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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file
December 31, 20172019
 number1-5805
JPMorgan Chase & Co.Co.
(Exact name of registrant as specified in its charter)
Delaware 13-2624428
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification no.)
   
270 Park383 Madison Avenue,
New York,New York 1001710179
(Address of principal executive offices) 
(Zip code)
Code)


Registrant’s telephone number, including area code: (212) (212) 270-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockThe New York Stock Exchange
Warrants to purchase shares of Common StockThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 5.45% Non-Cumulative Preferred Stock, Series PThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.70% Non-Cumulative Preferred Stock, Series TThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.30% Non-Cumulative Preferred Stock, Series WJPMThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.125% Non-Cumulative Preferred Stock, Series YJPM PR FThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.10% Non-Cumulative Preferred Stock, Series AAJPM PR GThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.15% Non-Cumulative Preferred Stock, Series BBJPM PR HThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 5.75% Non-Cumulative Preferred Stock, Series DDJPM PR DThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.00% Non-Cumulative Preferred Stock, Series EEJPM PR CThe New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of
4.75% Non-Cumulative Preferred Stock, Series GG
JPM PR JThe New York Stock Exchange
Alerian MLP Index ETNs due May 24, 2024AMJNYSE Arca, Inc.
Guarantee of Callable Step-Up Fixed Rate Notes due April 26, 2028 of JPMorgan Chase Financial Company LLCJPM/28The New York Stock Exchange
Guarantee of Cushing 30 MLP Index ETNs due June 15, 2037 of JPMorgan Chase Financial Company LLC
NYSE Arca, Inc.

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.o☐Yesx☒No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 orSection 15(d)of the Act.o☐Yesx☒No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.x☒Yeso☐No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).x☒Yeso☐No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-Kor any amendment to thisForm 10-K.x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
x☒
Large accelerated filer
☐
oAccelerated filer
☐

oNon-accelerated filer
(Do not check if a smaller reporting company)
o☐
Smaller reporting company
o☐
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).o☐Yesx☒No
The aggregate market value of JPMorgan Chase & Co. common stock held by non-affiliates as of June 30, 2017: $319,702,076,3162019: $354,989,423,493
Number of shares of common stock outstanding as of January 31, 2018: 3,431,958,4912020: 3,073,976,616
Documents incorporated by reference: Portions of the registrant’s Proxy Statement for the annual meeting of stockholders to be held on May 15, 2018,19, 2020, are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.







Form 10-K Index
Part I
 Page
Item 1.
Business.
1
 
Overview
1
 
Business segments
1
 
Competition
1
 
Supervision and regulation
11–6
 
Distribution of assets, liabilities and stockholders’ equity; interest rates and interest differentials
278288–292
 
Return on equity and assets
38, 277, 27840, 287, 288
 
SecuritiesInvestment securities portfolio
290300
 
Loan portfolio
99–116, 211–230,
291–296100–115, 217–236,
301–306
 
Summary of loan and lending-related commitments loss experience
117–119, 231–235,
297–298116–117, 237–241,
307–308
 
Deposits
248,299254, 309
 
Short-term and other borrowed funds
300310
Item 1A.
Risk Factors.
8–266–28
Item 1B.
Unresolved Staff Comments.
2628
Item 2.
Properties.
2729
Item 3.
Legal Proceedings.
2729
Item 4.
Mine Safety Disclosures.
2729
   
Part II
  
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
2830
Item 6.
Selected Financial Data.
2830
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
2830
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
2830
Item 8.
Financial Statements and Supplementary Data.
2830
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
2931
Item 9A.
Controls and Procedures.
2931
Item 9B.
Other Information.
2931
   
Part III
  
Item 10.
Directors, Executive Officers and Corporate Governance.
3032
Item 11.
Executive Compensation.
3133
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
3133
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
3133
Item 14.
Principal Accounting Fees and Services.
3133
   
Part IV
  
Item 15.
Exhibits, Financial Statement Schedules.
32-3534-37






Part I




Item 1. Business.
Overview
JPMorgan Chase & Co.(“ (“JPMorgan Chase” or the “Firm”), NYSE: JPM), 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 United States of America (“U.S.”), with operations worldwide; the FirmJPMorgan Chase had $2.52.7 trillion in assets and $255.7$261.3 billion in stockholders’ equity as of December 31, 2017.2019. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S. and many of the world’s most prominent corporate, institutional and government clients.
JPMorgan Chase’s principal bank subsidiaries aresubsidiary is JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank, N.A.”), a national banking association with U.S. branches in 2338 states and Chase Bank USA, National Association (“Chase Bank USA, N.A.”), a national banking association that is the Firm’s principal credit card-issuing bank.Washington, D.C. as of December 31, 2019. JPMorgan Chase’s principal nonbank subsidiary is J.P. Morgan Securities LLC (“JPMorganJ.P. Morgan Securities”), a U.S. broker-dealer. The bank and non-bank subsidiaries of JPMorgan Chase operate nationally as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. The Firm’s principal operating subsidiary inoutside the U.K.U.S. is J.P. Morgan Securities plc, a U.K.-based subsidiary of JPMorgan Chase Bank, N.A.
The Firm’s website is www.jpmorganchase.com. JPMorgan Chase makes available on its website, free of charge, through its website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after it electronically files such material with, or furnishes such material to the U.S. Securities and Exchange Commission (the “SEC”) at www.sec.gov. The Firm has adopted, and posted on its website, a Code of Conduct for all employees of the Firm and a Code of Ethics for its Chairman and Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and all other professionals of the Firm worldwide serving in a finance, accounting, treasury, tax or investor relations role.
Business segments
For management reporting purposes, JPMorgan Chase’s activities are organized for management reporting purposes, into four major reportable business segments, as well as a Corporate segment. The Firm’s consumer business is the Consumer & Community Banking (“CCB”) segment. The Firm’s wholesale business segments are the Corporate & Investment Bank (“CIB”), Commercial Banking (“CB”), and Asset & Wealth Management (“AWM”).
A description of the Firm’s business segments and the products and services they provide to their respective client bases is provided in the “Business segment results” section
of Management’s discussion and analysis of financial condition and results of operations (“MDManagement’s
discussion and analysis” or “MD&A”), beginning on page 4042 and in Note 31.32.
Competition
JPMorgan Chase and its subsidiaries and affiliates operate in a highly competitive environment.environments. Competitors include other banks, brokerage firms, investment banking companies, merchant banks, hedge funds, commodity trading companies, private equity firms, insurance companies, mutual fund companies, investment managers, credit card companies, mortgage banking companies, trust companies, securities processing companies, automobile financing companies, leasing companies, e-commerce and other Internet-basedinternet-based companies, financial technology companies, and other companies engaged in providing similar products and services. The Firm’s businesses generally compete on the basis of the quality and variety of the Firm’s products and services, transaction execution, innovation, reputation and price. Competition also varies based on the types of clients, customers, industries and geographies served. With respect to some of its geographies and products, JPMorgan Chase competes globally; with respect to others, the Firm competes on a national or regional basis. The Firm’s ability to compete also depends on its ability to attract and retain professional and other personnel, and on its reputation.
It is likely that competitionCompetition in the financial services industry will continuecontinues to be intense asintense. In some cases, the Firm’s businesses compete with other financial institutions that may have a stronger local presence in certain geographies or that operate under different rules and regulatory regimes than the Firm, orand with companies that provide new or innovative products or services, including those that the Firm does not provide.
Supervision and regulation
The Firm is subject to extensive and comprehensive regulation under U.S. federal and state and federal laws, in the U.S., as well as the applicable laws of each of the various jurisdictions outside the U.S. in which the Firm does business.
Financial holding company:
Consolidated supervision. JPMorgan Chase & Co. is a bank holding company (“BHC”) and a financial holding company (“FHC”) under U.S. federal law, and is subject to comprehensive consolidated supervision, regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Firm has experiencedFederal Reserve acts as an extended period“umbrella regulator,” and certain of significant change in regulation which has hadJPMorgan Chase’s subsidiaries are also regulated directly by additional authorities based on the activities of those subsidiaries.
JPMorgan Chase’s national bank subsidiary, JPMorgan Chase Bank, N.A., is supervised and could continueregulated by the Office of the Comptroller of the Currency (“OCC”) and, with respect to have significant consequences for howcertain matters, by the Firm conducts business inFederal Deposit Insurance Corporation (the “FDIC”).
JPMorgan Chase’s U.S. broker-dealers are supervised and regulated by the U.S.Securities and abroad. The Firm devotes substantial resources to complying with existing and new laws, rules and regulations, while, at the same time, endeavoring to best meet the needs and expectations of its customers, clients and shareholders. As a result of legislative and regulatory changes and expanded supervision, the Firm has implemented and refined policies, procedures and controls, and made adjustments to its business and operations, legal entity structure, and capital and liquidity management. The combined effect of numerous rule-makings by multiple governmental agencies and regulators, and the potential conflicts or inconsistencies among such rules, continue to present challenges and risks to the Firm’s business and operations.Exchange Commission


  1
Part I


Because regulatory changes are ongoing, the Firm cannot currently quantify all of the possible effects on its business and operations of the significant changes that are underway. For more information, see Risk Factors on pages 8–26.
Financial holding company:
Consolidated supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). As a bank holding company (“BHC”SEC”) and a financial holding company, JPMorgan Chase is subject to comprehensive consolidated supervision, regulation and examination by the Federal Reserve. The Federal Reserve acts as an “umbrella regulator” and certain of JPMorgan Chase’s subsidiaries are regulated directly by additional regulatory authorities based on the particular activities of those subsidiaries. For example, JPMorgan Chase’s national bank subsidiaries, JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A.Financial Industry Regulatory Authority (“FINRA”), are subject to supervision and regulation by the Office of the Comptroller of the Currency (“OCC”) and, with respect to certain matters, by the Federal Reserve and the Federal Deposit Insurance Corporation (the “FDIC”). Certain non-bank subsidiaries, such as the Firm’s U.S. broker-dealers, are subject to supervision and regulation by the SEC, and subsidiaries of the Firm that engage in certain futures-related and swaps-related activities are subject to supervisionsupervised and regulationregulated by the Commodity Futures Trading Commission (“CFTC”). J.P. Morgan Securities plc is a U.K.U.K.-based bank licensed within the European Economic Area (the “EEA”) to undertake all banking activity and is regulated by the U.K. Prudential Regulation Authority (the “PRA”), a subsidiary of the Bank of England which has responsibility for prudential regulation of banks and other systemically important institutions, and by the U.K. Financial Conduct Authority (“FCA”), which regulates conduct matters for all market participants. .
The Firm’s other non-U.S. subsidiaries are regulated by the banking, securities, prudential and securitiesconduct regulatory authorities in the countries in which they operate. See Securities and broker-dealer regulation, Investment management regulation and Derivatives regulation below. In addition, the Firm’s consumer
Permissible business activities are subject to supervision and regulation by the Consumer Financial Protection Bureau (“CFPB”) and to regulation under various state statutes which are enforced by the respective state’s Attorney General.
Scope of permissible business activities. . The Bank Holding Company Act generally restricts BHCs from engaging in business activities other than the business of banking and certain closely-related activities. Financial holding companies generallyFHCs can engage in a broader range of financial activities, than are otherwise permissible for BHCs, including underwriting, dealing and making markets in securities, and making merchant banking investments in non-financial companies. The Federal Reserve has the authority to limit a financial holding company’san FHC’s ability to conduct otherwise permissible activities if the financial holding companyFHC or any of its depository institution subsidiaries ceases to meet the applicable eligibility
requirements (including requirements that the financial holding company and each of its U.S. depository institution subsidiaries maintain their status as “well-capitalized” and “well-managed”). requirements. The Federal Reserve may also impose corrective capital and/or managerial requirements on the financial holding companyFHC, and if deficiencies are persistent, may for example, require divestiture of the holding company’sFHC’s depository institutions if the deficiencies persist. Federal regulations also provide that ifinstitutions. If any depository institution controlled by a financial holding companyan FHC fails to maintain a satisfactory rating under the Community Reinvestment Act, the Federal Reserve must prohibit the financial holding companyFHC and its subsidiaries from engaging in any activities other than those permissible for bank holding companies. In addition, a financial holding company must obtain Federal Reserve approval before engaging in certain banking and other financial activities both in the U.S. and internationally, as further described under Regulation of acquisitions below.BHCs.
Activities restrictions under the Volcker Rule. Section 619 (the “Volcker Rule”) of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) prohibits banking entities, including the Firm, from engaging in certain “proprietary trading” activities, subject to exceptions for underwriting, market-making, risk-mitigating hedging and certain other activities. In addition, the Volcker Rule limits the sponsorship of, and investment in, “covered funds” (as defined by the Volcker Rule) and imposes limits on certain transactions between the Firm and its sponsored funds (see JPMorgan Chase’s subsidiary banks — Restrictions on transactions with affiliates below). The period during which banking entities were required to bring covered funds into conformance with the Volcker Rule ended on July 21, 2017. The Volcker Rule requires banking entities to establish comprehensive compliance programs reasonably designed to help ensure and monitor compliance with the restrictions under the Volcker Rule, including, in order to distinguish permissible from impermissible risk-taking activities, the measurement, monitoring and reporting of certain key metrics.
Capital and liquidity requirements. requirements. The Federal Reserve establishes capital, liquidity and leverage requirements for the FirmJPMorgan Chase and evaluates itsthe Firm’s compliance with suchthose requirements. The OCC establishes similar capital and leverage requirements for JPMorgan Chase Bank, N.A. Banking supervisors globally continue to refine and enhance the Firm’sBasel III capital framework for financial institutions.
In January 2019, the Basel Committee issued “Minimum capital requirements for market risk,” which supersedes a previous release from January 2016. The Basel Committee expects national regulators to implement these revised market risk requirements for banking subsidiaries. For more information aboutorganizations in their jurisdictions by January 1, 2022, in line with the other elements of the Basel III Reforms.
U.S. banking regulators have announced their support for the issuance of the Basel III Reforms and are considering how to appropriately apply such reforms in the U.S. Any changes to U.S. capital rules based on the Basel III Reforms would first be proposed for public comment. In 2018, the Federal Reserve and the OCC released a proposal to revise the enhanced supplementary leverage ratio (“eSLR”) requirements applicable requirementsto the U.S. global systemically important banks (“GSIBs”) and their insured depository institutions (“IDIs”) and to make conforming changes to the rules which are applicable to U.S. GSIBs relating to risk-based capitaltotal loss-absorbing capacity (“TLAC”) and leverage, see Capital Risk Management on pages 82–91external long-term
debt that must satisfy certain eligibility criteria. Final requirements have not yet been issued. In November 2019, the U.S. banking regulators adopted a rule implementing “Standardized Approach for Counterparty Credit Risk” (“SA-CCR”), which will be effective in April 2020 and Note 26. which has a mandatory compliance date of January 1, 2022.
Under Basel III, bank holding companies and banks are required to measure their liquidity against two specific liquidity tests: the liquidity coverage ratio (“LCR”) and the net stable funding ratio (“NSFR”).  In the U.S., the final LCR rule (“U.S. LCR”) became effective on January 1, 2015. In April 2016, the U.S. banking regulators issued a proposed rule for NSFR, but no final rule has been issued. For additional information
Refer to Capital Risk Management on LCR, seepages 85–92 and Liquidity Risk Management on pages 92–97. On December 19, 2016,93–98 .
Stress tests. As a large BHC, JPMorgan Chase is subject to supervisory stress testing administered by the Federal Reserve published final U.S. LCR public disclosure requirements. Beginning in the second quarter of 2017, the Firm began disclosing its

2

consolidated LCR pursuant to the U.S. LCR rule. On September 8, 2016, the Federal Reserve published the framework that will apply to the setting of the countercyclical capital buffer. The Federal Reserve reviews the amount of this buffer at least annually, and on December 1, 2017, the Federal Reserve reaffirmed setting this buffer at 0%. Banking supervisors globally continue to consider refinements and enhancements to the Basel III capital framework for financial institutions. On December 7, 2017, the Basel Committee issued Basel III: Finalizing post-crisis reforms (“Basel III Reforms”), which seeks to reduce excessive variability in RWA and converge capital requirements between Standardized and Advanced approaches. The Basel III Reforms include revisions to both the standardized and internal ratings-based approach for credit risk, streamlining of the available approaches under the credit valuation adjustment (“CVA”) framework, a revised approach for operational risk, revisions to the measurement and calibration of the leverage ratio, and a capital floor based on 72.5% of the revised Standardized approaches. The Basel Committee expects national regulatory authorities to implement the Basel III Reforms in the laws of their respective jurisdictions and to require banking organizations subject to such laws to meet most of the revised requirements by January 1, 2022, with certain elements being phased in through January 1, 2027. U.S. banking regulators will now propose requirements applicable to U.S. financial institutions.
Stress tests. The Federal Reserve has adopted supervisory stress tests for large bank holding companies, including JPMorgan Chase, which formas part of the Federal Reserve’s annual Comprehensive Capital Analysis and Review (“CCAR”) framework. Under the framework, theThe Firm must conduct semi-annualannual company-run stress tests and in addition, must also submit an annual capital plan to the Federal Reserve, taking into account the results of separate stress tests designed by the Firm and the Federal Reserve. In reviewing the Firm’s capital plan, the Federal Reserve considers both quantitative and qualitative factors. Qualitative assessments include, among other things, the comprehensiveness of the plan, the assumptions and analysis underlying the plan, and the extent to which the Firm has satisfied certain supervisory matters related to the Firm’s processes and analyses, including the design and operational effectiveness of the controls governing such processes. Moreover, theThe Firm is required to receive a notice of non-objection from the Federal Reserve each year before taking capital actions, such as paying dividends, implementing common equity repurchase programs or redeeming or repurchasing capital instruments. The OCC requires JPMorgan Chase Bank, N.A. to perform separate, similar annual stress tests.tests annually. The Firm publishes each year the results of its mid-cyclethe annual stress tests underfor the Firm’s internally-developed “severely adverse” scenarioFirm and the results of its (and its two primary subsidiary banks’) annual stress testsJPMorgan Chase Bank, N.A. under the supervisory “severely adverse” scenarios provided by the Federal Reserve and the OCC. The Firm is required to file its 20182020 annual CCAR submission on April 5,
2018.6, 2020. Results will be published by the Federal Reserve by June 30, 2018,2020, with disclosures of results by BHCs, including the Firm, to follow within 15 days. The mid-cycle
In April 2018, the Federal Reserve proposed the introduction of a stress buffer framework that would create a single, integrated set of capital requirements by combining the supervisory stress test submissions are due on October 5, 2018results of the CCAR assessment and BHCs, includingthose under the Firm, will publish results by November 4, 2018.For additional information onDodd-Frank Act with current point-in-time capital requirements. In December 2019, the Firm’s CCAR, seeFederal Reserve indicated that it intends to have the stress buffer framework in place for the 2020 stress tests. Final requirements have not yet been issued.
Refer to Capital Risk Management on pages 82–91. In December 2017, the Federal Reserve released a set of proposals intended to provide85–92 for more detailed disclosure and transparencyinformation concerning the Federal Reserve’s approach, designFirm’s CCAR.
Enhanced prudential standards. As part of its mandate to identify and governancemonitor risks to the financial stability of the supervisory stress testing process. The proposals were open for public comment through January 22, 2018.
Enhanced prudential standards. TheU.S. posed by large banking organizations, the Financial Stability Oversight Council (“FSOC”), among other things, recommends prudential standards and reporting and disclosure requirements to the Federal Reserve for systemically important financial institutions (“SIFIs”), such as JPMorgan Chase. The Federal Reserve has adopted several rules to implement thethose heightened

2

prudential standards, including final rules relating to risk management and corporate governance of subject BHCs. Large BHCs with $50 billion or more in total consolidated assetssuch as JPMorgan Chase are required to comply with enhanced liquidity and overall risk management standards, and their boardsincluding oversight by the board of directors are required to conduct appropriate oversight of their risk management activities. For information on liquidity measures, see Liquidity Risk Management on pages 92–97.
Orderly liquidation authorityResolution and resolution and recovery. As a BHC with assets of $50 billion or more, therecovery. The Firm is required to submit periodically to the Federal Reserve and the FDIC a plan for resolution under Title I of the Bankruptcy CodeDodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) in the event of material distress or failure (a “resolution plan”). On December 19, 2017,17, 2019, the Firm received feedback from the Federal Reserve and FDIC on its 2019 resolution plan that set forth certain expectations for further enhancement of the FDIC announced joint determinations on the 2017Firm’s resolution plans of eight systemically important domestic banking institutions, including that of JPMorgan Chase,capabilities and extended the filing deadlineprovided initial expectations for the Firm’s next resolution plan, for each of these entities until July 1, 2019. The agencies determined that JPMorgan Chase’s 2017 resolution planbut did not have any “deficiencies,” which are weaknesses severe enough to trigger a resubmission process that could result in more stringent requirements,identify shortcomings or any “shortcomings,” which are less-severe weaknesses that would need to be addressed indeficiencies. In the next resolution plan. For more information aboutfuture, the Firm’s resolution plan see Risk Factorssubmissions will alternate between “targeted” and “full” plans, with the Firm’s next “targeted” resolution plan due to be filed on pages 8–26.or before July 1, 2021. The Firm also has a comprehensive recovery plan summarizing the actions it would take to avoid failure by remaining well-capitalized and well-funded in the case of an adverse event.
JPMorgan Chase Bank, N.A. is also required to provide a resolution plan to the FDIC. The FDIC has proposed changes to its rules relating to the resolution plans of IDIs in an advanced notice of proposed rulemaking. The OCC has published guidelines establishing standards for recovery planning by insured national banks, and JPMorgan Chase Bank, N.A. has submitted its recovery plan to the OCC.
Certain of the Firm’s non-U.S. subsidiaries are also subject to local resolution and recovery planning requirements.
Orderly liquidation authority. Certain financial companies, including JPMorgan Chase and certain of its subsidiaries, can also be subjected to resolution under an “orderly liquidation authority.” The U.S. Treasury Secretary, in consultation with the President of the United States, must first make certain determinations concerning extraordinary financial distress and systemic risk, determinations, and action must be recommended by the FDIC and the Federal Reserve. Absent such actions, the Firm, as a BHC, would remain subject to resolution under the Bankruptcy Code. In December 2013, theThe FDIC has issued a draft policy statement

3
Part I

describing its “single point of entry” strategy for resolution of systemically important financial institutionsSIFIs under the orderly liquidation authority. This strategyauthority, which seeks to keep operating subsidiaries of thea BHC open and impose losses on shareholders and creditors of the holding companyBHC in receivership according to their statutory order of priority. For further information see Risk Factors on pages 8–26.
The FDIC also requires each insured depository institution (“IDI”) with $50 billion or more in assets, such as JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., to provide an IDI resolution plan.
The Firm has a comprehensive recovery plan detailing the actions it would take to avoid failure by remaining well-capitalized and well-funded in the case of an adverse event. JPMorgan Chase has provided the Federal Reserve with comprehensive confidential supervisory information and analyses about the Firm’s businesses, legal entities and corporate governance and about its crisis management governance, capabilities and available alternatives to generate liquidity and capital in severe market circumstances. The OCC has published guidelines establishing standards for recovery planning by insured national banks, and JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. have submitted their recovery plans to the OCC.In addition, certain of the Firm’s non-U.S. subsidiaries are subject to resolution and recovery planning requirements in the jurisdictions in which they operate.
Regulators in the U.S. and abroad have proposed and implemented measures designed to address the possibility or perception that large financial institutions, including the Firm, may be “too big to fail,” and to provide safeguards so that, if a large financial institution does fail, it can be resolved without the use of public funds. Higher capital surcharges on global systemically important banks (“GSIBs”), requirements for certain large bank holding companies to maintain a minimum amount of long-term debt to facilitate orderly resolution of those firms (referred to as Total Loss Absorbing Capacity (“TLAC”)), and the International Swaps and Derivatives Association (“ISDA”) protocol relating to the “close-out” of derivatives transactions during the resolution of a large cross-border financial institution, are examples of initiatives to address “too big to fail.” For further information on the GSIB framework and TLAC, see Capital Risk Management on pages 82–91 and Risk Factors on pages 8–26, and on the ISDA close-out protocol, see Derivatives regulation below.
Holding company as a source of strength for bank subsidiaries.strength. JPMorgan Chase & Co. is required to serve as a source of financial strength for its depository institution subsidiaries and to commit resources to support those subsidiaries. This support may be requiredsubsidiaries, including when directed to do so by the Federal Reserve at times when the Firm might otherwise determine not to provide it.Reserve.
Regulation of acquisitions. acquisitions. Acquisitions by bank holding companiesBHCs and their banks are subject to multiple requirements established by the Federal Reserve and the OCC. For example, financial holding companiesFHCs and bank holding companiesBHCs are required to obtain the approval of the
Federal Reserve before they may acquire more than 5% of the voting shares of an unaffiliated bank. In addition, acquisitions by financial companies are prohibited if, as a result of the acquisition, the total liabilities of the financial company would exceed 10% of the total liabilities of all financial companies. In addition,Furthermore, for certain acquisitions, the Firm must provide written notice to the Federal Reserve prior to acquiring direct or indirect ownership or control of any voting shares of any company with over $10 billion in assets that is engaged in activities that are “financial in nature.”
JPMorgan Chase’s subsidiary banks:
Volcker Rule. The Firm’s two principal subsidiary banks,Volcker Rule prohibits banking entities, including the Firm, from engaging in certain “proprietary trading” activities, subject to exceptions for underwriting, market-making, risk-mitigating hedging and certain other activities. The Volcker Rule also limits the sponsorship of, and investment in, “covered funds,” and imposes limits on certain transactions between the Firm and covered funds for which a JPMorgan Chase Bank, N.A.entity serves as the investment manager, investment advisor, commodity trading advisor or sponsor, as well as certain covered funds controlled by such funds. The Volcker Rule requires banking entities to establish comprehensive compliance programs reasonably designed to help ensure and Chase Bank USA, N.A., are FDIC-insured national banks regulated bymonitor compliance with the OCC. As national banks,restrictions under the Volcker Rule. In August 2019, the
Federal Reserve and other regulatory agencies finalized
revisions to the proprietary trading restrictions of the
Volcker Rule, including simplifications to the Volcker Rule’s framework for demonstrating compliance with the
permitted activities under the rule. On January 30, 2020, the agencies proposed revisions to the Volcker Rule’s provisions relating to covered funds that would streamline the existing exclusion for non-U.S. public funds and introduce new exclusions for new classes of funds and from existing prohibitions on engaging in “covered transactions” with covered funds.
Consent orders. The Firm remains subject to consent orders entered into with its banking regulators between 2014 and 2016 concerning foreign exchange trading and referral hiring practices.
Subsidiary banks:
The activities of JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., the Firm’s principal subsidiary bank, are limited to those specifically authorized under the National Bank Act and related interpretations byof the OCC. The OCC has authority to bring an enforcement action against JPMorgan Chase Bank, N.A. for unsafe or unsound banking practices, which could include limiting JPMorgan Chase Bank, N.A.’s ability to conduct otherwise permissible activities, or imposing corrective capital and/or managerial requirements on the bank.

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Part I

FDIC deposit insurance. The FDIC deposit insurance fund provides insurance coverage for certain deposits and is funded through assessments on banks, such as JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. Changes in the methodology used to calculate such assessments, resulting from the enactment of the Dodd-Frank Act, significantly increased the assessments that the Firm’s bank subsidiaries pay annually to the FDIC. The FDIC instituted a new assessment surcharge on insured depository institutions with total consolidated assets greater than $10 billion in order to raise the reserve ratio for the FDIC deposit insurance fund.
FDIC powers upon a bank insolvency. Upon the insolvency of an insured depository institution, IDI, such as JPMorgan Chase Bank, N.A., the FDIC could be appointed as the conservator or receiver under the Federal Deposit Insurance Act (“FDIA”).Act. The FDIC has broad powers to transfer any assets and liabilities without the approval of the institution’s creditors.
Cross-guarantee. An FDIC-insured depository institution can be held liable for any loss incurred or expected to be incurred by the FDIC if another FDIC-insured institution that is under common control with such institution is in default or is deemed to be “in danger of default” (commonly referred to as “cross-guarantee” liability). An FDIC cross-guarantee claim against a depository institution is generally superior in right of payment to claims of the holding company and its affiliates against such depository institution.
Prompt corrective action and early remediation.action. The Federal Deposit Insurance Corporation Improvement Act of 1991 requires the relevant federal banking regulator to take “prompt corrective action” with respect to a depository institution if that institution does not meet certain capital adequacy standards. WhileAlthough these regulations apply only to banks, such as JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., the Federal Reserve is authorized to take appropriate action against the parent BHC, such as

4

JPMorgan Chase & Co., based on the undercapitalized status of any bank subsidiary. In certain instances, the BHC would be required to guarantee the performance of the capital restoration plan for its undercapitalized subsidiary.
OCC Heightened Standards. The OCC has established guidelines setting forth heightened standards for large banks. The guidelines establishbanks, including minimum standards for the design and implementation of a risk governance framework for banks. While the bank can use certain components of the parent company’sUnder these standards, a bank’s risk governance framework, the framework must ensure that the bank’s risk profile is easily distinguished and separate from thethat of its parent BHC for risk management purposes. The bank’s board or risk committee is responsible for approving the bank’s risk governance framework, providing active oversight of the bank’s risk-taking activities, and holding management accountable for adhering to the risk governance framework.
Restrictions on transactions with affiliates.The bank subsidiaries of JPMorgan Chase (includingBank, N.A. and its subsidiaries of those banks) are subject to certain restrictions imposed by federal law on extensions of credit to, investments in stock or securities of, and derivatives, securities lending and certain other transactions with, JPMorgan Chase & Co. and certain other affiliates. These restrictions prevent JPMorgan Chase & Co. and other affiliates from borrowing from such subsidiaries unless the loans are secured in specified amounts and comply with certain other requirements. For more information, see Note 25. In addition, the Volcker Rule imposes a prohibition on such transactions between any JPMorgan Chase entity and covered funds for which a JPMorgan Chase entity serves as the investment manager, investment advisor, commodity trading advisor or sponsor, as well as, subject to a limited exception, any covered fund controlled by such funds.
Dividend restrictions. Federal law imposes limitations on the payment of dividends by national banks, such as JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. SeeRefer to Note 2526 for the amount of dividends that the Firm’s principal bank subsidiariesJPMorgan Chase Bank, N.A. could pay, at January 1, 2018,2020, to their respective bank holding companiesJPMorgan Chase without the approval of theirthe banking regulators.
In addition to the dividend restrictions described above, the The OCC and the Federal Reserve also have authority to prohibit or limit the payment of dividends of thea bank subsidiariessubsidiary that they supervise 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 bank.
Depositor preference. Under federal law, the claims of a receiver of an insured depository institutionIDI for administrative expense and the claims of holders of U.S. deposit liabilities (including the FDIC and deposits in non-U.S. branches that are dually payable in the U.S. and in a non-U.S. branch) have priority over the claims of other unsecured creditors of the institution, including public noteholders and depositors in non-U.S. branches. As a result, such persons could receive substantially less than the depositors in U.S. offices of the depository institution.
branches and public noteholders.
CFPB regulation andConsumer supervision and other consumer regulations.regulation. JPMorgan Chase and its national bank subsidiaries, including JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., are subject to supervision and regulation by the CFPBConsumer Financial Protection Bureau (“CFPB”) with respect to federal consumer protection laws, including laws relating to fair lending and the prohibition of unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer financial products and services. These laws includeThe CFPB also has jurisdiction over small business lending activities with respect to fair lending and the Truth-in-Lending, Equal Credit Opportunity Act (“ECOA”), Fair Credit Reporting, Fair Debt Collection Practice, Electronic Funds Transfer, Credit Card Accountability, Responsibility and Disclosure (“CARD”) and Home Mortgage Disclosure Acts. The CFPB has authority to impose new disclosure requirements for certain consumer financial products and services. The CFPB’s rule-making efforts have addressed mortgage-related topics, including ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home Mortgage Disclosure Act requirements, appraisal and escrow standards and requirements for higher-priced mortgages. The CFPB continues to issue informal guidance on a variety of topics (such as the collection of consumer debts and credit card marketing practices). Other areas of focus include sales incentives, pre-authorized electronic funds transfers, “add-on” products, matters involving consumer populations considered vulnerable by the CFPB, credit reporting, and the furnishing of credit scores to individuals.Act. As part of its regulatory oversight, the CFPB has authority to take enforcement actions against firms that offer certain products and services to consumers including JPMorgan Chase.using practices that are deemed to be unfair, deceptive or abusive. The Firm’s consumer activities are also subject to regulation under state statutes which are enforced by the Attorney General or empowered agency of each state.
Securities and broker-dealer regulation:
The Firm conducts securities underwriting, dealing and brokerage activities in the U.S. through J.P. Morgan Securities LLC and other non-bank broker-dealer subsidiaries, all of which are subject to regulations of the SEC, the Financial Industry Regulatory AuthorityFINRA and the New York Stock Exchange, among others. The Firm conducts similar securities activities outside the U.S. subject to local regulatory requirements. In the U.K., those activities are conducted by J.P. Morgan Securities plc, a subsidiary of JPMorgan Chase Bank, N.A., and are regulated by the PRA and the FCA.plc. Broker-dealers are subject to laws and regulations covering all aspects of the securities business, including sales and trading practices, securities offerings, publication of research reports, use of customers’customer funds, the financing of clients’client purchases, capital structure, record-keeping and retention, and the conduct of their directors, officers and employees. ForRefer to Broker-dealer regulatory capital on page 92 for information onconcerning the net capital of J.P. Morgan Securities LLC and the applicable requirements relating to risk-based capital for J.P. Morgan Securities plc, see Broker-dealer regulatory capital on page 91. In addition, rules adopted by the U.S. Department of Labor (“DOL”) have imposed (among other things) a new standard of care applicable to broker-dealers when dealing

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Part I

with customers. For more information see Investment management regulation below.plc.
Investment management regulation:
The Firm’s asset and wealth management businesses are subject to significant regulation in numerous jurisdictions around the world relating to, among other things, the safeguarding and management of client assets, offerings of funds and marketing activities. Certain of the Firm’s subsidiaries are registered with, and subject to oversight by, the SEC as investment advisers. As such, theThe Firm’s registered investment advisers are subject to the fiduciary and other obligations imposed under the Investment Advisers Act of 1940, and the rules and regulations promulgated thereunder, as well as various state securities laws. For information regarding investigations and litigation in connection with disclosuresThe Firm’s fiduciary activities are also subject to clients related to proprietary products, see Note 29.supervision by the OCC.
The Firm’s asset and wealth management businesses continue to be affected by ongoing rule-making and implementation of new regulations. The DOL’s fiduciary rule, which became effective June 9, 2017, has significantly expanded the universe of persons viewed as investment advice fiduciaries to retirement plans and individual retirement accounts (“IRAs”) under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The prohibited transaction exemptions issued in connection with the rule require adherence to “impartial conduct standards” (including a requirement to act in the “best interest” of retirement clients), although compliance with requirements relating to conditions requiring new client contracts, implementation of policies and procedures, websites and other disclosures to both investors and the DOL have been delayed until July 1, 2019. Furthermore, the DOL is performing a review of the rule and the related exemptions in accordance with a February 2017 memorandum from the President. Subject to the outcome of the DOL’s review, it is expected that the rule and related prohibited transaction exemptions will have a significant impact on the fee and compensation practices at financial institutions that offer investment advice to retail retirement clients. In addition to the impact of the DOL’s fiduciary rule, the Firm’s asset and wealth management businesses may be affected by ongoing rule-making and

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implementation of new regulations, byincluding the SECSEC’s Regulation Best Interest, which becomes operative on June 30, 2020, and rules proposed or adopted by certain U.S. states relating to enhanced standards of conduct for broker-dealers and certain other market participants.
In the European Union (“EU”), substantial revisions to the Markets in Financial Instruments Directive (“MiFID II”) became effective across EU member states beginning January 3, 2018. These revisions introduced expanded requirements for a broad range of investment management activities, including product governance, transparency on costs and charges, independent investment advice, inducements, record keeping and client reporting. In addition, final regulations on European Money Market Fund Reform were published in July 2017 and, following an 18-month transition period for existing funds, will implement
new requirements to enhance the liquidity and stability of money market funds in the EU.
Derivatives regulation:
The Firm is subject to comprehensive regulation of its derivatives businesses. Thebusinesses, including regulations that impose capital and margin requirements, (including the collecting and posting of variation margin and initial margin in respect of non-centrally cleared derivatives), require central clearing of standardized over-the-counter (“OTC”) derivatives, requiremandate that certain standardized over-the-counter swaps be traded on regulated trading venues, and provide for reporting of certain mandated information. In addition,accordance with requirements under the Dodd-Frank Act, requires the registration of “swap dealers” and “major swap participants” with the CFTC and of “security-based swap dealers” and “major security-based swap participants” with the SEC. JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, J.P. Morgan Securities plc and J.P. Morgan Ventures Energy Corporation have registered with the CFTC as swap dealers, and JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and J.P. Morgan Securities plc have registered with the CFTC as “swap dealers” and may be required to register with the SEC as security-based“security-based swap dealers.” As a result, of their registration as swap dealers or security-based swap dealers, these entities are or will be subject to a comprehensive regulatory framework applicable to their swap or security-based swap activities, which includesincluding capital requirements, rules regulating their swap activities, rules requiring the collateralization of uncleared swaps and security-based swaps, rules regarding segregation of counterparty collateral, business conduct and documentation standards, record-keeping and reporting obligations, and anti-fraud and anti-manipulation requirements. Further, some of the rules for derivatives apply extraterritorially to U.S. firms doing business with clients outside of the U.S., as well as to the overseas activities of non-U.S. subsidiaries of the Firm that either deal with U.S. persons or that are guaranteed by U.S. subsidiaries of the Firm; however, the full scope of the extra-territorial impact of the U.S. swaps regulation has not been finalized and therefore remains unclear. The effect of these rules may require banking entities, such as the Firm, to modify the structure of their derivatives businesses and face increased operational and regulatory costs. In the EU,European Union (“EU”), the implementation of the European Market Infrastructure Regulation (“EMIR”) and substantial revisions to the Markets in Financial Instruments Directive (“MiFID II will resultII”) has resulted in comparable, but not identical, changes to the European regulatory regime for derivatives. The combined effect of the U.S. and EU requirements, and the potential conflicts and inconsistencies between them, present challenges and risks to the structure and operating model of the Firm’s derivatives businesses.
The Firm and other financial institutionsderivatives market participants have agreed to adhere to the 2015 Universal Resolution Stay Protocol (the “Protocol”)several protocols developed by ISDAthe International Swaps and Derivatives Association (“ISDA”) in response to regulator concerns that the close-out of derivatives and other financial transactions during the resolution of a large cross-border financial institution could impede resolution efforts and potentially destabilize markets. The Protocol providesThese protocols provide for the contractual recognition of cross-border stays under

6

various statutory resolution regimes and, in the case of certain of the protocols, a contractual stay on certain cross-default rights.
In the U.S., one subsidiary of the Firm, J.P. Morgan Securities LLC is registered with the CFTC as a futures commission merchant, and other subsidiaries are either registered with the CFTC as commodity pool operators and commodity trading advisors or are exempt from such registration. These CFTC-registered subsidiaries are also membersis a member of the National Futures Association.
Data and cyber regulation:
The Firm and its subsidiaries are subject to numerous U.S. federal and state andas well as international laws and regulations concerning the collection, use, confidentiality, disclosure, transfer, protection and protectionhandling of certain customer, employee and otherinformation, including personal information of individuals and confidential information including those imposed by(including the Gramm-Leach-Bliley Act and the Fair Credit Reporting Act,EU General Data Protection Regulation), as well as the EU Data Protection Directive. In addition, various U.S. regulators, including the Federal Reserve, the OCCmanagement of internal and external threats and vulnerabilities to protect information assets and the SEC, have increased theirsupporting infrastructure from cyberattacks. These laws and regulations are evolving at a rapid pace, remain a focus on cybersecurityof regulators globally and data privacy through guidance, examinations and regulations.will
In May 2018, the General Data Protection Regulation (“GDPR”) will replace the EU Data Protection Directive, and it will
continue to have a significant impact on how businesses can collect and processall of the personal data of EU individuals. In addition, numerous proposals regarding privacy and data protection are pending before U.S. and non-U.S. legislative and regulatory bodies.Firm’s businesses.
The Bank Secrecy Act and Economic Sanctions:
The Bank Secrecy Act (“BSA”) requires all financial institutions, including banks and securities broker-dealers, to among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. The BSA includes a variety of record-keeping and reporting requirements, (such as cash transaction and suspicious activity reporting), as well as due diligence/know your customerknow-your-customer documentation requirements. In January 2013, the Firm entered into Consent Orders with its banking regulators relating to the Firm’s Bank Secrecy Act/Anti-Money Laundering policies, procedures and controls; the Firm has taken significant steps to modify and enhance its processes and controls with respect to its Anti-Money Laundering procedures and to remediate the issues identified in the Consent Order. The Firm is also subject to the regulations and economic sanctions programs administered by the U.S. Treasury’s Office of Foreign Assets Control (“OFAC”). In addition, the EU has adopted various economic sanctions programs targeted at entities or individuals that are, or are located in countries that are, involved in terrorism, hostilities, embezzlement or human rights violations.
Anti-Corruption:
The Firm is subject to laws and regulations relating to corrupt and illegal payments to government officials and others in the jurisdictions in which it operates, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. In November 2016, the Firm entered into a Consent Order with the Federal Reserve to resolve its investigation relating to a former hiring program for candidates referred by clients, potential clients and government officials in the Asia Pacific region. The Firm has taken significant steps to modify and enhance its processes and controls with respect
to the hiring of referred candidates and to remediate the issues identified in the Consent Order.
Compensation practices:
The Firm’s compensation practices are subject to oversight by the Federal Reserve, as well as other agencies. The Federal Reserve has issued guidance jointly with the FDIC and the OCC that is designed to ensure that incentive compensation paid by banking organizations does not encourage imprudent risk-taking that threatens the organizations’ safety and soundness. In addition, under the Dodd-Frank Act, federal regulators, including the Federal Reserve, must issue regulations or guidelines requiring covered financial institutions, including the Firm, to report the structure of all incentive-based compensation arrangements and prohibit incentive-based payment arrangements that encourage inappropriate risks by providing compensation that is excessive or that could lead to material financial loss to the institution. The Federal Reserve has conducted a review of the incentive compensation policies and practices of a number of large banking institutions, including the Firm. The Financial Stability Board (“FSB”) has also established standards covering compensation principles for banks. In addition, the SEC has issued regulations that will require public companies to start disclosing, beginning with annual shareholder meetings in 2018, the pay ratio between the company’s median employee and the company’s chief executive officer or other principal executive officer in the proxy statement as of December 31, 2017. The Firm’s compensation practices are also subject to regulation and oversight by local regulators in other jurisdictions. In Europe,jurisdictions, notably the EU Fourth Capital Requirements Directive (“CRD IV”), which includes compensation provisions and thecompensation-related provisions. The European Banking Authority has instituted guidelines on compensation policies which in certain countries, such as the U.K., are implemented or supplemented by further local regulations or guidelines. The Firm expects that the implementation of the Federal Reserve’s and other banking regulators’regulatory guidelines regarding compensation are expectedin the U.S. and other countries will continue to evolve, over the next several years, and may affect the manner in which the Firm structures its compensation programs and practices.
SignificantOther significant international regulatory initiatives:
In theThe EU there iscontinues to implement an extensive and complex program of finalregulatory enhancement. Amendments to EMIR, known as “EMIR REFIT,” entered into force during 2019 and proposed regulatory enhancement that reflects, in part,made targeted changes to EMIR to make the EU’s commitments to policiesrules more streamlined and proportionate. While most of the Group of Twenty Finance Ministerschanges already apply, some will take effect in 2020 and Central Bank Governors (“G20”) together with other plans specific2021. This will include a new requirement for clearing firms to provide clearing services on “fair, reasonable, non-discriminatory and transparent commercial terms” as well as changes to the EU. The EU operates a European Systemic Risk Board that monitors financial stability, together with European Supervisory Authorities (“ESA”) that set detailed regulatory rules and encourage supervisory convergence across the EU’s Member States. The EU is currently reviewing the ESA framework. The EU has also created a Single Supervisory Mechanism for the euro-zone, under which the regulation of all banks in that zone will be under the auspices of the European Central Bank, together with a Single Resolution Mechanism and Single Resolution Board, having jurisdiction over bank resolution in the zone. At both the G20 and EUEMIR reporting rules.


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levels, various proposals are under consideration to address risks associated with global financial institutions.
In the EU, this includes EMIR, which requires, among other things, the central clearingThe European Commission (“EC”) has begun its review of certain standardized derivatives and risk mitigation for uncleared OTC derivatives, and MiFID II, which gives effectwill continue into 2020, with the EC expected to the G20 commitmentpublish a legislative proposal for changes to moveMiFID II. MiFID II, which became effective in 2018, requires the trading of standardizedshares and certain OTC derivatives to exchanges or electronictake place on trading platforms. MiFID IIvenues, and also significantly enhancesenhanced requirements for pre- and post-trade transparency, transaction reporting and investor protection. MiFID II also introduces a commoditiesprotection, and introduced position limits and a reporting regime. EMIR became effective in 2012, although some requirements apply on a phased basis and certain aspectsregime for commodities. The extent of the regulation are currently being reviewed.changes that will be proposed under the MiFID II became effective across EU Member States on January 3, 2018, after a one-year delay.review is not known.
The EU is also currently considering or implementing significant revisions to laws covering securities settlement; mutual funds and pensions; payments; anti-money laundering controls; data security and privacy; transparency and disclosure of securities financing transactions; benchmarks; resolution of banks, investment firms and market infrastructures; and capital and liquidity requirements for banks and investment firms. The capital and liquidity legislation for banks and investment firms will implement in the EUimplemented many of the finalized Basel III capital and liquidity standards, including in relation to the leverage ratio, market risk capital, and a net stable funding ratio. These changes will begin to take effect from June 2021. The final EU legislation also proposesincludes a requirement for certain non-EU banks operating in the EU to establish an intermediate parent undertaking (“IPU”) requirement for foreign banks, whichlocated in the EU. The IPU rule will require non-EU banks operating in Europe (with total EU assets greater than EUR30 billion or which are part ofallow a GSIB)second IPU to establishbe established if a single EU-located IPU. IPU would conflict with “home country” bank separation rules or impede resolvability.
The full impactEU has also proposed or implemented significant revisions to laws covering securities settlement, mutual funds and pensions, payments, anti-money laundering controls, data security and privacy, transparency and disclosure of the proposal on JPM’s EU operationssecurities financing transactions, benchmarks, and legal entities will be heavily influenced by the outcomeresolution of the EU legislative process, including whether any flexibility is introduced to the requirement.
Consistent with the G20banks, investment firms and EU policy frameworks, U.K. regulators have adopted a range of policy measures that have significantly changed the markets and prudential regulatory environment in the U.K. In addition, U.K. regulators have introduced measures to enhance accountability of individuals, and promote forward-looking conduct risk identification and mitigation, including by introducing the Senior Managers and Certification Regimes.
On June 23, 2016, the U.K. voted by referendum to leave the European Union. The U.K. government invoked Article 50 of the Lisbon Treaty on March 29, 2017, starting a two-year period for the formal exit negotiations. This means that the U.K. will leave the EU on March 29, 2019 unless the timeline is unanimously extended by the remaining 27 EU Member States (“EU27”) and the U.K. In December 2017, the EU27 agreed that “sufficient progress” had been made on the terms of the U.K.’s withdrawal to allow parallel talks on the future relationship, which are expected to begin in March 2018. The U.K.’s priorities in negotiating the future relationship are to seek a bilateral free trade agreement
with the EU27 that facilitates the “greatest possible access” to the Single Market. However, the U.K. will not seek to continue its membership in the Single Market. The current EU27 position is that a free trade agreement should be balanced, ambitious and wide-ranging, that the U.K.’s participation in the Single Market or parts thereof must end, and that there will not be any sector-specific carve-outs,market infrastructures, such as for financial services. Both the EU27 and the U.K. are open to the idea of a “transitional arrangement.”The U.K.’s departure from the EU will have a significant impact across the Firm’s European businesses, including business and legal entity reorganization, and may lead to direct and indirect changes to EU27 and U.K. regulatory approaches. The situation remains highly uncertain, particularly in relation to whether a transition period is implemented and whether financial services will be included in any future free trade agreement.central counterparties.
Item 1A. Risk Factors.
The following discussion sets forth the material risk factors that could affect JPMorgan Chase’s financial condition and operations. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Firm. Any of the risk factors discussed below could by itself, or combined with other factors, materially and adversely affect JPMorgan Chase’s business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.
Regulatory
JPMorgan Chase’s businesses are highly regulated, and the laws and regulations that apply to JPMorgan Chase have a significant impact on its business and operations.
JPMorgan Chase is a financial services firm with operations worldwide. JPMorgan Chase must comply with the laws, rules and regulations that apply to its operations in all of the jurisdictions around the world in which it does business. The regulationRegulation of financial services activities is typically extensive and comprehensive.extensive.
In recent years, legislators and regulators adopted a wide rangeJPMorgan Chase has experienced an extended period of newsignificant change in laws and regulations affecting the financial services industry, both within and outside the U.S. The supervision of financial services firms also expanded significantly during this period.
significantly. The wave of increased regulation and supervision of JPMorgan Chase has affected the way that it conducts its business and structures its operations. Existing and new laws and regulations and expanded supervision could require JPMorgan Chase to make further changes to its business and operations. These changes could result in JPMorgan Chase incurring additional costs for complying with laws and regulations or losing a significant amount of revenue, and could reduce JPMorgan Chase’sits profitability. More specifically,For example, existing and new laws and regulations have in the past and could in the future require JPMorgan Chase to:
limit the products and services that it offers
reduce the liquidity that it can provide through its market-making activities
stop or discourage it from engaging in business opportunities that it might otherwise pursue
recognize losses in the value of assets that it holds

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pay higher taxes, assessments, levies or other governmental charges, including in connection with the resolution of tax examinations
dispose of certain assets, and do so at times or prices that are disadvantageous
impose restrictions on certain business activities, or
increase the prices that it charges for products and services, which could reduce the demand for them.
Differences in financial services regulation can be disadvantageous for JPMorgan Chase’s business.
The content and application of laws and regulations affecting financial services firms sometimes vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, orand other criteria. For example:
larger firms are often subject to more stringent supervision and regulation
financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as the regulatory agencies which supervise more diversified financial services firms, or
the financial services regulatory framework in a particular jurisdiction may favor financial institutions that are based in that country.jurisdiction.
These differences in the regulatory framework can result in a firm such as JPMorgan Chase losing market share to competitors that are less regulated or not subject to regulation, especially with respect to unregulated financial products.
There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the U.S. and in differentother countries

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and regions in which JPMorgan Chase does business. For example, legislativewhen adopting rules that are intended to implement a global regulatory initiative or standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms, such as JPMorgan Chase, that may be subject to those enhanced regulations.
Legislative and regulatory initiatives withinoutside the EUU.S. could require JPMorgan Chase to make significant modifications to its operations and legal entity structure in that regionthe relevant countries or regions in order to comply with those requirements. These include laws and regulations that have been adopted or proposed relating to:
the resolution of financial institutions
the establishment by non-EU financial institutions of locally-based intermediate holding companies or operating subsidiaries
requirements to maintain minimum amounts of capital or liquidity in the EUlocally-based subsidiaries
the separation (or “ring fencing”) of trading activities from core banking products and services from markets activities
mandatory on-exchange tradingrequirements for executing or settling transactions on exchanges or through central counterparties (“CCPs”)
position limits and reporting rules for derivatives
governance and accountability regimes
conduct of business requirements, and
restrictions on compensation.
These types of differences in financial services regulation, or inconsistencies or conflicts between laws and regulations between different jurisdictions, could require JPMorgan Chase to, among other things:to:
divest assets or restructure its operations
absorb increased operational, capital and liquidity costs
change the prices that it charges for its products and services
curtail the products and services that it offers to its customers and clients, or
incur higher costs for complying with different legal and regulatory frameworks.
Any or all of these factors could harm JPMorgan Chase’s ability to compete against other firms that are not subject to the same laws and regulations or supervisory oversight, or harm JPMorgan Chase’s businesses, results of operations and profitability.
Governments in some countries in which JPMorgan Chase does business have adopted laws or regulations which require that JPMorgan Chase subsidiaries which operate in those countries maintain minimum amounts of capital or liquidity on a stand-alone basis. Some regulators outside the U.S. have also proposed that large banks which conduct certain businesses in their jurisdictions operate through separate subsidiaries located in those countries. These requirements, and any future laws or regulations that impose restrictions on the way JPMorgan Chase organizes its businesses or increase the capital or liquidity requirements that would apply to JPMorgan Chase subsidiaries, could hinder JPMorgan Chase’s ability to efficiently manage its operations, increase its funding and liquidity costs, and result in lower profitability.
Heightened regulatory scrutiny of JPMorgan Chase’s businesses has increased its compliance costs and could result in restrictions on its operations.
JPMorgan Chase’s operations are subject to heightened oversight and scrutiny from regulatory authorities in many jurisdictions where JPMorgan Chase does business. JPMorgan Chase has paid significant fines, or provided other monetary relief, incurred other penalties and experienced other repercussions in connection with resolving several investigations and enforcement actions by governmental agencies. JPMorgan Chase could become subject to similar regulatory settlementsresolutions or other actions in the future, and addressing the requirements of any such settlementresolutions or actions could result in JPMorgan Chase incurring higher operational and compliance costs.costs or needing to comply with other restrictions.
In connection with resolving specific regulatory investigations or enforcement actions, certain regulators have required JPMorgan Chase and other financial institutions to admit wrongdoing with respect to the activities that gave rise to the settlement.resolution. These types of admissions can lead to:
greater exposure in civil litigation
damage to reputation
disqualification from doing business with certain clients or customers, or in specific jurisdictions, or

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other direct and indirect adverse effects.
Furthermore, U.S. government officials have demonstrated a willingness to bring criminal actions against financial institutions and have increasingly demanded that institutions plead guilty to criminal offenses or admit other wrongdoing in connection with resolving regulatory investigations or enforcement actions. In the case of JPMorgan Chase, these resolutions have included:
JPMorgan Chase’s agreement in May 2015 to plead guilty to a single violation of federal antitrust law in connection with its settlements with certain government authorities relating to its foreign exchange sales and trading activities and controls related to those activities, and
the non-prosecution agreement entered into by a subsidiary of JPMorgan Chase with the U.S. Department of Justice in November 2016 in connection with settlements to resolve various governmental investigations relating to a former hiring program for candidates referred by clients, potential clients and government officials in the Asia Pacific region.
Resolutions of this type can have significant collateral consequences for the subject financial institution, including including:
loss of clients, customers and business the inability to offer
restrictions on offering certain products or services, or and
losing permission to operate certain businesses, either temporarily or permanently.
JPMorgan Chase expects that it and other financial services firms will continue to be subject to expandedheightened regulatory scrutiny and governmental investigations and enforcement actions. JPMorgan Chase also expects that regulators will continue to insist that financial institutions be penalized for actual or deemed violations of law with formal and punitive enforcement actions, including the imposition of significant monetary and other sanctions, rather than resolving these matters through informal supervisory actions. Furthermore, if JPMorgan Chase fails to meet the requirements of any resolution of a governmental settlements and other actions to which it is subject,investigation or enforcement action, or to maintain risk and control processes that meet

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Part I

the heightened standards established by its regulators, it could be required to, among other things:to:
enter into further orders and settlementsresolutions of investigations or enforcement actions
pay additional regulatory fines, penalties or judgments, or
accept material regulatory restrictions on, or changes in the management of, its businesses.
The extent ofIn these circumstances, JPMorgan Chase could also become subject to other sanctions, or to prosecution or civil litigation with respect to the conduct that gave rise to an investigation or enforcement action.
Complying with economic sanctions and anti-corruption and anti-money laundering laws and regulations can increase JPMorgan Chase’s exposureoperational and compliance costs and risks.
JPMorgan Chase must comply with economic sanctions and embargo programs administered by the Office of Foreign Assets Control (“OFAC”) and similar national and multi-national bodies and governmental agencies outside the U.S., as well as anti-corruption and anti-money laundering laws and regulations throughout the world. JPMorgan Chase can incur higher costs and face greater compliance risks in structuring and operating its businesses to comply with these requirements. Furthermore, a violation of a sanction or embargo program or anti-corruption or anti-money laundering laws and regulations could subject JPMorgan Chase, and individual employees, to regulatory enforcement actions as well as significant civil and criminal penalties.
JPMorgan Chase’s operations can be constrained in countries with less predictable legal and regulatory mattersframeworks.
If the legal and regulatory system in a particular country is less predictable, this can create a more difficult environment in which to conduct business. For example, any of the following could hamper JPMorgan Chase’s operations and reduce its earnings in these types of countries:
the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions
conflicting or ambiguous laws and regulations, or the inconsistent application or interpretation of existing laws and regulations
uncertainty concerning the enforceability of contractual, intellectual property or other obligations
difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive, and
the threat of arbitrary regulatory investigations, civil litigations or criminal prosecutions, the termination of licenses required to operate in the local market or the
suspension of business relationships with governmental bodies.
Conducting business in countries with less predictable legal and regulatory regimes could require JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws and regulations, as well as structuring its operations to comply with local laws and regulations and implementing and administering related internal policies and procedures.
There can be unpredictable and could, in some cases, exceed the amount of reservesno assurance that JPMorgan Chase has established for those matters.will always be successful in its efforts to fully understand and to conduct its business in compliance with the laws and regulations of all of the jurisdictions in which it operates, and the risk of non-compliance can be greater in countries that have less predictable legal and regulatory systems.
Requirements for the orderly resolution of JPMorgan Chase could result in JPMorgan Chase having to restructure or reorganize its businesses.
JPMorgan Chase is required under the Dodd-Frank Act and Federal Reserve and FDIC rules to prepare and submit
periodically to those agencies a detailed plan for rapid and orderly resolution in bankruptcy, without extraordinary government support, in the event of material financial distress or failure. The agencies’ evaluation of the Firm’sJPMorgan Chase’s resolution plan may change, and the requirements for resolution plans may be modified from time to time. Any such determinations or modifications could result in JPMorgan Chase makingneeding to make changes to its legal entity structure or to certain internal or external activities, thatwhich could increase its funding or operational costs.costs, or hamper its ability to serve clients and customers.
If the Federal Reserve and the FDIC were to determine that a future resolution plan submitted by JPMorgan Chase has deficiencies, they could jointly impose more stringent capital, leverage or liquidity requirements or restrictions on JPMorgan Chase’s growth, activities or operations. After two years, if the deficiencies are not cured, the agencies could also require that JPMorgan Chase restructure, reorganize or divest assets or businesses in ways that could materially and adversely affect JPMorgan Chase’s operations and strategy.
Holders of JPMorgan Chase & Co.’s debt and equity securities will absorb losses if it were to enter into a resolution.
Federal Reserve rules require that JPMorgan Chase & Co. (the “holding company”“Parent Company”) maintain minimum levels of unsecured external long-term debt and other loss-absorbing capacity with specific terms (“eligible LTD”) for purposes of recapitalizing JPMorgan Chase’s operating subsidiaries if the holding companyParent Company were to enter into a resolution either:
•
in a bankruptcy proceeding under Chapter 11 of the U.S. Bankruptcy Code, or
•
in a receivership administered by the FDIC under Title II of the Dodd-Frank Act (“Title II”).
in a bankruptcy proceeding under Chapter 11 of the U.S. Bankruptcy Code, or
in a receivership administered by the FDIC under Title II of the Dodd-Frank Act (“Title II”).
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If the holding companyParent Company were to enter into a resolution, holders of eligible LTD and other debt and equity securities of the holding companyParent Company will absorb the losses of the holding companyParent Company and its affiliates.subsidiaries.
The preferred “single point of entry” strategy under JPMorgan Chase’s resolution plan contemplates that only the holding companyParent Company would enter bankruptcy proceedings. JPMorgan Chase’s subsidiaries would be recapitalized, as needed, so that they could continue normal operations or subsequently be divested or wound down in an orderly manner. As a result, the holding company’sParent Company’s losses and any losses incurred by its subsidiaries would be imposed first on holders of the holding company’sParent Company’s equity securities and thereafter on its unsecured creditors, including holders of eligible LTD and other debt securities. Claims of holders of those securities would have a junior position to the claims of creditors of JPMorgan Chase’s subsidiaries and to the claims of priority (as determined by statute) and secured creditors of the holding company.Parent Company.
Accordingly, in a resolution of the holding companyParent Company in bankruptcy, holders of eligible LTD and other debt securities of the holding companyParent Company would realize value only to the

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extent available to the holding companyParent Company as a shareholder of JPMorgan Chase Bank, N.A. and its other subsidiaries, and only after any claims of priority and secured creditors of the holding companyParent Company have been fully repaid.
The FDIC has similarly indicated that a single point of entry recapitalization model could be a desirable strategy to resolve a systemically important financial institution, such as the holding company,Parent Company, under Title II. However, the FDIC has not to date, formally adopted a single point of entry resolution strategy.
If the holding companyParent Company were to approach, or enter into, a resolution, none of the holding company,Parent Company, the Federal Reserve or the FDIC is obligated to follow JPMorgan Chase’s preferred strategy, and losses to holders of eligible LTD and other debt and equity securities of the holding company,Parent Company, under whatever strategy is ultimately followed, could be greater.greater than they might have been under JPMorgan Chase’s preferred strategy.
Political
Political developments can cause uncertainty concerningThe departure of the regulatory environment inU.K. from the EU could negatively affect JPMorgan Chase’s business, results of operations and operating model.
It remains highly uncertain how the departure of the U.K. from the EU, which JPMorgan Chase operates its businesses.
Recent elections and referendums in the U.S. and abroad have introduced uncertainty regarding the regulatory environment in which JPMorgan Chase and otheris commonly referred to as “Brexit,” will affect financial services firms will operatesuch as JPMorgan Chase that conduct substantial operations in the future. For example,EU from legal entities that are organized in or operating from the U.K. It is possible that the transition period following the U.K.’s planned departure from the EU has engendered significant uncertainty concerning the regulatory framework under which global financial services institutions, including JPMorgan Chase,on January 31, 2020 will need to conduct their business in the U.K. and the EU. Dependingexpire on the nature of the arrangements agreedDecember 31, 2020 without any agreement having been reached between the U.K. and the EU including with respectconcerning whether or to what extent U.K.-based firms may conduct financial services activities within the EU. It is also possible that any
agreement reached between the U.K. and the EU may, depending on the final outcome of the ongoing negotiations and related legislative developments:
impede the ability of U.K.-based financial services companiesfirms to engage inconduct business in the EU from legal entities organized in
fail to address significant unresolved issues relating to the cross-border conduct of financial services activities, or operating from the U.K.,
apply only temporarily.
JPMorgan Chase may need to make significant changeshas been making appropriate modifications to its legal entity structure and operations andin the EU, the locations in which it operates. Theseoperates and the staffing in those locations to address the departure of the U.K. from the EU. If the U.K. and the EU fail to reach an agreement on their future relationship before the end of the transition period or if any other outcome persists that does not assure ongoing access for U.K.-based financial services firms to the EU market, the types of structural and operational changes couldthat JPMorgan Chase is in the process of making to its European operations may result in JPMorgan Chase needinghaving to implement ansustain a more fragmented operating model across its U.K., EU and other operating entities. Due to considerations such as operating expenses, liquidity, leverage and capital, the modified European operating framework will be more complex, less efficient and more costly than would otherwise have been the case.
A disorderly withdrawal of the U.K. from the EU, or unexpected consequences of the withdrawal, could have significant and immediate destabilizing effects on economic and market conditions in the region and globally. In particular, cross-border financial services activities could be severely disrupted depending on circumstances that may exist following the withdrawal, including:
the possibility that financial institutions, their clients and counterparties, and other market participants may not be positioned to continue to do business through EU-based legal entities
reduction or fragmentation of market liquidity that is less efficientmay be caused if significant market participants (including trading venues and CCPs) that are currently based in the U.K. have not completed arrangements to conduct operations from the EU either in the near term or, cost-effective.if authorized to continue to operate from the U.K. on a transitional basis, after any transitional or temporary relief has expired
The resultuncertainties concerning the application and interpretation of an election may suggest that the new administration will ease the regulatory requirements that applylaws and regulations relating to cross-border financial services firms. However, it is equally possible that the potential for reduced regulation does not occur or is reversed by another regulator or by a subsequent administration, or that deregulation measures that are ultimately enacted deliver significant competitive advantagesactivities
inability to engage in certain financial services firmsactivities through EU-based legal entities to the extent that are structured differentlylicenses or serve different markets than JPMorgan Chase. JPMorgan Chase cannot predict political developments of this nature, or whether they willtemporary permission to engage in such activities have favorablenot been granted timely by local regulators

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unexpected or unfavorable long-term effectschanges in laws and regulations, governmental policies or public sentiment, and
losses due to process errors or incorrect judgments concerning economic, political or regulatory developments.
Any or all of the above factors could have an adverse effect on its businesses.the overall operation of the European financial services market as well as JPMorgan Chase’s business, operations and earnings in the U.K., the EU and globally.
Economic uncertainty or instability caused by political developments can hurt JPMorgan Chase’s businesses.
The economic environment and market conditions in which JPMorgan Chase operates continue to be uncertain due to
recent political developments in the U.S. and abroad.other countries. Certain monetary, fiscal and other policy initiatives and proposals including isolationist foreign policies, protectionist trade policies or the possible withdrawal or reduction of government support for GSEs, could cause a contraction in U.S. and global economic growth and higher volatility in the financial markets. markets, including:
monetary and fiscal policies and actions taken by the Federal Reserve and other central banks or governmental authorities, including any suspension or reversal of large-scale asset purchases
inability to reach political consensus to keep the U.S. government open
isolationist foreign policies
the implementation of tariffs and other protectionist trade policies
political pressure on monetary policy decisions of central banks, or
the possible withdrawal or reduction of government support for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (together, the “U.S. GSEs”).
These types of political developments, could, among other things:and uncertainty about the possible outcomes of these developments, could:
erode investor confidence in the U.S. economy and financial markets, which could potentially undermine the status of the U.S. dollar as a safe haven currency
provoke retaliatory countermeasures by other countries and otherwise heighten tensions in diplomatic relations
increase concerns about whether the U.S. government will be funded, and its outstanding debt serviced, at any particular time, and
undermine the statusresult in periodic shutdowns of the U.S. dollar as a safe haven currency.government or governments in other countries.
These factors could lead to to:
slower growth rates, rising inflation or recession
greater market volatility
a contraction of available credit and the widening of credit spreads
diminished investor and consumer confidence
lower investment growth
large-scale sales of U.S. government debt and other U.S. debt and equity securities in the widening of credit spreadsU.S. and other countries
reduced commercial activity among trading partners
the potential for a currency redenomination by a particular country
the possible departure of a country from, or the dissolution of, a political or economic alliance or treaty
potential expropriation or nationalization of assets
other market dislocations. dislocations, including the spread of unfavorable economic conditions from a particular country or region to other countries or regions.
Any of these potential outcomes could cause JPMorgan Chase to suffer losses on its market-making positions or in its investment securities portfolio, reduce its liquidity and capital levels, hamper its ability to deliver products and services to its clients and customers, and weaken its results of operations.operations and financial condition.
Political developments in other parts of the world have also led to uncertainty in global economicMarket
Economic and market events and conditions including:
concerns about the capabilities and intentions of the government of North Korea, and
regional hostilities, and political or social upheavals, in other parts of the world.
JPMorgan Chase’s results of operations can be adversely affected by the uncertainty arising from significant political developments and any market volatility or disruption that results from that uncertainty.
The positive impact of U.S. tax reform legislation on JPMorgan Chase may diminish over time.
The long-term impact of the tax reform legislation recently enacted in the U.S. on JPMorgan Chase and the U.S. economy is not yet known. While the tax reform will have a positive impact on JPMorgan Chase’s net income, the competitive environment and other factors will influence the extent to which these benefits are retained by JPMorgan Chase over the longer term. In addition, the specific impact onmaterially affect JPMorgan Chase’s businesses products and geographies may vary.
Market
JPMorgan Chase’s businesses are materially affected by economicinvestment and market conditions.market-making positions.
JPMorgan Chase’s results of operations can be negatively affected by adverse changes in any of the following:
the liquidity in the U.S. and global financial markets
the level and volatility of market prices and rates, including those for debt and equity instruments,

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currencies, commodities, interest rates and other market indices
investor, consumer and business sentiment
events that reduce confidence in the financial markets
inflation andor deflation
high unemployment or, conversely, a tightening labor market
the availability and cost of capital, liquidity and credit
levels and volatility of interest rates (including overnight repo rates), credit spreads and market prices for currencies, equities and commodities, and the duration of any changes in levels or volatility
the economic effects of natural disasters, severe weather conditions, health emergencies or pandemics, cyberattacks, outbreaks of hostilities, terrorism or other geopolitical instabilities,
monetary and fiscal policies and actions taken by governmental authorities, including cyberattacks, climate change, natural disasters, severe weather conditions, health emergencies, the Federal Reserve and other central banks,spread of infectious diseases or pandemics, and
the health of the U.S. and global economies.
All of these are affected by global economic, market and political events and conditions, as well as regulatory restrictions.

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In addition, JPMorgan Chase’s investment portfolio and market-making businesses can suffer losses due to unanticipated market events, including:
severe declines in asset values
unexpected credit events
unforeseen events or conditions that may cause previously uncorrelated factors to become correlated (and vice versa)
the inability to effectively hedge market and other risks related to market-making position, or
other market risks that may not have been appropriately taken into account in the development, structuring or pricing of a financial instrument.
If JPMorgan Chase experiences significant losses in its investment portfolio or from market-making activities, this could reduce JPMorgan Chase’s profitability and its liquidity and capital levels, and thereby constrain the growth of its businesses.
JPMorgan Chase’s consumer businesses can be negatively affected by adverse economic conditions.
JPMorgan Chase’s consumer businesses are particularly affected by U.S. domesticand global economic conditions, including:
U.S. interest rates
the raterates of inflation and unemployment
housing prices
the level of consumer and small business confidence
changes in consumer spending or in the level of consumer debt, and
the number of personal bankruptcies.
A rapid increase in interest rates could negatively affect consumer credit performance to the extent that consumers are less able to service their debts. Sustained low growth, in the U.S. economylow or negative interest rates, inflationary pressures or recessionary conditions could diminish customer demand for the products and services offered by JPMorgan Chase’s consumer businesses. ItThese conditions could also increase the cost to provide those products and services. Adverse economic conditions could also lead to an increase in delinquencies in mortgage, credit card, auto and other loans and higher net charge-offs, which can reduce JPMorgan Chase’s earnings. These consequences could be significantly worse in certain geographies where high levels of unemployment have resulted from declining industrial or manufacturing activity.activity, or where high levels of consumer debt, such as outstanding student loans, impair the ability of customers to pay their other consumer loan obligations.
JPMorgan Chase’s earnings from its consumer businesses could also be adversely affected by changes in governmentgovernmental policies and actions that affect consumers, including thoseincluding:
policies and initiatives relating to medical insurance, education, immigration and employment status as well as governmental
the inability to reach political consensus to keep the U.S. government open and funded, and
policies aimed at the economy more broadly, such as infrastructure spending and global trade, which could result in among other things, higher inflation or reductions in consumer disposable income.
In addition, governmental proposals to permit student loan obligations to be discharged in bankruptcy proceedings could, if enacted into law, encourage certain of JPMorgan Chase’s customers to declare personal bankruptcy and thereby trigger defaults and charge-offs of credit card and other consumer loans extended to those customers.
Unfavorable market and economic conditions can have an adverse effect on JPMorgan Chase’s wholesale businesses.
In JPMorgan Chase’s wholesale businesses, market and economic factors can affect the volume of transactions that JPMorgan Chase executes for its clients or for which it advises clients, and, therefore, the revenue that JPMorgan Chase receives from those transactions. These factors can also influence the willingness of other financial institutions and investors to participate in capital markets transactions that JPMorgan Chase manages, such as loan syndications or securities underwritings. Furthermore, if a significant and sustained
deterioration in market conditions were to occur, the profitability of JPMorgan Chase’s capital markets businesses, including its loan syndication, securities underwriting and leveraged lending activities, could be reduced to the extent that those businesses:
earn less fee revenue due to lower transaction volumes, including when clients are unwilling or unable to refinance their outstanding debt obligations in unfavorable market conditions, or
dispose of portions of credit commitments such as loan syndications or securities underwritings, at a loss, or
hold larger residual positions in credit commitments that cannot be sold at favorable prices.
JPMorgan Chase’s investment securities portfolioAn adverse change in market conditions in particular segments of the economy, such as a sudden and market-making positions can suffer losses due tosevere downturn in oil and gas prices or an increase in commodity prices, could have a material adverse economic, market and political events and conditions.
effect on clients of JPMorgan Chase generally maintains positions in various fixed income instruments in its investment securities portfolio, and positions in various fixed income, currency, commodity, credit and equity instruments as partwhose operations or financial condition are directly or indirectly dependent on the health or stability of its market-making activities. Market-making positions are intended to facilitate demand from JPMorgan Chase’s clients for these instruments and to provide liquidity for clients. The value of the positions that JPMorgan Chase holds can be significantly affected by factors such as:
JPMorgan Chase’s ability to effectively hedgethose market and other risks on its positions
volatility in interest rates and debt, equity and commodities markets
changes in interest rates and credit spreads, and
the availability of liquidity in the capital markets.
All of these are affected by global economic, market and political events and conditions,segments, as well as regulatory restrictions on market-making activities.
JPMorgan Chase’s investment securities portfolio and market-making businesses can also suffer losses due to unanticipated market events, including:
severe declinesclients that are engaged in asset values
unexpected credit events
unforeseen events or conditions that may cause previously uncorrelated factors to become correlated (and vice versa), or
other market risks that may not have been appropriately taken into account in the development, structuring or pricing of a financial instrument.
Ifrelated businesses. JPMorgan Chase experiences significantcould incur losses on its loans and other credit commitments to clients that operate in, its investment securities portfolio or from market-making activities, this could reduce JPMorgan Chase’s profitability and its capital levels, and thereby constrainare dependent on, any sector of the growth of its businesses.

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JPMorgan Chase’s asset and wealth management and custody businesses may earn lower fee revenue during adverse macroeconomic conditions.economy that is under stress.
The fees that JPMorgan Chase earns from managing third-partyclient assets or holding assets inunder custody for clients could be diminished by declining asset values or other adverse macroeconomic conditions. For example, higher interest rates or a downturn in financial markets could affect the valuations of the client assets that JPMorgan Chase manages or holds inunder custody, which, in turn, could affect JPMorgan Chase’s revenue from fees that are based on the amount of assets under management or custody. Similarly, adverse

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Part I

macroeconomic or market conditions could prompt outflows from JPMorgan Chase funds or accounts, or cause clients to invest in products that generate lower revenue. Substantial and unexpected withdrawals from a JPMorgan Chase fund can also hamper the investment performance of the fund, particularly if the outflows create the need for the fund to dispose of fund assets at disadvantageous times or prices, and could lead to further withdrawals based on the weaker investment performance.
An economic downturn that results in lower consumer and business spending could also have a negative impact on certain of JPMorgan Chase’s wholesale clients, and thereby diminish JPMorgan Chase’s earnings from its wholesale operations. For example, the businesses of certain of JPMorgan Chase’s wholesale clients are dependent on consistent streams of rental income from commercial real estate properties which are owned or being built by those clients. Severe and sustained adverse economic conditions could reduce the rental cash flows that owners or developers receive from those properties which, in turn, could depress the values of the properties and impair the ability of borrowers to service or refinance their commercial real estate loans. These consequences could result in JPMorgan Chase experiencing higher delinquencies, defaults and write-offs within its commercial real estate loan portfolio and incurring higher costs for servicing a larger volume of delinquent loans in that portfolio, thereby reducing JPMorgan Chase’s earnings from its wholesale businesses.
Changes in interest rates and credit spreads can adversely affect certain of JPMorgan Chase’s revenue and income streams.
JPMorgan Chase can generally be expected to earn higher net interest income when interest rates are high or increasing. However, higher interest rates can also lead to:
fewer originations of commercial and residential real estate loans
lower returnslosses on JPMorgan Chase’s investment securities portfolio, andunderwriting exposures
the loss of deposits, toincluding in the extentevent that JPMorgan Chase makes incorrect assumptions about depositor behavior.behavior
lower net interest income if central banks introduce interest rate increases more quickly than anticipated and this results in a misalignment in the pricing of short-term and long-term borrowings
less liquidity in the financial markets, and
higher funding costs.
All of these outcomes could adversely affect JPMorgan Chase’s revenues and its liquidity and capital levels. Higher interest rates can also negatively affect the payment performance on loans within JPMorgan Chase’s consumer and wholesale loan portfolios that are linked to variable interest rates. If borrowers of variable rate loans are unable to afford higher interest payments, those borrowers may
reduce or stop making payments, thereby causing JPMorgan Chase to incur losses and increased operational costs related to servicing a higher volume of delinquent loans.
On the other hand, a low or negative interest rate environment may cause JPMorgan Chase’s cause:
net interest margins to be compressed, which could reduce:
reduce the amounts that JPMorgan Chase earns on its investment securities portfolio to the extent that it is unable to reinvest contemporaneously in higher-yielding instruments
unanticipated or adverse changes in depositor behavior, which could negatively affect JPMorgan Chase’s broader asset and liability management strategy, and
a reduction in the value of JPMorgan Chase’s mortgage servicing rights (“MSRs”) asset, thereby reducing its net interest income and otherdecreasing revenues.
When credit spreads widen, it becomes more expensive for JPMorgan Chase to borrow. JPMorgan Chase’s credit spreads
may widen or narrow not only in response to events and circumstances that are specific to JPMorgan Chase but also as a result of general economic and geopolitical events and conditions. Changes in JPMorgan Chase’s credit spreads will affect, positively or negatively, JPMorgan Chase’s earnings on certain liabilities, such as derivatives, that are recorded at fair value.
High market volatility can impact JPMorgan Chase’s markets businesses.
While JPMorgan Chase’s markets businessesresults may earn higher flow revenue during periods of elevatedbe materially affected by market volatility, suddenfluctuations and significant volatilitychanges in the pricesvalue of financial instruments.
The value of securities, loans, derivatives and other financial instruments can:

curtailwhich JPMorgan Chase owns or in which it makes markets can be materially affected by market fluctuations. Market volatility, illiquid market conditions and other disruptions in the tradingfinancial markets for those instruments
may make it extremely difficult to sell or hedge thosevalue certain financial instruments,
increase JPMorgan Chase’s funding costs, or
adversely affect JPMorgan Chase’s profitability, capital or liquidity.
The Federal Reserve has observed that market volatility may be exacerbated by regulatory restrictions. It noted that market participants that are subject to the Volcker Rule are likely to decrease their market-making activities, and thereby constrain market liquidity, particularly during periods of market stress. Furthermore,displacement. Subsequent valuations of financial instruments in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments. In addition, at the time of any disposition of these financial instruments, the price that JPMorgan Chase ultimately realizes will depend on the demand and liquidity in the market participantsat that are not requiredtime and may be materially lower than their current fair value. Any of these factors could cause a decline in the value of JPMorgan Chase’s financial instruments which may have an adverse effect on JPMorgan Chase’s results of operations.
JPMorgan Chase’s risk management and monitoring processes, including its stress testing framework, seek to hold substantial amounts of capital may retreatquantify and control JPMorgan Chase’s exposure to more quickly from volatile markets, whichextreme market moves. However, JPMorgan Chase could further reducerealize significant losses if extreme market liquidity.
In a difficult or less liquidevents were to occur. Under extreme market environment, JPMorgan Chase’sconditions, hedging and other risk management strategies may not be as effective because otherat

12

mitigating losses as they would be under more normal market participants may be attempting to use the same or similar strategies. In these circumstances, it may be difficult for JPMorgan Chase to reduce its risk positions due to the activity of other market participants or widespread market dislocations.
Sustained volatility in the financial markets may also negatively affect consumer or investor confidence, which could lead to lower client activity and reduce JPMorgan Chase’s revenues.conditions.
Credit
JPMorgan Chase can be adversely affected by the financial condition of its clients, customerscounterparties, custodians and counterparties.CCPs.
JPMorgan Chase routinely executes transactions with brokers and dealers, commercial and investment banks, mutual and hedge funds, investment managers and other types of financial institutions.institutions and market participants. Many of these transactions expose JPMorgan Chase to the credit risk of its clients and counterparties, and can involve JPMorgan Chase in disputes and litigation in the event thatif a client or counterparty defaults. JPMorgan Chase can also be subject to losses or liability where a financial institution that it has appointed to

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Part I

provide custodycustodial services for client assets or funds becomes insolvent as a result of JPMorgan Chase’s clients becomes insolvent.
Disputes may arise with counterparties to derivatives contracts with regard to the terms, the settlement proceduresfraud or the valuefailure to abide by existing laws and obligations, including under the EU Alternative Investment Fund Managers Directive.
A default by, or the financial or operational failure of, underlying collateral. The disposition of those disputes could causea CCP through which JPMorgan Chase executes contracts would require JPMorgan Chase to incur unexpected transaction,replace those contracts, thereby increasing its operational costs and legal costs, or resultpotentially resulting in credit losses. These consequencesJPMorgan Chase can also impair JPMorgan Chase’s abilitybe exposed to effectively manage its credit risk exposure from its market activities.
JPMorgan Chase’s markets businesses can be harmed by the insolvencylosses if a member of a significant market participant.
The failure ofCCP in which JPMorgan Chase is also a significant market participant, or concerns about the creditworthiness of such a firm, can have a cascading effect within the financial markets. JPMorgan Chase’s markets businesses could be significantly disrupted by such an event, particularly if it leads to other market participants incurring significant losses, experiencing liquidity issues or defaulting.
JPMorgan Chase’s clearing services business is exposedmember defaults on its obligations to the riskCCP because of client or counterparty default.
requirements that each member of the CCP absorb a portion of those losses. As part of its clearing services activities, JPMorgan Chase is a member of various central counterparty clearinghouses (“CCPs”). In the event that another member of such an organization defaults on its obligations to the CCP, JPMorgan Chase may be required to pay a portion of any losses incurred by the CCP as a result of that default. As a clearing member, JPMorgan Chase is also exposed to the risk of non-performancenonperformance by its clients, which it seeks to mitigate by requiring clients to provide adequate collateral. JPMorgan Chase is also exposed to intra-day credit risk of its clients in connection with providing cash management, clearing, custodial and other transaction services to those clients. If a client for which JPMorgan Chase provides these services becomes bankrupt or insolvent, JPMorgan Chase may incur losses, become involved in disputes and litigation with one or more CCPs, the client’s bankruptcy estate and other creditors, or be subject to regulatory investigations. All of the foregoing events can increase JPMorgan Chase’s operational and litigation costs, and JPMorgan Chase may suffer losses to the extent that any collateral that it has received is insufficient to cover those losses. JPMorgan Chase can also be subject to bearing its share of non-default losses incurred by a CCP, including losses from custodial, settlement or investment activities or due to cyber or other security breaches.
Disputes may arise with counterparties to derivatives contracts with regard to the terms, the settlement procedures or the value of underlying collateral. The disposition of those disputes could cause JPMorgan Chase to incur unexpected transaction, operational and legal costs, or result in credit losses. These consequences can also impair JPMorgan Chase’s ability to effectively manage its credit risk exposure from its market activities, or cause harm to JPMorgan Chase’s reputation.
The financial or operational failure of a significant market participant, such as a major financial institution or a CCP, or concerns about the creditworthiness of such a market participant, can have a cascading effect within the financial markets. JPMorgan Chase’s businesses could be significantly disrupted by such an event, particularly if it leads to other market participants incurring significant losses, experiencing liquidity issues or defaulting. JPMorgan Chase is likely to have significant interrelationships with, and credit exposure to, such a significant market participant, and would seek to unwind or hedge positions in securities, derivatives and other obligations in multiple jurisdictions during a period of heightened market volatility.
JPMorgan Chase may suffer losses if the value of collateral declines in stressed market conditions.
During periods of market stress or illiquidity, JPMorgan Chase’s credit risk may be further increased when JPMorgan Chase cannot realize the fair value of the collateral held by it or when collateral is liquidated at prices that are not sufficient to recover the full amount of the loan, derivative or other exposure due to it. Furthermore, disputes with counterparties concerning the valuation of collateral may increase in times of significant market stress, volatility or illiquidity, and JPMorgan Chase could suffer losses during these periods if it is unable to realize the fair value of collateral or to manage declines in the value of collateral.
JPMorgan Chase could incur significant losses arising from concentrations of credit and market risk.
JPMorgan Chase is exposed to greater credit and market risk to the extent that groupings of its clients or counterparties:
engage in similar or related businesses, or in businesses in related industries
do business in the same geographic region, or
have business profiles, models or strategies that could cause their ability to meet their obligations to be similarly affected by changes in economic conditions.
For example, a significant deterioration in the credit quality of one of JPMorgan Chase’s borrowers or counterparties could lead to concerns about the creditworthiness of other borrowers or counterparties in similar, related or dependent industries. This type of interrelationship could exacerbate JPMorgan Chase’s credit, liquidity and market risk exposure and potentially cause it to incur losses, including fair value losses in its tradingmarket-making businesses.
Similarly, challenging economic conditions that affect a particular industry or geographic area could lead to concerns about the credit quality of JPMorgan Chase’s borrowers or counterparties not only in that particular industry or geography but in related or dependent industries, wherever located. These conditions could also heighten concerns about the ability of customers of JPMorgan Chase’s consumer businesses who live in those areas or work in those affected industries or related or

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dependent industries to meet their obligations to JPMorgan Chase. JPMorgan Chase regularly monitors various segments of its credit and market risk exposures to assess the potential risks of concentration or contagion, but its efforts to diversify or hedge its exposures against those risks may not be successful.
JPMorgan Chase’s consumer businesses can also be harmed by an excessive industry-wide expansion of consumer credit. For example, heightenedcredit by bank or non-bank competitors. Heightened competition among financial institutions for certain types of consumer loans including credit card, mortgage, auto or other loans, could prompt industry-wide reactions such as significant reductions in the pricing or margins of those loans and thereby decrease their profitability, or result inthe making of loans being extended to less-creditworthy borrowers. If large numbers of consumers subsequently default on their loans, whether due to weak credit profiles, an economic downturn or other factors, this could impair their ability to repay obligations owed to JPMorgan Chase and result in higher charge-offs and other credit-related losses. More broadly, widespread defaults on consumer debt could lead to recessionary conditions in the U.S. economy, and JPMorgan Chase’s consumer businesses may earn lower revenues in such an environment.
Disruptions in the liquidity or transparency of the financial markets could causeIf JPMorgan Chase to be unable to sell, syndicate or realize the value of its positions in various debt instruments, loans, derivatives and other obligations, and thereby lead to increased risk concentrations. If JPMorgan

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Chase is unable to reduce positions effectively during a market dislocation, this can increase both the market and credit risks associated with those positions and the level of risk-weighted assets (“RWA”) that JPMorgan Chase holds on its balance sheet. These factors could increaseadversely affect JPMorgan Chase’s capital requirements andposition, funding costs and adversely affect the profitability of JPMorgan Chase’sits businesses.
Liquidity
Liquidity is critical to JPMorgan Chase’s ability to fund and operate its businesses.
JPMorgan Chase’s liquidity could be impaired at any given time by factors such as:
market-wide illiquidity or disruption
unforeseen cashliquidity or capital requirements, including as a result of changes in laws, rules and regulations
inability to sell assets, or to sell assets at favorable times or prices
default by a CCP or other significant market participant
unanticipated outflows of cash or collateral
unexpected loss of consumer deposits caused by changes in consumer behavior, and
lack of market or customer confidence in JPMorgan Chase or financial institutions in general.
A diminution ofreduction in JPMorgan Chase’s liquidity may be caused by events over which it has little or no control. For example, during the 2008-2009 financial crisis, periods of market stress, low investor confidence and significant market illiquidity resultedcould result in higher funding costs for JPMorgan Chase and limitedcould limit its access to some of its traditional sources of liquidity, including securitized debt issuances.liquidity. There is no assurance that severe conditions of this type will not occur in the future.occur.
JPMorgan Chase may need to raise funding from alternative sources if its access to stable and lower-cost sources of funding, such as bank deposits and borrowings from Federal Home Loan Banks, is reduced. Alternative sources of funding could be more expensive or limited in availability. JPMorgan Chase’s funding costs could also be negatively affected by actions that JPMorgan Chase may take in order to:
satisfy applicable liquidity coverage ratio and net stable funding ratio requirements
continue to satisfy requirements under the TLAC rules concerning the amount of eligible LTD that JPMorgan Chase must have outstanding
address obligations under its resolution plan, or
satisfy regulatory requirements in countriesjurisdictions outside the U.S. relating to the pre-positioning of liquidity in subsidiaries that are material legal entities.
More generally, if JPMorgan Chase fails to effectively manage its liquidity, this could constrain its ability to fund or invest in its businesses and subsidiaries (including, in particular, its broker-dealer subsidiaries), and thereby adversely affect its results of operations.
JPMorgan Chase & Co. is a holding company and depends on the cash flows of its subsidiaries to make payments on its outstanding securities.
JPMorgan Chase & Co. is a holding company that holds the stock of JPMorgan Chase Bank, N.A. and an intermediate holding company, JPMorgan Chase Holdings LLC (the “IHC”). The IHC in turn 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 holding 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 ability of JPMorgan Chase Bank, N.A. and the IHC to make payments to the holding company is also limited. JPMorgan Chase Bank, N.A. is subject to restrictions on its dividend distributions, as well as capital adequacy and liquidity requirements and other regulatory restrictions on its ability to make payments to the holding company. The IHC is prohibited from paying dividends or extending credit to the holding company if certain capital or liquidity “thresholds” are breached or if limits are otherwise imposed by JPMorgan Chase’s management or Board of Directors.
As a result of these arrangements, the ability of the holding company to make various payments is dependent on its receiving dividends from JPMorgan Chase Bank, N.A. and dividends and extensions of credit from the IHC. These limitations could affect the holding company’s ability to:
pay interest on its debt securities
pay dividends on its equity securities
redeem or repurchase outstanding securities, and

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fulfill its other payment obligations.
Collectively, theseThese regulatory restrictions and limitations could significantly limit the holding company’s ability to pay dividends and satisfy its debt and other obligations. They could also result in the holding company seeking protection under bankruptcy laws at a time earlier than would have been the case absent the existence of those thresholds.the capital and liquidity thresholds to which the IHC is subject.
Reductions in JPMorgan Chase’s credit ratings may adversely affect its liquidity and cost of funding.
JPMorgan Chase & Co. and certain of its principal subsidiaries are rated by credit rating agencies. Rating agencies evaluate both general and firm-firm-specific and industry-specific factors when determining their credit ratings for a particular financial institution, including:
economic and geopolitical trends
regulatory developments
expected future profitability

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risk management practices
legal expenses
assumptions about government support, and
ratings differentials between bank holding companies and their bank and non-bank subsidiaries.subsidiaries
regulatory developments
assumptions about government support, and
economic and geopolitical trends.
JPMorgan Chase closely monitors and manages, to the extent that it is able, factors that could influence its credit ratings. However, there is no assurance that JPMorgan Chase’s credit ratings will not be lowered in the future. Furthermore, any such downgrade could occur at times of broader market instability when JPMorgan Chase’s options for responding to events may be more limited and general investor confidence is low.
A reduction in JPMorgan Chase’s credit ratings could curtail JPMorgan Chase’s business activities and reduce its profitability in a number of ways, including by:including:
reducing its access to capital markets
materially increasing theits cost of issuing and servicing securities
triggering additional collateral or funding requirements, and
decreasing the number of investors and counterparties that are willing or permitted to do business with or lend to JPMorgan Chase.
Any rating reduction could also increase the credit spreads charged by the market for taking credit risk on JPMorgan Chase & Co. and its subsidiaries. This could, in turn, adversely affect the value of debt and other obligations of JPMorgan Chase & Co. and its subsidiaries.
Regulation
The reform and reformreplacement of benchmarksbenchmark rates could have adverse consequences on securitiesadversely affect JPMorgan Chase’s funding, investments and financial products, and expose it to litigation and other instruments that are linked to those benchmarks.disputes.
Interest rate, equity, foreign exchange rate and other types of indices which are deemed to be “benchmarks” are“benchmarks,” including those in widespread and long-standing use, have been the subject of recentongoing international, national and other regulatory guidancescrutiny and initiatives and proposals for reform. Some of these reforms are already effective while others are still to be implemented.implemented or are under consideration. These reforms may cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences which cannot be fully anticipated.
Any of the international, nationalbenchmark reforms which have been proposed or other proposals for reformimplemented, or the general increased regulatory scrutiny of benchmarks, could also increase the costs and risks of administering or otherwise participating in the setting of benchmarks and complying with any such regulations or requirements.requirements relating to benchmarks. Such factors may have the effect of discouraging market participants from continuing to administer or contribute to certain benchmarks, trigger changes in the rules or methodologies used in certain benchmarks or lead to the disappearance of certain benchmarks.
Any of these developments, and any future initiatives to regulate, reform or change the administration of benchmarks, could result in adverse consequences to the return on, value of and market for loans, mortgages, securities, derivatives and other financial instruments whose returns are linked to any such benchmark, including those issued, funded, serviced or held by JPMorgan Chase.
Various regulators, industry bodies and other market participants in the U.S. and other countries are engaged in initiatives to develop, introduce and encourage the use of alternative rates to replace certain benchmarks. There is no assurance that these new rates will be accepted or widely used by market participants, or that the characteristics of any of these new rates will be similar to, or produce the economic equivalent of, the benchmarks that they seek to replace. If a particular benchmark were to be discontinued and an alternative rate has not been successfully introduced to replace that benchmark, this could result in widespread dislocation in the financial markets, engender volatility in the pricing of securities, derivatives and other instruments, and suppress capital markets activities, all of which could have adverse effects on JPMorgan Chase’s results of operations. In addition, to the extent that appropriate relief is not provided by accounting standard setters with respect to the transition from benchmark rates, the transition could:
affect hedge accounting relationships between financial instruments linked to a particular benchmark and any related derivatives, which could adversely affect JPMorgan Chase’s results of operations, or
increase JPMorgan Chase’s operational costs with respect to the determination of whether the transition

On July 27, 2017,
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has resulted in the Chief Executivemodification or extinguishment of specific contracts for accounting purposes.
Representatives of the U.K. Financial Conduct Authority (the “FCA”), which regulates the London interbank offered rate (“LIBOR”), announced that have made a series of public statements during the past several years to the effect that:
the FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021. This announcement indicates2021, and
once a significant number of banks are no longer submitting such rates, the FCA may make a determination under applicable regulations that the continuation of LIBOR onbenchmark may not meet the current basis cannot and will not be guaranteed after 2021, andstandards required under those regulations for use as a benchmark.
These statements indicate that it appearsis highly likely that LIBOR will be discontinued on or modified byabout the end of 2021.
Any Vast amounts of loans, mortgages, securities, derivatives and other financial instruments are linked to the these developments,LIBOR benchmark, and any future initiativesinability of market participants and regulators to regulate, reform or changesuccessfully introduce benchmark rates to replace LIBOR and implement effective transitional arrangements to address the mannerdiscontinuation of administration of benchmarks,LIBOR could result in adverse consequencesdisruption in the financial markets and suppress capital markets activities, all of which could have a negative impact on JPMorgan Chase’s results of operations and on LIBOR-linked securities, credit or other instruments which are issued, funded, serviced or held by JPMorgan Chase.
JPMorgan Chase could also become involved in litigation and other types of disputes with clients, customers, counterparties and investors as a consequence of the transition from LIBOR and other benchmark rates to replacement rates, including claims that JPMorgan Chase has:
treated clients, customers, counterparties or investors unfairly, or caused them to experience losses, higher financing costs or lower returns on investments
failed to appropriately communicate the effects of the transition from benchmark rates on the products that JPMorgan Chase has sold to its clients and customers, or failed to disclose purported conflicts of interest
made inappropriate product recommendations to or investments on behalf of its clients, or sold products that did not serve their intended purpose, in connection with the transition from benchmark rates
engaged in anti-competitive behavior, or in the manipulation of markets or specific benchmarks, in connection with the discontinuation of or transition from benchmark rates, or
disadvantaged clients, customers, counterparties or investors when interpreting or making determinations under the terms of agreements or financial instruments.
These types of claims could subject JPMorgan Chase to higher legal expenses and operational costs, require it to pay significant amounts in connection with resolving litigation and other disputes, and harm its reputation.
Capital
Maintaining the appropriate level and composition of capital is critical to support JPMorgan Chase’s business activities, meet regulatory requirements and distribute capital to shareholders.
JPMorgan Chase is subject to various regulatory capital requirements, and although many of these requirements have been finalized, prudential regulators have recently issued new regulatory capital proposals, and continued uncertainty remains as to the returnmanner in which these requirements ultimately will apply to JPMorgan Chase. As a result, it is possible that these requirements could limit JPMorgan Chase’s ability to support its businesses and make capital distributions to its shareholders.
JPMorgan Chase is required to submit, on valuean annual basis, a capital plan describing proposed dividend payments to shareholders, redemptions and repurchases of and market forits outstanding securities and other instruments whose returns are linkedcapital actions that it intends to take. JPMorgan Chase considers various factors in the management of capital, including the impact of stress on its capital levels, as determined by both internal modeling and the Federal Reserve’s modeling of JPMorgan Chase’s capital position in supervisory stress tests and CCAR. Because the Federal Reserve and JPMorgan Chase use different forecasting models and methodologies when determining stress test results, there can be significant differences between the estimates of stress loss as determined by the Federal Reserve and JPMorgan Chase, respectively. The Federal Reserve may object to or require modifications to JPMorgan Chase’s capital plan, or JPMorgan Chase may otherwise modify its capital plan, and any such benchmark,modification could have an adverse effect on JPMorgan Chase’s shareholders, including those issued byby:
constraining the amount of dividends that may be paid on common stock
reducing the amount of common stock that JPMorgan Chase is permitted to repurchase
requiring the issuance of, or its subsidiaries.prohibiting the redemption of, capital instruments in a manner inconsistent with JPMorgan Chase’s capital management strategy
curtailing JPMorgan Chase’s business activities or operations, or
damaging JPMorgan Chase’s reputation.

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Operational
JPMorgan Chase’s businesses are highly dependent on the effectiveness of its operational systems and those of other market participants.
JPMorgan Chase’s businesses rely comprehensively on the ability of JPMorgan Chase’s financial, accounting, trading,transaction execution, data processing and other operational systems to process, record, monitor and report a large number of transactions on a continuous basis, and to do so accurately, quickly and quickly.securely. In addition to proper design, installation, maintenance and training, the effective functioning of JPMorgan Chase’s operational systems depends on, among other things:on:
the quality of the information contained in those systems, as inaccurate, outdated or corrupted data can significantly compromise the functionality or reliability of a particular operational system and other systems to which it transmits or from which it receives information, and
JPMorgan Chase’s ability to appropriately maintain and upgrade its systems on a regular basis, and to ensure that any changes introduced to its systems are managed carefully to ensure security and operational continuity.continuity and adhere to all applicable legal and regulatory requirements.
JPMorgan Chase also depends on its ability to access and use the operational systems of its vendors, custodians and other market participants, including clearing and payment systems, CCPs, securities exchanges and data processing, security and technology companies.
The ineffectiveness, failure or other disruption of the operational systems ofupon which JPMorgan Chase or another significant market participant,depends, including due to a systems malfunction, cyberbreach or other systems failure, could result in unfavorable ripple effects in the financial markets and for JPMorgan Chase and its clients and customers, including:
delays or other disruptions in providing information, services and liquidity to clients and customers
the inability to settle transactions or obtain access to funds and other assets,
including those for which physical settlement and delivery is required

failure to timely settle or confirm transactions
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the possibility that transactions such as funds transfers, or capital markets trades or other transactions are executed erroneously, illegally or with unintended consequences
financial losses, including due to loss-sharing requirements of CCPs, payment systems or other market infrastructures, or as possible restitution to clients and customers
higher operational costs associated with replacing services provided by a system that is unavailable
client or customer dissatisfaction and loss of confidence inwith JPMorgan Chase’s products and services
loss of confidence in the ability of JPMorgan Chase, or financial institutions generally, to protect against and withstand operational disruptions, or
harm to reputation.
Furthermore, the interconnectivity of multiple financial institutions with central agents, CCPs, payment processors, securities exchanges, clearing houses and other financial market infrastructures, and the increased importance of these entities, increases the risk that an operational failure at one institution or entity may cause an industry-wide operational failure that could materially affect JPMorgan Chase’s ability to conduct business.reputation.
As the speed, frequency, volume, interconnectivity and complexity of transactions increases,continue to increase, it becomes more challenging to effectively maintain and upgrade JPMorgan Chase’s operational systems and infrastructure, especially due to the heightened risks that:
errors made by JPMorgan Chase or another market participant, whether inadvertent or malicious, cause widespread system disruption
isolated or seemingly insignificant errors in operational systems compound, or migrate to other systems over time, to become larger issues
failures in synchronization or encryption software, or degraded performance of microprocessors due to design flaws, causescould cause disruptions in operational systems, or the inability of systems to communicate with each other, and
third parties may attempt to block the use of key technology solutions by claiming that the use infringes on their intellectual property rights.
If JPMorgan Chase’s operational systems, or those of thirdexternal parties on which JPMorgan Chase’s businesses depend, are unable to meet the demanding standards of JPMorgan Chase’s businesses and operations, or if they fail or have other significant shortcomings, JPMorgan Chase could be materially and adversely affected.
JPMorgan Chase relies on the skill and integrity of its employees and those of third parties in running its operational systems.
The effective functioning of JPMorgan Chase’s operational systems also depends on the competence and reliability of its employees, as well as the employees of third parties on whom JPMorgan Chase depends for technological support, security or other services. JPMorgan Chase could be materially and adversely affected by a significant operational breakdown or failure caused by human error or
misconduct by an employee of JPMorgan Chase or a third party.
JPMorgan Chase can be negatively affected if it fails to identify and address operational risks associated with newthe introduction of or changes to products, or processes.services and delivery platforms.
When JPMorgan Chase launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), or makes changes processesto an existing product, service or introduces new products and services or new connectivity solutions, JPMorgan Chasedelivery platform, it may not fully appreciate or identify new operational risks that may arise from those changes, or may fail to implement adequate controls to mitigate the risks associated with new business activities.those changes. Any of these occurrencessignificant failure in this regard could diminish JPMorgan Chase’s ability to operate one or more of its businesses or result in:
potential liability to clients, counterparties and customers
increased operating expenses
higher litigation costs, including regulatory fines, penalties and other sanctions
damage to JPMorgan Chase’s reputation
impairment of JPMorgan Chase’s liquidity

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Part I

regulatory intervention, or
weaker competitive standing.
Any of the foregoing consequences could materially and adversely affect JPMorgan Chase’s businesses and results of operations.
JPMorgan Chase’s connections to third-partyexternal operational systems expose it to greater operational risks.
Third partiesExternal operational systems with which JPMorgan is connected, whether directly or indirectly, can be sources of operational risk to JPMorgan Chase. JPMorgan Chase may be exposed not only to a systems failure that may be experienced by a vendor or market infrastructure with which JPMorgan Chase does business, as well asis directly connected, but also to a systems breakdown of another party to which such a vendor or infrastructure is connected. Similarly, retailers, data aggregators and other thirdexternal parties with which JPMorgan Chase’s customers do business can also be sources ofincrease JPMorgan Chase’s operational risk to JPMorgan Chase.risk. This is particularly the case where activities of customers or those third parties are beyond JPMorgan Chase’s security and control systems, including through the use of the internet, cloud computing services and personal smart phones and other mobile devices or services.
If a thirdan external party obtains access to customer account data on JPMorgan Chase’s systems, and that third party experiences a cyberbreach of its own systems or misappropriates that data, this could result in a variety of negative outcomes for JPMorgan Chase and its clients and customers, including:
heightened risk that thirdexternal parties will be able to execute fraudulent transactions using JPMorgan Chase’s systems
losses from fraudulent transactions, as well as potential liability for losses that exceed thresholds established in consumer protection laws and regulations
increased operational costs to remediate the consequences of the thirdexternal party’s security breach, and
harm to reputation arising from the perception that JPMorgan Chase’s systems may not be secure.

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As JPMorgan Chase’s interconnectivity with clients, customers and other thirdexternal parties expands, JPMorgan Chase increasingly faces the risk of operational failure with respect to their systems.the systems of those parties. Security breaches affecting JPMorgan Chase’s clients or customers, or systems breakdowns or failures, security breaches or human error or misconduct affecting those other thirdexternal parties, may require JPMorgan Chase to take steps to protect the integrity of its own operational systems or to safeguard confidential information.information, including restricting the access of customers to their accounts. These actions can increase JPMorgan Chase’s operational costs and potentially diminish customer satisfaction.satisfaction and confidence in JPMorgan Chase.
Furthermore, the widespread and expanding interconnectivity among financial institutions, central agents, CCPs, payment processors, securities exchanges, clearing houses and other financial market infrastructures increases the risk that an operational failure at one institution or entity may cause an industry-wide operational failure that could materially affect JPMorgan Chase’s ability to conduct business.
JPMorgan Chase’s operations depend on the competence and integrity of its employees and those of external parties.
JPMorgan Chase’s ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients and customers, and to maintain an effective risk management framework is highly dependent on the competence and integrity of its employees, as well as employees of other parties on which JPMorgan Chase’s operations rely, including vendors, custodians and financial markets infrastructures. JPMorgan Chase’s businesses could be materially and adversely affected by:
the ineffective implementation of business decisions
any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train employees with respect to those risks and controls
a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or
other negative outcomes caused by human error or misconduct by an employee of JPMorgan Chase or of another party on which JPMorgan Chase’s operations depend.
JPMorgan Chase faces substantial legal and operational risks in safeguarding personal information.
JPMorgan Chase’s businesses are subject to complex and evolving laws and regulations, both within and outside the U.S., governing the privacy and protection of personal information of individuals. The protected parties can include:
JPMorgan Chase’s clients and customers, and prospective clients and customers
clients and customers of JPMorgan Chase’s clients and customers
JPMorgan Chase’semployees and prospective employees, and
employees of JPMorgan Chase’s suppliers,vendors, counterparties and other thirdexternal parties.
Ensuring that JPMorgan Chase’s collection, use, transfer and storage of personal information comply with all applicable laws and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, can:
increase JPMorgan Chase’s compliance and operating costs
affect
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hinder the development of new products or services, curtail the offering of existing products or services, or affect how products and services are offered to clients and customers
demand significant oversight by JPMorgan Chase’s management, and
require JPMorgan Chase to structure its businesses, operations and systems in less efficient ways.
Furthermore, JPMorgan Chase cannot ensure that all of its clients and customers, suppliers,vendors, counterparties and other thirdexternal parties have appropriate controls in place to protect the confidentiality of the information exchanged between them and JPMorgan Chase, particularly where information is transmitted by electronic means. JPMorgan Chase could be exposed to litigation or regulatory fines, penalties or other sanctions if personal, confidential or proprietary information of clients, customers, employees or others were to be mishandled or misused, such as situations where such information is:
erroneously provided to parties who are not permitted to have the information, or
intercepted or otherwise compromised by third parties.
Concerns regarding the effectiveness of JPMorgan Chase’s measures to safeguard personal information, or even the perception that those measures are inadequate, could cause
JPMorgan Chase to lose existing or potential clients and customers, and thereby reduce JPMorgan Chase’s revenues. Furthermore, any failure or perceived failure by JPMorgan Chase to comply with applicable privacy or data protection laws and regulations may subject it to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices, significant liabilities or regulatory fines, penalties or other sanctions. Any of these could damage JPMorgan Chase’s reputation and otherwise adversely affect its businesses.
In recent years, well-publicized allegations involving the misuse or inappropriate sharing of personal information have led to expanded governmental scrutiny of practices relating to the safeguarding of personal information and the use or sharing of personal data by companies in the U.S. and other countries. That scrutiny has in some cases resulted in, and could in the future lead to, the adoption of stricter laws and regulations relating to the use and sharing of personal information. These types of laws and regulations could prohibit or significantly restrict financial services firms such as JPMorgan Chase from sharing information among affiliates or with third parties such as vendors, and thereby increase compliance costs, or could restrict JPMorgan Chase’s operations and resultsuse of personal data when developing or offering products or services to customers. These restrictions could be vulnerable to catastrophes or other events that disrupt its business.
also inhibit JPMorgan Chase’s business and operational systems could be seriously disrupted by events that are whollydevelopment or partially beyond its control, including:marketing of certain products or services, or increase the costs of offering them to customers.
cyberbreaches or breaches of physical premises
electrical or telecommunications outages
failures of, or loss of access to, operational systems, including computer systems, servers, networks and other technology assets
damage to or loss of property or assets
natural disasters or severe weather conditions
health emergencies or pandemics, or
events arising from local or larger-scale political events, including outbreaks of hostilities or terrorist acts.
JPMorgan Chase maintains a global resiliency and crisis management program that is intended to ensure the ability to recover critical business functions and supporting assets, including staff, technology and facilities, in the event of a business interruption. There can be no assurance that JPMorgan Chase’s resiliency plans will fully mitigate all potential business continuity risks to JPMorgan Chase or its clients and customers. Any significant failure or disruption of JPMorgan Chase’s operations or operational systems could, among other things:
hinder its ability to provide services to its clients and customers
require it to expend significant resources to correct the failure or disruption
cause it to incur financial losses, both from loss of revenue and damage to or loss of property, and
expose it to litigation or regulatory fines, penalties or other sanctions.
A successful cyberattack against JPMorgan Chase could cause significant harm to JPMorgan Chase or its clients and customers.
JPMorgan Chase experiences numerous cyberattacks on its computer systems, software, networks and other technology assets on a daily basis.basis from various actors, including cyber-criminals and “hacktivists” (i.e., individuals or groups that use technology to promote a political agenda or social change). These cyberattacks can

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take many forms, but a common objective of many of these attacks is to introduce computer viruses or malware into JPMorgan Chase’s systems. These viruses or malicious code are typically designed to, among other things:to:
obtain unauthorized access to confidential information belonging to JPMorgan Chase or its clients, and customers, counterparties or employees
manipulate or destroy data
disrupt, sabotage or degrade service on JPMorgan Chase’s systems, or
steal money.
JPMorgan Chase has also been the target ofexperienced significant distributed denial-of-service attacks which are intended to disrupt online banking services.
JPMorgan Chase devotes significant resources to maintain and regularly upgrade its systems to protect them against cyberattacks. However, JPMorgan Chase has experienced security breaches due to cyberattacks in the past, and it is inevitable that additional breaches will occur in the future. Any such breach could result in serious and harmful consequences for JPMorgan Chase or its clients and customers.
A principal reason that JPMorgan Chase cannot provide absolute security against cyberattacks is that it may not always be possible to anticipate, detect or recognize threats to JPMorgan Chase’s systems, or to implement effective preventive measures against all breaches. This is because, among other things:because:
the techniques used in cyberattacks change frequently and are increasingly sophisticated, and therefore may not be recognized until launched
cyberattacks can originate from a wide variety of sources, including third parties who are or may be involved in organized crime or linked to terrorist organizations or hostile foreign governments,countries, or whose objective is to disrupt the operations of financial institutions more generally
JPMorgan Chase does not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which it does business
third parties may seek to gain access to JPMorgan Chase’s systems either directly or using equipment or security passwords belonging to employees, customers,

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third-party service providers or other users of JPMorgan Chase’s systems, and
it is possible that a third party, after establishing a foothold on an internal network without being detected, might obtain access to other networks and systems.
The risk of a security breach due to a cyberattack could increase in the future as JPMorgan Chase continues to expand its mobile-paymentmobile banking and other internet-based product offerings and its internal use of web-basedinternet-based products and applications.
A successful penetration or circumvention of the security of JPMorgan Chase’s systems or the systems of a supplier,vendor, governmental body or another market participant could cause serious negative consequences, including:
significant disruption of JPMorgan Chase’s operations and those of its clients, customers and counterparties, including losing access to operational systems
misappropriation of confidential information of JPMorgan Chase or that of its clients, customers, counterparties, employees or employeesregulators
damage to computers or systems of JPMorgan Chase and those of its clients, customers and counterparties
inability to fully recover and restore data that has been stolen, manipulated or destroyed, or to prevent systems from processing fraudulent transactions
violations by JPMorgan Chase of applicable privacy and other laws
financial loss to JPMorgan Chase or to its clients, and customers, counterparties or employees
loss of confidence in JPMorgan Chase’s cybersecurity measures
client and customer dissatisfaction among JPMorgan Chase’s clients, customers or counterparties
significant exposure to litigation and regulatory fines, penalties or other sanctions, orand
harm to JPMorgan Chase’s reputation.
JPMorgan Chase could also suffer some of the above consequences if a third party were to misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by JPMorgan Chase’s employees.
JPMorgan Chase may not be able to immediately address the consequences of a security breach due to a cyberattack.
A successful breach of JPMorgan Chase’s computer systems, software, networks or other technology assets due to a cyberattack could occur and persist for an extended period of time before being detected due to, among other things:
the breadth of JPMorgan Chase’s operations and the high volume of transactions that it processes
the large number of customers, counterparties and third-party service providers with which JPMorgan Chase does business
the proliferation and increasing sophistication of cyberattacks, and
the possibility that a third party, after establishing a foothold on an internal network without being detected, might obtain access to other networks and systems.
The extent of a particular cyberattack and the steps that JPMorgan Chase may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed and full and reliable information about the attack is known.completed. While such an investigation is ongoing, JPMorgan Chase may not necessarily know the full extent of the harm orcaused by the cyberattack, and that damage may continue to spread. These factors may inhibit JPMorgan Chase’s ability to provide full and reliable information about
the cyberattack to its clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate it,the harm caused by the cyberattack, and certain errors or actions could be repeated or compounded before they are discovered and remediated, anyremediated. Any or all of these factors could further increase the costs and consequences of a cyberattack.
JPMorgan Chase’s operations, results and reputation could be harmed by catastrophes or other events.
JPMorgan Chase’s business and operational systems could be seriously disrupted, and its reputation could be harmed, by events or contributing factors that are wholly or partially beyond its control, including:
cyberbreaches or breaches of physical premises, including data centers
power, telecommunications or internet outages
failures of, or loss of access to, operational systems, including computer systems, servers, networks and other technology assets
damage to or loss of property or assets of JPMorgan Chase or third parties, and any consequent injuries, including in connection with any construction projects undertaken by JPMorgan Chase
effects of climate change
natural disasters or severe weather conditions
accidents such as explosions or structural failures
health emergencies, the spread of infectious diseases or pandemics, or
events arising from local or larger-scale political events, including outbreaks of hostilities or terrorist acts.
JPMorgan Chase maintains a firmwide resiliency program that is intended to enable it to recover critical business functions and supporting assets, including staff, technology and facilities, in the event of a business interruption. There can be no assurance that JPMorgan Chase’s resiliency plans will fully mitigate all potential business continuity risks to JPMorgan Chase or its clients and customers. In particular, JPMorgan Chase’s ability to respond effectively to a business interruption could be hampered to the extent that the members of its workforce, physical assets or systems and other support infrastructure needed to address the event are geographically dispersed, or conversely, if a catastrophic event occurs in an area in which a critical segment of JPMorgan Chase’s workforce, physical assets or systems and other support infrastructure is concentrated. In addition, should emergency or catastrophic events such as severe or abnormal weather conditions become more chronic, the disruptive effects of those events on JPMorgan Chase’s business and operations, and on its clients, customers, counterparties and employees, could become more significant and long-lasting.


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further increaseAny significant failure or disruption of JPMorgan Chase’s operations or operational systems, or any catastrophic event, could:
hinder JPMorgan Chase’s ability to provide services to its clients and customers or to transact with its counterparties
require it to expend significant resources to correct the costsfailure or disruption
cause it to incur losses or liabilities, including from loss of revenue, damage to or loss of property, or injuries
expose it to litigation or regulatory fines, penalties or other sanctions, and consequences of a cyberattack.
harm its reputation.
JPMorgan Chase’s risk management framework and procedures may not be effective in identifying and mitigating every risk to JPMorgan Chase.
Any inadequacy or lapse in JPMorgan Chase’s risk management framework, is intended to mitigate risk and loss. JPMorgan Chase has established processes and procedures to identify, measure, monitor, report and analyze the types of risk to which JPMorgan Chase is subject. However, there are inherent limitations to risk management strategies because there may be existinggovernance structure, practices, models or future risks that JPMorgan Chase has not appropriately anticipated or identified.
JPMorgan Chasereporting systems could be exposedexpose it to unexpected losses, and JPMorgan Chase’sits financial condition or results of operations could be materially and adversely affected, byaffected. In addition, any inadequacy or lapse in its risk management framework, governance structure, procedures and practices, models or reporting systems. Ansuch inadequacy or lapse could:
require significant resources to remediate
attract heightened regulatory scrutiny
expose JPMorgan Chase to regulatory investigations or legal proceedings
subject it to litigation or regulatory fines, penalties or other sanctions
harm its reputation, or
otherwise diminish confidence in JPMorgan Chase.
JPMorgan Chase relies on data to assess its various risk exposures. Any deficiencies in the quality or effectiveness of JPMorgan Chase’s data gathering and validation processes could result in ineffective risk management practices. These deficiencies could also result in inaccurate risk reporting.
JPMorgan Chase establishes allowances for probable credit losses that are inherent in its credit exposures. It then employs stress testing and other techniques to determine the capital and liquidity necessary in the event of adverse economic or market events. These processes are critical to JPMorgan Chase’s results of operations and financial condition. They require difficult, subjective and complex judgments, including forecasts of how economic conditions might impair the ability of JPMorgan Chase’s borrowers and counterparties to repay their loans or other obligations. It is possible that JPMorgan Chase will fail to identify the proper factors or that it will fail to accurately estimate the impact of factors that it identifies. 
Many of JPMorgan Chase’s risk management strategies and techniques consider historical market behavior.  These strategies and techniques are based to some degree on management’s subjective judgment. For example, many models used by JPMorgan Chase are based on assumptions regarding historical correlations among prices of various asset classes or other market indicators. In times of market stress, including difficult or less liquid market environments, or in
the event of other unforeseen circumstances, previously uncorrelated indicators may become correlated.  Conversely, previously-correlated indicators may make unrelated movements at those times. Sudden market movements and unanticipated or unidentified market or economic movements have,could, in some circumstances, limitedlimit the effectiveness of JPMorgan Chase’s risk management strategies, causing it to incur losses.
JPMorgan Chase could incur significant losses, its capital levels could be reduced and it could face greater regulatory scrutiny if its models or estimations areprove to be inadequate.
JPMorgan Chase has developed and uses a variety of models and other analytical and judgment-based estimations to assessmeasure, monitor and implement mitigating controls over its market, credit, liquidity, operational and other risks. These models and estimations are based on a variety of assumptions and historical trends, and are periodically reviewed and modified as necessary. The models and estimations that JPMorgan Chase uses may not be effective in all cases to identify, observe and mitigate risk due to a variety of factors, such as:
reliance on historical trends that may not accurately predict future events, including assumptions underlying the models and estimations which predict correlation among certain market indicators or asset prices
inherent limitations associated with forecasting uncertain economic and financial outcomes
historical trend information may be incomplete, or may not anticipate severely negative market conditions such as extreme volatility, dislocation or lack of liquidity
technology that is introduced to run models or estimations may not perform as expected, or may not be well understood by the personnel using the technology
models and estimations may contain erroneous data, valuations, formulas or algorithms, and
review processes may fail to detect flaws in models and estimations.
JPMorgan Chase could incur substantial losses, its capital levels could be reduced and it could face greater regulatory scrutiny if its models or estimations prove to be inadequate.
Some of the models and other analytical and judgment-based estimations used by JPMorgan Chase in managing risks are subject to review by, and require the approval of, JPMorgan Chase’s regulators. These reviews are required before JPMorgan Chase may use those models and estimations in connection with calculating market risk RWA, credit risk RWA and operational risk RWA under Basel III. If JPMorgan Chase’s models or estimations are not approved by its regulators, it may be subject to higher capital charges, which could adversely affect its financial results or limit the ability to expand its businesses. JPMorgan Chase’s capital actions could also be constrained if a CCAR submission is not approved by its banking regulators due to the perceived inadequacy of its models or estimations.

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Enhanced regulatory and other standards for vendor risk managementthe oversight of vendors and other service providers can result in higher costs and other potential exposures.
JPMorgan Chase must comply with enhanced standards for the assessmentregulatory and management of risksother standards associated with doing business with vendors and other third-party service providers. These requirements are contained both in bank regulatory regulationsproviders, including standards relating to the outsourcing of functions as well as the performance of significant banking and guidance and in certain consent orders to which JPMorgan Chase has been subject.other functions by subsidiaries. JPMorgan Chase incurs significant costs and

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expenses in connection with its initiatives to address the risks associated with oversight of its third party relationships.internal and external service providers. JPMorgan Chase’s failure to appropriately assess and manage third-partythese relationships, especially those involving significant banking functions, shared services or other critical activities, could materially adversely affect JPMorgan Chase. Specifically, any such failure could subject JPMorgan Chase to:result in:
potential liability to clients and customers
regulatory fines, penalties or other sanctions
lower revenues, and the opportunity cost from lost revenues
increased operational costs, or
harm to its reputation.
Requirements for physical settlement and delivery in trading agreements could expose JPMorgan Chase to operational and other risks.
Certain of JPMorgan Chase’s markets transactions require the physical settlement by delivery of securities or other obligations that JPMorgan Chase does not own. If JPMorgan Chase is unable to obtain the obligations within the required timeframe, JPMorgan Chase could forfeit payments otherwise due. Failures could also result in settlement delays, which could damage JPMorgan Chase’s reputation and ability to transact business. Failure to timely settle and confirm transactions could also subject JPMorgan Chase to heightened credit and operational risk, and in the event of a default, market and operational losses.reputation.
JPMorgan Chase could incur unexpected losses if estimates and judgments underlying its financial statements are incorrect.
Under U.S. generally accepted accounting principles (“U.S. GAAP”), JPMorgan Chase is required to use estimates and apply judgments in preparing its financial statements, including in determining allowancesthe allowance for credit losses and reserves related to litigation, among other items.litigation. Certain financial instruments require a determination of their fair value in order to prepare JPMorgan Chase’s financial statements, including:
trading assets and liabilities
instruments in the investment securities portfolio
certain loans
MSRs
structured notes, and
certain repurchase and resale agreements.
Where quoted market prices are not available for these types of financial instruments, JPMorgan Chase may make fair value determinations based on internally developed models or other means which ultimately rely to some degree on management estimates and judgment. Suddenjudgment, and these types of estimates and judgments may not prove to be accurate due to a variety of factors, as noted above. In addition, sudden illiquidity in markets or declines in prices of certain loans and securities may make it more difficult to value certain balance sheet items,financial instruments, which could lead to valuations being subsequently changed or adjusted. If estimates or judgments underlying JPMorgan Chase’s financial statements prove to have been incorrect, JPMorgan Chase may experience material losses.
JPMorgan Chase establishes an allowance for expected credit losses that are inherent in its credit exposures. It then employs stress testing and other techniques to determine the amounts of capital and liquidity that would be needed in the event of adverse economic or market events. These processes are critical to JPMorgan Chase’s results of operations and financial condition. They require difficult,
subjective and complex judgments, including forecasts of how economic conditions might impair the ability of JPMorgan Chase’s borrowers and counterparties to repay their loans or other obligations. It is possible that JPMorgan Chase will fail to identify the proper factors or that it will fail to accurately estimate the impact of factors that it identifies.
Lapses in controls over disclosure or financial reporting could materially affect JPMorgan Chase’s profitability or reputation.
There can be no assurance that JPMorgan Chase’s disclosure controls and procedures will be effective in every circumstance, or that a material weakness or significant deficiency in internal control over financial reporting will not occur. Any such lapses or deficiencies could:
materially and adversely affect JPMorgan Chase’s business and results of operations or financial condition
restrict its ability to access the capital markets
require it to expend significant resources to correct the lapses or deficiencies
expose it to litigation or regulatory fines, penalties or other sanctions
harm its reputation, or
otherwise diminish investor confidence in JPMorgan Chase.
JPMorgan Chase could be adversely affected by changes in accounting standards or policies.
The preparation of JPMorgan Chase’s financial statements is based on accounting standards established by the Financial Accounting Standards Board and the Securities and Exchange Commission, as well as more detailed accounting policies established by JPMorgan Chase’s management. From time to time these accounting standards or accounting policies may change, and in some cases these changes could have a significant effect on JPMorgan Chase’s financial statements and may adversely affect its financial results or investor perceptions of those results.
As of January 1, 2020, JPMorgan Chase has implemented a new accounting standard, commonly referred to as the Current Expected Credit Losses (“CECL”) framework, which requires earlier recognition of expected credit losses on loans and certain other instruments. The allowance for credit losses related to JPMorgan Chase’s loans and other lending-related commitments increased as a result of the implementation of CECL, which has a negative impact on JPMorgan Chase’s capital levels.
The ongoing impact of the adoption of CECL could include the following, each of which could result in diminished investor confidence:
greater volatility in JPMorgan Chase’s earnings and capital levels over economic cycles

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potential reductions in its capital distributions, or
unexpected increases in the allowance for credit losses.
In addition, JPMorgan Chase could be adversely impacted by associated changes in the competitive environment in which it operates, including changes in the availability or pricing of loan products, particularly during periods of economic stress, as well as changes related to non-U.S. financial institutions or other competitors that are not subject to this accounting standard.
Strategic
If JPMorgan Chase’s management fails to develop and execute effective business strategies, and to anticipate changes affecting those strategies, JPMorgan Chase’s competitive standing and results could suffer.
JPMorgan Chase’s business strategies significantly affect its competitive standing and results of operations. These strategies relate to:
the products and services that JPMorgan Chase offers
the geographies in which it operates
the types of clients and customers that it serves
the counterparties with which it does business, and
the methods and distribution channels by which it offers products and services.
The franchise values and growth prospects of JPMorgan Chase’s businesses, and its earnings and results of operations, may suffer and revenues could decline ifIf management makes choices about these strategies and goals that:
that prove to be incorrect,

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do not accurately assess the competitive landscape and industry trends, or
fail to address changing regulatory and market environments, inthen the U.S.franchise values and abroad.growth prospects of JPMorgan Chase’s businesses may suffer and its earnings could decline.
JPMorgan Chase’s growth and prospects also depend on management’s ability to develop and execute effective business plans to address these strategic priorities, both in the near term and over longer time horizons. Management’s effectiveness in this regard will affect JPMorgan Chase’s ability to develop and enhance its resources, control expenses and return capital to shareholders. Each of these objectives could be adversely affected by management’sany failure on the part of management to:
devise effective business plans and strategies
effectively implement business decisions, including by minimizing bureaucratic processes
institute controls that appropriately address the risks associated with business activities and any changes in those activities
offer products and services that meet thechanging expectations of clients and customers and in ways that enhance their satisfaction with those products and services
allocate capital to JPMorgan Chase’s businesses in a manner that promotes their long-term profitabilitystability to enable JPMorgan Chase to build and invest in market-leading businesses, even in a highly stressed environment
adequately respondallocate capital appropriately due to regulatory requirementsimprecise modeling or subjective judgments made in connection with those allocations
appropriately address shareholder concerns
react quickly to changes in market conditions or market structures, or
develop and enhance the operational, technology, risk, financial and managerial resources necessary to grow and manage JPMorgan Chase’s businesses.
Additionally, JPMorgan Chase’s Board of Directors plays an important role in exercising appropriate oversight of management’s significant strategic decisions, and a failure by the Board to perform this function could also impair JPMorgan Chase’s results of operations.
JPMorgan Chase faces significant and increasing competition in the rapidly evolving financial services industry.
JPMorgan Chase operates in a highly competitive environment in which it must evolve and adapt to the significant changes as a result of financial regulatory reform, technological advances, increased public scrutiny and current economic conditions. JPMorgan Chase expects that competition in the U.S. and global financial services industry will continue to be intense. Competitors include:
other banks and financial institutions
trading, advisory and investment management firms
finance companies and technology companies, and
other nonbank firms that are engaged in providing similar products and services.
JPMorgan Chase cannot provide assurance that the significant competition in the financial services industry will not materially and adversely affect its future results of operations.
New competitors in the financial services industry continue to emerge. For example, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally were banking products. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities trading, payments processing and online automated algorithmic-based investment advice. Furthermore, both financial institutions and their non-banking competitors face the risk that payments processing and other services could be significantly disrupted by technologies, such as cryptocurrencies, that require no intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies. In addition, new technologies may be used by customers, or breached or infiltrated by third parties, in unexpected ways, which can increase JPMorgan Chase’s costs for complying with laws and regulations that apply to the offering of products and services through those technologies and reduce the income

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that JPMorgan Chase earns from providing products and services through those new technologies.
Ongoing or increased competition may put pressure on the pricing for JPMorgan Chase’s products and services or may cause JPMorgan Chase to lose market share, particularly with respect to traditional banking products such as deposits and bank accounts. This competition may be on the basis of quality and variety of products and services offered, transaction execution, innovation, reputation and price. The failure of any of JPMorgan Chase’s businesses to meet the expectations of clients and customers, whether due to general market conditions, under-performance, a decision not to offer a particular product or service, changes in client and customer expectations or other factors, could affect JPMorgan Chase’s ability to attract or retain clients and customers. Any such impact could, in turn, reduce JPMorgan Chase’s revenues. Increased competition also may require JPMorgan Chase to make additional capital investments in its businesses, or to extend more of its capital on behalf of its clients in order to remain competitive.
Climate change could have a material adverse impact on JPMorgan Chase’s business operations, clients and customers.
JPMorgan Chase operates in many regions, countries and communities around the world where its businesses, and the activities of its clients and customers, could be disrupted by climate change. Potential physical risks from climate change may include:
altered distribution and intensity of rainfall
prolonged droughts or flooding
increased frequency of wildfires
rising sea levels
rising heat index
In addition, these physical changes may prompt changes in regulations or consumer preferences which in turn could have negative consequences for the business models of JPMorgan Chase’s clients.
These climate driven changes could have a material adverse impact on asset values and the financial performance of JPMorgan Chase’s businesses, and those of its clients and customers.
Conduct
MisconductConduct failure by JPMorgan Chase employees can harm its clients and customers, impact market integrity, damage itsJPMorgan Chase’s reputation and trigger litigation and regulatory action.
JPMorgan Chase’s employees interact with clients, customers and counterparties, and with each other, every day. All employees are expected to demonstrate values and exhibit the culture and behaviors that are an integral part of JPMorgan Chase’s How We Do Business Principles, including JPMorgan
Chase’s commitment to “do first class business in a first class way.” JPMorgan Chase endeavors to embed culture and conduct risk management throughout an employee’s life cycle, including recruiting, onboarding, training and development, and performance management. Culture and conductConduct risk management are
is also important toan integral component of JPMorgan Chase’s promotion and compensation processes.
Notwithstanding these expectations, policies and practices, certain employees have in the past engaged in improper or illegal conduct, resultingand these instances of misconduct have resulted in litigation as well as settlementsresolutions of governmental investigations or enforcement actions involving consent orders, deferred prosecution agreements, and non-prosecution agreements as well asand other civil andor criminal settlements with regulators and other governmental entities.sanctions. There is no assurance that further inappropriate or unlawful actions by employees will not occur or that any such actions will always be detected, deterred or quickly prevented.
JPMorgan Chase’s reputation could be harmed, and collateral consequences could result, from a failure by one or more employees to act consistently with JPMorgan Chase’s expectations, policies and practices, including by acting in ways that harm clients, customers, other market participants or other employees. Some examples of this include:
improperly selling and marketing JPMorgan Chase’s products or services
engaging in insider trading, market manipulation or unauthorized trading
facilitating illegal or aggressive tax-motivated transactions, or transactions designed to circumvent economic sanction programs
failing to fulfill fiduciary obligations or other duties owed to clients or customers
violating anti-trust or anti-competition laws by colluding with other market participants to manipulate markets, prices or indices
engaging in discriminatory behavior or harassment
making risk decisions in ways that subordinate JPMorgan Chase’s risk appetite to employee compensation objectives, and
misappropriating property, or confidential or proprietary information, or technology assets belonging to JPMorgan Chase, its clients and customers or third parties.
The consequences of any failure by employees to act consistently with JPMorgan Chase’s expectations, policies or practices could include litigation, or regulatory or other governmental investigations or enforcement actions. Any of these proceedings or actions could result in judgments, settlements, fines, penalties or other sanctions, or lead to:
financial losses
increased operational and compliance costs

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greater scrutiny by regulators and other parties
regulatory scrutiny
requirementsactions that require JPMorgan Chase to restructure, curtail or cease certain of its activities
the need for significant oversight by JPMorgan Chase’s management
the undermining of JPMorgan Chase’s culture

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loss of clients or customers, and
harm to JPMorgan Chase’s reputation.
Reputation
Damage to JPMorgan Chase’s reputation could harm its businesses.
Maintaining trust in JPMorgan Chase is critical to its ability to attract and retain clients, customers, investors and employees. Damage to JPMorgan Chase’s reputation can therefore cause significant harm to JPMorgan Chase’s business and prospects. Harm to JPMorgan Chase’s reputation can arise from numerous sources, including:
employee misconduct, including discriminatory behavior or harassment
security breaches, including cyberattacks
failure to safeguard client, customer or employee information
failure to manage environmental, social and sustainability risk issues associated with its business activities or those of its clients
compliance or operational failures
litigation or regulatory fines, penalties or other sanctions or
regulatory investigations or enforcement actions, or settlements.resolutions of these matters, and
JPMorgan Chase’s reputation could also be harmed by the failure or perceived failure of certain thirdclients, customers, counterparties or other parties to comply with laws or regulations, including companies in which JPMorgan Chase has made principal investments, parties to joint ventures with JPMorgan Chase, and vendors and other third parties with which JPMorgan Chase does business.
JPMorgan Chase’s reputation or prospects may be significantly damaged by adverse publicity or negative information regarding JPMorgan Chase, whether or not true, that may be published or broadcast by the media or posted on social media, non-mainstream news services or other parts of the internet, and thisinternet. This latter risk can be magnified by the speed and pervasiveness with which information is disseminated through those channels.
Social and environmental activists are increasingly targeting financial services firms such as JPMorgan Chase with public criticism for their relationships with clients that are engaged in certain sensitive industries, including businesses whose products are or are perceived to be harmful to human health, or whose activities negatively affect or are perceived to negatively affect the environment, workers’
rights or communities. Activists have also engaged in public protests at JPMorgan Chase’s headquarters and other properties. Activist criticism of JPMorgan Chase’s relationships with clients in sensitive industries could potentially engender dissatisfaction among clients, customers, investors and employees with how JPMorgan Chase addresses social and environmental concerns in its business activities. Alternatively, yielding to activism targeted at certain sensitive industries could damage JPMorgan Chase’s relationships with clients and customers, and with governmental bodies in jurisdictions in which JPMorgan Chase does business, whose views are not aligned with those of social and environmental activists. In either case, the resulting harm to JPMorgan Chase’s reputation could:
cause certain clients and customers to cease doing business with JPMorgan Chase
impair JPMorgan Chase’s ability to attract new clients and customers, or to expand its relationships with existing clients and customers
diminish JPMorgan Chase’s ability to hire or retain employees, or
prompt JPMorgan Chase to cease doing business with certain clients or customers.
Actions by the financial services industry generally or by certain members of or individuals in the industry can also affect JPMorgan Chase’s reputation. For example, concerns that consumers have been treated unfairly by a financial institution, or that a financial institution has acted inappropriately with respect to the methods used to offer products to customers, can damage the reputation of the industry as a whole. If JPMorgan Chase is perceived to have engaged in these types of behaviors, the measures needed to address the associated reputational issuesthis could increase JPMorgan Chase’s operational and compliance costs and negatively affectweaken its earnings. Furthermore, events that undermine JPMorgan Chase’s reputation can hinder its ability to attract and retainamong clients customers, investors and employees.or customers.
Failure to effectively manage potential conflicts of interest can result in litigation and enforcement actions, as well as damage JPMorgan Chase’s reputation.
JPMorgan Chase’s ability to manage potential conflicts of interest has become increasinglyis highly complex asdue to the broad range of its business activities which encompass morea variety of transactions, obligations and
interests with and among JPMorgan Chase’s clients and customers. JPMorgan Chase can become subject to litigation and enforcement actions, and its reputation can be damaged, by the failure or perceived failure to, among other things:to:
adequately address or appropriately disclose conflicts of interest, including potential conflicts of interest that may arise in connection with providing multiple products and services in the same transaction
deliver appropriate standards of service and quality
treat clients and customers fairlywith the appropriate standard of care

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use client and customer data responsibly and in a manner that meets legal requirements and regulatory expectations
provide fiduciary products or services in accordance with the applicable legal and regulatory standards, or
handle or use confidential information of customers or clients appropriately or in compliance with applicable data protection and privacy laws and regulations.
In the future, a failure or perceived failure to appropriately address conflicts of interest or fiduciary obligations could result in customer dissatisfaction, litigation and regulatory fines, penalties or other sanctions, and heightened regulatory scrutiny and enforcement actions, all of which can lead to lost revenue and higher operating costs and cause serious harm to JPMorgan Chase’s reputation.
Country
JPMorgan Chase can incur losses due to unfavorable economic developments around the world.
JPMorgan Chase’s businesses and earnings are affected by the monetary, fiscal and other policies adopted by various U.S. and non-U.S. regulatory authorities and agencies. For example, the Federal Reserve regulates the supplyAn outbreak of money and credit in the U.S. and its policies determine in large part the cost of funds for lending and investing in the U.S. and the return earned on those loans and investments. Changes in fiscal policies by central bankshostilities between countries or regulatory authorities, and the manner in which those policies are executed, are beyond JPMorgan Chase’s control and may be difficult to predict. Consequently, unanticipated changes in these policieswithin a country or the ways in which they are implementedregion could have a negative impactmaterial adverse effect on the global economy and on JPMorgan Chase’s businesses within the affected region or globally.
Aggressive actions by hostile governments or groups, including armed conflict or intensified cyberattacks, could expand in unpredictable ways by drawing in other countries or escalating into full-scale war with potentially catastrophic consequences, particularly if one or more of the combatants possess nuclear weapons. Depending on the scope of the conflict, the hostilities could result in:
worldwide economic disruption
heightened volatility in financial markets
severe declines in asset values, accompanied by widespread sell-offs of investments
substantial depreciation of local currencies, potentially leading to defaults by borrowers and resultscounterparties in the affected region
disruption of operations.global trade, and
diminished consumer, business and investor confidence.
Any of the above consequences could have significant negative effects on JPMorgan Chase’s businessesoperations and revenues are also subject to the risks inherent in investing and market-making in securities, loans and other obligations of companies worldwide. These risks include, among others:
negative effects from slowing growth rates or recessionary economic conditions
the risk of loss from unfavorable political, legal or other developments, including social or political instability,earnings, both in the countries or regions directly affected by the hostilities or globally. Further, if the U.S. were to become directly involved in which those companies operate, and
the other risks and considerations discussed below.

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Adverse economic and political developments insuch a country or region can haveconflict, this could lead to a wider negative impact on JPMorgan Chase’s businesses.
Some countries or regions in which JPMorgan Chase operates or invests, or in whichcurtailment of any operations that JPMorgan Chase may do business in the future, have in the past experienced severe economic disruptions particular to thoseaffected countries or regions. In some cases, concerns regardingregion, as well as in any nation that is aligned against the fiscal conditionU.S. in the hostilities. JPMorgan Chase could also experience more numerous and aggressive cyberattacks launched by or under the sponsorship of one or more countries can causeof the adversaries in such a contraction of available credit and reduced commercial activity among trading partners within the affected countries or region. These developments can also create market volatility which can lead to a contagion affecting other countries in the same region or beyond. Furthermore, governments in particular countries or regions in which JPMorgan Chase or its clients do business may choose to adopt protectionist economic or trade policies in response to concerns about domestic economic conditions. Any or all of these developments could lead to diminished cross-border trade and financing activity within that country or region, all of which could negatively affect JPMorgan Chase’s business and earnings in those jurisdictions. If JPMorgan Chase takes steps to reduce its market and credit risk exposure within a particular country or region that is experiencing economic or political disruption, it may incur losses that are higher than expected because it will be disposing of assets when market conditions are likely to be highly unfavorable.conflict.
JPMorgan Chase’s business activities with governmental entities can pose a greateran enhanced risk of loss.
Several of JPMorgan Chase’s businesses engage in transactions with, or trade in obligations of, governmental entities, including national, state, provincial, municipal and local authorities, both within and outside the U.S. These activities can expose JPMorgan Chase to enhanced sovereign, credit-related, operational and reputation risks, includingas governmental entities have in the risks that a governmental entity may:past, and may in the future, taken actions such as:
defaultdefaulting on or restructure itsrestructuring their obligations
claimclaiming that actions taken by government officials were beyond the legal authority of those officials, or
repudiaterepudiating transactions authorized by a previous incumbent government.
Any or all of these actions could adversely affect JPMorgan Chase’s financial condition and results of operations and could hurt its reputation, particularly if JPMorgan Chase pursues claims against a government obligor in a jurisdiction in which it has significant business relationships with clients or customers.
JPMorgan Chase’s business and revenues in emerging markets can be hampered by local economic, political, socialregulatory and economicsocial factors.
Some of the countries in which JPMorgan Chase conducts business have economies or markets that are less developed and more volatile, and may have legal and regulatory regimes that are less established or predictable,
than the U.S. and other developed markets in which JPMorgan Chase operates. Some of these countries have in the past experienced severe economic disruptions, including:
extreme currency fluctuations
high inflation
low or negative growth, orand
defaults or potential defaults on sovereign debt.
The governments in these countries have sometimes reacted to these developments by imposing restrictive monetary policies such as currency exchange controls and other laws and restrictions that adversely affect the local and regional business environment. In addition, these countries, as well as certain more developed countries, have been susceptible to unfavorable social developments arising from poor economic conditions and related governmental actions,environment, including:
social unrest
general strikes and demonstrations
crime and corruption
security and personal safety issues
outbreaks of hostilities
overthrow of incumbent governments
terrorist attacks, or
other forms of internal discord.
These economic, political and social developments have in the past resulted in, and in the future could lead to, conditions that can adversely affect JPMorgan Chase’s operations in those countries and impair the revenues, growth and profitability of those operations.
If the legal and regulatory system in a particular country is less established or predictable, this can create a more difficult environment in which to conduct business. For example, any of the following could hamper JPMorgan Chase’s operations and reduce its earnings in countries with less established or predictable legal and regulatory regimes:
the absence of a statutory or regulatory basis or guidance for engaging in specific types of business or transactions
the adoption of conflicting or ambiguous laws and regulations, or the inconsistent application or interpretation of existing laws and regulations
uncertainty concerning the enforceability of contractual obligations
difficulty in competing in economies in which the government controls or protects all or a portion of the local economy or specific businesses, or where graft or corruption may be pervasive, and

24

the threat of arbitrary regulatory investigations, civil litigations or criminal prosecutions, the termination of licenses required to operate in the local market or the suspension of business relationships with governmental bodies.
JPMorgan Chase’s operations in or involving emerging markets countries can also be affected by governmental actions such as:
monetary policies
expropriation, nationalization or confiscation of assets
price, capital or exchange controls, including imposition of punitive transfer and convertibility restrictions
expropriation or nationalization of assets or confiscation of property, including intellectual property, and
changes in laws and regulations.
The impact of these actions could be accentuated in trading markets that are smaller, less liquid and more volatile than more-developed markets. These types of government actions can negatively affect JPMorgan Chase’s operations

26

in the relevant country, either directly or by suppressing the business activities of local clients or multi-national clients that conduct business in the jurisdiction. For example, some or all of these governmental actions can result in funds belonging to JPMorgan Chase, or that it places with a local custodian on behalf of a client, being effectively trapped in a country. In addition to the ultimate risk of losing the funds entirely, JPMorgan Chase could be exposed for an extended period of time to the credit risk of a local custodian that is now operating in a deteriorating domestic economy.
In addition, emerging markets countries, as well as certain more developed countries, have been susceptible to unfavorable social developments arising from poor economic conditions and related governmental actions, as well as natural disasters, including:
social unrest
general strikes and demonstrations
crime and corruption
security and personal safety issues
outbreaks of hostilities
overthrow of incumbent governments
terrorist attacks, and
other forms of internal discord.
These economic, political, regulatory and social developments have in the past resulted in, and in the future could lead to, conditions that can adversely affect JPMorgan Chase’s operations in those countries and impair the revenues, from international operationsgrowth and trading in non-U.S. securities and other obligations can be negatively affected by the foregoing economic, political and social conditions in a particular country in which it does business.profitability of those operations. In addition, any of the above-mentionedthese events or circumstances in one country can affect JPMorgan Chase’s operations and investments in another country or countries, including in the U.S.
JPMorgan Chase’s operations in the emerging markets can subject it to higher operational and compliance costs.
Conducting business in countries with less-developed legal and regulatory regimes often requires JPMorgan Chase to devote significant additional resources to understanding, and monitoring changes in, local laws and regulations, as well as structuring its operations to comply with local laws and regulations and implementing and administering related internal policies and procedures. There can be no assurance that JPMorgan Chase will always be successful in its efforts to conduct its business in compliance with laws and regulations in countries with less predictable legal and regulatory systems or that JPMorgan Chase will be able to develop effective working relationships with local regulators.
Complying with economic sanctions and anti-corruption and anti-money laundering laws and regulations can increase JPMorgan Chase’s operational and compliance costs and risks.
JPMorgan Chase must comply with economic sanctions and embargo programs administered by OFAC and similar national and multi-national bodies and governmental agencies outside the U.S., as well as anti-corruption and anti-money laundering laws and regulations throughout the world. JPMorgan Chase can incur higher costs and face greater compliance risks in structuring and operating its businesses to comply with these requirements. Furthermore, a violation of a sanction or embargo program or anti-corruption or anti-money laundering laws and regulations could subject JPMorgan Chase, and individual employees, to regulatory enforcement actions as well as significant civil and criminal penalties.
Competition
The financial services industry is highly competitive, and JPMorgan Chase’s results of operations will suffer if it is not a strong and effective competitor.
JPMorgan Chase operates in a highly competitive environment, and expects that competition in the U.S. and global financial services industry will continue to be intense. Competitors include:
other banks and financial institutions
trading, advisory and investment management firms
finance companies and technology companies, and
other firms that are engaged in providing similar products and services.
JPMorgan Chase cannot provide assurance that the significant competition in the financial services industry will not materially and adversely affect its future results of operations.
New competitors have emerged. For example, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally were banking products. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities trading, payment processing and online automated algorithmic-based investment advice. Furthermore, both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies.
Ongoing or increased competition may put downward pressure on prices and fees for JPMorgan Chase’s products and services or may cause JPMorgan Chase to lose market share. This competition may be on the basis of, among other factors, quality and variety of products and services offered, transaction execution, innovation, reputation and price. The failure of any of JPMorgan Chase’s businesses to

25
Part I

meet the expectations of clients and customers, whether due to general market conditions or underperformance, could affect JPMorgan Chase’s ability to attract or retain clients and customers. Any such impact could, in turn, reduce JPMorgan Chase’s revenues. Increased competition also may require JPMorgan Chase to make additional capital investments in its businesses, or to extend more of its capital on behalf of its clients in order to remain competitive.
Non-U.S. competitors of JPMorgan Chase’s wholesale businesses outside the U.S. are typically subject to different, and in some cases, less stringent, legislative and regulatory regimes. The more restrictive laws and regulations applicable to JPMorgan Chase and other U.S. financial services institutions can put JPMorgan Chase and those firms at a competitive disadvantage to non-U.S. competitors. This could reduce the revenue and profitability of JPMorgan Chase’s wholesale businesses, resulting from:
prohibitions on engaging in certain transactions
higher capital and liquidity requirements
making JPMorgan Chase’s pricing of certain transactions more expensive for clients, and
adversely affecting JPMorgan Chase’s cost structure for providing certain products.
People
JPMorgan Chase’s ability to attract and retain qualified employees is critical to its success.
JPMorgan Chase’s employees are its most important resource, and in many areas of the financial services industry, competition for qualified personnel is intense. JPMorgan Chase endeavors to attract talented and diverse new employees and retain and motivate its existing employees. If JPMorgan Chase were unable to continue to attract or retain qualified employees, including successors to the Chief Executive Officer or members of the Operating Committee, JPMorgan Chase’s performance, including its competitive position, could be materially and adversely affected.
Changes
Unfavorable changes in immigration policies could adversely affect the quality of JPMorgan Chase.Chase’s businesses and operations.
There isJPMorgan Chase relies on the potential for changesskills, knowledge and expertise of employees located throughout the world. Changes in immigration policies in multiple jurisdictions around the world, including in the U.S. If immigration policies were toand other countries that unduly restrict or otherwise make it more difficult for qualified employees or their family members to work in, or transfer among, jurisdictions in which JPMorgan Chase has operations or conducts its business could inhibit JPMorgan Chase’s ability to attract and retain qualified employees, and thereby dilute the quality of its workforce, or could prompt JPMorgan Chase could be adversely affected.to make structural changes to its worldwide operating model that are less efficient or more costly.
Legal
JPMorgan Chase faces significant legal risks from private actions and formal and informal regulatory and government investigations.
JPMorgan Chase is named as a defendant or is otherwise involved in variousmany legal proceedings, including class actions and other litigation or disputes with third parties. Actions currently pending against JPMorgan Chase may result in judgments, settlements, fines, penalties or other resultssanctions adverse to JPMorgan Chase. Any of these matters could materially and adversely affect JPMorgan Chase’s business, financial condition or results of operations, or cause serious reputational harm. As a participant in the financial services industry, it is likely that JPMorgan Chase will continue to experience a high level of litigation and regulatory and government investigations related to its businesses and operations.
Regulators and other government agencies conduct examinations of JPMorgan Chase and its subsidiaries both on a routine basis and in targeted exams, and JPMorgan Chase’s businesses and operations are subject to heightened regulatory oversight. This heightened regulatory scrutiny, or the results of such an investigation or examination, may lead to additional regulatory investigations or enforcement actions. There is no assurance that those actions will not result in regulatory settlementsresolutions or other enforcement actions against JPMorgan Chase. Furthermore, a single event involving a potential violation of law or regulation may give rise to numerous and overlapping investigations and proceedings, either by multiple federal, and state or local agencies and officials in the U.S. or, in some instances, regulators and other governmental officials in non-U.S. jurisdictions.
If another financial institution violates a law or regulation relating to a particular business activity or practice, this will often give rise to an investigation by regulators and other governmental agencies of the same or similar activity or practice by JPMorgan Chase.

27
Part I

These and other initiatives by U.S. and non-U.S. governmental authorities may subject JPMorgan Chase to judgments, settlements, fines, or penalties or other sanctions, and may require JPMorgan Chase to restructure its operations and activities or to cease offering certain products or services. All of these potential outcomes could harm JPMorgan Chase’s reputation or lead to higher operational costs, thereby reducing JPMorgan Chase’s profitability, or result in collateral consequences. In addition, the extent of JPMorgan Chase’s exposure to legal and regulatory matters can be unpredictable and could, in some cases, exceed the amount of reserves that JPMorgan Chase has established for those matters.
Item 1B. Unresolved Staff Comments.
None.


2628  


Item 2. Properties.
JPMorgan Chase’s headquarters is located in New York City at 270 Park383 Madison Avenue, a 50-story47-story office building that it owns. The Firm is demolishing its former headquarters at 270 Park Avenue in New York City and is building a new headquarters on the same site.
The Firm owned or leased facilities in the following locations at December 31, 2017.2019.
December 31, 20172019
(in millions)
Approximate square footage
  
United States(a)
 
New York City, New York 
270 Park Ave,383 Madison Avenue, New York, New York1.31.1

All other New York City locations8.88.3

Total New York City, New York10.19.4

  
Other U.S. locations 
Columbus/Westerville, Ohio3.7

Chicago, Illinois2.8

Phoenix/Tempe, Arizona2.62.5

Wilmington/Newark, Delaware2.2
Dallas/Plano, Texas2.1

Houston, Texas2.11.9

Jersey City, New Jersey1.51.7

Dallas/Plano, Texas1.6
All other U.S. locations34.834.5

Total United States61.960.3

  
Europe, the Middle East and Africa (“EMEA”) 
25 Bank Street, London, U.K.1.4

All other U.K. locations3.02.9

All other EMEA locations0.91.4

Total EMEA5.35.7

  
Asia Pacific,Asia-Pacific, Latin America and Canada 
India3.13.8

All other locations3.94.0

Total Asia Pacific,Asia-Pacific, Latin America and Canada7.07.8

Total74.273.8

(a)At December 31, 2017,2019, the Firm owned or leased 5,1304,976 retail branches in 23 states.38 states and Washington D.C.
The premises and facilities occupied by JPMorgan Chase are used across all of the Firm’s business segments and for corporate purposes. JPMorgan Chase continues to evaluate its current and projected space requirements and may determine from time to time that certain of its properties (including the premises and facilities noted above) are no longer necessary for its operations. There is no assurance that the Firm will be able to dispose of any such excess properties, premises, andor facilities or that it will not incur costs in connection with such dispositions. Such disposition costs may be material to the Firm’s results of operations in a given period. For information on occupancy expense, seeRefer to the Consolidated Results of Operations on pages 44–46.48–51 for information on occupancy expense.


 
Item 3. Legal Proceedings.
ForRefer to Note 30 for a description of the Firm’s material legal proceedings, see Note 29.proceedings.
Item 4. Mine Safety Disclosures.
Not applicable.


  2729
Part II




Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for registrant’s common equity
The outstanding shares of JPMorgan ChaseChase’s common stock areis listed and traded on the New York Stock Exchange. For the quarterly high and low prices of JPMorgan Chase’s commonRefer to “Five-year stock and cash dividends declared on JPMorgan Chase’s common stock for the last two years, see the section entitled “Supplementary information – Selected quarterly financial data (unaudited)performance,” on page 277. For41 for a comparison of the cumulative total return for JPMorgan Chase common stock with the comparable total return of the S&P 500 Index, the KBW Bank Index and the S&P Financial Index over the five-year period ended December 31, 2017, see “Five-year stock performance,” on page 39.2019.
 


For information on the common dividend payout ratio, seeRefer to Capital actions in the Capital Risk Management section of Management’s discussion and analysis on pages 89-90. For90–91 for information on the common dividend payout ratio. Refer to Note 21 and Note 26 for a discussion of restrictions on dividend payments, see Note 20 and Note 25.payments. On January 31, 2018,2020, there were 192,658195,467 holders of record of JPMorgan Chase common stock. ForRefer to Part III, Item 12 on page 33 for information regarding securities authorized for issuance under the Firm’s employee share-based compensation plans, see Part III, Item 12 on page 31.incentive plans.
Repurchases under the common equity repurchase program
For information regarding repurchases under the Firm’s common equity repurchase program, seeRefer to Capital actions in the Capital Risk Management section of Management’s discussion and analysis on pages 89-90.90–91 for information regarding repurchases under the Firm’s common equity repurchase program.


Shares repurchased on a settlement-date basis, pursuant to the common equity repurchase program during 20172019 were as follows.
Year ended December 31, 2017 Total shares of common stock repurchased 
Average price paid per share of common stock(a)
 
Aggregate repurchases of common equity (in millions)(a)
 
Dollar value
of remaining
authorized
repurchase
(in millions)(a)
 
Year ended December 31, 2019 Total number of shares of common stock repurchased 
Average price paid per share of common stock(a)
 
Aggregate purchase price of common stock repurchases (in millions)(a)
 
Dollar value
of remaining
authorized
repurchase
(in millions)(a)
 
First quarter 32,132,964
 $88.14
 $2,832
 $3,221
  49,534,646
 $102.78
 $5,091
 $5,290
 
Second quarter 34,940,127
 86.05
 3,007
 214
(b) 
 47,434,255
 109.83
 5,210
 80
(b) 
Third quarter 51,756,892
 92.02
 4,763
 14,637
  62,011,400
 112.07
 6,949
 22,451
 
October 14,248,307
 98.04
 1,397
 13,241
  19,728,145
 118.30
 2,334
 20,116
 
November 19,472,405
 98.92
 1,926
 11,314
  17,489,713
 129.27
 2,261
 17,856
 
December 14,006,503
 106.02
 1,485
 9,830
  16,777,026
 135.65
 2,276
 15,580
(c) 
Fourth quarter 47,727,215
 100.74
 4,808
 9,830
  53,994,884
 127.24
 6,871
 15,580
(c) 
Year-to-date 166,557,198
 $92.52
 $15,410
 $9,830
(c) 
 212,975,185
 $113.26
 $24,121
 $15,580
(c) 
(a)Excludes commissions cost.
(b)The $214$80 million unused portion under the prior Board authorization was canceled when the $19.4$29.4 billion repurchase program was authorized by the Board of Directors on June 28, 2017.27, 2019.
(c)Represents the amount remaining under the $19.4$29.4 billion repurchase program.


Item 6. Selected Financial Data.
For five-year selected financial data, seeRefer to “Five-year summary of consolidated financial highlights (unaudited)” on page 38.40 for five-year selected financial data.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s discussion and analysis of financial condition and results of operations, entitled “Management’s discussion and analysis,” appears on pages 40–145.42–141. Such information should be read in conjunction with the Consolidated Financial Statements and Notes thereto, which appear on pages 148–276.147–286.


 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of the quantitative and qualitative disclosures about market risk, seeRefer to the Market Risk Management section of Management’s discussion and analysis on pages 121-128.119–126 for a discussion of quantitative and qualitative disclosures about market risk.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements, together with the Notes thereto and the report thereon dated February 27, 2018,25, 2020, of PricewaterhouseCoopers LLP, the Firm’s independent registered public accounting firm, appear on pages 146–276.143–286.
Supplementary financial data for each full quarter within the two years ended December 31, 2017,2019, are included on page 277287 in the table entitled “Selected quarterly financial

28

data (unaudited).” Also included is a “Glossary of Terms and Acronyms’’ on pages 283-289.293–299.

30

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.


Item 9A. Controls and Procedures.
The internal control framework promulgated by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), “Internal Control — Integrated Framework” (“COSO 2013”), provides guidance for designing, implementing and conducting internal control and assessing its effectiveness. The Firm used the COSO 2013 framework to assess the effectiveness of the Firm’s internal control over financial reporting as of December 31, 2017. See2019. Refer to “Management’s report on internal control over financial reporting” on page 146.142.
As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Firm’s management, including its Chairman and Chief Executive Officer and its Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chairman and Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were effective. SeeRefer to Exhibits 31.1 and 31.2 for the Certifications issuedfurnished by the Chairman and Chief Executive Officer and Chief Financial Officer.Officer, respectively.
The Firm is committed to maintaining high standards of internal control over financial reporting. Nevertheless, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, in a firm as large and complex as JPMorgan Chase, lapses or deficiencies in internal controls may occur from time to time, and there can be no assurance that any such deficiencies will not result in significant deficiencies or material weaknesses in internal control in the future. For further information, seefuture and collateral consequences therefrom. Refer to “Management’s report on internal control over financial reporting” on page 146.142 for further information. There was no change in the Firm’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the three months ended December 31, 2017,2019, that has materially affected, or is reasonably likely to materially affect, the Firm’s internal control over financial reporting.


 
Item 9B. Other Information.
Iran threat reduction disclosure
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure may be required even where the activities, transactions or dealings were conducted in compliance with applicable law. Except as set forth below, as of the date of this report, the Firm is not aware of any other activity, transaction or dealing by any of its affiliates during the calendar year 2017 that requires disclosure under Section 219.
As previously disclosed, during the first quarter of 2017, a non-U.S. subsidiary of JPMorgan Chase processed a payment in the amount of EUR 1,466 for its client, a non-U.S. international organization, where the payment originated from entities owned or controlled by the Government of Iran. JPMorgan Chase charged a fee of EUR 2.50 for this transaction. In addition to the previously disclosed transaction, the Firm identified four other payments made in 2017 in the amounts of $68,567, $66,280, $98,143, and $110,831, that were processed by JPMorgan Chase Bank N.A. and a non-U.S. subsidiary of JPMorgan Chase for a client, a U.S.-based international publishing business, where the payments originated from educational institutions owned or controlled by the Government of Iran. JPMorgan Chase charged total fees of $3,930 for these transactions.
Each of the above payments received into both clients’ accounts, were for the purchase of informational materials, and they were therefore exempt transactions pursuant to 31. C.F.R. 560.210(c), and were all processed in compliance with the Iran-related sanctions regulations.
JPMorgan Chase may in the future engage in similar transactions for its clients to the extent permitted by U.S. law.None.


  2931
Part III






Item 10. Directors, Executive Officers and Corporate Governance.
Executive officers of the registrant
 Age 
Name(at December 31, 2017)2019)Positions and offices
James Dimon6163Chairman of the Board and Chief Executive Officer; he had been President from July 2004 until January 2018.
Ashley Bacon4850Chief Risk Officer since June 2013. He had been Deputy Chief Risk Officer since June 2012, prior to which he had been Global Head of Market Risk for the Investment Bank (now part of Corporate & Investment Bank).
Lori A. Beer(a)
5052
Chief Information Officer since September 2017, prior to which she had been Chief Information Officer of the Corporate & Investment Bank since June 2016. She was Global Head of Banking Technology from January 2014 until May 2016. Prior to joining JPMorgan Chase in 2014, she was Executive Vice President of Specialty Businesses and Information Technology for Anthem, Inc.

Mary Callahan Erdoes5052Chief Executive Officer of Asset & Wealth Management since September 2009, prior to which she had been Chief Executive Officer of Wealth Management.2009.
Stacey Friedman4951General Counsel since January 2016, prior to which she was Deputy General Counsel since July 2015 and General Counsel for the Corporate & Investment Bank since August 2012. Prior to joining JPMorgan Chase in 2012, she was a partner at the law firm of Sullivan & Cromwell LLP.
Marianne Lake4850Chief FinancialExecutive Officer of Consumer Lending and Card Services since January 2013,May 2019, prior to which she had been Chief Financial Officer of Consumer & Community Banking since 2009.January 2013.
Robin Leopold(b)
5355
Head of Human Resources since January 2018, prior to which she had been Head of Human Resources for the Corporate & Investment Bank since 2012. She was a Human Resources Executive serving the Firm’s Corporate functions from February 2010 until August 2012.

Douglas B. Petno5254Chief Executive Officer of Commercial Banking since January 2012,2012.
Jennifer Piepszak49Chief Financial Officer since May 2019, prior to which heshe had been the Chief OperatingExecutive Officer for Card Services since 2017. She was Chief Executive Officer of Commercial Banking.Business Banking from 2015 to 2017.
Daniel E. Pinto(c)
5557Co-President and Co-Chief Operating Officer since January 30, 2018, Chief Executive Officer of the Corporate & Investment Bank since March 2014, and Chief Executive Officer of Europe, the Middle East and Africa since June 2011. He had been Co-Chief Executive Officer of the Corporate & Investment Bank from July 2012 until March 2014, prior to which he had been head or Co-head of the Global Fixed Income business from November 2009 until July 2012.2014.
Peter Scher(a)
  
5658
Head of Corporate Responsibility since 2011 and Chairman of the Mid-Atlantic Region since 2015.


Gordon A. Smith(c)
5961Co-President and Co-Chief Operating Officer since January 30, 2018, and Chief Executive Officer of Consumer & Community Banking since December 2012. He had been Co-Chief Executive Officer from July 2012 until December 2012, prior to which he had been Chief Executive Officer of Card Services from 2007 until 2012 and of the Auto Finance and Student Lending businesses from 2011 until 2012.
Unless otherwise noted, during the five fiscal years ended December 31, 2017,2019, all of JPMorgan Chase’s above-named executive officers have continuously held senior-level positions with JPMorgan Chase. There are no family relationships among the foregoing executive officers. Information to be provided in Items 10, 11, 12, 13 and 14 of the Form 10-K and not otherwise included herein is incorporated by reference to the Firm’s Definitive Proxy Statement for its 20182020 Annual Meeting of Stockholders to be held on May 15, 2018,19, 2020, which will be filed with the SEC within 120 days of the end of the Firm’s fiscal year ended December 31, 2017.2019.
(a)The Chief Information Officer and Head of Corporate Responsibility were both named as executive officers in 2017.
(b)On January 1, 2018, Ms. Leopold was named Head of Human Resources. At that date, Mr. John L. Donnelly, formerly Head of Human Resources, became a Vice Chairman of JPMorgan Chase; he is no longer an executive officer of the Firm.
(c)On January 30, 2018, Mr. Pinto and Mr. Smith were named Co-Presidents and Co-Chief Operating Officers of the Firm.




3032  




Item 11. Executive Compensation.
SeeRefer to Item 10.
 




Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
ForRefer to Item 10 for security ownership of certain beneficial owners and management, see Item 10.management.
The following table sets forth the total number of shares available for issuance under JPMorgan Chase’s employee share-based incentive plans (including shares available for issuance to non-employee directors). The Firm is not authorized to grant share-based incentive awards to non-employees, other than to non-employee directors.
December 31, 2017Number of shares to be issued upon exercise of outstanding options/stock appreciation rights 
Weighted-average
exercise price of
outstanding
options/stock appreciation rights
 Number of shares remaining available for future issuance under stock compensation plans
December 31, 2019Number of shares to be issued upon exercise of outstanding options/stock appreciation rights 
Weighted-average
exercise price of
outstanding
options/stock appreciation rights
 Number of shares remaining available for future issuance under stock incentive plans
Plan category            
Employee share-based incentive plans approved by shareholders17,492,607
(a) 
 $40.76
 66,828,172
(b) 
5,527,331
(a) 
 $41.36
 74,945,900
(b) 
Total17,492,607
 $40.76
 66,828,172
 5,527,331
 $41.36
 74,945,900
 
(a)Does not include restricted stock units or performance stock units granted under the shareholder-approved Long-Term Incentive Plan (“LTIP”), as amended and restated effective May 19, 2015. For15, 2018. Refer to Note 9 for further discussion, see Note 9.discussion.
(b)Represents shares available for future issuance under the shareholder-approved LTIP.
All shares available for future issuance will be issued under the shareholder-approved LTIP. ForRefer to Note 9 for further discussion, see Note 9.discussion.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
SeeRefer to Item 10.
Item 14. Principal Accounting Fees and Services.
SeeRefer to Item 10.


  3133
Part IV






Item 15. Exhibits, Financial Statement Schedules.
1 Financial statements
  The Consolidated Financial Statements, the Notes thereto and the report of the Independent Registered Public Accounting Firm thereon listed in Item 8 are set forth commencing on page 147.143.
   
2 Financial statement schedules
   
3 Exhibits
   
3.1 
Restated Certificate of Incorporation of JPMorgan Chase & Co., effective April 5, 2006 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed April 7, 2006).
   
3.2 
Amendment to the Restated Certificate of Incorporation of JPMorgan Chase & Co., effective June 7, 2013 (incorporated by reference to Appendix F to the Proxy Statement on Schedule 14A of JPMorgan Chase & Co. (File No. 1-5805) filed April 10, 2013).
   
3.3 
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed April 24, 2008).
   
3.4 
Certificate of Designations for 5.45% Non-Cumulative Preferred Stock, Series P (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed February 5, 2013).
3.5
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series Q (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed April 23, 2013)..
   
3.63.5 
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series R (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed July 29, 2013).
   
3.73.6 
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 22, 2014).
3.8
Certificate of Designations for 6.70% Non-Cumulative Preferred Stock, Series T (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 30, 2014).
   
3.93.7 
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series U (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed on March 10, 2014).
   
3.10
3.8 
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series V (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed on June 9, 2014).
   
3.113.9 
Certificate of Designations for 6.30% Non-Cumulative Preferred Stock, Series W (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed on June 23, 2014).
3.12
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series X (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed on September 23, 2014).
3.13
3.10 
Certificate of Designations for 6.125% Non-Cumulative Preferred Stock, Series Y (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed February 17, 2015).
   
3.143.11 
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series Z (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed April 21, 2015).
   
3.153.12 
Certificate of Designations for 6.10% Non-Cumulative Preferred Stock, Series AA (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed June 4, 2015).
   
3.163.13 
Certificate of Designations for 6.15% Non-Cumulative Preferred Stock, Series BB (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed July 29, 2015).
   
3.173.14 
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series CC (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed October 20, 2017).

   
3.15
Certificate of Designations for 5.75% Non-Cumulative Preferred Stock, Series DD (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed September 21, 2018).

3.16
Certificate of Designations for 6.00% Non-Cumulative Preferred Stock, Series EE (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 24, 2019).

3.17
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series FF (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed July 31, 2019).



3234  


3.18 
Certificate of Designations for 4.75% Non-Cumulative Preferred Stock, Series GG (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed November 7, 2019).
3.19
Certificate of Designations for Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series HH (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 23, 2020).
3.20
By-laws of JPMorgan Chase & Co., as amended, effective January 30, 2018 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 30, 2018).

4.1(a) 
Indenture, dated as of October 21, 2010, between JPMorgan Chase & Co. and Deutsche Bank Trust Company Americas, as Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No.1-5805) filed October 21, 2010).
   
4.1(b) 
First Supplemental Indenture, dated as of January 13, 2017, between JPMorgan Chase & Co. and Deutsche Bank Trust Company Americas, as Trustee, to the Indenture, dated as of October 21, 2010 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 13, 2017).
   
4.2(a) 
Subordinated Indenture, dated as of March 14, 2014, between JPMorgan Chase & Co. and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No.1-5805) filed March 14, 2014).
   
4.2(b) 
First Supplemental Indenture, dated as of January 13, 2017, between JPMorgan Chase & Co. and U.S. Bank Trust National Association, as Trustee, to the Subordinated Indenture, dated as of March 14, 2014 (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 13, 2017).
   
4.3(a) 
Indenture, dated as of May 25, 2001, between JPMorgan Chase & Co. and Bankers Trust Company (succeeded by Deutsche Bank Trust Company Americas), as Trustee (incorporated by reference to Exhibit 4(a)(1) to the Registration Statement on Form S-3 of JPMorgan Chase & Co. (File No. 333-52826) filed June 13, 2001).
   
4.3(b) 
Sixth Supplemental Indenture, dated as of January 13, 2017, between JPMorgan Chase & Co. and Bankers Trust Company (succeeded by Deutsche Bank Trust Company Americas), as Trustee, to the Indenture, dated as of May 25, 2001 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed January 13, 2017).
   
4.4 
Indenture, dated as of February 19, 2016, among JPMorgan Chase Financial Company LLC, JPMorgan Chase & Co. and Deutsche Bank Trust Company Americas, as Trustee (incorporated by reference to Exhibit 4(a)(7) to the Registration Statement on Form S-3 of JPMorgan Chase & Co. and JPMorgan Chase Financial Company LLC (File No. 333-209682) filed February 24, 2016).
   
4.5 
Form of Deposit Agreement (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-3 of JPMorgan Chase & Co. (File No. 333-191692) filed October 11, 2013).
   
4.6 
FormDescription of Warrant to purchase common stock (incorporated by reference to Exhibit 4.2 to the Form 8-ASecurities of JPMorgan Chase & Co. (File No. 1-5805) filed December 11, 2009).registered pursuant to Section 12 of the Securities Exchange Act of 1934.(a)(b)

   
Other instruments defining the rights of holders of long-term debt securities of JPMorgan Chase & Co. and its subsidiaries are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. JPMorgan Chase & Co. agrees to furnish copies of these instruments to the SEC upon request.
   
10.1 
Deferred Compensation Plan for Non-Employee Directors of JPMorgan Chase & Co., as amended and restated July 2001 and as of December 31, 2004 (incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2007).(a)
   
10.2 
2005 Deferred Compensation Plan for Non-Employee Directors of JPMorgan Chase & Co., effective as of January 1, 2005 (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2007).(a)
   
10.3 
2005 Deferred Compensation Program of JPMorgan Chase & Co., restated effective as of December 31, 2008 (incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)
   
10.4 
JPMorgan Chase & Co. Amended and Restated Long-Term Incentive Plan, as amended and restated effective May 19, 201515, 2018 (incorporated by reference to Appendix B of the Schedule 14A of JPMorgan Chase & Co. (File No. 1-5805) filed April 8, 2015)5, 2018).(a)

   

35
Part IV


10.5 
Key Executive Performance Plan of JPMorgan Chase & Co., as amended and restated effective January 1, 2014 (incorporated by reference to Appendix G of the Schedule 14A of JPMorgan Chase & Co. (File No. 1-5805) filed April 10, 2013).(a)
   
10.6 
Excess Retirement Plan of JPMorgan Chase & Co., restated and amended as of December 31, 2008, as amended (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2009).(a)
   
10.7 
Executive Retirement Plan of JPMorgan Chase & Co., as amended and restated December 31, 2008 (incorporated by reference to Exhibit 10.9 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)
   

33
Part IV


10.8 
Bank One Corporation Supplemental Savings and Investment Plan, as amended and restated effective December 31, 2008 (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)
   
10.9 
Banc One Corporation Revised and Restated 1995 Stock Incentive Plan, effective April 17, 1995 (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)
10.10
Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for stock appreciation rights, dated as of January 20, 2009 (incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2008).(a)
   
10.1110.10 
Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for Operating Committee member stock appreciation rights, dated as of February 3, 2010 (incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2009).(a)
   
10.1210.11 
Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for stock appreciation rights and restricted stock units, dated as of January 18, 2012 (incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2011).(a)
   
10.1310.12 
Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for stock appreciation rights and restricted stock units for Operating Committee members, dated as of January 17, 2013 (incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2012).(a)
10.14
Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for restricted stock units for Operating Committee members, dated as of January 22, 2014 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of JPMorgan Chase & Co. (File No. 1-5805) for the quarter ended March 31, 2014).(a)
10.15
Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms & Conditions for restricted stock units for Operating Committee members (U.S., E.U. and U.K.), dated as of January 20, 2015 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of JPMorgan Chase & Co. (File No. 1-5805) for the quarter ended March 31, 2015).(a)
   
 
10.1610.13 
Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for restricted stock units for Operating Committee members, dated as of January 19, 2016 (incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2015).(a)
10.17
Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for performance share units for Operating Committee members, dated as of January 19, 2016 (incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2015).(a)
10.18
Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for performance share units and restricted stock units for Operating Committee members (U.S. and U.K.), dated as of January 17, 2017 (incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2016).(a)
   
10.1910.14 
Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for performance share units and restricted stock units for Operating Committee members (U.S. and U.K.), dated as of January 16, 2018.(a)(b)
   
10.2010.15 
Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for restricted stock units for Operating Committee members (U.S. and U.K.), dated as of January 15, 2019.(a)
10.16
Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions of Performance Share Unit Award Operating Committee (U.S.) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed March 15, 2019).(a)
10.17
Form of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions of Performance Share Unit Award Operating Committee (U.K.) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of JPMorgan Chase & Co. (File No. 1-5805) filed March 15, 2019).(a)
10.18
Forms of JPMorgan Chase & Co. Long-Term Incentive Plan Terms and Conditions for restricted stock units and performance share unit awards for Operating Committee members (U.S. and U.K.), dated as of January 21, 2020.(a)(b)
10.19
Form of JPMorgan Chase & Co. Terms and Conditions of Fixed Allowance (UK) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of JPMorgan Chase & Co. (File No. 1-5805) for the quarter ended June 30, 2014).(a)
   
10.2110.20 
Form of JPMorgan Chase & Co. Performance-Based Incentive Compensation Plan, effective as of January 1, 2006, as amended (incorporated by reference to Exhibit 10.27 to the Annual Report on Form 10-K of JPMorgan Chase & Co. (File No. 1-5805) for the year ended December 31, 2009).(a)
   
10.2210.21 
Plea Agreement dated May 20, 2015 betweenEmployee Stock Purchase Plan of JPMorgan Chase & Co., as amended and the U.S. Departmentrestated effective as of JusticeJanuary 1, 2019 (incorporated by reference to Exhibit 99.310.1 to the CurrentQuarterly Report on Form 8-K10-Q of JPMorgan Chase & Co. (File No. 1-5805) filed May 20, 2015)for the quarter ended September 30, 2019).

   

12.1
Computation of ratio of earnings to fixed charges.(b)
36  

12.2
Computation of ratio of earnings to fixed charges and preferred stock dividend requirements.(b)
21 
List of subsidiaries of JPMorgan Chase & Co.(b)
   
22 Annual Report on Form 11-K of The JPMorgan Chase 401(k) Savings Plan for the year ended December 31, 20172019 (to be filed pursuant to Rule 15d-21 under the Securities Exchange Act of 1934).

34

   
23 
Consent of independent registered public accounting firm.(b)
   
31.1 
Certification.(b)
   
31.2 
Certification.(b)
   
32 
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(c)
   
101.INS 
The instance document does not appear in the interactive data file because its XBRL Instance Document.(b)tags are embedded within the Inline XBRL document.(d)
   
101.SCH 
XBRL Taxonomy Extension Schema
Document.(b)
   
101.CAL 
XBRL Taxonomy Extension Calculation Linkbase Document.(b)
   
101.DEF 
XBRL Taxonomy Extension Definition Linkbase Document.(b)
101.LAB 
XBRL Taxonomy Extension Label Linkbase Document.(b)
   
101.PRE 
XBRL Taxonomy Extension Presentation Linkbase Document.(b)
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).

(a)This exhibit is a management contract or compensatory plan or arrangement.
(b)Filed herewith.
(c)Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
(d)Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2017,2019, formatted in XBRL (eXtensible Business Reporting Language) interactive data files: (i) the Consolidated statements of income for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, (ii) the Consolidated statements of comprehensive income for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, (iii) the Consolidated balance sheets as of December 31, 20172019 and 2016,2018, (iv) the Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, (v) the Consolidated statements of cash flows for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, and (vi) the Notes to Consolidated Financial Statements.




















  3537















































page 3638 not used




38
Table of contents






Financial:    
       
38 
Five-Year Summary of Consolidated Financial Highlights
 Audited financial statements:
       
39 
Five-Year Stock Performance
 146 
Management’s Report on Internal Control Over Financial Reporting
       
Management’s discussion and analysis: 147 
Report of Independent Registered Public Accounting Firm
       
40 
Introduction
 148 
Consolidated Financial Statements
       
41 
Executive Overview
 153 
Notes to Consolidated Financial Statements
       
44 
Consolidated Results of Operations
  
       
47 
Consolidated Balance Sheets and Cash Flows Analysis
    
       
50 
Off–Balance Sheet Arrangements and Contractual Cash Obligations
    
       
52 
Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures
 Supplementary information:
       
55 
Business Segment Results
 277 
Selected quarterly financial data (unaudited)
       
75 
Enterprise-wide Risk Management
 278 
Distribution of assets, liabilities and stockholders’ equity; interest rates and interest differentials
      
       
81 
Strategic Risk Management
 283 
Glossary of Terms and Acronyms
       
99 
Credit and Investment Risk Management
    
       
121 
Market Risk Management
    
       
129 
Country Risk Management
    
       
131 
Operational Risk Management
    
       
138 
Critical Accounting Estimates Used by the Firm
    
       
141 
Accounting and Reporting Developments
    
       
145 
Forward-Looking Statements
    
       
Financial:    
       
40 
Five-Year Summary of Consolidated Financial Highlights
 Audited financial statements:
       
41 
Five-Year Stock Performance
 142 
Management’s Report on Internal Control Over Financial Reporting
       
Management’s discussion and analysis: 143 
Report of Independent Registered Public Accounting Firm
       
42 
Introduction
 146 
Consolidated Financial Statements
       
43 
Executive Overview
 151 
Notes to Consolidated Financial Statements
       
48 
Consolidated Results of Operations
  
       
52 
Consolidated Balance Sheets and Cash Flows Analysis
    
       
55 
Off–Balance Sheet Arrangements and Contractual Cash Obligations
    
       
57 
Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures
 Supplementary information:
       
60 
Business Segment Results
 287 
Selected quarterly financial data (unaudited)
       
79 
Firmwide Risk Management
 288–292 
Distribution of assets, liabilities and stockholders’ equity; interest rates and interest differentials
      
       
84 
Strategic Risk Management
 293 
Glossary of Terms and Acronyms
       
85 
Capital Risk Management
    
       
93 
Liquidity Risk Management
    
       
100 
Credit and Investment Risk Management
    
       
119 
Market Risk Management
    
       
127 
Country Risk Management
    
       
129 
Operational Risk Management
    
       
136 
Critical Accounting Estimates Used by the Firm
    
       
139 
Accounting and Reporting Developments
    
       
141 
Forward-Looking Statements
    
       




JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 3739
Financial


FIVE-YEAR SUMMARY OF CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
(unaudited)
As of or for the year ended December 31,
(in millions, except per share, ratio, headcount data and where otherwise noted)
    
20172016 201520142013

As of or for the year ended December 31,
(in millions, except per share, ratio, headcount data and where otherwise noted)
    
201920182017 20162015
Selected income statement data        
Total net revenue $99,624
$95,668
 $93,543
$95,112
$97,367
 $115,627
$109,029
$100,705
 $96,569
$94,440
Total noninterest expense 58,434
55,771
 59,014
61,274
70,467
 65,497
63,394
59,515
 56,672
59,911
Pre-provision profit 41,190
39,897
 34,529
33,838
26,900
 50,130
45,635
41,190
 39,897
34,529
Provision for credit losses 5,290
5,361
 3,827
3,139
225
 5,585
4,871
5,290
 5,361
3,827
Income before income tax expense 35,900
34,536
 30,702
30,699
26,675
 44,545
40,764
35,900
 34,536
30,702
Income tax expense 11,459
9,803
 6,260
8,954
8,789
 8,114
8,290
11,459
 9,803
6,260
Net income(a)
 $24,441
$24,733
 $24,442
$21,745
$17,886
 $36,431
$32,474
$24,441
(f) 
$24,733
$24,442
Earnings per share data        
Net income: Basic $6.35
$6.24
 $6.05
$5.33
$4.38
 $10.75
$9.04
$6.35
 $6.24
$6.05
Diluted 6.31
6.19
 6.00
5.29
4.34
 10.72
9.00
6.31
 6.19
6.00
Average shares: Basic 3,551.6
3,658.8
 3,741.2
3,808.3
3,832.4
 3,221.5
3,396.4
3,551.6
 3,658.8
3,741.2
Diluted 3,576.8
3,690.0
 3,773.6
3,842.3
3,864.9
 3,230.4
3,414.0
3,576.8
 3,690.0
3,773.6
Market and per common share data        
Market capitalization $366,301
$307,295
 $241,899
$232,472
$219,657
 $429,913
$319,780
$366,301
 $307,295
$241,899
Common shares at period-end 3,425.3
3,561.2
 3,663.5
3,714.8
3,756.1
 3,084.0
3,275.8
3,425.3
 3,561.2
3,663.5
Share price:(b)
    
High $108.46
$87.39
 $70.61
$63.49
$58.55
Low 81.64
52.50
 50.07
52.97
44.20
Close 106.94
86.29
 66.03
62.58
58.48
Book value per share 67.04
64.06
 60.46
56.98
53.17
 75.98
70.35
67.04
 64.06
60.46
Tangible book value per share (“TBVPS”)(c)
 53.56
51.44
 48.13
44.60
40.72
Tangible book value per share (“TBVPS”)(a)
 60.98
56.33
53.56
 51.44
48.13
Cash dividends declared per share 2.12
1.88
 1.72
1.58
1.44
 3.40
2.72
2.12
 1.88
1.72
Selected ratios and metrics        
Return on common equity (“ROE”) 10%10% 11%10%9% 15%13%10% 10%11%
Return on tangible common equity (“ROTCE”)(c)
 12
13
 13
13
11
Return on tangible common equity (“ROTCE”)(a)
 19
17
12
 13
13
Return on assets (“ROA”) 0.96
1.00
 0.99
0.89
0.75
 1.33
1.24
0.96
 1.00
0.99
Overhead ratio 59
58
 63
64
72
 57
58
59
 59
63
Loans-to-deposits ratio 64
65
 65
56
57
 61
67
64
 65
65
High quality liquid assets (“HQLA”) (in billions)(d)
 $556
$524
 $496
$600
$522
Common equity tier 1 (“CET1”) capital ratio(e)
 12.2%12.3%
(i) 
11.8%10.2%10.7%
Tier 1 capital ratio(e)
 13.9
14.0
(i) 
13.5
11.6
11.9
Total capital ratio(e)
 15.9
15.5
 15.1
13.1
14.3
Tier 1 leverage ratio(e)
 8.3
8.4
 8.5
7.6
7.1
Liquidity coverage ratio (“LCR”) (average)(b)
 116
113
119
 N/A
N/A
Common equity tier 1 (“CET1”) capital ratio(c)
 12.4
12.0
12.2
 12.3
11.8
Tier 1 capital ratio(c)
 14.1
13.7
13.9
 14.0
13.5
Total capital ratio(c)
 16.0
15.5
15.9
 15.5
15.1
Tier 1 leverage ratio(c)
 7.9
8.1
8.3
 8.4
8.5
Supplementary leverage ratio (“SLR”)(d)
 6.3%6.4%6.5% 6.5%6.5%
Selected balance sheet data (period-end)        
Trading assets $381,844
$372,130
 $343,839
$398,988
$374,664
 $411,103
$413,714
$381,844
 $372,130
$343,839
Securities 249,958
289,059
 290,827
348,004
354,003
Investment securities 398,239
261,828
249,958
 289,059
290,827
Loans 930,697
894,765
 837,299
757,336
738,418
 959,769
984,554
930,697
 894,765
837,299
Core Loans 863,683
806,152
 732,093
628,785
583,751
 916,144
931,856
863,683
 806,152
732,093
Average core loans 829,558
769,385
 670,757
596,823
563,809
 906,606
885,221
829,558
 769,385
670,757
Total assets 2,533,600
2,490,972
 2,351,698
2,572,274
2,414,879
 2,687,379
2,622,532
2,533,600
 2,490,972
2,351,698
Deposits 1,443,982
1,375,179
 1,279,715
1,363,427
1,287,765
 1,562,431
1,470,666
1,443,982
 1,375,179
1,279,715
Long-term debt(f)
 284,080
295,245
 288,651
276,379
267,446
Long-term debt 291,498
282,031
284,080
 295,245
288,651
Common stockholders’ equity 229,625
228,122
 221,505
211,664
199,699
 234,337
230,447
229,625
 228,122
221,505
Total stockholders’ equity 255,693
254,190
 247,573
231,727
210,857
 261,330
256,515
255,693
 254,190
247,573
Headcount 252,539
243,355
 234,598
241,359
251,196
 256,981
256,105
252,539
 243,355
234,598
Credit quality metrics        
Allowance for credit losses $14,672
$14,854
 $14,341
$14,807
$16,969
 $14,314
$14,500
$14,672
 $14,854
$14,341
Allowance for loan losses to total retained loans 1.47%1.55% 1.63%1.90%2.25% 1.39%1.39%1.47% 1.55%1.63%
Allowance for loan losses to retained loans excluding purchased credit-impaired loans(g)
 1.27
1.34
 1.37
1.55
1.80
Allowance for loan losses to retained loans excluding purchased credit-impaired loans(e)
 1.31
1.23
1.27
 1.34
1.37
Nonperforming assets $6,426
$7,535
 $7,034
$7,967
$9,706
 $4,497
$5,190
$6,426
 $7,535
$7,034
Net charge-offs(h)
 5,387
4,692
 4,086
4,759
5,802
Net charge-off rate(h)
 0.60%0.54% 0.52%0.65%0.81%
Net charge-offs 5,629
4,856
5,387
 4,692
4,086
Net charge-off rate 0.60%0.52%0.60%
(g) 
0.54%0.52%
(a)OnTBVPS and ROTCE are each non-GAAP financial measures. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 57–59 for a further discussion of these measures.
(b)For the years ended December 22,31, 2019, 2018 and 2017, the percentage represents the Firm’s reported average LCR for the three months ended December 31, 2019, 2018 and 2017, which became effective April 1, 2017. Refer to Liquidity Risk Management on pages 93–98 for additional information on the Firm’s LCR.
(c)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, 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.
(d)The Basel III rule for the SLR became fully phased-in effective January 1, 2018. Prior to this date, the SLR was calculated under the transitional rules. Refer to Capital Risk Management on pages 85–92 for additional information on these measures.
(e)This ratio is a non-GAAP financial measure as it excludes the impact of residential real estate purchased credit-impaired (“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 116–117 for further discussion of this measure.
(f)In December 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The Firm’s results for the year ended December 31, 2017 included a $2.4 billion decrease to net income as a result of the enactment of the TCJA. ForRefer to Note 25 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, the balance represents the average of quarterly reported results per the U.S. LCR public disclosure requirements effective April 1, 2017. Prior periods represent period-end balances under the final U.S. rule (“U.S. LCR”) for December 31, 2016 and 2015, and the Firm’s estimated amount for December 31, 2014 prior to the effective date of the final rule, and under the Basel III liquidity coverage ratio (“Basel III LCR”) for December 31, 2013. For additional information, see LCR and HQLA on page 93.    
(e)Ratios presented are calculated under the Basel III Transitional rules, which became effective on January 1, 2014, and for the capital ratios, represent the Collins Floor. Prior to 2014, the ratios were calculated under the Basel I rules. See Capital Risk Management on pages 82–91 for additional information on Basel III.
(f)Included unsecured long-term debt of $218.8 billion, $212.6 billion, $211.8 billion, $207.0 billion and $198.9 billion respectively, as of December 31, of each year presented.TCJA.
(g)Excluded the impact of residential real estate purchased credit-impaired (“PCI”) loans, a non-GAAP financial measure. For further discussion of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 52–54, and the Allowance for credit losses on pages 117–119.
(h)Excluding net charge-offs of $467 million related to the student loan portfolio sale, the net charge-off rate for the year ended December 31, 2017 would have been 0.55%.
(i)The prior period ratios have been revised to conform with the current period presentation.


3840 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




FIVE-YEAR STOCK PERFORMANCE
The following table and graph compare the five-year cumulative total return for JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) common stock with the cumulative return of the S&P 500 Index, the KBW Bank Index and the S&P FinancialFinancials Index. The S&P 500 Index is a commonly referenced equity benchmark in the United States of America (“U.S.”), consisting of leading companies from different economic sectors. The KBW Bank Index seeks to reflect the performance of banks and thrifts that are publicly traded in the U.S. and is composed of leading national money center and regional banks and thrifts. The S&P FinancialFinancials Index is an index of financial companies, all of which are components of the S&P 500. The Firm is a component of all three industry indices.
The following table and graph assume simultaneous investments of $100 on December 31, 2012,2014, in JPMorgan Chase common stock and in each of the above indices. The comparison assumes that all dividends arewere reinvested.
December 31,
(in dollars)
2012
 2013
 2014
 2015
 2016
 2017
2014
 2015
 2016
 2017
 2018
 2019
JPMorgan Chase$100.00
 $136.71
 $150.22
 $162.79
 $219.06
 $277.62
$100.00
 $108.37
 $145.82
 $184.81
 $172.52
 $254.07
KBW Bank Index100.00
 137.76
 150.66
 151.39
 194.55
 230.72
100.00
 100.48
 129.13
 153.14
 126.02
 171.54
S&P Financial Index100.00
 135.59
 156.17
 153.72
 188.69
 230.47
S&P Financials Index100.00
 98.44
 120.38
 147.58
 128.33
 169.52
S&P 500 Index100.00
 132.37
 150.48
 152.55
 170.78
 208.05
100.00
 101.37
 113.49
 138.26
 132.19
 173.80


December 31,
(in dollars)
chart-2a52f1787afa537fa3a.jpg
 


JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 3941
Management’s discussion and analysis


This section of JPMorgan Chase’s Annual Report for the year ended December 31, 2017 (“Annual Report”), providesThe following is Management’s discussion and analysis of the financial condition and results of operations (“MD&A”) of JPMorgan Chase for the year ended December 31, 2019. The MD&A is included in both JPMorgan Chase’s Annual Report for the year ended December 31, 2019 (“Annual Report”) and its Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”). SeeRefer to the Glossary of Termsterms and Acronymsacronyms on pages 283-289293–299 for definitions of terms and acronyms used throughout thisthe Annual Report. Report and the 2019 Form 10-K.

The MD&A included in this Annual Report contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. SuchThese statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. TheseRefer to Forward-looking Statements on page 141) and Part 1, Item 1A: Risk factors in the 2019 Form 10-K on pages 6–28 for a discussion of certain of those risks and uncertainties and the factors that could cause the Firm’sJPMorgan Chase’s actual results to differ materially frombecause of those set forth in such forward-looking statements. Certain of such risks and uncertainties are described herein (see Forward-looking Statements on page 145) and in JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”), in Part I, Item 1A: Risk factors; reference is hereby made to both.uncertainties.


INTRODUCTION
JPMorgan Chase & Co. (NYSE: JPM), 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 United States of America (“U.S.”), with operations worldwide; the FirmJPMorgan Chase had $2.5$2.7 trillion in assets and $255.7$261.3 billion in stockholders’ equity as ofDecember 31, 2017.2019. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S. and globally many of the world’s most prominent corporate, institutional and government clients.
JPMorgan Chase’s principal bank subsidiaries aresubsidiary is JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank, N.A.”), a national banking association with U.S. branches in 2338 states and Chase Bank USA, National Association (“Chase Bank USA, N.A.”), a national banking association that is the Firm’s principal credit card-issuing bank.Washington, D.C. as of December 31, 2019. JPMorgan Chase’s principal nonbank subsidiary is J.P. Morgan Securities LLC (“JPMorganJ.P. Morgan Securities”), a U.S. broker-dealer. The bank and non-bank subsidiaries of JPMorgan Chase operate nationally as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. The Firm’s principal operating subsidiary inoutside the U.K.U.S. is J.P. Morgan Securities plc, a U.K.-based subsidiary of JPMorgan Chase Bank, N.A.
 
For management reporting purposes, the Firm’s activities are organized into four major reportable business segments, as well as a Corporate segment. The Firm’s consumer business is the Consumer & Community Banking (“CCB”) segment. The Firm’s wholesale business segments are Corporate & Investment Bank (“CIB”), Commercial Banking (“CB”), and Asset & Wealth Management (“AWM”). ForRefer to Business Segment Results on pages 60–78, and Note 32 for a description of the Firm’s business segments, and the products and services they provide to their respective client bases, refer to Business Segment Results on pages 55–74, and Note 31.bases.




4042 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




EXECUTIVE OVERVIEW
This executive overview of the MD&A highlights selected information and maydoes not contain all of the information that is important to readers of this Annual Report.2019 Form 10-K. For a complete description of the trends and uncertainties, as well as the risks and critical accounting estimates affecting the Firm and its various lines of business (“LOBs”), this Annual Report2019 Form 10-K should be read in its entirety.
Financial performance of JPMorgan ChaseFinancial performance of JPMorgan Chase  Financial performance of JPMorgan Chase  
Year ended December 31,
(in millions, except per share data and ratios)
    
20172016 Change20192018 Change
Selected income statement data      
Total net revenue$99,624
$95,668
 4 %$115,627
$109,029
 6%
Total noninterest expense58,434
55,771
 5
65,497
63,394
 3
Pre-provision profit41,190
39,897
 3
50,130
45,635
 10
Provision for credit losses5,290
5,361
 (1)5,585
4,871
 15
Net income24,441
24,733
 (1)36,431
32,474
 12
Diluted earnings per share6.31
6.19
 2
10.72
9.00
 19
Selected ratios and metrics      
Return on common equity10%10%  15%13%  
Return on tangible common equity12
13
  19
17
  
Book value per share$67.04
$64.06
 5
$75.98
$70.35
 8
Tangible book value per share53.56
51.44
 4
60.98
56.33
 8
Capital ratios(a)
      
CET112.2%12.3%
(b) 
 12.4%12.0%  
Tier 1 capital13.9
14.0
(b) 
 14.1
13.7
  
Total capital15.9
15.5
  16.0
15.5
  
(a)Ratios presented are calculated under theThe Basel III Transitionalcapital 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, were the same on a fully phased-in and represent the Collins Floor. Seetransitional basis. Refer to Capital Risk Management on pages 82–9185–92 for additional information on Basel III.
(b)The prior period ratios have been revised to conform with the current period presentation.these measures.
Comparisons noted in the sections below are calculated for the full year of 20172019 versus the full year of 2016,2018, unless otherwise specified.
Summary of 2017 resultsFirmwide overview
JPMorgan Chase reported strong results for full year 20172019, with record revenue, net income and EPS of $24.4$115.6 billion, or $6.31$36.4 billion and $10.72 per share, on net revenue of $99.6 billion.respectively. The Firm reported ROE of 10%15% and ROTCE of 12%19%. The Firm’s results included a $2.4 billion decrease to net income as a result of the enactment of the Tax Cuts and Jobs Act (“TCJA”), 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. For additional information related to the impact of the TCJA, refer to Note 24.
Net income decreased 1% driven by higher noninterest expense and income tax expense, predominantly offset by higher net interest income.was $36.4 billion, up 12%.
Total net revenue increased by6%. Net interest income was $57.2 billion, up 4%, driven by continued balance sheet growth and mix as well as higher net interest income and investment banking fees,average short-term rates, partially
offset by lower Fixed Income Markets and Home Lending noninterest revenue.
higher deposit pay rates. Noninterest expenserevenue was $58.4 billion, up 5%8%, driven by growth across CCB as well as higher compensationMarkets revenue in CIB. Noninterest revenue included approximately $500 million of gains on the sales of certain mortgage loans in Home Lending.

Noninterest expense auto lease depreciation expense andwas $65.5 billion, up 3%, driven by continued investments across the businesses.businesses including employees, technology, real estate, and marketing, as well as higher volume- and revenue-related expenses, including depreciation expense on auto lease assets, partially offset by lower FDIC charges.
Income tax expense included $1.1 billion of tax benefits related to the resolution of certain tax audits.
The provision for credit losses was $5.3$5.6 billion, relatively flat compared with the prior year,up $714 million, reflecting a decreaseincreases in both wholesale and consumer. The increase in the wholesale provision driven byreflects additions to the allowance for credit quality improvementslosses in the current year on select client downgrades. The prior year reflected a benefit related to a single name in the Oil & Gas Natural Gas Pipelinesportfolio and Metals & Mining portfolios, offset by an increase in the consumer provision.higher recoveries. The increase in the consumer provision was driven byreflects higher net charge-offs and a higher additionadditions to the allowance for loan losses in Card, predominantly offset by a higher reduction in the credit card portfolio, and the impact of the sale of the studentallowance for loan portfolio.losses in Home Lending. The prior year also benefited from larger recoveries in Home Lending on loan sales.
The total allowance for credit losses was $14.7$14.3 billion at December 31, 2017,2019, and the Firm had a loan loss coverage ratio of 1.39%, flat compared with the prior year; excluding the PCI portfolio, of 1.27%,the equivalent ratio was 1.31% compared with 1.34%1.23% in the prior year. The Firm’s nonperforming assets totaled $6.4$4.5 billion at December 31, 2019, a decrease from $5.2 billion in the prior-year level of $7.5 billion.prior year, primarily reflecting paydowns in the wholesale portfolio and improved credit performance in the consumer portfolio.
Firmwide average coretotal loans increased 8%.of $955 billion were up 1%, or up 3% excluding the impact of certain loan sales in Home Lending.
Selected capital-related metrics
The Firm’s Basel III Fully Phased-In CET1 capital was $183$188 billion, and the Standardized and Advanced CET1 ratios were 12.1%12.4% and 12.7%13.4%, respectively.
The Firm’s Fully Phased-In supplementary leverage ratio (“SLR”)SLR was 6.5%6.3%.
The Firm continued to grow tangible book value per share (“TBVPS”), ending 20172019 at $53.56,$60.98, up 4%8%.
ROTCE and TBVPS are non-GAAP financial measures. Core loans and each of the Fully Phased-In capital and leverage measures are considered key performance measures. For a further discussion of each 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, and Capital Risk Management on pages 82–91.85–92 for a further discussion of each of these measures.


JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 4143
Management’s discussion and analysis


Lines of businessBusiness segment highlights
Selected business metrics for each of the Firm’s four lines of businessLOBs are presented below for the full year of 2017.2019.
CCB
ROE 17%
 31%
 
•
Record revenue of $55.9 billion, up 7%; record net income of $16.6 billion, up 12%
•
Average coreloans down 3%; Home Lending loans down 9% impacted by loan sales; Card loans up 9%7%
•
Client investment assets up 27%; average deposits of $640 billion, up 9%3%
•
Client investment assets of $273 billion, up 17%
•
Credit card sales volume up 14%10% and merchant processing volume up 12%11%
CIB
ROE
 14%
 
•
Record revenue of $38.3 billion, up 5%; record net income of $11.9 billion, up 1%
•
Maintained #1 ranking for Global Investment Banking fees with 8.1%9.0% wallet share, up 40 basis points (“bps”)
•
Investment Banking revenue of $7.2 billion, up 12%; Treasury Services3%
•
Total Markets revenue of $20.9 billion, up 15%; and Securities Services revenue up 9%7%
CB
ROE
 17%
 
•
Record Investment Banking revenue of $8.6$2.7 billion, up 15%; record net income of $3.5 billion, up 33%10%
•
Average loan balancesloans and deposits each up 1%
•
Strong credit quality with NCOs of $198 billion, up 10%8 bps
AWM
ROE 25%
 26%
 
•
Record revenue of $12.9$14.3 billion, up 7%; record net income of $2.3 billion, up 4%2%
•
Average loan balances of $123 billion,loans up 9%8%; average deposits up 2%
•
Record assetsAssets under management (“AUM”) of $2.0$2.4 trillion, up 15%19%
ForRefer to the Business Segment Results on pages 60–61 for a detailed discussion of results by line of business refer to the Business Segment Results on pages 55–56.segment.
Credit provided and capital raised
JPMorgan Chase continues to support consumers, businesses and communities around the globe. The Firm provided new and renewed credit and raised capital of $2.3 trillion for wholesale and consumer clients during 2017:2019, consisting of:
$258 billion of credit for consumers
$22 billion of credit for U.S. small businesses
$817 billion of credit for corporations
$1.1 trillion of capital raised for corporate clients and non-U.S. government entities
$92 billion of credit and capital raised for U.S. government and nonprofit entities, including states, municipalities, hospitals and universities.
$2.3 trillionTotal credit provided and capital raised
$262 billionCredit for consumers
$33 billionCredit for U.S. small businesses
$860 billionCredit for corporations
$1.0 trillionCapital raised for corporate clients and non-U.S. government entities
$79 billion
Credit and capital raised for nonprofit and U.S. government entities(a)
Recent events
On February 21, 2018, the Firm announced its intent to pursue building a new 2.5 million square foot headquarters at its 270 Park Avenue location in New York City. The project will be subject to various approvals, and the Firm will work closely with the New York City Council and State officials to complete the project in a manner that benefits all constituencies. Once the project’s approvals are granted, redevelopment and construction are expected to begin in 2019 and take approximately five years to complete. The project is not expected to have a material impact on the company’s financial results.
On January 30, 2018, Amazon, Berkshire Hathaway, and JPMorgan Chase announced that they are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs. Through a new independent company, the initial focus will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.
On January 29, 2018, JPMorgan Chase announced that Daniel Pinto, Chief Executive Officer (“CEO”) of CIB, and Gordon Smith, CEO of CCB, have been appointed Co-Presidents and Co-Chief Operating Officers (“COO”) of the Firm, effective January 30, 2018, and will continue to report to Jamie Dimon, Chairman and CEO. In addition to their current roles, Mr. Pinto and Mr. Smith will work closely with Mr. Dimon to help drive critical Firmwide opportunities. Responsibilities for the rest of the Firm’s Operating Committee will remain unchanged, with its members continuing to report to Mr. Dimon.
On January 23, 2018, the Firm announced a $20 billion, five-year comprehensive investment to help its employees and support job and economic growth in the U.S. Through these new investments, the Firm plans to develop hundreds of new branches in several new U.S. markets, increase wages and benefits for hourly U.S. employees, make increased small business and mortgage lending commitments, add approximately 4,000 jobs throughout the country, and increase philanthropic investments.
On December 22, 2017, the TCJA was signed into law. The Firm’s results 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.
During the second half of 2017, natural disasters caused significant disruptions to individuals and businesses, and damage to homes and communities in several regions where the Firm conducts business. The Firm continues to provide assistance to customers, clients, communities and employees who have been affected by these disasters. These events did not have a material impact on the Firm’s 2017 financial results.
(a)Includes states, municipalities, hospitals and universities.


4244 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




2018Recent events
On February 25, 2020, JPMorgan Chase announced additional steps in its initiatives to address climate change and further promote sustainable development. This year, JPMorgan Chase commits to facilitate $200 billion to advance the objectives of the United Nations Sustainable Development Goals (SDGs), including $50 billion toward green initiatives.  The new commitment is intended to address a broader set of challenges in the developing world and developed countries where social and economic development gaps persist. As part of this commitment, the Firm had previously announced the creation of the J.P. Morgan Development Finance Institution to expand its financing activities for developing countries.
On December 18, 2019, JPMorgan Chase announced that the China Securities Regulatory Commission has approved the application of J.P. Morgan Securities (China) Company Limited for a Securities and Futures Business Permit. This approval allows J.P. Morgan’s majority-owned securities company in China to commence operations.
On December 11, 2019, JPMorgan Chase announced certain organizational changes to its U.S. Wealth Management business. The Firm’s advisors across Chase Wealth Management and J.P. Morgan Securities will become one business unit – U.S. Wealth Management.
2020 outlook
These current expectations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. These risks and uncertainties could cause the Firm’s actual resultsRefer to differ materially from those set forth in such forward-looking statements. See Forward-Looking Statements on page 145141, and the Risk Factors section on pages 8–26.6–28 of the Firm’s 2019 Form 10-K, for a further discussion of certain of those risks and uncertainties and the other factors that could cause JPMorgan Chase’s actual results to differ materially because of those risks and uncertainties. There is no assurance that actual results for the full year of 2018in 2019 will be in line with the outlook set forth below, and the Firm does not undertake to update any forward-looking statements.
JPMorgan Chase’s outlook for 20182020 should be viewed against the backdrop of the global and U.S. economies, financial markets activity, the geopolitical environment, the competitive environment, client and customer activity levels, and regulatory and legislative developments in the U.S. and other countries where the Firm does business. Each of these interrelated factors will affect the performance of the Firm and its lines of business.LOBs. The Firm expects that it will continue to make appropriate adjustments to its businesses and operations in response to ongoing developments in the legal,business, economic, regulatory, business and economiclegal environments in which it operates.
Firmwide
As a result of the change in tax rate due to the TCJA, management expects a reduction in tax-equivalent adjustments, decreasing both revenue and income tax expense, on a managed basis, by approximately $1.2 billion on an annual run-rate basis.
Management expects the new revenue recognition accounting standard to increase both noninterest revenue and expense for full-year 2018 by approximately $1.2 billion, with most of the impact in the AWM business. For additional information on the new accounting standard, see Accounting and Reporting Developments on page 141.
2020
Management expects first-quarter 2018full-year 2020 net interest income, on a managed basis, to be down modestly compared with the fourth quarter of 2017, driven byapproximately $57 billion, market dependent, reflecting the impact of the TCJAlower interest rates offset by balance sheet growth and a lower day count. For full-year 2018, management expects net interest income, on a managed basis, to be in the $54 to $55 billion range, market dependent, and assuming expected core loan growth. Management expects Firmwide average core loan growth to be in the 6% to 7% range in 2018, excluding CIB loans.mix.
Excluding the impact of the new revenue recognition accounting standard, management expects Firmwide noninterest revenue for full-year 2018, on a managed basis, to be up approximately 7%, depending on market conditions.

The Firm continues to take a disciplined approach to managing its expenses, while investing for growth and innovation. As a result, management expects Firmwide adjusted expense for the full-year 20182020 to be less than $62 billion, excludingapproximately $67 billion.
The Firm continues to experience charge-off rates at very low levels, reflecting favorable credit trends across the impact of the new revenue recognition accounting standard.
consumer and wholesale portfolios. Management estimates theexpects full-year 2018 effective income tax rate2020 net charge-offs to be in the 19% to 20% range, depending upon several factors, including the geographic mix of taxable incomejust over $6 billion, an increase from prior year, driven by Card on growth and refinements to estimates of the impacts of the TCJA.
Management expects net charge-off rates to remain relatively flat across the wholesale and consumer portfolios, with the exception of Card.
CCBmix.
Management expects the full-year 2018 Card Services net revenue2020 effective tax rate, on a reported basis, to be approximately 11.25%.20%, and approximately 5 to 7 percentage points higher on a managed basis.
In Card, managementFirst-quarter 2020
Management expects thefirst-quarter 2020 net charge-off rateinterest income, on a managed basis, to increase tobe approximately 3.25% in 2018.$14.2 billion, market dependent.
CIB
Markets revenue inFirmwide adjusted expense for the first-quarter 20182020 is expected to be up by midapproximately $17 billion.
The effective tax rate, on a reported basis, for the first quarter of 2020 is expected to high single digit percentage pointsbe approximately 17% largely as a result of tax benefits related to the vesting of employee share-based awards.
Markets revenue for the first-quarter of 2020 is expected to be higher when compared with the prior-year quarter; actual Markets revenue results will continue to be affectedquarter by mid-teens percentage points, depending on market conditions, which can be volatile.

conditions.


JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 4345
Management’s discussion and analysis


Business Developments
Departure of the U.K. from the EU
The U.K.’s departure from the EU, which is commonly referred to as “Brexit,” occurred on January 31, 2020.
Following this departure, the U.K. has entered a transition period that is scheduled to expire on December 31, 2020. The purpose of the transition period is to enable the U.K. and the EU to negotiate the terms of their future relationship. The transition period can be extended, but both sides need to agree to extend it by July 1, 2020. It is not clear whether the terms of the future relationship can be agreed before the end of 2020, and so significant uncertainty remains about the relationship between the U.K. and the EU after the end of the transition period.
The Firm has a long-standing presence in the U.K., which currently serves as the regional headquarters of the Firm’s operations in over 30 countries across Europe, the Middle East, and Africa (“EMEA”). In the region, the Firm serves clients and customers across its business segments. The Firm has approximately 17,000 employees in the U.K., of which approximately two-thirds are in London, with operational and technology support centers in locations such as Bournemouth, Glasgow and Edinburgh.
In light of the ongoing uncertainty, the Firm continues to execute the relevant elements of its Firmwide Brexit Implementation program with the objective of being able to continue delivering the Firm’s capabilities to its EU clients. The program covers strategic implementation across all impacted businesses and functions and includes an ongoing assessment of implementation risks including political, legal and regulatory risks and plans for addressing and mitigating those risks under any scenario, including where the U.K. and the EU fail to reach an agreement on their future relationship by the end of 2020 and the transition period is not extended.
The principal operational risks associated with Brexit continue to be the potential for disruption caused by insufficient preparations by individual market participants or in the overall market ecosystem, and risks related to potential disruptions of connectivity among market participants. There continues to be regulatory and legal uncertainty with respect to various matters including contract continuity, access by market participants to liquidity in certain products, such as products subject to potentially conflicting U.K. and EU regulatory requirements in relation to eligible trading venues, including certain cross-border derivative contracts and equities that are listed on both U.K. and EU exchanges, as well as ongoing access to central banks. It is uncertain as to whether any of these issues will be resolved in the negotiations, or whether any of the previous temporary solutions will be available at the end of the transition period to mitigate these risks.
The Firm is focused on the following key areas to ensure continuation of service to its EU clients: regulatory and legal entity readiness; client readiness; and business and operational readiness. Following are the significant updates.
Regulatory and legal entity readiness
The Firm’s legal entities in Germany, Luxembourg and Ireland are now prepared and licensed to provide services to the Firm’s EU clients, including a branch network covering locations such as Paris, Madrid and Milan.
Client readiness
The agreements covering a significant proportion of the Firm’s EU client activity have been re-documented to other EU legal entities to help facilitate continuation of service. The Firm continues to actively engage with clients that have not completed re-documentation to ensure preparedness both in terms of documentation and any operational changes that may be required. The Firm may be negatively impacted by any operational disruption stemming from delays of or lapses in the readiness of other market participants or market infrastructures.
Business and operational readiness
The Firm relocated certain employees during 2019 and added specific employees to certain EU legal entities, where appropriate, to support the level of client activity that has been migrated. The Firm’s longer term staffing plan will develop in accordance with the increasing level of activity in the EU entities and alongside the future legal and regulatory framework between the U.K. and EU. The Firm continues to closely monitor legislative developments, and its implementation plan allows for flexibility given the continued uncertainties.

46JPMorgan Chase & Co./2019 Form 10-K


IBOR transition
As a result of the expected discontinuation of certain unsecured benchmark interest rates, including the London Interbank Offered Rate (“LIBOR”) and other Interbank Offered Rates (“IBORs”) regulators and market participants in various jurisdictions have been working to identify alternative reference rates that are compliant with the International Organization of Securities Commission’s standards for transaction-based benchmarks. In the U.S., the Alternative Reference Rates Committee (the “ARRC”), a group of market and official sector participants, identified the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative benchmark rate. Other alternative reference rates have been recommended in other jurisdictions. Industry sources estimate that IBORs are referenced in approximately $400 trillion of wholesale and consumer transactions globally spanning a broad range of financial products and contracts. The Firm has a significant number of IBOR-referenced contracts, including derivatives, bilateral and syndicated loans, securities, and debt and preferred stock issuances.
To manage the risks associated with the transition from IBORs, JPMorgan Chase established a Firmwide LIBOR Transition program in early 2018 that is overseen by the Firmwide CFO and the CEO of the CIB. When assessing risks associated with IBOR transition, the program monitors a variety of scenarios, including disorderly transition, measured/regulated transition considering volatility along the SOFR curve and clearinghouse plans to change their discount rates to alternative reference rates, and IBOR in continuity beyond December 2021.
The Firm continues to monitor and facilitate the transition by clients from IBOR-referencing products to products referencing alternative reference rates. The Firm’s transition efforts to date include:
ongoing implementation of new fallback provisions that provide for the determination of replacement rates for LIBOR-linked syndicated loans, securitizations, floating rate notes and bi-lateral business loans based on the recommendations of the ARRC, and introducing SOFR as a replacement benchmark rate for certain of these products;
planning to adopt further fallback provisions recommended by the ARRC, including for residential ARMs, in conjunction with the adoption of these provisions by market participants; and
completing its first bilateral SOFR loan in the U.S. and executing its first interest rate swap linked to the Euro short-term rate in Europe.
Market participants are continuing to work closely with the public sector as part of National Working Groups (“NWGs”) towards the common goal of facilitating an orderly transition from IBORs. Current NWG efforts include the continued development of cash and derivative markets referencing alternative reference rates, as well as the development of industry consensus for fallback language that would determine the replacement rates to use in various IBOR-indexed contracts when a particular IBOR ceases to be produced. The Firm is monitoring and providing input in the development of the IBOR Fallbacks Protocol of the International Swaps and Derivatives Association (“ISDA”), which is expected to be published in 2020, and is encouraging its clients to actively participate in ISDA and industry consultations in order to ensure the broadest possible industry engagement in and understanding of IBOR transition. The Firm continues to monitor the development of alternative reference rates in other jurisdictions with NWGs.
The Financial Accounting Standards Board (“FASB”) has confirmed that it will issue an accounting standards update in 2020 providing optional expedients and exceptions for applying generally accepted accounting principles to contracts and hedge relationships affected by benchmark reform. The International Accounting Standards Board (“IASB”) has made amendments to IFRS hedge accounting requirements that provide relief to market participants on the accounting treatment of IBOR-linked products in the period leading up to the expected cessation of IBORs and is also considering further relief for the accounting impacts upon transition to an alternative reference rate.
The U.S. Treasury Department has issued proposed regulations that are intended to avoid adverse tax consequences in connection with the transition from IBORs. Under the proposed regulations, amendments to contracts meeting certain requirements will not be treated as taxable for U.S. federal income tax purposes.
The Firm continues to monitor the transition relief being considered by the FASB, IASB and U.S. Treasury Department regarding accounting and tax implications of reference rate reform. The Firm also continues to develop and implement plans to appropriately mitigate the risks associated with IBOR discontinuation as identified alternative reference rates develop and liquidity in these rates increases. The Firm will continue to engage with regulators and clients as the transition from IBORs progresses.

JPMorgan Chase & Co./2019 Form 10-K47
Management’s discussion and analysis

CONSOLIDATED RESULTS OF OPERATIONS
This section provides a comparative discussion of JPMorgan Chase’s Consolidated Results of Operations on a reported basis for the three-yeartwo-year period ended December 31, 2017,2019, unless otherwise specified. Refer to Consolidated Results of Operations on pages 48-51 of the Firm’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) for a discussion of the 2018 versus 2017 results. Factors that relate primarily to a single business segment are discussed in more detail within that business segment. ForRefer to pages 136–138 for a discussion of the Critical Accounting Estimates Used by the Firm that affect the Consolidated Results of Operations, see pages 138–140.Operations.
Effective January 1, 2018, the Firm adopted several accounting standards. Certain of the accounting standards were applied retrospectively and, accordingly, prior period amounts were revised. Refer to Note 1 for additional information.
Revenue      
Year ended December 31,
(in millions)
      
2017
 2016
 2015
2019
2018
2017
Investment banking fees$7,248
 $6,448
 $6,751
$7,501
$7,550
$7,412
Principal transactions11,347
 11,566
 10,408
14,018
12,059
11,347
Lending- and deposit-related fees5,933
 5,774
 5,694
6,369
6,052
5,933
Asset management, administration and commissions15,377
 14,591
 15,509
17,165
17,118
16,287
Securities gains/(losses)(66) 141
 202
Investment securities gains/(losses)258
(395)(66)
Mortgage fees and related income1,616
 2,491
 2,513
2,036
1,254
1,616
Card income4,433
 4,779
 5,924
5,304
4,989
4,433
Other income(a)
3,639
 3,795
 3,032
5,731
5,343
3,646
Noninterest revenue49,527
 49,585
 50,033
58,382
53,970
50,608
Net interest income50,097
 46,083
 43,510
57,245
55,059
50,097
Total net revenue$99,624
 $95,668
 $93,543
$115,627
$109,029
$100,705
(a)Included operating lease income of $3.6$5.5 billion, $2.7$4.5 billion and $2.1$3.6 billion for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
20172019 compared with 20162018
Investment banking fees increased were relatively flat, reflecting higher debt and equity underwriting fees in CIB. The increase inCIB:
higher debt underwriting fees wasdriven by wallet share gains and increased activity in investment-grade and high-yield bonds,
offset by
lower advisory fees driven by a higher share of fees and an overall increasedecline in industry-wide fees;fees despite wallet share gains.
Refer to CIB segment results on pages 66-70 and the increaseNote 6 for additional information.
Principal transactions revenue increased reflecting:
higher revenue in equity underwriting fees was driven by growth in industry-wide issuance, includingCIB, which included a stronggain on the initial public offering (“IPO”) market. For additional information, see CIB segment results on pages 62–66 and Note 6.of Tradeweb in the second quarter of 2019. Excluding this gain, the increase in CIB’s revenue was driven by:
Principal transactions revenue decreased compared with a strong prior year in CIB, primarily reflecting:
lower Fixed Income-related revenue driven by sustained low volatility and tighter credit spreads
partially offset by
higher Equity-related revenue primarily in Prime Services, and
higher Lending-related revenue reflecting lower fair value losses on hedges of accrual loans.
For additional information, see CIB and Corporate segment results on pages 62–66 and pages 73–74, respectively, and Note 6.
Asset management, administration and commissions revenue increased as a result of higher asset management fees in AWM and CCB, and higher asset-based fees in CIB, both driven by higher market levels. For additional information, see AWM, CCB and CIB segment results on pages 70–72, pages 57-61 and pages 62–66, respectively, and Note 6.
 
For information on lending- and deposit-related fees, see the segment results for CCB on pages 57-61, CIB on pages 62–66, and CB on pages 67–69 and Note 6; on securities gains, see the Corporate segment discussion on pages 73–74.
Mortgage fees and related income decreased driven by lower MSR risk management results, lower net production revenue on lower margins and volumes, and lower servicing revenue on lower average third-party loans serviced. For further information, see CCB segment results on pages 57-61, Note 6 and 15.
Card income decreased predominantly driven by higher credit card new account origination costs, largely offset
by higher card-related fees, primarily annual fees. For further information, see CCB segment results on pages 57-61 .
Other income decreased primarily due to:
lower other income in CIB largely driven by a $520 million impact related to the enactment of the TCJA, which reduced the value of certain of CIB’s tax-oriented investments, and
the absence in the current year of gains from
–higher revenue in Fixed Income Markets, reflecting an overall strong performance, primarily in agency mortgage trading within Securitized Products; the saleincrease in 2019 also reflected the impact of Visa Europe interestschallenging market conditions in CCB,
–Credit in the redemptionfourth quarter of guaranteed capital debt securities (“trust preferred securities”),2018; and
–the disposalfavorable impact of an assettighter funding spreads on derivatives in AWMCredit Adjustments & Other.
The net increase in CIB was partially offset by
lower revenue in AWM related to hedges on certain investments. The impact of these hedges was more than offset by higher operating leasevaluation gains on the related investments reflected in other income
Principal transactions revenue in Corporate was relatively flat, reflecting the combined impact of losses on cash deployment transactions in Treasury and CIO, which were more than offset by the related net interest income earned on those transactions, and lower net markdowns on certain legacy private equity investments.
Principal transactions revenue in CIB may in certain cases have offsets across other revenue lines, including net interest income. The Firm assesses its CIB Markets business performance on a total revenue basis.
Refer to CIB, AWM and Corporate segment results on pages 66-70, pages 74–76 and pages 77–78, respectively, and Note 6 for additional information.
Lending- and deposit-related fees increased primarily due to higher deposit-related fees in CCB, reflecting growth in auto operating lease volume in CCB,customer accounts and
a legal benefit of $645 million recorded transactions, and higher lending-related commitment fees in the second quarter of 2017 in Corporate relatedwholesale businesses.
Refer to a settlement with the FDIC receivershipCCB, CIB and CB segment results on pages 62–65, pages 66-70 and pages 71–73, respectively, and Note 6 for Washington Mutualadditional information.
Asset management, administration and with Deutsche Bank as trustee of certain Washington Mutual trusts.
For further information, see Note 6.
Net interest incomecommissions revenue increased primarily driven bydue to higher asset management fees from growth in client investment assets in CCB.
Refer to CCB and AWM segment results on pages 62–65 and pages 74–76, respectively, and Note 6 for additional information.
Investment securities gains/(losses) in both periods reflect the net impact of higher ratesrepositioning the investment securities portfolio. Refer to Corporate segment results on pages 77–78 and loan growth across the businesses, partially offset by declines in Markets net interest income in CIB. The Firm’s average interest-earning assets were $2.2 trillion, up $79 billion from the prior year, and the net interest yield on these assets, on a fully taxable equivalent (“FTE”) basis, was 2.36%, an increase of 11 basis points from the prior year.

Note 10 for additional information.


4448 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




2016 compared with 2015
Investment banking fees decreased predominantly due to lower equity underwriting fees driven by declines in industry-wide fee levels.
Principal transactions revenue increased reflecting broad-based strength across products in CIB’s Fixed Income Markets business. Rates performance was strong, with increased client activity driven by high issuance-based flows, global political developments, and central bank actions. Credit revenue improved driven by higher market- making revenue from the secondary market as clients’ appetite for risk recovered.
Asset management, administration and commissions revenue decreased reflecting lower asset management fees in AWM driven by a reduction in revenue related to the disposal of assets at the beginning of 2016, the impact of lower average equity market levels and lower performance fees, as well as due to lower brokerage commissions and other fees in CIB and AWM.
Mortgage fees and related income were relatively flat, increased driven by:
higher net mortgage production revenue reflecting approximately $500 million of gains on sales of certain loans, as well as higher mortgage production volumes and margins,
partially offset by
lower net mortgage servicing revenue related to lower average third-party loans serviced was predominantly offset by higher MSR risk management results.
Card income decreased predominantly driven by higher new account origination costslower operating revenue reflecting faster prepayment speeds on lower rates and the impact of renegotiated co-brand partnership agreements,reclassifying certain loans to held-for-sale.
Refer to CCB segment results on pages 62–65, Note 6 and 15 for further information.
Card income increased as the prior year included an adjustment of approximately $330 million to the credit card rewards liability. Excluding this item, Card income was relatively flat. Refer to CCB segment results on pages 62–65 and Note 6 for further information.
Other incomeincreased reflecting:
higher operating lease income from growth in auto operating lease volume in CCB, and
higher investment valuation gains in AWM, which were largely offset by the impact of the related hedges that were reflected in principal transactions revenue,
largely offset by
lower other income in CIB largely related to increased amortization on a higher level of alternative energy investments. The increased amortization was more than offset by lower income tax expense from the associated tax credits.
The prior year included:
$505 million of fair value gains related to the adoption in the first quarter of 2018 of the recognition and measurement accounting guidance for certain equity investments previously held at cost.
Refer to Note 6 for further information.
Net interest income increased driven by continued balance sheet growth and changes in mix, as well as higher average short-term rates, partially offset by higher card sales volume and other card-related fees.rates paid on deposits.
Other income increased primarily reflecting:
▪higher operating lease income from growth in auto operating lease assets in CCB
▪a gain on the sale of Visa Europe interests in CCB
▪a gain related to the redemption of guaranteed capital debt securities
▪the absence of losses recognized in 2015 related to the accelerated amortization of cash flow hedges associated with the exit of certain non-operating deposits
▪a gain on disposal of an asset in AWM
partially offset by
▪a $514 million benefit recorded in the prior year from a legal settlement in Corporate.
Net interest income increased primarily driven by loan growth across the businesses and the net impact of higher rates, partially offset by lower investment securities balances and higher interest expense on long-term debt. The Firm’s average interest-earning assets were $2.1$2.3 trillion, in 2016, up $13$133 billion, from the prior year, and the yield was 3.61%, up 14 bps. The net interest yield on these assets, on aan FTE basis, was 2.25%2.46%, an increasea decrease of 11 basis points from6 bps. The net yield excluding CIB Markets was 3.27%, up 2bps.
Net yield excluding CIB Markets is a non-GAAP financial measure. Refer to Explanation and Reconciliation of the prior year.
Provision for credit losses    
Year ended December 31,     
(in millions)2017
 2016
 2015
Consumer, excluding credit card$620
 $467
 $(81)
Credit card4,973
 4,042
 3,122
Total consumer5,593
 4,509
 3,041
Wholesale(303) 852
 786
Total provision for credit losses$5,290
 $5,361
 $3,827
2017 compared with 2016
The provisionFirm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 57–59 for credit lossesdecreased 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
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 $416 million higher addition to the allowance for credit losses related to the credit card portfolio driven by higher loss rates and loan growth, and a lower reduction in the allowance for the residential real estate portfolio predominantly driven by continued improvement in home prices and delinquencies, and
–a $218 million impact in connection with the sale of the student loan portfolio.
For a more detailedfurther discussion of the credit portfolio, the student loan sale and the allowance for credit losses, see the segment discussions of CCB on pages 57-61, CIB on pages 62–66, CB on pages 67–69, the Allowance for Credit Losses on pages 117–119 and Note 13.this measure.
2016 compared with 2015
The provision for credit losses reflected an increase in the consumer provision and, to a lesser extent, the wholesale provision. The increase in the consumer provision was predominantly driven by:
▪a $920 million increase related to the credit card portfolio, due to a $600 million addition in the allowance for loan losses, as well as $320 million of higher net charge-offs, driven by loan growth (including growth in newer vintages which, as anticipated, have higher loss rates compared to the overall portfolio), and


JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 4549
Management’s discussion and analysis


Provision for credit losses    
Year ended December 31,     
(in millions)2019
 2018
 2017
Consumer, excluding credit card$(383) $(63) $620
Credit card5,348
 4,818
 4,973
Total consumer4,965
 4,755
 5,593
Wholesale620
 116
 (303)
Total provision for credit losses$5,585
 $4,871
 $5,290
2019 compared with 2018
The provision for credit lossesincreased driven by both the wholesale and consumer portfolios.
The increase in the wholesale provision reflects additions to the allowance for credit losses in the current year on select client downgrades. The prior year reflected a benefit related to a single name in the Oil & Gas portfolio and higher recoveries.

The increase in the total consumer provision reflects:
an increase in credit card due to
▪–higher net charge-offs on loan growth, in line with expectations, and
–a $470$500 million lower benefit relatedaddition to the residential real estateallowance for loan losses reflecting loan growth and higher loss rates, as newer vintages season and become a larger part of the portfolio, ascompared to a $300 million addition in the prior year
largely offset by
a decrease in consumer, excluding credit card, in CCB due to
–a $650 million reduction in the allowance for loan losses in 2016 was lower than the prior year. The reduction in both periods reflectedpurchase credit-impaired (“PCI”) residential real estate portfolio, reflecting continued improvementsimprovement in home prices and lower delinquencies.delinquencies, and a $100 million reduction in the allowance for loan losses in the non credit-impaired residential real estate portfolio, compared to a $250 million reduction in the PCI residential real estate portfolio in the prior year, and
–a $50 million reduction in the allowance for loan losses in the business banking portfolio
The increasepartially offset by
–lower net recoveries in the residential real estate portfolio as the prior year benefited from larger recoveries on loan sales.
Refer to the wholesale provision was largely driven bysegment discussions of CCB on pages 62–65, CIB on pages 66-70, CB on pages 71–73, the impactAllowance for Credit Losses on pages 116–117 and Note 13 for further discussion of downgrades in the Oil & Gascredit portfolio and Natural Gas Pipelines portfolios.the allowance for credit losses.


Noninterest expense    
Year ended December 31, 
(in millions)2017
 2016
 2015
Compensation expense$31,009
 $29,979
 $29,750
Noncompensation expense:     
Occupancy3,723
 3,638
 3,768
Technology, communications and equipment7,706
 6,846
 6,193
Professional and outside services6,840
 6,655
 7,002
Marketing2,900
 2,897
 2,708
Other(a)(b)
6,256
 5,756
 9,593
Total noncompensation expense27,425
 25,792
 29,264
Total noninterest expense$58,434
 $55,771
 $59,014
50JPMorgan Chase & Co./2019 Form 10-K


Noninterest expense  
Year ended December 31, 
(in millions)2019
2018
2017
Compensation expense$34,155
$33,117
$31,208
Noncompensation expense:   
Occupancy4,322
3,952
3,723
Technology, communications and equipment9,821
8,802
7,715
Professional and outside services8,533
8,502
7,890
Marketing3,579
3,290
2,900
Other(a)(b)
5,087
5,731
6,079
Total noncompensation expense31,342
30,277
28,307
Total noninterest expense$65,497
$63,394
$59,515
(a)
Included Firmwide legal expense/(benefit) of $(35)$239 million,, $(317) $72 million and $3.0 billion$(35) million for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, respectively.
(b)Included FDIC-related expense of $1.5 billion, $1.3$457 million, $1.2 billion and $1.2$1.5 billion for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
20172019 compared with 20162018
Compensation expense increased predominantly driven by investments in headcount in mostacross the businesses, including bankers and business-related supportfront office, as well as technology staff and higher performance-based compensation expense, predominantly in AWM.hires.
Noncompensation expense increased as a result of:
higher investments across the businesses, including technology, real estate and marketing
higher volume-related expense, including depreciation expense from growth in auto operating lease volumeassets in CCB,
contributions to the Firm’s Foundation
a lower legal net benefit compared to the prior year and brokerage expense in certain businesses in CIB
higher FDIC-relatedlegal expense, and
an impairment in CB on certain leased equipment, the majority of which was sold subsequenthigher pension costs due to year-endchanges to actuarial assumptions and estimates,
partiallylargely offset by
the absence in the current year of two items totaling $175 million in CCB related to liabilities from a merchant in bankruptcy and mortgage servicing reserves.
For a discussion of legal expense, see Note 29.
2016 compared with 2015
Compensation expense was relatively flat predominantly driven by higher performance-based compensation expense and investments in several businesses, offset by the impact of continued expense reduction initiatives, including lower headcount in certain businesses.
Noncompensation expense decreasedFDIC charges as a result of lower legal expense (including lower legal professional services expense), the elimination of the surcharge at the end of the third quarter of 2018
the impact of efficiencies and reduced non-U.S. tax surcharges. These factors were partially offset by higher depreciation expense from growth
lower other regulatory-related assessments in auto operating lease assets and higher investmentsCIB.
The prior year included a loss of $174 million on the liquidation of a legal entity in marketing.Corporate recorded in other expense. Refer to Note 24 for additional information on the liquidation of a legal entity.

Income tax expense     
Year ended December 31,
(in millions, except rate)
     
2017 2016 2015
Income before income tax expense$35,900
 $34,536
 $30,702
Income tax expense11,459
 9,803
 6,260
Effective tax rate31.9% 28.4% 20.4%
2017
Income tax expense     
Year ended December 31,
(in millions, except rate)
     
2019 2018 2017
Income before income tax expense$44,545
 $40,764
 $35,900
Income tax expense8,114
 8,290
 11,459
Effective tax rate18.2% 20.3% 31.9%
2019 compared with 20162018
The effective tax rate increased in 2017 driven by:
a $1.9 billion increase to income tax expense representing the impact of the enactment of the TCJA. The increase was driven by the deemed repatriation of the Firm’s unremitted non-U.S. earnings and adjustments decreased due to the valuerecognition of certain tax-oriented investments, partially offset by a benefit from the revaluation$1.1 billion of the Firm’s net deferred tax liability. The incremental expense resulted in a 5.4 percentage point increase to the Firm’s effective tax rate
partially offset by
benefits resulting from the vesting of employee share-based awards related to the appreciationresolution of the Firm’s stock price upon vesting above their original grant price,certain tax audits, and the release of a valuation allowance.
For further information, see Note 24.
2016 compared with 2015
The effective tax rate in 2016 was affected by changes in the mix of income and expense subject to U.S. federal, and state and local taxes,taxes. The decrease was partially offset by lower tax benefits related to the utilizationvesting of employee share-based awards. In addition, the prior year included a $302 million net tax benefit resulting from changes in the estimates under the TCJA related to the remeasurement of certain deferred taxes and the deemed repatriation tax assets, as well as the adoption of new accounting guidance relatedon non-U.S. earnings. Refer to employee share-based incentive payments. These tax benefits were partially offset by higher income tax expense from tax audits. The lower effective tax rate in 2015 was predominantly driven by $2.9 billion of tax benefits, which reduced the Firm’s effective tax rate by 9.4 percentage points. The recognition of tax benefits in 2015 resulted from the resolution of various tax audits, as well as the release of U.S. deferred taxes associated with the restructuring of certain non-U.S. entities.Note 25 for further information.


46JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K51

Management’s discussion and analysis


CONSOLIDATED BALANCE SHEETS AND CASH FLOWS ANALYSIS
Consolidated Balance Sheets Analysis
balance sheets analysis
The following is a discussion of the significant changes between December 31, 20172019 and 2016.2018.
Selected Consolidated balance sheets dataSelected Consolidated balance sheets data Selected Consolidated balance sheets data 
December 31, (in millions)2017 2016Change2019 2018Change
Assets        
Cash and due from banks$25,827
 $23,873
8 %$21,704
 $22,324
(3)%
Deposits with banks404,294
 365,762
11
241,927
 256,469
(6)
Federal funds sold and securities purchased under resale agreements198,422
 229,967
(14)249,157
 321,588
(23)
Securities borrowed105,112
 96,409
9
139,758
 111,995
25
Trading assets:    
Debt and equity instruments325,321
 308,052
6
Derivative receivables56,523
 64,078
(12)
Securities249,958
 289,059
(14)
Trading assets411,103
 413,714
(1)
Investment securities398,239
 261,828
52
Loans930,697
 894,765
4
959,769
 984,554
(3)
Allowance for loan losses(13,604) (13,776)(1)(13,123) (13,445)(2)
Loans, net of allowance for loan losses917,093
 880,989
4
946,646
 971,109
(3)
Accrued interest and accounts receivable67,729
 52,330
29
72,861
 73,200
—
Premises and equipment14,159
 14,131
—
25,813
 14,934
73
Goodwill, MSRs and other intangible assets

54,392
 54,246
—
53,341
 54,349
(2)
Other assets114,770
 112,076
2
126,830
 121,022
5
Total assets$2,533,600
 $2,490,972
2 %$2,687,379
 $2,622,532
2 %
Cash and due from banks and deposits with banks increased decreased primarily driven by deposit growth andas a result of a shift in the deployment of excess cash from securities purchased under resale agreements andto investment securities, into depositsand net maturities of short-term borrowings and long term debt in Treasury and CIO, partially offset by an increase in deposits. Deposits with banks. Thebanks reflect the Firm’s placements of its excess cash is placed with various central banks, predominantlyincluding the Federal Reserve Banks.
Federal funds sold and securities purchased under resale agreements decreased primarily due to the shift in the deployment of excess cash to deposits with banks and lower client activity in CIB. For additional information on the Firm’s Liquidity Risk Management, see pages 92–97.
Securities borrowed increased driven by higher demand for securities to cover short positions related to client-driven market-making activities in CIB.
Trading assets–debt and equity instruments increased predominantly as a result of client-driven market-making activities in Fixed Income Markets in CIB primarilyand a shift in the deployment of cash in Treasury and CIO. Refer to Liquidity Risk Management on pages 93–98 and Note 10 for additional information.
Securities borrowed increased in CIB related to client-driven market-making activities in Fixed Income Markets, and Prime Services, partially offset by lower equity instrumentsto cover customer short positions in Equity Markets. Forprime brokerage. Refer to Liquidity Risk Management on pages 93–98 and Note 10 for additional information, refer toinformation.
Note 2.
Trading assets was relatively flat, reflecting:
a reduction in short-term instruments associated with cash deployment activities in Treasury and trading liabilities–derivative receivables and payables decreased predominantly as a result ofCIO,
offset by
growth in client-driven market-making activities in CIB Markets, which reduced foreign exchangeprimarily debt instruments, and
in CCB, growth related to originations of mortgage warehouse loans, resulting from the favorable rate environment.
Refer to Notes 2 and 5 for additional information.
Investment securities increased primarily due to net purchases of U.S. Treasuries and U.S. GSE and government agency MBS in Treasury and CIO. The net purchases were primarily driven by cash deployment and interest rate derivative receivables and payables, and increased equity derivative receivables, driven by market movements. For additional information, referrisk management activities. Refer to Derivative contractsCorporate segment results on pages 114–115,77–78, Investment Portfolio Risk Management on page 118 and Notes 2 and 5.
Securities decreased primarily reflecting net sales, maturities and paydowns of U.S. Treasuries, non-U.S. government securities and collateralized loan obligations. For10 for additional information see Notes 2on investment securities.
Loansdecreased reflecting loan sales in Home Lending, and 10.
Loans increased reflecting:
higher wholesalelower loans in CIB, primarily driven by new originationsa loan syndication and net paydowns, partially offset by growth in CB and higher loans to Private Banking clients in AWM
higher consumer loans driven by higher retention of originated high-quality prime mortgages in CCB and AWM and higher credit card loans, largely offset by the sale of the student loan portfolio, lower home equity loans and the run-off of PCI loans.Card.
The allowance for loan losses decreased driven by:
•
an $800 million reduction in the CCB allowance for loan losses, which included $650 million in the PCI residential real estate portfolio, reflecting continued improvement in home prices and delinquencies; $100 million in the non credit-impaired residential real estate portfolio; and $50 million in the business banking portfolio; as well as
•
a $151 million reduction for write-offs of PCI loans,
largely offset by
•
a $500 million addition to the allowance for loan losses in the credit card portfolio reflecting loan growth and higher loss rates as newer vintages season and become a larger part of the portfolio, and
a net reduction$115 million addition in the wholesale allowance reflecting credit quality improvements in the Oil & Gas, Natural Gas Pipelines and Metals & Mining portfolios (compared with additions to the allowance in the prior year for loan losses driven by downgrades in the same portfolios)
select client downgrades.
largely offset by
a net increase in the consumer allowance, reflecting additionsRefer to the allowanceCredit and Investment Risk Management on pages 100–118, and Notes 2, 3, 12 and 13 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, largely offset by a reduction in the allowance for the residential real estate portfolio, predominantly driven by continued improvement in home prices and delinquencies, and the utilization of the allowance in connection with the sale of the student loan portfolio.
For a more detailedfurther discussion of loans and the allowance for loan losses, referlosses.

52JPMorgan Chase & Co./2019 Form 10-K


Premises and equipment increased primarily due to Creditthe adoption of the new lease accounting guidance effective January 1, 2019. Refer to Note 18 for additional information.
Goodwill, MSRs and Investmentother intangibles decreased reflecting lower MSRs as a result of the realization of expected cash flows and faster prepayment speeds on lower rates, partially offset by net additions to the MSRs. The decrease
in MSRs was partially offset by an increase in goodwill related to the acquisition of InstaMed. Refer to Note 15 for additional information.
Other assets increased reflecting higher cash collateral placed with central counterparties in CIB, and higher auto operating lease assets from growth in the business in CCB.

Selected Consolidated balance sheets data 
December 31, (in millions)2019 2018Change
Liabilities    
Deposits$1,562,431
 $1,470,666
6
Federal funds purchased and securities loaned or sold under repurchase agreements183,675
 182,320
1
Short-term borrowings40,920
 69,276
(41)
Trading liabilities119,277
 144,773
(18)
Accounts payable and other liabilities210,407
 196,710
7
Beneficial interests issued by consolidated variable interest entities (“VIEs”)17,841
 20,241
(12)
Long-term debt291,498
 282,031
3
Total liabilities2,426,049
 2,366,017
3
Stockholders’ equity261,330
 256,515
2
Total liabilities and stockholders’ equity$2,687,379
 $2,622,532
2 %
Deposits increased reflecting:
continued growth driven by new accounts in CCB
growth in operating deposits in CIB driven by client activity, primarily in Treasury Services, and an increase in client-driven net issuances of structured notes in Markets, and
•
higher deposits in CB and AWM from 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 Liquidity Risk Management discussion on pages 93–98; and Notes 2 and 17 for more information.
Federal funds purchased and securities loaned or sold under repurchase agreements was relatively flat,as the net increase from the Firm’s participation in the Federal Reserve’s open market operations was offset by client-driven activities, and lower secured financing of trading assets-debt instruments, all in CIB. Refer to the Liquidity Risk Management discussion on pages 93–98 and Note 11 for additional information.
Short-term borrowings decreased reflecting lower commercial paper issuances and short-term advances from Federal Home Loan Banks (“FHLB”) in Treasury and CIO, primarily driven by liquidity management. Refer to pages 93–98 for information on changes in Liquidity Risk Management.
Trading liabilities decreased due to client-driven market-making activities in CIB, which resulted in lower levels of short positions in both debt and equity instruments in Markets. Refer to Notes 2 and 5 for additional information.
Accounts payable and other liabilities increased reflecting:
the impact of the adoption of the new lease accounting guidance effective January 1, 2019, and
higher client payables related to client-driven activities in CIB.
Refer to Note 18 for additional information on Leases.
Beneficial interests issued by consolidated VIEs decreased due to:
maturities of credit card securitizations,
largely offset by
higher levels of Firm-administered multi-seller conduit commercial paper issued to third parties.
Refer to Off-Balance Sheet Arrangements on pages 55–56 and Note 14 and 28 for further information on Firm-sponsored VIEs and loan securitization trusts.
Long-term debt increased as a result of client-driven net issuances of structured notes in CIB’s Markets business, partially offset by net maturities of FHLB advances in Treasury and CIO.
Refer to Liquidity Risk Management on pages 99–120,93–98 and Notes 2, 3, 12Note 20 for additional information on the Firm’s long-term debt activities.
Refer to page 149 for information on changes in stockholders’ equity, and 13.Capital actions on pages 90–91.


JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 4753
Management’s discussion and analysis

Accrued interest and accounts receivable
increased primarily reflecting higher held-for-investment margin loans related to client-driven financing activities in Prime Services.
Other assets increased slightly as a result of higher auto operating lease assets from growth in business volume in CCB.
For information on Goodwill and MSRs, see Note 15.
Selected Consolidated balance sheets data 
December 31, (in millions)2017 2016Change
Liabilities    
Deposits$1,443,982
 $1,375,179
5
Federal funds purchased and securities loaned or sold under repurchase agreements158,916
 165,666
(4)
Short-term borrowings51,802
 34,443
50
Trading liabilities:    
Debt and equity instruments85,886
 87,428
(2)
Derivative payables37,777
 49,231
(23)
Accounts payable and other liabilities189,383
 190,543
(1)
Beneficial interests issued by consolidated variable interest entities (“VIEs”)26,081
 39,047
(33)
Long-term debt284,080
 295,245
(4)
Total liabilities2,277,907
 2,236,782
2
Stockholders’ equity255,693
 254,190
1
Total liabilities and stockholders’ equity$2,533,600
 $2,490,972
2 %
Deposits increased due to:
higher consumer deposits reflecting the continuation of strong growth from new and existing customers, and low attrition rates
higher wholesale deposits largely 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.
For more information, refer to the Liquidity Risk Management discussion on pages 92–97; and Notes 2
and 17.
Short-term borrowings increased primarily due to higher issuance of commercial paper reflecting in part a change in the mix of funding from securities sold under repurchase agreements for CIB Markets activities. For additional information, see Liquidity Risk Management on pages 92–97.
Beneficial interests issued by consolidated VIEs
decreased due to net maturities of credit card securitizations and the deconsolidation of the student loan securitization entities in connection with the portfolio’s sale. For further information on Firm-sponsored VIEs and loan securitization trusts, see Off-Balance Sheet Arrangements on pages 50–51 and Note 14 and 27; and for the sale of the student loan portfolio, see CCB segment results on pages 57-61.
Long-term debt decreased reflecting lower Federal Home Loan Bank (“FHLB”) advances, partially offset by the net issuance of senior debt and the net issuance of structured notes in CIB driven by client demand. For additional information on the Firm’s long-term debt activities, see Liquidity Risk Management on pages 92–97 and Note 19.
For information on changes in stockholders’ equity, see page 151, and on the Firm’s capital actions, see Capital actions on pages 89-90.

48JPMorgan Chase & Co./2017 Annual Report



Consolidated Cash Flows Analysiscash flows analysis
The following is a discussion of cash flow activities during the years ended December 31, 2019 and 2018. Refer to Consolidated cash flows analysis on page 54 of the Firm’s 2018 Form 10-K for a discussion of the 2017 activities.
(in millions) Year ended December 31, Year ended December 31,
2017 2016 2015 2019 2018 2017
Net cash provided by/(used in)            
Operating activities $(2,501) $20,196
 $73,466
 $6,046
 $14,187
 $(10,827)
Investing activities (10,283) (114,949) 106,980
 (54,013) (197,993) 28,249
Financing activities 14,642
 98,271
 (187,511) 32,987
 34,158
 14,642
Effect of exchange rate changes on cash 96
 (135) (276) (182) (2,863) 8,086
Net increase/(decrease) in cash and due from banks $1,954
 $3,383
 $(7,341)
Net increase/(decrease) in cash and due from banks and deposits with banks $(15,162) $(152,511) $40,150
Operating activities
JPMorgan Chase’s operating assets and liabilities primarily support the Firm’s lending and capital markets activities. These assets and liabilities can vary significantly in the normal course of business due to the amount and timing of cash flows, which are affected by client-driven and risk management activities and market conditions. The Firm believes that cash flows from operations, available cash and other liquidity sources, and its capacity to generate cash through secured and unsecured sources, are sufficient to meet its operating liquidity needs.
In 2017,2019, cash usedprovided primarily reflected net income excluding noncash adjustments and net proceeds of sales, securitizations, and paydowns of loans held-for-sale, partially offset by higher securities borrowed, an increase in held-for-investment margin loans in accrued interest and accounts receivableother assets and a decrease in trading liabilities.
In 2016,2018, cash provided primarily reflected increases innet income excluding noncash adjustments, increased trading liabilities and accounts payable and tradingother liabilities, partially offset by cash used reflecting an increase in trading assets an increase in accounts receivable from merchants and higher client receivables.net originations of loans held-for-sale.
In 2015, cash provided reflected decreases in trading assets and in accounts receivable, partially offset by cash used due to a decrease in accounts payable and other liabilities.
 
Investing activities
The Firm’s investing activities predominantly include originating held-for-investment loans and investing in the investment securities portfolio and other short-term interest-earning assets.instruments.
In 2017, cash used primarily reflected net originations of loans and a net increase in short-term interest-earning assets, partially offset by net proceeds from paydowns, maturities, sales and purchases of investment securities.
In 2016,2019, cash used reflected net originationspurchases of investment securities, partially offset by lower securities purchased under resale agreements, and net proceeds from sales and securitizations of loans an increase in short-term interest-earning assets,held-for-investment.
In 2018, cash used reflected an increase in securities purchased under resale agreements, and the deployment of excess cash.
In 2015, cash provided predominantly reflected lower short-term interest-earning assets, and net proceeds from lower investment securities, partially offset by cash used forhigher net originations of loans.loans and net purchases of investment securities.
Financing activities
The Firm’s financing activities include acquiring customer deposits and issuing long-term debt, as well as preferred and common stock.
In 2017,2019, cash provided reflected higher deposits, and short-term borrowings, partially offset by a decrease in long-termshort-term borrowings and net payments of long term borrowings.
In 2016,2018, cash provided reflected higher deposits, short-term borrowings, and an increase in securities loaned or sold under repurchase agreements, andpartially offset by net proceeds frompayments of long term borrowings.
In 2015, cash used reflected lower deposits and short-term borrowings, partially offset by net proceeds from long-term borrowings. Additionally, in 2015 cash outflows reflected a decrease in securities loaned or sold under repurchase agreements.
For allboth periods, cash was used for repurchases of common stock and cash dividends on common and preferred stock.
* * *
ForRefer to Consolidated Balance Sheets Analysis on pages 52–53, Capital Risk Management on pages 85–92, and Liquidity Risk Management on pages 93–98 for a further discussion of the activities affecting the Firm’s cash flows, see Consolidated Balance Sheets Analysis on pages 47-48 , Capital Risk Management on pages 82–91, and Liquidity Risk Management on pages 92–97.

flows.


54JPMorgan Chase & Co./2017 Annual Report492019 Form 10-K
Management’s discussion and analysis


OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL CASH OBLIGATIONS
In the normal course of business, the Firm enters into various off-balance sheet arrangements and contractual obligations that may require future cash payments. Certain obligations are recognized on-balance sheet, while others are disclosed off-balance sheet under accounting principles generally accepted in the U.S. (“U.S. GAAP”).
Special-purpose entities
The Firm is involved withhas several types of off–balance sheet arrangements, including through nonconsolidated SPEs,special-purpose entities (“SPEs”), which are a type of VIE, and through lending-related financial instruments (e.g., commitments and guarantees).
The Firm holds capital, as deemed appropriate, against all SPE-related transactions and related exposures, such as
derivative transactionscontracts and lending-related commitments and guarantees.
The Firm has no commitments to issue its own stock to support any SPE transaction, and its policies require that transactions with SPEs be conducted at arm’s length and reflect market pricing. Consistent with this policy, no JPMorgan Chase employee is permitted to invest in SPEs with which the Firm is involved where such investment would violate the Firm’s Code of Conduct.


The table below provides an index of where in this Annual Report2019 Form 10-K a discussion of the Firm’s various off-balance sheet arrangements can be found. In addition, seeRefer to Note 1 for additional information about the Firm’s consolidation policies.
Type of off-balance sheet arrangementLocation of disclosurePage references
Special-purpose entities: variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEsSeeRefer to Note 14
236–243

242–249
Off-balance sheet lending-related financial instruments, guarantees, and other commitmentsSeeRefer to Note 2728261–266272–277




50JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K55

Management’s discussion and analysis


Contractual cash obligations
The accompanying table summarizes, by remaining maturity, JPMorgan Chase’sChase’s significant contractual cash obligations at December 31, 2017.2019. The contractual cash obligations included in the table below reflect the minimum contractual obligation under legally enforceable contracts with terms that are both fixed and determinable. Excluded from the below table are certain liabilities with variable cash flows and/or no obligation to return a stated amount of principal at maturity.
 
The carrying amount of on-balance sheet obligations on the Consolidated balance sheets may differ from the minimum contractual amount of the obligations reported below. ForRefer to Note 28 for a discussion of mortgage repurchase liabilities and other obligations, see Note 27.obligations.
Contractual cash obligationsContractual cash obligations Contractual cash obligations 
By remaining maturity at December 31,
(in millions)		2017201620192018
20182019-20202021-2022After 2022TotalTotal20202021-20222023-2024After 2024TotalTotal
On-balance sheet obligations  
Deposits(a)
$1,421,174
$5,276
$4,810
$6,204
$1,437,464
$1,368,866
$1,546,142
$5,840
$3,550
$2,508
$1,558,040
$1,468,031
Federal funds purchased and securities loaned or sold under repurchase agreements133,779
4,198
4,958
15,981
158,916
165,666
183,304
—
—
371
183,675
182,320
Short-term borrowings(a)
42,664
—
—
—
42,664
26,497
35,107
—
—
—
35,107
62,393
Beneficial interests issued by consolidated VIEs13,636
9,542
2,544
314
26,036
38,927
13,628
3,950
—
296
17,874
20,258
Long-term debt(a)
37,211
63,685
43,180
116,819
260,895
288,315
35,031
58,847
50,680
105,857
250,415
258,658
Other(b)
4,726
2,146
2,080
4,573
13,525
8,980
Operating leases(b)
1,604
2,704
2,025
3,757
10,090
10,992
Other(c)
8,695
2,046
1,851
2,976
15,568
11,794
Total on-balance sheet obligations1,653,190
84,847
57,572
143,891
1,939,500
1,897,251
1,823,511
73,387
58,106
115,765
2,070,769
2,014,446
Off-balance sheet obligations 
Unsettled reverse repurchase and securities borrowing agreements(c)
76,859
—
—
—
76,859
50,722
Contractual interest payments(d)
9,248
11,046
7,471
26,338
54,103
48,862
Operating leases(e)
1,526
2,750
1,844
3,757
9,877
10,115
Unsettled resale and securities borrowed agreements(d)
117,203
748
—
—
117,951
102,008
Contractual interest payments(e)
7,844
10,517
7,876
28,444
54,681
58,252
Equity investment commitments(f)
174
46
19
515
754
1,068
539
—
—
—
539
271
Contractual purchases and capital expenditures1,923
937
439
204
3,503
2,566
1,920
766
210
33
2,929
3,599
Obligations under co-brand programs249
500
478
207
1,434
868
351
710
382
105
1,548
1,937
Total off-balance sheet obligations89,979
15,279
10,251
31,021
146,530
114,201
127,857
12,741
8,468
28,582
177,648
166,067
Total contractual cash obligations$1,743,169
$100,126
$67,823
$174,912
$2,086,030
$2,011,452
$1,951,368
$86,128
$66,574
$144,347
$2,248,417
$2,180,513
(a)Excludes structured notes on which the Firm is not obligated to return a stated amount of principal at the maturity of the notes, but is obligated to return an amount based on the performance of the structured notes.
(b)Includes noncancelable operating leases for premises and equipment used primarily for business purposes. Excludes the benefit of noncancelable sublease rentals of $846 million and $825 million at December 31, 2019 and 2018, respectively. Refer to Note 18 for further information on operating leases.
(c)Primarily includes dividends declared on preferred and common stock, deferred annuity contracts, pension and other postretirement employee benefit obligations, insurance liabilities and income taxes payable associated with the deemed repatriation under the TCJA.
(c)(d)For further information, referRefer to unsettled reverse repurchaseresale and securities borrowingborrowed agreements in Note 27.28 for further information.
(d)(e)Includes accrued interest and future contractual interest obligations. Excludes interest related to structured notes for which the Firm’s payment obligation is based on the performance of certain benchmarks.
(e)
Includes noncancelable operating leases for premises and equipment used primarily for banking purposes. Excludes the benefit of noncancelable sublease rentals of $1.0 billion and $1.4 billion at December 31, 2017 and 2016, respectively. See Note 28 for more information on lease commitments.
(f)At December 31, 2017 and 2016, included unfunded commitments of $40 million and $48 million, respectively, to third-party private equity funds, and $714 million and $1.0 billion of unfunded commitments, respectively, to other equity investments.





56JPMorgan Chase & Co./2017 Annual Report512019 Form 10-K
Management’s discussion and analysis


EXPLANATION AND RECONCILIATION OF THE FIRM’S USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE MEASURES
Non-GAAP financial measures
The Firm prepares its Consolidated Financial Statements usingin accordance with U.S. GAAP; these financial statements appear on pages 148–152.146–150. That presentation, which is referred to as “reported” basis, provides the reader with an understanding of the Firm’s results that can be tracked consistently from year-to-year and enables a comparison of the Firm’s performance with other companies’ U.S. GAAP financial statements.
In addition to analyzing the Firm’s results on a reported basis, management reviews Firmwide results, including the overhead ratio, on a “managed” basis; these Firmwide managed basis results are non-GAAP financial measures. The Firm also reviews the results of the lines of businessLOBs on a managed basis. The Firm’s definition of managed basis starts, in each case, with the reported U.S. GAAP results and includes certain reclassifications to present total net revenue for the Firm (and each of the reportable business segments) on aan FTE basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable investments and securities. These financial measures allow
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. These adjustments have no impact on net income as reported by the Firm as a whole or by the lines of business.LOBs.
Management also uses certain non-GAAP financial measures at the Firm and business-segment level, because these other non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Firm or of the particular business segment, as the case may be, and, therefore, facilitate a comparison of the Firm or the business segment with the performance of its relevant competitors. ForRefer to Business Segment Results on pages 60–78 for additional information on these non-GAAP measures, see Business Segment Results on pages 55–74.
Additionally, certain credit metrics and ratios disclosed by the Firm exclude PCI loans, and are therefore non-GAAP measures. For additional information on these non-GAAP measures, see Credit and Investment Risk Management on pages 99–120.
Non-GAAP financial measures used by the Firm may not be comparable to similarly named non-GAAP financial measures used by other companies.




The following summary table provides a reconciliation from the Firm’s reported U.S. GAAP results to managed basis.
2017 2016 20152019 2018 2017
Year ended
December 31,
(in millions, except ratios)
Reported
Results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
 
Reported
Results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
 
Reported
Results
 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
Reported 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
 Reported 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
 Reported 
Fully taxable-equivalent adjustments(a)
 
Managed
basis
Other income$3,639
 $2,704
(b) 
$6,343
 $3,795
 $2,265
 $6,060
 $3,032
 $1,980
 $5,012
$5,731
 $2,534
 $8,265
 $5,343
 $1,877
(b) 
$7,220
 $3,646
 $2,704
 $6,350
Total noninterest revenue49,527
 2,704
 52,231
 49,585
 2,265
 51,850
 50,033
 1,980
 52,013
58,382
 2,534
 60,916
 53,970
 1,877
 55,847
 50,608
 2,704
 53,312
Net interest income50,097
 1,313
 51,410
 46,083
 1,209
 47,292
 43,510
 1,110
 44,620
57,245
 531
 57,776
 55,059
 628
(b) 
55,687
 50,097
 1,313
 51,410
Total net revenue99,624
 4,017
 103,641
 95,668
 3,474
 99,142
 93,543
 3,090
 96,633
115,627
 3,065
 118,692
 109,029
 2,505
 111,534
 100,705
 4,017
 104,722
Pre-provision profit41,190
 4,017
 45,207
 39,897
 3,474
 43,371
 34,529
 3,090
 37,619
50,130
 3,065
 53,195
 45,635
 2,505
 48,140
 41,190
 4,017
 45,207
Income before income tax expense35,900
 4,017
 39,917
 34,536
 3,474
 38,010
 30,702
 3,090
 33,792
44,545
 3,065
 47,610
 40,764
 2,505
 43,269
 35,900
 4,017
 39,917
Income tax expense11,459
 4,017
(b) 
15,476
 9,803
 3,474
 13,277
 6,260
 3,090
 9,350
8,114
 3,065
 11,179
 8,290
 2,505
(b) 
10,795
 11,459
 4,017
 15,476
Overhead ratio59% NM
 56% 58% NM
 56% 63% NM
 61%57% NM
 55% 58% NM
 57% 59% NM
 57%
(a) Predominantly recognized in CIB, and CB business segments and Corporate.
(b) Included $375 million related to tax-oriented investments as a result ofThe decrease in fully taxable-equivalent adjustments for the enactmentyear ended December 31, 2018, reflects the impact of the TCJA.


52JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K57

Management’s discussion and analysis


Net interest income and net yield excluding CIB’s Markets businesses
In addition to reviewing net interest income and the net yield on a managed basis, management also reviews net interest incomethese metrics excluding net interest income arising from CIB’s Markets businesses, as shown below; these metrics, which exclude CIB’s Markets businesses, are non-GAAP financial measures. Management reviews these metrics to assess the performance of the Firm’s lending, investing (including asset-liability management) and deposit-raising activities. ThisThe resulting metrics that exclude CIB’s Markets businesses are referred to as non-markets-related net interest income is referred to as non-markets relatedand net interest income.yield. CIB’s Markets businesses are Fixed Income Markets and Equity Markets. Management believes that disclosure of non-markets relatednon-markets-related net interest income and net yield provides investors and analysts with another measureother measures by which to analyze the non-markets-related business trends of the Firm and provides a comparable measure to other financial institutions that are primarily focused on lending, investing and deposit-raising activities.
Year ended December 31,
(in millions, except rates)
201920182017
Net interest income – reported$57,245
$55,059
$50,097
Fully taxable-equivalent adjustments531
628
1,313
Net interest income – managed basis(a)
$57,776
$55,687
$51,410
Less: CIB Markets net interest income(b)
3,120
3,087
4,630
Net interest income excluding CIB Markets(a)
$54,656
$52,600
$46,780
Average interest-earning assets(c)
$2,345,491
$2,212,908
$2,170,974
Less: Average CIB Markets interest-earning assets(b)(c)
672,629
593,355
531,217
Average interest-earning assets excluding CIB Markets$1,672,862
$1,619,553
$1,639,757
Net yield on average interest-earning assets – managed basis(c)
2.46%2.52%2.37%
Net yield on average CIB Markets interest-earning assets(b)(c)
0.46
0.52
0.87
Net yield on average interest-earning assets excluding CIB Markets3.27%3.25%2.85%
The data presented below are non-GAAP financial measures
due to the exclusion of markets related net interest income
arising from CIB.
Year ended December 31,
(in millions, except rates)
201720162015
Net interest income – managed basis(a)(b)
$51,410
$47,292
$44,620
Less: CIB Markets net interest income(c)
4,630
6,334
5,298
Net interest income excluding CIB Markets(a)
$46,780
$40,958
$39,322
Average interest-earning assets$2,180,592
$2,101,604
$2,088,242
Less: Average CIB Markets interest-earning assets(c)
540,835
520,307
510,292
Average interest-earning assets excluding CIB Markets$1,639,757
$1,581,297
$1,577,950
Net interest yield on average interest-earning assets – managed basis2.36%2.25%2.14%
Net interest yield on average CIB Markets interest-earning assets(c)
0.86
1.22
1.04
Net interest yield on average interest-earning assets excluding CIB Markets2.85%2.59%2.49%
(a)Interest includes the effect of related hedges. Taxable-equivalent amounts are used where applicable.
(b)For a reconciliation of net interest incomeRefer to page 69 for further information on a reported and managed basis, see reconciliation from the Firm’s reported U.S. GAAP results to managed basis on page 52.CIB’s Markets businesses.
(c)TheIn the second quarter of 2019, the Firm reclassified balances related to certain instruments from interest-earning to noninterest-earning assets, 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 in this table differ fromwere revised to conform with the prior-period presentation to align with CIB’s Markets businesses. For further information on CIB’s Markets businesses, see page 65.current presentation.
 
Calculation of certain U.S. GAAP and non-GAAP financial measures
Certain U.S. GAAP and non-GAAP financial measures are calculated as follows:
Book value per share (“BVPS”)
Common stockholders’ equity at period-end /
Common shares at period-end
Overhead ratio
Total noninterest expense / Total net revenue
Return on assets (“ROA”)
Reported net income / Total average assets
Return on common equity (“ROE”)
Net income* / Average common stockholders’ equity
Return on tangible common equity (“ROTCE”)
Net income* / Average tangible common equity
Tangible book value per share (“TBVPS”)
Tangible common equity at period-end / Common shares at period-end
* Represents net income applicable to common equity
The Firm also reviews adjusted expense, which is noninterest expense excluding Firmwide legal expense and is therefore a non-GAAP financial measure. Additionally, certain credit metrics and ratios disclosed by the Firm exclude PCI loans, and are therefore non-GAAP measures. Management believes that these measures help investors understand the effect of these items on reported results and provide an alternate presentation of the Firm’s performance. Refer to Credit and Investment Risk Management on pages 100–118 for additional information on credit metrics and ratios excluding PCI loans.


58JPMorgan Chase & Co./2017 Annual Report532019 Form 10-K
Management’s discussion and analysis


Tangible common equity, ROTCE and TBVPS
Tangible common equity (“TCE”), ROTCE and TBVPS are each non-GAAP financial measures. TCE represents the Firm’s common stockholders’ equity (i.e., total stockholders’ equity less preferred stock) less goodwill and identifiable intangible assets (other than MSRs), net of related deferred tax liabilities. ROTCE measures the Firm’s net income applicable to common equity as a percentage of average TCE. TBVPS represents the Firm’s TCE at period-end divided by common shares at period-end. TCE, ROTCE and TBVPS are utilized by the Firm, as well as investors and analysts, in assessing the Firm’s use of equity.
The following summary table provides a reconciliation from the Firm’s common stockholders’ equity to TCE.
Period-end AveragePeriod-end Average
Dec 31,
2017		Dec 31,
2016		 Year ended December 31,Dec 31,
2019		Dec 31,
2018		 Year ended December 31,
(in millions, except per share and ratio data) 201720162015 201920182017
Common stockholders’ equity$229,625
$228,122
 $230,350
$224,631
$215,690
$234,337
$230,447
 $232,907
$229,222
$230,350
Less: Goodwill47,507
47,288
 47,317
47,310
47,445
47,823
47,471
 47,620
47,491
47,317
Less: Other intangible assets855
862
 832
922
1,092
819
748
 789
807
832
Add: Certain Deferred tax liabilities(a)(b)
2,204
3,230
 3,116
3,212
2,964
Add: Certain deferred tax liabilities(a)
2,381
2,280
 2,328
2,231
3,116
Tangible common equity$183,467
$183,202
 $185,317
$179,611
$170,117
$188,076
$184,508
 $186,826
$183,155
$185,317
      
Return on tangible common equityNA
NA
 12%13%13%NA
NA
 19%17%12%
Tangible book value per share$53.56
$51.44
 NANA$60.98
$56.33
 NA
NA
NA
(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 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.

Key performance measures
The Firm considers the following to be key regulatory capital measures:
Capital, risk-weighted assets (“RWA”), and capital and leverage ratios presented under Basel III Standardized and Advanced Fully Phased-In rules, and
SLR calculated under Basel III Advanced Fully Phased-In rules.
The Firm, as well as banking regulators, investors and analysts, use these measures to assess the Firm’s regulatory capital position and to compare the Firm’s regulatory capital to that of other financial services companies.
For additional information on these measures, see Capital Risk Management on pages 82–91.
Core loans are alsois considered a key performance measure. Core loans representrepresents loans considered central to the Firm’s ongoing businesses;businesses, and excludeexcludes loans classified as trading assets, runoff portfolios, discontinued portfolios and portfolios the Firm has an intent to exit. Core loans is a measure utilized by the Firm and its investors and analysts in assessing actual growth in the loan portfolio.portfolio.




54JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K59

Management’s discussion and analysis


BUSINESS SEGMENT RESULTS
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 definition of managed basis, see Refer 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 a definition of managed basis.
 JPMorgan Chase
  
 Consumer Businesses Wholesale Businesses
  
 Consumer & Community Banking Corporate & Investment Bank 
Commercial Banking(a)
 Asset & Wealth Management
              
 
Consumer &
Business Banking
 
Home Lending(a)
 
Card, Merchant Services & Auto(b)
 Banking 
Markets &
InvestorSecurities Services
  • Middle Market Banking  • Asset Management
 
 • Consumer Banking/Chase Wealth Management
 • Business Banking
 
 • Home Lending Production
 • Home Lending Servicing
 • Real Estate Portfolios

 • Card Services
 – Credit Card
 – Merchant Services(a)
 • Auto


 • Investment Banking
 • Treasury Services(a)
 • Lending
 • Fixed
Income
Markets
 • Corporate Client Banking
 • Wealth Management


 
 • Equity Markets
 • Securities Services
 • Credit Adjustments & Other
 • Commercial Term LendingReal Estate Banking
 
 • Real Estate Banking

 
(a)Formerly Mortgage Banking
(b)Formerly Card, Commerce Solutions & AutoEffective in the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The revenue and expenses of the Merchant Services business will be reported across CCB, CIB and CB based primarily on client relationship.


Description of business segment reporting methodology
Results of the business segments are intended to reflectpresent each segment as if it were essentially a stand-alone business. The management reporting process that derives business segment results includes the allocation of certain income and expense items, described in more detail below. The Firm also assesses the level of capital required for each line of businessLOB on at least an annual basis.
The Firm periodically assesses the assumptions, methodologies and reporting classifications used for segment reporting, and further refinements may be implemented in future periods.
Revenue sharing
When business segments join efforts to sell products and services to the Firm’s clients, the participating business segments may agree to share revenue from those transactions. Revenue is generally recognized in the segment responsible for the related product or service on a gross basis, with an allocation to the other segment(s) involved in the transaction. The segment results reflect these revenue-sharing agreements.

60JPMorgan Chase & Co./2019 Form 10-K


Expense Allocation
Where business segments use services provided by corporate support units, or another business segment, the costs of those services are allocated to the respective business segments. The expense is generally allocated based on the actual cost and use of services provided. In contrast, certain costs and investments related to corporate support units, technology and operations not currently leveraged by any LOB, are not allocated to the business segments and are retained in Corporate. Expense retained in Corporate generally includes parent company costs that would not be incurred if the segments were stand-alone businesses; adjustments to align corporate support units; and other items not aligned with a particular business segment.
Funds transfer pricing
Funds transfer pricing is used to assignthe process by which the Firm allocates interest income and expense to each business segment and to transfertransfers the primary interest rate risk and liquidity risk exposures to Treasury and CIO within Corporate. The funds transfer pricing process considers the interest rate risk, liquidity risk and regulatory requirements ofon a product-by-product basis within each business segment as if it were operating independently.segment. This process is overseen by senior management and reviewed by the Firm’s Asset-Liability Committee (“ALCO”).

Treasurer Committee.

JPMorgan Chase & Co./2017 Annual Report55
Management’s discussion and analysis

Debt expense and preferred stock dividend allocation
As part of the funds transfer pricing process, almost all of the cost of the credit spread component of outstanding unsecured long-term debt and preferred stock dividends is allocated to the reportable business segments, while the balance of the cost is retained in Corporate. The methodology to allocate the cost of unsecured long-term debt and preferred stock dividends to the business segments is aligned with the Firm’s process to allocate capital. The allocated cost of unsecured long-term debt is included in a business segment’s net interest income, and net income is reduced by preferred stock dividends to arrive at a business segment’s net income applicable to common equity.
Business segment capital allocation
The amount of capital assigned to each business is referred to as equity. On at least an annual basis, the Firm assesses the level of capital required for each line of business as well as Periodically, the assumptions and methodologies used to allocate
capital. For capital are assessed and as a result, the capital allocated to the LOBs may change. Refer to Line of business equity on page 90 for additional information on business segment capital allocation, see Line of business equity on page 89.
Expense allocation
Where business segments use services provided by corporate support units, or another business segment, the costs of those services are allocated to the respective business segments. The expense is generally allocated based on the actual cost and use of services provided. In contrast, certain other costs related to corporate support units, or to certain technology and operations, are not allocated to the business segments and are retained in Corporate. Expense retained in Corporate generally includes parent company costs that would not be incurred if the segments were stand-alone businesses; adjustments to align corporate support units; and other items not aligned with a particular business segment.

allocation.


Segment Results – Managed Basis
The following tables summarize the businessFirm’s results by segment results for the periods indicated.
Year ended December 31,Total net revenue Total noninterest expense Pre-provision profit/(loss)
(in millions)2017
2016
2015
 2017
2016
2015
 2017
2016
2015
Consumer & Community Banking$46,485
$44,915
$43,820
 $26,062
$24,905
$24,909
 $20,423
$20,010
$18,911
Corporate & Investment Bank34,493
35,216
33,542
 19,243
18,992
21,361
 15,250
16,224
12,181
Commercial Banking8,605
7,453
6,885
 3,327
2,934
2,881
 5,278
4,519
4,004
Asset & Wealth Management12,918
12,045
12,119
 9,301
8,478
8,886
 3,617
3,567
3,233
Corporate1,140
(487)267
 501
462
977
 639
(949)(710)
Total$103,641
$99,142
$96,633
 $58,434
$55,771
$59,014
 $45,207
$43,371
$37,619
Year ended December 31,Consumer & Community Banking Corporate & Investment Bank Commercial Banking
(in millions, except ratios)2019
2018
2017
 2019
2018
2017
 2019
2018
2017
Total net revenue$55,883
$52,079
$46,485
 $38,298
$36,448
$34,657
 $8,984
$9,059
$8,605
Total noninterest expense28,896
27,835
26,062
 21,519
20,918
19,407
 3,500
3,386
3,327
Pre-provision profit/(loss)26,987
24,244
20,423
 16,779
15,530
15,250
 5,484
5,673
5,278
Provision for credit losses4,952
4,753
5,572
 277
(60)(45) 296
129
(276)
Net income/(loss)16,641
14,852
9,395
 11,922
11,773
10,813
 3,924
4,237
3,539
Return on equity (“ROE”)31%28%17% 14%16%14% 17%20%17%
Year ended December 31,Provision for credit losses Net income/(loss) Return on equity
(in millions, except ratios)2017
2016
2015
 2017
2016
2015
 2017
2016
2015
Consumer & Community Banking$5,572
$4,494
$3,059
 $9,395
$9,714
$9,789
 17%18%18%
Corporate & Investment Bank(45)563
332
 10,813
10,815
8,090
 14
16
12
Commercial Banking(276)282
442
 3,539
2,657
2,191
 17
16
15
Asset & Wealth Management39
26
4
 2,337
2,251
1,935
 25
24
21
Corporate—
(4)(10) (1,643)(704)2,437
  NM NM NM
Total$5,290
$5,361
$3,827
 $24,441
$24,733
$24,442
 10%10%11%
Year ended December 31,Asset & Wealth Management Corporate Total
(in millions, except ratios)2019
2018
2017
 2019
2018
2017
 2019
2018
2017
Total net revenue$14,316
$14,076
$13,835
 $1,211
$(128)$1,140
 $118,692
$111,534
$104,722
Total noninterest expense10,515
10,353
10,218
 1,067
902
501
 65,497
63,394
59,515
Pre-provision profit/(loss)3,801
3,723
3,617
 144
(1,030)639
 53,195
48,140
45,207
Provision for credit losses61
53
39
 (1)(4)—
 5,585
4,871
5,290
Net income/(loss)2,833
2,853
2,337
 1,111
(1,241)(1,643) 36,431
32,474
24,441
Return on equity (“ROE”)26%31%25%  NM
 NM
NM
 15%13%10%

Note: Net income in 2019 and 2018 for each of the business segments reflects the favorable impact of the reduction in the U.S. federal statutory income tax rate as a result of the TCJA.
The following sections provide a comparative discussion of businessthe Firms results by segment results as of or for the years ended December 31, 2017, 20162019 and 2015.2018.




56JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K61

Management’s discussion and analysis


CONSUMER & COMMUNITY BANKING
Consumer & 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.
 
Selected income statement dataSelected income statement data    Selected income statement data    
Year ended December 31,  
(in millions, except ratios)2017 2016 20152019 2018 2017
Revenue          
Lending- and deposit-related fees$3,431
 $3,231
 $3,137
$3,859
 $3,624
 $3,431
Asset management, administration and commissions2,212
 2,093
 2,172
2,499
 2,402
 2,212
Mortgage fees and related income1,613
 2,490
 2,511
2,035
 1,252
 1,613
Card income4,024
 4,364
 5,491
4,847
 4,554
 4,024
All other income3,430
 3,077
 2,281
5,402
 4,428
 3,430
Noninterest revenue14,710
 15,255
 15,592
18,642
 16,260
 14,710
Net interest income31,775
 29,660
 28,228
37,241
 35,819
 31,775
Total net revenue46,485
 44,915
 43,820
55,883
 52,079
 46,485
          
Provision for credit losses5,572
 4,494
 3,059
4,952
 4,753
 5,572
          
Noninterest expense          
Compensation expense10,159
 9,723
 9,770
10,700
 10,534
 10,133
Noncompensation expense(a)
15,903
 15,182
 15,139
18,196
 17,301
 15,929
Total noninterest expense26,062
 24,905
 24,909
28,896
 27,835
 26,062
Income before income tax expense14,851
 15,516
 15,852
22,035
 19,491
 14,851
Income tax expense5,456
 5,802
 6,063
5,394
 4,639
 5,456
Net income$9,395
 $9,714
 $9,789
$16,641
 $14,852
 $9,395
          
Revenue by line of business          
Consumer & Business Banking$21,104
 $18,659
 $17,983
$26,495
 $24,805
 $21,104
Home Lending5,955
 7,361
 6,817
5,179
 5,484
 5,955
Card, Merchant Services & Auto19,426
 18,895
 19,020
24,209
 21,790
 19,426
          
Mortgage fees and related income details:          
Net production revenue636
 853
 769
1,618
 268
 636
Net mortgage servicing
revenue(b)
977
 1,637
 1,742
417
 984
 977
Mortgage fees and related income$1,613
 $2,490
 $2,511
$2,035
 $1,252
 $1,613
          
Financial ratios          
Return on equity17% 18% 18%31% 28% 17%
Overhead ratio56
 55
 57
52
 53
 56
Note: In the discussion and the tables which follow, CCB presents certainfinancial measures which exclude the impact of PCI loans; these are non-GAAP financial measures.
(a)Included operating lease depreciation expense on leased assets of $2.7$4.1 billion, $1.9$3.4 billion and $1.4$2.7 billion for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
(b)
Included MSR risk management results of $(242)$(165) million, $217$(111) million and $(117)$(242) million for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, respectively.
respectively.


62JPMorgan Chase & Co./2017 Annual Report572019 Form 10-K
Management’s discussion and analysis


20172019 compared with 20162018
Net income was $9.4$16.6 billion, a decreasean increase of 3%, driven by higher noninterest expense and provision for credit losses, largely offset by higher net revenue.12%.
Net revenue was $46.5$55.9 billion, an increase of 3%7%. Net production revenue included approximately $500 million of gains on the sales of certain mortgage loans that were predominantly offset by charges in net interest income for the unwind of the related internal funding from Treasury and CIO associated with these loans. The charges reflect the net present value of that funding and is recognized as interest income in Treasury and CIO. Refer to Corporate on pages 77–78 and Funds Transfer Pricing (“FTP”) on page 61 of this Form 10-K for further information.
Net interest income was $31.8$37.2 billion, up 7%4%, and included charges from the loan sales mentioned above. Excluding these charges, net interest income increased, driven by higher deposit balances, deposit margin expansion, and by:
higher loan balances and margin expansion in Card, as well as higher deposit margins and growth in deposit balances in CBB,
partially offset by
lower loan balances due to loan sales, as well as loan spread compression from higher rates, including the impact of higher funding costs in Home LendingLending.
Noninterest revenue was $18.6 billion, up 15%, and Auto andincluded gains from the loan sales mentioned above as well as the impact of the saleprior-year adjustment of approximately $330 million to the student loan portfolio.
Noninterestcredit card rewards liability. Excluding these notable items, noninterest revenue was $14.7 billion, down 4%increased 9%, driven by:
higher new account origination costs in Card,
lower MSR risk management results,
the absence in the current year of a gain on the sale of Visa Europe interests,
lower net production revenue reflecting lower mortgage production margins and volumes, and
lower mortgage servicing revenue as a result of a lower level of third-party loans serviced
largely offset by
higher auto lease volume, and
higher card-net mortgage production revenue reflecting higher production volumes and deposit-related fees.margins,
Seepartially offset by
lower net mortgage servicing revenue driven by lower operating revenue reflecting faster prepayment speeds on lower rates and the impact of reclassifying certain loans to held-for-sale.
Refer to Note 15 for further information regarding changes in value of the MSR asset and related hedges, and mortgage fees and related income.
Noninterest expense was $26.1$28.9 billion, an increase of 5%up 4%, driven by:
investments in the business including technology and marketing and higher depreciation on auto lease depreciation, and
continued business growthassets,
partially offset by
two items totaling $175 million included in the prior year related to liabilities from a merchant bankruptcyexpense efficiencies and mortgage servicing reserves.lower FDIC charges.
The provision for credit losses was $5.6$5.0 billion, an increase of 24%4%, reflecting:
$445 million of higher net charge-offs, primarilyan increase 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
–higher net charge-offs on loan growth, in line with expectations, and
–a $500 million addition to the allowance for loan losses reflecting loan growth and higher loss rates, as newer vintages season and become a larger part of the portfolio, compared to a $300 million addition in the prior year
largely offset by
a decrease in net charge-offs in the residential real estate portfolio reflecting continued improvement in home prices and delinquencies,
a $415 million higher addition to the allowance for credit losses related to theconsumer, excluding credit card portfolio driven by higher loss rates and loan growth, and a lower reduction in the allowance for the residential real estate portfolio predominantly driven by continued improvement in home prices and delinquencies, anddue to
–a $650 million reduction in the allowance for loan losses in the PCI residential real estate portfolio, reflecting continued improvement in home prices and delinquencies, and a $100 million reduction in the allowance for loan losses in the non credit-impaired residential real estate portfolio, compared to a $250 million reduction in the PCI residential real estate portfolio in the prior year, and
–a $50 million reduction in the allowance for loan losses in the business banking portfolio
a $218 million impact in connection with the sale of the student loan portfolio.
The sale of the student loan portfolio during 2017 did not have a material impact on the Firm’s Consolidated Financial Statements.
2016 compared with 2015
Net income was $9.7 billion, a decrease of 1%, driven by higher provision for credit losses, predominantly offset by higher net revenue.
Net revenue was $44.9 billion, an increase of 2%.
Net interest income was $29.7 billion, up 5%, driven by higher deposit balances and higher loan balances, partially offset by deposit spread compression and an increase in the reserve for uncollectible interest and fees in Card.
–lower net recoveries in the residential real estate portfolio as the prior year benefited from larger recoveries on loan sales.
Noninterest revenue was $15.3 billion, down 2%, driven by higher new account origination costs and the impact of renegotiated co-brand partnership agreements in Card and lower mortgage servicing revenue predominantly as a result of a lower level of third-party loans serviced; these factors were predominantly offset by higher auto lease and card sales volume, higher card- and deposit-related fees, higher MSR risk management results and a gain on the sale of Visa Europe interests. See Note 15 for further information regarding changes in value of the MSR asset and related hedges, and mortgage fees and related income.
Noninterest expense of $24.9 billion was flat, driven by:
lower legal expense and branch efficiencies
offset by
higher auto lease depreciation, and
higher investment in marketing.
The provision for credit losses was $4.5 billion, an increase of 47%, reflecting:
a $920 million increase related to the credit card portfolio, due to a $600 million addition in the allowance for loan losses, as well as $320 million of higher net charge-offs, driven by loan growth, including growth in newer vintages which, as anticipated, have higher loss rates compared to the overall portfolio,
a $450 million lower benefit related to the residential real estate portfolio, as the current year reduction in the allowance for loan losses was lower than the prior year. The reduction in both periods reflected continued improvements in home prices and lower delinquencies, and
a $150 million increase related to the auto and business banking portfolio, due to additions to the allowance for loan losses and higher net charge-offs, reflecting loan growth in the portfolios.





58JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K63

Management’s discussion and analysis


Selected metricsSelected metrics    Selected metrics    
As of or for the year ended
December 31,		          
(in millions, except headcount)2017 2016 20152019 2018 2017
Selected balance sheet data (period-end)          
Total assets$552,601
 $535,310
 $502,652
$539,090
 $557,441
 $552,601
Loans:          
Consumer & Business Banking25,789
 24,307
 22,730
27,199
 26,612
 25,789
Home equity42,751
 50,296
 58,734
30,163
 36,013
 42,751
Residential mortgage197,339
 181,196
 164,500
169,636
 203,859
 197,339
Home Lending240,090
 231,492
 223,234
199,799
 239,872
 240,090
Card149,511
 141,816
 131,463
168,924
 156,632
 149,511
Auto66,242
 65,814
 60,255
61,522
 63,573
 66,242
Student—
 7,057
 8,176
Total loans481,632
 470,486
 445,858
457,444
 486,689
 481,632
Core loans415,167
 382,608
 341,881
414,107
 434,466
 415,167
Deposits659,885
 618,337
 557,645
718,416
 678,854
 659,885
Equity51,000
 51,000
 51,000
52,000
 51,000
 51,000
Selected balance sheet data (average)          
Total assets$532,756
 $516,354
 $472,972
$542,191
 $547,368
 $532,756
Loans:          
Consumer & Business Banking24,875
 23,431
 21,894
26,608
 26,197
 24,875
Home equity46,398
 54,545
 63,261
32,975
 39,133
 46,398
Residential mortgage190,242
 177,010
 140,294
186,557
 202,624
 190,242
Home Lending236,640
 231,555
 203,555
219,532
 241,757
 236,640
Card140,024
 131,165
 125,881
156,325
 145,652
 140,024
Auto65,395
 63,573
 56,487
61,862
 64,675
 65,395
Student2,880
 7,623
 8,763
—
 —
 2,880
Total loans469,814
 457,347
 416,580
464,327
 478,281
 469,814
Core loans393,598
 361,316
 301,700
416,694
 419,066
 393,598
Deposits640,219
 586,637
 530,938
693,550
 670,388
 640,219
Equity51,000
 51,000
 51,000
52,000
 51,000
 51,000
          
Headcount134,117
 132,802
 127,094
127,137
 129,518
 133,721


 
Selected metricsSelected metrics Selected metrics    
As of or for the year ended
December 31,		     
(in millions, except ratio data)20172016201520192018 2017 
Credit data and quality statistics     
Nonaccrual loans(a)(b)
$4,084
$4,708
$5,313
$3,018
$3,339
 $4,084
 
Net charge-offs/(recoveries)(c)
     
Consumer & Business Banking257
257
253
296
236
 257
 
Home equity63
184
283
(48)(7) 63
 
Residential mortgage(16)14
2
(50)(287) (16) 
Home Lending47
198
285
(98)(294) 47
 
Card4,123
3,442
3,122
4,848
4,518
 4,123
 
Auto331
285
214
206
243
 331
 
Student498
162
210
—
—
 498
(g) 
Total net charge-offs/(recoveries)$5,256
$4,344
$4,084
$5,252
$4,703
 $5,256
(g) 
     
Net charge-off/(recovery) rate(c)
     
Consumer & Business Banking1.03%1.10%1.16%1.11 %0.90% 1.03% 
Home equity(d)
0.18
0.45
0.60
(0.19)(0.02) 0.18
 
Residential mortgage(d)
(0.01)0.01
—
(0.03)(0.16) (0.01) 
Home Lending(d)
0.02
0.10
0.18
(0.05)(0.14) 0.02
 
Card2.95
2.63
2.51
3.10
3.10
 2.95
 
Auto0.51
0.45
0.38
0.33
0.38
 0.51
 
StudentNM
2.13
2.40
—
—
 NM
 
Total net charge-offs/(recovery) rate(d)
1.21
1.04
1.10
1.20
1.04
 1.21
(g) 
30+ day delinquency rate     
Home Lending(e)(f)
1.19%1.23%1.57%0.76 %0.77% 1.19% 
Card1.80
1.61
1.43
1.87
1.83
 1.80
 
Auto0.89
1.19
1.35
0.94
0.93
 0.89
 
Student(g)
—
1.60
1.81
     
90+ day delinquency rate - Card0.92
0.81
0.72
0.95
0.92
 0.92
 
     
Allowance for loan losses     
Consumer & Business Banking$796
$753
$703
$746
$796
 $796
 
Home Lending, excluding PCI loans1,003
1,328
1,588
903
1,003
 1,003
 
Home Lending — PCI loans(c)
2,225
2,311
2,742
987
1,788
 2,225
 
Card4,884
4,034
3,434
5,683
5,184
 4,884
 
Auto464
474
399
465
464
 464
 
Student—
249
299
Total allowance for loan losses(c)
$9,372
$9,149
$9,165
$8,784
$9,235
 $9,372
 
(a)Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as each of the pools is performing.
(b)At December 31, 2017, 20162019, 2018 and 2015,2017, 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 billion, $5.0$961 million, $2.6 billion and $6.3$4.3 billion, respectively; and (2) student loans insured by U.S. government agencies under the Federal Family Education Loan Program (“FFELP”) of zero, $263 million and $290 million, respectively. These amounts have been excluded based upon the government guarantee.
(c)Net charge-offscharge-offs/(recoveries) and the net charge-offcharge-off/(recovery) rates for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, excluded $86$151 million, $156$187 million and $208$86 million, respectively, of write-offs in the PCI portfolio. These write-offs decreased the allowance for loan losses for PCI loans. For further information on PCI write-offs, see summaryRefer to Summary of changes in the allowance for credit losses on page 118.117 for further information on PCI write-offs.
(d)Excludes the impact of PCI loans. For the years ended December 31, 2017, 20162019, 2018 and 2015,2017, the net charge-offcharge-off/(recovery) rates including the impact of PCI loans were as follows: (1) home equity of 0.14%(0.15)%, 0.34%(0.02)% and 0.45%0.14%, respectively; (2) residential mortgage of (0.01)(0.03)%, 0.01%(0.14)% and –%(0.01)%, respectively; (3) Home Lending of 0.02%, 0.09% and 0.14%, respectively; and (4) total CCB of 1.12%, 0.95% and 0.99%, respectively.


64JPMorgan Chase & Co./2017 Annual Report592019 Form 10-K
Management’s discussion

Home Lending of (0.05)%, (0.12)% and analysis0.02%, respectively; and (4) total CCB of 1.14%, 0.98% and 1.12%, respectively.

(e)At December 31, 2017, 20162019, 2018 and 2015,2017, excluded mortgage loans insured by U.S. government agencies of $6.2$1.7 billion, $7.0$4.1 billion and $8.4$6.2 billion, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.
(f)Excludes PCI loans. The 30+ day delinquency rate for PCI loans was 10.13%8.44%, 9.82%9.16% and 11.21%10.13% at December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
(g)ExcludedExcluding net charge-offs of $467 million related to the student loans insured by U.S. government agencies under FFELP of $468 million and $526 million at December 31, 2016 and 2015, respectively, that are 30 or more days past due. These amountsloan portfolio transfer, the total net charge-off rates for the full year 2017 would have been excluded based upon the government guarantee.1.10%.

 
Selected metricsSelected metrics    Selected metrics 
As of or for the year ended December 31,      
(in billions, except ratios and where otherwise noted)2017 2016 2015201920182017
Business Metrics       
CCB households (in millions)(a)
61.0
 60.4
 58.1
62.6
61.7
61.1
Number of branches5,130
 5,258
 5,413
4,976
5,036
5,130
Active digital customers
(in thousands)(b)(a)
46,694
 43,836
 39,242
52,421
49,254
46,694
Active mobile customers
(in thousands)(c)(b)
30,056
 26,536
 22,810
37,297
33,260
30,056
Debit and credit card sales volume(a)
$916.9
 $821.6
 $754.1
$1,114.4
$1,016.9
$916.9
      
Consumer & Business Banking     Consumer & Business Banking 
Average deposits$625.6
 $570.8
 $515.2
$678.9
$656.5
$625.6
Deposit margin1.98% 1.81% 1.90%2.49%2.38%1.98%
Business banking origination volume$7.3
 $7.3
 $6.8
$6.6
$6.7
$7.3
Client investment assets273.3
 234.5
 218.6
358.0
282.5
273.3
      
Home Lending      
Mortgage origination volume by channel      
Retail$40.3
 $44.3
 $36.1
$51.0
$38.3
$40.3
Correspondent57.3
 59.3
 70.3
54.2
41.1
57.3
Total mortgage origination volume(d)(c)
$97.6
 $103.6
 $106.4
$105.2
$79.4
$97.6
Total loans serviced
(period-end)
$816.1
 $846.6
 $910.1
$761.4
$789.8
$816.1
Third-party mortgage loans serviced (period-end)553.5
 591.5
 674.0
520.8
519.6
553.5
MSR carrying value
(period-end)
6.0
 6.1
 6.6
4.7
6.1
6.0
Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end)1.08% 1.03% 0.98%0.90%1.17%1.08%
      
MSR revenue multiple(e)(d)
3.09x 2.94x 2.80x2.65x3.34x3.09x
      
Card, excluding Commercial Card     Card, excluding Commercial Card 
Credit card sales volume$622.2
 $545.4
 $495.9
$762.8
$692.4
$622.2
New accounts opened
(in millions)
8.4
 10.4
 8.7
7.8
7.8
8.4
      
Card Services      
Net revenue rate10.57% 11.29% 12.33%11.52%11.27%10.57%
      
Merchant Services      
Merchant processing volume$1,191.7
 $1,063.4
 $949.3
$1,511.5
$1,366.1
$1,191.7
      
Auto      
Loan and lease origination volume$33.3
 $35.4
 $32.4
$34.0
$31.8
$33.3
Average Auto operating lease assets15.2
 11.0
 7.8
21.6
18.8
15.2
(a)The prior period amounts have been revised to conform with the current period presentation.
(b)Users of all web and/or mobile platforms who have logged in within the past 90 days.
(c)(b)Users of all mobile platforms who have logged in within the past 90 days.
(d)(c)Firmwide mortgage origination volume was $107.6$115.9 billion, $117.4$86.9 billion and $115.2$107.6 billion for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
(e)(d)Represents the ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) divided by the ratio of loan servicing-related revenue to third-party mortgage loans serviced (average).

60JPMorgan Chase & Co./2017 Annual Report

Mortgage servicing-related matters
The Firm has resolved the majority of the consent orders and settlements into which it entered with federal and state governmental agencies and private parties related to mortgage servicing, origination, and residential mortgage-backed securities activities. On January 12, 2018, the Board of Governors of the Federal Reserve System terminated its mortgage servicing-related Consent Order with the Firm, which had been outstanding since April 2011.
Some of the remaining obligations are overseen by an independent reviewer, who publishes periodic reports detailing the Firm’s compliance with the obligations.


JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 6165
Management’s discussion and analysis


CORPORATE & INVESTMENT BANK

The 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-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.
Selected income statement data  
Year ended December 31, 
(in millions)2019 2018 2017
Revenue     
Investment banking fees$7,575
 $7,473
 $7,356
Principal transactions14,396
 12,271
 10,873
Lending- and deposit-related fees1,518
 1,497
 1,531
Asset management, administration and commissions4,545
 4,488
 4,207
All other income1,108
 1,239
 572
Noninterest revenue29,142
 26,968
 24,539
Net interest income9,156
 9,480
 10,118
Total net revenue(a)
38,298
 36,448
 34,657
      
Provision for credit losses277
 (60) (45)
      
Noninterest expense     
Compensation expense10,618
 10,215
 9,531
Noncompensation expense10,901
 10,703
 9,876
Total noninterest expense21,519
 20,918
 19,407
Income before income tax expense16,502
 15,590
 15,295
Income tax expense4,580
 3,817
 4,482
Net income$11,922
 $11,773
 $10,813
Selected income statement data  
Year ended December 31, 
(in millions)2017 2016 2015
Revenue     
Investment banking fees$7,192
 $6,424
 $6,736
Principal transactions10,873
 11,089
 9,905
Lending- and deposit-related fees1,531
 1,581
 1,573
Asset management, administration and commissions4,207
 4,062
 4,467
All other income572
 1,169
 1,012
Noninterest revenue24,375
 24,325
 23,693
Net interest income10,118
 10,891
 9,849
Total net revenue(a)(b)
34,493
 35,216
 33,542
      
Provision for credit losses(45) 563
 332
      
Noninterest expense     
Compensation expense9,535
 9,546
 9,973
Noncompensation expense9,708
 9,446
 11,388
Total noninterest expense19,243
 18,992
 21,361
Income before income tax expense15,295
 15,661
 11,849
Income tax expense4,482
 4,846
 3,759
Net income(a)
$10,813
 $10,815
 $8,090
(a)The full year 2017 results reflect the impact of the enactment of the TCJA including a decrease to net revenue of $259 million and a benefit to net income of $141 million. For additional information related to the impact of the TCJA, see Note 24.
(b)IncludedIncludes tax-equivalent adjustments, predominantly due to income tax credits related to alternative energy investments; income tax credits and amortization of the cost of investments in affordable housing projects; and tax-exempt income from municipal bonds of $2.4$2.3 billion, $2.0$1.7 billion and $1.7$2.4 billion for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
 
Selected income statement dataSelected income statement data  Selected income statement data  
Year ended December 31,  
(in millions, except ratios)2017 2016 20152019 2018 2017
Financial ratios          
Return on equity14% 16% 12%14% 16% 14%
Overhead ratio56
 54
 64
56
 57
 56
Compensation expense as
percentage of total net
revenue
28
 27
 30
28
 28
 28
Revenue by business          
Investment Banking$6,688
 $5,950
 $6,376
$7,215
 $6,987
 $6,852
Treasury Services4,172
 3,643
 3,631
4,565
 4,697
 4,172
Lending1,429
 1,208
 1,461
1,331
 1,298
 1,429
Total Banking12,289
 10,801
 11,468
13,111
 12,982
 12,453
Fixed Income Markets12,812
 15,259
 12,592
14,418
 12,706
 12,812
Equity Markets5,703
 5,740
 5,694
6,494
 6,888
 5,703
Securities Services3,917
 3,591
 3,777
4,154
 4,245
 3,917
Credit Adjustments & Other(a)
(228) (175) 11
121
 (373) (228)
Total Markets & Investor
Services
22,204
 24,415
 22,074
Total Markets & Securities
Services
25,187
 23,466
 22,204
Total net revenue$34,493
 $35,216
 $33,542
$38,298
 $36,448
 $34,657
(a)
Consists primarily ofIncludes credit valuation adjustments (“CVA”) managed centrally within CIB and funding valuation adjustments (“FVA”) and debit valuation adjustments (“DVA”) on derivatives. Resultsderivatives, which are primarily reported in principal transactions revenue. Results are presented net of associated hedging activities and net of CVA and FVA amounts allocated to Fixed Income Markets and Equity Markets. For additional information, see Accounting and Reporting Developments on pages 141–144 andRefer to Notes 2, 3 and 23.
24 for additional information.
20172019 compared with 20162018
Net income was $10.8$11.9 billion, flat compared with the prior year, reflecting lower net revenue and higher noninterest expense, offset by a lower provision for credit losses, and a tax benefit resulting from the vesting of employee share-based awards. The current year included a $141 million benefit to net income as a result of the enactment of the TCJA.up 1%.
Net revenue was $34.5$38.3 billion, down 2%up 5%.
Banking revenue was $12.3$13.1 billion, up 14% compared with the prior year. 1%.
Investment bankingBanking revenue was $6.7$7.2 billion, up 12% from the prior year, driven3%, with higher debt underwriting fees, largely offset by higher debtlower advisory and equity underwriting fees. The Firm maintained its #1 ranking for Global Investment Banking fees with overall share gains, according to Dealogic. Debt underwriting fees were $3.6 billion, up 16% driven by a higher share of fees and an overall increase in industry-wide fees; the Firm maintained its #1 ranking globally in fees across high-grade, high-yield, and loan products. Equity underwriting fees were $1.4 billion, up 20% driven by growth in industry-wide issuance including a strong IPO market; the Firm ranked #2 in equity underwriting fees globally. Advisory fees were $2.2 billion, up 2%; the Firm maintained its #2 ranking for M&A.
–Debt underwriting fees were $3.5 billion, up 8%, reflecting wallet share gains and increased activity in investment-grade and high-yield bonds.
–Advisory fees were $2.4 billion, down 5%, and Equity underwriting fees were $1.7 billion, down 1%, driven by a decline in industry-wide fees despite wallet share gains.
Treasury Services revenue was $4.2$4.6 billion, up 15%down 3%, driven by the impact ofdeposit margin compression predominantly offset by higher interest ratesbalances and growth in operating deposits. fee growth.
Lending revenue was $1.4$1.3 billion, up 3%, with higher net interest income largely offset by losses on hedges of accrual loans.


6266 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




18% from the prior year, reflecting lower fair value losses on hedges of accrual loans.
Markets & InvestorSecurities Services revenue was $22.2$25.2 billion, down 9% fromup 7%. Markets revenue was $20.9 billion, up 7% which included a gain on the prior year. IPO of Tradeweb in the second quarter of 2019. Prior year results included approximately $500 million of fair value gains recorded in the first quarter of 2018 related to the adoption of the recognition and measurement accounting guidance for certain equity investments previously held at cost.
Fixed Income Markets revenue was $12.8$14.4 billion, down 16%up 13%, as lower revenue across products was driven by sustained low volatility, tighter credit spreads, andreflecting an overall strong performance, notably in Securitized Products. The increase in 2019 also reflected the impact fromof challenging market conditions in Credit and Rates in the TCJA on tax-oriented investmentsfourth quarter of $259 million, against a strong prior year. 2018.
Equity Markets revenue was $5.7$6.5 billion, down 1% from the6%, compared to a strong prior year, and included a fair value loss of $143 million on a margin loan to a single client. Excluding the fair value loss, Equity Markets revenue was higher driven by higher revenuelower client activity in Prime Services and Cash Equities,derivatives partially offset by lower revenuehigher client activity in derivatives. Cash Equities.
Securities Services revenue was $3.9$4.2 billion, up 9%down 2%, driven by deposit margin compression and the impact of higher interest rates and deposit growth, as well as higher asset-based fees drivena business exit largely offset by higher market levels. organic growth.
Credit Adjustments & Other was a gain of $121 million reflecting tighter funding spreads on derivatives, compared with a loss of $228$373 million driven by valuation adjustments.in the prior year.
The provision for credit losses was $277 million, compared with a benefit of $45$60 million which included a net reductionbenefit in the allowance for credit losses driven by the Oil & Gas and Metals & Mining portfolios partially offset by a netprior year. This increase in the allowance for credit losses for a single client. The prior year was an expense of $563 million, which included an additionreflects additions to the allowance for credit losses driven byin the current year on select client downgrades, and a benefit related to a single name in the Oil & Gas portfolio and Metals & Mining portfolios.higher recoveries, both in the prior year.
Noninterest expense was $19.2$21.5 billion, up 1% compared with the prior year.
2016 compared with 2015
Net income was $10.8 billion, up 34% compared with the prior year,3%, predominantly driven by lower noninteresthigher volume-related expenses and investments, including front office and technology staff hires, as well as higher legal expense, and higher net revenue, partially offset by a higher provision for credit losses.
Banking revenue was $10.8 billion, down 6% compared with the prior year. Investment banking revenue was $6.0 billion, down 7% from the prior year, largely driven by lower equity underwriting fees. The Firm maintained its #1 ranking for Global Investment Banking fees, according to
Dealogic. Equity underwriting fees were $1.2 billion, down 19% driven by lower industry-wide fee levels; however, the Firm improved its market share and maintained its #1 ranking in equity underwriting fees globally as well as in both North America and Europe and its #1 ranking by volumes across all products, according to Dealogic. Advisory fees were $2.1 billion, down 1%; the Firm maintained its #2 ranking for M&A, according to Dealogic. Debt underwriting fees were $3.2 billion; the Firm maintained its #1 ranking globally in fees across high grade, high yield, and loan products, according to Dealogic. Treasury Services revenue was $3.6 billion. Lending revenue was $1.2 billion, down 17% from the prior year, reflecting fair value losses on hedges of accrual loans.
Markets & Investor Services revenue was $24.4 billion, up 11% from the prior year. Fixed Income Markets revenue was $15.3 billion, up 21% from the prior year, driven by broad strength across products. Rates performance was strong, with increased client activity driven by high issuance-based flows, global political developments, and central bank actions. Credit and Securitized Products revenue improved driven by higher market-making revenue from the secondary market as clients’ risk appetite recovered, and due to increased financing activity. Equity Markets revenue was $5.7 billion, up 1%, compared to a strong prior-year. Securities Services revenue was $3.6 billion, down 5% from the prior year, largely driven by lower fees and commissions. Credit Adjustments and Other was a loss of $175 million driven by valuation adjustments, compared with an $11 million gain in the prior-year, which included funding spread gains on fair value option elected liabilities.
The provision for credit losses was $563 million, compared to $332 million in the prior year, reflecting a higher allowance for credit losses, including the impact of select downgrades within the Oil & Gas portfolio.
Noninterest expense was $19.0 billion, down 11% compared with the prior year, driven by lower legal and compensation expenses.FDIC charges.



JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 6367
Management’s discussion and analysis


Selected metricsSelected metrics    Selected metrics    
As of or for the year ended
December 31,
(in millions, except headcount)
  
2017 2016 20152019 2018 2017
Selected balance sheet data (period-end)          
Assets$826,384
 $803,511
 $748,691
$908,153
 $903,051
 $826,384
Loans:          
Loans retained(a)
108,765
 111,872
 106,908
121,733
 129,389
 108,765
Loans held-for-sale and loans at fair value4,321
 3,781
 3,698
10,112
 13,050
 4,321
Total loans113,086
 115,653
 110,606
131,845
 142,439
 113,086
Core loans112,754
 115,243
 110,084
131,672
 142,122
 112,754
Equity70,000
 64,000
 62,000
80,000
 70,000
 70,000
Selected balance sheet data (average)          
Assets$857,060
 $815,321
 $824,208
$985,544
 $922,758
 $857,060
Trading assets-debt and equity instruments342,124
 300,606
 302,514
404,363
 349,169
 342,124
Trading assets-derivative receivables56,466
 63,387
 67,263
48,196
 60,552
 56,466
Loans:          
Loans retained(a)
108,368
 111,082
 98,331
122,371
 114,417
 108,368
Loans held-for-sale and loans at fair value4,995
 3,812
 4,572
8,609
 6,412
 4,995
Total loans113,363
 114,894
 102,903
130,980
 120,829
 113,363
Core loans113,006
 114,455
 102,142
130,810
 120,560
 113,006
Equity70,000
 64,000
 62,000
80,000
 70,000
 70,000
          
Headcount51,181
 48,748
 49,067
55,991
 54,480
 51,181
(a)Loans retained includes credit portfolio loans, loans held by consolidated Firm-administered multi-seller conduits, trade finance loans, other held-for-investment loans and overdrafts.

 
Selected metrics          
As of or for the year ended
December 31,
(in millions, except ratios)
  
2017 2016 20152019 2018 2017
Credit data and quality statistics          
Net charge-offs/(recoveries)$71
 $168
 $(19)$183
 $93
 $71
Nonperforming assets:          
Nonaccrual loans:          
Nonaccrual loans retained(a)
812
 467
 428
308
 443
 812
Nonaccrual loans held-for-sale and loans at fair value
—
 109
 10
95
 220
 —
Total nonaccrual loans812
 576
 438
403
 663
 812
Derivative receivables130
 223
 204
30
 60
 130
Assets acquired in loan satisfactions85
 79
 62
70
 57
 85
Total nonperforming assets1,027
 878
 704
503
 780
 1,027
Allowance for credit losses:          
Allowance for loan losses1,379
 1,420
 1,258
1,202
 1,199
 1,379
Allowance for lending-related commitments727
 801
 569
848
 754
 727
Total allowance for credit losses2,106
 2,221
 1,827
2,050
 1,953
 2,106
Net charge-off/(recovery) rate(b)
0.07% 0.15% (0.02)%0.15% 0.08% 0.07%
Allowance for loan losses to period-end loans
retained
1.27
 1.27
 1.18
0.99
 0.93
 1.27
Allowance for loan losses to period-end loans retained, excluding trade finance and conduits(c)
1.92
 1.86
 1.88
1.31
 1.24
 1.92
Allowance for loan losses to nonaccrual loans
retained(a)
170
 304
 294
390
 271
 170
Nonaccrual loans to total period-end loans0.72
 0.50
 0.40
0.31
 0.47
 0.72
(a)Allowance for loan losses of $316$110 million, $113$174 million and $177$316 million were held against these nonaccrual loans at December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
(b)Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.
(c)Management uses allowance for loan losses to period-end loans retained, excluding trade finance and conduits, a non-GAAP financial measure, to provide a more meaningful assessment of CIB’s allowance coverage ratio.


Investment banking fees          
Year ended December 31,Year ended December 31,
(in millions)2017 2016 20152019 2018 2017
Advisory$2,150
 $2,110
 $2,133
$2,377
 $2,509
 $2,150
Equity underwriting1,396
 1,159
 1,434
1,666
 1,684
 1,468
Debt underwriting(a)
3,646
 3,155
 3,169
3,532
 3,280
 3,738
Total investment banking fees$7,192
 $6,424
 $6,736
$7,575
 $7,473
 $7,356
(a)Includes loans syndication.Represents long-term debt and loan syndications.


6468 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




League table results – wallet share
2017 2016 20152019 2018 2017
Year ended
December 31,		RankShare RankShare RankShareRankShare RankShare RankShare
Based on fees(a)
            
Debt, equity and equity-related      
M&A(b)
      
Global#17.4% #1
7.0% #1
7.6%#2
9.2 #2
8.7 #2
8.4
U.S.111.2
 1
11.9
 1
11.5
2
9.4 2
8.9 2
9.0
Long-term debt(b)
      
Equity and equity-related(c)
      
Global17.6
 1
6.7
 1
8.1
1
9.4 1
9.0 2
7.1
U.S.210.9
 2
11.1
 1
11.7
1
13.4 1
12.3 1
11.5
Equity and equity-related      
Global(c)
27.1
 1
7.4
 2
6.9
U.S.111.7
 1
13.3
 1
11.3
M&A(d)
      
Long-term debt(d)
      
Global28.6
 2
8.3
 2
8.4
1
7.8 1
7.2 1
7.8
U.S.29.2
 2
9.8
 2
9.9
1
12.0 1
11.2 2
11.1
Loan syndications            
Global19.5
 1
9.3
 1
7.5
1
10.1 1
9.7 1
9.3
U.S.111.3
 2
11.9
 2
10.8
1
12.8 1
12.3 1
10.9
Global investment banking fees (e)
#18.1% #1
7.9% #1
7.8%#1
9.0 #1
8.6 #1
8.1
(a)Source: Dealogic as of January 1, 2018.2, 2020. Reflects the ranking of revenue wallet and market share.
(b)Global M&A excludes any withdrawn transactions. U.S. M&A revenue wallet represents wallet from client parents based in the U.S.
(c)Global equity and equity-related ranking includes rights offerings and Chinese A-Shares.
(d)Long-term debt rankings include investment-grade, high-yield, supranationals, sovereigns, agencies, covered bonds, asset-backed securities (“ABS”) and mortgage-backed securities (“MBS”); and exclude money market, short-term debt, and U.S. municipal securities.
(c)Global equity and equity-related ranking includes rights offerings and Chinese A-Shares.
(d)Global M&A reflect the removal of any withdrawn transactions. U.S. M&A revenue wallet represents wallet from client parents based in the U.S.
(e)Global investment banking fees exclude money market, short-term debt and shelf deals.
Markets revenue
The following table summarizes select income statement data for the Markets businesses. Markets includes both Fixed Income Markets and Equity Markets. Markets revenue consists ofcomprises principal transactions, fees, commissions and other income, as well as net interest income. The Firm assesses its Markets business performance on a total revenue basis, as offsets may occur across revenue line items. For example, securities that generate net interest income may be risk-managed by derivatives that are recorded in principal transactions. Fortransactions revenue. Refer to Notes 6 and 7 for a description of the composition of these income statement line items, see Notes 6 and 7.items.
Principal transactions reflects revenue on financial instruments and commodities transactions that arise from client-driven market makingmarket-making activity. Principal transactions revenue includes amounts recognized upon executing new transactions with market participants, as well as “inventory-related revenue”, which is revenue recognized from gains and losses on derivatives and other instruments that the
Firm has been holding in anticipation of, or in response to,
client demand, and changes in the fair value of instruments used by the Firm to actively manage the risk exposure arising from such inventory. Principal transactions revenue recognized upon executing new transactions with market participants is driven by many factors including the level of client activity, 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), market liquidity and volatility. These factors are interrelated and sensitive to the same factors that drive inventory-related revenue, which include general market conditions, such as interest rates, foreign exchange rates, credit spreads, and equity and commodity prices, as well as other macroeconomic conditions. 
For the periods presented below, the predominant source of principal transactions revenue was the amount recognized upon executing new transactions.
2017 2016 20152019 2018 2017
Year ended December 31,
(in millions, except where otherwise noted)
Fixed Income MarketsEquity MarketsTotal Markets Fixed Income MarketsEquity MarketsTotal Markets Fixed Income MarketsEquity MarketsTotal MarketsFixed Income MarketsEquity MarketsTotal Markets Fixed Income MarketsEquity MarketsTotal Markets Fixed Income MarketsEquity MarketsTotal Markets
Principal transactions$7,393
$3,855
$11,248
 $8,347
$3,130
$11,477
 $6,899
$3,038
$9,937
$8,786
$5,739
$14,525
 $7,560
$5,566
$13,126
 $7,393
$3,855
$11,248
Lending- and deposit-related fees191
6
197
 220
2
222
 194
—
194
198
7
205
 197
6
203
 191
6
197
Asset management, administration and commissions390
1,635
2,025
 388
1,551
1,939
 383
1,704
2,087
407
1,775
2,182
 410
1,794
2,204
 390
1,635
2,025
All other income436
(21)415
 1,014
13
1,027
 854
(84)770
872
8
880
 952
22
974
 436
(21)415
Noninterest revenue8,410
5,475
13,885
 9,969
4,696
14,665
 8,330
4,658
12,988
10,263
7,529
17,792
 9,119
7,388
16,507
 8,410
5,475
13,885
Net interest income(a)
4,402
228
4,630
 5,290
1,044
6,334
 4,262
1,036
5,298
4,155
(1,035)3,120
 3,587
(500)3,087
 4,402
228
4,630
Total net revenue$12,812
$5,703
$18,515
 $15,259
$5,740
$20,999
 $12,592
$5,694
$18,286
$14,418
$6,494
$20,912
 $12,706
$6,888
$19,594
 $12,812
$5,703
$18,515
Loss days(b)
4  0  2 1  5  4 
(a)DeclinesThe decline in Markets net interest income in 2017 were2018 was driven by higher funding costs.
(b)Loss days represent the number of days for which Markets posted losses. The loss days determined under this measure differ from the disclosure of daily market risk-related gains and losses for the Firm in the value-at-risk (“VaR”) back-testing discussion on pages 123–125.121–123.


JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 6569
Management’s discussion and analysis


Selected metrics          
As of or for the year ended
December 31,
(in millions, except where otherwise noted)
2017 2016 20152019 2018 2017
Assets under custody (“AUC”) by asset class (period-end) (in billions):          
Fixed Income$13,043
 $12,166
 $12,042
$13,498
 $12,440
 $13,043
Equity7,863
 6,428
 6,194
10,100
 8,078
 7,863
Other(a)
2,563
 1,926
 1,707
3,233
 2,699
 2,563
Total AUC$23,469
 $20,520
 $19,943
$26,831
 $23,217
 $23,469
Client deposits and other third party liabilities (average)(b)
$408,911
 $376,287
 $395,297
$464,770
 $434,422
 $408,911
Trade finance loans (period-end)17,947
 15,923
 19,255
(a)Consists of mutual funds, unit investment trusts, currencies, annuities, insurance contracts, options and other contracts.
(b)Client deposits and other third partythird-party liabilities pertain to the Treasury Services and Securities Services businesses.
International metricsInternational metrics    International metrics    
Year ended December 31, 
(in millions, except where otherwise noted)2017 2016 2015
As of or for the year ended
December 31,
(in millions, except where otherwise noted)
2019 
2018(c)
 
2017(c)
Total net revenue(a)
          
Europe/Middle East/Africa$11,328
 $10,786
 $10,894
$11,718
 $12,260
 $11,590
Asia/Pacific4,525
 4,915
 4,901
Asia-Pacific5,330
 5,077
 4,313
Latin America/Caribbean1,125
 1,225
 1,096
1,549
 1,473
 1,232
Total international net revenue16,978
 16,926
 16,891
18,597
 18,810
 17,135
North America17,515
 18,290
 16,651
19,701
 17,638
 17,522
Total net revenue$34,493
 $35,216
 $33,542
$38,298
 $36,448
 $34,657
          
Loans retained (period-end)(a)
          
Europe/Middle East/Africa$25,931
 $26,696
 $24,622
$23,056
 $24,842
 $23,689
Asia/Pacific15,248
 14,508
 17,108
Asia-Pacific15,144
 17,192
 15,385
Latin America/Caribbean6,546
 7,607
 8,609
6,189
 6,515
 5,895
Total international loans47,725
 48,811
 50,339
44,389
 48,549
 44,969
North America61,040
 63,061
 56,569
77,344
 80,840
 63,796
Total loans retained$108,765
 $111,872
 $106,908
$121,733
 $129,389
 $108,765
          
Client deposits and other third-party liabilities (average)(a)(b)
     
Client deposits and other third-party liabilities (average)(b)
     
Europe/Middle East/Africa$154,582
 $135,979
 $141,062
$174,477
 $162,846
 $154,654
Asia/Pacific76,744
 68,110
 67,111
Asia-Pacific90,364
 82,867
 76,673
Latin America/Caribbean25,419
 22,914
 23,070
29,027
 26,668
 25,490
Total international$256,745
 $227,003
 $231,243
$293,868
 $272,381
 $256,817
North America152,166
 149,284
 164,054
170,902
 162,041
 152,094
Total client deposits and other third-party liabilities$408,911
 $376,287
 $395,297
$464,770
 $434,422
 $408,911
          
AUC (period-end) (in billions)(a)
     
AUC (period-end)(b)
(in billions)
     
North America$13,971
 $12,290
 $12,034
$16,855
 $14,359
 $13,971
All other regions9,498
 8,230
 7,909
9,976
 8,858
 9,498
Total AUC$23,469
 $20,520
 $19,943
$26,831
 $23,217
 $23,469
(a)Total net revenue is based predominantly on the domicile of the client or location of the trading desk, as applicable. Loans outstandingand loans retained (excluding loans held-for-sale and loans at fair value), are based on the location of the trading desk, booking location, or domicile of the client, as applicable.
(b)Client deposits and other third-party liabilities pertaining to the Treasury Services and Securities Services businesses, and AUC, are based predominantly on the domicile of the client.
(b)(c)Client deposits and other third party liabilities pertainThe prior period amounts have been revised to conform with the Treasury Services and Securities Services businesses.current period presentation.




6670 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




COMMERCIAL BANKING
Commercial Banking delivers extensive industry knowledge, localexpertise 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, CB 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.
Selected income statement dataSelected income statement data    Selected income statement data    
Year ended December 31,
(in millions)
2017 2016 20152019 2018 2017
Revenue          
Lending- and deposit-related fees$919
 $917
 $944
$913
 $870
 $919
Asset management, administration and commissions68
 69
 88
All other income(a)
1,535
 1,334
 1,333
1,517
 1,473
 1,603
Noninterest revenue2,522
 2,320
 2,365
2,430
 2,343
 2,522
Net interest income6,083
 5,133
 4,520
6,554
 6,716
 6,083
Total net revenue(b)
8,605
 7,453
 6,885
8,984
 9,059
 8,605
          
Provision for credit losses(276) 282
 442
296
 129
 (276)
          
Noninterest expense          
Compensation expense1,470
 1,332
 1,238
1,785
 1,694
 1,534
Noncompensation expense1,857
 1,602
 1,643
1,715
 1,692
 1,793
Total noninterest expense3,327
 2,934
 2,881
3,500
 3,386
 3,327
          
Income before income tax expense5,554
 4,237
 3,562
5,188
 5,544
 5,554
Income tax expense2,015
 1,580
 1,371
1,264
 1,307
 2,015
Net income$3,539
 $2,657
 $2,191
$3,924
 $4,237
 $3,539
(a)IncludesEffective in the first quarter of 2019, includes revenue from investment banking products, and commercial card transactions.transactions and asset management fees. The prior period amounts have been revised to conform with the current period presentation.
(b)Total net revenue included tax-equivalent adjustments from income tax credits related to equity investments in designated community development entities that provide loans to qualified businessesand in low-income communities,entities established for rehabilitation of historic properties, as well as tax-exempt income related to municipal financing activities of $699$460 million, $505$444 million and $493$699 million for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, respectively. The 2017 results reflect the impact of the enactment of the TCJA including a benefit to all other income of $115 million on certain investments in the Community Development Banking business. For additional information related to the impact of the TCJA, see Note 24.



 
20172019 compared with 20162018
Net income was $3.9 billion, a decrease of 7%.
Net revenue was $9.0 billion, a decrease of 1%. Net interest income was $6.6 billion, a decrease of 2%, predominantly driven by lower deposit margins. Noninterest revenue was $2.4 billion, an increase of 4%, driven by higher investment banking revenue, predominantly due to increased equity underwriting and M&A activity, and growth in lending and deposit related fees.
Noninterest expense was $3.5 billion, an increase of 33% compared with the prior year,3%, driven by higher net revenue and a lower provision for credit losses, partiallycontinued investments in the business, largely offset by higher noninterest expense.
Net revenue was $8.6 billion, an increase of 15% compared with the prior year. Net interest income was $6.1 billion, an increase of 19% compared with the prior year, driven by higher deposit spreads and loan growth. Noninterest revenue was $2.5 billion, an increase of 9% compared with the prior year, predominantly driven by higher Community Development Banking revenue, including a $115 million benefit for the impact of the TCJA on certain investments, and higher investment banking revenue.
Noninterest expense was $3.3 billion, an increase of 13% driven by hiring of bankers and business-related support staff, investments in technology, and an impairment of approximately $130 million on certain leased equipment, the majority of which was sold subsequent to year-end.lower FDIC charges.
The provision for credit losses was a benefit of $276$296 million, driven by net reductionsup from $129 million in the prior year. The increase in the provision reflects additions to the allowance for credit
losses including in the Oil & Gas, Natural Gas Pipelines and Metals & Mining portfolios. The prior year provision for credit losses was $282 million driven by downgrades in the Oil & Gas portfolio andon select client downgrades in other industries.
2016 compared with 2015
Net income was $2.7 billion, an increase of 21% compared withthe current year and higher recoveries in the prior year, driven by higher net revenue and a lower provision for credit losses, partially offset by higher noninterest expense.year.
Net revenue was $7.5 billion, an increase of 8% compared with the prior year. Net interest income was $5.1 billion, an increase of 14% compared with the prior year, driven by higher loan balances and deposit spreads. Noninterest revenue was $2.3 billion, a decrease of 2% compared with the prior year, largely driven by lower lending-and-deposit-related fees and other revenue, partially offset by higher investment banking revenue.
Noninterest expense was $2.9 billion, an increase of 2% compared with the prior year, reflecting increased hiring of bankers and business-related support staff and investments in technology.
The provision for credit losses was $282 million and $442 million for 2016 and 2015, respectively, with both periods driven by downgrades in the Oil & Gas portfolio and select client downgrades in other industries.
















JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 6771
Management’s discussion and analysis


CB product revenue consists of the following:
Lending includes a variety of financing alternatives, which are primarily provided on a secured basis; collateral includes receivables, inventory, equipment, real estate or other assets. Products include term loans, revolving lines of credit, bridge financing, asset-based structures, leases, and standby letters of credit.
Treasury services includes revenue from a broad range of products and services that enable CB clients to manage payments and receipts, as well as invest and manage funds.
Investment banking includes revenue from a range of products providing CB clients with sophisticated capital-raising alternatives, as well as balance sheet and risk management tools through advisory, equity underwriting, and loan syndications. Revenue from Fixed Income and Equity Markets products used by CB clients is also included.
Other product revenue primarily includes tax-equivalent adjustments generated from Community Development Banking activities and certain income derived from principal transactions.
CB is divided into four primary client segments: Middle Market Banking, Corporate Client Banking, Commercial Term Lending, and Real Estate Banking.
Middle Market Banking covers corporate, municipal and nonprofit clients, with annual revenue generally ranging between $20 million and $500 million.
Corporate Client Banking covers clients with annual revenue generally ranging between $500 million and $2 billion and focuses on clients that have broader investment banking needs.
Commercial Term Lending primarily provides term financing to real estate investors/owners for multifamily properties as well as office, retail and industrial properties.
Real Estate Banking provides full-service banking to investors and developers of institutional-grade real estate investment properties.
Other primarily includes lending and investment-related activities within the Community Development Banking business.
 
Selected income statement data (continued)Selected income statement data (continued)  Selected income statement data (continued)  
Year ended December 31,
(in millions, except ratios)
2017 2016 20152019 2018 2017
Revenue by product          
Lending$4,094
 $3,795
 $3,429
$4,057
 $4,049
 $4,094
Treasury services3,444
 2,797
 2,581
3,920
 4,074
 3,444
Investment banking(a)
805
 785
 730
919
 852
 805
Other(b)
262
 76
 145
Other88
 84
 262
Total Commercial Banking net revenue$8,605
 $7,453
 $6,885
$8,984
 $9,059
 $8,605
          
Investment banking revenue, gross(c)(b)
$2,327
 $2,286
 $2,179
$2,744
 $2,491
 $2,385
          
Revenue by client segment          
Middle Market Banking(d)
$3,341
 $2,848
 $2,685
$3,702
 $3,708
 $3,341
Corporate Client Banking(d)
2,727
 2,429
 2,205
2,994
 2,984
 2,727
Commercial Term Lending1,454
 1,408
 1,275
Real Estate Banking604
 456
 358
Other(b)
479
 312
 362
Commercial Real Estate Banking(c)
2,169
 2,249
 2,416
Other(c)
119
 118
 121
Total Commercial Banking net revenue$8,605
 $7,453
 $6,885
$8,984
 $9,059
 $8,605
          
Financial ratios          
Return on equity17% 16% 15%17% 20% 17%
Overhead ratio39
 39
 42
39
 37
 39
(a)Includes total FirmCB’s share of revenue from investment banking products sold to CB clients net of revenue sharing withthrough the CIB.
(b)The 2017 results reflect the impactRefer to page 60 for a discussion of the enactment of the TCJA including a benefit of $115 million on certain investments in the Community Development Banking business. For additional information related to the impact of the TCJA, see Note 24.revenue sharing.
(c)Represents total Firm revenue from investment banking products sold to CB clients.
(d)Certain clients were transferred from Middle Market Banking to Corporate Client BankingEffective in the secondfirst quarter of 2017.2019, client segment data includes Commercial Real Estate Banking which comprises the former Commercial Term Lending and Real Estate Banking client segments, and Community Development Banking (previously part of Other). The prior period amounts have been revised to conform with the current period presentation.







6872 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




Selected metrics
As of or for the year ended December 31, (in millions, except headcount)2017 2016 20152019 2018 2017
Selected balance sheet data (period-end)          
Total assets$221,228
 $214,341
 $200,700
$220,514
 $220,229
 $221,228
Loans:          
Loans retained202,400
 188,261
 167,374
207,287
 204,219
 202,400
Loans held-for-sale and loans at fair value1,286
 734
 267
1,009
 1,978
 1,286
Total loans$203,686
 $188,995
 $167,641
$208,296
 $206,197
 $203,686
Core loans203,469
 188,673
 166,939
208,181
 206,039
 203,469
Equity20,000
 16,000
 14,000
22,000
 20,000
 20,000
          
Period-end loans by client segment          
Middle Market Banking(a)
$56,965
 $53,929
 $50,501
Corporate Client Banking(a)
46,963
 43,027
 37,709
Commercial Term Lending74,901
 71,249
 62,860
Real Estate Banking17,796
 14,722
 11,234
Other7,061
 6,068
 5,337
Middle Market Banking$54,188
 $56,656
 $56,965
Corporate Client Banking51,165
 48,343
 46,963
Commercial Real Estate Banking(a)
101,951
 100,088
 98,297
Other(a)
992
 1,110
 1,461
Total Commercial Banking loans$203,686
 $188,995
 $167,641
$208,296
 $206,197
 $203,686
          
Selected balance sheet data (average)          
Total assets$217,047
 $207,532
 $198,076
$218,896
 $218,259
 $217,047
Loans:          
Loans retained197,203
 178,670
 157,389
206,837
 204,243
 197,203
Loans held-for-sale and loans at fair value909
 723
 492
1,082
 1,258
 909
Total loans$198,112
 $179,393
 $157,881
$207,919
 $205,501
 $198,112
Core loans197,846
 178,875
 156,975
207,787
 205,320
 197,846
Client deposits and other third-party liabilities177,018
 174,396
 191,529
172,734
 170,901
 177,018
Equity20,000
 16,000
 14,000
22,000
 20,000
 20,000
          
Average loans by client segment          
Middle Market Banking(a)
$55,474
 $52,242
 $50,334
Corporate Client Banking(a)
46,037
 41,756
 34,497
Commercial Term Lending73,428
 66,700
 58,138
Real Estate Banking16,525
 13,063
 9,917
Other6,648
 5,632
 4,995
Middle Market Banking$55,690
 $57,092
 $55,474
Corporate Client Banking50,360
 47,780
 46,037
Commercial Real Estate Banking(a)
100,884
 99,243
 95,038
Other(a)
985
 1,386
 1,563
Total Commercial Banking loans$198,112
 $179,393
 $157,881
$207,919
 $205,501
 $198,112
          
Headcount9,005
 8,365
 7,845
11,629
 11,042
 10,061
(a)Certain clients were transferred from Middle Market Banking to Corporate Client BankingEffective in the secondfirst quarter of 2017.2019, client segment data includes Commercial Real Estate Banking which comprises the former Commercial Term Lending and Real Estate Banking client segments, and Community Development Banking (previously part of Other). The prior period amounts have been revised to conform with the current period presentation.
 
Selected metricsSelected metrics    Selected metrics    
As of or for the year ended December 31, (in millions, except ratios)2017 2016 20152019 2018 2017
Credit data and quality statistics          
Net charge-offs/(recoveries)$39
 $163
 $21
$160
 $53
 $39
Nonperforming assets          
Nonaccrual loans:          
Nonaccrual loans retained(a)
617
 1,149
 375
498
 511
 617
Nonaccrual loans held-for-sale and loans at fair value—
 —
 18
—
 —
 —
Total nonaccrual loans617
 1,149
 393
498
 511
 617
          
Assets acquired in loan satisfactions3
 1
 8
25
 2
 3
Total nonperforming assets620
 1,150
 401
523
 513
 620
Allowance for credit losses:          
Allowance for loan losses2,558
 2,925
 2,855
2,780
 2,682
 2,558
Allowance for lending-related commitments300
 248
 198
293
 254
 300
Total allowance for credit losses2,858
 3,173
 3,053
3,073
 2,936
 2,858
          
Net charge-off/(recovery) rate(b)
0.02% 0.09% 0.01%0.08% 0.03% 0.02%
Allowance for loan losses to period-end loans retained
1.26
 1.55
 1.71
1.34
 1.31
 1.26
Allowance for loan losses to nonaccrual loans retained(a)
415
 255
 761
558
 525
 415
Nonaccrual loans to period-end total loans0.30
 0.61
 0.23
0.24
 0.25
 0.30
(a)Allowance for loan losses of $114 million, $92 million $155 million and $64$92 million was held against nonaccrual loans retained at December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
(b)Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.




JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 6973
Management’s discussion and analysis


ASSET & WEALTH MANAGEMENT
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.
Selected income statement dataSelected income statement data Selected income statement data 
Year ended December 31,
(in millions, except ratios
and headcount)
201720162015201920182017
Revenue  
Asset management, administration and commissions$8,946
$8,414
$9,175
$10,212
$10,171
$9,856
All other income593
598
388
604
368
600
Noninterest revenue9,539
9,012
9,563
10,816
10,539
10,456
Net interest income3,379
3,033
2,556
3,500
3,537
3,379
Total net revenue12,918
12,045
12,119
14,316
14,076
13,835
  
Provision for credit losses39
26
4
61
53
39
  
Noninterest expense  
Compensation expense5,318
5,065
5,113
5,705
5,495
5,317
Noncompensation expense3,983
3,413
3,773
4,810
4,858
4,901
Total noninterest expense9,301
8,478
8,886
10,515
10,353
10,218
  
Income before income tax expense3,578
3,541
3,229
3,740
3,670
3,578
Income tax expense1,241
1,290
1,294
907
817
1,241
Net income$2,337
$2,251
$1,935
$2,833
$2,853
$2,337
  
Revenue by line of business  
Asset Management$6,340
$5,970
$6,301
$7,254
$7,163
$7,257
Wealth Management6,578
6,075
5,818
7,062
6,913
6,578
Total net revenue$12,918
$12,045
$12,119
$14,316
$14,076
$13,835
   
Financial ratios  
Return on common equity25%24%21%26%31%25%
Overhead ratio72
70
73
73
74
74
Pre-tax margin ratio:  
Asset Management25
31
31
26
26
22
Wealth Management30
28
22
26
26
30
Asset & Wealth Management28
29
27
26
26
26
  
Headcount22,975
21,082
20,975
24,191
23,920
22,975
  
Number of Wealth Management client advisors2,605
2,504
2,778
2,890
2,865
2,605
 
20172019 compared with 20162018
Net income was $2.3$2.8 billion, a decrease of 1%.
Net revenue was $14.3 billion, an increase of 4% compared with the prior year, reflecting higher revenue and a tax benefit resulting from the vesting of employee share-based awards, offset by higher noninterest expense.
Net revenue was $12.9 billion, an increase of 7%2%. Net interest income was $3.4$3.5 billion, down 1%, driven by deposit margin compression, predominantly offset by loan and deposit growth. Noninterest revenue was $10.8 billion, up 11%3%, driven by higher deposit spreads. Noninterest revenue was $9.5 billion, up 6%, driven bynet investment valuation gains and growth in fees on higher average market levels, partially offset by the absence of a gainshift in the prior year on the disposal of an asset.mix toward lower fee products.
Revenue from Asset Management was $6.3$7.3 billion, up 6% from the prior year,1%, driven by higher investment valuation gains. The impact on fees from higher average market levels partiallywas more than offset by a shift in the absence of a gain in prior year on the disposal of an asset. mix toward lower fee products.
Revenue from Wealth Management was $6.6$7.1 billion, up 8%2%, driven by loan and deposit growth, growth in fees on the cumulative impact of net inflows and higher average market levels and brokerage activity, largely offset by deposit margin compression.
The provision for credit losses was $61 million, up from $53 million in the prior year, reflecting higher net-charge offs, as well as net interest income from higher deposit spreads.additions to the allowance for loan losses, predominantly due to loan growth.
Noninterest expense was $9.3$10.5 billion, an increase of 10%2%, predominantly driven by higher legal expenseinvestments in the business as well as volume- and compensation expense on higher revenue and headcount.revenue-related expenses.
2016 compared with 2015
Net income was $2.3 billion, a decrease of 16% compared with the prior year, reflecting lower noninterest expense, predominantly offset by lower net revenue.
Net revenue was $12.0 billion, a decrease of 1%. Net interest income was $3.0 billion, up 19%, driven by higher loan balances and spreads. Noninterest revenue was $9.0 billion, a decrease of6%, reflecting the impact of lower average equity market levels, a reduction in revenue related to the disposal of assets at the beginning of 2016, and lower performance fees and placement fees.
Revenue from Asset Management was $6.0 billion, down 5% from the prior year, driven by a reduction in revenue related to the disposal of assets at the beginning of 2016, the impact of lower average equity market levels and lower performance fees. Revenue from Wealth Management was $6.1 billion, up 4% from the prior year, reflecting higher net interest income from higher deposit and loan spreads and continued loan growth, partially offset by the impact of lower average equity market levels and lower placement fees.
Noninterest expense was $8.5 billion, a decrease of 5%, predominantly due to a reduction in expense related to the disposal of assets at the beginning of 2016 and lower legal expense.


7074 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




AWM’s lines of business consist of the following:
Asset Management provides comprehensive global investment services, including asset management, pension analytics, asset-liability management and active risk-budgeting strategies.
Wealth Management offers investment advice and wealth management, including investment management, capital markets and risk management, tax and estate planning, banking, lending and specialty-wealth advisory services.
AWM’s client segments consist of the following:
Private Banking clients include high- and ultra-high-net-worth individuals, families, money managers, business owners and small corporations worldwide.
Institutional clients include both corporate and public institutions, endowments, foundations, nonprofit organizations and governments worldwide.
Retail clients include financial intermediaries and individual investors.
Asset Management has two high-level measures of its overall fund performance.
• Percentage of mutual fund assets under management in funds rated 4- or 5-star: Mutual fund rating services rank funds based on their risk-adjusted performance over various periods. A 5-star rating is the best rating and represents the top 10% of industry-wide ranked funds. A 4-star rating represents the next 22.5% of industry-wide ranked funds. A 3-star rating represents the next 35% of industry-wide ranked funds. A 2-star rating represents the next 22.5% of industry-wide ranked funds. A 1-star rating is the worst rating and represents the bottom 10% of industry-wide ranked funds. The “overall Morningstar rating” is derived from a weighted average of the performance associated with a fund’s three-, five- and ten-year (if applicable) Morningstar Rating metrics. For U.S. domiciled funds, separate star ratings are given at the individual share class level. The Nomura “star rating” is based on three-year risk-adjusted performance only. Funds with fewer than three years of history are not rated and hence excluded from this analysis. All ratings, the assigned peer categories and the asset values used to derive this analysis are sourced from these fund rating providers mentioned in footnote (a). The data providers re-denominate the asset values into U.S. dollars. This % of AUM is based on star ratings at the share class level for U.S. domiciled funds, and at a “primary share class” level to represent the star rating of all other funds except for Japan where Nomura provides ratings at the fund level. The “primary share class”, as defined by Morningstar, denotes the share class recommended as being the best proxy for the portfolio and in most cases will be the most retail version (based upon annual management charge, minimum investment, currency and other factors). The performance data could have been different if all funds/accounts would have been included. Past performance is not indicative of future results.
• Percentage of mutual fund assets under management in funds ranked in the 1st or 2nd quartile (one, three and five years): All quartile rankings, the assigned peer categories and the asset values used to derive this analysis are sourced from the fund ranking providers mentioned in footnote (c)(b). Quartile rankings are done on the net-of-fee absolute return of each fund. The data providers re-denominate the asset values into U.S. dollars. This % of AUM is based on fund performance and associated peer rankings at the share class level for U.S. domiciled funds and at a “primarythe “primary share class” level to represent the quartile ranking of the U.K., Luxembourg and Hong Kong funds and at theor fund level for all other funds. The “primary“primary share class”class”, as defined by Morningstar, denotes the share class recommended as being the best proxy for the portfolio and in most cases will be the most retail version (based upon annual management charge, minimum investment, currency and other factors). Where peer group rankings given for a fund are in more than one “primary share class” territory both rankings are included to reflect local market competitiveness (applies to “Offshore Territories” and “HK SFC Authorized” funds only).competitiveness. The performance data could have been different if all funds/accounts would have been included. Past performance is not indicative of future results.
 
Selected metrics  
As of or for the year ended December 31,
(in millions, except ranking data and ratios)
201720162015201920182017
% of JPM mutual fund assets rated as 4- or 5-star(b)(a)
60%63%52%61%58%60%
% of JPM mutual fund assets ranked in 1st or 2nd
quartile:(c)(b)
  
1 year64
54
62
59
68
64
3 years75
72
78
77
73
75
5 years(b)
83
79
79
75
85
83
  
Selected balance sheet data (period-end)(c)  
Total assets$151,909
$138,384
$131,451
$182,004
$170,024
$151,909
Loans130,640
118,039
111,007
160,535
147,632
130,640
Core loans130,640
118,039
111,007
160,535
147,632
130,640
Deposits146,407
161,577
146,766
147,804
138,546
146,407
Equity9,000
9,000
9,000
10,500
9,000
9,000
  
Selected balance sheet data (average)(c)  
Total assets$144,206
$132,875
$129,743
$170,764
$160,269
$144,206
Loans123,464
112,876
107,418
149,655
138,622
123,464
Core loans123,464
112,876
107,418
149,655
138,622
123,464
Deposits148,982
153,334
149,525
140,118
137,272
148,982
Equity9,000
9,000
9,000
10,500
9,000
9,000
  
Credit data and quality statistics(c)  
Net charge-offs$14
$16
$12
$31
$10
$14
Nonaccrual loans375
390
218
116
263
375
Allowance for credit losses:  
Allowance for loan losses290
274
266
354
326
290
Allowance for lending-related commitments10
4
5
19
16
10
Total allowance for credit losses300
278
271
373
342
300
Net charge-off rate0.01%0.01%0.01%0.02%0.01%0.01%
Allowance for loan losses to period-end loans0.22
0.23
0.24
0.22
0.22
0.22
Allowance for loan losses to nonaccrual loans77
70
122
305
124
77
Nonaccrual loans to period-end loans0.29
0.33
0.20
0.07
0.18
0.29
(a)Represents the “overall star rating” derived from Morningstar for the U.S., the U.K., Luxembourg, Hong Kong and Taiwan domiciled funds; and Nomura “star rating” for Japan domiciled funds and Morningstar for all other domiciled funds. Includes only Asset Management retail open-ended mutual funds that have a rating. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds.
(b)The prior period amounts have been revised to conform with the current period presentation.
(c)Quartile ranking sourced from:from Lipper, for the U.S. and Taiwan domiciled funds; Morningstar, for the U.K., Luxembourg and Hong Kong domiciled funds; Nomura for Japan domiciled funds and Fund Doctor for South Korea domiciled funds.based on country of domicile. Includes only Asset Management retail open-ended mutual funds that are ranked by the aforementioned sources. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds.
(c)Loans, deposits and related credit data and quality statistics relate to the Wealth Management business.


JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 7175
Management’s discussion and analysis


Client assets
20172019 compared with 20162018
Client assets were $2.8$3.2 trillion, an increase of 14% compared with the prior year.18%. Assets under management were $2.0$2.4 trillion, an increase of 15% from19% driven by the prior year reflectingimpact of higher market levels and net inflows into both long-term and liquidity products.
2016 compared with 2015
Client assets were $2.5 trillion, an increase of 4% compared with the prior year. Assets under management were $1.8 trillion, an increase of 3% from the prior year reflecting inflows into both liquidity and long-term products and the effect of higher market levels, partially offset by asset sales at the beginning of 2016.
Client assetsClient assets Client assets 
December 31,
(in billions)
201720162015201920182017
Assets by asset class    
Liquidity(a)
$459
$436
$430
$542
$480
$459
Fixed income(a)
474
420
376
602
464
474
Equity428
351
353
474
384
428
Multi-asset and alternatives673
564
564
746
659
673
Total assets under management2,034
1,771
1,723
2,364
1,987
2,034
Custody/brokerage/
administration/deposits
755
682
627
862
746
755
Total client assets$2,789
$2,453
$2,350
$3,226
$2,733
$2,789
  
Memo:  
Alternatives client assets(b)(a)
$166
$154
$172
$185
$171
$166
  
Assets by client segment  
Private Banking$526
$435
$437
$672
$552
$526
Institutional968
869
816
1,074
926
968
Retail540
467
470
618
509
540
Total assets under management$2,034
$1,771
$1,723
$2,364
$1,987
$2,034
  
Private Banking$1,256
$1,098
$1,050
$1,504
$1,274
$1,256
Institutional990
886
824
1,099
946
990
Retail543
469
476
623
513
543
Total client assets$2,789
$2,453
$2,350
$3,226
$2,733
$2,789
(a)The prior period amounts have been revised to conform with the current period presentation.
(b)Represents assets under management, as well as client balances in brokerage accounts.
Client assets (continued)   
Year ended December 31,
(in billions)
201920182017
Assets under management rollforward   
Beginning balance$1,987
$2,034
$1,771
Net asset flows:   
Liquidity60
31
9
Fixed income106
(1)36
Equity(10)2
(11)
Multi-asset and alternatives4
24
43
Market/performance/other impacts217
(103)186
Ending balance, December 31$2,364
$1,987
$2,034
    
Client assets rollforward   
Beginning balance$2,733
$2,789
$2,453
Net asset flows178
88
93
Market/performance/other impacts315
(144)243
Ending balance, December 31$3,226
$2,733
$2,789
 
Client assets (continued)   
Year ended December 31,
(in billions)
201720162015
Assets under management rollforward   
Beginning balance$1,771
$1,723
$1,744
Net asset flows:   
Liquidity9
24
—
Fixed income36
30
(8)
Equity(11)(29)1
Multi-asset and alternatives43
22
22
Market/performance/other impacts186
1
(36)
Ending balance, December 31$2,034
$1,771
$1,723
    
Client assets rollforward   
Beginning balance$2,453
$2,350
$2,387
Net asset flows93
63
27
Market/performance/other impacts243
40
(64)
Ending balance, December 31$2,789
$2,453
$2,350
International metrics
Year ended December 31,
(in billions, except where otherwise noted)
201920182017
Total net revenue (in millions)(a)
   
Europe/Middle East/Africa(b)
$2,869
$2,850
$2,837
Asia-Pacific(b)
1,509
1,538
1,405
Latin America/Caribbean(b)
724
755
702
Total international net revenue5,102
5,143
4,944
    
North America9,214
8,933
8,891
Total net revenue$14,316
$14,076
$13,835
    
Assets under management   
Europe/Middle East/Africa(b)
$428
$366
$393
Asia-Pacific(b)
192
163
161
Latin America/Caribbean(b)
62
51
51
Total international assets under management682
580
605
    
North America1,682
1,407
1,429
Total assets under management$2,364
$1,987
$2,034
    
Client assets   
Europe/Middle East/Africa(b)
$520
$440
$466
Asia-Pacific(b)
272
226
230
Latin America/Caribbean(b)
147
125
124
Total international client assets939
791
820
    
North America2,287
1,942
1,969
Total client assets$3,226
$2,733
$2,789
International metrics
Year ended December 31,
(in billions, except where otherwise noted)
201720162015
Total net revenue (in millions)(a)
   
Europe/Middle East/Africa$2,021
$1,849
$1,946
Asia/Pacific1,162
1,077
1,130
Latin America/Caribbean844
726
795
Total international net revenue4,027
3,652
3,871
    
North America8,891
8,393
8,248
Total net revenue$12,918
$12,045
$12,119
    
Assets under management   
Europe/Middle East/Africa$384
$309
$302
Asia/Pacific160
123
123
Latin America/Caribbean61
45
45
Total international assets under management605
477
470
    
North America1,429
1,294
1,253
Total assets under management$2,034
$1,771
$1,723
    
Client assets   
Europe/Middle East/Africa$441
$359
$351
Asia/Pacific225
177
173
Latin America/Caribbean154
114
110
Total international client assets820
650
634
    
North America1,969
1,803
1,716
Total client assets$2,789
$2,453
$2,350
(a)Regional revenue is based on the domicile of the client.

(b)The prior period amounts have been revised to conform with the current period presentation.


7276 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K




CORPORATE
The Corporate segment consists of Treasury and Chief Investment Office and Other Corporate, which includes corporate staff unitsfunctions and expense that is centrally managed. Treasury and CIO is 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, Corporate Finance, Human Resources, Internal Audit, Risk Management, Compliance, Oversight & Controls,Control Management, Corporate Responsibility and various Other Corporate groups.
Selected income statement data    
Selected income statement and balance sheet dataSelected income statement and balance sheet data
Year ended December 31,
(in millions, except headcount)
2017 2016 20152019 2018 2017
Revenue          
Principal transactions$284
 $210
 $41
$(461) $(426) $284
Securities gains/(losses)(66) 140
 190
All other income/(loss)(a)
867
 588
 569
Investment securities gains/(losses)258
 (395) (66)
All other income(a)
89
 558
 867
Noninterest revenue1,085
 938
 800
(114) (263) 1,085
Net interest income55
 (1,425) (533)1,325
 135
 55
Total net revenue(b)
1,140
 (487) 267
1,211
 (128) 1,140
          
Provision for credit losses—
 (4) (10)(1) (4) —
          
Noninterest expense(c)
501
 462
 977
1,067
 902
 501
Income/(loss) before income tax benefit639
 (945) (700)
Income/(loss) before income tax expense/(benefit)145
 (1,026) 639
Income tax expense/(benefit)2,282
 (241) (3,137)(966) 215
 2,282
Net income/(loss)$(1,643) $(704) $2,437
$1,111
 $(1,241) $(1,643)
Total net revenue          
Treasury and CIO566
 (787) (493)2,032
 510
 566
Other Corporate574
 300
 760
(821) (638) 574
Total net revenue$1,140
 $(487) $267
$1,211
 $(128) $1,140
Net income/(loss)          
Treasury and CIO60
 (715) (235)1,394
 (69) 60
Other Corporate(1,703) 11
 2,672
(283) (1,172) (1,703)
Total net income/(loss)$(1,643) $(704) $2,437
$1,111
 $(1,241) $(1,643)
          
Total assets (period-end)$781,478
 $799,426
 $768,204
$837,618
 $771,787
 $781,478
Loans (period-end)1,653
 1,592
 2,187
1,649
 1,597
 1,653
Core loans(d)
1,653
 1,589
 2,182
1,649
 1,597
 1,653
Headcount35,261
 32,358
 29,617
38,033
 37,145
 34,601
(a)Included revenue related to a legal settlement of $645 million for the year ended December 31, 2017.
(b)Included tax-equivalent adjustments, predominantly due todriven by tax-exempt income from municipal bond investmentsbonds, of $905$314 million, $885$382 million and $839$905 million for the years ended December 31, 2019, 2018 and 2017, 2016 and 2015, respectively. The decrease in taxable-equivalent adjustments for the year ended December 31, 2018, reflects the impact of the TCJA.
(c)Included a net legal expense/(benefit)benefit of $(593)$(214) million, $(385)$(241) million and $832$(593) million for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively.
(d)Average core loans were $1.6$1.7 billion, $1.9$1.7 billion and $2.5$1.6 billion for the years ended December 31, 2017, 20162019, 2018 and 2015,2017, respectively.


 
20172019 compared with 20162018
Net lossIncome was $1.6$1.1 billion compared with a net loss of $704 million in the prior year. The current year net loss included a $2.7 billion increase to income tax expense related to the impact of the TCJA.
Net revenue was $1.1 billion, compared with a loss of $487 million in the prior year. The increase in current year net revenue was driven by a $645 million benefit from a legal settlement with the FDIC receivership for Washington Mutual and with Deutsche Bank as trustee of certain Washington Mutual trusts and by the net impact of higher interest rates.
Net interest income was $55 million, compared with a loss of $1.4 billion in the prior year. The gain in the current year was primarily driven by higher interest income on deposits with banks due to higher interest rates and balances, partially offset by higher interest expense on long-term debt primarily driven by higher interest rates.
2016 compared with 2015
Net loss was $704 million, compared with net income of $2.4$1.2 billion in the prior year.
Net revenue was a loss of $487 million,$1.2 billion, compared with a gainnet loss of $267$128 million in the prior year. year driven by higher net interest income and noninterest revenue. The increase in net interest income was driven by balance sheet growth and changes in mix, and also includes income related to the unwind of the internal funding provided to CCB upon the sale of certain mortgage loans. The income reflects the net present value of that funding and is recognized as a charge to net interest income in CCB. Refer to CCB on pages 62–65 and FTP on page 61 of this Form 10-K for further information.
Noninterest revenue increased reflecting:
investment securities gains, compared with losses in the prior year, due to the repositioning of the investment securities portfolio, and
lower net markdowns on certain legacy private equity investments,
partially offset by
market-driven impacts on certain Corporate investments, and
higher losses on cash deployment transactions which were more than offset by the related net interest income earned on those transactions.
Noninterest expense of $1.1 billion was up $165 million reflecting higher investments in technology and real estate, and higher pension costs due to changes to actuarial assumptions and estimates.
The prior year included a $514pre-tax loss of $174 million benefit fromon the liquidation of a legal settlement.entity.
Net interest income was a lossThe current period included $1.1 billion of $1.4 billion, compared with a losstax benefits related to the resolution of $533 million in the prior year. The loss in the current year was primarily driven by higher interest expense on long-term debt and lower investment securities balances during the year, partially offset by higher interest income on deposits with banks and securities purchased under resale agreements as a result of higher interest rates.
Noninterest expense was $462 million, a decrease of $515 million from the prior year driven by lower legal expense, partially offset by higher compensation expense.
certain tax audits. The prior year expense reflected a net benefit of $302 million resulting from changes in estimates under the TCJA related to the remeasurement of certain deferred taxes and the deemed repatriation tax benefits of $2.6 billion predominantly from the resolution of variouson non-U.S. earnings, which was more than offset by changes to certain tax audits.reserves and other tax adjustments.





JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K 7377
Management’s discussion and analysis


Treasury and CIO overview
Treasury and CIO is 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 risks managed by Treasury and CIO arise from the activities undertaken by the Firm’s four major reportable business segments to serve their respective client bases, which generate both on- and off-balance sheet assets and liabilities.
Treasury and CIO seek to achieve the Firm’s asset-liability management objectives generally by investing in high-quality securities that are managed for the longer-term as part of the Firm’s investment securities portfolio. Treasury and CIO also use derivatives to meet the Firm’s asset-liability management objectives. ForRefer to Note 5 for further information on derivatives, see Note 5. derivatives. In addition, Treasury and CIO manage the Firm’s cash position primarily through deposits at central banks and investments in short-term instruments. Refer to Liquidity Risk Management onpages 93–98 for further information on liquidity and funding risk. Refer to Market Risk Management onpages 119–126 for information on interest rate, foreign exchange and other risks.
The investment securities portfolio primarily consists of U.S. GSE and government agency and nonagency mortgage-backed securities, U.S. and non-U.S. government securities, obligations of U.S. states and municipalities, other ABS and corporate debt securities. At December 31, 2017,2019, the 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&P and Moody’s). See Note 10 for further information on the details of the Firm’s investment securities portfolio.
For further information on liquidityportfolio and fundinginternal risk see Liquidity Risk Management on pages 92–97. For information on interest rate, foreign exchange and other risks, see Market Risk Management on pages 121-128.ratings.
 
Selected income statement and balance sheet data
As of or for the year ended December 31, (in millions)2017 2016 20152019 2018 2017
Securities gains/(losses)$(78) $132
 $190
AFS investment securities (average)219,345
 226,892
 264,758
HTM investment securities (average)47,927
 51,358
 50,044
Investment securities gains/(losses)$258
 $(395) $(78)
Available-for-sale (“AFS”) investment securities (average)283,205
 203,449
 219,345
Held-to-maturity (“HTM”) investment securities (average)34,939
 31,747
 47,927
Investment securities portfolio (average)267,272
 278,250
 314,802
318,144
 235,196
 267,272
AFS investment securities (period-end)200,247
 236,670
 238,704
348,876
 228,681
 200,247
HTM investment securities (period-end)47,733
 50,168
 49,073
47,540
 31,434
 47,733
Investment securities portfolio (period–end)247,980
 286,838
 287,777
396,416
 260,115
 247,980












7478 JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K


ENTERPRISE-WIDEFIRMWIDE RISK MANAGEMENT
Risk is an inherent part of JPMorgan Chase’s business activities. When the Firm extends a consumer or wholesaleloan, advises customers and clients on their investment decisions, makes markets in securities, or offers other products or services, the Firm takes on some degree of risk. The Firm’s overall objective is to manage its businesses, and the associated risks, in a manner that balances serving the interests of its clients, customers and investors and protects the safety and soundness of the Firm.
The Firm believes that effective risk management requires: requires, among other things:
•
Acceptance of responsibility, including identification and escalation of risk issues, by all individuals within the Firm;
•
Ownership of risk identification, assessment, data and management within each of the LOBs and Corporate; and
•
Firmwide structures for risk governance.
Acceptance of responsibility, including identification and escalation of risk issues, by all individuals within the Firm;
Ownership of risk identification, assessment, data and management within each of the lines of business and corporate functions; and
Firmwide structures for risk governance.
The Firm strives for continual improvement throughin its efforts to enhance controls, ongoing employee training and development, talent retention, and other measures. The Firm follows a disciplined and balanced compensation framework with strong internal governance and independent oversight by the Board oversight.of Directors (the “Board”). The impact of risk and control issues areis carefully considered in the Firm’s performance evaluation and incentive compensation processes.
Risk governance and oversight framework
Firmwide Risk Management is overseen and managed on an enterprise-wide basis. The Firm’s approach to risk management governance and oversight framework involves understanding drivers of risks, risk types of risks, and impacts of risks.jpmcgovernanceandoversight.jpg
Drivers of Risks are factors that cause a risk to exist. Drivers of risks include but are not limited to, the economic environment, regulatory orand government policy, competitor orand market evolution, business decisions, process orand judgment error, deliberate wrongdoing, dysfunctional markets, and natural disasters.
The Firm’sTypes of Risks are categories by which risks manifest themselves. Risks are generally categorized in the following four risk types:
•
Strategic risk is the risk to earnings, capital, liquidity or reputation associated with poorly designed or failed business plans or inadequate response to changes in the operating environment.
Strategic risk is the risk associated with the Firm’s current and future business plans and objectives, including capital risk, liquidity risk, and the impact to the Firm’s reputation.
•
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.

JPMorgan Chase & Co./2017 Annual Report75
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 OversightDefinition
Page
references
Strategic risk

The risk associated with the Firm’s current and future business plans and objectives.


81
Capital riskThe 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

76JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K79

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.



80JPMorgan Chase & Co./2017 Annual Report772019 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. jpmcoversightstructure.jpg
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.

78JPMorgan 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 Report79
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-K81
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 functionsPage
Strategic risk

84
Capital risk85–92
Liquidity risk93–98
Reputation risk99
Consumer credit risk

103–107
Wholesale credit risk108–115
Investment portfolio risk118
Market risk119–126
Country risk127–128
Operational risk129–135
Compliance risk

132
Conduct risk133
Legal risk134
Estimations and Model risk135




JPMorgan Chase & Co./2019 Form 10-K83

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.


84JPMorgan Chase & Co./2017 Annual Report812019 Form 10-K
Management’s discussion and analysis


CAPITAL RISK MANAGEMENT
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

82JPMorgan 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.

 TransitionalFully 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 capital208,644
 208,644
   208,564
 208,564
   
Total capital238,395
 227,933
   237,960
 227,498
   
Risk-weighted assets1,499,506
 1,435,825
   1,509,762
 1,446,696
   
CET1 capital ratio12.2% 12.8% 7.5% 12.1% 12.7% 10.5% 
Tier 1 capital ratio13.9
 14.5
 9.0
 13.8
 14.4
 12.0
 
Total capital ratio15.9
 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 exposureNA
 $3,204,463
   NA
 $3,205,015
   
SLR(c)
NA
 6.5% NA
 NA
 6.5% 5.0%
(e) 

 TransitionalFully 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 capital208,112
 208,112
   207,474
 207,474
   
Total capital239,553
 228,592
   237,487
 226,526
   
Risk-weighted assets1,483,132
(d) 
1,476,915
   1,492,816
(d) 
1,487,180
   
CET1 capital ratio12.3%
(d) 
12.4% 6.25% 12.2%
(d) 
12.2% 10.5% 
Tier 1 capital ratio14.0
(d) 
14.1
 7.75
 13.9
(d) 
14.0
 12.0
 
Total capital ratio16.2
(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 exposureNA
 $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 Report83
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.


84JPMorgan 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 12.50%2.50%
Method 23.50%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 Report85
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 capital6.0
  8.0
 
Total capital10.0
  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 stock26,068
26,068
Common stockholders’ equity229,625
228,122
Less:  
Goodwill47,507
47,288
Other intangible assets855
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 capital183,244
181,734
Preferred stock26,068
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 losses14,672
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.


86JPMorgan 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 AOCI536
Adjustment related to DVA(b)
468
Changes related to other CET1 capital adjustments(c)
59
Increase in Standardized/Advanced CET1 capital1,510
Standardized/Advanced CET1 capital at
December 31, 2017
$183,244
  
Standardized/Advanced Tier 1 capital at
December 31, 2016
$207,474
Change in CET1 capital1,510
Net issuance of noncumulative perpetual preferred stock—
Other(420)
Increase in Standardized/Advanced Tier 1 capital1,090
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 losses317
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 Report87
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 RWATotal RWA Credit risk RWAMarket 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 RWA20,923
 (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 assets2,562,155
2,532,457
Less: Adjustments for deductions from Tier 1 capital47,333
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
SLR6.5%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.

88JPMorgan 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
 20172016
Consumer & Community Banking$51.0
 $51.0
$51.0
Corporate & Investment Bank70.0
 70.0
64.0
Commercial Banking20.0
 20.0
16.0
Asset & Wealth Management9.0
 9.0
9.0
Corporate79.6
 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-K85
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.


86JPMorgan 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.
a201910knewcapratioa04.jpg
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 12.50%2.50%
Method 23.50%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-K87
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 capital214,432
 214,432
   209,093
 209,093
   
Total capital242,589
 232,112
   237,511
 227,435
   
Risk-weighted assets1,515,869
 1,397,878
   1,528,916
 1,421,205
   
CET1 capital ratio12.4% 13.4% 10.5% 12.0% 12.9% 9.0% 
Tier 1 capital ratio14.1
 15.3
 12.0
 13.7
 14.7
 10.5
 
Total capital ratio16.0
 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 ratio7.9% 7.9% 4.0% 8.1% 8.1% 4.0% 
Total leverage exposureNA
 $3,423,431
   NA
 $3,269,988
   
SLRNA
 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.

88JPMorgan 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 stock26,993
26,068
Common stockholders’ equity234,337
230,447
Less:  
Goodwill47,823
47,471
Other intangible assets819
748
Other CET1 capital adjustments323
1,034
Add:  
Certain deferred tax liabilities(a)
2,381
2,280
Standardized/Advanced CET1 capital187,753
183,474
Preferred stock26,993
26,068
Less: Other Tier 1 adjustments314
449
Standardized/Advanced Tier 1 capital214,432
209,093
Long-term debt and other instruments qualifying as Tier 2 capital13,733
13,772
Qualifying allowance for credit losses14,314
14,500
Other110
146
Standardized Tier 2 capital28,157
28,418
Standardized Total capital242,589
237,511
Adjustment in qualifying allowance for credit losses for Advanced Tier 2 capital(10,477)(10,076)
Advanced Tier 2 capital17,680
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 equity34,844
Dividends declared on common stock(10,897)
Net purchase of treasury stock(22,555)
Changes in additional paid-in capital(640)
Changes related to AOCI2,904
Adjustment related to DVA(a)
1,103
Changes related to other CET1 capital adjustments(480)
Change in Standardized/Advanced CET1 capital4,279
Standardized/Advanced CET1 capital at
December 31, 2019
187,753
  
Standardized/Advanced Tier 1 capital at
December 31, 2018
209,093
Change in CET1 capital4,279
Net issuance of noncumulative perpetual preferred stock925
Other135
Change in Standardized/Advanced Tier 1 capital5,339
Standardized/Advanced Tier 1 capital at
December 31, 2019
214,432
  
Standardized Tier 2 capital at December 31, 201828,418
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, 201928,157
Standardized Total capital at December 31, 2019242,589
Advanced Tier 2 capital at December 31, 201818,342
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, 201917,680
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-K89
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 RWAMarket risk RWATotal RWA Credit risk RWAMarket 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 RWA17,167
(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 assets2,777,270
$2,636,505
Less: Adjustments for deductions from Tier 1 capital47,031
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
SLR6.3%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 Bank80.0
 80.0
70.0
Commercial Banking22.0
 22.0
20.0
Asset & Wealth Management10.5
 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.


90JPMorgan Chase & Co./2017 Annual Report892019 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 ratio33% 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:
a4qtlaca01.jpg
(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 TLACEligible LTD
Total eligible TLAC & LTD$386.4
$161.8
% of RWA25.5%10.7%
Minimum requirement23.0
9.5
Surplus/(shortfall)$37.7
$17.8
   
% of total leverage exposure11.3%4.7%
Minimum requirement9.5
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.



90JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K91

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, 2017Net 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, 2017Total capital CET1 ratio Total capital ratio
(in billions, except ratios)Estimated EstimatedMinimum EstimatedMinimum
J.P. Morgan Securities plc$39.6
 15.94.5 15.98.0
December 31, 2019  
(in millions, except ratios)Estimated
Minimum ratios
Total capital$52,983
 
CET1 ratio16.5%4.5%
Total capital ratio21.3%8.0%








92JPMorgan Chase & Co./2017 Annual Report912019 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;
•
Monitor exposures;
•
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;
Governance
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.
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.


92JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K93

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, 2019September 30, 2019December 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
LCR119%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.






94JPMorgan Chase & Co./2017 Annual Report932019 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)20172016 2017201620192018 20192018
Consumer & Community Banking$659,885
$618,337
 $640,219
$586,637
$718,416
$678,854
 $693,550
$670,388
Corporate & Investment Bank455,883
412,434
 447,697
409,680
511,843
482,084
 515,913
477,250
Commercial Banking181,512
179,532
 176,884
172,835
184,115
170,859
 172,666
170,822
Asset & Wealth Management146,407
161,577
 148,982
153,334
147,804
138,546
 140,118
137,272
Corporate295
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)
  
2017201620192018
Deposits$1,444.0
$1,375.2
$1,562.4
$1,470.7
Deposits as a % of total liabilities63%61%64%62%
Loans930.7
894.8
959.8
984.6
Loans-to-deposits ratio64%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.



94JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K95

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)20172016 20172016
Commercial paper$24,186
$11,738
 $19,920
$15,001
Other borrowed funds27,616
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 notes45,727
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 advances60,617
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)20192018 20192018
Commercial paper$14,754
$30,059
 $22,977
$27,834
Other borrowed funds7,544
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 debt17,591
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 advances28,635
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 Report95
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.

96JPMorgan 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)		20172016
Year ended December 31,20192018 20192018
(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. markets2,210
7,063
5,867
1,502
 —
—
Total senior notes23,402
32,702
19,867
23,502
 1,750
9,562
Subordinated debt—
1,093
Structured notes29,040
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 debt6,901
3,596
183
136
 —
—
Structured notes22,581
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 fundingLong-term secured funding  Long-term secured funding  
Year ended
December 31,
Issuance Maturities/RedemptionsIssuance Maturities/Redemptions
(in millions)20172016 2017201620192018 20192018
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.




96JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K97

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, 20172019Long-term issuerShort-term issuerOutlook Long-term issuerShort-term issuerOutlook Long-term issuerShort-term issuerOutlook
Moody’s Investors ServiceA3P-2StableAa3A2P-1Stable A1Aa2P-1StableAa3P-1Stable
Standard & Poor’sA-A-2Stable A+A-1Stable A+A-1Stable
Fitch RatingsA+F1StableAA-F1+Stable AA-AAF1+StableAAF1+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.








98JPMorgan Chase & Co./2017 Annual Report972019 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
framework
three 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.







98JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K99

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 Report99
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.

100JPMorgan 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.




100JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K101

Management’s discussion and analysis


CREDIT PORTFOLIO
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 portfolioTotal credit portfolio   Total credit portfolio   
December 31,
(in millions)
Credit exposure 
Nonperforming(e)(f)
Credit exposure 
Nonperforming(d)(e)
20172016 2017201620192018 20192018
Loans retained$924,838
$889,907
 $5,943
$6,721
$945,601
$969,415
 $3,983
$4,611
Loans held-for-sale3,351
2,628
 —
162
7,064
11,988
 7
—
Loans at fair value2,508
2,230
 —
—
7,104
3,151
 90
220
Total loans – reported930,697
894,765
 5,943
6,883
959,769
984,554
 4,080
4,831
Derivative receivables56,523
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 assets1,013,492
976,403
 6,073
7,106
1,043,241
1,068,984
 4,110
4,891
Assets acquired in loan satisfactions      
Real estate ownedNA
NA
 311
370
NA
NA
 344
269
OtherNA
NA
 42
59
NA
NA
 43
30
Total assets acquired in loan satisfactions
NA
NA
 353
429
NA
NA
 387
299
Lending-related commitments991,482
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)
 20172016 20192018
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%.






102JPMorgan Chase & Co./2017 Annual Report1012019 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.


102JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K103

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 20172016 20172016 201720162019 2018 20192018 20192018 20192018
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 equity33,450
 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-sale341,977
 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 equity10,799
 12,902
 NA
NA
 NA
NA
 NA
NA
7,377
 8,963
 NA
NA
 NA
NA
 NA
NA
Prime mortgage6,479
 7,602
 NA
NA
 NA
NA
 NA
NA
3,965
 4,690
 NA
NA
 NA
NA
 NA
NA
Subprime mortgage2,609
 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 ARMs7,281
 8,436
 NA
NA
 NA
NA
 NA
NA
Total loans – PCI30,576
 35,679
 NA
NA
 NA
NA
 NA
NA
20,363
 24,034
 NA
NA
 NA
NA
 NA
NA
Total loans – retained372,553
 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-sale128
 238
 —
53
 —
—
 —
—
3,002
 95
 2
—
 NA
NA
 NA
NA
Total consumer, excluding credit card loans372,681
 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 card421,367
 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-sale124
 105
 —
—
 —
—
 —
—
—
 16
 —
—
 NA
NA
 NA
NA
Total credit card loans149,511
 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 exposure722,342
 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.


104JPMorgan Chase & Co./2017 Annual Report1032019 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 due695
1,528
90 or more days past due961
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.

104JPMorgan 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-K105
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 20162019 2018 2019 2018
Home equity$14.2
 $14.4
 $12.9
 $12.8
$13.9
 $14.1
 $13.0
 $13.0
Prime mortgage4.0
 4.0
 3.8
 3.7
4.1
 4.1
 3.9
 3.9
Subprime mortgage3.3
 3.2
 3.1
 3.1
3.4
 3.3
 3.2
 3.2
Option ARMs10.0
 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 Report105
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.
 20192018
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 equity1,921
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 mortgage2,825
NA
3,179
NA
Subprime mortgage1,869
NA
2,041
NA
Option ARMs5,692
NA
6,410
NA
Total modified PCI loans$12,372
NA
$13,716
NA
Modified residential real estate loans
 20172016
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 mortgage5,620
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 mortgage4,490
NA
5,052
NA
Subprime mortgage2,678
NA
2,951
NA
Option ARMs8,276
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.

106JPMorgan 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 loans4,209
 4,820
3,142

3,461
Assets acquired in loan satisfactions   




Real estate owned(c)225
 292
214

196
Other40
 57
24

30
Total assets acquired in loan satisfactions265
 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.


106JPMorgan 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
20172016 2017201620192018 20192018
Loans retained$402,898
$383,790
 $1,734
$1,954
$444,639
$439,162
 $843
$1,150
Loans held-for-sale3,099
2,285
 —
109
4,062
11,877
 5
—
Loans at fair value2,508
2,230
 —
—
7,104
3,151
 90
220
Loans – reported408,505
388,305
 1,734
2,063
455,805
454,190
 938
1,370
Derivative receivables56,523
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 assets491,167
469,823
 1,864
2,286
539,277
538,466
 968
1,430
Assets acquired in loan satisfactions   
Real estate ownedNA
NA
 130
73
OtherNA
NA
 19
—
Total assets acquired in loan satisfactions
NA
NA
 149
73
Lending-related commitments370,098
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 profileWholesale 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 yearsTotal Investment-grade Noninvestment-grade Total
Total %
of IG
Due in 1 year or less
Due after
1 year through
5 years
Due after 5 yearsTotal     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 yearsTotal 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 collateral9,882
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 commitments80,273
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
Subtotal211,798
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 yearsTotal Investment-grade Noninvestment-grade Total
Total %
of IG
Due in 1 year or less
Due after
1 year through
5 years
Due after 5 yearsTotal     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 yearsTotal 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 collateral14,019
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 commitments88,399
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
Subtotal219,656
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
NoncriticizedCriticized performing
Criticized
nonperforming
Credit
exposure(f)
Investment-
grade
NoncriticizedCriticized 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
NoncriticizedCriticized 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 & Retail87,679
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)
Industrials58,250
38,760
18,264
1,050
176
161
41
(746)(9)
Asset Managers51,775
45,208
6,550
4
13
18
—
—
(4,785)
Banks & Finance Cos50,091
34,599
14,692
795
5
—
—
(834)(2,112)
Healthcare55,997
42,643
12,731
585
38
82
(1)—
(207)46,638
36,231
9,248
1,074
85
79
6
(405)(145)
Industrials55,272
37,198
16,770
1,159
145
150
(1)(196)(21)
Banks & Finance Cos49,037
34,654
13,767
612
4
1
6
(1,216)(3,174)
Oil & Gas41,317
21,430
14,854
4,046
987
22
71
(747)(1)41,570
22,221
17,780
992
577
—
98
(429)(10)
Asset Managers32,531
28,029
4,484
4
14
27
—
—
(5,290)
Utilities29,317
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)
Automotive17,317
10,000
6,759
558
—
5
—
(194)—
Chemicals & Plastics17,276
11,984
5,080
212
—
3
—
(10)(13)
Metals & Mining15,337
7,020
7,620
658
39
1
(1)(33)(6)
Central Govt19,182
18,741
376
65
—
4
—
(10,095)(2,520)14,843
14,502
341
—
—
—
—
(9,018)(1,963)
Chemicals & Plastics15,945
11,107
4,764
74
—
4
—
—
—
Transportation15,797
9,870
5,302
527
98
9
14
(32)(131)13,917
8,644
4,863
347
63
29
7
(37)(37)
Automotive14,820
9,321
5,278
221
—
10
1
(284)—
Metals & Mining14,171
6,989
6,822
321
39
3
(13)(316)(1)
Insurance14,089
11,028
2,981
—
80
1
—
(157)(2,195)12,202
9,413
2,768
17
4
3
—
(36)(1,998)
Securities Firms7,335
5,969
1,339
27
—
—
—
(48)(3,201)
Financial Markets Infrastructure5,036
4,775
261
—
—
—
—
—
(23)4,116
3,969
147
—
—
—
—
—
(6)
Securities Firms4,113
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 value5,607
  11,166
  
Receivables from customers and other26,139
 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
NoncriticizedCriticized performing
Criticized
nonperforming
Credit
exposure(f)
Investment-
grade
NoncriticizedCriticized 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
NoncriticizedCriticized 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 & Retail84,804
54,730
28,255
1,571
248
75
24
(424)(69)94,815
60,678
31,901
2,033
203
Technology, Media & Telecommunications63,324
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)
Industrials58,528
38,487
18,594
1,311
136
171
20
(207)(29)
Asset Managers42,807
36,722
6,067
4
14
10
—
—
(5,829)
Banks & Finance Cos49,920
34,120
15,496
299
5
11
—
(575)(2,290)
Healthcare49,445
39,244
9,279
882
40
86
37
(286)(246)48,142
36,687
10,625
761
69
23
(5)(150)(133)
Industrials55,733
36,710
17,854
1,033
136
128
3
(434)(40)
Banks & Finance Cos48,393
35,385
12,560
438
10
21
(2)(1,336)(7,337)
Oil & Gas40,367
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 Managers33,201
29,194
4,006
1
—
17
—
—
(5,737)
Utilities29,672
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)
Automotive17,339
9,637
7,310
392
—
1
—
(125)—
Chemicals & Plastics16,035
11,490
4,427
118
—
4
—
—
—
Metals & Mining15,359
8,188
6,767
385
19
1
—
(174)(22)
Central Govt20,408
20,123
276
9
—
4
—
(11,691)(4,183)18,456
18,251
124
81
—
4
—
(7,994)(2,130)
Chemicals & Plastics15,043
10,405
4,452
156
30
3
—
(35)(3)
Transportation19,096
12,178
6,421
444
53
9
10
(93)(188)15,660
10,508
4,699
393
60
21
6
(31)(112)
Automotive16,736
9,235
7,299
201
1
7
—
(401)(14)
Metals & Mining13,419
5,523
6,744
1,133
19
—
36
(621)(62)
Insurance13,510
10,918
2,459
—
133
9
—
(275)(2,538)12,639
9,777
2,830
—
32
—
—
(36)(2,080)
Securities Firms4,558
3,099
1,459
—
—
—
—
(158)(823)
Financial Markets Infrastructure8,732
7,980
752
—
—
—
—
—
(390)7,484
6,746
738
—
—
—
—
—
(26)
Securities Firms4,211
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 value4,515
  15,028
  
Receivables from customers and other17,440
 30,063
 
Total(d)
$837,837
 
Total(e)
$926,279
 
(a)The
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, 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% 
Other54,620
 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% 
Other53,801
 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 & Gas39,590
 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 & Gas38,489
 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.

112JPMorgan 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) 20172016 20192018
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)
20192018
Loans – reported  
Average loans retained$435,876
$416,828
Gross charge-offs411
313
Gross recoveries(42)(158)
Net charge-offs/(recoveries)369
155
Net charge-off/(recovery) rate0.08%0.04%
Wholesale net charge-offs/(recoveries)
Year ended December 31,
(in millions, except ratios)
20172016
Loans – reported  
Average loans retained$392,263
$371,778
Gross charge-offs212
398
Gross recoveries(93)(57)
Net charge-offs119
341
Net charge-off rate0.03%0.09%

112JPMorgan 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 Report113
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
20192018
Interest rate$24,673
$28,302
Credit derivatives869
1,294
Foreign exchange16,151
23,271
Equity7,882
4,939
Commodity6,948
6,272
Total, net of cash collateral56,523
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-K113
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

114JPMorgan 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)
chart-de48fff1d1e953e28ff.jpg

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 equivalent2017 2016
Internal rating equivalent2019 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-/A36,919
17
 8,505
20
5,471
16
 7,428
19
BBB+/Baa1 to BBB-/Baa313,925
34
 13,127
32
13,148
39
 12,536
32
BB+/Ba1 to B-/B37,397
18
 7,308
18
6,225
18
 6,373
16
CCC+/Caa1 and below645
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.

114JPMorgan 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 Report115
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)2017201620192018
Credit derivatives used to manage:      
Loans and lending-related commitments$1,867
 $2,430
$2,047
 $1,272
Derivative receivables15,742
 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.



116JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K115

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.


116JPMorgan Chase & Co./2017 Annual Report1172019 Form 10-K
Management’s discussion and analysis


Summary of changes in the allowance for credit lossesSummary of changes in the allowance for credit losses  Summary of changes in the allowance for credit losses  
2017 20162019 2018
Year ended December 31,
Consumer, excluding
credit card
Credit cardWholesaleTotal 
Consumer, excluding
credit card
Credit cardWholesaleTotal
Consumer, excluding
credit card
Credit cardWholesaleTotal 
Consumer, excluding
credit card
Credit cardWholesaleTotal
(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-offs1,779
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 losses613
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-based2,108
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
PCI2,225
—
—
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 commitments7
—
(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-based33
—
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, average366,798
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 period30,576
—
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 loans1.23%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
NM239
229
 109
NM233
205
102
NM503
329
 120
NM358
292
Allowance for loan losses to retained nonaccrual loans excluding credit card109
NM239
147
 109
NM233
145
102
NM503
187
 120
NM358
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 rates0.12
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
NM239
191
 61
NM233
171
70
NM503
305
 68
NM358
253
Allowance for loan losses to retained nonaccrual
loans excluding credit card
56
NM239
109
 61
NM233
111
70
NM503
162
 68
NM358
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 rates0.13%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.


118JPMorgan 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 card4,973
4,042
3,122
 —
—
—
 4,973
4,042
3,122
Total consumer5,586
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 MANAGEMENT
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 CorporatePredominant business activities and relatedRelated market risksPositions included in Risk Management VaRPositions included in earnings-at-riskPositions 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
•
MSRs
•
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
•
Retained loan portfolio
•
Deposits
 
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
•
Retained loan portfolio
•
Deposits
• 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)

•
Retained loan portfolio
•
Deposits
 
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
•
Retained loan portfolio
•
Deposits(a)
•
Retained loan portfolio
•
Deposits
•
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
•
Deposits with banks
•
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 VaRTotal VaR    Total VaR    
As of or for the year ended December 31,2017 20162019 2018
(in millions) Avg.MinMax  Avg.MinMax Avg.MinMax  Avg.MinMax
CIB trading VaR by risk type                          
Fixed income$28
 $20
 $40
 $45
 $33
 $65
 $40
 $31
 $50
 $33
 $25
 $46
 
Foreign exchange10
 4
 20
 12
 7
 27
 7
 4
 15
 6
 3
 15
 
Equities12
 8
 19
 13
 5
 32
 20
 13
 31
 17
 13
 26
 
Commodities and other7
 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 VaR27
 14
(b) 
38
(b) 
 43
 28
(b) 
79
(b) 
42
 29
(b) 
61
(b) 
 38
 26
(b) 
58
(b) 
Credit portfolio VaR7
 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 VaR28
 17
(b) 
39
(b) 
 45
 32
(b) 
81
(b) 
42
 29
(b) 
63
(b) 
 39
 26
(b) 
59
(b) 
                        
CCB VaR2
 1
 4
 3
 1
 6
 5
 1
 11
 1
 —
 3
 
Corporate VaR4
 1
 16
(c) 
 6
 3
 13
(c) 
AWM VaR—
 —
 —
 2
 —
 4
 
Corporate and other LOB VaR10
 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 VaR5
 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 Losses
 
Risk Management VaR
chart-40d17857f1705e0db2b.jpg
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.

126JPMorgan 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
124JPMorgan 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. dollarInstantaneous 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 rates1.2
 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 rates0.5
 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 measureDecember 31, 2017December 31, 2016 Description Sensitivity measure 20192018
     
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.


126JPMorgan Chase & Co./2017 Annual Report1282019 Form 10-K




COUNTRY RISK MANAGEMENT
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
received
Deposits 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-K127
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 Report129
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
Japan35.5
8.0
0.3
43.8
 29.1
United Kingdom31.0
9.9
1.5
42.4
 40.7
China11.3
6.5
1.4
19.2
 19.3
Switzerland10.9
0.8
6.6
18.3
 12.8
France10.7
6.5
0.9
18.1
 17.9
Canada12.0
1.1
0.1
13.2
 14.3
Luxembourg12.1
0.8
—
12.9
 11.0
Australia6.9
4.8
—
11.7
 13.0
India4.6
3.6
3.1
11.3
 11.8
Netherlands4.4
0.8
3.8
9.0
 5.8
Brazil4.8
2.4
—
7.2
 7.3
Singapore4.3
1.6
0.9
6.8
 6.8
Italy2.4
4.2
0.2
6.8
 6.4
South Korea4.5
1.8
0.1
6.4
 7.6
Spain3.2
2.6
—
5.8
 5.1
Saudi Arabia4.7
0.5
—
5.2
 5.3
Hong Kong SAR2.6
1.7
0.8
5.1
 5.4
Mexico3.9
0.8
—
4.7
 5.5
Malaysia1.8
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)Country
Top 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 Report131
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-K129
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

130JPMorgan 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.

132JPMorgan 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.






132JPMorgan Chase & Co./2017 Annual Report1342019 Form 10-K




CONDUCT RISK MANAGEMENT
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 MANAGEMENT
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.

138JPMorgan 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

136JPMorgan 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 valueTotal level 3 assets
December 31, 2019
(in billions, except ratios)		Total assets at fair valueTotal 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 assets381.8
 11.4
411.0
 8.1
AFS securities202.2
 0.3
350.7
 —
Loans2.5
 0.3
7.1
 —
MSRs6.0
 6.0
4.7
 4.7
Other33.2
 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 basis1.3
 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 Report139
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-K137
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
BulletinSummary of guidanceEffects 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 Report141
Management’s discussion and analysis

FASB Standards issued but not adopted as of December 31, 2017 (continued)
     
StandardSummary of guidanceEffects 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.

142JPMorgan Chase & Co./2017 Annual Report


FASB Standards issued but not adopted as of December 31, 2017 (continued)

StandardSummary of guidanceEffects 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 conditions
2.
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 loans
3.
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.

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James Dimon
Chairman and Chief Executive Officer



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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


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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 transactions11,347
 11,566
 10,408
Lending- and deposit-related fees5,933
 5,774
 5,694
Asset management, administration and commissions15,377
 14,591
 15,509
Securities gains/(losses)(66) 141
 202
Mortgage fees and related income1,616
 2,491
 2,513
Card income4,433
 4,779
 5,924
Other income3,639
 3,795
 3,032
Noninterest revenue49,527
 49,585
 50,033
Interest income64,372
 55,901
 50,973
Interest expense14,275
 9,818
 7,463
Net interest income50,097
 46,083
 43,510
Total net revenue99,624
 95,668
 93,543
      
Provision for credit losses5,290
 5,361
 3,827
      
Noninterest expense     
Compensation expense31,009
 29,979
 29,750
Occupancy expense3,723
 3,638
 3,768
Technology, communications and equipment expense7,706
 6,846
 6,193
Professional and outside services6,840
 6,655
 7,002
Marketing2,900
 2,897
 2,708
Other expense6,256
 5,756
 9,593
Total noninterest expense58,434
 55,771
 59,014
Income before income tax expense35,900
 34,536
 30,702
Income tax expense11,459
 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 share6.31
 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.

pwcsignaturea16.jpg


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 transactions14,018
 12,059
 11,347
Lending- and deposit-related fees6,369
 6,052
 5,933
Asset management, administration and commissions17,165
 17,118
 16,287
Investment securities gains/(losses)258
 (395) (66)
Mortgage fees and related income2,036
 1,254
 1,616
Card income5,304
 4,989
 4,433
Other income5,731
 5,343
 3,646
Noninterest revenue58,382
 53,970
 50,608
Interest income(a)
84,040
 76,100
 63,971
Interest expense(a)
26,795
 21,041
 13,874
Net interest income57,245
 55,059
 50,097
Total net revenue115,627
 109,029
 100,705
      
Provision for credit losses5,585
 4,871
 5,290
      
Noninterest expense     
Compensation expense34,155
 33,117
 31,208
Occupancy expense4,322
 3,952
 3,723
Technology, communications and equipment expense9,821
 8,802
 7,715
Professional and outside services8,533
 8,502
 7,890
Marketing3,579
 3,290
 2,900
Other expense5,087
 5,731
 6,079
Total noninterest expense65,497
 63,394
 59,515
Income before income tax expense44,545
 40,764
 35,900
Income tax expense8,114
 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 share10.72
 9.00
 6.31
      
Weighted-average basic shares3,221.5
 3,396.4
 3,551.6
Weighted-average diluted shares3,230.4
 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.

146JPMorgan 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-K147
Consolidated balance sheets




December 31, (in millions, except share data)2017 20162019 2018
Assets      
Cash and due from banks$25,827
 $23,873
$21,704
 $22,324
Deposits with banks404,294
 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 losses917,093
 880,989
946,646
 971,109
Accrued interest and accounts receivable67,729
 52,330
72,861
 73,200
Premises and equipment14,159
 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 liabilities123,663
 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 capital90,579
 91,627
88,522
 89,162
Retained earnings177,676
 162,440
223,211
 199,202
Accumulated other comprehensive income(119) (1,175)
Accumulated other comprehensive income/loss1,569
 (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’ equity255,693
 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
Loans42,931
 59,456
All other assets881
 1,013
Total assets$46,445
 $62,435
Liabilities   
Beneficial interests issued by consolidated VIEs$17,841
 $20,241
All other liabilities447
 312
Total liabilities$18,288
 $20,553

December 31, (in millions)2017 2016
Assets   
Trading assets$1,449
 $3,185
Loans68,995
 75,614
All other assets2,674
 3,321
Total assets$73,118
 $82,120
Liabilities   
Beneficial interests issued by consolidated VIEs$26,081
 $39,047
All other liabilities349
 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.


148JPMorgan 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-K149
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 losses5,585
 4,871
 5,290
Depreciation and amortization8,368
 7,791
 6,179
Deferred tax expense949
 1,721
 2,312
Other1,996
 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-sale79,182
 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 adjustments5,693
 295
 7,803
Net cash provided by/(used in) operating activities6,046
 14,187
 (10,827)
Investing activities     
Net change in:     
Federal funds sold and securities purchased under resale agreements72,396
 (123,201) 31,448
Held-to-maturity securities:     
Proceeds from paydowns and maturities3,423
 2,945
 4,563
Purchases(13,427) (9,368) (2,349)
Available-for-sale securities:     
Proceeds from paydowns and maturities52,200
 37,401
 56,117
Proceeds from sales70,181
 46,067
 90,201
Purchases(242,149) (95,091) (105,309)
Proceeds from sales and securitizations of loans held-for-investment62,095
 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:     
Deposits101,002
 26,728
 57,022
Federal funds purchased and securities loaned or sold under repurchase agreements1,347
 23,415
 (6,739)
Short-term borrowings(28,561) 18,476
 16,540
Beneficial interests issued by consolidated VIEs4,289
 1,712
 (1,377)
Proceeds from long-term borrowings61,085
 71,662
 56,271
Payments of long-term borrowings(69,610) (76,313) (83,079)
Proceeds from issuance of preferred stock5,000
 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 activities32,987
 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 period278,793
 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, net5,624
 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 Report151
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 losses5,290
 5,361
 3,827
Depreciation and amortization6,179
 5,478
 4,940
Deferred tax expense2,312
 4,651
 1,333
Other2,136
 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-sale93,270
 60,196
 49,363
Net change in:     
Trading assets5,673
 (20,007) 62,212
Securities borrowed(8,653) 2,313
 12,165
Accrued interest and accounts receivable(15,868) (5,815) 22,664
Other assets4,318
 (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 adjustments7,803
 (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 agreements31,448
 (17,468) 3,190
Held-to-maturity securities:     
Proceeds from paydowns and maturities4,563
 6,218
 6,099
Purchases(2,349) (143) (6,204)
Available-for-sale securities:     
Proceeds from paydowns and maturities56,117
 65,950
 76,448
Proceeds from sales90,201
 48,592
 40,444
Purchases(105,309) (123,959) (70,804)
Proceeds from sales and securitizations of loans held-for-investment15,791
 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:     
Deposits57,022
 97,336
 (88,678)
Federal funds purchased and securities loaned or sold under repurchase agreements(6,739) 13,007
 (39,415)
Short-term borrowings16,540
 (2,461) (57,828)
Beneficial interests issued by consolidated VIEs(1,377) (5,707) (5,632)
Proceeds from long-term borrowings56,271
 83,070
 79,611
Payments of long-term borrowings(83,079) (68,949) (67,247)
Proceeds from issuance of preferred stock1,258
 —
 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, net407
 (467) (726)
Net cash provided by/(used in) financing activities14,642
 98,271
 (187,511)
Effect of exchange rate changes on cash and due from banks96
 (135) (276)
Net increase/(decrease) in cash and due from banks1,954
 3,383
 (7,341)
Cash and due from banks at the beginning of the period23,873
 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, net4,325
 2,405
 9,423
The Notes to Consolidated Financial Statements are an integral part of these statements.


152JPMorgan 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-K151
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 Report153
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.

152JPMorgan 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, 2019CECL adoption impactJanuary 1, 2020
Allowance for credit losses   
Consumer, excluding credit card$3.2
$0.2
$3.4
Credit card5.7
5.5
11.2
Wholesale5.4
(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 measurementNote 2 Page 155page 154
Fair value optionNote 3 Page 174page 175
Derivative instrumentsNote 5 Page 179page 180
Noninterest revenue and noninterest expenseNote 6 Page 192page 195
Interest income and interestInterest expenseNote 7 Page 195page 198
Pension and other postretirement employee benefit plansNote 8 Page 195page 199
Employee share-based incentivesNote 9 Page 201page 206
SecuritiesInvestment securitiesNote 10 Page 203page 208
Securities financing activitiesNote 11 Page 208page 214
LoansNote 12 Page 211page 217
Allowance for credit lossesNote 13 Page 231page 237
Variable interest entitiesNote 14 Page 236page 242
Goodwill and Mortgage servicing rightsNote 15 page 244250
Premises and equipmentNote 16 page 248254
LeasesNote 18page 254
Long-term debtNote 1920 page 249257
Income taxesNote 2425 page 255265
Off–balance sheet lending-related financial instruments, guarantees and other commitmentsNote 2728 page 261272
LitigationNote 2930 page 268279


JPMorgan Chase & Co./2019 Form 10-K153
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 Report155
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
154JPMorgan 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.


156JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K155

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 methodologyClassifications in the valuation hierarchy
 Securities financing agreementsValuations 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 commitmentsValuations 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 cardValuations are based on discounted cash flows, which consider:Predominantly level 2
• Credit losses – which consider expected and current default rates, and loss severity
•
  Prepayment speed
•
  Discount rates
•
 Servicing costs
For information regarding the valuation of loans measured at collateral value, see Note 12.
Held-for-investment credit card receivablesValuations 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/instrumentValuation methodology, inputs and assumptionsClassifications in the valuation hierarchy
Investment and trading securitiesQuoted 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 
 
•
  Relevant broker quotes
 
 
•
  Discounted cash flows
 
 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 spreads
 
 • Credit rating data 
Physical commoditiesValued using observable market prices or data.Predominantly levelLevel 1 andor 2


156JPMorgan Chase & Co./2019 Form 10-K


Product/instrumentValuation methodologyClassifications in the valuation hierarchy
DerivativesExchange-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
 
 
•
  Equity-FX correlation
•
  Equity-IR 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: 
 
•
  Commodity volatility
 
 
•
  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. 
  
  

158JPMorgan Chase & Co./2017 Annual Report


Product/instrumentValuation methodology, inputs and assumptionsClassification in the valuation hierarchy
Mortgage servicing rightsSeeRefer to Mortgage servicing rights in Note 15.Level 3
 
Private equity direct investmentsFair 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 VIEsValued 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-K157
Notes to consolidated financial statements

 
•
  Market rates for respective maturity
Product/instrument		Valuation methodologyClassification 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)158Excludes 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 1Level 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 securities26,600
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 instruments104,889
159,753
 2,966
 —
267,608
Equity securities71,890
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 rate721
311,173
 1,400
 (285,873)27,421
Credit—
14,252
 624
 (14,175)701
Foreign exchange117
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 receivables838
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 agencies139,436
—
 —
 —
139,436
Obligations of U.S. states and municipalities—
29,810
 —
 —
29,810
Certificates of deposit—
77
 —
 —
77
Non-U.S. government debt securities12,966
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 securities152,402
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 rate795
276,746
 1,732
 (270,670)8,603
Credit—
14,358
 763
 (13,469)1,652
Foreign exchange109
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 payables904
502,010
 9,214
 (468,420)43,708
Total trading liabilities59,951
518,491
 9,255
 (468,420)119,277
Accounts payable and other liabilities3,231
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 1Level 2 Level 3 Derivative netting adjustmentsTotal 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 securities28,887
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 instruments59,645
152,266
 4,385
 —
216,296
Equity securities87,346
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 rate181
314,107
 1,704
 (291,319)24,673
Credit—
21,995
 1,209
 (22,335)869
Foreign exchange841
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 securities18,140
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 securities547
—
 —
 —
547
Total available-for-sale securities41,432
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 rate170
282,825
 1,440
 (277,306)7,129
Credit—
22,009
 1,244
 (21,954)1,299
Foreign exchange794
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 liabilities65,628
540,777
 10,287
 (493,029)123,663
Accounts payable and other liabilities9,074
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

160JPMorgan Chase & Co./2017 Annual Report



Fair value hierarchy    Fair value hierarchy    
December 31, 2016 (in millions)Level 1Level 2 Level 3 Derivative netting adjustments Total fair value
December 31, 2018 (in millions)Level 1Level 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 securities13
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 securities28,443
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 instruments48,010
138,754
 6,902
 —
 193,666
79,355
184,099
 3,635
 —
 267,089
Equity securities96,759
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 rate715
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 exchange812
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
Commodity158
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 securities22,793
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 securities926
—
 —
 —
 926
Total available-for-sale securities67,791
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 rate539
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 exchange902
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
Commodity173
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 payables2,221
490,054
 9,613
 (460,119) 41,769
Total trading liabilities69,918
902,553
 8,196
 (844,008) 136,659
82,420
512,809
 9,663
 (460,119) 144,773
Accounts payable and other liabilities9,107
—
 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


160JPMorgan Chase & Co./2017 Annual Report1612019 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.








162JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K161

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.


162JPMorgan Chase & Co./2017 Annual Report1632019 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, 2019December 31, 2019 
Product/Instrument
Fair value (in millions)
 Principal valuation technique
Unobservable inputs(g)
Range of input valuesWeighted average
Fair value (in millions)
 Principal valuation technique
Unobservable inputs(g)
Range of input valuesWeighted average
Residential mortgage-backed securities and loans(b)
$1,418
 Discounted cash flowsYield3 %–16%6%$976

Discounted cash flowsYield2%–18%6%
 Prepayment speed0 %–13%9%

Prepayment speed0%–26%13%
  Conditional default rate0 %–5%1%

Conditional default rate0%–5%0%
  Loss severity0 %–84%3%

Loss severity0%–100%5%
Commercial mortgage-backed securities and loans(c)
714
 Market comparablesPrice$0
–$100$9499

Market comparablesPrice$0–$100$79
Obligations of U.S. states and municipalities744
 Market comparablesPrice$59
–$100$9810

Market comparablesPrice$71–$100$95
Corporate debt securities312
 Market comparablesPrice$3
–$111$82558

Market comparablesPrice$4–$112$72
Loans(d)
1,242
 Market comparablesPrice$4
–$103$84193

Discounted cash flowsYield5%–28%8%
939

Market comparablesPrice$2–$116$70
Asset-backed securities276
 Discounted cash flowsCredit spread204bps–205bps205bps37

Market comparablesPrice$1–$102$71
Net interest rate derivatives(395)
Option pricingInterest rate volatility6%–44%
  Prepayment speed20%20%

Interest rate spread volatility20bps–30bps
  Conditional default rate2%2%
  Loss severity30%30%
153
 Market comparablesPrice$2
–$160$79
Net interest rate derivatives28
 Option pricingInterest rate spread volatility27bps–38bps 
  Interest rate correlation(50)%–98% 

Interest rate correlation(65)%–94%
  IR-FX correlation60 %–70% 

IR-FX correlation(58)%–40%
236
 Discounted cash flowsPrepayment speed0 %–30% 63

Discounted cash flowsPrepayment speed4%–30%
Net credit derivatives(37) Discounted cash flowsCredit correlation40 %–75% (174)
Discounted cash flowsCredit correlation31%–59%
  Credit spread6bps–1,489bps 



Credit spread3bps–1,308bps
  Recovery rate20 %–70% 



Recovery rate15%–70%
  Yield1 %–20% 



Conditional default rate2%–18%
  Prepayment speed4 %–21% 

Loss severity100%
  Conditional default rate0 %–100% 35

Market comparablesPrice$1–$115
  Loss severity4 %–100% 
2
 Market comparablesPrice$10

$98 
Net foreign exchange derivatives(200) Option pricingIR-FX correlation(50)%–70% (469)
Option pricingIR-FX correlation(58)%–65%
(196) Discounted cash flowsPrepayment speed7% (138)
Discounted cash flowsPrepayment speed9%
Net equity derivatives(3,409) Option pricingEquity volatility20 %–55% (3,395)
Option pricing
Forward equity price(h)
92%–105%





Equity volatility9%–93%
  Equity correlation0 %–
85% 



Equity correlation10%–97%
  Equity-FX correlation(50)%–
30% 



Equity-FX correlation(81)%–60%
  Equity-IR correlation10 %–40% 



Equity-IR correlation25%–35%
Net commodity derivatives(674) Option pricingForward commodity price$54
–$68 per barrel(16)
Option pricingForward commodity price$39–$ 76 per barrel
  Commodity volatility5 %
46% 



Commodity volatility5%–105%
  Commodity correlation(40)%–
70% 



Commodity correlation(48)%–95%
MSRs6,030
 Discounted cash flowsRefer to Note 15  4,699

Discounted cash flowsRefer to Note 15



Other assets984
 Discounted cash flowsCredit spread40bps–70bps55bps222

Discounted cash flowsCredit spread45bps45bps
  Yield8%–
60%47%



Yield12%12%
971
 Market comparablesEBITDA multiple4.7x–
10.6x8.9x734

Market comparablesPrice$17–$117$37
Long-term debt, short-term borrowings, and deposits(e)
21,932
 Option pricingInterest rate spread volatility27bps–38bps 28,373

Option pricingInterest rate volatility6%–44%
 Interest rate correlation(50)%–98% 

Interest rate correlation(65)%–94%
 IR-FX correlation(50)%–70% 

IR-FX correlation(58)%–40%
 Equity correlation0 %–85% 

Equity correlation10%–97%
 Equity-FX correlation(50)%–30% 

Equity-FX correlation(81)%–60%
 Equity-IR correlation10 %–40% 

Equity-IR correlation25%–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.

164JPMorgan 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-K163
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.


164JPMorgan Chase & Co./2017 Annual Report1652019 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-K165
Notes to consolidated financial statements

 Fair value measurements using significant unobservable inputs  
Year ended
December 31, 2019
(in millions)		Fair value at January 1, 2019Total 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 – nonagency64
25
 83
(86)

(20)15
(58)23
 2
 
Commercial – nonagency11
2
 20
(26)

(14)15
(4)4
 1
 
Total mortgage-backed securities624
(35) 876
(422)

(168)31
(82)824
 (55) 
U.S. Treasury, GSEs and government agencies—
—
 —
—


—
—
—
—
 —
 
Obligations of U.S. states and municipalities689
13
 85
(159)

(8)—
(610)10
 13
 
Non-U.S. government debt securities155
1
 290
(287)

—
14
(18)155
 4
 
Corporate debt securities334
47
 437
(247)

(52)112
(73)558
 40
 
Loans1,706
132
 727
(708)

(562)625
(538)1,382
 51
 
Asset-backed securities127
—
 37
(93)

(40)28
(22)37
 (3) 
Total debt instruments3,635
158
 2,452
(1,916)

(830)810
(1,343)2,966
 50
 
Equity securities232
(41) 58
(103)

(22)181
(109)196
 (18) 
Other301
(36) 50
(26)

(54)2
(5)232
 91
 
Total trading assets – debt and equity instruments4,168
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 securities1
—
 —
—


—
—
—
1
 —
 
Asset-backed securities—
—
 —
—


—
—
—
—
 —
 
Total available-for-sale securities1
—
 —
—


—
—
—
1
 —
 
Loans122
4
(c) 
—
—


(125)—
(1)—
 —
 
Mortgage servicing rights6,130
(1,180)
(d) 
1,489
(789)

(951)—
—
4,699
 (1,180)
(d) 
Other assets927
(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, 2019Total 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
PurchasesSalesIssuances
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 borrowings1,523
229
(c)(e) 
—
—
3,441
(3,356)85
(248)1,674
 155
(c)(e) 
Trading liabilities – debt and equity instruments50
2
(c) 
(22)41
—
1
16
(47)41
 3
(c) 
Accounts payable and other liabilities10
(2)
(c) 
(84)115
—
—
6
—
45
 29
(c) 
Beneficial interests issued by consolidated VIEs1
(1)
(c) 
—
—
—
—
—
—
—
 —
 
Long-term debt19,418
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, 2017Total 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, 2018Total 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 – nonagency83
19
 53
(30) (64)132
(133)60
 11
 60
(2) 78
(50)

(7)59
(74)64
 1
 
Commercial – nonagency17
9
 27
(44) (13)64
(49)11
 1
 11
2
 18
(18)

(17)36
(21)11
 (2) 
Total mortgage-backed securities492
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 agencies1
—
 —
—


—
—
(1)—
 —
 
Obligations of U.S. states and municipalities649
18
 152
(70) (5)—
—
744
 15
 744
(17) 112
(70)

(80)—
—
689
 (17) 
Non-U.S. government debt securities46
—
 559
(518) —
62
(71)78
 —
 78
(22) 459
(277)

(12)23
(94)155
 (9) 
Corporate debt securities576
11
 872
(612) (497)157
(195)312
 18
 312
(18) 364
(309)

(48)262
(229)334
 (1) 
Loans4,837
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 securities302
32
 354
(356) (56)75
(198)153
 —
 153
28
 98
(41)

(55)45
(101)127
 22
 
Total debt instruments6,902
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 securities231
39
 176
(148) (4)59
(58)295
 21
 295
(40) 118
(120)

(1)107
(127)232
 9
 
Other761
100
 30
(46) (162)17
(10)690
 39
 690
(285) 55
(40)

(118)3
(4)301
 (301) 
Total trading assets – debt and equity instruments7,894
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 rate1,263
72
 60
(82) (1,040)(8)(1)264
 (473) 264
150
 107
(133)

(430)(15)19
(38) 187
 
Credit98
(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 securities1
—
 —
—


—
—
—
1
 —
 
Asset-backed securities663
15
 —
(50) (352)—
—
276
 14
 276
1
 —
—


(277)—
—
—
 —
 
Other1
—
 —
—
 —
—
—
1
 —
 
Total available-for-sale securities664
15
(d) 
—
(50) (352)—
—
277
 14
(d) 
277
1
(i) 
—
—


(277)—
—
1
 —
 
Loans570
35
(c) 
—
(26) (303)—
—
276
 3
(c) 
276
(7)
(c) 
123
—


(196)—
(74)122
 (7)
(c) 
Mortgage servicing rights6,096
(232)
(e) 
1,103
(140) (797)—
—
6,030
 (232)
(e) 
6,030
230
(d) 
1,246
(636)

(740)—
—
6,130
 230
(d) 
Other assets2,223
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, 2017Total 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
PurchasesSalesIssuances
Settlements(g)
Transfers into
level 3(h)
Year ended
December 31, 2018
(in millions)		Fair value at January 1, 2018Total 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
PurchasesSalesIssuances
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 borrowings1,134
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 instruments43
(3)
(c) 
(46)48
—
3
3
(9)39
 —
(c) 
39
19
(c) 
(99)114
—
(1)14
(36)50
 16
(c) 
Accounts payable and other liabilities13
(2) (1)—
—
3
—
—
13
 (2) 13
—
 (12)5
—
—
4
—
10
 —
 
Beneficial interests issued by consolidated VIEs48
2
(c) 
(122)39
—
(6)78
—
39
 —
(c) 
39
—
 —
1
—
(39)—
—
1
 —
 
Long-term debt12,850
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, 2016Total 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, 2017Total 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 – nonagency194
 4
 252
(319)  (20)67
(95)83
 5
 83
19
 53
 (30)

 (64) 132
(133)60
 11
 
Commercial – nonagency115
 (11) 69
(29)  (3)173
(297)17
 3
 17
9
 27
 (44)

 (13) 64
(49)11
 1
 
Total mortgage-backed securities1,024
 (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 municipalities651
 19
 149
(132)  (38)—
—
649
 —
 649
18
 152
 (70)

 (5) —
—
744
 15
 
Non-U.S. government debt securities74
 (4) 91
(97)  (7)19
(30)46
 (7) 46
—
 559
 (518)

 —
 62
(71)78
 —
 
Corporate debt securities736
 2
 445
(359)  (189)148
(207)576
 (22) 576
11
 872
 (612)

 (497) 157
(195)312
 18
 
Loans6,604
 (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 securities1,832
 39
 655
(712)  (968)288
(832)302
 19
 302
32
 354
 (356)

 (56) 75
(198)153
 —
 
Total debt instruments10,921
 (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 securities265
 —
 90
(108)  (40)29
(5)231
 7
 231
39
 176
 (148)

 (4) 59
(58)295
 21
 
Other744
 79
 649
(287)  (360)26
(90)761
 28
 761
100
 30
 (46)

 (162) 17
(10)690
 39
 
Total trading assets – debt and equity instruments11,930
 (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 rate876
 756
 193
(57)  (713)(14)222
1,263
 (144) 1,263
72
 60
 (82)

 (1,040) (8)(1)264
 (473) 
Credit549
 (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 securities1
—
 —
 —


 —
 —
—
1
 —
 
Asset-backed securities823
 1
 —
—
  (119)—
(42)663
 1
 663
15
 —
 (50)

 (352) —
—
276
 14
 
Other1
 —
 —
—
  —
—
—
1
 —
 
Total available-for-sale securities824
 1
(d) 
—
—
  (119)—
(42)664
 1
(d) 
664
15
(i) 
—
 (50)

 (352) —
—
277
 14
(i) 
Loans1,518
 (49)
(c) 
259
(7)  (838)—
(313)570
 —
(c) 
570
35
(c) 
—
 (26)

 (303) —
—
276
 3
(c) 
Mortgage servicing rights6,608
 (163)
(e) 
679
(109)  (919)—
—
6,096
 (163)
(e) 
6,096
(232)
(d) 
1,103
 (140)

 (797) —
—
6,030
 (232)
(d) 
Other assets2,401
 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
PurchasesSalesIssuances 
Settlements(g)
Transfers into
level 3(h)
Liabilities:(b)
          
Year ended
December 31, 2017
(in millions)
Fair value at January 1, 2017Total 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 SalesIssuances 
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 borrowings639
 (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 instruments63
 (12)
(c) 
(15)23
—
 (22)13
(7)43
 (18)
(c) 
43
(3)
(c) 
(46) 48
—
 3
 3
(9)39
 —
 
Accounts payable and other liabilities19
 —
 —
—
—
 (6)—
—
13
 —
 13
(2)
(c) 
(1) —
—
 3
 —
—
13
 (2)
(c) 
Beneficial interests issued by consolidated VIEs549
 (31)
(c) 
—
—
143
 (613)—
—
48
 6
(c) 
48
2
(c) 
(122) 39
—
 (6) 78
—
39
 —
 
Long-term debt11,447
(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, 2015Total 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 – nonagency663
130
 253
 (611) (23) 180
(398)194
 4
 
Commercial – nonagency306
(14) 246
 (262) (22) 117
(256)115
 (5) 
Total mortgage-backed securities1,891
88
 826
 (1,176) (177) 322
(750)1,024
 (28) 
Obligations of U.S. states and municipalities1,273
14
 352
 (133) (27) 5
(833)651
 (1) 
Non-U.S. government debt securities302
9
 205
 (123) (64) 16
(271)74
 (16) 
Corporate debt securities2,989
(77) 1,171
 (1,038) (125) 179
(2,363)736
 2
 
Loans13,287
(174) 3,532
 (4,661) (3,112) 509
(2,777)6,604
 (181) 
Asset-backed securities1,264
(41) 1,920
 (1,229) (35) 205
(252)1,832
 (32) 
Total debt instruments21,006
(181) 8,006
 (8,360) (3,540) 1,236
(7,246)10,921
 (256) 
Equity securities431
96
 89
 (193) (26) 51
(183)265
 82
 
Physical commodities2
(2) —
 —
 —
 —
—
—
 —
 
Other1,050
119
 1,581
 (1,313) 192
 33
(918)744
 85
 
Total trading assets – debt and equity instruments22,489
32
(c) 
9,676
 (9,866) (3,374) 1,320
(8,347)11,930
 (89)
(c) 
Net derivative receivables:(a)
   

 

 

 





 

 
Interest rate626
962
 513
 (173) (732) 6
(326)876
 263
 
Credit189
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 securities908
(32) 51
 (43) (61) —
—
823
 (28) 
Other129
—
 —
 —
 (29) —
(99)1
 —
 
Total available-for-sale securities1,037
(32)
(d) 
51
 (43) (90) —
(99)824
 (28)
(d) 
Loans2,541
(133)
(c) 
1,290
 (92) (1,241) —
(847)1,518
 (32)
(c) 
Mortgage servicing rights7,436
(405)
(e) 
985
 (486) (922) —
—
6,608
 (405)
(e) 
Other assets3,184
(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, 2015Total realized/unrealized (gains)/losses      
Transfers into
level 3(h)
Transfers (out of) level 3(h)
Fair value at Dec. 31, 2015Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2015
Purchases SalesIssuances
Settlements(g)
 
Liabilities:(b)
               
Deposits$2,859
$(39)
(c) 
$—
 $—
$1,993
$(850) $—
$(1,013)$2,950
 $(29)
(c) 
Short-term borrowings1,453
(697)
(c) 
—
 —
3,334
(2,963) 243
(731)639
 (57)
(c) 
Trading liabilities – debt and equity instruments72
15
(c) 
(163) 160
—
(17) 12
(16)63
 (4)
(c) 
Accounts payable and other liabilities26
—
(c) 
—
 —
—
(7) —
—
19
 —

Beneficial interests issued by consolidated VIEs1,146
(82)
(c) 
—
 —
286
(574) —
(227)549
 (63)
(c) 
Long-term debt11,877
(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 Report169
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-K169
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 FVA199
 (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 valueFair 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 valueFair 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) $(159) 
Other assets168
(b) 
132
(b) 
(148) 
Accounts payable and other liabilities—
 —
 (1) 
Total nonrecurring fair value gains/(losses)$(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..


172JPMorgan 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)20192018
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.


172JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K173

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, 2016December 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 1Level 2Level 3
Total estimated
fair value
 
Carrying
value
Level 1Level 2Level 3
Total estimated
fair value
Carrying
value
Level 1Level 2Level 3
Total estimated
fair value
 
Carrying
value
Level 1Level 2Level 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 banks404.3
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 receivable67.0
—
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 agreements183.7
—
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 borrowed102.1
—
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-maturity47.7
—
48.7
—
48.7
 50.2
—
50.9
—
50.9
Investment securities, held-to-maturity47.5
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
Other62.9
—
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 agreements158.2
—
158.2
—
158.2
 165.0
—
165.0
—
165.0
183.1
—
183.1
—
183.1
 181.4
—
181.4
—
181.4
Short-term borrowings42.6
—
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 liabilities152.0
—
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 VIEs26.0
—
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 debentures236.6
—
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, 2016December 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 1Level 2Level 3Total estimated fair value 
Carrying value(a)
Level 1Level 2Level 3Total estimated fair value
Carrying value(a)
Level 1Level 2Level 3Total estimated fair value 
Carrying value(a)
Level 1Level 2Level 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.



174JPMorgan Chase & Co./2017 Annual Report1732019 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


174JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K175

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 20152019 2018 2017
December 31, (in millions)Principal transactionsAll other incomeTotal changes in fair value recorded Principal transactionsAll other incomeTotal changes in fair value recorded Principal transactionsAll other incomeTotal changes in fair value recordedPrincipal transactionsAll other income
Total changes in fair value recorded(e)
 Principal transactionsAll other income
Total changes in fair value recorded(e)
 Principal transactionsAll 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 borrowed50
—
 50
 1
—
 1
 (6)—
 (6)133
—
 133
 22
—
 22
 50
—
 50
Trading assets:      

   

      

   

Debt and equity instruments, excluding loans1,943
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 risk330
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 value217
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 assets11
(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 agreements11
—
 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.


176JPMorgan Chase & Co./2017 Annual Report1752019 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 20162019 2018
December 31, (in millions)Contractual principal outstanding Fair valueFair value over/(under) contractual principal outstanding Contractual principal outstanding Fair valueFair value over/(under) contractual principal outstandingContractual principal outstanding Fair valueFair value over/(under) contractual principal outstanding Contractual principal outstanding Fair valueFair 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)
Loans39
 —
(39) —
 —
—
178
 139
(39) 39
 —
(39)
Subtotal4,258
 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 assets38,157
 36,590
(1,567) 35,477
 33,054
(2,423)48,570
 47,318
(1,252) 42,215
 40,403
(1,812)
Loans2,539
 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 debtNA
 $47,519
NA
 NA
 $37,686
NA
NA
 $75,745
NA
 NA
 $54,886
NA
Long-term beneficial interests              
Nonprincipal-protected debtNA
 $45
NA
 NA
 $120
NA
Nonprincipal-protected debt(b)
NA
 $36
NA
 NA
 $28
NA
Total long-term beneficial interestsNA

$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.



176JPMorgan 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 debtShort-term borrowingsDepositsTotal Long-term debtShort-term borrowingsDepositsTotal
Risk exposure         
Interest rate$35,470
$34
$16,692
$52,196
 $24,137
$62
$12,372
$36,571
Credit5,715
875
—
6,590
 4,009
995
—
5,004
Foreign exchange3,862
48
5
3,915
 3,169
157
38
3,364
Equity29,294
4,852
8,177
42,323
 21,382
5,422
7,368
34,172
Commodity472
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 debtShort-term borrowingsDepositsTotal Long-term debtShort-term borrowingsDepositsTotal
Risk exposure         
Interest rate$22,056
$69
$8,058
$30,183
 $16,296
$184
$4,296
$20,776
Credit4,329
1,312
—
5,641
 3,267
225
—
3,492
Foreign exchange2,841
147
38
3,026
 2,365
135
6
2,506
Equity17,581
7,106
6,548
31,235
 14,831
8,234
5,481
28,546
Commodity230
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-K177
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.


178JPMorgan Chase & Co./2017 Annual Report1772019 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 exposureOn-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)LoansDerivatives LoansDerivatives LoansDerivatives LoansDerivatives 
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 card421,367
372,681
—
48,553
 418,011
364,644
—
53,247
(h) 
386,452
335,040
—
51,412
 419,952
373,732
—
46,066
 
Credit Card722,342
149,511
—
572,831
 695,707
141,816
—
553,891
 
Credit card819,644
168,924
—
650,720
 762,011
156,632
—
605,379
 
Total consumer-related1,143,709
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 Estate139,409
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 & Retail87,679
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 & Telecommunications59,274
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
 
Industrials58,250
19,096
878
38,276
 58,528
19,126
958
38,444
 
Asset Managers51,775
23,939
7,160
20,676
 42,807
16,806
9,033
16,968
 
Banks & Finance Cos50,091
30,639
5,165
14,287
 49,920
28,825
5,903
15,192
 
Healthcare55,997
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
 
Industrials55,272
18,161
1,163
35,948
 55,733
17,295
1,658
36,780
 
Banks & Finance Cos49,037
25,879
6,816
16,342
 48,393
22,714
12,257
13,422
 
Oil & Gas41,317
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 Managers32,531
11,480
7,998
13,053
 33,201
10,339
10,820
12,042
 
Utilities29,317
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
 
Automotive17,317
5,408
368
11,541
 17,339
5,170
399
11,770
 
Chemicals & Plastics17,276
4,710
459
12,107
 16,035
4,902
181
10,952
 
Metals & Mining15,337
5,202
402
9,733
 15,359
5,370
488
9,501
 
Central Govt19,182
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 & Plastics15,945
5,654
208
10,083
 15,043
5,292
271
9,480
 
Transportation15,797
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
 
Automotive14,820
4,903
342
9,575
 16,736
4,964
1,196
10,576
 
Metals & Mining14,171
4,728
702
8,741
 13,419
4,350
439
8,630
 
Insurance14,089
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 Firms7,335
752
4,507
2,076
 4,558
645
2,029
1,884
 
Financial Markets Infrastructure5,036
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 Firms4,113
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
 
Subtotal829,519
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 value5,607
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-related861,265
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.


178JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K179

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.


180JPMorgan Chase & Co./2017 Annual Report1792019 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.


180JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K181

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 DerivativeUse of DerivativeDesignation and disclosureAffected segment or unitPage reference
Manage specifically identified risk exposures in qualifying hedge accounting relationships:   
•
Interest rate
Hedge fixed rate assets and liabilitiesFair value hedgeCorporate187188
•
Interest rate
Hedge floating-rate assets and liabilitiesCash flow hedgeCorporate188190
•
Foreign exchange
Hedge foreign currency-denominated assets and liabilitiesFair value hedgeCorporate187188
•
Foreign exchange
Hedge foreign currency-denominated forecasted revenue and expenseCash flow hedgeCorporate188190
•
Foreign exchange
Hedge the value of the Firm’s investments in non-U.S. dollar functional currency entitiesNet investment hedgeCorporate189191
•
Commodity
Hedge commodity inventoryFair value hedgeCIB187188
Manage specifically identified risk exposures not designated in qualifying hedge accounting relationships:   
•
Interest rate
Manage the risk of theassociated with mortgage pipeline,commitments, warehouse loans and MSRsSpecified risk managementCCB189191
•
Credit
Manage the credit risk ofassociated with wholesale lending exposuresSpecified risk managementCIB189191
•
CommodityInterest rate and foreign exchange
Manage the risk of certain commodities-related contracts and investmentsSpecified risk managementCIB189
•
Interest rate and
foreign exchange
Manage the risk ofassociated with certain other specified assets and liabilitiesSpecified risk managementCorporate189191
Market-making derivatives and other activities:   
•
Various
Market-making and related risk managementMarket-making and otherCIB189191
•
Various
Other derivativesMarket-making and otherCIB, AWM, Corporate189191




182JPMorgan Chase & Co./2017 Annual Report1812019 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 20162019 2018
Interest rate contracts      
Swaps$21,043
 $22,000
$21,228
 $21,763
Futures and forwards4,904
 5,289
3,152
 3,562
Written options3,576
 3,091
3,938
 3,997
Purchased options3,987
 3,482
4,361
 4,322
Total interest rate contracts33,510
 33,862
32,679
 33,644
Credit derivatives(a)
1,522
 2,032
1,242
 1,501
Foreign exchange contracts   
   
Cross-currency swaps3,953
 3,359
3,604
 3,548
Spot, futures and forwards5,923
 5,341
5,577
 5,871
Written options786
 734
700
 835
Purchased options776
 721
718
 830
Total foreign exchange contracts11,438
 10,155
10,599
 11,084
Equity contracts      
Swaps367
 258
406
 346
Futures and forwards90
 59
142
 101
Written options531
 417
646
 528
Purchased options453
 345
611
 490
Total equity contracts1,441
 1,079
1,805
 1,465
Commodity contracts   
   
Swaps116
 102
147
 134
Spot, futures and forwards168
 130
211
 156
Written options98
 83
135
 135
Purchased options93
 94
124
 120
Total commodity contracts475
 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.




182JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K183

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 hedgesTotal derivative receivables 
Net derivative receivables(b)
 Not designated as hedges Designated as hedgesTotal derivative payables 
Net derivative payables(b)
December 31, 2019
(in millions)		Not designated as hedges Designated as hedgesTotal 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
Credit23,205
 —
 23,205
 869
 23,252
 —
23,252
 1,299
14,876
 —
 14,876
 701
 15,121
 —
 15,121
 1,652
Foreign exchange159,740
 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
Equity40,040
 —
 40,040
 7,882
 45,395
 —
45,395
 9,192
45,727
 —
 45,727
 6,477
 52,741
 —
 52,741
 12,537
Commodity20,066
 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 hedgesTotal derivative receivables 
Net derivative receivables(b)
 Not designated as hedges Designated as hedgesTotal derivative payables 
Net derivative payables(b)
December 31, 2018
(in millions)		Not designated as hedges Designated as hedgesTotal 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
Credit29,645
 —
 29,645
 1,294
 28,666
 —
28,666
 1,411
20,095
 —
 20,095
 612
 20,276
 —
 20,276
 1,667
Foreign exchange232,137
 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
Equity34,940
 —
 34,940
 4,939
 38,362
 —
38,362
 8,140
49,285
 —
 49,285
 9,946
 51,195
 —
 51,195
 10,161
Commodity18,505
 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.






184JPMorgan Chase & Co./2017 Annual Report1832019 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 receivablesAmounts netted on the Consolidated balance sheetsNet 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–cleared9,442
(9,360) 82
 6,404
 (5,856) 548
 
Exchange-traded(a)
347
(258) 89
 322
 (136) 186
 
Total interest rate contracts308,994
(285,873) 23,121
 264,953
 (245,490) 19,463
 
Credit contracts:           
OTC10,743
(10,317) 426
 12,648
 (12,261) 387
 
OTC–cleared3,864
(3,858) 6
 7,267
 (7,222) 45
 
Total credit contracts14,607
(14,175) 432
 19,915
 (19,483) 432
 
Foreign exchange contracts:           
OTC136,252
(129,324) 6,928
 163,862
 (153,988) 9,874
 
OTC–cleared185
(152) 33
 235
 (226) 9
 
Exchange-traded(a)
10
(6) 4
 32
 (21) 11
 
Total foreign exchange contracts136,447
(129,482) 6,965
 164,129
 (154,235) 9,894
 
Equity contracts:           
OTC23,106
(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 contracts42,760
(39,250) 3,510
 45,054
 (39,339) 5,715
 
Commodity contracts:           
OTC7,093
(5,149) 1,944
 7,448
 (5,261) 2,187
 
OTC–cleared28
(28) —
 —
 —
 —
 
Exchange-traded(a)
6,154
(5,903) 251
 8,815
 (8,218) 597
 
Total commodity contracts13,275
(11,080) 2,195
 16,263
 (13,479) 2,784
 
Derivative receivables with appropriate legal opinion516,083
(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 obtained13,543
  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 receivablesAmounts netted on the Consolidated balance sheetsNet derivative receivables Gross derivative receivables Amounts netted on the Consolidated balance sheetsNet 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–cleared6,531
(6,318) 213
 235,399
 (235,261) 138
Exchange-traded(a)
185
(84) 101
 241
 (227) 14
Total interest rate contracts312,285
(291,319) 20,966
 600,867
 (577,661) 23,206
Credit contracts:          
OTC15,390
(15,165) 225
 23,130
 (22,612) 518
OTC–cleared7,225
(7,170) 55
 5,746
 (5,739) 7
Total credit contracts22,615
(22,335) 280
 28,876
 (28,351) 525
Foreign exchange contracts:          
OTC155,289
(142,420) 12,869
 226,271
 (208,962) 17,309
OTC–cleared1,696
(1,654) 42
 1,238
 (1,165) 73
Exchange-traded(a)
141
(7) 134
 104
 (27) 77
Total foreign exchange contracts157,126
(144,081) 13,045
 227,613
 (210,154) 17,459
Equity contracts:          
OTC22,024
(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 contracts36,212
(32,158) 4,054
 32,307
 (30,001) 2,306
Commodity contracts:          
OTC10,903
(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 contracts19,757
(13,137) 6,620
 18,365
 (12,371) 5,994
Derivative receivables with appropriate legal opinion547,995
(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 obtained11,558
  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


184JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K185

Notes to consolidated financial statements


2017 2016 2019 2018
December 31, (in millions)December 31, (in millions)Gross derivative payablesAmounts netted on the Consolidated balance sheetsNet derivative payables Gross derivative payables Amounts netted on the Consolidated balance sheetsNet derivative payablesDecember 31, (in millions)Gross derivative payablesAmounts netted on the Consolidated balance sheetsNet derivative payables Gross derivative payables Amounts netted on the Consolidated balance sheets
Net
derivative payables
U.S. GAAP nettable derivative payablesU.S. GAAP nettable derivative payables         U.S. GAAP nettable derivative payables          
Interest rate contracts:Interest rate contracts:         Interest rate contracts:          
OTCOTC$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–clearedOTC–cleared6,004
(5,928) 76
 230,464
 (230,463) 1
OTC–cleared10,217
(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 contractsTotal interest rate contracts283,091
(277,306) 5,785
 569,162
 (559,963) 9,199
Total interest rate contracts277,893
(270,670) 7,223
 240,777
 (234,998) 5,779
 
Credit contracts:Credit contracts:         Credit contracts:          
OTCOTC16,194
(15,170) 1,024
 22,366
 (21,614) 752
OTC11,570
(10,080) 1,490
 13,412
 (11,895) 1,517
 
OTC–clearedOTC–cleared6,801
(6,784) 17
 5,641
 (5,641) —
OTC–cleared3,390
(3,389) 1
 6,716
 (6,714) 2
 
Total credit contractsTotal credit contracts22,995
(21,954) 1,041
 28,007
 (27,255) 752
Total credit contracts14,960
(13,469) 1,491
 20,128
 (18,609) 1,519
 
Foreign exchange contracts:Foreign exchange contracts:         Foreign exchange contracts:          
OTCOTC150,966
(141,789) 9,177
 228,300
 (213,296) 15,004
OTC142,360
(131,792) 10,568
 160,930
 (152,161) 8,769
 
OTC–clearedOTC–cleared1,555
(1,553) 2
 1,158
 (1,158) —
OTC–cleared186
(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 contractsTotal foreign exchange contracts152,619
(143,349) 9,270
 229,786
 (214,463) 15,323
Total foreign exchange contracts142,558
(131,950) 10,608
 161,220
 (152,432) 8,788
 
Equity contracts:Equity contracts:         Equity contracts:          
OTCOTC28,193
(23,969) 4,224
 24,688
 (20,808) 3,880
OTC27,594
(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 contractsTotal equity contracts40,913
(36,203) 4,710
 34,692
 (30,222) 4,470
Total equity contracts47,810
(40,204) 7,606
 45,722
 (41,034) 4,688
 
Commodity contracts:Commodity contracts:         Commodity contracts:          
OTCOTC12,645
(5,508) 7,137
 12,885
 (5,252) 7,633
OTC8,714
(6,235) 2,479
 8,930
 (4,838) 4,092
 
OTC–clearedOTC–cleared30
(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 contractsTotal commodity contracts21,515
(14,217) 7,298
 19,984
 (12,105) 7,879
Total commodity contracts14,756
(12,127) 2,629
 17,189
 (13,046) 4,143
 
Derivative payables with appropriate legal opinionDerivative payables with appropriate legal opinion521,133
(493,029)
(b) 
28,104
 881,631
 (844,008)
(b) 
37,623
Derivative payables with appropriate legal opinion497,977
(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 obtainedDerivative payables where an appropriate legal opinion has not been either sought or obtained9,673
  9,673
 11,608
   11,608
Derivative payables where an appropriate legal opinion has not been either sought or obtained14,151
  14,151
 16,852
   16,852
 
Total derivative payables recognized on the Consolidated balance sheetsTotal 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 amountsNet 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.




186JPMorgan Chase & Co./2017 Annual Report1852019 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)20172016 2019
 2018
Aggregate fair value of net derivative payables$11,916
$21,550
 $14,819
 $9,396
Collateral posted9,973
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 20162019 2018
December 31, (in millions)Single-notch downgradeTwo-notch downgrade Single-notch downgradeTwo-notch downgradeSingle-notch downgradeTwo-notch downgrade Single-notch downgradeTwo-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.


186JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K187

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)		DerivativesHedged itemsIncome statement impact Amortization approachChanges 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)		DerivativesHedged itemsIncome statement impact Amortization approachChanges 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)DerivativesHedged itemsTotal income statement impact 
Hedge ineffectiveness(e)
Excluded components(f)
DerivativesHedged itemsIncome 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)DerivativesHedged itemsTotal 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)DerivativesHedged itemsTotal 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.




188JPMorgan 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 impactDerivatives – effective portion recorded in OCI 
Total change
in OCI
for period
Year ended December 31, 2019
(in millions)
Amounts reclassified from AOCI to incomeAmounts 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 impactDerivatives – effective portion recorded in OCI Total change
in OCI
for period
Year ended December 31, 2018
(in millions)
Amounts reclassified from AOCI to incomeAmounts recorded in OCITotal 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 impactDerivatives – 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 20152019 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-K193
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.


194JPMorgan Chase & Co./2017 Annual Report1912019 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
Debt3,710
 3,207
 3,232
Total underwriting5,104
 4,353
 4,640
Advisory2,144
 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
Debt3,513
 3,347
 3,802
Total underwriting5,161
 5,031
 5,268
Advisory2,340
 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
Credit1,329
 2,096
 1,735
Foreign exchange2,746
 2,827
 2,557
Equity3,873
 2,994
 2,990
Commodity661
 1,067
 842
Total trading revenue11,088
 11,309
 10,057
Private equity gains259
 257
 351
Principal transactions$11,347
 $11,566
 $10,408
JPMorgan Chase & Co./2019 Form 10-K195
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
Credit1,611
 1,395
 1,329
Foreign exchange3,171
 3,222
 2,746
Equity5,812
 4,924
 3,873
Commodity1,122
 906
 661
Total trading revenue14,268
 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 fees4,823
 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 fees5,185
 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.

192JPMorgan 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 fees9,820
 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 fees1,289
 1,324
 1,435
Total commissions and fees3,528
 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 fees11,180
 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 fees1,349
 1,396
 1,289
Total commissions and fees3,788
 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

196JPMorgan 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 Report193
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 expense457
 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 expense1,492
 1,296
 1,227





194JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K197

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)
201720162015201920182017
Interest Income 
Interest income 
Loans(a)$41,008
$36,634
$33,134
$50,375
$47,620
$41,008
Taxable securities5,535
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 securities7,382
7,304
8,256
Trading assets7,610
7,292
6,621
Total investment securities(a)
9,291
7,248
7,382
Trading assets - debt instruments10,800
8,703
7,610
Federal funds sold and securities purchased under resale agreements2,327
2,265
1,592
6,146
3,819
2,327
Securities borrowed(b)(c)
(37)(332)(532)1,574
913
94
Deposits with banks4,219
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 agreements1,611
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 debt6,753
5,564
4,435
8,807
7,978
6,753
Beneficial interest issued by consolidated VIEs503
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 losses5,290
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.



198JPMorgan 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 Report195
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-K199
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 paid820
 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 assets2,932
 (548) 454
 (28)
Firm contributions80
 75
 2
 2
Employee contributions8
 7
 14
 15
Benefits paid(820) (873) (110) (113)
Plan settlements—
 (15) —
 —
Foreign exchange impact and other121
 (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

$184
Weighted-average actuarial assumptions used to determine benefit obligations
Discount rate (e)
0.20 - 3.30%
 0.60 - 4.30 %
 3.20% 4.20%
Rate of compensation increase (e)
2.25 - 3.00
 2.25 – 3.00
 NA
 NA
Interest crediting rate(e)
1.78 - 4.65%
 1.81 - 4.90%
 NA
 NA
Health care cost trend rate(f)
Assumed for next yearNA
 NA
 5.00
 5.00
UltimateNA
 NA
 5.00
 5.00
Year when rate will reach ultimateNA
 NA
 2020 2019
As of or for the year ended December 31,Defined benefit
pension plans
OPEB plans(f)
(in millions)2017 2016 2017 2016
Change in benefit obligation       
Benefit obligation, beginning of year$(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 paid841
 851
 76
 76
Plan settlements30
 21
 —
 —
Expected Medicare Part D subsidy receiptsNA
 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 assets2,356
 1,375
 233
 131
Firm contributions78
 86
 602
 2
Employee contributions7
 7
 —
 —
Benefits paid(841) (851) (34) (32)
Plan settlements(30) (21) —
 —
Foreign exchange impact and other330
 (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 yearNA
 NA
 5.00
 5.00
UltimateNA
 NA
 5.00
 5.00
Year when rate will reach ultimateNA
 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-K201
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 obligations596
556
598
 24
24
28
Expected return on plan assets(915)(981)(968) (112)(103)(97)
Amortization:       
Net (gain)/loss167
103
250
 —
—
—
Prior service (credit)/cost3
(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 plans952
872
814
 NA
NA
NA
Total pension and OPEB cost included in noninterest expense$1,184
$924
$1,014
 $(88)$(79)$(69)
Changes in plan assets and benefit obligations recognized in other comprehensive income    
Prior service (credit)/cost arising during the year5
29
—
 —
—
—
Net (gain)/loss arising during the year(719)467
(669) (286)91
(133)
Amortization of net loss(167)(103)(250) —
—
—
Amortization of prior service (cost)/credit(3)23
36
 —
—
—
Curtailment gain/(loss)—
(21)—
 —
—
—
Settlement gain/(loss)—
(2)(2) —
—
—
Foreign exchange impact and other13
(30)54
 —
(4)—
Total recognized in other comprehensive income$(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 - 5.500.70 - 5.500.70 - 6.00 4.30
4.00
5.00
Rate of compensation increase (c)
2.25 - 3.002.25 - 3.002.25 - 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 yearNA
NA
NA
 5.00
5.00
5.00
UltimateNA
NA
NA
 5.00
5.00
5.00
Year when rate will reach ultimateNA
NA
NA
 201920182017
 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 obligations598
629
610
 28
31
31
Expected return on plan assets(968)(1,030)(1,079) (97)(105)(106)
Amortization:       
Net (gain)/loss250
257
282
 —
—
—
Prior service cost/(credit)(36)(36)(36) —
—
—
Special termination benefits—
—
1
 —
—
—
Settlement loss2
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 plans814
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)$21
Amortization of net loss(250)(257)(282) —
—
—
Amortization of prior service (cost)/credit36
36
36
 —
—
—
Settlement loss(2)(4)—
 —
—
—
Foreign exchange impact and other54
(77)(33) —
—
—
Total recognized in other comprehensive income$(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 - 6.000.80 – 6.500.90 – 6.50 5.00
5.75
6.00
Rate of compensation increase (b)
2.25 - 3.002.25 – 4.302.75 – 4.20 NA
NA
NA
Health care cost trend rate       
Assumed for next yearNA
NA
NA
 5.00
5.50
6.00
UltimateNA
NA
NA
 5.00
5.00
5.00
Year when rate will reach ultimateNA
NA
NA
 201720172017

(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.

202JPMorgan 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.


198JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K203




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 assetsAsset % of plan assets Asset % of plan assets
December 31,Allocation 2017 2016 Allocation 
2017(d)
 2016Allocation 2019 2018 Allocation 2019 2018
Asset classAsset class          Asset class          
Debt securities(a)(b)
0-80%
 42% 35% 30-70%
 61% 50%42-100%
 74% 48% 30-70%
 60% 61%
Equity securities0-85
 42
 47
 30-70
 39
 50
0-40
 16
 37
 30-70
 40
 39
Real estate0-10
 3
 4
 —
 —
 —
0-6
 1
 2
 —
 —
 —
Alternatives (b)(c)
0-35
 13
 14
 —
 —
 —
0-24
 9
 13
 —
 —
 —
Total100% 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 securities3,240
 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 securities1,790
 1,054
 —
 2,844
 1,191
 743
 —
 1,934
Mortgage-backed securities314
 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 securities6,407
 194
 2
 6,603
 6,158
 166
 2
 6,326
Mutual funds325
 —
 —
 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 securities1,096
 784
 —
 1,880
 1,139
 804
 —
 1,943
Mortgage-backed securities92
 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.


204JPMorgan Chase & Co./2017 Annual Report1992019 Form 10-K
Notes to consolidated financial statements


Changes in level 3 fair value measurements using significant unobservable inputsChanges 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




200JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K205

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.







206JPMorgan Chase & Co./2017 Annual Report2012019 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
 1.9538,971

  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
 3.31,070,212
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




202JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K207

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.




208JPMorgan 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 20162019 2018
December 31, (in millions)Amortized costGross unrealized gainsGross unrealized losses
Fair
value
 Amortized costGross unrealized gainsGross unrealized losses
Fair
value
Amortized costGross unrealized gainsGross unrealized losses
Fair
value
 Amortized costGross unrealized gainsGross 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
Commercial4,932
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 securities85,886
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 municipalities30,490
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 deposit59
—
—
 59
 106
—
—
 106
77
—
—
 77
 75
—
—
 75
Non-U.S. government debt securities26,900
426
32
 27,294
 34,497
836
45
 35,288
21,427
377
17
 21,787
 23,771
351
20
 24,102
Corporate debt securities2,657
101
1
 2,757
 4,916
64
22
 4,958
823
22
—
 845
 1,904
23
9
 1,918
Asset-backed securities:              
Collateralized loan obligations20,928
69
1
 20,996
 27,352
75
26
 27,401
25,038
9
56
 24,991
 19,612
1
176
 19,437
Other8,764
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 securities198,194
3,961
477
 201,678
 235,516
4,096
1,647
 237,965
Available-for-sale equity securities547
—
—
 547
 914
12
—
 926
Total available-for-sale securities198,741
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
Commercial5,783
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 securities33,360
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 municipalities14,373
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 securities47,733
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 obligations6,169
—
—
 6,169
 —
—
—
 —
Total held-to-maturity securities47,540
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 lossesInvestment 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 valueGross unrealized losses Fair valueGross unrealized lossesTotal fair valueTotal gross unrealized losses
Available-for-sale debt securities   
December 31, 2019 (in millions)Fair valueGross unrealized losses Fair valueGross unrealized lossesTotal fair valueTotal 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.S1,112
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
Commercial528
4
 335
1
863
5
1,287
12
 199
1
1,486
13
Total mortgage-backed securities37,677
148
 8,908
207
46,585
355
19,338
68
 4,100
41
23,438
109
U.S. Treasury and government agencies1,834
11
 373
20
2,207
31
23,003
145
 5,695
30
28,698
175
Obligations of U.S. states and municipalities949
7
 1,652
26
2,601
33
186
1
 —
—
186
1
Certificates of deposit—
—
 —
—
—
—
77
—
 —
—
77
—
Non-U.S. government debt securities6,500
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
Other3,521
20
 720
4
4,241
24
1,639
9
 753
11
2,392
20
Total available-for-sale debt securities50,481
201
 12,792
276
63,273
477
Available-for-sale equity securities—
—
 —
—
—
—
Total available-for-sale securities58,577
247
 19,710
131
78,287
378
Held-to-maturity securities      
Mortgage-backed securities   
U.S. government securities4,070
38
 205
2
4,275
40
Commercial3,706
41
 1,882
33
5,588
74
Mortgage-backed securities:   
U.S. GSEs and government agencies5,186
62
 81
—
5,267
62
Total mortgage-backed securities7,776
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 municipalities584
9
 2,131
71
2,715
80
—
—
 —
—
—
—
Asset-backed securities:   
Collateralized loan obligations3,421
—
 1,375
—
4,796
—
Total held-to-maturity securities8,360
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 valueGross unrealized losses Fair valueGross unrealized lossesTotal fair valueTotal gross unrealized losses
Available-for-sale securities       
Mortgage-backed securities:       
U.S. GSEs and government agencies17,656
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
Commercial974
6
 3,172
141
4,146
147
Total mortgage-backed securities20,160
333
 27,510
825
47,670
1,158
U.S. Treasury and government agencies4,792
7
 2,391
71
7,183
78
Obligations of U.S. states and municipalities1,808
15
 2,477
65
4,285
80
Certificates of deposit75
—
 —
—
75
—
Non-U.S. government debt securities3,123
5
 1,937
15
5,060
20
Corporate debt securities478
8
 37
1
515
9
Asset-backed securities:       
Collateralized loan obligations18,681
176
 —
—
18,681
176
Other1,208
6
 2,354
16
3,562
22
Total available-for-sale securities50,325
550
 36,706
993
87,031
1,543
Held-to-maturity securities       
Mortgage-backed securities:       
U.S. GSEs and government agencies4,385
23
 7,082
177
11,467
200
Total mortgage-backed securities4,385
23
 7,082
177
11,467
200
Obligations of U.S. states and municipalities12
—
 1,114
15
1,126
15
Total held-to-maturity securities4,397
23
 8,196
192
12,593
215
Total investment securities with gross unrealized losses54,722
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 valueGross unrealized losses Fair valueGross unrealized lossesTotal fair valueTotal 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
Commercial2,328
17
 1,078
3
3,406
20
Total mortgage-backed securities33,557
486
 3,543
43
37,100
529
U.S. Treasury and government agencies23,543
796
 —
—
23,543
796
Obligations of U.S. states and municipalities7,215
181
 55
3
7,270
184
Certificates of deposit—
—
 —
—
—
—
Non-U.S. government debt securities4,436
36
 421
9
4,857
45
Corporate debt securities797
2
 829
20
1,626
22
Asset-backed securities:       
Collateralized loan obligations766
2
 5,263
24
6,029
26
Other739
6
 1,992
39
2,731
45
Total available-for-sale debt securities71,053
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 agencies3,129
37
 —
—
3,129
37
Commercial5,163
114
 441
15
5,604
129
Total mortgage-backed securities8,292
151
 441
15
8,733
166
Obligations of U.S. states and municipalities4,702
125
 —
—
4,702
125
Total held-to-maturity securities12,994
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 Report205
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-K211
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 value3
 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 value60
 —
 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 value72
 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 value59
 —
 —
 —
 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 value5,022
 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
 $—
 $823
Fair value151
 1,197
 1,255
 154
 2,757
207
 212
 426
 —
 845
Average yield(b)
3.07% 3.60% 3.58% 3.22% 3.54%
Average yield(a)
4.49% 4.14% 3.50% —% 3.91%
Asset-backed securities                  
Amortized cost$—
 $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
 $198,194
Fair value5,367
 19,868
 47,922
 128,521
 201,678
Average yield(b)
3.03% 1.86% 2.28% 3.66% 3.14%
Available-for-sale equity securities         
Amortized cost$—
 $—
 $—
 $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 value5,367
 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 Report207
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-K213
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.
20172019
December 31, (in millions)Gross amountsAmounts 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 amountsAmounts netted on the Consolidated balance sheetsAmounts 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 borrowed113,926
(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
20162018
December 31, (in millions)Gross amountsAmounts 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 amountsAmounts netted on the Consolidated balance sheetsAmounts 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 borrowed96,409
—
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 - nonagency2,972
—
 6,224
—
Commercial - nonagency1,594
—
 4,173
—
U.S. Treasury and government agencies(a)
177,581
14
 185,145
—
Obligations of U.S. states and municipalities1,557
—
 2,491
—
Non-U.S. government debt170,196
2,485
 149,008
1,279
Corporate debt securities14,231
287
 18,140
108
Asset-backed securities3,508
—
 7,721
—
Equity securities13,479
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 days30 – 90 daysTotal
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 days30 – 90 daysTotal
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 - nonagency1,239
 —
 2,165
 —
Commercial - nonagency1,612
 —
 1,390
 —
U.S. Treasury, GSEs and government agencies334,398
 29
 317,578
(a) 
69
Obligations of U.S. states and municipalities1,181
 —
 1,150
 —
Non-U.S. government debt145,548
 1,528
 154,900
 4,313
Corporate debt securities13,826
 1,580
 13,898
 428
Asset-backed securities1,794
 —
 3,867
 —
Equity securities21,455
 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 daysTotal
Total securities sold under repurchase agreements$225,134
 $199,870
 $57,305
$72,863
$555,172
Total securities loaned and other32,028
 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 daysTotal
Total securities sold under repurchase agreements$247,579
 $174,971
 $71,637
$47,400
$541,587
Total securities loaned and other28,402
 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


Loan portfolio
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, 2017Consumer, excluding credit card
Credit card(a)
WholesaleTotal 
December 31, 2019Consumer, excluding credit card
Credit card(a)
WholesaleTotal 
(in millions)Consumer, excluding credit card
Credit card(a)
WholesaleTotal  
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, 2016Consumer, excluding credit card 
Credit card(a)
 Wholesale Total 
December 31, 2018Consumer, 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 cardWholesaleTotal
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 cardWholesaleTotal
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 cardWholesaleTotal
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 cardWholesaleTotal
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 cardWholesaleTotal
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
 $305
Credit card(8) (12) 1
Wholesale41
 26
 34
Total net gains/(losses) on sales of loans (including lower of cost or fair value adjustments)$(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 equity23,917
28,340
Other consumer loans  
Auto61,522
63,573
Consumer & Business Banking27,199
26,612
Residential real estate – PCI  
Home equity7,377
8,963
Prime mortgage3,965
4,690
Subprime mortgage1,740
1,945
Option ARMs7,281
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 equity33,450
39,063
Other consumer loans  
Auto66,242
65,814
Consumer & Business Banking(a)
25,789
24,307
Student(a)
—
7,057
Residential real estate – PCI  
Home equity10,799
12,902
Prime mortgage6,479
7,602
Subprime mortgage2,609
2,941
Option ARMs10,689
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 loansResidential 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 PCIResidential mortgage Home equity Total residential real estate – excluding PCI
20172016
20172016
2017201620192018
20192018
20192018
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 due4,234
3,828
 671
646
 4,905
4,474
604
2,763
 336
453
 940
3,216
150 or more days past due3,549
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 loans2,175
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 66019
48
 3
15
 22
63
8
13
 1
1
 9
14
101% to 125% and refreshed FICO scores:          
Equal to or greater than 66036
135
 296
668
 332
803
31
37
 56
111
 87
148
Less than 66088
177
 95
221
 183
398
35
53
 19
38
 54
91
80% to 100% and refreshed FICO scores:          
Equal to or greater than 6604,369
4,026
 1,676
2,961
 6,045
6,987
5,013
3,977
 606
986
 5,619
4,963
Less than 660483
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 660194,758
169,579
 25,262
27,317
 220,020
196,896
186,972
212,505
 19,597
22,632
 206,569
235,137
Less than 6606,952
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 available1,259
1,650
 1,689
2,486
 2,948
4,136
689
813
 667
885
 1,356
1,698
U.S. government-guaranteed8,495
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 York27,473
24,916
 6,866
7,978
 34,339
32,894
25,706
28,847
 4,885
5,769
 30,591
34,616
Illinois14,501
13,126
 2,521
2,947
 17,022
16,073
13,204
15,249
 1,788
2,131
 14,992
17,380
Texas12,508
10,772
 2,021
2,225
 14,529
12,997
12,601
13,769
 1,599
1,819
 14,200
15,588
Florida9,598
8,395
 1,847
2,133
 11,445
10,528
10,454
10,704
 1,325
1,575
 11,779
12,279
New Jersey7,142
6,374
 1,957
2,253
 9,099
8,627
Washington6,962
5,451
 1,026
1,229
 7,988
6,680
7,708
8,304
 720
869
 8,428
9,173
Colorado7,335
6,306
 632
677
 7,967
6,983
7,777
8,140
 444
521
 8,221
8,661
New Jersey5,792
7,302
 1,394
1,642
 7,186
8,944
Massachusetts6,323
5,834
 295
371
 6,618
6,205
5,596
6,574
 202
236
 5,798
6,810
Arizona4,109
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) 20172016 20172016 20192018 20192018
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
 
20172016 20172016 2017201620192018 20192018 20192018 
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)
201720162015 201720162015 201720162015201920182017 201920182017 201920182017
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 equity2,189
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 equity321
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
 
201720162015 201720162015 201720162015201920182017 20192018 2017 20192018 2017 
Number of loans approved for a trial modification1,283
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 modified2,628
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 reduction63%76%71% 59%75%66% 60%76%68%66%40%63% 81%62% 59% 77%54% 60% 
Term or payment extension72
90
81
 69
83
89
 70
86
86
90
55
72
 64
66
 69
 71
62
 70
 
Principal and/or interest deferred15
16
27
 10
19
23
 12
18
24
26
44
15
 7
20
 10
 13
29
 12
 
Principal forgiveness16
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
 
201720162015 201720162015 201720162015
Year ended
December 31,
(in millions, except weighted-average data)		Residential mortgage Home equity Total residential real estate – excluding PCI
 
201920182017 201920182017 201920182017
Weighted-average interest rate of loans with interest rate reductions – before TDR5.15%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 TDR2.99
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 TDR24
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 TDR38
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 deferred12
30
58
 10
23
27
 22
53
85
15
21
12
 4
9
10
 19
30
22
Principal forgiven20
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 201620192018 20192018 20192018
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 due584
 773
 213
 247
578
589
 240
252
 818
841
120 or more days past due7
 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 loans0.89% 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
Texas7,013
 7,041
 2,916
 2,954
6,804
6,531
 3,110
2,993
 9,914
9,524
New York4,023
 4,078
 4,195
 3,979
3,639
3,863
 4,432
4,381
 8,071
8,244
Illinois3,916
 3,984
 2,017
 1,758
3,360
3,716
 1,745
2,046
 5,105
5,762
Florida3,350
 3,374
 1,424
 1,195
3,262
3,256
 1,609
1,502
 4,871
4,758
Arizona2,221
 2,209
 1,383
 1,307
2,024
2,084
 1,276
1,491
 3,300
3,575
Ohio2,105
 2,194
 1,380
 1,402
1,986
1,973
 1,139
1,305
 3,125
3,278
New Jersey1,905
1,981
 798
723
 2,703
2,704
Michigan1,418
 1,567
 1,357
 1,343
1,215
1,357
 1,253
1,329
 2,468
2,686
New Jersey2,044
 2,031
 721
 623
Louisiana1,656
 1,814
 849
 979
1,617
1,587
 741
860
 2,358
2,447
All other30,051
 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 performing93
 201
 791
 816
360
273
 727
751
 1,087
1,024
Criticized nonaccrual9
 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 status268
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)20172016
Loans modified in TDRs(a)(b)
$102
$362
TDRs on nonaccrual status72
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 PCIHome equity Prime mortgage Subprime mortgage Option ARMs Total PCI
20172016
20172016
20172016
20172016
2017201620192018
20192018
20192018
20192018
20192018
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 due356
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 due392
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 loans6.79%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 66021
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 660274
555
 16
52
 20
39
 43
83
 353
729
86
135
 3
6
 6
4
 14
17
 109
162
Less than 660132
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 6601,195
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 660559
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 6606,134
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 6602,095
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 available577
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
Florida1,137
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 York607
697
 457
515
 330
363
 628
711
 2,022
2,286
451
525
 324
365
 245
268
 441
502
 1,461
1,660
Illinois200
233
 134
154
 113
123
 175
199
 622
709
Washington532
673
 135
167
 61
68
 238
290
 966
1,198
326
419
 80
98
 37
44
 143
177
 586
738
Illinois273
314
 200
226
 161
178
 249
282
 883
1,000
New Jersey242
280
 178
210
 110
125
 336
401
 866
1,016
174
210
 112
134
 78
88
 219
258
 583
690
Massachusetts79
94
 149
173
 98
110
 307
346
 633
723
53
65
 97
113
 67
73
 206
240
 423
491
Maryland57
64
 129
144
 132
145
 232
267
 550
620
40
48
 86
95
 87
96
 157
178
 370
417
Virginia44
54
 77
91
 33
37
 180
211
 334
393
Arizona203
241
 106
124
 60
68
 156
181
 525
614
130
165
 57
69
 37
43
 93
112
 317
389
Virginia66
77
 123
142
 51
56
 280
314
 520
589
All other1,269
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, 20172016 20172016
(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
 20192018 20192018
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 PCITotal PCI
2017 2016 20152019
 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 loans503
 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 percentage4.53% 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)
20172016
Net charge-offs$4,123
$3,442
% of net charge-offs to retained loans2.95%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 accruing1,305
1,134
90 or more days past due and still accruing1,378
1,143
Total retained credit card loans$149,387
$141,711
Loan delinquency ratios  
% of 30+ days past due to total retained loans1.80%1.61%
% of 90+ days past due to total retained loans0.92
0.81
Credit card loans by geographic region  
California$22,245
$20,571
Texas14,200
13,220
New York13,021
12,249
Florida9,138
8,585
Illinois8,585
8,189
New Jersey6,506
6,271
Ohio4,997
4,906
Pennsylvania4,883
4,787
Colorado4,006
3,699
Michigan3,826
3,741
All other57,980
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 66084.0%84.4%
Less than 66014.6
14.2
No FICO available1.4
1.4

As of or for the year ended December 31,
(in millions, except ratios)
20192018
Net charge-offs$4,848
$4,518
Net charge-off rate3.10%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 accruing1,550
1,426
90 or more days past due and still accruing1,607
1,444
Total retained loans$168,924
$156,616
Loan delinquency ratios  
% of 30+ days past due to total retained loans1.87%1.83%
% of 90+ days past due to total retained loans0.95
0.92
Geographic region(a)
  
California$25,783
$23,757
Texas16,728
15,085
New York14,544
13,601
Florida10,830
9,770
Illinois9,579
8,938
New Jersey7,165
6,739
Ohio5,406
5,094
Pennsylvania5,245
4,996
Colorado4,763
4,309
Michigan4,164
3,912
All other64,717
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 66084.0%84.2%
Less than 66015.4
15.0
No FICO available0.6
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)
 201720162015 201920182017
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.
concentrations.
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
20172016 20172016 20172016 20172016 20172016 2017201620192018 20192018 20192018 20192018 20192018 20192018
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:
                      
Noncriticized46,558
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 performing3,983
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 nonaccrual1,357
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 loans4.45%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 loans1.13
1.23
 0.12
0.19
 —
0.03
 —
—
 0.21
0.24
 0.43
0.51
% of criticized nonaccrual to total retained loans0.64
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 accruing216
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 nonaccrual1,357
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
20192018 20192018 20192018
Real estate retained loans$79,402
$79,184
 $36,842
$36,553
 $116,244
$115,737
Criticized407
388
 642
366
 1,049
754
% of total criticized to total real estate retained loans0.51%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 loans0.05%0.07% 0.03%0.21% 0.04%0.12%

December 31,
(in millions, except ratios)
Multifamily Other Commercial Total real estate loans
20172016 20172016 20172016
Real estate retained loans$77,597
$72,143
 $36,051
$33,659
 $113,648
$105,802
Criticized491
539
 355
459
 846
998
% of criticized to total real estate retained loans0.63%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 loans0.06%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
 
20172016 20172016 20172016 20172016 20172016 2017 2016 20192018 20192018 20192018 20192018 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)201720162015201920182017
Commercial and industrial$1,145
$1,480
$453
$1,086
$1,027
$1,256
Real estate164
217
250
94
133
165
Financial institutions20
13
13
11
57
48
Government agencies—
—
—
Other231
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-offs1,779

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-offs1,145

4,123
 119
 5,387
 412

4,848
 369
 5,629
 
Write-offs of PCI loans(a)
86
 —
 —
 86
 151
 —
 —
 151
 
Provision for loan losses613
 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-based2,108
 4,501
 3,680
 10,289
 2,076
 5,206
 4,007
 11,289
 
PCI2,225
 —
 —
 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-based333,941
 148,172
 401,028
 883,141
 305,503
 167,472
 443,727
 916,702
 
PCI30,576
 —
 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 sell2,133
 —
 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 commitments7
 —
 (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-based33
 —
 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-based48,553
 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 BusinessTransaction TypeActivity
Annual Report2019 Form 10-K
page references
CCBCredit card securitization trustsSecuritization of originated credit card receivables236-237242–243
Mortgage securitization trustsServicing and securitization of both originated and purchased residential mortgages237-239243–245
CIBMortgage and other securitization trustsSecuritization of both originated and purchased residential and commercial mortgages, and other consumer loans237-239243–245
Multi-seller conduitsAssist clients in accessing the financial markets in a cost-efficient manner and structures transactions to meet investor needs239245
Municipal bond vehiclesFinancing of municipal bond investments239-240245–246

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 SecuritiesOther financial assetsTotal 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 securitiesOther financial assetsTotal 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
Subprime18,984
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 assetsSecuritiesOther financial assetsTotal 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 securitiesOther financial assetsTotal 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
Subprime21,542
—
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 agencies25,852
 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 VIEs2,928
 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 VIEs29
 43
Agency   
Interest in VIEs2,250
 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 Report239
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-K245
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.



240JPMorgan 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 LiabilitiesAssets Liabilities
December 31, 2017 (in millions)Trading assetsLoans
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 assetsLoans
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 vehicles1,278
—
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
Other105
—
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 LiabilitiesAssets Liabilities
December 31, 2016 (in millions)Trading assetsLoans
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 assetsLoans
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 vehicles2,897
—
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
Other145
—
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.

246JPMorgan 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 Report241
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-K247
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 20152019 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 interests463
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%


242JPMorgan 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.

248JPMorgan 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)		201720162015201920182017
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 owned95
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 lossesSecuritized assets 90 days past due 
Net liquidation losses(a)
As of or for the year ended December 31, (in millions)20172016 20172016 2017201620192018 20192018 20192018
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
Subprime17,612
19,903
 3,276
4,186
 719
1,087
13,490
15,434
 1,813
2,478
 532
(169)
Commercial and other63,411
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)201920182017
Consumer & Community Banking$31,041
$30,984
$31,013
Corporate & Investment Bank6,942
6,770
6,776
Commercial Banking2,982
2,860
2,860
Asset & Wealth Management6,858
6,857
6,858
Total goodwill$47,823
$47,471
$47,507
December 31, (in millions)201720162015
Consumer & Community Banking$31,013
$30,797
$30,769
Corporate & Investment Bank6,776
6,772
6,772
Commercial Banking2,860
2,861
2,861
Asset & Wealth Management6,858
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 20152019 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 MSRs1,103
 679
 550
 1,384
 931
 1,103
 
Purchase of MSRs—
 —
 435
 105
 315
 —
 
Disposition of MSRs(a)
(140) (109) (486) (789) (636) (140) 
Net additions963
 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 income1,886
 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 20152019 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 revenue2,014
 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 revenue1,219
 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 revenue977
 1,637
 1,742
417
 984
 977
          
Total CCB mortgage fees and related income1,613
 2,490
 2,511
2,035
 1,252
 1,613
          
All other3
 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 20162019 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. offices1,187,263
 1,138,780
 1,271,823
 1,200,590
 
Non-U.S. offices        
Noninterest-bearing15,576
 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. offices256,719
 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.

254JPMorgan 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 liabilities8,505
  
Weighted average remaining lease term (in years)8.8
Weighted average discount rate3.68%
  
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
20211,447
20221,257
20231,081
2024944
After 20243,757
Total future minimum lease payments10,090
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)
 20192018
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
20212,733
20221,025
202386
202437
After 202452
Total future minimum lease receipts$8,101



JPMorgan Chase & Co./2019 Form 10-K255
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 rate5,547
 12,802
 8,112
 26,461
 34,766
Variable rate2,788
 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 rate12,450
 37,000
 11,000
 60,450
 79,340
Variable rate9,500
 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 rate8,967
 13,287
 3,964
 26,218
 19,379
Variable rate11,650
 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 rate3,399
 4,472
 321
 8,192
 14,681
Variable rate900
 2,572
 276
 3,748
 6,103
 
Interest rates1.10-2.50% 1.27-6.54% 0.00-3.75% 0.00-6.54% 0.39-7.87%Interest rates1.49-2.19%
 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 dateContractual 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 dateContractual rate
in effect at
December 31, 2017		 Earliest redemption dateDate at which dividend rate becomes floatingFloating annual
rate of
three-month LIBOR plus:		December 31, December 31, Year ended December 31, 
20172016 20172016 20192018 20192018Floating annualized
rate of
three-month LIBOR/Term SOFR plus:		20182017 
Fixed-rate:            
Series O—
125,750
 $—
$1,258
 8/27/2012N/A
 9/1/2017NA
Series P90,000
90,000
 900
900
 2/5/20135.450% 3/1/2018NA—
90,000
 $—
$900
 2/5/2013—%3/1/2018NA$545.00 
Series T92,500
92,500
 925
925
 1/30/20146.700
 3/1/2019NA—
92,500
 —
925
 1/30/2014—
3/1/2019NA167.50670.00 
Series W88,000
88,000
 880
880
 6/23/20146.300
 9/1/2019NA—
88,000
 —
880
 6/23/2014—
9/1/2019NA472.50630.00 
Series Y143,000
143,000
 1,430
1,430
 2/12/20156.125
 3/1/2020NA143,000
143,000
 1,430
1,430
 2/12/20156.125
3/1/2020NA612.52 
Series AA142,500
142,500
 1,425
1,425
 6/4/20156.100
 9/1/2020NA142,500
142,500
 1,425
1,425
 6/4/20156.100
9/1/2020NA610.00 
Series BB115,000
115,000
 1,150
1,150
 7/29/20156.150
 9/1/2020NA115,000
115,000
 1,150
1,150
 7/29/20156.150
9/1/2020NA615.00 
      
Series DD169,625
169,625
 1,696
1,696
 9/21/20185.750
12/1/2023NA575.00111.81— 
Series EE185,000
—
 1,850
—
 1/24/20196.000
3/1/2024NA511.67—
(d) 
Series GG90,000
—
 900
—
 11/7/20194.750
12/1/2024NA—
(e) 
            
Fixed-to-floating-rate:      Fixed-to-floating-rate:      
Series I600,000
600,000
 6,000
6,000
 4/23/20087.900% 4/30/2018LIBOR + 3.47%293,375
430,375
 2,934
4,304
 4/23/2008LIBOR + 3.47%
4/30/2018LIBOR + 3.47%$593.23$646.38$790.00
(f) 
Series Q150,000
150,000
 1,500
1,500
 4/23/20135.150
 5/1/2023LIBOR + 3.25150,000
150,000
 1,500
1,500
 4/23/20135.150
5/1/2023LIBOR + 3.25515.00 
Series R150,000
150,000
 1,500
1,500
 7/29/20136.000
 8/1/2023LIBOR + 3.30150,000
150,000
 1,500
1,500
 7/29/20136.000
8/1/2023LIBOR + 3.30600.00 
Series S200,000
200,000
 2,000
2,000
 1/22/20146.750
 2/1/2024LIBOR + 3.78200,000
200,000
 2,000
2,000
 1/22/20146.750
2/1/2024LIBOR + 3.78675.00 
Series U100,000
100,000
 1,000
1,000
 3/10/20146.125
 4/30/2024LIBOR + 3.33100,000
100,000
 1,000
1,000
 3/10/20146.125
4/30/2024LIBOR + 3.33612.50 
Series V250,000
250,000
 2,500
2,500
 6/9/20145.000
 7/1/2019LIBOR + 3.32250,000
250,000
 2,500
2,500
 6/9/2014LIBOR + 3.32%
7/1/2019LIBOR + 3.32534.09500.00
(g) 
Series X160,000
160,000
 1,600
1,600
 9/23/20146.100
 10/1/2024LIBOR + 3.33160,000
160,000
 1,600
1,600
 9/23/20146.100
10/1/2024LIBOR + 3.33610.00 
Series Z200,000
200,000
 2,000
2,000
 4/21/20155.300
 5/1/2020LIBOR + 3.80200,000
200,000
 2,000
2,000
 4/21/20155.300
5/1/2020LIBOR + 3.80530.00 
Series CC125,750
—
 1,258
—
 10/20/20174.625
 11/1/2022LIBOR + 2.58125,750
125,750
 1,258
1,258
 10/20/20174.625
11/1/2022LIBOR + 2.58462.50129.76 
Series FF225,000
—
 2,250
—
 7/31/20195.000
8/1/2024SOFR + 3.38251.39—
(h) 
Total preferred stock2,606,750
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-K259
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”).


260JPMorgan Chase & Co./2017 Annual Report2512019 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 14,104.9
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 plans24.5
26.0
32.8
20.4
21.7
24.5
Warrant exercise5.4
11.1
4.7
—
9.4
5.4
Employee stock purchase plans0.8
1.0
1.0
0.8
0.9
0.8
Total reissuance30.7
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 313,425.3
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.


252JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K261

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)
201920182017
Basic earnings per share   
Net income$36,431
$32,474
$24,441
Less: Preferred stock dividends1,587
1,551
1,663
Net income applicable to common equity34,844
30,923
22,778
Less: Dividends and undistributed earnings allocated to participating securities202
214
211
Net income applicable to common stockholders$34,642
$30,709
$22,567
    
Total weighted-average basic shares outstanding3,221.5
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 outstanding3,221.5
3,396.4
3,551.6
Add: Dilutive impact of SARs and employee stock options, unvested PSUs and non-dividend-earning RSUs, and warrants8.9
17.6
25.2
Total weighted-average diluted shares outstanding3,230.4
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)
201720162015
Basic earnings per share   
Net income$24,441
$24,733
$24,442
Less: Preferred stock dividends1,663
1,647
1,515
Net income applicable to common equity22,778
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.







262JPMorgan Chase & Co./2017 Annual Report2532019 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 plansDVA on fair value option elected liabilitiesAccumulated 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 plansDVA on fair value option elected liabilitiesAccumulated 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-KRepresents 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 20152019 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-taxPre-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 change1,010
 (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):
                                  
Translation1,313
 (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 change19
 (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 period147
 (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 change281
 (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 period802
 (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 period1,005
 (169) 836
 (558) 102
 (456) 802
 (160) 642
Reclassification adjustments included in net income(e):
                                  
Amortization of net loss250
 (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 change964
 (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 - 2014Field Examination
JPMorgan Chase – 2013New York City2012 - 2014 Field Examination
JPMorgan Chase – California 2011 – 2012 Field Examination
JPMorgan Chase – U.K. 2006 – 20152017 Field examination of certain select entities


268JPMorgan 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)20192018
Cash reserves – Federal Reserve Banks$26.6
$22.1
Segregated for the benefit of securities and cleared derivative customers16.0
14.6
Cash reserves at non-U.S. central banks and held for other general purposes3.9
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.


258JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K269

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:
capitalcomponentsa21.jpg
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 capital238,395
239,553
 227,933
228,592
      
Assets 
 
  
 
Risk-weighted1,499,506
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)
 
 
  
 
CET112.2%12.3%
(e) 
12.8%12.4%
Tier 1(a)
13.9
14.0
(e) 
14.5
14.1
Total15.9
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 capital195,839
191,662
 189,419
184,637
 

    
Assets 
   
 
Risk-weighted1,335,809
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)
 
   
 
CET113.8%13.7%
(e) 
15.0%14.2%
Tier 1(a)
13.8
13.7
(e) 
15.0
14.2
Total14.7
14.6
(e) 
15.4
14.6
Tier 1 leverage(d)
8.7
8.6
 8.7
8.6

JPMorgan Chase & Co./2017 Annual Report259
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 capital21,600
 16,784
 21,600
 16,784
Total capital27,691
 22,862
 26,250
 21,434
        
Assets       
Risk-weighted113,108
 112,297
 190,523
 186,378
Adjusted average(b)
126,517
 120,304
 126,517
 120,304
        
Capital ratios(c)
       
CET119.1% 14.9% 11.3% 9.0%
Tier 119.1
 14.9
 11.3
 9.0
Total24.5
 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 ratiosWell-capitalized ratiosMinimum capital ratiosWell-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       
CET17.50%5.75%—%6.50%10.5%7.0%N/A6.5%
Tier 19.00
7.25
6.00
8.00
12.0
8.5
6.08.0
Total11.00
9.25
10.00
10.00
14.0
10.5
10.010.0
Tier 1 leverage4.00
4.00
—
5.00
4.0
4.0
N/A5.0
SLR5.0
6.0
N/A6.0
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.

270JPMorgan 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 capital214,432
206,851
 214,432
206,851
Total capital242,589
224,390
 232,112
214,091
      
Assets     
Risk-weighted1,515,869
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)
     
CET112.4%14.2% 13.4%16.3%
Tier 114.1
14.2
 15.3
16.3
Total16.0
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 capital209,093
211,671
 209,093
211,671
Total capital237,511
229,952
 227,435
220,025
      
Assets     
Risk-weighted1,528,916
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)
     
CET112.0%14.6% 12.9%16.5%
Tier 113.7
14.6
 14.7
16.5
Total15.5
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 exposure3,423,431
$3,044,509
 $3,269,988
$2,915,541
SLR6.3%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.

260JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K271

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.



272JPMorgan Chase & Co./2017 Annual Report2612019 Form 10-K
Notes to consolidated financial statements


Off–balance sheet lending-related financial instruments, guarantees and other commitmentsOff–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 201720162019 2018 20192018
By remaining maturity at December 31,
(in millions)		Expires in 1 year or lessExpires after
1 year through
3 years		Expires after
3 years through
5 years		Expires after 5 yearsTotal Total  Expires in 1 year or lessExpires after
1 year through
3 years		Expires after
3 years through
5 years		Expires after 5 yearsTotal 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
 —
—
Auto8,007
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 card27,537
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 card572,831
—
—
—
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 guarantees4,529
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 agreements76,859
—
—
—
76,859
 50,722
 —
—
Unsettled repurchase and securities lending agreements44,205
—
—
—
44,205
 26,948
 —
—
Unsettled resale and securities borrowed agreements117,203
748
—
—
117,951
 102,008
 —
—
Unsettled repurchase and securities loaned agreements72,790
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.







262JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K273

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 20162019 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.


274JPMorgan Chase & Co./2017 Annual Report2632019 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 exposure28,877
 28,637
Maximum exposure of stable value contracts with contractually limited exposure2,967
 2,963
    
Fair value   
Derivative payables159
 367

(in millions)December 31, 2017
 December 31, 2016
Notional amounts   
Derivative guarantees57,174
 51,966
Stable value contracts with contractually limited exposure29,104
 28,665
Maximum exposure of stable value contracts with contractually limited exposure3,053
 3,012
    
Fair value   
Derivative payables304
 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.

264JPMorgan 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-K275
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 Report265
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.

276JPMorgan 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.


266JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K277

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) 
20181,526
20191,450
20201,300
20211,029
2022815
After 20223,757
Total minimum payments required9,877
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




278JPMorgan Chase & Co./2017 Annual Report2672019 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-K279
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

268JPMorgan 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 Report269
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 Report271
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.


272JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K281

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.


282JPMorgan Chase & Co./2017 Annual Report2732019 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.




274JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K283

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
201720162015 201720162015 201720162015 201720162015 201920182017 201920182017 201920182017 201920182017
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
 201720162015 2017 20162015 201720162015
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
284JPMorgan 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
 201920182017 20192018 2017 201920182017
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 ended2017  20162019 2018 
(in millions, except per share, ratio, headcount data and where otherwise noted)4th quarter3rd quarter 2nd quarter 1st quarter 4th quarter 3rd quarter2nd quarter1st quarter4th quarter3rd quarter2nd quarter1st quarter 4th quarter 3rd quarter2nd quarter1st 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 expense14,591
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 profit9,562
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 losses1,308
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 expense8,254
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 expense4,022
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
 
Diluted1.07
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: Basic3,489.7
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
 
Diluted3,512.2
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-end3,425.3
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
Low94.96
88.08
 81.64
 83.03
 66.10
 58.76
57.05
52.50
Close106.94
95.51
 91.40
 87.84
 86.29
 66.59
62.14
59.22
Book value per share67.04
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 share0.56
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               
ROE7%11% 12% 11% 11% 10%10%9%
ROTCE(c)
8
13
 14
 13
 14
 13
13
12
ROA0.66
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 ratio60
57
 57
 61
 59
 59
56
60
58
56
57
56
 60
 57
58
58
 
Loans-to-deposits ratio64
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
 
Securities249,958
263,288
 263,458
 281,850
 $289,059
 272,401
278,610
285,323
Investment Securities398,239
394,251
307,264
267,365
 $261,828
 231,398
233,015
238,188
 
Loans930,697
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 loans863,683
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 loans850,166
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 assets2,533,600
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
 
Deposits1,443,982
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 debt291,498
296,472
288,869
290,893
 282,031
 270,124
273,114
274,449
 
Common stockholders’ equity229,625
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’ equity255,693
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
 
Headcount252,539
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 loans1.47%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-offs1,494
1,371
1,403
1,361
 1,236
 1,033
1,252
1,335
 
Net charge-off rate0.63%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.



277JPMorgan Chase & Co./2017 Annual Report2019 Form 10-K287
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 agreements191,819
 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 securities223,592
 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 securities268,678
 8,303
 3.09
(j) 
Total investment securities319,875
 9,617
 3.01
(j) 
Loans906,397
 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 banks20,364
     20,645
     
Trading assets – equity instruments115,913
     
Trading assets – equity and other instruments(a)
114,323
     
Trading assets – derivative receivables59,588
     53,786
     
Goodwill, MSRs and other intangible assets53,999
     53,683
     
Other assets139,059
     
All other noninterest-earning assets167,244
     
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 agreements187,386
 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 VIEs32,457
 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 payables44,122
     42,560
     
All other liabilities, including the allowance for lending-related commitments(a)87,292
     151,717
     
Total liabilities2,299,500
     2,481,423
     
Stockholders’ equity            
Preferred stock26,212
     27,511
     
Common stockholders’ equity230,350
     232,907
     
Total stockholders’ equity256,562
(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)      
20172019
Year ended December 31,
(Taxable-equivalent interest and rates; in millions, except rates)		Average balanceInterest Average rate
(Unaudited)
Year ended December 31,
(Taxable-equivalent interest and rates; in millions, except rates)		Average balanceInterest 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 balanceInterest Average rate  Average balanceInterest 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 balanceInterest Rate  Average balanceInterest 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 20152019 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 Report283
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-K293
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

284JPMorgan 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

294JPMorgan 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 Report285
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-K295
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.

286JPMorgan 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.

296JPMorgan 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•287
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.
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-K297
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.

288JPMorgan 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

298JPMorgan 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 agencies11,202
 11,036
All other AFS securities172,567
 175,652
Total available-for-sale debt securities$237,458
 $241,754
    
Held-to-maturity securities   
Mortgage-backed securities: U.S Government agencies36,271
 37,081
All other HTM securities12,802
 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 agencies22,510
 22,745
All other AFS securities106,352
 109,200
Total available-for-sale securities$198,741
 $202,225
    
Held-to-maturity securities   
Mortgage-backed securities: U.S. GSEs and government agencies27,577
 28,095
All other HTM securities20,156
 20,557
Total held-to-maturity securities$47,733
 $48,652
Total investment securities$246,474
 $250,877




290300  
Loan portfolio


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 equity44,249
51,965
60,548
69,837
76,790
31,294
37,303
44,249
51,965
60,548
Auto66,242
65,814
60,255
54,536
52,757
61,522
63,573
66,242
65,814
60,255
Other26,033
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 loans372,681
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 loans149,107
141,447
131,132
129,067
125,308
168,787
156,312
149,107
141,447
131,132
Non-U.S. credit card loans404
369
331
1,981
2,483
137
320
404
369
331
Total credit card loans149,511
141,816
131,463
131,048
127,791
168,924
156,632
149,511
141,816
131,463
Total consumer loans522,192
506,460
476,284
426,422
416,854
503,964
530,364
522,192
506,460
476,284
U.S. wholesale loans  
Commercial and industrial93,522
91,393
83,739
78,664
79,436
90,706
111,208
93,522
91,393
83,739
Real estate112,562
104,268
90,836
77,022
67,815
117,949
115,401
112,562
104,268
90,836
Financial institutions23,819
20,499
12,708
13,743
11,087
39,925
29,165
23,819
20,499
12,708
Government agencies12,603
12,655
9,838
7,574
8,316
Governments & Agencies10,510
11,037
12,603
12,655
9,838
Other69,602
66,363
67,925
49,838
48,158
93,495
83,386
69,602
66,363
67,925
Total U.S. wholesale loans312,108
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 industrial29,233
31,340
30,385
34,782
36,447
29,423
30,450
29,233
31,340
30,385
Real estate3,302
3,975
4,577
2,224
1,621
4,601
3,397
3,302
3,975
4,577
Financial institutions16,845
15,196
17,188
21,099
22,813
16,894
18,563
16,845
15,196
17,188
Government agencies2,906
3,726
1,788
1,122
2,146
Governments & Agencies2,321
3,150
2,906
3,726
1,788
Other44,111
38,890
42,031
44,846
43,725
49,981
48,433
44,111
38,890
42,031
Total non-U.S. wholesale loans96,397
93,127
95,969
104,073
106,752
103,220
103,993
96,397
93,127
95,969
Total wholesale loans  
Commercial and industrial122,755
122,733
114,124
113,446
115,883
120,129
141,658
122,755
122,733
114,124
Real estate115,864
108,243
95,413
79,246
69,436
122,550
118,798
115,864
108,243
95,413
Financial institutions40,664
35,695
29,896
34,842
33,900
56,819
47,728
40,664
35,695
29,896
Government agencies15,509
16,381
11,626
8,696
10,462
Governments & Agencies12,831
14,187
15,509
16,381
11,626
Other113,713
105,253
109,956
94,684
91,883
143,476
131,819
113,713
105,253
109,956
Total wholesale loans408,505
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 value2,508
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.



  291301


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 estate8,044
 25,054
 79,464
 112,562
5,922
 25,976
 86,051
 117,949
Financial institutions15,176
 7,699
 944
 23,819
21,185
 18,282
 458
 39,925
Government agencies1,644
 4,182
 6,777
 12,603
Governments & Agencies1,106
 3,541
 5,863
 10,510
Other23,274
 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 industrial11,648
 14,708
 2,877
 29,233
10,537
 15,991
 2,895
 29,423
Real estate834
 2,460
 8
 3,302
1,008
 3,497
 96
 4,601
Financial institutions12,716
 4,109
 20
 16,845
9,367
 7,503
 24
 16,894
Government agencies149
 1,955
 802
 2,906
Governments & Agencies278
 1,336
 707
 2,321
Other33,383
 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 loans4,209
 4,820
 5,413
 6,509
 7,496
3,142
 3,461
 4,209
 4,820
 5,413
Wholesale:                  
Commercial and industrial703
 1,145
 315
 184
 317
636
 624
 703
 1,145
 315
Real estate95
 148
 175
 237
 338
53
 212
 95
 148
 175
Financial institutions2
 4
 4
 12
 19
3
 4
 2
 4
 4
Government agencies—
 —
 —
 —
 1
Governments & Agencies—
 —
 —
 —
 —
Other137
 198
 86
 59
 97
34
 89
 137
 198
 86
Total U.S. wholesale nonaccrual loans937
 1,495
 580
 492
 772
726
 929
 937
 1,495
 580
Total U.S. nonaccrual loans5,146
 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 industrial654
 454
 314
 21
 116
207
 358
 654
 454
 314
Real estate41
 52
 63
 23
 88
—
 12
 41
 52
 63
Financial institutions—
 5
 6
 7
 8
—
 —
 —
 5
 6
Government agencies—
 —
 —
 —
 —
Governments & Agencies—
 —
 —
 —
 —
Other102
 57
 53
 81
 60
5
 71
 102
 57
 53
Total non-U.S. wholesale nonaccrual loans797
 568
 436
 132
 272
212
 441
 797
 568
 436
Total non-U.S. nonaccrual loans797
 568
 436
 132
 272
212
 441
 797
 568
 436
Total nonaccrual loans5,943
 6,883
 6,429
 7,133
 8,540
4,080
 4,831
 5,943
 6,883
 6,429
Derivative receivables130
 223
 204
 275
 415
30
 60
 130
 223
 204
Assets acquired in loan satisfactions353
 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





292302  


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 loans1,378
 1,143
 944
 893
 997
1,605
 1,442
 1,378
 1,143
 944
 
Total U.S. consumer loans1,378
 1,143
 944
 893
 997
1,605
 1,442
 1,378
 1,143
 944
 
Wholesale:                   
Commercial and industrial107
 86
 6
 14
 14
34
 167
 107
 86
 6
 
Real estate12
 2
 15
 33
 14
4
 3
 12
 2
 15
 
Financial institutions14
 12
 1
 —
 —
2
 8
 14
 12
 1
 
Government agencies4
 4
 6
 —
 —
Governments & Agencies—
 4
 4
 4
 6
 
Other2
 19
 28
 26
 16
1
 2
 2
 19
 28
 
Total U.S. wholesale loans139
 123
 56
 73
 44
41
 184
 139
 123
 56
 
Total U.S. loans1,517
 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 loans1
 2
 —
 2
 25
2
 3
 1
 2
 —
 
Total non-U.S. consumer loans1
 2
 —
 2
 25
2
 3
 1
 2
 —
 
Wholesale:                   
Commercial and industrial1
 —
 1
 —
 —
1
 1
 1
 —
 1
 
Real estate—
 —
 —
 —
 —
—
 —
 —
 —
 —
 
Financial institutions1
 9
 10
 —
 6
—
 2
 1
 9
 10
 
Government agencies—
 —
 —
 —
 —
Governments & Agencies—
 —
 —
 —
 —
 
Other—
 —
 —
 3
 —
—
 1
 —
 —
 —
 
Total non-U.S. wholesale loans2
 9
 11
 3
 6
1
 4
 2
 9
 11
 
Total non-U.S. loans3
 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 loans6,208
 6,801
 7,445
 9,843
 12,288
5,068
 5,504
 6,208
 6,801
 7,445
Wholesale:                  
Commercial and industrial32
 34
 12
 10
 —
32
 50
 32
 34
 12
Real estate5
 11
 28
 31
 27
1
 3
 5
 11
 28
Financial institutions79
 —
 —
 —
 —
—
 —
 79
 —
 —
Other—
 4
 —
 1
 3
1
 5
 —
 4
 —
Total U.S. wholesale loans116
 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 industrial10
 17
 —
 —
 —
32
 45
 10
 17
 —
Real estate—
 —
 —
 —
 —
—
 —
 —
 —
 —
Financial institutions11
 —
 —
 —
 —
—
 —
 11
 —
 —
Other—
 —
 —
 —
 —
3
 —
 —
 —
 —
Total non-U.S. wholesale loans21
 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.


  293303


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)201720162015
(Unaudited)
Year ended December 31, (in millions)
201920182017
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 card192
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. consumer192
257
288
90
131
192
Wholesale:  
Gross amount of interest that would have been recorded at the original terms46
56
24
53
51
46
Interest that was recognized in income(30)(5)(10)(24)(16)(30)
Total U.S. wholesale16
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 terms24
25
13
12
13
24
Interest that was recognized in income(12)(2)(6)(5)(3)(12)
Total non-U.S. wholesale12
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




294304  


Year ended December 31, (in millions)201720162015
(Unaudited)
Year ended December 31, (in millions)
201920182017
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 card156
195
199
89
112
156
Credit card:  
Gross amount of interest that would have been recorded at the original terms202
207
260
265
227
202
Interest that was recognized in income(59)(63)(82)(72)(65)(59)
Total U.S. credit card143
144
178
193
162
143
Total U.S. consumer299
339
377
282
274
299
Wholesale:  
Gross amount of interest that would have been recorded at the original terms13
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


  295305


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 assetsCross-border outstandings exceeding 0.75% of total assetsCross-border outstandings exceeding 0.75% of total assets 
(in millions)December 31,GovernmentsBanks
Other(a)
Net local
country
assets
Total
cross-border outstandings(b)
Commitments(c)
Total exposure
(Unaudited)
(in millions)
December 31,GovernmentsBanks
Other(a)
Net local
country
assets
 
Total
cross-border outstandings(c)
 
Commitments(d)
Total exposure 
Germany2017$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
 
201622,332
2,118
14,310
25,269
64,029
71,981
136,010
201812,793
7,769
15,393
30,054
(b) 
66,009
(b) 
67,973
133,982
(b) 
201519,817
2,028
8,455
—
30,300
106,104
136,404
201717,751
5,357
12,320
20,117
 55,545
 65,333
120,878
 
Cayman Islands2017$5
$462
$61,302
$58
$61,827
$12,361
$74,188
2019$15
$367
$89,124
$—
 $89,506
 $114,398
$203,904
 
201618
107
74,810
84
75,019
10,708
85,727
20181
308
105,857
20
 106,186
 45,073
151,259
 
2015—
153
76,160
35
76,348
12,708
89,056
20175
462
61,268
58
 61,793
 12,361
74,154
 
Japan2017$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
 
2016865
16,522
5,209
48,505
71,101
52,448
123,549
2018282
9,803
4,167
41,948
(b) 
56,200
(b) 
51,901
108,101
(b) 
2015367
12,556
3,972
29,348
46,243
47,069
93,312
20171,082
17,159
12,239
25,229
 55,709
 52,928
108,637
 
France2017$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
 
201610,871
4,076
26,195
3,723
44,865
88,256
133,121
201812,556
3,499
21,571
2,771
 40,397
 105,845
146,242
 
20159,139
5,780
21,199
2,890
39,008
127,159
166,167
201712,975
7,083
15,329
2,471
 37,858
 83,572
121,430
 
Italy2017$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
 
201612,290
4,760
4,487
848
22,385
62,382
84,767
20189,401
4,098
5,145
1,375
 20,019
 61,326
81,345
 
201512,313
3,618
6,331
732
22,994
89,712
112,706
201711,516
4,524
4,499
611
 21,150
 61,005
82,155
 
Ireland2017$630
$318
$19,669
$—
$20,617
$5,728
$26,345
2019$381
$319
$18,061
$—
 $18,761
 $9,520
$28,281
 
2016148
664
18,916
—
19,728
5,469
25,197
2018185
45
19,439
—
 19,669
 5,585
25,254
 
201567
952
12,436
—
13,455
8,024
21,479
2017630
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.


296306  


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)20172016201520142013
(Unaudited)
Year ended December 31, (in millions)
20192018201720162015
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 card1,779
1,500
1,658
2,132
2,754
963
1,025
1,779
1,500
1,658
U.S. credit card4,521
3,799
3,475
3,682
4,358
5,436
5,011
4,521
3,799
3,475
Total U.S. consumer charge-offs6,300
5,299
5,133
5,814
7,112
6,399
6,036
6,300
5,299
5,133
U.S. wholesale:  
Commercial and industrial87
240
63
44
150
273
161
87
240
63
Real estate3
7
6
14
51
12
3
3
7
6
Financial institutions—
—
5
14
1
—
—
—
—
5
Government agencies5
—
—
25
1
Governments & Agencies—
—
5
—
—
Other19
13
6
22
9
16
97
19
13
6
Total U.S. wholesale charge-offs114
260
80
119
212
301
261
114
260
80
Total U.S. charge-offs6,414
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 industrial89
134
5
27
5
75
51
89
134
5
Real estate—
1
—
4
11
—
—
—
1
—
Financial institutions7
1
—
—
—
—
—
7
1
—
Government agencies—
—
—
—
—
Governments & Agencies—
—
—
—
—
Other2
2
10
1
13
35
1
2
2
10
Total non-U.S. wholesale charge-offs98
138
15
32
29
110
52
98
138
15
Total non-U.S. charge-offs98
138
28
181
143
110
52
98
138
28
Total charge-offs6,512
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-offs5,387
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 losses5,300
5,080
3,663
3,224
188
5,449
4,885
5,300
5,080
3,663
Other1
(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.





  297307
Summary of loan and lending-related commitments loss experience


Allowance for lending-related commitments
Year ended December 31, (in millions)20172016201520142013
(Unaudited)
Year ended December 31, (in millions)
20192018201720162015
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)
20172016201520142013
(Unaudited)
As of or for the year ended December 31,
(in millions, except ratios)
20192018201720162015
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-end930,697
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 – average0.60%0.54%0.52%0.65%0.81%0.60%0.52%0.60%0.54%0.52%
Allowance for loan losses39.60
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 retained229
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.


298308  




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 20152019 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
Time53,410
 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-bearing16,741
 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




  299309




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 year187,386
 178,720
 192,510
227,994
 189,282
 187,386
Maximum month-end balance205,286
 207,211
 212,112
251,829
 201,340
 205,286
Weighted-average rate at December 311.03% 0.50% 0.39%1.77% 2.18% 1.03%
Weighted-average rate during the year0.86
 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 year19,920
 15,001
 38,140
22,977
 27,834
 19,920
Maximum month-end balance24,934
 19,083
 64,012
30,007
 30,470
 24,934
Weighted-average rate at December 311.59% 1.13% 0.55%2.16% 2.71% 1.59%
Weighted-average rate during the year1.39
 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 year96,331
 93,252
 93,001
106,348
 108,436
 96,331
Maximum month-end balance107,157
 102,310
 99,226
128,488
 125,544
 107,157
Weighted-average rate at December 312.09% 1.79% 1.89%1.85% 2.23% 2.09%
Weighted-average rate during the year1.98
 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 year5,327
 8,296
 15,608
12,511
 4,756
 5,327
Maximum month-end balance7,573
 10,494
 17,137
16,016
 6,527
 7,573
Weighted-average rate at December 311.50% 0.83% 0.41%1.92% 2.53% 1.50%
Weighted-average rate during the year1.07
 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.




300310  




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. BOWLESDirector 
(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 HOBSONDirector
(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. WELDONDirector 
 (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)   




  301311