
| 6,000 |
| | 4/23/2008 | 7.900 | % | | 4/30/2018 | LIBOR + 3.47% | 293,375 |
| 430,375 |
| | 2,934 |
| 4,304 |
| | 4/23/2008 | LIBOR + 3.47% |
| 4/30/2018 | LIBOR + 3.47% | $593.23 | $646.38 | $790.00 | (f) | Series Q | 150,000 |
| 150,000 |
| | 1,500 |
| 1,500 |
| | 4/23/2013 | 5.150 |
| | 5/1/2023 | LIBOR + 3.25 | 150,000 |
| 150,000 |
| | 1,500 |
| 1,500 |
| | 4/23/2013 | 5.150 |
| 5/1/2023 | LIBOR + 3.25 | 515.00 | | Series R | 150,000 |
| 150,000 |
| | 1,500 |
| 1,500 |
| | 7/29/2013 | 6.000 |
| | 8/1/2023 | LIBOR + 3.30 | 150,000 |
| 150,000 |
| | 1,500 |
| 1,500 |
| | 7/29/2013 | 6.000 |
| 8/1/2023 | LIBOR + 3.30 | 600.00 | | Series S | 200,000 |
| 200,000 |
| | 2,000 |
| 2,000 |
| | 1/22/2014 | 6.750 |
| | 2/1/2024 | LIBOR + 3.78 | 200,000 |
| 200,000 |
| | 2,000 |
| 2,000 |
| | 1/22/2014 | 6.750 |
| 2/1/2024 | LIBOR + 3.78 | 675.00 | | Series U | 100,000 |
| 100,000 |
| | 1,000 |
| 1,000 |
| | 3/10/2014 | 6.125 |
| | 4/30/2024 | LIBOR + 3.33 | 100,000 |
| 100,000 |
| | 1,000 |
| 1,000 |
| | 3/10/2014 | 6.125 |
| 4/30/2024 | LIBOR + 3.33 | 612.50 | | Series V | 250,000 |
| 250,000 |
| | 2,500 |
| 2,500 |
| | 6/9/2014 | 5.000 |
| | 7/1/2019 | LIBOR + 3.32 | 250,000 |
| 250,000 |
| | 2,500 |
| 2,500 |
| | 6/9/2014 | LIBOR + 3.32% |
| 7/1/2019 | LIBOR + 3.32 | 534.09 | 500.00 | (g) | Series X | 160,000 |
| 160,000 |
| | 1,600 |
| 1,600 |
| | 9/23/2014 | 6.100 |
| | 10/1/2024 | LIBOR + 3.33 | 160,000 |
| 160,000 |
| | 1,600 |
| 1,600 |
| | 9/23/2014 | 6.100 |
| 10/1/2024 | LIBOR + 3.33 | 610.00 | | Series Z | 200,000 |
| 200,000 |
| | 2,000 |
| 2,000 |
| | 4/21/2015 | 5.300 |
| | 5/1/2020 | LIBOR + 3.80 | 200,000 |
| 200,000 |
| | 2,000 |
| 2,000 |
| | 4/21/2015 | 5.300 |
| 5/1/2020 | LIBOR + 3.80 | 530.00 | | Series CC | 125,750 |
| — |
| | 1,258 |
| — |
| | 10/20/2017 | 4.625 |
| | 11/1/2022 | LIBOR + 2.58 | 125,750 |
| 125,750 |
| | 1,258 |
| 1,258 |
| | 10/20/2017 | 4.625 |
| 11/1/2022 | LIBOR + 2.58 | 462.50 | 129.76 | | Series FF | | 225,000 |
| — |
| | 2,250 |
| — |
| | 7/31/2019 | 5.000 |
| 8/1/2024 | SOFR + 3.38 | 251.39 | — | (h) | Total preferred stock | 2,606,750 |
| 2,606,750 |
| | $ | 26,068 |
| $ | 26,068 |
| | | | 2,699,250 |
| 2,606,750 |
| | $ | 26,993 |
| $ | 26,068 |
| | | |
| | (a) | Represented by depositary shares. |
| | (b) | Fixed-to-floating rate notes convert to a floating rate at the earliest redemption date. |
| | (c) | Dividends are declared quarterly. Dividends are payable quarterly on fixed-rate preferred stock. Dividends are payable semiannually on fixed-to-floating-rate preferred stock while at a fixed rate, and payable quarterly after converting to a floating rate. |
| | (d) | Dividends in the amount of $211.67 per share were declared on April 12, 2019 and include dividends from the original issue date of January 24, 2019 through May 31, 2019. Dividends in the amount of $150.00 per share were declared thereafter on July 10, 2019 and October 9, 2019. |
| | (e) | NaN dividends were declared for Series GG from the original issue date of November 7, 2019 through December 31, 2019. |
| | (f) | The dividend rate for Series I preferred stock became floating and payable quarterly starting on April 30, 2018; prior to which the dividend rate was fixed at 7.90% or $395.00 per share payable semi annually. |
| | (g) | The dividend rate for Series V preferred stock became floating and payable quarterly starting on July 1, 2019; prior to which the dividend rate was fixed at 5% or $250.00 per share payable semi annually. The Firm declared a dividend of $144.11 and $139.98 per share on outstanding Series V preferred stock on August 15, 2019 and November 15, 2019, respectively. |
| | (h) | Dividends in the amount of $126.39 per share were declared on September 9, 2019 and include dividends from the original issue date of July 31, 2019 through October 31, 2019. Dividends in the amount of $125.00 per share were declared thereafter on December 10, 2019. |
Each series of preferred stock has a liquidation value and redemption price per share of $10,000, plus accrued but unpaid dividends. Dividends on fixed-rate preferred stock are payable quarterly. Dividends on fixed-to-floating-rate preferred stock are payable semiannually while The aggregate liquidation value was $27.3 billion at a fixed rate, and become payable quarterly after converting to a floating rate.December 31, 2019.
On October 20, 2017,February 24, 2020, the Firm issued $1.3$1.5 billion of fixed to-floatingfixed-to- floating rate non-cumulative preferred stock, Series CC, with an initial dividend rate of 4.625%. II. On December 1, 2017, TheJanuary 31, 2020, the Firm redeemedannounced that it will redeem all $1.3$1.43 billion of its outstanding 5.50%6.125% non-cumulative preferred stock, Series O.Y on March 1, 2020. On January 23, 2020, the Firm issued $3.0 billion of fixed-to-floating rate non-cumulative preferred stock, Series HH. On December 1, 2019, the Firm redeemed all $900 million of its 5.45% non-cumulative preferred stock, Series P. On November 7, 2019, the Firm issued $900 million of 4.75% non-cumulative preferred stock, Series GG. On October 30, 2019, the Firm redeemed $1.37 billion of its fixed-to-floating rate non-cumulative perpetual preferred stock, Series I.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 259 |
Notes to consolidated financial statements
On September 1, 2019, the Firm redeemed all $880 million of its 6.30% non-cumulative preferred stock, Series W. On July 31, 2019, the Firm issued $2.25 billion of fixed-to-floating rate non-cumulative preferred stock, Series FF. On March 1, 2019, the Firm redeemed $925 million of its 6.70% non-cumulative preferred stock, Series T. On January 24, 2019, the Firm issued $1.85 billion of 6.00% non-cumulative preferred stock, Series EE. On October 30, 2018, the Firm redeemed $1.7 billion of its fixed-to-floating rate non-cumulative perpetual preferred stock, Series I. On September 21, 2018, the Firm issued $1.7 billion of 5.75% non-cumulative preferred stock, Series DD. Dividends in the amount of $550.00 per share were declared for series O from January 1, 2017 through redemption on December 1, 2017. Redemption rights Each series of the Firm’s preferred stock may be redeemed on any dividend payment date on or after the earliest redemption date for that series. All outstanding preferred stock series except Series I may also be redeemed following a “capital treatment event,” as described in the terms of each series. Any redemption of the Firm’s preferred stock is subject to non-objection from the Board of Governors of the Federal Reserve System (the “Federal Reserve”).
| | | | 260 | | JPMorgan Chase & Co./2017 Annual Report | | 2512019 Form 10-K |
Notes to consolidated financial statements
Note 2122 – Common stock At December 31, 20172019 and 2016,2018, JPMorgan Chase was authorized to issue 9.0 billion shares of common stock with a par value of $1 per share. Common shares issued (newly issued or reissuance from treasury) by JPMorgan Chase during the years ended December 31, 2017, 20162019, 2018 and 20152017 were as follows. | | Year ended December 31, (in millions) | 2017 |
| 2016 |
| 2015 |
| 2019 |
| 2018 |
| 2017 |
| Total issued – balance at January 1 | 4,104.9 |
| 4,104.9 |
| 4,104.9 |
| 4,104.9 |
| 4,104.9 |
| 4,104.9 |
| Treasury – balance at January 1 | (543.7 | ) | (441.4 | ) | (390.1 | ) | (829.1 | ) | (679.6 | ) | (543.7 | ) | Repurchase | (166.6 | ) | (140.4 | ) | (89.8 | ) | (213.0 | ) | (181.5 | ) | (166.6 | ) | Reissuance: | | | Employee benefits and compensation plans | 24.5 |
| 26.0 |
| 32.8 |
| 20.4 |
| 21.7 |
| 24.5 |
| Warrant exercise | 5.4 |
| 11.1 |
| 4.7 |
| — |
| 9.4 |
| 5.4 |
| Employee stock purchase plans | 0.8 |
| 1.0 |
| 1.0 |
| 0.8 |
| 0.9 |
| 0.8 |
| Total reissuance | 30.7 |
| 38.1 |
| 38.5 |
| 21.2 |
| 32.0 |
| 30.7 |
| Total treasury – balance at December 31 | (679.6 | ) | (543.7 | ) | (441.4 | ) | (1,020.9 | ) | (829.1 | ) | (679.6 | ) | Outstanding at December 31 | 3,425.3 |
| 3,561.2 |
| 3,663.5 |
| 3,084.0 |
| 3,275.8 |
| 3,425.3 |
|
At December 31, 2017, 2016, and 2015, respectively, the Firm had 15.0 million, 24.9 million and 47.4 millionThere were 0 warrants outstanding to purchase shares of common stock (the “Warrants”(“Warrants”). The outstanding at December 31, 2019, as any Warrants are currently tradedthat were not exercised on the New York Stock Exchange, and they are exercisable, in whole or in part, at any time and from time to time untilbefore October 28, 2018. The original warrant exercise price was $42.42 per share. The number of shares issuable upon the exercise of each warrant and the warrant exercise price is subject to adjustment upon the occurrence of certain events, including, but not limited to, the extent to which regular quarterly cash dividends exceed $0.38 per share. As of29, 2018, have expired. At December 31, 2017, the exercise price was $41.834 and the Warrant share number was 1.01.Firm had 15.0 million Warrants outstanding.
On June 28, 2017,27, 2019, in conjunction with the Federal Reserve’s release of its 20172019 CCAR results, the Firm’s Board of Directors authorized a $19.4$29.4 billion common equity (i.e., common stock and warrants) repurchase program. As of December 31, 2017, $9.82019, $15.6 billion of authorized repurchase capacity remained under the program. This authorization includes shares repurchased to offset issuances under the Firm’s share-based compensation plans. The following table sets forth the Firm’s repurchases of common equity for the years ended December 31, 2017, 20162019, 2018 and 2015.2017. There were no warrants0 Warrants repurchased during any of the years ended December 31, 2017, 2016 and 2015.years. | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2019 |
| | 2018 |
| | 2017 |
| Total number of shares of common stock repurchased | | 213.0 |
| | 181.5 |
| | 166.6 |
| Aggregate purchase price of common stock repurchases | | $ | 24,121 |
| | $ | 19,983 |
| | $ | 15,410 |
|
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| Total number of shares of common stock repurchased | | 166.6 |
| | 140.4 |
| | 89.8 |
| Aggregate purchase price of common stock repurchases | | $ | 15,410 |
| | $ | 9,082 |
| | $ | 5,616 |
|
The Firm may, from time to time enterenters into written trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934 to facilitate repurchases in accordance with the common equity repurchase program. A Rule 10b5-1 repurchase plan allows the Firm to repurchase its equity during periods when it would not otherwise be repurchasing common equity — for example, during internal trading “blackout periods.” All purchases under a Rule 10b5-1 plan must be made according to a predefined plan established when the Firm is not aware of material nonpublic information. For additional information regarding repurchases of the Firm’s equity securities, seeRefer to Part II, Item 5: Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities, on page 28.30 for additional information regarding repurchases of the Firm’s equity securities. As of December 31, 2017,2019, approximately 12070.5 million shares of common stock were reserved for issuance under various employee incentive, compensation, option and stock purchase plans, directorand directors’ compensation plans, and the Warrants. plans.
| | | | 252 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 261 |
Management’s discussion and analysis
Note 2223 – Earnings per share EarningsBasic earnings per share (“EPS”) is calculated underusing the two-class method. Under the two-class method, under which all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. securities. JPMorgan Chase grants RSUs to certain employees under its share-based compensation programs, predominantly all of which entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of the Firm’s common stock; thesestock. These unvested awardsRSUs meet the definition of participating securities.securities based on their respective rights to receive nonforfeitable dividends, and they are treated as a separate class of securities in computing basic EPS. Participating securities are not included as incremental shares in computing diluted EPS; refer to Note 9 for additional information.
Diluted EPS incorporates the potential impact of contingently issuable shares, including awards which require future service as a condition of delivery of the underlying common stock. Diluted EPS is calculated under both the two-class and treasury stock methods, and the more dilutive amount is reported. For each of the periods presented in the table below, diluted EPS calculated under the two-class method was more dilutive. The following table presents the calculation of net income applicable to common stockholders and basic and diluted EPS for the years ended December 31, 2017, 20162019, 2018 and 2015.2017. | | | | | | | | | | | Year ended December 31, (in millions, except per share amounts) | 2019 | 2018 | 2017 | Basic earnings per share | | | | Net income | $ | 36,431 |
| $ | 32,474 |
| $ | 24,441 |
| Less: Preferred stock dividends | 1,587 |
| 1,551 |
| 1,663 |
| Net income applicable to common equity | 34,844 |
| 30,923 |
| 22,778 |
| Less: Dividends and undistributed earnings allocated to participating securities | 202 |
| 214 |
| 211 |
| Net income applicable to common stockholders | $ | 34,642 |
| $ | 30,709 |
| $ | 22,567 |
| | | | | Total weighted-average basic shares outstanding | 3,221.5 |
| 3,396.4 |
| 3,551.6 |
| Net income per share | $ | 10.75 |
| $ | 9.04 |
| $ | 6.35 |
| | | | | Diluted earnings per share | | | | Net income applicable to common stockholders | $ | 34,642 |
| $ | 30,709 |
| $ | 22,567 |
| | | | | Total weighted-average basic shares outstanding | 3,221.5 |
| 3,396.4 |
| 3,551.6 |
| Add: Dilutive impact of SARs and employee stock options, unvested PSUs and non-dividend-earning RSUs, and warrants | 8.9 |
| 17.6 |
| 25.2 |
| Total weighted-average diluted shares outstanding | 3,230.4 |
| 3,414.0 |
| 3,576.8 |
| Net income per share | $ | 10.72 |
| $ | 9.00 |
| $ | 6.31 |
|
| | | | | | | | | | | Year ended December 31, (in millions, except per share amounts) | 2017 | 2016 | 2015 | Basic earnings per share | | | | Net income | $ | 24,441 |
| $ | 24,733 |
| $ | 24,442 |
| Less: Preferred stock dividends | 1,663 |
| 1,647 |
| 1,515 |
| Net income applicable to common equity | 22,778 |
| 23,086 |
| 22,927 |
| Less: Dividends and undistributed earnings allocated to participating securities(a) | 211 |
| 252 |
| 276 |
| Net income applicable to common stockholders(a) | $ | 22,567 |
| $ | 22,834 |
| $ | 22,651 |
| | | | | Total weighted-average basic shares outstanding(a) | 3,551.6 |
| 3,658.8 |
| 3,741.2 |
| Net income per share | $ | 6.35 |
| $ | 6.24 |
| $ | 6.05 |
| | | | | Diluted earnings per share | | | | Net income applicable to common stockholders(a) | $ | 22,567 |
| $ | 22,834 |
| $ | 22,651 |
| | | | | Total weighted-average basic shares outstanding(a) | 3,551.6 |
| 3,658.8 |
| 3,741.2 |
| Add: Employee stock options, SARs, warrants and PSUs(a) | 25.2 |
| 31.2 |
| 32.4 |
| Total weighted-average diluted shares outstanding(a)(b) | 3,576.8 |
| 3,690.0 |
| 3,773.6 |
| Net income per share | $ | 6.31 |
| $ | 6.19 |
| $ | 6.00 |
|
| | (a) | The prior period amounts have been revised to conform with the current period presentation. The revision had no impact on the Firm’s reported earnings per share. |
| | (b) | Participating securities were included in the calculation of diluted EPS using the two-class method, as this computation was more dilutive than the calculation using the treasury stock method. |
| | | | 262 | | JPMorgan Chase & Co./2017 Annual Report | | 2532019 Form 10-K |
Notes to consolidated financial statements
Note 2324 – Accumulated other comprehensive income/(loss) AOCI includes the after-tax change in unrealized gains and losses on investment securities, foreign currency translation adjustments (including the impact of related derivatives), fair value changes of excluded components on fair value hedges, cash flow hedging activities, and net loss and prior service costs/(credit) related to the Firm’s defined benefit pension and OPEB plans.plans, and fair value option-elected liabilities arising from changes in the Firm’s own credit risk (DVA). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | Unrealized gains/(losses) on investment securities | | Translation adjustments, net of hedges | | Fair value hedges | Cash flow hedges | | Defined benefit pension and OPEB plans | DVA on fair value option elected liabilities | Accumulated other comprehensive income/(loss) | | | Balance at December 31, 2016 | | $ | 1,524 |
|
| | | $ | (164 | ) | | | NA |
| | $ | (100 | ) | | | | $ | (2,259 | ) | | | $ | (176 | ) | | | $ | (1,175 | ) | | Net change | | 640 |
| | | | (306 | ) | | | NA |
| | 176 |
| | | | 738 |
| | | (192 | ) | | | 1,056 |
| | Balance at December 31, 2017 | | $ | 2,164 |
| | | | $ | (470 | ) | | | $ | — |
| | $ | 76 |
| | | | $ | (1,521 | ) | | | $ | (368 | ) | | | $ | (119 | ) | | Cumulative effect of changes in accounting principles:(a) | | 896 |
| | | | (277 | ) | | | (54 | ) | | 16 |
| | | | (414 | ) | | | (79 | ) | | | 88 |
| | Net change | | (1,858 | ) | | | | 20 |
| | | (107 | ) | | (201 | ) | | | | (373 | ) | | | 1,043 |
| | | (1,476 | ) | | Balance at December 31, 2018 | | $ | 1,202 |
| | | | $ | (727 | ) | | | $ | (161 | ) | | $ | (109 | ) | | | | $ | (2,308 | ) | | | $ | 596 |
| | | $ | (1,507 | ) | | Net change | | 2,855 |
| | | | 20 |
| | | 30 |
| | 172 |
| | | | 964 |
| | | (965 | ) | | | 3,076 |
| | Balance at December 31, 2019 | | $ | 4,057 |
| | | | $ | (707 | ) | | | $ | (131 | ) | | $ | 63 |
| | | | $ | (1,344 | ) | | | $ | (369 | ) | | | $ | 1,569 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | Unrealized gains/(losses) on investment securities(b) | | Translation adjustments, net of hedges | | Cash flow hedges | | Defined benefit pension and OPEB plans | DVA on fair value option elected liabilities | Accumulated other comprehensive income/(loss) | | | Balance at December 31, 2014 | | $ | 4,773 |
|
| | | $ | (147 | ) | | | | $ | (95 | ) | | | | $ | (2,342 | ) | | | $ | — |
| | | $ | 2,189 |
| | Net change | | (2,144 | ) | | | | (15 | ) | | | | 51 |
| | | | 111 |
| | | — |
| | | (1,997 | ) | | Balance at December 31, 2015 | | $ | 2,629 |
| | | | $ | (162 | ) | | | | $ | (44 | ) | | | | $ | (2,231 | ) | | | $ | — |
| | | $ | 192 |
| | Cumulative effect of change in accounting principle(a) | | — |
| | | | — |
| | | | — |
| | | | — |
| | | 154 |
| | | 154 |
| | Net change | | (1,105 | ) | | | | (2 | ) | | | | (56 | ) | | | | (28 | ) | | | (330 | ) | | | (1,521 | ) | | Balance at December 31, 2016 | | $ | 1,524 |
| | | | $ | (164 | ) | | | | $ | (100 | ) | | | | $ | (2,259 | ) | | | $ | (176 | ) | | | $ | (1,175 | ) | | Net change | | 640 |
| | | | (306 | ) | | | | 176 |
| | | | 738 |
| | | (192 | ) | | | 1,056 |
| | Balance at December 31, 2017 | | $ | 2,164 |
| | | | $ | (470 | ) | | | | $ | 76 |
| | | | $ | (1,521 | ) | | | (368 | ) | | | $ | (119 | ) |
| | (a) | Effective January 1, 2016,Represents the Firm adopted new accounting guidance relatedadjustment to the recognition and measurement of financial liabilities where the fair value option has been elected. This guidance requires the portionAOCI as a result of the total change in fair value caused by changesaccounting standards adopted in the Firm’s own credit risk (DVA)first quarter of 2018. Refer to be presented separately in OCI; previously these amounts were recognized in net income.Note 1 for additional information. |
| | | | (b)JPMorgan Chase & Co./2019 Form 10-K | Represents the after-tax difference between the fair value and amortized cost of securities accounted for as AFS, including net unamortized unrealized gains and losses related to AFS securities transferred to HTM. | 263 |
Notes to consolidated financial statements
The following table presents the pre-tax and after-tax changes in the components of OCI. | | | 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 | Year ended December 31, (in millions) | Pre-tax | | Tax effect | | After-tax | | Pre-tax | | Tax effect | | After-tax | | Pre-tax | | Tax effect | | After-tax | Pre-tax | | Tax effect | | After-tax | | Pre-tax | | Tax effect | | After-tax | | Pre-tax | | Tax effect | | After-tax | Unrealized gains/(losses) on investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net unrealized gains/(losses) arising during the period | $ | 944 |
| | $ | (346 | ) | | $ | 598 |
| | $ | (1,628 | ) | | $ | 611 |
| | $ | (1,017 | ) | | $ | (3,315 | ) | | $ | 1,297 |
| | $ | (2,018 | ) | $ | 4,025 |
| | $ | (974 | ) | | $ | 3,051 |
| | $ | (2,825 | ) | | $ | 665 |
| | $ | (2,160 | ) | | $ | 944 |
| | $ | (346 | ) | | $ | 598 |
| Reclassification adjustment for realized (gains)/losses included in net income(a) | 66 |
| | (24 | ) | | 42 |
| | (141 | ) | | 53 |
| | (88 | ) | | (202 | ) | | 76 |
| | (126 | ) | (258 | ) | | 62 |
| | (196 | ) | | 395 |
| | (93 | ) | | 302 |
| | 66 |
| | (24 | ) | | 42 |
| Net change | 1,010 |
| | (370 | ) | | 640 |
| | (1,769 | ) | | 664 |
| | (1,105 | ) | | (3,517 | ) | | 1,373 |
| | (2,144 | ) | 3,767 |
| | (912 | ) | | 2,855 |
| | (2,430 | ) | | 572 |
| | (1,858 | ) | | 1,010 |
| | (370 | ) | | 640 |
| Translation adjustments(b): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Translation | 1,313 |
| | (801 | ) | | 512 |
| | (261 | ) | | 99 |
| | (162 | ) | | (1,876 | ) | | 682 |
| | (1,194 | ) | (49 | ) | | 33 |
| | (16 | ) | | (1,078 | ) | | 156 |
| | (922 | ) | | 1,313 |
| | (801 | ) | | 512 |
| Hedges | (1,294 | ) | | 476 |
| | (818 | ) | | 262 |
| | (102 | ) | | 160 |
| | 1,885 |
| | (706 | ) | | 1,179 |
| 46 |
| | (10 | ) | | 36 |
| | 1,236 |
| | (294 | ) | | 942 |
| | (1,294 | ) | | 476 |
| | (818 | ) | Net change | 19 |
| | (325 | ) | | (306 | ) | | 1 |
| | (3 | ) | | (2 | ) | | 9 |
| | (24 | ) | | (15 | ) | (3 | ) | | 23 |
| | 20 |
| | 158 |
| | (138 | ) | | 20 |
| | 19 |
| | (325 | ) | | (306 | ) | Fair value hedges, net change(c): | | 39 |
| | (9 | ) | | 30 |
| | (140 | ) | | 33 |
| | (107 | ) | | NA |
| | NA |
| | NA |
| Cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net unrealized gains/(losses) arising during the period | 147 |
| | (55 | ) | | 92 |
| | (450 | ) | | 168 |
| | (282 | ) | | (97 | ) | | 35 |
| | (62 | ) | 122 |
| | (28 | ) | | 94 |
| | (245 | ) | | 58 |
| | (187 | ) | | 147 |
| | (55 | ) | | 92 |
| Reclassification adjustment for realized (gains)/losses included in net income(c)(d) | 134 |
| | (50 | ) | | 84 |
| | 360 |
| | (134 | ) | | 226 |
| | 180 |
| | (67 | ) | | 113 |
| | Reclassification adjustment for realized (gains)/losses included in net income(d) | | 103 |
| | (25 | ) | | 78 |
| | (18 | ) | | 4 |
| | (14 | ) | | 134 |
| | (50 | ) | | 84 |
| Net change | 281 |
| | (105 | ) | | 176 |
| | (90 | ) | | 34 |
| | (56 | ) | | 83 |
| | (32 | ) | | 51 |
| 225 |
| | (53 | ) | | 172 |
| | (263 | ) | | 62 |
| | (201 | ) | | 281 |
| | (105 | ) | | 176 |
| Defined benefit pension and OPEB plans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net gains/(losses) arising during the period | 802 |
| | (160 | ) | | 642 |
| | (366 | ) | | 145 |
| | (221 | ) | | 29 |
| | (47 | ) | | (18 | ) | | Prior service credit/(cost) arising during the period | | (5 | ) | | 1 |
| | (4 | ) | | (29 | ) | | 7 |
| | (22 | ) | | — |
| | — |
| | — |
| Net gain/(loss) arising during the period | | 1,005 |
| | (169 | ) | | 836 |
| | (558 | ) | | 102 |
| | (456 | ) | | 802 |
| | (160 | ) | | 642 |
| Reclassification adjustments included in net income(e): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amortization of net loss | 250 |
| | (90 | ) | | 160 |
| | 257 |
| | (97 | ) | | 160 |
| | 282 |
| | (106 | ) | | 176 |
| 167 |
| | (36 | ) | | 131 |
| | 103 |
| | (24 | ) | | 79 |
| | 250 |
| | (90 | ) | | 160 |
| Prior service costs/(credits) | (36 | ) | | 13 |
| | (23 | ) | | (36 | ) | | 14 |
| | (22 | ) | | (36 | ) | | 14 |
| | (22 | ) | | Settlement loss/(gain) | 2 |
| | (1 | ) | | 1 |
| | 4 |
| | (1 | ) | | 3 |
| | — |
| | — |
| | — |
| | Amortization of prior service cost/(credit) | | 3 |
| | (1 | ) | | 2 |
| | (23 | ) | | 6 |
| | (17 | ) | | (36 | ) | | 13 |
| | (23 | ) | Curtailment (gain)/loss | | — |
| | — |
| | — |
| | 21 |
| | (5 | ) | | 16 |
| | — |
| | — |
| | — |
| Settlement (gain)/loss | | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
| | 2 |
| | (1 | ) | | 1 |
| Foreign exchange and other | (54 | ) | | 12 |
| | (42 | ) | | 77 |
| | (25 | ) | | 52 |
| | 33 |
| | (58 | ) | | (25 | ) | (13 | ) | | 12 |
| | (1 | ) | | 34 |
| | (9 | ) | | 25 |
| | (54 | ) | | 12 |
| | (42 | ) | Net change | 964 |
| | (226 | ) | | 738 |
| | (64 | ) | | 36 |
| | (28 | ) | | 308 |
| | (197 | ) | | 111 |
| 1,157 |
| | (193 | ) | | 964 |
| | (450 | ) | | 77 |
| | (373 | ) | | 964 |
| | (226 | ) | | 738 |
| DVA on fair value option elected liabilities, net change: | $ | (303 | ) | | $ | 111 |
| | $ | (192 | ) | | $ | (529 | ) | | $ | 199 |
| | $ | (330 | ) | | $ | — |
| | $ | — |
| | $ | — |
| $ | (1,264 | ) | | $ | 299 |
| | $ | (965 | ) | | $ | 1,364 |
| | $ | (321 | ) | | $ | 1,043 |
| | $ | (303 | ) | | $ | 111 |
| | $ | (192 | ) | Total other comprehensive income/(loss) | $ | 1,971 |
| | $ | (915 | ) | | $ | 1,056 |
| | $ | (2,451 | ) | | $ | 930 |
| | $ | (1,521 | ) | | $ | (3,117 | ) | | $ | 1,120 |
| | $ | (1,997 | ) | $ | 3,921 |
| | $ | (845 | ) | | $ | 3,076 |
| | $ | (1,761 | ) | | $ | 285 |
| | $ | (1,476 | ) | | $ | 1,971 |
| | $ | (915 | ) | | $ | 1,056 |
|
| | (a) | The pre-tax amount is reported in investment securities gains/(losses) in the Consolidated statements of income. |
| | (b) | Reclassifications of pre-tax realized gains/(losses) on translation adjustments and related hedges are reported in other income/expense in the Consolidated statements of income. TheDuring the year ended December 31, 2019, the Firm reclassified net pre-tax gains of $7 million to other income and $1 million to other expense, respectively. These amounts, were not material forwhich related to the periods presented.liquidation of certain legal entities, are comprised of $18 million related to net investment hedge gains and$10 million related to cumulative translation adjustments. During the year ended December 31, 2018, the Firm reclassified a net pre-tax loss of $168 million to other expense related to the liquidation of certain legal entities, $17 million related to net investment hedge losses and $151 million related to cumulative translation adjustments. During the year ended December 31, 2017, the Firm reclassified a net pre-tax loss of $25 million to other expense related to the liquidation of a legal entity, $50 million related to net investment hedge gains and $75 million related to cumulative translation adjustments. |
| | (c) | Represents changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads, which are excluded from the assessment of hedge effectiveness and recorded in other comprehensive income. The initial cost of cross-currency basis spreads is recognized in earnings as part of the accrual of interest on the cross-currency swap. |
| | (d) | The pre-tax amounts are primarily recorded in noninterest revenue, net interest income and compensation expense in the Consolidated statements of income. |
| | (d) | In 2015, the Firm reclassified approximately $150 million of net losses from AOCI to other income because the Firm determined that it is probable that the forecasted interest payment cash flows would not occur. For additional information, see Note 5. |
| | (e) | The pre-tax amount is reported in compensationother expense in the Consolidated statements of income. |
| | | | 254264 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Note 2425 – Income taxes JPMorgan Chase and its eligible subsidiaries file a consolidated U.S. federal income tax return. JPMorgan Chase uses the asset and liability method to provide income taxes on all transactions recorded in the Consolidated Financial Statements. This method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets or liabilities for book and tax purposes. Accordingly, a deferred tax asset or liability for each temporary difference is determined based on the tax rates that the Firm expects to be in effect when the underlying items of income and expense are realized. JPMorgan Chase’s expense for income taxes includes the current and deferred portions of that expense. A valuation allowance is established to reduce deferred tax assets to the amount the Firm expects to realize. Due to the inherent complexities arising from the nature of the Firm’s businesses, and from conducting business and being taxed in a substantial number of jurisdictions, significant judgments and estimates are required to be made. Agreement of tax liabilities between JPMorgan Chase and the many tax jurisdictions in which the Firm files tax returns may not be finalized for several years. Thus, the Firm’s final tax-related assets and liabilities may ultimately be different from those currently reported. Effective tax rate and expense AThe following table presents a reconciliation of the applicable statutory U.S. federal income tax rate to the effective tax rate for each of the years ended December 31, 2017, 2016 and 2015, is presented in the following table.rate.
| | Effective tax rate | | | | | | | | | | | | | | Year ended December 31, | | 2017 |
| | 2016 |
| | 2015 |
| | 2019 | | 2018 | | 2017 | | Statutory U.S. federal tax rate | | 35.0 | % | | 35.0 | % | | 35.0 | % | | 21.0 | % | | 21.0 | % | | 35.0 | % | | Increase/(decrease) in tax rate resulting from: | | | | | | | | | | | | | | U.S. state and local income taxes, net of U.S. federal income tax benefit | | 2.2 |
| | 2.4 |
| | 1.5 |
| | 3.5 |
| | 4.0 |
| | 2.2 |
| | Tax-exempt income | | (3.3 | ) | | (3.1 | ) | | (3.3 | ) | | (1.4 | ) | | (1.5 | ) | | (3.3 | ) | | Non-U.S. subsidiary earnings(a) | | (3.1 | ) | | (1.7 | ) | | (3.9 | ) | | Non-U.S. earnings | | | 1.8 |
| | 0.6 |
| | (3.1 | ) | (a) | Business tax credits | | (4.2 | ) | | (3.9 | ) | | (3.7 | ) | | (4.4 | ) | | (3.5 | ) | | (4.2 | ) | | Nondeductible legal expense | | — |
| | 0.3 |
| | 0.8 |
| | Tax audit resolutions | | — |
| | — |
| | (5.7 | ) | | (2.3 | ) | | (0.1 | ) | | (0.3 | ) | | Impact of the TCJA | | 5.4 |
| | — |
| | — |
| | — |
| | (0.7 | ) | | 5.4 |
| | Other, net | | (0.1 | ) | | (0.6 | ) | | (0.3 | ) | | — |
| | 0.5 |
| | 0.2 |
| | Effective tax rate | | 31.9 | % | | 28.4 | % | | 20.4 | % | | 18.2 | % | | 20.3 | % | | 31.9 | % | |
| | (a) | Predominantly includes earnings of U.K. subsidiaries that were deemed to be reinvested indefinitely through December 31, 2017. |
Impact of the TCJA On December 22, 2017,2018
The Firm’s effective tax rate decreased in 2018 due to the TCJA, including the reduction in the U.S. federal statutory income tax rate as well as a $302 million nettax benefit recorded in 2018 resulting from changes in the estimates related to the remeasurement of certain deferred taxes and the deemed repatriation tax on non-U.S. earnings. The change in estimate was signed into law. recorded under SEC Staff Accounting Bulletin No. 118 (“SAB 118”) and the accounting under SAB 118 is complete. 2017 The Firm’s effective tax rate increased in 2017 driven by a $1.9 billion income tax expense representing the estimated impact of the enactment of the TCJA. The $1.9 billion tax expense was predominantly driven by a deemed repatriation of the Firm’s unremitted non-U.S. earnings and adjustments to the value of certain tax-oriented investments partially offset by a benefit from the revaluation of the Firm’s net deferred tax liability. The deemed repatriation of the Firm’s unremitted non-U.S. earnings is based on the post-1986 earnings and profits of each controlled foreign corporation. The calculation resulted in an estimated income tax expense of $3.7 billion. Furthermore, accounting for income taxes requires the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The Firm remeasured its deferred tax asset and liability balances in the fourth quarter of 2017 to the new statutory U.S. federal income tax rate of 21% as well as any federal benefit associated with state and local deferred income taxes. The remeasurement resulted in an estimated income tax benefit of $2.1 billion. The deemed repatriation and remeasurement of deferred taxes were calculated based on all available information and published legislative guidance. These amounts are considered to be estimates under SEC Staff Accounting Bulletin No. 118 as the Firm anticipates refinements to both calculations. Anticipated refinements will result from the issuance of future legislative and accounting guidance as well as those in the normal course of business, including true-ups to the tax liability on the tax return as filed and the resolution of tax audits.
Adjustments were also recorded in 2017 to income tax expense for certain tax-oriented investments. These adjustments were driven by changes to affordable housing proportional amortization resulting from the reduction of the federal income tax rate under the TCJA. SEC Staff Accounting Bulletin No.SAB 118 doesdid not apply to these adjustments.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 255265 |
The following table reflects the components of income tax expense/(benefit) included in the Consolidated statements of income were as follows for each of the years ended December 31, 2017, 2016, and 2015.income. | | | | | | | | | | | | | | Income tax expense/(benefit) | Year ended December 31, (in millions) | | 2019 |
| | 2018 |
| | 2017 |
| Current income tax expense/(benefit) | | | | | | | U.S. federal | | $ | 3,284 |
| | $ | 2,854 |
| | $ | 5,718 |
| Non-U.S. | | 2,103 |
| | 2,077 |
| | 2,400 |
| U.S. state and local | | 1,778 |
| | 1,638 |
| | 1,029 |
| Total current income tax expense/(benefit) | | 7,165 |
| | 6,569 |
| | 9,147 |
| Deferred income tax expense/(benefit) | | | | | | | U.S. federal | | 709 |
| | 1,359 |
| | 2,174 |
| Non-U.S. | | 20 |
| | (93 | ) | | (144 | ) | U.S. state and local | | 220 |
| | 455 |
| | 282 |
| Total deferred income tax expense/(benefit) | | 949 |
| | 1,721 |
| | 2,312 |
| Total income tax expense | | $ | 8,114 |
| | $ | 8,290 |
| | $ | 11,459 |
|
| | | | | | | | | | | | | | Income tax expense/(benefit) | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| Current income tax expense/(benefit) | | | | | | | U.S. federal | | $ | 5,718 |
| | $ | 2,488 |
| | $ | 3,160 |
| Non-U.S. | | 2,400 |
| | 1,760 |
| | 1,220 |
| U.S. state and local | | 1,029 |
| | 904 |
| | 547 |
| Total current income tax expense/(benefit) | | 9,147 |
| | 5,152 |
| | 4,927 |
| Deferred income tax expense/(benefit) | | | | | | | U.S. federal | | 2,174 |
| | 4,364 |
| | 1,213 |
| Non-U.S. | | (144 | ) | | (73 | ) | | (95 | ) | U.S. state and local | | 282 |
| | 360 |
| | 215 |
| Total deferred income tax expense/(benefit) | | 2,312 |
| | 4,651 |
| | 1,333 |
| Total income tax expense | | $ | 11,459 |
| | $ | 9,803 |
| | $ | 6,260 |
|
Total income tax expense includes $252 million, $55$1.1 billion, $54 million and $2.4 billion$252 million of tax benefits recorded in 2019, 2018, and 2017, 2016, and 2015, respectively, as a resultresulting from the resolution of tax audit resolutions.audits. Tax effect of items recorded in stockholders’ equity The preceding table does not reflect the tax effect of certain items that are recorded each period directly in stockholders’ equity.equity. The tax effect of all items recorded directly to stockholders’ equity resulted in a decrease of $862 million in 2019, an increase of $172 million in 2018, and a decrease of $915 million in 2017, an increase of $925 million in 2016, and an increase of $1.5 billion in 2015. Effective January 1, 2016, the Firm adopted new accounting guidance related to employee share-based payments. As a result of the adoption of this new guidance, all excess tax benefits (including tax benefits from dividends or dividend equivalents) on share-based payment awards are recognized within income tax expense in the Consolidated statements of income. In prior years these tax benefits were recorded as increases to additional paid-in capital.2017. Results from Non-U.S. earnings The following table presents the U.S. and non-U.S. components of income before income tax expense for the years ended December 31, 2017, 2016 and 2015.expense. | | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| | 2019 |
| | 2018 |
| | 2017 |
| U.S. | | $ | 27,103 |
| | $ | 26,651 |
| | $ | 23,191 |
| | $ | 36,670 |
| | $ | 33,052 |
| | $ | 27,103 |
| Non-U.S.(a) | | 8,797 |
| | 7,885 |
| | 7,511 |
| | 7,875 |
| | 7,712 |
| | 8,797 |
| Income before income tax expense | | $ | 35,900 |
| | $ | 34,536 |
| | $ | 30,702 |
| | $ | 44,545 |
| | $ | 40,764 |
| | $ | 35,900 |
|
| | (a) | For purposes of this table, non-U.S. income is defined as income generated from operations located outside the U.S. |
Prior to December 31, 2017, U.S. federal income taxes had not been provided on the undistributed earnings of certain non-U.S. subsidiaries, to the extent that such earnings had been reinvested abroad for an indefinite period of time. The Firm willis no longer maintainmaintaining the indefinite reinvestment assertion on the undistributed earnings of those non-U.S. subsidiaries in light of the enactment of the TCJA. The U.S. federal and state and local income taxes associated with the undistributed and previously untaxed earnings of those non-U.S. subsidiaries was included in the deemed repatriation charge recorded as of December 31, 2017. JPMCThe Firm will treatrecognize any taxtaxes it may incur on global intangible low tax income as a period cost toincome tax expense whenin the period in which the tax is incurred.
Affordable housing tax credits The Firm recognized $1.5 billion, $1.5 billion and $1.7 billion $1.7 billion and $1.6 billion of tax credits and other tax benefits associated with investments in affordable housing projects within income tax expense for the years 2019, 2018 and 2017, 2016 and 2015, respectively. The amount of amortization of such investments reported in income tax expense under the current period presentation during these years was $1.7 $1.1 billion, $1.2 billion and $1.1$1.7 billion, respectively. The carrying value of these investments, which are reported in other assets on the Firm’s Consolidated balance sheets, was $7.8 $8.6 billion and $8.8$7.9 billion at December 31, 20172019 and 2016, 2018, respectively. The amount of commitments related to these investments, which are reported in accounts payable and other liabilities on the Firm’s Consolidated balance sheets, was $2.4 $2.8 billion and $2.8$2.3 billion at December 31, 20172019 and 2016, 2018, respectively. The results are inclusive of any impacts from the TCJA.
| | | | 256266 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Deferred taxes Deferred income tax expense/(benefit) results from differences between assets and liabilities measured for financial reporting purposes versus income tax return purposes. Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not. If a deferred tax asset is determined to be unrealizable, a valuation allowance is established. The significant components of deferred tax assets and liabilities are reflected in the following table as of December 31, 2017 and 2016.table. | | December 31, (in millions) | | 2017 |
| | 2016 |
|
| 2019 |
|
| 2018 |
| Deferred tax assets | | | | |
|
|
|
| Allowance for loan losses | | $ | 3,395 |
| | $ | 5,534 |
|
| $ | 3,400 |
|
| $ | 3,433 |
| Employee benefits | | 688 |
| | 2,911 |
|
| 1,039 |
|
| 1,129 |
| Accrued expenses and other | | 3,528 |
| | 6,831 |
|
| 2,767 |
|
| 2,701 |
| Non-U.S. operations | | 327 |
| | 5,368 |
|
| 949 |
|
| 629 |
| Tax attribute carryforwards | | 219 |
| | 2,155 |
|
| 605 |
|
| 163 |
| Gross deferred tax assets | | 8,157 |
| | 22,799 |
|
| 8,760 |
|
| 8,055 |
| Valuation allowance | | (46 | ) | | (785 | ) |
| (557 | ) |
| (89 | ) | Deferred tax assets, net of valuation allowance | | $ | 8,111 |
| | $ | 22,014 |
|
| $ | 8,203 |
|
| $ | 7,966 |
| Deferred tax liabilities | | | | |
|
|
|
| Depreciation and amortization | | $ | 2,299 |
| | $ | 3,294 |
|
| $ | 2,852 |
|
| $ | 2,533 |
| Mortgage servicing rights, net of hedges | | 2,757 |
| | 4,807 |
|
| 2,354 |
|
| 2,586 |
| Leasing transactions | | 3,483 |
| | 4,053 |
|
| 5,598 |
|
| 4,719 |
| Non-U.S. operations | | 200 |
| | 4,572 |
| | Other, net | | 3,502 |
| | 5,493 |
|
| 4,683 |
|
| 3,713 |
| Gross deferred tax liabilities | | 12,241 |
| | 22,219 |
|
| 15,487 |
|
| 13,551 |
| Net deferred tax (liabilities)/assets | | $ | (4,130 | ) | | $ | (205 | ) |
| $ | (7,284 | ) |
| $ | (5,585 | ) |
JPMorgan Chase has recorded deferred tax assets of $219$605 million at December 31, 2017,2019, in connection with U.S. federal and non-U.S. net operating lossNOL carryforwards, foreign tax credit (“NOL”FTC”) carryforwards, and state and local capital loss carryforwards. At December 31, 2017,2019, total U.S. federal NOL carryforwards were approximately $769 million,$1.0 billion, non-U.S. NOL carryforwards were approximately $142$80 million, FTC carryforwards were $329 million, and state and local capital loss carryforwards were $660 million.$1.1 billion. If not utilized, a portion of the U.S. federal NOL carryforwards will expire between 20252022 and 2036 whereas others have an unlimited carryforward period. Similarly, certain non-U.S. NOL carryforwards will expire between 2029 and 2037 whereas others have an unlimited carryforward period. The FTC carryforwards will expire in 2029 and the state and local capital loss carryforwards will expire between 2020 and 2021. Certain non-U.S. NOL carryforwards will expire between 2028 and 2034 whereas others have an unlimited carryforward period.2022. The valuation allowance at December 31, 2017,2019, was due to the state and local capital loss carryforwards, FTC carryforwards, and certain non-U.S. deferred tax assets, including NOL carryforwards.
Unrecognized tax benefits At December 31, 2017, 20162019, 2018 and 2015,2017, JPMorgan Chase’s unrecognized tax benefits, excluding related interest expense and penalties, were $4.0 billion, $4.9 billion and $4.7 billion, $3.5respectively, of which $2.8 billion, $3.8 billion and $3.5 billion, respectively, of which $3.5 billion, $2.6 billion and $2.1 billion, respectively, if recognized, would reduce the annual effective tax rate. Included in the amount of unrecognized tax benefits are certain items that would not affect the effective tax rate if they were recognized in the Consolidated statements of income.These unrecognized items include the tax effect of certain temporary differences, the portion of gross state and local unrecognized tax benefits that would be offset by the benefit from associated U.S. federal income tax deductions, and the portion of gross non-U.S. unrecognized tax benefits that would have offsets in other jurisdictions. JPMorgan Chase is presently under audit by a number of taxing authorities, most notably by the Internal Revenue Service as summarized in the Tax examination status table below. As JPMorgan Chase is presently under audit by a number of taxing authorities, it is reasonably possible that over the next 12 months the resolution of these examinations may increase or decrease the gross balance of unrecognized tax benefits by as much as $1.3 $0.5 billion. Upon settlement of an audit, the change in the unrecognized tax benefit would result from payment or income statement recognition. The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2017, 2016 and 2015.benefits. | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2019 |
| | 2018 |
| | 2017 |
| Balance at January 1, | | $ | 4,861 |
| | $ | 4,747 |
| | $ | 3,450 |
| Increases based on tax positions related to the current period | | 871 |
| | 980 |
| | 1,355 |
| Increases based on tax positions related to prior periods | | 10 |
| | 649 |
| | 626 |
| Decreases based on tax positions related to prior periods | | (706 | ) | | (1,249 | ) | | (350 | ) | Decreases related to cash settlements with taxing authorities | | (1,012 | ) | | (266 | ) | | (334 | ) | Balance at December 31, | | $ | 4,024 |
| | $ | 4,861 |
| | $ | 4,747 |
|
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| Balance at January 1, | | $ | 3,450 |
| | $ | 3,497 |
| | $ | 4,911 |
| Increases based on tax positions related to the current period | | 1,355 |
| | 262 |
| | 408 |
| Increases based on tax positions related to prior periods | | 626 |
| | 583 |
| | 1,028 |
| Decreases based on tax positions related to prior periods | | (350 | ) | | (785 | ) | | (2,646 | ) | Decreases related to cash settlements with taxing authorities | | (334 | ) | | (56 | ) | | (204 | ) | Decreases related to a lapse of applicable statute of limitations | | — |
| | (51 | ) | | — |
| Balance at December 31, | | $ | 4,747 |
| | $ | 3,450 |
| | $ | 3,497 |
|
After-tax interest expense/(benefit) and penalties related to income tax liabilities recognized in income tax expense were $(52) million, $192 million and $102 million $86 millionin 2019, 2018 and $(156) million in 2017, 2016 and 2015, respectively. At December 31, 20172019 and 2016, 2018, in addition to the liability for unrecognized tax benefits, the Firm had accrued $639 $817 million and $687$887 million, respectively, for income tax-related interest and penalties.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 257267 |
Tax examination status JPMorgan Chase is continually under examination by the Internal Revenue Service, by taxing authorities throughout the world, and by many state and local jurisdictions throughout the U.S. The following table summarizes the status of significant income tax examinations of JPMorgan Chase and its consolidated subsidiaries as of December 31, 2017.2019. | | | | | | December 31, 2017 | | Periods under examination | | Status | JPMorgan Chase – U.S. | | 20032011 – 20052013 | | At Appellate levelField Examination completed; JPMorgan Chase intends to file amended returns | JPMorgan Chase – U.S. | | 2006 – 20102014 - 2016 | | Field examination of amended returns; certain matters at Appellate levelExamination | JPMorgan Chase – U.S.New York State | | 20112012 - 2014 | | Field Examination | JPMorgan Chase – 2013New York City | | 2012 - 2014 | | Field Examination | JPMorgan Chase – California | | 2011 – 2012 | | Field Examination | JPMorgan Chase – U.K. | | 2006 – 20152017 | | Field examination of certain select entities |
| | | | 268 | | JPMorgan Chase & Co./2019 Form 10-K |
Note 2526 – Restrictions onRestricted cash, andother restricted assets and intercompany funds transfers Restricted cash and other restricted assets Certain of the Firm’s cash and other assets are restricted as to withdrawal or usage. These restrictions are imposed by various regulatory authorities based on the particular activities of the Firm’s subsidiaries. The business of JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank, N.A.”) is subject to examination and regulation by the OCC. The Bank is a member of the U.S. Federal Reserve System, and its deposits in the U.S. are insured by the FDIC, subject to applicable limits. The Federal Reserve requires depository institutions to maintain cash reserves with a Federal Reserve Bank. The average required amount of reserve balances is deposited by the Firm’s bank subsidiariessubsidiaries. In addition, the Firm is required to maintain cash reserves at certain non-US central banks. The Firm is also subject to rules and regulations established by other U.S. and non U.S. regulators.As part of its compliance with various Federal Reserve Banks was approximately $24.9the respective regulatory requirements, the Firm’s broker-dealers (principally J.P. Morgan Securities LLC in the U.S and J.P. Morgan Securities plc in the U.K.) are subject to certain restrictions on cash and other assets. The following table presents the components of the Firm’s restricted cash: | | | | | | | | December 31, (in billions) | 2019 | 2018 | Cash reserves – Federal Reserve Banks | $ | 26.6 |
| $ | 22.1 |
| Segregated for the benefit of securities and cleared derivative customers | 16.0 |
| 14.6 |
| Cash reserves at non-U.S. central banks and held for other general purposes | 3.9 |
| 4.1 |
| Total restricted cash(a) | $ | 46.5 |
| $ | 40.8 |
|
| | (a) | Comprises $45.3 billion and $39.6 billionin deposits with banks as of December 31, 2019 and 2018, respectively, and $1.2 billion in cash and due from banks as of December 31, 2019 and 2018, on the Consolidated balance sheets. |
Also, as of December 31, 2019 and 2018, the Firm had the following other restricted assets: | | • | Cash and securities pledged with clearing organizations for the benefit of customers of $24.7 billion and $20.6 billion, respectively. |
Securities with a fair value of $8.8 billion and $19.3$9.7 billion, respectively, were also restricted in 2017 and 2016, respectively.relation to customer activity. Intercompany funds transfers Restrictions imposed by U.S. federal law prohibit JPMorgan Chase & Co. (“Parent Company”) and certain of its affiliates from borrowing frombanking subsidiaries unless the loans are secured in specified amounts. Such secured loans provided by any banking subsidiary to the Parent Company or to any particular affiliate, together with certain other transactions with such affiliate (collectively referred to as “covered transactions”), are generally limited to 10% of the banking subsidiary’s total capital, as determined by the risk-based capital guidelines; the aggregate amount of covered transactions between any banking subsidiary and all of its affiliates is limited to 20% of the banking subsidiary’s total capital. The Parent Company’s two principal subsidiaries are JPMorgan Chase Bank, N.A. and JPMorgan Chase Holdings LLC, an intermediate holding company (the “IHC”). The IHC holds the stock of substantially all of JPMorgan Chase’s subsidiaries other than JPMorgan Chase Bank, N.A. and its subsidiaries. The IHC also owns other assets and owes intercompany indebtedness owing to the holding company. The Parent Company is obligated to contribute to the IHC substantially all the net proceeds received from securities issuances (including issuances of senior and subordinated debt securities and of preferred and common stock). The principal sources of income and funding for the Parent Company are dividends from JPMorgan Chase Bank, N.A. and dividends and extensions of credit from the IHC. In addition to dividend restrictions set forth in statutes and regulations, the Federal Reserve, the OCC and the FDIC have authority under the Financial Institutions Supervisory Act to prohibit or to limit the payment of dividends by the banking organizations they supervise, including JPMorgan Chase the Parent Company and its subsidiaries that are banks or bank holding companies, if, in the banking regulator’s opinion, payment of a dividend would constitute an unsafe or unsound practice in light of the financial condition of the banking organization. The IHC is prohibited from paying dividends or extending credit to the Parent Company if certain capital or liquidity “thresholds” are breached or if limits are otherwise imposed by JPMorgan Chase’sthe Parent Company’s management or Board of Directors. At January 1, 2018, JPMorgan Chase’s2020, the Parent Company’s banking subsidiaries could pay, in the aggregate, approximately $17 $9 billion in dividends to their respective bank holding companies without the prior approval of their relevant banking regulators. The capacity to pay dividends in 2018 2020 will be supplemented by the banking subsidiaries’ earnings during the year. In compliance with rules and regulations established by U.S. and non-U.S. regulators, as of December 31, 2017 and 2016, cash in the amount of $16.8 billion and $13.4 billion, respectively, were segregated in special bank accounts for the benefit of securities and futures brokerage customers. Also, as of December 31, 2017 and 2016, the Firm had:
Receivables and securities of $18.0 billion and $18.2 billion, respectively, consisting of cash and securities pledged with clearing organizations for the benefit of customers.
Securities with a fair value of $3.5 billion and $19.3 billion, respectively, were also restricted in relation to customer activity.
In addition, as of December 31, 2017 and 2016, the Firm had other restricted cash of $3.3 billion and $3.6 billion, respectively, primarily representing cash reserves held at non-U.S. central banks and held for other general purposes.
| | | | 258 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 269 |
Notes to consolidated financial statements
Note 2627 – Regulatory capital The Federal Reserve establishes capital requirements, including well-capitalized standards, for the consolidated financial holding company. The OCC establishes similar minimum capital requirements and standards for the Firm’s IDI subsidiaries, including JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. CapitalThe capital rules under Basel III establish minimum capital ratios and overall capital adequacy standards for large and internationally active U.S. bank holding companies and banks, including the Firm and its IDI subsidiaries. Basel III set forth twosubsidiaries, including JPMorgan Chase Bank, N.A. Two comprehensive approaches are prescribed for calculating RWA: a standardized approach (“Basel III Standardized”), and an advanced approach (“Basel III Advanced”). CertainEffective January 1, 2019, the capital adequacy of the Firm and JPMorgan Chase Bank, N.A. is evaluated against the fully phased-in measures under Basel III that represents the lower of the requirements of Basel III areStandardized or Advanced approaches. During 2018, the required capital measures were subject to phase-in periods that beganthe transitional rules and as of December 31, 2018 were the same on January 1, 2014a fully phased-in and continue through the end of 2018 (“on a transitional period”).basis.
The three categoriescomponents of risk-basedregulatory capital and their predominant components under the Basel III Transitional rules are as illustrated below: The following tables present the regulatory capital, assets and risk-based capital ratios for JPMorgan Chase and its significant IDI subsidiaries under both Basel III Standardized Transitional and Basel III Advanced Transitional at December 31, 2017 and 2016.
| | | | | | | | | | | | | | | | JPMorgan Chase & Co. | | Basel III Standardized Transitional | | Basel III Advanced Transitional | (in millions, except ratios) | Dec 31, 2017 |
| Dec 31, 2016 |
| | Dec 31, 2017 |
| Dec 31, 2016 |
| Regulatory capital | |
| | | |
| |
| CET1 capital | $ | 183,300 |
| $ | 182,967 |
| | $ | 183,300 |
| $ | 182,967 |
| Tier 1 capital(a) | 208,644 |
| 208,112 |
| | 208,644 |
| 208,112 |
| Total capital | 238,395 |
| 239,553 |
| | 227,933 |
| 228,592 |
| | | | | | | Assets | |
| |
| | |
| |
| Risk-weighted | 1,499,506 |
| 1,483,132 |
| (e) | 1,435,825 |
| 1,476,915 |
| Adjusted average(b) | 2,514,270 |
| 2,484,631 |
| | 2,514,270 |
| 2,484,631 |
| | | | | | | Capital ratios(c) | |
| |
| | |
| |
| CET1 | 12.2 | % | 12.3 | % | (e) | 12.8 | % | 12.4 | % | Tier 1(a) | 13.9 |
| 14.0 |
| (e) | 14.5 |
| 14.1 |
| Total | 15.9 |
| 16.2 |
| (e) | 15.9 |
| 15.5 |
| Tier 1 leverage(d) | 8.3 |
| 8.4 |
| | 8.3 |
| 8.4 |
|
| | | | | | | | | | | | | | | | JPMorgan Chase Bank, N.A. | | Basel III Standardized Transitional | | Basel III Advanced Transitional | (in millions, except ratios) | Dec 31, 2017 |
| Dec 31, 2016 |
|
| Dec 31, 2017 |
| Dec 31, 2016 |
| Regulatory capital | |
| | | |
| |
| CET1 capital | $ | 184,375 |
| $ | 179,319 |
| | $ | 184,375 |
| $ | 179,319 |
| Tier 1 capital(a) | 184,375 |
| 179,341 |
| | 184,375 |
| 179,341 |
| Total capital | 195,839 |
| 191,662 |
| | 189,419 |
| 184,637 |
| |
|
| | | | | Assets | |
| | | |
| |
| Risk-weighted | 1,335,809 |
| 1,311,240 |
| (e) | 1,226,534 |
| 1,262,613 |
| Adjusted average(b) | 2,116,031 |
| 2,088,851 |
| | 2,116,031 |
| 2,088,851 |
| |
|
| | | | | Capital ratios(c) | |
| | | |
| |
| CET1 | 13.8 | % | 13.7 | % | (e) | 15.0 | % | 14.2 | % | Tier 1(a) | 13.8 |
| 13.7 |
| (e) | 15.0 |
| 14.2 |
| Total | 14.7 |
| 14.6 |
| (e) | 15.4 |
| 14.6 |
| Tier 1 leverage(d) | 8.7 |
| 8.6 |
| | 8.7 |
| 8.6 |
|
| | | | JPMorgan Chase & Co./2017 Annual Report | | 259 |
Notes to consolidated financial statements
| | | | | | | | | | | | | | | | | | Chase Bank USA, N.A. | | Basel III Standardized Transitional | | Basel III Advanced Transitional | (in millions, except ratios) | Dec 31, 2017 |
| | Dec 31, 2016 |
| | Dec 31, 2017 |
| | Dec 31, 2016 |
| Regulatory capital | | | | | | | | CET1 capital | $ | 21,600 |
| | $ | 16,784 |
| | $ | 21,600 |
| | $ | 16,784 |
| Tier 1 capital | 21,600 |
| | 16,784 |
| | 21,600 |
| | 16,784 |
| Total capital | 27,691 |
| | 22,862 |
| | 26,250 |
| | 21,434 |
| | | | | | | | | Assets | | | | | | | | Risk-weighted | 113,108 |
| | 112,297 |
| | 190,523 |
| | 186,378 |
| Adjusted average(b) | 126,517 |
| | 120,304 |
| | 126,517 |
| | 120,304 |
| | | | | | | | | Capital ratios(c) | | | | | | | | CET1 | 19.1 | % | | 14.9 | % | | 11.3 | % | | 9.0 | % | Tier 1 | 19.1 |
| | 14.9 |
| | 11.3 |
| | 9.0 |
| Total | 24.5 |
| | 20.4 |
| | 13.8 |
| | 11.5 |
| Tier 1 leverage(d) | 17.1 |
| | 14.0 |
| | 17.1 |
| | 14.0 |
|
| | (a) | Includes the deduction associated with the permissible holdings of covered funds (as defined by the Volcker Rule). The deduction was not material as of December 31, 2017 and 2016. |
| | (b) | Adjusted average assets, for purposes of calculating the Tier 1 leverage ratio, includes total quarterly average assets adjusted for unrealized gains/(losses) on AFS securities, less deductions for goodwill and other intangible assets, defined benefit pension plan assets, and deferred tax assets related to tax attributes, including NOLs.
|
| | (c) | For each of the risk-based capital ratios, the capital adequacy of the Firm and its IDI subsidiaries is evaluated against the lower of the two ratios as calculated under Basel III approaches (Standardized or Advanced) as required by the Collins Amendment of the Dodd-Frank Act (the “Collins Floor”)
|
| | (d) | The Tier 1 leverage ratio is not a risk-based measure of capital. This ratio is calculated by dividing Tier 1 capital by adjusted average assets.
|
| | (e) | The prior period amounts have been revised to conform with the current period presentation. |
Under the risk-based capital and leverage-basedguidelines of the Federal Reserve, JPMorgan Chase is required to maintain minimum ratios offor CET1, Tier 1, and Total, capital to RWA, as well as a minimum leverage ratio (which is defined as Tier 1 capital divided by adjusted quarterly average assets).leverage and the SLR. Failure to meet these minimum requirements could cause the Federal Reserve to take action. IDI subsidiaries are also are subject to these capital requirements by their respective primary regulators. The following table presents the minimum and well-capitalized ratios to which the Firm and its IDI subsidiaries arewere subject as of December 31, 2017.2019. | | | Minimum capital ratios | Well-capitalized ratios | Minimum capital ratios | Well-capitalized ratios | | BHC(a)(e) | IDI(b)(e) | BHC(c) | IDI(d) | BHC(a)(e)(f) | IDI(b)(e)(f) | BHC(c) | IDI(d) | Capital ratios | | | | | | | | CET1 | 7.50 | % | 5.75 | % | — | % | 6.50 | % | 10.5 | % | 7.0 | % | N/A | 6.5 | % | Tier 1 | 9.00 |
| 7.25 |
| 6.00 |
| 8.00 |
| 12.0 |
| 8.5 |
| 6.0 | 8.0 |
| Total | 11.00 |
| 9.25 |
| 10.00 |
| 10.00 |
| 14.0 |
| 10.5 |
| 10.0 | 10.0 |
| Tier 1 leverage | 4.00 |
| 4.00 |
| — |
| 5.00 |
| 4.0 |
| 4.0 |
| N/A | 5.0 |
| SLR | | 5.0 |
| 6.0 |
| N/A | 6.0 |
|
Note: The table above is as defined by the regulations issued by the Federal Reserve, OCC and FDIC and to which the Firm and its IDI subsidiaries are subject. | | (a) | Represents the Transitional minimum capital ratios applicable to the Firm under Basel III at December 31, 2017. At December 31, 2017, theIII. The CET1 minimum capital ratio includes 1.25% resulting from the phase-in of the Firm’s 2.5%a capital conservation buffer of 2.5% and 1.75% resulting from the phase-inGSIB surcharge of the Firm’s 3.5% GSIB surcharge.as calculated under Method 2. |
| | (b) | Represents requirements for JPMorgan Chase’s IDI subsidiaries. The CET1 minimum capital ratio includes 1.25% resulting from the phase-in of the 2.5%a capital conservation buffer of 2.5% that is applicable to the IDI subsidiaries. The IDI subsidiaries are not subject to the GSIB surcharge. |
| | (c) | Represents requirements for bank holding companies pursuant to regulations issued by the Federal Reserve. |
| | (d) | Represents requirements for IDI subsidiaries pursuant to regulations issued under the FDIC Improvement Act. |
| | (e) | For the period ended December 31, 20162018, the CET1, Tier 1, Total and Tier 1 leverage minimum capital ratios applicable to the Firm were 6.25%9.0%, 7.75%10.5%, 9.75%12.5%, and 4.0% and the CET1, Tier 1, Total and Tier 1 leverage minimum capital ratios applicable to the Firm’s IDI subsidiaries were 5.125%6.375%, 6.625%7.875%, 8.625%9.875%, and 4.0%, respectively. |
| | (f) | Represents minimum SLR requirement of 3.0%, as well as, supplementary leverage buffers of 2.0% and 3.0% for BHC and IDI, respectively. |
| | | | 270 | | JPMorgan Chase & Co./2019 Form 10-K |
The following tables present the risk-based and leverage-based capital metrics for JPMorgan Chase and JPMorgan Chase Bank, N.A. under both the Basel III Standardized and Basel III Advanced Approaches. As of December 31, 20172019 and 2016, 2018, JPMorgan Chase and all of its IDI subsidiariesJPMorgan Chase Bank, N.A. were well-capitalized and met all capital requirements to which each was subject.
| | | | | | | | | | | | | | | December 31, 2019 (in millions, except ratios) | Basel III Standardized Fully Phased-In | | Basel III Advanced Fully Phased-In | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | Regulatory capital | | | | | | CET1 capital | $ | 187,753 |
| $ | 206,848 |
| | $ | 187,753 |
| $ | 206,848 |
| Tier 1 capital | 214,432 |
| 206,851 |
| | 214,432 |
| 206,851 |
| Total capital | 242,589 |
| 224,390 |
| | 232,112 |
| 214,091 |
| | | | | | | Assets | | | | | | Risk-weighted | 1,515,869 |
| 1,457,689 |
| | 1,397,878 |
| 1,269,991 |
| Adjusted average(a) | 2,730,239 |
| 2,353,432 |
| | 2,730,239 |
| 2,353,432 |
| | | | | | | Capital ratios(b) | | | | | | CET1 | 12.4 | % | 14.2 | % | | 13.4 | % | 16.3 | % | Tier 1 | 14.1 |
| 14.2 |
| | 15.3 |
| 16.3 |
| Total | 16.0 |
| 15.4 |
| | 16.6 |
| 16.9 |
| Tier 1 leverage(c) | 7.9 |
| 8.8 |
| | 7.9 |
| 8.8 |
|
| | | | | | | | | | | | | | | December 31, 2018 (in millions, except ratios) | Basel III Standardized Transitional | | Basel III Advanced Transitional | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A.(d) | | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A.(d) | Regulatory capital | | | | | | CET1 capital | $ | 183,474 |
| $ | 211,671 |
| | $ | 183,474 |
| $ | 211,671 |
| Tier 1 capital | 209,093 |
| 211,671 |
| | 209,093 |
| 211,671 |
| Total capital | 237,511 |
| 229,952 |
| | 227,435 |
| 220,025 |
| | | | | | | Assets | | | | | | Risk-weighted | 1,528,916 |
| 1,446,529 |
| | 1,421,205 |
| 1,283,146 |
| Adjusted average(a) | 2,589,887 |
| 2,250,480 |
| | 2,589,887 |
| 2,250,480 |
| | | | | | | Capital ratios(b) | | | | | | CET1 | 12.0 | % | 14.6 | % | | 12.9 | % | 16.5 | % | Tier 1 | 13.7 |
| 14.6 |
| | 14.7 |
| 16.5 |
| Total | 15.5 |
| 15.9 |
| | 16.0 |
| 17.1 |
| Tier 1 leverage(c) | 8.1 |
| 9.4 |
| | 8.1 |
| 9.4 |
|
| | (a) | Adjusted average assets, for purposes of calculating the Tier 1 leverage ratio, includes total quarterly average assets adjusted for on-balance sheet assets that are subject to deduction from Tier 1 capital, predominantly goodwill and other intangible assets. |
| | (b) | For each of the risk-based capital ratios, the capital adequacy of the Firm and JPMorgan Chase Bank, N.A. is evaluated against the lower of the two ratios as calculated under Basel III approaches (Standardized or Advanced). |
| | (c) | The Tier 1 leverage ratio is not a risk-based measure of capital. |
| | (d) | On May 18, 2019, Chase Bank USA, N.A. merged with and into JPMorgan Chase Bank, N.A., with JPMorgan Chase Bank, N.A as the surviving entity. The December 31, 2018 amounts reported for JPMorgan Chase Bank, N.A. retrospectively reflect the impact of the merger. |
| | | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | | Basel III Advanced Fully Phased-In | | Basel III Advanced Fully Phased-In | (in millions, except ratios) | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A.(a) | Total leverage exposure | 3,423,431 |
| $ | 3,044,509 |
| | $ | 3,269,988 |
| $ | 2,915,541 |
| SLR | 6.3 | % | 6.8 | % | | 6.4 | % | 7.3 | % |
| | (a) | On May 18, 2019, Chase Bank USA, N.A. merged with and into JPMorgan Chase Bank, N.A., with JPMorgan Chase Bank, N.A as the surviving entity. The December 31, 2018 amounts reported for JPMorgan Chase Bank, N.A. retrospectively reflect the impact of the merger. |
| | | | 260 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 271 |
Notes to consolidated financial statements
Note 2728 – Off–balance sheet lending-related financial instruments, guarantees, and other commitments JPMorgan Chase provides lending-related financial instruments (e.g., commitments and guarantees) to meetaddress the financing needs of its clients or customers.customers and clients. The contractual amount of these financial instruments represents the maximum possible credit risk to the Firm should the counterpartycustomer or client draw upon the commitment or the Firm be required to fulfill its obligation under the guarantee, and should the counterpartycustomer or client subsequently fail to perform according to the terms of the contract. Most of these commitments and guarantees are refinanced, extended, cancelled, or expire without being drawn or a default occurring. As a result, the total contractual amount of these instruments is not, in the Firm’s view, representative of its expected future credit exposure or funding requirements. To provide for probable credit losses inherent in wholesale and certain consumer lending-commitments, an allowance for credit losses on lending-related commitments is maintained. SeeRefer to Note 13 for further information regarding the allowance for credit losses on lending-related commitments. The following table summarizes the contractual amounts and carrying values of off-balance sheet lending-related financial instruments, guarantees and other commitments at December 31, 20172019 and 2016. 2018. The amounts in the table below for credit card and home equity lending-related commitments represent the total available credit for these products. The Firm has not experienced, and does not anticipate, that all available lines of credit for these products will be utilized at the same time. The Firm can reduce or cancel credit card lines of credit by providing the borrower notice or, in some cases as permitted by law, without notice.In addition, the Firm typically closes credit card lines when the borrower is 60 days or more past due. The Firm may reduce or close HELOCs when there are significant decreases in the value of the underlying property, or when there has been a demonstrable decline in the creditworthiness of the borrower.
| | | | 272 | | JPMorgan Chase & Co./2017 Annual Report | | 2612019 Form 10-K |
Notes to consolidated financial statements
| | Off–balance sheet lending-related financial instruments, guarantees and other commitments | Off–balance sheet lending-related financial instruments, guarantees and other commitments | | Off–balance sheet lending-related financial instruments, guarantees and other commitments | | | Contractual amount | | Carrying value(i) | Contractual amount | | Carrying value(g) | | 2017 | | 2016 | | 2017 | 2016 | 2019 | | 2018 | | 2019 | 2018 | By remaining maturity at December 31, (in millions) | Expires in 1 year or less | Expires after 1 year through 3 years | Expires after 3 years through 5 years | Expires after 5 years | Total | | Total | | | Expires in 1 year or less | Expires after 1 year through 3 years | Expires after 3 years through 5 years | Expires after 5 years | Total | | Total | | | Lending-related | | | | | | | | | | | Consumer, excluding credit card: | | | | | | | | | | | Home equity | $ | 2,165 |
| $ | 1,370 |
| $ | 1,379 |
| $ | 15,446 |
| $ | 20,360 |
| | $ | 21,714 |
| | $ | 12 |
| $ | 12 |
| $ | 680 |
| $ | 1,187 |
| $ | 2,548 |
| $ | 16,704 |
| $ | 21,119 |
| | $ | 20,901 |
| | $ | 12 |
| $ | 12 |
| Residential mortgage(b)(a) | 5,723 |
| — |
| — |
| 13 |
| 5,736 |
| | 10,332 |
| | — |
| — |
| 9,086 |
| — |
| — |
| 12 |
| 9,098 |
| | 5,481 |
| | — |
| — |
| Auto | 8,007 |
| 872 |
| 292 |
| 84 |
| 9,255 |
| | 8,468 |
| | 2 |
| 2 |
| 8,296 |
| 600 |
| 197 |
| 195 |
| 9,288 |
| | 8,011 |
| | 2 |
| 2 |
| Consumer & Business Banking(b) | 11,642 |
| 926 |
| 112 |
| 522 |
| 13,202 |
| | 12,733 |
| | 19 |
| 12 |
| 9,994 |
| 646 |
| 105 |
| 1,162 |
| 11,907 |
| | 11,673 |
| | 19 |
| 19 |
| Total consumer, excluding credit card | 27,537 |
| 3,168 |
| 1,783 |
| 16,065 |
| 48,553 |
| | 53,247 |
| (h) | 33 |
| 26 |
| 28,056 |
| 2,433 |
| 2,850 |
| 18,073 |
| 51,412 |
| | 46,066 |
| | 33 |
| 33 |
| Credit card | 572,831 |
| — |
| — |
| — |
| 572,831 |
| | 553,891 |
| | — |
| — |
| 650,720 |
| — |
| — |
| — |
| 650,720 |
| | 605,379 |
| | — |
| — |
| Total consumer(c)(b) | 600,368 |
| 3,168 |
| 1,783 |
| 16,065 |
| 621,384 |
| | 607,138 |
| (h) | 33 |
| 26 |
| 678,776 |
| 2,433 |
| 2,850 |
| 18,073 |
| 702,132 |
| | 651,445 |
| | 33 |
| 33 |
| Wholesale: | | | | | | | | | | | Other unfunded commitments to extend credit(d)(c) | 61,536 |
| 118,907 |
| 138,289 |
| 12,428 |
| 331,160 |
| | 328,497 |
| | 840 |
| 905 |
| 58,645 |
| 129,414 |
| 168,400 |
| 10,791 |
| 367,250 |
| | 351,490 |
| | 938 |
| 852 |
| Standby letters of credit and other financial guarantees(d)(c) | 15,278 |
| 9,905 |
| 7,963 |
| 2,080 |
| 35,226 |
| | 35,947 |
| | 636 |
| 586 |
| 15,919 |
| 11,127 |
| 5,117 |
| 1,745 |
| 33,908 |
| | 33,498 |
| | 618 |
| 521 |
| Other letters of credit(d)(c) | 3,459 |
| 114 |
| 139 |
| — |
| 3,712 |
| | 3,570 |
| | 3 |
| 2 |
| 2,734 |
| 183 |
| 40 |
| — |
| 2,957 |
| | 2,825 |
| | 4 |
| 3 |
| Total wholesale(e)(b) | 80,273 |
| 128,926 |
| 146,391 |
| 14,508 |
| 370,098 |
| | 368,014 |
| | 1,479 |
| 1,493 |
| 77,298 |
| 140,724 |
| 173,557 |
| 12,536 |
| 404,115 |
| | 387,813 |
| | 1,560 |
| 1,376 |
| Total lending-related | $ | 680,641 |
| $ | 132,094 |
| $ | 148,174 |
| $ | 30,573 |
| $ | 991,482 |
| | $ | 975,152 |
| (h) | $ | 1,512 |
| $ | 1,519 |
| $ | 756,074 |
| $ | 143,157 |
| $ | 176,407 |
| $ | 30,609 |
| $ | 1,106,247 |
| | $ | 1,039,258 |
| | $ | 1,593 |
| $ | 1,409 |
| Other guarantees and commitments | | | | | | | | | | | Securities lending indemnification agreements and guarantees(f)(d) | $ | 179,490 |
| $ | — |
| $ | — |
| $ | — |
| $ | 179,490 |
| | $ | 137,209 |
| | $ | — |
| $ | — |
| $ | 204,827 |
| $ | — |
| $ | — |
| $ | — |
| $ | 204,827 |
| | $ | 186,077 |
| | $ | — |
| $ | — |
| Derivatives qualifying as guarantees | 4,529 |
| 101 |
| 12,479 |
| 40,065 |
| 57,174 |
| | 51,966 |
| | 304 |
| 80 |
| 1,403 |
| 144 |
| 11,299 |
| 40,243 |
| 53,089 |
| | 55,271 |
| | 159 |
| 367 |
| Unsettled reverse repurchase and securities borrowing agreements | 76,859 |
| — |
| — |
| — |
| 76,859 |
| | 50,722 |
| | — |
| — |
| | Unsettled repurchase and securities lending agreements | 44,205 |
| — |
| — |
| — |
| 44,205 |
| | 26,948 |
| | — |
| — |
| | Unsettled resale and securities borrowed agreements | | 117,203 |
| 748 |
| — |
| — |
| 117,951 |
| | 102,008 |
| | — |
| — |
| Unsettled repurchase and securities loaned agreements | | 72,790 |
| 561 |
| — |
| — |
| 73,351 |
| | 57,732 |
| | — |
| — |
| Loan sale and securitization-related indemnifications: | | | | | | | | | | | Mortgage repurchase liability | NA |
| NA |
| NA |
| NA |
| NA |
| | NA |
| | 111 |
| 133 |
| NA |
| NA |
| NA |
| NA |
| NA |
| | NA |
| | 59 |
| 89 |
| Loans sold with recourse | NA |
| NA |
| NA |
| NA |
| 1,169 |
| | 2,730 |
| | 38 |
| 64 |
| NA |
| NA |
| NA |
| NA |
| 944 |
| | 1,019 |
| | 27 |
| 30 |
| Other guarantees and commitments(g) | 7,668 |
| 1,084 |
| 434 |
| 2,681 |
| 11,867 |
| | 5,715 |
| | (76 | ) | (118 | ) | | Exchange & clearing house guarantees and commitments(e) | | 206,432 |
| — |
| — |
| — |
| 206,432 |
| | 58,960 |
| | — |
| — |
| Other guarantees and commitments (f) | | 2,684 |
| 841 |
| 293 |
| 3,399 |
| 7,217 |
| | 8,183 |
| | (73 | ) | (73 | ) |
| | (a) | Includes certain commitments to purchase loans from correspondents. |
| | (b) | Certain loan portfolios have been reclassified. The prior period amounts have been revised to conform with the current period presentation. |
| | (c) | Predominantly all consumer and wholesale lending-related commitments are in the U.S. |
| | (d)(c) | At December 31, 20172019 and 2016,2018, reflected the contractual amount net of risk participations totaling $334$76 million and $328$282 million, respectively, for other unfunded commitments to extend credit; $10.4$9.8 billion and $11.1$10.4 billion, respectively, for standby letters of credit and other financial guarantees; and $405$546 million and $265$385 million, respectively, for other letters of credit. In regulatory filings with the Federal Reserve these commitments are shown gross of risk participations. |
| | (e)(d) | At December 31, 20172019 and 2016, the U.S. portion of the contractual amount of total wholesale lending-related commitments was 77% and 79%, respectively. |
| | (f) | At December 31, 2017 and 2016,2018, collateral held by the Firm in support of securities lending indemnification agreements was $188.7$216.2 billion and $143.2$195.6 billion, respectively. Securities lending collateral consistprimarily consists of primarily cash, G7 government securities, and securities issued by governments that are members of G7U.S. GSEs and U.S. government agencies. |
| | (g)(e) | At December 31, 2017,2019 and 2018, includes guarantees to the Fixed Income Clearing Corporation under the sponsored member repo program and commitments and guarantees associated with the Firm’s membership in certain clearing houses. |
| | (f) | At December 31, 2019 and 2018, primarily includes letters of credit hedged by derivative transactions and managed on a market risk basis, and unfunded commitments related to institutional lending and commitments associated with the Firm’s membership in certain clearing houses.lending. Additionally, includes unfunded commitments predominantly related to certain tax-oriented equity investments. |
| | (h) | The prior period amounts have been revised to conform with the current period presentation. |
| | (i)(g) | For lending-related products, the carrying value represents the allowance for lending-related commitments and the guarantee liability; for derivative-related products, the carrying value represents the fair value. |
| | | | 262 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 273 |
Notes to consolidated financial statements
Other unfunded commitments to extend credit Other unfunded commitments to extend credit generally consist of commitments for working capital and general corporate purposes, extensions of credit to support commercial paper facilities and bond financings in the event that those obligations cannot be remarketed to new investors, as well as committed liquidity facilities to clearing organizations. The Firm also issues commitments under multipurpose facilities which could be drawn upon in several forms, including the issuance of a standby letter of credit. The Firm acts as a settlement and custody bank in the U.S. tri-party repurchase transaction market. In its role as settlement and custody bank, the Firm is exposed to the intra-day credit risk of its cash borrower clients, usually broker-dealers. This exposure arises under secured clearance advance facilities that the Firm extends to its clients (i.e. cash borrowers); these facilities contractually limit the Firm’s intra-day credit risk to the facility amount and must be repaid by the end of the day. As of December 31, 2017 and 2016, the secured clearance advance facility maximum outstanding commitment amount was $1.5 billion and $2.4 billion, respectively.Guarantees
Guarantees
U.S. GAAP requires that a guarantor recognize, at the inception of a guarantee, a liability in an amount equal to the fair value of the obligation undertaken in issuing the guarantee. U.S. GAAP defines a guarantee as a contract that contingently requires the guarantor to pay a guaranteed party based upon: (a) changes in an underlying asset, liability or equity security of the guaranteed party; or (b) a third party’s failure to perform under a specified agreement. The Firm considers the following off–balance sheet lending-related arrangements to be guarantees under U.S. GAAP: standby letters of credit and other financial guarantees, securities lending indemnifications, certain indemnification agreements included within third-party contractual arrangements, and certain derivative contracts.contracts and the guarantees under the sponsored member repo program. As required by U.S. GAAP, the Firm initially records guarantees at the inception date fair value of the obligation assumed (e.g., the amount of consideration received or the net present value of the premium receivable). For certain types of guarantees, the Firm records this fair value amount in other liabilities with an offsetting entry recorded in cash (for premiums received), or other assets (for premiums receivable). Any premium receivable recorded in other assets is reduced as cash is received under the contract, and the fair value of the liability recorded at inception is amortized into income as lending and deposit-related fees over the life of the guarantee contract. For indemnifications provided in sales agreements, a portion of the sale proceeds is allocated to the guarantee, which adjusts the gain or loss that would otherwise result from the transaction. For these indemnifications, the initial liability is amortized to income as the Firm’s risk is reduced (i.e., over time or when the indemnification expires). Any contingent liability that exists as a result of issuing the guarantee or indemnification is recognized when it becomes probable and reasonably estimable. The contingent portion of the liability is not recognized if the estimated amount is less than the carrying amount of the liability recognized at inception (adjusted for any amortization).The recorded amountscontractual amount and carrying value of the liabilities related to guarantees and indemnifications at December 31, 2017 and 2016, excludingare included in the allowance for credit lossestable on lending-related commitments, are discussed page 273. For additional information on the guarantees, see below. Standby letters of credit and other financial guarantees Standby letters of credit and other financial guarantees are conditional lending commitments issued by the Firm to guarantee the performance of a client or customer to a third party under certain arrangements, such as commercial paper facilities, bond financings, acquisition financings, trade and similar transactions. The carrying values of standby and other letters of credit were $639 million and $588 million at December 31, 2017 and 2016, respectively, which were classified in accounts payable and other liabilities on the Consolidated balance sheets; these carrying values included $195 million and $147 million, respectively, for the allowance for lending-related commitments, and $444 million and $441 million, respectively, for the guarantee liability and corresponding asset. The following table summarizes the typescontractual amount and carrying value of facilities under which standby letters of credit and other financial guarantees and other letters of credit arrangements are outstanding by the ratings profiles of the Firm’s clients, as of December 31, 20172019 and 2016.2018. Standby letters of credit, other financial guarantees and other letters of credit | | | 2017 | | 2016 | 2019 | | 2018 | December 31, (in millions) | Standby letters of credit and other financial guarantees | | Other letters of credit | | Standby letters of credit and other financial guarantees | | Other letters of credit | Standby letters of credit and other financial guarantees | | Other letters of credit | | Standby letters of credit and other financial guarantees | | Other letters of credit | Investment-grade(a) | | $ | 28,492 |
| | $ | 2,646 |
| | $ | 28,245 |
| | $ | 2,781 |
| | $ | 26,647 |
| | $ | 2,136 |
| | $ | 26,420 |
| | $ | 2,079 |
| Noninvestment-grade(a) | | 6,734 |
| | 1,066 |
| | 7,702 |
| | 789 |
| | 7,261 |
| | 821 |
| | 7,078 |
| | 746 |
| Total contractual amount | | $ | 35,226 |
| | $ | 3,712 |
| | $ | 35,947 |
| | $ | 3,570 |
| | $ | 33,908 |
| | $ | 2,957 |
| | $ | 33,498 |
| | $ | 2,825 |
| Allowance for lending-related commitments | | $ | 192 |
| | $ | 3 |
| | $ | 145 |
| | $ | 2 |
| | $ | 216 |
| | $ | 4 |
| | $ | 167 |
| | $ | 3 |
| Guarantee liability | | 444 |
| | — |
| | | 441 |
| | | — |
| | 402 |
| | — |
| | | 354 |
| | | — |
| Total carrying value | | $ | 636 |
| | $ | 3 |
| | $ | 586 |
| | $ | 2 |
| | $ | 618 |
| | $ | 4 |
| | $ | 521 |
| | $ | 3 |
| Commitments with collateral | | $ | 17,421 |
| | $ | 878 |
| | $ | 19,346 |
| | $ | 940 |
| | $ | 17,582 |
| | $ | 726 |
| | $ | 17,400 |
| | $ | 583 |
|
| | (a) | The ratings scale is based on the Firm’s internal ratings, which generally correspondrisk ratings. Refer to ratings as defined by S&P and Moody’s.Note 12 for further information on internal risk ratings. |
| | | | 274 | | JPMorgan Chase & Co./2017 Annual Report | | 2632019 Form 10-K |
Notes to consolidated financial statements
Securities lending indemnifications Through the Firm’s securities lending program, counterparties’ securities, via custodial and non-custodial arrangements, may be lent to third parties. As part of this program, the Firm provides an indemnification in the lending agreements which protects the lender against the failure of the borrower to return the lent securities. To minimize its liability under these indemnification agreements, the Firm obtains cash or other highly liquid collateral with a market value exceeding 100% of the value of the securities on loan from the borrower. Collateral is marked to market daily to help assure that collateralization is adequate. Additional collateral is called from the borrower if a shortfall exists, or collateral may be released to the borrower in the event of overcollateralization. If a borrower defaults, the Firm would use the collateral held to purchase replacement securities in the market or to credit the lending client or counterparty with the cash equivalent thereof. The cash collateral held by the Firm may be invested on behalf of the client in indemnified resale agreements, whereby the Firm indemnifies the client against the loss of principal invested. To minimize its liability under these agreements, the Firm obtains collateral with a market value exceeding 100% of the principal invested. Derivatives qualifying as guarantees The Firm transacts in certain derivative contracts that have the characteristics of a guarantee under U.S. GAAP. These contracts include written put options that require the Firm to purchase assets upon exercise by the option holder at a specified price by a specified date in the future. The Firm may enter into written put option contracts in order to meet client needs, or for other trading purposes. The terms of written put options are typically five years or less. Derivatives deemed to be guarantees also includes stable value contracts, commonly referred to as “stable value products”, that require the Firm to make a payment of the difference between the market value and the book value of a counterparty’s reference portfolio of assets in the event that market value is less than book value and certain other conditions have been met. Stable value products are transacted in order to allow investors to realize investment returns with less volatility than an unprotected portfolio. These contracts are typically longer-term or may have no stated maturity, but allow the Firm to elect to terminate the contract under certain conditions. The notional value of derivatives guarantees generally represents the Firm’s maximum exposure. However, exposure to certain stable value products is contractually limited to a substantially lower percentage of the notional amount. The fair value of derivative guarantees reflects the probability, in the Firm’s view, of whether the Firm will be required to perform under the contract. The Firm reduces exposures to these contracts by entering into offsetting transactions, or by entering into contracts that hedge the market risk related to the derivative guarantees.
The following table summarizes the derivatives qualifying as guarantees as of December 31, 2017,2019 and 2016.2018. | | | | | | | | | (in millions) | December 31, 2019 |
| | December 31, 2018 |
| Notional amounts | | | | Derivative guarantees | $ | 53,089 |
| | $ | 55,271 |
| Stable value contracts with contractually limited exposure | 28,877 |
| | 28,637 |
| Maximum exposure of stable value contracts with contractually limited exposure | 2,967 |
| | 2,963 |
| | | | | Fair value | | | | Derivative payables | 159 |
| | 367 |
|
| | | | | | | (in millions) | December 31, 2017 |
| | December 31, 2016 |
| Notional amounts | | | | Derivative guarantees | 57,174 |
| | 51,966 |
| Stable value contracts with contractually limited exposure | 29,104 |
| | 28,665 |
| Maximum exposure of stable value contracts with contractually limited exposure | 3,053 |
| | 3,012 |
| | | | | Fair value | | | | Derivative payables | 304 |
| | 96 |
| Derivative receivables | — |
| | 16 |
|
In addition to derivative contracts that meet the characteristics of a guarantee, the Firm is both a purchaser and seller of credit protection in the credit derivatives market. ForRefer to Note 5 for a further discussion of credit derivatives, see Note 5.derivatives. Unsettled securities financing agreements
Unsettled reverse repurchase and securities borrowing agreements, and unsettled repurchase and securities lending agreements
In the normal course of business, the Firm enters into reverse repurchase agreementsresale and securities borrowing agreements, which are secured financingborrowed agreements. Such agreements settle at a future date. At settlement, these commitments result in the Firm advancing cash to and receiving securities collateral from the counterparty. The Firm also enters into repurchase agreements and securities lendingloaned agreements. At settlement, these commitments result in the Firm receiving cash from and providing securities collateral to the counterparty. Such agreements settle at a future date. These agreements generally do not meet the definition of a derivative, and therefore, are not recorded on the Consolidated balance sheets until settlement date. These agreements predominantly consist of agreements withhave regular-way settlement periods. Forterms. Refer to Note 11 for a further discussion of securities purchased under resale agreements and securities borrowed, and securities sold under repurchase agreements and securities loaned, see Note 11. financing agreements.
| | | | 264 | | JPMorgan Chase & Co./2017 Annual Report |
Loan sales- and securitization-related indemnifications Mortgage repurchase liability In connection with the Firm’s mortgage loan sale and securitization activities with U.S. GSEs as described in Note 14, the Firm has made representations and warranties that the loans sold meet certain requirements, and that may require the Firm to repurchase mortgage loans and/or indemnify the loan purchaser.purchaser if such representations and warranties are breached by the Firm. Further, although the Firm’s securitizations are predominantly nonrecourse, the Firm does provide recourse servicing in certain limited cases where it agrees to share credit risk with the owner of the mortgage loans. To the extent that repurchase demands that are received relate to loans that the Firm purchased from third parties that remain viable, the Firm typically will have the right to seek a recovery of related repurchase losses from the third party. Generally, the maximum amount of future payments the Firm would be required to make for breaches of these representations and warranties would be equal to the unpaid principal balance of such loans that are deemed to have defects that were sold to purchasers (including securitization-related SPEs) plus, in certain circumstances, accrued interest on such loans and certain expenses.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 275 |
Notes to consolidated financial statements
Private label securitizations The liability related to repurchase demands associated with private label securitizations is separately evaluated by the Firm in establishing its litigation reserves. ForRefer to Note 30 for additional information regarding litigation, see Note 29.litigation.
Loans sold with recourse The Firm provides servicing for mortgages and certain commercial lending products on both a recourse and nonrecourse basis. In nonrecourse servicing, the principal credit risk to the Firm is the cost of temporary servicing advances of funds (i.e., normal servicing advances). In recourse servicing, the servicer agrees to share credit risk with the owner of the mortgage loans, such as Fannie Mae or Freddie Mac or a private investor, insurer or guarantor. Losses on recourse servicing predominantly occur when foreclosure sales proceeds of the property underlying a defaulted loan are less than the sum of the outstanding principal balance, plus accrued interest on the loan and the cost of holding and disposing of the underlying property. The Firm’s securitizations are predominantly nonrecourse, thereby effectively transferring the risk of future credit losses to the purchaser of the mortgage-backed securities issued by the trust. At December 31, 20172019 and 2016, 2018, the unpaid principal balance of loans sold with recourse totaled $1.2 $944 million and $1.0 billion, and $2.7 billion, respectively. The carrying value of the related liability that the Firm has recorded in accounts payable and other liabilities on the Consolidated balance sheets, which is representative of the Firm’s view of the likelihood it will have to perform under its recourse obligations, was $38 $27 million and $64$30 million at December 31, 20172019 and 2016, 2018, respectively. Other off-balance sheet arrangements Indemnification agreements – general In connection with issuing securities to investors outside the U.S., the Firm may agree to pay additional amounts to the holders of the securities in the event that, due to a change in tax law, certain types of withholding taxes are imposed on payments on the securities. The terms of the securities may also give the Firm the right to redeem the securities if such additional amounts are payable. The enactment of the TCJA will not cause the Firm to become obligated to pay any such additional amounts. The Firm may also enter into indemnification clauses in connection with the licensing of software to clients (“software licensees”) or when it sells a business or assets to a third party (“third-party purchasers”), pursuant to which it indemnifies software licensees for claims of liability or damages that may occur subsequent to the licensing of the software, or third-party purchasers for losses they may incur due to actions taken by the Firm prior to the sale of the business or assets. It is difficult to estimate the Firm’s maximum exposure under these indemnification arrangements, since this would require an assessment of future changes in tax law and future claims that may be made against the Firm that have not yet occurred. However, based on historical experience, management expects the risk of loss to be remote. Card
Merchant charge-backs. Under the rules of Visa USA, Inc.,payment networks, the Firm, in its role as a merchant acquirer, retains a contingent liability for disputed processed credit and MasterCard International, JPMorgan Chase Bank, N.A., is primarily liable fordebit card transactions that result in a charge-back to the amount of each processed card sales transaction that is the subject of a dispute between a cardmember and a merchant. If a dispute is resolved in the cardmember’scardholder’s favor, Merchant Services will (through the cardmember’scardholder’s issuing bank) credit or refund the amount to the cardmembercardholder and will charge back the transaction to the merchant. If Merchant Services is unable to collect the amount from the merchant, Merchant Services will bear the loss for the amount credited or refunded to the cardmember.cardholder. Merchant Services mitigates this risk by withholding future settlements, retaining cash reserve accounts or by obtaining other security. However, in the unlikely event that: (1) a merchant ceases operations and is unable to deliver products, services or a refund; (2)collateral. In addition, Merchant Services does not have sufficient collateral from the merchant to provide cardmember refunds; and (3) Merchant Services does not have sufficient financial resources to provide cardmember refunds, JPMorgan Chase Bank, N.A., would recognize the loss. Merchant Services incurred aggregate losses of $28 million, $85 million, and $12 million on $1,191.7 billion, $1,063.4 billion, and $949.3 billion of aggregate volume processed for the years ended December 31, 2017, 2016 and 2015, respectively. Incurred losses from merchant charge-backs are charged to other expense, with the offset recorded inrecognizes a valuation allowance against accrued interest and accounts receivable on the Consolidated balance sheets. The carrying value of the valuation allowance was $7 million and $45 million at December 31, 2017 and 2016, respectively, which the Firm believes, based on historical experience and the collateral held by Merchant Services of $141 million and $125 million at December 31, 2017 and 2016, respectively, is representative ofthat covers the payment or performance risk to the Firm related to charge-backs.
For the years ended December 31, 2019, 2018 and 2017, Merchant Services processed an aggregate volume of $1,511.5 billion, $1,366.1 billion, and $1,191.7 billion, respectively, and the related losses from merchant charge-backs were not material.
| | | | JPMorgan Chase & Co./2017 Annual Report | | 265 |
Notes to consolidated financial statements
Clearing Services – Client Credit Risk The Firm provides clearing services for clients by entering into securities purchases and sales and derivative transactionscontracts with CCPs, including ETDs such as futures and options, as well as OTC-cleared derivative contracts. As a clearing member, the Firm stands behind the performance of its clients, collects cash and securities collateral (margin) as well as any settlement amounts due from or to clients, and remits them to the relevant CCP or client in whole or part. There are two types of margin: variation margin is posted on a daily basis based on the value of clients’ derivative contracts and initial margin is posted at inception of a derivative contract, generally on the basis of the potential changes in the variation margin requirement for the contract. As a clearing member, the Firm is exposed to the risk of nonperformance by its clients, but is not liable to clients for the performance of the CCPs. Where possible, the Firm seeks to mitigate its risk to the client through the collection of appropriate amounts of margin at inception and throughout the life of the transactions. The Firm can also cease providing clearing services if clients do not adhere to their obligations under the clearing agreement. In the event of nonperformance by a client, the Firm would close out the client’s positions and access available margin. The CCP would utilize any margin it holds to make itself whole, with any remaining shortfalls required to be paid by the Firm as a clearing member. The Firm reflects its exposure to nonperformance risk of the client through the recognition of margin receivables from clients and margin payables to CCPs; the clients’ underlying securities or derivative contracts are not reflected in the Firm’s Consolidated Financial Statements.
| | | | 276 | | JPMorgan Chase & Co./2019 Form 10-K |
It is difficult to estimate the Firm’s maximum possible exposure through its role as a clearing member, as this would require an assessment of transactions that clients may execute in the future. However, based upon historical experience, and the credit risk mitigants available to the Firm, management believes it is unlikely that the Firm will have to make any material payments under these arrangements and the risk of loss is expected to be remote. ForRefer to Note 5 for information on the derivatives that the Firm executes for its own account and records in its Consolidated Financial Statements, see Note 5.Statements.
Exchange & Clearing House Memberships The Firm is a member of several securities and derivative exchanges and clearing houses, both in the U.S. and other countries, and it provides clearing services.services to its clients. Membership in some of these organizations requires the Firm to pay a pro rata share of the losses incurred by the organization as a result of the default of another member. Such obligations vary with different organizations. These obligations may be limited to members who dealt with the defaulting member or to the amount (or a multiple of the amount) of the Firm’s contribution to the guarantee fund maintained by a clearing house or exchange as part of the resources available to cover any losses in the event of a member default. Alternatively, these obligations may also include a pro rata share of the residual losses after applying the guarantee fund. Additionally, certain clearing houses require the Firm as a member to pay a pro rata share of losses that may result from the clearing house’s investment of guarantee fund contributions and initial margin, unrelated to and independent of the default of another member. Generally a payment would only be required should such losses exceed the resources of the clearing house or exchange that are contractually required to absorb the losses in the first instance. ItIn certain cases, it is difficult to estimate the Firm’s maximum possible exposure under these membership agreements, since this would require an assessment of future claims that may be made against the Firm that have not yet occurred. However, based on historical experience, management expects the risk of loss to the Firm to be remote.Where the Firm’s maximum possible exposure can be estimated, the amount is disclosed in the table on page 273, in the Exchange & clearing house guarantees and commitments line. Sponsored member repo program In 2018 the Firm commenced the sponsored member repo program, wherein the Firm acts as a sponsoring member to clear eligible overnight resale and repurchase agreements through the Government Securities Division of the Fixed Income Clearing Corporation (“FICC”) on behalf of clients that become sponsored members under the FICC’s rules. The Firm also guarantees to the FICC the prompt and full payment and performance of its sponsored member clients’ respective obligations under the FICC’s rules. The Firm minimizes its liability under these overnight guarantees byobtaining a security interest in the cash or high-quality securities collateral that the clients place with the clearing house; therefore, the Firm expects the risk of loss to be remote. The Firm’s maximum possible exposure, without taking into consideration the associated collateral, is includedin the Exchange & clearing house guarantees and commitments line on page 273. Refer to Note 11 for additional information on credit risk mitigation practices on resale agreements and the types of collateral pledged under repurchase agreements. Guarantees of subsidiaries In the normal course of business,the Parent Companymay provide counterparties with guarantees of certain of the trading and other obligations of its subsidiarieson a contract-by-contract basis, as negotiated with the Firm’s counterparties. The obligations of the subsidiaries are included on the Firm’s Consolidated balance sheets or are reflected as off-balance sheet commitments; therefore, the Parent Company has not recognized a separate liability for these guarantees. The Firm believes that the occurrence of any event that would trigger payments by the Parent Company under these guarantees is remote. The Parent Company has guaranteed certain long-term debt and structured notes of its subsidiaries, including JPMorgan Chase Financial Company LLC (“JPMFC”), a 100%-owned finance subsidiary. All securities issued by JPMFC are fully and unconditionally guaranteed by the Parent Company. These guarantees, which rank on a parity with the Firm’s unsecured and unsubordinated indebtedness, are not included in the table on page 262273 of this Note. ForRefer to Note 20 for additional information, see Note 19.information.
| | | | 266 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 277 |
Notes to consolidated financial statements
Note 2829 – Commitments, pledgedPledged assets and collateral Lease commitments
At December 31, 2017, JPMorgan Chase and its subsidiaries were obligated under a number of noncancelable operating leases for premises and equipment used primarily for banking purposes. Certain leases contain renewal options or escalation clauses providing for increased rental payments based on maintenance, utility and tax increases, or they require the Firm to perform restoration work on leased premises. No lease agreement imposes restrictions on the Firm’s ability to pay dividends, engage in debt or equity financing transactions or enter into further lease agreements.
The following table presents required future minimum rental payments under operating leases with noncancelable lease terms that expire after December 31, 2017.
| | | | | Year ended December 31, (in millions) | | 2018 | 1,526 |
| 2019 | 1,450 |
| 2020 | 1,300 |
| 2021 | 1,029 |
| 2022 | 815 |
| After 2022 | 3,757 |
| Total minimum payments required | 9,877 |
| Less: Sublease rentals under noncancelable subleases | (1,034 | ) | Net minimum payment required | $ | 8,843 |
|
Total rental expense was as follows.
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | | | | | | | 2017 | | 2016 | | 2015 | Gross rental expense | | $ | 1,853 |
| | $ | 1,860 |
| | $ | 2,015 |
| Sublease rental income | | (251 | ) | | (241 | ) | | (411 | ) | Net rental expense | | $ | 1,602 |
| | $ | 1,619 |
| | $ | 1,604 |
|
Pledged assets The Firm may pledgepledges financial assets that it owns to maintain potential borrowing capacity at discount windows with Federal Reserve banks, various other central banks and FHLBs. Additionally, the Firm pledges assets for other purposes, including to secure borrowings and public deposits, collateralize repurchase and other securities financing agreements, to cover short sales and cover customer short sales. to collateralize derivative contracts and deposits. Certain of these pledged assets may be sold or repledged or otherwise used by the secured parties and are parenthetically identified as financial instruments owned (pledged to various parties) on the Consolidated balance sheets.sheets as assets pledged. The following table presents the Firm’s pledged assets. | | | | | | | | | | December 31, (in billions) | | 2019 | | 2018 | Assets that may be sold or repledged or otherwise used by secured parties | | $ | 125.2 |
| | $ | 104.0 |
| Assets that may not be sold or repledged or otherwise used by secured parties | | 80.2 |
| | 83.7 |
| Assets pledged at Federal Reserve banks and FHLBs | | 478.9 |
| | 475.3 |
| Total pledged assets | | $ | 684.3 |
| | $ | 663.0 |
|
| | | | | | | | | | December 31, (in billions) | | 2017 | | 2016 | Assets that may be sold or repledged or otherwise used by secured parties | | $ | 129.6 |
| | $ | 133.6 |
| Assets that may not be sold or repledged or otherwise used by secured parties | | 67.9 |
| | 53.5 |
| Assets pledged at Federal Reserve banks and FHLBs | | 493.7 |
| | 441.9 |
| Total assets pledged | | $ | 691.2 |
| | $ | 629.0 |
|
Total pledged assets pledged do not include assets of consolidated VIEs; these assets are used to settle the liabilities of those entities. SeeRefer to Note 14 for additional information on assets and liabilities of consolidated VIEs. ForRefer to Note 11 for additional information on the Firm’s securities financing activities, seeactivities. Refer to Note 11. For 20 for additional information on the Firm’s long-term debt, see Note 19.debt. The significant components of the Firm’s pledged assets were as follows. | | | | | | | | | | December 31, (in billions) |
| 2019 |
| 2018 | Investment securities |
| $ | 35.9 |
|
| $ | 59.5 |
| Loans |
| 460.4 |
|
| 440.1 |
| Trading assets and other |
| 188.0 |
|
| 163.4 |
| Total pledged assets |
| $ | 684.3 |
|
| $ | 663.0 |
|
| | | | | | | | | | December 31, (in billions) |
| 2017 |
| 2016 | Securities |
| $ | 86.2 |
|
| $ | 101.1 |
| Loans |
| 437.7 |
|
| 374.9 |
| Trading assets and other |
| 167.3 |
|
| 153.0 |
| Total assets pledged |
| $ | 691.2 |
|
| $ | 629.0 |
|
Collateral The Firm accepts financial assets as collateral that it is permitted to sell or repledge, deliver or otherwise use. This collateral is generally obtained under resale and other securities financing agreements, securities borrowing agreements,prime brokerage-related held-for-investment customer margin loansreceivables and derivative agreements. contracts.Collateral is generally used under repurchase agreements,and other securities lendingfinancing agreements, or to cover customer short sales, and to collateralize depositsderivative contracts and derivative agreements.deposits. The following table presents the fair value of collateral accepted. | | | | | | | | | | December 31, (in billions) |
| 2019 |
| 2018 | Collateral permitted to be sold or repledged, delivered, or otherwise used |
| $ | 1,282.5 |
|
| $ | 1,245.3 |
| Collateral sold, repledged, delivered or otherwise used |
| 1,000.5 |
|
| 998.3 |
|
| | | | | | | | | | December 31, (in billions) |
| 2017 |
| 2016 | Collateral permitted to be sold or repledged, delivered, or otherwise used |
| $ | 968.8 |
|
| $ | 914.1 |
| Collateral sold, repledged, delivered or otherwise used |
| 775.3 |
|
| 746.6 |
|
| | | | 278 | | JPMorgan Chase & Co./2017 Annual Report | | 2672019 Form 10-K |
Notes to consolidated financial statements
Note 2930 – Litigation Contingencies As of December 31, 2017,2019, the Firm and its subsidiaries and affiliates are defendants, or putative defendants or respondents in numerous legal proceedings, including private, civil litigations and regulatory/government investigations. The litigations range from individual actions involving a single plaintiff to class action lawsuits with potentially millions of class members. Investigations involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations. These legal proceedings are at varying stages of adjudication, arbitration or investigation, and involve each of the Firm’s lines of business and several geographies and a wide variety of claims (including common law tort and contract claims and statutory antitrust, securities and consumer protection claims), some of which present novel legal theories. The Firm believes the estimate of the aggregate range of reasonably possible losses, in excess of reserves established, for its legal proceedings is from $0 to approximately $1.7$1.3 billion at December 31, 2017.2019. This estimated aggregate range of reasonably possible losses was based upon currentlyinformation available informationas of that date for those proceedings in which the Firm believes that an estimate of reasonably possible loss can be made. For certain matters, the Firm does not believe that such an estimate can be made, as of that date. The Firm’s estimate of the aggregate range of reasonably possible losses involves significant judgment, given given: the number, variety and varying stages of the proceedings, (includingincluding the fact that many are in preliminary stages), stages, the existence in many such proceedings of multiple defendants, (includingincluding the Firm)Firm, whose share of liability (if any) has yet to be determined, the numerous yet-unresolved issues in many of the proceedings, (includingincluding issues regarding class certification and the scope of many of the claims)claims, and the attendant uncertainty of the various potential outcomes of such proceedings, including where the Firm has made assumptions concerning future rulings by the court or other adjudicator, or about the behavior or incentives of adverse parties or regulatory authorities, and those assumptions prove to be incorrect. In addition, the outcome of a particular proceeding may be a result which the Firm did not take into account in its estimate because the Firm had deemed the likelihood of that outcome to be remote. Accordingly, the Firm’s estimate of the aggregate range of reasonably possible losses will change from time to time, and actual losses may vary significantly. Set forth below are descriptions of the Firm’s material legal proceedings. Federal Republic of Nigeria Litigation. JPMorgan Chase Bank, N.A. operated an escrow and depository account for the Federal Government of Nigeria (“FGN”) and two major international oil companies. The account held approximately $1.1 billion in connection with a dispute among the clients over rights to an oil field. Following the settlement of the dispute, JPMorgan Chase Bank, N.A. paid out the monies in the account in 2011 and 2013 in accordance with directions received from its clients. In November 2017, the Federal Republic of Nigeria (“FRN”) commenced a claim in the English High Court for approximately $875 million in payments made out of the accounts. The FRN, claiming to be the same entity as the FGN, alleges that the payments were instructed as part of a complex fraud not involving JPMorgan Chase Bank, N.A., but that JPMorgan Chase Bank, N.A. was or should have been on notice that the payments may be fraudulent. JPMorgan Chase Bank, N.A. applied for summary judgment and was unsuccessful. The claim is ongoing and no trial date has been set. Foreign Exchange Investigations and Litigation. The Firm previously reported settlements with certain government authorities relating to its foreign exchange (“FX”) sales and trading activities and controls related to those activities. FX-related investigations and inquiries by government authorities, including competition authorities, are ongoing, and the Firm is cooperating with and working to resolve those matters. In May 2015, the Firm pleaded guilty to a single violation of federal antitrust law. In January 2017, the Firm was sentenced, with judgment entered thereafter.thereafter and a term of probation ending in January 2020. The term of probation has concluded, with the Firm remaining in good standing throughout the probation period. The Department of Labor has granted the Firm a five-year exemption of disqualification effective upon expiration of a temporary one-year exemption previously granted, that allows the Firm and its affiliates to continue to rely on the Qualified Professional Asset Manager exemption under the Employee Retirement Income Security Act (“ERISA”). until January 2023. The Firm will need to reapply in due course for a further exemption to cover the remainder of the ten-year disqualification period. In addition, the Firm has paid fines totaling approximately $265 million in connection with the settlement of FX-related investigations conducted by the European Commission and the Swiss Competition Commission which were announced in May 2019 and June 2019, respectively. Separately, in February 2017 the South Africa Competition Commission referred its FX investigation of the Firm and other banks to the South Africa Competition Tribunal, which is conducting civil proceedings concerning that matter. The Firm is also one of a number of foreign exchange dealers defending a class action filed in
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 279 |
Notes to consolidated financial statements
In August 2018, the United States District Court for the Southern District of New York granted final approval to the Firm’s settlement of a consolidated class action brought by U.S.-based plaintiffs, which principally allegingalleged violations of federal antitrust laws based on an alleged conspiracy to manipulate foreign exchange rates (the “U.S. class action”). In January 2015, the Firm entered into a settlement agreement in the U.S. class action. Following this settlement, a numberand also sought damages on behalf of additional putative class actions were filed seeking damages for persons who transacted in FX futures and options on futures (the “exchanged-based actions”),futures. Certain members of the settlement class filed requests to the Court to be excluded from the class, and certain of them filed a complaint against the Firm and a number of other foreign exchange dealers in November 2018. A number of these actions remain pending. Further, putative class actions have been filed against the Firm and a number of other foreign exchange dealers on behalf of certain consumers who purchased foreign currencies at allegedly inflated rates (the “consumer action”), participants or beneficiaries of qualified ERISA plans (the “ERISA actions”), and purported indirect purchasers of FX instruments (the “indirect purchaser action”). Since then, the Firm has entered into a revised settlement agreement to resolve the consolidated U.S. class action, including the exchange-basedinstruments; these actions and that agreement has been preliminarily approved by the Court. The District Court has dismissed one of the ERISA actions, and the plaintiffs have filed an appeal. The consumer action, a second ERISA action and the indirect purchaser actionalso remain pending in the District Court. General Motors Litigation. JPMorgan Chase Bank, N.A. participated in, In addition, some FX-related individual and was the Administrative Agent on behalf of a syndicate of lenders on, a $1.5 billion syndicated Term Loan facility (“Term Loan”) for General Motors Corporation (“GM”). In July 2009, in connection with the GM bankruptcy proceedings, the Official Committee of Unsecured Creditors of Motors Liquidation Company (“Creditors Committee”) filed a lawsuit against JPMorgan Chase Bank, N.A., in its individual capacity and as Administrative Agent for other lenders on the Term Loan, seeking to hold the underlying lien invalidputative class actions based on similar alleged underlying conduct have been filed outside the filing of a UCC-3 termination statement relating to the Term Loan. In January 2015, following several court proceedings, the United States Court of Appeals for the Second Circuit reversed the Bankruptcy Court’s dismissal of the Creditors Committee’s claim and
| | | | 268 | | JPMorgan Chase & Co./2017 Annual Report |
remanded the case to the Bankruptcy Court with instructions to enter partial summary judgment for the Creditors Committee as to the termination statement. The proceedingsU.S., including in the Bankruptcy Court continue with respect to, among other things, additional defenses asserted by JPMorgan Chase Bank, N.A.U.K., Israel and the value of additional collateral on the Term Loan that was unaffected by the filing of the termination statement at issue. In connection with that additional collateral, a trial in the Bankruptcy Court regarding the value of certain representative assets concluded in May 2017, and a ruling was issued in September 2017. The Bankruptcy Court found that 33 of the 40 representative assets are fixtures and that these fixtures generally should be valued on a “going concern” basis. The Creditors Committee is seeking leave to appeal the Bankruptcy Court’s ruling that the fixtures should be valued on a “going concern” basis rather than on a liquidation basis. In addition, certain Term Loan lenders filed cross-claims in the Bankruptcy Court against JPMorgan Chase Bank, N.A. seeking indemnification and asserting various claims. The parties are engaged in mediation concerning, among other things, the characterization and value of the remaining additional collateral, in light of the Bankruptcy Court’s ruling regarding the representative assets, as well as other issues, including the cross-claims. Australia.
Hopper Estate Litigation. The Firm is a defendant in an action in connection with its role as an independent administrator of an estate. The plaintiffs sought in excess of $7 million in compensatory damages, primarily relating to attorneys’ fees incurred by the plaintiffs. After a trial in probate court in Dallas, Texas that ended in September 2017, the jury returned a verdict against the Firm, awarding plaintiffs their full compensatory damages and multiple billions in punitive damages. Notwithstanding the jury verdict, in light of legal limitations on the availability of damages, certain of the plaintiffs moved for entry of judgment in the total amount of approximately $71 million, including punitive damages, while another plaintiff has not yet moved for judgment. The court has not yet entered a judgment in this matter. The parties are engaged in post-trial briefing.
Interchange Litigation. A groupGroups of merchants and retail associations filed a series of class action complaints alleging that Visa and MasterCard,Mastercard, as well as certain banks, conspired to set the price of credit and debit card interchange fees and enacted respectiverelated rules in violation of antitrust laws. TheIn 2012, the parties initially settled the cases for a cash payment, of $6.1 billion to the class plaintiffs (of which the Firm’s share is approximately 20%) and an amount equal to ten basis pointsa temporary reduction of credit card interchange, for a period of 8 months to be measured from a date within 60 days of the end of the opt-out period. The settlement also provided forand modifications to eachcertain credit card network’s rules, including those that prohibit surcharging credit card transactions.network rules. In December 2013, the District Court granted final approval of the settlement. A number of merchants appealed to the United States Court of Appeals for the Second Circuit, which, in June 2016, vacated the District Court’s certification of the class action and reversed2017, after the approval of that settlement was reversed on appeal, the class settlement. In March 2017, the U.S. Supreme Court declined petitions seeking review of the decision of the Court of Appeals. The case has beenwas remanded to the District Court for further proceedings consistent with the appellate decision.
The original class action was divided into 2 separate actions, one seeking primarily monetary relief and the other seeking primarily injunctive relief. In September 2018, the parties to the class action seeking monetary relief finalized an agreement which amends and supersedes the prior settlement agreement. Pursuant to this settlement, the defendants collectively contributed an additional $900 million to the approximately $5.3 billion previously held in escrow from the original settlement. In December 2019, the amended agreement was approved by the District Court. Certain merchants filed notices of appeal of the District Court’s approval order. Based on the percentage of merchants that opted out of the amended class settlement, $700 million has been returned to the defendants from the settlementescrow in accordance with the settlement agreement. The class action seeking primarily injunctive relief continues separately. In addition, certain merchants have filed individual actions raising similar allegations against Visa and MasterCard,Mastercard, as well as against the Firm and other banks, and those actions are proceeding. LIBOR and Other Benchmark Rate Investigations and Litigation. JPMorgan Chase has received subpoenas and requests for documents and, in some cases, interviews,responded to inquiries from federal and state various governmental agencies and entities including the U.S. Commodity Futures Trading Commission (“CFTC”) and various state attorneys general, as well as the European Commission (“EC”), the Swiss Competition Commission (“ComCo”) and other regulatory authorities and banking associations around the world relating primarily to the process by which interest rates were submitted to the British Bankers Association (“BBA”) in connection with the setting of the BBA’sAssociation’s London Interbank Offered Rate (“LIBOR”) for various currencies principally in 2007 and 2008. Some of the inquiries also relate to similar processes by which information on rates was submitted to the European Banking Federation (“EBF”) in connection with the setting of the EBF’sFederation’s Euro Interbank Offered RatesRate (“EURIBOR”) and to the Japanese Bankers’ Association for the setting of Tokyo Interbank Offered Rates (“TIBOR”) during similar time periods, as well as processes for the setting of U.S. dollar ISDAFIX rates and other reference rates in various parts of the world during similar time periods, including through 2012.. The Firm continues to cooperate with these ongoing investigations, and is currently engaged in discussions with the CFTC about resolving its U.S. dollar ISDAFIX-related investigation with respect to the Firm. There is no assurance that such discussions will result in a settlement. As previously reported, the Firm has resolved EC inquiries relating to Yen LIBOR and Swiss Franc LIBOR. In December 2016, the Firm resolved ComCo inquiries relating to these same rates. ComCo’sCompetition Commission’s investigation relating to EURIBOR, to which the Firm and other banks are subject, continues. In December 2016, the ECEuropean Commission issued a decision against the Firm and other banks finding an infringement of European antitrust rules relating to EURIBOR. The Firm has filed an appeal of that decision with the European General Court.Court, and that appeal is pending. In addition, the Firm has been named as a defendant along with other banks in a series of individual and putative class actions filedrelated to benchmarks, including U.S. dollar LIBOR during the period that it was administered by the BBA and, in various United States District Courts.a separate consolidated putative class action, during the period that it was administered by ICE Benchmark Administration. These actions have been filed, or consolidated for pre-trial purposes, in the United States District Court for the Southern District of New York. In these actions, plaintiffs make varying allegations that in various periods, starting in 2000 or later, defendants either individually or collectively
| | | | JPMorgan Chase & Co./2017 Annual Report | | 269 |
Notes to consolidated financial statements
manipulated various benchmark rates by submitting rates that were artificially low or high. Plaintiffs allege that they transacted in loans, derivatives or other financial instruments whose values are affected by changes in these rates and assert a variety of claims including antitrust claims seeking treble damages. These mattersactions are in various stages of litigation. The Firm has agreed to settle a putative class action related to Swiss franc LIBOR, and that settlement remains subject to final court approval.
In an action related to EURIBOR, the District Court dismissed all claims except a single antitrust claim and two common law claims, and dismissed all defendants except the Firm and Citibank.
In actions related to U.S. dollar LIBOR during the period that it was administered by the BBA, the District Court dismissed certain claims, including antitrust claims brought by some plaintiffs whom the District Court found did not have standing to assert such claims, and permitted certain claims to proceed, including antitrust, claims, claims underCommodity Exchange Act, Section 10(b) of the CommoditySecurities Exchange Act and common law claims to proceed.claims. The plaintiffs whose antitrust claims were dismissed for lack of standing have filed an appeal. In May 2017, plaintiffs in threeThe District Court granted class certification of antitrust claims related to bonds and interest rate swaps sold directly by the defendants and denied class certification motions filed by other plaintiffs. The Firm’s settlements of putative class actions moved in the District Court for class certification, and the Firm and other defendants have opposed that motion. In January 2018, the District Court heard oral arguments on the class certification motions and reserved decision. In an action related to Swiss franc LIBOR, the Singapore Interbank Offered Rate and the Singapore Swap Offer Rate (“SIBOR”), the District Court dismissed without prejudice all claims except a single antitrust claim,Australian Bank Bill Swap Reference Rate, and dismissed without prejudice all defendants except the Firm, Bank of America and Citibank. The plaintiffs filed an amended complaint in September 2017, which the Firm and other defendants have moved to dismiss.
The Firm is onecertain of the defendants in a number of putative class actions alleging that defendant banks and ICAP conspiredrelated to manipulate the U.S. dollar ISDAFIX rates. In April 2016, the Firm settled this litigation, along with certain other banks. Those settlements have been preliminarily approved by the Court.
Mortgage-Backed Securities and Repurchase Litigation and Related Regulatory Investigations. The Firm and affiliates (together, “JPMC”), Bear Stearns and affiliates (together, “Bear Stearns”) and certain Washington Mutual affiliates (together, “Washington Mutual”) have been named as defendants in a number of cases in their various roles in offerings of MBS. The remaining civil cases include one investor action and actions for repurchase of mortgage loans. The Firm and certain of its current and former officers and Board members have also been sued in a shareholder derivative action relating to the Firm’s MBS activities, which remains pending.
Issuer Litigation – Individual Purchaser Actions. With the exception of one remaining action, the Firm has resolved all of the individual actions brought against JPMC, Bear Stearns and Washington Mutual as MBS issuers (and, in some cases, also as underwriters of their own MBS offerings).
Repurchase Litigation. The Firm is defending a few actions brought by trustees and/or securities administrators of various MBS trusts on behalf of purchasers of securities issued by those trusts. These cases generally allege breaches of various representations and warranties regarding securitized loans and seek repurchase of those loans or equivalent monetary relief, as well as indemnification of attorneys’ fees and costs and other remedies. The trustees and/or securities administrators have accepted settlement offers on these MBS transactions, and these settlements areLIBOR remain subject to court approval. In the class actions related to SIBOR and Swiss franc LIBOR, the District Court concluded that the Court lacked subject matter jurisdiction, and plaintiffs’ appeals of those decisions are pending.
In addition,Metals and U.S. Treasuries Investigations and Litigation and Related Inquiries. Various authorities, including the Firm and a groupDepartment of 21institutional MBS investors made a binding offer to the trustees of MBS issued by JPMC and Bear Stearns providing for the payment of $4.5 billion and the implementation of certain servicing changes by JPMC, to resolve all repurchase and servicing claims that have been asserted or could have been asserted with respect to 330 MBS trusts created between 2005 and 2008. The offer does not resolve claimsJustice’s Criminal Division, are conducting investigations relating to Washington Mutual MBS. The trustees (or separatetrading practices in the metals markets and successor trustees) for this group of 330 trusts have accepted the settlement for 319 trusts in whole or in part and excluded from the settlement 16 trusts in whole or in part. The trustees’ acceptance received final approval from the court and the Firm paid the settlement in December 2017.
Additional actions have been filed against third-party trustees that relate to loan repurchase and servicing claims involving trusts sponsored by JPMC, Bear Stearns and Washington Mutual.
In actions against the Firm involving offerings of MBS issued by the Firm, the Firm has contractual rights to indemnification from sellers of mortgage loans that were securitized in such offerings. However, certain of those indemnity rights may prove effectively unenforceable in various situations, such as where the loan sellers are now defunct.
related conduct. The Firm has entered into agreements with a number of MBS trustees or entities that purchased MBS that toll applicable statute of limitations periods with respectalso is responding to their claims, and has settled, and in the future may settle, tolled claims. There is no assurance that the Firm will not be named as a defendant in additional MBS-related litigation. Derivative Action. A shareholder derivative action against the Firm, as nominal defendant, and certain of its current and former officers and members of its Board of Directors relating to the Firm’s MBS activities was filed in California federal court in 2013. In June 2017, the court granted defendants’ motion to dismiss the cause of action that alleged material misrepresentations and omissions in the
| | | | 270280 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Firm’s proxy statement, foundrelated requests concerning similar trading-practices issues in markets for other financial instruments, such as U.S. Treasuries. The Firm continues to cooperate with these investigations and is currently engaged in discussions with various regulators about resolving their respective investigations. There is no assurance that the court did notsuch discussions will result in settlements. Several putative class action complaints have personal jurisdiction over the individual defendants with respect to the remaining causes of action, and transferred that remaining portion of the case tobeen filed in the United States District Court for the Southern District of New York without ruling on the merits. The motion by the defendants to dismiss is pending.
Municipal Derivatives Litigation. Several civil actions were commenced in New York and Alabama courts against the Firm relating toand certain Jefferson County, Alabama (the “County”) warrant underwritingsformer employees, alleging a precious metals futures and swap transactions.options price manipulation scheme in violation of the Commodity Exchange Act. Some of the complaints also allege unjust enrichment and deceptive acts or practices under the General Business Law of the State of New York. The claimsCourt consolidated these putative class actions in February 2019. The Firm is also a defendant in a consolidated action filed in the civil actions generally alleged thatUnited States District Court for the Firm made payments to certain third partiesSouthern District of New York alleging monopolization of silver futures in exchange for being chosen to underwrite more than $3.0 billion in warrants issued by the County and to act as the counterparty for certain swaps executed by the County. The County filed for bankruptcy in November 2011. In June 2013, the County filed a Chapter 9 Plan of Adjustment, as amended (the “Plan of Adjustment”), which provided that all the above-described actions against the Firm would be released and dismissed with prejudice. In November 2013, the Bankruptcy Court confirmed the Plan of Adjustment, and in December 2013, certain sewer rate payers filed an appeal challenging the confirmationviolation of the Plan of Adjustment. All conditions to the Plan of Adjustment’s effectiveness, including the dismissal of the actions against the Firm, were satisfied or waived and the transactions contemplated by the Plan of Adjustment occurred in December 2013. Accordingly, all the above-described actions against the Firm have been dismissed pursuant to the terms of the Plan of Adjustment. The appeal of the Bankruptcy Court’s order confirming the Plan of Adjustment remains pending.Sherman Act.
Petters Bankruptcy and Related Matters. JPMorgan Chase and certain of its affiliates, including One Equity Partners (“OEP”), were named as defendants in several actions filed in connection with the receivership and bankruptcy proceedings pertaining to Thomas J. Petters and certain affiliated entities (collectively, “Petters”) and the Polaroid Corporation. The principal actions against JPMorgan Chase and its affiliates were brought by a court-appointed receiver for Petters and the trustees in bankruptcy proceedings for three Petters entities. These actions generally sought to avoid certain putative transfers in connection with (i) the 2005 acquisition by Petters of Polaroid, which at the time was majority-owned by OEP; (ii) two credit facilities that JPMorgan Chase and other financial institutions entered into with Polaroid; and (iii) a credit line and investment accounts held by Petters. In January 2017, the Court substantially denied the defendants’ motion to dismiss an amended complaint filed by the plaintiffs. In October 2017, JPMorgan Chase and its affiliates reached an agreement in principle to settle the litigation brought by the Petters bankruptcy trustees, or their successors, and the receiver for Thomas J. Petters. The settlement is subject to final documentation and Court approval.
Wendel. Since 2012, the French criminal authorities have been investigating a series of transactions entered into by senior managers of Wendel Investissement (“Wendel”) during the period from 2004 through 2007 to restructure their shareholdings in Wendel. JPMorgan Chase Bank, N.A., Paris branch provided financing for the transactions to a number of managers of Wendel in 2007. JPMorgan Chase has cooperated with the investigation. The investigating judges issued an ordonnance de renvoi in November 2016, referring JPMorgan Chase Bank, N.A. to the French tribunal correctionnel for alleged complicity in tax fraud. No date for trial has been set by the court. The Firm has been successful in legal challenges made to the Court of Cassation, France’s highest court, with respect to the criminal proceedings. In January 2018, the Paris Court of Appeal issued a decision cancelling the mise en examen of JPMorgan Chase Bank, N.A. The Firm is requesting clarification from the Court of Cassation, concerningFrance’s highest court, ruled in September 2018 that a mise en examen is a prerequisite for an ordonnance de renvoi and in January 2020 ordered the Courtannulment of Appeal’s decision before seeking direction on next steps in the criminal proceedings.ordonnance de renvoi referring JPMorgan Chase Bank, N.A. to the French tribunal correctionnel. In addition, a number of the managers have commenced civil proceedings against JPMorgan Chase Bank, N.A. The claims are separate, involve different allegations and are at various stages of proceedings. * * * In addition to the various legal proceedings discussed above, JPMorgan Chase and its subsidiaries are named as defendants or are otherwise involved in a substantial number of other legal proceedings. The Firm believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and it intends to defend itself vigorously. Additional legal proceedings may be initiated from time to time in the future. The Firm has established reserves for several hundred of its currently outstanding legal proceedings. In accordance with the provisions of U.S. GAAP for contingencies, the Firm accrues for a litigation-related liability when it is probable that such a liability has been incurred and the amount of the loss can be reasonably estimated. The Firm evaluates its outstanding legal proceedings each quarter to assess its litigation reserves, and makes adjustments in such reserves, upwards or downward, as appropriate, based on management’s best judgment after consultation with counsel. DuringThe Firm’s legal expense/(benefit) was $239 million, $72 million and $(35) million for the years ended December 31, 2017, 20162019, 2018 and 2015, the Firm’s legal expense was a benefit of $(35) million, a benefit of $(317) million, and an expense of $3.0 billion,2017, respectively. There is no assurance that the Firm’s litigation reserves will not need to be adjusted in the future. In view of the inherent difficulty of predicting the outcome of legal proceedings, particularly where the claimants seek very large or indeterminate damages, or where the matters present novel legal theories, involve a large number of parties or are in early stages of discovery, the Firm cannot state with confidence what will be the eventual outcomes of the currently pending matters, the timing of their ultimate resolution or the eventual losses, fines, penalties or
| | | | JPMorgan Chase & Co./2017 Annual Report | | 271 |
Notes to consolidated financial statements
consequences related to those matters. JPMorgan Chase believes, based upon its current knowledge and after consultation with counsel, consideration of the material legal proceedings described above and after taking into account its current litigation reserves and its estimated aggregate range of possible losses, that the other legal proceedings currently pending against it should not have a material adverse effect on the Firm’s consolidated financial condition. The Firm notes, however, that in light of the uncertainties involved in such proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves it has currently accrued or that a matter will not have material reputational consequences. As a result, the outcome of a particular matter may be material to JPMorgan Chase’s operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of JPMorgan Chase’s income for that period.
| | | | 272 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 281 |
Notes to consolidated financial statements
Note 3031 – International operations The following table presents income statement-statement and balance sheet-related information for JPMorgan Chase by major international geographic area. The Firm defines international activities for purposes of this footnote presentation as business transactions that involve clients residing outside of the U.S., and the information presented below is based predominantly on the domicile of the client, the location from which the client relationship is managed, booking location or the location of the trading desk. However, many of the Firm’s U.S. operations serve international businesses. As the Firm’s operations are highly integrated, estimates and subjective assumptions have been made to apportion revenue and expense between U.S. and international operations. These estimates and assumptions are consistent with the allocations used for the Firm’s segment reporting as set forth in Note 31.32. The Firm’s long-lived assets for the periods presented are not considered by management to be significant in relation to total assets. The majority of the Firm’s long-lived assets are located in the U.S. | | As of or for the year ended December 31, (in millions) | | Revenue(b) | | Expense(c) | | Income before income tax expense | | Net income | | Total assets |
| | | Revenue(c) | | Expense(d) | | Income before income tax expense | | Net income | | Total assets |
| | 2017 | | | | | | | | | | | | | 2019 | | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 14,426 |
| | $ | 8,653 |
| | $ | 5,773 |
| | $ | 4,007 |
| | $ | 407,145 |
| (d) | | $ | 15,902 |
| | $ | 9,977 |
| | $ | 5,925 |
| | $ | 4,084 |
| | $ | 388,353 |
| (e) | Asia/Pacific | | 5,805 |
| | 4,277 |
| | 1,528 |
| | 852 |
| | 163,718 |
| | | Asia-Pacific | | | 7,270 |
| | 5,014 |
| | 2,256 |
| | 1,511 |
| | 183,408 |
| | Latin America/Caribbean | | 1,994 |
| | 1,523 |
| | 471 |
| | 299 |
| | 44,569 |
| | | 2,411 |
| | 1,561 |
| | 850 |
| | 613 |
| | 47,836 |
| | Total international | | 22,225 |
| | 14,453 |
| | 7,772 |
| | 5,158 |
| | 615,432 |
| | | 25,583 |
| | 16,552 |
| | 9,031 |
| | 6,208 |
| | 619,597 |
| | North America(a) | | 77,399 |
| | 49,271 |
| | 28,128 |
| | 19,283 |
| | 1,918,168 |
| | | 90,044 |
| | 54,530 |
| | 35,514 |
| | 30,223 |
| | 2,067,782 |
| | Total | | $ | 99,624 |
| | $ | 63,724 |
| | $ | 35,900 |
| | $ | 24,441 |
| | $ | 2,533,600 |
| | | $ | 115,627 |
| | $ | 71,082 |
| | $ | 44,545 |
| | $ | 36,431 |
| | $ | 2,687,379 |
| | 2016 | | | | | | | | | | | | | 2018(b) | | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 13,842 |
| | $ | 8,550 |
| | $ | 5,292 |
| | $ | 3,783 |
| | $ | 394,134 |
| (d) | | $ | 16,468 |
| | $ | 10,033 |
| | $ | 6,435 |
| | $ | 4,583 |
| | $ | 426,129 |
| (e) | Asia/Pacific | | 6,112 |
| | 4,213 |
| | 1,899 |
| | 1,212 |
| | 156,946 |
| | | Asia-Pacific | | | 6,997 |
| | 4,877 |
| | 2,120 |
| | 1,491 |
| | 171,637 |
| | Latin America/Caribbean | | 1,959 |
| | 1,632 |
| | 327 |
| | 208 |
| | 42,971 |
| | | 2,365 |
| | 1,301 |
| | 1,064 |
| | 745 |
| | 43,870 |
| | Total international | | 21,913 |
| | 14,395 |
| | 7,518 |
| | 5,203 |
| | 594,051 |
| | | 25,830 |
| | 16,211 |
| | 9,619 |
| | 6,819 |
| | 641,636 |
| | North America(a) | | 73,755 |
| | 46,737 |
| | 27,018 |
| | 19,530 |
| | 1,896,921 |
| | | 83,199 |
| | 52,054 |
| | 31,145 |
| | 25,655 |
| | 1,980,896 |
| | Total | | $ | 95,668 |
| | $ | 61,132 |
| | $ | 34,536 |
| | $ | 24,733 |
| | $ | 2,490,972 |
| | | $ | 109,029 |
| | $ | 68,265 |
| | $ | 40,764 |
| | $ | 32,474 |
| | $ | 2,622,532 |
| | 2015 | | | | | | | | | | | | | 2017(b) | | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 14,206 |
| | $ | 8,871 |
| | $ | 5,335 |
| | $ | 4,158 |
| | $ | 347,647 |
| (d) | | $ | 15,505 |
| | $ | 9,235 |
| | $ | 6,270 |
| | $ | 4,320 |
| | $ | 409,204 |
| (e) | Asia/Pacific | | 6,151 |
| | 4,241 |
| | 1,910 |
| | 1,285 |
| | 138,747 |
| | | Asia-Pacific | | | 5,835 |
| | 4,523 |
| | 1,312 |
| | 725 |
| | 163,823 |
| | Latin America/Caribbean | | 1,923 |
| | 1,508 |
| | 415 |
| | 253 |
| | 48,185 |
| | | 1,959 |
| | 1,527 |
| | 432 |
| | 274 |
| | 42,403 |
| | Total international | | 22,280 |
| | 14,620 |
| | 7,660 |
| | 5,696 |
| | 534,579 |
| | | 23,299 |
| | 15,285 |
| | 8,014 |
| | 5,319 |
| | 615,430 |
| | North America(a) | | 71,263 |
| | 48,221 |
| | 23,042 |
| | 18,746 |
| | 1,817,119 |
| | | 77,406 |
| | 49,520 |
| | 27,886 |
| | 19,122 |
| | 1,918,170 |
| | Total | | $ | 93,543 |
| | $ | 62,841 |
| | $ | 30,702 |
| | $ | 24,442 |
| | $ | 2,351,698 |
| | | $ | 100,705 |
| | $ | 64,805 |
| | $ | 35,900 |
| | $ | 24,441 |
| | $ | 2,533,600 |
| |
| | (a) | Substantially reflects the U.S. |
| | (b) | The prior period amounts have been revised to conform with the current period presentation. |
| | (c) | Revenue is composed of net interest income and noninterest revenue. |
| | (c)(d) | Expense is composed of noninterest expense and the provision for credit losses. |
| | (d)(e) | Total assets for the U.K. were approximately $310$305 billion, $310$297 billion, and $306$310 billion at December 31, 2017, 20162019, 2018 and 2015,2017, respectively. |
| | | | 282 | | JPMorgan Chase & Co./2017 Annual Report | | 2732019 Form 10-K |
Notes to consolidated financial statements
Note 3132 – Business segments The Firm is managed on a line of businessan LOB basis. There are four major reportable business segments – Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking and Asset & Wealth Management. In addition, there is a Corporate segment.The business segments are determined based on the products and services provided, or the type of customer served, and they reflect the manner in which financial information is currently evaluated by management. Results of these lines of businessthe Firm’s Operating Committee. Segment results are presented on a managed basis. For a further discussion concerning JPMorgan Chase’s business segments, see Refer to Segment results of this footnote.footnote for a further discussion of JPMorgan Chase’s business segments. The following is a description of each of the Firm’s business segments, and the products and services they provide to their respective client bases. Consumer & Community Banking CCBConsumer & Community Banking offers services to consumers and businesses through bank branches, ATMs, online,digital (including mobile and online) and telephone banking. CCB is organized into Consumer & Business Banking (including Consumer Banking/Chase Wealth Management and Business Banking), Home Lending (including Home Lending Production, Home Lending Servicing and Real Estate Portfolios) and Card, Merchant Services & Auto. Consumer & Business Banking offers deposit and investment products and services to consumers, and lending, deposit, and cash management and payment solutions to small businesses. Home Lending includes mortgage origination and servicing activities, as well as portfolios consisting of residential mortgages and home equity loans. Card, Merchant Services & Auto issues credit cards to consumers and small businesses, offers payment processing services to merchants, and originates and services auto loans and leases.
Corporate & Investment Bank The CIB,Corporate & Investment Bank, which consists of Banking and Markets & InvestorSecurities Services, offers a broad suite of investment banking, market-making, prime brokerage, and treasury and securities products and services to a global client base of corporations, investors, financial institutions, government and municipal entities. Banking offers a full range of investment banking products and services in all major capital markets, including advising on corporate strategy and structure, capital-raising in equity and debt markets, as well as loan origination and syndication. Banking also includes Treasury Services, which provides transaction services, consisting of cash management and liquidity solutions. Markets & InvestorSecurities Services is a global market- makermarket-maker in cash securities and derivative instruments, and also offers sophisticated risk
management solutions, prime brokerage, and research. Markets & InvestorSecurities Services also includes Securities Services, a leading global custodian which provides custody, fund accounting and administration, and securities lending products principally for asset managers, insurance companies and public and private investment funds. Commercial Banking CB delivers extensive industry knowledge, local expertise and dedicated service to U.S. and U.S. multinational clients, including corporations, municipalities, financial institutions and nonprofit entities with annual revenue generally ranging from $20 million to $2 billion. In addition, CB provides financing to real estate investors and owners. Partnering with the Firm’s other businesses, CBCommercial Banking provides comprehensive financial solutions, including lending, treasury services, investment banking and asset management to meet its clients’ domesticproducts across three primary client segments: Middle Market Banking, Corporate Client Banking and international financial needs.Commercial Real Estate Banking. Other includes amounts not aligned with a primary client segment.
Middle Market Banking covers small business and midsized corporations, local governments and nonprofit clients.
Corporate Client Banking covers large corporations.
Commercial Real Estate Banking covers investors, developers, and owners of multifamily, office, retail, industrial and affordable housing properties.
Asset & Wealth Management AWM,Asset & Wealth Management, with client assets of $2.8$3.2 trillion, is a global leader in investment and wealth management. AWM clients include institutions, high-net-worth individuals and retail investors in many major markets throughout the world. AWM offers investment management across most major asset classes including equities, fixed income, alternatives and money market funds. AWM also offers multi-asset investment management, providing solutions for a broad range of clients’ investment needs. For Wealth Management clients, AWM also provides retirement products and services, brokerage and banking services including trusts and estates, loans, mortgages and deposits. The majority of AWM’s client assets are in actively managed portfolios.
Corporate The Corporate segment consists of Treasury and CIOChief Investment Office and Other Corporate, which includes corporate staff unitsfunctions and expense that is centrally managed. Treasury and CIO areis predominantly responsible for measuring, monitoring, reporting and managing the Firm’s liquidity, funding, andcapital, structural interest rate and foreign exchange risks, as well as executing the Firm’s capital plan.risks. The major Other Corporate unitsfunctions include Real Estate, Enterprise Technology, Legal, Compliance,Corporate Finance, Human Resources, Internal Audit, Risk Management, Oversight &Compliance, Control Management, Corporate Responsibility and various Other Corporate groups.
| | | | 274 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 283 |
Notes to consolidated financial statements
Segment results The following tables providetable provides a summary of the Firm’s segment results as of or for the years ended December 31, 2017, 20162019, 2018 and 20152017, on a managed basis.The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications to present total net revenue (noninterest revenue and net interest income) for the Firm (and each of the reportable business segmentssegments) on aan FTE basis. Accordingly, revenue from investments receivingthat receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable investments and securities. This allows management to assess the comparability of revenue from year-to-year arising from both taxable and tax-exempt sources. The corresponding income tax impact related to tax-exempt items is recorded within income tax expense/(benefit). These adjustments have no impact on net income as reported by the Firm as a whole or by the LOBs. Effective January 1, 2017, the
Business segment capital allocation Each business segment is allocated capital by taking into consideration a variety of factors including capital levels of similarly rated peers and applicable regulatory capital requirements. ROE is measured and internal targets for expected returns are established as key measures of a business segment’s performance. The Firm’s methodology used to allocate capital to the Firm’s business segments was updated. The newallocation methodology incorporates Basel III Standardized Fully Phased-In RWA, (as well as Basel III Advanced Fully Phased-In RWA),RWA, leverage, the GSIB surcharge, and a simulation of capital in a severe stress environment. The methodology will continuePeriodically, the assumptions and methodologies used to be weighted towards Basel III Advanced Fully Phased-In RWA becauseallocate capital are assessed and as a result, the Firm believes itcapital allocated to be the best proxy for economic risk.LOBs may change. Segment results and reconciliation | | (Table continued on next page) | | (Table continued on next page) | | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | | Consumer & Community Banking | | Corporate & Investment Bank | | Commercial Banking | | Asset & Wealth Management | | Consumer & Community Banking | | Corporate & Investment Bank | | Commercial Banking | | Asset & Wealth Management | | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | | 2017 | 2016 | 2015 | | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 | Noninterest revenue | | $ | 14,710 |
| $ | 15,255 |
| $ | 15,592 |
| | $ | 24,375 |
| $ | 24,325 |
| $ | 23,693 |
| | $ | 2,522 |
| $ | 2,320 |
| $ | 2,365 |
| | $ | 9,539 |
| $ | 9,012 |
| $ | 9,563 |
| | $ | 18,642 |
| $ | 16,260 |
| $ | 14,710 |
| | $ | 29,142 |
| $ | 26,968 |
| $ | 24,539 |
| | $ | 2,430 |
| $ | 2,343 |
| $ | 2,522 |
| | $ | 10,816 |
| $ | 10,539 |
| $ | 10,456 |
| Net interest income | | 31,775 |
| 29,660 |
| 28,228 |
| | 10,118 |
| 10,891 |
| 9,849 |
| | 6,083 |
| 5,133 |
| 4,520 |
| | 3,379 |
| 3,033 |
| 2,556 |
| | 37,241 |
| 35,819 |
| 31,775 |
| | 9,156 |
| 9,480 |
| 10,118 |
| | 6,554 |
| 6,716 |
| 6,083 |
| | 3,500 |
| 3,537 |
| 3,379 |
| Total net revenue | | 46,485 |
| 44,915 |
| 43,820 |
| | 34,493 |
| 35,216 |
| 33,542 |
| | 8,605 |
| 7,453 |
| 6,885 |
| | 12,918 |
| 12,045 |
| 12,119 |
| | 55,883 |
| 52,079 |
| 46,485 |
| | 38,298 |
| 36,448 |
| 34,657 |
| | 8,984 |
| 9,059 |
| 8,605 |
| | 14,316 |
| 14,076 |
| 13,835 |
| Provision for credit losses | | 5,572 |
| 4,494 |
| 3,059 |
| | (45 | ) | 563 |
| 332 |
| | (276 | ) | 282 |
| 442 |
| | 39 |
| 26 |
| 4 |
| | 4,952 |
| 4,753 |
| 5,572 |
| | 277 |
| (60 | ) | (45 | ) | | 296 |
| 129 |
| (276 | ) | | 61 |
| 53 |
| 39 |
| Noninterest expense | | 26,062 |
| 24,905 |
| 24,909 |
| | 19,243 |
| 18,992 |
| 21,361 |
| | 3,327 |
| 2,934 |
| 2,881 |
| | 9,301 |
| 8,478 |
| 8,886 |
| | 28,896 |
| 27,835 |
| 26,062 |
| | 21,519 |
| 20,918 |
| 19,407 |
| | 3,500 |
| 3,386 |
| 3,327 |
| | 10,515 |
| 10,353 |
| 10,218 |
| Income/(loss) before income tax expense/(benefit) | | 14,851 |
| 15,516 |
| 15,852 |
| | 15,295 |
| 15,661 |
| 11,849 |
| | 5,554 |
| 4,237 |
| 3,562 |
| | 3,578 |
| 3,541 |
| 3,229 |
| | 22,035 |
| 19,491 |
| 14,851 |
| | 16,502 |
| 15,590 |
| 15,295 |
| | 5,188 |
| 5,544 |
| 5,554 |
| | 3,740 |
| 3,670 |
| 3,578 |
| Income tax expense/(benefit) | | 5,456 |
| 5,802 |
| 6,063 |
| | 4,482 |
| 4,846 |
| 3,759 |
| | 2,015 |
| 1,580 |
| 1,371 |
| | 1,241 |
| 1,290 |
| 1,294 |
| | 5,394 |
| 4,639 |
| 5,456 |
| | 4,580 |
| 3,817 |
| 4,482 |
| | 1,264 |
| 1,307 |
| 2,015 |
| | 907 |
| 817 |
| 1,241 |
| Net income/(loss) | | $ | 9,395 |
| $ | 9,714 |
| $ | 9,789 |
| | $ | 10,813 |
| $ | 10,815 |
| $ | 8,090 |
| | $ | 3,539 |
| $ | 2,657 |
| $ | 2,191 |
| | $ | 2,337 |
| $ | 2,251 |
| $ | 1,935 |
| | $ | 16,641 |
| $ | 14,852 |
| $ | 9,395 |
| | $ | 11,922 |
| $ | 11,773 |
| $ | 10,813 |
| | $ | 3,924 |
| $ | 4,237 |
| $ | 3,539 |
| | $ | 2,833 |
| $ | 2,853 |
| $ | 2,337 |
| Average equity | | $ | 51,000 |
| $ | 51,000 |
| $ | 51,000 |
| | $ | 70,000 |
| $ | 64,000 |
| $ | 62,000 |
| | $ | 20,000 |
| $ | 16,000 |
| $ | 14,000 |
| | $ | 9,000 |
| $ | 9,000 |
| $ | 9,000 |
| | $ | 52,000 |
| $ | 51,000 |
| $ | 51,000 |
| | $ | 80,000 |
| $ | 70,000 |
| $ | 70,000 |
| | $ | 22,000 |
| $ | 20,000 |
| $ | 20,000 |
| | $ | 10,500 |
| $ | 9,000 |
| $ | 9,000 |
| Total assets | | 552,601 |
| 535,310 |
| 502,652 |
| | 826,384 |
| 803,511 |
| 748,691 |
| | 221,228 |
| 214,341 |
| 200,700 |
| | 151,909 |
| 138,384 |
| 131,451 |
| | 539,090 |
| 557,441 |
| 552,601 |
| | 908,153 |
| 903,051 |
| 826,384 |
| | 220,514 |
| 220,229 |
| 221,228 |
| | 182,004 |
| 170,024 |
| 151,909 |
| Return on equity | | 17 | % | 18 | % | 18 | % | | 14 | % | 16 | % | 12 | % | | 17 | % | 16 | % | 15 | % | | 25 | % | 24 | % | 21 | % | | 31 | % | 28 | % | 17 | % | | 14 | % | 16 | % | 14 | % | | 17 | % | 20 | % | 17 | % | | 26 | % | 31 | % | 25 | % | Overhead ratio | | 56 |
| 55 |
| 57 |
| | 56 |
| 54 |
| 64 |
| | 39 |
| 39 |
| 42 |
| | 72 |
| 70 |
| 73 |
| | 52 |
| 53 |
| 56 |
| | 56 |
| 57 |
| 56 |
| | 39 |
| 37 |
| 39 |
| | 73 |
| 74 |
| 74 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (table continued from above) | | | | | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | | Corporate | | Reconciling Items(a) | | Total | | 2017 | 2016 | 2015 | | 2017 | | 2016 | 2015 | | 2017 | 2016 | 2015 | Noninterest revenue | | $ | 1,085 |
| $ | 938 |
| $ | 800 |
| | $ | (2,704 | ) | (b) | $ | (2,265 | ) | $ | (1,980 | ) | | $ | 49,527 |
| $ | 49,585 |
| $ | 50,033 |
| Net interest income | | 55 |
| (1,425 | ) | (533 | ) | | (1,313 | ) | | (1,209 | ) | (1,110 | ) | | 50,097 |
| 46,083 |
| 43,510 |
| Total net revenue | | 1,140 |
| (487 | ) | 267 |
| | (4,017 | ) | | (3,474 | ) | (3,090 | ) | | 99,624 |
| 95,668 |
| 93,543 |
| Provision for credit losses | | — |
| (4 | ) | (10 | ) | | — |
| | — |
| — |
| | 5,290 |
| 5,361 |
| 3,827 |
| Noninterest expense | | 501 |
| 462 |
| 977 |
| | — |
| | — |
| — |
| | 58,434 |
| 55,771 |
| 59,014 |
| Income/(loss) before income tax expense/(benefit) | | 639 |
| (945 | ) | (700 | ) | | (4,017 | ) | | (3,474 | ) | (3,090 | ) | | 35,900 |
| 34,536 |
| 30,702 |
| Income tax expense/(benefit) | | 2,282 |
| (241 | ) | (3,137 | ) | | (4,017 | ) | (b) | (3,474 | ) | (3,090 | ) | | 11,459 |
| 9,803 |
| 6,260 |
| Net income/(loss) | | $ | (1,643 | ) | $ | (704 | ) | $ | 2,437 |
| | $ | — |
| | $ | — |
| $ | — |
| | $ | 24,441 |
| $ | 24,733 |
| $ | 24,442 |
| Average equity | | $ | 80,350 |
| $ | 84,631 |
| $ | 79,690 |
| | $ | — |
| | $ | — |
| $ | — |
| | $ | 230,350 |
| $ | 224,631 |
| $ | 215,690 |
| Total assets | | 781,478 |
| 799,426 |
| 768,204 |
| | NA |
| | NA |
| NA |
| | 2,533,600 |
| 2,490,972 |
| 2,351,698 |
| Return on equity | | NM |
| NM |
| NM |
| | NM |
| | NM |
| NM |
| | 10 | % | 10 | % | 11 | % | Overhead ratio | | NM |
| NM |
| NM |
| | NM |
| | NM |
| NM |
| | 59 |
| 58 |
| 63 |
|
| | | | 284 | | JPMorgan Chase & Co./2019 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | | Corporate | | Reconciling Items(a) | | Total | | 2019 | 2018 | 2017 | | 2019 | 2018 | | 2017 | | 2019 | 2018 | 2017 | Noninterest revenue | | $ | (114 | ) | $ | (263 | ) | $ | 1,085 |
| | $ | (2,534 | ) | $ | (1,877 | ) | | $ | (2,704 | ) | (b) | $ | 58,382 |
| $ | 53,970 |
| $ | 50,608 |
| Net interest income | | 1,325 |
| 135 |
| 55 |
| | (531 | ) | (628 | ) | | (1,313 | ) | | 57,245 |
| 55,059 |
| 50,097 |
| Total net revenue | | 1,211 |
| (128 | ) | 1,140 |
| | (3,065 | ) | (2,505 | ) | | (4,017 | ) | | 115,627 |
| 109,029 |
| 100,705 |
| Provision for credit losses | | (1 | ) | (4 | ) | — |
| | — |
| — |
| | — |
| | 5,585 |
| 4,871 |
| 5,290 |
| Noninterest expense | | 1,067 |
| 902 |
| 501 |
| | — |
| — |
| | — |
| | 65,497 |
| 63,394 |
| 59,515 |
| Income/(loss) before income tax expense/(benefit) | | 145 |
| (1,026 | ) | 639 |
| | (3,065 | ) | (2,505 | ) | | (4,017 | ) | | 44,545 |
| 40,764 |
| 35,900 |
| Income tax expense/(benefit) | | (966 | ) | 215 |
| 2,282 |
| | (3,065 | ) | (2,505 | ) | | (4,017 | ) | (b) | 8,114 |
| 8,290 |
| 11,459 |
| Net income/(loss) | | $ | 1,111 |
| $ | (1,241 | ) | $ | (1,643 | ) | | $ | — |
| $ | — |
| | $ | — |
| | $ | 36,431 |
| $ | 32,474 |
| $ | 24,441 |
| Average equity | | $ | 68,407 |
| $ | 79,222 |
| $ | 80,350 |
| | $ | — |
| $ | — |
| | $ | — |
| | $ | 232,907 |
| $ | 229,222 |
| $ | 230,350 |
| Total assets | | 837,618 |
| 771,787 |
| 781,478 |
| | NA |
| NA |
| | NA |
| | 2,687,379 |
| 2,622,532 |
| 2,533,600 |
| Return on equity | | NM |
| NM |
| NM |
| | NM |
| NM |
| | NM |
| | 15 | % | 13 | % | 10 | % | Overhead ratio | | NM |
| NM |
| NM |
| | NM |
| NM |
| | NM |
| | 57 |
| 58 |
| 59 |
|
| | (a) | Segment results on a managed basis reflect revenue on a FTE basis with the corresponding income tax impact recorded within income tax expense/(benefit). These adjustments are eliminated in reconciling items to arrive at the Firm’s reported U.S. GAAP results. |
| | (b) | Included $375 million related to tax-oriented investments as a result of the enactment of the TCJA. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 275285 |
Note 3233 – Parent Company The following tables present Parent Company-only financial statements. | | Statements of income and comprehensive income(a) | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| | 2019 |
|
| 2018 |
| | 2017 |
| Income | | | | | | | |
|
|
| | | Dividends from subsidiaries and affiliates: | | | | | | | |
|
|
| | | Bank and bank holding company | | $ | 13,000 |
| | $ | 10,000 |
| | $ | 10,653 |
| | $ | 26,000 |
|
| $ | 32,501 |
| | $ | 13,000 |
| Non-bank(b)(a) | | 540 |
| | 3,873 |
| | 8,172 |
| | — |
|
| 2 |
| | 540 |
| Interest income from subsidiaries | | 72 |
| | 794 |
| | 443 |
| | 223 |
|
| 216 |
| | 72 |
| Other interest income | | 41 |
| | 207 |
| | 234 |
| | — |
|
| — |
| | 41 |
| Other income from subsidiaries, primarily fees: | | | | | | | | Other income from subsidiaries: | | |
|
|
| | | Bank and bank holding company | | 1,553 |
| | 852 |
| | 1,438 |
| | 2,738 |
|
| 515 |
| | 1,553 |
| Non-bank | | (88 | ) | | 1,165 |
| | (1,402 | ) | | 197 |
|
| (444 | ) | | (88 | ) | Other income | | (623 | ) | | (846 | ) | | 1,773 |
| | (1,731 | ) |
| 888 |
| | (623 | ) | Total income | | 14,495 |
| | 16,045 |
| | 21,311 |
| | 27,427 |
|
| 33,678 |
| | 14,495 |
| Expense | | | | | | | |
|
|
| | | Interest expense to subsidiaries and affiliates(b)(a) | | 400 |
| | 105 |
| | 98 |
| | (5,303 | ) |
| 2,291 |
| | 400 |
| Other interest expense | | 5,202 |
| | 4,413 |
| | 3,720 |
| | 13,246 |
|
| 4,581 |
| | 5,202 |
| Noninterest expense | | (1,897 | ) | | 1,643 |
| | 2,611 |
| | 1,992 |
|
| 1,793 |
| | (1,897 | ) | Total expense | | 3,705 |
| | 6,161 |
| | 6,429 |
| | 9,935 |
|
| 8,665 |
| | 3,705 |
| Income before income tax benefit and undistributed net income of subsidiaries | | 10,790 |
| | 9,884 |
| | 14,882 |
| | 17,492 |
|
| 25,013 |
| | 10,790 |
| Income tax benefit | | 1,007 |
| | 876 |
| | 1,640 |
| | 2,033 |
|
| 1,838 |
| | 1,007 |
| Equity in undistributed net income of subsidiaries | | 12,644 |
| | 13,973 |
| | 7,920 |
| | 16,906 |
|
| 5,623 |
| | 12,644 |
| Net income | | $ | 24,441 |
| | $ | 24,733 |
| | $ | 24,442 |
| | $ | 36,431 |
|
| $ | 32,474 |
| | $ | 24,441 |
| Other comprehensive income, net | | 1,056 |
| | (1,521 | ) | | (1,997 | ) | | 3,076 |
|
| (1,476 | ) | | 1,056 |
| Comprehensive income | | $ | 25,497 |
| | $ | 23,212 |
| | $ | 22,445 |
| | $ | 39,507 |
|
| $ | 30,998 |
| | $ | 25,497 |
|
| | Balance sheets(a) | | | | | | | | | December 31, (in millions) | | 2017 |
| | 2016 |
| | 2019 |
| | 2018 |
| Assets | | | | | | | | | Cash and due from banks | | $ | 163 |
| | $ | 113 |
| | $ | 32 |
| | $ | 55 |
| Deposits with banking subsidiaries | | 5,306 |
| | 5,450 |
| | 5,309 |
| | 5,315 |
| Trading assets | | 4,773 |
| | 10,326 |
| | 3,011 |
| | 3,304 |
| Available-for-sale securities | | — |
| | 2,694 |
| | Loans | | — |
| | 77 |
| | Advances to, and receivables from, subsidiaries: | | | | | | | | | Bank and bank holding company | | 2,106 |
| | 524 |
| | 2,358 |
| | 3,334 |
| Non-bank | | 82 |
| | 46 |
| | 84 |
| | 74 |
| Investments (at equity) in subsidiaries and affiliates: | | | | | | | | | Bank and bank holding company | | 451,713 |
| | 422,028 |
| | 471,207 |
| | 449,628 |
| Non-bank(b) | | 422 |
| | 13,103 |
| | Non-bank | | | 1,044 |
| | 1,077 |
| Other assets | | 10,458 |
| | 10,257 |
| | 10,699 |
| | 10,478 |
| Total assets | | $ | 475,023 |
| | $ | 464,618 |
| | $ | 493,744 |
| | $ | 473,265 |
| Liabilities and stockholders’ equity | | | | | | | | | Borrowings from, and payables to, subsidiaries and affiliates(b) | | $ | 23,426 |
| | $ | 13,584 |
| | Borrowings from, and payables to, subsidiaries and affiliates(a) | | | $ | 23,410 |
| | $ | 20,017 |
| Short-term borrowings | | 3,350 |
| | 3,831 |
| | 2,616 |
| | 2,672 |
| Other liabilities | | 8,302 |
| | 11,224 |
| | 9,288 |
| | 8,821 |
| Long-term debt(c)(d) | | 184,252 |
| | 181,789 |
| | Total liabilities(d) | | 219,330 |
| | 210,428 |
| | Long-term debt(b)(c) | | | 197,100 |
| | 185,240 |
| Total liabilities(c) | | | 232,414 |
| | 216,750 |
| Total stockholders’ equity | | 255,693 |
| | 254,190 |
| | 261,330 |
| | 256,515 |
| Total liabilities and stockholders’ equity | | $ | 475,023 |
| | $ | 464,618 |
| | $ | 493,744 |
| | $ | 473,265 |
|
| | Statements of cash flows(a) | Statements of cash flows(a) | | | Statements of cash flows(a) | | | Year ended December 31, (in millions) | | 2017 |
| | 2016 |
| | 2015 |
| | 2019 |
| | 2018 |
| | 2017 |
| Operating activities | | | | | | | | | | | | | Net income | | $ | 24,441 |
| | $ | 24,733 |
| | $ | 24,442 |
| | $ | 36,431 |
| | $ | 32,474 |
| | $ | 24,441 |
| Less: Net income of subsidiaries and affiliates(b)(a) | | 26,185 |
| | 27,846 |
| | 26,745 |
| | 42,906 |
| | 38,125 |
| | 26,185 |
| Parent company net loss | | (1,744 | ) | | (3,113 | ) | | (2,303 | ) | | (6,475 | ) | | (5,651 | ) | | (1,744 | ) | Cash dividends from subsidiaries and affiliates(b)(a) | | 13,540 |
| | 13,873 |
| | 17,023 |
| | 26,000 |
| | 32,501 |
| | 13,540 |
| Other operating adjustments | | 4,635 |
| | (18,166 | ) | | 2,483 |
| | 9,862 |
| | (4,400 | ) | | 4,635 |
| Net cash provided by/(used in) operating activities | | 16,431 |
| | (7,406 | ) | | 17,203 |
| | 29,387 |
| | 22,450 |
| | 16,431 |
| Investing activities | | | | | | | | | | | | | Net change in: | | | | | | | | | | | | | Deposits with banking subsidiaries | | 144 |
| | 60,349 |
| | 30,085 |
| | Available-for-sale securities: | | | | | | | | Proceeds from paydowns and maturities | | — |
| | 353 |
| | 120 |
| | Other changes in loans, net | | 78 |
| | 1,793 |
| | 321 |
| | — |
| | — |
| | 78 |
| Advances to and investments in subsidiaries and affiliates, net | | (280 | ) | | (51,967 | ) | | (81 | ) | | (6 | ) | (e) | 8,036 |
| | (280 | ) | All other investing activities, net | | 17 |
| | 114 |
| | 153 |
| | 71 |
| | 63 |
| | 49 |
| Net cash provided by/(used in) investing activities | | (41 | ) | | 10,642 |
| | 30,598 |
| | 65 |
| | 8,099 |
| | (153 | ) | Financing activities | | | | | | | | | | | | | Net change in: | | | | | | | | | | | | | Borrowings from subsidiaries and affiliates(b) | | 13,862 |
| | 2,957 |
| | (4,062 | ) | | Borrowings from subsidiaries and affiliates(a) | | | 2,941 |
| | (2,273 | ) | | 13,862 |
| Short-term borrowings | | (481 | ) | | 109 |
| | (47,483 | ) | | (56 | ) | | (678 | ) | | (481 | ) | Proceeds from long-term borrowings | | 25,855 |
| | 41,498 |
| | 42,121 |
| | 25,569 |
| | 25,845 |
| | 25,855 |
| Payments of long-term borrowings | | (29,812 | ) | | (29,298 | ) | | (30,077 | ) | | (21,226 | ) | | (21,956 | ) | | (29,812 | ) | Proceeds from issuance of preferred stock | | 1,258 |
| | — |
| | 5,893 |
| | 5,000 |
| | 1,696 |
| | 1,258 |
| Redemption of preferred stock | | (1,258 | ) | | — |
| | — |
| | (4,075 | ) | | (1,696 | ) | | (1,258 | ) | Treasury stock repurchased | | (15,410 | ) | | (9,082 | ) | | (5,616 | ) | | (24,001 | ) | | (19,983 | ) | | (15,410 | ) | Dividends paid | | (8,993 | ) | | (8,476 | ) | | (7,873 | ) | | (12,343 | ) | | (10,109 | ) | | (8,993 | ) | All other financing activities, net | | (1,361 | ) | | (905 | ) | | (840 | ) | | (1,290 | ) | | (1,526 | ) | | (1,361 | ) | Net cash used in financing activities | | (16,340 | ) | | (3,197 | ) | | (47,937 | ) | | (29,481 | ) | | (30,680 | ) | | (16,340 | ) | Net increase/(decrease) in cash and due from banks | | 50 |
| | 39 |
| | (137 | ) | | Cash and due from banks at the beginning of the year | | 113 |
| | 74 |
| | 211 |
| | Cash and due from banks at the end of the year | | $ | 163 |
| | $ | 113 |
| | $ | 74 |
| | Net decrease in cash and due from banks and deposits with banking subsidiaries | | | (29 | ) | | (131 | ) | | (62 | ) | Cash and due from banks and deposits with banking subsidiaries at the beginning of the year | | | 5,370 |
| | 5,501 |
| | 5,563 |
| Cash and due from banks and deposits with banking subsidiaries at the end of the year | | | $ | 5,341 |
| | $ | 5,370 |
| | $ | 5,501 |
| Cash interest paid | | $ | 5,426 |
| | $ | 4,550 |
| | $ | 3,873 |
| | $ | 7,957 |
| | $ | 6,911 |
| | $ | 5,426 |
| Cash income taxes paid, net | | 1,775 |
| | 1,053 |
| | 8,251 |
| | Cash income taxes paid, net(d) | | | 3,910 |
| | 1,782 |
| | 1,775 |
|
| | (a) | In 2016, in connection with the Firm’s 2016 Resolution Submission, the Parent Company established the IHC, and contributed substantially all of its direct subsidiaries (totaling $55.4 billion) other than JPMorgan Chase Bank, N.A., as well as most of its other assets (totaling $160.5 billion) and intercompany indebtedness to the IHC. Total noncash assets contributed were $62.3 billion. In 2017, the Parent Company transferred $16.2 billion of noncash assets to the IHC to complete the contributions to the IHC. |
| | (b) | Affiliates include trusts that issued guaranteed capital debt securities (“issuer trusts”). For further discussion on these issuer trusts, see Note 19. |
| | (b) | At December 31, 2019, long-term debt that contractually matures in 2020 through 2024 totaled $16.4 billion, $20.4 billion, $12.7 billion, $18.6 billion, and $18.2 billion, respectively. |
| | (c) | At December 31, 2017, long-term debt that contractually matures in 2018 through 2022 totaled $20.6 billion, $13.3 billion, $22.4 billion, $20.6 billionRefer to Notes 20 and $10.5 billion, respectively. |
| | (d) | For28 for information regarding the Parent Company’s guarantees of its subsidiaries’ obligations, see Notes 19obligations. |
| | (d) | Represents payments, net of refunds, made by the Parent Company to various taxing authorities and 27.includes taxes paid on behalf of certain of its subsidiaries that are subsequently reimbursed. The reimbursements were $6.4 billion, $1.2 billion, and $4.1 billion for the years ended December 31, 2019, 2018, and 2017, respectively. |
| | (e) | As a result of the merger of Chase Bank USA, N.A. with and into JPMorgan Chase Bank, N.A., JPMorgan Chase Bank, N.A. distributed $13.5 billion to the Parent company as a return of capital, which the Parent company contributed to the IHC. |
| | | | 276286 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Supplementary information
Selected quarterly financial data (unaudited) | | As of or for the period ended | 2017 | | | 2016 | 2019 | | 2018 | | (in millions, except per share, ratio, headcount data and where otherwise noted) | 4th quarter | 3rd quarter | | 2nd quarter | | 1st quarter | | 4th quarter | | 3rd quarter | 2nd quarter | 1st quarter | 4th quarter | 3rd quarter | 2nd quarter | 1st quarter | | 4th quarter | | 3rd quarter | 2nd quarter | 1st quarter | | Selected income statement data | | | | | | | | | | | | | | | | Total net revenue | $ | 24,153 |
| $ | 25,326 |
| | $ | 25,470 |
| | $ | 24,675 |
| | $ | 23,376 |
| | $ | 24,673 |
| $ | 24,380 |
| $ | 23,239 |
| $ | 28,331 |
| $ | 29,341 |
| $ | 28,832 |
| $ | 29,123 |
| | $ | 26,109 |
| | $ | 27,260 |
| $ | 27,753 |
| $ | 27,907 |
| | Total noninterest expense | 14,591 |
| 14,318 |
| | 14,506 |
| | 15,019 |
| | 13,833 |
| | 14,463 |
| 13,638 |
| 13,837 |
| 16,339 |
| 16,422 |
| 16,341 |
| 16,395 |
| | 15,720 |
| | 15,623 |
| 15,971 |
| 16,080 |
| | Pre-provision profit | 9,562 |
| 11,008 |
| | 10,964 |
| | 9,656 |
| | 9,543 |
| | 10,210 |
| 10,742 |
| 9,402 |
| 11,992 |
| 12,919 |
| 12,491 |
| 12,728 |
| | 10,389 |
| | 11,637 |
| 11,782 |
| 11,827 |
| | Provision for credit losses | 1,308 |
| 1,452 |
| | 1,215 |
| | 1,315 |
| | 864 |
| | 1,271 |
| 1,402 |
| 1,824 |
| 1,427 |
| 1,514 |
| 1,149 |
| 1,495 |
| | 1,548 |
| | 948 |
| 1,210 |
| 1,165 |
| | Income before income tax expense | 8,254 |
| 9,556 |
| | 9,749 |
| | 8,341 |
| | 8,679 |
| | 8,939 |
| 9,340 |
| 7,578 |
| 10,565 |
| 11,405 |
| 11,342 |
| 11,233 |
| | 8,841 |
| | 10,689 |
| 10,572 |
| 10,662 |
| | Income tax expense | 4,022 |
| 2,824 |
| | 2,720 |
| | 1,893 |
| | 1,952 |
| | 2,653 |
| 3,140 |
| 2,058 |
| 2,045 |
| 2,325 |
| 1,690 |
| 2,054 |
| | 1,775 |
| | 2,309 |
| 2,256 |
| 1,950 |
| | Net income(a) | $ | 4,232 |
| $ | 6,732 |
| | $ | 7,029 |
| | $ | 6,448 |
| | $ | 6,727 |
| | $ | 6,286 |
| $ | 6,200 |
| $ | 5,520 |
| $ | 8,520 |
| $ | 9,080 |
| $ | 9,652 |
| $ | 9,179 |
| | $ | 7,066 |
| | $ | 8,380 |
| $ | 8,316 |
| $ | 8,712 |
| | Per common share data | | | | | | | | | | | Earnings per share data | | | | | | | | Net income: Basic | $ | 1.08 |
| $ | 1.77 |
| | $ | 1.83 |
| | $ | 1.66 |
| | $ | 1.73 |
| | $ | 1.60 |
| $ | 1.56 |
| $ | 1.36 |
| $ | 2.58 |
| $ | 2.69 |
| $ | 2.83 |
| $ | 2.65 |
| | $ | 1.99 |
| | $ | 2.35 |
| $ | 2.31 |
| $ | 2.38 |
| | Diluted | 1.07 |
| 1.76 |
| | 1.82 |
| | 1.65 |
| | 1.71 |
| | 1.58 |
| 1.55 |
| 1.35 |
| 2.57 |
| 2.68 |
| 2.82 |
| 2.65 |
| | 1.98 |
| | 2.34 |
| 2.29 |
| 2.37 |
| | Average shares: Basic | 3,489.7 |
| 3,534.7 |
| | 3,574.1 |
| | 3,601.7 |
| | 3,611.3 |
| | 3,637.7 |
| 3,675.5 |
| 3,710.6 |
| 3,140.7 |
| 3,198.5 |
| 3,250.6 |
| 3,298.0 |
| | 3,335.8 |
| | 3,376.1 |
| 3,415.2 |
| 3,458.3 |
| | Diluted | 3,512.2 |
| 3,559.6 |
| | 3,599.0 |
| | 3,630.4 |
| | 3,646.6 |
| | 3,669.8 |
| 3,706.2 |
| 3,737.6 |
| 3,148.5 |
| 3,207.2 |
| 3,259.7 |
| 3,308.2 |
| | 3,347.3 |
| | 3,394.3 |
| 3,434.7 |
| 3,479.5 |
| | Market and per common share data | | | | | | | | | | | | | | | | Market capitalization | $ | 366,301 |
| $ | 331,393 |
| | $ | 321,633 |
| | $ | 312,078 |
| | $ | 307,295 |
| | $ | 238,277 |
| $ | 224,449 |
| $ | 216,547 |
| $ | 429,913 |
| $ | 369,133 |
| $ | 357,479 |
| $ | 328,387 |
| | $ | 319,780 |
| | $ | 375,239 |
| $ | 350,204 |
| $ | 374,423 |
| | Common shares at period-end | 3,425.3 |
| 3,469.7 |
| | 3,519.0 |
| | 3,552.8 |
| | 3,561.2 |
| | 3,578.3 |
| 3,612.0 |
| 3,656.7 |
| 3,084.0 |
| 3,136.5 |
| 3,197.5 |
| 3,244.0 |
| | 3,275.8 |
| | 3,325.4 |
| 3,360.9 |
| 3,404.8 |
| | Share price:(b) | | | | | | | | | | | High | $ | 108.46 |
| $ | 95.88 |
| | $ | 92.65 |
| | $ | 93.98 |
| | $ | 87.39 |
| | $ | 67.90 |
| $ | 66.20 |
| $ | 64.13 |
| | Low | 94.96 |
| 88.08 |
| | 81.64 |
| | 83.03 |
| | 66.10 |
| | 58.76 |
| 57.05 |
| 52.50 |
| | Close | 106.94 |
| 95.51 |
| | 91.40 |
| | 87.84 |
| | 86.29 |
| | 66.59 |
| 62.14 |
| 59.22 |
| | Book value per share | 67.04 |
| 66.95 |
| | 66.05 |
| | 64.68 |
| | 64.06 |
| | 63.79 |
| 62.67 |
| 61.28 |
| 75.98 |
| 75.24 |
| 73.88 |
| 71.78 |
| | 70.35 |
| | 69.52 |
| 68.85 |
| 67.59 |
| | TBVPS(c) | 53.56 |
| 54.03 |
| | 53.29 |
| | 52.04 |
| | 51.44 |
| | 51.23 |
| 50.21 |
| 48.96 |
| | TBVPS(a) | | 60.98 |
| 60.48 |
| 59.52 |
| 57.62 |
| | 56.33 |
| | 55.68 |
| 55.14 |
| 54.05 |
| | Cash dividends declared per share | 0.56 |
| 0.56 |
| | 0.50 |
| | 0.50 |
| | 0.48 |
| | 0.48 |
| 0.48 |
| 0.44 |
| 0.90 |
| 0.90 |
| 0.80 |
| 0.80 |
| | 0.80 |
| | 0.80 |
| 0.56 |
| 0.56 |
| | Selected ratios and metrics | | | | | | | | | | | | | | | | ROE | 7 | % | 11 | % | | 12 | % | | 11 | % | | 11 | % | | 10 | % | 10 | % | 9 | % | | ROTCE(c) | 8 |
| 13 |
| | 14 |
| | 13 |
| | 14 |
| | 13 |
| 13 |
| 12 |
| | ROA | 0.66 |
| 1.04 |
| | 1.10 |
| | 1.03 |
| | 1.06 |
| | 1.01 |
| 1.02 |
| 0.93 |
| | ROE(b) | | 14 | % | 15 | % | 16 | % | 16 | % | | 12 | % | | 14 | % | 14 | % | 15 | % | | ROTCE(a)(b) | | 17 |
| 18 |
| 20 |
| 19 |
| | 14 |
| | 17 |
| 17 |
| 19 |
| | ROA(b) | | 1.22 |
| 1.30 |
| 1.41 |
| 1.39 |
| | 1.06 |
| | 1.28 |
| 1.28 |
| 1.37 |
| | Overhead ratio | 60 |
| 57 |
| | 57 |
| | 61 |
| | 59 |
| | 59 |
| 56 |
| 60 |
| 58 |
| 56 |
| 57 |
| 56 |
| | 60 |
| | 57 |
| 58 |
| 58 |
| | Loans-to-deposits ratio | 64 |
| 63 |
| | 63 |
| | 63 |
| | 65 |
| | 65 |
| 66 |
| 64 |
| 61 |
| 62 |
| 63 |
| 64 |
| | 67 |
| | 65 |
| 65 |
| 63 |
| | HQLA (in billions)(d) | $ | 560 |
| $ | 568 |
| | $ | 541 |
| | $ | 528 |
| | $ | 524 |
| | $ | 539 |
| $ | 516 |
| $ | 505 |
| | LCR (average) | 119 | % | 120 | % | | 115 | % | | NA% |
| | NA% |
| | NA% |
| NA% |
| NA% |
| | CET1 capital ratio(e) | 12.2 |
| 12.5 |
| (i) | 12.5 |
| (i) | 12.4 |
| (i) | | 12.3 |
| (i) | 12.0 |
| 12.0 |
| 11.9 |
| | Tier 1 capital ratio(e) | 13.9 |
| 14.1 |
| (i) | 14.2 |
| (i) | 14.1 |
| (i) | | 14.0 |
| (i) | 13.6 |
| 13.6 |
| 13.5 |
| | Total capital ratio(e) | 15.9 |
| 16.1 |
| | 16.0 |
| | 15.6 |
| | 15.5 |
| | 15.1 |
| 15.2 |
| 15.1 |
| | Tier 1 leverage ratio(e) | 8.3 |
| 8.4 |
| | 8.5 |
| | 8.4 |
| | 8.4 |
| | 8.5 |
| 8.5 |
| 8.6 |
| | LCR (average)(c) | | 116 |
| 115 |
| 113 |
| 111 |
| | 113 |
| | 115 |
| 115 |
| 115 |
| | CET1 capital ratio(d) | | 12.4 |
| 12.3 |
| 12.2 |
| 12.1 |
| | 12.0 |
| | 12.0 |
| 12.0 |
| 11.8 |
| | Tier 1 capital ratio(d) | | 14.1 |
| 14.1 |
| 14.0 |
| 13.8 |
| | 13.7 |
| | 13.6 |
| 13.6 |
| 13.5 |
| | Total capital ratio(d) | | 16.0 |
| 15.9 |
| 15.8 |
| 15.7 |
| | 15.5 |
| | 15.4 |
| 15.5 |
| 15.3 |
| | Tier 1 leverage ratio(d) | | 7.9 |
| 7.9 |
| 8.0 |
| 8.1 |
| | 8.1 |
| | 8.2 |
| 8.2 |
| 8.2 |
| | SLR(e) | | 6.3 |
| 6.3 |
| 6.4 |
| 6.4 |
| | 6.4 |
| | 6.5 |
| 6.5 |
| 6.5 |
| | Selected balance sheet data (period-end) | Selected balance sheet data (period-end) | | | | | | | | | | Selected balance sheet data (period-end) | | | | | | | Trading assets | $ | 381,844 |
| $ | 420,418 |
| | $ | 407,064 |
| | $ | 402,513 |
| | $ | 372,130 |
| | $ | 374,837 |
| $ | 380,793 |
| $ | 366,153 |
| $ | 411,103 |
| $ | 495,875 |
| $ | 523,373 |
| $ | 533,402 |
| | $ | 413,714 |
| | $ | 419,827 |
| $ | 418,799 |
| $ | 412,282 |
| | Securities | 249,958 |
| 263,288 |
| | 263,458 |
| | 281,850 |
| | $ | 289,059 |
| | 272,401 |
| 278,610 |
| 285,323 |
| | Investment Securities | | 398,239 |
| 394,251 |
| 307,264 |
| 267,365 |
| | $ | 261,828 |
| | 231,398 |
| 233,015 |
| 238,188 |
| | Loans | 930,697 |
| 913,761 |
| | 908,767 |
| | 895,974 |
| | $ | 894,765 |
| | 888,054 |
| 872,804 |
| 847,313 |
| 959,769 |
| 945,218 |
| 956,889 |
| 956,245 |
| | $ | 984,554 |
| | 954,318 |
| 948,414 |
| 934,424 |
| | Core loans | 863,683 |
| 843,432 |
| | 834,935 |
| | 812,119 |
| | 806,152 |
| | 795,077 |
| 775,813 |
| 746,196 |
| 916,144 |
| 899,572 |
| 908,971 |
| 905,943 |
| | 931,856 |
| | 899,006 |
| 889,433 |
| 870,536 |
| | Average core loans | 850,166 |
| 837,522 |
| | 824,583 |
| | 805,382 |
| | 799,698 |
| | 779,383 |
| 760,721 |
| 737,297 |
| 903,707 |
| 900,567 |
| 905,786 |
| 916,567 |
| | 907,271 |
| | 894,279 |
| 877,640 |
| 861,089 |
| | Total assets | 2,533,600 |
| 2,563,074 |
| | 2,563,174 |
| | 2,546,290 |
| | 2,490,972 |
| | 2,521,029 |
| 2,466,096 |
| 2,423,808 |
| 2,687,379 |
| 2,764,661 |
| 2,727,379 |
| 2,737,188 |
| | 2,622,532 |
| | 2,615,183 |
| 2,590,050 |
| 2,609,785 |
| | Deposits | 1,443,982 |
| 1,439,027 |
| | 1,439,473 |
| | 1,422,999 |
| | 1,375,179 |
| | 1,376,138 |
| 1,330,958 |
| 1,321,816 |
| 1,562,431 |
| 1,525,261 |
| 1,524,361 |
| 1,493,441 |
| | 1,470,666 |
| | 1,458,762 |
| 1,452,122 |
| 1,486,961 |
| | Long-term debt(f) | 284,080 |
| 288,582 |
| | 292,973 |
| | 289,492 |
| | 295,245 |
| | 309,418 |
| 295,627 |
| 290,754 |
| | Long-term debt | | 291,498 |
| 296,472 |
| 288,869 |
| 290,893 |
| | 282,031 |
| | 270,124 |
| 273,114 |
| 274,449 |
| | Common stockholders’ equity | 229,625 |
| 232,314 |
| | 232,415 |
| | 229,795 |
| | 228,122 |
| | 228,263 |
| 226,355 |
| 224,089 |
| 234,337 |
| 235,985 |
| 236,222 |
| 232,844 |
| | 230,447 |
| | 231,192 |
| 231,390 |
| 230,133 |
| | Total stockholders’ equity | 255,693 |
| 258,382 |
| | 258,483 |
| | 255,863 |
| | 254,190 |
| | 254,331 |
| 252,423 |
| 250,157 |
| 261,330 |
| 264,348 |
| 263,215 |
| 259,837 |
| | 256,515 |
| | 258,956 |
| 257,458 |
| 256,201 |
| | Headcount | 252,539 |
| 251,503 |
| | 249,257 |
| | 246,345 |
| | 243,355 |
| | 242,315 |
| 240,046 |
| 237,420 |
| 256,981 |
| 257,444 |
| 254,983 |
| 255,998 |
| | 256,105 |
| | 255,313 |
| 252,942 |
| 253,707 |
| | Credit quality metrics | | | | | | | | | | | | | | | | Allowance for credit losses | $ | 14,672 |
| $ | 14,648 |
| | $ | 14,480 |
| | $ | 14,490 |
| | $ | 14,854 |
| | $ | 15,304 |
| $ | 15,187 |
| $ | 15,008 |
| $ | 14,314 |
| $ | 14,400 |
| $ | 14,295 |
| $ | 14,591 |
| | $ | 14,500 |
| | $ | 14,225 |
| $ | 14,367 |
| $ | 14,482 |
| | Allowance for loan losses to total retained loans | 1.47 | % | 1.49 | % | | 1.49 | % | | 1.52 | % | | 1.55 | % | | 1.61 | % | 1.64 | % | 1.66 | % | 1.39 | % | 1.42 | % | 1.39 | % | 1.43 | % | | 1.39 | % | | 1.39 | % | 1.41 | % | 1.44 | % | | Allowance for loan losses to retained loans excluding purchased credit-impaired loans(g) | 1.27 |
| 1.29 |
| | 1.28 |
| | 1.31 |
| | 1.34 |
| | 1.37 |
| 1.40 |
| 1.40 |
| | Allowance for loan losses to retained loans excluding purchased credit-impaired loans(f) | | 1.31 |
| 1.32 |
| 1.28 |
| 1.28 |
| | 1.23 |
| | 1.23 |
| 1.22 |
| 1.25 |
| | Nonperforming assets | $ | 6,426 |
| $ | 6,154 |
| | $ | 6,432 |
| | $ | 6,826 |
| | $ | 7,535 |
| | $ | 7,779 |
| $ | 7,757 |
| $ | 8,023 |
| $ | 4,497 |
| $ | 5,343 |
| $ | 5,260 |
| $ | 5,616 |
| | $ | 5,190 |
| | $ | 5,034 |
| $ | 5,767 |
| $ | 6,364 |
| | Net charge-offs(h) | 1,264 |
| 1,265 |
| | 1,204 |
| | 1,654 |
| | 1,280 |
| | 1,121 |
| 1,181 |
| 1,110 |
| | Net charge-off rate(h) | 0.55 | % | 0.56 | % | | 0.54 | % | | 0.76 | % | | 0.58 | % | | 0.51 | % | 0.56 | % | 0.53 | % | | Net charge-offs | | 1,494 |
| 1,371 |
| 1,403 |
| 1,361 |
| | 1,236 |
| | 1,033 |
| 1,252 |
| 1,335 |
| | Net charge-off rate | | 0.63 | % | 0.58 | % | 0.60 | % | 0.58 | % | | 0.52 | % | | 0.43 | % | 0.54 | % | 0.59 | % | |
| | (a) | The Firm’s results for the three months ended December 31, 2017, included a $2.4 billion decrease to net income as a result of the enactment of the TCJA. For additional information related to the impact of the TCJA, see Note 24. |
| | (b) | Based on daily prices reported by the New York Stock Exchange. |
| | (c) | TBVPS and ROTCE are non-GAAP financial measures. For further discussion of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Financial Performance Measures on pages 52–54. |
| | (d) | HQLA represents the amount of assets that qualify for inclusion in the liquidity coverage ratio. For December 31, 2017, September 30,2017 and June 30, 2017 the balance represents the average of quarterly reported results per the U.S. LCR public disclosure requirements effective April 1, 2017 and period-end balances for the remaining periods. For additional information, see HQLA on page 93. |
| | (e) | Ratios presented are calculated under the Basel III Transitional rules and for the capital ratios represent the Collins Floor. See Capital Risk Management on pages 82–91 for additional information on Basel III. |
| | (f) | Included unsecured long-term debt of $218.8 billion, $221.7 billion, $221.0 billion, $212.0 billion, $212.6 billion, $226.8 billion, $220.6 billion, $216.1 billion respectively, for the periods presented. |
| | (g) | Excludes the impact of residential real estate PCI loans, a non-GAAP financial measure. For further discussion of these measures, seeRefer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 52–54,57–59 for further discussion of these measures. |
| | (b) | Quarterly ratios are based upon annualized amounts. |
| | (c) | The percentage represents the Firm’s reported average LCR. |
| | (d) | The Basel III capital rules became fully phased-in effective January 1, 2019. Prior to this date, the required capital measures were subject to the transitional rules which, as of December 31, 2018 and September 30, 2018, were the same on a fully phased-in and transitional basis. Refer to Capital Risk Management on pages 85–92 for additional information on these measures. |
| | (e) | The Basel III rule for the SLR became fully phased-in effective January 1, 2018. Refer to Capital Risk Management on pages 85–92 for additional information on these measures. |
| | (f) | This ratio is a non-GAAP financial measure as it excludes the impact of residential real estate PCI loans. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 57–59, and the Allowance for credit losses on pages 117–119. |
| | (h) | Excluding net charge-offs116–117 for further discussion of $467 million related to the student loan portfolio sale, the net charge-off rates for the three months ended March 31, 2017 would have been 0.54%. |
| | (i) | The prior period ratios have been revised to conform with the current period presentation.this measure. |
| | | | 277 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 287 |
Distribution of assets, liabilities and stockholders’ equity; interest rates and interest differentials
Consolidated average balance sheet,sheets, interest and rates Provided below is a summary of JPMorgan Chase’s consolidated average balances, interest rates and interest differentialsrates on a taxable-equivalent basis for the years 20152017 through 2017.2019. Income computed on a taxable-equivalent basis is the income reported in the Consolidated statements of income, statements of income, adjusted to present interest income and average rates earned on assets exempt from income taxes (i.e., federal taxes) on a basis comparable with other taxable investments. The incremental tax rate used for calculating the taxable-equivalent adjustment was approximately 24% in both 2019 and 2018, and 37% in2017 and 38% in 2016 and 2015..
| | (Table continued on next page) | | | | | | | | | | | | | | 2017 | | (Unaudited) | | 2019 | Year ended December 31, (Taxable-equivalent interest and rates; in millions, except rates) | Average balance | | Interest(g) | | Average rate | Average balance | | Interest(h) | | Rate | Assets | | | | | | | | | | | | | Deposits with banks | $ | 438,240 |
| | $ | 4,219 |
| | 0.96 | % | | $ | 280,004 |
| | $ | 3,887 |
| | 1.39 | % | | Federal funds sold and securities purchased under resale agreements | 191,819 |
| | 2,327 |
| | 1.21 |
| | 275,429 |
| | 6,146 |
| | 2.23 |
| | Securities borrowed(a) | 95,324 |
| | (37 | ) | (h) | (0.04 | ) | | 131,291 |
| | 1,574 |
|
| 1.20 |
| | Trading assets – debt instruments(a) | 237,206 |
| | 7,714 |
| | 3.25 |
| | 334,269 |
| | 10,848 |
| | 3.25 |
| | Taxable securities | 223,592 |
| | 5,534 |
| | 2.48 |
| | 284,127 |
| | 7,962 |
| | 2.80 |
| | Non-taxable securities(a)(b) | 45,086 |
| | 2,769 |
| | 6.14 |
| | 35,748 |
| | 1,655 |
| | 4.63 |
| | Total securities | 268,678 |
| | 8,303 |
| | 3.09 |
| (j) | | Total investment securities | | 319,875 |
| | 9,617 |
| | 3.01 |
| (j) | Loans | 906,397 |
| | 41,296 |
| (i) | 4.56 |
| | 954,539 |
| | 50,532 |
| (i) | 5.29 |
| | All other interest-earning assets(b)(c) | 42,928 |
| | 1,863 |
| | 4.34 |
| | 50,084 |
| | 1,967 |
| | 3.93 |
| | Total interest-earning assets(a) | 2,180,592 |
| | 65,685 |
| | 3.01 |
| | 2,345,491 |
| | 84,571 |
| | 3.61 |
| | Allowance for loan losses | (13,453 | ) | | | | | | (13,331 | ) | | | | | | Cash and due from banks | 20,364 |
| | | | | | 20,645 |
| | | | | | Trading assets – equity instruments | 115,913 |
| | | | | | | Trading assets – equity and other instruments(a) | | 114,323 |
| | | | | | Trading assets – derivative receivables | 59,588 |
| | | | | | 53,786 |
| | | | | | Goodwill, MSRs and other intangible assets | 53,999 |
| | | | | | 53,683 |
| | | | | | Other assets | 139,059 |
| | | | | | | All other noninterest-earning assets | | 167,244 |
| | | | | | Total assets | $ | 2,556,062 |
| | | | | | $ | 2,741,841 |
| | | | | | Liabilities | | | | | | | | | | | | | Interest-bearing deposits(a) | $ | 1,013,221 |
| | $ | 2,857 |
| | 0.28 | % | | $ | 1,115,848 |
| | $ | 8,957 |
| | 0.80 | % | | Federal funds purchased and securities loaned or sold under repurchase agreements | 187,386 |
| | 1,611 |
| | 0.86 |
| | 227,994 |
| | 4,630 |
| | 2.03 |
| | Short-term borrowings(c)(d) | 46,532 |
| | 481 |
| | 1.03 |
| | 52,426 |
| | 1,248 |
| | 2.38 |
| | Trading liabilities – debt and other interest-bearing liabilities(d)(e) | 171,814 |
| | 2,070 |
| | 1.21 |
| | | Trading liabilities – debt and all other interest-bearing liabilities(a)(e)(f) | | 182,105 |
| | 2,585 |
| | 1.42 |
| | Beneficial interests issued by consolidated VIEs | 32,457 |
| | 503 |
| | 1.55 |
| | 22,501 |
| | 568 |
| | 2.52 |
| | Long-term debt(a) | 291,489 |
| | 6,753 |
| | 2.32 |
| | 247,968 |
| | 8,807 |
| | 3.55 |
| | Total interest-bearing liabilities(a) | 1,742,899 |
| | 14,275 |
| | 0.82 |
| | 1,848,842 |
| | 26,795 |
| | 1.45 |
| | Noninterest-bearing deposits(a) | 404,165 |
| | | | | | 407,219 |
| | | | | | Trading liabilities – equity instruments(e) | 21,022 |
| | | | | | | Trading liabilities – equity and other instruments(a)(f) | | 31,085 |
| | | | | | Trading liabilities – derivative payables | 44,122 |
| | | | | | 42,560 |
| | | | | | All other liabilities, including the allowance for lending-related commitments(a) | 87,292 |
| | | | | | 151,717 |
| | | | | | Total liabilities | 2,299,500 |
| | | | | | 2,481,423 |
| | | | | | Stockholders’ equity | | | | | | | | | | | | | Preferred stock | 26,212 |
| | | | | | 27,511 |
| | | | | | Common stockholders’ equity | 230,350 |
| | | | | | 232,907 |
| | | | | | Total stockholders’ equity | 256,562 |
| (f) | | | | | 260,418 |
| (g) | | | | | Total liabilities and stockholders’ equity | $ | 2,556,062 |
| | | | | | $ | 2,741,841 |
| | | | | | Interest rate spread(a) | | | | | 2.19 | % | | | | | | 2.16 | % | | Net interest income and net yield on interest-earning assets(a) | | | $ | 51,410 |
| | 2.36 |
| | | | $ | 57,776 |
| | 2.46 |
| |
| | (a) | In the second quarter of 2019, the Firm implemented certain presentation changes that impacted interest income and interest expense, but had no effect on net interest income. These changes were made to align the accounting treatment between the balance sheet and the related interest income or expense, primarily by offsetting interest income and expense for certain prime brokerage-related held-for-investment customer receivables and payables that are currently presented as a single margin account on the balance sheet. In addition, the Firm reclassified balances related to certain instruments and structured notes from interest-earning/bearing to noninterest-earning/bearing assets and liabilities as the associated returns are recorded in principal transactions revenue and not in net interest income. These changes were applied retrospectively and, accordingly, prior period amounts were revised to conform with the current presentation. |
| | (b) | Represents securities that are tax-exempt for U.S. federal income tax purposes. |
| | (b)(c) | Includes prime brokerage-related held-for-investment margin loans,customer receivables, which are classified in accrued interest and accounts receivable, and all other interest-earning assets, includedwhich are classified in other assets.assets on the Consolidated Balance Sheets. |
| | (c)(d) | Includes commercial paper. |
| | (d)(e) | OtherAll other interest-bearing liabilities include brokerageprime brokerage-related customer payables. |
| | (e) | Included trading liabilities – debt and equity instruments of $90.7 billion, $92.8 billion and $81.4 billion for the twelve months ended December 31, 2017, 2016 and 2015, respectively. |
| | (f) | The ratio of average stockholders’ equity to average assets was 10.0% for 2017, 10.2% for 2016, and 9.7% for 2015. The return on average stockholders’ equity, based on net income, was 9.5% for 2017, 9.9% for 2016, and 10.2% for 2015. |
| | (g) | Interest includes the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable. |
| | (h) | Negative interest income and yield is related to client-driven demand for certain securities combined with the impact of low interest rates; this is matched book activity and the negative interest expense on the corresponding securities loaned is recognized in interest expense and reported within trading liabilities – debt, short-term and other liabilities. |
| | (i) | Fees and commissions on loans included in loan interest amounted to $1.0 billion in 2017, $808 million in 2016, and $936 million in 2015. |
| | (j) | The annualized rate for securities based on amortized cost was 3.13% in 2017, 2.99% in 2016, and 2.94% in 2015, and does not give effect to changes in fair value that are reflected in AOCI. |
| | | | 278288 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Within the Consolidated average balance sheets, interest and rates summary, the principal amounts of nonaccrual loans have been included in the average loan balances used to determine the average interest rate earned on loans. ForRefer to Note 12 for additional information on nonaccrual loans, including interest accrued, see Note 12.accrued.
| | | | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | | | 2016 | | 2015 | | Average balance | | Interest(g) | | Average rate | | Average balance | | Interest(g) | | Average rate | | | | | | | | | | | | | | | $ | 392,160 |
| | $ | 1,863 |
| | 0.48 | % | | | $ | 427,963 |
| | $ | 1,250 |
| | 0.29 | % | | 205,368 |
| | 2,265 |
| | 1.10 |
| | | 206,637 |
| | 1,592 |
| | 0.77 |
| | 102,964 |
| | (332 | ) | (h) | (0.32 | ) | | | 105,273 |
| | (532 | ) | (h) | (0.50 | ) | | 215,565 |
| | 7,373 |
| | 3.42 |
| | | 206,385 |
| | 6,694 |
| | 3.24 |
| | 235,211 |
| | 5,538 |
| | 2.35 |
| | | 273,730 |
| | 6,550 |
| | 2.39 |
| | 44,176 |
| | 2,662 |
| | 6.03 |
| | | 42,125 |
| | 2,556 |
| | 6.07 |
| | 279,387 |
| | 8,200 |
| | 2.94 |
| (j) | | 315,855 |
| | 9,106 |
| | 2.88 |
| (j) | 866,378 |
| | 36,866 |
| (i) | 4.26 |
| | | 787,318 |
| | 33,321 |
| (i) | 4.23 |
| | 39,782 |
| | 875 |
| | 2.20 |
| | | 38,811 |
| | 652 |
| | 1.68 |
| | 2,101,604 |
| | 57,110 |
| | 2.72 |
| | | 2,088,242 |
| | 52,083 |
| | 2.49 |
| | (13,965 | ) | | | | | | | (13,885 | ) | | | | | | 18,660 |
| | | | | | | 22,042 |
| | | | | | 95,528 |
| | | | | | | 105,489 |
| | | | | | 70,897 |
| | | | | | | 73,290 |
| | | | | | 53,752 |
| | | | | | | 55,439 |
| | | | | | 135,143 |
| | | | | | | 138,792 |
| | | | | | $ | 2,461,619 |
| | | | | | | $ | 2,469,409 |
| | | | | | | | | | | | | | | | | | | $ | 925,270 |
| | $ | 1,356 |
| | 0.15 | % | | | $ | 876,840 |
| | $ | 1,252 |
| | 0.14 | % | | 178,720 |
| | 1,089 |
| | 0.61 |
| | | 192,510 |
| | 609 |
| | 0.32 |
| | 36,140 |
| | 203 |
| | 0.56 |
| | | 66,956 |
| | 175 |
| | 0.26 |
| | 177,765 |
| | 1,102 |
| | 0.62 |
| | | 178,994 |
| | 557 |
| | 0.31 |
| | 40,180 |
| | 504 |
| | 1.25 |
| | | 49,200 |
| | 435 |
| | 0.88 |
| | 295,573 |
| | 5,564 |
| | 1.88 |
| | | 284,940 |
| | 4,435 |
| | 1.56 |
| | 1,653,648 |
| | 9,818 |
| | 0.59 |
| | | 1,649,440 |
| | 7,463 |
| | 0.45 |
| | 402,698 |
| | | | | | | 418,948 |
| | | | | | 20,737 |
| | | | | | | 17,282 |
| | | | | | 55,927 |
| | | | | | | 64,716 |
| | | | | | 77,910 |
| | | | | | | 79,293 |
| | | | | | 2,210,920 |
| | | | | | | 2,229,679 |
| | | | | | | | | | | | | | | | | | | 26,068 |
| | | | | | | 24,040 |
| | | | | | 224,631 |
| | | | | | | 215,690 |
| | | | | | 250,699 |
| (f) | | | | | | 239,730 |
| (f) | | | | | $ | 2,461,619 |
| | | | | | | $ | 2,469,409 |
| | | | | | | | | | 2.13 | % | | | | | | | 2.04 | % | | | | $ | 47,292 |
| | 2.25 |
| | | | | $ | 44,620 |
| | 2.14 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | | | 2018 | | 2017 | | Average balance | | Interest(h) | | Rate | | Average balance | | Interest(h) | | Rate | | | | | | | | | | | | | | | $ | 405,514 |
| | $ | 5,907 |
| | 1.46 | % | | | $ | 439,663 |
| | $ | 4,238 |
| | 0.96 | % | | 217,150 |
| | 3,819 |
| | 1.76 |
| | | 191,820 |
| | 2,327 |
| | 1.21 |
| | 115,082 |
| | 913 |
| | 0.79 |
| | | 95,324 |
| | 94 |
| | 0.10 |
| | 244,771 |
| | 8,763 |
| | 3.58 |
| | | 227,588 |
| | 7,714 |
| | 3.39 |
| | 194,232 |
| | 5,653 |
| | 2.91 |
| | | 223,592 |
| | 5,534 |
| | 2.48 |
| | 42,456 |
| | 1,987 |
| | 4.68 |
| | | 45,086 |
| | 2,769 |
| | 6.14 |
| | 236,688 |
| | 7,640 |
| | 3.23 |
| (j) | | 268,678 |
| | 8,303 |
| | 3.09 |
| (j) | 944,885 |
| | 47,796 |
| (i) | 5.06 |
| | | 906,397 |
| | 41,296 |
| (i) | 4.56 |
| | 48,818 |
| | 1,890 |
| | 3.87 |
| | | 41,504 |
| | 1,312 |
| | 3.16 |
| | 2,212,908 |
| | 76,728 |
| | 3.47 |
| | | 2,170,974 |
| | 65,284 |
| | 3.01 |
| | (13,269 | ) | | | | | | | (13,453 | ) | | | | | | 21,694 |
| | | | | | | 20,432 |
| | | | | | 118,152 |
| | | | | | | 125,530 |
| | | | | | 60,734 |
| | | | | | | 59,588 |
| | | | | | 54,669 |
| | | | | | | 53,999 |
| | | | | | 154,010 |
| | | | | | | 138,992 |
| | | | | | $ | 2,608,898 |
| | | | | | | $ | 2,556,062 |
| | | | | | | | | | | | | | | | | | | $ | 1,045,037 |
| | $ | 5,973 |
| | 0.57 | % | | | $ | 1,006,184 |
| | $ | 2,857 |
| | 0.28 | % | | 189,282 |
| | 3,066 |
| | 1.62 |
| | | 187,386 |
| | 1,611 |
| | 0.86 |
| | 54,993 |
| | 1,144 |
| | 2.08 |
| | | 38,095 |
| | 481 |
| | 1.26 |
| | 177,788 |
| | 2,387 |
| | 1.34 |
| | | 171,731 |
| | 1,669 |
| | 0.97 |
| | 21,079 |
| | 493 |
| | 2.34 |
| | | 32,457 |
| | 503 |
| | 1.55 |
| | 243,246 |
| | 7,978 |
| | 3.28 |
| | | 263,928 |
| | 6,753 |
| | 2.56 |
| | 1,731,425 |
| | 21,041 |
| | 1.22 |
| | | 1,699,781 |
| | 13,874 |
| | 0.82 |
| | 411,424 |
| | | | | | | 411,202 |
| | | | | | 34,667 |
| | | | | | | 21,104 |
| | | | | | 43,075 |
| | | | | | | 44,122 |
| | | | | | 132,836 |
| | | | | | | 123,291 |
| | | | | | 2,353,427 |
| | | | | | | 2,299,500 |
| | | | | | | | | | | | | | | | | | | 26,249 |
| | | | | | | 26,212 |
| | | | | | 229,222 |
| | | | | | | 230,350 |
| | | | | | 255,471 |
| (g) | | | | | | 256,562 |
| (g) | | | | | $ | 2,608,898 |
| | | | | | | $ | 2,556,062 |
| | | | | | | | | | 2.25 | % | | | | | | | 2.19 | % | | | | $ | 55,687 |
| | 2.52 |
| | | | | $ | 51,410 |
| | 2.37 |
| |
| | (f) | The combined balance of trading liabilities – debt and equity instruments was $101.0 billion, $107.0 billion and $90.7 billion for the years ended December 31, 2019, 2018 and 2017, respectively. |
| | (g) | The ratio of average stockholders’ equity to average assets was 9.5%, 9.8% and 10.0% for the years ended December 31, 2019, 2018 and 2017, respectively. |
The return on average stockholders’ equity, based on net income, was 14.0%, 12.7% and 9.5% for the years ended December 31, 2019, 2018 and 2017, respectively. | | (h) | Interest includes the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable. |
| | (i) | Fees and commissions on loans included in loan interest amounted to $1.2 billion each for the years ended December 31, 2019 and 2018, and $1.0 billion for 2017. |
| | (j) | The annualized rate for securities based on amortized cost was 3.05%, 3.25% and 3.13% for the years ended December 31, 2019, 2018 and 2017, respectively, and does not give effect to changes in fair value that are reflected in AOCI. |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 279289 |
Interest rates and interest differential analysis of net interest income – U.S. and non-U.S.
Presented below is a summary of interest rates and interest differentialsrates segregated between U.S. and non-U.S. operations for the years 20152017 through 20172019. The segregation of U.S. and non-U.S. components is based on the location of the office recording the transaction. Intercompany funding generally consists of dollar-denominated deposits originated in various locations that are centrally managed by Treasury and CIO. | | (Table continued on next page) | | | | | | | | 2017 | 2019 | Year ended December 31, (Taxable-equivalent interest and rates; in millions, except rates) | Average balance | Interest | | Average rate | | (Unaudited) Year ended December 31, (Taxable-equivalent interest and rates; in millions, except rates) | | Average balance | Interest | | Rate | Interest-earning assets | | | | | | | Deposits with banks: | | | | | | | U.S. | $ | 366,177 |
| $ | 4,091 |
| | 1.12 | % | $ | 165,066 |
| $ | 3,588 |
| | 2.17 | % | Non-U.S. | 72,063 |
| 128 |
| | 0.18 |
| 114,938 |
| 299 |
| | 0.26 |
| Federal funds sold and securities purchased under resale agreements: | | | | | | | U.S. | 90,878 |
| 1,360 |
| | 1.50 |
| 150,205 |
| 4,068 |
| | 2.71 |
| Non-U.S. | 100,941 |
| 967 |
| | 0.96 |
| 125,224 |
| 2,078 |
| | 1.66 |
| Securities borrowed:(a) | | | | | | | U.S. | 68,110 |
| (66 | ) | (c) | (0.10 | ) | 92,625 |
| 1,423 |
| | 1.54 |
| Non-U.S. | 27,214 |
| 29 |
| | 0.11 |
| 38,666 |
| 151 |
| | 0.39 |
| Trading assets – debt instruments: | | | | | | | U.S. | 128,293 |
| 4,186 |
| | 3.26 |
| 223,270 |
| 7,125 |
| | 3.19 |
| Non-U.S. | 108,913 |
| 3,528 |
| | 3.24 |
| 110,999 |
| 3,723 |
| | 3.35 |
| Securities: | | | | | Investment securities: | | | | | U.S. | 223,140 |
| 7,490 |
| | 3.36 |
| 287,961 |
| 8,963 |
| | 3.11 |
| Non-U.S. | 45,538 |
| 813 |
| | 1.79 |
| 31,914 |
| 654 |
| | 2.05 |
| Loans: | | | | | | | U.S. | 832,608 |
| 39,439 |
| | 4.74 |
| 875,869 |
| 48,097 |
| | 5.49 |
| Non-U.S. | 73,789 |
| 1,857 |
| | 2.52 |
| 78,670 |
| 2,435 |
| | 3.10 |
| All other interest-earning assets, predominantly U.S.(a) | 42,928 |
| 1,863 |
| | 4.34 |
| 50,084 |
| 1,967 |
| | 3.93 |
| Total interest-earning assets(a) | 2,180,592 |
| 65,685 |
| | 3.01 |
| 2,345,491 |
| 84,571 |
| | 3.61 |
| Interest-bearing liabilities | | | | | | | Interest-bearing deposits: | | | | | | | U.S. | 776,049 |
| 2,223 |
| | 0.29 |
| 850,493 |
| 6,896 |
| | 0.81 |
| Non-U.S. | 237,172 |
| 634 |
| | 0.27 |
| 265,355 |
| 2,061 |
| | 0.78 |
| Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | | | U.S. | 115,574 |
| 1,349 |
| | 1.17 |
| 164,284 |
| 3,989 |
| | 2.43 |
| Non-U.S. | 71,812 |
| 262 |
| | 0.37 |
| 63,710 |
| 641 |
| | 1.01 |
| Trading liabilities – debt, short-term and all other interest-bearing liabilities:(a)(b) | | | | | | | U.S. | 138,470 |
| 1,271 |
|
| 0.92 |
| 147,247 |
| 2,574 |
| | 1.75 |
| Non-U.S. | 79,876 |
| 1,280 |
| | 1.60 |
| 87,284 |
| 1,259 |
| | 1.44 |
| Beneficial interests issued by consolidated VIEs, predominantly U.S. | 32,457 |
| 503 |
| | 1.55 |
| 22,501 |
| 568 |
| | 2.52 |
| Long-term debt: | | | | | | | U.S. | 276,750 |
| 6,745 |
| | 2.44 |
| 241,914 |
| 8,766 |
| | 3.62 |
| Non-U.S. | 14,739 |
| 8 |
| | 0.05 |
| 6,054 |
| 41 |
| | 0.68 |
| Intercompany funding: | | | | | | | U.S. | (2,874 | ) | (25 | ) | | — |
| (42,947 | ) | (1,414 | ) | | — |
| Non-U.S. | 2,874 |
| 25 |
| | — |
| 42,947 |
| 1,414 |
| | — |
| Total interest-bearing liabilities(a) | 1,742,899 |
| 14,275 |
| | 0.82 |
| 1,848,842 |
| 26,795 |
| | 1.45 |
| Noninterest-bearing liabilities(b)(c) | 437,693 |
| | | | 496,649 |
| | | | Total investable funds | $ | 2,180,592 |
| $ | 14,275 |
| | 0.65 | % | $ | 2,345,491 |
| $ | 26,795 |
| | 1.14 | % | Net interest income and net yield: | | $ | 51,410 |
| | 2.36 | % | | $ | 57,776 |
| | 2.46 | % | U.S. | | 46,059 |
| | 2.68 |
| | 52,217 |
| | 2.86 |
| Non-U.S. | | 5,351 |
| | 1.15 |
| | 5,559 |
| | 1.07 |
| Percentage of total assets and liabilities attributable to non-U.S. operations: | | | | | | | Assets | | | 22.5 |
| | | 24.5 |
| Liabilities | | | 21.1 |
| | | 22.1 |
|
| | (a) | In the second quarter of 2019, the Firm implemented certain presentation changes that impacted interest income and interest expense, but had no effect on net interest income. These changes were made to align the accounting treatment between the balance sheet and the related interest income or expense, primarily by offsetting interest income and expense for certain prime brokerage-related held-for-investment customer receivables and payables that are currently presented as a single margin account on the balance sheet. These changes were applied retrospectively and, accordingly, prior period amounts were revised to conform with the current presentation. |
| | (b) | Includes commercial paper. |
| | (b)(c) | Represents the amount of noninterest-bearing liabilities funding interest-earning assets. |
| | (c) | Negative interest income and yield is related to client-driven demand for certain securities combined with the impact of low interest rates; this is matched book activity and the negative interest expense on the corresponding securities loaned is recognized in interest expense and reported within trading liabilities – debt, short-term and other liabilities. |
| | | | 280290 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
For further information, see
Refer to the “Net interest income” discussion in Consolidated Results of Operations on pages 44–46.48–51 for further information.
| | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | 2016 | | 2015 | | Average balance | Interest | | Average rate | | | Average balance | Interest | | Average rate | | | | | | | | | | | | | | | | | | | | | | | | $ | 328,831 |
| $ | 1,708 |
| | 0.52 | % | | | $ | 388,833 |
| $ | 1,021 |
| | 0.26 | % | | 63,329 |
| 155 |
| | 0.25 |
| | | 39,130 |
| 229 |
| | 0.59 |
| | | | | | | | | | | | | 112,902 |
| 1,166 |
| | 1.03 |
| | | 118,945 |
| 900 |
| | 0.76 |
| | 92,466 |
| 1,099 |
| | 1.19 |
| | | 87,692 |
| 692 |
| | 0.79 |
| | | | | | | | | | | | | 73,297 |
| (341 | ) | (c) | (0.46 | ) | | | 78,815 |
| (562 | ) | (c) | (0.71 | ) | | 29,667 |
| 9 |
| | 0.03 |
| | | 26,458 |
| 30 |
| | 0.11 |
| | |
| | | | | | | | | | | 116,211 |
| 3,825 |
| | 3.29 |
| | | 106,465 |
| 3,572 |
| | 3.35 |
| | 99,354 |
| 3,548 |
| | 3.57 |
| | | 99,920 |
| 3,122 |
| | 3.12 |
| | | | | | | | | | | | | 216,726 |
| 6,971 |
| | 3.22 |
| | | 200,240 |
| 6,676 |
| | 3.33 |
| | 62,661 |
| 1,229 |
| | 1.97 |
| | | 115,615 |
| 2,430 |
| | 2.10 |
| | | | | | | | | | | | | 788,213 |
| 35,110 |
| | 4.45 |
| | | 699,664 |
| 31,468 |
| | 4.50 |
| | 78,165 |
| 1,756 |
| | 2.25 |
| | | 87,654 |
| 1,853 |
| | 2.11 |
| | 39,782 |
| 875 |
| | 2.20 |
| | | 38,811 |
| 652 |
| | 1.68 |
| | 2,101,604 |
| 57,110 |
| | 2.72 |
| | | 2,088,242 |
| 52,083 |
| | 2.49 |
| | |
| | | | | | | | | | | |
| | | | | | | | | | | 703,738 |
| 1,029 |
| | 0.15 |
| | | 638,756 |
| 761 |
| | 0.12 |
| | 221,532 |
| 327 |
| | 0.15 |
| | | 238,084 |
| 491 |
| | 0.21 |
| | | | | | | | | | | | | 121,945 |
| 773 |
| | 0.63 |
| | | 140,609 |
| 366 |
| | 0.26 |
| | 56,775 |
| 316 |
| | 0.56 |
| | | 51,901 |
| 243 |
| | 0.47 |
| | |
| | | | | | | | | | | 133,788 |
| 86 |
| | 0.06 |
| | | 166,838 |
| (394 | ) | (c) | (0.24 | ) | | 80,117 |
| 1,219 |
| | 1.52 |
| | | 79,112 |
| 1,126 |
| | 1.42 |
| | 40,180 |
| 504 |
| | 1.25 |
| | | 49,200 |
| 435 |
| | 0.88 |
| | | | | | | | | | | | | 283,169 |
| 5,533 |
| | 1.95 |
| | | 273,033 |
| 4,386 |
| | 1.61 |
| | 12,404 |
| 31 |
| | 0.25 |
| | | 11,907 |
| 49 |
| | 0.41 |
| | |
| | | | | | | | | | | (20,405 | ) | 10 |
| | — |
| | | (50,517 | ) | 7 |
| | — |
| | 20,405 |
| (10 | ) | | — |
| | | 50,517 |
| (7 | ) | | — |
| | 1,653,648 |
| 9,818 |
| | 0.59 |
| | | 1,649,440 |
| 7,463 |
| | 0.45 |
| | 447,956 |
| | | | | | 438,802 |
| | | | | $ | 2,101,604 |
| $ | 9,818 |
| | 0.47 | % | | | $ | 2,088,242 |
| $ | 7,463 |
| | 0.36 | % | | | $ | 47,292 |
| | 2.25 | % | | | | $ | 44,620 |
| | 2.14 | % | | | 40,705 |
| | 2.49 |
| | | | 38,033 |
| | 2.34 |
| | | 6,587 |
| | 1.42 |
| | | | 6,587 |
| | 1.42 |
| | | | | | | | | | | | | | | | 23.1 |
| | | | | | 24.7 |
| | | | | 20.7 |
| | | | | | 21.1 |
| |
| | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | 2018 | | 2017 | | Average balance | Interest | | Rate | | | Average balance | Interest | | Rate | | | | | | | | | | | | | | | | | | | | | | | | $ | 305,117 |
| $ | 5,703 |
| | 1.87 | % | | | $ | 366,814 |
| $ | 4,093 |
| | 1.12 | % | | 100,397 |
| 204 |
| | 0.20 |
| | | 72,849 |
| 145 |
| | 0.20 |
| | | | | | | | | | | | | 102,144 |
| 2,427 |
| | 2.38 |
| | | 90,879 |
| 1,360 |
| | 1.50 |
| | 115,006 |
| 1,392 |
| | 1.21 |
| | | 100,941 |
| 967 |
| | 0.96 |
| | | | | | | | | | | | | 77,027 |
| 825 |
| | 1.07 |
| | | 68,110 |
| 65 |
| | 0.11 |
| | 38,055 |
| 88 |
| | 0.23 |
| | | 27,214 |
| 29 |
| | 0.11 |
| | |
| | | | | | | | | | | 140,221 |
| 5,068 |
| | 3.61 |
| | | 128,157 |
| 4,186 |
| | 3.27 |
| | 104,550 |
| 3,695 |
| | 3.53 |
| | | 99,431 |
| 3,528 |
| | 3.55 |
| | | | | | | | | | | | | 200,883 |
| 6,943 |
| | 3.46 |
| | | 223,140 |
| 7,490 |
| | 3.36 |
| | 35,805 |
| 697 |
| | 1.95 |
| | | 45,538 |
| 813 |
| | 1.79 |
| | | | | | | | | | | | | 864,149 |
| 45,395 |
| | 5.25 |
| | | 832,608 |
| 39,439 |
| | 4.74 |
| | 80,736 |
| 2,401 |
| | 2.97 |
| | | 73,789 |
| 1,857 |
| | 2.52 |
| | 48,818 |
| 1,890 |
| | 3.87 |
| | | 41,504 |
| 1,312 |
| | 3.16 |
| | 2,212,908 |
| 76,728 |
| | 3.47 |
| | | 2,170,974 |
| 65,284 |
| | 3.01 |
| | |
| | | | | | | | | | | |
| | | | | | | | | | | 802,786 |
| 4,562 |
| | 0.57 |
| | | 769,596 |
| 2,223 |
| | 0.29 |
| | 242,251 |
| 1,411 |
| | 0.58 |
| | | 236,588 |
| 634 |
| | 0.27 |
| | | | | | | | | | | | | 117,754 |
| 2,562 |
| | 2.18 |
| | | 115,574 |
| 1,349 |
| | 1.17 |
| | 71,528 |
| 504 |
| | 0.70 |
| | | 71,812 |
| 262 |
| | 0.37 |
| | |
| | | | | | | | | | | 147,512 |
| 2,225 |
| | 1.51 |
| | | 134,826 |
| 927 |
| | 0.69 |
| | 85,269 |
| 1,306 |
| | 1.53 |
| | | 75,000 |
| 1,223 |
| | 1.63 |
| | 21,079 |
| 493 |
| | 2.34 |
| | | 32,457 |
| 503 |
| | 1.55 |
| | | | | | | | | | | | | 239,718 |
| 7,954 |
| | 3.32 |
| | | 262,817 |
| 6,745 |
| | 2.57 |
| | 3,528 |
| 24 |
| | 0.68 |
| | | 1,111 |
| 8 |
| | 0.72 |
| | |
| | | | | | | | | | | (51,933 | ) | (746 | ) | | — |
| | | (2,874 | ) | (25 | ) | | — |
| | 51,933 |
| 746 |
| | — |
| | | 2,874 |
| 25 |
| | — |
| | 1,731,425 |
| 21,041 |
| | 1.22 |
| | | 1,699,781 |
| 13,874 |
| | 0.82 |
| | 481,483 |
| | |
| | | 471,193 |
| | |
| | $ | 2,212,908 |
| $ | 21,041 |
| | 0.95 | % | | | $ | 2,170,974 |
| $ | 13,874 |
| | 0.64 | % | | | $ | 55,687 |
| | 2.52 | % | | | | $ | 51,410 |
| | 2.37 | % | | | 50,236 |
| | 2.95 |
| | | | 46,059 |
| | 2.69 |
| | | 5,451 |
| | 1.05 |
| | | | 5,351 |
| | 1.16 |
| | | | | | | | | | | | | | | | 24.7 |
| | | | | | 22.5 |
| | | | | 22.3 |
| | | | | | 21.1 |
| |
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 281291 |
Changes in net interest income, volume and rate analysis
The table below presents an attribution of net interest income between volume and rate. The attribution between volume and rate is calculated using annual average balances for each category of assets and liabilities shown in the table and the corresponding annual average rates (see(refer to pages 278-282288–292 for more information on average balances and rates). In this analysis, when the change cannot be isolated to either volume or rate, it has been allocated to volume. The average annual rates include the impact of changes in market rates, as well as the impact of any change in composition of the various products within each category of asset or liability. This analysis is calculated separately for each category without consideration of the relationship between categories (for example, the net spread between the rates earned on assets and the rates paid on liabilities that fund those assets). As a result, changes in the granularity or groupings considered in this analysis would produce a different attribution result, and due to the complexities involved, precise allocation of changes in interest rates between volume and rates is inherently complex and judgmental. | | | 2017 versus 2016 | | 2016 versus 2015 | 2019 versus 2018 | | 2018 versus 2017 | | Increase/(decrease) due to change in: | | | | Increase/(decrease) due to change in: | | | | (Unaudited) | | Increase/(decrease) due to change in: | | | | Increase/(decrease) due to change in: | | | Year ended December 31, (On a taxable-equivalent basis; in millions) | Volume | | Rate | | Net change | | Volume | | Rate | | Net change | Volume | | Rate | | Net change | | Volume | | Rate | | Net change | Interest-earning assets | | | | | | | | | | | | | | | | | | | | | | | Deposits with banks: | | | | | | | | | | | | | | | | | | | | | | | U.S. | $ | 410 |
| | $ | 1,973 |
| | $ | 2,383 |
| | $ | (324 | ) | | $ | 1,011 |
| | $ | 687 |
| $ | (3,030 | ) | | $ | 915 |
| | $ | (2,115 | ) | | $ | (1,141 | ) | | $ | 2,751 |
| | $ | 1,610 |
| Non-U.S. | 17 |
| | (44 | ) | | (27 | ) | | 59 |
| | (133 | ) | | (74 | ) | 35 |
| | 60 |
| | 95 |
| | 59 |
| | — |
| | 59 |
| Federal funds sold and securities purchased under resale agreements: | | | | | | | | |
| | | | | | | | | | |
| | | U.S. | (337 | ) | | 531 |
| | 194 |
| | (55 | ) | | 321 |
| | 266 |
| 1,304 |
| | 337 |
| | 1,641 |
| | 267 |
| | 800 |
| | 1,067 |
| Non-U.S. | 81 |
| | (213 | ) | | (132 | ) | | 56 |
| | 351 |
| | 407 |
| 168 |
| | 518 |
| | 686 |
| | 173 |
| | 252 |
| | 425 |
| Securities borrowed:(a) | | | | | | | | |
| | | | | | | | | | |
| | | U.S. | 11 |
| | 264 |
| | 275 |
| | 24 |
| | 197 |
| | 221 |
| 236 |
| | 362 |
| | 598 |
| | 106 |
| | 654 |
| | 760 |
| Non-U.S. | (4 | ) | | 24 |
| | 20 |
| | — |
| | (21 | ) | | (21 | ) | 2 |
| | 61 |
| | 63 |
| | 26 |
| | 33 |
| | 59 |
| Trading assets – debt instruments: | | | | | | | | |
| | | | | | | | | | |
| | | U.S. | 396 |
| | (35 | ) | | 361 |
| | 317 |
| | (64 | ) | | 253 |
| 2,646 |
| | (589 | ) | | 2,057 |
| | 446 |
| | 436 |
| | 882 |
| Non-U.S. | 308 |
| | (328 | ) | | (20 | ) | | (24 | ) | | 450 |
| | 426 |
| 216 |
| | (188 | ) | | 28 |
| | 187 |
| | (20 | ) | | 167 |
| Securities: | | | | | | | | |
| | | | Investment securities: | | | | | | | | | |
| | | U.S. | 216 |
| | 303 |
| | 519 |
| | 515 |
| | (220 | ) | | 295 |
| 2,723 |
| | (703 | ) | | 2,020 |
| | (770 | ) | | 223 |
| | (547 | ) | Non-U.S. | (303 | ) | | (113 | ) | | (416 | ) | | (1,051 | ) | | (150 | ) | | (1,201 | ) | (79 | ) | | 36 |
| | (43 | ) | | (189 | ) | | 73 |
| | (116 | ) | Loans: | | | | | | | | |
| | | | | | | | | | |
| | | U.S. | 2,043 |
| | 2,286 |
| | 4,329 |
| | 3,992 |
| | (350 | ) | | 3,642 |
| 628 |
| | 2,074 |
| | 2,702 |
| | 1,710 |
| | 4,246 |
| | 5,956 |
| Non-U.S. | (110 | ) | | 211 |
| | 101 |
| | (220 | ) | | 123 |
| | (97 | ) | (71 | ) | | 105 |
| | 34 |
| | 212 |
| | 332 |
| | 544 |
| All other interest-earning assets, predominantly U.S.(a) | 137 |
| | 851 |
| | 988 |
| | 21 |
| | 202 |
| | 223 |
| 48 |
| | 29 |
| | 77 |
| | 283 |
| | 295 |
| | 578 |
| Change in interest income(a) | 2,865 |
| | 5,710 |
| | 8,575 |
| | 3,310 |
| | 1,717 |
| | 5,027 |
| 4,826 |
| | 3,017 |
| | 7,843 |
| | 1,369 |
| | 10,075 |
| | 11,444 |
| Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | | | | | U.S. | 209 |
| | 985 |
| | 1,194 |
| | 76 |
| | 192 |
| | 268 |
| 407 |
| | 1,927 |
| | 2,334 |
| | 184 |
| | 2,155 |
| | 2,339 |
| Non-U.S. | 41 |
| | 266 |
| | 307 |
| | (21 | ) | | (143 | ) | | (164 | ) | 165 |
| | 485 |
| | 650 |
| | 44 |
| | 733 |
| | 777 |
| Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | | |
| |
| | | | | | | | |
| |
| | | U.S. | (83 | ) | | 659 |
| | 576 |
| | (113 | ) | | 520 |
| | 407 |
| 1,133 |
| | 294 |
| | 1,427 |
| | 46 |
| | 1,167 |
| | 1,213 |
| Non-U.S. | 54 |
| | (108 | ) | | (54 | ) | | 26 |
| | 47 |
| | 73 |
| (85 | ) | | 222 |
| | 137 |
| | 5 |
| | 237 |
| | 242 |
| Trading liabilities – debt, short-term and other interest-bearing liabilities: (a) | | | | | | |
| |
| | | | Trading liabilities – debt, short-term and all other interest-bearing liabilities: (a)(b) | | | | | | | |
| |
| | | U.S. | 45 |
| | 1,140 |
| | 1,185 |
| | (24 | ) | | 504 |
| | 480 |
| (5 | ) | | 354 |
| | 349 |
| | 203 |
| | 1,095 |
| | 1,298 |
| Non-U.S. | (3 | ) | | 64 |
| | 61 |
| | 14 |
| | 79 |
| | 93 |
| 30 |
| | (77 | ) | | (47 | ) | | 158 |
| | (75 | ) | | 83 |
| Beneficial interests issued by consolidated VIEs, predominantly U.S. | (122 | ) | | 121 |
| | (1 | ) | | (113 | ) | | 182 |
| | 69 |
| 37 |
| | 38 |
| | 75 |
| | (266 | ) | | 256 |
| | (10 | ) | Long-term debt: | | | | | | |
|
| |
|
| |
|
| | | | | | |
|
| |
|
| |
|
| U.S. | (176 | ) | | 1,388 |
| | 1,212 |
| | 219 |
| | 928 |
| | 1,147 |
| 93 |
| | 719 |
| | 812 |
| | (762 | ) | | 1,971 |
| | 1,209 |
| Non-U.S. | 2 |
| | (25 | ) | | (23 | ) | | 1 |
| | (19 | ) | | (18 | ) | 17 |
| | — |
| | 17 |
| | 16 |
| | — |
| | 16 |
| Intercompany funding: | | | | | | | | | | | | | | | | | |
| |
| | | U.S. | 151 |
| | (186 | ) | | (35 | ) | | (17 | ) | | 20 |
| | 3 |
| 293 |
| | (961 | ) | | (668 | ) | | (704 | ) | | (17 | ) | | (721 | ) | Non-U.S. | (151 | ) | | 186 |
| | 35 |
| | 17 |
| | (20 | ) | | (3 | ) | (293 | ) | | 961 |
| | 668 |
| | 704 |
| | 17 |
| | 721 |
| Change in interest expense(a) | (33 | ) | | 4,490 |
| | 4,457 |
| | 65 |
| | 2,290 |
| | 2,355 |
| 1,792 |
| | 3,962 |
| | 5,754 |
| | (372 | ) | | 7,539 |
| | 7,167 |
| Change in net interest income | $ | 2,898 |
| | $ | 1,220 |
| | $ | 4,118 |
| | $ | 3,245 |
| | $ | (573 | ) | | $ | 2,672 |
| $ | 3,034 |
| | $ | (945 | ) | | $ | 2,089 |
| | $ | 1,741 |
| | $ | 2,536 |
| | $ | 4,277 |
|
| | (a) | In the second quarter of 2019, the Firm implemented certain presentation changes that impacted interest income and interest expense, but had no effect on net interest income. These changes were made to align the accounting treatment between the balance sheet and the related interest income or expense, primarily by offsetting interest income and expense for certain prime brokerage-related held-for-investment customer receivables and payables that are currently presented as a single margin account on the balance sheet. These changes were applied retrospectively and, accordingly, prior period amounts were revised to conform with the current presentation. |
| | (b) | Includes commercial paper. |
| | | | 282292 | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K |
Glossary of Terms and Acronyms
2017 Annual Report or 20172019 Form 10-K: Annual report on Form 10-K for year ended December 31, 2017,2019, filed with the U.S. Securities and Exchange Commission.
ABS: Asset-backed securities Active foreclosures: Loans referred to foreclosure where formal foreclosure proceedings are ongoing. Includes both judicial and non-judicial states.AFS: Available-for-sale
AFS: Available-for-sale
ALCO: Asset Liability Committee Allowance for loan losses to total loans: Represents period-end allowance for loan losses divided by retained loans.
Alternative assets: The following types of assets constitute alternative investments – hedge funds, currency, real estate, private equity and other investment funds designed to focus on nontraditional strategies.
AWM: Asset & Wealth Management AOCI: Accumulated other comprehensive income/(loss) ARM: Adjustable rate mortgage(s) AUC: Assets under custody AUM: “Assets under management”: Represent assets managed by AWM on behalf of its Private Banking, Institutional and Retail clients. Includes “Committed capital not Called.” Auto loan and lease origination volume: Dollar amount of auto loans and leases originated. Beneficial interests issued by consolidated VIEs: Represents the interest of third-party holders of debt, equity securities, or other obligations, issued by VIEs that JPMorgan Chase consolidates. Benefit obligation: Refers to the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for OPEB plans. BHC: Bank holding company Card Services includes the Credit Card and Merchant Services businesses. CB: Commercial Banking CBB: Consumer & Business Banking CCAR: Comprehensive Capital Analysis and Review CCB: Consumer & Community Banking CCO: Chief Compliance Officer CCP: “Central counterparty” is a clearing house that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the future performance of open contracts. A CCP becomes a counterparty to trades with market participants through novation, an open offer system, or another legally binding arrangement. CDS: Credit default swaps CECL: Current Expected Credit Losses CEO: Chief Executive Officer CET1 Capital: Common equity Tier 1 Capitalcapital CFTC: Commodity Futures Trading Commission CFO: Chief Financial Officer CFP: Contingency funding plan Chase Bank USA, N.A.: Chase Bank USA, National Association CIB: Corporate & Investment Bank CIO: Chief Investment Office Client assets: Represent assets under management as well as custody, brokerage, administration and deposit accounts. Client deposits and other third-party liabilities: Deposits, as well as deposits that are swept to on-balance sheet liabilities (e.g., commercial paper, federal funds purchased and securities loaned or sold under repurchase agreements) as part of client cash management programs. CLO: Collateralized loan obligations CLTV: Combined loan-to-value Collateral-dependent: A loan is considered to be collateral-dependent when repayment of the loan is expected to be provided solely by the underlying collateral, rather than by cash flows from the borrower’s operations, income or other resources. Merchant Services: isa business that primarily processes transactions for merchants.
Commercial Card: provides a wide range of payment services to corporate and public sector clients worldwide through the commercial card products. Services include procurement, corporate travel and entertainment, expense management services, and business-to-business payment solutions. COO: Chief Operating Officer
Core loans: Represents loans considered central to the Firm’s ongoing businesses; core loans exclude loans classified as trading assets, runoff portfolios, discontinued portfolios and portfolios the Firm has an intent to exit. Credit cycle: A period of time over which credit quality improves, deteriorates and then improves again (or vice versa). The duration of a credit cycle can vary from a couple of years to several years. Credit derivatives: Financial instruments whose value is derived from the credit risk associated with the debt of a third-party issuer (the reference entity) which allow oneparty (the protection purchaser) to transfer that risk to another party (the protection seller). Upon the occurrence of a credit event by the reference entity, which may include, among other events, the bankruptcy or failure to pay its
| | | | JPMorgan Chase & Co./2017 Annual Report | | 283 |
Glossary of Terms and Acronyms
obligations, or certain restructurings of the debt of the reference entity, neither party has recourse to the reference entity. The protection purchaser has recourse to the protection seller for the difference between the face value of the CDS contract and the fair value at the time of settling the credit derivative contract. The determination as to whether a credit event has occurred is generally made by the relevant International Swaps and Derivatives Association (“ISDA”) Determinations Committee. Criticized: Criticized loans, lending-related commitments and derivative receivables that are classified as special
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 293 |
Glossary of Terms and Acronyms
mention, substandard and doubtful categories for regulatory purposes and are generally consistent with a rating of CCC+/Caa1 and below, as defined by S&P and Moody’s.purposes. CRO: Chief Risk Officer CRSC: Conduct Risk Steering Committee CTC: CIO, Treasury and Corporate CVA: Credit valuation adjustmentsadjustment Debit and credit card sales volume: Dollar amount of card member purchases, net of returns. Deposit margin/deposit spread: Represents net interest income expressed as a percentage of average deposits. Distributed denial-of-service attack: The use of a large number of remote computer systems to electronically send a high volume of traffic to a target website to create a service outage at the target. This is a form of cyberattack. DFAST: Dodd-Frank Act Stress Test
Dodd-Frank Act: Wall Street Reform and Consumer Protection Act DOJ: U.S. Department of Justice
DOL: U.S.Department of Labor
DRPC: Board of Directors’ Risk Policy Committee
DVA: Debit valuation adjustment E&P: Exploration & Production
EC: European Commission Eligible LTD: Long-term debt satisfying certain eligibility criteria Embedded derivatives: are implicit or explicit terms or features of a financial instrument that affect some or all of the cash flows or the value of the instrument in a manner similar to a derivative. An instrument containing such terms or features is referred to as a “hybrid.” The component of the hybrid that is the non-derivative instrument is referred to as the “host.” For example, callable debt is a hybrid instrument that contains a plain vanilla debt instrument (i.e., the host) and an embedded option that allows the issuer to redeem the debt issue at a specified date for a specified amount (i.e., the embedded derivative). However, a floating rate instrument is not a hybrid composed of a fixed-rate instrument and an interest rate swap. ERISA: Employee Retirement Income Security Act of 1974 EPS: Earnings per share ETD: “Exchange-traded derivatives”: Derivative contracts that are executed on an exchange and settled via a central clearing house. EU: European Union Fannie Mae: Federal National Mortgage Association FASB: Financial Accounting Standards Board FCA: Financial Conduct Authority FCC: Firmwide Control Committee FDIA: Federal Depository Insurance Act FDIC: Federal Deposit Insurance Corporation Federal Reserve: The Board of the Governors of the Federal Reserve System Fee share: Proportion of fee revenue based on estimates of investment banking fees generated across the industry from investment banking transactions in M&A, equity and debt underwriting, and loan syndications. Source: Dealogic, a third-party provider of investment banking fee competitive analysis and volume-based league tables for the above noted industry products.
FFELP: Federal Family Education Loan Program
FFIEC: Federal Financial Institutions Examination Council FHA: Federal Housing Administration FHLB: Federal Home Loan Bank FICC: TheFixed Income Clearing Corporation FICO score: A measure of consumer credit risk provided by credit bureaus, typically produced from statistical models by Fair Isaac Corporation utilizing data collected by the credit bureaus. Firm: JPMorgan Chase & Co. Forward points: Represents the interest rate differential between two currencies, which is either added to or subtracted from the current exchange rate (i.e., “spot rate”) to determine the forward exchange rate. FRC: Firmwide Risk Committee Freddie Mac: Federal Home Loan Mortgage Corporation Free standing derivatives: a derivative contract entered into either separate and apart from any of the Firm’s other financial instruments or equity transactions. Or, in conjunction with some other transaction and is legally detachable and separately exercisable. FSB: Financial Stability Board FTE: Fully taxable equivalent FVA: Funding valuation adjustment FX: Foreign exchange
| | | | 284 | | JPMorgan Chase & Co./2017 Annual Report |
Glossary of Terms and Acronyms
G7: Group of Seven nations: Countries in the G7 are Canada, France, Germany, Italy, Japan, the U.K. and the U.S. G7 government bonds: Bonds issued by the government of one of the G7 nations. Ginnie Mae:Government National Mortgage Association GSE: Fannie Mae and Freddie Mac
GSIB: Global systemically important banks HAMP: Home affordable modification program
Headcount-related expense: Includes salary and benefits (excluding performance-based incentives), and other noncompensation costs related to employees. HELOAN: Home equity loan HELOC: Home equity line of credit Home equity – senior lien: Represents loans and commitments where JPMorgan Chase holds the first security interest on the property. Home equity – junior lien: Represents loans and commitments where JPMorgan Chase holds a security interest that is subordinate in rank to other liens. Households: A household is a collection of individuals or entities aggregated together by name, address, tax identifier and phone. Reported on a one-month lag.phone number. HQLA: High qualityHigh-quality liquid assets HTM: Held-to-maturity
| | | | 294 | | JPMorgan Chase & Co./2019 Form 10-K |
Glossary of Terms and Acronyms
IBOR: Interbank Offered Rate ICAAP: Internal capital adequacy assessment process IDI: Insured depository institutions IHC: JPMorgan Chase Holdings LLC, an intermediate holding company Impaired loan: Impaired loans are loans measured at amortized cost, for which it is probable that the Firm will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the agreement. Impaired loans include the following: All wholesale nonaccrual loans All TDRs (both wholesale and consumer), including ones that have returned to accrual status Interchange income: A fee paid to a credit card issuer in the clearing and settlement of a sales or cash advance transaction.
Investment-grade: An indication of credit quality based on JPMorgan Chase’s internal risk assessment system. “Investment grade” generally represents a risk profile similar to a ratingassessment. The Firm considers ratings of a “BBB-”BBB-/“Baa3”Baa3 or better,higher as defined by independent rating agencies.investment-grade. IPO: Initial public offering ISDA: International Swaps and Derivatives Association JPMorgan Chase: JPMorgan Chase & Co. JPMorgan Chase Bank, N.A.: JPMorgan Chase Bank, National Association JPMorgan Clearing: J.P. Morgan Clearing Corp.
JPMorgan Securities: J.P. Morgan Securities LLC Loan-equivalent: Represents the portion of the unused commitment or other contingent exposure that is expected, based on historical portfolio experience, to become drawn prior to an event of a default by an obligor. LCR: Liquidity coverage ratio LDA: Loss Distribution Approach LGD: Loss given default LIBOR: London Interbank Offered Rate LLC: Limited Liability Company LOB: Line of business LOB CROs: Line of Business and CTC Chief Risk Officers Loss emergence period: Represents the time period between the date at which the loss is estimated to have been incurred and the ultimate realization of that loss. LTIP: Long-term incentive plan LTV: “Loan-to-value”: For residential real estate loans, the relationship, expressed as a percentage, between the principal amount of a loan and the appraised value of the collateral (i.e., residential real estate) securing the loan. Origination date LTV ratio The LTV ratio at the origination date of the loan. Origination date LTV ratios are calculated based on the actual appraised values of collateral (i.e., loan-level data) at the origination date. date. Current estimated LTV ratio An estimate of the LTV as of a certain date. The current estimated LTV ratios are calculated using estimated collateral values derived from a nationally recognized home price index measured at the metropolitan statistical area (“MSA”) level. These MSA-level home price indices consist of actual data to the extent available and forecasted data where actual data is not available. As a result, the estimated collateral values used to calculate these ratios do not represent actual appraised loan-level collateral values; as such, the resulting LTV ratios are necessarily imprecise and should therefore be viewed as estimates. Combined LTV ratio The LTV ratio considering all available lien positions, as well as unused lines, related to the property. Combined LTV ratios are used for junior lien home equity products. Managed basis: A non-GAAP presentation of Firmwide financial results that includes reclassifications to present revenue on a fully taxable-equivalent basis. Management also uses this non- GAAP financial measure at the segment level, because it believes this provides information to enable investors to understand the underlying operational performance and
| | | | JPMorgan Chase & Co./2017 Annual Report | | 285 |
Glossary of Terms and Acronyms
trends of the particular business segment and facilitates a comparison of the business segment with the performance of competitors. Master netting agreement: A single agreement with a counterparty that permits multiple transactions governed by that agreement to be terminated or accelerated and settled through a single payment in a single currency in the event of a default (e.g., bankruptcy, failure to make a required payment or securities transfer or deliver collateral or margin when due). Measurement alternative: Measures equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer. MBS: Mortgage-backed securities MD&A: Management’s discussion and analysis MMDA: Money Market Deposit AccountsMerchant Services: isa business that primarily processes transactions for merchants.
Moody’s: Moody’s Investor Services Mortgage origination channels: Retail – Borrowers who buy or refinance a home through direct contact with a mortgage banker employed by the Firm using a branch office, the Internet or by phone. Borrowers are frequently referred to a mortgage banker by a banker in a Chase branch, real estate brokers, home builders or other third parties. Correspondent – Banks, thrifts, other mortgage banks and other financial institutions that sell closed loans to the Firm.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 295 |
Glossary of Terms and Acronyms
Mortgage product types: Alt-A Alt-A loans are generally higher in credit quality than subprime loans but have characteristics that would disqualify the borrower from a traditional prime loan. Alt-A lending characteristics may include one or more of the following: (i) limited documentation; (ii) a high CLTV ratio; (iii) loans secured by non-owner occupied properties; or (iv) a debt-to-income ratio above normal limits. A substantial proportion of the Firm’s Alt-A loans are those where a borrower does not provide complete documentation of his or her assets or the amount or source of his or her income. Option ARMs The option ARM real estate loan product is an adjustable-rate mortgage loan that provides the borrower with the option each month to make a fully amortizing, interest-only or minimum payment. The minimum payment on an option ARM loan is based on the interest rate charged during the introductory period. This introductory rate is usually significantly below the fully indexed rate. The fully indexed rate is calculated using an index rate plus a margin. Once the introductory period ends, the contractual interest rate charged on the loan increases to the fully indexed rate and adjusts monthly to reflect movements in the index. The minimum payment is typically insufficient to cover interest accrued in the prior month, and any unpaid interest is deferred and added to the principal balance of the loan. Option ARM loans are subject to payment recast, which converts the loan to a variable-rate fully amortizing loan upon meeting specified loan balance and anniversary date triggers. Prime Prime mortgage loans are made to borrowers with good credit records who meet specific underwriting requirements, including prescriptive requirements related to income and overall debt levels. New prime mortgage borrowers provide full documentation and generally have reliable payment histories. Subprime Subprime loans are loans that, prior to mid-2008, were offered to certain customers with one or more high risk characteristics, including but not limited to: (i) unreliable or poor payment histories; (ii) a high LTV ratio of greater than 80% (without borrower-paid mortgage insurance); (iii) a high debt-to-income ratio; (iv) an occupancy type for the loan is other than the borrower’s primary residence; or (v) a history of delinquencies or late payments on the loan. MSA: Metropolitan statistical areas MSR: Mortgage servicing rights Multi-asset: Any fund or account that allocates assets under management to more than one asset class. NA: Data is not applicable or available for the period presented. NAV: Net Asset Value Net Capital Rule: Rule 15c3-1 under the Securities Exchange Act of 1934. Net charge-off/(recovery) rate: Represents net charge-offs/(recoveries) (annualized) divided by average retained loans for the reporting period. Net mortgage servicing revenue interchange income includes the following components: | | • | Interchange income: Fees earned by credit and debit card issuers on sales transactions. |
| | • | Reward costs: The cost to the Firm for points earned by cardholders enrolled in credit card rewards programs. |
| | • | Partner payments: Payments to co-brand credit card partners based on the cost of loyalty program rewards earned by cardholders on credit card transactions. |
OperatingNet mortgage servicing revenue: Includes operating revenue predominantly represents the return on Home Lending Servicing’s MSR asset and includes:
– Actual gross income earned from servicing third-party mortgage loans, such as contractually specified servicing fees and ancillary income; and
– The changewhich is recognized over the period in which the service is provided; changes in the fair value of MSRs; the MSR asset due to the collection or realizationimpact of expected cash flows.
Risk management represents the components of
Home Lending Servicing’s MSR asset that are subject to ongoing risk management activities togetherassociated with derivativesMSRs; and other instruments used in thosegains and losses on securitization of excess mortgage servicing. Net mortgage servicing revenue also includes gains and losses on sales and lower of cost or fair value adjustments of certain repurchased loans insured by U.S. government agencies.
Net production revenue: Includes fees and income recognized as earned on mortgage loans originated with the intent to sell, and the impact of risk management activities. activities associated with the mortgage pipeline and warehouse loans. Net production revenue: Includes netrevenue also includes gains orand losses on originationssales and saleslower of cost or fair value adjustments on mortgage loans other production-related feesheld-for-sale (excluding certain repurchased loans insured by U.S. government agencies), and losses related tochanges in the repurchasefair value of previously sold loans. financial instruments measured under the fair value option.
| | | | 286 | | JPMorgan Chase & Co./2017 Annual Report |
Glossary of Terms and Acronyms
Net revenue rate: Represents Card Services net revenue (annualized) expressed as a percentage of average loans for the period. Net yield on interest-earning assets: The average rate for interest-earning assets less the average rate paid for all sources of funds. NM: Not meaningful NOL: Net operating loss Nonaccrual loans: Loans for which interest income is not recognized on an accrual basis. Loans (other than credit card loans and certain consumer loans insured by U.S. government agencies) are placed on nonaccrual status when full payment of principal and interest is not expected, regardless of delinquency status, or when principal and interest have been in default for a period of 90 days or more unless the loan is both well-secured and in the process of collection. Collateral-dependent loans are typically maintained on nonaccrual status.
| | | | 296 | | JPMorgan Chase & Co./2019 Form 10-K |
Glossary of Terms and Acronyms
Nonperforming assets: Nonperforming assets include nonaccrual loans, nonperforming derivatives and certain assets acquired in loan satisfaction, predominantly real estate owned and other commercial and personal property. NOW: Negotiable Order of Withdrawal NSFR: Net stable funding ratio
OAS: Option-adjusted spread OCC: Office of the Comptroller of the Currency OCI: Other comprehensive income/(loss) OEP: One Equity Partners
OIS: Overnight index swap
OPEB: Other postretirement employee benefit ORMF: Operational Risk Management Framework
OTTI: Other-than-temporary impairment Over-the-counter (“OTC”) derivatives: Derivative contracts that are negotiated, executed and settled bilaterally between two derivative counterparties, where one or both counterparties is a derivatives dealer. Over-the-counter cleared (“OTC-cleared”) derivatives: Derivative contracts that are negotiated and executed bilaterally, but subsequently settled via a central clearing house, such that each derivative counterparty is only exposed to the default of that clearing house. Overhead ratio: Noninterest expense as a percentage of total net revenue. Parent Company: JPMorgan Chase & Co. Participating securities: Represents unvested share-based compensation awards containing nonforfeitable rights to dividends or dividend equivalents (collectively, “dividends”), which are included in the earnings per share calculation using the two-class method. JPMorgan Chase grants RSUs to certain employees under its share-based compensation programs, which entitle the recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities. Under the two-class method, all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities, based on their respective rights to receive dividends. PCA: Prompt corrective action PCI: “Purchased credit-impaired” loans represents certain loans that were acquired and deemed to be credit-impaired on the acquisition date in accordance with the guidance of the FASB. The guidance allows purchasers to aggregate credit-impaired loans acquired in the same fiscal quarter into one or more pools, provided that the loans have common risk characteristics(e.g., product type, LTV ratios, FICO scores, past due status, geographic location). A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. PD: Probability of default PRA: Prudential RegulatoryRegulation Authority Pre-provision profit/(loss): Represents total net revenue less noninterest expense. The Firm believes that this financial measure is useful in assessing the ability of a lending institution to generate income in excess of its provision for credit losses. Pretax margin: Represents income before income tax expense divided by total net revenue, which is, in management’s view, a comprehensive measure of pretax performance derived by measuring earnings after all costs are taken into consideration. It is one basis upon which management evaluates the performance of AWM against the performance of their respective competitors. Principal transactions revenue: Principal transactions revenue is driven by many factors, including the bid-offer spread, which is the difference between the price at which the Firm is willing to buy a financial or other instrument and the price at which the Firm is willing to sell that instrument. It also consists of realized (as a result of closing out or termination of transactions, or interim cash payments) and unrealized (as a result of changes in valuation) gains and losses on financial and other instruments (including those accounted for under the fair value option) primarily used in client-driven market-making activities and on private equity investments. including: | | • | the bid-offer spread, which is the difference between the price at which a market participant is willing and able to sell an instrument to the Firm and the price at which another market participant is willing and able to buy it from the Firm, and vice versa; and |
| | • | realized and unrealized gains and losses on financial instruments and commodities transactions, including those accounted for under the fair value option, primarily used in client-driven market-making activities, and on private equity investments. |
| | – | Realized gains and losses result from the sale of instruments, closing out or termination of transactions, or interim cash payments. |
| | – | Unrealized gains and losses result from changes in valuation. |
In connection with its client-driven market-making activities, the Firm transacts in debt and equity instruments, derivatives and commodities, (includingincluding physical commodities inventories and financial instruments that reference commodities).commodities. Principal transactions revenue also includes certain realized and unrealized gains and losses related to hedge accounting and specified risk-management activities, including: (a)to:
| | | | JPMorgan Chase & Co./2017 Annual Report• | | 287derivatives designated in qualifying hedge accounting relationships, primarily fair value hedges of commodity and foreign exchange risk; |
| | • | derivatives used for specific risk management purposes, primarily to mitigate credit risk and foreign exchange risk. |
Glossary of Terms and Acronyms
certain derivatives designated in qualifying hedge accounting relationships (primarily fair value hedges of commodity and foreign exchange risk), (b) certain derivatives used for specific risk management purposes, primarily to mitigate credit risk, foreign exchange risk and commodity risk, and (c) other derivatives.
PSU(s):PSUs: Performance share units
RCSA: Risk and Control Self-Assessment
Real assets: Real assets include investments in productive assets such as agriculture, energy rights, mining and timber properties and exclude raw land to be developed for real estate purposes.
REIT: “Real estate investment trust”: A special purpose investment vehicle that provides investors with the ability to participate directly in the ownership or financing of real-estate related assets by pooling their capital to purchase and manage income property (i.e., equity REIT) and/or mortgage loans (i.e., mortgage REIT). REITs can be publicly or privately held and they also qualify for certain favorable tax considerations. Receivables from customers: Primarily represents margin loans to brokerage customers that are collateralized through assets maintained in the clients’ brokerage accounts, as such no allowance is held against these receivables. These receivables are reported within accrued interest and accounts receivable on the Firm’s Consolidated balance sheets.
Regulatory VaR: Daily aggregated VaR calculated in accordance with regulatory rules. REO: Real estate owned Reported basis: Financial statements prepared under U.S.
| | | | JPMorgan Chase & Co./2019 Form 10-K | | 297 |
Glossary of Terms and Acronyms
GAAP, which excludes the impact of taxable-equivalent adjustments. Retained loans: Loans that are held-for-investment (i.e., excludes loans held-for-sale and loans at fair value). Revenue wallet: Proportion of fee revenue based on estimates of investment banking fees generated across the industry (i.e., the revenue wallet) from investment banking transactions in M&A, equity and debt underwriting, and loan syndications. Source: Dealogic, a third-party provider of investment banking competitive analysis and volume-based league tables for the above noted industry products. RHS: Rural Housing Service of the U.S. Department of Agriculture Risk-rated portfolio: Credit loss estimates are based on estimates of the probability of default (“PD”) and loss severity given a default. The probability of default is the likelihood that a borrower will default on its obligation; the loss given default (“LGD”) is the estimated loss on the loan that would be realized upon the default and takes intoconsideration collateral and structural support for each credit facility. ROA: Return on assets ROE: Return on equity ROTCE: Return on tangible common equity ROU assets: Right-of-use assets RSU(s): Restricted stock units RWA: “Risk-weighted assets”: Basel III establishes two comprehensive methodologiesapproaches for calculating RWA (a Standardized approach and an Advanced approach) which include capital requirements for credit risk, market risk, and in the case of Basel III Advanced, also operational risk. Key differences in the calculation of credit risk RWA between the Standardized and Advanced approaches are that for Basel III Advanced, credit risk RWA is based on risk-sensitive approaches which largely rely on the use of internal credit models and parameters, whereas for Basel III Standardized, credit risk RWA is generally based on supervisory risk-weightings which vary primarily by counterparty type and asset class. Market risk RWA is calculated on a generally consistent basis between Basel III Standardized and Basel III Advanced. S&P: Standard and Poor’s 500 Index SAR(s): Stock appreciation rights SCCL: single-counterparty credit limits
Scored portfolio: The scored portfolio predominantly includes residential real estate loans, credit card loans and certain auto and business banking loans where credit loss estimates are based on statistical analysis of credit losses over discrete periods of time. The statistical analysis uses portfolio modeling, credit scoring and decision-support tools. SEC: Securities and Exchange Commission Securities financing agreements: Include resale, repurchase, securities borrowed and securities loaned agreements Seed capital: Initial JPMorgan capital invested in products, such as mutual funds, with the intention of ensuring the fund is of sufficient size to represent a viable offering to clients, enabling pricing of its shares, and allowing the manager to develop a track record. After these goals are achieved, the intent is to remove the Firm’s capital from the investment. Short sale: A short sale is a sale of real estate in which proceeds fromShelf Deals: Shelf offerings are SEC provisions that allow issuers to register for new securities without selling the underlying propertyentire issuance at once. Since these issuances are less thanfiled with the amount owedSEC but are not yet priced in the Firm undermarket, they are not included in the terms ofleague tables until the related mortgage, and the related lien is released upon receipt of such proceeds.actual securities are issued.
Single-name: Single reference-entities SLR: Supplementary leverage ratio SMBS: Stripped mortgage-backed securities SOA: Society of ActuariesSOFR: Secured Overnight Financing Rate
SPEs: Special purpose entities Structural interest rate risk: Represents interest rate risk of the non-trading assets and liabilities of the Firm.
| | | | 288 | | JPMorgan Chase & Co./2017 Annual Report |
Glossary of Terms and Acronyms
Structured notes: Structured notes are predominantly financial instruments containingwhose cash flows are linked to the movement in one or more indexes, interest rates, foreign exchange rates, commodities prices, prepayment rates, or other market variables. The notes typically contain embedded (but not separable or detachable) derivatives. Contractual cash flows for principal, interest, or both can vary in amount and timing throughout the life of the note based on non-traditional indexes or non-traditional uses of traditional interest rates or indexes. Suspended foreclosures: Loans referred to foreclosure where formal foreclosure proceedings have started but are currently on hold, which could be due to bankruptcy or loss mitigation. Includes both judicial and non-judicial states.
Taxable-equivalent basis: In presenting results on a managed basis, the total net revenue for each of the business segments and the Firm is presented on a tax-equivalent basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in managed basis results on a level comparable to taxable investments and securities; the corresponding income tax impact related to tax-exempt items is recorded within income tax expense. TBVPS: Tangible book value per share TCE: Tangible common equity TDR:“Troubled debt restructuring” is deemed to occur when the Firm modifies the original terms of a loan agreement by granting a concession to a borrower that is experiencing financial difficulty. TLAC: Total Loss Absorbing Capacityloss-absorbing capacity U.K.: United Kingdom Unaudited: Financial statements and information that have
| | | | 298 | | JPMorgan Chase & Co./2019 Form 10-K |
Glossary of Terms and Acronyms
not been subjected to auditing procedures sufficient to permit an independent certified public accountant to express an opinion. U.S.: United States of America U.S. government agencies: U.S. government agencies include, but are not limited to, agencies such as Ginnie Mae and FHA, and do not include Fannie Mae and Freddie Mac which are U.S. government-sponsored enterprises (“U.S. GSEs”). In general, obligations of U.S. government agencies are fully and explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government in the event of a default. U.S. GAAP: Accounting principles generally accepted in the U.S. U.S. GSE(s): “U.S. government-sponsored enterprises (“U.S. GSEs”) and U.S. GSE obligations: Inenterprises” are quasi-governmental, privately-held entities established or chartered by the U.S., GSEs are quasi-governmental, privately held entities established government to serve public purposes as specified by the U.S. Congress to improve the flow of credit to specific sectors of the economy and provide certain essential services to the public. U.S. GSEs include Fannie Mae and Freddie Mac, but do not include Ginnie Mae which is directly owned by the U.S. Department of Housing and Urban Development.or FHA. U.S. GSE obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government. U.S. LCR: Liquidity coverage ratio under the final U.S. rule. U.S. Treasury: U.S. Department of the Treasury VA: U.S. Department of Veterans Affairs VaR: “Value-at-risk” is a measure of the dollar amount of potential loss from adverse market moves in an ordinary market environment. VCG: Valuation Control Group VGF: Valuation Governance Forum VIEs: Variable interest entities Warehouse loans: Consist of prime mortgages originated with the intent to sell that are accounted for at fair value and classified as trading assets. Washington Mutual transaction: On September 25, 2008, JPMorgan Chase acquired certain of the assets of the banking operations of Washington Mutual Bank (“Washington Mutual”) from the FDIC.
| | | | JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K | | 289299 |
SecuritiesInvestment securities portfolio
ForRefer to Note 10 for information regarding the securities portfolio as of December 31, 20172019 and 20162018, and for the years ended December 31, 20172019 and 2016, see Note 10.2018.
| | | | | | | | | | 2015 | December 31, (in millions) | Amortized cost | | Fair value | Available-for-sale debt securities | | | | Mortgage-backed securities: U.S Government agencies | $ | 53,689 |
| | $ | 55,066 |
| U.S. Treasury and government agencies | 11,202 |
| | 11,036 |
| All other AFS securities | 172,567 |
| | 175,652 |
| Total available-for-sale debt securities | $ | 237,458 |
| | $ | 241,754 |
| | | | | Held-to-maturity securities | | | | Mortgage-backed securities: U.S Government agencies | 36,271 |
| | 37,081 |
| All other HTM securities | 12,802 |
| | 13,506 |
| Total held-to-maturity debt securities | $ | 49,073 |
| | $ | 50,587 |
| Total securities | $ | 286,531 |
| | $ | 292,341 |
|
| | | | | | | | | | 2017 | (Unaudited) December 31, (in millions) | Amortized cost | | Fair value | Available-for-sale securities | | | | Mortgage-backed securities: U.S. GSEs and government agencies | $ | 69,879 |
| | $ | 70,280 |
| U.S. Treasury and government agencies | 22,510 |
| | 22,745 |
| All other AFS securities | 106,352 |
| | 109,200 |
| Total available-for-sale securities | $ | 198,741 |
| | $ | 202,225 |
| | | | | Held-to-maturity securities | | | | Mortgage-backed securities: U.S. GSEs and government agencies | 27,577 |
| | 28,095 |
| All other HTM securities | 20,156 |
| | 20,557 |
| Total held-to-maturity securities | $ | 47,733 |
| | $ | 48,652 |
| Total investment securities | $ | 246,474 |
| | $ | 250,877 |
|
The table below presents loans by portfolio segment and loan class that are presented in Credit and Investment Risk Management on page 101,102, pages 102-107103–107 and page 108, and in Note 12, at the periods indicated.12. | | December 31, (in millions) | 2017 |
| 2016(b) |
| 2015 |
| 2014 |
| 2013 |
| | (Unaudited) December 31, (in millions) | | 2019 |
| 2018 |
| 2017 |
| 2016 |
| 2015 |
| U.S. consumer, excluding credit card loans | | | Residential mortgage | $ | 236,157 |
| $ | 215,178 |
| $ | 192,714 |
| $ | 139,973 |
| $ | 129,008 |
| $ | 215,025 |
| $ | 246,244 |
| $ | 236,157 |
| $ | 215,178 |
| $ | 192,714 |
| Home equity | 44,249 |
| 51,965 |
| 60,548 |
| 69,837 |
| 76,790 |
| 31,294 |
| 37,303 |
| 44,249 |
| 51,965 |
| 60,548 |
| Auto | 66,242 |
| 65,814 |
| 60,255 |
| 54,536 |
| 52,757 |
| 61,522 |
| 63,573 |
| 66,242 |
| 65,814 |
| 60,255 |
| Other | 26,033 |
| 31,687 |
| 31,304 |
| 31,028 |
| 30,508 |
| 27,199 |
| 26,612 |
| 26,033 |
| 31,687 |
| 31,304 |
| Total U.S. consumer, excluding credit card loans | 372,681 |
| 364,644 |
| 344,821 |
| 295,374 |
| 289,063 |
| 335,040 |
| 373,732 |
| 372,681 |
| 364,644 |
| 344,821 |
| Credit card Loans | | | U.S. credit card loans | 149,107 |
| 141,447 |
| 131,132 |
| 129,067 |
| 125,308 |
| 168,787 |
| 156,312 |
| 149,107 |
| 141,447 |
| 131,132 |
| Non-U.S. credit card loans | 404 |
| 369 |
| 331 |
| 1,981 |
| 2,483 |
| 137 |
| 320 |
| 404 |
| 369 |
| 331 |
| Total credit card loans | 149,511 |
| 141,816 |
| 131,463 |
| 131,048 |
| 127,791 |
| 168,924 |
| 156,632 |
| 149,511 |
| 141,816 |
| 131,463 |
| Total consumer loans | 522,192 |
| 506,460 |
| 476,284 |
| 426,422 |
| 416,854 |
| 503,964 |
| 530,364 |
| 522,192 |
| 506,460 |
| 476,284 |
| U.S. wholesale loans | | | Commercial and industrial | 93,522 |
| 91,393 |
| 83,739 |
| 78,664 |
| 79,436 |
| 90,706 |
| 111,208 |
| 93,522 |
| 91,393 |
| 83,739 |
| Real estate | 112,562 |
| 104,268 |
| 90,836 |
| 77,022 |
| 67,815 |
| 117,949 |
| 115,401 |
| 112,562 |
| 104,268 |
| 90,836 |
| Financial institutions | 23,819 |
| 20,499 |
| 12,708 |
| 13,743 |
| 11,087 |
| 39,925 |
| 29,165 |
| 23,819 |
| 20,499 |
| 12,708 |
| Government agencies | 12,603 |
| 12,655 |
| 9,838 |
| 7,574 |
| 8,316 |
| | Governments & Agencies | | 10,510 |
| 11,037 |
| 12,603 |
| 12,655 |
| 9,838 |
| Other | 69,602 |
| 66,363 |
| 67,925 |
| 49,838 |
| 48,158 |
| 93,495 |
| 83,386 |
| 69,602 |
| 66,363 |
| 67,925 |
| Total U.S. wholesale loans | 312,108 |
| 295,178 |
| 265,046 |
| 226,841 |
| 214,812 |
| 352,585 |
| 350,197 |
| 312,108 |
| 295,178 |
| 265,046 |
| Non-U.S. wholesale loans | | | Commercial and industrial | 29,233 |
| 31,340 |
| 30,385 |
| 34,782 |
| 36,447 |
| 29,423 |
| 30,450 |
| 29,233 |
| 31,340 |
| 30,385 |
| Real estate | 3,302 |
| 3,975 |
| 4,577 |
| 2,224 |
| 1,621 |
| 4,601 |
| 3,397 |
| 3,302 |
| 3,975 |
| 4,577 |
| Financial institutions | 16,845 |
| 15,196 |
| 17,188 |
| 21,099 |
| 22,813 |
| 16,894 |
| 18,563 |
| 16,845 |
| 15,196 |
| 17,188 |
| Government agencies | 2,906 |
| 3,726 |
| 1,788 |
| 1,122 |
| 2,146 |
| | Governments & Agencies | | 2,321 |
| 3,150 |
| 2,906 |
| 3,726 |
| 1,788 |
| Other | 44,111 |
| 38,890 |
| 42,031 |
| 44,846 |
| 43,725 |
| 49,981 |
| 48,433 |
| 44,111 |
| 38,890 |
| 42,031 |
| Total non-U.S. wholesale loans | 96,397 |
| 93,127 |
| 95,969 |
| 104,073 |
| 106,752 |
| 103,220 |
| 103,993 |
| 96,397 |
| 93,127 |
| 95,969 |
| Total wholesale loans | | | Commercial and industrial | 122,755 |
| 122,733 |
| 114,124 |
| 113,446 |
| 115,883 |
| 120,129 |
| 141,658 |
| 122,755 |
| 122,733 |
| 114,124 |
| Real estate | 115,864 |
| 108,243 |
| 95,413 |
| 79,246 |
| 69,436 |
| 122,550 |
| 118,798 |
| 115,864 |
| 108,243 |
| 95,413 |
| Financial institutions | 40,664 |
| 35,695 |
| 29,896 |
| 34,842 |
| 33,900 |
| 56,819 |
| 47,728 |
| 40,664 |
| 35,695 |
| 29,896 |
| Government agencies | 15,509 |
| 16,381 |
| 11,626 |
| 8,696 |
| 10,462 |
| | Governments & Agencies | | 12,831 |
| 14,187 |
| 15,509 |
| 16,381 |
| 11,626 |
| Other | 113,713 |
| 105,253 |
| 109,956 |
| 94,684 |
| 91,883 |
| 143,476 |
| 131,819 |
| 113,713 |
| 105,253 |
| 109,956 |
| Total wholesale loans | 408,505 |
| 388,305 |
| 361,015 |
| 330,914 |
| 321,564 |
| 455,805 |
| 454,190 |
| 408,505 |
| 388,305 |
| 361,015 |
| Total loans(a) | $ | 930,697 |
| $ | 894,765 |
| $ | 837,299 |
| $ | 757,336 |
| $ | 738,418 |
| $ | 959,769 |
| $ | 984,554 |
| $ | 930,697 |
| $ | 894,765 |
| $ | 837,299 |
| Memo: | | | Loans held-for-sale | $ | 3,351 |
| $ | 2,628 |
| $ | 1,646 |
| $ | 7,217 |
| $ | 12,230 |
| $ | 7,064 |
| $ | 11,988 |
| $ | 3,351 |
| $ | 2,628 |
| $ | 1,646 |
| Loans at fair value | 2,508 |
| 2,230 |
| 2,861 |
| 2,611 |
| 2,011 |
| 7,104 |
| 3,151 |
| 2,508 |
| 2,230 |
| 2,861 |
| Total loans held-for-sale and loans at fair value | $ | 5,859 |
| $ | 4,858 |
| $ | 4,507 |
| $ | 9,828 |
| $ | 14,241 |
| $ | 14,168 |
| $ | 15,139 |
| $ | 5,859 |
| $ | 4,858 |
| $ | 4,507 |
|
| | (a) | Loans (other than purchased credit-impaired loans and those for which the fair value option have been elected) are presented net of unamortized discounts and premiums and net deferred loan fees or costs. These amounts were not material as of December 31, 2019, 2018, 2017, 2016 2015, 2014 and 2013. |
| | (b) | Certain prior period amounts have been revised to conform with the current period presentation.2015. |
Maturities and sensitivity to changes in interest rates The table below sets forth at December 31, 2017, wholesale loan maturitymaturities and the distribution between fixed and floating interest rates based on the stated terms of the loan agreements. The table below also presents loans by loan class that are presented in Wholesale credit portfolio on pages 108–116115 and Note 12. The table does not include the impact of derivative instruments. | | December 31, 2017 (in millions) | Within 1 year (a) | | 1-5 years | | After 5 years | | Total | | (Unaudited) December 31, 2019 (in millions) | | Within 1 year (a) | | 1-5 years | | After 5 years | | Total | U.S. | | | | | | | | | | | | | | | Commercial and industrial | $ | 15,403 |
| | $ | 67,056 |
| | $ | 11,063 |
| | $ | 93,522 |
| $ | 15,300 |
| | $ | 66,970 |
| | $ | 8,436 |
| | $ | 90,706 |
| Real estate | 8,044 |
| | 25,054 |
| | 79,464 |
| | 112,562 |
| 5,922 |
| | 25,976 |
| | 86,051 |
| | 117,949 |
| Financial institutions | 15,176 |
| | 7,699 |
| | 944 |
| | 23,819 |
| 21,185 |
| | 18,282 |
| | 458 |
| | 39,925 |
| Government agencies | 1,644 |
| | 4,182 |
| | 6,777 |
| | 12,603 |
| | Governments & Agencies | | 1,106 |
| | 3,541 |
| | 5,863 |
| | 10,510 |
| Other | 23,274 |
| | 42,702 |
| | 3,626 |
| | 69,602 |
| 32,433 |
| | 58,615 |
| | 2,447 |
| | 93,495 |
| Total U.S. | 63,541 |
| | 146,693 |
| | 101,874 |
| | 312,108 |
| 75,946 |
| | 173,384 |
| | 103,255 |
| | 352,585 |
| Non-U.S. | | | | | | | | | | | | | | | Commercial and industrial | 11,648 |
| | 14,708 |
| | 2,877 |
| | 29,233 |
| 10,537 |
| | 15,991 |
| | 2,895 |
| | 29,423 |
| Real estate | 834 |
| | 2,460 |
| | 8 |
| | 3,302 |
| 1,008 |
| | 3,497 |
| | 96 |
| | 4,601 |
| Financial institutions | 12,716 |
| | 4,109 |
| | 20 |
| | 16,845 |
| 9,367 |
| | 7,503 |
| | 24 |
| | 16,894 |
| Government agencies | 149 |
| | 1,955 |
| | 802 |
| | 2,906 |
| | Governments & Agencies | | 278 |
| | 1,336 |
| | 707 |
| | 2,321 |
| Other | 33,383 |
| | 9,788 |
| | 940 |
| | 44,111 |
| 33,194 |
| | 15,411 |
| | 1,376 |
| | 49,981 |
| Total non-U.S. | 58,730 |
| | 33,020 |
| | 4,647 |
| | 96,397 |
| 54,384 |
| | 43,738 |
| | 5,098 |
| | 103,220 |
| Total wholesale loans | $ | 122,271 |
| | $ | 179,713 |
| | $ | 106,521 |
| | $ | 408,505 |
| $ | 130,330 |
| | $ | 217,122 |
| | $ | 108,353 |
| | $ | 455,805 |
| Loans at fixed interest rates | | | $ | 13,561 |
| | $ | 13,310 |
| | | | | $ | 15,090 |
| | $ | 11,393 |
| | | Loans at variable interest rates | | | 166,152 |
| | 93,211 |
| | | | | 202,032 |
| | 96,960 |
| | | Total wholesale loans | | | $ | 179,713 |
| | $ | 106,521 |
| | | | | $ | 217,122 |
| | $ | 108,353 |
| | |
| | (a) | Includes demand loans and overdrafts. |
Risk elements The following tables set forth nonperforming assets, contractually past-due assets, and accruing restructured loans by portfolio segment and loan class that are presented in Credit and Investment Risk Management on page 101102, page 103104 and page 108, at the periods indicated.. | | December 31, (in millions) | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | | (Unaudited) December 31, (in millions) | | 2019 | | 2018 | | 2017 | | 2016 | | 2015 | Nonperforming assets | | | | | | | | | | | | | | | | | | | U.S. nonaccrual loans: | | | | | | | | | | | | | | | | | | | Consumer, excluding credit card loans | $ | 4,209 |
| | $ | 4,820 |
| | $ | 5,413 |
| | $ | 6,509 |
| | $ | 7,496 |
| $ | 3,142 |
| | $ | 3,461 |
| | $ | 4,209 |
| | $ | 4,820 |
| | $ | 5,413 |
| Credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| Total U.S. nonaccrual consumer loans | 4,209 |
| | 4,820 |
| | 5,413 |
| | 6,509 |
| | 7,496 |
| 3,142 |
| | 3,461 |
| | 4,209 |
| | 4,820 |
| | 5,413 |
| Wholesale: | | | | | | | | | | | | | | | | | | | Commercial and industrial | 703 |
| | 1,145 |
| | 315 |
| | 184 |
| | 317 |
| 636 |
| | 624 |
| | 703 |
| | 1,145 |
| | 315 |
| Real estate | 95 |
| | 148 |
| | 175 |
| | 237 |
| | 338 |
| 53 |
| | 212 |
| | 95 |
| | 148 |
| | 175 |
| Financial institutions | 2 |
| | 4 |
| | 4 |
| | 12 |
| | 19 |
| 3 |
| | 4 |
| | 2 |
| | 4 |
| | 4 |
| Government agencies | — |
| | — |
| | — |
| | — |
| | 1 |
| | Governments & Agencies | | — |
| | — |
| | — |
| | — |
| | — |
| Other | 137 |
| | 198 |
| | 86 |
| | 59 |
| | 97 |
| 34 |
| | 89 |
| | 137 |
| | 198 |
| | 86 |
| Total U.S. wholesale nonaccrual loans | 937 |
| | 1,495 |
| | 580 |
| | 492 |
| | 772 |
| 726 |
| | 929 |
| | 937 |
| | 1,495 |
| | 580 |
| Total U.S. nonaccrual loans | 5,146 |
| | 6,315 |
| | 5,993 |
| | 7,001 |
| | 8,268 |
| 3,868 |
| | 4,390 |
| | 5,146 |
| | 6,315 |
| | 5,993 |
| Non-U.S. nonaccrual loans: | | | | | | | | | | | | | | | | | | | Consumer, excluding credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| Credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| Total non-U.S. nonaccrual consumer loans | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| Wholesale: | | | | | | | | | | | | | | | | | | | Commercial and industrial | 654 |
| | 454 |
| | 314 |
| | 21 |
| | 116 |
| 207 |
| | 358 |
| | 654 |
| | 454 |
| | 314 |
| Real estate | 41 |
| | 52 |
| | 63 |
| | 23 |
| | 88 |
| — |
| | 12 |
| | 41 |
| | 52 |
| | 63 |
| Financial institutions | — |
| | 5 |
| | 6 |
| | 7 |
| | 8 |
| — |
| | — |
| | — |
| | 5 |
| | 6 |
| Government agencies | — |
| | — |
| | — |
| | — |
| | — |
| | Governments & Agencies | | — |
| | — |
| | — |
| | — |
| | — |
| Other | 102 |
| | 57 |
| | 53 |
| | 81 |
| | 60 |
| 5 |
| | 71 |
| | 102 |
| | 57 |
| | 53 |
| Total non-U.S. wholesale nonaccrual loans | 797 |
| | 568 |
| | 436 |
| | 132 |
| | 272 |
| 212 |
| | 441 |
| | 797 |
| | 568 |
| | 436 |
| Total non-U.S. nonaccrual loans | 797 |
| | 568 |
| | 436 |
| | 132 |
| | 272 |
| 212 |
| | 441 |
| | 797 |
| | 568 |
| | 436 |
| Total nonaccrual loans | 5,943 |
| | 6,883 |
| | 6,429 |
| | 7,133 |
| | 8,540 |
| 4,080 |
| | 4,831 |
| | 5,943 |
| | 6,883 |
| | 6,429 |
| Derivative receivables | 130 |
| | 223 |
| | 204 |
| | 275 |
| | 415 |
| 30 |
| | 60 |
| | 130 |
| | 223 |
| | 204 |
| Assets acquired in loan satisfactions | 353 |
| | 429 |
| | 401 |
| | 559 |
| | 751 |
| 387 |
| | 299 |
| | 353 |
| | 429 |
| | 401 |
| Nonperforming assets | $ | 6,426 |
| | $ | 7,535 |
| | $ | 7,034 |
| | $ | 7,967 |
| | $ | 9,706 |
| $ | 4,497 |
| | $ | 5,190 |
| | $ | 6,426 |
| | $ | 7,535 |
| | $ | 7,034 |
| Memo: | | | | | | | | | | | | | | | | | | | Loans held-for-sale | $ | — |
| | $ | 162 |
| | $ | 101 |
| | $ | 95 |
| | $ | 26 |
| $ | 7 |
| | $ | — |
| | $ | — |
| | $ | 162 |
| | $ | 101 |
| Loans at fair value | — |
| | — |
| | 25 |
| | 21 |
| | 197 |
| 90 |
| | 220 |
| | — |
| | — |
| | 25 |
| Total loans held-for-sale and loans at fair value | $ | — |
| | $ | 162 |
| | $ | 126 |
| | $ | 116 |
| | $ | 223 |
| $ | 97 |
| | $ | 220 |
| | $ | — |
| | $ | 162 |
| | $ | 126 |
|
| | December 31, (in millions) | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | | (Unaudited) December 31, (in millions) | | 2019 | | 2018 | | 2017 | | 2016 | | 2015 | | Contractually past-due loans(a) | | | | | | | | | | | | | | | | | | | | U.S. loans: | | | | | | | | | | | | | | | | | | | | Consumer, excluding credit card loans(b) | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | Credit card loans | 1,378 |
| | 1,143 |
| | 944 |
| | 893 |
| | 997 |
| 1,605 |
| | 1,442 |
| | 1,378 |
| | 1,143 |
| | 944 |
| | Total U.S. consumer loans | 1,378 |
| | 1,143 |
| | 944 |
| | 893 |
| | 997 |
| 1,605 |
| | 1,442 |
| | 1,378 |
| | 1,143 |
| | 944 |
| | Wholesale: | | | | | | | | | | | | | | | | | | | | Commercial and industrial | 107 |
| | 86 |
| | 6 |
| | 14 |
| | 14 |
| 34 |
| | 167 |
| | 107 |
| | 86 |
| | 6 |
| | Real estate | 12 |
| | 2 |
| | 15 |
| | 33 |
| | 14 |
| 4 |
| | 3 |
| | 12 |
| | 2 |
| | 15 |
| | Financial institutions | 14 |
| | 12 |
| | 1 |
| | — |
| | — |
| 2 |
| | 8 |
| | 14 |
| | 12 |
| | 1 |
| | Government agencies | 4 |
| | 4 |
| | 6 |
| | — |
| | — |
| | Governments & Agencies | | — |
| | 4 |
| | 4 |
| | 4 |
| | 6 |
| | Other | 2 |
| | 19 |
| | 28 |
| | 26 |
| | 16 |
| 1 |
| | 2 |
| | 2 |
| | 19 |
| | 28 |
| | Total U.S. wholesale loans | 139 |
| | 123 |
| | 56 |
| | 73 |
| | 44 |
| 41 |
| | 184 |
| | 139 |
| | 123 |
| | 56 |
| | Total U.S. loans | 1,517 |
| | 1,266 |
| | 1,000 |
| | 966 |
| | 1,041 |
| 1,646 |
| | 1,626 |
| | 1,517 |
| | 1,266 |
| | 1,000 |
| | Non-U.S. loans: | | | | | | | | | | | | | | | | | | | | Consumer, excluding credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| | Credit card loans | 1 |
| | 2 |
| | — |
| | 2 |
| | 25 |
| 2 |
| | 3 |
| | 1 |
| | 2 |
| | — |
| | Total non-U.S. consumer loans | 1 |
| | 2 |
| | — |
| | 2 |
| | 25 |
| 2 |
| | 3 |
| | 1 |
| | 2 |
| | — |
| | Wholesale: | | | | | | | | | | | | | | | | | | | | Commercial and industrial | 1 |
| | — |
| | 1 |
| | — |
| | — |
| 1 |
| | 1 |
| | 1 |
| | — |
| | 1 |
| | Real estate | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| | Financial institutions | 1 |
| | 9 |
| | 10 |
| | — |
| | 6 |
| — |
| | 2 |
| | 1 |
| | 9 |
| | 10 |
| | Government agencies | — |
| | — |
| | — |
| | — |
| | — |
| | Governments & Agencies | | — |
| | — |
| | — |
| | — |
| | — |
| | Other | — |
| | — |
| | — |
| | 3 |
| | — |
| — |
| | 1 |
| | — |
| | — |
| | — |
| | Total non-U.S. wholesale loans | 2 |
| | 9 |
| | 11 |
| | 3 |
| | 6 |
| 1 |
| | 4 |
| | 2 |
| | 9 |
| | 11 |
| | Total non-U.S. loans | 3 |
| | 11 |
| | 11 |
| | 5 |
| | 31 |
| 3 |
| | 7 |
| | 3 |
| | 11 |
| | 11 |
| | Total contractually past due loans | $ | 1,520 |
| | $ | 1,277 |
| | $ | 1,011 |
| | $ | 971 |
| | $ | 1,072 |
| $ | 1,649 |
| | $ | 1,633 |
| | $ | 1,520 |
| | $ | 1,277 |
| | $ | 1,011 |
| |
| | (a) | Represents accruing loans past-due 90 days or more as to principal and interest, which are not characterized as nonaccrual loans. Excludes PCI loans which are accounted for on a pool basis. Since each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, the past-due status of the pools, or that of individual loans within the pools, is not meaningful. The Firm is recognizing interest income on each pool of loans as each of the pools is performing. |
| | (b) | At December 31, 2019, 2018, 2017, 2016 and 2015, 2014 and 2013, excluded mortgage loans 90 or more days past due and still accruing as follows: (1) mortgage loans insured by U.S. government agencies of $193 million, $1.6 billion, $2.7 billion, $2.7 billion and $2.8 billion, $3.4 billionrespectively. At December 31, 2016 and $3.2 billion, respectively; and (2)2015, student loans insured by U.S. government agencies under the FFELPFederal Family Education Loan Program of zero, $263 million and $290 million, $367 million and $428 million, respectively.respectively, were also excluded prior to sale of the student loan portfolio in 2017. These amounts have been excluded from the nonaccrual loans based upon the government guarantee. Prior period amounts have been revised to conform with current period presentation. |
| | December 31, (in millions) | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | | (Unaudited) December 31, (in millions) | | 2019 | | 2018 | | 2017 | | 2016 | | 2015 | Accruing restructured loans(a) | | | | | | | | | | | | | | | | | | | U.S.: | | | | | | | | | | | | | | | | | | | Consumer, excluding credit card loans | $ | 4,993 |
| | $ | 5,561 |
| | $ | 5,980 |
| | $ | 7,814 |
| | $ | 9,173 |
| $ | 3,616 |
| | $ | 4,185 |
| | $ | 4,993 |
| | $ | 5,561 |
| | $ | 5,980 |
| Credit card loans(b) | 1,215 |
| | 1,240 |
| | 1,465 |
| | 2,029 |
| | 3,115 |
| 1,452 |
| | 1,319 |
| | 1,215 |
| | 1,240 |
| | 1,465 |
| Total U.S. consumer loans | 6,208 |
| | 6,801 |
| | 7,445 |
| | 9,843 |
| | 12,288 |
| 5,068 |
| | 5,504 |
| | 6,208 |
| | 6,801 |
| | 7,445 |
| Wholesale: | | | | | | | | | | | | | | | | | | | Commercial and industrial | 32 |
| | 34 |
| | 12 |
| | 10 |
| | — |
| 32 |
| | 50 |
| | 32 |
| | 34 |
| | 12 |
| Real estate | 5 |
| | 11 |
| | 28 |
| | 31 |
| | 27 |
| 1 |
| | 3 |
| | 5 |
| | 11 |
| | 28 |
| Financial institutions | 79 |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | 79 |
| | — |
| | — |
| Other | — |
| | 4 |
| | — |
| | 1 |
| | 3 |
| 1 |
| | 5 |
| | — |
| | 4 |
| | — |
| Total U.S. wholesale loans | 116 |
| | 49 |
| | 40 |
| | 42 |
| | 30 |
| 34 |
| | 58 |
| | 116 |
| | 49 |
| | 40 |
| Total U.S. | 6,324 |
| | 6,850 |
| | 7,485 |
| | 9,885 |
| | 12,318 |
| 5,102 |
| | 5,562 |
| | 6,324 |
| | 6,850 |
| | 7,485 |
| Non-U.S.: | | | | | | | | | | | | | | | | | | | Consumer, excluding credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| Credit card loans(b) | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| Total non-U.S. consumer loans | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| Wholesale: | | | | | | | | | | | | | | | | | | | Commercial and industrial | 10 |
| | 17 |
| | — |
| | — |
| | — |
| 32 |
| | 45 |
| | 10 |
| | 17 |
| | — |
| Real estate | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
| Financial institutions | 11 |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | 11 |
| | — |
| | — |
| Other | — |
| | — |
| | — |
| | — |
| | — |
| 3 |
| | — |
| | — |
| | — |
| | — |
| Total non-U.S. wholesale loans | 21 |
| | 17 |
| | — |
| | — |
| | — |
| 35 |
| | 45 |
| | 21 |
| | 17 |
| | — |
| Total non-U.S. | 21 |
| | 17 |
| | — |
| | — |
| | — |
| 35 |
| | 45 |
| | 21 |
| | 17 |
| | — |
| Total accruing restructured notes | $ | 6,345 |
| | $ | 6,867 |
| | $ | 7,485 |
| | $ | 9,885 |
| | $ | 12,318 |
| $ | 5,137 |
| | $ | 5,607 |
| | $ | 6,345 |
| | $ | 6,867 |
| | $ | 7,485 |
|
| | (a) | Represents performing loans modified in TDRs in which an economic concession was granted by the Firm and the borrower has demonstrated its ability to repay the loans according to the terms of the restructuring. As defined in U.S. GAAP, concessions include the reduction of interest rates or the deferral of interest or principal payments, resulting from deterioration in the borrowers’ financial condition. Excludes nonaccrual assets and contractually past-due assets, which are included in the sections above. |
| | (b) | Includes credit card loans that have been modified in a TDR. |
ForRefer to Credit and Investment Risk Management on pages 100–118, and Note 12 for a discussion of nonaccrual loans, past-due loan accounting policies, and accruing restructured loans see Credit and Investment Risk Management on pages 99–120, and Note 12.loans.
Impact of nonaccrual loans and accruing restructured loans on interest income The negative impact on interest income from nonaccrual loans represents the difference between the amount of interest income that would have been recorded on such nonaccrual loans according to their original contractual terms had they been performing and the amount of interest that actually was recognized on a cash basis. The negative impact on interest income from accruing restructured loans represents the difference between the amount of interest income that would have been recorded on such loans according to their original contractual terms and the amount of interest that actually was recognized under the modified terms. The following table sets forth this data for the years specified. The change in forgone interest income from 20152017 through 20172019 was primarily driven by the change in the levels of nonaccrual loans. | | Year ended December 31, (in millions) | 2017 | 2016 | 2015 | | (Unaudited) Year ended December 31, (in millions) | | 2019 | 2018 | 2017 | Nonaccrual loans | | | U.S.: | | | Consumer, excluding credit card: | | | Gross amount of interest that would have been recorded at the original terms | $ | 367 |
| $ | 464 |
| $ | 513 |
| $ | 266 |
| $ | 318 |
| $ | 367 |
| Interest that was recognized in income | (175 | ) | (207 | ) | (225 | ) | (176 | ) | (187 | ) | (175 | ) | Total U.S. consumer, excluding credit card | 192 |
| 257 |
| 288 |
| 90 |
| 131 |
| 192 |
| Credit card: | | | Gross amount of interest that would have been recorded at the original terms | — |
| — |
| — |
| — |
| — |
| — |
| Interest that was recognized in income | — |
| — |
| — |
| — |
| — |
| — |
| Total U.S. credit card | — |
| — |
| — |
| — |
| — |
| — |
| Total U.S. consumer | 192 |
| 257 |
| 288 |
| 90 |
| 131 |
| 192 |
| Wholesale: | | | Gross amount of interest that would have been recorded at the original terms | 46 |
| 56 |
| 24 |
| 53 |
| 51 |
| 46 |
| Interest that was recognized in income | (30 | ) | (5 | ) | (10 | ) | (24 | ) | (16 | ) | (30 | ) | Total U.S. wholesale | 16 |
| 51 |
| 14 |
| 29 |
| 35 |
| 16 |
| Negative impact — U.S. | 208 |
| 308 |
| 302 |
| 119 |
| 166 |
| 208 |
| Non-U.S.: | | | Consumer, excluding credit card: | | | Gross amount of interest that would have been recorded at the original terms | — |
| — |
| — |
| — |
| — |
| — |
| Interest that was recognized in income | — |
| — |
| — |
| — |
| — |
| — |
| Total non-U.S. consumer, excluding credit card | — |
| — |
| — |
| — |
| — |
| — |
| Credit card: | | | Gross amount of interest that would have been recorded at the original terms | — |
| — |
| — |
| — |
| — |
| — |
| Interest that was recognized in income | — |
| — |
| — |
| — |
| — |
| — |
| Total non-U.S. credit card | — |
| — |
| — |
| — |
| — |
| — |
| Total non-U.S. consumer | — |
| — |
| — |
| — |
| — |
| — |
| Wholesale: | | | Gross amount of interest that would have been recorded at the original terms | 24 |
| 25 |
| 13 |
| 12 |
| 13 |
| 24 |
| Interest that was recognized in income | (12 | ) | (2 | ) | (6 | ) | (5 | ) | (3 | ) | (12 | ) | Total non-U.S. wholesale | 12 |
| 23 |
| 7 |
| 7 |
| 10 |
| 12 |
| Negative impact — non-U.S. | 12 |
| 23 |
| 7 |
| 7 |
| 10 |
| 12 |
| Total negative impact on interest income | $ | 220 |
| $ | 331 |
| $ | 309 |
| $ | 126 |
| $ | 176 |
| $ | 220 |
|
| | Year ended December 31, (in millions) | 2017 | 2016 | 2015 | | (Unaudited) Year ended December 31, (in millions) | | 2019 | 2018 | 2017 | Accruing restructured loans | | | U.S.: | | | Consumer, excluding credit card: | | | Gross amount of interest that would have been recorded at the original terms | $ | 401 |
| $ | 451 |
| $ | 485 |
| $ | 283 |
| $ | 329 |
| $ | 401 |
| Interest that was recognized in income | (245 | ) | (256 | ) | (286 | ) | (194 | ) | (217 | ) | (245 | ) | Total U.S. consumer, excluding credit card | 156 |
| 195 |
| 199 |
| 89 |
| 112 |
| 156 |
| Credit card: | | | Gross amount of interest that would have been recorded at the original terms | 202 |
| 207 |
| 260 |
| 265 |
| 227 |
| 202 |
| Interest that was recognized in income | (59 | ) | (63 | ) | (82 | ) | (72 | ) | (65 | ) | (59 | ) | Total U.S. credit card | 143 |
| 144 |
| 178 |
| 193 |
| 162 |
| 143 |
| Total U.S. consumer | 299 |
| 339 |
| 377 |
| 282 |
| 274 |
| 299 |
| Wholesale: | | | Gross amount of interest that would have been recorded at the original terms | 13 |
| 2 |
| 2 |
| 1 |
| 4 |
| 13 |
| Interest that was recognized in income | (13 | ) | (2 | ) | (2 | ) | (1 | ) | (4 | ) | (13 | ) | Total U.S. wholesale | — |
| — |
| — |
| — |
| — |
| — |
| Negative impact — U.S. | 299 |
| 339 |
| 377 |
| 282 |
| 274 |
| 299 |
| Non-U.S.: | | | Consumer, excluding credit card: | | | Gross amount of interest that would have been recorded at the original terms | — |
| — |
| — |
| — |
| — |
| — |
| Interest that was recognized in income | — |
| — |
| — |
| — |
| — |
| — |
| Total non-U.S. consumer, excluding credit card | — |
| — |
| — |
| — |
| — |
| — |
| Credit card: | | | Gross amount of interest that would have been recorded at the original terms | — |
| — |
| — |
| — |
| — |
| — |
| Interest that was recognized in income | — |
| — |
| — |
| — |
| — |
| — |
| Total non-U.S. credit card | — |
| — |
| — |
| — |
| — |
| — |
| Total non-U.S. consumer | — |
| — |
| — |
| — |
| — |
| — |
| Wholesale: | | | Gross amount of interest that would have been recorded at the original terms | — |
| — |
| — |
| — |
| — |
| — |
| Interest that was recognized in income | — |
| — |
| — |
| — |
| — |
| — |
| Total non-U.S. wholesale | — |
| — |
| — |
| — |
| — |
| — |
| Negative impact — non-U.S. | — |
| — |
| — |
| — |
| — |
| — |
| Total negative impact on interest income | $ | 299 |
| $ | 339 |
| $ | 377 |
| $ | 282 |
| $ | 274 |
| $ | 299 |
|
Cross-border outstandings Cross-border disclosure is based on the FFIEC guidelines governing the determination of cross-border risk. The reporting of country exposure under the FFIEC bank regulatory requirements provides information on the distribution, by country and sector, of claims on, and liabilities to, U.S. and foreign residents held by U.S. banks and bank holding companies and is used by the regulatory agencies to determine the presence of credit and related risks, risks, including transfer and country risk. Country location under the FFIEC bank regulatory reporting is based on where the entity or counterparty is legally established. JPMorgan Chase’s total cross-border exposure tendsexposures may fluctuate from period to fluctuate greatly,period due to client activity and the amount of exposure at year-end tendsmarket flows. Refer to be a function of timing rather than representing a consistent trend. ForCountry Risk Management on pages 127–128 for a further discussion of JPMorgan Chase’s country risk exposure, see Country Risk Management on pages 129–130.exposure.
The following table lists all countries in which JPMorgan Chase’s cross-border outstandings exceed 0.75% of consolidated assets as of the dates specified. | | Cross-border outstandings exceeding 0.75% of total assets | Cross-border outstandings exceeding 0.75% of total assets | Cross-border outstandings exceeding 0.75% of total assets | | (in millions) | December 31, | Governments | Banks | Other(a) | Net local country assets | Total cross-border outstandings(b) | Commitments(c) | Total exposure | | (Unaudited) (in millions) | | December 31, | Governments | Banks | Other(a) | Net local country assets | | Total cross-border outstandings(c) | | Commitments(d) | Total exposure | | Germany | 2017 | $ | 17,166 |
| $ | 5,357 |
| $ | 19,504 |
| $ | 20,117 |
| $ | 62,144 |
| $ | 65,333 |
| $ | 127,477 |
| 2019 | $ | 9,757 |
| $ | 4,175 |
| $ | 8,709 |
| $ | 12,143 |
| | $ | 34,784 |
| | $ | 54,817 |
| $ | 89,601 |
| | | 2016 | 22,332 |
| 2,118 |
| 14,310 |
| 25,269 |
| 64,029 |
| 71,981 |
| 136,010 |
| 2018 | 12,793 |
| 7,769 |
| 15,393 |
| 30,054 |
| (b) | 66,009 |
| (b) | 67,973 |
| 133,982 |
| (b) | | 2015 | 19,817 |
| 2,028 |
| 8,455 |
| — |
| 30,300 |
| 106,104 |
| 136,404 |
| 2017 | 17,751 |
| 5,357 |
| 12,320 |
| 20,117 |
| | 55,545 |
| | 65,333 |
| 120,878 |
| | Cayman Islands | 2017 | $ | 5 |
| $ | 462 |
| $ | 61,302 |
| $ | 58 |
| $ | 61,827 |
| $ | 12,361 |
| $ | 74,188 |
| 2019 | $ | 15 |
| $ | 367 |
| $ | 89,124 |
| $ | — |
| | $ | 89,506 |
| | $ | 114,398 |
| $ | 203,904 |
| | | 2016 | 18 |
| 107 |
| 74,810 |
| 84 |
| 75,019 |
| 10,708 |
| 85,727 |
| 2018 | 1 |
| 308 |
| 105,857 |
| 20 |
| | 106,186 |
| | 45,073 |
| 151,259 |
| | | 2015 | — |
| 153 |
| 76,160 |
| 35 |
| 76,348 |
| 12,708 |
| 89,056 |
| 2017 | 5 |
| 462 |
| 61,268 |
| 58 |
| | 61,793 |
| | 12,361 |
| 74,154 |
| | Japan | 2017 | $ | 606 |
| $ | 17,617 |
| $ | 12,256 |
| $ | 25,229 |
| $ | 55,708 |
| $ | 52,928 |
| $ | 108,636 |
| 2019 | $ | 191 |
| $ | 4,863 |
| $ | 3,495 |
| $ | 45,654 |
| | $ | 54,203 |
| | $ | 42,049 |
| $ | 96,252 |
| | | 2016 | 865 |
| 16,522 |
| 5,209 |
| 48,505 |
| 71,101 |
| 52,448 |
| 123,549 |
| 2018 | 282 |
| 9,803 |
| 4,167 |
| 41,948 |
| (b) | 56,200 |
| (b) | 51,901 |
| 108,101 |
| (b) | | 2015 | 367 |
| 12,556 |
| 3,972 |
| 29,348 |
| 46,243 |
| 47,069 |
| 93,312 |
| 2017 | 1,082 |
| 17,159 |
| 12,239 |
| 25,229 |
| | 55,709 |
| | 52,928 |
| 108,637 |
| | France | 2017 | $ | 11,982 |
| $ | 6,828 |
| $ | 15,399 |
| $ | 2,471 |
| $ | 36,680 |
| $ | 83,572 |
| $ | 120,252 |
| 2019 | $ | 9,445 |
| $ | 5,294 |
| $ | 12,746 |
| $ | 2,697 |
| | $ | 30,182 |
| | $ | 107,178 |
| $ | 137,360 |
| | | 2016 | 10,871 |
| 4,076 |
| 26,195 |
| 3,723 |
| 44,865 |
| 88,256 |
| 133,121 |
| 2018 | 12,556 |
| 3,499 |
| 21,571 |
| 2,771 |
| | 40,397 |
| | 105,845 |
| 146,242 |
| | | 2015 | 9,139 |
| 5,780 |
| 21,199 |
| 2,890 |
| 39,008 |
| 127,159 |
| 166,167 |
| 2017 | 12,975 |
| 7,083 |
| 15,329 |
| 2,471 |
| | 37,858 |
| | 83,572 |
| 121,430 |
| | Italy | 2017 | $ | 11,376 |
| $ | 4,628 |
| $ | 4,526 |
| $ | 611 |
| $ | 21,141 |
| $ | 61,005 |
| $ | 82,146 |
| 2019 | $ | 10,567 |
| $ | 2,192 |
| $ | 6,095 |
| $ | 881 |
| | $ | 19,735 |
| | $ | 49,456 |
| $ | 69,191 |
| | | 2016 | 12,290 |
| 4,760 |
| 4,487 |
| 848 |
| 22,385 |
| 62,382 |
| 84,767 |
| 2018 | 9,401 |
| 4,098 |
| 5,145 |
| 1,375 |
| | 20,019 |
| | 61,326 |
| 81,345 |
| | | 2015 | 12,313 |
| 3,618 |
| 6,331 |
| 732 |
| 22,994 |
| 89,712 |
| 112,706 |
| 2017 | 11,516 |
| 4,524 |
| 4,499 |
| 611 |
| | 21,150 |
| | 61,005 |
| 82,155 |
| | Ireland | 2017 | $ | 630 |
| $ | 318 |
| $ | 19,669 |
| $ | — |
| $ | 20,617 |
| $ | 5,728 |
| $ | 26,345 |
| 2019 | $ | 381 |
| $ | 319 |
| $ | 18,061 |
| $ | — |
| | $ | 18,761 |
| | $ | 9,520 |
| $ | 28,281 |
| | | 2016 | 148 |
| 664 |
| 18,916 |
| — |
| 19,728 |
| 5,469 |
| 25,197 |
| 2018 | 185 |
| 45 |
| 19,439 |
| — |
| | 19,669 |
| | 5,585 |
| 25,254 |
| | | 2015 | 67 |
| 952 |
| 12,436 |
| — |
| 13,455 |
| 8,024 |
| 21,479 |
| 2017 | 630 |
| 318 |
| 19,630 |
| — |
| | 20,578 |
| | 5,728 |
| 26,306 |
| |
| | (a) | Consists primarily of commercial and industrial.non-banking financial institutions. |
| | (b) | The prior period amounts have been revised to conform with the current period presentation. |
| | (c) | Outstandings include loans and accrued interest receivable, interest-bearing deposits with banks, acceptances, resale agreements, other monetary assets, cross-border trading debt and equity instruments, fair value of foreign exchange and derivative contracts, and local country assets, net of local country liabilities. The amounts associated with foreign exchange and derivative contracts are presented after taking into account the impact of legally enforceable master netting agreements. |
| | (c)(d) | Commitments include outstanding letters of credit, undrawn commitments to extend credit, and the gross notional value of credit derivatives where JPMorgan Chase is a protection seller. |
The following tables below summarize the changes in the allowance for loan losses and the allowance for lending-related commitments, as well as loan loss analysis during the periods indicated. For a further discussion, seeRefer to Allowance for credit losses on pages 117–119,116–117, and Note 13. for a further discussion. | | Allowance for loan losses | | | Year ended December 31, (in millions) | 2017 | 2016 | 2015 | 2014 | 2013 | | (Unaudited) Year ended December 31, (in millions) | | 2019 | 2018 | 2017 | 2016 | 2015 | Balance at beginning of year | $ | 13,776 |
| $ | 13,555 |
| $ | 14,185 |
| $ | 16,264 |
| $ | 21,936 |
| $ | 13,445 |
| $ | 13,604 |
| $ | 13,776 |
| $ | 13,555 |
| $ | 14,185 |
| U.S. charge-offs | | | U.S. consumer, excluding credit card | 1,779 |
| 1,500 |
| 1,658 |
| 2,132 |
| 2,754 |
| 963 |
| 1,025 |
| 1,779 |
| 1,500 |
| 1,658 |
| U.S. credit card | 4,521 |
| 3,799 |
| 3,475 |
| 3,682 |
| 4,358 |
| 5,436 |
| 5,011 |
| 4,521 |
| 3,799 |
| 3,475 |
| Total U.S. consumer charge-offs | 6,300 |
| 5,299 |
| 5,133 |
| 5,814 |
| 7,112 |
| 6,399 |
| 6,036 |
| 6,300 |
| 5,299 |
| 5,133 |
| U.S. wholesale: | | | Commercial and industrial | 87 |
| 240 |
| 63 |
| 44 |
| 150 |
| 273 |
| 161 |
| 87 |
| 240 |
| 63 |
| Real estate | 3 |
| 7 |
| 6 |
| 14 |
| 51 |
| 12 |
| 3 |
| 3 |
| 7 |
| 6 |
| Financial institutions | — |
| — |
| 5 |
| 14 |
| 1 |
| — |
| — |
| — |
| — |
| 5 |
| Government agencies | 5 |
| — |
| — |
| 25 |
| 1 |
| | Governments & Agencies | | — |
| — |
| 5 |
| — |
| — |
| Other | 19 |
| 13 |
| 6 |
| 22 |
| 9 |
| 16 |
| 97 |
| 19 |
| 13 |
| 6 |
| Total U.S. wholesale charge-offs | 114 |
| 260 |
| 80 |
| 119 |
| 212 |
| 301 |
| 261 |
| 114 |
| 260 |
| 80 |
| Total U.S. charge-offs | 6,414 |
| 5,559 |
| 5,213 |
| 5,933 |
| 7,324 |
| 6,700 |
| 6,297 |
| 6,414 |
| 5,559 |
| 5,213 |
| Non-U.S. charge-offs | | | Non-U.S. consumer, excluding credit card |
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| Non-U.S. credit card | — |
| — |
| 13 |
| 149 |
| 114 |
| — |
| — |
| — |
| — |
| 13 |
| Total non-U.S. consumer charge-offs | — |
| — |
| 13 |
| 149 |
| 114 |
| — |
| — |
| — |
| — |
| 13 |
| Non-U.S. wholesale: | | | Commercial and industrial | 89 |
| 134 |
| 5 |
| 27 |
| 5 |
| 75 |
| 51 |
| 89 |
| 134 |
| 5 |
| Real estate | — |
| 1 |
| — |
| 4 |
| 11 |
| — |
| — |
| — |
| 1 |
| — |
| Financial institutions | 7 |
| 1 |
| — |
| — |
| — |
| — |
| — |
| 7 |
| 1 |
| — |
| Government agencies | — |
| — |
| — |
| — |
| — |
| | Governments & Agencies | | — |
| — |
| — |
| — |
| — |
| Other | 2 |
| 2 |
| 10 |
| 1 |
| 13 |
| 35 |
| 1 |
| 2 |
| 2 |
| 10 |
| Total non-U.S. wholesale charge-offs | 98 |
| 138 |
| 15 |
| 32 |
| 29 |
| 110 |
| 52 |
| 98 |
| 138 |
| 15 |
| Total non-U.S. charge-offs | 98 |
| 138 |
| 28 |
| 181 |
| 143 |
| 110 |
| 52 |
| 98 |
| 138 |
| 28 |
| Total charge-offs | 6,512 |
| 5,697 |
| 5,241 |
| 6,114 |
| 7,467 |
| 6,810 |
| 6,349 |
| 6,512 |
| 5,697 |
| 5,241 |
| U.S. recoveries | | | U.S. consumer, excluding credit card | (634 | ) | (591 | ) | (704 | ) | (814 | ) | (847 | ) | (551 | ) | (842 | ) | (634 | ) | (591 | ) | (704 | ) | U.S. credit card | (398 | ) | (357 | ) | (364 | ) | (383 | ) | (568 | ) | (588 | ) | (493 | ) | (398 | ) | (357 | ) | (364 | ) | Total U.S. consumer recoveries | (1,032 | ) | (948 | ) | (1,068 | ) | (1,197 | ) | (1,415 | ) | (1,139 | ) | (1,335 | ) | (1,032 | ) | (948 | ) | (1,068 | ) | U.S. wholesale: | | | Commercial and industrial | (55 | ) | (10 | ) | (32 | ) | (49 | ) | (27 | ) | (15 | ) | (45 | ) | (55 | ) | (10 | ) | (32 | ) | Real estate | (6 | ) | (15 | ) | (20 | ) | (27 | ) | (56 | ) | (1 | ) | (23 | ) | (6 | ) | (15 | ) | (20 | ) | Financial institutions | — |
| (3 | ) | (8 | ) | (12 | ) | (90 | ) | — |
| — |
| — |
| (3 | ) | (8 | ) | Government agencies | — |
| (1 | ) | (8 | ) | — |
| — |
| | Governments & Agencies | | — |
| — |
| — |
| (1 | ) | (8 | ) | Other | (15 | ) | (3 | ) | (3 | ) | (36 | ) | (6 | ) | (18 | ) | (44 | ) | (15 | ) | (3 | ) | (3 | ) | Total U.S. wholesale recoveries | (76 | ) | (32 | ) | (71 | ) | (124 | ) | (179 | ) | (34 | ) | (112 | ) | (76 | ) | (32 | ) | (71 | ) | Total U.S. recoveries | (1,108 | ) | (980 | ) | (1,139 | ) | (1,321 | ) | (1,594 | ) | (1,173 | ) | (1,447 | ) | (1,108 | ) | (980 | ) | (1,139 | ) | Non-U.S. recoveries | | | Non-U.S. consumer, excluding credit card | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| Non-U.S. credit card | — |
| — |
| (2 | ) | (19 | ) | (25 | ) | — |
| — |
| — |
| — |
| (2 | ) | Total non-U.S. consumer recoveries | — |
| — |
| (2 | ) | (19 | ) | (25 | ) | — |
| — |
| — |
| — |
| (2 | ) | Non-U.S. wholesale: | | | Commercial and industrial | (4 | ) | (18 | ) | (10 | ) | — |
| (29 | ) | (4 | ) | (2 | ) | (4 | ) | (18 | ) | (10 | ) | Real estate | (1 | ) | — |
| — |
| — |
| — |
| — |
| — |
| (1 | ) | — |
| — |
| Financial institutions | (1 | ) | — |
| (2 | ) | (14 | ) | (10 | ) | — |
| — |
| (1 | ) | — |
| (2 | ) | Government agencies | — |
| — |
| — |
| — |
| — |
| | Governments & Agencies | | — |
| — |
| — |
| — |
| — |
| Other | (11 | ) | (7 | ) | (2 | ) | (1 | ) | (7 | ) | (4 | ) | (44 | ) | (11 | ) | (7 | ) | (2 | ) | Total non-U.S. wholesale recoveries | (17 | ) | (25 | ) | (14 | ) | (15 | ) | (46 | ) | (8 | ) | (46 | ) | (17 | ) | (25 | ) | (14 | ) | Total non-U.S. recoveries | (17 | ) | (25 | ) | (16 | ) | (34 | ) | (71 | ) | (8 | ) | (46 | ) | (17 | ) | (25 | ) | (16 | ) | Total recoveries | (1,125 | ) | (1,005 | ) | (1,155 | ) | (1,355 | ) | (1,665 | ) | (1,181 | ) | (1,493 | ) | (1,125 | ) | (1,005 | ) | (1,155 | ) | Net charge-offs | 5,387 |
| 4,692 |
| 4,086 |
| 4,759 |
| 5,802 |
| 5,629 |
| 4,856 |
| 5,387 |
| 4,692 |
| 4,086 |
| Write-offs of PCI loans(a) | 86 |
| 156 |
| 208 |
| 533 |
| 53 |
| 151 |
| 187 |
| 86 |
| 156 |
| 208 |
| Provision for loan losses | 5,300 |
| 5,080 |
| 3,663 |
| 3,224 |
| 188 |
| 5,449 |
| 4,885 |
| 5,300 |
| 5,080 |
| 3,663 |
| Other | 1 |
| (11 | ) | 1 |
| (11 | ) | (5 | ) | 9 |
| (1 | ) | 1 |
| (11 | ) | 1 |
| Balance at year-end | $ | 13,604 |
| $ | 13,776 |
| $ | 13,555 |
| $ | 14,185 |
| $ | 16,264 |
| $ | 13,123 |
| $ | 13,445 |
| $ | 13,604 |
| $ | 13,776 |
| $ | 13,555 |
|
| | (a) | Write-offs of PCI loans are recorded against the allowance for loan losses when actual losses for a pool exceed estimated losses that were recorded as purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan is recognized when the underlying loan is removed from a pool (e.g., upon liquidation). During 2014 the Firm recorded a $291 million adjustment to reduce the PCI allowance and the recorded investment in the Firm’s PCI loan portfolio, primarily reflecting the cumulative effect of interest forgiveness modifications. This adjustment had no impact to the Firm’s Consolidated statements of income.pool. |
Summary of loan and lending-related commitments loss experience
Allowance for lending-related commitments | | Year ended December 31, (in millions) | 2017 | 2016 | 2015 | 2014 | 2013 | | (Unaudited) Year ended December 31, (in millions) | | 2019 | 2018 | 2017 | 2016 | 2015 | Balance at beginning of year | $ | 1,078 |
| $ | 786 |
| $ | 622 |
| $ | 705 |
| $ | 668 |
| $ | 1,055 |
| $ | 1,068 |
| $ | 1,078 |
| $ | 786 |
| $ | 622 |
| Provision for lending-related commitments | (10 | ) | 281 |
| 164 |
| (85 | ) | 37 |
| 136 |
| (14 | ) | (10 | ) | 281 |
| 164 |
| Net charge-offs | — |
| — |
| — |
| — |
| — |
| | Other | — |
| 11 |
| — |
| 2 |
| — |
| — |
| 1 |
| — |
| 11 |
| — |
| Balance at year-end | $ | 1,068 |
| $ | 1,078 |
| $ | 786 |
| $ | 622 |
| $ | 705 |
| $ | 1,191 |
| $ | 1,055 |
| $ | 1,068 |
| $ | 1,078 |
| $ | 786 |
|
| | Loan loss analysis | | | As of or for the year ended December 31, (in millions, except ratios) | 2017 | 2016 | 2015 | 2014 | 2013 | | (Unaudited) As of or for the year ended December 31, (in millions, except ratios) | | 2019 | 2018 | 2017 | 2016 | 2015 | Balances | | | Loans – average | $ | 906,397 |
| $ | 866,378 |
| $ | 787,318 |
| $ | 739,175 |
| $ | 726,450 |
| $ | 954,539 |
| $ | 944,885 |
| $ | 906,397 |
| $ | 866,378 |
| $ | 787,318 |
| Loans – year-end | 930,697 |
| 894,765 |
| 837,299 |
| 757,336 |
| 738,418 |
| 959,769 |
| 984,554 |
| 930,697 |
| 894,765 |
| 837,299 |
| Net charge-offs(a) | 5,387 |
| 4,692 |
| 4,086 |
| 4,759 |
| 5,802 |
| 5,629 |
| 4,856 |
| 5,387 |
| 4,692 |
| 4,086 |
| Allowance for loan losses: | | | U.S. | $ | 12,552 |
| $ | 12,738 |
| $ | 12,704 |
| $ | 13,472 |
| $ | 15,382 |
| $ | 12,303 |
| $ | 12,692 |
| $ | 12,552 |
| $ | 12,738 |
| $ | 12,704 |
| Non-U.S. | 1,052 |
| 1,038 |
| 851 |
| 713 |
| 882 |
| 820 |
| 753 |
| 1,052 |
| 1,038 |
| 851 |
| Total allowance for loan losses | $ | 13,604 |
| $ | 13,776 |
| $ | 13,555 |
| $ | 14,185 |
| $ | 16,264 |
| $ | 13,123 |
| $ | 13,445 |
| $ | 13,604 |
| $ | 13,776 |
| $ | 13,555 |
| Nonaccrual loans | $ | 5,943 |
| $ | 6,883 |
| $ | 6,429 |
| $ | 7,133 |
| $ | 8,540 |
| $ | 4,080 |
| $ | 4,831 |
| $ | 5,943 |
| $ | 6,883 |
| $ | 6,429 |
| Ratios | | | Net charge-offs to: | | | Loans retained – average | 0.60 | % | 0.54 | % | 0.52 | % | 0.65 | % | 0.81 | % | 0.60 | % | 0.52 | % | 0.60 | % | 0.54 | % | 0.52 | % | Allowance for loan losses | 39.60 |
| 34.06 |
| 30.14 |
| 33.55 |
| 35.67 |
| 42.89 |
| 36.12 |
| 39.60 |
| 34.06 |
| 30.14 |
| Allowance for loan losses to: | | | Loans retained – year-end(b)(a) | 1.47 |
| 1.55 |
| 1.63 |
| 1.90 |
| 2.25 |
| 1.39 |
| 1.39 |
| 1.47 |
| 1.55 |
| 1.63 |
| Nonaccrual loans retained | 229 |
| 205 |
| 215 |
| 202 |
| 196 |
| 329 |
| 292 |
| 229 |
| 205 |
| 215 |
|
| | (a) | There were no net charge-offs/(recoveries) on lending-related commitments in 2017, 2016, 2015, 2014 or 2013.
|
| | (b) | The allowance for loan losses as a percentage of retained loans declined from 20132015 to 2017,2019, due to overall improvement in credit quality of the consumer and wholesalequality. Refer to Provision for credit portfolios. Forlosses on page 50 for a more detailed discussion of the 20152018 through 20172019 provision for credit losses, see Provision for credit losses on page 119. losses. |
Deposits The following table provides a summary of the average balances and average interest rates of JPMorgan Chase’s various deposits for the years indicated. | | Year ended December 31, | Average balances | | Average interest rates | | (Unaudited) Year ended December 31, | | Average balances | | Average interest rates | (in millions, except interest rates) | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | 2019 | | 2018 | | 2017 | | 2019 | | 2018
| | 2017 | U.S. offices | | | | | | | | | | | | | | | | | | | | | | | Noninterest-bearing | $ | 387,424 |
| | $ | 386,528 |
| | $ | 403,143 |
| | — | % | | — | % | | — | % | | Noninterest-bearing(a) | | $ | 386,116 |
| | $ | 391,325 |
| | $ | 393,877 |
| | — | % | | — | % | | — | % | Interest-bearing | | | | | | | | | | | | | | | | | | | | | | | Demand(c)(b) | 162,985 |
| | 128,046 |
| | 78,516 |
| | 0.50 |
| | 0.18 |
| | 0.11 |
| 195,350 |
| | 177,403 |
| | 162,985 |
| | 1.42 |
| | 1.09 |
| | 0.50 |
| Savings(b)(c) | 559,654 |
| | 515,982 |
| | 475,142 |
| | 0.15 |
| | 0.09 |
| | 0.07 |
| 602,728 |
| | 585,885 |
| | 559,654 |
| | 0.46 |
| | 0.32 |
| | 0.15 |
| Time | 53,410 |
| | 59,710 |
| | 85,098 |
| | 1.02 |
| | 0.59 |
| | 0.38 |
| | Total interest-bearing deposits(c) | 776,049 |
| | 703,738 |
| | 638,756 |
| | 0.29 |
| | 0.15 |
| | 0.12 |
| | Time(a) | | 52,415 |
| | 39,498 |
| | 46,957 |
| | 2.56 |
| | 1.94 |
| | 1.16 |
| Total interest-bearing deposits(a) | | 850,493 |
| | 802,786 |
| | 769,596 |
| | 0.81 |
| | 0.57 |
| | 0.29 |
| Total deposits in U.S. offices(c) | 1,163,473 |
| | 1,090,266 |
| | 1,041,899 |
| | 0.19 |
| | 0.09 |
| | 0.07 |
| 1,236,609 |
| | 1,194,111 |
| | 1,163,473 |
| | 0.56 |
| | 0.38 |
| | 0.19 |
| Non-U.S. offices | | | | | | | | | | | | | | | | | | | | | | | Noninterest-bearing | 16,741 |
| | 16,170 |
| | 15,805 |
| | — |
| | — |
| | — |
| | Noninterest-bearing(a) | | 21,103 |
| | 20,099 |
| | 17,325 |
| | — |
| | — |
| | — |
| Interest-bearing | | | | | | | | | | | | | | | | | | | | | | | Demand(c) | 213,733 |
| | 198,919 |
| | 197,572 |
| | 0.18 |
| | 0.10 |
| | 0.12 |
| 217,979 |
| | 210,978 |
| | 213,733 |
| | 0.59 |
| | 0.45 |
| | 0.18 |
| Savings | — |
| | — |
| | — |
| | NM |
| | NM |
| | NM |
| — |
| | — |
| | — |
| | NM |
| | NM |
| | NM |
| Time(c) | 23,439 |
| | 22,613 |
| | 40,512 |
| | 1.08 |
| | 0.56 |
| | 0.60 |
| | Total interest-bearing deposits(c) | 237,172 |
| | 221,532 |
| | 238,084 |
| | 0.27 |
| | 0.15 |
| | 0.21 |
| | Time(a) | | 47,376 |
| | 31,273 |
| | 22,855 |
| | 1.64 |
| | 1.48 |
| | 1.11 |
| Total interest-bearing deposits(a) | | 265,355 |
| | 242,251 |
| | 236,588 |
| | 0.78 |
| | 0.58 |
| | 0.27 |
| Total deposits in non-U.S. offices(c) | 253,913 |
| | 237,702 |
| | 253,889 |
| | 0.25 |
| | 0.14 |
| | 0.19 |
| 286,458 |
| | 262,350 |
| | 253,913 |
| | 0.72 |
| | 0.54 |
| | 0.25 |
| Total deposits | $ | 1,417,386 |
| | $ | 1,327,968 |
| | $ | 1,295,788 |
| | 0.20 | % | | 0.10 | % | | 0.10 | % | $ | 1,523,067 |
| | $ | 1,456,461 |
| | $ | 1,417,386 |
| | 0.59 | % | | 0.41 | % | | 0.20 | % |
| | (a) | In the second quarter of 2019, the Firm reclassified balances related to certain structured notes from interest-bearing to noninterest-bearing deposits as the associated returns are recorded in principal transactions revenue and not in net interest income. This change was applied retrospectively and, accordingly, prior period amounts were revised to conform with the current presentation. |
| | (b) | Includes Negotiable Order of Withdrawal (“NOW”) accounts, and certain trust accounts. |
| | (b)(c) | Includes Money Market Deposit Accounts (“MMDAs”). |
| | (c) | Prior periods have been revised to conform with the current period presentation. |
At December 31, 2017,2019, other U.S. time deposits in denominations of $100,000 or more totaled $23.1$15.0 billion, substantially all of which mature in three months or less. In addition, the table below presents the maturities for U.S. time certificates of deposit in denominations of $100,000 or more. | | By remaining maturity at December 31, 2017 (in millions) | Three months or less | | Over three months but within six months | | Over six months but within 12 months | | Over 12 months | | Total | | (Unaudited) By remaining maturity at December 31, 2019 (in millions) | | Three months or less | | Over three months but within six months | | Over six months but within 12 months | | Over 12 months | | Total | U.S. time certificates of deposit ($100,000 or more) | $ | 6,425 |
| | $ | 2,174 |
| | $ | 2,095 |
| | $ | 6,207 |
| | $ | 16,901 |
| $ | 15,759 |
| | $ | 15,249 |
| | $ | 7,252 |
| | $ | 1,294 |
| | $ | 39,554 |
|
Short-term and other borrowed funds The following table provides a summary of JPMorgan Chase’s short-term and other borrowed funds for the years indicated. | | As of or for the year ended December 31, (in millions, except rates) | 2017 | | 2016 | | 2015 | | (Unaudited) As of or for the year ended December 31, (in millions, except rates) | | 2019 | | 2018 | | 2017 | Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | | | | | | | Balance at year-end | $ | 158,916 |
| | $ | 165,666 |
| | $ | 152,678 |
| $ | 183,675 |
| | $ | 182,320 |
| | $ | 158,916 |
| Average daily balance during the year | 187,386 |
| | 178,720 |
| | 192,510 |
| 227,994 |
| | 189,282 |
| | 187,386 |
| Maximum month-end balance | 205,286 |
| | 207,211 |
| | 212,112 |
| 251,829 |
| | 201,340 |
| | 205,286 |
| Weighted-average rate at December 31 | 1.03 | % | | 0.50 | % | | 0.39 | % | 1.77 | % | | 2.18 | % | | 1.03 | % | Weighted-average rate during the year | 0.86 |
| | 0.61 |
| | 0.32 |
| 2.03 |
| | 1.62 |
| | 0.86 |
| | | | | | | | | | | | Commercial paper: | | | | | | | | | | | Balance at year-end | $ | 24,186 |
| | $ | 11,738 |
| | $ | 15,562 |
| $ | 14,754 |
| | $ | 30,059 |
| | $ | 24,186 |
| Average daily balance during the year | 19,920 |
| | 15,001 |
| | 38,140 |
| 22,977 |
| | 27,834 |
| | 19,920 |
| Maximum month-end balance | 24,934 |
| | 19,083 |
| | 64,012 |
| 30,007 |
| | 30,470 |
| | 24,934 |
| Weighted-average rate at December 31 | 1.59 | % | | 1.13 | % | | 0.55 | % | 2.16 | % | | 2.71 | % | | 1.59 | % | Weighted-average rate during the year | 1.39 |
| | 0.90 |
| | 0.29 |
| 2.66 |
| | 2.27 |
| | 1.39 |
| | | | | | | | | | | | Other borrowed funds:(a) | | | | | | | | | | | Balance at year-end | $ | 87,652 |
| | $ | 89,154 |
| | $ | 80,126 |
| $ | 73,312 |
| | $ | 101,513 |
| | $ | 87,652 |
| Average daily balance during the year | 96,331 |
| | 93,252 |
| | 93,001 |
| 106,348 |
| | 108,436 |
| | 96,331 |
| Maximum month-end balance | 107,157 |
| | 102,310 |
| | 99,226 |
| 128,488 |
| | 125,544 |
| | 107,157 |
| Weighted-average rate at December 31 | 2.09 | % | | 1.79 | % | | 1.89 | % | 1.85 | % | | 2.23 | % | | 2.09 | % | Weighted-average rate during the year | 1.98 |
| | 1.93 |
| | 1.84 |
| 2.05 |
| | 2.06 |
| | 1.98 |
| | | | | | | | | | | | Short-term beneficial interests:(b) | | | | | | | | | | | Commercial paper and other borrowed funds: | | | | | | | | | | | Balance at year-end | $ | 4,310 |
| | $ | 5,688 |
| | $ | 11,322 |
| $ | 11,103 |
| | $ | 6,527 |
| | $ | 4,310 |
| Average daily balance during the year | 5,327 |
| | 8,296 |
| | 15,608 |
| 12,511 |
| | 4,756 |
| | 5,327 |
| Maximum month-end balance | 7,573 |
| | 10,494 |
| | 17,137 |
| 16,016 |
| | 6,527 |
| | 7,573 |
| Weighted-average rate at December 31 | 1.50 | % | | 0.83 | % | | 0.41 | % | 1.92 | % | | 2.53 | % | | 1.50 | % | Weighted-average rate during the year | 1.07 |
| | 0.67 |
| | 0.32 |
| 2.39 |
| | 2.10 |
| | 1.07 |
|
| | (a) | Includes interest-bearing securities sold but not yet purchased.purchased of $47.1 billion, $62.3 billion and $60.0 billion at December 31, 2019, 2018 and 2017, respectively. |
| | (b) | Included on the Consolidated balance sheets in beneficial interests issued by consolidated VIEs. |
Federal funds purchased represent overnight funds. Securities loaned or sold under repurchase agreements generally mature between one and ninety days. Commercial paper generally is issued in amounts not less than $100,000, and with maturities of 270 days or less. Other borrowed funds consist of demand notes, term federal funds purchased, and various other borrowings that generally have maturities of one year or less.
Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned, thereunto duly authorized. | | | | JPMorgan Chase & Co. (Registrant) | | By: /s/ JAMES DIMON | | (James Dimon Chairman and Chief Executive Officer) | | February 27, 201825, 2020 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the date indicated. JPMorgan Chase & Co. does not exercise the power of attorney to sign on behalf of any Director. | | | | | | | | Capacity | | Date | /s/ JAMES DIMON | | Director, Chairman and Chief Executive Officer (Principal Executive Officer) | | | (James Dimon) | | | | | | | | | /s/ LINDA B. BAMMANN | | Director | | | (Linda B. Bammann) | | | | | | | | | | /s/ JAMES A. BELL | | Director | | | (James A. Bell) | | | | | | | | | | /s/ CRANDALL C. BOWLES | | Director | | | (Crandall C. Bowles) | | | | | | | | | | /s/ STEPHEN B. BURKE | | Director | | | (Stephen B. Burke) | | | | | | | | | | /s/ TODD A. COMBS | | Director | | | (Todd A. Combs) | | | | | | | | | | /s/ JAMES S. CROWN | | Director | | February 27, 201825, 2020 | (James S. Crown) | | | | | | | | | | /s/ TIMOTHY P. FLYNN | | Director | | | (Timothy P. Flynn) | | | | | | | | | | /s/ MELLODY HOBSON | | Director | | | (Mellody Hobson) | | | | | | | | | | /s/ LABAN P. JACKSON, JR. | | Director | | | (Laban P. Jackson, Jr.) | | | | | | | | | | /s/ MICHAEL A. NEAL | | Director | | | (Michael A. Neal) | | | | | | | | | | /s/ LEE R. RAYMOND | | Director | | | (Lee R. Raymond) | | | | | | | | | | /s/ WILLIAM C. WELDON | | Director | | | (William C. Weldon) | | | | | | | | | | /s/ MARIANNE LAKEJENNIFER PIEPSZAK | | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | | (Marianne Lake)Jennifer Piepszak) | | | | | | | | | /s/ NICOLE GILES | | Managing Director and CorporateFirmwide Controller (Principal Accounting Officer) | | | (Nicole Giles) | | | |
|