Adjustment related to AOCI(a) (1,829) | | Changes related to other CET1 capital adjustments(b) | 1,571 | | Change in Standardized/Advanced CET1 capital | 17,325 | | Standardized/Advanced CET1 capital at December 31, 2020 | $ | 205,078 | | | | (a)Standardized/Advanced Tier 1 capital at December 31, 2019 | Includes DVA related to structured notes recorded$ | 214,432 | | Change in AOCI.CET1 capital(b) | 17,325 | | Net issuance of noncumulative perpetual preferred stock | 3,070 | | | | Other | 17 | | Change in Standardized/Advanced Tier 1 capital | 20,412 | | Standardized/Advanced Tier 1 capital at December 31, 2020 | $ | 234,844 | | | | Standardized Tier 2 capital at December 31, 2019 | $ | 28,157 | | Change in long-term debt and other instruments qualifying as Tier 2 | 2,912 | | Change in qualifying allowance for credit losses(b) | 4,058 | | Other | (48) | | Change in Standardized Tier 2 capital | 6,922 | | Standardized Tier 2 capital at December 31, 2020 | $ | 35,079 | | Standardized Total capital at December 31, 2020 | $ | 269,923 | | Advanced Tier 2 capital at December 31, 2019 | $ | 17,680 | | Change in long-term debt and other instruments qualifying as Tier 2 | 2,912 | | Change in qualifying allowance for credit losses(b) | 1,840 | | Other | (48) | | Change in Advanced Tier 2 capital | 4,704 | | Advanced Tier 2 capital at December 31, 2020 | $ | 22,384 | | Advanced Total capital at December 31, 2020 | $ | 257,228 | |
(a)Includes cash flow hedges and DVA related to structured notes recorded in AOCI. (b)Includes the impact of the CECL capital transition provisions.
| | | | | | | | | 90 | | JPMorgan Chase & Co./20182020 Form 10-K | | 97 |
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-Inapproaches for the year ended December 31, 2018.2020. The amounts in the rollforward categories are estimates, based on the predominant driver of the change. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Standardized | | Advanced | Year ended December 31, 2020 (in millions) | Credit risk RWA | Market risk RWA | Total RWA | | Credit risk RWA | Market risk RWA | Operational risk RWA | Total RWA | December 31, 2019 | $ | 1,440,220 | | $ | 75,649 | | $ | 1,515,869 | | | $ | 932,948 | | $ | 75,652 | | $ | 389,278 | | $ | 1,397,878 | | Model & data changes(a) | (800) | | (16,320) | | (17,120) | | | (6,100) | | (16,320) | | — | | (22,420) | | Portfolio runoff(b) | (4,450) | | — | | (4,450) | | | (4,000) | | — | | — | | (4,000) | | Movement in portfolio levels(c) | 29,249 | | 37,061 | | 66,310 | | | 79,482 | | 37,578 | | (4,087) | | 112,973 | | Changes in RWA | 23,999 | | 20,741 | | 44,740 | | | 69,382 | | 21,258 | | (4,087) | | 86,553 | | December 31, 2020 | $ | 1,464,219 | | $ | 96,390 | | $ | 1,560,609 | | | $ | 1,002,330 | | $ | 96,910 | | $ | 385,191 | | $ | 1,484,431 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Standardized | | Advanced | Year ended December 31, 2018 (in millions) | Credit risk RWA | Market risk RWA | Total RWA | | Credit risk RWA | Market risk RWA | Operational risk RWA | Total RWA | December 31, 2017 | $ | 1,386,060 |
| $ | 123,702 |
| $ | 1,509,762 |
| | $ | 922,905 |
| $ | 123,791 |
| $ | 400,000 |
| $ | 1,446,696 |
| Model & data changes(a) | (10,431 | ) | (13,191 | ) | (23,622 | ) | | 3,750 |
| (13,191 | ) | — |
| (9,441 | ) | Portfolio runoff(b) | (8,381 | ) | — |
| (8,381 | ) | | (10,161 | ) | — |
| — |
| (10,161 | ) | Movement in portfolio levels(c) | 55,805 |
| (4,648 | ) | 51,157 |
| | 10,153 |
| (4,624 | ) | (11,418 | ) | (5,889 | ) | Changes in RWA | 36,993 |
| (17,839 | ) | 19,154 |
| | 3,742 |
| (17,815 | ) | (11,418 | ) | (25,491 | ) | December 31, 2018 | $ | 1,423,053 |
| $ | 105,863 |
| $ | 1,528,916 |
| | $ | 926,647 |
| $ | 105,976 |
| $ | 388,582 |
| $ | 1,421,205 |
|
(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). | | (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 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. |
(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; updates to cumulative losses for operational risk RWA; and deductions to credit risk RWA for excess eligible credit reserves not eligible for inclusion in Tier 2 capital. Supplementary leverage ratio The following table presents the components of the Firm’s Fully Phased-InSLR. | | | | | | | | | Three months ended (in millions, except ratio) | December 31, 2020 | December 31, 2019 | Tier 1 capital | $ | 234,844 | | 214,432 | | Total average assets | 3,399,818 | | 2,777,270 | | Less: Regulatory capital adjustments(a) | 46,499 | | 47,031 | | Total adjusted average assets(b) | 3,353,319 | | 2,730,239 | | Add: Off-balance sheet exposures(c) | 729,978 | | 693,192 | | Less: Exclusion for U.S. Treasuries and Federal Reserve Bank deposits | 681,755 | | — | | Total leverage exposure | $ | 3,401,542 | | $ | 3,423,431 | | SLR | 6.9 | % | 6.3 | % | | | |
(a)For purposes of calculating the SLR, asincludes 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. As of December 31, 20182020, includes adjustments for the CECL capital transition provisions and 2017.the exclusion of average assets purchased from money market mutual fund clients pursuant to nonrecourse advances provided under the MMLF. (b)Adjusted average assets used for the calculation of Tier 1 leverage ratio. | | | | | | | | (in millions, except ratio) | December 31, 2018 |
| December 31, 2017 |
| Tier 1 capital | $ | 209,093 |
| $ | 208,564 |
| Total average assets | 2,636,505 |
| $ | 2,562,155 |
| Less: Adjustments for deductions from Tier 1 capital | 46,618 |
| 47,333 |
| Total adjusted average assets(a) | 2,589,887 |
| 2,514,822 |
| Off-balance sheet exposures(b) | 680,101 |
| 690,193 |
| Total leverage exposure | $ | 3,269,988 |
| $ | 3,205,015 |
| SLR | 6.4 | % | 6.5 | % |
(c)Off-balance sheet exposures are calculated as the average of the three month-end spot balances during the reporting quarter. | | (a) | Adjusted average assets,Refer to Note 27 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.
|
For JPMorgan Chase Bank, N.A.’s and Chase Bank USA, N.A.’s SLR ratios, refer to Note 26.SLR.
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. On at leastAs of January 1, 2021, the Firm has changed its line of business capital allocations primarily as a result of changes in exposures for each LOB and an annual basis,increase in the relative risk weighting toward Standardized RWA. The assumptions and methodologies used into allocate capital allocation are periodically assessed and as a result, the capital allocated to lines of businessthe LOBs may change.As of January 1, 2019, line of business capital allocations have increased duechange from time to a combination of changes in the relative weights toward Standardized RWA and stress, a higher capitalization rate, updated stress simulations, and general business growth. time. The following table below presents the Firm’s assessed level of capital allocated to each line of business as of the dates indicated.segment. | | | | | | | | | | | | Line of business equity (Allocated capital) | | | | December 31, | (in billions) | January 1, 2019 |
| | 2018 |
| 2017 |
| Consumer & Community Banking | $ | 52.0 |
| | $ | 51.0 |
| $ | 51.0 |
| Corporate & Investment Bank | 80.0 |
| | 70.0 |
| 70.0 |
| Commercial Banking | 22.0 |
| | 20.0 |
| 20.0 |
| Asset & Wealth Management | 10.5 |
| | 9.0 |
| 9.0 |
| Corporate | 65.9 |
| | 80.4 |
| 79.6 |
| Total common stockholders’ equity | $ | 230.4 |
| | $ | 230.4 |
| $ | 229.6 |
|
Capital actions | | | | | | | | | | | | | | | Line of business equity (Allocated capital) | | | | December 31, | (in billions) | January 1, 2021 | | 2020 | 2019 | Consumer & Community Banking | $ | 50.0 | | | $ | 52.0 | | $ | 52.0 | | Corporate & Investment Bank | 83.0 | | | 80.0 | | 80.0 | | Commercial Banking | 24.0 | | | 22.0 | | 22.0 | | Asset & Wealth Management | 14.0 | | | 10.5 | | 10.5 | | Corporate | 78.3 | | | 84.8 | | 69.8 | | Total common stockholders’ equity | $ | 249.3 | | | $ | 249.3 | | $ | 234.3 | |
Preferred stock
Preferred stock dividends declared were $1.6 billion for the year ended December 31, 2018.
On January 24, 2019, the Firm issued $1.85 billion of 6.00% non-cumulative preferred stock, Series EE, and on January 30, 2019, the Firm announced that it will redeem all $925 million of its outstanding 6.70% non-cumulative preferred stock, Series T, on March 1, 2019.On September 21, 2018, the Firm issued $1.7 billion of 5.75% non-cumulative preferred stock, Series DD. On October 30, 2018, the Firm redeemed $1.7 billion of its fixed-to-floating rate non-cumulative perpetual preferred stock, Series I.
On October 20, 2017, the Firm issued $1.3 billion 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.
For additional information on the Firm’s preferred stock, refer to Note 20.
| | | | | | | | | 98 | | JPMorgan Chase & Co./20182020 Form 10-K | | 91 |
Management’s discussion and analysis
Trust preferred securities
On September 10, 2018, the Firm’s last remaining issuer of outstanding trust preferred securities (“issuer trust”) was liquidated, resulting in $475 million of trust preferred securities and $15 million of trust common securities originally issued by the issuer trust being cancelled.
On December 18, 2017, the Delaware trusts that issued
seven series of outstanding trust preferred securities were
liquidated, and $1.6 billion of trust preferred and $56 million of trust common securities originally issued by those trusts were cancelled.
For additional information, refer to Note 19.Capital actions
Common stock dividends The Firm’s common stock dividends are planned as part of the Capital Management governance framework in line with the Firm’s capital management objectives. On September 18, 2018, the Firm announced that its Board of Directors increased theThe Firm’s quarterly common stock dividend from $0.56is currently $0.90 per share to $0.80 per share, effective with the dividend paid on October 31, 2018.share. 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, refer to Note 20 and Note 25.restrictions.
The following table shows the common dividend payout ratio based on net income applicable to common equity. | | Year ended December 31, | 2018 |
| | 2017 |
| | 2016 |
| Year ended December 31, | 2020 | | 2019 | | 2018 | Common dividend payout ratio | 30 | % | | 33 | % | | 30 | % | Common dividend payout ratio | 40 | % | | 31 | % | | 30 | % |
Common equitystock DuringOn March 15, 2020, in response to the year endedeconomic disruptions caused by the COVID-19 pandemic, the Firm temporarily suspended repurchases of its common stock. Subsequently, the Federal Reserve directed all large banks, including the Firm, to discontinue net share repurchases through the end of 2020. On December 31, 2018, warrant holders exercised their right to purchase 14.9 million shares18, 2020, the Federal Reserve announced that all large banks, including the Firm, could resume share repurchases commencing in the first quarter of 2021. As directed by the Federal Reserve, total net repurchases and common stock dividends in the first quarter of 2021 are restricted and cannot exceed the average of the Firm’s common stock.net income for the four preceding calendar quarters. The Firm issued from treasury stock 9.4 million shares of its common stock as a result of these exercises. There were no warrants outstanding at December 31, 2018, as any warrants that were not exercised on or before October 29, 2018, have expired. At December 31, 2017, the Firm had 15.0 million warrants outstanding.
Effective June 28, 2018, the Firm’sFirm's Board of Directors has authorized thea new common share repurchase ofprogram for up to $20.7 billion of common equity between July 1, 2018 and June 30, 2019, as part of its annual capital plan. As of December 31, 2018, $10.4 billion of authorized repurchase capacity remained under the common equity repurchase program.$30 billion.
The following table sets forth the Firm’s repurchases of common equitystock for the years ended December 31, 2018, 20172020, 2019 and 2016. There were no repurchases of warrants during the years ended December 31, 2018, 2017 and 2016.2018. | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | Total number of shares of common stock repurchased | | 50.0 | | | 213.0 | | | 181.5 | | Aggregate purchase price of common stock repurchases | | $ | 6,397 | | | $ | 24,121 | | | $ | 19,983 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2018 |
| | 2017 |
| | 2016 |
| Total number of shares of common stock repurchased | | 181.5 |
| | 166.6 |
| | 140.4 |
| Aggregate purchase price of common stock repurchases | | $ | 19,983 |
| | $ | 15,410 |
| | $ | 9,082 |
|
The Firm from time to time enters 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 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 beshares is utilized at management’s discretion, and the timing of purchases and the exact amount of common equityshares 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 suspended by management at any time; and may be executed through open market purchases or privately negotiated transactions, or utilizing Rule 10b5-1 plans; andplans, which are written trading plans that the Firm may be suspended by management at any time. For additional information regarding repurchasesenter into from time to time under Rule 10b5-1 of the Firm’s equity securities, referSecurities Exchange Act of 1934 and which allow the Firm to repurchase its common shares during periods when it may otherwise not be repurchasing common shares — for example, during internal trading blackout periods.
Refer to Part II, Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities on page 30.34 of the 2020 Form 10-K for additional information regarding repurchases of the Firm’s equity securities. Preferred stock Preferred stock dividends declared were $1.6 billion for the year ended December 31, 2020. The Firm has not issued or redeemed any preferred stock since the first quarter of 2020. Refer to Note 21 for additional information on the Firm’s preferred stock, including the issuance and redemption of preferred stock. Subordinated Debt On May 13, 2020, the Firm issued $3.0 billion of fixed-to-floating rate subordinated notes due 2031. Refer to Long-term funding and issuance on page 107 and Note 20 for additional information.
| | | | | | | | | 92 | | JPMorgan Chase & Co./20182020 Form 10-K | | 99 |
Management’s discussion and analysis
Other capital requirements Total Loss-Absorbing Capacity (“TLAC”) On December 15, 2016, theThe Federal Reserve issued its finalReserve’s TLAC rule which requires the top-tier holding companies of eight U.S. GSIB top-tier holding companies, including the Firm, to maintain minimum levels of external TLAC and externaleligible long-term debt that satisfies certain eligibility criteria (“eligible LTD”), effective January 1, 2019.debt.
The minimum external TLAC and the minimum level of eligible long-term debt requirements are shown below: (a) RWA is the greater of Standardized and Advanced.Advanced compared to their respective minimum capital ratios. Failure to maintain TLAC equal to or in excess of the regulatory minimum plus applicable buffers maywill result in limitations to the amount of capital that the Firm may distribute, such as through dividends and common equityshare repurchases. The finalfollowing table presents the TLAC rule permanently grandfathered alland external long-term debt issued before December 31, 2016, to the extent these securities would be ineligible because they contained impermissible acceleration rights or were governed by non-U.S. law. Asminimum requirements including applicable regulatory buffers, as of December 31, 2018, the Firm exceeded the minimum requirements under the rule to which it became subject to on2020 and 2019. | | | | | | | Minimum Requirements | TLAC to RWA | 23.0 | % | TLAC to leverage exposure | 9.5 | | External long-term debt to RWA | 9.5 | | External long-term debt to leverage | 4.5 | |
Effective January 1, 2019.2021, Method 1 GSIB surcharge is 2.0% (down from 2.5%). As a result, the Firm’s TLAC to RWA requirement will become 22.5%. Refer to Risk-based Capital Regulatory Minimums on pages 94-95 for further information on the GSIB surcharge. The following table presents the eligible external TLAC and eligible LTD amounts, as well as a representation of the amounts as a percentage of the Firm’s total RWA and total leverage exposure.exposure applying the impact of the CECL capital transition provisions as of December 31, 2020 and 2019. | | | | | | | | | | | | | | | | December 31, 2020 | December 31, 2019 | (in billions, except ratio) | External TLAC | LTD | External TLAC | LTD | Total eligible amount | $ | 421.0 | | $ | 181.4 | | $ | 386.4 | | $ | 161.8 | | % of RWA | 27.0 | % | 11.6 | % | 25.5 | % | 10.7 | % | | | | | | Surplus/(shortfall) | $ | 62.1 | | $ | 33.1 | | $ | 37.7 | | $ | 17.8 | | | | | | | % of total leverage exposure | 12.4 | % | 5.3 | % | 11.3 | % | 4.7 | % | | | | | | Surplus/(shortfall) | $ | 97.9 | | $ | 28.3 | | $ | 61.2 | | $ | 7.8 | |
Refer to Part I, Item 1A: Risk Factors on pages 8-32 of the 2020 Form 10-K | | | | | | | | December 31, 2018 | | (in billions, except ratio) | Eligible External TLAC | Eligible LTD | Total eligible TLAC & LTD | $ | 380.5 |
| $ | 160.5 |
| % of RWA | 24.9 | % | 10.5 | % | Minimum requirement | 23.0 |
| 9.5 |
| Surplus/(shortfall) | $ | 28.9 |
| $ | 15.3 |
| | | | % of total leverage exposure | 11.6 | % | 4.9 | % | Minimum requirement(a) | 9.5 |
| 4.5 |
| Surplus/(shortfall) | $ | 69.9 |
| $ | 13.4 |
|
Forfor information on the financial consequences to holders of the Firm’s debt and equity securities in a resolution scenario, refer to Part I, Item 1A: Risk Factors on pages 7-28 of the Firm’s 2018 Form 10-K.scenario.
| | | | | | | | | 100 | | JPMorgan Chase & Co./20182020 Form 10-K | | 93 |
Management’s discussion and analysis
Broker-dealer regulatory capital J.P. Morgan Securities JPMorgan Chase’s principal U.S. broker-dealer subsidiary is J.P. Morgan Securities. J.P. Morgan Securities is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the “Net Capital Rule”). J.P. Morgan Securities is also registered as a futures commission merchant and is subject to Rule 1.17 ofregulatory capital requirements, including those imposed by the CFTC.SEC, Commodity Futures Trading Commission (“CFTC”), Financial Industry Regulatory Authority (“FINRA”) and the National Futures Association (“NFA”). J.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, 2020 | | (in millions) | Actual(a) | Minimum | Net Capital | $ | 27,651 | | $ | 5,024 | |
Under(a)Net capital reflects the exclusion of assets purchased from money market and credit risk standards of Appendix E ofmutual fund clients pursuant to nonrecourse advances provided under the Net Capital Rule,MMLF.
In addition to its alternative minimum net capital requirements, J.P. Morgan Securities is eligiblerequired to use the alternative methodhold “tentative net capital” in excess of computing net capital if, in addition to meeting its minimum net capital requirements, it maintains tentative net capital of at least $1.0 billion. J.P. Morgan Securitiesbillion 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, 2018,2020, J.P. Morgan Securities maintained tentative net capital in excess of the minimum and notification requirements. The following table presents J.P.Morgan Securities’ net capital information:
| | | | | | | | December 31, 2018 | Net capital | (in millions) | Actual |
| Minimum |
| J.P. Morgan Securities | $ | 16,648 |
| $ | 3,069 |
|
J.P. Morgan Securities plc J.P. Morgan Securities plc is a wholly-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 PRAU.K. Prudential 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 PRA capital rules, each of which implementedimplement Basel III and thereby subject J.P. Morgan Securities plc to its requirements. Effective January 1, 2021, J.P. Morgan Securities plc is subject to the amended EU Capital Requirement Regulation, as adopted in the U.K. 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, 2020, 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, 2020 | | | (in millions, except ratios) | Estimated | Minimum ratios | Total capital | $ | 55,156 | | | CET1 ratio | 17.9 | % | 4.5 | % | Total capital ratio | 22.8 | % | 8.0 | % |
| | | | | | | | | | | December 31, 2018 | Total capital(a) | | CET1 ratio | | Total capital ratio | (in millions, except ratios) | Estimated | | Estimated | Minimum | | Estimated | Minimum | J.P. Morgan Securities plc | $ | 53,086 |
| | 17.4 | 4.5 | | 22.5 | 8.0 |
| | (a) | Includes the tier 2 qualifying subordinated debt securities issued to meet the MREL requirements to which J.P. Morgan Securities plc became subject to on January 1, 2019. For additional information on MREL, refer to Supervision & Regulation on pages 1-6 |
| | | | 94 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 101 |
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 oversightLiquidity Risk Oversight function whose primary objective is to provide assessment, measurement, monitoring, and controloversight of liquidity risk across the Firm. Liquidity risk oversight is managed through a dedicated firmwide Liquidity Risk Oversight group. The CTC CRO, who reports to the Firm’s CRO, 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 and indicators, including liquidity risk appetite tolerances;
|
| | • | 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;
|
Monitoring liquidity positions, balance sheet variances and funding activities; | | • | Conducting ad hoc analysis to identify potential emerging liquidity risks; and
|
| | • | Performing independent review of liquidity risk management processes.
|
Liquidity management Treasury and CIO is responsible for liquidity management. The primary objectives of effectivethe Firm’s 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 overall liquidity management strategy, the Firm manages liquidity and funding using a centralized, global approach in order to: •Optimize liquidity sources and uses; | | • | Optimize liquidity sources and uses;
|
| | • | Identify constraints on the transfer of liquidity between the Firm’s legal entities; and
|
| | • | Maintain the appropriate amount of surplus liquidity at a firmwide and legal entity level, where relevant.
|
•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 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.
|
Risk governance
•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. Governance Committees responsible for liquidity governance include the firmwideFirmwide ALCO as well as line of businessLOB and regional ALCOs, the Treasurer Committee, and the CTC Risk Committee. In addition, the DRPC Board 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 85-89 for further discussion of ALCO and other risk-related committees, refer to Enterprise-wide Risk Management on pages 79–140.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, | | • | 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.
|
•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, IHC, and the IHC, in addition to liquidity held at the
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 95 |
Management’s discussion and analysis
operating subsidiaries at levels sufficient to comply with liquidity risk tolerances and minimum liquidity requirements, and to manage through periods of | | | | | | | | | 102 | | JPMorgan Chase & Co./2020 Form 10-K |
stress wherewhen access to normal funding sources ismay be disrupted. Contingency funding plan The Firm’s contingency funding planContingency Funding Plan (“CFP”), which is approved by sets out the firmwide ALCOstrategies for addressing and the DRPC, is a compilation of procedures and action plans for managing liquidity throughresource needs during a liquidity stress events.event and incorporates liquidity risk limits, indicators and risk appetite tolerances that make up Liquidity Escalation Points. The CFP incorporates the limits and indicators set by the Liquidity Risk Oversight group. These limits and indicators are reviewed regularly to identify emerging risks or vulnerabilities in the Firm’s liquidity position. The CFPalso identifies the alternative contingent funding and liquidity resources available to the Firm and its legal entities in a period of stress. Liquidity Coverage Ratio The LCR rule requires that the Firm toand JPMorgan Chase Bank, N.A. maintain an amount of unencumbered High Quality Liquid Assets (“HQLA”)eligible HQLA that is sufficient to meet its estimated total net cash outflows over a prospective 30 calendar-day period of significant stress. Eligible HQLA, for purposes of calculating the LCR, is the amount of liquid assetsunencumbered HQLA that qualify for inclusionsatisfy certain operational considerations as defined in the LCR.LCR rule. HQLA primarily consist of unencumbered cash and certain high qualityhigh-quality liquid securities as defined in the LCR rule. Under the LCR rule, the amountsamount of eligible 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 eligible HQLA. 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 for both the Firm and JPMorgan Chase Bank, N.A. is required to be a minimum of 100%. The following table summarizes the Firm’sFirm and JPMorgan Chase Bank, N.A.’s average LCR for the three months ended December 31, 2018,2020, September 30, 20182020 and December 31, 20172019 based on the Firm’s current interpretation of the finalized LCR framework. | | | | | | | | | | | | | Three months ended | Average amount (in millions) | December 31, 2020 | September 30, 2020 | December 31, 2019 | JPMorgan Chase & Co.: | | | | Eligible HQLA | | | | Eligible cash(a) | $ | 455,612 | | $ | 458,336 | | $ | 203,296 | | Eligible securities(b)(c) | 241,447 | | 211,841 | | 341,990 | | Total eligible HQLA(d) | $ | 697,059 | | $ | 670,177 | | $ | 545,286 | | Net cash outflows | $ | 634,037 | | $ | 587,811 | | $ | 469,402 | | LCR | 110 | % | 114 | % | 116 | % | Net excess eligible HQLA(d) | $ | 63,022 | | $ | 82,366 | | $ | 75,884 | | JPMorgan Chase Bank, N.A.: | LCR | 160 | % | 157 | % | 116 | % | Net excess eligible HQLA | $ | 401,903 | | $ | 366,096 | | $ | 79,483 | |
| | | | | | | | | | | | Three months ended | Average amount (in millions) | December 31, 2018 | September 30, 2018 | December 31, 2017 | HQLA | | | | Eligible cash(a) | $ | 297,069 |
| $ | 344,660 |
| $ | 370,126 |
| Eligible securities(b)(c) | 232,201 |
| 190,349 |
| 189,955 |
| Total HQLA(d) | $ | 529,270 |
| $ | 535,009 |
| $ | 560,081 |
| Net cash outflows | $ | 467,704 |
| $ | 466,803 |
| $ | 472,078 |
| LCR | 113 | % | 115 | % | 119 | % | Net excess HQLA (d) | $ | 61,566 |
| $ | 68,206 |
| $ | 88,003 |
|
(a)Represents cash on deposit at central banks, primarily the Federal Reserve Banks. | | (a) | Represents cash on deposit at central banks, primarily Federal Reserve Banks. |
| | (b) | Predominantly U.S. Treasuries, U.S. Agency MBS, and sovereign bonds net of applicable haircuts under the LCR rules. |
| | (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. |
(b)Predominantly U.S. Treasuries, U.S. GSE and government agency MBS, and sovereign bonds net of applicable haircuts under the LCR rule. (c)Eligible HQLA 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 eligible HQLA at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates. The Firm’s average LCR decreased during the three months ended December 31, 2018,2020, compared with the three monththree-month period ended September 30, 2018 due to2020, predominantly driven by a decrease in cash from long-term debt maturities, including the average amountearly termination of reportable HQLA. Although HQLA increased in JPMorgan Chase Bank, N.A. duringcertain of the period, Firm's debt at the end of the third quarter 2020.there was a decrease in the amount of HQLA in JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. that was determined to be transferable to non-bank affiliates. This decrease was based on a change in the Firm’s interpretation of amounts available for transfer.
The Firm’sFirm's average LCR decreased forduring the three months ended December 31, 2018,2020, compared with the prior year period primarily due to a reductionthe relative impact on net cash outflows from the significant increase in deposits as well as elevated market activities in the CIB. JPMorgan Chase Bank, N.A.’s average HQLALCR increased during the three months ended December 31, 2020, compared with both the three month periods ended September 30, 2020 and December 31, 2019 primarily due to growth in deposits. Deposits continued to increase in the fourth quarter primarily driven by (a) long-term debt maturitiesthe COVID-19 pandemic and CIB activities, and (b) a decreasethe related effect of certain government actions. The increase in the amount of HQLAexcess liquidity in JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A that was determined to be transferable to non-bank affiliates based on a change inis excluded from the Firm’s interpretation of amounts available for transfer.reported LCR under the LCR rule. The Firm’s average LCR may fluctuatefluctuates from period to period, due to changes in its eligible HQLA and estimated net cash outflows under the LCR as a result of ongoing business activity. The Firm’s HQLA are expected to be available to meet its liquidity needs in a time of stress. For a further discussion of the Firm’s LCR, referRefer to the Firm’s USU.S. LCR Disclosure reports, which are available on the Firm’s website at: (https://jpmorganchaseco.gcs-web.com/financial-information/basel-pillar-3-us-lcr-disclosures).for a further discussion of the Firm’s LCR. | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 103 |
Management’s discussion and analysis Other liquidity sources As of December 31, 2018, inIn addition to the assets reported in the Firm’s eligible HQLA under the LCR rule,above, the Firm had approximately $226 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.liquidity. This includes HQLA-eligible securities included as part of the excess liquidityeligible HQLA at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates. The fair value of these securities was approximately
As$740 billion and $315 billion as of December 31, 2018,2020 and 2019, respectively, although the amount of liquidity that could be raised would be dependent on prevailing market conditions. The fair value increased compared to December 31, 2019, due to an increase in excess eligible HQLA at JPMorgan Chase Bank, N.A. which was primarily a result of increased deposits. the
The Firm also had approximately $276 billion of available borrowing capacity at various 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 $307 billion and $322 billion as of December 31, 2020 and 2019, respectively. This borrowing capacity excludes the benefit of cash and securities reported in the Firm’s eligible HQLA or other unencumbered securities that are currently pledged at the Federal Reserve Bank discount windows.window and other central banks. Available borrowing capacity decreased from December 31, 2019 primarily due to lower pledged credit card receivable balances driven by the COVID-19 pandemic and a decrease in pledged mortgage collateral as a result of paydown and maturity activity. 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 a liquidity requirement for large banking organizations that is intended to measure the adequacy of “available” and “required” amounts of stable funding over a one-year horizon. On October 20, 2020, the federal banking agencies issued a final NSFR rule under which large banking organizations such as the Firm will be required to maintain an NSFR of at least 100% on an ongoing basis. The final NSFR rule will become effective on July 1, 2021, and the Firm will be required to publicly disclose its quarterly average NSFR semi-annually beginning in 2023.
As of December 31, 2020 the Firm estimates that it was compliant with the 100% minimum NSFR based on its current understanding of the final rule.
| | | | | | | | | 96104 | | JPMorgan Chase & Co./20182020 Form 10-K |
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 secured unsecured 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. 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 and equity 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. Refer to 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 and Corporate, the period-end and average deposit balances as of and for the years ended December 31, 20182020 and 2017.2019. | | | | | | | | | | | | | | | | | | | | | | | | | | As of or for the year ended December 31, | | | | Average | | (in millions) | 2020 | 2019 | | 2020 | 2019 | | Consumer & Community Banking | $ | 958,706 | | $ | 723,418 | | (a) | $ | 851,390 | | $ | 698,378 | | (a) | Corporate & Investment Bank | 702,215 | | 511,905 | | (a) | 655,095 | | 515,938 | | (a) | Commercial Banking | 284,263 | | 184,115 | | | 237,645 | | 172,666 | | | Asset & Wealth Management | 198,755 | | 142,740 | | (a) | 161,955 | | 135,265 | | (a) | Corporate | 318 | | 253 | | | 666 | | 820 | | | Total Firm | $ | 2,144,257 | | $ | 1,562,431 | | | $ | 1,906,751 | | $ | 1,523,067 | | |
| | | | | | | | | | | | | | | Deposits | | | Year ended December 31, | As of or for the year ended December 31, | | | | Average | (in millions) | 2018 | 2017 | | 2018 | 2017 | Consumer & Community Banking | $ | 678,854 |
| $ | 659,885 |
| | $ | 670,388 |
| $ | 640,219 |
| Corporate & Investment Bank | 482,084 |
| 455,883 |
| | 477,250 |
| 447,697 |
| Commercial Banking | 170,859 |
| 181,512 |
| | 170,822 |
| 176,884 |
| Asset & Wealth Management | 138,546 |
| 146,407 |
| | 137,272 |
| 148,982 |
| Corporate | 323 |
| 295 |
| | 729 |
| 3,604 |
| Total Firm | $ | 1,470,666 |
| $ | 1,443,982 |
| | $ | 1,456,461 |
| $ | 1,417,386 |
|
(a)In the fourth quarter of 2020, the Firm realigned certain wealth management clients from AWM to the J.P. Morgan Wealth Management business unit within CCB. 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. Prior-period amounts have been revised to conform with the current presentation.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, 20182020 and 2017.2019. | | | | | | | | | As of December 31, (in billions except ratios) | | | 2020 | 2019 | Deposits | $ | 2,144.3 | | $ | 1,562.4 | | Deposits as a % of total liabilities | 69 | % | 64 | % | Loans | 1,012.9 | | 997.6 | | Loans-to-deposits ratio | 47 | % | 64 | % |
| | | | | | | | As of December 31, (in billions except ratios) | | | 2018 | 2017 | Deposits | $ | 1,470.7 |
| $ | 1,444.0 |
| Deposits as a % of total liabilities | 62 | % | 63 | % | Loans | 984.6 |
| 930.7 |
| Loans-to-deposits ratio | 67 | % | 64 | % |
The Firm believes that average deposit balances are generally more representative of deposit trends than period-end deposit balances.balances, over time. However, during periods of market disruption those trends could be affected. Average deposits increased for the year ended December 31, 2018 in CCB and CIB, partially offset by decreases in AWM, CB and Corporate. The increase in CCB reflects2020, reflecting significant inflows across the continuation of growth from new accounts, and in CIB reflects growth in operating deposits in both Treasury Services and Securities ServicesLOBs primarily driven by growththe impact of the COVID-19 pandemic and the related effect of certain government actions. In the wholesale businesses, while the inflows principally occurred in client activity.
The decrease in AWMMarch as clients sought to remain liquid as a result of market conditions, balances continued to increase through the end of 2020. In CCB, the increase was driven by balance migration predominantly into the Firm’s investment-related products. The decrease in CB was driven by a reduction in non-operating deposits. The decrease in Corporate was predominantly due to maturities of wholesale non-operating deposits, consistent with the Firm’s efforts to reduce such deposits.lower spending and higher cash balances across both consumer and small business customers, as well as growth from existing and new accounts.
For further information on deposit and liability balance trends, referRefer to the discussion of the Firm’s Business Segment Results and the Consolidated Balance Sheets Analysis on pages 60-7865–84 and pages 52–53, respectively.
57-58, respectively, for further information on deposit and liability balance trends.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 97105 |
Management’s discussion and analysis
The following table summarizes short-term and long-term funding, excluding deposits, as of December 31, 20182020 and 2017,2019, and average balances for the years ended December 31, 20182020 and 2017. For additional information, refer2019. Refer to the Consolidated Balance Sheets Analysis on pages 52–5357-58 and Note 19.20 for additional information. | | | | | | | | | | | | | | | | | | Sources of funds (excluding deposits) | | | | | As of or for the year ended December 31, | | | | Average | (in millions) | 2020 | 2019 | | 2020 | 2019 | Commercial paper | $ | 12,031 | | $ | 14,754 | | | $ | 12,129 | | $ | 22,977 | | Other borrowed funds | 8,510 | | 7,544 | | | 9,198 | | 10,369 | | Total short-term unsecured funding | $ | 20,541 | | $ | 22,298 | | | $ | 21,327 | | $ | 33,346 | | | | | | | | Securities sold under agreements to repurchase(a) | $ | 207,877 | | $ | 175,709 | | | $ | 246,354 | | $ | 217,807 | | Securities loaned(a) | 4,886 | | 5,983 | | | 6,536 | | 8,816 | | Other borrowed funds(b) | 24,667 | | 18,622 | | | 23,812 | | 26,050 | | Obligations of Firm-administered multi-seller conduits(c) | 10,523 | | 9,223 | | | 11,430 | | 10,929 | | Total short-term secured funding | $ | 247,953 | | $ | 209,537 | | | $ | 288,132 | | $ | 263,602 | | | | | | | | Senior notes | $ | 166,089 | | $ | 166,185 | | | $ | 171,509 | | $ | 168,546 | | | | | | | | Subordinated debt | 21,608 | | 17,591 | | | 20,789 | | 17,387 | | Structured notes(d) | 75,325 | | 74,724 | | | 73,056 | | 65,487 | | Total long-term unsecured funding | $ | 263,022 | | $ | 258,500 | | | $ | 265,354 | | $ | 251,420 | | | | | | | | Credit card securitization(c) | $ | 4,943 | | $ | 6,461 | | | $ | 5,520 | | $ | 9,707 | | | | | | | | FHLB advances | 14,123 | | 28,635 | | | 27,076 | | 34,143 | | Other long-term secured funding(e) | 4,540 | | 4,363 | | | 4,460 | | 4,643 | | Total long-term secured funding | $ | 23,606 | | $ | 39,459 | | | $ | 37,056 | | $ | 48,493 | | | | | | | | Preferred stock(f) | $ | 30,063 | | $ | 26,993 | | | $ | 29,899 | | $ | 27,511 | | Common stockholders’ equity(f) | $ | 249,291 | | $ | 234,337 | | | $ | 236,865 | | $ | 232,907 | |
(a)Primarily consists of short-term securities loaned or sold under agreements to repurchase. (b)Effective March 2020, includes nonrecourse advances provided under the MMLF. (c)Included in beneficial interests issued by consolidated variable interest entities on the Firm’s Consolidated balance sheets. (d)Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company. (e)Includes long-term structured notes which are secured. (f)Refer to Capital Risk Management on pages 91-101, Consolidated statements of changes in stockholders’ equity on page 165, Note 21 and Note 22 for additional information on preferred stock and common stockholders’ equity. | | | | | | | | | | | | | | | Sources of funds (excluding deposits) | | | | | As of or for the year ended December 31, | | | | Average | (in millions) | 2018 | 2017 | | 2018 | 2017 | Commercial paper | $ | 30,059 |
| $ | 24,186 |
| | $ | 27,834 |
| $ | 19,920 |
| Other borrowed funds(a) | 8,789 |
| 10,727 |
| | 11,369 |
| 10,755 |
| Total short-term unsecured funding(a) | $ | 38,848 |
| $ | 34,913 |
| | $ | 39,203 |
| $ | 30,675 |
| | | | | | | Securities sold under agreements to repurchase(a)(b) | $ | 171,975 |
| $ | 147,713 |
| | $ | 177,629 |
| $ | 173,450 |
| Securities loaned(a)(b) | 9,481 |
| 9,211 |
| | 10,692 |
| 12,798 |
| Other borrowed funds(a)(c) | 30,428 |
| 16,889 |
| | 24,320 |
| 15,857 |
| Obligations of Firm-administered multi-seller conduits(d) | 4,843 |
| 3,045 |
| | 3,396 |
| 3,206 |
| Total short-term secured funding(a) | $ | 216,727 |
| $ | 176,858 |
| | $ | 216,037 |
| $ | 205,311 |
| | | | | | | Senior notes | $ | 162,733 |
| $ | 155,852 |
| | $ | 153,162 |
| $ | 154,352 |
| Trust preferred securities | — |
| 690 |
| | 471 |
| 2,276 |
| Subordinated debt | 16,743 |
| 16,553 |
| | 16,178 |
| 18,832 |
| Structured notes(e) | 53,090 |
| 45,727 |
| | 49,640 |
| 42,918 |
| Total long-term unsecured funding | $ | 232,566 |
| $ | 218,822 |
| | $ | 219,451 |
| $ | 218,378 |
| | | | | | | Credit card securitization(d) | $ | 13,404 |
| $ | 21,278 |
| | $ | 15,900 |
| $ | 25,933 |
| Other securitizations(d)(f) | — |
| — |
| | — |
| 626 |
| Federal Home Loan Bank (“FHLB”) advances | 44,455 |
| 60,617 |
| | 52,121 |
| 69,916 |
| Other long-term secured funding(g) | 5,010 |
| 4,641 |
| | 4,842 |
| 3,195 |
| Total long-term secured funding | $ | 62,869 |
| $ | 86,536 |
| | $ | 72,863 |
| $ | 99,670 |
| | | | | | | Preferred stock(h) | $ | 26,068 |
| $ | 26,068 |
| | $ | 26,249 |
| $ | 26,212 |
| Common stockholders’ equity(h) | $ | 230,447 |
| $ | 229,625 |
| | $ | 229,222 |
| $ | 230,350 |
|
| | (a) | The prior period amounts have been revised to conform with the current period presentation. |
| | (b) | Primarily consists of short-term securities loaned or sold under agreements to repurchase. |
| | (c) | Includes FHLB advances with original maturities of less than one year of $11.4 billion as of December 31, 2018; there were no FHLB advances with original maturities of less than one year as of December 31, 2017. |
| | (d) | Included in beneficial interests issued by consolidated variable interest entities on the Firm’s Consolidated balance sheets. |
| | (e) | Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company. |
| | (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) | For additional information on preferred stock and common stockholders’ equity refer to Capital Risk Management on pages 85-94, Consolidated statements of changes in stockholders’ equity, Note 20 and Note 21. |
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 and U.S. GSE and government agency MBS, and constitute a significant portion of the federal funds purchased and securities loaned orMBS. Securities sold under agreements to repurchase agreements on the Consolidated balance sheets. The increaseincreased at December 31, 2018,2020, compared towith December 31, 2017, was primarily due to2019, reflecting higher client-driven market-making activities and higher secured financing of AFS investment securities in Treasury and CIO, as well as trading assets-debt and equity instrumentsassets in CIB, partially offset by. a decline in client-driven market-making activities in CIB, including the Firm's non-participation in the Federal Reserve's open market operations. The balances associated with securities loaned or sold under agreements to repurchase fluctuate over time due to customers’ investment and financing activities;activities of clients, 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.
As of December 31, 2020, the Firm participated in the MMLF government facility. The secured nonrecourse advances under the MMLF are included in other borrowed funds. Refer to Capital Risk Management on pages 91-101 for additional information on the MMLF. The Primary Dealer Credit Facility ("PDCF") was established by the Federal Reserve on March 20, 2020. Under the PDCF, the Federal Reserve Bank of New York (“FRBNY”) provides collateralized financing on a term basis to primary dealers. These financing transactions were reported as securities sold under agreements to repurchase. The Firm participated in the PDCF in the first quarter of 2020, and ceased its participation in May 2020 as the secured financing market normalized. The Firm’s sources of short-term unsecured funding primarily consist of other borrowed funds and issuance of wholesale commercial paper. The increasedecrease in commercial papershort-term unsecured funding at December 31, 2020, from December 31, 2019 and for the average year ended December 31, 2020 compared to the prior year period, was due to higherlower net commercial paper issuance primarily for short-term liquidity management.
| | | | | | | | | 106 | | JPMorgan Chase & Co./2020 Form 10-K |
Long-term funding and issuance
Long-term funding provides an additional sourcessource 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 optimizing funding costs. The Firm evaluates various funding markets, tenors and currencies in creating its optimal long-term funding plan.
| | | | 98 | | JPMorgan Chase & Co./2018 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, 20182020 and 2017. For2019. Refer to Note 20 for additional information refer to Note 19.on long-term debt. | | | | | | | | | | | | | | | | | | Long-term unsecured funding | | | | | Year ended December 31, | 2020 | 2019 | | 2020 | 2019 | (Notional in millions) | Parent Company | | Subsidiaries | Issuance | | | | | | Senior notes issued in the U.S. market | $ | 25,500 | | $ | 14,000 | | | $ | 60 | | $ | 1,750 | | Senior notes issued in non-U.S. markets | 1,355 | | 5,867 | | | — | | — | | Total senior notes | 26,855 | | 19,867 | | | 60 | | 1,750 | | | | | | | | Subordinated debt | 3,000 | | — | | | — | | — | | Structured notes(a) | 7,596 | | 5,844 | | | 24,185 | | 33,563 | | Total long-term unsecured funding – issuance | $ | 37,451 | | $ | 25,711 | | | $ | 24,245 | | $ | 35,313 | | | | | | | | Maturities/redemptions | | | | | | Senior notes | $ | 28,719 | | $ | 18,098 | | | $ | 7,701 | | $ | 5,367 | | | | | | | | Subordinated debt | 135 | | 183 | | | — | | — | | Structured notes | 5,340 | | 2,944 | | | 30,002 | | 19,271 | | Total long-term unsecured funding – maturities/redemptions | $ | 34,194 | | $ | 21,225 | | | $ | 37,703 | | $ | 24,638 | |
(a)Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company. | | | | | | | | | | | | | | | Long-term unsecured funding | | | | | Year ended December 31, | 2018 | 2017 | | 2018 | 2017 | (Notional in millions) | Parent Company(b) | | Subsidiaries(b) | Issuance | | | | | | Senior notes issued in the U.S. market | $ | 22,000 |
| $ | 21,250 |
| | $ | 9,562 |
| $ | 62 |
| Senior notes issued in non-U.S. markets | 1,502 |
| 2,220 |
| | — |
| — |
| Total senior notes | 23,502 |
| 23,470 |
| | 9,562 |
| 62 |
| Structured notes(a) | 2,444 |
| 2,516 |
| | 25,410 |
| 26,524 |
| Total long-term unsecured funding – issuance | $ | 25,946 |
| $ | 25,986 |
| | $ | 34,972 |
| $ | 26,586 |
| | | | | | | Maturities/redemptions | | | | | | Senior notes | $ | 19,141 |
| $ | 20,971 |
| | $ | 4,466 |
| $ | 1,366 |
| Subordinated debt | 136 |
| 3,401 |
| | — |
| 3,500 |
| Structured notes | 2,678 |
| 5,440 |
| | 15,049 |
| 17,141 |
| Total long-term unsecured funding – maturities/redemptions | $ | 21,955 |
| $ | 29,812 |
| | $ | 19,515 |
| $ | 22,007 |
|
| | (a) | Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company. |
| | (b) | The prior period amounts have been revised to conform with the current period presentation. |
The Firm raises can also raise secured long-term funding through securitization of consumer credit card loans and advances from the FHLBs.through FHLB advances. The following table summarizes the securitization issuance and FHLB advances and their respective maturities or redemptions for the years ended December 31, 20182020 and 2017.2019. | | | | | | | | | | | | | | | | | | Long-term secured funding | | | | Year ended December 31, | Issuance | | Maturities/Redemptions | (in millions) | 2020 | 2019 | | 2020 | 2019 | Credit card securitization | $ | 1,000 | | $ | — | | | $ | 2,525 | | $ | 6,975 | | | | | | | | FHLB advances | 15,000 | | — | | | 29,509 | | 15,817 | | Other long-term secured funding(a) | 1,130 | | 204 | | | 1,048 | | 927 | | Total long-term secured funding | $ | 17,130 | | $ | 204 | | | $ | 33,082 | | $ | 23,719 | |
(a)Includes long-term structured notes which are secured. | | | | | | | | | | | | | | | Long-term secured funding | | | | Year ended December 31, | Issuance | | Maturities/Redemptions | (in millions) | 2018 | 2017 | | 2018 | 2017 | Credit card securitization | $ | 1,396 |
| $ | 1,545 |
| | $ | 9,250 |
| $ | 11,470 |
| Other securitizations(a) | — |
| — |
| | — |
| 55 |
| FHLB advances | 9,000 |
| — |
| | 25,159 |
| 18,900 |
| Other long-term secured funding(b) | 377 |
| 2,354 |
| | 289 |
| 731 |
| Total long-term secured funding | $ | 10,773 |
| $ | 3,899 |
| | $ | 34,698 |
| $ | 31,156 |
|
| | (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 a further description of the client-driven loan securitizations, refer to Note 14.securitizations.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 99107 |
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- partythird-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, refer to SPEs on page 55, and liquidity risk and credit-related contingent features in Note 5.
The credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries as of December 31, 2018,2020 were as follows. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | JPMorgan Chase & Co. | | JPMorgan Chase Bank, N.A. Chase Bank USA, N.A.
| | J.P. Morgan Securities LLC J.P. Morgan Securities plc
| December 31, 20182020 | Long-term issuer | Short-term issuer | Outlook | | Long-term issuer | Short-term issuer | Outlook | | Long-term issuer | Short-term issuer | Outlook | Moody’s Investors Service | A2 | P-1 | Stable | | Aa2 | P-1 | Stable | | Aa3 | P-1 | Stable | Standard & Poor’s | A- | A-2 | Stable | | A+ | A-1 | Stable | | A+ | A-1 | Stable | Fitch Ratings(a) | AA- | F1+ | StableNegative | | AA | F1+ | StableNegative | | AA | F1+ | StableNegative |
(a)On October 25, 2018, Moody’s upgradedApril 18, 2020, Fitch affirmed the credit ratings of the Parent Company’s long-term issuer ratingCompany and the Firm’s principal bank and non-bank subsidiaries but revised the outlook on the credit ratings from stable to A2 (previously A3) and short-term issuer rating to P-1 (previously P-2). The long-term issuer ratings were also upgraded for JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A. to Aa2 (previously Aa3), and for J.P. Morgan Securities LLC and J.P. Morgan Securities plc to Aa3 (previously A1). On June 21, 2018, Fitch upgraded the Parent Company’s long-term issuer rating to AA- (previously A+) and short-term issuer rating to F1+ (previously F1). The long-term issuer ratings were also upgraded to AA for JPMorgan Chase Bank, N.A, Chase Bank USA, N.A., J.P. Morgan Securities LLC and J.P. Morgan Securities plc (all previously AA-).
Downgradesnegative given expectations that credit fundamentals will deteriorate as a result 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. 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
COVID-19 pandemic. 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. 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.
| | | | 100 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | 108 | | JPMorgan Chase & Co./2020 Form 10-K |
| | | | | | | | | | | | | | | REPUTATION RISK MANAGEMENT |
Reputation risk is the potentialrisk that an action or inaction transaction, investment or event willmay negatively impact perception of the Firm’s integrity and reduce trustconfidence in the Firm’s integrity or competence by its various constituents, including clients, counterparties, customers, investors, regulators, employees, communities or the broader public. Organization and management Reputation Risk Management is an independent risk management function that establishes the governance framework for managing reputation risk across the Firm. The Firmwide Risk Executive for Reputation Risk reportsAs reputation risk is inherently challenging to the Firm’s CRO.identify, manage, and quantify, a reputation risk management function is critical. The Firm’s reputation risk management function includes the following activities: Establishing•Maintaining a firmwideFirmwide Reputation Risk Governance policy and standards consistent with the reputation risk framework
•Managing the governance infrastructure and processes that support consistent identification, escalation, management and monitoring of reputation risk issues firmwideFirmwide •Providing oversightguidance to LOB Reputation Risk Offices (“RRO”) on certain situations that have the potential to damage the reputation of the LOB or the Firm, as appropriate The types of events that give rise to reputation risk are broadwide-ranging 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.business with. These events could result in financial losses, litigation and regulatory fines, as well as other damages to the Firm. As reputation risk is inherently difficult to identify, manage, and quantify, an independent reputation risk management governance function is critical. Governance and oversight The Firm’s Reputation Risk Governance policy establishes the principles for managing reputation risk for the Firm, and is approved annually by the Directors’ Risk Policy Committee.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,Sustainability, social responsibility and environmental impacts are important considerations in assessing the Firm’s reputation risk, and are considered as parta component of the Firm’s reputation risk governance. The Firm’s reputation risk governance framework applies to each LOB and Corporate. Each LOB RRO advises their business on potential reputation risk issues and provides oversight of policy and standards created to guide the identification and assessment of reputation risk. LOB Reputation Risk Committees and forums review and assess reputation risk for their respective businesses. Each function also applies appropriate diligence to reputation risk arising from their day-to-day activities. Reputation risk issues deemed significant materialare escalated to the appropriate LOB Risk Committee and/or to the Firmwide Risk Committee.
as appropriate.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 101 |
Management’s discussion and analysis
| | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 109 |
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, 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), and securities financing activities,activities. The Firm is also exposed to credit risk through its investment securities portfolio and cash placed with banks. Credit Risk 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•Maintaining 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 and •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 and Note 10, 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. Thesecommitments reflects credit losses are estimated using statistical analysesrelated to the Firm’s lending-related commitments and other factors as described inthe allowance for investment securities reflects the credit losses related to the Firm’s HTM and AFS securities. Refer to Note 13. 13, Note 10 and Critical Accounting Estimates used by the Firm on pages 152-155 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, refer to Critical Accounting Estimates used by the Firm on pages 141-143. 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.
| | | | 102 | | JPMorgan Chase & Co./2018 Form 10-K |
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 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 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 stress testing 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. | | | | | | | | | 110 | | JPMorgan Chase & Co./2020 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-wayWrong-way risk —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.decreasing. 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, and •Collateral and other risk-reduction techniques
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 103 |
Management’s discussion and analysis
In addition to Credit Risk Management, an independent Credit Review function is responsible for: •Independently validating or changing the risk grades assigned to exposures in the Firm’s wholesale credit portfolio, and assessing the timeliness of risk grade changes initiated by responsible business units; and | | • | 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.
|
For•Evaluating the effectiveness of business units’ credit management processes, including the adequacy of credit analyses and risk grading/LGD rationales, proper monitoring and management of credit exposures, and compliance with applicable grading policies and underwriting guidelines.
Refer to Note 12 for further discussion of consumer and wholesale loans, refer to 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.Directors.
| | | | 104 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 111 |
Management’s discussion and analysis
Credit risk isEffective January 1, 2020, the riskFirm adopted the CECL accounting guidance. The adoption resulted in a change in the accounting for PCI loans, which are considered PCD loans under CECL. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied when determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information.
The Firm has provided various forms of assistance to customers and clients impacted by the COVID-19 pandemic, including payment deferrals and covenant modifications. The majority of the Firm’s COVID-19 related loan modifications have not been considered troubled debt restructurings (“TDRs”) because: •they represent short-term or other insignificant modifications, whether under the Firm’s regular loan modification assessments or the IA Statement guidance, or •the Firm has elected to apply the option to suspend the application of accounting guidance for TDRs provided by the CARES Act and extended by the Consolidated Appropriations Act. To the extent that certain modifications do not meet any of the above criteria, the Firm accounts for them as TDRs. The Firm considers expected losses of principal and accrued interest associated with all COVID-19 related loan modifications in its allowance for credit losses. Refer to Business Developments on pages 50-51 for more information on customer and client assistance granted. Refer to Notes 12 and 13 for further information on the defaultFirm’s accounting policies on loan modifications and the allowance for credit losses. The effectiveness of the Firm’s actions in helping borrowers recover and in mitigating the Firm’s credit losses remains uncertain in light of the unpredictable nature and duration of the COVID-19 pandemic. Assistance provided in response to the COVID-19 pandemic could delay the recognition of delinquencies, nonaccrual status, and net charge-offs for those customers and clients who would have otherwise moved into past due or change in credit profilenonaccrual status. Refer to Consumer Credit Portfolio on pages 114-120 and Wholesale Credit Portfolio on pages 121-131 for information on loan modifications as of a client, counterparty or customer.
December 31, 2020.
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 loans which the Firm accounts for at fair value and classifies as trading assets. For further information regarding these loans,assets; refer to Notes 2 and 3. For3 for further information regarding these loans. Refer to Notes 12, 28, and 5 for additional information on the Firm’s loans, lending-related commitments and derivative receivables, including the Firm’s accounting policies, referpolicies. Refer to Notes 12, 27, and 5, respectively.
For further information regarding the credit risk inherent in the Firm’s cash placed with banks, refer to Wholesale credit exposure – industry exposures on pages 113–115 ;Note 10 for information regarding the credit risk inherent in the Firm’s investment securities portfolio,portfolio; and refer to Note 10; and11 for information regarding credit risk inherent in the securities financing portfolio, referportfolio. Refer to Consumer Credit Portfolio on pages 114-120 and Note 11.
For a12 for further discussiondiscussions of the consumer credit environment and consumer loans, referloans. Refer to ConsumerWholesale Credit Portfolio on pages 106–111121-131 and Note 12. For a12 for further discussiondiscussions of the wholesale credit environment and wholesale loans, refer to Wholesale Credit Portfolio on pages 112–119 and Note 12.
loans.
| | | | | | | | | | | | | | | Total credit portfolio | | | | | December 31, (in millions) | Credit exposure | | Nonperforming(d)(e) | 2018 | 2017 | | 2018 | 2017 | Loans retained | $ | 969,415 |
| $ | 924,838 |
| | $ | 4,611 |
| $ | 5,943 |
| Loans held-for-sale | 11,988 |
| 3,351 |
| | — |
| — |
| Loans at fair value | 3,151 |
| 2,508 |
| | 220 |
| — |
| Total loans – reported | 984,554 |
| 930,697 |
| | 4,831 |
| 5,943 |
| Derivative receivables | 54,213 |
| 56,523 |
| | 60 |
| 130 |
| Receivables from customers and other(a) | 30,217 |
| 26,272 |
| | — |
| — |
| Total credit-related assets | 1,068,984 |
| 1,013,492 |
| | 4,891 |
| 6,073 |
| Assets acquired in loan satisfactions | | | | | | Real estate owned | NA |
| NA |
| | 269 |
| 311 |
| Other | NA |
| NA |
| | 30 |
| 42 |
| Total assets acquired in loan satisfactions | NA |
| NA |
| | 299 |
| 353 |
| Lending-related commitments | 1,039,258 |
| 991,482 |
| | 469 |
| 731 |
| Total credit portfolio | $ | 2,108,242 |
| $ | 2,004,974 |
| | $ | 5,659 |
| $ | 7,157 |
| Credit derivatives used in credit portfolio management activities(b) | $ | (12,682 | ) | $ | (17,609 | ) | | $ | — |
| $ | — |
| Liquid securities and other cash collateral held against derivatives(c) | (15,322 | ) | (16,108 | ) | | NA |
| NA |
|
| | | | | | | | | Year ended December 31, (in millions, except ratios) | | 2018 | 2017 | Net charge-offs(f) | | $ | 4,856 |
| $ | 5,387 |
| Average retained loans | | | | Loans | | 936,829 |
| 898,979 |
| Loans – reported, excluding residential real estate PCI loans | | 909,386 |
| 865,887 |
| Net charge-off rates(f) | | | | Loans | | 0.52 | % | 0.60 | % | Loans – excluding PCI | | 0.53 |
| 0.62 |
|
| | (a) | Receivables from customers and other primarily represents held-for-investment margin loans to brokerage customers. |
| | (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, refer to Credit derivatives on page 119 and Note 5. |
| | (c) | Includes collateral related to derivative instruments where an appropriate legal opinion has not been either sought or obtained. |
| | (d) | Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as each of the pools is performing. |
| | (e) | At December 31, 2018 and 2017, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $2.6 billion and $4.3 billion, respectively, and real estate owned (“REO”) insured by U.S. government agencies of $75 million and $95 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”). |
| | (f) | For the year ended December 31, 2017, excluding net charge-offs of $467 million related to the student loan portfolio transfer, the net charge-off rate for loans would have been 0.55% and for loans - excluding PCI would have been 0.57%. |
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 105 |
Management’s discussion and analysis
| | | | | | 112 | | JPMorgan Chase & Co./2020 Form 10-K |
| | | | | | | | | | | | | | | | | | Total credit portfolio | | | | | December 31, (in millions) | Credit exposure | | Nonperforming(f)(g) | 2020 | 2019 | | 2020 | 2019 | Loans retained | $ | 960,506 | | $ | 945,601 | | | $ | 8,782 | | $ | 3,983 | | Loans held-for-sale | 7,873 | | 7,064 | | | 284 | | 7 | | Loans at fair value (a) | 44,474 | | 44,955 | | | 1,507 | | 647 | | Total loans – reported | 1,012,853 | | 997,620 | | | 10,573 | | 4,637 | | Derivative receivables | 79,630 | | 49,766 | | | 56 | | 30 | | Receivables from customers(b) | 47,710 | | 33,706 | | | — | | — | | Total credit-related assets | 1,140,193 | | 1,081,092 | | | 10,629 | | 4,667 | | Assets acquired in loan satisfactions | | | | | | Real estate owned | NA | NA | | 256 | | 344 | | Other | NA | NA | | 21 | | 43 | | Total assets acquired in loan satisfactions | NA | NA | | 277 | | 387 | | Lending-related commitments(a) | 1,165,688 | | 1,108,399 | | | 577 | | 474 | | Total credit portfolio | $ | 2,305,881 | | $ | 2,189,491 | | | $ | 11,483 | | $ | 5,528 | | Credit derivatives used in credit portfolio management activities(c)(d) | $ | (22,239) | | $ | (18,530) | | | $ | — | | $ | — | | Liquid securities and other cash collateral held against derivatives(e) | (14,806) | | (13,052) | | | NA | NA |
| | | | | | | | | | Year ended December 31, (in millions, except ratios) | | 2020 | 2019 | Net charge-offs | | $ | 5,259 | | $ | 5,629 | | Average retained loans | | 958,303 | | 941,919 | | Net charge-off rates | | 0.55 | % | 0.60 | % |
(a) In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans, which resulted in a corresponding reclassification of certain off-balance sheet commitments. Prior-period amounts have been revised to conform with the current presentation. (b) Receivables from customers reflect held-for-investment margin loans to brokerage clients in CIB, CCB and AWM; these are reported within accrued interest and accounts receivable on the Consolidated balance sheets. (c) 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. Refer to Credit derivatives on page 131 and Note 5 for additional information. (d) Prior-period amount has been revised to conform with the current presentation. (e) In the fourth quarter of 2020, the Firm refined its approach for disclosing additional collateral held by the Firm that may be used as security when the fair value of the client’s exposure is in the Firm’s favor. Prior-period amounts have been revised to conform with the current presentation. (f) At December 31, 2020 and 2019, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $874 million and $1.1 billion, respectively, and real estate owned (“REO”) insured by U.S. government agencies of $9 million and $41 million, respectively. Prior-period amount of mortgage loans 90 or more days past due and insured by U.S. government agencies excluded from nonperforming assets has been revised to conform with the current presentation; refer to footnote (a) for additional information. 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. (g) At December 31, 2020, nonperforming loans included $1.6 billion of PCD loans on nonaccrual status. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing. Paycheck Protection Program The PPP, established by the CARES Act and implemented by the SBA, provided the Firm with delegated authority to process and originate PPP loans. When certain criteria are met, PPP loans are subject to forgiveness and the Firm will receive payment of the forgiveness amount from the SBA. PPP loans have a contractual term of two or five years and provide borrowers with an automatic payment deferral of principal and interest. Given that PPP loans are guaranteed by the SBA, the Firm does not expect to realize material credit losses on these loans. PPP processing fees are deferred and accreted into interest income over the contractual life of the loans, but may be accelerated upon forgiveness or prepayment. The impact on interest income related to PPP loans was not material for the year ended December 31, 2020. The Firm was in the early stages of the PPP loan forgiveness process at December 31, 2020. At December 31, 2020, the Firm had approximately $27 billion of loans under the PPP, of which $19 billion are in the consumer portfolio and $8 billion are in the wholesale portfolio. | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 113 |
Management’s discussion and analysis
| | | | | | | | | | | | | | | CONSUMER CREDIT PORTFOLIO |
The Firm’s retained consumer portfolio consists primarily of residential real estate loans, credit card loans, scored 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 mortgageresidential real estate 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 continuesRefer to benefit from discipline in credit underwriting as well as improvement in the economy driven by low unemployment and increasing home prices. The total amount of residential real estate loans delinquent 30+ days, excluding government guaranteed and purchased credit-impaired loans, decreased from December 31, 2017 due to improved credit performance and the impact of loans that were delinquent in 2017 due to hurricanes. 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, referloan portfolio. Refer to Note 12. For28 for further information on lending-related commitments, refercommitments. In 2020, the allowance for credit losses increased, reflecting the deterioration in and uncertainty around the future macroeconomic environment as a result of the impact of the COVID-19 pandemic. Net charge-offs for the year ended December 31, 2020 decreased when compared to Note 27. December 31, 2019, benefiting from payment assistance and government stimulus. The potential for increased infection rates and related lock downs, as well as the duration and effectiveness of government and other consumer relief measures remains uncertain which could have a longer term impact on delinquency rates and net charge-offs.
| | | | | | | | | 106114 | | JPMorgan Chase & Co./20182020 Form 10-K |
The following table presents consumer credit-related information with respect to the scored credit portfolio held byin CCB, primeAWM, CIB and Corporate. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Consumer credit portfolio | As of or for the year ended December 31, (in millions, except ratios) | Credit exposure | | Nonaccrual loans(j)(k)(l) | | Net charge-offs/(recoveries) | | Net charge-off/ (recovery) rate(m) | 2020 | | 2019 | | 2020 | 2019 | | 2020 | 2019 | | 2020 | | 2019 | Consumer, excluding credit card | | | | | | | | | | | | | | Residential real estate(a) | $ | 225,302 | | | $ | 243,317 | | | $ | 5,313 | | $ | 2,780 | | | $ | (164) | | $ | (92) | | | (0.07) | % | | (0.04) | % | Auto and other(b)(c)(d) | 76,825 | | | 51,682 | | | 151 | | $ | 146 | | | 338 | | $ | 456 | | | 0.51 | | (d) | 0.88 | | Total loans - retained | 302,127 | | | 294,999 | | | 5,464 | | 2,926 | | | 174 | | 364 | | | 0.06 | | | 0.12 | | Loans held-for-sale | 1,305 | | | 3,002 | | | — | | 2 | | | NA | NA | | NA | | NA | Loans at fair value(e)(f) | 15,147 | | | 19,816 | | | 1,003 | | 438 | | | NA | NA | | NA | | NA | Total consumer, excluding credit card loans | 318,579 | | | 317,817 | | | 6,467 | | 3,366 | | | 174 | | 364 | | | 0.06 | | | 0.12 | | Lending-related commitments(g) | 57,319 | | | 40,169 | | | | | | | | | | | | Total consumer exposure, excluding credit card | 375,898 | | | 357,986 | | | | | | | | | | | | Credit Card | | | | | | | | | | | | | | Loans retained(h) | 143,432 | | | 168,924 | | | NA | NA | | 4,286 | | 4,848 | | | 2.93 | | | 3.10 | | Loans held-for-sale | 784 | | | — | | | NA | NA | | NA | NA | | NA | | NA | Total credit card loans | 144,216 | | | 168,924 | | | NA | NA | | 4,286 | | 4,848 | | | 2.93 | | | 3.10 | | Lending-related commitments(g)(i) | 658,506 | | | 650,720 | | | | | | | | | | | | Total credit card exposure(i) | 802,722 | | | 819,644 | | | | | | | | | | | | Total consumer credit portfolio(i) | $ | 1,178,620 | | | $ | 1,177,630 | | | $ | 6,467 | | $ | 3,366 | | | $ | 4,460 | | $ | 5,212 | | | 0.99 | % | | 1.11 | % |
(a)Includes scored mortgage and home equity loans held byin CCB and AWM, and primescored mortgage loans held by Corporain Corporatete.. (b) For further information aboutAt December 31, 2020 and 2019, excluded operating lease assets of $20.6 billion and $22.8 billion, respectively. These operating lease assets are included in other assets on the Firm’s Consolidated balance sheets. Refer to Note 18 for further information. (c)Includes scored auto and business banking loans and overdrafts. (d)At December 31, 2020, included $19.2 billion of loans in Business Banking under the PPP. Given that PPP loans are guaranteed by the SBA, the Firm does not expect to realize material credit losses on these loans. Refer to Credit Portfolio on pages 112-113 for a further discussion of the PPP. (e)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans. Prior-period amounts have been revised to conform with the current presentation. (f)Includes scored mortgage loans held in CCB and CIB. (g)Credit card, home equity and certain business banking 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 and certain business banking commitments, 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. Refer to Note 28 for further information. (h)Includes billed interest and fees. (i)Also includes commercial card lending-related commitments primarily in CB and CIB. (j)At December 31, 2020 and 2019, nonaccrual loans excluded mortgage loans 90 or more days past due and charge-off accounting policies,insured by U.S. government agencies of $874 million and $1.1 billion, respectively. Prior-period amount of mortgage loans 90 or more days past due and insured by U.S. government agencies excluded from nonaccrual loans has been revised to conform with the current presentation; refer to Note 12.footnote (e) for additional information. 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. (k)At December 31, 2020, nonaccrual loans included $1.6 billion of PCD loans. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Consumer credit portfolio | As of or for the year ended December 31, (in millions, except ratios) | Credit exposure | | Nonaccrual loans(i)(j) | | Net charge-offs/(recoveries)(d)(k) | | Net charge-off/(recovery) rate(d)(k)(l) | 2018 | | 2017 | | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | Consumer, excluding credit card | | | | | | | | | | | | | Loans, excluding PCI loans and loans held-for-sale | | | | | | | | | | | | | Residential mortgage | $ | 231,078 |
| | $ | 216,496 |
| | $ | 1,765 |
| $ | 2,175 |
| | $ | (291 | ) | $ | (10 | ) | | (0.13 | )% | — | % | Home equity | 28,340 |
| | 33,450 |
| | 1,323 |
| 1,610 |
| | (5 | ) | 69 |
| | (0.02 | ) | 0.19 |
| Auto(a)(b) | 63,573 |
| | 66,242 |
| | 128 |
| 141 |
| | 243 |
| 331 |
| | 0.38 |
| 0.51 |
| Consumer & Business Banking(b)(c) | 26,612 |
| | 25,789 |
| | 245 |
| 283 |
| | 236 |
| 257 |
| | 0.90 |
| 1.03 |
| Student(d) | — |
| | — |
| | — |
| — |
| | — |
| 498 |
| | — |
| NM |
| Total loans, excluding PCI loans and loans held-for-sale | 349,603 |
| | 341,977 |
| | 3,461 |
| 4,209 |
| | 183 |
| 1,145 |
| | 0.05 |
| 0.34 |
| Loans – PCI | | | | | | | | | | | | | Home equity | 8,963 |
| | 10,799 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Prime mortgage | 4,690 |
| | 6,479 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Subprime mortgage | 1,945 |
| | 2,609 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Option ARMs(e) | 8,436 |
| | 10,689 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Total loans – PCI | 24,034 |
| | 30,576 |
| | NA |
| NA |
| | NA |
| NA |
| | NA |
| NA |
| Total loans – retained | 373,637 |
| | 372,553 |
| | 3,461 |
| 4,209 |
| | 183 |
| 1,145 |
| | 0.05 |
| 0.31 |
| Loans held-for-sale | 95 |
| | 128 |
| | — |
| — |
| | — |
| — |
| | — |
| — |
| Total consumer, excluding credit card loans | 373,732 |
| | 372,681 |
| | 3,461 |
| 4,209 |
| | 183 |
| 1,145 |
| | 0.05 |
| 0.31 |
| Lending-related commitments(f) | 46,066 |
| | 48,553 |
| | | | | | | | | | Receivables from customers(g) | 154 |
| | 133 |
| | | | | | | | | | Total consumer exposure, excluding credit card | 419,952 |
| | 421,367 |
| | | | | | | | | | Credit Card | | | | | | | | | | | | | Loans retained(h) | 156,616 |
| | 149,387 |
| | — |
| — |
| | 4,518 |
| 4,123 |
| | 3.10 |
| 2.95 |
| Loans held-for-sale | 16 |
| | 124 |
| | — |
| — |
| | — |
| — |
| | — |
| — |
| Total credit card loans | 156,632 |
| | 149,511 |
| | — |
| — |
| | 4,518 |
| 4,123 |
| | 3.10 |
| 2.95 |
| Lending-related commitments(f) | 605,379 |
| | 572,831 |
| | | | | | | | | | Total credit card exposure | 762,011 |
| | 722,342 |
| | | | | | | | | | Total consumer credit portfolio | $ | 1,181,963 |
| | $ | 1,143,709 |
| | $ | 3,461 |
| $ | 4,209 |
| | $ | 4,701 |
| $ | 5,268 |
| | 0.90 | % | 1.04 | % | Memo: Total consumer credit portfolio, excluding PCI | $ | 1,157,929 |
| | $ | 1,113,133 |
| | $ | 3,461 |
| $ | 4,209 |
| | $ | 4,701 |
| $ | 5,268 |
| | 0.95 | % | 1.11 | % |
(l)Generally excludes loans under payment deferral programs offered in response to the COVID-19 pandemic. Includes loans to customers that have exited COVID-19 payment deferral programs and are 90 or more days past due, predominantly all of which were also at least 150 days past due and therefore considered collateral-dependent. Collateral-dependent loans are charged down to the lower of amortized cost or fair value of the underlying collateral less costs to sell. | | (a) | At December 31, 2018 and 2017, excluded operating lease assets of $20.5 billion and $17.1 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 relates 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. |
| | (b) | Includes certain business banking and auto dealer risk-rated loans that apply the wholesale methodology 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. |
| | (c) | Predominantly includes Business Banking loans. |
| | (d) | 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%. |
| | (e) | At December 31, 2018 and 2017, approximately 69% and 68%, respectively, of the PCI option adjustable rate mortgages (“ARMs”) portfolio has been modified into fixed-rate, fully amortizing loans. |
| | (f) | 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, 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. For further information, refer to Note 27. |
| | (g) | 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. |
| | (h) | Includes billed interest and fees net of an allowance for uncollectible interest and fees. |
| | (i) | At December 31, 2018 and 2017, nonaccrual loans excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $2.6 billion and $4.3 billion, 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. |
| | (j) | Excludes PCI loans. The Firm is recognizing interest income on each pool of PCI loans as each of the pools is performing. |
| | (k) | Net charge-offs/(recoveries) and net charge-off/(recovery) rates excluded write-offs in the PCI portfolio of $187 million and $86 million for the years ended December 31, 2018 and 2017, respectively. These write-offs decreased the allowance for loan losses for PCI loans. Refer to Allowance for Credit Losses on pages 120–122 for further information. |
| | (l) | Average consumer loans held-for-sale were $387 million and $1.5 billion for the years ended December 31, 2018 and 2017, respectively. These amounts were excluded when calculating net charge-off/(recovery) rates. |
(m)Average consumer loans held-for-sale and loans at fair value were $18.3 billion and $20.4 billion for the years ended December 31, 2020 and 2019, respectively. Prior-period amounts have been revised to conform with the current presentation; refer to footnote (e) for additional information. These amounts were excluded when calculating net charge-off/(recovery) rates.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 107115 |
Management’s discussion and analysis
Consumer assistance In March 2020, the Firm began providing assistance to customers in response to the COVID-19 pandemic, predominantly in the form of payment deferrals. As of December 31, 2020, the Firm had $10.7 billion of retained loans under payment deferral programs, which represented a decrease of approximately $1.5 billion from September 30, 2020 and $17.5 billion from June 30, 2020. During the fourth quarter of 2020, there were approximately $1.4 billion of new enrollments in payment deferral programs predominantly in residential real estate and credit card. Predominantly all borrowers that exited payment deferral programs are current. The Firm continues to monitor the credit risk associated with loans subject to payment deferrals throughout the deferral period and on an ongoing basis after the borrowers are required to resume making regularly scheduled payments and considers expected losses of principal and accrued interest on these loans in its allowance for credit losses. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | September 30, 2020 | | June 30, 2020 | | | (in millions, except ratios) | Loan balance | Percent of loan class balance(e) | Percent of accounts who exited payment deferral and are current | | Loan balance | | | | | Loan balance | | | Type of assistance | Residential real estate(a)(b) | $ | 10,106 | | 4.5 | % | 95 | % | | $ | 11,458 | | | | | | $ | 20,548 | | | | Rolling three month payment deferral up to one year; in most cases, deferred payments will be due at the end of the loan term | Auto and other(c) | 377 | | 0.5 | | 94 | | | 457 | | | | | | 3,357 | | | | •Auto: Currently offering one month payment deferral (initially offered three month payment deferral). Maturity date is extended by number of months deferred •Business Banking: Three month deferral with automatic deferment to either maturity (loan) or one year forward (line) | Credit card | 264 | | 0.2 | | 90 | | (f) | 368 | | | | | | 4,384 | | | | Currently offering deferral of one month minimum payment (initially offered three month minimum payment deferral). Interest continues to accrue during the deferral period and is added to the principal balance | Total consumer(d) | $ | 10,747 | | 2.4 | % | 91 | % | | $ | 12,283 | | | | | | $ | 28,289 | | | |
(a)Excludes $13.4 billion, $17.1 billion and $34.0 billion of third-party mortgage loans serviced at December 31, 2020, September 30, 2020 and June 30, 2020, respectively. (b)The weighted average LTV ratio of residential real estate loans under payment deferral at December 31, 2020 was 57%. (c)Excludes risk-rated business banking and auto dealer loans held in CCB and auto operating lease assets that were still under payment deferral programs as of December 31, 2020, September 30, 2020 and June 30, 2020. Auto operating lease asset payment assistance is currently offering one month payment deferral (initially offered three month payment deferral). Deferrals do not extend the term of the lease and all deferred payments are due at the end of the lease term. (d)Includes $3.8 billion, $3.8 billion and $5.7 billion of loans that were accounted for as TDRs prior to payment deferral as of December 31, 2020, September 30, 2020 and June 30, 2020, respectively. (e)Represents the unpaid principal balance of retained loans which were still under payment deferral programs, divided by the total unpaid principal balance of the respective loan classes retained loans. (f)85% of the balance that exited deferral were current at December 31, 2020. Of the $10.7 billion of loans still under payment deferral programs as of December 31, 2020, approximately $4.0 billion were accounted for as TDRs, either because they were accounted for as TDRs prior to payment deferral, or because they did not qualify for or the Firm did not elect the option to suspend TDR accounting guidance provided by the CARES Act and extended by the Consolidated Appropriations Act. A portion of the remaining $6.7 billion of loans could become TDRs in future periods, depending on the nature and timing of further modifications or payment arrangements offered to these borrowers. If the remaining $6.7 billion of loans were considered TDRs, the Firm estimates that it would result in an increase in standardized RWA of as much as $2.5 billion. Predominantly all borrowers, including those accounted for as TDRs, were current upon enrollment in payment deferral programs and are expected to exit payment deferral programs in a current status, either because no payments are contractually due during the deferral period or because payments originally contractually due during the deferral period will be due at maturity upon exit. For those borrowers that are unable to resume making payments in accordance with the original or modified contractual terms of their agreements upon exit from deferral programs, they will be placed on nonaccrual status in line with the Firm’s nonaccrual policy, except for credit cards as permitted by regulatory guidance, and charged off or down in accordance with the Firm’s charge-off policies. Refer to Note 12 for additional information on the Firm’s nonaccrual and charge-off policies. | | | | | | | | | 116 | | JPMorgan Chase & Co./2020 Form 10-K |
Consumer, excluding credit card Portfolio analysis Consumer loanLoan balances increasedwere flat from December 31, 2017 predominantly due to2019 as PPP loan originations of high-quality prime mortgage loans that have been retained on the balance sheet, largelyin Business Banking were offset by paydowns and the charge-off or liquidation of delinquent loans.lower residential real estate loans, reflecting paydowns.
PCI loans are excluded from theThe following discussions ofprovide information concerning individual loan products and are addressed separately below. Forproducts. Refer to Note 12 for further information about the Firm’s consumerthis portfolio, including information about delinquencies, loan modifications and other credit quality indicators, refer to
Note 12.indicators.
Residential mortgage:real estate: The residential mortgagereal estate portfolio, including loans held-for-sale and loans at fair value, predominantly consists of high-quality prime mortgage loans with approximately 1% consistingand home equity lines of subprimecredit. The portfolio decreased from December 31, 2019 driven by paydowns largely offset by originations of prime mortgage loans which continuethat have been retained on the balance sheet. The 30+ delinquency rate decreased to run off. The residential mortgage portfolio0.98% at December 31, 2020, from 1.35% at December 31, 2019, primarily due to payment assistance and government stimulus. Nonaccrual loans increased from December 31, 2017 driven by2019 due primarily to loans placed on nonaccrual status related to the retentionimpact of originated high-quality prime mortgagethe COVID-19 pandemic as well as the adoption of CECL, as PCD loans which exceeded paydowns and mortgage loan sales. Residential mortgage 30+ day delinquencies decreased from December 31, 2017. Nonaccrual loans decreased from December 31, 2017 duebecame subject to lower delinquencies.nonaccrual treatment. Net recoveries for the year ended December 31, 2018 improved2020 were higher when compared with the prior year reflectingas the current year benefited from a recovery on a loan sales and continued improvement in home prices and delinquencies.sale. At December 31, 2018 and 2017, the Firm’s residential mortgage portfolio included $21.6 billion and $20.2 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. Performance of this portfolio for the year ended December 31, 2018 was in line with the performance of the broader residential mortgage portfolio for the same period. The Firm continues to monitor the risks associated with these loans.
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 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. | | | | | | | | (in millions) | December 31, 2018 |
| December 31, 2017 |
| Current | $ | 2,884 |
| $ | 2,401 |
| 30-89 days past due | 1,528 |
| 1,958 |
| 90 or more days past due | 2,600 |
| 4,264 |
| Total government guaranteed loans | $ | 7,012 |
| $ | 8,623 |
|
Home equity: The home equity portfolio declined from December 31, 2017 primarily reflecting loan paydowns. The amount of 30+ day delinquencies decreased from December 31, 2017. Nonaccrual loans decreased from December 31, 2017 due to lower delinquencies. There was a net recovery for the year ended December 31, 2018 compared to a net charge-off for the prior year, as a result of continued improvement in home prices and lower delinquencies.
At December 31, 2018, approximately 90% of the Firm’s home equity portfolio consistscarrying value of home equity lines of credit (“HELOCs”) and the remainder consisted 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 $26$23.7 billion at December 31, 2018.2020. This amount included $12$8.6 billion of HELOCs that have recast from interest-only to fully amortizing payments or have been modified and $4$7.7 billion of 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.
| | | | 108 | | JPMorgan Chase & Co./2018 Form 10-K |
The Firm monitors risks associated with junior lien loans where the borrower has a senior lien loan that is either 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, 2018, the Firm estimated that2020 and 2019, the carrying value of its home equity portfolio contained approximately $550 million of current junior lien loans that were considered high-risk seconds, compared with approximately $725 million at December 31, 2017.
Auto: The auto loan portfolio, which predominantly consists of prime-quality loans, declined when compared with December 31, 2017, as paydowns and the charge-off or liquidation of delinquentinterest-only residential mortgage loans were $25.6 billion and $22.5 billion, respectively. 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, predominantly offset by new originations. Nonaccrual loans decreased from December 31, 2017. Net charge-offsin AWM. The net charge-off rate for the year ended December 31, 2018 declined when compared2020 was consistent with the prior year primarilyrate of the broader residential mortgage portfolio as a resultthe performance of an incremental adjustment recordedthis portfolio is generally in 2017 in accordance with regulatory guidance regarding the timing of loss recognition for certain loans in bankruptcy and loans where assets were acquired in loan satisfactions.
Consumer & Business banking: Consumer & Business Banking loans increased when compared with December 31, 2017 due to loan originations, predominantly offset by paydowns and charge-offs of delinquent loans. Nonaccrual loans and net charge-offs decreased when comparedline with the prior year.
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 from December 31, 2017 due to portfolio run off and loan sales. As of December 31, 2018, approximately 10%performance of the option ARM PCI loans were delinquent and approximately 69% of the portfolio had 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. broader residential mortgage portfolio.
The following table provides a summary of lifetime principal loss estimates includedthe Firm’s residential mortgage portfolio insured and/or guaranteed by U.S. government agencies, predominantly loans held-for-sale and loans at fair value. The Firm monitors its exposure to certain potential unrecoverable claim payments related to government-insured loans and considers this exposure in either the nonaccretable difference orestimating the allowance for loan losses. | | | | | | | | | | | | | | | | | Summary of PCI loans lifetime principal loss estimates | | Lifetime loss estimates(a) | | Life-to-date liquidation losses(b) | December 31, (in billions) | 2018 | | 2017 | | 2018 | | 2017 | Home equity | $ | 14.1 |
| | $ | 14.2 |
| | $ | 13.0 |
| | $ | 12.9 |
| Prime mortgage | 4.1 |
| | 4.0 |
| | 3.9 |
| | 3.8 |
| Subprime mortgage | 3.3 |
| | 3.3 |
| | 3.2 |
| | 3.1 |
| Option ARMs | 10.3 |
| | 10.0 |
| | 9.9 |
| | 9.7 |
| Total | $ | 31.8 |
| | $ | 31.5 |
| | $ | 30.0 |
| | $ | 29.5 |
|
| | | | | | | | | (in millions) | December 31, 2020 | December 31, 2019 | Current | $ | 669 | | $ | 1,432 | | 30-89 days past due | 235 | | 704 | | 90 or more days past due | 874 | | 1,090 | | Total government guaranteed loans(a) | $ | 1,778 | | $ | 3,226 | |
| | (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 $512 million and $842 million at December 31, 2018 and 2017, respectively. |
| | (b) | Represents both realization of loss upon loan resolution and any principal forgiven upon modification. |
For further information on(a)In the Firm’s PCI loans, including write-offs, referthird quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to Note 12.loans. Prior-period amounts have been revised to conform with the current presentation.
Geographic composition and current estimated loan-to-value ratio of residential real estate loans At December 31, 2018, $160.32020, $146.6 billion, or 63%65% 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,Florida, Texas and Florida,Illinois, compared with $152.8$157.9 billion, or 63%65%, at December 31, 2017. For additional information on the geographic composition of the Firm’s residential real estate loans, refer to Note 12. Current estimated loan-to-values of residential real estate loans2019.
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. For further Refer to Note 12 for information on the geographic composition and current estimated LTVs of the Firm’s residential real estate loans, refer to Note 12.loans.
Loan modification activities for 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 22% for residential mortgages and 20% for home equity. 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 19% for home equity, 18% for prime mortgages, 16% for option ARMs and 32% for subprime mortgages. The cumulative redefault rates reflect the performance of modifications completed from October 1, 2009 through December 31, 2018.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 109117 |
Management’s discussion and analysis
Certain modifiedModified residential real estate loans have interest rate reset provisions (“step-rate modifications”) where the 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, 2018, 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 $2 billion and $3 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, 2018 and 2017, relating to modified retained residential real estate loans for which concessions have been granted to borrowers experiencing financial difficulty. Fordifficulty, which include both TDRs and modified loans accounted for as PCI loans prior to the adoption of CECL. The following table does not include loans with short-term or other insignificant modifications that are not considered concessions and, therefore, are not TDRs, or loans for which the Firm has elected to apply the option to suspend the application of accounting guidance for TDRs as provided by the CARES Act and extended by the Consolidated Appropriations Act. Refer to Note 12 for further information on modifications for the years ended December 31, 20182020 and 2017, refer2019. | | | | | | | | | | | | | | | (in millions) | December 31, 2020 | | December 31, 2019 | | Retained loans(a) | $ | 15,406 | | | 5,926 | | | PCI loans | NA | | 12,372 | | (d) | Nonaccrual retained loans(b)(c) | $ | 3,899 | | | 2,332 | | |
(a)At December 31, 2020 and 2019, $7 million and $14 million, 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. Refer to Note 12.14 for additional information about sales of loans in securitization transactions with Ginnie Mae. (b)At December 31, 2020 and 2019, nonaccrual loans included $3.0 billion and $1.9 billion, respectively, of TDRs for which the borrowers were less than 90 days past due. Refer to Note 12 for additional information about loans modified in a TDR that are on nonaccrual status. (c)At December 31, 2020, nonaccrual loans included $1.3 billion of PCD loans. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing. (d)Amount represents the unpaid principal balance of modified PCI loans at December 31, 2019, which were moved to retained loans upon the adoption of CECL. Auto and other: The auto and other loan portfolio predominantly consists of prime-quality scored auto and business banking loans, as well as overdrafts. The portfolio increased when compared with December 31, 2019, predominantly due to PPP loan originations of $21.9 billion in Business Banking of which $19.2 billion remained outstanding at December 31, 2020 as well as from growth in the auto portfolio from loan originations, partially offset by paydowns and charge-offs or liquidation of delinquent loans. The 30+ delinquency rate decreased to 0.60% at December 31, 2020, from 1.31% at December 31, 2019, primarily due to payment assistance and government stimulus, as well as PPP loan originations as these loans are all considered current. The scored auto portfolio net charge-off rates were 0.25% and 0.44% for the years ended December 31, 2020 and 2019, respectively. Auto charge-offs for the year ended December 31, 2020 benefited from payment assistance programs and high vehicle collateral values. | | | | | | | | | | | | | | Modified residential real estate loans | | 2018 | 2017 | 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 | $ | 4,565 |
| $ | 1,459 |
| $ | 5,620 |
| $ | 1,743 |
| Home equity | 2,012 |
| 955 |
| 2,118 |
| 1,032 |
| Total modified residential real estate loans, excluding PCI loans | $ | 6,577 |
| $ | 2,414 |
| $ | 7,738 |
| $ | 2,775 |
| Modified PCI loans(c) | | | | | Home equity | $ | 2,086 |
| NA |
| $ | 2,277 |
| NA |
| Prime mortgage | 3,179 |
| NA |
| 4,490 |
| NA |
| Subprime mortgage | 2,041 |
| NA |
| 2,678 |
| NA |
| Option ARMs | 6,410 |
| NA |
| 8,276 |
| NA |
| Total modified PCI loans | $ | 13,716 |
| NA |
| $ | 17,721 |
| NA |
|
| | (a) | Amounts represent the carrying value of modified residential real estate loans. |
| | (b) | At December 31, 2018 and 2017, $4.1 billion and $3.8 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. For additional information about sales of loans in securitization transactions with Ginnie Mae, refer to Note 14. |
| | (c) | Amounts represent the unpaid principal balance of modified PCI loans. |
| | (d) | As of December 31, 2018 and 2017, nonaccrual loans included $2.0 billion and $2.2 billion, respectively, of troubled debt restructurings (“TDRs”) for which the borrowers were less than 90 days past due. For additional information about loans modified in a TDR that are on nonaccrual status, refer to Note 12. |
Nonperforming assets The following table presents information as of December 31, 20182020 and 2017,2019, about consumer, excluding credit card, nonperforming assets. | | | | | | | | | | | | Nonperforming assets(a) | | | | December 31, (in millions) | 2020 | | 2019 | Nonaccrual loans | | | | Residential real estate(b)(c)(d) | $ | 6,316 | | | $ | 3,220 | | Auto and other | 151 | | | 146 | | Total nonaccrual loans | 6,467 | | | 3,366 | | Assets acquired in loan satisfactions | | | | Real estate owned(e) | 131 | | | 229 | | Other | 21 | | | 24 | | Total assets acquired in loan satisfactions | 152 | | | 253 | | Total nonperforming assets | $ | 6,619 | | | $ | 3,619 | |
| | | | | | | | | Nonperforming assets(a) | | | | December 31, (in millions) | 2018 |
| | 2017 |
| Nonaccrual loans(b) | | | | Residential real estate | $ | 3,088 |
| | $ | 3,785 |
| Other consumer | 373 |
| | 424 |
| Total nonaccrual loans | 3,461 |
| | 4,209 |
| Assets acquired in loan satisfactions | | | | Real estate owned | 210 |
| | 225 |
| Other | 30 |
| | 40 |
| Total assets acquired in loan satisfactions | 240 |
| | 265 |
| Total nonperforming assets | $ | 3,701 |
| | $ | 4,474 |
|
| | (a) | (a)At December 31, 2018 and 2017, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $2.6 billion and $4.3 billion, respectively, and real estate owned (“REO”) insured by U.S. government agencies of $75 million and $95 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. |
Nonaccrual loans in the residential real estate portfolio at December 31, 20182020 and 2019, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $874 million and $1.1 billion, respectively, and REO insured by U.S. government agencies of $9 million and $41 million, respectively. Prior-period amount of mortgage loans 90 or more days past due and insured by U.S. government agencies excluded from nonperforming assets has been revised to conform with the current presentation; refer to footnote (b) for additional information. These amounts have been excluded based upon the government guarantee.
(b) decreasedIn the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to $3.1 billion from $3.8 billion at December 31, 2017,loans. Prior-period amounts have been revised to conform with the current presentation. (c)Generally excludes loans under payment deferral programs offered in response to the COVID-19 pandemic. Includes loans to customers that have exited COVID-19 payment deferral programs and are 90 or more days past due, predominantly all of which 24% and 26% were greater than also at least 150 days past due respectively. In the aggregate, the unpaid principal balance of residential real estateand therefore considered collateral-dependent. Collateral-dependent loans greater than 150 days past due wasare charged down by approximately 32% and 40% to the estimated net realizablelower of amortized cost or fair value of the underlying collateral atless costs to sell. (d)At December 31, 2018 and 2017, respectively.2020, nonaccrual loans included $1.6 billion of PCD loans. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing. (e)Prior-period amount has been revised to conform with the current presentation. | | | | | | | | | 118 | | JPMorgan Chase & Co./2020 Form 10-K |
Nonaccrual loans: loans The following table presents changes in the consumer, excluding credit card, nonaccrual loans for the years ended December 31, 20182020 and 2017.2019. | | Nonaccrual loan activity | | | | Nonaccrual loan activity(a) | | Nonaccrual loan activity(a) | | | Year ended December 31, | | | Year ended December 31, | | (in millions) | | 2018 |
| 2017 |
| (in millions) | | 2020 | | 2019 | Beginning balance | | $ | 4,209 |
| $ | 4,820 |
| Beginning balance | | $ | 3,366 | | | $ | 3,853 | | Additions | | 2,799 |
| 3,525 |
| | Additions: | | Additions: | | PCD loans, upon adoption of CECL | | PCD loans, upon adoption of CECL | | 708 | | | NA | Other additions | | Other additions | | 5,184 | | (c) | 2,174 | | Total additions | | Total additions | | 5,892 | | | 2,174 | | Reductions: | | | Reductions: | | Principal payments and other(a) | | 1,407 |
| 1,577 |
| | Principal payments and other(b) | | Principal payments and other(b) | | 983 | | | 1,167 | | Charge-offs | | 468 |
| 699 |
| Charge-offs | | 390 | | | 371 | | Returned to performing status | | 1,399 |
| 1,509 |
| Returned to performing status | | 1,024 | | | 751 | | Foreclosures and other liquidations | | 273 |
| 351 |
| Foreclosures and other liquidations | | 394 | | | 372 | | Total reductions | | 3,547 |
| 4,136 |
| Total reductions | | 2,791 | | | 2,661 | | Net changes | | (748 | ) | (611 | ) | Net changes | | 3,101 | | | (487) | | Ending balance | | $ | 3,461 |
| $ | 4,209 |
| Ending balance | | $ | 6,467 | | | $ | 3,366 | |
| | (a) | Other reductions includes loan sales. |
(a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans. Prior-period amounts have been revised to conform with the current presentation. (b)Other reductions includes loan sales. (c)Includes loans to customers that have exited COVID-19 payment deferral programs and are 90 or more days past due, predominantly all of which were also at least 150 days past due and therefore considered collateral-dependent. Collateral-dependent loans are charged down to the lower of amortized cost or fair value of the underlying collateral less costs to sell. Active and suspended foreclosure: ForRefer to Note 12 for information on loans that were in the process of active or suspended foreclosure, referforeclosure. Refer to Note 12.12 for further information about the consumer credit portfolio, including information about delinquencies, loan modifications and other credit quality indicators. Purchased credit deteriorated (“PCD”) loans The following tables provide credit-related information for PCD loans, which were accounted for as PCI loans prior to the adoption of CECL. PCI loans are considered PCD loans under CECL and are subject to the Firm’s nonaccrual and charge-off policies. PCD loans are now reported in the consumer, excluding credit card portfolio’s residential real estate class. Refer to Note 1 for further information. | | | | | | | | | (in millions, except ratios) | December 31, 2020 | December 31, 2019 | Loan delinquency(a) | | | Current | $ | 16,036 | | $ | 18,571 | | 30-149 days past due | 432 | | 970 | | 150 or more days past due(b) | 573 | | 822 | | | | | | | | Total PCD loans | $ | 17,041 | | $ | 20,363 | | | | | % of 30+ days past due to total retained PCD loans | 5.90 | % | 8.80 | % | | | | Nonaccrual loans(c) | $ | 1,609 | | NA |
| | | | | | | (in millions, except ratios) | | Twelve months ended December 31, 2020 | Net charge-offs | | $ | 74 | | Net charge-off rate | | 0.39 | % |
(a)At December 31, 2020, loans under payment deferral programs offered in response to the COVID-19 pandemic which are still within their deferral period and performing according to their modified terms are generally not considered delinquent. (b)Includes loans to customers that have exited COVID-19 payment deferral programs and are 150 or more days past due and therefore considered collateral-dependent. Collateral dependent loans are charged down to the lower of amortized cost or fair value of the underlying collateral less costs to sell. (c)Includes loans to customers that have exited COVID-19 payment deferral programs and are 90 or more days past due, predominantly all of which were also at least 150 days past due and therefore considered collateral-dependent.
| | | | | | | | | 110 | | JPMorgan Chase & Co./20182020 Form 10-K | | 119 |
Management’s discussion and analysis
Credit card Total credit card loans increaseddecreased from December 31, 2017 due to new account growth and higher2019 reflecting a decline in sales volume.volume that began in March as a result of the impact of the COVID-19 pandemic. The December 31, 20182020 30+ and 90+ day delinquency rate increasedrates of 1.68% and 0.92%, respectively, decreased compared to 1.83% from 1.80% at December 31, 2017, but the December 31, 20182019 30+ and 90+ day delinquency raterates of 0.92% was flat compared to December 31, 2017.1.87% and 0.95%, respectively. The delinquency rates were positively impacted by borrowers who received payment assistance and government stimulus. Net charge-offs increaseddecreased for the year ended December 31, 2018 when2020 compared with the prior year reflecting lower charge-offs and higher recoveries primarily due to the seasoning of more recent vintages with higher loss rates, as anticipated given underwriting standards at the time of origination.benefiting from payment assistance and government stimulus. Consistent with the Firm’s policy, all credit card loans typically remain on accrual status until charged off. However, the Firm establishes anFirm’s allowance which is offset against loans and reduces interest income, for loan losses includes 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. Geographic and FICO composition of credit card loans At December 31, 2018, $71.22020, $65.0 billion, or 45% of the total retained credit card loan portfolio, werewas concentrated in California, Texas, New York, Florida and Illinois, compared with $67.2$77.5 billion, or 45%46%, at December 31, 2017. For2019. Refer to Note 12 for additional information on the geographic and FICO composition of the Firm’s credit card loans, refer to Note 12.loans. Modifications of credit card loans At December 31, 2018 and 2017,2020, the Firm had $1.3$1.4 billion and $1.2 billion, respectively, of credit card loans outstanding that have been modified in TDRs. ForTDRs, which does not include loans with short-term or other insignificant modifications that are not considered TDRs, compared to $1.5 billion at December 31, 2019. Refer to Note 12 for additional information about loan modification programs to borrowers, refer to Note 12. for borrowers.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 111 |
Management’s discussion and analysis
| | | | | | 120 | | JPMorgan Chase & Co./2020 Form 10-K |
| | | | | | | | | | | | | | | 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 various operating services (such as cash management and clearing activities), securities financing activities 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 quality of the wholesale portfolio was stable for the year ended December 31, 2018, characterized by low levels of criticized exposure, nonaccrual loans and charge-offs. Refer to the industry discussion on pages 113–115 for further information. Retained loans increased across all wholesale lines of business, primarily driven by commercial and industrial and financial institution clients in CIB, and Wealth Management clients globally in AWM. 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. Refer to the industry discussion on pages 123-127 for further information.In the following tables, theThe Firm’s wholesale credit portfolio includes exposure held in CIB, CB, AWM and Corporate, as well as risk-rated business banking and excludes allauto dealer exposures held in CCB for which the wholesale methodology is applied when determining the allowance for credit losses.
In 2020, the impacts of the COVID-19 pandemic resulted in broad-based credit deterioration and an increase in the allowance for credit losses. As of December 31, 2020, the investment-grade percentage of the portfolio decreased from 74% to 71%, and criticized exposure managedincreased $26.5 billion from $15.1 billion to $41.6 billion. The increase in criticized exposure was largely driven by CCB.downgrades in Consumer & Retail, Oil & Gas and Real Estate, and to a lesser extent, net portfolio activity in Technology, Media & Telecommunications. The continuation or worsening of the effects of the COVID-19 pandemic on the macroeconomic environment could result in further impacts to credit quality metrics, including investment-grade percentages, as well as to criticized and nonperforming exposures and charge-offs. As of December 31, 2020 retained loans were up $33.3 billion predominantly driven by AWM and CIB, and lending-related commitments were up $32.4 billion, predominantly driven by CIB and CB. | | | | | | | | | | | | | | | | Wholesale credit portfolio | December 31, (in millions) | Credit exposure | | Nonperforming(f) | 2020 | 2019 | | 2020 | 2019 | Loans retained | $ | 514,947 | | $ | 481,678 | | | $ | 3,318 | | $ | 1,057 | | Loans held-for-sale | 5,784 | | 4,062 | | | 284 | | 5 | | Loans at fair value (a) | 29,327 | | 25,139 | | | 504 | | 209 | | Loans – reported | 550,058 | | 510,879 | | | 4,106 | | 1,271 | | Derivative receivables | 79,630 | | 49,766 | | | 56 | | 30 | | Receivables from customers(b) | 47,710 | | 33,706 | | | — | | — | | Total wholesale credit-related assets | 677,398 | | 594,351 | | | 4,162 | | 1,301 | | Assets acquired in loan satisfactions | | | | | | Real estate owned (c) | NA | NA | | 125 | | 115 | | Other | NA | NA | | — | | 19 | | Total assets acquired in loan satisfactions | NA | NA | | 125 | | 134 | | Lending-related commitments (a) | 449,863 | | 417,510 | | | 577 | | 474 | | Total wholesale credit portfolio | $ | 1,127,261 | | $ | 1,011,861 | | | $ | 4,864 | | $ | 1,909 | | Credit derivatives used in credit portfolio management activities(c)(d) | $ | (22,239) | | $ | (18,530) | | | $ | — | | $ | — | | Liquid securities and other cash collateral held against derivatives(e) | (14,806) | | (13,052) | | | NA | NA |
(a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans, which resulted in a corresponding reclassification of certain off-balance sheet commitments. Prior-period amounts have been revised to conform with the current presentation. (b)Receivables from customers reflect held-for-investment margin loans to brokerage clients in CIB, CCB and AWM; these are reported within accrued interest and accounts receivable on the Consolidated balance sheets. (c)Prior-period amounts have been revised to conform with the current presentation. (d)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. Refer to Credit derivatives on page 131 and Note 5 for additional information. (e)In the fourth quarter of 2020, the Firm refined its approach for disclosing additional collateral held by the Firm that may be used as security when the fair value of the client’s exposure is in the Firm’s favor. Prior-period amounts have been revised to conform with the current presentation. (f)Loans that were modified in response to the COVID-19 pandemic continue to be risk-rated in accordance with the Firm’s overall credit risk management framework. As of December 31, 2020, predominantly all of these loans were considered performing.
| | | | | | | | | | | | | | | Wholesale credit portfolio | December 31, (in millions) | Credit exposure | | Nonperforming(c) | 2018 | 2017 | | 2018 | 2017 | Loans retained | $ | 439,162 |
| $ | 402,898 |
| | $ | 1,150 |
| $ | 1,734 |
| Loans held-for-sale | 11,877 |
| 3,099 |
| | — |
| — |
| Loans at fair value | 3,151 |
| 2,508 |
| | 220 |
| — |
| Loans – reported | 454,190 |
| 408,505 |
| | 1,370 |
| 1,734 |
| Derivative receivables | 54,213 |
| 56,523 |
| | 60 |
| 130 |
| Receivables from customers and other(a) | 30,063 |
| 26,139 |
| | — |
| — |
| Total wholesale credit-related assets | 538,466 |
| 491,167 |
| | 1,430 |
| 1,864 |
| Lending-related commitments | 387,813 |
| 370,098 |
| | 469 |
| 731 |
| Total wholesale credit exposure | $ | 926,279 |
| $ | 861,265 |
| | $ | 1,899 |
| $ | 2,595 |
| Credit derivatives used in credit portfolio management activities(b) | $ | (12,682 | ) | $ | (17,609 | ) | | $ | — |
| $ | — |
| Liquid securities and other cash collateral held against derivatives | (15,322 | ) | (16,108 | ) | | NA |
| NA |
|
| | (a) | Receivables from customers and other include $30.1 billion and $26.0 billion of held-for-investment margin loans at December 31, 2018 and 2017, respectively, to prime brokerage customers in CIB and 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, refer to Credit derivatives on page 119, and Note 5. |
| | (c) | Excludes assets acquired in loan satisfactions. |
| | | | | | | | | 112 | | JPMorgan Chase & Co./20182020 Form 10-K | | 121 |
Management’s discussion and analysis
Wholesale assistance
In March 2020, the Firm began providing assistance to clients in response to the COVID-19 pandemic, predominantly in the form of payment deferrals and covenant modifications. As of December 31, 2020, the Firm had approximately $1.6 billion of retained loans still under payment deferral, which has decreased approximately $4.6 billion from the third quarter, and $15.1 billion from the second quarter. Predominantly all clients that exited deferral are current or have paid down their loans, and the Firm has not experienced significant new payment deferral requests. The Firm continues to monitor the credit risk associated with loans subject to deferrals throughout the deferral period and on an ongoing basis after the borrowers are required to resume making regularly scheduled payments and considers expected losses of principal and accrued interest on these loans in its allowance for credit losses. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions, except ratios) | December 31, 2020 | | September 30, 2020 | | June 30, 2020 | Industry | Loan balance | | Percent of total industry loan balance(a) | IG percentage of loan balance in payment deferral | | Loan balance | | | | Loan balance | | | Real Estate | $ | 550 | | | 0.46 | % | 36 | % | | $ | 4,385 | | | | | $ | 5,211 | | | | Individuals and Individual Entities | 402 | | | 0.37 | | 4 | | | 691 | | | | | 809 | | | | Transportation | 394 | | | 5.99 | | 92 | | | 346 | | | | | 294 | | | | Consumer & Retail | 82 | | | 0.21 | | 2 | | | 413 | | | | | 690 | | | | Automotive | 22 | | | 0.13 | | — | | | 15 | | | | | 8,827 | | | | Industrials | 19 | | | 0.09 | | — | | | 91 | | | | | 335 | | | | Healthcare | 7 | | | 0.04 | | — | | | 100 | | | | | 300 | | | | All Other industries | 147 | | | 0.08 | | 99 | | | 233 | | | | | 309 | | | | Total wholesale | $ | 1,623 | |
| 0.32 | % | 45 | % | | $ | 6,274 | | | | | $ | 16,775 | | | |
(a)Represents the balance of the retained loans which were still under payment deferral, divided by the respective industry total retained loans balance. In addition, the Firm granted assistance in the form of covenant modifications. These types of assistance, both payment deferrals and covenant modifications, are generally not reported as TDRs, either because the modifications were insignificant or they qualified for the option to suspend the application of accounting guidance for TDRs as provided by the CARES Act and extended by the Consolidated Appropriations Act. A portion of the $1.6 billion of loans under payment deferral as December 31, 2020 could become TDRs in future periods, depending on the nature and timing of further modifications or payment arrangements offered to these borrowers. If the $1.6 billion of loans under payment deferral were considered TDRs, the Firm estimates that it would result in an increase in standardized RWA of as much as $500 million. Loans under assistance continue to be risk-rated in accordance with the Firm’s overall credit risk management framework. As of December 31, 2020, predominantly all of these loans were considered performing. Wholesale credit exposure – maturity and ratings profile The following tables present the maturity and internal risk ratings profiles of the wholesale credit portfolio as of December 31, 20182020 and 2017.2019. The Firm generally considers internal ratings scalewith qualitative characteristics equivalent to BBB-/Baa3 or higher as investment grade, and takes into consideration collateral and structural support when determining the internal risk rating for each credit facility. Refer to Note 12 for further information on internal risk ratings. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturity profile(g) | | Ratings profile | | | | 1 year or less | 1 year through 5 years | After 5 years | Total | | | | | | Total | Total % of IG | December 31, 2020 (in millions, except ratios) | | Investment-grade | | Noninvestment-grade | | Loans retained | $ | 183,969 | | $ | 197,905 | | $ | 133,073 | | $ | 514,947 | | | $ | 379,273 | | | $ | 135,674 | | | $ | 514,947 | | 74 | % | Derivative receivables | | | | 79,630 | | | | | | | 79,630 | | | Less: Liquid securities and other cash collateral held against derivatives(b) | | | | (14,806) | | | | | | | (14,806) | | | Total derivative receivables, net of collateral | 18,456 | | 17,599 | | 28,769 | | 64,824 | | | 38,941 | | | 25,883 | | | 64,824 | | 60 | | Lending-related commitments(c) | 116,950 | | 315,179 | | 17,734 | | 449,863 | | | 312,694 | | | 137,169 | | | 449,863 | | 70 | | Subtotal | 319,375 | | 530,683 | | 179,576 | | 1,029,634 | | | 730,908 | | | 298,726 | | | 1,029,634 | | 71 | | Loans held-for-sale and loans at fair value(c)(d) | | | | 35,111 | | | | | | | 35,111 | | | Receivables from customers | | | | 47,710 | | | | | | | 47,710 | | | Total exposure – net of liquid securities and other cash collateral held against derivatives | | | | $ | 1,112,455 | | | | | | | $ | 1,112,455 | | | Credit derivatives used in credit portfolio management activities(e)(f) | $ | (6,190) | | $ | (13,223) | | $ | (2,826) | | $ | (22,239) | | | $ | (17,860) | | | $ | (4,379) | | | $ | (22,239) | | 80 | % |
| | | | | | | | | 122 | | JPMorgan Chase & Co./2020 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturity profile(g) | | Ratings profile | | 1 year or less | 1 year through 5 years | After 5 years | Total | | | | | | Total | Total % of IG | December 31, 2019 (in millions, except ratios) | | Investment-grade | | Noninvestment-grade | | Loans retained(a) | $ | 159,006 | | $ | 186,256 | | $ | 136,416 | | $ | 481,678 | | | $ | 363,444 | | | $ | 118,234 | | | $ | 481,678 | | 75 | % | Derivative receivables | | | | 49,766 | | | | | | | 49,766 | | | Less: Liquid securities and other cash collateral held against derivatives(b) | | | | (13,052) | | | | | | | (13,052) | | | Total derivative receivables, net of collateral | 7,136 | | 7,569 | | 22,009 | | 36,714 | | | 29,416 | | | 7,298 | | | 36,714 | | 80 | | Lending-related commitments(a)(c) | 87,577 | | 312,939 | | 16,994 | | 417,510 | | | 296,702 | | | 120,808 | | | 417,510 | | 71 | | Subtotal | 253,719 | | 506,764 | | 175,419 | | 935,902 | | | 689,562 | | | 246,340 | | | 935,902 | | 74 | | Loans held-for-sale and loans at fair value(c)(d) | | | | 29,201 | | | | | | | 29,201 | | | Receivables from customers | | | | 33,706 | | | | | | | 33,706 | | | Total exposure – net of liquid securities and other cash collateral held against derivatives | | | | $ | 998,809 | | | | | | | $ | 998,809 | | | Credit derivatives used in credit portfolio management activities(a)(e)(f) | $ | (5,412) | | $ | (10,031) | | $ | (3,087) | | $ | (18,530) | | | $ | (16,724) | | | $ | (1,806) | | | $ | (18,530) | | 90 | % |
(a)Prior-period amounts have been revised to conform with the current presentation. (b)In the fourth quarter of 2020, the Firm refined its approach for disclosing additional collateral held by the Firm that may be used as security when the fair value of the client’s exposure is in the Firm’s favor. Prior-period amounts have been revised to conform with the current presentation. (c)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans, which resulted in a corresponding reclassification of certain off-balance sheet commitments. Prior-period amounts have been revised to conform with the current presentation. (d)Represents loans held-for-sale, primarily related to syndicated loans and loans transferred from the retained portfolio, and loans at fair value. (e)These derivatives do not qualify for hedge accounting under U.S. GAAP. (f)The notional amounts are presented on a net basis by underlying reference entity and the ratings profile shown is based on the Firm’s internal risk 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. (g)The maturity profile of retained loans, lending-related commitments and derivative receivables is generally correspondbased on remaining contractual maturity. Derivative contracts that are in a receivable position at December 31, 2020, may become payable prior to the ratings assigned by S&P and Moody’s. For additional informationmaturity based on wholesale loan portfolio risk ratings, refer to Note 12.their cash flow profile or changes in market conditions. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wholesale credit exposure – maturity and ratings profile | | | | | | | | | Maturity profile(d) | | Ratings profile | | | | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years | Total | | Investment-grade | | Noninvestment-grade | | Total | Total % of IG | December 31, 2018 (in millions, except ratios) | | AAA/Aaa to BBB-/Baa3 | | BB+/Ba1 & below | | Loans retained | $ | 138,458 |
| $ | 196,974 |
| $ | 103,730 |
| $ | 439,162 |
| | $ | 339,729 |
| | $ | 99,433 |
| | $ | 439,162 |
| 77 | % | Derivative receivables | | | | 54,213 |
| | | | | | 54,213 |
| | Less: Liquid securities and other cash collateral held against derivatives | | | | (15,322 | ) | | | | | | (15,322 | ) | | Total derivative receivables, net of all collateral | 11,038 |
| 9,169 |
| 18,684 |
| 38,891 |
| | 31,794 |
| | 7,097 |
| | 38,891 |
| 82 |
| Lending-related commitments | 79,400 |
| 294,855 |
| 13,558 |
| 387,813 |
| | 288,724 |
| | 99,089 |
| | 387,813 |
| 74 |
| Subtotal | 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) | | | | 15,028 |
| | | | | | 15,028 |
| | Receivables from customers and other | | | | 30,063 |
| | | | | | 30,063 |
| | Total exposure – net of liquid securities and other cash collateral held against derivatives | | | | $ | 910,957 |
| | | | | | $ | 910,957 |
| | Credit derivatives used in credit portfolio management activities(b)(c) | $ | (447 | ) | $ | (9,318 | ) | $ | (2,917 | ) | $ | (12,682 | ) | | $ | (11,213 | ) | | $ | (1,469 | ) | | $ | (12,682 | ) | 88 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturity profile(d) | | Ratings profile | | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years | Total | | Investment-grade | | Noninvestment-grade | | Total | Total % of IG | December 31, 2017 (in millions, except ratios) | | AAA/Aaa to BBB-/Baa3 | | BB+/Ba1 & below | | Loans retained | $ | 121,643 |
| $ | 177,033 |
| $ | 104,222 |
| $ | 402,898 |
| | $ | 311,681 |
| | $ | 91,217 |
| | $ | 402,898 |
| 77 | % | Derivative receivables | | | | 56,523 |
| | | | | | 56,523 |
| | Less: Liquid securities and other cash collateral held against derivatives | | | | (16,108 | ) | | | | | | (16,108 | ) | | Total derivative receivables, net of all collateral | 9,882 |
| 10,463 |
| 20,070 |
| 40,415 |
| | 32,373 |
| | 8,042 |
| | 40,415 |
| 80 |
| Lending-related commitments | 80,273 |
| 275,317 |
| 14,508 |
| 370,098 |
| | 274,127 |
| | 95,971 |
| | 370,098 |
| 74 |
| Subtotal | 211,798 |
| 462,813 |
| 138,800 |
| 813,411 |
| | 618,181 |
| | 195,230 |
| | 813,411 |
| 76 |
| Loans held-for-sale and loans at fair value(a) | | | | 5,607 |
| | | | | | 5,607 |
| | Receivables from customers and other | | | | 26,139 |
| | | | | | 26,139 |
| | Total exposure – net of liquid securities and other cash collateral held against derivatives | | | | $ | 845,157 |
| | | | | | $ | 845,157 |
| | 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 | % |
| | (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, 2018, 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 totalTotal criticized component of the portfolio,exposure excluding loans held-for-sale and loans at fair value, was $12.1$41.6 billion at December 31, 2018,2020, compared with $15.6$15.1 billion at December 31, 2017.2019, representing approximately 4.0% and 1.5% of total wholesale credit exposure, respectively. The decreaseincrease in total criticized exposure was largely driven by downgrades in Consumer & Retail, Oil & Gas including credit quality improvementsand Real Estate due to impacts from the COVID-19 pandemic, and to a lesser extent, net portfolio activity in Technology, Media & Telecommunications. Predominantly all of the portfolio,$41.6 billion was performing and a loan sale in the first quarter of 2018.largely undrawn.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 113123 |
Management’s discussion and analysis
Below are summaries ofThe table below summarizes by industry the Firm’s exposures as of December 31, 20182020 and 2017.2019. The industry of risk category is generally based on the client or counterparty’s primary business activity. ForRefer to Note 4 for additional information on industry concentrations, refer to Note 4.concentrations.
As a result of continued growth and the relative size of the portfolio, exposure to “Individuals,” which was previously disclosed in “All Other,” is now separately disclosed | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wholesale credit exposure – industries(a) | | | | | | | | Selected metrics | | | | | | | 30 days or more past due and accruing loans(h) | Net charge-offs/ (recoveries) | Credit derivative hedges(i) | Liquid securities and other cash collateral held against derivative receivables(k) | | | | Noninvestment-grade | | Credit exposure(f)(g) | Investment- grade(g) | Noncriticized(g) | Criticized performing | Criticized nonperforming | As of or for the year ended December 31, 2020 (in millions) | Real Estate | $ | 148,498 | | $ | 116,124 | | $ | 27,576 | | $ | 4,294 | | $ | 504 | | $ | 374 | | $ | 94 | | $ | (110) | | $ | — | | Individuals and Individual Entities(b) | 122,870 | | 107,266 | | 14,688 | | 227 | | 689 | | 1,570 | | (17) | | — | | — | | Consumer & Retail | 108,437 | | 57,580 | | 41,624 | | 8,852 | | 381 | | 203 | | 55 | | (381) | | (5) | | Technology, Media & Telecommunications | 72,150 | | 36,435 | | 27,770 | | 7,738 | | 207 | | 10 | | 73 | | (934) | | (56) | | Asset Managers | 66,573 | | 57,582 | | 8,885 | | 85 | | 21 | | 19 | | 1 | | — | | (4,685) | | Industrials | 66,470 | | 37,512 | | 26,881 | | 1,852 | | 225 | | 278 | | 70 | | (658) | | (61) | | Healthcare | 60,118 | | 44,901 | | 13,356 | | 1,684 | | 177 | | 96 | | 104 | | (378) | | (191) | | Banks & Finance Cos | 54,032 | | 35,115 | | 17,820 | | 1,045 | | 52 | | 20 | | 13 | | (555) | | (1,648) | | Automotive | 43,331 | | 25,548 | | 15,575 | | 2,149 | | 59 | | 152 | | 22 | | (434) | | — | | Oil & Gas | 39,159 | | 18,456 | | 14,969 | | 4,952 | | 782 | | 11 | | 249 | | (238) | | (4) | | State & Municipal Govt(c) | 38,286 | | 37,705 | | 574 | | 2 | | 5 | | 41 | | — | | — | | (41) | | Utilities | 30,124 | | 22,451 | | 7,048 | | 571 | | 54 | | 14 | | (7) | | (402) | | (1) | | Chemicals & Plastics | 17,176 | | 10,622 | | 5,703 | | 822 | | 29 | | 6 | | — | | (83) | | — | | Central Govt | 17,025 | | 16,652 | | 373 | | — | | — | | — | | — | | (8,364) | | (982) | | Transportation | 16,232 | | 7,549 | | 6,340 | | 2,137 | | 206 | | 30 | | 117 | | (83) | | (26) | | Metals & Mining | 15,542 | | 5,958 | | 8,699 | | 704 | | 181 | | 8 | | 16 | | (141) | | (13) | | Insurance | 13,141 | | 10,177 | | 2,960 | | 3 | | 1 | | 7 | | — | | — | | (1,771) | | Securities Firms | 8,048 | | 6,116 | | 1,927 | | 1 | | 4 | | — | | 18 | | (49) | | (3,423) | | Financial Markets Infrastructure | 6,515 | | 6,449 | | 66 | | — | | — | | — | | — | | — | | (10) | | All other(d) | 100,713 | | 84,650 | | 15,185 | | 504 | | 374 | | 83 | | (9) | | (9,429) | | (1,889) | | Subtotal | $ | 1,044,440 | | $ | 744,848 | | $ | 258,019 | | $ | 37,622 | | $ | 3,951 | | $ | 2,922 | | $ | 799 | | $ | (22,239) | | $ | (14,806) | | Loans held-for-sale and loans at fair value | 35,111 | | | | | | | | | | Receivables from customers | 47,710 | | | | | | | | | | Total(e) | $ | 1,127,261 | | | | | | | | | |
| | | | | | | | | 124 | | JPMorgan Chase & Co./2020 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Selected metrics | | | | | | | 30 days or more past due and accruing loans | Net charge-offs/ (recoveries) | Credit derivative hedges(i) | | Liquid securities and other cash collateral held against derivative receivables(k) | | | | Noninvestment-grade | | | Credit exposure(f)(g) | Investment- grade(g) | Noncriticized(g) | Criticized performing | Criticized nonperforming | | As of or for the year ended December 31, 2019 (in millions) | | Real Estate | $ | 150,919 | | $ | 121,625 | | $ | 27,779 | | $ | 1,457 | | $ | 58 | | $ | 104 | | $ | 13 | | $ | (100) | | | $ | — | | Individuals and Individual Entities(b) | 105,027 | | 93,181 | | 11,617 | | 192 | | 37 | | 388 | | 33 | | — | | | (287) | | Consumer & Retail | 106,986 | | 58,704 | | 45,806 | | 2,261 | | 215 | | 118 | | 124 | | (235) | | | (5) | | Technology, Media & Telecommunications | 60,033 | | 35,878 | | 21,066 | | 2,953 | | 136 | | 27 | | 27 | | (658) | | | (13) | | Asset Managers | 54,304 | | 47,569 | | 6,716 | | 6 | | 13 | | 18 | | — | | — | | | (4,410) | | Industrials | 62,483 | | 39,434 | | 21,673 | | 1,157 | | 219 | | 172 | | 48 | | (746) | | | (1) | | Healthcare | 50,824 | | 36,988 | | 12,544 | | 1,141 | | 151 | | 108 | | 14 | | (405) | | | (144) | | Banks & Finance Cos | 50,786 | | 34,941 | | 15,031 | | 808 | | 6 | | — | | — | | (834) | | | (1,419) | | Automotive | 35,118 | | 24,255 | | 10,246 | | 615 | | 2 | | 8 | | 1 | | (194) | | | — | | Oil & Gas | 41,641 | | 22,244 | | 17,823 | | 995 | | 579 | | — | | 98 | | (429) | | | (6) | | State & Municipal Govt(c) | 30,095 | | 29,586 | | 509 | | — | | — | | 33 | | 7 | | — | | | (16) | | Utilities | 34,843 | | 22,213 | | 12,316 | | 301 | | 13 | | 2 | | 39 | | (414) | | | (34) | | Chemicals & Plastics | 17,499 | | 12,033 | | 5,243 | | 221 | | 2 | | 5 | | — | | (10) | | | (13) | | Central Govt | 14,865 | | 14,524 | | 341 | | — | | — | | — | | — | | (9,018) | | | (850) | | Transportation | 14,497 | | 8,734 | | 5,336 | | 353 | | 74 | | 30 | | 8 | | (37) | | | (37) | | Metals & Mining | 15,586 | | 7,095 | | 7,789 | | 661 | | 41 | | 2 | | (1) | | (33) | | | (2) | | Insurance | 12,348 | | 9,458 | | 2,867 | | 19 | | 4 | | 3 | | — | | (36) | | | (1,790) | | Securities Firms | 7,381 | | 6,010 | | 1,344 | | 27 | | — | | — | | — | | (48) | | | (3,088) | | Financial Markets Infrastructure | 4,121 | | 3,969 | | 152 | | — | | — | | — | | — | | — | | | (4) | | All other(d) | 79,598 | | 73,453 | | 5,722 | | 412 | | 11 | | 4 | | 4 | | (5,333) | | (j) | (933) | | Subtotal | $ | 948,954 | | $ | 701,894 | | $ | 231,920 | | $ | 13,579 | | $ | 1,561 | | $ | 1,022 | | $ | 415 | | $ | (18,530) | | | $ | (13,052) | | Loans held-for-sale and loans at fair value | 29,201 | | | | | | | | | | | Receivables from customers | 33,706 | | | | | | | | | | | Total(e) | $ | 1,011,861 | | | | | | | | | | |
(a)The industry rankings presented in the table below as “Individualsof December 31, 2019, are based on the industry rankings of the corresponding exposures at December 31, 2020, not actual rankings of such exposures at December 31, 2019. (b)Individuals and Individual Entities.” This categoryEntities predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies and personal and testamentary trusts. Predominantly all (c)In addition to the credit risk exposure to states and municipal governments (both U.S. and non-U.S.) at December 31, 2020 and 2019, noted above, the Firm held: $7.2 billion and $6.5 billion, respectively, of thistrading assets; $20.4 billion and $29.8 billion, respectively, of AFS securities; and $12.8 billion and $4.8 billion, respectively, of HTM securities, issued by U.S. state and municipal governments. Refer to Note 2 and Note 10 for further information. (d)All other includes: SPEs and Private education and civic organizations, representing approximately 92% and 8%, respectively, at December 31, 2020 and 90% and 10%, respectively, at December 31, 2019 . (e)Excludes cash placed with banks of $516.9 billion and $254.0 billion, at December 31, 2020 and 2019, respectively, which is predominantly placed with various central banks, primarily Federal Reserve Banks. (f)Credit exposure is secured, largely bynet 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 and marketable securities. collateral held against derivative receivables. (g)In the table below, prior periodthird quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans, which resulted in a corresponding reclassification of certain off-balance sheet commitments. Prior-period amounts have been revised to conform with the current period presentation. (h)Generally excludes loans under payment deferral programs offered in response to the COVID-19 pandemic. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wholesale credit exposure – industries(a) | | | | | | | | Selected metrics | | | | | | | 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 | | Credit exposure(f) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | As of or for the year ended December 31, 2018 (in millions) | Real Estate | $ | 143,316 |
| $ | 117,988 |
| $ | 24,174 |
| $ | 1,019 |
| $ | 135 |
| $ | 70 |
| $ | (20 | ) | $ | (2 | ) | $ | (1 | ) | Individuals and Individual Entities(b) | 97,077 |
| 86,581 |
| 10,164 |
| 174 |
| 158 |
| 703 |
| 12 |
| — |
| (915 | ) | Consumer & Retail | 94,815 |
| 60,678 |
| 31,901 |
| 2,033 |
| 203 |
| 43 |
| 55 |
| (248 | ) | (14 | ) | Technology, Media & Telecommunications | 72,646 |
| 46,334 |
| 24,081 |
| 2,170 |
| 61 |
| 8 |
| 12 |
| (1,011 | ) | (12 | ) | Industrials | 58,528 |
| 38,487 |
| 18,594 |
| 1,311 |
| 136 |
| 171 |
| 20 |
| (207 | ) | (29 | ) | Banks & Finance Cos | 49,920 |
| 34,120 |
| 15,496 |
| 299 |
| 5 |
| 11 |
| — |
| (575 | ) | (2,290 | ) | Healthcare | 48,142 |
| 36,687 |
| 10,625 |
| 761 |
| 69 |
| 23 |
| (5 | ) | (150 | ) | (133 | ) | Asset Managers | 42,807 |
| 36,722 |
| 6,067 |
| 4 |
| 14 |
| 10 |
| — |
| — |
| (5,829 | ) | Oil & Gas | 42,600 |
| 23,356 |
| 17,451 |
| 1,158 |
| 635 |
| 6 |
| 36 |
| (248 | ) | — |
| Utilities | 28,172 |
| 23,558 |
| 4,326 |
| 138 |
| 150 |
| — |
| 38 |
| (142 | ) | (60 | ) | State & Municipal Govt(c) | 27,351 |
| 26,746 |
| 603 |
| 2 |
| — |
| 18 |
| (1 | ) | — |
| (42 | ) | Central Govt | 18,456 |
| 18,251 |
| 124 |
| 81 |
| — |
| 4 |
| — |
| (7,994 | ) | (2,130 | ) | Automotive | 17,339 |
| 9,637 |
| 7,310 |
| 392 |
| — |
| 1 |
| — |
| (125 | ) | — |
| Chemicals & Plastics | 16,035 |
| 11,490 |
| 4,427 |
| 118 |
| — |
| 4 |
| — |
| — |
| — |
| Transportation | 15,660 |
| 10,508 |
| 4,699 |
| 393 |
| 60 |
| 21 |
| 6 |
| (31 | ) | (112 | ) | Metals & Mining | 15,359 |
| 8,188 |
| 6,767 |
| 385 |
| 19 |
| 1 |
| — |
| (174 | ) | (22 | ) | Insurance | 12,639 |
| 9,777 |
| 2,830 |
| — |
| 32 |
| — |
| — |
| (36 | ) | (2,080 | ) | Financial Markets Infrastructure | 7,484 |
| 6,746 |
| 738 |
| — |
| — |
| — |
| — |
| — |
| (26 | ) | Securities Firms | 4,558 |
| 3,099 |
| 1,459 |
| — |
| — |
| — |
| — |
| (158 | ) | (823 | ) | All other(d) | 68,284 |
| 64,664 |
| 3,606 |
| 12 |
| 2 |
| 2 |
| 2 |
| (1,581 | ) | (804 | ) | Subtotal | $ | 881,188 |
| $ | 673,617 |
| $ | 195,442 |
| $ | 10,450 |
| $ | 1,679 |
| $ | 1,096 |
| $ | 155 |
| $ | (12,682 | ) | $ | (15,322 | ) | Loans held-for-sale and loans at fair value | 15,028 |
| | | | | | | | | Receivables from customers and other | 30,063 |
| | | | | | | | | Total(e) | $ | 926,279 |
| | | | | | | | |
(i)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.
(j)Prior-period amount has been revised to conform with the current presentation.
(k)In the fourth quarter of 2020, the Firm refined its approach for disclosing additional collateral held by the Firm that may be used as security when the fair value of the client’s exposure is in the Firm’s favor. Prior-period amounts have been revised to conform with the current presentation.
| | | | | | | | | 114 | | JPMorgan Chase & Co./20182020 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Selected metrics | | | | | | | 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 | | Credit exposure(f) | Investment- grade | Noncriticized | Criticized performing | Criticized nonperforming | As of or for the year ended December 31, 2017 (in millions) | Real Estate | $ | 139,409 |
| $ | 115,401 |
| $ | 23,012 |
| $ | 859 |
| $ | 137 |
| $ | 254 |
| $ | (4 | ) | $ | — |
| $ | (2 | ) | Individuals and Individual Entities(b) | 87,371 |
| 77,029 |
| 10,024 |
| 80 |
| 238 |
| 899 |
| 10 |
| — |
| (762 | ) | Consumer & Retail | 87,679 |
| 55,737 |
| 29,619 |
| 1,791 |
| 532 |
| 30 |
| 34 |
| (275 | ) | (9 | ) | Technology, Media & Telecommunications | 59,274 |
| 36,510 |
| 20,453 |
| 2,258 |
| 53 |
| 14 |
| (12 | ) | (910 | ) | (19 | ) | Industrials | 55,272 |
| 37,198 |
| 16,770 |
| 1,159 |
| 145 |
| 150 |
| (1 | ) | (196 | ) | (21 | ) | Banks & Finance Cos | 49,037 |
| 34,654 |
| 13,767 |
| 612 |
| 4 |
| 1 |
| 6 |
| (1,216 | ) | (3,174 | ) | Healthcare | 55,997 |
| 42,643 |
| 12,731 |
| 585 |
| 38 |
| 82 |
| (1 | ) | — |
| (207 | ) | Asset Managers | 32,531 |
| 28,029 |
| 4,484 |
| 4 |
| 14 |
| 27 |
| — |
| — |
| (5,290 | ) | Oil & Gas | 41,317 |
| 21,430 |
| 14,854 |
| 4,046 |
| 987 |
| 22 |
| 71 |
| (747 | ) | (1 | ) | Utilities | 29,317 |
| 24,486 |
| 4,383 |
| 227 |
| 221 |
| — |
| 11 |
| (160 | ) | (56 | ) | State & Municipal Govt(c) | 28,633 |
| 27,977 |
| 656 |
| — |
| — |
| 12 |
| 5 |
| (130 | ) | (524 | ) | Central Govt | 19,182 |
| 18,741 |
| 376 |
| 65 |
| — |
| 4 |
| — |
| (10,095 | ) | (2,520 | ) | Automotive | 14,820 |
| 9,321 |
| 5,278 |
| 221 |
| — |
| 10 |
| 1 |
| (284 | ) | — |
| Chemicals & Plastics | 15,945 |
| 11,107 |
| 4,764 |
| 74 |
| — |
| 4 |
| — |
| — |
| — |
| Transportation | 15,797 |
| 9,870 |
| 5,302 |
| 527 |
| 98 |
| 9 |
| 14 |
| (32 | ) | (131 | ) | Metals & Mining | 14,171 |
| 6,989 |
| 6,822 |
| 321 |
| 39 |
| 3 |
| (13 | ) | (316 | ) | (1 | ) | Insurance | 14,089 |
| 11,028 |
| 2,981 |
| — |
| 80 |
| 1 |
| — |
| (157 | ) | (2,195 | ) | Financial Markets Infrastructure | 5,036 |
| 4,775 |
| 261 |
| — |
| — |
| — |
| — |
| — |
| (23 | ) | Securities Firms | 4,113 |
| 2,559 |
| 1,553 |
| 1 |
| — |
| — |
| — |
| (274 | ) | (335 | ) | All other(d) | 60,529 |
| 57,081 |
| 3,259 |
| 180 |
| 9 |
| 2 |
| (2 | ) | (2,817 | ) | (838 | ) | Subtotal | $ | 829,519 |
| $ | 632,565 |
| $ | 181,349 |
| $ | 13,010 |
| $ | 2,595 |
| $ | 1,524 |
| $ | 119 |
| $ | (17,609 | ) | $ | (16,108 | ) | Loans held-for-sale and loans at fair value | 5,607 |
| | | | | | | | | Receivables from customers and other | 26,139 |
| | | | | | | | | Total(e) | $ | 861,265 |
| | | | | | | | |
| | (a) | The industry rankings presented in the table as of December 31, 2017, are based on the industry rankings of the corresponding exposures at December 31, 2018, not actual rankings of such exposures at December 31, 2017.
|
| | (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, 2018 and 2017, noted above, the Firm held: $7.8 billion and $9.8 billion, respectively, of trading securities; $37.7 billion and $32.3 billion, respectively, of AFS securities; and $4.8 billion and $14.4 billion, respectively, of held-to-maturity (“HTM”) securities, issued by U.S. state and municipal governments. For further information, refer to Note 2 and Note 10. |
| | (d) | All other includes: SPEs and Private education and civic organizations, representing approximately 92% and 8%, respectively, at December 31, 2018 and 90% and 10%, respectively, at December 31, 2017. |
| | (e) | Excludes cash placed with banks of $268.1 billion and $421.0 billion, at December 31, 2018 and 2017, respectively, which is predominantly placed with various central banks, primarily Federal Reserve Banks. |
| | (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. |
| | (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. |
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 115125 |
Management’s discussion and analysis
Real Estate
Presented below is additional informationdetail on certain of the Firm’s largest industry exposures and/or certain industries which present potential heightened credit concerns. Real Estate industry to which the Firm has significant exposure. Real Estate exposure increased $3.9was $148.5 billion to $143.3as of December 31, 2020, of which $85.6 billion duringwas multifamily lending as shown in the table below. During the year ended December 31, 2018, while 2020, the following changes were primarily driven by impacts from the COVID-19 pandemic: •the investment-grade portion of the Real Estate portfolio decreased from 81% to 78%. •the drawn percentage of thethis portfolio remained relatively flat at 82%. For further information on increased from 78% to 80% •criticized exposure increased by $3.3 billion from $1.5 billion to $4.8 billion
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | (in millions, except ratios) | Loans and Lending-related Commitments(d) | | Derivative Receivables | | Credit exposure | | % Investment-grade | % Drawn(e) | Multifamily(a) | $ | 85,368 | | | $ | 183 | | | $ | 85,551 | | | 85 | % | | 92 | % | | Office | 16,372 | | | 475 | | | 16,847 | | | 76 | | | 70 | | | Other Income Producing Properties(b) | 13,435 | | | 421 | | | 13,856 | | | 76 | | | 55 | | | Retail | 10,573 | | | 199 | | | 10,772 | | | 60 | | | 69 | | | Services and Non Income Producing | 9,242 | | | 22 | | | 9,264 | | | 62 | | | 47 | | | Industrial | 9,039 | | | 69 | | | 9,108 | | | 76 | | | 73 | | | Lodging | 3,084 | | | 16 | | | 3,100 | | | 24 | | | 57 | | | Total Real Estate Exposure(c) | 147,113 | | | 1,385 | | | 148,498 | | | 78 | | | 80 | | | | | | | | | | | | | | | December 31, 2019 | | (in millions, except ratios) | Loans and Lending-related Commitments(d) | | Derivative Receivables | | Credit exposure | | % Investment- grade | % Drawn(e) | Multifamily(a) | $ | 86,381 | | | $ | 58 | | | $ | 86,439 | | | 91 | % | | 92 | % | | Office | 15,734 | | | 231 | | | 15,965 | | | 80 | | | 70 | | | Other Income Producing Properties(b) | 14,372 | | | 181 | | | 14,553 | | | 48 | | | 45 | | | Retail | 11,347 | | | 87 | | | 11,434 | | | 83 | | | 68 | | | Services and Non Income Producing | 9,922 | | | 19 | | | 9,941 | | | 57 | | | 47 | | | Industrial | 8,842 | | | 24 | | | 8,866 | | | 74 | | | 75 | | | Lodging | 3,702 | | | 19 | | | 3,721 | | | 51 | | | 38 | | | Total Real Estate Exposure | 150,300 | | | 619 | | | 150,919 | | | 81 | | | 78 | | |
(a)Multifamily exposure is largely in California. (b)Other Income Producing Properties consists of clients with diversified property types or other property types outside of multifamily, office, retail, industrial and lodging with less material exposures. (c)Real Estate exposure is approximately 80% secured; unsecured exposure is approximately 78% investment-grade. (d)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans, referwhich resulted in a corresponding reclassification of certain off-balance sheet commitments. Prior-period amounts have been revised to Note 12.conform with the current presentation. (e)Represents drawn exposure as a percentage of credit exposure.
| | | | | | | | | | | | | | | | | | | | | December 31, 2018 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment-grade | % Drawn(c) | Multifamily(a) | $ | 85,683 |
| | $ | 33 |
| | $ | 85,716 |
| | 89 | % | | 92 | % | | Other | 57,469 |
| | 131 |
| | 57,600 |
| | 72 |
| | 63 |
| | Total Real Estate Exposure(b) | 143,152 |
| | 164 |
| | 143,316 |
| | 82 |
| | 81 |
| | | | | | | | | | | | | | December 31, 2017 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment- grade | % Drawn(c) | Multifamily(a) | $ | 84,635 |
| | $ | 34 |
| | $ | 84,669 |
| | 89 | % | | 92 | % | | Other | 54,620 |
| | 120 |
| | 54,740 |
| | 74 |
| | 66 |
| | Total Real Estate Exposure(b) | 139,255 |
| | 154 |
| | 139,409 |
| | 83 |
| | 82 |
| |
| | | | | | | | | (a)126 | Multifamily exposure is largely in California. | JPMorgan Chase & Co./2020 Form 10-K |
Consumer & Retail Consumer & Retail exposure was $108.4 billion as of December 31, 2020, and predominantly included Retail, Food and Beverage, and Business and Consumer Services as shown in the table below. During the year ended December 31, 2020, the following changes were primarily driven by impacts from the COVID-19 pandemic: •the investment-grade portion of the Consumer & Retail portfolio decreased from 55% to 53% •the drawn percentage of this portfolio increased from 35% to 36% •criticized exposure increased by $6.7 billion from $2.5 billion to $9.2 billion | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment-grade | % Drawn(d) | Retail(a) | $ | 32,486 | | | $ | 887 | | | $ | 33,373 | | | 52 | % | | 33 | % | | Food and Beverage | 28,012 | | | 897 | | | 28,909 | | | 62 | | | 33 | | | Business and Consumer Services | 24,760 | | | 599 | | | 25,359 | | | 52 | | | 41 | | | Consumer Hard Goods | 12,937 | | | 178 | | | 13,115 | | | 59 | | | 36 | | | Leisure(b) | 7,440 | | | 241 | | | 7,681 | | | 18 | | | 43 | | | Total Consumer & Retail(c) | 105,635 | | | 2,802 | | | 108,437 | | | 53 | | | 36 | | | | | | | | | | | | | | | December 31, 2019 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment- grade | % Drawn(d) | Retail(a) | $ | 29,290 | | | $ | 294 | | | $ | 29,584 | | | 54 | % | | 37 | % | | Food and Beverage | 27,956 | | | 625 | | | 28,581 | | | 67 | | | 36 | | | Business and Consumer Services | 24,242 | | | 249 | | | 24,491 | | | 51 | | | 37 | | | Consumer Hard Goods | 13,144 | | | 109 | | | 13,253 | | | 65 | | | 35 | | | Leisure(b) | 10,930 | | | 147 | | | 11,077 | | | 21 | | | 19 | | | Total Consumer & Retail | 105,562 | | | 1,424 | | | 106,986 | | | 55 | | | 35 | | |
(a)Retail consists of Home Improvement & Specialty Retailers, Restaurants, Supermarkets, Discount & Drug Stores, Specialty Apparel and Department Stores. (b)Leisure consists of Gaming, Arts & Culture, Travel Services and Sports & Recreation. As of December 31, 2020 approximately 75% of the noninvestment-grade Leisure portfolio is secured. (c)Approximately 80% of the noninvestment-grade portfolio is secured. (d)Represents drawn exposure as a percent of credit exposure. Oil & Gas Oil & Gas exposure was $39.2 billion as of December 31, 2020, including $19.3 billion of Exploration & Production and Oil field Services as shown in the table below. During the year ended December 31, 2020, the following changes were driven by lower oil prices and impacts from the COVID-19 pandemic: •the investment-grade portion of the Oil & Gas portfolio decreased from 53% to 47% •criticized exposure increased by $4.1 billion from $1.6 billion to $5.7 billion | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment-grade | % Drawn(c) | Exploration & Production ("E&P") and Oil field Services | $ | 18,228 | | | $ | 1,048 | | | $ | 19,276 | | | 32 | % | | 37 | % | | Other Oil & Gas(a) | 19,288 | | | 595 | | | 19,883 | | | 62 | | | 21 | | | Total Oil & Gas(b) | 37,516 | | | 1,643 | | | 39,159 | | | 47 | | | 29 | | | | | | | | | | | | | | | December 31, 2019 | | (in millions, except ratios) | Loans and Lending-related Commitments | | Derivative Receivables | | Credit exposure | | % Investment- grade | % Drawn(c) | Exploration & Production ("E&P") and Oil field Services | $ | 22,543 | | | $ | 646 | | | $ | 23,189 | | | 38 | % | | 38 | % | | Other Oil & Gas(a) | 18,246 | | | 206 | | | 18,452 | | | 73 | | | 23 | | | Total Oil & Gas(b) | 40,789 | | | 852 | | | 41,641 | | | 53 | | | 31 | | |
(a)Other Oil & Gas includes Integrated Oil & Gas companies, Midstream/Oil Pipeline companies and refineries. (b)Secured lending was $13.2 billion and $15.7 billion at December 31, 2020 and 2019, respectively, approximately half of which is reserve-based lending to the Exploration & Production sub-sector; unsecured exposure is largely investment-grade. (c)Represents drawn exposure as a percent of credit exposure. | | | | | | | | | (b)JPMorgan Chase & Co./2020 Form 10-K | Real Estate exposure is predominantly secured; unsecured exposure is predominantly investment-grade. | 127 |
| | (c) | Represents drawn exposure as a percentage of credit exposure. |
Management’s discussion and analysis
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, refer to Note 12.indicators. The following table presents the change in the nonaccrual loan portfolio for the years ended December 31, 20182020 and 2017.2019. The increase was driven by downgrades across multiple industries on client credit deterioration, with the largest concentration in Real Estate, predominantly within retail and lodging. | | | | | | | | | | | | Wholesale nonaccrual loan activity | | | Year ended December 31, (in millions) | | 2020 | 2019 | Beginning balance | | $ | 1,271 | | $ | 1,587 | | Additions(a) | | 6,753 | | 2,552 | | Reductions: | | | | Paydowns and other | | 2,290 | | 1,585 | | Gross charge-offs | | 922 | | 425 | | Returned to performing status | | 569 | | 652 | | Sales | | 137 | | 206 | | Total reductions | | 3,918 | | 2,868 | | Net changes | | 2,835 | | (316) | | Ending balance | | $ | 4,106 | | $ | 1,271 | |
(a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans. Prior-period amounts have been revised to conform with the current presentation. | | | | | | | | | Wholesale nonaccrual loan activity | | | Year ended December 31, (in millions) | | 2018 | 2017 | Beginning balance | | $ | 1,734 |
| $ | 2,063 |
| Additions | | 1,188 |
| 1,482 |
| Reductions: | | | | Paydowns and other | | 692 |
| 1,137 |
| Gross charge-offs | | 299 |
| 200 |
| Returned to performing status | | 234 |
| 189 |
| Sales | | 327 |
| 285 |
| Total reductions | | 1,552 |
| 1,811 |
| Net changes | | (364 | ) | (329 | ) | Ending balance | | $ | 1,370 |
| $ | 1,734 |
|
The following table presents net charge-offs/recoveries, which are defined as gross charge-offs less recoveries, for the years ended December 31, 20182020 and 2017.2019. The amounts in the table below do not include gains or losses from sales of nonaccrual loans. | | Wholesale net charge-offs/(recoveries) | Wholesale net charge-offs/(recoveries) | Wholesale net charge-offs/(recoveries) | Year ended December 31, (in millions, except ratios) | 2018 | 2017 | Year ended December 31, (in millions, except ratios) | 2020 | 2019 | Loans – reported | | Loans – reported | | Average loans retained | $ | 416,828 |
| $ | 392,263 |
| Average loans retained | $ | 509,907 | | $ | 472,628 | | Gross charge-offs | 313 |
| 212 |
| Gross charge-offs | 954 | | 472 | | Gross recoveries | (158 | ) | (93 | ) | | Net charge-offs | 155 |
| 119 |
| | Net charge-off rate | 0.04 | % | 0.03 | % | | Gross recoveries collected | | Gross recoveries collected | (155) | | (57) | | Net charge-offs/(recoveries) | | Net charge-offs/(recoveries) | 799 | | 415 | | Net charge-off/(recovery) rate | | Net charge-off/(recovery) rate | 0.16 | % | 0.09 | % |
| | | | | | | | | 116128 | | JPMorgan Chase & Co./20182020 Form 10-K |
Lending-related commitments The Firm uses lending-related financial instruments, such as commitments (including revolving credit facilities) and guarantees, to address the financing needs of its clients. The contractual amounts of these financial instruments represent the maximum possible credit risk should the clients draw down on these commitments or when the Firm fulfillfulfills its obligations under these guarantees, and the clients subsequently fail to perform according to the terms of these contracts. Most of these commitments and guarantees arehave historically been refinanced, extended, cancelled, or expireexpired 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, refercommitments. Receivables from Customers Receivables from customers reflect held-for-investment margin loans to Note 27.brokerage clients in CIB, CCB 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). Because of this collateralization, no allowance for credit losses is generally 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 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 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, refer to Note 27.
services.
Derivative contracts Derivatives enable clients and counterparties to manage risks including credit risk and risks arising from fluctuations in interest rates, foreign exchange, equities, and 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 risk 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 generallycan also be exposed to the credit risk of the relevant CCP. Where possible, the Firm seeks to mitigate its credit risk exposures arising from derivative contracts through the use of legally enforceable master netting arrangements and collateral agreements. ForThe percentage of the Firm’s over-the-counter derivative 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 88% and 90% at December 31, 2020 and 2019, respectively. Refer to Note 5 for additional information on the Firm’s use of collateral agreements. Refer to Note 5 for a further discussion of derivative contracts, counterparties and settlement types, refer to Note 5.types. The following table summarizes the net derivative receivables for the periods presented.
| | | | | | | | Derivative receivables | | | December 31, (in millions) | 2018 | 2017 | Total, net of cash collateral | $ | 54,213 |
| $ | 56,523 |
| Liquid securities and other cash collateral held against derivative receivables(a) | (15,322 | ) | (16,108 | ) | Total, net of all collateral | $ | 38,891 |
| $ | 40,415 |
|
| | (a) | Includes collateral related to derivative instruments where appropriate legal opinions have not been either sought or obtained with respect to master netting agreements. |
The fair value of derivative receivables reported on the Consolidated balance sheets were $54.2$79.6 billion and $56.5$49.8 billion at December 31, 20182020 and 2017, respectively. 2019, respectively, with increases in CIB resulting from market movements. Derivative receivables represent the fair value of the derivative contracts after giving effect to legally enforceable master netting agreements and the related cash collateral held by the Firm. However,In addition, the Firm held liquid securities and other cash collateral that the Firm believes is legally enforceable and may be used as security when the fair value of the client’s exposure is in the Firm’s favor. Liquid securities represents high quality liquid assets as defined in the LCR rule. In management’s view, the appropriate measure of current credit risk should also take into consideration additionalother collateral, which generally represents securities that do not qualify as high quality liquid securities (primarily U.S. governmentassets under the LCR rule, but that the Firm believes is legally enforceable. The collateral amounts for each counterparty are limited to the net derivative receivables for the counterparty. The following tables summarize the net derivative receivables and agency securities and other groupthe internal ratings profile for the periods presented. | | | | | | | | | Derivative receivables | | | December 31, (in millions) | 2020 | 2019 | Total, net of cash collateral | $ | 79,630 | | $ | 49,766 | | Liquid securities and other cash collateral held against derivative receivables(a) | (14,806) | | (13,052) | | Total, net of liquid securities and other cash collateral | $ | 64,824 | | $ | 36,714 | | Other collateral held against derivative receivables(a) | (6,022) | | (1,837) | | Total, net of collateral | $ | 58,802 | | $ | 34,877 | |
(a)In the fourth quarter of seven nations (“G7”) government securities) and other cash2020, the Firm refined its approach for disclosing additional collateral held by the Firm aggregating $15.3 billion and $16.1 billion at December 31, 2018 and 2017, respectively, that may be used as security when the fair value of the client’s exposure is in the Firm’s favor. Prior-period amounts have been revised to conform with the current presentation.
| | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 129 |
Management’s discussion and analysis
| | | | | | | | | | | | | | | | | | Ratings profile of derivative receivables | | | | | | | 2020(a) | | 2019(a) | December 31, (in millions, except ratios) | Exposure net of collateral | % of exposure net of collateral | | Exposure net of collateral | % of exposure net of collateral | Investment-grade | $ | 37,013 | | 63 | % | | $ | 27,851 | | 80 | % | Noninvestment-grade | 21,789 | | 37 | | | 7,026 | | 20 | | | | | | | | | | | | | | | | | | | | Total | $ | 58,802 | | 100 | % | | $ | 34,877 | | 100 | % |
(a)In addition to the fourth quarter of 2020, the Firm refined its approach for disclosing additional collateral describedheld by the Firm that may be used as security when the fair value of the client’s exposure is in the preceding paragraph,Firm’s favor. Prior-period amounts have been revised to conform with the current presentation. The 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 contracts 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, refer to 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 (“AVG”). These measures all incorporate netting and collateral benefits, where applicable. Peak represents a conservative measure of potential derivative exposure, including the benefit of collateral, 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 contracts, senior management reporting and derivatives exposure management. DRE exposure is a measure that expresses the risk of derivative exposure, including the benefit of collateral, on a basis intended to be
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 117 |
Management’s discussion and analysis
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,exposure, including the benefit of collateral.collateral, at future time periods. AVG 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 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 impact of wrong-way risk, which is broadly defined as the potential for increased correlation between the Firm’srisk that exposure to a counterparty (AVG) andis 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 credit quality.capacity to meet its obligations is decreasing. 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 thata particular counterparty’s AVG. The Firm risk manages exposure to changes in CVA by entering into credit derivative contracts, as well as interest rate, foreign exchange, equity and commodity derivative 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, 20182020 (in billions)
The following table summarizes the ratings profile 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’s internal ratings, which generally correspond to the ratings as assigned by S&P and Moody’s.
| | | | | | | | | | | | | Ratings profile of derivative receivables | | | | | | Rating equivalent | 2018 | | 2017 | 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 | AAA/Aaa to AA-/Aa3 | $ | 11,831 |
| 31 | % | | $ | 11,529 |
| 29 | % | A+/A1 to A-/A3 | 7,428 |
| 19 |
| | 6,919 |
| 17 |
| BBB+/Baa1 to BBB-/Baa3 | 12,536 |
| 32 |
| | 13,925 |
| 34 |
| BB+/Ba1 to B-/B3 | 6,373 |
| 16 |
| | 7,397 |
| 18 |
| CCC+/Caa1 and below | 723 |
| 2 |
| | 645 |
| 2 |
| Total | $ | 38,891 |
| 100 | % | | $ | 40,415 |
| 100 | % |
As previously noted, the Firm uses collateral agreements to mitigate counterparty credit risk. The percentage of the Firm’s over-the-counter derivative 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% at both December 31, 2018, and December 31, 2017.
| | | | | | | | | 118130 | | JPMorgan Chase & Co./20182020 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, refer to 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 unfundedlending-related commitments) and derivatives counterparty exposure in the Firm’s wholesale businesses (collectively, “credit portfolio management” activities)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, refer to 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 inactivities.
| | | | | | | | | | | | Credit derivatives used in credit portfolio management activities | | Notional amount of protection purchased and sold(b) | December 31, (in millions) | 2020 | 2019 | Credit derivatives used to manage: | | | | Loans and lending-related commitments | $ | 3,877 | | | $ | 2,047 | | Derivative receivables (a) | 18,362 | | | 16,483 | | Credit derivatives used in credit portfolio management activities | $ | 22,239 | | | $ | 18,530 | |
(a)Prior-period amount has been revised to conform with the current presentation. (b)Amounts are presented net, considering the Firm’s capacity as a market-maker in credit derivatives, refernet protection purchased or sold with respect to Credit derivatives in Note 5.each underlying reference entity or index. | | | | | | | | | Credit derivatives used in credit portfolio management activities | | Notional amount of protection purchased and sold (a) | December 31, (in millions) | 2018 | 2017 | Credit derivatives used to manage: | | | | Loans and lending-related commitments | $ | 1,272 |
| | $ | 1,867 |
| Derivative receivables | 11,410 |
| | 15,742 |
| Credit derivatives used in credit portfolio management activities | $ | 12,682 |
| | $ | 17,609 |
|
| | (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.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 119 |
Management’s discussion and analysis
| | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 131 |
Management’s discussion and analysis
| | | | | | | | | | | | | | | ALLOWANCE FOR CREDIT LOSSES |
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. The adoption of this guidance established a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. This framework requires that management’s estimate reflects credit losses over the instrument’s remaining expected life and considers expected future changes in macroeconomic conditions. Refer to Note 1 for further information. The Firm’s allowance for credit losses comprises: •the allowance for loan losses, which covers the Firm’s retained consumer and wholesale loan portfolios as well as the Firm’s wholesale(scored and certain consumer lending-related commitments. For further informationrisk-rated) and is presented separately on the components of Consolidated balance sheets,
•the allowance for lending-related commitments, which is presented on the Consolidated balance sheets in accounts payable and other liabilities, and •the allowance for credit losses on investment securities, which covers the Firm’s HTM and AFS securities and is recognized within Investment Securities on the Consolidated balance sheets. The allowance for credit losses increased compared with December 31, 2019, primarily reflecting the deterioration and uncertainty in the macroeconomic environment, in particular in the first half of 2020, as a result of the impact of the COVID-19 pandemic, consisting of: •a net $7.4 billion addition in consumer, predominantly in the credit card portfolio, and •a net $4.7 billion addition in wholesale, across the LOBs, impacting multiple industries. The adoption of CECL on January 1, 2020, resulted in a $4.3 billion addition to the allowance for credit losses. Discussion of changes in the allowance during 2020 The increase in the allowance for loan losses and lending-related commitments was primarily driven by an increase in the provision for credit losses, reflecting the deterioration in and uncertainty around the future macroeconomic environment as a result of the impact of the COVID-19 pandemic. As of December 31, 2020, the Firm’s central case reflected U.S. unemployment rates of approximately 7% through the second quarter of 2021 and remaining above 5% until the second half of 2022. This compared with relatively low levels of unemployment of approximately 4% throughout 2020 and 2021 in the Firm’s January 1, 2020 central case. Further, while the Firm’s January 1, 2020 central case U.S. GDP forecast reflected a 1.7% expansion in 2020, actual U.S. GDP contracted approximately 2.5% in 2020. As of December 31, 2020, the Firm’s central case assumptions reflect a return to pre-pandemic GDP levels in the fourth quarter of 2021. Due to elevated uncertainty in the near term outlook, driven by the potential for increased infection rates and related managementlock downs resulting from the pandemic, as well as the prospect that government and other consumer relief measures set to expire may not be extended, the Firm has placed significant weighting on its adverse scenarios. These scenarios incorporate more punitive macroeconomic factors than the central case assumptions, resulting in weighted average U.S. unemployment rates remaining elevated throughout 2021 and 2022, ending the fourth quarter of 2022 at approximately 6%, and in U.S. GDP ending 2022 approximately 0.9% higher than fourth quarter 2019 actual pre-pandemic levels. The Firm’s central case assumptions reflected U.S. unemployment rates and U.S. real GDP as follows: | | | | | | | | | | | | | Assumptions at January 1, 2020 | | 2Q20 | 4Q20(b) | 2Q21 | U.S. unemployment rate(a) | 3.7 | % | 3.8 | % | 4.0 | % | Cumulative change in U.S. real GDP from 12/31/2019 | 0.9 | % | 1.7 | % | 2.4 | % |
| | | | | | | | | | | | | Assumptions at December 31, 2020 | | 2Q21 | 4Q21 | 2Q22 | U.S. unemployment rate(a) | 6.8 | % | 5.7 | % | 5.1 | % | Cumulative change in U.S. real GDP from 12/31/2019 | (1.9) | % | 0.6 | % | 2.0 | % |
(a)Reflects quarterly average of forecasted U.S. unemployment rate. (b)4Q20 actual U.S. unemployment rate (quarterly average) was 6.8%. 4Q20 actual cumulative change in U.S. real GDP from 4Q19 was (2.5%). Subsequent changes to this forecast and related estimates will be reflected in the provision for credit losses in future periods. Refer to Note 13 and Note 10 for a description of the policies, methodologies and judgments referused to determine the Firm’s allowances for credit losses on loans, lending-related commitments, and investment securities. Refer to Critical Accounting Estimates Used by the Firm on pages 141-143 and Note 13. At least quarterly,152-155 for further information on the allowance for credit losses is reviewed by the CRO, the CFO and the Controller of the Firm. As of December 31, 2018, JPMorgan Chase deemed the allowancerelated management judgments.
Refer to Consumer Credit Portfolio on pages 114-120, Wholesale Credit Portfolio on pages 121-131 and Note 12 for credit losses to be appropriate and sufficient to absorb probable credit losses inherent in the portfolio. The allowance for credit losses decreased compared with December 31, 2017 driven by:
a reduction in the consumer allowance due to a $250 million reduction in the CCB allowance for loan losses in the residential real estate PCI portfolio, reflecting continued improvement in home prices and lower delinquencies, as well as a $187 million reduction in the allowance for write-offs of PCI loans partially due to loan sales. These reductions were largely offset by a $300 million addition to the allowance in the credit card portfolio, due to loan growth and higher loss rates, as anticipated.
For additional information on the consumer and wholesale credit portfolios, refer to Consumer Credit Portfolio on pages 106–111, Wholesale Credit Portfolio on pages 112–119 and Note 12.portfolios.
| | | | 120 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Summary of changes in the allowance for credit losses | | | | | | | 2018 | | 2017 | Year ended December 31, | Consumer, excluding credit card | Credit card | Wholesale | Total | | Consumer, excluding credit card | Credit card | Wholesale | Total | (in millions, except ratios) | Allowance for loan losses | | | | | | | | | | Beginning balance at January 1, | $ | 4,579 |
| $ | 4,884 |
| $ | 4,141 |
| $ | 13,604 |
| | $ | 5,198 |
| $ | 4,034 |
| $ | 4,544 |
| $ | 13,776 |
| Gross charge-offs | 1,025 |
| 5,011 |
| 313 |
| 6,349 |
| | 1,779 |
| 4,521 |
| 212 |
| 6,512 |
| Gross recoveries | (842 | ) | (493 | ) | (158 | ) | (1,493 | ) | | (634 | ) | (398 | ) | (93 | ) | (1,125 | ) | Net charge-offs(a) | 183 |
| 4,518 |
| 155 |
| 4,856 |
| | 1,145 |
| 4,123 |
| 119 |
| 5,387 |
| Write-offs of PCI loans(b) | 187 |
| — |
| — |
| 187 |
| | 86 |
| — |
| — |
| 86 |
| Provision for loan losses | (63 | ) | 4,818 |
| 130 |
| 4,885 |
| | 613 |
| 4,973 |
| (286 | ) | 5,300 |
| Other | — |
| — |
| (1 | ) | (1 | ) | | (1 | ) | — |
| 2 |
| 1 |
| Ending balance at December 31, | $ | 4,146 |
| $ | 5,184 |
| $ | 4,115 |
| $ | 13,445 |
| | $ | 4,579 |
| $ | 4,884 |
| $ | 4,141 |
| $ | 13,604 |
| Impairment methodology | | | | | | | | | | Asset-specific(c) | $ | 196 |
| $ | 440 |
| $ | 297 |
| $ | 933 |
| | $ | 246 |
| $ | 383 |
| $ | 461 |
| $ | 1,090 |
| Formula-based | 2,162 |
| 4,744 |
| 3,818 |
| 10,724 |
| | 2,108 |
| 4,501 |
| 3,680 |
| 10,289 |
| PCI | 1,788 |
| — |
| — |
| 1,788 |
| | 2,225 |
| — |
| — |
| 2,225 |
| Total allowance for loan losses | $ | 4,146 |
| $ | 5,184 |
| $ | 4,115 |
| $ | 13,445 |
| | $ | 4,579 |
| $ | 4,884 |
| $ | 4,141 |
| $ | 13,604 |
| Allowance for lending-related commitments | | | | | | | | | | Beginning balance at January 1, | $ | 33 |
| $ | — |
| $ | 1,035 |
| $ | 1,068 |
| | $ | 26 |
| $ | — |
| $ | 1,052 |
| $ | 1,078 |
| Provision for lending-related commitments | — |
| — |
| (14 | ) | (14 | ) | | 7 |
| — |
| (17 | ) | (10 | ) | Other | — |
| — |
| 1 |
| 1 |
| | — |
| — |
| — |
| — |
| Ending balance at December 31, | $ | 33 |
| $ | — |
| $ | 1,022 |
| $ | 1,055 |
| | $ | 33 |
| $ | — |
| $ | 1,035 |
| $ | 1,068 |
| Impairment methodology | | | | | | | | | | Asset-specific | $ | — |
| $ | — |
| $ | 99 |
| $ | 99 |
| | $ | — |
| $ | — |
| $ | 187 |
| $ | 187 |
| Formula-based | 33 |
| — |
| 923 |
| 956 |
| | 33 |
| — |
| 848 |
| 881 |
| Total allowance for lending-related commitments(d) | $ | 33 |
| $ | — |
| $ | 1,022 |
| $ | 1,055 |
| | $ | 33 |
| $ | — |
| $ | 1,035 |
| $ | 1,068 |
| Total allowance for credit losses | $ | 4,179 |
| $ | 5,184 |
| $ | 5,137 |
| $ | 14,500 |
| | $ | 4,612 |
| $ | 4,884 |
| $ | 5,176 |
| $ | 14,672 |
| Memo: | | | | | | | | | | Retained loans, end of period | $ | 373,637 |
| $ | 156,616 |
| $ | 439,162 |
| $ | 969,415 |
| | $ | 372,553 |
| $ | 149,387 |
| $ | 402,898 |
| $ | 924,838 |
| Retained loans, average | 374,395 |
| 145,606 |
| 416,828 |
| 936,829 |
| | 366,798 |
| 139,918 |
| 392,263 |
| 898,979 |
| PCI loans, end of period | 24,034 |
| — |
| 3 |
| 24,037 |
| | 30,576 |
| — |
| 3 |
| 30,579 |
| Credit ratios | | | | | | | | | | Allowance for loan losses to retained loans | 1.11 | % | 3.31 | % | 0.94 | % | 1.39 | % | | 1.23 | % | 3.27 | % | 1.03 | % | 1.47 | % | Allowance for loan losses to retained nonaccrual loans(e) | 120 |
| NM | 358 |
| 292 |
| | 109 |
| NM | 239 |
| 229 |
| Allowance for loan losses to retained nonaccrual loans excluding credit card | 120 |
| NM | 358 |
| 179 |
| | 109 |
| NM | 239 |
| 147 |
| Net charge-off rates(a) | 0.05 |
| 3.10 |
| 0.04 |
| 0.52 |
| | 0.31 |
| 2.95 |
| 0.03 |
| 0.60 |
| Credit ratios, excluding residential real estate PCI loans | | | | | | | | | | Allowance for loan losses to retained loans | 0.67 |
| 3.31 |
| 0.94 |
| 1.23 |
| | 0.69 |
| 3.27 |
| 1.03 |
| 1.27 |
| Allowance for loan losses to retained nonaccrual loans(e) | 68 |
| NM | 358 |
| 253 |
| | 56 |
| NM | 239 |
| 191 |
| Allowance for loan losses to retained nonaccrual loans excluding credit card | 68 |
| NM | 358 |
| 140 |
| | 56 |
| NM | 239 |
| 109 |
| Net charge-off rates(a) | 0.05 | % | 3.10 | % | 0.04 | % | 0.53 | % | | 0.34 | % | 2.95 | % | 0.03 | % | 0.62 | % |
| | 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 transfer, 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. |
| | (c) | 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) | The allowance for lending-related commitments is reported in accounts payable and other liabilities on the Consolidated balance sheets. |
| | (e) | The Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance. |
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 121 |
Management’s discussion and analysis
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 | 2018 |
| 2017 |
| 2016 | | 2018 |
| 2017 |
| 2016 |
| | 2018 |
| 2017 |
| 2016 |
| Consumer, excluding credit card | $ | (63 | ) | $ | 613 |
| $ | 467 |
| | $ | — |
| $ | 7 |
| $ | — |
| | $ | (63 | ) | $ | 620 |
| $ | 467 |
| Credit card | 4,818 |
| 4,973 |
| 4,042 |
| | — |
| — |
| — |
| | 4,818 |
| 4,973 |
| 4,042 |
| Total consumer | 4,755 |
| 5,586 |
| 4,509 |
| | — |
| 7 |
| — |
| | 4,755 |
| 5,593 |
| 4,509 |
| Wholesale | 130 |
| (286 | ) | 571 |
| | (14 | ) | (17 | ) | 281 |
| | 116 |
| (303 | ) | 852 |
| Total | $ | 4,885 |
| $ | 5,300 |
| $ | 5,080 |
| | $ | (14 | ) | $ | (10 | ) | $ | 281 |
| | $ | 4,871 |
| $ | 5,290 |
| $ | 5,361 |
|
Provision for credit losses
The for the year ended December 31, 2018 as a result of a decline in the consumer provision, partially offset by an increase in the wholesale provision provision for credit losses for the year ended December 31, 2018 as a result of a decline in the consumer provision, partially offset by an increase in the wholesale provision for the year ended December 31, 2018 as a result of a decline in the consumer provision, partially offset by an increase in the wholesale provision decreased for the year ended December 31, 2018 as a result of a decline in the consumer provision, partially offset by an increase in the wholesale provision
| | • | the decrease in the consumer, excluding credit card portfolio in CCB was due to
|
| | – | lower net charge-offs in the residential real estate portfolio, largely driven by recoveries from loan sales, and |
| | – | lower net charge-offs in the auto portfolio |
partially offset by
| | – | a $250 million reduction in the allowance for loan losses in the residential real estate portfolio — PCI, reflecting continued improvement in home prices and lower delinquencies; the reduction was $75 million lower than the prior year for the residential real estate portfolio — non credit-impaired |
| | • | the prior year also included a net $218 million write-down recorded in connection with the sale of the student loan portfolio, and
|
| | • | the decrease in the credit card portfolio was due to
|
| | – | a $300 million addition to the allowance for loan losses, reflecting loan growth and higher loss rates, as anticipated; the addition was $550 million lower than the prior year, |
largely offset by
| | – | higher net charge-offs due to seasoning of more recent vintages, as anticipated, and |
| | • | in wholesale, the current period expense of $116 million reflected additions to the allowance for loan losses from select client downgrades,
|
largely offset by
| | – | other net portfolio activity, including a reduction in the allowance for loan losses related to a single name in the Oil & Gas portfolio in the first quarter of 2018, compared to a net benefit of $303 million in the prior year. The prior year benefit reflected a reduction in the allowance for loan losses on credit quality improvements in the Oil & Gas, Natural Gas Pipelines, and Metals and Mining portfolios. |
| | | | 122 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | 132 | | JPMorgan Chase & Co./2020 Form 10-K |
The adoption of the CECL accounting guidance resulted in a change in the accounting for PCI loans, which are considered PCD loans under CECL. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied when determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses and related information | | | | | | | 2020(d) | | 2019 | Year ended December 31, | Consumer, excluding credit card | Credit card | Wholesale | Total | | Consumer, excluding credit card | Credit card | Wholesale | Total | (in millions, except ratios) | Allowance for loan losses | | | | | | | | | | Beginning balance at January 1, | $ | 2,538 | | $ | 5,683 | | $ | 4,902 | | $ | 13,123 | | | $ | 3,434 | | $ | 5,184 | | $ | 4,827 | | $ | 13,445 | | Cumulative effect of a change in accounting principle | 297 | | 5,517 | | (1,642) | | 4,172 | | | NA | NA | NA | NA | Gross charge-offs | 805 | | 5,077 | | 954 | | 6,836 | | | 902 | | 5,436 | | 472 | | 6,810 | | Gross recoveries collected | (631) | | (791) | | (155) | | (1,577) | | | (536) | | (588) | | (57) | | (1,181) | | Net charge-offs | 174 | | 4,286 | | 799 | | 5,259 | | | 366 | | 4,848 | | 415 | | 5,629 | | Write-offs of PCI loans(a) | NA | NA | NA | NA | | 151 | | — | | — | | 151 | | Provision for loan losses | 974 | | 10,886 | | 4,431 | | 16,291 | | | (378) | | 5,348 | | 479 | | 5,449 | | Other | 1 | | — | | — | | 1 | | | (1) | | (1) | | 11 | | 9 | | Ending balance at December 31, | $ | 3,636 | | $ | 17,800 | | $ | 6,892 | | $ | 28,328 | | | $ | 2,538 | | $ | 5,683 | | $ | 4,902 | | $ | 13,123 | | | | | | | | | | | | Allowance for lending-related commitments | | | | | | | | | | Beginning balance at January 1, | $ | 12 | | $ | — | | $ | 1,179 | | $ | 1,191 | | | $ | 12 | | $ | — | | $ | 1,043 | | $ | 1,055 | | Cumulative effect of a change in accounting principle | 133 | | — | | (35) | | 98 | | | NA | NA | NA | NA | Provision for lending-related commitments | 42 | | — | | 1,079 | | 1,121 | | | — | | — | | 136 | | 136 | | Other | — | | — | | (1) | | (1) | | | — | | — | | — | | — | | Ending balance at December 31, | $ | 187 | | $ | — | | $ | 2,222 | | $ | 2,409 | | | $ | 12 | | $ | — | | $ | 1,179 | | $ | 1,191 | | | | | | | | | | | | Impairment methodology | | | | | | | | | | Asset-specific(b) | $ | (7) | | $ | 633 | | $ | 682 | | $ | 1,308 | | | $ | 75 | | $ | 477 | | $ | 295 | | $ | 847 | | Portfolio-based | 3,643 | | 17,167 | | 6,210 | | 27,020 | | | 1,476 | | 5,206 | | 4,607 | | 11,289 | | PCI | NA | NA | NA | NA | | 987 | | — | | — | | 987 | | Total allowance for loan losses | $ | 3,636 | | $ | 17,800 | | $ | 6,892 | | $ | 28,328 | | | $ | 2,538 | | $ | 5,683 | | $ | 4,902 | | $ | 13,123 | | | | | | | | | | | | Impairment methodology | | | | | | | | | | Asset-specific | $ | — | | $ | — | | $ | 114 | | $ | 114 | | | $ | — | | $ | — | | $ | 102 | | $ | 102 | | Portfolio-based | 187 | | — | | 2,108 | | 2,295 | | | 12 | | — | | 1,077 | | 1,089 | | Total allowance for lending-related commitments | $ | 187 | | $ | — | | $ | 2,222 | | $ | 2,409 | | | $ | 12 | | $ | — | | $ | 1,179 | | $ | 1,191 | | Total allowance for credit losses | $ | 3,823 | | $ | 17,800 | | $ | 9,114 | | $ | 30,737 | | | $ | 2,550 | | $ | 5,683 | | $ | 6,081 | | $ | 14,314 | | | | | | | | | | | | Memo: | | | | | | | | | | Retained loans, end of period | $ | 302,127 | | $ | 143,432 | | $ | 514,947 | | $ | 960,506 | | | $ | 294,999 | | $ | 168,924 | | $ | 481,678 | | $ | 945,601 | | Retained loans, average | 302,005 | | 146,391 | | 509,907 | | 958,303 | | | 312,972 | | 156,319 | | 472,628 | | 941,919 | | Credit ratios | | | | | | | | | | Allowance for loan losses to retained loans | 1.20 | % | 12.41 | % | 1.34 | % | 2.95 | % | | 0.86 | % | 3.36 | % | 1.02 | % | 1.39 | % | Allowance for loan losses to retained nonaccrual loans(c) | 67 | | NM | 208 | | 323 | | | 87 | | NM | 464 | | 329 | | Allowance for loan losses to retained nonaccrual loans excluding credit card | 67 | | NM | 208 | | 120 | | | 87 | | NM | 464 | | 187 | | Net charge-off rates | 0.06 | | 2.93 | | 0.16 | | 0.55 | | | 0.12 | | 3.10 | | 0.09 | | 0.60 | |
(a)Prior to the adoption of CECL, write-offs of PCI loans were recorded against the allowance for loan losses when actual losses for a pool exceeded estimated losses that were recorded as purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan was recognized when the underlying loan was removed from a pool. (b)Includes modified PCD loans and loans that have been modified or are reasonably expected to be modified in a TDR. Also includes risk-rated loans that have been placed on nonaccrual status for the wholesale portfolio segment. The asset-specific credit card allowance for loan losses modified or reasonably expected to be modified in a TDR is calculated based on the loans’ original contractual interest rates and does not consider any incremental penalty rates. (c)The Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status as permitted by regulatory guidance. (d)Excludes HTM securities, which had an allowance for credit losses of $78 million and a provision for credit losses of $68 million as of and for the year ended December 31, 2020. | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 133 |
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 predominantly by Treasury and CIO in connection with the Firm’sFirm's balance sheet or asset-liability management objectives or from principalobjectives. Principal investments are predominantly privately-held non-traded financial instruments and are managed in variousthe LOBs and Corporate in predominantly privately-held financial instruments.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 payment of principal and interest. This risk is minimizedmitigated given that the investment securities portfolio held by Treasury and CIO substantially investis predominantly invested in high-quality securities. At December 31, 2018,2020, the Treasury and CIO investment securities portfolio, net of allowance for credit losses, was $260.1$587.9 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 83–84 and Moody’s). ForNote 10 for further information on the investment securities portfolio referand internal risk ratings. Refer to Corporate segment resultsMarket Risk Management on pages 77–78 and Note 10. For135–142 for further information on the market risk inherent in the portfolio, referportfolio. Refer to MarketLiquidity Risk Management on pages 124–131. For102–108 for further information on related liquidity risk, refer to Liquidity Risk on pages 95–100.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 privateprivately held non-traded financial instruments representing ownership or other forms of junior capital. Principal investments covercapital and span multiple asset classes andclasses. These investments are made either in stand-aloneby dedicated investing businesses or as part of a broader business platform.strategy. In general, new principal investments include tax-oriented investments as well asand investments made to enhance or accelerate LOBthe Firm’s business strategies. The Firm’s investments will continue to evolve in line with its strategies, including the Firm’s commitment to support underserved communities and Corporate strategic business initiatives.minority-owned businesses. The Firm’s principal investments are managed by the various LOBs and Corporate and are reflected within their respective financial results. Effective January 1, 2018, the Firm adopted new accounting guidance related to the recognition and measurementThe aggregate carrying values of financial assets, which requires fair value adjustments upon observable price changes to certain equity investments previously held at cost in the principal investment portfolios. For additional information, referportfolios have not been significantly affected by recent market events as a result of the COVID-19 pandemic. However, the duration and severity of adverse macroeconomic conditions could subject certain principal investments to Notes 1 and 2.impairments, write-downs, or other negative impacts. As of December 31, 20182020 and 2017,2019, the aggregate carrying values of the principal investment portfolios were $22.2$27.5 billion and $19.5$24.2 billion, respectively, which included tax-oriented investments (e.g., alternative energy and affordable housing and alternative energy investments) of $16.6$21.3 billion and $14.0$18.2 billion, respectively, and private equity, various debt and equity instruments, and real assets of $5.6$6.2 billion and $5.5$6.0 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 functions are responsible for reviewing the appropriateness of the carrying value of investments in accordance with relevant policies. As 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. 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.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 123 |
Management’s discussion and analysis
| | | | | | 134 | | JPMorgan Chase & Co./2020 Form 10-K |
Market risk is the risk associated with the effect of changes in market factors, such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term. Market Risk Management Market Risk Management monitors market risks throughout the Firm and defines market risk policies and procedures. The Market Risk Management function reports to the Firm’s CRO. Market Risk Management seeks to manage risk, facilitate efficient risk/return decisions, reduce volatility in operating performance and provide transparency into the Firm’s market risk profile for senior management, the Board of Directors and regulators. Market Risk Management is responsible for the following functions: Establishment of•Maintaining a market risk policy framework
Independent measurement,•Independently measuring, monitoring and control of line of business,controlling LOB, Corporate, and firmwideFirmwide market risk
Definition, approval•Defining, approving and monitoring of limits
Performance of•Performing stress testing and qualitative risk assessments
Risk measurement Measures used to capture 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: •Value-at-risk (VaR) •Stress testing •Profit and loss drawdowns •Earnings-at-risk •Other sensitivity-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, accommodation of client business, and management experience. The FirmMarket Risk Management maintains different levels of limits. Firm level limits include VaR and stress limits. Similarly, line of businessLOB and Corporate limits include VaR and stress limits and may be supplemented by certain nonstatistical risk measures such as profit and loss drawdowns. Limits may also be set within the lines of businessLOBs and Corporate, as well as at the portfolio and/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 or Corporate 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. Limits that have not been reviewed within specified time periods by Market Risk Management are escalatedreported 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 of the line of business or Corporate 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 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 breachedLOB-level limit breaches are escalated as appropriate. COVID-19 Pandemic Market Risk Management continues to senior management,actively monitor the LOBimpact of the COVID-19 pandemic on market risk exposures by leveraging existing risk measures and controls. Models used to measure market risk are inherently imprecise and are limited in their ability to measure certain risks or to predict losses. This imprecision may be heightened when sudden or severe shifts in market conditions occur, such as those observed at the onset of the COVID-19 pandemic. For additional discussion on model uncertainty refer to Estimations and Model Risk Committee, and/orManagement on page 151. Market Risk Management periodically reviews the Firmwide Risk Committee.Firm’s existing market risk measures to identify opportunities for enhancement, and to the extent appropriate, will calibrate those measures accordingly over time. This is increasingly important in periods of sustained, heightened market volatility.
| | | | | | | | | 124 | | JPMorgan Chase & Co./20182020 Form 10-K | | 135 |
Management’s discussion and analysis
The following table summarizes by line of business and Corporate, the predominant business activities thatand related market risks, as well as positions which give rise to market risks,risk and certain measures used to capture those risks.risks, for each LOB and Corporate. | | | | | | | Predominant business activities that give rise to market risk by line of business and Corporate | LOBs and Corporate | Predominant business activities(a)
| Related market risks | Positions included in Risk Management VaR | Positions included in earnings-at-risk | Positions included in other sensitivity-based measures | CCB | •
Originates loans and takes deposits | •
Non-linear risk primarily from prepayment options embedded in mortgages and changes in the probability of newly originated mortgage commitments actually closing•
Basis risk from differences in the relative movements of the rate indices underlying mortgage exposure and other interest rates | •
Mortgage pipeline loans, classified as derivatives•
Warehouse loans, classified as trading assets – debt instruments•
Hedges of pipeline loans, warehouse loans and MSRs, classified as derivatives•
Interest-only securities, classified as trading assets debt instruments, and related hedges, classified as derivatives | | | CIB
| •
Makes markets and services clients across fixed income, foreign exchange, equities and commodities•
Originates loans and takes deposits | •
Risk of loss from adverse movements in market prices across interest rate, credit, currency, commodity and equity risk factors | •
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 | | •
Privately held equity and other investments measured at fair value•
Derivatives FVA and fair value option elected liabilities DVA | CB | •
Originates loans and takes deposits | •
Interest rate risk and prepayment risk | | | | AWM | •
Provides initial capital investments in products such as mutual funds and capital invested alongside third-party investors•
Originates loans and takes deposits | •
Risk from changes in market factors (e.g., rates and credit spreads) | •
Debt securities held in advance of distribution to clients, classified as trading assets - debt instruments(b) | | •
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 | •
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 | •
Investment securities portfolio and related interest rate hedges•
Long-term debt and related interest rate hedges | •
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) In addition to the predominant business activities, each of the LOBsLOB and Corporate may engage in principal investing activities. To the extent principal investments are deemed market risk sensitive, they are reflected in relevant risk measures (i.e., VaR or Other sensitivity-based measures) and captured in the table above. For additional discussion on principal investments referbelow. Refer to Investment Portfolio Risk Management on page 123.134 for additional discussion on principal investments.
| | | | | | | | | | | | | | | | | | LOBs and Corporate | Predominant business activities | Related market risks | Positions included in Risk Management VaR | Positions included in earnings-at-risk | Positions included in other sensitivity-based measures | CCB | •Services mortgage loans •Originates loans and takes deposits | •Risk from changes in the probability of newly originated mortgage commitments closing •Interest rate risk and prepayment risk | •Mortgage commitments, classified as derivatives •Warehouse loans that are fair value option elected, classified as loans – debt instruments •MSRs •Hedges of mortgage commitments, warehouse loans and MSRs, classified as derivatives •Interest-only and mortgage-backed securities, classified as trading assets debt instruments, and related hedges, classified as derivatives •Fair value option elected liabilities(a) | •Retained loan portfolio •Deposits | •Fair value option elected liabilities DVA(a)
| CIB
| •Makes markets and services clients across fixed income, foreign exchange, equities and commodities •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(a) •Derivative CVA and associated hedges •Marketable equity investments | •Retained loan portfolio •Deposits | •Privately held equity and other investments measured at fair value; and certain asset-backed fair value option elected loans •Derivatives FVA and fair value option elected liabilities DVA(a)
| CB | •Originates loans and takes deposits | •Interest rate risk and prepayment risk | •Marketable equity investments(b)
| •Retained loan portfolio •Deposits | | AWM | •Provides initial capital investments in products such as mutual funds and capital invested alongside third-party investors •Originates loans and takes deposits | •Risk from adverse movements in market factors (e.g., market prices, 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(b) | •Retained loan portfolio •Deposits | •Initial seed capital investments and related hedges, classified as derivatives •Certain deferred compensation 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 | •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 | •Deposits with banks •Investment securities portfolio and related interest rate hedges •Long-term debt and related interest rate hedges | •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)Reflects structured notes in Risk Management VaR and the DVA on structured notes in other sensitivity-based measures. (b)The AWM contributionand CB contributions to Firmwide average VaR waswere not material for the year ended December 31, 20182020 and 2017.2019.
| | | | | | | | | 136 | | JPMorgan Chase & Co./20182020 Form 10-K | | 125 |
Management’s discussion and analysis
Value-at-risk JPMorgan Chase utilizes VaR, a statistical risk measure,, to estimate the potential loss from adverse market moves in the 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 daily measure of risk that is closely aligned to risk management decisions made by the lines of businessLOBs and Corporate and, along with other market risk measures, provides the appropriate information needed to respond to risk 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“backtesting 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-testingbacktesting exceptions observed can differ from the statistically expected number of back-testingbacktesting 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 risk factors and/or 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 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, 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. ForRefer to Valuation process in Note 2 for further information on the Firm’s valuation process, refer to Valuation process in Note 2. 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. For information regarding model reviews and approvals, referRefer to Estimations and Model Risk Management on page 140.151 for information regarding model reviews and 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.
| | | | | | | | | 126 | | JPMorgan Chase & Co./20182020 Form 10-K | | 137 |
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), refer to 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | Total VaR | | | | | As of or for the year ended December 31, | 2018 | | 2017 | (in millions) | Avg. | Min | Max | | Avg. | Min | Max | CIB trading VaR by risk type | | | | | | | | | | | | | | Fixed income | $ | 33 |
| | $ | 25 |
| | $ | 46 |
| | | $ | 28 |
| | $ | 20 |
| | $ | 40 |
| | Foreign exchange | 6 |
| | 3 |
| | 15 |
| | | 10 |
| | 4 |
| | 20 |
| | Equities | 17 |
| | 13 |
| | 26 |
| | | 12 |
| | 8 |
| | 19 |
| | Commodities and other | 8 |
| | 4 |
| | 13 |
| | | 7 |
| | 4 |
| | 10 |
| | Diversification benefit to CIB trading VaR | (26 | ) | (a) | NM |
| (b) | NM |
| (b) | | (30 | ) | (a) | NM |
| (b) | NM |
| (b) | CIB trading VaR | 38 |
| | 26 |
| (b) | 58 |
| (b) | | 27 |
| | 14 |
| (b) | 38 |
| (b) | Credit portfolio VaR | 3 |
| | 3 |
| | 4 |
| | | 7 |
| | 3 |
| | 12 |
| | Diversification benefit to CIB VaR | (2 | ) | (a) | NM |
| (b) | NM |
| (b) | | (6 | ) | (a) | NM |
| (b) | NM |
| (b) | CIB VaR | 39 |
| | 26 |
| (b) | 59 |
| (b) | | 28 |
| | 17 |
| (b) | 39 |
| (b) | | | | | | | | | | | | | | | CCB VaR | 1 |
| | — |
| | 3 |
| | | 2 |
| | 1 |
| | 4 |
| | Corporate VaR | 12 |
| | 9 |
| | 14 |
| | | 4 |
| | 1 |
| | 16 |
| | Diversification benefit to other VaR | (1 | ) | (a) | NM |
| (b) | NM |
| (b) | | (1 | ) | (a) | NM |
| (b) | NM |
| (b) | Other VaR | 12 |
| | 9 |
| (b) | 14 |
| (b) | | 5 |
| | 2 |
| (b) | 16 |
| (b) | Diversification benefit to CIB and other VaR | (10 | ) | (a) | NM |
| (b) | NM |
| (b) | | (4 | ) | (a) | NM |
| (b) | NM |
| (b) | Total VaR | $ | 41 |
| | $ | 28 |
| (b) | $ | 62 |
| (b) | | $ | 29 |
| | $ | 17 |
| (b) | $ | 42 |
| (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 business, 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. |
Average Total VaR increased $12 million for the year-ended December 31, 2018 as compared with the prior year.
The increase was primarily due to changes in the risk profile for Fixed Income and Equities risk types, the inclusion of certain CIB marketable equity investments and a Corporate private equity position that became publicly traded in the fourth quarter of 2017, as well as increased volatility in the one-year historical look-back period.
In addition, average Credit Portfolio VaR has declined by $4 million, reflecting the sale of select positions in the prior year.
VaR can vary significantly over time as positions change, market volatility fluctuates, and diversification benefits change. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total VaR | | | | | As of or for the year ended December 31, | 2020 | | 2019 | (in millions) | Avg. | Min | Max | | Avg. | Min | Max | CIB trading VaR by risk type | | | | | | | | | | | | | | Fixed income | $ | 98 | | | $ | 35 | | | $ | 156 | | | | $ | 40 | | | $ | 31 | | | $ | 50 | | | Foreign exchange | 10 | | | 4 | | | 18 | | | | 7 | | | 4 | | | 15 | | | Equities | 24 | | | 13 | | | 41 | | | | 20 | | | 13 | | | 31 | | | Commodities and other | 28 | | | 7 | | | 47 | | | | 8 | | | 6 | | | 12 | | | Diversification benefit to CIB trading VaR | (67) | | (a) | NM | (b) | NM | (b) | | (33) | | (a) | NM | (b) | NM | (b) | CIB trading VaR | 93 | | | 32 | | (b) | 160 | | (b) | | 42 | | | 29 | | (b) | 61 | | (b) | Credit portfolio VaR | 16 | | | 3 | | | 28 | | | | 5 | | | 3 | | | 7 | | | Diversification benefit to CIB VaR | (17) | | (a) | NM | (b) | NM | (b) | | (5) | | (a) | NM | (b) | NM | (b) | CIB VaR | 92 | | | 31 | | (b) | 162 | | (b) | | 42 | | | 29 | | (b) | 63 | | (b) | | | | | | | | | | | | | | | CCB VaR | 5 | | | 1 | | | 12 | | | | 5 | | | 1 | | | 11 | | | Corporate and other LOB VaR | 19 | | | 9 | | | 82 | | (c) | | 10 | | | 9 | | | 13 | | | Diversification benefit to other VaR | (4) | | (a) | NM | (b) | NM | (b) | | (4) | | (a) | NM | (b) | NM | (b) | Other VaR | 20 | | | 10 | | (b) | 82 | | (b) | | 11 | | | 8 | | (b) | 17 | | (b) | Diversification benefit to CIB and other VaR | (17) | | (a) | NM | (b) | NM | (b) | | (10) | | (a) | NM | (b) | NM | (b) | Total VaR | $ | 95 | | | $ | 32 | | (b) | $ | 164 | | (b) | | $ | 43 | | | $ | 30 | | (b) | $ | 65 | | (b) |
(a)Diversification benefit represents the difference between the portfolio VaR and the sum of its individual components. This reflects the non-additive nature of VaR due to imperfect correlation across LOBs, Corporate, and risk types. (b)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 and other LOB VaR was higher than the prior year, due to increases in the fourth quarter of 2020 driven by a private equity position that became publicly traded at the end of the third quarter of 2020. Generally, average VaR and maximum VaR across risk types and LOBs were higher due to increased volatility that occurred at the onset of the COVID-19 pandemic, which remains in the one-year historical look-back period. As a result average total VaR increased by $52 million for the year-ended December 31, 2020 when compared with the prior year driven by the fixed income and commodities risk types.
Effective January 1, 2020, the Firm refined the scope of VaR back-testingto exclude positions related to the risk management of interest rate exposure from changes in the Firm’s own credit spread on fair value option elected liabilities, and included these positions in other sensitivity-based measures. Additionally, effective July 1, 2020, the Firm refined the scope of VaR to exclude certain asset-backed fair value option elected loans, and included them in other sensitivity-based measures to more effectively measure the risk from these loans. In the absence of these refinements, the average Total VaR and each of the components would have been higher by the amounts reported in the following table: | | | | | | | | | | | | (in millions) | Amount by which reported average VaR would have been higher for the year ended December 31, 2020 | CIB fixed income VaR | | $ | 9 | | | CIB trading VaR | | 7 | | | CIB VaR | | 9 | | | Total VaR | | 8 | | |
| | | | | | | | | 138 | | JPMorgan Chase & Co./2020 Form 10-K |
VaR backtesting The Firm evaluates the effectiveness of itsperforms daily VaR methodology by back-testing,model backtesting, which compares the daily Risk Management VaR results with the daily gains and losses actually recognized on market-risk related revenue. that are utilized for VaR backtesting purposes. The Firm’s definition of market risk-related gains and losses is consistentin the chart below do not reflect the Firm’s revenue results as they exclude select components of total net revenue, such as those associated with the definition used by the banking regulators under Basel III. Under this definition, market risk-related gainsexecution of new transactions (i.e., intraday client-driven trading and losses are defined as: gains and losses on the positions included in the Firm’s Risk Management VaR, excludingintraday risk management activities), fees, commissions, certain valuation adjustments and net interest income, andincome. These excluded components of total net revenue may more than offset backtesting gains and losses arising from intraday trading.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 127 |
Management’s discussionon a particular day. The definition of backtesting gains and analysis
losses above is consistent with the requirements for backtesting under Basel III capital rules.
The following chart compares actualFirmwide daily market risk-relatedbacktesting gains and losses with the Firm’s Risk Management VaR for the year ended December 31, 2018. As the chart presents market risk-related gains and losses related to those positions included in the Firm’s Risk Management VaR, the2020. The results in the tablechart below differ from the results of back-testingbacktesting disclosed in the Market Risk section of the Firm’s BaselBasel III Pillar 3 Regulatory Capital Disclosures reports, which are based on Regulatory VaR applied to the Firm’s covered positions. The chart shows that for For the year ended December 31, 20182020, the Firm observed ten VaR back-testing exceptions and posted backtesting gains on 128162 of the 259 days.260 days, and observed 10 VaR backtesting exceptions, which were predominantly driven by volatility at the onset of the COVID-19 pandemic that was materially higher than the levels realized in the historical data used for the VaR calculation. Firmwide backtesting loss days can differ from the loss days for which Fixed Income Markets and Equity Markets posted losses, as disclosed in CIB Markets revenue, as the population of positions which compose each metric are different and due to the exclusion of select components of total net revenue in backtesting gains and losses as described above. For more information on CIB Markets revenue, refer to pages 74-75. Daily Market Risk-Related Gains and Losses vs. Risk Management VaR (1-day, 95% Confidence level)Backtesting Results
Year ended December 31, 20182020 Market Risk-RelatedBacktesting Gains and Losses
Risk Management VaR(1-day, 95% Confidence level) | | | | | | | | | | | | First Quarter 2018
2020 | Second Quarter 2018
2020 | Third Quarter 2018
2020 | Fourth Quarter 2018
2020 |
| | | | | | | | | 128 | | JPMorgan Chase & Co./20182020 Form 10-K | | 139 |
Management’s discussion and analysis
Other risk measures Stress testing Along with VaR, stress testing is an important tool used to assess risk. While VaR reflects the risk of loss due to adverse changes in markets using recent historical market behavior, stress testing reflects the risk of loss from hypothetical changes in the value of market risk sensitive positions applied simultaneously. Stress testing measures the Firm’s vulnerability to losses under a range of stressed but possible economic and market scenarios. The results are used to understand the exposures responsible for those potential losses and are measured against limits. The Firm’s stress framework covers Corporate and all lines of business with market risk sensitive positions.positions in the LOBs and Corporate. The framework is used to calculate multiple magnitudes of potential stress for both market rallies and market sell-offs, assuming significant changes in market factors such as credit spreads, equity prices, interest rates, currency rates and commodity prices, and combines them in multiple ways to capture an array of hypothetical economic and market scenarios. The Firm generates a number of scenarios that focus on tail events in specific asset classes and geographies, including how the event may impact multiple market factors simultaneously. Scenarios also incorporate specific idiosyncratic risks and stress basis risk between different products. The flexibility in the stress framework allows the Firm to construct new scenarios that can test the outcomes against possible future stress events. Stress testing results are reported on a regular basis to senior management of the respective LOBs, Corporate and the Firm’s senior management.Firm, as appropriate. Stress scenarios are governed by an overall stress framework and are 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 on an annual basis or as changing market conditions warrant and may be redefined to reflect current or expected market conditions.appropriate. The Firm’s stress testing framework is utilized in calculating the Firm’s CCAR and other stress test results, which are reported to the Board of Directors. In addition, stress testing results are incorporated into the Firm’s Risk Appetite framework, and are reported quarterlyperiodically to the DRPC.Board Risk Committee. Profit and loss drawdowns Profit and loss drawdowns are 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.
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 136 for a summary by line of business LOB and Corporate, identifying positions included in earnings-at-risk refer to the table on page 125.. The CTC Risk Committee establishes the Firm’s structural interest rate risk policy and related 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.In addition, oversight of structural interest rate risk is managed through a dedicated risk function reporting to the CTC CRO. 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.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 129 |
Management’s discussion and analysis
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. TheOne 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 includesinclude retained loans, deposits, deposits with banks, investment securities, long termlong-term debt and any related interest rate hedges, and excludes otherfunds transfer pricing of positions in risk management VaR and other sensitivity-based measures as described on page 125.136.
| | | | | | | | | 140 | | JPMorgan Chase & Co./2020 Form 10-K |
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;rates; and a flatter yield curve involving holding short-term rates constant and decreasing long-term rates or increasing short-term rates and holding long-term rates constant.These scenarios consider themany different factors, including: •The impact on exposures as a result of instantaneous changes in interest rates from baseline rates, as well as pricing sensitivities of deposits, optionality and changes in product mix. The scenarios include forecastedrates. •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 or its clients and customers 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, inknown as deposit betas, represent the baseline and scenarios use assumedamount by which deposit rates paid whichcould change upon a given change in market interest rates over the cycle. The deposit rates paid in these scenarios may differ from actual deposit rates paid, due to timingrepricing lags and other factors.
The Firm’s earnings-at-risk scenarios areperiodically 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 Outlook on page 49 for additional information). The Firm’s U.S. dollar sensitivities are presented in the table below. | | | | | | | | | | | | December 31, (in billions) | 2020 | | 2019 | Parallel shift: | | | | +100 bps shift in rates | $ | 6.9 | | | $ | 0.3 | | | | | | Steeper yield curve: | | | | +100 bps shift in long-term rates | 2.4 | | | 1.2 | | | | | | Flatter yield curve: | | | | +100 bps shift in short-term rates | 4.5 | | | (0.9) | | | | | |
| | | | | | | | | December 31, (in billions) | 2018 |
| 2017 | Parallel shift: |
|
|
|
|
| +100 bps shift in rates | $ | 0.9 |
| | $ | 1.7 |
| -100 bps shift in rates | (2.1 | ) | | (3.6 | ) | Steeper yield curve: | | | | +100 bps shift in long-term rates | 0.5 |
| | 0.7 |
| -100 bps shift in short-term rates | (1.2 | ) | | (2.2 | ) | Flatter yield curve: | | | | +100 bps shift in short-term rates | 0.4 |
| | 1.0 |
| -100 bps shift in long-term rates | (0.9 | ) | | (1.4 | ) |
The change in the Firm’s U.S. dollar sensitivities as of December 31, 2020 compared to December 31, 2019 reflected updates to the Firm’s baseline for lower short-term and long-term rates as well as the impact of changes in the Firm’s balance sheet. In addition, during the fourth quarter of 2020 as part of the Firm’s continuous evaluation and periodic enhancement to its earnings-at-risk calculations, the Firm updated the deposit rates paid betas for consumer deposit products based upon observed pricing during the most recent economic cycle. In the absence of this update, the Firm’s U.S. dollar sensitivities as of December 31, 2020 would have been lower by $2.0 billion to the +100bps shift in short-term and parallel rate scenarios.The Firm’s sensitivity to rates is largelyprimarily a result of assets repricing at a faster pace than deposits. The Firm’s net U.S. dollar sensitivitiesBased upon current and implied market rates as of December 31, 2018decreased when compared to December 31, 2017 primarily as a2020, scenarios reflecting lower rates could result of updating the Firm’s baseline to reflect higherin negative interest rates. As higherThe U.S. has never experienced an interest rate environment where the Federal Reserve has a negative interest rate policy. While the impact of negative interest rates are now reflected inon the Firm’s baselines, sensitivitiesFirm's earnings-at-risk would vary by scenario, a parallel shift downward of up to changes in rates are expected to be less significant.100bps would negatively impact net interest income. In a negative interest rate environment, the modeling assumptions used for certain assets and liabilities require additional management judgment and therefore, the actual outcomes may differ from these assumptions.
The Firm’s non-U.S. dollar sensitivities are presented in the table below. | | December 31, (in billions) | 2018 |
| 2017 | December 31, (in billions) | 2020 | | 2019 | Parallel shift: |
|
|
|
|
| Parallel shift: | | +100 bps shift in rates | $ | 0.5 |
| | $ | 0.5 |
| +100 bps shift in rates | $ | 0.9 | | | $ | 0.5 | | Flatter yield curve: | | | | Flatter yield curve: | | +100 bps shift in short-term rates | 0.5 |
| | 0.5 |
| +100 bps shift in short-term rates | 0.8 | | | 0.5 | |
The results of the non-U.S. dollar interest rate scenario involving a steeper yield curve with long-term rates rising by 100 basis points and short-term rates staying at current levels were not material to the Firm’s earnings-at-risk at December 31, 20182020 and 2017.2019.
| | | | | | | | | 130 | | JPMorgan Chase & Co./20182020 Form 10-K | | 141 |
Management’s discussion and analysis
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 investmentdebt and equity and funding activities by assessing the potential impact on net revenue, other comprehensive income (“OCI”) and OCInoninterest expense due to changes in relevant market variables. For additional information on the positions captured in other sensitivity-based measures, referRefer to the table Predominant business activities that give rise to market risk on page 125.136 for additional information on the positions captured in other sensitivity-based measures. The table below represents the potential impact to net revenue, OCI or OCInoninterest expense 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 withnet of 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, 20182020 and 2017,2019, 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, Gain/(loss) (in millions) | | | | | | | | | Activity | | Description | | Sensitivity measure | | 2020 | 2019 | | | | | | | | | | | Debt and equity(a) | | | | | | | | | Asset Management activities | | Consists of seed capital and related hedges; fund co-investments(b); and certain deferred compensation and related hedges(c) | | 10% decline in market value | | $ | (48) | | $ | (68) | | | Other debt and equity | | Consists of certain asset-backed fair value option elected loans, privately held equity and other investments held at fair value(b) | | 10% decline in market value | | (919) | | (867) | | (e) | | | | | | | | | | 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(d) | | 1 basis point parallel tightening of cross currency basis | | (16) | | (17) | | | Non-USD LTD hedges foreign currency (“FX”) exposure | | Primarily represents the foreign exchange revaluation on the fair value of the derivative hedges(d) | | 10% depreciation of currency | | 13 | | 15 | | | Derivatives – funding spread risk | | Impact of changes in the spread related to derivatives FVA(b) | | 1 basis point parallel increase in spread | | (4) | | (5) | | | Fair value option elected liabilities – funding spread risk | | Impact of changes in the spread related to fair value option elected liabilities DVA(d) | | 1 basis point parallel increase in spread | | 33 | | 29 | | | 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(d) | | 1 basis point parallel increase in spread | | (3) | | (2) | | | | Interest rate sensitivity related to risk management of changes in the Firm’s own credit spread on fair value option liabilities(b) | | 1 basis point parallel increase in spread | | 3 | | 2 | | |
| | | | | | | | | | | | | Year ended December 31, Gain/(loss) (in millions) | | | | | | | | Activity | | Description | | Sensitivity measure | | 2018 | 2017 | | | | | | | | | Investment activities(a) | | | | | | | | Investment management activities | | Consists of seed capital and related hedges; and fund co-investments | | 10% decline in market value | | $ | (102 | ) | $ | (110 | ) | Other investments | | Consists of privately held equity and other investments held at fair value | | 10% decline in market value | | (218 | ) | (338 | ) | | | | | | | | | 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(b) | | 1 basis point parallel tightening of cross currency basis | | (13 | ) | (10 | ) | Non-USD LTD hedges foreign currency (“FX”) exposure | | Primarily represents the foreign exchange revaluation on the fair value of the derivative hedges(b) | | 10% depreciation of currency | | 17 |
| (13 | ) | Derivatives – funding spread risk | | Impact of changes in the spread related to derivatives FVA | | 1 basis point parallel increase in spread | | (4 | ) | (6 | ) | Fair value option elected liabilities – funding spread risk | | Impact of changes in the spread related to fair value option elected liabilities DVA(b) | | 1 basis point parallel increase in spread | | 30 |
| 22 |
| 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(b) | | 1 basis point parallel increase in spread | | 1 |
| (1 | ) |
(a)Excludes equity securities without readily determinable fair values that are measured under the measurement alternative. Refer to Note 2 for additional information. | | (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. |
(b)Impact recognized through net revenue.
(c)In the second quarter of 2020, the Firm refined the approach for risk management of certain deferred compensation, which is recognized through noninterest expense. As a result, certain deferred compensation and related hedges are now included in other sensitivity-based measures. (d)Impact recognized through OCI. (e)Prior-period amount has been revised to conform with the current presentation. In the absence of the scope refinement, Other debt and equity would have been $(203) million and $(192) million for the periods ending December 31, 2020 and 2019, respectively. Refer to Total VaR on page 138 for additional information. | | | | JPMorgan Chase & Co./2018 Form 10-K | | 131 |
Management’s discussion and analysis
| | | | | | 142 | | JPMorgan Chase & Co./2020 Form 10-K |
The Firm, through its lines of businessLOBs and Corporate, may be exposed to country risk resulting 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 which the Firm’s exposures are diversified 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•Maintaining policies, procedures and standards consistent with a comprehensive country risk framework
•Assigning sovereign ratings, 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 specifican individual country is based on the country where the largest proportion of the assets of the counterparty, issuer, obligor or guarantor are located or where the largest proportion of its revenue is derived, which may be different than the domicile (i.e. legal residence) or country of incorporationincorporation. Individual country exposures reflect an aggregation of the counterparty, issuer, obligor or guarantor. Country exposures are generally measured by considering the Firm’s risk to an immediate default, with zero recovery, of the counterparty, issuer, obligorcounterparties, issuers, obligors or guarantor, with zero recovery. guarantors attributed to that country. Activities which result in contingent or indirect exposure to a country are not included in the country exposure measure (for example, providing clearing services or secondary exposure to collateral on securities financing receivables). Assumptions are sometimes required in determining the measurement and allocation of country exposure, particularly in the case of certain non-linear or index exposures.products, or where the nature of the counterparty, issuer, obligor or guarantor is not suitable for attribution to an individual country. The use of different measurement approaches or assumptions could affect the amount of reported country exposure. During the fourth quarter of 2018, the Firm refined its country exposure measurement approach to exclude capital invested in local entities. With this change, country exposure more directly measures the Firm’s risk to an immediate default of a counterparty, issuer, obligor or guarantor. The risk associated with capital invested in local entities will continue to be examined in tailored stress scenarios, depending on the vulnerabilities being tested. For more on the Firm’s country risk stress testing, refer to page 133.
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 •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 eligible 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 318 of the 2020 Form 10-K for further information on the FFIEC’s reporting methodology, refer to Cross-border outstandings on page 306 of the 2018 Form 10-K.
methodology.
| | | | | | | | | 132 | | JPMorgan Chase & Co./20182020 Form 10-K | | 143 |
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 sets of countries in response to specific or potential market events, sector performance concerns, sovereign actions and geopolitical risks. These tailored stress results are used to inform potential risk reduction across the Firm, as necessary. COVID-19 Pandemic Country Risk Management continues to monitor the impact of the COVID-19 pandemic, leveraging existing stress testing, exposure reporting and controls, as well as tailored analysis, to assess the extent to which individual countries may be adversely impacted. Risk reporting To enable effective risk management of country risk to the Firm, countryCountry 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, 2018,2020, and their comparative exposures as of December 31, 2017.2019. The selection of countries represents the Firm’s largest total exposures by individual 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. Country exposures may fluctuatefluctuate from period to period due to client activity and market flows. As discussed on page 132, duringThe overall increase in top 20 exposures was largely driven by client activity and growth in client deposits, relative to the period ending December 31, 2019. This resulted in an increase in cash placements with the central banks of Germany and the United Kingdom.
| | | | | | | | | | | | | | | | | | | | | | Top 20 country exposures (excluding the U.S.)(a) | December 31, (in billions) | 2020 | | 2019(f) | | | Lending and deposits(c) | Trading and investing(d) | Other(e) | Total exposure | | Total exposure | Germany | | $ | 120.8 | | $ | 5.8 | | $ | 0.6 | | $ | 127.2 | | | $ | 51.6 | | United Kingdom | | 57.2 | | 9.4 | | 1.8 | | 68.4 | | | 42.4 | | Japan | | 36.7 | | 8.6 | | 0.3 | | 45.6 | | | 43.8 | | China | | 9.7 | | 9.9 | | 1.6 | | 21.2 | | | 19.2 | | France | | 13.4 | | 4.6 | | 0.8 | | 18.8 | | | 18.1 | | Switzerland | | 14.7 | | 0.5 | | 3.5 | | 18.7 | | | 18.3 | | Australia | | 9.9 | | 5.7 | | 0.3 | | 15.9 | | | 11.7 | | Canada | | 13.4 | | 0.9 | | 0.2 | | 14.5 | | | 13.2 | | Luxembourg | | 11.1 | | 1.3 | | — | | 12.4 | | | 12.9 | | Brazil | | 4.2 | | 6.6 | | — | | 10.8 | | | 7.2 | | India | | 3.9 | | 5.1 | | 1.5 | | 10.5 | | | 11.3 | | South Korea | | 5.4 | | 4.3 | | 0.4 | | 10.1 | | | 6.4 | | Italy | | 4.7 | | 4.7 | | 0.3 | | 9.7 | | | 6.8 | | Singapore | | 4.0 | | 2.7 | | 2.0 | | 8.7 | | | 6.8 | | Netherlands(b) | | 5.4 | | 0.1 | | 2.2 | | 7.7 | | | 5.8 | | Hong Kong SAR | | 3.7 | | 1.9 | | 0.6 | | 6.2 | | | 5.1 | | Spain | | 4.1 | | 1.6 | | 0.1 | | 5.8 | | | 5.8 | | Saudi Arabia | | 4.9 | | 0.9 | | — | | 5.8 | | | 5.2 | | Mexico | | 3.9 | | 1.0 | | — | | 4.9 | | | 4.7 | | Sweden | | 5.4 | | (1.1) | | — | | 4.3 | | | 1.1 | |
(a)Country exposures presented in the table reflect 90% and 87% of total Firmwide non-U.S. exposure,where exposure is attributed to an individual country, at December 31, 2020 and 2019, respectively. (b)In the fourth quarter of 20182020, Country Risk Management determined that the Firm refined itsexposure for certain commodities contracts corresponds to an EU-wide risk and should not be attributed to the individual country of registration, previously the Netherlands. As such, the exposure measurement approach to exclude capital invested in local entities. While this change did not have a material impact to country exposure, prior period amounts haveis no longer included and the prior-period amount has been revised within the following table to conform with the current period presentation. (c)Lending and deposits includes loans and accrued interest receivable, lending-related commitments (net of eligible collateral and the allowance for credit losses), deposits with banks (including central banks), acceptances, other monetary assets, and issued letters of credit net of participations. Excludes intra-day and operating exposures, such as those from settlement and clearing activities. (d)Includes market-making inventory, Investment securities, and counterparty exposure on derivative and securities financings net of eligible collateral and hedging. 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)Predominantly includes physical commodity inventory. (f)The country rankings presented in the table as of December 31, 2019, are based on the country rankings of the corresponding exposures at December 31, 2020, not actual rankings of such exposures at December 31, 2019.
| | | | | | | | | | | | | | | | | | Top 20 country exposures (excluding the U.S.)(a) | | December 31, (in billions) | 2018 | | 2017(f) | | Lending and deposits(b) | Trading and investing(c)(d) | Other(e) | Total exposure | | Total exposure | Germany | $ | 53.7 |
| $ | 8.1 |
| $ | 0.3 |
| $ | 62.1 |
| | $ | 57.4 |
| United Kingdom | 28.0 |
| 10.1 |
| 2.6 |
| 40.7 |
| | 44.9 |
| Japan | 25.4 |
| 3.3 |
| 0.4 |
| 29.1 |
| | 30.8 |
| China | 9.5 |
| 7.1 |
| 2.7 |
| 19.3 |
| | 16.3 |
| France | 10.8 |
| 6.5 |
| 0.6 |
| 17.9 |
| | 19.4 |
| Canada | 10.8 |
| 3.4 |
| 0.1 |
| 14.3 |
| | 14.9 |
| Australia | 7.2 |
| 5.4 |
| 0.4 |
| 13.0 |
| | 11.4 |
| Switzerland | 9.1 |
| 0.6 |
| 3.1 |
| 12.8 |
| | 13.9 |
| India | 6.1 |
| 4.0 |
| 1.7 |
| 11.8 |
| | 12.3 |
| Luxembourg | 10.5 |
| 0.5 |
| — |
| 11.0 |
| | 9.5 |
| South Korea | 4.2 |
| 3.2 |
| 0.2 |
| 7.6 |
| | 6.8 |
| Brazil | 4.4 |
| 2.9 |
| — |
| 7.3 |
| | 4.6 |
| Singapore | 3.9 |
| 1.4 |
| 1.5 |
| 6.8 |
| | 6.3 |
| Italy | 2.4 |
| 3.8 |
| 0.2 |
| 6.4 |
| | 6.7 |
| Netherlands | 5.0 |
| 0.4 |
| 0.4 |
| 5.8 |
| | 8.0 |
| Mexico | 3.7 |
| 1.8 |
| — |
| 5.5 |
| | 5.2 |
| Hong Kong | 2.4 |
| 1.1 |
| 1.9 |
| 5.4 |
| | 4.2 |
| Saudi Arabia | 4.7 |
| 0.6 |
| — |
| 5.3 |
| | 4.5 |
| Spain | 3.8 |
| 1.3 |
| — |
| 5.1 |
| | 6.8 |
| Malaysia | 1.8 |
| 1.1 |
| 1.4 |
| 4.3 |
| | 3.0 |
|
| | (a) | Country exposures presented in the table reflect 87% and 86% of total firmwide non-U.S. exposure,where exposure is attributed to a specific country, for the periods ending December 31, 2018 and 2017, respectively.
|
| | (b) | Lending and deposits includes loans and accrued interest receivable (net ofeligiblecollateral 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, andcounterparty exposure on derivative and securities financings net of eligible collateral and hedging.
|
| | (d) | Includes 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) | Predominantly includes physical commodity inventory. |
| | (f) | The country rankings presented in the table as of December 31, 2017, are based on the country rankings of the corresponding exposures at December 31, 2018, not actual rankings of such exposures at December 31, 2017. |
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 133 |
Management’s discussion and analysis
| | | | | | 144 | | JPMorgan Chase & Co./2020 Form 10-K |
| | | | | | | | | | | | | | | OPERATIONAL RISK MANAGEMENT |
Operational risk is the risk associated withof an adverse outcome resulting from inadequate or failed internal processes people and systems, or fromsystems; human factors; or external events andimpacting the Firm’s processes or systems; Operational Risk includes compliance, risk, conduct, risk, legal, risk, and estimations and model risk. Operational risk is inherent in the Firm’s activities and can manifest itself in various ways, including fraudulent acts, business interruptions, cybersecuritycyber attacks, inappropriate employee behavior, failure to comply with applicable laws and regulations or failure of vendors to perform in accordance with their agreements. These events could result in financial losses, litigation and regulatory fines, as well as other damagesOperational 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, Operational Risk Measurement, and Operational Risk Monitoring and Reporting. Governance The lines of businessLOBs and Corporate are responsible for applying the ORMF in order to manage themanagement of operational risk that arises from their activities.risk. The Control Management organization,Organization, which consists of control managers within each line of businessLOB and Corporate, is responsible for the day-to-day execution of the ORMF. LineCCOR Framework and the evaluation of business and Corporatethe effectiveness of their control committees are responsible for reviewing data that indicates the quality and stability of processes, addressing key operational risk issues, focusing on processes with control concerns, and overseeing control remediation. These committees escalate operational risk issuesenvironments to the FCC, as appropriate. For additional information on the FCC, refer to Enterprise-wide Risk Management on pages 79–140.determine where targeted remediation efforts may be required.
The Firmwide Risk ExecutiveFirm’s Global Chief Compliance Officer (“CCO”) and FRE for Operational Risk Management (“ORM”), 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 ORM, and are independent of the respective businesses or corporate functions they oversee. The Firm’s Operational RiskCCOR Management Policy is approved by the DRPC. This 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 a structured risk and control self-assessment process whichthat is executed by the lines of businessLOBs and Corporate in accordance with the minimum standards established by ORM, to identify, assess, mitigate and manage its operational risk.Corporate. As part of this process, lines of businessthe LOBs and Corporate identify key operational risks inherent in their activities, address gaps or deficiencies identified, and define actions to reduce residual risk. Action plans are developed for identified control issues and lines of business and Corporate are held accountable for tracking and resolving issues in a timely manner. Operational Risk Officers independently challenge the execution of the self-assessment and evaluate the appropriateness of the residual risk results. In addition to the self-assessment process, the Firm tracks and monitors events that have led to or could lead to actual operational risk losses, including litigation-related events. Responsible lines of business and Corporate analyze their losses to evaluate the effectiveness of their control environment to assess where controls have failed, and to determine where targeted remediation efforts may be required. ORMThe Firm’s Operational Risk and Compliance organization (“Operational Risk and Compliance”) 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 Operational Risk and Compliance 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, operational 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.
| | | | 134 | | JPMorgan Chase & Co./2018 Form 10-K |
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 other stress testing processes. ForRefer to Capital Risk Management section, on pages 91-101 for information related to operational risk RWA, CCAR or ICAAP, refer to Capital Risk Management section, pages 85-94.and CCAR.
Operational Risk Monitoring and reportingtesting ORMThe results of risk assessments performed by Operational Risk and Compliance 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, Operational Risk and Compliance independently identify areas of operational risk and tests the effectiveness of controls within the LOBs and Corporate.
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. Operational Risk and | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 145 |
Management’s discussion and analysis Compliance 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 Operational Risk and Compliance are escalated to the appropriate LOB and Corporate Control Committees, as needed. Operational Risk and Compliance has established standards forto ensure that consistent operational risk monitoringreporting and reporting. Operationaloperational risk reports are produced on a firmwideFirmwide basis as well as by line of businessthe 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 reinforce escalation protocols to senior management and to the Board of Directors. COVID-19 Pandemic Under the CCOR Management Framework, Operational Risk and Compliance monitors and assesses COVID-19 related legal and regulatory developments associated with the Firm’s financial products and services offered to clients and customers as part of the existing change management process. The Firm will continue to review and assess the impact of the pandemic on operational risk and implement adequate measures as needed. Subcategories and examples of operational risks Operational 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. Forprocesses. Refer to pages 148, 149, 150 and 151, respectively for more information on Compliance, risk, Conduct, risk, Legal, risk and Estimations and Model risk, refer to pages 137, 138, 139 and 140, respectively.risk. Details on other select examples of operational risks are provided below. Cybersecurity risk Cybersecurity risk is the risk of the Firm’s exposure to harm or loss resulting from misuse or abuse of technology by malicious actors. Cybersecurity risk is an important continuous and continuously evolving focus for the Firm. The Firm devotes significantSignificant resources are devoted to protecting and continuing to improveenhancing the security of the Firm’s computer systems, software, networks and other technology assets. The Firm’s security efforts are designed 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. Ongoing business expansions may expose the Firm to potential new threats as well as expanded regulatory scrutiny including the introduction of new cybersecurity requirements. The Firm continues to make significant investments in enhancing its cyberdefensecyber defense 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.topic of cybersecurity risks. Third parties with which the Firm does business or that facilitate the Firm’s business activities (e.g., vendors, supply chain, 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 maintains a cybersecurity program designed to prevent, detect, and respond to cyberattacks. The Global Chief Information Officer, Chief Technology Control Officer, and Chief Information Security Officer (“CISO”) update the Audit Committee of the Board of Directors at least annuallyis updated periodically on the Firm’s Information Security Program, recommended changes, cybersecurity policies and practices, ongoing efforts to improve security, as well as its efforts regarding significant cybersecurity events. In addition, the Firm has a detailed 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.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 in this regard including Compliancepoints. Due to the impact of COVID-19, the Firm increased the use of remote access and also video conferencing solutions provided by third parties to facilitate remote work. As a result the Legal Department.Firm took additional precautionary measures to mitigate cybersecurity risks. 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 lines of business,LOBs and Corporate, the Cybersecurity and Technology Control organization identifies information security risk issues and championsoversees 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 Control organization comprises Governance and Control, Assessments, Assurance and Training, Cybersecurity Operations,consists of business aligned control officers, Identity and Access Management, and resiliency functionsinformation security managers that are supported within the organization by the following products that execute the Information Security Program.Program for the Firm: •Cyber Defense & Fraud | | | | | | | | | 146 | | JPMorgan Chase & Co./2020 Form 10-K |
•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 technology efforts. These forums are established at multiple levels throughout the Firm and include representatives from each line of businessLOB and Corporate.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 135 |
Management’s discussion and analysis
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 including technology management, Firmwide management and the Operating Committee.levels. The forums are used to escalate information security risks or other matters as appropriate to the FCC.appropriate. The IRM function provides oversight of the activities whichdesigned to identify, assess, managemeasure, and mitigate cybersecurity risk. As integral participants in cybersecurity governance forums, the IRM organization actively monitors and oversees the Cybersecurity and Technology Control functions. 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 an annuala periodic basis, and it is supplemented by firmwideFirmwide testing initiatives, including quarterlyperiodic phishing tests. Finally, the Firm’s Global Privacy Program requires all employees to take annualperiodic 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 the spread of infectious diseases or pandemics, severe weather, power or telecommunications loss, accidents, failure of a third party to provide expected services, cyberattack, flooding, transit strikes, terrorist threats or infectious disease.terrorism, health emergencies. 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 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. Overthe past year, theThe risk of payment fraud remainedremains at a heightened level across the industry.industry, particularly during the current COVID-19 pandemic due to the use of contingent forms of payment authentication methods, scams involving the pandemic being perpetrated including an increase in the level of fraud attempts against consumers. The complexities of these incidents and the strategies used by perpetrators continue to evolve. A Payments Control Program including the LOBs and Corporate develop methodsThe Firm employs various controls for managing thepayment fraud risk implementing controls andas well as providing employee and client education and awareness training.trainings. The Firm’s monitoring of customer behavior to detect new fraud strategies is periodically evaluated and enhanced in an effort to detect and mitigate new strategies implemented bythese fraud perpetrators. The Firm’s consumer and wholesale businesses collaborate closely to deploy risk mitigation controls across their businesses.risks. 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 the lines of businessLOBs and Corporate in selecting, documenting, onboarding, monitoring and managing their supplier relationships.relationships including services provided by affiliates. The objectiveobjectives of the TPO framework isare 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, as needed to comply 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.
| | | | 136 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 147 |
Management’s discussion and analysis | | | | | | | | | | | | | | | COMPLIANCE RISK MANAGEMENT |
Compliance risk, a subcategory of operational risk, is the risk of failurefailing to comply with legal or regulatory obligationslaws, rules, regulations or codes of conduct and standards of self-regulatory organizations applicable to the business activities of the Firm.organizations. Overview Each line of businessLOB and Corporate hold primary ownership of and accountability for managing compliance risk. The Firm’s Operational Risk and Compliance Organization (“Operational Risk and Compliance”), which is independent of the lines of business, works closely with senior management to provideLOBs and Corporate, provides independent review, monitoring and oversight of business operations with a focus on compliance with the legallaws, rules, and regulatory obligationsregulations applicable to the delivery of the Firm’s products and services to clients and customers. These compliance risks relate to a wide variety of legallaws, rules and regulatory obligations,regulations 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 laws, 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 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. Operational Risk and Compliance implements various practices designed to identify and mitigate compliance risk by establishing policies and standards testing, monitoring, trainingdesigned to govern, identify, measure, monitor and providing guidance.test, manage, and report on compliance risk.
Governance and oversight Operational Risk and 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 knownpotential or suspectedactual 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 ReportingJPMC Conduct 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 Code prohibits retaliation against anyone who raises an issue or concern in good faith. Periodically, the Audit Committee receives a reportreports on the Code of Conduct program, including an update on the employee completion rate for Code of Conduct training and affirmation.program.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 137 |
Management’s discussion and analysis
| | | | | | 148 | | JPMorgan Chase & Co./2020 Form 10-K |
Conduct risk, a subcategory of operational risk, is the risk that any action or inaction by an employee or employees could lead to unfair client or customer outcomes, impact the integrity of the markets in which the Firm operates, or compromise the Firm’s reputation. Overview Each line of businessLOB 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 (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. For further discussion of the Code, referRefer to Compliance Risk Management on page 137.148 for further discussion of the Code. Governance and oversight The Conduct Risk Program is governed by a Board-level approved Conduct Risk Governance Policy. The Conduct Risk Governance Policythe CCOR Management policy, which establishes the framework for ownership, assessment, managinggovernance, identification, measurement, monitoring and escalatingtesting, management and reporting conduct riskrisk in the Firm. The CRSCFirm has a senior committee that provides oversight of the Firm’s conduct initiatives to develop a more holistic view of conduct risks and to connect key programs across the Firm in order to identify opportunities and emerging areas of focus. The CRSC may escalate systemic conduct risk issues This committee is responsible for setting overall program direction for strategic enhancements to the FRCFirm's employee conduct framework and as appropriate toreview the DRPC. The misconduct (actual or potential) of individuals involved in material risk and control issues are escalated to the HR Control Forum.consolidated Firmwide Conduct Risk Appetite Assessment.
Certain committees of the Board oversee conduct risk issues within the scope of their responsibilities.
Conduct risk management encompasses various aspects of people management practices throughout the employee life cycle, including recruiting, onboarding, training and development, performance management, promotion and compensation processes. Each LOB, Treasury and CIO, 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.
| | | | 138 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 149 |
Management’s discussion and analysis Legal risk, a subcategory of operational risk, is the risk of loss primarily caused by the actual or alleged failure to meet legal obligations that arise from the rule of law in jurisdictions in which the Firm operates, agreements with clients and customers, and products and services offered by the Firm. Overview The global Legal function (“Legal”) provides legal services and advice to the Firm. Legal is responsible for managing the Firm’s exposure to Legallegal risk by: •managing actual and potential litigation and enforcement matters, including internal reviews and investigations related to such matters •advising on products and services, including contract negotiation and documentation •advising on offering and marketing documents and new business initiatives •managing dispute resolution •interpreting existing laws, rules and regulations, and advising on changes theretoto them •advising on advocacy in connection with contemplated and proposed laws, rules and regulations, and •providing legal advice to the LOBs, Corporate, functions and Corporate, in alignment with the lines of defense described under Enterprise-wide Risk Management.Board. 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 quarterlyand to the Audit Committee, and periodically to the DRPC.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.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 139 |
Management’s discussion and analysis
| | | | | | 150 | | JPMorgan Chase & Co./2020 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 to the Firm’s CRO. The governance of analytical and judgment-based estimations within MRGR’s scope follows a consistent approach to the approach used for models, which is described in detail below. Model risks are owned by the users of the models within 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 functionMRGR 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.MRGR. In its review of a model, the Model Risk functionMRGR considers whether the model is suitable for the specific purposes for which it will be used. 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. When reviewing a model, the Model Risk functionMRGR 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 functionMRGR based on the relevant model tier. Under the Firm’s Estimations and Model Risk Management Policy, the Model Risk functionMRGR 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 functionMRGR 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. ForWhile models are inherently imprecise, the degree of imprecision or uncertainty can be heightened by the market or economic environment. This is particularly true when the current and forecasted environment is significantly different from the historical macroeconomic environments upon which the models were trained, as the Firm has experienced during the COVID-19 pandemic. This uncertainty may necessitate a summarygreater degree of model-based valuationsjudgment and other valuation techniques, referanalytics to inform adjustments to model outputs than in typical periods.
Refer to Critical Accounting Estimates Used by the Firm on pages 141-143152-155 and Note 2.2 for a summary of model-based valuations and other valuation techniques.
| | | | 140 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 151 |
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 coversrepresents management’s estimate of expected credit losses over the retained consumer and wholesale loan portfolios, as well asremaining expected life of the Firm’s wholesalefinancial assets measured at amortized cost and certain consumeroff-balance sheet lending-related commitments. The allowance for credit losses comprises:
•The allowance for loan losses, is intended to adjust the carrying value ofwhich covers the Firm’s retained loan assets to reflect probable credit losses inherent in the loan portfolio as of the balance sheet date. Similarly, theportfolios (scored and risk-rated), •The allowance for lending-related commitments, is established to cover probableand •The allowance for credit losses inherent inon investment securities, which covers the lending-related commitments portfolio as of the balance sheet date.Firm’s HTM and AFS securities. 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. Formatters including development and weighting of macroeconomic forecasts, incorporation of historical loss experience, assessment of risk characteristics, assignment of risk ratings, valuation of collateral, and the determination of remaining expected life. Refer to Note 10 and Note 13 for further information on these components, areas of judgmentjudgments as well as the Firm’s policies and methodologies used to determine the Firm’s allowance for credit losses. One of the most significant judgments involved in establishingestimating the Firm’s allowance for credit losses referrelates to Allowance forthe macroeconomic forecasts used to estimate credit losses on pages 120–122 and Note 13. Allowanceover the eight-quarter forecast period within the Firm’s methodology. The eight-quarter forecast incorporates hundreds of macroeconomic variables (“MEVs”) that are relevant for exposures across the Firm, with modeled credit losses sensitivity
being driven primarily by a subset of less than twenty variables. The Firm’s allowance for credit losses is sensitive to numerous factors, which may differ dependingspecific variables that have the greatest effect on the portfolio. modeled losses of each portfolio vary by portfolio and geography. •Key MEVs for the consumer portfolio include U.S. unemployment, house price index (“HPI”) and U.S. real gross domestic product (“GDP”). •Key MEVs for the wholesale portfolio include U.S. real GDP, U.S. unemployment, U.S. equity prices, corporate credit spreads, oil prices, commercial real estate prices and HPI. Changes in economic conditions or in the Firm’s assumptions and estimatesforecasts of economic conditions could significantly affect its estimate of probableexpected credit losses inherent in the portfolio at the balance sheet date. The Firm uses its best judgmentdate or lead 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. Refer to Note 13 for further discussion. To illustrate the potential magnitude of certain alternate judgments, the Firm estimates thatsignificant changes in the following inputs would haveestimate from one reporting period to the following effects onnext.
The COVID-19 pandemic has resulted in a weak labor market and weak overall economic conditions that will continue to affect borrowers across the Firm’s modeled credit loss estimates as of December 31, 2018, without consideration of any offsetting or correlated effects of other inputs inconsumer and wholesale lending portfolios. Significant judgment is required to estimate the Firm’s allowance for loan losses: A combined 5% decline in housing pricesseverity and a 100 basis point increase in unemployment rates from current levels could imply:
| | ◦ | an increase to modeled credit loss estimates of approximately $425 million for PCI loans. |
| | ◦ | an increase to modeled annual credit loss estimates of approximately $50 million for residential real estate loans, excluding PCI loans. |
For credit card loans, a 100 basis point increase in unemployment rates from current levels could imply an increase to modeled annual credit loss estimates of approximately $875 million.
An increase in probability 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 $1.6 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 million.
The purpose of these sensitivity analyses is to provide an indicationduration of the isolated impactscurrent economic downturn, as well as its potential impact on borrower defaults and loss severities. In particular, macroeconomic conditions and forecasts regarding the duration and severity of hypothetical alternative assumptions on modeled loss estimates. Thethe economic downturn caused by the COVID-19 pandemic have been rapidly changing and remain highly uncertain. It is difficult to predict exactly how borrower behavior will be impacted by these changes in economic conditions. The effectiveness of government support, customer assistance and enhanced unemployment benefits should act as mitigants to credit losses, but the inputs presented above are not intended to imply management’s expectationextent 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.mitigation impact remains uncertain.
It is difficult to estimate how potential changes in specific factorsany one factor or input might affect the overall allowance for credit losses because management considers a wide variety of factors and inputs in estimating the allowance for credit losses. Changes in thesethe factors and inputs considered may not occur at the same rate and may not be consistent across all geographies or product types, and changes in factors and inputs may be directionally inconsistent, such that improvement in one factor or input 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 factorsothers. To consider the impact of a hypothetical alternate macroeconomic forecast, the Firm compared the modeled credit losses determined using its central and relative adverse macroeconomic scenarios, which are two of the five scenarios considered by management in estimating the allowanceallowances for credit losses. Givenloan losses and lending-related commitments. The central and relative adverse scenarios each included a full suite of MEVs, but differed in the processlevels, paths and peaks/troughs of those variables over the Firm followseight-quarter forecast period. For example, compared to the Firm’s central scenario described on page 132 and in Note 13, the judgments madeFirm’s relative adverse scenario assumes a significantly elevated U.S. unemployment rate throughout 2021, averaging 3.0% higher over the eight-quarter forecast, with a peak difference of approximately 4.0% in evaluating the risk factors relatedsecond quarter of 2021; lower U.S. real GDP with a slower recovery, | | | | | | | | | 152 | | JPMorgan Chase & Co./2020 Form 10-K |
remaining nearly 2.6% lower at the end of the eight-quarter forecast, with a peak difference of nearly 4.1% in the third quarter of 2021; and a 10.1% further deterioration in the national HPI with a trough in the first quarter of 2022. This analysis is not intended to its loss estimates, management believes that its current estimate ofexpected future changes in the allowance for credit losses, for a number of reasons, including: •the Firm has placed significant weight on its adverse scenarios in estimating its allowance for credit losses as of December 31, 2020, and accordingly, the existing allowance already reflects credit losses beyond those estimated under the central scenario •the impacts of changes in many MEVs are both interrelated and nonlinear, so the results of this analysis cannot be simply extrapolated for more severe changes in macroeconomic variables •the COVID-19 pandemic has stressed many MEVs at a speed and to degrees not seen in recent history, adding significantly higher degrees of uncertainty around modeled credit loss estimations •significant changes in the expected severity and duration of the economic downturn caused by the COVID-19 pandemic, the effects of government support and customer assistance, and the speed of the subsequent recovery could significantly affect the Firm’s estimate of expected credit losses irrespective of the estimated sensitivities described below. Without considering the additional weight the Firm has placed on its adverse scenarios or any other offsetting or correlated effects in other qualitative components of the Firm’s allowance for credit losses for the lending exposures noted below, the difference between the modeled estimates under the Firm’s relative adverse and central scenarios at December 31, 2020 would result in the following: •An increase of approximately $700 million for residential real estate loans and lending-related commitments •An increase of approximately $5.1 billion for credit card loans •An increase of approximately $2.8 billion for wholesale loans and lending-related commitments This analysis relates only to the modeled credit loss estimates and is appropriate.not intended to estimate changes in the overall allowance for credit losses as it does not reflect any potential changes in other adjustments to the quantitative calculation, which would also be influenced by the judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these modeled lifetime loss estimates based on then-current circumstances and conditions. Recognizing that forecasts of macroeconomic conditions are inherently uncertain, particularly in light of the recent economic conditions, the Firm believes that its process to consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected credit losses were reasonable and appropriate for the period ended December 31, 2020. Fair value 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, 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
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 141 |
Management’s discussion and analysis
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. For further information, referRefer to Note 2.2 for further information. | | | | | | | | | | | | December 31, 2020 (in billions, except ratios) | Total assets at fair value | | Total level 3 assets | Federal Funds sold and securities purchased under resale agreements | $ | 238.0 | | | $ | — | | Securities borrowed | 53.0 | | | — | | Trading assets: | | | | Trading debt and equity instruments | $ | 423.5 | | | $ | 2.6 | | Derivative receivables(a) | 79.6 | | | 7.7 | | Total trading assets | 503.1 | | | 10.3 | | AFS securities | 388.2 | | | — | | Loans | 44.5 | | | 2.3 | | MSRs | 3.3 | | | 3.3 | | Other | 304.1 | | | 0.5 | | Total assets measured at fair value on a recurring basis | 1,243.2 | | | 16.4 | | Total assets measured at fair value on a nonrecurring basis | 3.6 | | | 2.0 | | Total assets measured at fair value | $ | 1,246.8 | | | $ | 18.4 | | Total Firm assets | $ | 3,386.1 | | | | Level 3 assets at fair value as a percentage of total Firm assets(a) | | | 0.5 | % | Level 3 assets at fair value as a percentage of total Firm assets at fair value(a) | | | 1.5 | % |
| | | | | | | | | December 31, 2018 (in billions, except ratios) | Total assets at fair value | Total level 3 assets | Trading debt and equity instruments | $ | 359.5 |
| | $ | 4.2 |
| Derivative receivables(a) | 54.2 |
| | 5.8 |
| Trading assets | 413.7 |
| | 10.0 |
| AFS securities | 230.4 |
| | — |
| Loans | 3.2 |
| | 0.1 |
| MSRs | 6.1 |
| | 6.1 |
| Other | 27.2 |
| | 1.0 |
| Total assets measured at fair value on a recurring basis | 680.6 |
| | 17.2 |
| Total assets measured at fair value on a nonrecurring basis | 1.4 |
| | 1.1 |
| Total assets measured at fair value | $ | 682.0 |
| | $ | 18.3 |
| Total Firm assets | $ | 2,622.5 |
| | | Level 3 assets as a percentage of total Firm assets(a) | | | 0.7 | % | Level 3 assets as a percentage of total Firm assets at fair value(a) | | | 2.7 | % |
(a)For purposes of the table above, the derivative receivables total reflects the impact of netting adjustments; however, the $7.7 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. | | (a) | For purposes of the table above, the derivative receivables total reflects the impact of netting adjustments; however, the $5.8 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. | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 153 |
Management’s discussion and analysis 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, 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,speed, default rates, volatilities, correlations, prices (such as commodity, equity or debt prices,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, refer to 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. ForIn periods of heightened market volatility and uncertainty judgments are further affected by the wider variation of reasonable valuation estimates, particularly for positions that are less liquid. Refer to Note 2 for a further discussion of valuation adjustments applied by the Firm, refer to 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, refer to 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 testing goodwill for impairment. The goodwill associated with each business combination is allocated to the related reporting units for goodwill impairment testing. For the year ended December 31, 2018,2020, the Firm reviewed current economic conditions, including the potential impacts of the COVID-19 pandemic on business performance, estimated market cost of equity, as well as actual business results and projections of business performance for all its businesses. Based upon such reviews, thereporting units. The Firm has concluded that the goodwill allocated to its reporting units was not impaired as of December 31, 2018.2020. The fair values of these reporting units exceeded their carrying values by approximately 20% or higherat least 15% and did not indicate a significant risk of goodwill impairment based on current projections and valuations. The projections for all of the Firm’s reporting units are consistent with management’s current short-term business outlook assumptions and in the longershort term, incorporate a set of macroeconomic assumptions and the Firm’s best estimates of long-term growth and returnsreturn on equity of its businesses.in the longer term. 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 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, refer to Note 15.
including the goodwill impairment assessment as of December 31, 2020.
| | | | 142 | | JPMorgan Chase & Co./2018 Form 10-K |
Credit card rewards liability JPMorgan Chase offers credit cards with various rewards programs which allow cardholders to earn rewards 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 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 rewards 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 rewards 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 $5.8$7.7 billion and $4.9$6.4 billion at December 31, 20182020 and 2017,2019, respectively, and is recorded in accounts payable and other liabilities on the Consolidated balance sheets. The rewards liability is sensitive to redemption rate (“RR”) and cost per point (“CPP”) assumptions. The RR assumption is used to estimate the number of points earned by customers that will be redeemed over the life of the account. The CPP assumption is used to estimate the cost of future point redemptions. These assumptions are evaluated periodically considering historical actuals and cardholder redemption behavior and updates to them will impact the rewards liability. As of December 31, 2020, a combined increase of 25 basis points in RR and 1 basis point in CPP would increase the rewards liability by approximately $215 million. 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 | | | | | | | | | 154 | | JPMorgan Chase & Co./2020 Form 10-K |
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, 2018,2020, 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 is no longer maintaining 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 will recognize any taxes it may incur on global intangible low tax income as income tax expense in the period in which the tax is incurred.
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 change in estimate recorded under SEC Staff Accounting Bulletin No. 118 (SAB 118) resulting from the enactment of the TCJA. The accounting under SAB 118 is complete.
For additional information on income taxes, refer to Note 24.taxes.
Litigation reserves ForRefer to Note 30 for a description of the significant estimates and judgments associated with establishing litigation reserves, refer to
Note 29.reserves.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 143155 |
Management’s discussion and analysis
| | | | | | | | | | | | | | | ACCOUNTING AND REPORTING DEVELOPMENTS |
| | | | | | | | | | | | | | | Financial Accounting Standards Board (“FASB”) Standards Adopted since January 1, 2020 | | | | | | ACCOUNTING AND REPORTING DEVELOPMENTSStandard |
| Summary of guidance | | Effects on financial statements | | | | | | Financial Accounting Standards Board (“FASB”) Standards Adopted during 2018 | | | | | | 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.
| | • Adopted January 1, 2018.
• For further information, refer to Note 1.
| 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 are reflected in earnings beginning in the period of adoption.
| | • Adopted January 1, 2018.
• For further information, refer to Note 1.
| 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 the treatment of settlement payments for zero coupon debt instruments and distributions received from equity method investments. | | • Adopted January 1, 2018.
• The adoption of the guidance had no material impact as the Firm was either in compliance with the amendments or the amounts to which it was applied were immaterial.
| Treatment of restricted cash on the statement of cash flows
Issued November 2016
| | • Requires restricted cash to be combined with unrestricted cash when reconciling the beginning and ending cash balances on the Consolidated statements of cash flows.
• Requires additional disclosures to supplement the Consolidated statements of cash flows.
| | • Adopted January 1, 2018
• For further information, refer to Note 1.
|
| | | | 144 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | FASB Standards Adopted during 2018 (continued) | | | | | | Standard | | Summary of guidance | | Effects on financial statements | | | | | | Definition of a business
Issued January 2017
| | • Narrows the definition of a business and clarifies that, to be considered a business, substantially all of the fair value of the gross assets acquired (or disposed of) may not be concentrated in a single identifiable asset or a group of similar assets.
• In addition, a business must now include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
| | • Adopted January 1, 2018.
• The adoption of the guidance had no impact because it is 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 statements of income from the other cost components. | | • Adopted January 1, 2018.
• For further information, refer to Note 1.
| Premium amortization on purchased callable debt securities
Issued March 2017
| | • Requires amortization of premiums to the earliest call date on certain debt securities.
| | • Adopted January 1, 2018.
• For further information, refer to Note 1.
| Hedge accounting
Issued August 2017
| | • Aligns 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.
• Permits an election at adoption to transfer certain investment securities classified as held-to-maturity to available-for-sale.
• Simplifies hedge documentation requirements.
| | • Adopted January 1, 2018.
• For further information, refer to Note 1.
| Reclassification of certain tax effects from AOCI
Issued February 2018
| | • Permits reclassification of the income tax effects of the TCJA on items within AOCI to retained earnings so that the tax effects of items within AOCI reflect the appropriate tax rate. | | • Adopted January 1, 2018.
• For further information, refer to Note 1.
|
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 145 |
Management’s discussion and analysis
| | | | | | FASB Standards Issued but not adopted as of December 31, 2018 | | | | | | Standard | | Summary of guidance | | Effects on financial statements | | | | | | Leases
Issued February 2016
| | • Requires lessees to recognize all leases longer than twelve months on the Consolidated balance sheets as a lease liability with a corresponding right-of-use asset.
• Requires lessees and lessors to classify most leases using principles similar to existing lease accounting, but eliminates the “bright line” classification tests.
• Expands qualitative and quantitative leasing disclosures.
| | • Adopted January 1, 2019.
• The Firm elected the practical expedient to adopt and implement the new lease guidance as of January 1, 2019 through a cumulative-effect adjustment without revising prior comparative periods. Upon adoption, the Firm recognized lease right-of-use (“ROU”) assets and lease liabilities on the Consolidated balance sheet of $8.1 billion and $8.2 billion, respectively. The impact to the Firm’s CET1 capital ratio was a reduction of approximately 6 bps. The adoption of the new lease guidance did not have a material impact on the Firm’s Consolidated statement of income.
• The Firm elected the available practical expedients to not reassess whether existing contracts contain a lease or whether classification or unamortized initial lease costs would be different under the new lease guidance.
| Financial instruments – credit lossesInstruments - Credit Losses (“CECL”) Issued June 2016 | | • Replaces existing incurred loss impairment guidance and establishesEstablishes a single allowance framework for all financial assets carriedmeasured at amortized cost which will reflectand certain off-balance sheet credit exposures. This framework requires that management’s estimate ofreflects credit losses over the fullinstrument’s remaining expected life of the financial assets and will considerconsiders 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, which will be offset by anwith a corresponding increase in the recorded investmentamortized cost of the related loans. •Requires inclusion of expected recoveries, limited to the cumulative amount of prior writeoffs, 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 credit 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 established a Firmwide, cross-discipline governance structure, which provides implementation oversight. The Firm continuesRefer to test and refine its current expected credit loss models that satisfy the requirements of the new standard. This review and testing, as well as efforts to meet expanded disclosure requirements, will extend through the remainder of 2019. •
The Firm expects that the allowance related to the Firm’s loans and commitments will increase as it will cover credit losses over the full remaining expected life of the portfolios. The Firm currently intends to estimate losses over a two-year forecast period using the weighted-average of a range of macroeconomic scenarios (established on a Firmwide basis), and then revert to longer term historical loss experience to estimate losses over more extended periods.•
The Firm currently expects the increase in the allowance to be in the range of $4-6 billion, primarily driven by Card. This estimate is subject toNote 1 for further refinement based on continuing reviews and approvals of models, methodologies and judgments. The ultimate impact will depend upon the nature and characteristics of the Firm’s portfolio at the adoption date, the macroeconomic conditions and forecasts at that date, and other management judgments.•
The Firm plans to adopt the new guidance on January 1, 2020.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)•No impact upon adoption as the guidance was applied prospectively.
• Based onRefer to Note 15 for further information. | Reference Rate Reform
Issued March 2020 and updated January 2021 | | •Provides optional expedients and exceptions to current impairment test results,accounting guidance when financial instruments, hedge accounting relationships, and other transactions are amended due to reference rate reform. •Provides an election to account for certain contract amendments related to reference rate reform as modifications rather than extinguishments without the requirement to assess the significance of the amendments. •Allows for changes in critical terms of a hedge accounting relationship without automatic termination of that relationship. Provides various practical expedients and elections designed to allow hedge accounting to continue uninterrupted during the transition period. •Provides a one-time election to transfer securities out of the held-to-maturity classification if certain criteria are met. •The January 2021 update provides an election to account for derivatives modified to change the rate used for discounting, margining, or contract price alignment (collectively “discounting transition”) as modifications. | | •Issued and effective March 12, 2020. The January 7, 2021 update was effective when issued. •The Firm doeselected to apply certain of the practical expedients related to contract modifications and hedge accounting relationships, and discounting transition beginning in the third quarter of 2020. The discounting transition election was applied retrospectively. The main purpose of the practical expedients is to ease the administrative burden of accounting for contracts impacted by reference rate reform, and these elections did not expecthave a material effectimpact on the Consolidated Financial Statements. However, the impact of the new accounting guidance will depend on the performance of the reporting units and the market conditions at the time of adoption. • After adoption, the guidance may result in more frequent goodwill impairment losses due to the removal of the second condition.
• The Firm plans to adopt the new guidance on January 1, 2020.
|
| | (a) | Early adoption is permitted. |
| | | | 146 | | JPMorgan Chase & Co./2018 Form 10-K |
| | | | | | 156 | | JPMorgan Chase & Co./2020 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 20182020 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: •Economic, financial, reputational and other impacts of the COVID-19 pandemic; •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;liquidity; •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 environmentalsustainability concerns that may arise, including 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 effectiveness of the Firm’s control agenda; •Ability of the Firm to develop or 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 and diverse 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 cyberattackscyber attacks 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 2018JPMorgan Chase’s 2020 Form 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./20182020 Form 10-K | | 147157 |
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, 2018.2020. 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, 2018,2020, 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, 2018.2020. The effectiveness of the Firm’s internal control over financial reporting as of December 31, 2018,2020, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
James Dimon Chairman and Chief Executive Officer
Marianne LakeJennifer Piepszak
Executive Vice President and Chief Financial Officer
February 26, 201923, 2021
| | | | | | | | | 148158 | | JPMorgan Chase & Co./20182020 Form 10-K |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders 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, 20182020 and 2017,2019, 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, 2018,2020, 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, 2018,2020, 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 of December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20182020 in 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, 2018,2020, based on criteria established in Internal Control – Integrated Framework (2013)(2013) issued by the COSO. Change in Accounting Principle As discussed in Note 1 and Note 13 to the consolidated financial statements, the Firm changed the manner in which it accounts for credit losses on certain financial instruments in 2020. 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) 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.
| | | PricewaterhouseCoopers LLP 300 Madison Avenue New York, NY 10017 |
| | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 159 |
Report of 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. Allowance for Loan Losses – Portfolio-based component of Wholesale Loan and Credit Card Loan Portfolios As described in Note 13 to the consolidated financial statements, the allowance for loan losses for the portfolio-based component of the wholesale and credit card loan portfolios was $23.4 billion on total portfolio-based retained loans of $653.4 billion at December 31, 2020. The Firm’s allowance for loan losses represents management’s estimate of expected credit losses over the remaining expected life of the Firm's loan portfolios and considers expected future changes in macroeconomic conditions. The portfolio-based component of the Firm’s allowance for loan losses for the wholesale and credit card retained loan portfolios begins with a quantitative calculation of expected credit losses over the expected life of the loan by applying credit loss factors to the estimated exposure at default. The credit loss factors applied are determined based on the weighted average of five internally developed macroeconomic scenarios that take into consideration the Firm's economic outlook as derived through forecast macroeconomic variables, the most significant of which are U.S. unemployment and U.S. real gross domestic product. This quantitative calculation is further adjusted to take into consideration model imprecision, emerging risk assessments, trends and other subjective factors that are not yet otherwise reflected in the credit loss estimate. The principal considerations for our determination that performing procedures relating to the allowance for loan losses for the portfolio-based component of the wholesale and credit card loan portfolios is a critical audit matter are (i) the significant judgment and estimation by management in the forecast of macroeconomic variables, specifically U.S. unemployment and U.S. real gross domestic product, as the Firm’s forecasts of economic conditions significantly affect its estimate of expected credit losses at the balance sheet date, (ii) the significant judgment and estimation by management in determining the quantitative calculation utilized in their credit loss estimates and the adjustments to take into consideration model imprecision, emerging risk assessments, trends and other subjective factors that are not yet otherwise reflected in the credit loss estimate, which both 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 credit loss estimates and the appropriateness of the adjustments to the credit loss estimates, and (iii) 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, including controls over model validation and generation of macroeconomic scenarios. These procedures also included, among others, testing management’s process for estimating the allowance for loan losses, which involved (i) evaluating the appropriateness of the models and methodologies used in quantitative calculations; (ii) evaluating the reasonableness of forecasts of U.S. unemployment and U.S. real gross domestic product; (iii) testing the completeness and accuracy of data used in the estimate; and (iv) evaluating the reasonableness of management’s adjustments to the quantitative output for the impacts of model imprecision, emerging risk assessments, trends and other subjective factors that are not yet otherwise reflected in the credit loss estimate. These procedures also included the use of professionals with specialized skill and knowledge to assist in evaluating the appropriateness of certain models, methodologies and macroeconomic variables. Fair Value of Certain Level 3 Financial Instruments As described in Notes 2 and 3 to the consolidated financial statements, the Firm carries $1.2 trillion of its assets and $437.6 billion of its liabilities at fair value on a recurring basis. Included in these balances are $10.3 billion of trading assets and $41.5 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 forward equity prices, volatility relating to interest rates and equity prices and correlation relating to interest rates, equity prices, credit 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) the 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. | | | | | | | | | 160 | | JPMorgan Chase & Co./2020 Form 10-K |
Report of Independent Registered Public Accounting Firm 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.
February 26, 201923, 2021
We have served as the Firm’s auditor since 1965.
| | PricewaterhouseCoopers LLP Ÿ 300 Madison Avenue Ÿ New York, NY 10017
|
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 149161 |
Consolidated statements of income
| | | | | | | | | | | | | Year ended December 31, (in millions, except per share data) | 2018 |
| | 2017 |
| | 2016 |
| Revenue | | | | | | Investment banking fees | $ | 7,550 |
| | $ | 7,412 |
| | $ | 6,572 |
| Principal transactions | 12,059 |
| | 11,347 |
| | 11,566 |
| Lending- and deposit-related fees | 6,052 |
| | 5,933 |
| | 5,774 |
| Asset management, administration and commissions | 17,118 |
| | 16,287 |
| | 15,364 |
| Investment securities gains/(losses) | (395 | ) | | (66 | ) | | 141 |
| Mortgage fees and related income | 1,254 |
| | 1,616 |
| | 2,491 |
| Card income | 4,989 |
| | 4,433 |
| | 4,779 |
| Other income | 5,343 |
| | 3,646 |
| | 3,799 |
| Noninterest revenue | 53,970 |
| | 50,608 |
| | 50,486 |
| Interest income | 77,442 |
| | 64,372 |
| | 55,901 |
| Interest expense | 22,383 |
| | 14,275 |
| | 9,818 |
| Net interest income | 55,059 |
| | 50,097 |
| | 46,083 |
| Total net revenue | 109,029 |
| | 100,705 |
| | 96,569 |
| | | | | | | Provision for credit losses | 4,871 |
| | 5,290 |
| | 5,361 |
| | | | | | | Noninterest expense | | | | | | Compensation expense | 33,117 |
| | 31,208 |
| | 30,203 |
| Occupancy expense | 3,952 |
| | 3,723 |
| | 3,638 |
| Technology, communications and equipment expense | 8,802 |
| | 7,715 |
| | 6,853 |
| Professional and outside services | 8,502 |
| | 7,890 |
| | 7,526 |
| Marketing | 3,290 |
| | 2,900 |
| | 2,897 |
| Other expense | 5,731 |
| | 6,079 |
| | 5,555 |
| Total noninterest expense | 63,394 |
| | 59,515 |
| | 56,672 |
| Income before income tax expense | 40,764 |
| | 35,900 |
| | 34,536 |
| Income tax expense | 8,290 |
| | 11,459 |
| | 9,803 |
| Net income | $ | 32,474 |
| | $ | 24,441 |
| | $ | 24,733 |
| Net income applicable to common stockholders | $ | 30,709 |
| | $ | 22,567 |
| | $ | 22,834 |
| Net income per common share data | | | | | | Basic earnings per share | $ | 9.04 |
| | $ | 6.35 |
| | $ | 6.24 |
| Diluted earnings per share | 9.00 |
| | 6.31 |
| | 6.19 |
| | | | | | | Weighted-average basic shares | 3,396.4 |
| | 3,551.6 |
| | 3,658.8 |
| Weighted-average diluted shares | 3,414.0 |
| | 3,576.8 |
| | 3,690.0 |
|
Effective January 1, 2018,
| | | | | | | | | | | | | | | | | | Year ended December 31, (in millions, except per share data) | 2020 | | 2019 | | 2018 | Revenue | | | | | | Investment banking fees | $ | 9,486 | | | $ | 7,501 | | | $ | 7,550 | | Principal transactions | 18,021 | | | 14,018 | | | 12,059 | | Lending- and deposit-related fees(a) | 6,511 | | | 6,626 | | | 6,377 | | Asset management, administration and commissions(a) | 18,177 | | | 16,908 | | | 16,793 | | Investment securities gains/(losses) | 802 | | | 258 | | | (395) | | Mortgage fees and related income | 3,091 | | | 2,036 | | | 1,254 | | Card income(b) | 4,435 | | | 5,076 | | | 4,743 | | Other income | 4,457 | | | 5,731 | | | 5,343 | | Noninterest revenue | 64,980 | | | 58,154 | | | 53,724 | | Interest income | 64,523 | | | 84,040 | | | 76,100 | | Interest expense | 9,960 | | | 26,795 | | | 21,041 | | Net interest income | 54,563 | | | 57,245 | | | 55,059 | | Total net revenue | 119,543 | | | 115,399 | | | 108,783 | | | | | | | | Provision for credit losses | 17,480 | | | 5,585 | | | 4,871 | | | | | | | | Noninterest expense | | | | | | Compensation expense | 34,988 | | | 34,155 | | | 33,117 | | Occupancy expense | 4,449 | | | 4,322 | | | 3,952�� | | Technology, communications and equipment expense | 10,338 | | | 9,821 | | | 8,802 | | Professional and outside services | 8,464 | | | 8,533 | | | 8,502 | | Marketing(b) | 2,476 | | | 3,351 | | | 3,044 | | Other expense | 5,941 | | | 5,087 | | | 5,731 | | Total noninterest expense | 66,656 | | | 65,269 | | | 63,148 | | Income before income tax expense | 35,407 | | | 44,545 | | | 40,764 | | Income tax expense | 6,276 | | | 8,114 | | | 8,290 | | Net income | $ | 29,131 | | | $ | 36,431 | | | $ | 32,474 | | Net income applicable to common stockholders | $ | 27,410 | | | $ | 34,642 | | | $ | 30,709 | | Net income per common share data | | | | | | Basic earnings per share | $ | 8.89 | | | $ | 10.75 | | | $ | 9.04 | | Diluted earnings per share | 8.88 | | | 10.72 | | | 9.00 | | | | | | | | Weighted-average basic shares | 3,082.4 | | | 3,221.5 | | | 3,396.4 | | Weighted-average diluted shares | 3,087.4 | | | 3,230.4 | | | 3,414.0 | |
(a)In the first quarter of 2020, the Firm adopted several new accounting standards. Certainreclassified certain fees from asset management, administration and commissions to lending- and deposit-related fees. Prior-period amounts have been revised to conform with the current presentation. (b)In the second quarter of the new accounting standards were applied retrospectively and, accordingly, prior period amounts were revised. For additional information, refer to Note 1.
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | 150 | | JPMorgan Chase & Co./2018 Form 10-K |
Consolidated statements of comprehensive income
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2018 |
| | 2017 |
| | 2016 |
| Net income | | $ | 32,474 |
| | $ | 24,441 |
| | $ | 24,733 |
| Other comprehensive income/(loss), after–tax | | | | | | | Unrealized gains/(losses) on investment securities | | (1,858 | ) | | 640 |
| | (1,105 | ) | Translation adjustments, net of hedges | | 20 |
| | (306 | ) | | (2 | ) | Fair value hedges | | (107 | ) | | NA |
| | NA |
| Cash flow hedges | | (201 | ) | | 176 |
| | (56 | ) | Defined benefit pension and OPEB plans | | (373 | ) | | 738 |
| | (28 | ) | DVA on fair value option elected liabilities | | 1,043 |
| | (192 | ) | | (330 | ) | Total other comprehensive income/(loss), after–tax | | (1,476 | ) | | 1,056 |
| | (1,521 | ) | Comprehensive income | | $ | 30,998 |
| | $ | 25,497 |
| | $ | 23,212 |
|
Effective January 1, 2018,2020, the Firm adopted several new accounting standards. For additional information, referreclassified certain spend-based credit card reward costs from marketing expense to Note 1.be a reduction of card income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation.
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 151 |
Consolidated balance sheets
| | | | | | | | | December 31, (in millions, except share data) | 2018 | | 2017 | Assets | | | | Cash and due from banks | $ | 22,324 |
| | $ | 25,898 |
| Deposits with banks | 256,469 |
| | 405,406 |
| Federal funds sold and securities purchased under resale agreements (included 13,235 and $14,732 at fair value) | 321,588 |
| | 198,422 |
| Securities borrowed (included $5,105 and $3,049 at fair value) | 111,995 |
| | 105,112 |
| Trading assets (included assets pledged of $89,073 and $109,887) | 413,714 |
| | 381,844 |
| Investment securities (included $230,394 and $202,225 at fair value and assets pledged of $11,432 and $17,969) | 261,828 |
| | 249,958 |
| Loans (included $3,151 and $2,508 at fair value) | 984,554 |
| | 930,697 |
| Allowance for loan losses | (13,445 | ) | | (13,604 | ) | Loans, net of allowance for loan losses | 971,109 |
| | 917,093 |
| Accrued interest and accounts receivable | 73,200 |
| | 67,729 |
| Premises and equipment | 14,934 |
| | 14,159 |
| Goodwill, MSRs and other intangible assets | 54,349 |
| | 54,392 |
| Other assets (included $9,630 and $16,128 at fair value and assets pledged of $3,457 and $7,980) | 121,022 |
| | 113,587 |
| Total assets(a) | $ | 2,622,532 |
| | $ | 2,533,600 |
| Liabilities | | | | Deposits (included $23,217 and $21,321 at fair value) | $ | 1,470,666 |
| | $ | 1,443,982 |
| Federal funds purchased and securities loaned or sold under repurchase agreements (included $935 and $697 at fair value) | 182,320 |
| | 158,916 |
| Short-term borrowings (included $7,130 and $9,191 at fair value) | 69,276 |
| | 51,802 |
| Trading liabilities | 144,773 |
| | 123,663 |
| Accounts payable and other liabilities (included $3,269 and $9,208 at fair value) | 196,710 |
| | 189,383 |
| Beneficial interests issued by consolidated VIEs (included $28 and $45 at fair value) | 20,241 |
| | 26,081 |
| Long-term debt (included $54,886 and $47,519 at fair value) | 282,031 |
| | 284,080 |
| Total liabilities(a) | 2,366,017 |
| | 2,277,907 |
| Commitments and contingencies (refer to Notes 27, 28 and 29) |
|
| |
|
| Stockholders’ equity | | | | Preferred stock ($1 par value; authorized 200,000,000 shares: issued 2,606,750 shares) | 26,068 |
| | 26,068 |
| Common stock ($1 par value; authorized 9,000,000,000 shares; issued 4,104,933,895 shares) | 4,105 |
| | 4,105 |
| Additional paid-in capital | 89,162 |
| | 90,579 |
| Retained earnings | 199,202 |
| | 177,676 |
| Accumulated other comprehensive loss | (1,507 | ) | | (119 | ) | Shares held in restricted stock units (“RSU”) trust, at cost (472,953 shares) | (21 | ) | | (21 | ) | Treasury stock, at cost (829,167,674 and 679,635,064 shares) | (60,494 | ) | | (42,595 | ) | Total stockholders’ equity | 256,515 |
| | 255,693 |
| Total liabilities and stockholders’ equity | $ | 2,622,532 |
| | $ | 2,533,600 |
|
Effective January 1, 2018, the Firm adopted several new accounting standards. Certain of the new accounting standards were applied retrospectively and, accordingly, prior period amounts were revised. For additional information, refer to Note 1.
| | (a) | The following table presents information on assets and liabilities related to VIEs that are consolidated by the Firm at December 31, 2018 and 2017. 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. The assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs and exclude intercompany balances that eliminate in consolidation. For a further discussion, refer to Note 14. |
| | | | | | | | | December 31, (in millions) | 2018 | | 2017 | Assets | | | | Trading assets | $ | 1,966 |
| | $ | 1,449 |
| Loans | 59,456 |
| | 68,995 |
| All other assets | 1,013 |
| | 2,674 |
| Total assets | $ | 62,435 |
| | $ | 73,118 |
| Liabilities | | | | Beneficial interests issued by consolidated VIEs | $ | 20,241 |
| | $ | 26,081 |
| All other liabilities | 312 |
| | 349 |
| Total liabilities | $ | 20,553 |
| | $ | 26,430 |
|
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | 152 | | JPMorgan Chase & Co./2018 Form 10-K |
Consolidated statements of changes in stockholders’ equity
| | | | | | | | | | | | | | Year ended December 31, (in millions, except per share data) | | 2018 |
| 2017 | | 2016 | Preferred stock | | | | | | | Balance at January 1 | | $ | 26,068 |
| | $ | 26,068 |
| | $ | 26,068 |
| Issuance | | 1,696 |
| | 1,258 |
| | — |
| Redemption | | (1,696 | ) | | (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 | | 90,579 |
| | 91,627 |
| | 92,500 |
| Shares issued and commitments to issue common stock for employee share-based compensation awards, and related tax effects | | (738 | ) | | (734 | ) | | (334 | ) | Other | | (679 | ) | | (314 | ) | | (539 | ) | Balance at December 31 | | 89,162 |
| | 90,579 |
| | 91,627 |
| Retained earnings | | | | | | | Balance at January 1 | | 177,676 |
| | 162,440 |
| | 146,420 |
| Cumulative effect of change in accounting principles | | (183 | ) | | — |
| | (154 | ) | Net income | | 32,474 |
| | 24,441 |
| | 24,733 |
| Dividends declared: | | | | | | | Preferred stock | | (1,551 | ) | | (1,663 | ) | | (1,647 | ) | Common stock ($2.72, $2.12 and $1.88 per share for 2018, 2017 and 2016, respectively) | | (9,214 | ) | | (7,542 | ) | | (6,912 | ) | Balance at December 31 | | 199,202 |
| | 177,676 |
| | 162,440 |
| Accumulated other comprehensive income | | | | | | | Balance at January 1 | | (119 | ) | | (1,175 | ) | | 192 |
| Cumulative effect of change in accounting principles | | 88 |
| | — |
| | 154 |
| Other comprehensive income/(loss), after-tax | | (1,476 | ) | | 1,056 |
| | (1,521 | ) | Balance at December 31 | | (1,507 | ) | | (119 | ) | | (1,175 | ) | 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 | | (42,595 | ) | | (28,854 | ) | | (21,691 | ) | Repurchase | | (19,983 | ) | | (15,410 | ) | | (9,082 | ) | Reissuance | | 2,084 |
| | 1,669 |
| | 1,919 |
| Balance at December 31 | | (60,494 | ) | | (42,595 | ) | | (28,854 | ) | Total stockholders’ equity | | $ | 256,515 |
| | $ | 255,693 |
| | $ | 254,190 |
|
Effective January 1, 2018, the Firm adopted several new accounting standards. For additional information, refer to Note 1.
The Notes to Consolidated Financial Statements are an integral part of these statements.
| | | | | | | | | 162 | | JPMorgan Chase & Co./20182020 Form 10-K | | 153 |
Consolidated statements of cash flows
comprehensive income
| | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | Net income | | $ | 29,131 | | | $ | 36,431 | | | $ | 32,474 | | Other comprehensive income/(loss), after–tax | | | | | | | Unrealized gains/(losses) on investment securities | | 4,123 | | | 2,855 | | | (1,858) | | Translation adjustments, net of hedges | | 234 | | | 20 | | | 20 | | Fair value hedges | | 19 | | | 30 | | | (107) | | Cash flow hedges | | 2,320 | | | 172 | | | (201) | | Defined benefit pension and OPEB plans | | 212 | | | 964 | | | (373) | | DVA on fair value option elected liabilities | | (491) | | | (965) | | | 1,043 | | Total other comprehensive income/(loss), after–tax | | 6,417 | | | 3,076 | | | (1,476) | | Comprehensive income | | $ | 35,548 | | | $ | 39,507 | | | $ | 30,998 | |
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | Operating activities | | | | | | Net income | $ | 32,474 |
| | $ | 24,441 |
| | $ | 24,733 |
| Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | | | | | Provision for credit losses | 4,871 |
| | 5,290 |
| | 5,361 |
| Depreciation and amortization | 7,791 |
| | 6,179 |
| | 5,478 |
| Deferred tax expense | 1,721 |
| | 2,312 |
| | 4,651 |
| Other | 2,717 |
| | 2,136 |
| | 1,799 |
| Originations and purchases of loans held-for-sale | (102,141 | ) | | (94,628 | ) | | (61,107 | ) | Proceeds from sales, securitizations and paydowns of loans held-for-sale | 93,453 |
| | 93,270 |
| | 60,196 |
| Net change in: | | | | | | Trading assets | (38,371 | ) | | 5,673 |
| | (20,007 | ) | Securities borrowed | (6,861 | ) | | (8,653 | ) | | 2,313 |
| Accrued interest and accounts receivable | (5,849 | ) | | (15,868 | ) | | (5,815 | ) | Other assets | (8,833 | ) | | 3,982 |
| | (4,176 | ) | Trading liabilities | 18,290 |
| | (26,256 | ) | | 5,198 |
| Accounts payable and other liabilities | 14,630 |
| | (16,508 | ) | | 5,087 |
| Other operating adjustments | 295 |
| | 7,803 |
| | (1,827 | ) | Net cash provided by/(used in) operating activities | 14,187 |
| | (10,827 | ) | | 21,884 |
| Investing activities | | | | | | Net change in: | | | | | | Federal funds sold and securities purchased under resale agreements | (123,201 | ) | | 31,448 |
| | (17,468 | ) | Held-to-maturity securities: | | | | | | Proceeds from paydowns and maturities | 2,945 |
| | 4,563 |
| | 6,218 |
| Purchases | (9,368 | ) | | (2,349 | ) | | (143 | ) | Available-for-sale securities: | | | | | | Proceeds from paydowns and maturities | 37,401 |
| | 56,117 |
| | 65,950 |
| Proceeds from sales | 46,067 |
| | 90,201 |
| | 48,592 |
| Purchases | (95,091 | ) | | (105,309 | ) | | (123,959 | ) | Proceeds from sales and securitizations of loans held-for-investment | 29,826 |
| | 15,791 |
| | 15,429 |
| Other changes in loans, net | (81,586 | ) | | (61,650 | ) | | (80,996 | ) | All other investing activities, net | (4,986 | ) | | (563 | ) | | (2,825 | ) | Net cash provided by/(used in) investing activities | (197,993 | ) | | 28,249 |
| | (89,202 | ) | Financing activities | | | | | | Net change in: | | | | | | Deposits | 26,728 |
| | 57,022 |
| | 97,336 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | 23,415 |
| | (6,739 | ) | | 13,007 |
| Short-term borrowings | 18,476 |
| | 16,540 |
| | (2,461 | ) | Beneficial interests issued by consolidated VIEs | 1,712 |
| | (1,377 | ) | | (5,707 | ) | Proceeds from long-term borrowings | 71,662 |
| | 56,271 |
| | 83,070 |
| Payments of long-term borrowings | (76,313 | ) | | (83,079 | ) | | (68,949 | ) | Proceeds from issuance of preferred stock | 1,696 |
| | 1,258 |
| | — |
| Redemption of preferred stock | (1,696 | ) | | (1,258 | ) | | — |
| Treasury stock repurchased | (19,983 | ) | | (15,410 | ) | | (9,082 | ) | Dividends paid | (10,109 | ) | | (8,993 | ) | | (8,476 | ) | All other financing activities, net | (1,430 | ) | | 407 |
| | (467 | ) | Net cash provided by financing activities | 34,158 |
| | 14,642 |
| | 98,271 |
| Effect of exchange rate changes on cash and due from banks and deposits with banks | (2,863 | ) | | 8,086 |
| | (1,482 | ) | Net increase/(decrease) in cash and due from banks and deposits with banks | (152,511 | ) | | 40,150 |
| | 29,471 |
| Cash and due from banks and deposits with banks at the beginning of the period | 431,304 |
| | 391,154 |
| | 361,683 |
| Cash and due from banks and deposits with banks at the end of the period | $ | 278,793 |
| | $ | 431,304 |
| | $ | 391,154 |
| Cash interest paid | $ | 21,152 |
| | $ | 14,153 |
| | $ | 9,508 |
| Cash income taxes paid, net | 3,542 |
| | 4,325 |
| | 2,405 |
|
Effective January 1, 2018, the Firm adopted several new accounting standards. Certain of the new accounting standards were applied retrospectively and, accordingly, prior period amounts were revised. For additional information, refer to Note 1.
The Notes to Consolidated Financial Statements are an integral part of these statements. | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 163 |
Consolidated balance sheets
| | | | | | | | | | | | December 31, (in millions, except share data) | 2020 | | 2019 | Assets | | | | Cash and due from banks | $ | 24,874 | | | $ | 21,704 | | Deposits with banks | 502,735 | | | 241,927 | | Federal funds sold and securities purchased under resale agreements (included $238,015 and $14,561 at fair value) | 296,284 | | | 249,157 | | Securities borrowed (included $52,983 and $6,237 at fair value) | 160,635 | | | 139,758 | | Trading assets (included assets pledged of $130,645 and $111,522)(a) | 503,126 | | | 369,687 | | Available-for-sale securities (amortized cost of $381,729 and $345,306; included assets pledged of $32,227 and $10,325) | 388,178 | | | 350,699 | | Held-to-maturity securities (net of allowance for credit losses of $78) | 201,821 | | | 47,540 | | Investment securities, net of allowance for credit losses | 589,999 | | | 398,239 | | Loans (included $44,474 and $44,955 at fair value)(a) | 1,012,853 | | | 997,620 | | Allowance for loan losses | (28,328) | | | (13,123) | | Loans, net of allowance for loan losses | 984,525 | | | 984,497 | | Accrued interest and accounts receivable | 90,503 | | | 72,861 | | Premises and equipment | 27,109 | | | 25,813 | | | | | | | | | | | | | | Goodwill, MSRs and other intangible assets | 53,428 | | | 53,341 | | Other assets (included $13,827 and $12,676 at fair value and assets pledged of $3,739 and $3,349)(a) | 152,853 | | | 130,395 | | Total assets(b) | $ | 3,386,071 | | | $ | 2,687,379 | | Liabilities | | | | Deposits (included $14,484 and $28,589 at fair value) | $ | 2,144,257 | | | $ | 1,562,431 | | Federal funds purchased and securities loaned or sold under repurchase agreements (included $155,735 and $549 at fair value) | 215,209 | | | 183,675 | | | | | | | | | | Short-term borrowings (included $16,893 and $5,920 at fair value) | 45,208 | | | 40,920 | | Trading liabilities | 170,181 | | | 119,277 | | Accounts payable and other liabilities (included $3,476 and $3,728 at fair value) | 232,599 | | | 210,407 | | Beneficial interests issued by consolidated VIEs (included $41 and $36 at fair value) | 17,578 | | | 17,841 | | Long-term debt (included $76,817 and $75,745 at fair value) | 281,685 | | | 291,498 | | Total liabilities(b) | 3,106,717 | | | 2,426,049 | | Commitments and contingencies (refer to Notes 28, 29 and 30) | 0 | | 0 | Stockholders’ equity | | | | Preferred stock ($1 par value; authorized 200,000,000 shares: issued 3,006,250 and 2,699,250 shares) | 30,063 | | | 26,993 | | Common stock ($1 par value; authorized 9,000,000,000 shares; issued 4,104,933,895 shares) | 4,105 | | | 4,105 | | Additional paid-in capital | 88,394 | | | 88,522 | | Retained earnings | 236,990 | | | 223,211 | | Accumulated other comprehensive income | 7,986 | | | 1,569 | | Shares held in restricted stock units (“RSU”) trust, at cost (0 and 472,953 shares) | 0 | | | (21) | | Treasury stock, at cost (1,055,499,435 and 1,020,912,567 shares) | (88,184) | | | (83,049) | | Total stockholders’ equity | 279,354 | | | 261,330 | | Total liabilities and stockholders’ equity | $ | 3,386,071 | | | $ | 2,687,379 | |
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information. (a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation. (b)The following table presents information on assets and liabilities related to VIEs that are consolidated by the Firm at December 31, 2020 and 2019. 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. The assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs and exclude intercompany balances that eliminate in consolidation. Refer to Note 14 for a further discussion. | | | | | | | | | | | | December 31, (in millions) | 2020 | | 2019 | Assets | | | | Trading assets | $ | 1,934 | | | $ | 2,633 | | Loans | 37,619 | | | 42,931 | | All other assets | 681 | | | 881 | | Total assets | $ | 40,234 | | | $ | 46,445 | | Liabilities | | | | Beneficial interests issued by consolidated VIEs | $ | 17,578 | | | $ | 17,841 | | All other liabilities | 233 | | | 447 | | Total liabilities | $ | 17,811 | | | $ | 18,288 | |
The Notes to Consolidated Financial Statements are an integral part of these statements. | | | | | | | | | 154164 | | JPMorgan Chase & Co./20182020 Form 10-K |
Consolidated statements of changes in stockholders’ equity | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions, except per share data) | | 2020 | | 2019 | | 2018 | Preferred stock | | | | | | | Balance at January 1 | | $ | 26,993 | | | $ | 26,068 | | | $ | 26,068 | | Issuance | | 4,500 | | | 5,000 | | | 1,696 | | Redemption | | (1,430) | | | (4,075) | | | (1,696) | | Balance at December 31 | | 30,063 | | | 26,993 | | | 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 | | 88,522 | | | 89,162 | | | 90,579 | | Shares issued and commitments to issue common stock for employee share-based compensation awards, and related tax effects | | (72) | | | (591) | | | (738) | | Other | | (56) | | | (49) | | | (679) | | Balance at December 31 | | 88,394 | | | 88,522 | | | 89,162 | | Retained earnings | | | | | | | Balance at January 1 | | 223,211 | | | 199,202 | | | 177,676 | | Cumulative effect of change in accounting principles | | (2,650) | | | 62 | | | (183) | | Net income | | 29,131 | | | 36,431 | | | 32,474 | | Dividends declared: | | | | | | | Preferred stock | | (1,583) | | | (1,587) | | | (1,551) | | Common stock ($3.60, $3.40 and $2.72 per share for 2020, 2019 and 2018, respectively) | | (11,119) | | | (10,897) | | | (9,214) | | Balance at December 31 | | 236,990 | | | 223,211 | | | 199,202 | | Accumulated other comprehensive income | | | | | | | Balance at January 1 | | 1,569 | | | (1,507) | | | (119) | | Cumulative effect of change in accounting principles | | — | | | — | | | 88 | | Other comprehensive income/(loss), after-tax | | 6,417 | | | 3,076 | | | (1,476) | | Balance at December 31 | | 7,986 | | | 1,569 | | | (1,507) | | Shares held in RSU Trust, at cost | | | | | | | Balance at the beginning of the period | | (21) | | | (21) | | | (21) | | Liquidation of RSU Trust | | 21 | | | 0 | | | 0 | | Balance at December 31 | | 0 | | | (21) | | | (21) | | | | | | | | | | | | | | | | Treasury stock, at cost | | | | | | | Balance at January 1 | | (83,049) | | | (60,494) | | | (42,595) | | Repurchase | | (6,397) | | | (24,121) | | | (19,983) | | Reissuance | | 1,262 | | | 1,566 | | | 2,084 | | | | | | | | | Balance at December 31 | | (88,184) | | | (83,049) | | | (60,494) | | Total stockholders’ equity | | $ | 279,354 | | | $ | 261,330 | | | $ | 256,515 | |
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information.
The Notes to Consolidated Financial Statements are an integral part of these statements. | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 165 |
Consolidated statements of cash flows
| | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Operating activities | | | | | | Net income | $ | 29,131 | | | $ | 36,431 | | | $ | 32,474 | | Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | | | | | Provision for credit losses | 17,480 | | | 5,585 | | | 4,871 | | | | | | | | | | | | | | Depreciation and amortization | 8,614 | | | 8,368 | | | 7,791 | | Deferred tax expense | (3,981) | | | 949 | | | 1,721 | | Other | 1,649 | | | 1,996 | | | 2,717 | | Originations and purchases of loans held-for-sale(a) | (166,504) | | | (169,289) | | | (172,728) | | Proceeds from sales, securitizations and paydowns of loans held-for-sale(a) | 175,490 | | | 171,415 | | | 163,747 | | Net change in: | | | | | | Trading assets(a) | (148,749) | | | 6,551 | | | (35,067) | | Securities borrowed | (20,734) | | | (27,631) | | | (6,861) | | Accrued interest and accounts receivable | (18,012) | | | (78) | | | (5,849) | | Other assets(a) | (42,434) | | | (17,570) | | | (8,779) | | Trading liabilities | 77,198 | | | (14,516) | | | 18,290 | | Accounts payable and other liabilities | 7,827 | | | (352) | | | 14,630 | | Other operating adjustments(a) | 3,115 | | | 2,233 | | | (1,343) | | Net cash provided by/(used in) operating activities | (79,910) | | | 4,092 | | | 15,614 | | Investing activities | | | | | | Net change in: | | | | | | Federal funds sold and securities purchased under resale agreements | (47,115) | | | 72,396 | | | (123,201) | | Held-to-maturity securities: | | | | | | Proceeds from paydowns and maturities | 21,360 | | | 3,423 | | | 2,945 | | Purchases | (12,400) | | | (13,427) | | | (9,368) | | Available-for-sale securities: | | | | | | Proceeds from paydowns and maturities | 57,675 | | | 52,200 | | | 37,401 | | Proceeds from sales | 149,758 | | | 70,181 | | | 46,067 | | Purchases | (397,145) | | | (242,149) | | | (95,091) | | Proceeds from sales and securitizations of loans held-for-investment | 23,559 | | | 62,095 | | | 29,826 | | Other changes in loans, net(a) | (50,263) | | | (51,743) | | | (83,013) | | All other investing activities, net | (7,341) | | | (5,035) | | | (4,986) | | Net cash (used in) investing activities | (261,912) | | | (52,059) | | | (199,420) | | Financing activities | | | | | | Net change in: | | | | | | Deposits | 602,765 | | | 101,002 | | | 26,728 | | Federal funds purchased and securities loaned or sold under repurchase agreements | 31,528 | | | 1,347 | | | 23,415 | | Short-term borrowings | 4,438 | | | (28,561) | | | 18,476 | | Beneficial interests issued by consolidated VIEs | 1,347 | | | 4,289 | | | 1,712 | | Proceeds from long-term borrowings | 78,686 | | | 61,085 | | | 71,662 | | Payments of long-term borrowings | (105,055) | | | (69,610) | | | (76,313) | | Proceeds from issuance of preferred stock | 4,500 | | | 5,000 | | | 1,696 | | Redemption of preferred stock | (1,430) | | | (4,075) | | | (1,696) | | Treasury stock repurchased | (6,517) | | | (24,001) | | | (19,983) | | Dividends paid | (12,690) | | | (12,343) | | | (10,109) | | All other financing activities, net | (927) | | | (1,146) | | | (1,430) | | Net cash provided by financing activities | 596,645 | | | 32,987 | | | 34,158 | | Effect of exchange rate changes on cash and due from banks and deposits with banks | 9,155 | | | (182) | | | (2,863) | | Net increase/(decrease) in cash and due from banks and deposits with banks | 263,978 | | | (15,162) | | | (152,511) | | Cash and due from banks and deposits with banks at the beginning of the period | 263,631 | | | 278,793 | | | 431,304 | | Cash and due from banks and deposits with banks at the end of the period | $ | 527,609 | | | $ | 263,631 | | | $ | 278,793 | | Cash interest paid | $ | 13,077 | | | $ | 29,918 | | | $ | 21,152 | | Cash income taxes paid, net | 7,661 | | | 5,624 | | | 3,542 | |
(a) In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation. The Notes to Consolidated Financial Statements are an integral part of these statements. | | | | | | | | | 166 | | JPMorgan Chase & Co./2020 Form 10-K |
Notes to consolidated financial statements 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,businesses, commercial banking, financial transaction processing and asset management. ForRefer to Note 32 for a further discussion of the Firm’s business segments, refer to 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 of JPMorgan Chase and 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 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 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.without cause (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 the Firm is the 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 the accounting under such specialized investment company guidelines. Variable interest 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./2020 Form 10-K | | 167 |
Notes to consolidated financial statements circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment
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Notes to consolidated financial statements
includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and 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 recordsrecognizes interest income on loans, debt securities, and other debt instruments, generally on a level-yield basis, based on the underlying contractual rate. ForRefer to Note 7 for further discussion of interest income, refer to Note 7.income. Revenue from contracts with customers JPMorgan Chase recordsrecognizes noninterest revenue from certain contracts with customers under ASC 606, Revenue from Contracts with customers,, in investment banking fees, deposit-related fees, asset management administration and commissions, and components of card income. Under this guidance, revenue is recognizedincome, when the Firm’s related performance obligations are satisfied. ForRefer to Note 6 for further discussion of the Firm’s revenue from contracts with customers, refer to Note 6.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. ForRefer to Notes 2 and 3 for further discussion of fair value measurement, refermeasurement. Refer to Notes 2 and 3. ForNote 6 for further discussion of principal transactions revenue, refer to Note 6.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 borrowed and securities loaned 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.
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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, referinstruments. Refer to Note 5. For 11 for further discussion of the Firm’s securities financing agreements, refer to Note 11.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 standardsstandard adopted January 1, 20182020 Revenue recognitionFinancial Instruments – revenue from contracts with customersCredit Losses (“CECL”)
The adoption of this guidance established a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. This framework requires gross presentation of certain costs that were previously offset against revenue. Adoptionmanagement’s estimate reflects credit losses over the instrument’s remaining expected life and considers expected future changes in macroeconomic conditions. Refer to Note 13 for further information. Prior to the adoption of the CECL accounting guidance, did not result in any material changesthe Firm’s allowance for credit losses represented management’s estimate of probable credit losses inherent in the timing ofFirm’s retained loan portfolios and certain lending-related commitments. The following table presents the Firm’s revenue recognition. This guidance was adopted retrospectively and, accordingly, prior period amounts were revised, which resulted in an increase in both noninterest revenue and noninterest expense. The Firm did not apply any practical expedients. For additional information, referimpacts to the table on page 158 of this Note,allowance for credit losses and Note 6. Recognition and measurement of financial assets and financial liabilities
Theretained earnings upon adoption of this guidance requires that certain equity instruments be measuredon January 1, 2020:
| | | | | | | | | | | | (in billions) | December 31, 2019 | CECL adoption impact | January 1, 2020 | Allowance for credit losses | | | | Consumer, excluding credit card(a) | $ | 2.6 | | $ | 0.4 | | $ | 3.0 | | Credit card | 5.7 | | 5.5 | | 11.2 | | Wholesale(a) | 6.0 | | (1.6) | | 4.4 | | Firmwide | $ | 14.3 | | $ | 4.3 | | $ | 18.6 | | | | | | Retained earnings | | | | Firmwide allowance increase | | $ | 4.3 | | | Balance sheet reclassification(b) | | (0.8) | | | Total pre-tax impact | | 3.5 | | | Tax effect | | (0.8) | | | Decrease to retained earnings | | $ | 2.7 | | |
(a)In conjunction with the adoption of CECL, the Firm reclassified risk-rated business banking and auto dealer loans and lending-related commitments held in CCB from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied when determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Accordingly, $0.6 billion of the allowance for credit losses at December 31, 2019 and $(0.2) billion of the CECL adoption impact were reclassified. (b)Represents the recognition of the nonaccretable difference on purchased credit deteriorated loans 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. Securities Financing Agreements As permitted by the guidance, the Firm elected the fair value with changes inoption for certain securities financing agreements. The difference between their carrying amount and fair value recognized in earnings.was immaterial and was recorded as part of the Firm’s cumulative-effect adjustment. Refer to Note 11 for further information. Investment securities Upon adoption, HTM securities are presented net of an allowance for credit losses. The guidance also providesamended the previous other-than-temporary impairment (“OTTI”) model for AFS securities to incorporate an alternativeallowance. Refer to measure 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 Note 10 for further information. Credit quality disclosures As a result of the same issuer (the “measurement alternative”). The Firm elected the measurement alternative for its qualifying equity securities and the adoption of the guidance resulted in fair value gains of $505 million which were recognized in other income in the first quarter of 2018. For additional information, refer to Notes 2 and 10. Premium amortization on purchased callable debt securities
The adoption of this guidance, requires that premiums bethe Firm
expanded credit quality disclosures for financial assets measured at amortized cost particularly within the retained loan portfolios. Refer to the earliest call date on certain debt securities. Note 12 for further information. PCD loans The adoption of this guidance resulted in a cumulative-effect adjustment to retained earnings and change in the accounting for PCIloans, which are considered purchased credit deteriorated AOCI. For additional information, refer to the table below, and Notes 10 and 23.
Hedge accounting
The(“PCD”) loans under CECL. Upon adoption, of this guidance better aligns hedge accounting with the economics of the Firm’s risk management activities. As permitted by the guidance, the Firmalso elected to transfer certain investment securities from HTM to AFS. The adoption of this guidance
recognized the nonaccretable difference on PCD loans in the allowance, which resulted in a cumulative-effect adjustment corresponding increase to retained earnings and AOCI as a result of the investment securities transfer and the revised guidance for excluded components. For additional information, referloans. PCD loans are subject to the table below,Firm’s nonaccrual and Notes 5, 10 charge-off policies and 23. Treatment of restricted cash on the statement of cash flows
The adoption of this guidance requires restricted cash to be combined with unrestricted cash when reconciling the beginning and ending cash balances on the Consolidated statements of cash flows. To align the Consolidated balance sheets with the Consolidated statements of cash flows, the Firm reclassified restricted cash into cash and due from banks or deposits with banks. In addition, for the Firm’s Consolidated statements of cash flows, cash is defined as those amounts included in cash and due from banksand deposits with banks. This guidance was applied retrospectively and, accordingly, prior period amounts have been revised. For additional information, refer to the table below, and Note 25.
Presentation of net periodic pension cost and net periodic postretirement benefit cost
The adoption of this guidance requires the service cost component of net periodic pension cost and net periodic postretirement benefit cost to beare now reported separately in the Consolidated statements of income from the other cost components. This change was adopted retrospectively and, accordingly, prior period amounts were revised, which resulted in an increase in compensation expense and a reduction in other expense. For additional information, refer to the table below, and Note 8.consumer,
Reclassification of certain tax effects from AOCI
The adoption of this guidance permitted the Firm 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. The adoption of this guidance resulted in a cumulative-effect adjustment to retained earnings and AOCI. For additional information, refer to the table below, and Note 23.excluding credit card portfolio’s residential real estate loan
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Notes to consolidated financial statements
class. Refer to Note 12 for further information. Changes in credit portfolio segments and classes The following tables presentIn conjunction with the prior period impactadoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer excluding credit card portfolio segment to the Consolidated statements of incomewholesale portfolio segment, to align with the methodology applied when determining the allowance. The Firm also revised its loan classes. Prior- period amounts have been revised to conform with the current presentation. Refer to Note 12 for further information.
Accrued interest receivables As permitted by the guidance, the Firm elected to continue classifying accrued interest on loans, including accrued but unbilled interest on credit card loans, and investment securities in accrued interest and accounts receivables on the Consolidated balance sheets fromsheets. For credit card loans, accrued interest once billed is then recognized in the retrospectiveloan balances, with the related allowance recorded in the allowance for credit losses. Changes in the allowance for credit losses on accrued interest on credit card loans are recognized in the provision for credit losses and charge-offs are recognized by reversing interest income. For other loans and securities, the Firm generally does not recognize an allowance for credit losses on accrued interest receivables, consistent with its policy to write them off no later than 90 days past due by reversing interest income. Capital transition provisions As permitted under the U.S. capital rules issued by the federal banking agencies in 2019, the Firm initially elected to phase-in the January 1, 2020 (“day 1”) CECL adoption impact to retained earnings of $2.7 billion to CET1 capital, at 25% per year in each of 2020 to 2023. As part of their response to the impact of the COVID-19 pandemic, on March 31, 2020, the federal banking agencies issued an interim final rule (issued as final on August 26, 2020) that provided the option to delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period (“CECL capital transition provisions”). Refer to Note 27 for further information. 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. The adoption of the new accounting standardsrecognition and measurement guidance resulted in $505 million of fair value gains in the first quarter of 2018: 2018, recorded in total net revenue, on certain equity investments that were previously held at cost. | | | | | | | | | | | Selected Consolidated statements of income data | Year ended December 31, 2017 (in millions) | Reported | Revisions(a) | Revised | Revenue | | | | Investment banking fees | $ | 7,248 |
| $ | 164 |
| $ | 7,412 |
| Asset management, administration and commissions | 15,377 |
| 910 |
| 16,287 |
| Other income | 3,639 |
| 7 |
| 3,646 |
| Total net revenue | 99,624 |
| 1,081 |
| 100,705 |
| | | | | Noninterest expense | | | | Compensation expense | 31,009 |
| 199 |
| 31,208 |
| Technology, communication and equipment expense | 7,706 |
| 9 |
| 7,715 |
| Professional and outside services | 6,840 |
| 1,050 |
| 7,890 |
| Other expense | 6,256 |
| (177 | ) | 6,079 |
| Total noninterest expense | $ | 58,434 |
| $ | 1,081 |
| $ | 59,515 |
|
| | | | | | | | | | | Year ended December 31, 2016 (in millions) | Reported | Revisions(a) | Revised | Revenue | | | | Investment banking fees | $ | 6,448 |
| $ | 124 |
| $ | 6,572 |
| Asset management, administration and commissions | 14,591 |
| 773 |
| 15,364 |
| Other income | 3,795 |
| 4 |
| 3,799 |
| Total net revenue | 95,668 |
| 901 |
| 96,569 |
| | | | | Noninterest expense | | | | Compensation expense | 29,979 |
| 224 |
| 30,203 |
| Technology, communication and equipment expense | 6,846 |
| 7 |
| 6,853 |
| Professional and outside services | 6,655 |
| 871 |
| 7,526 |
| Other expense | 5,756 |
| (201 | ) | 5,555 |
| Total noninterest expense | $ | 55,771 |
| $ | 901 |
| $ | 56,672 |
|
| | (a) | Revisions relate to revenue recognition and pension cost guidance. |
| | | | | | | | | | | Selected Consolidated balance sheets data | December 31, 2017 (in millions)
| Reported | Revisions(a) | Revised | Assets | | | | Cash and due from banks | $ | 25,827 |
| $ | 71 |
| $ | 25,898 |
| Deposits with banks | 404,294 |
| 1,112 |
| 405,406 |
| Other assets | 114,770 |
| (1,183 | ) | 113,587 |
| Total assets | $ | 2,533,600 |
| $ | — |
| $ | 2,533,600 |
|
| | (a) | Revisions relate to the reclassification of restricted cash. |
The following table presents the adjustment to retained earnings and AOCI as a result of the adoption of new accounting standards in the first quarter of 2018:
| | | | | | | | Increase/(decrease) (in millions) | Retained earnings
| AOCI | Premium amortization on purchased callable debt securities | $ | (505 | ) | $ | 261 |
| Hedge accounting | 34 |
| 115 |
| Reclassification of certain tax effects from AOCI | 288 |
| (288 | ) | Total | $ | (183 | ) | $ | 88 |
|
Significant accounting policies The following table identifies JPMorgan Chase’s other significant accounting policies and the Note and page where a detailed description of each policy can be found. | | | | | | | | | | | | | | | | Fair value measurement | Note 2 | | Page 159page 171 | Fair value option | Note 3 | | Page 179page 192 | Derivative instruments | Note 5 | | Page 184page 198 | Noninterest revenue and noninterest expense | Note 6 | | Page 198page 212 | Interest income and interestInterest expense | Note 7 | | Page 201page 215 | Pension and other postretirement employee benefit plans | Note 8 | | Page 202page 216 | Employee share-based incentives | Note 9 | | Page 209page 221 | Investment securities | Note 10 | | Page 211page 223 | Securities financing activities | Note 11 | | Page 216page 229 | Loans | Note 12 | | Page 219page 232 | Allowance for credit losses | Note 13 | | Page 239page 248 | Variable interest entities | Note 14 | | Page 244page 253 | Goodwill and Mortgage servicing rights | Note 15 | | page 252261 | Premises and equipment | Note 16 | | page 256265 | Long-term debtLeases | Note 1918 | | page 257266 | Long-term debt | Note 20 | | page 269 | Earnings per share | Note 23 | | page 274 | Income taxes | Note 2425 | | page 264277 | Off–balance sheet lending-related financial instruments, guarantees and other commitments | Note 2728 | | page 271283 | Litigation | Note 2930 | | page 278290 |
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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./2018 Form 10-K | | 159 |
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 (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 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 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 Firm manages 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 related to unobservable parameters may be made when positions are valued using prices or input parameters to valuation models | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 171 |
Notes to consolidated financial statements 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 adjustmentsAdjustments are appliedmade to reflect the uncertainty inherent in the resulting valuation estimate.
•Where appropriate, the Firm also applies adjustments to its estimates of fair value in order to appropriately reflect counterparty credit quality (CVA), the Firm’s own creditworthiness (DVA) and the impact of funding (FVA), using a consistent framework across the Firm. Refer to Credit and funding adjustments on page 188 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 refer to Credit and funding adjustments on page 175 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 functionMRGR 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 functionMRGR 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. |
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.
| | | | | | | | | 160172 | | JPMorgan Chase & Co./20182020 Form 10-K |
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 | Product/instrument | Valuation methodology | Classifications in the valuation hierarchy | | Securities financing agreements | Valuations are based on discounted cash flows, which consider: | Predominantly level 2 | | • Derivative features: for further information refer to the discussion of derivatives below.below for further information. | | • Market rates for the respective maturity | | • Collateral characteristics | | Loans and lending-related commitments — wholesale | | | Loans carried at fair value (e.g., 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 — consumer | | | | Trading loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans carried at fair value — 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 | | | | | | | | Investment and trading securities | Quoted market prices are used where available. | Level 1 | | | In the absence of quoted market prices, securities are valued based on: | Level 2 or 3 | | | • Observable market prices for similar securities | | | | | | | | | | | | In addition, the following inputs to discounted cash flows are used for the following products: | | | | Mortgage- and asset-backed securities specific inputs: | | | | • Collateral characteristics | | | | • Deal-specific payment and loss allocations | | | | • Current market assumptions related to yield, prepayment speed, conditional default rates and loss severity | | | | Collateralized loan obligations (“CLOs”) specific inputs: | | | | • Collateral characteristics | | | | • Deal-specific payment and loss allocations | | | | • Expected prepayment speed, conditional default rates, loss severity | | | | | | | | • Credit rating data | | | Physical commodities | Valued using observable market prices or data. | Level 1 andor 2 |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 161173 |
Notes to consolidated financial statements
| | | | | | | | | Product/instrument | Valuation methodology | Classifications in the valuation hierarchy | | | | | | | Product/instrument | Valuation methodology | Classifications in the valuation hierarchy | Derivatives | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives | Exchange-traded derivatives that are actively traded and valued using the exchange price. | Level 1 | | Derivatives that are valued using models such as the Black-Scholes option pricing model, simulation models, or a combination of models that may use observable or unobservable valuation inputs as well as considering the contractual terms. The key valuation inputs used will depend on the type of derivative and the nature of the underlying instruments and may include equity prices, commodity prices, interest rate yield curves, foreign exchange rates, volatilities, correlations, CDS spreads and recovery rates. Additionally, the credit quality of the counterparty and of the Firm as well as market funding levels may also be considered.
| Level 2 or 3 | | In addition, specific inputs used for derivatives that are valued based on models with significant unobservable inputs are as follows: | | | Structured credit derivatives specific inputs include: | | | • CDS spreads and recovery rates | | | • Credit correlation between the underlying debt instruments | | | Equity option specific inputs include: | | | • Forward equity price | | | • Equity volatilitiesvolatility | | | | | | | | | | | | Interest rate and FX exotic options specific inputs include: | | | • Interest rate volatility | | | • Interest rate spread volatility | | | • Interest rate correlation | | | • Foreign exchange correlation | | | • Interest rate-FX correlation | | | Commodity derivatives specific inputs include: | | | | | | • Forward commodity price | | | • Commodity correlation | | | | | | | | | | | | | | | | | | | | | | | | Additionally, adjustments are made to reflect counterparty credit quality (CVA) and the impact of funding (FVA). Refer to page 175188 of this Note. | | | | | | Mortgage servicing rights | Refer to Mortgage servicing rights in Note 15. | Level 3 | | Private equity direct investments | Fair value is estimated using all available information; the range of potential inputs include: | Level 2 or 3 | • Transaction prices | | • Trading multiples of comparable public companies | | | • Operating performance of the underlying portfolio company | | | • Adjustments as required, since comparable public companies are not identical to the company being valued, and for company-specific issues and lack of liquidity. | | | • Additional available inputs relevant to the investment. | | Fund investments (e.g., mutual/collective investment funds, private equity funds, hedge funds, and real estate funds) | Net asset value | | • NAV is supported by the ability to redeem and purchase at the NAV level. | Level 1 | | • Adjustments to the NAV as required, for restrictions on redemption (e.g., lock-up periods or withdrawal limitations) or where observable activity is limited. | Level 2 or 3(a) | | | Beneficial interests issued by consolidated VIEs | Valued using observable market information, where available. | Level 2 or 3 | In the absence of observable market information, valuations are based on the fair value of the underlying assets held by the VIE. | |
| | (a) | Excludes certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient. |
| | | | 162 | | JPMorgan Chase & Co./2018 Form 10-K | |
(a)Excludes certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient.
| | | | | | | | | 174 | | JPMorgan Chase & Co./2020 Form 10-K |
| | | | | | | | | Product/instrument | Valuation methodology | Classification in the valuation hierarchy | | | | | | | | | | | | | | | | | | | | Structured notes (included in deposits, short-term borrowings and long-term debt) | • Valuations are based on discounted cash flow analyses that consider the embedded derivative and the terms and payment structure of the note.
• The embedded derivative features are considered using models such as the Black-Scholes option pricing model, simulation models, or a combination of models that may use observable or unobservable valuation inputs, depending on the embedded derivative. The specific inputs used vary according to the nature of the embedded derivative features, as described in the discussion above regarding derivatives valuation. Adjustments are then made to this base valuation to reflect the Firm’s own credit risk (DVA). Refer to page 175188 of this Note. | Level 2 or 3 | | | | |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 163175 |
Notes to consolidated financial statements
The following table presents the assets and liabilities reported at fair value as of December 31, 20182020 and 2017, 2019, by major product category and fair value hierarchy. | | | | | | | | | | | | | | | | | | | Assets and liabilities measured at fair value on a recurring basis | | | | | | | Fair value hierarchy | | | | December 31, 2018 (in millions) | Level 1 | Level 2 | | Level 3 | | Derivative netting adjustments | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | — |
| $ | 13,235 |
| | $ | — |
| | $ | — |
| $ | 13,235 |
| Securities borrowed | — |
| 5,105 |
| | — |
| | — |
| 5,105 |
| Trading assets: | | | | | | | | Debt instruments: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies(a) | — |
| 76,249 |
| | 549 |
| | — |
| 76,798 |
| Residential – nonagency | — |
| 1,798 |
| | 64 |
| | — |
| 1,862 |
| Commercial – nonagency | — |
| 1,501 |
| | 11 |
| | — |
| 1,512 |
| Total mortgage-backed securities | — |
| 79,548 |
| | 624 |
| | — |
| 80,172 |
| U.S. Treasury and government agencies(a) | 51,477 |
| 7,702 |
| | — |
| | — |
| 59,179 |
| Obligations of U.S. states and municipalities | — |
| 7,121 |
| | 689 |
| | — |
| 7,810 |
| Certificates of deposit, bankers’ acceptances and commercial paper | — |
| 1,214 |
| | — |
| | — |
| 1,214 |
| Non-U.S. government debt securities | 27,878 |
| 27,056 |
| | 155 |
| | — |
| 55,089 |
| Corporate debt securities | — |
| 18,655 |
| | 334 |
| | — |
| 18,989 |
| Loans(b) | — |
| 40,047 |
| | 1,706 |
| | — |
| 41,753 |
| Asset-backed securities | — |
| 2,756 |
| | 127 |
| | — |
| 2,883 |
| Total debt instruments | 79,355 |
| 184,099 |
| | 3,635 |
| | — |
| 267,089 |
| Equity securities | 71,119 |
| 482 |
| | 232 |
| | — |
| 71,833 |
| Physical commodities(c) | 5,182 |
| 1,855 |
| | — |
| | — |
| 7,037 |
| Other | — |
| 13,192 |
| | 301 |
| | — |
| 13,493 |
| Total debt and equity instruments(d) | 155,656 |
| 199,628 |
| | 4,168 |
| | — |
| 359,452 |
| Derivative receivables: | | | | | | | | Interest rate | 682 |
| 266,380 |
| | 1,642 |
| | (245,490 | ) | 23,214 |
| Credit | — |
| 19,235 |
| | 860 |
| | (19,483 | ) | 612 |
| Foreign exchange | 771 |
| 166,238 |
| | 676 |
| | (154,235 | ) | 13,450 |
| Equity | — |
| 46,777 |
| | 2,508 |
| | (39,339 | ) | 9,946 |
| Commodity | — |
| 20,339 |
| | 131 |
| | (13,479 | ) | 6,991 |
| Total derivative receivables(e) | 1,453 |
| 518,969 |
| | 5,817 |
| | (472,026 | ) | 54,213 |
| Total trading assets(f) | 157,109 |
| 718,597 |
| | 9,985 |
| | (472,026 | ) | 413,665 |
| Available-for-sale securities: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies(a) | — |
| 68,646 |
| | — |
| | — |
| 68,646 |
| Residential – nonagency | — |
| 8,519 |
| | 1 |
| | — |
| 8,520 |
| Commercial – nonagency | — |
| 6,654 |
| | — |
| | — |
| 6,654 |
| Total mortgage-backed securities | — |
| 83,819 |
| | 1 |
| | — |
| 83,820 |
| U.S. Treasury and government agencies | 56,059 |
| — |
| | — |
| | — |
| 56,059 |
| Obligations of U.S. states and municipalities | — |
| 37,723 |
| | — |
| | — |
| 37,723 |
| Certificates of deposit | — |
| 75 |
| | — |
| | — |
| 75 |
| Non-U.S. government debt securities | 15,313 |
| 8,789 |
| | — |
| | — |
| 24,102 |
| Corporate debt securities | — |
| 1,918 |
| | — |
| | — |
| 1,918 |
| Asset-backed securities: | | | | | | | | Collateralized loan obligations | — |
| 19,437 |
| | — |
| | — |
| 19,437 |
| Other | — |
| 7,260 |
| | — |
| | — |
| 7,260 |
| Total available-for-sale securities | 71,372 |
| 159,021 |
| | 1 |
| | — |
| 230,394 |
| Loans | — |
| 3,029 |
| | 122 |
| | — |
| 3,151 |
| Mortgage servicing rights | — |
| — |
| | 6,130 |
| | — |
| 6,130 |
| Other assets(f)(g) | 7,810 |
| 195 |
| | 927 |
| | — |
| 8,932 |
| Total assets measured at fair value on a recurring basis | $ | 236,291 |
| $ | 899,182 |
| | $ | 17,165 |
| | $ | (472,026 | ) | $ | 680,612 |
| Deposits | $ | — |
| $ | 19,048 |
| | $ | 4,169 |
| | $ | — |
| $ | 23,217 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| 935 |
| | — |
| | — |
| 935 |
| Short-term borrowings | — |
| 5,607 |
| | 1,523 |
| | — |
| 7,130 |
| Trading liabilities: | | | | | | |
|
| Debt and equity instruments(d) | 80,199 |
| 22,755 |
| | 50 |
| | — |
| 103,004 |
| Derivative payables: | | | | | | |
|
| Interest rate | 1,526 |
| 239,576 |
| | 1,680 |
| | (234,998 | ) | 7,784 |
| Credit | — |
| 19,309 |
| | 967 |
| | (18,609 | ) | 1,667 |
| Foreign exchange | 695 |
| 163,549 |
| | 973 |
| | (152,432 | ) | 12,785 |
| Equity | — |
| 46,462 |
| | 4,733 |
| | (41,034 | ) | 10,161 |
| Commodity | — |
| 21,158 |
| | 1,260 |
| | (13,046 | ) | 9,372 |
| Total derivative payables(e) | 2,221 |
| 490,054 |
| | 9,613 |
| | (460,119 | ) | 41,769 |
| Total trading liabilities | 82,420 |
| 512,809 |
| | 9,663 |
| | (460,119 | ) | 144,773 |
| Accounts payable and other liabilities | 3,063 |
| 196 |
| | 10 |
| | — |
| 3,269 |
| Beneficial interests issued by consolidated VIEs | — |
| 27 |
| | 1 |
| | — |
| 28 |
| Long-term debt | — |
| 35,468 |
| | 19,418 |
| | — |
| 54,886 |
| Total liabilities measured at fair value on a recurring basis | $ | 85,483 |
| $ | 574,090 |
| | $ | 34,784 |
| | $ | (460,119 | ) | $ | 234,238 |
|
| | | | | | | | | | | | | | | | | | | | | | | | Assets and liabilities measured at fair value on a recurring basis | | | | | | | Fair value hierarchy | | | | December 31, 2020 (in millions) | Level 1 | Level 2 | | Level 3 | | Derivative netting adjustments(g) | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | 0 | | $ | 238,015 | | | $ | 0 | | | $ | — | | $ | 238,015 | | Securities borrowed | 0 | | 52,983 | | | 0 | | | — | | 52,983 | | Trading assets: | | | | | | | | Debt instruments: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. GSEs and government agencies(a) | 0 | | 68,395 | | | 449 | | | — | | 68,844 | | Residential – nonagency | 0 | | 2,138 | | | 28 | | | — | | 2,166 | | Commercial – nonagency | 0 | | 1,327 | | | 3 | | | — | | 1,330 | | Total mortgage-backed securities | 0 | | 71,860 | | | 480 | | | — | | 72,340 | | U.S. Treasury, GSEs and government agencies(a) | 104,263 | | 10,996 | | | 0 | | | — | | 115,259 | | Obligations of U.S. states and municipalities | 0 | | 7,184 | | | 8 | | | — | | 7,192 | | Certificates of deposit, bankers’ acceptances and commercial paper | 0 | | 1,230 | | | 0 | | | — | | 1,230 | | Non-U.S. government debt securities | 26,772 | | 40,671 | | | 182 | | | — | | 67,625 | | Corporate debt securities | 0 | | 21,017 | | | 507 | | | — | | 21,524 | | Loans(b) | 0 | | 6,101 | | | 893 | | | — | | 6,994 | | Asset-backed securities | 0 | | 2,304 | | | 28 | | | — | | 2,332 | | Total debt instruments | 131,035 | | 161,363 | | | 2,098 | | | — | | 294,496 | | Equity securities | 97,035 | | 2,652 | | | 179 | | | — | | 99,866 | | Physical commodities(c) | 6,382 | | 5,189 | | | 0 | | | — | | 11,571 | | Other | 0 | | 17,165 | | | 346 | | | — | | 17,511 | | Total debt and equity instruments(d) | 234,452 | | 186,369 | | | 2,623 | | | — | | 423,444 | | Derivative receivables: | | | | | | | | Interest rate | 2,318 | | 386,865 | | | 2,307 | | | (355,765) | | 35,725 | | Credit | 0 | | 12,879 | | | 624 | | | (12,823) | | 680 | | Foreign exchange | 146 | | 205,127 | | | 987 | | | (190,479) | | 15,781 | | Equity | 0 | | 71,279 | | | 3,519 | | | (54,125) | | 20,673 | | Commodity | 0 | | 21,272 | | | 231 | | | (14,732) | | 6,771 | | Total derivative receivables | 2,464 | | 697,422 | | | 7,668 | | | (627,924) | | 79,630 | | Total trading assets(e) | 236,916 | | 883,791 | | | 10,291 | | | (627,924) | | 503,074 | | Available-for-sale securities: | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. GSEs and government agencies(a) | 21,018 | | 92,283 | | | 0 | | | — | | 113,301 | | Residential – nonagency | 0 | | 10,233 | | | 0 | | | — | | 10,233 | | Commercial – nonagency | 0 | | 2,856 | | | 0 | | | — | | 2,856 | | Total mortgage-backed securities | 21,018 | | 105,372 | | | 0 | | | — | | 126,390 | | U.S. Treasury and government agencies | 201,951 | | 0 | | | 0 | | | — | | 201,951 | | Obligations of U.S. states and municipalities | 0 | | 20,396 | | | 0 | | | — | | 20,396 | | Certificates of deposit | 0 | | 0 | | | 0 | | | — | | 0 | | Non-U.S. government debt securities | 13,135 | | 9,793 | | | 0 | | | — | | 22,928 | | Corporate debt securities | 0 | | 216 | | | 0 | | | — | | 216 | | Asset-backed securities: | | | | | | | | Collateralized loan obligations | 0 | | 10,048 | | | 0 | | | — | | 10,048 | | Other | 0 | | 6,249 | | | 0 | | | — | | 6,249 | | | | | | | | | | Total available-for-sale securities | 236,104 | | 152,074 | | | 0 | | | — | | 388,178 | | Loans(b)(f) | 0 | | 42,169 | | | 2,305 | | | — | | 44,474 | | Mortgage servicing rights | 0 | | 0 | | | 3,276 | | | — | | 3,276 | | Other assets(b)(e) | 8,110 | | 4,561 | | | 538 | | | — | | 13,209 | | Total assets measured at fair value on a recurring basis | $ | 481,130 | | $ | 1,373,593 | | | $ | 16,410 | | | $ | (627,924) | | $ | 1,243,209 | | Deposits | $ | 0 | | $ | 11,571 | | | $ | 2,913 | | | $ | — | | $ | 14,484 | | Federal funds purchased and securities loaned or sold under repurchase agreements | 0 | | 155,735 | | | 0 | | | — | | 155,735 | | Short-term borrowings | 0 | | 14,473 | | | 2,420 | | | — | | 16,893 | | Trading liabilities: | | | | | | | | Debt and equity instruments(d) | 82,669 | | 16,838 | | | 51 | | | — | | 99,558 | | Derivative payables: | | | | | | | | Interest rate | 2,496 | | 349,082 | | | 2,049 | | | (340,615) | | 13,012 | | Credit | 0 | | 14,344 | | | 848 | | | (13,197) | | 1,995 | | Foreign exchange | 132 | | 214,373 | | | 1,421 | | | (194,493) | | 21,433 | | Equity | 0 | | 74,032 | | | 7,381 | | | (55,515) | | 25,898 | | Commodity | 0 | | 21,767 | | | 962 | | | (14,444) | | 8,285 | | Total derivative payables | 2,628 | | 673,598 | | | 12,661 | | | (618,264) | | 70,623 | | Total trading liabilities | 85,297 | | 690,436 | | | 12,712 | | | (618,264) | | 170,181 | | Accounts payable and other liabilities | 2,895 | | 513 | | | 68 | | | — | | 3,476 | | Beneficial interests issued by consolidated VIEs | 0 | | 41 | | | 0 | | | — | | 41 | | Long-term debt | 0 | | 53,420 | | | 23,397 | | | — | | 76,817 | | Total liabilities measured at fair value on a recurring basis | $ | 88,192 | | $ | 926,189 | | | $ | 41,510 | | | $ | (618,264) | | $ | 437,627 | |
| | | | | | | | | 164176 | | JPMorgan Chase & Co./20182020 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value hierarchy | | | | | December 31, 2019 (in millions) | Level 1 | Level 2 | | Level 3 | | Derivative netting adjustments(g) | | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | 0 | | $ | 14,561 | | | $ | 0 | | | $ | — | | | $ | 14,561 | | Securities borrowed | 0 | | 6,237 | | | 0 | | | — | | | 6,237 | | Trading assets: | | | | — | | | | | | Debt instruments: | | | | — | | | | | | Mortgage-backed securities: | | | | — | | | | | | U.S. GSEs and government agencies(a) | 0 | | 44,510 | | | 797 | | | — | | | 45,307 | | Residential – nonagency | 0 | | 1,977 | | | 23 | | | — | | | 2,000 | | Commercial – nonagency | 0 | | 1,486 | | | 4 | | | — | | | 1,490 | | Total mortgage-backed securities | 0 | | 47,973 | | | 824 | | | — | | | 48,797 | | U.S. Treasury, GSEs and government agencies(a) | 78,289 | | 10,295 | | | 0 | | | — | | | 88,584 | | Obligations of U.S. states and municipalities | 0 | | 6,468 | | | 10 | | | — | | | 6,478 | | Certificates of deposit, bankers’ acceptances and commercial paper | 0 | | 252 | | | 0 | | | — | | | 252 | | Non-U.S. government debt securities | 26,600 | | 27,169 | | | 155 | | | — | | | 53,924 | | Corporate debt securities | 0 | | 17,956 | | | 558 | | | — | | | 18,514 | | Loans(b) | 0 | | 6,340 | | | 673 | | | — | | | 7,013 | | Asset-backed securities | 0 | | 2,593 | | | 37 | | | — | | | 2,630 | | Total debt instruments | 104,889 | | 119,046 | | | 2,257 | | | — | | | 226,192 | | Equity securities | 71,890 | | 244 | | | 196 | | | — | | | 72,330 | | Physical commodities(c) | 3,638 | | 3,579 | | | 0 | | | — | | | 7,217 | | Other | 0 | | 13,896 | | | 232 | | | — | | | 14,128 | | Total debt and equity instruments(d) | 180,417 | | 136,765 | | | 2,685 | | | — | | | 319,867 | | Derivative receivables: | | | | | | | | | Interest rate | 721 | | 311,173 | | | 1,400 | | | (285,873) | | | 27,421 | | Credit | 0 | | 14,252 | | | 624 | | | (14,175) | | | 701 | | Foreign exchange | 117 | | 137,938 | | | 432 | | | (129,482) | | | 9,005 | | Equity | 0 | | 43,642 | | | 2,085 | | | (39,250) | | | 6,477 | | Commodity | 0 | | 17,058 | | | 184 | | | (11,080) | | | 6,162 | | Total derivative receivables | 838 | | 524,063 | | | 4,725 | | | (479,860) | | | 49,766 | | Total trading assets(e) | 181,255 | | 660,828 | | | 7,410 | | | (479,860) | | | 369,633 | | Available-for-sale securities: | | | | | | | | | Mortgage-backed securities: | | | | | | | | | U.S. GSEs and government agencies(a) | 0 | | 110,117 | | | 0 | | | — | | | 110,117 | | Residential – nonagency | 0 | | 12,989 | | | 1 | | | — | | | 12,990 | | Commercial – nonagency | 0 | | 5,188 | | | 0 | | | — | | | 5,188 | | Total mortgage-backed securities | 0 | | 128,294 | | | 1 | | | — | | | 128,295 | | U.S. Treasury and government agencies | 139,436 | | 0 | | | 0 | | | — | | | 139,436 | | Obligations of U.S. states and municipalities | 0 | | 29,810 | | | 0 | | | — | | | 29,810 | | Certificates of deposit | 0 | | 77 | | | 0 | | | — | | | 77 | | Non-U.S. government debt securities | 12,966 | | 8,821 | | | 0 | | | — | | | 21,787 | | Corporate debt securities | 0 | | 845 | | | 0 | | | — | | | 845 | | Asset-backed securities: | | | | — | | | — | | | — | | Collateralized loan obligations | 0 | | 24,991 | | | 0 | | | — | | | 24,991 | | Other | 0 | | 5,458 | | | 0 | | | — | | | 5,458 | | | | | | | | | | | Total available-for-sale securities | 152,402 | | 198,296 | | | 1 | | | — | | | 350,699 | | Loans(b)(f) | 0 | | 44,439 | | | 516 | | | — | | | 44,955 | | Mortgage servicing rights | 0 | | 0 | | | 4,699 | | | — | | | 4,699 | | Other assets(b)(e) | 7,305 | | 3,824 | | | 917 | | | — | | | 12,046 | | Total assets measured at fair value on a recurring basis | $ | 340,962 | | $ | 928,185 | | | $ | 13,543 | | | $ | (479,860) | | | $ | 802,830 | | Deposits | $ | 0 | | $ | 25,229 | | | $ | 3,360 | | | $ | — | | | $ | 28,589 | | Federal funds purchased and securities loaned or sold under repurchase agreements | 0 | | 549 | | | 0 | | | — | | | 549 | | Short-term borrowings | 0 | | 4,246 | | | 1,674 | | | — | | | 5,920 | | Trading liabilities: | | | | | | | | | Debt and equity instruments(d) | 59,047 | | 16,481 | | | 41 | | | — | | | 75,569 | | Derivative payables: | | | | | | | | | Interest rate | 795 | | 276,746 | | | 1,732 | | | (270,670) | | | 8,603 | | Credit | 0 | | 14,358 | | | 763 | | | (13,469) | | | 1,652 | | Foreign exchange | 109 | | 143,960 | | | 1,039 | | | (131,950) | | | 13,158 | | Equity | 0 | | 47,261 | | | 5,480 | | | (40,204) | | | 12,537 | | Commodity | 0 | | 19,685 | | | 200 | | | (12,127) | | | 7,758 | | Total derivative payables | 904 | | 502,010 | | | 9,214 | | | (468,420) | | | 43,708 | | Total trading liabilities | 59,951 | | 518,491 | | | 9,255 | | | (468,420) | | | 119,277 | | Accounts payable and other liabilities | 3,231 | | 452 | | | 45 | | | — | | | 3,728 | | Beneficial interests issued by consolidated VIEs | 0 | | 36 | | | 0 | | | — | | | 36 | | Long-term debt | 0 | | 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 | |
(a)At December 31, 2020 and 2019, included total U.S. GSE obligations of $117.6 billion and $104.5 billion, respectively, which were mortgage-related. | | | | | | | | | | | | | | | | | | | | | Fair value hierarchy | | | | | December 31, 2017 (in millions) | Level 1 | Level 2 | | Level 3 | | Derivative netting adjustments | | Total fair value | Federal funds sold and securities purchased under resale agreements | $ | — |
| $ | 14,732 |
| | $ | — |
| | $ | — |
| | $ | 14,732 |
| Securities borrowed | — |
| 3,049 |
| | — |
| | — |
| | 3,049 |
| Trading assets: | | | | | | | | | Debt instruments: | | | | | | | | | Mortgage-backed securities: | | | | | | | | | U.S. government agencies(a) | — |
| 41,515 |
| | 307 |
| | — |
| | 41,822 |
| Residential – nonagency | — |
| 1,835 |
| | 60 |
| | — |
| | 1,895 |
| Commercial – nonagency | — |
| 1,645 |
| | 11 |
| | — |
| | 1,656 |
| Total mortgage-backed securities | — |
| 44,995 |
| | 378 |
| | — |
| | 45,373 |
| U.S. Treasury and government agencies(a) | 30,758 |
| 6,475 |
| | 1 |
| | — |
| | 37,234 |
| Obligations of U.S. states and municipalities | — |
| 9,067 |
| | 744 |
| | — |
| | 9,811 |
| Certificates of deposit, bankers’ acceptances and commercial paper | — |
| 226 |
| | — |
| | — |
| | 226 |
| Non-U.S. government debt securities | 28,887 |
| 28,831 |
| | 78 |
| | — |
| | 57,796 |
| Corporate debt securities | — |
| 24,146 |
| | 312 |
| | — |
| | 24,458 |
| Loans(b) | — |
| 35,242 |
| | 2,719 |
| | — |
| | 37,961 |
| Asset-backed securities | — |
| 3,284 |
| | 153 |
| | — |
| | 3,437 |
| Total debt instruments | 59,645 |
| 152,266 |
| | 4,385 |
| | — |
| | 216,296 |
| Equity securities | 87,346 |
| 197 |
| | 295 |
| | — |
| | 87,838 |
| Physical commodities(c) | 4,924 |
| 1,322 |
| | — |
| | — |
| | 6,246 |
| Other | — |
| 14,197 |
| | 690 |
| | — |
| | 14,887 |
| Total debt and equity instruments(d) | 151,915 |
| 167,982 |
| | 5,370 |
| | — |
| | 325,267 |
| Derivative receivables: | | | | | | | | | Interest rate | 181 |
| 314,107 |
| | 1,704 |
| | (291,319 | ) | | 24,673 |
| Credit | — |
| 21,995 |
| | 1,209 |
| | (22,335 | ) | | 869 |
| Foreign exchange | 841 |
| 158,834 |
| | 557 |
| | (144,081 | ) | | 16,151 |
| Equity | — |
| 37,722 |
| | 2,318 |
| | (32,158 | ) | | 7,882 |
| Commodity | — |
| 19,875 |
| | 210 |
| | (13,137 | ) | | 6,948 |
| Total derivative receivables(e) | 1,022 |
| 552,533 |
| | 5,998 |
| | (503,030 | ) | | 56,523 |
| Total trading assets(f) | 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 | 22,745 |
| — |
| | — |
| | — |
| | 22,745 |
| Obligations of U.S. states and municipalities | — |
| 32,338 |
| | — |
| | — |
| | 32,338 |
| Certificates of deposit | — |
| 59 |
| | — |
| | — |
| | 59 |
| Non-U.S. government debt securities | 18,140 |
| 9,154 |
| | — |
| | — |
| | 27,294 |
| Corporate debt securities | — |
| 2,757 |
| | — |
| | — |
| | 2,757 |
| Asset-backed securities: | | | | | | | | | Collateralized loan obligations | — |
| 20,720 |
| | 276 |
| | — |
| | 20,996 |
| Other | — |
| 8,817 |
| | — |
| | — |
| | 8,817 |
| Equity securities(g) | 547 |
| — |
| | — |
| | — |
| | 547 |
| Total available-for-sale securities | 41,432 |
| 160,516 |
| | 277 |
| | — |
| | 202,225 |
| Loans | — |
| 2,232 |
| | 276 |
| | — |
| | 2,508 |
| Mortgage servicing rights | — |
| — |
| | 6,030 |
| | — |
| | 6,030 |
| Other assets(f)(g) | 13,795 |
| 343 |
| | 1,265 |
| | — |
| | 15,403 |
| Total assets measured at fair value on a recurring basis | $ | 208,164 |
| $ | 901,387 |
| | $ | 19,216 |
| | $ | (503,030 | ) | | $ | 625,737 |
| Deposits | $ | — |
| $ | 17,179 |
| | $ | 4,142 |
| | $ | — |
| | $ | 21,321 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| 697 |
| | — |
| | — |
| | 697 |
| Short-term borrowings | — |
| 7,526 |
| | 1,665 |
| | — |
| | 9,191 |
| Trading liabilities: | | | | | | | | | Debt and equity instruments(d) | 64,664 |
| 21,183 |
| | 39 |
| | — |
| | 85,886 |
| Derivative payables: | | | | | | | | | Interest rate | 170 |
| 282,825 |
| | 1,440 |
| | (277,306 | ) | | 7,129 |
| Credit | — |
| 22,009 |
| | 1,244 |
| | (21,954 | ) | | 1,299 |
| Foreign exchange | 794 |
| 154,075 |
| | 953 |
| | (143,349 | ) | | 12,473 |
| Equity | — |
| 39,668 |
| | 5,727 |
| | (36,203 | ) | | 9,192 |
| Commodity | — |
| 21,017 |
| | 884 |
| | (14,217 | ) | | 7,684 |
| Total derivative payables(e) | 964 |
| 519,594 |
| | 10,248 |
| | (493,029 | ) | | 37,777 |
| Total trading liabilities | 65,628 |
| 540,777 |
| | 10,287 |
| | (493,029 | ) | | 123,663 |
| Accounts payable and other liabilities | 9,074 |
| 121 |
| | 13 |
| | — |
| | 9,208 |
| Beneficial interests issued by consolidated VIEs | — |
| 6 |
| | 39 |
| | — |
| | 45 |
| Long-term debt | — |
| 31,394 |
| | 16,125 |
| | — |
| | 47,519 |
| Total liabilities measured at fair value on a recurring basis | $ | 74,702 |
| $ | 597,700 |
| | $ | 32,271 |
| | $ | (493,029 | ) | | $ | 211,644 |
|
(b)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation. | | (a) | At December 31, 2018 and 2017, included total U.S. government-sponsored enterprise obligations of $92.3 billion and $78.0 billion, respectively, which were predominantly mortgage-related. |
| | (b) | At December 31, 2018 and 2017, included within trading loans were $13.2 billion and $11.4 billion, respectively, of residential first-lien mortgages, and $2.3 billion and $4.2 billion, respectively, of commercial first-lien mortgages. Residential mortgage loans include conforming mortgage loans originated with the intent to sell to U.S. government agencies of $7.6 billion and $5.7 billion, respectively, and reverse mortgages of zero and $836 million, 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 approximates fair value, because under fair value hedge accounting, the cost basis is adjusted for changes in fair value. Refer to Note 5 for a further
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 165177 |
Notes to consolidated financial statements
discussion of the Firm’s hedge accounting relationships. To provide consistent fair value disclosure information, all physical commodities inventories have been included in each period presented.
| | (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 approximates fair value, because under fair value hedge accounting, the cost basis is adjusted for changes in fair value. For a further discussion of the Firm’s hedge accounting relationships, refer to Note 5. 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) | 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, 2018 and 2017, the fair values of these investments, which include certain hedge funds, private equity funds, real estate and other funds, were $747 million and $779 million, respectively. Included in these balances at December 31, 2018 and 2017, were trading assets of $49 million and $54 million, respectively, and other assets of $698 million and $725 million, respectively. |
| | (g) | Effective January 1, 2018, the Firm adopted the recognition and measurement guidance. Equity securities that were previously reported as AFS securities were reclassified to other assets upon adoption. Balances reflect the reduction of securities owned (long positions) by the amount of identical securities sold but not yet purchased (short positions).
(e)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, 2020 and 2019, the fair values of these investments, which include certain hedge funds, private equity funds, real estate and other funds, were $670 million and $684 million, respectively. Included in these balances at December 31, 2020 and 2019, were trading assets of $52 million and $54 million, respectively, and other assets of $618 million and $630 million, respectively. (f)At December 31, 2020 and 2019, included within loans were $15.1 billion and $19.8 billion, respectively, of residential first-lien mortgages, and $6.3 billion and $8.2 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 $8.4 billion and $13.6 billion, respectively. (g)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 level 3 balances would be reduced if netting were applied, including the netting benefit associated with cash collateral.
|
| | | | | | | | | 166178 | | JPMorgan Chase & Co./20182020 Form 10-K |
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 171-175 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, refer to pages 159–163 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 or arithmetic 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, weighted and the weightedarithmetic average valuevalues 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, 2018, interest rate correlation inputs used in estimating fair value were concentrated towards the upper end of 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 the interest rate-foreign exchange (“IR-FX”) correlation inputs were distributed across the range. In addition, the interest rate spread volatility inputs used in estimating fair value were distributed across the range; equity volatilities and commodity volatilities were concentrated in the middle of the range; and forward commodity prices used in estimating the fair value of commodity derivatives were concentrated towards the lower end of the range. Recovery rate inputs used in estimating the fair value of credit derivatives were distributed across the range; credit spreads and conditional default rates were concentrated towards the lower end of the range; loss severity and price inputs were concentrated towards the upper end of the range.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 167179 |
Notes to consolidated financial statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | Level 3 inputs(a) | | December 31, 2020 | | | | | | Product/Instrument | Fair value (in millions) | | Principal valuation technique | Unobservable inputs(g) | Range of input values | Average(i) | Residential mortgage-backed securities and loans(b) | $ | 1,282 | | | Discounted cash flows | Yield | 0% | – | 18% | 6% | | | | Prepayment speed | 0% | – | 46% | 10% | | | | | Conditional default rate | 0% | – | 30% | 14% | | | | | Loss severity | 0% | – | 107% | 7% | Commercial mortgage-backed securities and loans(c) | 466 | | | Market comparables | Price | $0 | – | $101 | $84 | | | | | | | | | | Corporate debt securities | 507 | | | Market comparables | Price | $2 | – | $116 | $85 | | | | | | | | | | Loans(d) | 1,930 | | | Market comparables | Price | $10 | – | $104 | $72 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset-backed securities | 28 | | | Market comparables | Price | $1 | – | $97 | $57 | Net interest rate derivatives | 238 | | | Option pricing | Interest rate volatility | 7bps | – | 513bps | 101bps | | | | | Interest rate spread volatility | 11bps | – | 23bps | 15bps | | | | | Interest rate correlation | (65)% | – | 99% | 35% | | | | | | | | | | | | | | IR-FX correlation | (35)% | – | 50% | 0% | | 20 | | | Discounted cash flows | Prepayment speed | 0% | – | 30% | 8% | Net credit derivatives | (260) | | | Discounted cash flows | Credit correlation | 34% | – | 65% | 48% | | | | | Credit spread | 3bps | – | 1,302bps | 441bps | | | | | Recovery rate | 0% | – | 67% | 46% | | | | | | | | | | | | | | | | | | | | | | | Conditional default rate | 2% | – | 100% | 58% | | | | | | | | | | | | | | Loss severity | 100% | 100% | | | | | | | | | | | 36 | | | Market comparables | Price | $1 | – | $115 | $71 | Net foreign exchange derivatives | (298) | | | Option pricing | IR-FX correlation | (40)% | – | 65% | 18% | | (136) | | | Discounted cash flows | Prepayment speed | 9% | 9% | Net equity derivatives | (3,862) | | | Option pricing | Forward equity price(h) | 61% | – | 106% | 99% | | | | | Equity volatility | 5% | – | 138% | 35% | | | | | Equity correlation | 18% | – | 99% | 60% | | | | | Equity-FX correlation | (79)% | – | 55% | (27)% | | | | | Equity-IR correlation | 20% | – | 50% | 28% | Net commodity derivatives | (731) | | | Option pricing | Oil Commodity Forward | $600 / MT | – | $609 / MT | $605 / MT | | | | | Forward power price | $12 / MWH | – | $55 / MWH | $34 / MWH | | | | | Commodity volatility | 1% | – | 58% | 29% | | | | | Commodity correlation | (49)% | – | 95% | 23% | MSRs | 3,276 | | | Discounted cash flows | Refer to Note 15 | | | | | Other assets | 299 | | | Discounted cash flows | Credit spread | 45bps | 45bps | | | | | Yield | 4% | | 30% | 7% | | 585 | | | Market comparables | Price | $29 | – | $29 | $29 | | | | | | | | | | Long-term debt, short-term borrowings, and deposits(e) | 27,912 | | | Option pricing | Interest rate volatility | 7bps | – | 513bps | 101bps | | | | Interest rate correlation | (65)% | – | 99% | 35% | | | | | | | | | | | | IR-FX correlation | (35)% | – | 50% | 0% | | | | Equity correlation | 18% | – | 99% | 60% | | | | | | | | | | | | Equity-FX correlation | (79)% | – | 55% | (27)% | | | | Equity-IR correlation | 20% | – | 50% | 28% | | 818 | | | Discounted cash flows | Credit correlation | 34% | – | 65% | 48% | Other level 3 assets and liabilities, net(f) | 250 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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. (b)Comprises U.S. GSE and government agency securities of $449 million, nonagency securities of $28 million and non-trading loans of $805 million. (c)Comprises nonagency securities of $3 million, trading loans of $43 million and non-trading loans of $420 million. (d)Comprises trading loans of $850 million and non-trading loans of $1.1 billion. (e)Long-term debt, short-term borrowings and deposits include structured notes issued by the Firm that are financial instruments that 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. (i)Amounts represent weighted averages except for derivative related inputs where arithmetic averages are used. | | | | | | | | | | | | | | Level 3 inputs(a) | | December 31, 2018 | | | | | | Product/Instrument | Fair value (in millions) | | Principal valuation technique | Unobservable inputs(g) | Range of input values | Weighted average | Residential mortgage-backed securities and loans(b) | $ | 858 |
| | Discounted cash flows | Yield | 0 | % | – | 19% | 6% | | | | Prepayment speed | 0 | % | – | 24% | 9% | | | | | Conditional default rate | 0 | % | – | 9% | 1% | | | | | Loss severity | 0 | % | – | 100% | 6% | Commercial mortgage-backed securities and loans(c) | 419 |
| | Market comparables | Price | $ | 0 |
| – | $103 | $90 | Obligations of U.S. states and municipalities | 689 |
| | Market comparables | Price | $ | 62 |
| – | $100 | $96 | Corporate debt securities | 334 |
| | Market comparables | Price | $ | 0 |
| – | $107 | $57 | Loans(d) | 234 |
| | Discounted cash flows | Yield | 8% | 8% | | 942 |
| | Market comparables | Price | $ | 2 |
| – | $101 | $78 | Asset-backed securities | 127 |
| | Market comparables | Price | $ | 1 |
| – | $102 | $67 | Net interest rate derivatives | (180 | ) | | Option pricing | Interest rate spread volatility | 16 | bps | – | 38bps | | | | | | Interest rate correlation | (45 | )% | – | 97% | | | | | | IR-FX correlation | 45 | % | – | 60% | | | 142 |
| | Discounted cash flows | Prepayment speed | 4 | % | – | 30% | | Net credit derivatives | (163 | ) | | Discounted cash flows | Credit correlation | 25 | % | – | 55% | | | | | | Credit spread | 10 | bps | – | 1,487bps | | | | | | Recovery rate | 20 | % | – | 70% | | | | | | Conditional default rate | 3 | % | – | 72% | | | | | | Loss severity | 100% | | | 56 |
| | Market comparables | Price | $ | 1 |
| – | $115 | | Net foreign exchange derivatives | (122 | ) | | Option pricing | IR-FX correlation | (45 | )% | – | 60% | | | (175 | ) | | Discounted cash flows | Prepayment speed | 8 | % | – | 9% | | Net equity derivatives | (2,225 | ) | | Option pricing | Equity volatility | 14 | % | – | 57% | | | | | | Equity correlation | 20 | % | – | 98% | | | | | | Equity-FX correlation | (75 | )% | – | 61% | | | | | | Equity-IR correlation | 20 | % | – | 60% | | Net commodity derivatives | (1,129 | ) | | Option pricing | Forward commodity price | $ | 39 |
| – | $56 per barrel | | | | | Commodity volatility | 5 | % | – | 68% | | | | | | Commodity correlation | (51 | )% | – | 95% | | MSRs | 6,130 |
| | Discounted cash flows | Refer to Note 15 | | | | | Other assets | 306 |
| | Discounted cash flows | Credit spread | 55bps | 55bps | | | | | Yield | 8% | – | 10% | 8% | | 922 |
| | Market comparables | Price | $ | 20 |
| | $108 | $40 | | | | | EBITDA multiple | 2.9x | – | 8.3x | 7.5x | Long-term debt, short-term borrowings, and deposits(e) | 25,110 |
| | Option pricing | Interest rate spread volatility | 16 | bps | – | 38bps | | | | | Interest rate correlation | (45 | )% | – | 97% | | | | | IR-FX correlation | (45 | )% | – | 60% | | | | | Equity correlation | 20 | % | – | 98% | | | | | Equity-FX correlation | (75 | )% | – | 61% | | | | | Equity-IR correlation | 20 | % | – | 60% | | Other level 3 assets and liabilities, net(f) | 326 |
| | | | | | | |
| | (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. |
| | (b) | Includes U.S. government agency securities of $541 million, nonagency securities of $65 million and trading loans of $252 million. |
| | (c) | Includes U.S. government agency securities of $8 million, nonagency securities of $11 million, trading loans of $278 million and non-trading loans of $122 million. |
| | (d) | Comprises trading loans. |
| | (e) | Long-term debt, short-term borrowings and deposits include structured notes issued by the Firm that are financial instruments that 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.
|
| | | | | | | | | 168180 | | JPMorgan Chase & Co./20182020 Form 10-K |
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.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 169181 |
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 commodity) 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 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, 2018, 20172020, 2019 and 2016. 2018. When a determination is made to classify a financial instrument within level 3, the determination is based on the significance of the unobservable inputs 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.
| | | | | | | | | 170182 | | JPMorgan Chase & Co./20182020 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2018 (in millions) | Fair value at January 1, 2018 | Total realized/unrealized gains/(losses) | | | | | Transfers into level 3(h) | 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) | Assets:(a) | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | U.S. government agencies | $ | 307 |
| $ | (23 | ) | | $ | 478 |
| $ | (164 | ) | | $ | (73 | ) | $ | 94 |
| $ | (70 | ) | $ | 549 |
| | $ | (21 | ) | | Residential – nonagency | 60 |
| (2 | ) | | 78 |
| (50 | ) | | (7 | ) | 59 |
| (74 | ) | 64 |
| | 1 |
| | Commercial – nonagency | 11 |
| 2 |
| | 18 |
| (18 | ) | | (17 | ) | 36 |
| (21 | ) | 11 |
| | (2 | ) | | Total mortgage-backed securities | 378 |
| (23 | ) | | 574 |
| (232 | ) | | (97 | ) | 189 |
| (165 | ) | 624 |
| | (22 | ) | | U.S. Treasury and government agencies | 1 |
| — |
| | — |
| — |
| | — |
| — |
| (1 | ) | — |
| | — |
| | Obligations of U.S. states and municipalities | 744 |
| (17 | ) | | 112 |
| (70 | ) | | (80 | ) | — |
| — |
| 689 |
| | (17 | ) | | Non-U.S. government debt securities | 78 |
| (22 | ) | | 459 |
| (277 | ) | | (12 | ) | 23 |
| (94 | ) | 155 |
| | (9 | ) | | Corporate debt securities | 312 |
| (18 | ) | | 364 |
| (309 | ) | | (48 | ) | 262 |
| (229 | ) | 334 |
| | (1 | ) | | Loans | 2,719 |
| 26 |
| | 1,364 |
| (1,793 | ) | | (658 | ) | 813 |
| (765 | ) | 1,706 |
| | (1 | ) | | Asset-backed securities | 153 |
| 28 |
| | 98 |
| (41 | ) | | (55 | ) | 45 |
| (101 | ) | 127 |
| | 22 |
| | Total debt instruments | 4,385 |
| (26 | ) | | 2,971 |
| (2,722 | ) | | (950 | ) | 1,332 |
| (1,355 | ) | 3,635 |
| | (28 | ) | | Equity securities | 295 |
| (40 | ) | | 118 |
| (120 | ) | | (1 | ) | 107 |
| (127 | ) | 232 |
| | 9 |
| | Other | 690 |
| (285 | ) | | 55 |
| (40 | ) | | (118 | ) | 3 |
| (4 | ) | 301 |
| | (301 | ) | | Total trading assets – debt and equity instruments | 5,370 |
| (351 | ) | (c) | 3,144 |
| (2,882 | ) | | (1,069 | ) | 1,442 |
| (1,486 | ) | 4,168 |
| | (320 | ) | (c) | Net derivative receivables:(b) | | | | | | | |
|
| | | | | | Interest rate | 264 |
| 150 |
| | 107 |
| (133 | ) | | (430 | ) | (15 | ) | 19 |
| (38 | ) | | 187 |
| | Credit | (35 | ) | (40 | ) | | 5 |
| (7 | ) | | (57 | ) | 4 |
| 23 |
| (107 | ) | | (28 | ) | | Foreign exchange | (396 | ) | 103 |
| | 52 |
| (20 | ) | | 30 |
| (108 | ) | 42 |
| (297 | ) | | (63 | ) | | Equity | (3,409 | ) | 198 |
| | 1,676 |
| (2,208 | ) | | 1,805 |
| (617 | ) | 330 |
| (2,225 | ) | | 561 |
| | Commodity | (674 | ) | (73 | ) | | 1 |
| (72 | ) | | (301 | ) | 7 |
| (17 | ) | (1,129 | ) | | 146 |
| | Total net derivative receivables | (4,250 | ) | 338 |
| (c) | 1,841 |
| (2,440 | ) | | 1,047 |
| (729 | ) | 397 |
| (3,796 | ) | | 803 |
| (c) | Available-for-sale securities: | | | | | | | |
|
| | | | | | Mortgage-backed securities | 1 |
| — |
| | — |
| — |
| | — |
| — |
| — |
| 1 |
| | — |
| | Asset-backed securities | 276 |
| 1 |
| | — |
| — |
| | (277 | ) | — |
| — |
| — |
| | — |
| | Total available-for-sale securities | 277 |
| 1 |
| (d) | — |
| — |
| | (277 | ) | — |
| — |
| 1 |
| | — |
| | Loans | 276 |
| (7 | ) | (c) | 123 |
| — |
| | (196 | ) | — |
| (74 | ) | 122 |
| | (7 | ) | (c) | Mortgage servicing rights | 6,030 |
| 230 |
| (e) | 1,246 |
| (636 | ) | | (740 | ) | — |
| — |
| 6,130 |
| | 230 |
| (e) | Other assets | 1,265 |
| (328 | ) | (c) | 61 |
| (37 | ) | | (37 | ) | 4 |
| (1 | ) | 927 |
| | (340 | ) | (c) | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2018 (in millions) | Fair value at January 1, 2018 | Total realized/unrealized (gains)/losses | | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2018 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2018 | Purchases | Sales | Issuances | Settlements(g) | Transfers into level 3(h) | Liabilities:(a) | | | | | | | | | | | | | | Deposits | $ | 4,142 |
| $ | (136 | ) | (c)(i) | $ | — |
| $ | — |
| $ | 1,437 |
| $ | (736 | ) | $ | 2 |
| $ | (540 | ) | $ | 4,169 |
| | $ | (204 | ) | (c)(i) | Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| — |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
| | — |
| | Short-term borrowings | 1,665 |
| (329 | ) | (c)(i) | — |
| — |
| 3,455 |
| (3,388 | ) | 272 |
| (152 | ) | 1,523 |
| | (131 | ) | (c)(i) | Trading liabilities – debt and equity instruments | 39 |
| 19 |
| (c) | (99 | ) | 114 |
| — |
| (1 | ) | 14 |
| (36 | ) | 50 |
| | 16 |
| (c) | Accounts payable and other liabilities | 13 |
| — |
| | (12 | ) | 5 |
| — |
| — |
| 4 |
| — |
| 10 |
| | — |
| | Beneficial interests issued by consolidated VIEs | 39 |
| — |
| | — |
| 1 |
| — |
| (39 | ) | — |
| — |
| 1 |
| | — |
| | Long-term debt | 16,125 |
| (1,169 | ) | (c)(i) | — |
| — |
| 11,919 |
| (7,769 | ) | 1,143 |
| (831 | ) | 19,418 |
| | (1,385 | ) | (c)(i) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2020 (in millions) | Fair value at January 1, 2020 | Total realized/unrealized gains/(losses) | | | | | Transfers into level 3(i) | Transfers (out of) level 3(i) | Fair value at Dec. 31, 2020 | | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2020 | Purchases(g) | Sales | | Settlements(h) | Assets:(a) | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | U.S. GSEs and government agencies | $ | 797 | | $ | (172) | | | $ | 134 | | $ | (149) | | | $ | (161) | | $ | 0 | | $ | 0 | | $ | 449 | | | $ | (150) | | | Residential – nonagency | 23 | | 2 | | | 15 | | (5) | | | (4) | | 0 | | (3) | | 28 | | | (1) | | | Commercial – nonagency | 4 | | 0 | | | 1 | | 0 | | | (1) | | 2 | | (3) | | 3 | | | 0 | | | Total mortgage-backed securities | 824 | | (170) | | | 150 | | (154) | | | (166) | | 2 | | (6) | | 480 | | | (151) | | | U.S. Treasury, GSEs and government agencies | 0 | | 0 | | | 0 | | 0 | | | 0 | | 0 | | 0 | | 0 | | | 0 | | | Obligations of U.S. states and municipalities | 10 | | 0 | | | 0 | | (1) | | | (1) | | 0 | | 0 | | 8 | | | 0 | | | Non-U.S. government debt securities | 155 | | 21 | | | 281 | | (245) | | | (7) | | 0 | | (23) | | 182 | | | 11 | | | Corporate debt securities | 558 | | (23) | | | 582 | | (205) | | | (236) | | 411 | | (580) | | 507 | | | (25) | | | Loans(b) | 673 | | (73) | | | 1,112 | | (484) | | | (182) | | 791 | | (944) | | 893 | | | (40) | | | Asset-backed securities | 37 | | (3) | | | 44 | | (40) | | | (9) | | 9 | | (10) | | 28 | | | (4) | | | Total debt instruments | 2,257 | | (248) | | | 2,169 | | (1,129) | | | (601) | | 1,213 | | (1,563) | | 2,098 | | | (209) | | | Equity securities | 196 | | (75) | | | 53 | | (376) | | | (1) | | 535 | | (153) | | 179 | | | (20) | | | | | | | | | | | | | | | | | Other | 232 | | 271 | | | 245 | | (9) | | | (154) | | 6 | | (245) | | 346 | | | 206 | | | Total trading assets – debt and equity instruments | 2,685 | | (52) | | (d) | 2,467 | | (1,514) | | | (756) | | 1,754 | | (1,961) | | 2,623 | | | (23) | | (d) | Net derivative receivables:(c) | | | | | | | | | | | | | | Interest rate | (332) | | 2,682 | | | 308 | | (148) | | | (2,228) | | (332) | | 308 | | 258 | | | 325 | | | Credit | (139) | | (212) | | | 73 | | (154) | | | 181 | | 59 | | (32) | | (224) | | | (110) | | | Foreign exchange | (607) | | 49 | | | 49 | | (24) | | | 83 | | 13 | | 3 | | (434) | | | 116 | | | Equity | (3,395) | | (65) | | | 1,664 | | (2,317) | | | 1,162 | | (935) | | 24 | | (3,862) | | | (556) | | | Commodity | (16) | | (546) | | | 27 | | (241) | | | 356 | | (310) | | (1) | | (731) | | | 267 | | | Total net derivative receivables | (4,489) | | 1,908 | | (d) | 2,121 | | (2,884) | | | (446) | | (1,505) | | 302 | | (4,993) | | | 42 | | (d) | Available-for-sale securities: | | | | | | | | | | | | | | Mortgage-backed securities | 1 | | 0 | | | 0 | | 0 | | | (1) | | 0 | | 0 | | 0 | | | 0 | | | Asset-backed securities | 0 | | 0 | | | 0 | | 0 | | | 0 | | 0 | | 0 | | 0 | | | 0 | | | Total available-for-sale securities | 1 | | 0 | | | 0 | | 0 | | | (1) | | 0 | | 0 | | 0 | | | 0 | | | Loans(b) | 516 | | (243) | | (d) | 962 | | (84) | | | (733) | | 2,571 | | (684) | | 2,305 | | | (18) | | (d) | Mortgage servicing rights | 4,699 | | (1,540) | | (e) | 1,192 | | (176) | | | (899) | | 0 | | 0 | | 3,276 | | | (1,540) | | (e) | Other assets(b) | 917 | | (63) | | (d) | 75 | | (104) | | | (320) | | 40 | | (7) | | 538 | | | (3) | | (d) | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2020 (in millions) | Fair value at January 1, 2020 | Total realized/unrealized (gains)/losses | | | | | | Transfers (out of) level 3(i) | Fair value at Dec. 31, 2020 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2020 | Purchases | Sales | Issuances | Settlements(h) | Transfers into level 3(i) | Liabilities:(a) | | | | | | | | | | | | | | Deposits | $ | 3,360 | | $ | 165 | | (d)(f) | $ | 0 | | $ | 0 | | $ | 671 | | $ | (605) | | $ | 265 | | $ | (943) | | $ | 2,913 | | | $ | 455 | | (d)(f) | | | | | | | | | | | | | | | Short-term borrowings | 1,674 | | (338) | | (d)(f) | 0 | | 0 | | 5,140 | | (4,115) | | 105 | | (46) | | 2,420 | | | 143 | | (d)(f) | Trading liabilities – debt and equity instruments | 41 | | (2) | | (d) | (126) | | 14 | | 0 | | (4) | | 136 | | (8) | | 51 | | | (1) | | (d) | Accounts payable and other liabilities | 45 | | 33 | | (d) | (87) | | 37 | | 0 | | 0 | | 47 | | (7) | | 68 | | | 28 | | (d) | Beneficial interests issued by consolidated VIEs | 0 | | 0 | | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | | 0 | | | Long-term debt | 23,339 | | 40 | | (d)(f) | 0 | | 0 | | 9,883 | | (9,833) | | 1,250 | | (1,282) | | 23,397 | | | 1,920 | | (d)(f) |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 171183 |
Notes to consolidated financial statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2017 (in millions) | Fair value at January 1, 2017 | Total realized/unrealized gains/(losses) | | | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2017 | | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2017 | Purchases(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 | ) | | Residential – nonagency | 83 |
| | 19 |
| | 53 |
| (30 | ) | | | (64 | ) | 132 |
| (133 | ) | 60 |
| | 11 |
| | Commercial – nonagency | 17 |
| | 9 |
| | 27 |
| (44 | ) | | | (13 | ) | 64 |
| (49 | ) | 11 |
| | 1 |
| | Total mortgage-backed securities | 492 |
| | 17 |
| | 241 |
| (245 | ) | | | (147 | ) | 245 |
| (225 | ) | 378 |
| | (8 | ) | | U.S. Treasury and government agencies | — |
| | — |
| | — |
| — |
| | | — |
| 1 |
| — |
| 1 |
| | — |
| | Obligations of U.S. states and municipalities | 649 |
| | 18 |
| | 152 |
| (70 | ) | | | (5 | ) | — |
| — |
| 744 |
| | 15 |
| | Non-U.S. government debt securities | 46 |
| | — |
| | 559 |
| (518 | ) | | | — |
| 62 |
| (71 | ) | 78 |
| | — |
| | Corporate debt securities | 576 |
| | 11 |
| | 872 |
| (612 | ) | | | (497 | ) | 157 |
| (195 | ) | 312 |
| | 18 |
| | Loans | 4,837 |
| | 333 |
| | 2,389 |
| (2,832 | ) | | | (1,323 | ) | 806 |
| (1,491 | ) | 2,719 |
| | 43 |
| | Asset-backed securities | 302 |
| | 32 |
| | 354 |
| (356 | ) | | | (56 | ) | 75 |
| (198 | ) | 153 |
| | — |
| | Total debt instruments | 6,902 |
| | 411 |
| | 4,567 |
| (4,633 | ) | | | (2,028 | ) | 1,346 |
| (2,180 | ) | 4,385 |
| | 68 |
| | Equity securities | 231 |
| | 39 |
| | 176 |
| (148 | ) | | | (4 | ) | 59 |
| (58 | ) | 295 |
| | 21 |
| | Other | 761 |
| | 100 |
| | 30 |
| (46 | ) | | | (162 | ) | 17 |
| (10 | ) | 690 |
| | 39 |
| | Total trading assets – debt and equity instruments | 7,894 |
| | 550 |
| (c) | 4,773 |
| (4,827 | ) | | | (2,194 | ) | 1,422 |
| (2,248 | ) | 5,370 |
| | 128 |
| (c) | Net derivative receivables:(b) | — |
| | | |
|
|
|
| | |
|
|
|
|
|
|
|
| |
|
| | Interest rate | 1,263 |
| | 72 |
| | 60 |
| (82 | ) | | | (1,040 | ) | (8 | ) | (1 | ) | 264 |
| | (473 | ) | | Credit | 98 |
| | (164 | ) | | 1 |
| (6 | ) | | | — |
| 77 |
| (41 | ) | (35 | ) | | 32 |
| | Foreign exchange | (1,384 | ) | | 43 |
| | 13 |
| (10 | ) | | | 854 |
| (61 | ) | 149 |
| (396 | ) | | 42 |
| | Equity | (2,252 | ) | | (417 | ) | | 1,116 |
| (551 | ) | | | (245 | ) | (1,482 | ) | 422 |
| (3,409 | ) | | (161 | ) | | Commodity | (85 | ) | | (149 | ) | | — |
| — |
| | | (433 | ) | (6 | ) | (1 | ) | (674 | ) | | (718 | ) | | Total net derivative receivables | (2,360 | ) | | (615 | ) | (c) | 1,190 |
| (649 | ) | | | (864 | ) | (1,480 | ) | 528 |
| (4,250 | ) | | (1,278 | ) | (c) | Available-for-sale securities: | | | | |
|
|
|
| | |
|
|
|
|
|
| — |
| |
|
| | Mortgage-backed securities | 1 |
| | — |
| | — |
| — |
| | | — |
| — |
| — |
| 1 |
| | — |
| | Asset-backed securities | 663 |
| | 15 |
| | — |
| (50 | ) | | | (352 | ) | — |
| — |
| 276 |
| | 14 |
| | Total available-for-sale securities | 664 |
| | 15 |
| (d) | — |
| (50 | ) | | | (352 | ) | — |
| — |
| 277 |
| | 14 |
| (d) | Loans | 570 |
| | 35 |
| (c) | — |
| (26 | ) | | | (303 | ) | — |
| — |
| 276 |
| | 3 |
| (c) | Mortgage servicing rights | 6,096 |
| | (232 | ) | (e) | 1,103 |
| (140 | ) | | | (797 | ) | — |
| — |
| 6,030 |
| | (232 | ) | (e) | Other assets | 2,223 |
| | 244 |
| (c) | 66 |
| (177 | ) | | | (870 | ) | — |
| (221 | ) | 1,265 |
| | 74 |
| (c) | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2017 (in millions) | Fair value at January 1, 2017 | | Total realized/unrealized (gains)/losses | | | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2017 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2017 | Purchases | Sales | Issuances | | Settlements(g) | Transfers into level 3(h) | Liabilities:(a) | | | | | | | | | | | | | | | | Deposits | $ | 2,117 |
| | $ | 152 |
| (c)(i) | $ | — |
| $ | — |
| $ | 3,027 |
| | $ | (291 | ) | $ | 11 |
| $ | (874 | ) | $ | 4,142 |
| | $ | 198 |
| (c)(i) | Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| | — |
| | — |
| — |
| — |
| | — |
| — |
| — |
| — |
| | — |
| | Short-term borrowings | 1,134 |
| | 42 |
| (c)(i) | — |
| — |
| 3,289 |
| | (2,748 | ) | 150 |
| (202 | ) | 1,665 |
| | 7 |
| (c)(i) | Trading liabilities – debt and equity instruments | 43 |
| | (3 | ) | (c) | (46 | ) | 48 |
| — |
| | 3 |
| 3 |
| (9 | ) | 39 |
| | — |
| | Accounts payable and other liabilities | 13 |
| | (2 | ) | | (1 | ) | — |
| — |
| | 3 |
| — |
| — |
| 13 |
| | (2 | ) | | Beneficial interests issued by consolidated VIEs | 48 |
| | 2 |
| (c) | (122 | ) | 39 |
| — |
| | (6 | ) | 78 |
| — |
| 39 |
| | — |
| | Long-term debt | 12,850 |
| | 1,067 |
| (c)(i) | — |
| — |
| 12,458 |
| | (10,985 | ) | 1,660 |
| (925 | ) | 16,125 |
| | 552 |
| (c)(i) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2019 (in millions) | Fair value at January 1, 2019 | Total realized/unrealized gains/(losses) | | | | | | | Transfers (out of) level 3(i) | | Fair value at Dec. 31, 2019 | | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2019 | Purchases(g) | Sales | | | Settlements(h) | Transfers into level 3(i) | Assets:(a) | | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | | | | U.S. GSEs and government agencies | $ | 549 | | | $ | (62) | | | $ | 773 | | $ | (310) | | | | $ | (134) | | $ | 1 | | $ | (20) | | | $ | 797 | | | $ | (58) | | | Residential – nonagency | 64 | | | 25 | | | 83 | | (86) | | | | (20) | | 15 | | (58) | | | 23 | | | 2 | | | Commercial – nonagency | 11 | | | 2 | | | 20 | | (26) | | | | (14) | | 15 | | (4) | | | 4 | | | 1 | | | Total mortgage-backed securities | 624 | | | (35) | | | 876 | | (422) | | | | (168) | | 31 | | (82) | | | 824 | | | (55) | | | U.S. Treasury, GSEs and government agencies | 0 | | | 0 | | | 0 | | 0 | | | | 0 | | 0 | | 0 | | | 0 | | | 0 | | | Obligations of U.S. states and municipalities | 689 | | | 13 | | | 85 | | (159) | | | | (8) | | 0 | | (610) | | | 10 | | | 13 | | | Non-U.S. government debt securities | 155 | | | 1 | | | 290 | | (287) | | | | 0 | | 14 | | (18) | | | 155 | | | 4 | | | Corporate debt securities | 334 | | | 47 | | | 437 | | (247) | | | | (52) | | 112 | | (73) | | | 558 | | | 40 | | | Loans(b) | 738 | | | 29 | | | 456 | | (519) | | | | (82) | | 437 | | (386) | | | 673 | | | 13 | | | Asset-backed securities | 127 | | | 0 | | | 37 | | (93) | | | | (40) | | 28 | | (22) | | | 37 | | | (3) | | | Total debt instruments | 2,667 | | | 55 | | | 2,181 | | (1,727) | | | | (350) | | 622 | | (1,191) | | | 2,257 | | | 12 | | | Equity securities | 232 | | | (41) | | | 58 | | (103) | | | | (22) | | 181 | | (109) | | | 196 | | | (18) | | | Other | 301 | | | (36) | | | 50 | | (26) | | | | (54) | | 2 | | (5) | | | 232 | | | 91 | | | Total trading assets – debt and equity instruments | 3,200 | | | (22) | | (d) | 2,289 | | (1,856) | | | | (426) | | 805 | | (1,305) | | | 2,685 | | | 85 | | (d) | Net derivative receivables:(c) | | | | | | | | | | | | | | | | | 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) | | (d) | 579 | | (1,122) | | | | (89) | | (411) | | 1,144 | | | (4,489) | | | (2,584) | | (d) | Available-for-sale securities: | | | | | | | | | | | | | | | | | Mortgage-backed securities | 1 | | | 0 | | | 0 | | 0 | | | | 0 | | 0 | | 0 | | | 1 | | | 0 | | | Asset-backed securities | 0 | | | 0 | | | 0 | | 0 | | | | 0 | | 0 | | 0 | | | 0 | | | 0 | | | Total available-for-sale securities | 1 | | | 0 | |
| 0 | | 0 | | | | 0 | | 0 | | 0 | | | 1 | | | 0 | | | Loans(b) | 856 | | | 59 | | (d) | 236 | | (188) | | | | (482) | | 188 | | (153) | | | 516 | | | 38 | | (d) | Mortgage servicing rights | 6,130 | | | (1,180) | | (e) | 1,489 | | (789) | | | | (951) | | 0 | | 0 | | | 4,699 | | | (1,180) | | (e) | Other assets(b) | 1,161 | | | (150) | | (d) | 229 | | (166) | | | | (156) | | 6 | | (7) | | | 917 | | | (180) | | (d) | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2019 (in millions) | Fair value at January 1, 2019 | | Total realized/unrealized (gains)/losses | | | | | | | Transfers (out of) level 3(i) | | Fair value at Dec. 31, 2019 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2019 | Purchases | Sales | Issuances | | Settlements(h) | Transfers into level 3(i) | Liabilities:(a) | | | | | | | | | | | | | | | | | Deposits | $ | 4,169 | | | $ | 278 | | (d)(f) | $ | 0 | | $ | 0 | | $ | 916 | | | $ | (806) | | $ | 12 | | $ | (1,209) | | | $ | 3,360 | | | $ | 307 | | (d)(f) | | | | | | | | | | | | | | | | | | Short-term borrowings | 1,523 | | | 229 | | (d)(f) | 0 | | 0 | | 3,441 | | | (3,356) | | 85 | | (248) | | | 1,674 | | | 155 | | (d)(f) | Trading liabilities – debt and equity instruments | 50 | | | 2 | | (d) | (22) | | 41 | | 0 | | | 1 | | 16 | | (47) | | | 41 | | | 3 | | (d) | Accounts payable and other liabilities | 10 | | | (2) | | (d) | (84) | | 115 | | 0 | | | 0 | | 6 | | 0 | | | 45 | | | 29 | | (d) | Beneficial interests issued by consolidated VIEs | 1 | | | (1) | | (d) | 0 | | 0 | | 0 | | | 0 | | 0 | | 0 | | | 0 | | | 0 | | | Long-term debt | 19,418 | | | 2,815 | | (d)(f) | 0 | | 0 | | 10,441 | | | (8,538) | | 651 | | (1,448) | | | 23,339 | | | 2,822 | | (d)(f) |
| | | | | | | | | 172184 | | JPMorgan Chase & Co./20182020 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2016 (in millions) | Fair value at January 1, 2016 | Total realized/unrealized gains/(losses) | | | | | | | | | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2016 | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2016 | Purchases(f) | | Sales | | | Settlements(g) | | Transfers into level 3(h) | Assets:(a) | | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | | | | U.S. government agencies | $ | 715 |
| $ | (20 | ) | | $ | 135 |
| | $ | (295 | ) | | | $ | (115 | ) | | $ | 111 |
| $ | (139 | ) | $ | 392 |
| | $ | (36 | ) | | Residential – nonagency | 194 |
| 4 |
| | 252 |
| | (319 | ) | | | (20 | ) | | 67 |
| (95 | ) | 83 |
| | 5 |
| | Commercial – nonagency | 115 |
| (11 | ) | | 69 |
| | (29 | ) | | | (3 | ) | | 173 |
| (297 | ) | 17 |
| | 3 |
| | Total mortgage-backed securities | 1,024 |
| (27 | ) | | 456 |
| | (643 | ) | | | (138 | ) | | 351 |
| (531 | ) | 492 |
| | (28 | ) | | Obligations of U.S. states and municipalities | 651 |
| 19 |
| | 149 |
| | (132 | ) | | | (38 | ) | | — |
| — |
| 649 |
| | — |
| | Non-U.S. government debt securities | 74 |
| (4 | ) | | 91 |
| | (97 | ) | | | (7 | ) | | 19 |
| (30 | ) | 46 |
| | (7 | ) | | Corporate debt securities | 736 |
| 2 |
| | 445 |
| | (359 | ) | | | (189 | ) | | 148 |
| (207 | ) | 576 |
| | (22 | ) | | Loans | 6,604 |
| (343 | ) | | 2,228 |
| | (2,598 | ) | | | (1,311 | ) | | 1,044 |
| (787 | ) | 4,837 |
| | (169 | ) | | Asset-backed securities | 1,832 |
| 39 |
| | 655 |
| | (712 | ) | | | (968 | ) | | 288 |
| (832 | ) | 302 |
| | 19 |
| | Total debt instruments | 10,921 |
| (314 | ) | | 4,024 |
| | (4,541 | ) | | | (2,651 | ) | | 1,850 |
| (2,387 | ) | 6,902 |
| | (207 | ) | | Equity securities | 265 |
| — |
| | 90 |
| | (108 | ) | | | (40 | ) | | 29 |
| (5 | ) | 231 |
| | 7 |
| | Physical commodities | — |
| — |
| | — |
| | — |
| | | — |
| | — |
| — |
| — |
| | — |
| | Other | 744 |
| 79 |
| | 649 |
| | (287 | ) | | | (360 | ) | | 26 |
| (90 | ) | 761 |
| | 28 |
| | Total trading assets – debt and equity instruments | 11,930 |
| (235 | ) | (c) | 4,763 |
| | (4,936 | ) | | | (3,051 | ) | | 1,905 |
| (2,482 | ) | 7,894 |
| | (172 | ) | (c) | Net derivative receivables:(b) | | | |
|
| |
|
| | |
|
| |
|
|
|
|
|
| |
|
| | Interest rate | 876 |
| 756 |
| | 193 |
| | (57 | ) | | | (713 | ) | | (14 | ) | 222 |
| 1,263 |
| | (144 | ) | | Credit | 549 |
| (742 | ) | | 10 |
| | (2 | ) | | | 211 |
| | 36 |
| 36 |
| 98 |
| | (622 | ) | | Foreign exchange | (725 | ) | 67 |
| | 64 |
| | (124 | ) | | | (649 | ) | | (48 | ) | 31 |
| (1,384 | ) | | (350 | ) | | Equity | (1,514 | ) | (145 | ) | | 277 |
| | (852 | ) | | | 213 |
| | 94 |
| (325 | ) | (2,252 | ) | | (86 | ) | | Commodity | (935 | ) | 194 |
| | 1 |
| | 10 |
| | | 645 |
| | 8 |
| (8 | ) | (85 | ) | | (36 | ) | | Total net derivative receivables | (1,749 | ) | 130 |
| (c) | 545 |
| | (1,025 | ) | | | (293 | ) | | 76 |
| (44 | ) | (2,360 | ) | | (1,238 | ) | (c) | Available-for-sale securities: |
|
|
|
| |
|
| |
|
| | |
|
| |
|
|
|
|
|
| |
|
| | Mortgage-backed securities | 1 |
| — |
| | — |
| | — |
| | | — |
| | — |
| — |
| 1 |
| | — |
| | Asset-backed securities | 823 |
| 1 |
| | — |
| | — |
| | | (119 | ) | | — |
| (42 | ) | 663 |
| | 1 |
| | Total available-for-sale securities | 824 |
| 1 |
| (d) | — |
| | — |
| | | (119 | ) | | — |
| (42 | ) | 664 |
| | 1 |
| (d) | Loans | 1,518 |
| (49 | ) | (c) | 259 |
| | (7 | ) | | | (838 | ) | | — |
| (313 | ) | 570 |
| | — |
| | Mortgage servicing rights | 6,608 |
| (163 | ) | (e) | 679 |
| | (109 | ) | | | (919 | ) | | — |
| — |
| 6,096 |
| | (163 | ) | (e) | Other assets | 2,401 |
| 130 |
| (c) | 487 |
| | (496 | ) | | | (299 | ) | | — |
| — |
| 2,223 |
| | 48 |
| (c) | | | | | | | | | | | | | | | | | | | 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 into level 3(h) | Transfers (out of) level 3(h) | Fair value at Dec. 31, 2016 | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2016 | Purchases | | Sales | Issuances | | Settlements(g) | | Liabilities:(a) | | | | | | | | | | | | | | | | | Deposits | $ | 2,950 |
| $ | (56 | ) | (c) | $ | — |
| | $ | — |
| $ | 1,375 |
| | $ | (1,283 | ) | | $ | — |
| $ | (869 | ) | $ | 2,117 |
| | $ | 23 |
| (c) | Federal funds purchased and securities loaned or sold under repurchase agreements | — |
| — |
| | — |
| | — |
| — |
| | (2 | ) | | 6 |
| (4 | ) | — |
| | — |
| | Short-term borrowings | 639 |
| (230 | ) | (c) | — |
| | — |
| 1,876 |
| | (1,210 | ) | | 114 |
| (55 | ) | 1,134 |
| | (70 | ) | (c) | Trading liabilities – debt and equity instruments | 63 |
| (12 | ) | (c) | (15 | ) | | 23 |
| — |
| | (22 | ) | | 13 |
| (7 | ) | 43 |
| | (18 | ) | (c) | Accounts payable and other liabilities | 19 |
| — |
| | — |
| | — |
| — |
| | (6 | ) | | — |
| — |
| 13 |
| | — |
|
| Beneficial interests issued by consolidated VIEs | 549 |
| (31 | ) | (c) | — |
| | — |
| 143 |
| | (613 | ) | | — |
| — |
| 48 |
| | 6 |
| (c) | Long-term debt | 11,447 |
| 147 |
| (c) | — |
| | — |
| 8,140 |
| | (5,810 | ) | | 315 |
| (1,389 | ) | 12,850 |
| | 639 |
| (c) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2018 (in millions) | Fair value at January 1, 2018 | Total realized/unrealized gains/(losses) | | | | | | | | | | Transfers (out of) level 3(i) | Fair value at Dec. 31, 2018 | | Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2018 | Purchases(g) | | Sales | | | | Settlements(h) | | Transfers into level 3(i) | Assets:(a) | | | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | | | | | Debt instruments: | | | | | | | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | | | | | U.S. GSEs and government agencies | $ | 307 | | $ | (23) | | | $ | 478 | | | $ | (164) | | | | | $ | (73) | | | $ | 94 | | $ | (70) | | $ | 549 | | | $ | (21) | | | Residential – nonagency | 60 | | (2) | | | 78 | | | (50) | | | | | (7) | | | 59 | | (74) | | 64 | | | 1 | | | Commercial – nonagency | 11 | | 2 | | | 18 | | | (18) | | | | | (17) | | | 36 | | (21) | | 11 | | | (2) | | | Total mortgage-backed securities | 378 | | (23) | | | 574 | | | (232) | | | | | (97) | | | 189 | | (165) | | 624 | | | (22) | | | U.S. Treasury, GSEs and government agencies | 1 | | 0 | | | 0 | | | 0 | | | | | 0 | | | 0 | | (1) | | 0 | | | 0 | | | Obligations of U.S. states and municipalities | 744 | | (17) | | | 112 | | | (70) | | | | | (80) | | | 0 | | 0 | | 689 | | | (17) | | | Non-U.S. government debt securities | 78 | | (22) | | | 459 | | | (277) | | | | | (12) | | | 23 | | (94) | | 155 | | | (9) | | | Corporate debt securities | 312 | | (18) | | | 364 | | | (309) | | | | | (48) | | | 262 | | (229) | | 334 | | | (1) | | | Loans(b) | 612 | | 1 | | | 941 | | | (536) | | | | | (219) | | | 619 | | (680) | | 738 | | | (13) | | | Asset-backed securities | 153 | | 28 | | | 98 | | | (41) | | | | | (55) | | | 45 | | (101) | | 127 | | | 22 | | | Total debt instruments | 2,278 | | (51) | | | 2,548 | | | (1,465) | | | | | (511) | | | 1,138 | | (1,270) | | 2,667 | | | (40) | | | Equity securities | 295 | | (40) | | | 118 | | | (120) | | | | | (1) | | | 107 | | (127) | | 232 | | | 9 | | | | | | | | | | | | | | | | | | | | | Other | 690 | | (285) | | | 55 | | | (40) | | | | | (118) | | | 3 | | (4) | | 301 | | | (301) | | | Total trading assets – debt and equity instruments | 3,263 | | (376) | | (d) | 2,721 | | | (1,625) | | | | | (630) | | | 1,248 | | (1,401) | | 3,200 | | | (332) | | (d) | Net derivative receivables:(c) | | | | | | | | | | | | | | | | | | Interest rate | 264 | | 150 | | | 107 | | | (133) | | | | | (430) | | | (15) | | 19 | | (38) | | | 187 | | | Credit | (35) | | (40) | | | 5 | | | (7) | | | | | (57) | | | 4 | | 23 | | (107) | | | (28) | | | Foreign exchange | (396) | | 103 | | | 52 | | | (20) | | | | | 30 | | | (108) | | 42 | | (297) | | | (63) | | | Equity | (3,409) | | 198 | | | 1,676 | | | (2,208) | | | | | 1,805 | | | (617) | | 330 | | (2,225) | | | 561 | | | Commodity | (674) | | (73) | | | 1 | | | (72) | | | | | (301) | | | 7 | | (17) | | (1,129) | | | 146 | | | Total net derivative receivables | (4,250) | | 338 | | (d) | 1,841 | | | (2,440) | | | | | 1,047 | | | (729) | | 397 | | (3,796) | | | 803 | | (d) | Available-for-sale securities: | | | | | | | | | | | | | | — | | | | | Mortgage-backed securities | 1 | | 0 | | | 0 | | | 0 | | | | | 0 | | | 0 | | 0 | | 1 | | | 0 | | | Asset-backed securities | 276 | | 1 | | | 0 | | | 0 | | | | | (277) | | | 0 | | 0 | | 0 | | | — | | | Total available-for-sale securities | 277 | | 1 | | (j) | 0 | | | 0 | | | | | (277) | | | 0 | | 0 | | 1 | | | 0 | |
| Loans(b) | 2,152 | | 9 | | (d) | 412 | | | (1,256) | | | | | (496) | | | 194 | | (159) | | 856 | | | (4) | | (d) | Mortgage servicing rights | 6,030 | | 230 | | (e) | 1,246 | | | (636) | | | | | (740) | | | 0 | | 0 | | 6,130 | | | 230 | | (e) | Other assets(b) | 1,496 | | (319) | | (d) | 195 | | | (38) | | | | | (176) | | | 4 | | (1) | | 1,161 | | | (331) | | (d) | | | | | | | | | | | | | | | | | | | | Fair value measurements using significant unobservable inputs | | | Year ended December 31, 2018 (in millions) | Fair value at January 1, 2018 | Total realized/unrealized (gains)/losses | | | | | | | | | Transfers into level 3(i) | Transfers (out of) level 3(i) | Fair value at Dec. 31, 2018 | | Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2018 | Purchases | | Sales | | Issuances | | Settlements(h) | | Liabilities:(a) | | | | | | | | | | | | | | | | | | Deposits | $ | 4,142 | | $ | (136) | | (d)(f) | $ | 0 | | | $ | 0 | | | $ | 1,437 | | | $ | (736) | | | $ | 2 | | $ | (540) | | $ | 4,169 | | | $ | (204) | | (d)(f) | | | | | | | | | | | | | | | | | | | Short-term borrowings | 1,665 | | (329) | | (d)(f) | 0 | | | 0 | | | 3,455 | | | (3,388) | | | 272 | | (152) | | 1,523 | | | (131) | | (d)(f) | Trading liabilities – debt and equity instruments | 39 | | 19 | | (d) | (99) | | | 114 | | | 0 | | | (1) | | | 14 | | (36) | | 50 | | | 16 | | (d) | Accounts payable and other liabilities | 13 | | 0 | | | (12) | | | 5 | | | 0 | | | 0 | | | 4 | | 0 | | 10 | | | 0 | | | Beneficial interests issued by consolidated VIEs | 39 | | 0 | | | 0 | | | 1 | | | 0 | | | (39) | | | 0 | | 0 | | 1 | | | 0 | | | Long-term debt | 16,125 | | (1,169) | | (d)(f) | 0 | | | 0 | | | 11,919 | | | (7,769) | | | 1,143 | | (831) | | 19,418 | | | (1,385) | | (d)(f) |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 173185 |
Notes to consolidated financial statements
| | (a) | (a)Level 3 assets at fair value as a percentage of total Firm assets accounted for at fair value (including assets measured at fair value on a nonrecurring basis) were 3%, 3% and 4% at December 31, 2018, 2017 and 2016 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%, 15% and 12% at December 31, 2018, 2017 and 2016, 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 investment securities gains/(losses). Unrealized gains/(losses) are reported in OCI. Realized gains/(losses) and foreign exchange hedge accounting adjustments recorded in income on AFS securities were $1 million, zero and zero for the years ended December 31, 2018, 2017 and 2016, respectively. Unrealized gains/(losses) recorded on AFS securities in OCI were zero, $15 million and $1 million for the years ended December 31, 2018, 2017 and 2016, respectively.
|
| | (e) | Changes in fair value for MSRs are reported in mortgage fees and related income. |
| | (f) | Loan originations are included in purchases. |
| | (g) | Includes financial assets and liabilities that have matured, been partially or fully repaid, impacts of modifications, deconsolidations 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)/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, 2018 and 2017, respectively. Unrealized (gains)/losses are reported in OCI, and they were $(277) million and $(48) million for the years ended December 31, 2018 and 2017, respectively.
|
Level 3 analysis
Consolidated balance sheets changes
Level 3 assets (including assets measured at fair value on a nonrecurring basis) were 0.7%1%, 2% and 3% at December 31, 2020, 2019 and 2018, respectively. Level 3 liabilities at fair value as a percentage of total Firm liabilities at fair value (including liabilities measured at fair value on a nonrecurring basis) were 9%, 16% and 15% at December 31, 2020, 2019 and 2018, respectively.
(b)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation. (c)All level 3 derivatives are presented on a net basis, irrespective of underlying counterparty. (d)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. (e)Changes in fair value for MSRs are reported in mortgage fees and related income. (f)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, 2020, 2019 and 2018, respectively. Unrealized (gains)/losses are reported in OCI, and they were $221 million, $319 million and $(277) million for the years ended December 31, 2020, 2019 and 2018, respectively. (g)Loan originations are included in purchases. (h)Includes financial assets and liabilities that have matured, been partially or fully repaid, impacts of modifications, deconsolidation associated with beneficial interests in VIEs and other items. (i)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. (j)Realized gains/(losses) on AFS securities, as well as other-than-temporary impairment (“OTTI”) losses that are recorded in earnings, are reported in investment securities gains/(losses). Unrealized gains/(losses) are reported in OCI. There were 0 realized gains/(losses) and foreign exchange hedge accounting adjustments recorded in income on AFS securities for the years ended December 31, 2020 and 2019, respectively and $1 million recorded for the year ended December 31, 2018. There were 0 material unrealized gains/(losses) recorded on AFS securities in OCI for the years ended December 31, 2020, 2019 and 2018 respectively.
Level 3 analysis Consolidated balance sheets changes Level 3 assets at fair value including assets measured at fair value on a nonrecurring basis were 0.5% of total Firm assets at December 31, 2018.2020. The following describes significant changes to level 3 assets since December 31, 2017,2019, for those items measured at fair value on a recurring basis. For further information on changes impacting items measured at fair value on a nonrecurring basis, referRefer to Assets and liabilities measured at fair value on a nonrecurring basis on page 176.189 for further information on changes impacting items measured at fair value on a nonrecurring basis. For the year ended December 31, 20182020 Level 3 assets were $17.2$16.4 billion at December 31, 2018,2020, reflecting a decreasean increase of $2.1$2.9 billion from December 31, 2017,2019. The increase for the year ended December 31, 2020 was driven by: •$907 million increase in gross interest rate derivative receivables and $1.4 billion increase in gross equity derivative receivables largely due to:to gains net of settlements. •$1.21.8 billion increase in non-trading loans due to net transfers. partially offset by •$1.4 billion decrease in trading assets — debt and equity instruments predominantly driven by a decrease of $1.0 billion in trading loans primarilyMSRs due to losses and settlements and net sales.partially offset by purchases. Refer to the sections below for additional information. Transfers between levels for instruments carried at fair value on a recurring basis During the year ended December 31, 2018,2020, significant transfers from level 2 into level 3 included the following: •$1.8 billion of total debt and equity instruments, predominantly equity securities and trading loans, driven by a decrease in observability. •$2.6 billion of gross equity derivative receivables and $3.5 billion of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs. •$880 million of gross interest rate derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs. •$2.6 billion of non-trading loans driven by a decrease in observability. •$1.2 billion of long-term debt driven by a decrease in observability and an increase in the significance of unobservable inputs for structured notes. During the year ended December 31, 2020, significant transfers from level 3 into level 2 included the following: •$2.0 billion of total debt and equity instruments, predominantly due to corporate debt and trading loans, driven by an increase in observability. •$2.4 billion of gross equity derivative receivables and $2.4 billion of gross equity derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs. •$943 million of deposits as a result of an increase in observability and a decrease in the significance of unobservable inputs. •$1.3 billion of long-term debt driven by an increase in observability and a decrease in the significance of unobservable inputs for structured notes. During the year ended December 31, 2019, significant transfers from level 2 into level 3 included the following: •$993 million of total debt and equity instruments, the majority of which were trading loans, driven by a decrease in observability. •$904 million of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs.
| | | | | | | | | 186 | | JPMorgan Chase & Co./2020 Form 10-K |
During the year ended December 31, 2019, 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 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 an increase in observability and a decrease in the 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, 2018, 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, 2017, 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.
During the year ended December 31, 2017, 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, 2016, transfers from level 3 into 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 into 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.
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, 2018, 20172020, 2019 and 2016. For further information on these2018. These amounts exclude any effects of the Firm’s risk management activities where the financial instruments referare 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 170-174.182-186 for further information on these instruments. 2020 •$10 million of net gains on assets driven by gains in net interest rate derivative receivables due to market movements largely offset by losses in MSRs reflecting faster prepayment speeds on lower rates. Refer to Note 15 for additional information on MSRs. •$102 million of net gains on liabilities driven by market movements in short-term borrowings. 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 predominantly driven by market movements in long-term debt.
2016
There were no individually significant movements for the year ended December 31, 2016.
| | | | | | | | | 174 | | JPMorgan Chase & Co./20182020 Form 10-K | | 187 |
Notes to consolidated financial statements
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 presented below 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 over time. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | Credit and funding adjustments: | | | | | | Derivatives CVA | $ | 193 |
| | $ | 802 |
| | $ | (84 | ) | Derivatives FVA | (74 | ) | | (295 | ) | | 7 |
|
| | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Credit and funding adjustments: | | | | | | Derivatives CVA | $ | (337) | | | $ | 241 | | | $ | 193 | | Derivatives FVA | (64) | | | 199 | | | (74) | |
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. Realized (gains)/losses due to DVA for fair value option elected liabilities are reported in principal transactions revenue. Unrealized (gains)/losses are reported in OCI. Refer to page 174186 in this Note and Note 2324 for further information.
| | | | | | | | | 188 | | JPMorgan Chase & Co./20182020 Form 10-K | | 175 |
Notes to consolidated financial statements
Assets and liabilities measured at fair value on a nonrecurring basis The following tables present the assets and liabilities held as of December 31, 20182020 and 2017,2019, respectively, for which a nonrecurring fair value adjustment wasadjustments were recorded during the years ended December 31, 20182020 and 2017, 2019, respectively, by major product category and fair value hierarchy. | | | | | | | | | | | | | | | | | | | | | | Fair value hierarchy | | Total fair value | December 31, 2020 (in millions) | Level 1 | Level 2 | | Level 3 | | Loans | $ | 0 | | $ | 1,611 | | (c) | $ | 972 | | (d) | $ | 2,583 | | Other assets(a) | 0 | | 5 | | | 979 | | | 984 | | Total assets measured at fair value on a nonrecurring basis | $ | 0 | | $ | 1,616 | | | $ | 1,951 | | | $ | 3,567 | | Accounts payable and other liabilities(b) | 0 | | 0 | | | 12 | | | 12 | | Total liabilities measured at fair value on a nonrecurring basis | $ | 0 | | $ | 0 | | | $ | 12 | | | $ | 12 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Fair value hierarchy | | Total fair value | December 31, 2018 (in millions) | Level 1 |
| Level 2 |
| | Level 3 |
| | Loans | $ | — |
| $ | 273 |
| | $ | 264 |
| (b) | $ | 537 |
| Other assets(a) | — |
| 8 |
| | 815 |
| | 823 |
| Total assets measured at fair value on a nonrecurring basis | $ | — |
| $ | 281 |
| | $ | 1,079 |
| | $ | 1,360 |
|
| | | | | | | | | | | | | | Fair value hierarchy | | Total fair value | | Fair value hierarchy | | Total fair value | | December 31, 2017 (in millions) | Level 1 |
| Level 2 |
| | Level 3 |
| | | December 31, 2019 (in millions) | | December 31, 2019 (in millions) | Level 1 | Level 2 | | Level 3 | | Total fair value | Loans | $ | — |
| $ | 238 |
| | $ | 596 |
| | $ | 834 |
| Loans | $ | 0 | | $ | 3,462 | | (c) | $ | 269 | | | Other assets | — |
| 283 |
| | 183 |
| | 466 |
| Other assets | 0 | | 14 | | | 1,043 | | (e) | 1,057 | | Total assets measured at fair value on a nonrecurring basis | $ | — |
| $ | 521 |
| | $ | 779 |
| | $ | 1,300 |
| Total assets measured at fair value on a nonrecurring basis | $ | 0 | | $ | 3,476 | | | $ | 1,312 | | | $ | 4,788 | | |
(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) as a result of the adoption of the recognition and measurement guidance.. Of the $815$979 million in level 3 assets measured at fair value on a nonrecurring basis as of December 31, 2018, $6672020, $535 million related to such equity securities.securities adjusted based on the measurement alternative. These equity securities are classified as level 3 due to the infrequency of the observable prices and/or the restrictions on the shares. (b) There were 0 liabilities measured at fair value on a nonrecurring basis at December 31, 2019. (c) Primarily includes certain mortgage loans that were reclassified to held-for-sale. (d) Of the $264$972 million in level 3 assets measured at fair value on a nonrecurring basis as of December 31, 2018, $2252020, $602 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)loans). These amounts are classified as level 3 as they are valued using information from broker’s price opinions, appraisals and automated valuation models and discounted based upon the Firm’s experience with actual liquidation values. These discounts ranged from 13% to 54%46% with a weighted average of 25%27%.
(e) Prior-period amounts have been revised to conform with the current presentation.
There were no material liabilities measured at fair value on a nonrecurring basis at December 31, 2018 and 2017.
Nonrecurring fair value changes The following table presents the total change in value of assets and liabilities for which a fair value adjustment hasadjustments have been recognized for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, related to financial instrumentsassets and liabilities held at those dates. | | | | | | | | | | | | | | | | | | | | | December 31, (in millions) | 2020 | | 2019 | | 2018 | | Loans(a) | $ | (393) | | | $ | (274) | | | $ | (68) | | | Other assets(b) | (529) | | | 182 | | (c) | 132 | |
| Accounts payable and other liabilities | (11) | | | 0 | | | 0 | | | Total nonrecurring fair value gains/(losses) | $ | (933) | | | $ | (92) | | | $ | 64 | | |
(a) | | | | | | | | | | | | | | December 31, (in millions) | 2018 |
| | 2017 |
| | 2016 |
| | Loans | $ | (68 | ) | | $ | (159 | ) | | $ | (209 | ) | | Other assets | 132 |
| (a) | (148 | ) | | 37 |
| | Accounts payable and other liabilities | — |
| | (1 | ) | | — |
| | Total nonrecurring fair value gains/(losses) | $ | 64 |
| | $ | (308 | ) | | $ | (172 | ) | |
Includes the impact of certain mortgage loans that were reclassified to held-for-sale. (a) (b)Included $(134) million, $201 million and $149 million for the yearyears ended December 31, 2020, 2019 and 2018, respectively,of net (losses)/gains as a result of the measurement alternative.
For(c)Prior-period amounts have been revised to conform with the current presentation.
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), refer to Note 12.
loans.
| | | | | | | | | 176 | | JPMorgan Chase & Co./20182020 Form 10-K | | 189 |
Notes to consolidated financial statements
Equity securities without readily determinable fair values As a result of the adoption of the recognition and measurement guidance and the election of the measurement alternative in the first quarter of 2018, theThe 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, 2018, 2020 and 2019, 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) | | | 2020 | | 2019 | | Other assets | | | | | | | Carrying value(a) | | | $ | 2,368 | | | $ | 2,441 | | | Upward carrying value changes(b) | | | 167 | |
| 243 | | (d) | Downward carrying value changes/impairment(c) | | | (301) | | | (42) | | | | | | | | | |
(a)The period-end carrying values reflect cumulative purchases and sales in addition to upward and downward carrying value changes. (b)The cumulative upward carrying value changes between January 1, 2018 and December 31, 2020 were $708 million. | | | | | | As of or for the | (in millions) | Year ended December 31, 2018 | Other assets | | Carrying value | $ | 1,510 |
| Upward carrying value changes | 309 |
| Downward carrying value changes/impairment | (160 | ) |
(c)The cumulative downward carrying value changes/impairment between January 1, 2018 and December 31, 2020 were $(430) million.(d)Prior-period amounts have been revised to conform with the current presentation.
Included in other assets above is the Firm’s interest in approximately 40 million Visa Class B common shares, recorded at a nominal carrying value. These shares are subject to certain transfer restrictions currently and will be convertible into Visa Class A common shares upon final resolution of certain litigation matters involving Visa. The conversion rate of Visa Class B common shares into Visa Class A common shares is 1.6298 1.6228 at December 31, 2018,2020, 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. 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.
| | | | | | | | | 190 | | JPMorgan Chase & Co./20182020 Form 10-K | | 177 |
Notes to consolidated financial statements
The following table presents by fair value hierarchy classification the carrying values and estimated fair values at December 31, 20182020 and 2017, 2019, 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | (in billions) | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | Financial assets | | | | | | | | | | | | Cash and due from banks | $ | 24.9 | | $ | 24.9 | | $ | 0 | | $ | 0 | | $ | 24.9 | | | $ | 21.7 | | $ | 21.7 | | $ | 0 | | $ | 0 | | $ | 21.7 | | Deposits with banks | 502.7 | | 502.7 | | 0 | | 0 | | 502.7 | | | 241.9 | | 241.9 | | 0 | | 0 | | 241.9 | | Accrued interest and accounts receivable | 89.4 | | 0 | | 89.3 | | 0.1 | | 89.4 | | | 71.3 | | 0 | | 71.2 | | 0.1 | | 71.3 | | Federal funds sold and securities purchased under resale agreements | 58.3 | | 0 | | 58.3 | | 0 | | 58.3 | | | 234.6 | | 0 | | 234.6 | | 0 | | 234.6 | | Securities borrowed | 107.7 | | 0 | | 107.7 | | 0 | | 107.7 | | | 133.5 | | 0 | | 133.5 | | 0 | | 133.5 | | Investment securities, held-to-maturity | 201.8 | | 53.2 | | 152.3 | | 0 | | 205.5 | | | 47.5 | | 0.1 | | 48.8 | | 0 | | 48.9 | | Loans, net of allowance for loan losses(a) | 940.1 | | 0 | | 210.9 | | 755.6 | | 966.5 | | | 939.5 | | 0 | | 214.1 | | 734.9 | | 949.0 | | Other | 81.8 | | 0 | | 80.0 | | 1.9 | | 81.9 | | | 61.3 | | 0 | | 60.6 | | 0.8 | | 61.4 | | Financial liabilities | | | | | | | | | | | | Deposits | $ | 2,129.8 | | $ | 0 | | $ | 2,128.9 | | $ | 0 | | $ | 2,128.9 | | | $ | 1,533.8 | | $ | 0 | | $ | 1,534.1 | | $ | 0 | | $ | 1,534.1 | | Federal funds purchased and securities loaned or sold under repurchase agreements | 59.5 | | 0 | | 59.5 | | 0 | | 59.5 | | | 183.1 | | 0 | | 183.1 | | 0 | | 183.1 | | Short-term borrowings | 28.3 | | 0 | | 28.3 | | 0 | | 28.3 | | | 35.0 | | 0 | | 35.0 | | 0 | | 35.0 | | Accounts payable and other liabilities | 186.6 | | 0 | | 181.9 | | 4.3 | | 186.2 | | | 164.0 | | 0.1 | | 160.0 | | 3.5 | | 163.6 | | Beneficial interests issued by consolidated VIEs | 17.5 | | 0 | | 17.6 | | 0 | | 17.6 | | | 17.8 | | 0 | | 17.9 | | 0 | | 17.9 | | Long-term debt | 204.8 | | 0 | | 209.2 | | 3.2 | | 212.4 | | | 215.5 | | 0 | | 218.3 | | 3.5 | | 221.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2018 | | December 31, 2017 | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | (in billions) | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value | Level 1 | Level 2 | Level 3 | Total estimated fair value | Financial assets | | | | | | | | | | | | Cash and due from banks | $ | 22.3 |
| $ | 22.3 |
| $ | — |
| $ | — |
| $ | 22.3 |
| | $ | 25.9 |
| $ | 25.9 |
| $ | — |
| $ | — |
| $ | 25.9 |
| Deposits with banks | 256.5 |
| 256.5 |
| — |
| — |
| 256.5 |
| | 405.4 |
| 401.8 |
| 3.6 |
| — |
| 405.4 |
| Accrued interest and accounts receivable | 72.0 |
| — |
| 71.9 |
| 0.1 |
| 72.0 |
| | 67.0 |
| — |
| 67.0 |
| — |
| 67.0 |
| Federal funds sold and securities purchased under resale agreements | 308.4 |
| — |
| 308.4 |
| — |
| 308.4 |
| | 183.7 |
| — |
| 183.7 |
| — |
| 183.7 |
| Securities borrowed | 106.9 |
| — |
| 106.9 |
| — |
| 106.9 |
| | 102.1 |
| — |
| 102.1 |
| — |
| 102.1 |
| Investment securities, held-to-maturity | 31.4 |
| — |
| 31.5 |
| — |
| 31.5 |
| | 47.7 |
| — |
| 48.7 |
| — |
| 48.7 |
| Loans, net of allowance for loan losses(a) | 968.0 |
| — |
| 241.5 |
| 728.5 |
| 970.0 |
| | 914.6 |
| — |
| 213.2 |
| 707.1 |
| 920.3 |
| Other(b) | 60.5 |
| — |
| 59.6 |
| 1.0 |
| 60.6 |
| | 53.9 |
| — |
| 52.1 |
| 9.2 |
| 61.3 |
| Financial liabilities | | | | | | | | | | | | Deposits | $ | 1,447.4 |
| $ | — |
| $ | 1,447.5 |
| $ | — |
| $ | 1,447.5 |
| | $ | 1,422.7 |
| $ | — |
| $ | 1,422.7 |
| $ | — |
| $ | 1,422.7 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | 181.4 |
| — |
| 181.4 |
| — |
| 181.4 |
| | 158.2 |
| — |
| 158.2 |
| — |
| 158.2 |
| Short-term borrowings | 62.1 |
| — |
| 62.1 |
| — |
| 62.1 |
| | 42.6 |
| — |
| 42.4 |
| 0.2 |
| 42.6 |
| Accounts payable and other liabilities | 160.6 |
| 0.2 |
| 157.0 |
| 3.0 |
| 160.2 |
| | 152.0 |
| — |
| 148.9 |
| 2.9 |
| 151.8 |
| Beneficial interests issued by consolidated VIEs | 20.2 |
| — |
| 20.2 |
| — |
| 20.2 |
| | 26.0 |
| — |
| 26.0 |
| — |
| 26.0 |
| Long-term debt and junior subordinated deferrable interest debentures | 227.1 |
| — |
| 224.6 |
| 3.3 |
| 227.9 |
| | 236.6 |
| — |
| 240.3 |
| 3.2 |
| 243.5 |
|
Effective January 1, 2018,(a)Fair value is typically estimated using a discounted cash flow model that incorporates the Firm adopted several new accounting standards. Certaincharacteristics of the new accounting standards were applied retrospectivelyunderlying loans (including principal, contractual interest rate and accordingly, prior period amounts were revised.contractual fees) and other key inputs, including expected lifetime credit losses, interest rates, prepayment rates, and primary origination or secondary market spreads. For additional information, refercertain loans, the fair value is measured based on the value of the underlying collateral. Carrying value of the loan takes into account the loan’s allowance for loan losses, which represents the loan’s expected credit losses over its remaining expected life. The difference between the estimated fair value and carrying value of a loan is generally attributable to Note 1.changes in market interest rates, including credit spreads, market liquidity premiums and other factors that affect the fair value of a loan but do not affect its carrying value.
| | (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 loss 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. |
| | (b) | The prior period amounts have been revised to conform with the current period presentation. |
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, 2020 | | December 31, 2019 | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | (in billions) | Carrying value(a)(b) | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value(a)(b) | Level 1 | Level 2 | Level 3 | Total estimated fair value | Wholesale lending-related commitments | $ | 2.2 | | $ | 0 | | $ | 0 | | $ | 2.1 | | $ | 2.1 | | | $ | 1.2 | | $ | 0 | | $ | 0 | | $ | 1.9 | | $ | 1.9 | |
(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)Includes the wholesale allowance for lending-related commitments. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2018 | | December 31, 2017 | | | Estimated fair value hierarchy | | | | Estimated fair value hierarchy | | (in billions) | Carrying value(a) | Level 1 | Level 2 | Level 3 | Total estimated fair value | | Carrying value(a) | Level 1 | Level 2 | Level 3 | Total estimated fair value | Wholesale lending-related commitments | $ | 1.0 |
| $ | — |
| $ | — |
| $ | 2.1 |
| $ | 2.1 |
| | $ | 1.1 |
| $ | — |
| $ | — |
| $ | 1.6 |
| $ | 1.6 |
|
| | (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. |
The Firm does not estimate the fair value of consumer off-balance sheet 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 173 of this Note for a further discussion of the valuation of lending-related commitments, refer to page 161 of this Note.commitments.
| | | | | | | | | 178 | | JPMorgan Chase & Co./20182020 Form 10-K | | 191 |
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 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 Certain securities financing agreements
•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 client-driven activities |
| | • | Certain long-term beneficial interests issued by CIB’s consolidated securitization trusts where the underlying assets are carried at fair value
|
| | | | | | | | | 192 | | JPMorgan Chase & Co./20182020 Form 10-K | | 179 |
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, 2020, 2019 and 2018, 2017 and 2016, 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | December 31, (in millions) | Principal transactions | All other income | Total changes in fair value recorded(f) | | Principal transactions | All other income | Total changes in fair value recorded(f) | | Principal transactions | All other income | Total changes in fair value recorded(f) | Federal funds sold and securities purchased under resale agreements | $ | 12 | | $ | 0 | | | $ | 12 | | | $ | (36) | | $ | 0 | | | $ | (36) | | | $ | (35) | | $ | 0 | | | $ | (35) | | Securities borrowed | 143 | | 0 | | | 143 | | | 133 | | 0 | | | 133 | | | 22 | | 0 | | | 22 | | Trading assets: | | | | | | | | | | | | | | | Debt and equity instruments, excluding loans | 1,546 | | (1) | | (d) | 1,545 | | | 2,482 | | (1) | | (d) | 2,481 | | | (1,680) | | 1 | | (d) | (1,679) | | Loans reported as trading assets: | | | | | | | | | | | | | | | Changes in instrument-specific credit risk(a) | 135 | | 0 | | | 135 | | | 248 | | 0 | | | 248 | | | 15 | | 0 | | | 15 | | Other changes in fair value(a) | (19) | | 0 | | | (19) | | | (1) | | 0 | | | (1) | | | 28 | | 0 | | | 28 | | Loans: | | | | | | | | | | | | | | | Changes in instrument-specific credit risk(a) | 190 | | 7 | | (d) | 197 | | | 475 | | 2 | | (d) | 477 | | | 385 | | 1 | | (d) | 386 | | Other changes in fair value(a) | 470 | | 3,239 | | (d) | 3,709 | | | 267 | | 1,224 | | (d) | 1,491 | | | 138 | | 185 | | (d) | 323 | | Other assets(a) | 103 | | (65) | | (e) | 38 | | | 8 | | 6 | | (e) | 14 | | | 11 | | (45) | | (e) | (34) | | Deposits(b) | (726) | | 0 | | | (726) | | | (1,730) | | 0 | | | (1,730) | | | 181 | | 0 | | | 181 | | Federal funds purchased and securities loaned or sold under repurchase agreements | (6) | | 0 | | | (6) | | | (8) | | 0 | | | (8) | | | 11 | | 0 | | | 11 | | Short-term borrowings(b) | 294 | | 0 | | | 294 | | | (693) | | 0 | | | (693) | | | 862 | | 0 | | | 862 | | Trading liabilities | 2 | | 0 | | | 2 | | | 6 | | 0 | | | 6 | | | 1 | | 0 | | | 1 | | | | | | | | | | | | | | | | | Other liabilities | (94) | | 0 | | | (94) | | | (16) | | 0 | | | (16) | | | 0 | | 0 | | | 0 | | Long-term debt(b)(c) | (2,120) | | (1) | | (d) | (2,121) | | | (6,173) | | 1 | | (d) | (6,172) | | | 2,695 | | 0 | | | 2,695 | |
(a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation. (b)Unrealized gains/(losses) due to instrument-specific credit risk (DVA) for liabilities for which the fair value option has been elected are recorded in OCI and subsequently recorded in principal transactions revenue when realized. Realized gains/(losses) due to instrument-specific credit risk recorded in principal transactions revenue were $20 million for the year ended December 31,2020 and were 0t material for the years ended December 31, 2019 and 2018. (c)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. (d)Reported in mortgage fees and related income. (e)Reported in other income. (f)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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | | 2016 | December 31, (in millions) | Principal transactions | All other income | Total changes in fair value recorded(e) | | Principal transactions | All other income | Total changes in fair value recorded(e) | | Principal transactions | All other income | Total changes in fair value recorded(e) | Federal funds sold and securities purchased under resale agreements | $ | (35 | ) | $ | — |
| | $ | (35 | ) | | $ | (97 | ) | $ | — |
| | $ | (97 | ) | | $ | (76 | ) | $ | — |
| | $ | (76 | ) | Securities borrowed | 22 |
| — |
| | 22 |
| | 50 |
| — |
| | 50 |
| | 1 |
| — |
| | 1 |
| Trading assets: | | | | | | | | |
|
| | | | |
|
| Debt and equity instruments, excluding loans | (1,680 | ) | 1 |
| (c) | (1,679 | ) | | 1,943 |
| 2 |
| (c) | 1,945 |
| | 120 |
| (1 | ) | (c) | 119 |
| Loans reported as trading assets: | | | | | | | | |
|
| | | | |
|
| Changes in instrument-specific credit risk | 414 |
| 1 |
| (c) | 415 |
| | 330 |
| 14 |
| (c) | 344 |
| | 461 |
| 43 |
| (c) | 504 |
| Other changes in fair value | 160 |
| 185 |
| (c) | 345 |
| | 217 |
| 747 |
| (c) | 964 |
| | 79 |
| 684 |
| (c) | 763 |
| Loans: | | | | | | | | |
|
| | | | |
|
| Changes in instrument-specific credit risk | (1 | ) | — |
| | (1 | ) | | (1 | ) | — |
| | (1 | ) | | 13 |
| — |
| | 13 |
| Other changes in fair value | (1 | ) | — |
| | (1 | ) | | (12 | ) | 3 |
| (c) | (9 | ) | | (7 | ) | — |
| | (7 | ) | Other assets | 5 |
| (45 | ) | (d) | (40 | ) | | 11 |
| (55 | ) | (d) | (44 | ) | | 20 |
| 62 |
| (d) | 82 |
| Deposits(a) | 181 |
| — |
| | 181 |
| | (533 | ) | — |
| | (533 | ) | | (134 | ) | — |
| | (134 | ) | Federal funds purchased and securities loaned or sold under repurchase agreements | 11 |
| — |
| | 11 |
| | 11 |
| — |
| | 11 |
| | 19 |
| — |
| | 19 |
| Short-term borrowings(a) | 862 |
| — |
| | 862 |
| | (747 | ) | — |
| | (747 | ) | | (236 | ) | — |
| | (236 | ) | Trading liabilities | 1 |
| — |
| | 1 |
| | (1 | ) | — |
| | (1 | ) | | 6 |
| — |
| | 6 |
| Beneficial interests issued by consolidated VIEs | — |
| — |
| | — |
| | — |
| — |
| | — |
| | 23 |
| — |
| | 23 |
| Long-term debt(a)(b) | 2,695 |
| — |
| | 2,695 |
| | (2,022 | ) | — |
| | (2,022 | ) | | (773 | ) | — |
| | (773 | ) |
| | (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. Realized gains/(losses) due to instrument-specific credit risk recorded in principal transactions revenue were not material for the years ended December 31, 2018, 2017 and 2016. |
| | (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. For further information regarding interest income and interest expense, refer to Note 7. |
Determination of instrument-specific credit risk for items for which athe fair value electionoption was madeelected 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. |
| | • | 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.
|
•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. | | | | | | | | | 180 | | JPMorgan Chase & Co./20182020 Form 10-K | | 193 |
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, 20182020 and 2017, 2019, for loans, long-term debt and long-term beneficial interests for which the fair value option has been elected. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | December 31, (in millions) | Contractual principal outstanding | | Fair value | Fair value over/(under) contractual principal outstanding | | Contractual principal outstanding | | Fair value | Fair value over/(under) contractual principal outstanding | Loans | | | | | | | | | | Nonaccrual loans | | | | | | | | | | Loans reported as trading assets(a) | $ | 3,386 | | | $ | 555 | | $ | (2,831) | | | $ | 2,563 | | | $ | 234 | | $ | (2,329) | | Loans(a) | 1,867 | | | 1,507 | | (360) | | | 964 | | | 696 | | (268) | | Subtotal | 5,253 | | | 2,062 | | (3,191) | | | 3,527 | | | 930 | | (2,597) | | 90 or more days past due and government guaranteed(b) | | | | | | | | | | Loans reported as trading assets | 0 | | | 0 | | 0 | | | 0 | | | 0 | | 0 | | Loans | 328 | | | 317 | | (11) | | | 138 | | | 129 | | (9) | | Subtotal | 328 | | | 317 | | (11) | | | 138 | | | 129 | | (9) | | All other performing loans(c) | | | | | | | | | | Loans reported as trading assets(a) | 7,917 | | | 6,439 | | (1,478) | | | 8,288 | | | 6,779 | | (1,509) | | Loans(a) | 42,022 | | | 42,650 | | 628 | | | 43,955 | | | 44,130 | | 175 | | Subtotal | 49,939 | | | 49,089 | | (850) | | | 52,243 | | | 50,909 | | (1,334) | | Total loans | $ | 55,520 | | | $ | 51,468 | | $ | (4,052) | | | $ | 55,908 | | | $ | 51,968 | | $ | (3,940) | | Long-term debt | | | | | | | | | | Principal-protected debt | $ | 40,560 | | (e) | $ | 40,526 | | $ | (34) | | | $ | 40,124 | | (e) | $ | 39,246 | | $ | (878) | | Nonprincipal-protected debt(d) | NA | | 36,291 | | NA | | NA | | 36,499 | | NA | Total long-term debt | NA | | $ | 76,817 | | NA | | NA | | $ | 75,745 | | NA | Long-term beneficial interests | | | | | | | | | | Nonprincipal-protected debt(d) | NA | | $ | 41 | | NA | | NA | | $ | 36 | | NA | Total long-term beneficial interests | NA | | $ | 41 | | NA | | NA | | $ | 36 | | NA |
(a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation. (b)These balances are excluded from nonaccrual loans as the loans are insured and/or guaranteed by U.S. government agencies. | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | December 31, (in millions) | Contractual principal outstanding | | Fair value | Fair value over/(under) contractual principal outstanding | | Contractual principal outstanding | | Fair value | Fair value over/(under) contractual principal outstanding | Loans(a) | | | | | | | | | | Nonaccrual loans | | | | | | | | | | Loans reported as trading assets | $ | 4,240 |
| | $ | 1,350 |
| $ | (2,890 | ) | | $ | 4,219 |
| | $ | 1,371 |
| $ | (2,848 | ) | Loans | 39 |
| | — |
| (39 | ) | | 39 |
| | — |
| (39 | ) | Subtotal | 4,279 |
| | 1,350 |
| (2,929 | ) | | 4,258 |
| | 1,371 |
| (2,887 | ) | All other performing loans | | | | | | | | | | Loans reported as trading assets | 42,215 |
| | 40,403 |
| (1,812 | ) | | 38,157 |
| | 36,590 |
| (1,567 | ) | Loans | 3,186 |
| | 3,151 |
| (35 | ) | | 2,539 |
| | 2,508 |
| (31 | ) | Total loans | $ | 49,680 |
| | $ | 44,904 |
| $ | (4,776 | ) | | $ | 44,954 |
| | $ | 40,469 |
| $ | (4,485 | ) | Long-term debt | | | | | | | | | | Principal-protected debt | $ | 32,674 |
| (c) | $ | 28,718 |
| $ | (3,956 | ) | | $ | 26,297 |
| (c) | $ | 23,848 |
| $ | (2,449 | ) | Nonprincipal-protected debt(b) | NA |
| | 26,168 |
| NA |
| | NA |
| | 23,671 |
| NA |
| Total long-term debt | NA |
| | $ | 54,886 |
| NA |
| | NA |
| | $ | 47,519 |
| NA |
| Long-term beneficial interests | | | | | | | | | | Nonprincipal-protected debt(b) | NA |
| | $ | 28 |
| NA |
| | NA |
| | $ | 45 |
| NA |
| Total long-term beneficial interests | NA |
|
| $ | 28 |
| NA |
| | NA |
| | $ | 45 |
| NA |
|
| | (a) | There were no(c)There were 0 performing loans that were ninety days or more past due as of December 31, 2018 and 2017.
|
| | (b) | Remaining contractual principal is not applicable to nonprincipal-protected 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 maturity, 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-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, 20182020 and 2019.
(d)Remaining contractual principal is not applicable to nonprincipal-protected 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 maturity, 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-protected notes. (e)2017Where 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., At December 31, 2020 and 2019, the contractual amount of lending-related commitments for which the fair value option was elected was$6.9 $18.1 billion and $7.4$8.6 billion, respectively, with a corresponding fair value of$(82) $(39) million and $(76)$(120) million,, respectively. ForRefer to Note 28 for further information regarding off-balance sheet lending-related financial instruments, referinstruments. Prior-period amounts have been revised to Noteconform with the current presentation. 27.
| | | | | | | | | 194 | | JPMorgan Chase & Co./2020 Form 10-K |
Structured note products by balance sheet classification and risk component The following table presents the fair value of structured notes, by balance sheet classification and the primary risk type. | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2018 | | December 31, 2017 | (in millions) | Long-term debt | Short-term borrowings | Deposits | Total | | Long-term debt | Short-term borrowings | Deposits | Total | Risk exposure | | | | | | | | | | Interest rate | $ | 24,137 |
| $ | 62 |
| $ | 12,372 |
| $ | 36,571 |
| | $ | 22,056 |
| $ | 69 |
| $ | 8,058 |
| $ | 30,183 |
| Credit | 4,009 |
| 995 |
| — |
| 5,004 |
| | 4,329 |
| 1,312 |
| — |
| 5,641 |
| Foreign exchange | 3,169 |
| 157 |
| 38 |
| 3,364 |
| | 2,841 |
| 147 |
| 38 |
| 3,026 |
| Equity | 21,382 |
| 5,422 |
| 7,368 |
| 34,172 |
| | 17,581 |
| 7,106 |
| 6,548 |
| 31,235 |
| Commodity | 372 |
| 34 |
| 1,207 |
| 1,613 |
| | 230 |
| 15 |
| 4,468 |
| 4,713 |
| Total structured notes | $ | 53,069 |
| $ | 6,670 |
| $ | 20,985 |
| $ | 80,724 |
| | $ | 47,037 |
| $ | 8,649 |
| $ | 19,112 |
| $ | 74,798 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | (in millions) | Long-term debt | Short-term borrowings | Deposits | Total | | Long-term debt | Short-term borrowings | Deposits | Total | Risk exposure | | | | | | | | | | Interest rate | $ | 38,129 | | $ | 65 | | $ | 5,057 | | $ | 43,251 | | | $ | 35,470 | | $ | 34 | | $ | 16,692 | | $ | 52,196 | | Credit | 6,409 | | 1,022 | | 0 | | 7,431 | | | 5,715 | | 875 | | 0 | | 6,590 | | Foreign exchange | 3,613 | | 92 | | 0 | | 3,705 | | | 3,862 | | 48 | | 5 | | 3,915 | | Equity | 26,943 | | 5,021 | | 6,893 | | 38,857 | | | 29,294 | | 4,852 | | 8,177 | | 42,323 | | Commodity | 250 | | 13 | | 232 | | 495 | | | 472 | | 32 | | 1,454 | | 1,958 | | Total structured notes | $ | 75,344 | | $ | 6,213 | | $ | 12,182 | | $ | 93,739 | | | $ | 74,813 | | $ | 5,841 | | $ | 26,328 | | $ | 106,982 | |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 181195 |
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 managed 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. For Refer to Note 12for additional information on the geographic composition of the Firm’s consumer loan portfolios, refer to Note 12. 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, refer to Note 12.loans. The Firmdoes not believe that its exposure to any particular loan productor 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.
| | | | | | | | | 182196 | | JPMorgan Chase & Co./20182020 Form 10-K |
The table below presents both on–balance sheet and off–balance sheet consumer and wholesale-relatedwholesale credit exposure by the Firm’s three credit portfolio segments as of December 31, 20182020 and 2017.2019. The wholesale industry of risk category is generally based on the client or counterparty’s primary business activity. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied when determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | Credit exposure(h)(i) | On-balance sheet | Off-balance sheet(i)(k) | | Credit exposure(h)(i) | On-balance sheet | Off-balance sheet(i)(k) | December 31, (in millions) | Loans(i) | | Derivatives | | Loans(i) | Derivatives | Consumer, excluding credit card | $ | 375,898 | | $ | 318,579 | | (j) | $ | — | | $ | 57,319 | | | $ | 357,986 | | $ | 317,817 | | $ | — | | $ | 40,169 | | Credit card(a) | 802,722 | | 144,216 | | | — | | 658,506 | | | 819,644 | | 168,924 | | — | | 650,720 | | Total consumer-related(a) | 1,178,620 | | 462,795 | | | — | | 715,825 | | | 1,177,630 | | 486,741 | | — | | 690,889 | | Wholesale-related(b) | | | | | | | | | | | Real Estate | 148,498 | | 118,299 | | | 1,385 | | 28,814 | | | 150,919 | | 117,709 | | 619 | | 32,591 | | Individuals and Individual Entities(c) | 122,870 | | 109,746 | | | 1,750 | | 11,374 | | | 105,027 | | 94,616 | | 694 | | 9,717 | | Consumer & Retail | 108,437 | | 39,013 | | | 2,802 | | 66,622 | | | 106,986 | | 36,985 | | 1,424 | | 68,577 | | Technology, Media & Telecommunications | 72,150 | | 14,687 | | | 4,252 | | 53,211 | | | 60,033 | | 15,322 | | 2,766 | | 41,945 | | Asset Managers | 66,573 | | 31,059 | | | 9,277 | | 26,237 | | | 54,304 | | 24,008 | | 7,160 | | 23,136 | | Industrials | 66,470 | | 21,143 | | | 1,851 | | 43,476 | | | 62,483 | | 22,063 | | 878 | | 39,542 | | Healthcare | 60,118 | | 19,405 | | | 3,252 | | 37,461 | | | 50,824 | | 17,607 | | 2,078 | | 31,139 | | Banks & Finance Cos | 54,032 | | 31,004 | | | 8,044 | | 14,984 | | | 50,786 | | 31,191 | | 5,165 | | 14,430 | | Automotive | 43,331 | | 17,128 | | | 5,995 | | 20,208 | | | 35,118 | | 18,844 | | 368 | | 15,906 | | Oil & Gas | 39,159 | | 11,267 | | | 1,643 | | 26,249 | | | 41,641 | | 13,101 | | 852 | | 27,688 | | State & Municipal Govt(d) | 38,286 | | 18,054 | | | 2,347 | | 17,885 | | | 30,095 | | 13,271 | | 2,000 | | 14,824 | | Utilities | 30,124 | | 4,874 | | | 3,340 | | 21,910 | | | 34,843 | | 5,157 | | 2,573 | | 27,113 | | Chemicals & Plastics | 17,176 | | 4,884 | | | 856 | | 11,436 | | | 17,499 | | 4,864 | | 459 | | 12,176 | | Central Govt | 17,025 | | 3,396 | | | 12,313 | | 1,316 | | | 14,865 | | 2,840 | | 10,477 | | 1,548 | | Transportation | 16,232 | | 6,566 | | | 1,495 | | 8,171 | | | 14,497 | | 5,253 | | 715 | | 8,529 | | Metals & Mining | 15,542 | | 4,854 | | | 882 | | 9,806 | | | 15,586 | | 5,364 | | 402 | | 9,820 | | Insurance | 13,141 | | 1,042 | | | 2,527 | | 9,572 | | | 12,348 | | 1,356 | | 2,282 | | 8,710 | | Securities Firms | 8,048 | | 469 | | | 4,838 | | 2,741 | | | 7,381 | | 757 | | 4,507 | | 2,117 | | Financial Markets Infrastructure | 6,515 | | 19 | | | 3,757 | | 2,739 | | | 4,121 | | 13 | | 2,482 | | 1,626 | | All other(e) | 100,713 | | 58,038 | | | 7,024 | | 35,651 | | | 79,598 | | 51,357 | | 1,865 | | 26,376 | | Subtotal | 1,044,440 | | 514,947 | | | 79,630 | | 449,863 | | | 948,954 | | 481,678 | | 49,766 | | 417,510 | | Loans held-for-sale and loans at fair value | 35,111 | | 35,111 | | | — | | — | | | 29,201 | | 29,201 | | — | | — | | Receivables from customers(f) | 47,710 | | — | | | — | | — | | | 33,706 | | — | | — | | — | | Total wholesale-related | 1,127,261 | | 550,058 | | | 79,630 | | 449,863 | | | 1,011,861 | | 510,879 | | 49,766 | | 417,510 | | Total exposure(g)(h) | $ | 2,305,881 | | $ | 1,012,853 | | | $ | 79,630 | | $ | 1,165,688 | | | $ | 2,189,491 | | $ | 997,620 | | $ | 49,766 | | $ | 1,108,399 | |
(a)Also includes commercial card lending-related commitments primarily in CB and CIB. As a result of continued growth and the relative size of the portfolio, exposure to “Individuals,” which was previously disclosed in “All Other,” is now separately disclosed(b)The industry rankings presented in the table below as “Individualsof December 31, 2019, are based on the industry rankings of the corresponding exposures at December 31, 2020, not actual rankings of such exposures at December 31, 2019.
(c)Individuals and Individual Entities.” This categoryEntities predominantly consists ofWealth Managementclients within AWM and includes exposure to personal investment companies and personal and testamentary trusts. (d)Predominantly allIn addition to the credit risk exposure to states and municipal governments (both U.S. and non-U.S.) at December 31, 2020 and 2019, noted above, the Firm held: $7.2 billion and $6.5 billion, respectively, of trading assets; $20.4 billion and $29.8 billion, respectively, of AFS securities; and $12.8 billion and $4.8 billion, respectively, of HTM securities, issued by U.S. state and municipal governments. Refer to Note 2 and Note 10 for further information. (e)All other includes: SPEs and Private education and civic organizations, representing approximately 92% and 8%, respectively, at December 31, 2020 and 90% and 10%, respectively, at December 31, 2019 . Refer to Note 14 for more information on exposures to SPEs. (f)Receivables from customers reflect held-for-investment margin loans to brokerage clients in CIB, CCB 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). Because of this collateralization, no allowance for credit losses is generally 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. (g)Excludes cash placed with banks of $516.9 billion and $254.0 billion, at December 31, 2020 and 2019, respectively, which is predominantly placed with various central banks, primarily Federal Reserve Banks. (h)Credit exposure is secured, largely bynet 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 and marketable securities. collateral held against derivative receivables. (i)In the table below, prior periodthird quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans, which resulted in a corresponding reclassification of certain off-balance sheet commitments. Prior-period amounts have been revised to conform with the current period presentation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | | | Credit exposure(g) | On-balance sheet | Off-balance sheet(h) | | Credit exposure(g) | On-balance sheet | Off-balance sheet(h) | | December 31, (in millions) | Loans | Derivatives | | Loans | Derivatives | | Consumer, excluding credit card | $ | 419,798 |
| $ | 373,732 |
| $ | — |
| $ | 46,066 |
| | $ | 421,234 |
| $ | 372,681 |
| $ | — |
| $ | 48,553 |
| | Receivables from customers(a) | 154 |
| — |
| — |
| — |
| | 133 |
| — |
| — |
| — |
| | Total Consumer, excluding credit card | 419,952 |
| 373,732 |
| — |
| 46,066 |
| | 421,367 |
| 372,681 |
| — |
| 48,553 |
| | Credit card | 762,011 |
| 156,632 |
| — |
| 605,379 |
| | 722,342 |
| 149,511 |
| — |
| 572,831 |
| | Total consumer-related | 1,181,963 |
| 530,364 |
| — |
| 651,445 |
| | 1,143,709 |
| 522,192 |
| — |
| 621,384 |
| | Wholesale-related(b) | | | | | | | | | | | Real Estate | 143,316 |
| 115,737 |
| 164 |
| 27,415 |
| | 139,409 |
| 113,648 |
| 153 |
| 25,608 |
| | Individuals and Individual Entities(c) | 97,077 |
| 86,586 |
| 1,017 |
| 9,474 |
| | 87,371 |
| 77,768 |
| 1,252 |
| 8,351 |
| | Consumer & Retail | 94,815 |
| 36,921 |
| 1,093 |
| 56,801 |
| | 87,679 |
| 31,044 |
| 1,114 |
| 55,521 |
| | Technology, Media & Telecommunications | 72,646 |
| 16,980 |
| 2,667 |
| 52,999 |
| | 59,274 |
| 13,665 |
| 2,265 |
| 43,344 |
| | Industrials | 58,528 |
| 19,126 |
| 958 |
| 38,444 |
| | 55,272 |
| 18,161 |
| 1,163 |
| 35,948 |
| | Banks & Finance Cos | 49,920 |
| 28,825 |
| 5,903 |
| 15,192 |
| | 49,037 |
| 25,879 |
| 6,816 |
| 16,342 |
| | Healthcare | 48,142 |
| 16,347 |
| 1,874 |
| 29,921 |
| | 55,997 |
| 16,273 |
| 2,191 |
| 37,533 |
| | Asset Managers | 42,807 |
| 16,806 |
| 9,033 |
| 16,968 |
| | 32,531 |
| 11,480 |
| 7,998 |
| 13,053 |
| | Oil & Gas | 42,600 |
| 13,008 |
| 559 |
| 29,033 |
| | 41,317 |
| 12,621 |
| 1,727 |
| 26,969 |
| | Utilities | 28,172 |
| 5,591 |
| 1,740 |
| 20,841 |
| | 29,317 |
| 6,187 |
| 2,084 |
| 21,046 |
| | State & Municipal Govt(d) | 27,351 |
| 10,319 |
| 2,000 |
| 15,032 |
| | 28,633 |
| 12,134 |
| 2,888 |
| 13,611 |
| | Central Govt | 18,456 |
| 3,867 |
| 12,869 |
| 1,720 |
| | 19,182 |
| 3,375 |
| 13,937 |
| 1,870 |
| | Automotive | 17,339 |
| 5,170 |
| 399 |
| 11,770 |
| | 14,820 |
| 4,903 |
| 342 |
| 9,575 |
| | Chemicals & Plastics | 16,035 |
| 4,902 |
| 181 |
| 10,952 |
| | 15,945 |
| 5,654 |
| 208 |
| 10,083 |
| | Transportation | 15,660 |
| 6,391 |
| 1,102 |
| 8,167 |
| | 15,797 |
| 6,733 |
| 977 |
| 8,087 |
| | Metals & Mining | 15,359 |
| 5,370 |
| 488 |
| 9,501 |
| | 14,171 |
| 4,728 |
| 702 |
| 8,741 |
| | Insurance | 12,639 |
| 1,356 |
| 2,569 |
| 8,714 |
| | 14,089 |
| 1,411 |
| 2,804 |
| 9,874 |
| | Financial Markets Infrastructure | 7,484 |
| 18 |
| 5,941 |
| 1,525 |
| | 5,036 |
| 351 |
| 3,499 |
| 1,186 |
| | Securities Firms | 4,558 |
| 645 |
| 2,029 |
| 1,884 |
| | 4,113 |
| 952 |
| 1,692 |
| 1,469 |
| | All other(e) | 68,284 |
| 45,197 |
| 1,627 |
| 21,460 |
| | 60,529 |
| 35,931 |
| 2,711 |
| 21,887 |
| | Subtotal | 881,188 |
| 439,162 |
| 54,213 |
| 387,813 |
| | 829,519 |
| 402,898 |
| 56,523 |
| 370,098 |
| | Loans held-for-sale and loans at fair value | 15,028 |
| 15,028 |
| — |
| — |
| | 5,607 |
| 5,607 |
| — |
| — |
| | Receivables from customers and other(a) | 30,063 |
| — |
| — |
| — |
| | 26,139 |
| — |
| — |
| — |
| | Total wholesale-related | 926,279 |
| 454,190 |
| 54,213 |
| 387,813 |
| | 861,265 |
| 408,505 |
| 56,523 |
| 370,098 |
| | Total exposure(f)(g) | $ | 2,108,242 |
| $ | 984,554 |
| $ | 54,213 |
| $ | 1,039,258 |
| | $ | 2,004,974 |
| $ | 930,697 |
| $ | 56,523 |
| $ | 991,482 |
| |
(j)At December 31, 2020, included $19.2 billion of loans in Business Banking under the PPP. PPP loans are guaranteed by the SBA. Other than in certain limited circumstances, the Firm typically does not recognize charge-offs, classify as nonaccrual nor record an allowance for loan losses on these loans. | | (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, 2017, are based on the industry rankings of the corresponding exposures at December 31, 2018, not actual rankings of such exposures at December 31, 2017. |
| | (c) | Individuals and Individual Entities predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies and personal and testamentary trusts. |
| | (d) | In addition to the credit risk exposure to states and municipal governments (both U.S. and non-U.S.) at December 31, 2018 and 2017, noted above, the Firm held: $7.8 billion and $9.8 billion, respectively, of trading securities; $37.7 billion and $32.3 billion, respectively, of AFS securities; and $4.8 billion and $14.4 billion, respectively, of held-to-maturity (“HTM”) securities, issued by U.S. state and municipal governments. For further information, refer to Note 2 and Note 10. |
| | (e) | All other includes: SPEs and Private education and civic organizations, representing approximately 92% and 8%, respectively, at December 31, 2018 and 90% and 10%, respectively, at December 31, 2017. For more information on exposures to SPEs, refer to Note 14. |
| | (f) | Excludes cash placed with banks of $268.1 billion and $421.0 billion, at December 31, 2018 and 2017, respectively, which is predominantly placed with various central banks, primarily Federal Reserve Banks. |
| | (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. |
| | (h) | Represents lending-related financial instruments. |
(k)Represents lending-related financial instruments.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 183197 |
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 contracts 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. The Firm generally uses interest rate contractsderivatives to manage 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 and losses on the derivative instruments related to these assets and liabilities are expected to substantially offset this 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. ForRefer to the Credit derivatives section on pages 209-211 of this Note for a further discussion of credit derivatives, refer to the discussion in the Credit derivatives section onpages 195-197of this Note.derivatives. For more information about risk management derivatives, referRefer to the risk management derivatives gains and losses table onpage 195209 of this Note, and the hedge accounting gains and losses tables on pages 192-195 206-208 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, refer to 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, refer to 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 188-195 202-209 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 a further discussion of derivatives embedded in structured notes, refer to Notes 2 and 3.notes.
| | | | | | | | | 184198 | | JPMorgan Chase & Co./20182020 Form 10-K |
Derivatives designated as hedges The Firm adopted new hedge accounting guidance in the first quarter of 2018, which required prospective amendments to the disclosures, as reflected in this Note. For additional information on the impact upon adoption of the new guidance, refer to Notes 1 and 23. 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, nonstatistical methods such 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, 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. 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, changes in the fair value of the derivative are recorded in OCI and recognized in earnings as the hedged item 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. 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 not 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 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 assessment of effectiveness are recorded directly in earnings.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 185199 |
Notes to consolidated financial statements
The following table outlines the Firm’s primary uses of derivatives and the related hedge accounting designation or disclosure category. | | | | | | | | | | | | | | | Type of Derivative | Use of Derivative | Designation and disclosure | Affected segment or unit | Page reference | Manage specifically identified risk exposures in qualifying hedge accounting relationships: | | | | | Hedge fixed rate assets and liabilities | Fair value hedge | Corporate | 192206-207 | | Hedge floating-rate assets and liabilities | Cash flow hedge | Corporate | 194208 | | Hedge foreign currency-denominated assets and liabilities | Fair value hedge | Corporate | 192206-207 | | Hedge foreign currency-denominated forecasted revenue and expense | Cash flow hedge | Corporate | 194208 | | Hedge the value of the Firm’s investments in non-U.S. dollar functional currency entities | Net investment hedge | Corporate | 195208 | | Hedge commodity inventory | Fair value hedge | CIB | 192206-207 | Manage specifically identified risk exposures not designated in qualifying hedge accounting relationships: | | | | | Manage the risk of theassociated with mortgage pipeline,commitments, warehouse loans and MSRs | Specified risk management | CCB | 195209 | | Manage the credit risk ofassociated with wholesale lending exposures | Specified risk management | CIB | 195209 | • Interest rate and foreign exchange | Manage the risk ofassociated with certain other specified assets and liabilities | Specified risk management | Corporate | 195209 | Market-making derivatives and other activities: | | | | | Market-making and related risk management | Market-making and other | CIB | 195209 | | Other derivatives | Market-making and other | CIB, AWM, Corporate | 195209 |
| | | | | | | | | 186200 | | JPMorgan Chase & Co./20182020 Form 10-K |
Notional amount of derivative contracts The following table summarizes the notional amount of derivative contracts outstanding as of December 31, 20182020 and 2017.2019. | | | | | | | | | | | | | | | | | | | | Notional amounts(b) | December 31, (in billions) | | | | 2020 | | | | | 2019 | Interest rate contracts | | | | | | | | | | Swaps | | | | $ | 20,986 | | | | | | $ | 21,228 | | Futures and forwards | | | | 3,057 | | | | | | 3,152 | | Written options | | | | 3,375 | | | | | | 3,938 | | Purchased options | | | | 3,675 | | | | | | 4,361 | | Total interest rate contracts | | | | 31,093 | | | | | | 32,679 | | Credit derivatives(a) | | | | 1,201 | | | | | | 1,242 | | Foreign exchange contracts | | | | | | | | | | Cross-currency swaps | | | | 3,924 | | | | | | 3,604 | | Spot, futures and forwards | | | | 6,871 | | | | | | 5,577 | | Written options | | | | 830 | | | | | | 700 | | Purchased options | | | | 825 | | | | | | 718 | | Total foreign exchange contracts | | | | 12,450 | | | | | | 10,599 | | Equity contracts | | | | | | | | | | Swaps | | | | 448 | | | | | | 406 | | Futures and forwards | | | | 140 | | | | | | 142 | | Written options | | | | 676 | | | | | | 646 | | Purchased options | | | | 621 | | | | | | 611 | | Total equity contracts | | | | 1,885 | | | | | | 1,805 | | Commodity contracts | | | | | | | | | | Swaps | | | | 138 | | | | | | 147 | | Spot, futures and forwards | | | | 198 | | | | | | 211 | | Written options | | | | 124 | | | | | | 135 | | Purchased options | | | | 105 | | | | | | 124 | | Total commodity contracts | | | | 565 | | | | | | 617 | | Total derivative notional amounts | | | | $ | 47,194 | | | | | | $ | 46,942 | |
| | | | | | | | | | | Notional amounts(b) | December 31, (in billions) | 2018 | | 2017 | | Interest rate contracts | | | | | Swaps | $ | 21,763 |
| | $ | 21,043 |
| | Futures and forwards | 3,562 |
| | 4,904 |
| | Written options | 3,997 |
| | 3,576 |
| | Purchased options | 4,322 |
| | 3,987 |
| | Total interest rate contracts | 33,644 |
| | 33,510 |
| | Credit derivatives(a) | 1,501 |
| | 1,522 |
| | Foreign exchange contracts | | | |
| | Cross-currency swaps | 3,548 |
| | 3,953 |
| | Spot, futures and forwards | 5,871 |
| | 5,923 |
| | Written options | 835 |
| | 786 |
| | Purchased options | 830 |
| | 776 |
| | Total foreign exchange contracts | 11,084 |
| | 11,438 |
| | Equity contracts | | | | | Swaps | 346 |
| | 367 |
| | Futures and forwards | 101 |
| | 90 |
| | Written options | 528 |
| | 531 |
| | Purchased options | 490 |
| | 453 |
| | Total equity contracts | 1,465 |
| | 1,441 |
| | Commodity contracts | | | |
| | Swaps | 134 |
| | 133 |
| (c) | Spot, futures and forwards | 156 |
| | 168 |
| | Written options | 135 |
| | 98 |
| | Purchased options | 120 |
| | 93 |
| | Total commodity contracts | 545 |
| | 492 |
| (c) | Total derivative notional amounts | $ | 48,239 |
| | $ | 48,403 |
| (c) |
| | (a) | For(a) Refer to the Credit derivatives discussion on pages 209-211 for more information on volumes and types of credit derivative contracts, refer to the Credit derivatives discussion on pages 195-197. |
| | (b) | Represents the sum of gross long and gross short third-party notional derivative contracts. |
| | (c) | The prior period amounts have been revised to conform with the current period presentation. |
(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 contracts, the notional amount is not exchanged; it is used simply as a reference amount used to calculate payments.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 187201 |
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, 20182020 and 2017, 2019, by accounting designation (e.g., whether the derivatives were designated in qualifying hedge accounting relationships or not) and contract type. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Free-standing derivative receivables and payables(a) | | | | | | | | | | | | | | | Gross derivative receivables | | | | | Gross derivative payables | | | | December 31, 2020 (in millions) | Not designated as hedges | | Designated as hedges | Total derivative receivables | | | Net derivative receivables(b) | | Not designated as hedges | | | Designated as hedges | | Total derivative payables | | | Net derivative payables(b) | Trading assets and liabilities | | | | | | | | | | | | | | | | | | | Interest rate | $ | 390,659 | | | $ | 831 | | | $ | 391,490 | | | | $ | 35,725 | | | $ | 353,627 | | | | $ | 0 | | | $ | 353,627 | | | | $ | 13,012 | | Credit | 13,503 | | | 0 | | | 13,503 | | | | 680 | | | 15,192 | | | | 0 | | | 15,192 | | | | 1,995 | | Foreign exchange | 205,359 | | | 901 | | | 206,260 | | | | 15,781 | | | 214,229 | | | | 1,697 | | | 215,926 | | | | 21,433 | | Equity | 74,798 | | | 0 | | | 74,798 | | | | 20,673 | | | 81,413 | | | | 0 | | | 81,413 | | | | 25,898 | | Commodity | 20,579 | | | 924 | | | 21,503 | | | | 6,771 | | | 20,834 | | | | 1,895 | | | 22,729 | | | | 8,285 | | Total fair value of trading assets and liabilities | $ | 704,898 | | | $ | 2,656 | | | $ | 707,554 | | | | $ | 79,630 | | | $ | 685,295 | | | | $ | 3,592 | | | $ | 688,887 | | | | $ | 70,623 | | | | | | | | | | | | | | | | | | | | | | Gross derivative receivables | | | | | Gross derivative payables | | | | December 31, 2019 (in millions) | Not designated as hedges | | Designated as hedges | Total derivative receivables | | | Net derivative receivables(b) | | Not designated as hedges | | | Designated as hedges | | Total derivative payables | | | Net derivative payables(b) | Trading assets and liabilities | | | | | | | | | | | | | | | | | | | Interest rate | $ | 312,451 | | | $ | 843 | | | $ | 313,294 | | | | $ | 27,421 | | | $ | 279,272 | | | | $ | 1 | | | $ | 279,273 | | | | $ | 8,603 | | Credit | 14,876 | | | 0 | | | 14,876 | | | | 701 | | | 15,121 | | | | 0 | | | 15,121 | | | | 1,652 | | Foreign exchange | 138,179 | | | 308 | | | 138,487 | | | | 9,005 | | | 144,125 | | | | 983 | | | 145,108 | | | | 13,158 | | Equity | 45,727 | | | 0 | | | 45,727 | | | | 6,477 | | | 52,741 | | | | 0 | | | 52,741 | | | | 12,537 | | Commodity | 16,914 | | | 328 | | | 17,242 | | | | 6,162 | | | 19,736 | | | | 149 | | | 19,885 | | | | 7,758 | | Total fair value of trading assets and liabilities | $ | 528,147 | | | $ | 1,479 | | | $ | 529,626 | | | | $ | 49,766 | | | $ | 510,995 | | | | $ | 1,133 | | | $ | 512,128 | | | | $ | 43,708 | |
(a)Balances exclude structured notes for which the fair value option has been elected. Refer 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Free-standing derivative receivables and payables(a) | | | | | | | | | | | | Gross derivative receivables | | | | Gross derivative payables | | | December 31, 2018 (in millions) | Not designated as hedges | | Designated as hedges | Total derivative receivables | | Net derivative receivables(b) | | Not designated as hedges | | Designated as hedges | | Total derivative payables | | Net derivative payables(b) | Trading assets and liabilities | | | | | | | | | | | | | | | | Interest rate | $ | 267,871 |
| | $ | 833 |
| | $ | 268,704 |
| | $ | 23,214 |
| | $ | 242,782 |
| | $ | — |
| | $ | 242,782 |
| | $ | 7,784 |
| Credit | 20,095 |
| | — |
| | 20,095 |
| | 612 |
| | 20,276 |
| | — |
| | 20,276 |
| | 1,667 |
| Foreign exchange | 167,057 |
| | 628 |
| | 167,685 |
| | 13,450 |
| | 164,392 |
| | 825 |
| | 165,217 |
| | 12,785 |
| Equity | 49,285 |
| | — |
| | 49,285 |
| | 9,946 |
| | 51,195 |
| | — |
| | 51,195 |
| | 10,161 |
| Commodity | 20,223 |
| | 247 |
| | 20,470 |
| | 6,991 |
| | 22,297 |
| | 121 |
| | 22,418 |
| | 9,372 |
| Total fair value of trading assets and liabilities | $ | 524,531 |
| | $ | 1,708 |
| | $ | 526,239 |
| | $ | 54,213 |
| | $ | 500,942 |
| | $ | 946 |
| | $ | 501,888 |
| | $ | 41,769 |
| | | | | | | | | | | | | | | | | | Gross derivative receivables | | | | Gross derivative payables | | | December 31, 2017 (in millions) | Not designated as hedges | | Designated as hedges | Total derivative receivables | | Net derivative receivables(b) | | Not designated as hedges | | Designated as hedges | | Total derivative payables | | Net derivative payables(b) | Trading assets and liabilities | | | | | | | | | | | | | | | | Interest rate | $ | 314,962 |
| (c) | $ | 1,030 |
| (c) | $ | 315,992 |
| | $ | 24,673 |
| | $ | 284,433 |
| (c) | $ | 3 |
| (c) | $ | 284,436 |
| | $ | 7,129 |
| Credit | 23,205 |
| | — |
| | 23,205 |
| | 869 |
| | 23,252 |
| | — |
| | 23,252 |
| | 1,299 |
| Foreign exchange | 159,740 |
| | 491 |
| | 160,231 |
| | 16,151 |
| | 154,601 |
| | 1,221 |
| | 155,822 |
| | 12,473 |
| Equity | 40,040 |
| | — |
| | 40,040 |
| | 7,882 |
| | 45,395 |
| | — |
| | 45,395 |
| | 9,192 |
| Commodity | 20,066 |
| | 19 |
| | 20,085 |
| | 6,948 |
| | 21,498 |
| | 403 |
| | 21,901 |
| | 7,684 |
| Total fair value of trading assets and liabilities | $ | 558,013 |
| (c) | $ | 1,540 |
| (c) | $ | 559,553 |
| | $ | 56,523 |
| | $ | 529,179 |
| (c) | $ | 1,627 |
| (c) | $ | 530,806 |
| | $ | 37,777 |
|
| | (a) | Balances exclude structured notes for which the fair value option has been elected. Refer 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. |
| | (c) | The prior period amounts have been revised to conform with the current period presentation. |
| | | | | | | | | 188202 | | JPMorgan Chase & Co./20182020 Form 10-K |
Derivatives netting The following tables present, as of December 31, 20182020 and 2017,2019, 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.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | December 31, (in millions) | Gross derivative receivables | Amounts netted on the Consolidated balance sheets | Net derivative receivables | | Gross derivative receivables | | Amounts netted on the Consolidated balance sheets | Net derivative receivables | U.S. GAAP nettable derivative receivables | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | OTC | $ | 258,227 |
| $ | (239,498 | ) | | $ | 18,729 |
| | $ | 305,569 |
| | $ | (284,917 | ) | | $ | 20,652 |
| | OTC–cleared | 6,404 |
| (5,856 | ) | | 548 |
| | 6,531 |
| | (6,318 | ) | | 213 |
| | Exchange-traded(a) | 322 |
| (136 | ) | | 186 |
| | 185 |
| | (84 | ) | | 101 |
| | Total interest rate contracts | 264,953 |
| (245,490 | ) | | 19,463 |
| | 312,285 |
| | (291,319 | ) | | 20,966 |
| | Credit contracts: | | | | | | | | | | | | OTC | 12,648 |
| (12,261 | ) | | 387 |
| | 15,390 |
| | (15,165 | ) | | 225 |
| | OTC–cleared | 7,267 |
| (7,222 | ) | | 45 |
| | 7,225 |
| | (7,170 | ) | | 55 |
| | Total credit contracts | 19,915 |
| (19,483 | ) | | 432 |
| | 22,615 |
| | (22,335 | ) | | 280 |
| | Foreign exchange contracts: | | | | | | | | | | | | OTC | 163,862 |
| (153,988 | ) | | 9,874 |
| | 155,289 |
| | (142,420 | ) | | 12,869 |
| | OTC–cleared | 235 |
| (226 | ) | | 9 |
| | 1,696 |
| | (1,654 | ) | | 42 |
| | Exchange-traded(a) | 32 |
| (21 | ) | | 11 |
| | 141 |
| | (7 | ) | | 134 |
| | Total foreign exchange contracts | 164,129 |
| (154,235 | ) | | 9,894 |
| | 157,126 |
| | (144,081 | ) | | 13,045 |
| | Equity contracts: | | | | | | | | | | | | OTC | 26,178 |
| (23,879 | ) | | 2,299 |
| | 22,024 |
| | (19,917 | ) | | 2,107 |
| | Exchange-traded(a) | 18,876 |
| (15,460 | ) | | 3,416 |
| | 14,188 |
| | (12,241 | ) | | 1,947 |
| | Total equity contracts | 45,054 |
| (39,339 | ) | | 5,715 |
| | 36,212 |
| | (32,158 | ) | | 4,054 |
| | Commodity contracts: | | | | | | | | | | | | OTC | 7,448 |
| (5,261 | ) | | 2,187 |
| | 7,204 |
| (e) | (4,436 | ) | | 2,768 |
| (e) | Exchange-traded(a) | 8,815 |
| (8,218 | ) | | 597 |
| | 8,854 |
| | (8,701 | ) | | 153 |
| | Total commodity contracts | 16,263 |
| (13,479 | ) | | 2,784 |
| | 16,058 |
| (e) | (13,137 | ) | | 2,921 |
| (e) | Derivative receivables with appropriate legal opinion | 510,314 |
| (472,026 | ) | | 38,288 |
| (d) | 544,296 |
| (e) | (503,030 | ) | | 41,266 |
| (d)(e) | Derivative receivables where an appropriate legal opinion has not been either sought or obtained | 15,925 |
| | | 15,925 |
| | 15,257 |
| (e) | | | 15,257 |
| (e) | Total derivative receivables recognized on the Consolidated balance sheets | $ | 526,239 |
| | | $ | 54,213 |
| | $ | 559,553 |
| | | | $ | 56,523 |
| | Collateral not nettable on the Consolidated balance sheets(b)(c) | | | | (13,046 | ) | | | | | | (13,363 | ) | | Net amounts | | | | $ | 41,167 |
| | | | | | $ | 43,160 |
| |
collateral that consists of liquid securities and other 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. Liquid securities represent high quality liquid assets as defined in the LCR rule;
•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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | December 31, (in millions) | Gross derivative receivables | Amounts netted on the Consolidated balance sheets | Net derivative receivables | | Gross derivative receivables | | Amounts netted on the Consolidated balance sheets | Net derivative receivables | U.S. GAAP nettable derivative receivables | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | OTC | $ | 367,056 | | $ | (337,451) | | | $ | 29,605 | | | $ | 299,205 | | | $ | (276,255) | | | $ | 22,950 | | | OTC–cleared | 18,340 | | (17,919) | | | 421 | | | 9,442 | | | (9,360) | | | 82 | | | Exchange-traded(a) | 554 | | (395) | | | 159 | | | 347 | | | (258) | | | 89 | | | Total interest rate contracts | 385,950 | | (355,765) | | | 30,185 | | | 308,994 | | | (285,873) | | | 23,121 | | | Credit contracts: | | | | | | | | | | | | OTC | 9,052 | | (8,514) | | | 538 | | | 10,743 | | | (10,317) | | | 426 | | | OTC–cleared | 4,326 | | (4,309) | | | 17 | | | 3,864 | | | (3,858) | | | 6 | | | Total credit contracts | 13,378 | | (12,823) | | | 555 | | | 14,607 | | | (14,175) | | | 432 | | | Foreign exchange contracts: | | | | | | | | | | | | OTC | 201,349 | | (189,655) | | | 11,694 | | | 136,252 | | | (129,324) | | | 6,928 | | | OTC–cleared | 834 | | (819) | | | 15 | | | 185 | | | (152) | | | 33 | | | Exchange-traded(a) | 35 | | (5) | | | 30 | | | 10 | | | (6) | | | 4 | | | Total foreign exchange contracts | 202,218 | | (190,479) | | | 11,739 | | | 136,447 | | | (129,482) | | | 6,965 | | | Equity contracts: | | | | | | | | | | | | OTC | 34,030 | | (27,374) | | | 6,656 | | | 23,106 | | | (20,820) | | | 2,286 | | | Exchange-traded(a) | 28,294 | | (26,751) | | | 1,543 | | | 19,654 | | | (18,430) | | | 1,224 | | | Total equity contracts | 62,324 | | (54,125) | | | 8,199 | | | 42,760 | | | (39,250) | | | 3,510 | | | Commodity contracts: | | | | | | | | | | | | OTC | 10,924 | | (7,901) | | | 3,023 | | | 7,093 | | | (5,149) | | | 1,944 | | | OTC–cleared | 20 | | (20) | | | 0 | | | 28 | | | (28) | | | 0 | | | Exchange-traded(a) | 6,833 | | (6,811) | | | 22 | | | 6,154 | | | (5,903) | | | 251 | | | Total commodity contracts | 17,777 | | (14,732) | | | 3,045 | | | 13,275 | | | (11,080) | | | 2,195 | | | Derivative receivables with appropriate legal opinion | 681,647 | | (627,924) | | | 53,723 | | (d) | 516,083 | | | (479,860) | | | 36,223 | | (d) | Derivative receivables where an appropriate legal opinion has not been either sought or obtained | 25,907 | | | | 25,907 | | | 13,543 | | | | | 13,543 | | | Total derivative receivables recognized on the Consolidated balance sheets | $ | 707,554 | | | | $ | 79,630 | | | $ | 529,626 | | | | | $ | 49,766 | | | Collateral not nettable on the Consolidated balance sheets(b)(c) | | | | (14,806) | | | | | | | (13,052) | | | Net amounts | | | | $ | 64,824 | | | | | | | $ | 36,714 | | |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 189203 |
Notes to consolidated financial statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | December 31, (in millions) | Gross derivative payables | Amounts netted on the Consolidated balance sheets | Net derivative payables | | Gross derivative payables | | Amounts netted on the Consolidated balance sheets | Net derivative payables | U.S. GAAP nettable derivative payables | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | OTC | $ | 331,854 | | $ | (320,780) | | | $ | 11,074 | | | $ | 267,311 | | | $ | (260,229) | | | $ | 7,082 | | | OTC–cleared | 19,710 | | (19,494) | | | 216 | | | 10,217 | | | (10,138) | | | 79 | | | Exchange-traded(a) | 358 | | (341) | | | 17 | | | 365 | | | (303) | | | 62 | | | Total interest rate contracts | 351,922 | | (340,615) | | | 11,307 | | | 277,893 | | | (270,670) | | | 7,223 | | | Credit contracts: | | | | | | | | | | | | OTC | 10,671 | | (9,141) | | | 1,530 | | | 11,570 | | | (10,080) | | | 1,490 | | | OTC–cleared | 4,075 | | (4,056) | | | 19 | | | 3,390 | | | (3,389) | | | 1 | | | Total credit contracts | 14,746 | | (13,197) | | | 1,549 | | | 14,960 | | | (13,469) | | | 1,491 | | | Foreign exchange contracts: | | | | | | | | | | | | OTC | 210,803 | | (193,672) | | | 17,131 | | | 142,360 | | | (131,792) | | | 10,568 | | | OTC–cleared | 836 | | (819) | | | 17 | | | 186 | | | (152) | | | 34 | | | Exchange-traded(a) | 34 | | (2) | | | 32 | | | 12 | | | (6) | | | 6 | | | Total foreign exchange contracts | 211,673 | | (194,493) | | | 17,180 | | | 142,558 | | | (131,950) | | | 10,608 | | | Equity contracts: | | | | | | | | | | | | OTC | 35,330 | | (28,763) | | | 6,567 | | | 27,594 | | | (21,778) | | | 5,816 | | | Exchange-traded(a) | 34,491 | | (26,752) | | | 7,739 | | | 20,216 | | | (18,426) | | | 1,790 | | | Total equity contracts | 69,821 | | (55,515) | | | 14,306 | | | 47,810 | | | (40,204) | | | 7,606 | | | Commodity contracts: | | | | | | | | | | | | OTC | 10,365 | | (7,544) | | | 2,821 | | | 8,714 | | | (6,235) | | | 2,479 | | | OTC–cleared | 32 | | (32) | | | 0 | | | 30 | | | (30) | | | 0 | | | Exchange-traded(a) | 7,391 | | (6,868) | | | 523 | | | 6,012 | | | (5,862) | | | 150 | | | Total commodity contracts | 17,788 | | (14,444) | | | 3,344 | | | 14,756 | | | (12,127) | | | 2,629 | | | Derivative payables with appropriate legal opinion | 665,950 | | (618,264) | | | 47,686 | | (d) | 497,977 | | | (468,420) | | | 29,557 | | (d) | Derivative payables where an appropriate legal opinion has not been either sought or obtained | 22,937 | | | | 22,937 | | | 14,151 | | | | | 14,151 | | | Total derivative payables recognized on the Consolidated balance sheets | $ | 688,887 | | | | $ | 70,623 | | | $ | 512,128 | | | | | $ | 43,708 | | | Collateral not nettable on the Consolidated balance sheets(b)(c) | | | | (11,964) | | | | | | | (6,960) | | | Net amounts | | | | $ | 58,659 | | | | | | | $ | 36,748 | | |
(a)Exchange-traded derivative balances that relate to futures contracts are settled daily. | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | December 31, (in millions) | Gross derivative payables | Amounts netted on the Consolidated balance sheets | Net derivative payables | | Gross derivative payables | | Amounts netted on the Consolidated balance sheets | Net derivative payables | U.S. GAAP nettable derivative payables | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | OTC | $ | 233,404 |
| $ | (228,369 | ) | | $ | 5,035 |
| | $ | 276,960 |
| | $ | (271,294 | ) | | $ | 5,666 |
| | OTC–cleared | 7,163 |
| (6,494 | ) | | 669 |
| | 6,004 |
| | (5,928 | ) | | 76 |
| | Exchange-traded(a) | 210 |
| (135 | ) | | 75 |
| | 127 |
| | (84 | ) | | 43 |
| | Total interest rate contracts | 240,777 |
| (234,998 | ) | | 5,779 |
| | 283,091 |
| | (277,306 | ) | | 5,785 |
| | Credit contracts: | | | | | | | | | | | | OTC | 13,412 |
| (11,895 | ) | | 1,517 |
| | 16,194 |
| | (15,170 | ) | | 1,024 |
| | OTC–cleared | 6,716 |
| (6,714 | ) | | 2 |
| | 6,801 |
| | (6,784 | ) | | 17 |
| | Total credit contracts | 20,128 |
| (18,609 | ) | | 1,519 |
| | 22,995 |
| | (21,954 | ) | | 1,041 |
| | Foreign exchange contracts: | | | | | | | | | | | | OTC | 160,930 |
| (152,161 | ) | | 8,769 |
| | 150,966 |
| | (141,789 | ) | | 9,177 |
| | OTC–cleared | 274 |
| (268 | ) | | 6 |
| | 1,555 |
| | (1,553 | ) | | 2 |
| | Exchange-traded(a) | 16 |
| (3 | ) | | 13 |
| | 98 |
| | (7 | ) | | 91 |
| | Total foreign exchange contracts | 161,220 |
| (152,432 | ) | | 8,788 |
| | 152,619 |
| | (143,349 | ) | | 9,270 |
| | Equity contracts: | | | | | | | | | | | | OTC | 29,437 |
| (25,544 | ) | | 3,893 |
| | 28,193 |
| | (23,969 | ) | | 4,224 |
| | Exchange-traded(a) | 16,285 |
| (15,490 | ) | | 795 |
| | 12,720 |
| | (12,234 | ) | | 486 |
| | Total equity contracts | 45,722 |
| (41,034 | ) | | 4,688 |
| | 40,913 |
| | (36,203 | ) | | 4,710 |
| | Commodity contracts: | | | | | | | | | | | | OTC | 8,930 |
| (4,838 | ) | | 4,092 |
| | 7,697 |
| (e) | (5,508 | ) | | 2,189 |
| (e) | Exchange-traded(a) | 8,259 |
| (8,208 | ) | | 51 |
| | 8,870 |
| | (8,709 | ) | | 161 |
| | Total commodity contracts | 17,189 |
| (13,046 | ) | | 4,143 |
| | 16,567 |
| (e) | (14,217 | ) | | 2,350 |
| (e) | Derivative payables with appropriate legal opinion | 485,036 |
| (460,119 | ) | | 24,917 |
| (d) | 516,185 |
| (e) | (493,029 | ) | | 23,156 |
| (d)(e) | Derivative payables where an appropriate legal opinion has not been either sought or obtained | 16,852 |
| | | 16,852 |
| | 14,621 |
| (e) | | | 14,621 |
| (e) | Total derivative payables recognized on the Consolidated balance sheets | $ | 501,888 |
| | | $ | 41,769 |
| | $ | 530,806 |
| | | | $ | 37,777 |
| | Collateral not nettable on the Consolidated balance sheets(b)(c) | | | | (4,449 | ) | | | | | | (4,180 | ) | | Net amounts | | | | $ | 37,320 |
| | | | | | $ | 33,597 |
| |
| | (a) | Exchange-traded derivative balances that relate to futures contracts are settled daily. |
| | (b) | 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. |
| | (c) | Derivative collateral relates only to OTC and OTC-cleared derivative instruments. |
| | (d) | Net derivatives receivable included cash collateral netted of $55.2 billion and $55.5 billion at December 31, 2018 and 2017, respectively. Net derivatives payable included cash collateral netted of $43.3 billion and $45.5 billion at December 31, 2018 and 2017, respectively. Derivative cash collateral relates to OTC and OTC-cleared derivative instruments. |
| | (e) | The prior period amounts have been revised to conform with the current period presentation. |
(b)Includes liquid securities and other 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. In the fourth quarter of 2020, the Firm refined its approach for disclosing additional collateral held by the Firm that may be used as security when the fair value of the client’s exposure is in the Firm’s favor. Prior-period amounts have been revised to conform with the current presentation.
(c)Derivative collateral relates only to OTC and OTC-cleared derivative instruments. (d)Net derivatives receivable included cash collateral netted of $88.0 billion and $65.9 billion at December 31, 2020 and 2019, respectively. Net derivatives payable included cash collateral netted of $78.4 billion and $54.4 billion at December 31, 2020 and 2019, respectively. Derivative cash collateral relates to OTC and OTC-cleared derivative instruments.
| | | | | | | | | 190204 | | JPMorgan Chase & Co./20182020 Form 10-K |
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 v aluevalue 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, 20182020 and 2017.2019.
| | | | | | | | OTC and OTC-cleared derivative payables containing downgrade triggers | December 31, (in millions) | 2018 | 2017 | Aggregate fair value of net derivative payables | $ | 9,396 |
| $ | 11,916 |
| Collateral posted | 8,907 |
| 9,973 |
|
| | | | | | | | | | | | | | | | | | OTC and OTC-cleared derivative payables containing downgrade triggers | December 31, (in millions) | | 2020 | | | 2019 | Aggregate fair value of net derivative payables | | $ | 27,712 | | | | $ | 14,819 | | Collateral posted | | 26,289 | | | | 13,329 | |
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, 20182020 and 2017, 2019, 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 | | 2020 | | 2019 | December 31, (in millions) | Single-notch downgrade | Two-notch downgrade | | Single-notch downgrade | Two-notch downgrade | Amount of additional collateral to be posted upon downgrade(a) | $ | 119 | | $ | 1,243 | | | $ | 189 | | $ | 1,467 | | Amount required to settle contracts with termination triggers upon downgrade(b) | 153 | | 2,449 | | | 104 | | 1,398 | |
(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. | | | | | | | | | | | | | | | Liquidity impact of downgrade triggers on OTC and OTC-cleared derivatives | | 2018 | | 2017 | December 31, (in millions) | Single-notch downgrade | Two-notch downgrade | | Single-notch downgrade | Two-notch downgrade | Amount of additional collateral to be posted upon downgrade(a) | $ | 76 |
| $ | 947 |
| | $ | 79 |
| $ | 1,989 |
| Amount required to settle contracts with termination triggers upon downgrade(b) | 172 |
| 764 |
| | 320 |
| 650 |
|
| | (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. The amount of such transfers accounted for as a sale where the associated derivative was outstanding at December 31, 2018 was not material and there were no such transfers at both December 31, 2017.
2020 and 2019.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 191205 |
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, 2018, 20172020, 2019 and 2016, 2018, respectively. The Firm includes gains/(losses) on the hedging derivative in the same line item in the Consolidated statements of income as the related hedged item. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact of excluded components(e) | | OCI impact | Year ended December 31, 2020 (in millions) | Derivatives | Hedged items | Income statement impact | | Amortization approach | Changes in fair value | | Derivatives - Gains/(losses) recorded in OCI(f) | Contract type | | | | | | | | | Interest rate(a)(b) | $ | 2,962 | | $ | (1,889) | | $ | 1,073 | | | $ | 0 | | $ | 1,093 | | | $ | 0 | | Foreign exchange(c) | 793 | | (619) | | 174 | | | (457) | | 174 | | | 25 | | Commodity(d) | (2,507) | | 2,650 | | 143 | | | 0 | | 137 | | | 0 | | Total | $ | 1,248 | | $ | 142 | | $ | 1,390 | | | $ | (457) | | $ | 1,404 | | | $ | 25 | | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact of excluded components(e) | | OCI impact | Year ended December 31, 2019 (in millions) | Derivatives | Hedged items | Income statement impact | | Amortization approach | Changes in fair value | | Derivatives - Gains/(losses) recorded in OCI(f) | Contract type | | | | | | | | | Interest rate(a)(b) | $ | 3,204 | | $ | (2,373) | | $ | 831 | | | $ | 0 | | $ | 828 | | | $ | 0 | | Foreign exchange(c) | 154 | | 328 | | 482 | | | (866) | | 482 | | | 39 | | Commodity(d) | (77) | | 148 | | 71 | | | 0 | | 63 | | | 0 | | Total | $ | 3,281 | | $ | (1,897) | | $ | 1,384 | | | $ | (866) | | $ | 1,373 | | | $ | 39 | | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact of excluded components(e) | | OCI impact | Year ended December 31, 2018 (in millions) | Derivatives | Hedged items | Income statement impact | | Amortization approach | Changes in fair value | | Derivatives - Gains/(losses) recorded in OCI(f) | Contract type | | | | | | | | | Interest rate(a)(b) | $ | (1,145) | | $ | 1,782 | | $ | 637 | | | $ | 0 | | $ | 623 | | | $ | 0 | | Foreign exchange(c) | 1,092 | | (616) | | 476 | | | (566) | | 476 | | | (140) | | Commodity(d) | 789 | | (754) | | 35 | | | 0 | | 26 | | | 0 | | Total | $ | 736 | | $ | 412 | | $ | 1,148 | | | $ | (566) | | $ | 1,125 | | | $ | (140) | |
(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. | | | | | | | | | | | | | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact of excluded components(f) |
| OCI impact | Year ended December 31, 2018 (in millions) | Derivatives | Hedged items | Income statement impact | | Amortization approach | Changes in fair value |
| Derivatives - Gains/(losses) recorded in OCI(g) | Contract type | | | | | | | | | Interest rate(a)(b) | $ | (1,145 | ) | $ | 1,782 |
| $ | 637 |
| | $ | — |
| $ | 623 |
| | $ | — |
| Foreign exchange(c) | 1,092 |
| (616 | ) | 476 |
| | (566 | ) | 476 |
| | (140 | ) | Commodity(d) | 789 |
| (754 | ) | 35 |
| | — |
| 26 |
| | — |
| Total | $ | 736 |
| $ | 412 |
| $ | 1,148 |
| | $ | (566 | ) | $ | 1,125 |
| | $ | (140 | ) | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact due to: | | | Year ended December 31, 2017 (in millions) | Derivatives | Hedged items | Income statement impact | | Hedge ineffectiveness(e) | Excluded components(f) | | | Contract type | | | | | | | | | Interest rate(a)(b) | $ | (481 | ) | $ | 1,359 |
| $ | 878 |
| | $ | (18 | ) | $ | 896 |
| | | Foreign exchange(c) | (3,509 | ) | 3,507 |
| (2 | ) | | — |
| (2 | ) | | | Commodity(d) | (1,275 | ) | 1,348 |
| 73 |
| | 29 |
| 44 |
| | | Total | $ | (5,265 | ) | $ | 6,214 |
| $ | 949 |
| | $ | 11 |
| $ | 938 |
| | | | | | | | | | | | | Gains/(losses) recorded in income | | Income statement impact due to: | | | Year ended December 31, 2016 (in millions) | Derivatives | Hedged items | 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 |
| | |
| | (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 cross-currency basis spreads. Under the new hedge accounting guidance, the initial amount of the excluded components may be amortized into income over the life of the derivative, or changes in fair value may be recognized in current period earnings. |
| | (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. |
(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)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 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. (f)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.
| | | | | | | | | 192206 | | JPMorgan Chase & Co./20182020 Form 10-K |
As of December 31, 2018,2020 and 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, 2020 (in millions) | | | Active hedging relationships | Discontinued hedging relationships(d)(e) | Total | Assets | | | | | | | Investment securities - AFS | | $ | 139,684 | | (c) | $ | 3,572 | | $ | 847 | | $ | 4,419 | | Liabilities | | | | | | | Long-term debt | | $ | 177,611 | | | $ | 3,194 | | $ | 11,473 | | $ | 14,667 | | Beneficial interests issued by consolidated VIEs | | 746 | | | 0 | | (3) | | (3) | | | | | | | | | | | 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)(e) | 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 | | | 0 | | (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 $6.8 billion 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. Given 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. The carrying amount excluded for available-for-sale securities is $14.6 billion and for long-term debt is $7.3 billion. |
| | (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. |
(a)Excludes physical commodities with a carrying value of $11.5 billion and $6.5 billion at December 31, 2020 and 2019, 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, 2020 and 2019, the carrying amount excluded for AFS securities is $14.5 billion and $14.9 billion, respectively, and for long-term debt is $6.6 billion and $2.8 billion, respectively.
(c)Carrying amount represents the amortized cost, net of allowance if applicable. Refer to Note 10 for additional information. (d)Represents basis adjustments existing on the balance sheet date associated with hedged items that have been de-designated from qualifying fair value hedging relationships. (e)Positive amounts related to assets represent cumulative fair value hedge basis adjustments that will reduce net interest income in future periods. Positive (negative) amounts related to liabilities represent cumulative fair value hedge basis adjustments that will increase (reduce) net interest income in future periods. | | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 193207 |
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, 2018, 20172020, 2019 and 2016, 2018, respectively. The Firm includes the gain/(loss)gains/(losses) on the hedging derivative in the same line item in the Consolidated statements of income as the change in cash flows on the related hedged item. | | | | | | | | | | | | | | | | | | | | | | | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | Year ended December 31, 2020 (in millions) | | Amounts reclassified from AOCI to income | | | | Amounts recorded in OCI | | Total change in OCI for period | Contract type | | | | | | | | | | | | | Interest rate(a) | | $ | 570 | | | | | | | | | $ | 3,582 | | | $ | 3,012 | | Foreign exchange(b) | | 0 | | | | | | | | | 41 | | | 41 | | Total | | $ | 570 | | | | | | | | | $ | 3,623 | | | $ | 3,053 | |
| | | | | | | | | | | | | | | | | | | | | | | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | Year ended December 31, 2019 (in millions) | | Amounts reclassified from AOCI to income | | | | Amounts recorded in OCI | | Total change in OCI for period | Contract type | | | | | | | | | | | | | Interest rate(a) | | $ | (28) | | | | | | | | | $ | (3) | | | $ | 25 | | Foreign exchange(b) | | (75) | | | | | | | | | 125 | | | 200 | | Total | | $ | (103) | | | | | | | | | $ | 122 | | | $ | 225 | | | | | | | | | | | | | | | | | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | Year ended December 31, 2018 (in millions) | | Amounts reclassified from AOCI to income | | | | Amounts recorded in OCI | | Total change in OCI for period | Contract type | | | | | | | | | | | | | Interest rate(a) | | $ | 44 | | | | | | | | | $ | (44) | | | $ | (88) | | Foreign exchange(b) | | (26) | | | | | | | | | (201) | | | (175) | | Total | | $ | 18 | | | | | | | | | $ | (245) | | | $ | (263) | |
(a)Primarily consists of 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. | | | | | | | | | | | | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | Year ended December 31, 2018 (in millions) | Amounts reclassified from AOCI to income | Amounts recorded in OCI | Total change in OCI for period | Contract type | | | | Interest rate(a) | $ | 44 |
| $ | (44 | ) | $ | (88 | ) | Foreign exchange(b) | (26 | ) | (201 | ) | (175 | ) | Total | $ | 18 |
| $ | (245 | ) | $ | (263 | ) |
| | | | | | | | | | | | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | 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) | $ | (17 | ) | $ | 12 |
| $ | 29 |
| Foreign exchange(b) | (117 | ) | 135 |
| 252 |
| Total | $ | (134 | ) | $ | 147 |
| $ | 281 |
| | | | | | Derivatives gains/(losses) recorded in income and other comprehensive income/(loss) | Year ended December 31, 2016 (in millions) | Amounts reclassified from AOCI to income | Amounts recorded in OCI(c) | Total change in OCI for period | Contract type | | | | Interest rate(a) | $ | (74 | ) | $ | (55 | ) | $ | 19 |
| Foreign exchange(b) | (286 | ) | (395 | ) | (109 | ) | Total | $ | (360 | ) | $ | (450 | ) | $ | (90 | ) |
| | (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 and 2016. |
The Firm did not experience any forecasted transactions that failed to occur for the years ended 2018, 2017 2020, 2019 and 2016.2018.
Over the next 12 months, the Firm expects that approximately $(74) $818 million (after-tax) of net lossesgains recorded in AOCI at December 31, 2018, 2020, related to cash flow hedges will be recognized in income. For cash flow hedges that have been terminated, the maximum length of time over which the derivative results recorded in AOCI will be recognized in earnings is approximately sixnine 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 six seven years. The Firm’s longer-dated forecasted transactions relate to core lending and borrowing activities.
| | | | 194 | | JPMorgan Chase & Co./2018 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, 20182020, 2019 and 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | Year ended December 31, (in millions) | 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 | Foreign exchange derivatives | $(122) | $(1,408) | | $72 | $64 | | $11 | $1,219 |
(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. The Firm elects to record changes in fair value of these amounts directly in other income. (b)2017Excludes amounts reclassified from AOCI to income on the sale or liquidation of hedged entities. The Firm reclassified net pre-tax gains/(losses) of $3 million and $18 million to other income, and $(17) million to other expense related to the liquidation of certain legal entities during the years ended December 31, 2020, 2019 and 2018, respectively. Refer to Note 24 for further information. 2016.
| | | | | | | | | | | 2018 | | 2017 | | 2016 | Year ended December 31, (in millions) | Amounts recorded in income(a)(b) | Amounts recorded in OCI | | Amounts recorded in income(a)(b)(c) | Amounts recorded in OCI(d) | | Amounts recorded in income(a)(b)(c) | Amounts recorded in OCI(d) | Foreign exchange derivatives | $11 | $1,219 | | $(152) | $(1,244) | | $(280) | $262 |
| | | | | | | | | (a)208 | 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. The Firm elects to record changes in fair value of these amounts directly in other income. | JPMorgan Chase & Co./2020 Form 10-K |
| | (b) | Excludes amounts reclassified from AOCI to income on the sale or liquidation of hedged entities. For additional information, refer to Note 23. |
| | (c) | The prior period amounts have been revised to conform with the current period presentation. |
| | (d) | Represents the effective portion of changes in value of the related hedging derivative. The Firm did not recognize any ineffectiveness on net investment hedges directly in income during 2017 and 2016. |
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. | | | | | | | | | | | | | | | | | | | Derivatives gains/(losses) recorded in income | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Contract type | | | | | | Interest rate(a) | $ | 2,994 | | | $ | 1,491 | | | $ | 79 | | Credit(b) | (176) | | | (30) | | | (21) | | Foreign exchange(c) | 43 | | | (5) | | | 117 | | Total | $ | 2,861 | | | $ | 1,456 | | | $ | 175 | |
(a)Primarily represents interest rate derivatives used to hedge the interest rate risk inherent in mortgage 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. | | | | | | | | | | | | | | | Derivatives gains/(losses) recorded in income | Year ended December 31, (in millions) | 2018 |
| | 2017 |
| | 2016 |
| | Contract type | | | | | | | Interest rate(a) | $ | 79 |
| | $ | 331 |
| | $ | 1,174 |
| | Credit(b) | (21 | ) | | (74 | ) | | (282 | ) | | Foreign exchange(c) | 117 |
| | (107 | ) | (d) | (20 | ) | (d) | Total | $ | 175 |
| | $ | 150 |
| (d) | $ | 872 |
| (d) |
| | (a) | Primarily represents interest rate derivatives used to hedge the interest rate risk inherent in the mortgage pipeline, 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) | The prior period amounts have been revised to conform with the current period presentation. |
(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. 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. Refer to Note 6 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./20182020 Form 10-K | | 195209 |
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, 20182020 and 2017. 2019. 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.
| | | | | | | | | 196210 | | JPMorgan Chase & Co./20182020 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 | | | | | | | | | Maximum payout/Notional amount | | Protection sold | | Protection purchased with identical underlyings(b) | Net protection (sold)/purchased(c) | Other protection purchased(d) | December 31, 2020 (in millions) | Credit derivatives | | | | | | | | Credit default swaps | $ | (535,094) | | | | $ | 554,565 | | | $ | 19,471 | | $ | 4,001 | | Other credit derivatives(a) | (40,084) | | | | 57,344 | | | 17,260 | | 9,415 | | Total credit derivatives | (575,178) | | | | 611,909 | | | 36,731 | | 13,416 | | Credit-related notes | 0 | | | | 0 | | | 0 | | 10,248 | | Total | $ | (575,178) | | | | $ | 611,909 | | | $ | 36,731 | | $ | 23,664 | | | | | | | | | | | 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) | (50,395) | | (e) | | 46,541 | | (e) | (3,854) | | 7,364 | | Total credit derivatives | (612,733) | | | | 618,433 | | | 5,700 | | 11,300 | | Credit-related notes | 0 | | | | 0 | | | 0 | | 9,606 | | Total | $ | (612,733) | | | | $ | 618,433 | | | $ | 5,700 | | $ | 20,906 | |
(a)Other credit derivatives predominantly consist of credit swap options and total return swaps. | | | | | | | | | | | | | | | | | 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, 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 |
|
(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. | | (a) | Other credit derivatives largely consists of credit swap options. |
| | (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. |
(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. (e)Prior-period amounts have been revised to conform with the current presentation. 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, 20182020 and 2017, 2019, 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 | | | | | December 31, 2020 (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 | $ | (93,905) | | | $ | (307,648) | | | $ | (35,326) | | | $ | (436,879) | | | $ | 5,521 | | | $ | (835) | | | $ | 4,686 | | Noninvestment-grade | (31,809) | | | (97,337) | | | (9,153) | | | (138,299) | | | 3,953 | | | (2,542) | | | 1,411 | | Total | $ | (125,714) | | | $ | (404,985) | | | $ | (44,479) | | | $ | (575,178) | | | $ | 9,474 | | | $ | (3,377) | | | $ | 6,097 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2019 (in millions) | <1 year(c) | | 1–5 years | | >5 years | | Total notional amount | | Fair value of receivables(b)(c) | | Fair value of payables(b)(c) | | Net fair value | Risk rating of reference entity | | | | | | | | | | | | | | Investment-grade | $ | (119,788) | | | $ | (311,407) | | | $ | (42,129) | | | $ | (473,324) | | | $ | 6,168 | | | $ | (901) | | | $ | 5,267 | | Noninvestment-grade | (41,799) | | | (87,769) | | | (9,841) | | | (139,409) | | | 4,287 | | | (2,817) | | | 1,470 | | Total | $ | (161,587) | | | $ | (399,176) | | | $ | (51,970) | | | $ | (612,733) | | | $ | 10,455 | | | $ | (3,718) | | | $ | 6,737 | |
(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 including cash collateral netting. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Protection sold – credit derivatives and credit-related notes ratings(a)/maturity profile | | | | | 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 | $ | (115,443 | ) | | $ | (402,325 | ) | | $ | (43,611 | ) | | $ | (561,379 | ) | | $ | 5,720 |
| | $ | (2,791 | ) | | $ | 2,929 |
| Noninvestment-grade | (45,897 | ) | | (119,348 | ) | | (11,840 | ) | | (177,085 | ) | | 4,719 |
| | (5,660 | ) | | (941 | ) | Total | $ | (161,340 | ) | | $ | (521,673 | ) | | $ | (55,451 | ) | | $ | (738,464 | ) | | $ | 10,439 |
| | $ | (8,451 | ) | | $ | 1,988 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | Risk rating of reference entity | | | | | | | | | | | | | | Investment-grade | $ | (159,286 | ) | | $ | (319,726 | ) | | $ | (39,429 | ) | | $ | (518,441 | ) | | $ | 8,516 |
| | $ | (1,134 | ) | | $ | 7,382 |
| Noninvestment-grade | (73,394 | ) | | (134,125 | ) | | (18,439 | ) | | (225,958 | ) | | 7,407 |
| | (5,313 | ) | | 2,094 |
| Total | $ | (232,680 | ) | | $ | (453,851 | ) | | $ | (57,868 | ) | | $ | (744,399 | ) | | $ | 15,923 |
| | $ | (6,447 | ) | | $ | 9,476 |
|
| | (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. |
(c)Prior-period amounts have been revised to conform with the current presentation.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 197211 |
Notes to consolidated financial statements
Note 6 – Noninterest revenue and noninterest expense Noninterest revenue The Firm records noninterest revenue from certain contracts with customers under ASC 606, 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.Revenue from Contracts with Customers 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., in investment banking fees, deposit-related fees, asset management, administration, and commissions, and components of card income. Contracts in the scope of ASC 606 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. The adoption of the revenue recognition guidance in the first quarter of 2018, required gross presentation of certain costs previously offset against revenue, predominantly associated with certain distribution costs (previously offset against asset management, administration and commissions), with the remainder associated with certain underwriting costs (previously offset against investment banking fees). Adoption of the guidance did not result in any material changes in the timing of revenue recognition. This guidance was adopted retrospectively and, accordingly, prior period amounts were revised, which resulted in an increase in both noninterest revenue and noninterest expense. The Firm did not apply any practical expedients. For additional information, refer to Note 1.
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 and equity 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) | 2018 | | 2017 | | 2016 | Underwriting | | | | | | Equity | $ | 1,684 |
| | $ | 1,466 |
| | $ | 1,200 |
| Debt | 3,347 |
| | 3,802 |
| | 3,277 |
| Total underwriting | 5,031 |
| | 5,268 |
| | 4,477 |
| Advisory | 2,519 |
| | 2,144 |
| | 2,095 |
| Total investment banking fees | $ | 7,550 |
| | $ | 7,412 |
| | $ | 6,572 |
|
The following table presents the components of investment banking fees.
| | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Underwriting | | | | | | Equity | $ | 2,759 | | | $ | 1,648 | | | $ | 1,684 | | Debt | 4,362 | | | 3,513 | | | 3,347 | | Total underwriting | 7,121 | | | 5,161 | | | 5,031 | | Advisory | 2,365 | | | 2,340 | | | 2,519 | | Total investment banking fees | $ | 9,486 | | | $ | 7,501 | | | $ | 7,550 | |
Investment banking fees are earned primarily by CIB. Refer to Note 3132 for segment results. Principal transactions Principal transactions revenue is driven by many factors, including 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 Firmis willing to buy a financial or other instrument and the price at which another market participant is willing and able to buy it from the Firm, and vice versa; and •is willing to sell that instrument. It also consists ofrealized and unrealized gains and losses on financial instruments and commodities transactions, including those accounted for under the realized (as afair value option, primarily used in client-driven market-making activities, and on private equity investments. –Realized gains and losses result offrom the sale of instruments, closing out or termination of transactions, or interim cash payments) and unrealized (as a result of changes in valuation)payments. –Unrealized gains and losses on financial and other instruments (including those accounted for under the fair value option) primarily usedresult from changes in client-driven market-making activities and on private equity investments. 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) certain to: •derivatives designated in qualifying hedge accounting relationships, (primarilyprimarily fair value hedges of commodity and foreign exchange risk), (b) certain risk; •derivatives used for specific risk management purposes, primarily to mitigate credit riskand foreign exchange risk, and (c) other derivatives. Forrisk. Refer to Note 5 for further information on the income statement classification of gains and losses from derivatives activities, refer to 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.activities 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.
| | | | | | | | | 198212 | | JPMorgan Chase & Co./20182020 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | | Trading revenue by instrument type | | | | | | | Interest rate(a) | $ | 2,575 | | | $ | 2,739 | | (c) | $ | 1,844 | | (c) | Credit(b) | 2,753 | | | 1,628 | | (c) | 1,625 | | (c) | Foreign exchange | 4,253 | | | 3,179 | | (c) | 3,222 | | (c) | Equity | 6,171 | | | 5,589 | | (c) | 4,822 | | (c) | Commodity | 2,088 | | | 1,133 | | (c) | 895 | | (c) | Total trading revenue | 17,840 | | | 14,268 | | | 12,408 | | | Private equity gains/ (losses) | 181 | | | (250) | | | (349) | | | Principal transactions | $ | 18,021 | | | $ | 14,018 | | | $ | 12,059 | | |
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | Trading revenue by instrument type | | | | | | Interest rate | $ | 1,961 |
| | $ | 2,479 |
| | $ | 2,325 |
| Credit | 1,395 |
| | 1,329 |
| | 2,096 |
| Foreign exchange | 3,222 |
| | 2,746 |
| | 2,827 |
| Equity | 4,924 |
| | 3,873 |
| | 2,994 |
| Commodity | 906 |
| | 661 |
| | 1,067 |
| Total trading revenue | 12,408 |
| | 11,088 |
| | 11,309 |
| Private equity gains | (349 | ) | | 259 |
| | 257 |
| Principal transactions | $ | 12,059 |
| | $ | 11,347 |
| | $ | 11,566 |
|
(a)Includes the impact of changes in funding valuation adjustments on derivatives.
(b)Includes the impact of changes in credit valuation adjustments on derivatives, net of the associated hedging activities.
(c)The prior-period amounts have been revised to conform with the current presentation. Principal transactions revenue is earned primarily by CIB. Refer 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,from providing overdraft and fees earnedother deposit account services, and from performing cash management activities and other deposit account services.activities. Lending- and deposit-related fees in this revenue category are recognized over the period in which the related service is provided. The following table presents the components of lending- and deposit-related fees. | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Lending-related fees | $ | 1,271 | | | $ | 1,184 | | | $ | 1,117 | | Deposit-related fees(a) | 5,240 | | | 5,442 | | | 5,260 | | Total lending- and deposit-related fees | $ | 6,511 | | | $ | 6,626 | | | $ | 6,377 | |
(a) | | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | Lending-related fees | $ | 1,117 |
| | $ | 1,110 |
| | $ | 1,114 |
| Deposit-related fees | 4,935 |
| | 4,823 |
| | 4,660 |
| Total lending- and deposit-related fees | $ | 6,052 |
| | $ | 5,933 |
| | $ | 5,774 |
|
In the first quarter of 2020, the Firm reclassified certain fees from asset management, administration and commissions to lending- and deposit-related fees. Prior-period amounts have been revised to conform with the current presentation. Lending- and deposit-related fees are earned by CCB, CIB, CB, and AWM. Refer to Note 3132 for segment results. 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. The following table presents the components of Firmwide asset management, administration and commissions. | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Asset management fees | | | | | | Investment management fees(a) | $ | 11,694 | | | $ | 10,865 | | | $ | 10,768 | | All other asset management fees(b) | 338 | | | 315 | | | 270 | | Total asset management fees | 12,032 | | | 11,180 | | | 11,038 | | | | | | | | Total administration fees(c) | 2,249 | | | 2,197 | | | 2,179 | | | | | | | | Commissions and other fees | | | | | | Brokerage commissions(d) | 2,959 | | | 2,439 | | | 2,505 | | All other commissions and fees(e) | 937 | | | 1,092 | | | 1,071 | | Total commissions and fees | 3,896 | | | 3,531 | | | 3,576 | | Total asset management, administration and commissions | $ | 18,177 | | | $ | 16,908 | | | $ | 16,793 | |
(a)Represents 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, such 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. (c)Predominantly includes fees for custody, securities lending, funds services and securities clearance. These fees are recorded as revenue over the period in which the related service is provided. | | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | Asset management fees | | | | | | Investment management fees(a) | $ | 10,768 |
| | $ | 10,434 |
| | $ | 9,636 |
| All other asset management fees(b) | 270 |
| | 296 |
| | 338 |
| Total asset management fees | 11,038 |
| | 10,730 |
| | 9,974 |
| | | | | | | Total administration fees(c) | 2,179 |
| | 2,029 |
| | 1,915 |
| | | | | | | Commissions and other fees | | | | | | Brokerage commissions(d) | 2,505 |
| | 2,239 |
| | 2,151 |
| All other commissions and fees | 1,396 |
| | 1,289 |
| | 1,324 |
| Total commissions and fees | 3,901 |
| | 3,528 |
| | 3,475 |
| Total asset management, administration and commissions | $ | 17,118 |
| | $ | 16,287 |
| | $ | 15,364 |
|
(d)Represents commissions earned when the Firm acts as a broker, by facilitating its clients’ purchases and sales of securities and other financial instruments. Brokerage commissions are collected and recognized 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.(e)In the first quarter of 2020, the Firm reclassified certain fees from asset management, administration and commissions to lending- and deposit-related fees. Prior-period amounts have been revised to conform with the current presentation. | | (a) | Represents 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) | The Firm receives other asset management fees for services that are ancillary to investment management services, including commissions earned on 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. |
| | (c) | The Firm receives administrative fees predominantly from custody, securities lending, fund services and securities clearance services it provides. These fees are recorded as revenue over the period in which the related service is provided. |
| | (d) | The Firm acts as a broker, by facilitating its clients’ purchases and sales of securities and other financial instruments. Brokerage commissions are collected and recognized 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.CCB. Refer 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 includes fees and income recognized as earned on mortgage loans originated with the intent to sell;sell, and the impact of risk management activities associated with the mortgage pipeline and warehouse loans; and changes in the fair value of any residual interests held from mortgage securitizations.loans. Net production revenue also includes gains and losses on sales of mortgage loans,and lower of cost or fair value adjustments on mortgage loans held-for-sale (excluding certain repurchased loans insured by U.S. government agencies), and changes in the fair value on mortgage loans originated with the intent to sell andof financial instruments measured at fair value under the fair value option, as well as losses recognized as incurred relatedoption. Net mortgage | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 213 |
Notes to the repurchase of previously sold loans.consolidated financial statements 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,provided; changes in the fair value of MSRs andMSRs; the impact of risk management activities associated with MSRs.MSRs; and gains 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. ForRefer to Note 15 for further discussion ofinformation on risk management activities and MSRs, refer to Note 15.MSRs.
Net interest income from mortgage loans is recorded in interest income.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 199 |
Notes to consolidated financial statements
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 fees, 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. The Firm typically makes payments to the co-brand credit card partners based on the cost of 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 marketing 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 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) | 2020 | | 2019 | | 2018 | | Interchange and merchant processing income | $ | 18,563 | | | $ | 20,370 | | | $ | 18,808 | | | Reward costs and partner payments(a) | (13,637) | | | (14,540) | | | (13,320) | | (c) | Other card income(b) | (491) | | | (754) | | | (745) | | | Total card income | $ | 4,435 | | | $ | 5,076 | | | $ | 4,743 | | |
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | Interchange and merchant processing income | $ | 18,808 |
| | $ | 17,080 |
| | $ | 15,367 |
| Reward costs and partner payments | (13,074 | ) | (b) | (10,820 | ) | | (9,480 | ) | Other card income(a) | (745 | ) | | (1,827 | ) | | (1,108 | ) | Total card income | $ | 4,989 |
| | $ | 4,433 |
| | $ | 4,779 |
|
| | (a) | Predominantly represents annual fees and new account origination costs, which are deferred and recognized on a straight-line basis over a 12-month periodand are outside the scope of the revenue recognition guidance, ASC 606, Revenue from Contracts with Customers. In the second quarter of 2020, the Firm reclassified certain spend-based credit card reward costs from marketing expense to be a reduction of card income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation.
(b)Predominantly represents the amortization of account origination costs and annual fees, which are deferred and recognized on a straight-line basis over a 12-month period. (c)Includes an adjustment to the credit card rewards liability of approximately $330 million, recorded in the second quarter of 2018. |
| | (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, CIB and CB. Refer to Note 3132 for segment results. Other income
Other incomeRefer to Note 18 for information on the Firm’s Consolidated statements of operating lease income included the following:
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | Operating lease income | $ | 4,540 |
| | $ | 3,613 |
| | $ | 2,724 |
|
Operating lease income is recognized on a straight–line basis over the lease term.within other income.
Noninterest expense Other expense Other expense on the Firm’s Consolidated statements of income included the following: | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Legal expense/(benefit) | $ | 1,115 | | | $ | 239 | | | $ | 72 | | FDIC-related expense | 717 | | | 457 | | | 1,239 | |
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 |
| | 2017 |
| | 2016 |
| Legal expense/(benefit) | $ | 72 |
| | $ | (35 | ) | | $ | (317 | ) | FDIC-related expense | 1,239 |
| | 1,492 |
| | 1,296 |
|
| | | | | | | | | 200214 | | JPMorgan Chase & Co./20182020 Form 10-K |
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) | 2020 | 2019 | 2018 | Interest income | | | | Loans(a)(b) | $ | 43,758 | | $ | 51,855 | | $ | 49,032 | | Taxable securities | 7,843 | | 7,962 | | 5,653 | | Non-taxable securities(c) | 1,184 | | 1,329 | | 1,595 | | Total investment securities(a) | 9,027 | | 9,291 | | 7,248 | | Trading assets - debt instruments(b) | 7,832 | | 9,141 | | 7,146 | | Federal funds sold and securities purchased under resale agreements | 2,436 | | 6,146 | | 3,819 | | Securities borrowed(d) | (302) | | 1,574 | | 913 | | Deposits with banks | 749 | | 3,887 | | 5,907 | | All other interest-earning assets(b)(e) | 1,023 | | 2,146 | | 2,035 | | Total interest income | $ | 64,523 | | $ | 84,040 | | $ | 76,100 | | Interest expense | | | | Interest bearing deposits | $ | 2,357 | | $ | 8,957 | | $ | 5,973 | | Federal funds purchased and securities loaned or sold under repurchase agreements | 1,058 | | 4,630 | | 3,066 | | Short-term borrowings(f) | 372 | | 1,248 | | 1,144 | | Trading liabilities - debt and all other interest-bearing liabilities(d)(g) | 195 | | 2,585 | | 2,387 | | Long-term debt | 5,764 | | 8,807 | | 7,978 | | Beneficial interest issued by consolidated VIEs | 214 | | 568 | | 493 | | Total interest expense | $ | 9,960 | | $ | 26,795 | | $ | 21,041 | | Net interest income | $ | 54,563 | | $ | 57,245 | | $ | 55,059 | | Provision for credit losses | 17,480 | | 5,585 | | 4,871 | | Net interest income after provision for credit losses | $ | 37,083 | | $ | 51,660 | | $ | 50,188 | |
(a)Includes the amortization/accretion of unearned income (e.g., purchase premiums/discounts, net deferred fees/costs, and others). (b)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation. (c)Represents securities that are tax-exempt for U.S. federal income tax purposes. (d)Negative interest income is related to the impact of current interest rates combined with the fees paid on client-driven securities borrowed balances. The negative interest expense related to prime brokerage customer payables is recognized in interest expense and reported within trading liabilities - debt and all other interest-bearing liabilities. (e)Includes interest earned on brokerage-related held-for-investment customer receivables, which are classified in accrued interest and accounts receivable, and all other interest-earning assets, which are classified in other assets on the Consolidated balance sheets. (f)Includes commercial paper. (g)All other interest-bearing liabilities includes interest expense on brokerage-related customer payables.
| | | | | | | | | | | Year ended December 31, (in millions) | 2018 | 2017 | 2016 | Interest income | | | | Loans(a) | $ | 47,620 |
| $ | 41,008 |
| $ | 36,634 |
| Taxable securities | 5,653 |
| 5,535 |
| 5,538 |
| Non-taxable securities(b) | 1,595 |
| 1,847 |
| 1,766 |
| Total investment securities | 7,248 |
| 7,382 |
| 7,304 |
| Trading assets | 8,703 |
| 7,610 |
| 7,292 |
| Federal funds sold and securities purchased under resale agreements | 3,819 |
| 2,327 |
| 2,265 |
| Securities borrowed(c) | 728 |
| (37 | ) | (332 | ) | Deposits with banks | 5,907 |
| 4,238 |
| 1,879 |
| All other interest-earning assets(d) | 3,417 |
| 1,844 |
| 859 |
| Total interest income | $ | 77,442 |
| $ | 64,372 |
| $ | 55,901 |
| Interest expense | | | | Interest bearing deposits | $ | 5,973 |
| $ | 2,857 |
| $ | 1,356 |
| Federal funds purchased and securities loaned or sold under repurchase agreements | 3,066 |
| 1,611 |
| 1,089 |
| Short-term borrowings(e) | 1,144 |
| 481 |
| 203 |
| Trading liabilities - debt and all other interest-bearing liabilities(f) | 3,729 |
| 2,070 |
| 1,102 |
| Long-term debt | 7,978 |
| 6,753 |
| 5,564 |
| Beneficial interest issued by consolidated VIEs | 493 |
| 503 |
| 504 |
| Total interest expense | $ | 22,383 |
| $ | 14,275 |
| $ | 9,818 |
| Net interest income | $ | 55,059 |
| $ | 50,097 |
| $ | 46,083 |
| Provision for credit losses | 4,871 |
| 5,290 |
| 5,361 |
| Net interest income after provision for credit losses | $ | 50,188 |
| $ | 44,807 |
| $ | 40,722 |
|
| | (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. |
| | (c) | Negative interest income 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. |
| | (d) | Includes held-for-investment margin loans, which are classified in accrued interest and accounts receivable, and all other interest-earning assets, which are classified in other assets on the Consolidated balance sheets. |
| | (e) | Includes commercial paper. |
| | (f) | Other interest-bearing liabilities include brokerage 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, refer to Notesrespectively. 12, 10, 11 and 19, respectively.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 201215 |
Notes to consolidated financial statements
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 in the U.S. and certain non-U.S. locations. The Firm also provides a qualified defined 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. In connection with changes who were hired prior to the U.S. Retirement Savings Program during the fourth quarter of 2018, theDecember 2, 2017. The Firm announced that it will freezehas frozen the U.S. defined benefit pension plan. Commencing onplan (the “Plan Freeze”). Effective as of January 1, 2020 (and January 1, 2019 for new hires), new pay credits will behave been directed to the U.S. defined contribution plan. Interest credits will continue to accrue.accrue on the U.S. defined benefit pension plan. As a result of the Plan Freeze, 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 resulted in an increase to pension expense of $21 million representing the immediate recognition of the prior service cost, but 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 not0t anticipate at this time making any contribution to the U.S. defined benefit pension plan in 2019.2021. The 20192021 contributions to the non-U.S. defined benefit pension plans are expected to be $45 $50 million, of which $30 $35 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 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 fair value of plan assets are recorded in other comprehensive income (“OCI”)OCI and recognized as part of the net periodic benefit cost over subsequent periods as discussed in the Gains and losses section of this Note. Additionally, income statement items related to pension and OPEB plans (other than benefits earned during the period)year are aggregated and reported in compensation expense; all other components of net withinperiodic defined benefit costs are reported in other expense. expense in the Consolidated statements of income.
| | | | | | | | | 202216 | | JPMorgan Chase & Co./20182020 Form 10-K |
The following table presents the pretax 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, andplans. | | | | | | | | | | | | | | As of or for the year ended December 31, | Defined benefit pension and OPEB plans | | (in millions) | 2020 | | 2019 | | | | | Change in projected and accumulated benefit obligations, U.S. defined benefit pension plans | | | | | | | | Benefit obligation, beginning of year | $ | (13,277) | | | $ | (12,173) | | | | | | Benefits earned during the year | (2) | | | (327) | | | | | | Interest cost on benefit obligations | (422) | | | (518) | | | | | | Plan amendments | 0 | | | (5) | | | | | | | | | | | | | | | | | | | | | | Net gain/(loss) | (1,086) | | | (944) | | | | | | Benefits paid | 640 | | | 690 | | | | | | | | | | | | | | Benefit obligations, end of year, U.S. defined benefit pension plans | $ | (14,147) | | | $ | (13,277) | | | | | | Benefit obligations, other defined benefit pension and OPEB plans | (4,990) | | | (4,428) | | | | | | Benefit obligations, end of year | $ | (19,137) | | | $ | (17,705) | | | | | | Change in plan assets, U.S. defined benefit pension plans | | | | | | | | Fair value of plan assets, beginning of year | $ | 16,329 | | | $ | 14,521 | | | | | | Actual return on plan assets | 1,901 | | | 2,465 | | | | | | Firm contributions | 29 | | | 33 | | | | | | | | | | | | | | Benefits paid | (640) | | | (690) | | | | | | | | | | | | | | Fair value of plan assets, end of year, U.S. defined benefit pension plans | $ | 17,619 | | | $ | 16,329 | | | | | | Fair value of plan assets, other defined benefit pension and OPEB plans | 7,798 | | | 7,037 | | | | | | Fair value of plan assets, end of year | $ | 25,417 | | | $ | 23,366 | | | | | | Net funded status, U.S. defined benefit pension plans | $ | 3,472 | | | $ | 3,052 | | | | | | Net funded status, other defined benefit pension and OPEB plans | 2,808 | | | 2,609 | | | | | | Net funded status | $ | 6,280 | | | $ | 5,661 | | | | | | Amounts recorded in accumulated other comprehensive income/(loss), U.S. defined benefit pension plans | | | | | | | | Net gain/(loss), U.S. defined benefit pension plans | $ | (1,558) | | | $ | (1,745) | | | | | | Prior service credit/(cost), U.S. defined benefit pension plans | (4) | | | (5) | | | | | | Accumulated other comprehensive income/(loss), end of year, U.S. defined benefit pension plans | $ | (1,562) | | | $ | (1,750) | | | | | | Accumulated other comprehensive income/(loss), other defined benefit pension and OPEB plans | (24) | | | (66) | | | | | | Accumulated other comprehensive income/(loss) | $ | (1,586) | | | $ | (1,816) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table presents the weighted-average actuarial annualized assumptions used to value the benefit obligations for the projected and accumulated postretirementU.S. defined benefit obligations.pension plans. | | | | | | | | | | | | | | | | | As of or for the year ended December 31, | Defined benefit pension plans | OPEB plans(h) | (in millions) | 2018 | | 2017 | | 2018 | | 2017 | Change in benefit obligation | | | | | | | | Benefit obligation, beginning of year | $ | (16,700 | ) | | $ | (15,594 | ) | | $ | (684 | ) | | $ | (708 | ) | Benefits earned during the year | (354 | ) | | (330 | ) | | — |
| | — |
| Interest cost on benefit obligations | (556 | ) | | (598 | ) | | (24 | ) | | (28 | ) | Plan amendments | (29 | ) | | — |
| | — |
| | — |
| Plan curtailment | 123 |
| | — |
| | — |
| | — |
| Employee contributions | (7 | ) | | (7 | ) | | (15 | ) | | (16 | ) | Net gain/(loss) | 938 |
| (g) | (721 | ) | (g) | 40 |
| | (4 | ) | Benefits paid | 873 |
| | 841 |
| | 69 |
| | 76 |
| Plan settlements | 15 |
| | 30 |
| | — |
| | — |
| Expected Medicare Part D subsidy receipts | NA |
| | NA |
| | — |
| | (1 | ) | Foreign exchange impact and other | 185 |
| | (321 | ) | | 2 |
| | (3 | ) | Benefit obligation, end of year(a) | $ | (15,512 | ) | | $ | (16,700 | ) | | $ | (612 | ) | | $ | (684 | ) | Change in plan assets | | | | | | | | Fair value of plan assets, beginning of year | $ | 19,603 |
| | $ | 17,703 |
| | $ | 2,757 |
| | $ | 1,956 |
| Actual return on plan assets | (548 | ) | | 2,356 |
| | (28 | ) | | 233 |
| Firm contributions | 75 |
| | 78 |
| | 2 |
| | 602 |
| Employee contributions | 7 |
| | 7 |
| | 15 |
| | — |
| Benefits paid | (873 | ) | | (841 | ) | | (113 | ) | | (34 | ) | Plan settlements | (15 | ) | | (30 | ) | | — |
| | — |
| Foreign exchange impact and other | (197 | ) | | 330 |
| | — |
| | — |
| Fair value of plan assets, end of year (a)(b)(c) | $ | 18,052 |
| | $ | 19,603 |
| | $ | 2,633 |
| | $ | 2,757 |
| Net funded status (d)(e) | $ | 2,540 |
|
| $ | 2,903 |
| | $ | 2,021 |
| | $ | 2,073 |
| Accumulated benefit obligation, end of year | $ | (15,494 | ) | | $ | (16,530 | ) | | NA |
| | NA |
| Pretax pension and OPEB amounts recorded in AOCI | Net gain/(loss) | $ | (3,134 | ) |
| $ | (2,800 | ) | | $ | 184 |
|
| $ | 271 |
| Prior service credit/(cost) | (23 | ) |
| 6 |
| | — |
|
| — |
| Accumulated other comprehensive income/(loss), pretax, end of year | $ | (3,157 | ) |
| $ | (2,794 | ) | | $ | 184 |
|
| $ | 271 |
| Weighted-average actuarial assumptions used to determine benefit obligations | Discount Rate (f) | 0.60 - 4.30 % |
| | 0.60 - 3.70 % |
| | 4.20 | % | | 3.70 | % | Rate of compensation increase (f) | 2.25 – 3.00 |
| | 2.25 – 3.00 |
| | NA |
| | NA | Interest crediting rate(f) | 1.81 - 4.90% |
| | 1.81 - 4.90% |
| | NA |
| | NA | Health care cost trend rate: | Assumed for next year | NA |
| | NA |
| | 5.00 |
| | 5.00 |
| Ultimate | NA |
| | NA |
| | 5.00 |
| | 5.00 |
| Year when rate will reach ultimate | NA |
| | NA |
| | 2019 | | 2018 |
| | (a) | At December 31, 2018 and 2017, included non-U.S. benefit obligations of $(3.3) billion and $(3.8) billion, and plan assets of $3.5 billion and $3.9 billion, respectively, predominantly in the U.K. |
| | (b) | At both December 31, 2018 and 2017, approximately $302 million of U.S. defined benefit pension plan assets included participation rights under participating annuity contracts. |
| | (c) | At December 31, 2018 and 2017, defined benefit pension plan amounts that were not measured at fair value included $340 million and $377 million, respectively, of accrued receivables, and $503 million and $587 million, respectively, of accrued liabilities, for U.S. plans. |
| | (d) | Represents plans with an aggregate overfunded balance of $5.1 billion and $5.6 billion at December 31, 2018 and 2017, respectively, and plans with an aggregate underfunded balance of $547 million and $612 million at December 31, 2018 and 2017, respectively. |
| | (e) | For pension plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation and fair value of plan assets was $1.3 billion and $762 million at December 31, 2018, respectively and $1.4 billion and $811 million at December 31, 2017, respectively. For pension plans with an accumulated benefit obligation exceeding plan assets, the accumulated benefit obligation and fair value of plan assets was $1.3 billion and $762 million at December 31, 2018, respectively, and $1.4 billion and $811 million at December 31, 2017, respectively. For OPEB plans with a projected benefit obligation exceeding plan assets, the projected benefit obligation was $26 million and $32 million at December 31, 2018 and December 31, 2017, respectively, they had no plan assets. |
| | (f) | For the U.S. defined benefit pension plans, the discount rate assumption is 4.30% and 3.70% for 2018 and 2017, respectively, and the rate of compensation increase and the interest crediting rate are 2.30% and 4.90%, respectively, for both 2018 and 2017. |
| | (g) | At December 31, 2018 and 2017, the gain/(loss) was primarily attributable to the change in the discount rate. |
| | (h) | Includes an unfunded postretirement benefit obligation of $26 million and $32 million at December 31, 2018 and 2017, respectively, for the U.K. plan. |
| | | | | | | | | | | | | | | U.S. defined benefit pension plans | | As of December 31, | 2020 | | 2019 | | | | | | Discount rate | 2.50% | | 3.30% | | | | | Rate of compensation increase | NA | | NA | | | | | Interest crediting rate | 4.65 | | 4.65 | | | | |
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 203 |
Notes to consolidated financial statements
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 periodexpected remaining lifetime of defined benefit pension plan participants, which for the U.S. defined benefit pension planplans is currently eight 37 years and for the non-U.S. defined benefit pension plans is the period appropriate for the affected plan. 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.Due to the curtailment of the principal U.S. defined benefit pension plan in 2018, all related prior service cost was recognized in the annual net periodic benefit cost. 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 gainsyears ended December 31, 2020 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,2019, the net gain or loss exceeds 10% ofwas primarily attributable to a market-driven increase in the greater of the accumulated postretirement benefit obligation or the market-relatedfair value of assets. Any excess net gain or loss is amortized overplan assets, predominantly offset by a decrease in 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 remaining to full eligibility age, which is currently one year.
discount rate.
| | | | | | | | | 204 | | JPMorgan Chase & Co./20182020 Form 10-K | | 217 |
Notes to 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, andplans. | | | | | | | | | | | | | | | | | Pension and OPEB plans | | | Year ended December 31, (in millions) | 2020 | 2019 | 2018 | | | | | Components of net periodic benefit cost, U.S. defined benefit pension plans | | | | | | | | Benefits earned during the year | $ | 2 | | $ | 327 | | $ | 323 | | | | | | Interest cost on benefit obligations | 422 | | 518 | | 478 | | | | | | Expected return on plan assets | (634) | | (776) | | (836) | | | | | | Amortization: | | | | | | | | Net (gain)/loss | 6 | | 147 | | 80 | | | | | | Prior service (credit)/cost | 0 | | 0 | | (21) | | | | | | | | | | | | | | Curtailment (gain)/loss | 0 | | 0 | | 21 | | | | | | | | | | | | | | | | | | | | | | Net periodic defined benefit plan cost/(credit), U.S. defined benefit pension plans | $ | (204) | | $ | 216 | | $ | 45 | | | | | | Other defined benefit pension and OPEB plans | (81) | | (72) | | (72) | | | | | | Total net periodic defined benefit plan cost/(credit) | $ | (285) | | $ | 144 | | $ | (27) | | | | | | Total defined contribution plans | 1,332 | | 952 | | 872 | | | | | | Total pension and OPEB cost included in noninterest expense | $ | 1,047 | | $ | 1,096 | | $ | 845 | | | | | | Changes recognized in other comprehensive income, U.S. defined benefit pension plans | | | | | Prior service (credit)/cost arising during the year | 0 | | 5 | | 0 | | | | | | Net (gain)/loss arising during the year | (181) | | (745) | | 453 | | | | | | Amortization of net (loss)/gain | (6) | | (147) | | (80) | | | | | | Amortization of prior service (cost)/credit | 0 | | 0 | | 21 | | | | | | Curtailment (loss)/gain | 0 | | 0 | | (21) | | | | | | | | | | | | | | | | | | | | | | Total recognized in other comprehensive income, U.S. defined benefit pension plans | $ | (187) | | $ | (887) | | $ | 373 | | | | | | Other defined benefit pension and OPEB plans | (27) | | (270) | | 77 | | | | | | Total recognized in other comprehensive income | $ | (214) | | $ | (1,157) | | $ | 450 | | | | | | Total recognized in net periodic defined benefit plan cost/(credit) and other comprehensive income | $ | (499) | | $ | (1,013) | | $ | 423 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table presents the weighted-average annualized actuarial assumptions forused to determine the net periodic benefit cost.costs for the U.S. defined benefit pension plans. | | | | | | | | | | | | | | | | | | | U.S. defined benefit pension plans | | | Year ended December 31, (in millions) | 2020 | 2019 | 2018 | | | | | | | | | | Discount rate | 3.30% | 4.30% | 3.70 / 4.50% | | | | | Expected long-term rate of return on plan assets | 4.00 | 5.50 | 5.50 | | | | | Rate of compensation increase | NA | 2.30 | 2.30 | | | | | Interest crediting rate | 4.65 | 4.90 | 4.90 | | | | |
| | | | | | | | | | | | | | | | | | | | | | Pension plans | | OPEB plans | Year ended December 31, (in millions) | 2018 |
| 2017 |
| 2016 |
| | 2018 |
| 2017 |
| 2016 |
| Components of net periodic benefit cost | | | | | | | | Benefits earned during the year | $ | 354 |
| $ | 330 |
| $ | 332 |
| | $ | — |
| $ | — |
| $ | — |
| Interest cost on benefit obligations | 556 |
| 598 |
| 629 |
| | 24 |
| 28 |
| 31 |
| Expected return on plan assets | (981 | ) | (968 | ) | (1,030 | ) | | (103 | ) | (97 | ) | (105 | ) | Amortization: | | | | | | | | Net (gain)/loss | 103 |
| 250 |
| 257 |
| | — |
| — |
| — |
| Prior service cost/(credit) | (23 | ) | (36 | ) | (36 | ) | | — |
| — |
| — |
| Curtailment (gain)/loss | 21 |
| — |
| — |
| | — |
| — |
| — |
| Settlement (gain)/loss | 2 |
| 2 |
| 4 |
| | — |
| — |
| — |
| Net periodic defined benefit cost(a) | $ | 32 |
| $ | 176 |
| $ | 156 |
| | $ | (79 | ) | $ | (69 | ) | $ | (74 | ) | Other defined benefit pension plans(b) | 20 |
| 24 |
| 25 |
| | NA |
| NA |
| NA |
| Total defined benefit plans | $ | 52 |
| $ | 200 |
| $ | 181 |
| | $ | (79 | ) | $ | (69 | ) | $ | (74 | ) | Total defined contribution plans | 872 |
| 814 |
| 789 |
| | NA |
| NA |
| NA |
| Total pension and OPEB cost included in noninterest expense | $ | 924 |
| $ | 1,014 |
| $ | 970 |
| | $ | (79 | ) | $ | (69 | ) | $ | (74 | ) | Changes in plan assets and benefit obligations recognized in other comprehensive income | | | | | Prior service (credit)/cost arising during the year | 29 |
| — |
| — |
| | — |
| — |
| — |
| Net (gain)/loss arising during the year | 467 |
| (669 | ) | 395 |
| | 91 |
| (133 | ) | (29 | ) | Amortization of net loss | (103 | ) | (250 | ) | (257 | ) | | — |
| — |
| — |
| Amortization of prior service (cost)/credit | 23 |
| 36 |
| 36 |
| | — |
| — |
| — |
| Curtailment gain/(loss) | (21 | ) | — |
| — |
| | — |
| — |
| — |
| Settlement gain/(loss) | (2 | ) | (2 | ) | (4 | ) | | — |
| — |
| — |
| Foreign exchange impact and other | (30 | ) | 54 |
| (77 | ) | | (4 | ) | — |
| — |
| Total recognized in other comprehensive income | $ | 363 |
| $ | (831 | ) | $ | 93 |
| | $ | 87 |
| $ | (133 | ) | $ | (29 | ) | Total recognized in net periodic benefit cost and other comprehensive income | $ | 395 |
| $ | (655 | ) | $ | 249 |
| | $ | 8 |
| $ | (202 | ) | $ | (103 | ) | Weighted-average assumptions used to determine net periodic benefit costs | | | | | Discount rate(c) | 0.60 - 4.50 % |
| 0.60 - 4.30 % |
| 0.90 – 4.50% |
| | 3.70 | % | 4.20 | % | 4.40 | % | Expected long-term rate of return on plan assets (c) | 0.70 - 5.50 | 0.70 - 6.00 | 0.80 – 6.50 | | 4.00 |
| 5.00 |
| 5.75 |
| Rate of compensation increase (c) | 2.25 - 3.00 | 2.25 - 3.00 | 2.25 – 4.30 | | NA |
| NA |
| NA |
| Interest crediting rate(c) | 1.81- 4.90% |
| 1.81- 4.90% |
| 1.56- 4.90% |
| | NA |
| NA |
| NA |
| Health care cost trend rate | | | | | | | | Assumed for next year | NA |
| NA |
| NA |
| | 5.00 |
| 5.00 |
| 5.50 |
| Ultimate | NA |
| NA |
| NA |
| | 5.00 |
| 5.00 |
| 5.00 |
| Year when rate will reach ultimate | NA |
| NA |
| NA |
| | 2018 | 2017 | 2017 |
| | (a) | Effective January 1, 2018, 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. |
| | (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 is 2.30% for both 2018 and 2017, and 3.50% for 2016. |
Plan assumptions 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 plan 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, 2018,2020, the Firm increaseddecreased the discount rates used to determine its benefit obligations for the U.S. defined benefit pension and OPEB plans in light of curr
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 205 |
Notes to consolidated financial statements
entcurrent market interest rates, which willis expected to decrease expense by approximately $20 $64 million in 2019. 2021. The 20192021 expected long-term rate of return on U.S. defined benefit pension plan assets and U.S. OPEB plan assets are 5.50% and 4.30%, respectively. As of December 31, 2018, the interest crediting rate assumption was 4.90% is 3.00%.
The following table represents the effect of a 25-basis point decline in the two listed rates below on estimated 2019 defined benefit pensionexpected long-term rate of return of 3.00% and OPEB plan expense, as well as the effect on the postretirement benefit obligations.discount rate of 2.50%. | Effect on U.S. defined benefit pension plans | | Effect on U.S. defined benefit pension plans | (in millions) | | (in millions) | Pension expense | | Benefit obligation | | Expected long-term rate of return | | Expected long-term rate of return | $ | 43 | | | NA | Discount rate | | Discount rate | (20) | | | 404 | | | |
(in millions) | Defined benefit pension and OPEB plan expense | | Benefit obligation | | Expected long-term rate of return | $ | 51 |
| | NA |
| | Discount rate | $ | 50 |
| | $ | 490 |
| |
| | | | | | | | | 218 | | JPMorgan Chase & Co./2020 Form 10-K |
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. The trust-owned assets of the Firm’s U.S. OPEB plan are invested primarily in fixed income securities. COLI policies used to partially defray the cost of the Firm’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 each plan using a global portfolio of various asset classes diversified by market segment, economic sector, and issuer.plan. 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 could impact the portfolios, which are rebalanced when deemed necessary.
Investments held by the Firm’s defined benefit pension and OPEB 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 collective investment funds and/or registered investment companies are further diversified into various financial instruments. As of December 31, 2018,2020, assets held by the Firm’s defined benefit pension and OPEB plans do not include securities issued by JPMorgan 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 defined benefit pension and OPEB plans hold investments in funds that are sponsored or managed by affiliates of JPMorgan Chase in the amount of $3.7 $2.7 billion and $6.0 $3.1 billion,, as of December 31, 2018 2020 and 2017, 2019, respectively.
| | | | 206 | | JPMorgan Chase & Co./2018 Form 10-K |
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. | | | | | | | | | | | | | | | | | | | | | | | | | | | U.S. defined benefit pension plan(c) | | | | Asset | | % of plan assets | | | | | December 31, | Allocation | | 2020 | | 2019 | | | | | | | Asset class | | | | | | | | | | | Debt securities(a) | 42-100% | | 77 | % | | 74 | % | | | | | | | Equity securities | 0-40 | | 15 | | | 16 | | | | | | | | Real estate | 0-4 | | 1 | | | 1 | | | | | | | | Alternatives(b) | 0-15 | | 7 | | | 9 | | | | | | | | Total | 100 | % | | 100 | % | | 100 | % | | | | | | |
(a)Debt securities primarily includes cash and cash equivalents, corporate debt, U.S. federal, state, local and non-U.S. government, asset-backed and mortgage-backed securities. (b)Alternatives primarily include limited partnerships. (c)Represents the U.S. defined benefit pension plan only as it is the most significant plan. The other U.S. defined benefit pension plans are unfunded. The weighted-average asset allocation for the U.S. OPEB plan was 59% debt securities and 41% equity securities and 60% debt securities and 40% equity securities at December 31, 2020 and 2019, respectively.
| | | | | | | | | | | | | | | | | | | Defined benefit pension plans(a) | OPEB plan(d) | | Asset | | % of plan assets | | Asset | | % of plan assets | December 31, | Allocation | | 2018 | | 2017 | | Allocation | | 2018 | | 2017 | Asset class | | | | | | | | | | | Debt securities(b) | 27-100% |
| | 48 | % | | 42 | % | | 30-70% |
| | 61 | % | | 61 | % | Equity securities | 10-45 |
| | 37 |
| | 42 |
| | 30-70 |
| | 39 |
| | 39 |
| Real estate | 0-10 |
| | 2 |
| | 3 |
| | — |
| | — |
| | — |
| Alternatives (c) | 0-35 |
| | 13 |
| | 13 |
| | — |
| | — |
| | — |
| Total | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
| | | | | | | | | (a)JPMorgan Chase & Co./2020 Form 10-K | Represents the U.S. defined benefit pension plan only, as that is the most significant plan. | 219 |
| | (b) | Debt securities primarily includes cash and cash equivalents, corporate debt, U.S. federal, state, local and non-U.S. government, and mortgage-backed securities. |
| | (c) | Alternatives primarily include limited partnerships. |
| | (d) | Represents the U.S. OPEB plan only, as the U.K. OPEB plan is unfunded. |
Notes to consolidated financial statements 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension plan assets and liabilities measured at fair value | | | | | | | | | | Defined benefit pension and OPEB plans | | 2020 | | 2019 | December 31, (in millions) | Level 1 | | Level 2 | | Level 3 | | Total fair value | | Level 1 | | Level 2 | | Level 3 | | Total fair value | | | | | | | | | | | | | | | | | Equity securities | $ | 2,353 | | | $ | 0 | | | $ | 2 | | | $ | 2,355 | | | $ | 2,259 | | | $ | 3 | | | $ | 2 | | | $ | 2,264 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate debt securities | 0 | | | 7,414 | | | 11 | | | 7,425 | | | 0 | | | 6,474 | | | 2 | | | 6,476 | | U.S. federal, state, local and non-U.S. government debt securities | 1,395 | | | 360 | | | 0 | | | 1,755 | | | 1,616 | | | 401 | | | 0 | | | 2,017 | | Mortgage-backed securities | 461 | | | 1,184 | | | 31 | | | 1,676 | | | 312 | | | 681 | | | 4 | | | 997 | | | | | | | | | | | | | | | | | | Other(a) | 788 | | | 861 | | | 201 | | | 1,850 | | | 718 | | | 49 | | | 250 | | | 1,017 | | U.S. defined benefit pension plans(b) | $ | 4,997 | | | $ | 9,819 | | | $ | 245 | | | $ | 15,061 | | | $ | 4,905 | | | $ | 7,608 | | | $ | 258 | | | $ | 12,771 | | Other defined benefit pension and OPEB plans(c) | 2,034 | | | 2,565 | | | 2,707 | | | 7,306 | | | 1,834 | | | 2,307 | | | 2,431 | | | 6,572 | | Total assets measured at fair value | $ | 7,031 | | | $ | 12,384 | | | $ | 2,952 | | | $ | 22,367 | | | $ | 6,739 | | | $ | 9,915 | | | $ | 2,689 | | | $ | 19,343 | |
(a) the Firm, refer to Note 2.Other consists primarily of mutual funds, money market funds and participating annuity contracts. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pension and OPEB plan assets and liabilities measured at fair value | | | | | | | | | | Defined benefit pension plans | | 2018 | | 2017 | 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 | $ | 343 |
| | $ | 1 |
| | $ | — |
| | $ | 344 |
| | $ | 173 |
| | $ | 1 |
| | $ | — |
| | $ | 174 |
| Equity securities | 5,342 |
| | 162 |
| | 2 |
| | 5,506 |
| | 6,407 |
| | 194 |
| | 2 |
| | 6,603 |
| Mutual funds | — |
| | — |
| | — |
| | — |
| | 325 |
| | — |
| | — |
| | 325 |
| Collective investment funds(a) | 161 |
| | — |
| | — |
| | 161 |
| | 778 |
| | — |
| | — |
| | 778 |
| Limited partnerships(b) | 40 |
| | — |
| | — |
| | 40 |
| | 60 |
| | — |
| | — |
| | 60 |
| Corporate debt securities(c) | — |
| | 3,540 |
| | 3 |
| | 3,543 |
| | — |
| | 2,644 |
| | 4 |
| | 2,648 |
| U.S. federal, state, local and non-U.S. government debt securities | 1,191 |
| | 743 |
| | — |
| | 1,934 |
| | 1,096 |
| | 784 |
| | — |
| | 1,880 |
| Mortgage-backed securities | 82 |
| | 272 |
| | 3 |
| | 357 |
| | 92 |
| | 100 |
| | 2 |
| | 194 |
| Derivative receivables | — |
| | 143 |
| | — |
| | 143 |
| | — |
| | 203 |
| | — |
| | 203 |
| Other(d) | 885 |
| | 80 |
| | 302 |
| | 1,267 |
| | 2,353 |
| | 60 |
| | 302 |
| | 2,715 |
| Total assets measured at fair value(e) | $ | 8,044 |
| | $ | 4,941 |
| | $ | 310 |
| | $ | 13,295 |
| | $ | 11,284 |
| | $ | 3,986 |
| | $ | 310 |
| | $ | 15,580 |
| Derivative payables | $ | — |
| | $ | (96 | ) | | $ | — |
| | $ | (96 | ) | | $ | — |
| | $ | (141 | ) | | $ | — |
| | $ | (141 | ) | Total liabilities measured at fair value(e) | $ | — |
| | $ | (96 | ) | | $ | — |
| | $ | (96 | ) | | $ | — |
| | $ | (141 | ) | | $ | — |
| | $ | (141 | ) |
(b) | | (a) | At December 31, 2018 and 2017, collective investment funds primarily included a mix of short-term investment funds, U.S. and non-U.S. equity investments (including index) and real estate funds. |
| | (b) | Unfunded commitments to purchase limited partnership investments for the plans were $521 million and $605 million for 2018 and 2017, 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. Mutual 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, 2018 and 2017, excludes $5.0 billion and $4.4 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, $340 million and $377 million of defined benefit pension plan receivables for investments sold and dividends and interest receivables, $479 million and $561 million of defined benefit pension plan payables for investments purchased, and $24 million and $26 million of other liabilities, respectively. |
The assetsAt December 31, 2020 and 2019, excludes $3.2 billion and $3.9 billion, respectively, of certain investments that are measured at fair value using the U.S. OPEB plan consisted of $561net asset value per share (or its equivalent) as a practical expedient, and $606 million and $600$343 million, in corporate debt securities, U.S. federal, state, localrespectively, of net defined benefit pension plan payables, primarily for investments sold and non-U.S. government debt securities and otherpurchased, which are not required to be classified in the fair value hierarchy. Investments in level 1 and level 23 of the valuation hierarchy include $199 million and in cash$250 million of participating annuity contracts at December 31, 2020 and cash equivalents classified2019, respectively.
(c)At December 31, 2020 and 2019, excludes $487 million and $465 million, respectively, of certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient. Investments in level 13 of the valuation hierarchy and $2.1include $2.7 billion and $2.2$2.4 billion of COLI policies at December 31, 2020 and 2019, respectively. Changes in level 3 fair value measurements using significant unobservable inputs Investments classified in level 3 of the valuation hierarchy at December 31, 2018 and 2017, respectively.increased $263 million in 2020 from $2.7 billion to $3.0 billion, consisting of $343 million in unrealized gains, partially offset by $113 million in settlements. In addition, there were transfers into level 3 of $33 million. In 2019, there was an increase of $307 million from $2.4 billion to $2.7 billion, consisting of $401 million in unrealized gains, partially offset by $85 million in settlements.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 207 |
Notes to consolidated financial statements
| | | | | | | | | | | | | | | | | | | | | | | | | | 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 | Realized gains/(losses) | | Unrealized gains/(losses) | 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 | | $ | 2,157 |
| | $ | — |
| | $ | (85 | ) | | $ | — |
| | $ | — |
| | $ | 2,072 |
| Year ended December 31, 2017 U.S. defined benefit pension plan Annuity contracts and other (a) | | $ | 396 |
| | $ | — |
| | $ | 1 |
| | $ | (87 | ) | | $ | — |
| | $ | 310 |
| U.S. OPEB plan COLI policies | | $ | 1,957 |
| | $ | — |
| | $ | 200 |
| | $ | — |
| | $ | — |
| | $ | 2,157 |
|
| | (a) | Substantially all are participating and non-participating annuity contracts. |
Estimated future benefit payments The following table presents benefit payments expected to be paid which includefor the effect of expected future service,U.S. defined benefit pension plans for the years indicated. The OPEB medical and life insurance payments are net of expected retiree contributions. | | | | | | | | | | | | | | | Year ended December 31, (in millions) | | U.S. defined benefit pension plans | | | 2021 | | $ | 912 | | | | 2022 | | 918 | | | | 2023 | | 897 | | | | 2024 | | 847 | | | | 2025 | | 829 | | | | Years 2026–2030 | | 3,843 | | | |
| | | | | | | | | | | | | | | Year ended December 31, (in millions) | | Defined benefit pension plans | | | OPEB before Medicare Part D subsidy | | Medicare Part D subsidy | 2019 | | $ | 939 |
| | | $ | 62 |
| | $ | 1 |
| 2020 | | 932 |
| | | 60 |
| | 1 |
| 2021 | | 921 |
| | | 57 |
| | 1 |
| 2022 | | 920 |
| | | 55 |
| | 1 |
| 2023 | | 919 |
| | | 52 |
| | — |
| Years 2024–2028 | | 4,529 |
| | | 223 |
| | 2 |
|
| | | | | | | | | 208220 | | JPMorgan Chase & Co./20182020 Form 10-K |
Note 9 – Employee share-based incentives Employee share-based awards In 2018, 20172020, 2019 and 2016, 2018, JPMorgan Chasegranted long-term share-based awards to certain employees under its LTIP, as amended and restated effective May 19, 2015, and further amended and restated effective May 15, 2018. Under the terms of the LTIP, as ofDecember 31, 2018,862020, 67 million shares of common stock were available for issuance through May 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 and, as such, are considered participating securities as discussed in Note 22.outstanding. In January 2018, 2017 and 2016, the Firm’s Board of Directors approved the grant of performancePerformance share units (“PSUs”) are granted annually, and approved by the Firm’s Board of Directors, to members of the Firm’s Operating Committee under the variable compensation program for performance years 2017, 2016 and 2015, respectively.program. PSUs are subject to the Firm’s achievement of specified performance criteria over a three-yearthree-year period. The number of awards that vest can range from zero0 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-yeartwo-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 employee SARs and stock options to individual employees.There were no material grants of stock options or SARs in 2018, 2017 and 2016. SARs generally expire ten years after the grant date. There were no material grants of SARs or stock optionsin 2020, 2019 and 2018.
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 2018, 20172020, 2019 and 2016,2018, the Firm settled all of its employee share-based awards by issuing treasury shares. Refer to Note 23 for further information on the classification of share-based awards for purposes of calculating earnings per share.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 209221 |
Notes to consolidated financial statements
RSUs, PSUs, employeeSARs 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 employeeSARs 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, employeeSARs and stock options and SARs activity for 2018. | | | | | | | | | | | | | | | | | | | | | | RSUs/PSUs | | Options/SARs | Year ended December 31, 2018 | | 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 | | 72,733 |
| $ | 66.36 |
| | 17,493 |
| | $ | 40.76 |
| | | | Granted | | 20,489 |
| 110.46 |
| | 46 |
| | 113.63 |
| | | | Exercised or vested | | (32,277 | ) | 58.97 |
| | (5,054 | ) | | 39.65 |
| | | | Forfeited | | (2,136 | ) | 84.60 |
| | (1 | ) | | 112.25 |
| | | | Canceled | | NA |
| NA |
| | (21 | ) | | 45.75 |
| | | | Outstanding, December 31 | | 58,809 |
| $ | 85.04 |
| | 12,463 |
| | $ | 41.46 |
| | 2.4 | $ | 702,815 |
| Exercisable, December 31 | | NA |
| NA |
| | 12,449 |
| | 41.37 |
| | 2.4 | 702,815 |
|
2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSUs/PSUs | | SARs/Options | Year ended December 31, 2020 | | 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 | | 52,239 | | $ | 99.62 | | | 5,527 | | | $ | 41.36 | | | | | Granted | | 17,891 | | 132.17 | | | 1 | | | 137.80 | | | | | Exercised or vested | | (21,502) | | 96.64 | | | (2,389) | | | 41.40 | | | | | Forfeited | | (1,118) | | 111.59 | | | (4) | | | 122.59 | | | | | Canceled | | NA | NA | | (11) | | | 39.33 | | | | | Outstanding, December 31 | | 47,510 | | $ | 112.85 | | | 3,124 | | | $ | 41.25 | | | 1.4 | $ | 265,059 | | Exercisable, December 31 | | NA | NA | | 3,124 | | | 41.25 | | | 1.4 | 265,059 | |
The total fair value of RSUs that vested during the years ended December 31, 2020, 2019 and 2018, 2017 and 2016, was $3.6$2.8 billion, $2.9 billion and $2.2$3.6 billion, respectively. The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018, 2017was $182 million, $503 million and 2016, was $370 million, $651 million and $338 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) | | 2018 |
| | 2017 |
| | 2016 |
| Cost of prior grants of RSUs, PSUs and SARs that are amortized over their applicable vesting periods | | $ | 1,241 |
| | $ | 1,125 |
| | $ | 1,046 |
| Accrual of estimated costs of share-based awards to be granted in future periods including those to full-career eligible employees | | 1,081 |
| | 945 |
| | 894 |
| Total noncash compensation expense related to employee share-based incentive plans | | $ | 2,322 |
| | $ | 2,070 |
| | $ | 1,940 |
|
| | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | Cost of prior grants of RSUs, PSUs, SARs and stock options that are amortized over their applicable vesting periods | | $ | 1,101 | | | $ | 1,141 | | | $ | 1,241 | | Accrual of estimated costs of share-based awards to be granted in future periods including those to full-career eligible employees | | 1,350 | | | 1,115 | | | 1,081 | | Total noncash compensation expense related to employee share-based incentive plans | | $ | 2,451 | | | $ | 2,256 | | | $ | 2,322 | |
At December 31, 2018, 2020, approximately $704 $664 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 1.6 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 excessIncome tax benefits (including tax benefits from dividends or dividenddividend equivalents) on share-based payment awards are recognized within income tax expense in the Consolidated statements of income.Income tax benefits related to share-based incentive arrangements recognized in the Firm’s Consolidated statements of income for the years ended December 31, 2020, 2019 and 2018, 2017were $837 million, $895 million and 2016, were $1.1 billion, $1.0 billion and $916 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) | | 2018 |
| | 2017 |
| | 2016 |
| Cash received for options exercised | | $ | 14 |
| | $ | 18 |
| | $ | 26 |
| Tax benefit | | 75 |
| | 190 |
| | 70 |
|
| | | | | | | | | 210222 | | JPMorgan Chase & Co./20182020 Form 10-K |
Note 10 – Investment securities Investment securities consist of debt securities that are classified as AFS or HTM. Debt securities classified as trading assets are discussed in Note 2. Predominantly all of the Firm’s AFS and HTM securities are held by Treasury and CIO in connection with its asset-liability management activities. At AFS securities are carried at fair value on the Consolidated balance sheets. Unrealized gains and losses, after any applicable hedge accounting adjustments or allowance for credit losses, are reported in AOCI. The specific identification method is used to determine realized gains and losses on AFS securities, which are included in investment securities gains/(losses) on the Consolidated statements of income. HTM securities, which the Firm has the intent and ability to hold until maturity, are carried at amortized cost, net of allowance for credit losses, on the Consolidated balance sheets. For both AFS and HTM 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. Effective January 1, 2020, the Firm adopted the CECL accounting guidance, which also amended the AFS securities impairment guidance. Refer to Note 1 for further information. During 2020, the Firm transferred $164.2 billion of investment securities from AFS to HTM for capital management purposes. AOCI included pretax unrealized gains of $5.0 billion on the securities at the dates of transfer. Unrealized gains or losses at the date of transfer of these securities continue to be reported in AOCI and are amortized into interest income on a level-yield basis over the remaining life of the securities. This amortization will offset the effect on interest income of the amortization of the premium or discount resulting from the transfer recorded at fair value. Transfers of securities from AFS to HTM are non-cash transactions and are recorded at fair value.
| | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 223 |
Notes to consolidated financial statements The amortized costs and estimated fair values of the investment securities portfolio were as follows for the dates indicated. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | December 31, (in millions) | Amortized cost(e) | Gross unrealized gains | Gross unrealized losses | Fair value | | Amortized cost(e) | Gross unrealized gains | Gross unrealized losses | Fair value | Available-for-sale securities | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | U.S. GSEs and government agencies(a) | $ | 110,979 | | $ | 2,372 | | $ | 50 | | | $ | 113,301 | | | $ | 107,811 | | $ | 2,395 | | $ | 89 | | | $ | 110,117 | | Residential: | | | | | | | | | | | | U.S. | 6,246 | | 224 | | 3 | | | 6,467 | | | 10,223 | | 233 | | 6 | | | 10,450 | | Non-U.S. | 3,751 | | 20 | | 5 | | | 3,766 | | | 2,477 | | 64 | | 1 | | | 2,540 | | Commercial | 2,819 | | 71 | | 34 | | | 2,856 | | | 5,137 | | 64 | | 13 | | | 5,188 | | Total mortgage-backed securities | 123,795 | | 2,687 | | 92 | | | 126,390 | | | 125,648 | | 2,756 | | 109 | | | 128,295 | | U.S. Treasury and government agencies | 199,910 | | 2,141 | | 100 | | | 201,951 | | | 139,162 | | 449 | | 175 | | | 139,436 | | Obligations of U.S. states and municipalities | 18,993 | | 1,404 | | 1 | | | 20,396 | | | 27,693 | | 2,118 | | 1 | | | 29,810 | | Certificates of deposit | 0 | | 0 | | 0 | | | 0 | | | 77 | | 0 | | 0 | | | 77 | | Non-U.S. government debt securities | 22,587 | | 354 | | 13 | | | 22,928 | | | 21,427 | | 377 | | 17 | | | 21,787 | | Corporate debt securities | 215 | | 4 | | 3 | | | 216 | | | 823 | | 22 | | 0 | | | 845 | | Asset-backed securities: | | | | | | | | | | | | Collateralized loan obligations | 10,055 | | 24 | | 31 | | | 10,048 | | | 25,038 | | 9 | | 56 | | | 24,991 | | Other | 6,174 | | 91 | | 16 | | | 6,249 | | | 5,438 | | 40 | | 20 | | | 5,458 | | Total available-for-sale securities(b) | 381,729 | | 6,705 | | 256 | | | 388,178 | | | 345,306 | | 5,771 | | 378 | | | 350,699 | | Held-to-maturity securities(c) | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | U.S. GSEs and government agencies(a) | 107,889 | | 2,968 | | 29 | | | 110,828 | | | 36,523 | | 1,165 | | 62 | | | 37,626 | | U.S. Residential | 4,345 | | 8 | | 30 | | | 4,323 | | | 0 | | 0 | | 0 | | | 0 | | Commercial | 2,602 | | 77 | | 0 | | | 2,679 | | | 0 | | 0 | | 0 | | | 0 | | Total mortgage-backed securities | 114,836 | | 3,053 | | 59 | | | 117,830 | | | 36,523 | | 1,165 | | 62 | | | 37,626 | | U.S. Treasury and government agencies | 53,184 | | 50 | | 0 | | | 53,234 | | | 51 | | 0 | | 1 | | | 50 | | Obligations of U.S. states and municipalities | 12,751 | | 519 | | 0 | | | 13,270 | | | 4,797 | | 299 | | 0 | | | 5,096 | | Asset-backed securities: | | | | | | | | | | | | Collateralized loan obligations | 21,050 | | 90 | | 2 | | | 21,138 | | | 6,169 | | 0 | | 0 | | | 6,169 | | Total held-to-maturity securities, net of allowance for credit losses(d) | 201,821 | | 3,712 | | 61 | | | 205,472 | | | 47,540 | | 1,464 | | 63 | | | 48,941 | | Total investment securities, net of allowance for credit losses(d) | $ | 583,550 | | $ | 10,417 | | $ | 317 | | | $ | 593,650 | | | $ | 392,846 | | $ | 7,235 | | $ | 441 | | | $ | 399,640 | |
(a)Includes AFS U.S. GSE obligations with fair values of $65.8 billion and $78.5 billion, and HTM U.S. GSE obligations with amortized cost of $86.3 billion and $31.6 billion, at December 31, 2020 and 2019, respectively. As of December 31, 2020, 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 $95.7 billion and $98.8 billion, and $54.7 billion and $55.8 billion, respectively. (b)There was 0 allowance for credit losses on AFS securities at December 31, 2020. (c)The Firm purchased $12.4 billion, $13.4 billion and $9.4 billion of HTM securities for the years ended December 31, 2020, 2019 and 2018, respectively. (d)HTM securities measured at amortized cost are reported net of allowance for credit losses of $78 million at December 31, 2020. (e)Excludes $2.1 billion and $1.9 billion of accrued interest receivables at December 31, 2020 and 2019, respectively. The Firm did 0t reverse through interest income any accrued interest receivables for the years ended December 31, 2020 and 2019. AtDecember 31, 2020, the investment securities portfolio consisted of debt securities with an average credit rating of AA+ (based upon external ratings where available, and where not available, based primarily upon internal risk ratings). Risk ratings which correspondare used to identify the credit quality of securities and differentiate risk within the portfolio. The Firm’s internal risk ratings asgenerally align with the qualitative characteristics (e.g., borrower capacity to meet financial commitments and vulnerability to changes in the economic environment) defined by S&P and Moody’s). AFS securities are carried at fair value on the Consolidated balance sheets. Unrealized gains and losses, after any applicable hedge accounting adjustments, are reported as net increases or decreases to AOCI. The specific identification method is used to determine realized gains and losses on AFS securities, which are included in securities gains/(losses) on the Consolidated statements of income. HTM debt securities, which the Firm has the intent and ability to hold until maturity, are carried at amortized cost on the Consolidated balance sheets.Moody’s, For both AFShowever the quantitative characteristics (e.g., probability of default (“PD”) and HTM debt securities, purchase discounts or premiumsloss given default (“LGD”)) may differ as they reflect internal historical experiences and assumptions.Risk ratings are generally amortized into interest incomeassigned at acquisition, are reviewed on a level-yieldregular and ongoing basis by Credit Risk Management and are adjusted as necessary over the contractual life of the security. However, as a result ofinvestment for updated information affecting the adoption of the premium amortization accounting guidance in the first quarter of 2018, premiums on purchased callable debt securities must be amortizedissuer’s ability to the earliest call date for debt securities with call features that are explicit, noncontingent and callable at fixed prices and on preset dates. The guidance primarily impacts obligations of U.S. states and municipalities held in the Firm’s investment securities portfolio. For additional information, refer to Note 23.
As permitted by the new hedge accounting guidance, the Firm also elected to transfer U.S. government agency MBS,
commercial MBS, and obligations of U.S. states and municipalities with a carrying value of $22.4 billion from HTM to AFS in the first quarter of 2018. The transfer of these investment securities resulted in the recognition of a net pretax unrealized gain of $221 million within AOCI. This transfer was a noncash transaction. For additional information, refer to Notes 1, 5 and 23.fulfill its obligations.
The amortized costs and estimated fair values of the investment securities portfolio were as follows for the dates indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | December 31, (in millions) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | Available-for-sale securities | | | | | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | U.S. government agencies(a) | $ | 69,026 |
| $ | 594 |
| $ | 974 |
| | $ | 68,646 |
| | $ | 69,879 |
| $ | 736 |
| $ | 335 |
| | $ | 70,280 |
| Residential: | | | | | | | | | | | | U.S | 5,877 |
| 79 |
| 31 |
| | 5,925 |
| | 8,193 |
| 185 |
| 14 |
| | 8,364 |
| Non-U.S. | 2,529 |
| 72 |
| 6 |
| | 2,595 |
| | 2,882 |
| 122 |
| 1 |
| | 3,003 |
| Commercial | 6,758 |
| 43 |
| 147 |
| | 6,654 |
| | 4,932 |
| 98 |
| 5 |
| | 5,025 |
| Total mortgage-backed securities | 84,190 |
| 788 |
| 1,158 |
| | 83,820 |
| | 85,886 |
| 1,141 |
| 355 |
| | 86,672 |
| U.S. Treasury and government agencies | 55,771 |
| 366 |
| 78 |
| | 56,059 |
| | 22,510 |
| 266 |
| 31 |
| | 22,745 |
| Obligations of U.S. states and municipalities | 36,221 |
| 1,582 |
| 80 |
| | 37,723 |
| | 30,490 |
| 1,881 |
| 33 |
| | 32,338 |
| Certificates of deposit | 75 |
| — |
| — |
| | 75 |
| | 59 |
| — |
| — |
| | 59 |
| Non-U.S. government debt securities | 23,771 |
| 351 |
| 20 |
| | 24,102 |
| | 26,900 |
| 426 |
| 32 |
| | 27,294 |
| Corporate debt securities | 1,904 |
| 23 |
| 9 |
| | 1,918 |
| | 2,657 |
| 101 |
| 1 |
| | 2,757 |
| Asset-backed securities: | | | | | | | | | | | | Collateralized loan obligations | 19,612 |
| 1 |
| 176 |
| | 19,437 |
| | 20,928 |
| 69 |
| 1 |
| | 20,996 |
| Other | 7,225 |
| 57 |
| 22 |
| | 7,260 |
| | 8,764 |
| 77 |
| 24 |
| | 8,817 |
| Total available-for-sale debt securities | 228,769 |
| 3,168 |
| 1,543 |
| | 230,394 |
| | 198,194 |
| 3,961 |
| 477 |
| | 201,678 |
| Available-for-sale equity securities(b) | — |
| — |
| — |
| | — |
| | 547 |
| — |
| — |
| | 547 |
| Total available-for-sale securities | 228,769 |
| 3,168 |
| 1,543 |
| | 230,394 |
| | 198,741 |
| 3,961 |
| 477 |
| | 202,225 |
| Held-to-maturity securities | | | | | | | | | | | | Mortgage-backed securities | | | | | | | | | | | | U.S. government agencies(c) | 26,610 |
| 134 |
| 200 |
| | 26,544 |
| | 27,577 |
| 558 |
| 40 |
| | 28,095 |
| Commercial | — |
| — |
| — |
| | — |
| | 5,783 |
| 1 |
| 74 |
| | 5,710 |
| Total mortgage-backed securities | 26,610 |
| 134 |
| 200 |
| | 26,544 |
| | 33,360 |
| 559 |
| 114 |
| | 33,805 |
| Obligations of U.S. states and municipalities | 4,824 |
| 105 |
| 15 |
| | 4,914 |
| | 14,373 |
| 554 |
| 80 |
| | 14,847 |
| Total held-to-maturity securities | 31,434 |
| 239 |
| 215 |
| | 31,458 |
| | 47,733 |
| 1,113 |
| 194 |
| | 48,652 |
| Total investment securities | $ | 260,203 |
| $ | 3,407 |
| $ | 1,758 |
| | $ | 261,852 |
| | $ | 246,474 |
| $ | 5,074 |
| $ | 671 |
| | $ | 250,877 |
|
| | | | | | | | | 224 | | JPMorgan Chase & Co./20182020 Form 10-K | | 211 |
Notes to consolidated financial statements
| | (a) | Includes total U.S. government-sponsored enterprise obligations with fair values of $50.7 billion and $45.8 billion for the years ended December 31, 2018 and 2017 respectively. |
| | (b) | Effective January 1, 2018, the Firm adopted the recognition and measurement guidance. Equity securities that were previously reported as AFS securities were reclassified to other assets upon adoption. |
| | (c) | Included total U.S. government-sponsored enterprise obligations with amortized cost of $20.9 billion and $22.0 billion at December 31, 2018 and 2017, respectively. |
Investment securities impairment
The following tables present the fair value and gross unrealized losses for investment securities by aging category for AFS securities at December 31, 20182020 and 2017.2019. The tables exclude U.S. Treasury and government agency securities and U.S. GSE and government agency MBS with unrealized losses of $150 million and $264 million, at December 31, 2020 and 2019, respectively; changes in the value of these securities are generally driven by changes in interest rates rather than changes in their credit profile given the explicit or implicit guarantees provided by the U.S. government. | | | | | | | | | | | | | | | | | | | | | | | | | Available-for-sale securities with gross unrealized losses | | Less than 12 months | | 12 months or more | | | December 31, 2020 (in millions) | Fair value | Gross unrealized losses | | Fair value | Gross unrealized losses | Total fair value | Total gross unrealized losses | Available-for-sale securities | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | | | Residential: | | | | | | | | U.S. | $ | 562 | | $ | 3 | | | $ | 32 | | $ | 0 | | $ | 594 | | $ | 3 | | Non-U.S. | 2,507 | | 4 | | | 235 | | 1 | | 2,742 | | 5 | | Commercial | 699 | | 18 | | | 124 | | 16 | | 823 | | 34 | | Total mortgage-backed securities | 3,768 | | 25 | | | 391 | | 17 | | 4,159 | | 42 | | | | | | | | | | Obligations of U.S. states and municipalities | 49 | | 1 | | | 0 | | 0 | | 49 | | 1 | | Certificates of deposit | 0 | | 0 | | | 0 | | 0 | | 0 | | 0 | | Non-U.S. government debt securities | 2,709 | | 9 | | | 968 | | 4 | | 3,677 | | 13 | | Corporate debt securities | 91 | | 3 | | | 5 | | 0 | | 96 | | 3 | | Asset-backed securities: | | | | | | | | Collateralized loan obligations | 5,248 | | 18 | | | 2,645 | | 13 | | 7,893 | | 31 | | Other | 268 | | 1 | | | 685 | | 15 | | 953 | | 16 | | Total available-for-sale securities with gross unrealized losses | $ | 12,133 | | $ | 57 | | | $ | 4,694 | | $ | 49 | | $ | 16,827 | | $ | 106 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Available-for-sale securities with gross unrealized losses | | Less than 12 months | | 12 months or more | | | December 31, 2019 (in millions) | Fair value | Gross unrealized losses | | Fair value | Gross unrealized losses | Total fair value | Total gross unrealized losses | Available-for-sale securities | | | | | | | | Mortgage-backed securities: | | | | | | | | | | | | | | | | Residential: | | | | | | | | U.S. | $ | 1,072 | | $ | 3 | | | $ | 423 | | $ | 3 | | $ | 1,495 | | $ | 6 | | Non-U.S. | 13 | | 0 | | | 420 | | 1 | | 433 | | 1 | | Commercial | 1,287 | | 12 | | | 199 | | 1 | | 1,486 | | 13 | | Total mortgage-backed securities | 2,372 | | 15 | | | 1,042 | | 5 | | 3,414 | | 20 | | | | | | | | | | Obligations of U.S. states and municipalities | 186 | | 1 | | | 0 | | 0 | | 186 | | 1 | | Certificates of deposit | 77 | | 0 | | | 0 | | 0 | | 77 | | 0 | | Non-U.S. government debt securities | 3,970 | | 13 | | | 1,406 | | 4 | | 5,376 | | 17 | | Corporate debt securities | 0 | | 0 | | | 0 | | 0 | | 0 | | 0 | | Asset-backed securities: | | | | | | | | Collateralized loan obligations | 10,364 | | 11 | | | 7,756 | | 45 | | 18,120 | | 56 | | Other | 1,639 | | 9 | | | 753 | | 11 | | 2,392 | | 20 | | Total available-for-sale securities with gross unrealized losses | $ | 18,608 | | $ | 49 | | | $ | 10,957 | | $ | 65 | | $ | 29,565 | | $ | 114 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Investment securities with gross unrealized losses | | Less than 12 months | | 12 months or more | | | December 31, 2018 (in millions) | Fair value | Gross unrealized losses | | Fair value | Gross unrealized losses | Total fair value | Total gross unrealized losses | Available-for-sale securities | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies | $ | 17,656 |
| $ | 318 |
| | $ | 22,728 |
| $ | 656 |
| $ | 40,384 |
| $ | 974 |
| Residential: | | | | | | | | U.S | 623 |
| 4 |
| | 1,445 |
| 27 |
| 2,068 |
| 31 |
| Non-U.S. | 907 |
| 5 |
| | 165 |
| 1 |
| 1,072 |
| 6 |
| Commercial | 974 |
| 6 |
| | 3,172 |
| 141 |
| 4,146 |
| 147 |
| Total mortgage-backed securities | 20,160 |
| 333 |
| | 27,510 |
| 825 |
| 47,670 |
| 1,158 |
| U.S. Treasury and government agencies | 4,792 |
| 7 |
| | 2,391 |
| 71 |
| 7,183 |
| 78 |
| Obligations of U.S. states and municipalities | 1,808 |
| 15 |
| | 2,477 |
| 65 |
| 4,285 |
| 80 |
| Certificates of deposit | 75 |
| — |
| | — |
| — |
| 75 |
| — |
| Non-U.S. government debt securities | 3,123 |
| 5 |
| | 1,937 |
| 15 |
| 5,060 |
| 20 |
| Corporate debt securities | 478 |
| 8 |
| | 37 |
| 1 |
| 515 |
| 9 |
| Asset-backed securities: | | | | | | | | Collateralized loan obligations | 18,681 |
| 176 |
| | — |
| — |
| 18,681 |
| 176 |
| Other | 1,208 |
| 6 |
| | 2,354 |
| 16 |
| 3,562 |
| 22 |
| Total available-for-sale securities | 50,325 |
| 550 |
| | 36,706 |
| 993 |
| 87,031 |
| 1,543 |
| Held-to-maturity securities | | | | | | | | Mortgage-backed securities | | | | | | | | U.S. government agencies | 4,385 |
| 23 |
| | 7,082 |
| 177 |
| 11,467 |
| 200 |
| Commercial | — |
| — |
| | — |
| — |
| — |
| — |
| Total mortgage-backed securities | 4,385 |
| 23 |
| | 7,082 |
| 177 |
| 11,467 |
| 200 |
| Obligations of U.S. states and municipalities | 12 |
| — |
| | 1,114 |
| 15 |
| 1,126 |
| 15 |
| Total held-to-maturity securities | 4,397 |
| 23 |
| | 8,196 |
| 192 |
| 12,593 |
| 215 |
| Total investment securities with gross unrealized losses | $ | 54,722 |
| $ | 573 |
| | $ | 44,902 |
| $ | 1,185 |
| $ | 99,624 |
| $ | 1,758 |
|
| | | | | | | | | 212 | | JPMorgan Chase & Co./20182020 Form 10-K | | 225 |
Notes to consolidated financial statements
| | | | | | | | | | | | | | | | | | | | | | Investment securities with gross unrealized losses | | Less than 12 months | | 12 months or more | | | December 31, 2017 (in millions) | Fair value | Gross unrealized losses | | Fair value | Gross unrealized losses | Total fair value | Total gross unrealized losses | Available-for-sale securities | | | | | | | | Mortgage-backed securities: | | | | | | | | U.S. government agencies | $ | 36,037 |
| $ | 139 |
| | $ | 7,711 |
| $ | 196 |
| $ | 43,748 |
| $ | 335 |
| Residential: | | | | | | | | U.S. | 1,112 |
| 5 |
| | 596 |
| 9 |
| 1,708 |
| 14 |
| Non-U.S. | — |
| — |
| | 266 |
| 1 |
| 266 |
| 1 |
| Commercial | 528 |
| 4 |
| | 335 |
| 1 |
| 863 |
| 5 |
| Total mortgage-backed securities | 37,677 |
| 148 |
| | 8,908 |
| 207 |
| 46,585 |
| 355 |
| U.S. Treasury and government agencies | 1,834 |
| 11 |
| | 373 |
| 20 |
| 2,207 |
| 31 |
| Obligations of U.S. states and municipalities | 949 |
| 7 |
| | 1,652 |
| 26 |
| 2,601 |
| 33 |
| Certificates of deposit | — |
| — |
| | — |
| — |
| — |
| — |
| Non-U.S. government debt securities | 6,500 |
| 15 |
| | 811 |
| 17 |
| 7,311 |
| 32 |
| Corporate debt securities | — |
| — |
| | 52 |
| 1 |
| 52 |
| 1 |
| Asset-backed securities: | | | | | | | | Collateralized loan obligations | — |
| — |
| | 276 |
| 1 |
| 276 |
| 1 |
| Other | 3,521 |
| 20 |
| | 720 |
| 4 |
| 4,241 |
| 24 |
| Total available-for-sale securities | 50,481 |
| 201 |
| | 12,792 |
| 276 |
| 63,273 |
| 477 |
| Held-to-maturity securities | | | | | | | | Mortgage-backed securities | | | | | | | | U.S. government agencies | 4,070 |
| 38 |
| | 205 |
| 2 |
| 4,275 |
| 40 |
| Commercial | 3,706 |
| 41 |
| | 1,882 |
| 33 |
| 5,588 |
| 74 |
| Total mortgage-backed securities | 7,776 |
| 79 |
| | 2,087 |
| 35 |
| 9,863 |
| 114 |
| Obligations of U.S. states and municipalities | 584 |
| 9 |
| | 2,131 |
| 71 |
| 2,715 |
| 80 |
| Total held-to-maturity securities | 8,360 |
| 88 |
| | 4,218 |
| 106 |
| 12,578 |
| 194 |
| Total investment securities with gross unrealized losses | $ | 58,841 |
| $ | 289 |
| | $ | 17,010 |
| $ | 382 |
| $ | 75,851 |
| $ | 671 |
|
Other-than-temporaryAs a result of the adoption of the amended AFS securities impairment guidance, an allowance for credit losses on AFS securities is required for impaired securities if a credit loss exists.
AFS securities are considered impaired if the fair value is less than the amortized cost. AFS and HTM debt securities in unrealized loss positions are analyzed as part of the Firm’s ongoing assessment of OTTI.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 AFS debt securities, the Firm recognizes OTTIimpairment 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.cost. In these circumstances the impairment loss recognized in investment securities gains/(losses) is equal to the full difference between the amortized cost basis(net of allowance if applicable) and the fair value of the securities.
For impaired debt securities in an unrealized loss position that the Firm has the intent and ability to hold, the securities are evaluated to determine if a credit loss exists. In the event ofIf it is determined that a credit loss onlyexists, that loss is recognized as an allowance for credit losses through the provision for credit losses in the Consolidated Statements of Income, limited by the amount of impairment. Any impairment associated with the credit loss is recognized in income. Amounts relatingnot due to factors other than credit losses areis recorded in OCI. Factors considered in evaluating potential OTTIcredit losses include adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a security; and payment structure of the security.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.
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. When assessing securities issued in a securitization for OTTI,credit losses, the Firm estimates cash flows considering relevant market and economic data, 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 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 anevaluates impairment to be other-than-temporaryfor credit losses when there is an adverse change in expected cash flows. Allowance for credit losses Based on its assessment, the Firm did not recognize an allowance for credit losses on impaired AFS securities as of January 1, 2020 or December 31, 2020.
| | | | | | | | | 226 | | JPMorgan Chase & Co./20182020 Form 10-K |
HTM securities – credit risk The adoption of the CECL accounting guidance requires management to estimate expected credit losses on HTM securities over the remaining expected life and recognize this estimate as an allowance for credit losses. As a result of the adoption of this guidance, the Firm recognized an allowance for credit losses on HTM obligations of U.S. states and municipalities of $10 million as a cumulative-effect adjustment to retained earnings as of January 1, 2020. Credit quality indicator The primary credit quality indicator for HTM securities is the risk rating assigned to each security. At December 31, 2020, all HTM securities were rated investment grade and were current and accruing, with approximately 98% rated at least AA+. Allowance for credit losses The allowance for credit losses on HTM obligations of U.S. states and municipalities and commercial mortgage-backed securities is calculated by applying statistical credit loss factors (estimated PD and LGD) to the amortized cost. The credit loss factors are derived using a weighted average of five internally developed eight-quarter macroeconomic scenarios, followed by a single year straight-line interpolation to revert to long run historical information for periods beyond the forecast period. Refer to Note 13 for further information on the eight-quarter macroeconomic forecast. The allowance for credit losses on HTM collateralized loan obligations and U.S. residential mortgage-backed securities is calculated as the difference between the amortized cost and the present value of the cash flows expected to be collected, discounted at the security’s effective interest rate. These cash flow estimates are developed based on expectations of underlying collateral performance derived using the eight-quarter macroeconomic forecast and the single year straight-line interpolation, as well as considering the structural features of the security. The application of different inputs and assumptions into the calculation of the allowance for credit losses is subject to significant 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 on HTM securities. The allowance for credit losses on HTM securities was $78 million as of December 31, 2020, reflecting $68 million recognized in the provision for credit losses for the year ended December 31, 2020. Selected impacts of investment securities on the Consolidated statements of income | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Realized gains | $ | 3,080 | | | $ | 650 | | | $ | 211 | | Realized losses | (2,278) | | | (392) | | | (606) | | | | | | | | Net investment securities gains/(losses) | $ | 802 | | | $ | 258 | | | $ | (395) | | Provision for credit losses | $ | 68 | | | NA | | NA | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 213 | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 227 |
Notes to consolidated financial statements
As a result of the adoption of the recognition and measurement guidance in the first quarter of 2018, equity securities are no longer permitted to be classified as AFS. For additional information, refer to Note 1. Additionally, the Firm did not recognize any OTTI for AFS equity securities for the years ended December 31, 2017 and 2016.
For the year ended December 31, 2018, the Firm recognized $22 million of unrealized losses as OTTI on securities it intended to sell and subsequently sold during the year. The Firm does not intend to sell any of the remaining investment securities with an unrealized loss in AOCI as of December 31, 2018, and it is not likely that the Firm will be required to sell these securities before recovery of their amortized cost basis. Further, the Firm did not recognize any credit-related OTTI losses during the year ended December 31, 2018. Accordingly, the Firm believes that the investment securities with an unrealized loss in AOCI as of December 31, 2018, are not other-than-temporarily impaired.
Investment 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) | 2018 | | 2017 | | 2016 | Realized gains | $ | 211 |
| | $ | 1,013 |
| | $ | 401 |
| Realized losses | (606 | ) | | (1,072 | ) | | (232 | ) | OTTI losses | — |
| | (7 | ) | | (28 | ) | Net investment securities gains/(losses) | (395 | ) | | (66 | ) | | 141 |
| | | | | | | OTTI losses | | | | | | Credit-related losses recognized in income | — |
| | — |
| | (1 | ) | Investment securities the Firm intends to sell(a) | — |
| | (7 | ) | | (27 | ) | Total OTTI losses recognized in income | $ | — |
| | $ | (7 | ) | | $ | (28 | ) |
| | (a) | Excludes realized losses on securities sold of $22 million, $6 million and $24 million for the years ended December 31, 2018, 2017 and 2016, 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 securities was not material as of and during the years ended December 31, 2018, 2017 and 2016.
| | | | 214 | | JPMorgan Chase & Co./2018 Form 10-K |
Contractual maturities and yields The following table presents the amortized cost and estimated fair value at December 31, 2018, 2020, of JPMorgan Chase’s investment securities portfolio by contractual maturity. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | By remaining maturity December 31, 2020 (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 | $ | 0 | | | $ | 741 | | | $ | 7,797 | | | $ | 115,257 | | | $ | 123,795 | | Fair value | 0 | | | 756 | | | 8,139 | | | 117,495 | | | 126,390 | | Average yield(a) | 0 | % | | 1.66 | % | | 1.67 | % | | 2.57 | % | | 2.51 | % | U.S. Treasury and government agencies | | | | | | | | | | Amortized cost | $ | 33,633 | | | $ | 110,033 | | | $ | 46,827 | | | $ | 9,417 | | | $ | 199,910 | | Fair value | 33,678 | | | 111,014 | | | 47,675 | | | 9,584 | | | 201,951 | | Average yield(a) | 0.42 | % | | 0.53 | % | | 0.79 | % | | 0.48 | % | | 0.57 | % | Obligations of U.S. states and municipalities | | | | | | | | | | Amortized cost | $ | 33 | | | $ | 203 | | | $ | 1,047 | | | $ | 17,710 | | | $ | 18,993 | | Fair value | 33 | | | 211 | | | 1,111 | | | 19,041 | | | 20,396 | | Average yield(a) | 4.11 | % | | 4.59 | % | | 4.84 | % | | 4.80 | % | | 4.80 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-U.S. government debt securities | | | | | | | | | | Amortized cost | $ | 8,282 | | | $ | 8,011 | | | $ | 5,615 | | | $ | 679 | | | $ | 22,587 | | Fair value | 8,297 | | | 8,225 | | | 5,726 | | | 680 | | | 22,928 | | Average yield(a) | 1.25 | % | | 1.70 | % | | 0.68 | % | | 0.17 | % | | 1.24 | % | Corporate debt securities | | | | | | | | | | Amortized cost | $ | 0 | | | $ | 141 | | | $ | 74 | | | $ | 0 | | | $ | 215 | | Fair value | 0 | | | 139 | | | 77 | | | 0 | | | 216 | | Average yield(a) | 0 | % | | 1.21 | % | | 1.92 | % | | 0 | % | | 1.45 | % | Asset-backed securities | | | | | | | | | | Amortized cost | $ | 554 | | | $ | 2,569 | | | $ | 5,987 | | | $ | 7,119 | | | $ | 16,229 | | Fair value | 554 | | | 2,591 | | | 5,990 | | | 7,162 | | | 16,297 | | Average yield(a) | 1.31 | % | | 2.00 | % | | 1.33 | % | | 1.48 | % | | 1.50 | % | Total available-for-sale securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amortized cost | $ | 42,502 | | | $ | 121,698 | | | $ | 67,347 | | | $ | 150,182 | | | $ | 381,729 | | Fair value | 42,562 | | | 122,936 | | | 68,718 | | | 153,962 | | | 388,178 | | Average yield(a) | 0.59 | % | | 0.65 | % | | 1.00 | % | | 2.64 | % | | 1.49 | % | Held-to-maturity securities | | | | | | | | | | Mortgage-backed securities | | | | | | | | | | Amortized cost | $ | 0 | | | $ | 158 | | | $ | 11,908 | | | $ | 102,791 | | | $ | 114,857 | | Fair value | 0 | | | 160 | | | 12,707 | | | 104,963 | | | 117,830 | | Average yield(a) | 0 | % | | 1.56 | % | | 2.42 | % | | 2.94 | % | | 2.88 | % | U.S. Treasury and government agencies | | | | | | | | | | Amortized cost | $ | 501 | | | $ | 42,477 | | | $ | 10,206 | | | $ | 0 | | | $ | 53,184 | | Fair value | 501 | | | 42,511 | | | 10,222 | | | 0 | | | 53,234 | | Average yield(a) | 1.86 | % | | 0.60 | % | | 0.94 | % | | 0 | % | | 0.67 | % | Obligations of U.S. states and municipalities | | | | | | | | | | Amortized cost | $ | 0 | | | $ | 65 | | | $ | 532 | | | $ | 12,211 | | | $ | 12,808 | | Fair value | 0 | | | 67 | | | 565 | | | 12,638 | | | 13,270 | | Average yield(a) | 0 | % | | 3.09 | % | | 3.57 | % | | 3.62 | % | | 3.62 | % | Asset-backed securities | | | | | | | | | | Amortized cost | $ | 0 | | | $ | 0 | | | $ | 11,617 | | | $ | 9,433 | | | $ | 21,050 | | Fair value | 0 | | | 0 | | | 11,658 | | | 9,480 | | | 21,138 | | Average yield(a) | 0 | % | | 0 | % | | 1.40 | % | | 1.33 | % | | 1.37 | % | Total held-to-maturity securities | | | | | | | | | | Amortized cost | $ | 501 | | | $ | 42,700 | | | $ | 34,263 | | | $ | 124,435 | | | $ | 201,899 | | Fair value | 501 | | | 42,738 | | | 35,152 | | | 127,081 | | | 205,472 | | Average yield(a) | 1.86 | % | | 0.60 | % | | 1.65 | % | | 2.88 | % | | 2.19 | % |
(a)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. However, for certain callable debt securities, the average yield is calculated to the earliest call date. | | | | | | | | | | | | | | | | | | | | | By remaining maturity December 31, 2018 (in millions) | Due in one year or less | | Due after one year through five years | | Due after five years through 10 years | | Due after 10 years(c) | | Total | Available-for-sale securities | | | | | | | | | | Mortgage-backed securities(a) | | | | | | | | | | Amortized cost | $ | 519 |
| | $ | 77 |
| | $ | 7,574 |
| | $ | 76,020 |
| | $ | 84,190 |
| Fair value | 520 |
| | 77 |
| | 7,616 |
| | 75,607 |
| | 83,820 |
| Average yield(b) | 2.02 | % | | 3.50 | % | | 3.48 | % | | 3.52 | % | | 3.51 | % | U.S. Treasury and government agencies | | | | | | | | | | Amortized cost | $ | 22,439 |
| | $ | 17,945 |
| | $ | 9,618 |
| | $ | 5,769 |
| | $ | 55,771 |
| Fair value | 22,444 |
| | 18,090 |
| | 9,588 |
| | 5,937 |
| | 56,059 |
| Average yield(b) | 2.42 | % | | 2.90 | % | | 2.60 | % | | 3.05 | % | | 2.67 | % | Obligations of U.S. states and municipalities | | | | | | | | | | Amortized cost | $ | 177 |
| | $ | 617 |
| | $ | 2,698 |
| | $ | 32,729 |
| | $ | 36,221 |
| Fair value | 176 |
| | 629 |
| | 2,790 |
| | 34,128 |
| | 37,723 |
| Average yield(b) | 1.94 | % | | 4.30 | % | | 5.26 | % | | 5.02 | % | | 5.01 | % | Certificates of deposit | | | | | | | | | | Amortized cost | $ | 75 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 75 |
| Fair value | 75 |
| | — |
| | — |
| | — |
| | 75 |
| Average yield(b) | 0.49 | % | | — | % | | — | % | | — | % | | 0.49 | % | Non-U.S. government debt securities | | | | | | | | | | Amortized cost | $ | 5,604 |
| | $ | 13,117 |
| | $ | 5,050 |
| | $ | — |
| | $ | 23,771 |
| Fair value | 5,606 |
| | 13,314 |
| | 5,182 |
| | — |
| | 24,102 |
| Average yield(b) | 3.25 | % | | 1.95 | % | | 1.33 | % | | — | % | | 2.13 | % | Corporate debt securities | | | | | | | | | | Amortized cost | $ | 22 |
| | $ | 950 |
| | $ | 792 |
| | $ | 140 |
| | $ | 1,904 |
| Fair value | 22 |
| | 964 |
| | 792 |
| | 140 |
| | 1,918 |
| Average yield(b) | 4.05 | % | | 4.64 | % | | 4.56 | % | | 4.74 | % | | 4.60 | % | Asset-backed securities | | | | | | | | | | Amortized cost | $ | — |
| | $ | 3,222 |
| | $ | 4,615 |
| | $ | 19,000 |
| | $ | 26,837 |
| Fair value | — |
| | 3,208 |
| | 4,592 |
| | 18,897 |
| | 26,697 |
| Average yield(b) | — | % | | 2.85 | % | | 3.12 | % | | 3.19 | % | | 3.14 | % | Total available-for-sale securities | | | | | | | | | | Amortized cost | $ | 28,836 |
| | $ | 35,928 |
| | $ | 30,347 |
| | $ | 133,658 |
| | $ | 228,769 |
| Fair value | 28,843 |
| | 36,282 |
| | 30,560 |
| | 134,709 |
| | 230,394 |
| Average yield(b) | 2.57 | % | | 2.62 | % | | 2.98 | % | | 3.82 | % | | 3.36 | % | Held-to-maturity securities | | | | | | | | | | Mortgage-backed securities(a) | | | | | | | | | | Amortized Cost | $ | — |
| | $ | — |
| | $ | 3,125 |
| | $ | 23,485 |
| | $ | 26,610 |
| Fair value | — |
| | — |
| | 3,141 |
| | 23,403 |
| | 26,544 |
| Average yield(b) | — | % | | — | % | | 3.53 | % | | 3.34 | % | | 3.36 | % | Obligations of U.S. states and municipalities | | | | | | | | | | Amortized cost | $ | — |
| | $ | — |
| | $ | 20 |
| | $ | 4,804 |
| | $ | 4,824 |
| Fair value | — |
| | — |
| | 20 |
| | 4,894 |
| | 4,914 |
| Average yield(b) | — | % | | — | % | | 3.93 | % | | 4.12 | % | | 4.12 | % | Total held-to-maturity securities | | | | | | | | | | Amortized cost | $ | — |
| | $ | — |
| | $ | 3,145 |
| | $ | 28,289 |
| | $ | 31,434 |
| Fair value | — |
| | — |
| | 3,161 |
| | 28,297 |
| | 31,458 |
| Average yield(b) | — | % | | — | % | | 3.53 | % | | 3.47 | % | | 3.48 | % |
| | (a) | As of December 31, 2018, mortgage-backed securities issued by Fannie Mae exceeded 10% of JPMorgan Chase’s total stockholders’ equity; both the amortized cost and fair value of such securities was $52.3 billion(b)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 5 years for agency residential MBS, 4 years for agency residential collateralized mortgage obligations and 3 years for nonagency residential collateralized mortgage obligations..
|
| | (b) | Average yield is computed using the effective yield of each security owned at the end of the period, weighted based on the amortized cost of each security. The effective yield considers the contractual coupon, amortization of premiums and accretion of discounts, and the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable. The effective yield excludes unscheduled principal prepayments; and accordingly, actual maturities of securities may differ from their contractual or expected maturities as certain securities may be prepaid. |
| | (c) | Substantially all of the Firm’s U.S. residential MBS and collateralized mortgage obligations are due in 10 years or more, based on contractual maturity. The estimated weighted-average life, which reflects anticipated future prepayments, is approximately 7 years for agency residential MBS, 3 years for agency residential collateralized mortgage obligations and 2 years for nonagency residential collateralized mortgage obligations. |
| | | | | | | | | 228 | | JPMorgan Chase & Co./20182020 Form 10-K | | 215 |
Notes to consolidated financial statements
Note 11 – Securities financing activities JPMorgan Chase enters into resale, repurchase, securities borrowed and securities loaned agreements (collectively, “securities financing agreements”) primarily to finance the Firm’s inventory positions, acquire securities to cover short sales, accommodate customers’ financing needs,settle other securities 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 agreements are generally carried at the amount of cash collateral advanced or received. Where appropriate under applicable accounting guidance, securities 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, refer to 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, refer to Note 3. 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 agreements not elected under the fair value option are measured at amortized cost. As a result of the Firm’s credit risk mitigation practices described below, the Firm did not hold any allowance for credit losses with respect to resale and securities borrowed arrangements as of December 31, 2020 and 2019. Credit risk mitigation practices Securities financing agreements 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 and securities borrowed 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 and securities loaned agreements, credit risk exposure arises to the extent that the value of underlying securities advanced exceeds the value of the initial cash principal 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 and securities borrowed agreements.For Refer to Note 29 for further information regarding assets pledged and collateral received in securities financing agreements, refer to Note 28. 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, 2018 and 2017.
agreements.
| | | | | | | | | 216 | | JPMorgan Chase & Co./20182020 Form 10-K | | 229 |
Notes to consolidated financial statements
The table below summarizes the gross and net amounts of the Firm’s securities financing agreements, as of December 31, 20182020 and 2017. 2019. 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 with the counterparty, 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 counterparty.table below as “Amounts not nettable on the Consolidated balance sheets,” and reduces the “Net amounts” presented. Where a legal opinion has not been either sought or obtained, the securities financing balances are presented gross in the “Net amounts” below,below. | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | December 31, (in millions) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets | Amounts not nettable on the Consolidated balance sheets(b) | Net amounts(c) | Assets | | | | | | | | Securities purchased under resale agreements | $ | 666,467 | | $ | (370,183) | | $ | 296,284 | | $ | (273,206) | | | $ | 23,078 | | | Securities borrowed | 193,700 | | (33,065) | | 160,635 | | (115,219) | | | 45,416 | | | Liabilities | | | | | | | | Securities sold under repurchase agreements | $ | 578,060 | | $ | (370,183) | | $ | 207,877 | | $ | (191,980) | | | $ | 15,897 | | | Securities loaned and other(a) | 41,366 | | (33,065) | | 8,301 | | (8,257) | | | 44 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | 2019 | | December 31, (in millions) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets | Amounts not nettable on the Consolidated balance sheets(b) | Net amounts(c) | Assets | | | | | | | | Securities purchased under resale agreements | $ | 628,609 | | $ | (379,463) | | $ | 249,146 | | $ | (231,147) | | (d) | $ | 17,999 | | (d) | Securities borrowed | 166,718 | | (26,960) | | 139,758 | | (104,990) | | | 34,768 | | | Liabilities | | | | | | | | Securities sold under repurchase agreements | $ | 555,172 | | $ | (379,463) | | $ | 175,709 | | $ | (151,566) | | | $ | 24,143 | | | Securities loaned and other(a) | 36,649 | | (26,960) | | 9,689 | | (9,654) | | | 35 | | |
(a)Includes securities-for-securities lending agreements of $3.4 billion and related$3.7 billion at December 31, 2020 and 2019, respectively, accounted for at fair value, where the Firm is acting as lender. In 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. (b)In some cases, collateral does not reduceexchanged with a counterparty exceeds the net asset or liability balance with that counterparty. In such cases, the amounts presented.reported in this column are limited to the related net asset or liability with that counterparty. (c) the Firm hasIncludes securities financing agreements that provide collateral rights, but where an appropriate legal opinion with respect to the master netting agreement with the counterparty. Where a legal opinion has not been either sought or obtained, theobtained. At December 31, 2020 and 2019, included $17.0 billion and $11.0 billion, respectively, of securities financing balances are presented gross in the “Net amounts” below,purchased under resale agreements; $42.1 billion and related collateral does not reduce the$31.9 billion, respectively, of securities borrowed; $14.5 billion and $22.7 billion, respectively, of securities sold under repurchase agreements; and $8 million and $7 million, respectively, of securities loaned and other. (d)The prior period amounts presented.the counterparty. Such collateral, along with securities financing balances that do not meet all these relevant netting criteria under U.S. GAAP, is presented 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 respecthave been revised to the master netting agreementconform with the counterparty. 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.current period presentation. | | | | | | | | | | | | | | | | | | 2018 | December 31, (in millions) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets(b) | Amounts not nettable on the Consolidated balance sheets(c) | Net amounts(d) | Assets | | | | | | Securities purchased under resale agreements | $ | 691,116 |
| $ | (369,612 | ) | $ | 321,504 |
| $ | (308,854 | ) | $ | 12,650 |
| Securities borrowed | 132,955 |
| (20,960 | ) | 111,995 |
| (79,747 | ) | 32,248 |
| Liabilities | | | | | | Securities sold under repurchase agreements | $ | 541,587 |
| $ | (369,612 | ) | $ | 171,975 |
| $ | (149,125 | ) | $ | 22,850 |
| Securities loaned and other(a) | 33,700 |
| (20,960 | ) | 12,740 |
| (12,358 | ) | 382 |
|
| | | | | | | | | | | | | | | | | | 2017 | December 31, (in millions) | Gross amounts | Amounts netted on the Consolidated balance sheets | Amounts presented on the Consolidated balance sheets(b) | Amounts not nettable on the Consolidated balance sheets(c) | Net amounts(d) | Assets | | | | | | Securities purchased under resale agreements | $ | 448,608 |
| $ | (250,505 | ) | $ | 198,103 |
| $ | (188,502 | ) | $ | 9,601 |
| Securities borrowed | 113,926 |
| (8,814 | ) | 105,112 |
| (76,805 | ) | 28,307 |
| Liabilities | | | | | | Securities sold under repurchase agreements | $ | 398,218 |
| $ | (250,505 | ) | $ | 147,713 |
| $ | (129,178 | ) | $ | 18,535 |
| Securities loaned and other(a) | 27,228 |
| (8,814 | ) | 18,414 |
| (18,151 | ) | 263 |
|
| | (a) | Includes securities-for-securities lending agreements of $3.3 billion and $9.2 billion at December 31, 2018 and 2017, respectively, accounted for at fair value, where the Firm is acting as lender. These amounts are presented within accounts payable and other liabilities in the Consolidated balance sheets. |
| | (b) | Includes securities financing agreements accounted for at fair value. At December 31, 2018 and 2017, included securities purchased under resale agreements of $13.2 billion and $14.7 billion, respectively; securities sold under repurchase agreements of $935 million and $697 million, respectively; and securities borrowed of $5.1 billion and $3.0 billion, respectively. 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) | 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, 2018 and 2017, included $7.9 billion and $7.5 billion, respectively, of securities purchased under resale agreements; $30.3 billion and $25.5 billion, respectively, of securities borrowed; $21.5 billion and $16.5 billion, respectively, of securities sold under repurchase agreements; and $25 million and $29 million, respectively, of securities loaned and other. |
| | | | | | | | | 230 | | JPMorgan Chase & Co./20182020 Form 10-K | | 217 |
Notes to consolidated financial statements
The tables below present as of December 31, 20182020 and 20172019 the types of financial assets pledged in securities financing agreements and the remaining contractual maturity of the securities financing agreements. | | | | | | | | | | | | | | | | | | | | | | | | | Gross liability balance | | 2020 | | 2019 | 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 | $ | 56,744 | | | $ | 0 | | | $ | 34,119 | | | $ | 0 | | Residential - nonagency | 1,016 | | | 0 | | | 1,239 | | | 0 | | Commercial - nonagency | 855 | | | 0 | | | 1,612 | | | 0 | | U.S. Treasury, GSEs and government agencies | 315,834 | | | 143 | | | 334,398 | | | 29 | | Obligations of U.S. states and municipalities | 1,525 | | | 2 | | | 1,181 | | | 0 | | Non-U.S. government debt | 157,563 | | | 1,730 | | | 145,548 | | | 1,528 | | Corporate debt securities | 22,849 | | | 1,864 | | | 13,826 | | | 1,580 | | Asset-backed securities | 694 | | | 0 | | | 1,794 | | | 0 | | Equity securities | 20,980 | | | 37,627 | | | 21,455 | | | 33,512 | | Total | $ | 578,060 | | | $ | 41,366 | | | $ | 555,172 | | | $ | 36,649 | |
| | | | | | | | | | | | | | | | Gross liability balance | | 2018 | | 2017 | 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. government agencies | $ | 28,811 |
| $ | — |
| | $ | 13,100 |
| $ | — |
| Residential - nonagency | 2,165 |
| — |
| | 2,972 |
| — |
| Commercial - nonagency | 1,390 |
| — |
| | 1,594 |
| — |
| U.S. Treasury and government agencies | 323,078 |
| 69 |
| | 177,581 |
| 14 |
| Obligations of U.S. states and municipalities | 1,150 |
| — |
| | 1,557 |
| — |
| Non-U.S. government debt | 154,900 |
| 4,313 |
| | 170,196 |
| 2,485 |
| Corporate debt securities | 13,898 |
| 428 |
| | 14,231 |
| 287 |
| Asset-backed securities | 3,867 |
| — |
| | 3,508 |
| — |
| Equity securities | 12,328 |
| 28,890 |
| | 13,479 |
| 24,442 |
| Total | $ | 541,587 |
| $ | 33,700 |
| | $ | 398,218 |
| $ | 27,228 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining contractual maturity of the agreements | | Overnight and continuous | | | | | | Greater than 90 days | | | 2020 (in millions) | | Up to 30 days | | 30 – 90 days | | | Total | Total securities sold under repurchase agreements | $ | 238,667 | | | $ | 230,980 | | | $ | 70,777 | | | $ | 37,636 | | | $ | 578,060 | | Total securities loaned and other | 37,887 | | | 1,647 | | | 500 | | | 1,332 | | | 41,366 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining contractual maturity of the agreements | | Overnight and continuous | | | | | | Greater than 90 days | | | 2019 (in millions) | | Up to 30 days | | 30 – 90 days | | | Total | Total securities sold under repurchase agreements | $ | 225,134 | | | $ | 195,816 | | (a) | $ | 56,020 | | (a) | $ | 78,202 | | (a) | $ | 555,172 | | Total securities loaned and other | 32,028 | | | 1,706 | | | 937 | | | 1,978 | | | 36,649 | |
| | | | | | | | | | | | | | | | | | | | Remaining contractual maturity of the agreements | | Overnight and continuous | | | | | Greater than 90 days | | 2018 (in millions) | | Up to 30 days | | 30 – 90 days | Total | Total securities sold under repurchase agreements | $ | 247,579 |
| | $ | 174,971 |
| | $ | 71,637 |
| $ | 47,400 |
| $ | 541,587 |
| Total securities loaned and other | 28,402 |
| | 997 |
| | 2,132 |
| 2,169 |
| 33,700 |
|
| | | | | | | | | | | | | | | | | | | | Remaining contractual maturity of the agreements | | Overnight and continuous | | | | | Greater than 90 days | | 2017 (in millions) | | Up to 30 days | | 30 – 90 days | Total | Total securities sold under repurchase agreements | $ | 142,185 |
| (a) | $ | 180,674 |
| (a) | $ | 41,611 |
| $ | 33,748 |
| $ | 398,218 |
| Total securities loaned and other | 22,876 |
| | 375 |
| | 2,328 |
| 1,649 |
| 27,228 |
|
(a)The prior period amounts have been revised to conform with the current period presentation. | | (a) | The prior period amounts have been revised to conform with the current period presentation. |
Transfers not qualifying for sale accounting At December 31, 20182020 and 2017,2019, the Firm held $701 $598 million and $1.5 billion, $743 million, 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.
| | | | | | | | | 218 | | JPMorgan Chase & Co./20182020 Form 10-K | | 231 |
Notes to consolidated financial statements
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.loan. 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-investmentEffective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information.
The following provides a detailed accounting discussion of these loan categories:the Firm’s loans by category: 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.fees. 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 as an adjustment of yield. The Firm classifies accrued interest on loans, including accrued but unbilled interest on credit card loans, in accrued interest and accounts receivables on the Consolidated balance sheets. For credit card loans, accrued interest once billed is then recognized in the loan balances, with the related allowance recorded in the allowance for credit losses. Changes in the allowance for credit losses on accrued interest on credit card loans are recognized in the provision for credit losses and charge-offs are recognized by reversing interest income. Expected losses related to accrued interest on certain performing, modified loans to borrowers impacted by COVID-19 are considered in the Firm’s allowance for loan losses. For other loans, the Firm generally does not recognize an allowance for credit losses on accrued interest receivables, consistent with its policy to write them off no later than 90 days past due by reversing interest income. 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.The Firm separately establishes an allowance, which reduces loans and is charged to interest income, for the estimated uncollectible portion of accrued and billed interest and fee income on credit card loans. Allowance for loan losses The allowance for loan losses represents the estimated probableexpected 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 investmentamortized cost 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. Refer 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 lower of the amortized cost or the net realizable value of the underlying collateral (i.e., fair value less estimated 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-modifiedunmodified credit card loans and scored business banking loans are generally charged off no later than180 dayspast due.Scored auto and modified credit card loans are charged off no later than120 dayspast due. | | | | | | | | | 232 | | JPMorgan Chase & Co./2020 Form 10-K |
Certain consumer loans will beare 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 or charged down within 60 days of receiving notification of a bankruptcy filing). | | • | Auto loans upon repossession of the automobile.
|
•Auto loans upon repossession of the automobile. Other than in certain limited circumstances, the Firm typically does not recognize charge-offs on the government-guaranteed portion of loans.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 219 |
Notes to consolidated financial statements
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.realized. 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 lower of its amortized cost or the estimated net realizable value of the underlying collateral, 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 utilizes 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 everytwelve months,, 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 afor which the fair value basisoption has been elected 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. Refer to Note 3 for further information on the Firm’s elections of fair value accounting under the fair value option. Refer 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. Refer to page 231 of this Note for information on accounting for PCI loans subsequent to their acquisition.
| | | | | | | | | 220 | | JPMorgan Chase & Co./20182020 Form 10-K | | 233 |
Notes to consolidated financial statements
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 ofamortized 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, refer to Note 13.losses. Loan modifications The Firm seeks to modify certain loans in conjunction with its loss-mitigationloss 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,delays, principal forgiveness, or the acceptance of equity or other assets in lieu of payments. Such modifications are accounted for and reported as TDRs. A loanLoans with short-term and other insignificant modifications that has been modified in a TDR is generallyare not 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 isconcessions are 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. TDRs.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 loansLoans modified in TDRs are considered to be impaired, these loans aregenerally 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 component of the 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). Forstatus. Refer to Note 13 for further
discussion of the methodology used to estimate the Firm’s asset-specific allowance. The Firm has granted various forms of assistance to customers and clients impacted by the COVID-19 pandemic, including payment deferrals and covenant modifications. The majority of the Firm’s COVID-19 related loan modifications have not been considered TDRs because: •asset-specific allowance, refer to Note 13.they represent short-term or other insignificant modifications, whether under the Firm’s regular loan modification assessments or as permitted by regulatory guidance, or •the Firm has elected to apply the option to suspend the application of accounting guidance for TDRs as provided by the CARES Act and extended by the Consolidated Appropriations Act. To the extent that certain modifications do not meet any of the above criteria, the Firm accounts for them as TDRs. As permitted by regulatory guidance, the Firm does not place loans with deferrals granted due to COVID-19 on nonaccrual status where such loans are not otherwise reportable as nonaccrual. The Firm considers expected losses of principal and accrued interest associated with all COVID-19 related loan modifications in its allowance for credit losses. Assistance provided in response to the COVID-19 pandemic could delay the recognition of delinquencies, nonaccrual status, and net charge-offs for those customers who would have otherwise moved into past due or nonaccrual status. Foreclosedproperty 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 estimated 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. In response to the COVID-19 pandemic, the Firm has temporarily suspended certain foreclosure activities. This could delay recognition of foreclosed properties until the foreclosure moratoriums are lifted.
| | | | | | | | | 234 | | JPMorgan Chase & Co./20182020 Form 10-K | | 221 |
Notes to consolidated financial statements
The Firm’s loan portfolio is divided into three3 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. In conjunction with the adoption of CECL, the Firm revised its loan classes. Prior-period amounts have been revised to conform with the current presentation: •The consumer, excluding credit card portfolio segment’s residential mortgage and home equity loans and lending-related commitments have been combined into a residential real estate class. •Upon adoption of CECL, the Firm elected to discontinue the pool-level accounting for PCI loans and to account for these loans on an individual loan basis. PCI loans are considered PCD loans under CECL and are subject to the Firm’s nonaccrual and charge-off policies. PCD loans are now reported in the consumer, excluding credit card portfolio segment’s residential real estate class. •Risk-rated business banking and auto dealer loans and lending-related commitments held in CCB were reclassified from the consumer, excluding credit card portfolio segment, to the wholesale portfolio segment, to align with the methodology applied when determining the allowance. The remaining scored auto and business banking loans and lending-related commitments have been combined into an auto and other class. •The wholesale portfolio segment’s classes, previously based on the borrower’s primary business activity, have been revised to align with the loan classifications as defined by the bank regulatory agencies, based on the loan’s collateral, purpose, and type of borrower. | | | | | | | | | | | | | | | Consumer, excluding credit card(a) | | Credit card | | Wholesale(f)(c) | • Residential real estate – excluding PCI • Residential mortgage(b)(a)
• Home equityAuto and other(c)(b) Other consumer loans
(d)
• Auto
• Consumer & Business Banking(e)
Residential real estate – PCI
• Home equity
• Prime mortgage
• Subprime mortgage
• Option ARMs
| | • Credit card loans | | • Secured by real estate • Commercial and industrial • Real estate
• Financial institutions
• Governments & Agencies
• Other(g)(d) |
| | (a) | Includes loans held in CCB, prime(a)Includes scored mortgage and home equity loans held in CCB and AWM, and scored mortgage and home equity loans held in AWM and prime mortgage loans held in Corporate. |
| | (b) | Predominantly includes prime (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 apply the wholesale methodology 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 prime mortgage and home equity loans held in AWM and prime mortgage loans held in Corporate. Classes are internally defined and may not align with regulatory definitions. |
| | (g) | Includes loans to: individuals and individual entities (predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies and personal and testamentary trusts), SPEs and Private education and civic organizations. For more information on SPEs, refer to Note 14. |
The following tables summarize the Firm’s loan balances by portfolio segment.
(b)Includes scored auto and business banking loans and overdrafts. | | | | | | | | | | | | | | | | | | | | | | December 31, 2018 | Consumer, excluding credit card | Credit card(a) | Wholesale | Total | | (in millions) | | Retained | | $ | 373,637 |
| | | $ | 156,616 |
| | | $ | 439,162 |
| | | $ | 969,415 |
| (b) | Held-for-sale | | 95 |
| | | 16 |
| | | 11,877 |
| | | 11,988 |
| | At fair value | | — |
| | | — |
| | | 3,151 |
| | | 3,151 |
| | Total | | $ | 373,732 |
| | | $ | 156,632 |
| | | $ | 454,190 |
| | | $ | 984,554 |
| | | | | | | | | | | | | | | December 31, 2017 | Consumer, excluding credit card | | Credit card(a) | | | Wholesale | | | Total | | (in millions) | | Retained | | $ | 372,553 |
| | | $ | 149,387 |
| | | $ | 402,898 |
| | | $ | 924,838 |
| (b) | Held-for-sale | | 128 |
| | | 124 |
| | | 3,099 |
| | | 3,351 |
| | At fair value | | — |
| | | — |
| | | 2,508 |
| | | 2,508 |
| | Total | | $ | 372,681 |
| | | $ | 149,511 |
| | | $ | 408,505 |
| | | $ | 930,697 |
| |
(c)Includes loans held in CIB, CB, AWM, Corporate as well as risk-rated business banking and auto dealer loans held in CCB for which the wholesale methodology is applied when determining the allowance for loan losses. | | (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, 2018 and 2017. |
(d)Includes loans to financial institutions, states and political subdivisions, SPEs, nonprofits, personal investment companies and trusts, as well as loans to individuals and individual entities (predominantly Wealth Management clients within AWM). Refer to Note 14 for more information on SPEs.
| | | | | | | | | 222 | | JPMorgan Chase & Co./20182020 Form 10-K | | 235 |
Notes to consolidated financial statements
The following tables summarize the Firm’s loan balances by portfolio segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | Consumer, excluding credit card | Credit card | Wholesale | Total(b)(c) | | (in millions) | | Retained | | $ | 302,127 | | | | $ | 143,432 | | | | $ | 514,947 | | | | $ | 960,506 | | | Held-for-sale | | 1,305 | | | | 784 | | | | 5,784 | | | | 7,873 | | | At fair value(a) | | 15,147 | | | | 0 | | | | 29,327 | | | | 44,474 | | | Total | | $ | 318,579 | | | | $ | 144,216 | | | | $ | 550,058 | | | | $ | 1,012,853 | | | | | | | | | | | | | | | | December 31, 2019 | Consumer, excluding credit card | | Credit card | | | Wholesale | | | Total(b)(c) | | (in millions) | | Retained | | $ | 294,999 | | | | $ | 168,924 | | | | $ | 481,678 | | | | $ | 945,601 | | | Held-for-sale | | 3,002 | | | | 0 | | | | 4,062 | | | | 7,064 | | | At fair value(a) | | 19,816 | | | | 0 | | | | 25,139 | | | | 44,955 | | | Total | | $ | 317,817 | | | | $ | 168,924 | | | | $ | 510,879 | | | | $ | 997,620 | | |
(a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans. Prior-period amounts have been revised to conform with the current presentation. (b)Excludes $2.9 billion of accrued interest receivables at both December 31, 2020 and 2019. The Firm wrote off accrued interest receivables of $121 million and $50 million for the years ended December 31, 2020 and 2019, respectively. (c)Loans (other than 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, 2020 and 2019.
The following tables provide information about the carrying value of retained loans purchased, sold and reclassified to held-for-sale during the periods indicated. Reclassifications of loans 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 3,474 | | (b)(c) | | $ | 0 | | | | $ | 1,159 | | | | $ | 4,633 | | Sales | | | 352 | | | | 0 | | | | 17,916 | | | | 18,268 | | Retained loans reclassified to held-for-sale(a) | | | 2,084 | | | | 787 | | | | 1,580 | | | | 4,451 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2019 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 1,282 | | (b)(c) | | $ | 0 | | | | $ | 1,291 | | | | $ | 2,573 | | Sales | | | 30,474 | | | | 0 | | | | 23,445 | | | | 53,919 | | Retained loans reclassified to held-for-sale(a) | | | 9,188 | | | | 0 | | | | 2,371 | | | | 11,559 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 2,543 | | (b)(c) | | $ | 0 | | | | $ | 2,354 | | | | $ | 4,897 | | Sales | | | 9,984 | | | | 0 | | | | 16,741 | | | | 26,725 | | Retained loans reclassified to held-for-sale(a) | | | 36 | |
| | 0 | | | | 2,276 | | | | 2,312 | |
(a)Reclassifications of loans to held-for-sale are non-cash transactions. (b)Predominantly includes purchases of residential real estate loans, including the Firm’s voluntary repurchases of certain delinquent loans from loan pools as permitted by Government National Mortgage Association (“Ginnie Mae”) guidelines for the years ended December 31, 2020, 2019 and 2018. 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. | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 2,543 |
| (a)(b) | | $ | — |
| | | $ | 2,354 |
| | | $ | 4,897 |
| Sales | | | 9,984 |
| | | — |
| | | 16,741 |
| | | 26,725 |
| Retained loans reclassified to held-for-sale | | | 36 |
| | | — |
| | | 2,276 |
| | | 2,312 |
|
(c)Excludes purchases of retained loans sourced through the correspondent origination channel and underwritten in accordance with the Firm’s standards. Such purchases were $15.3 billion, $16.6 billion and $18.6 billion for the years ended December 31, 2020, 2019 and 2018, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 3,461 |
| (a)(b) | | $ | — |
| | | $ | 1,799 |
| | | $ | 5,260 |
| Sales | | | 3,405 |
| | | — |
| | | 11,063 |
| | | 14,468 |
| Retained loans reclassified to held-for-sale | | | 6,340 |
| (c)
| | — |
| | | 1,229 |
| | | 7,569 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | 2016 | Year ended December 31, (in millions) | | Consumer, excluding credit card | Credit card | Wholesale | Total | Purchases | | | $ | 4,116 |
| (a)(b) | | $ | — |
| | | $ | 1,448 |
| | | $ | 5,564 |
| Sales | | | 6,368 |
| | | — |
| | | 8,739 |
| | | 15,107 |
| Retained loans reclassified to held-for-sale | | | 321 |
| | | — |
| | | 2,381 |
| | | 2,702 |
|
| | (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 $18.6 billion, $23.5 billion and $30.4 billion for the years ended December 31, 2018, 2017 and 2016, respectively. |
| | (c) | Includes the Firm’s student loan portfolio which was sold in 2017. |
Gains and losses on sales of loans Gains and lossesNet gains/(losses) on sales of loans and lending-related commitments (including adjustments to record loans and lending-related commitments held-for-sale at the lower of cost or fair value) recognized in other income were not material to the Firmnoninterest revenue was $(43) million for the yearsyear ended December 31, 2018, 20172020 of which $(36) million was related to loans. Net gains on sales of loans was $394 million for the year ended December 31, 2019. Gains and 2016.losses on sales of loans was 0t material for the year ended December 31, 2018. 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.
| | | | | | | | | 236 | | JPMorgan Chase & Co./20182020 Form 10-K | | 223 |
Notes to consolidated financial statements
Consumer, excluding credit card loan portfolio Consumer loans, excluding credit card loans, consist primarily of scored residential mortgages, home equity loans and lines of credit, auto loans and consumer and business banking 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 provides information about retained consumer loans, excluding credit card, by class. In 2017, | | | | | | | | | December 31, (in millions) | 2020 | 2019 | Residential real estate | $ | 225,302 | | $ | 243,317 | | Auto and other(a) | 76,825 | | 51,682 | | Total retained loans | $ | 302,127 | | $ | 294,999 | |
(a)At December 31, 2020, included $19.2 billion of loans in Business Banking under the Firm sold its student loan portfolio. | | | | | | | | December 31, (in millions) | 2018 |
| 2017 |
| Residential real estate – excluding PCI | | | Residential mortgage | $ | 231,078 |
| $ | 216,496 |
| Home equity | 28,340 |
| 33,450 |
| Other consumer loans | | | Auto | 63,573 |
| 66,242 |
| Consumer & Business Banking | 26,612 |
| 25,789 |
| Residential real estate – PCI | | | Home equity | 8,963 |
| 10,799 |
| Prime mortgage | 4,690 |
| 6,479 |
| Subprime mortgage | 1,945 |
| 2,609 |
| Option ARMs | 8,436 |
| 10,689 |
| Total retained loans | $ | 373,637 |
| $ | 372,553 |
|
PPP. Delinquency rates are athe 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 eitherto be 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, 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, refer to page 236 of this Note.
|
| | | | | | | | | 224 | | JPMorgan Chase & Co./20182020 Form 10-K |
Residential real estate — excluding PCI loans
The following table provides information by class for retained residential real estate — excluding PCI loans. | | | | | | | | | | | | | | | | | | | | | | Residential real estate – excluding PCI loans | | | | | | | December 31, (in millions, except ratios) | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | 2018 | 2017 |
| 2018 | 2017 |
| 2018 | 2017 | Loan delinquency(a) | | | | | | | | | Current | $ | 225,899 |
| $ | 208,713 |
| | $ | 27,611 |
| $ | 32,391 |
| | $ | 253,510 |
| $ | 241,104 |
| 30–149 days past due | 2,763 |
| 4,234 |
| | 453 |
| 671 |
| | 3,216 |
| 4,905 |
| 150 or more days past due | 2,416 |
| 3,549 |
| | 276 |
| 388 |
| | 2,692 |
| 3,937 |
| Total retained loans | $ | 231,078 |
| $ | 216,496 |
| | $ | 28,340 |
| $ | 33,450 |
| | $ | 259,418 |
| $ | 249,946 |
| % of 30+ days past due to total retained loans(b) | 0.48 | % | 0.77 | % | | 2.57 | % | 3.17 | % | | 0.71 | % | 1.09 | % | 90 or more days past due and government guaranteed(c) | $ | 2,541 |
| $ | 4,172 |
| | — |
| — |
| | $ | 2,541 |
| $ | 4,172 |
| Nonaccrual loans | 1,765 |
| 2,175 |
| | 1,323 |
| 1,610 |
| | 3,088 |
| 3,785 |
| Current estimated LTV ratios(d)(e) | | | | | | | | | Greater than 125% and refreshed FICO scores: | | | | | | | | | Equal to or greater than 660 | $ | 25 |
| $ | 37 |
| | $ | 6 |
| $ | 10 |
| | $ | 31 |
| $ | 47 |
| Less than 660 | 13 |
| 19 |
| | 1 |
| 3 |
| | 14 |
| 22 |
| 101% to 125% and refreshed FICO scores: | | | | | | | | | Equal to or greater than 660 | 37 |
| 36 |
| | 111 |
| 296 |
| | 148 |
| 332 |
| Less than 660 | 53 |
| 88 |
| | 38 |
| 95 |
| | 91 |
| 183 |
| 80% to 100% and refreshed FICO scores: | | | | | | | | | Equal to or greater than 660 | 3,977 |
| 4,369 |
| | 986 |
| 1,676 |
| | 4,963 |
| 6,045 |
| Less than 660 | 281 |
| 483 |
| | 326 |
| 569 |
| | 607 |
| 1,052 |
| Less than 80% and refreshed FICO scores: | | | | | | | | | Equal to or greater than 660 | 212,505 |
| 194,758 |
| | 22,632 |
| 25,262 |
| | 235,137 |
| 220,020 |
| Less than 660 | 6,457 |
| 6,952 |
| | 3,355 |
| 3,850 |
| | 9,812 |
| 10,802 |
| No FICO/LTV available | 813 |
| 1,259 |
| | 885 |
| 1,689 |
| | 1,698 |
| 2,948 |
| U.S. government-guaranteed | 6,917 |
| 8,495 |
| | — |
| — |
| | 6,917 |
| 8,495 |
| Total retained loans | $ | 231,078 |
| $ | 216,496 |
| | $ | 28,340 |
| $ | 33,450 |
| | $ | 259,418 |
| $ | 249,946 |
| Geographic region(f) | | | | | | | | | California | $ | 74,759 |
| $ | 68,855 |
| | $ | 5,695 |
| $ | 6,582 |
| | $ | 80,454 |
| $ | 75,437 |
| New York | 28,847 |
| 27,473 |
| | 5,769 |
| 6,866 |
| | 34,616 |
| 34,339 |
| Illinois | 15,249 |
| 14,501 |
| | 2,131 |
| 2,521 |
| | 17,380 |
| 17,022 |
| Texas | 13,769 |
| 12,508 |
| | 1,819 |
| 2,021 |
| | 15,588 |
| 14,529 |
| Florida | 10,704 |
| 9,598 |
| | 1,575 |
| 1,847 |
| | 12,279 |
| 11,445 |
| Washington | 8,304 |
| 6,962 |
| | 869 |
| 1,026 |
| | 9,173 |
| 7,988 |
| New Jersey | 7,302 |
| 7,142 |
| | 1,642 |
| 1,957 |
| | 8,944 |
| 9,099 |
| Colorado | 8,140 |
| 7,335 |
| | 521 |
| 632 |
| | 8,661 |
| 7,967 |
| Massachusetts | 6,574 |
| 6,323 |
| | 236 |
| 295 |
| | 6,810 |
| 6,618 |
| Arizona | 4,434 |
| 4,109 |
| | 1,158 |
| 1,439 |
| | 5,592 |
| 5,548 |
| All other(g) | 52,996 |
| 51,690 |
| | 6,925 |
| 8,264 |
| | 59,921 |
| 59,954 |
| Total retained loans | $ | 231,078 |
| $ | 216,496 |
| | $ | 28,340 |
| $ | 33,450 |
| | $ | 259,418 |
| $ | 249,946 |
|
| | (a) | Individual delinquency classifications include mortgage loans insured by U.S. government agencies as follows: current included $2.8 billion and $2.4 billion; 30–149 days past due included $2.1 billion and $3.2 billion; and 150 or more days past due included $2.0 billion and $2.9 billion at December 31, 2018 and 2017, respectively. |
| | (b) | At December 31, 2018 and 2017, residential mortgage loans excluded mortgage loans insured by U.S. government agencies of $4.1 billion and $6.1 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, 2018 and 2017, these balances included $999 million and $1.5 billion, 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 no 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, 2018 and 2017. |
| | (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, 2018. |
| | (g) | At December 31, 2018 and 2017, included mortgage loans insured by U.S. government agencies of $6.9 billion and $8.5 billion, respectively. These amounts have been excluded from the geographic regions presented based upon the government guarantee. |
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 225237 |
Notes to consolidated financial statements
Residential real estate
The following table provides information on delinquency, which is the primary credit quality indicator for retained residential real estate loans.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in millions, except ratios) | December 31, 2020 | | December 31, 2019 | Term loans by origination year | | Revolving loans | | Total | | Total | 2020 | 2019 | 2018 | 2017 | 2016 | Prior to 2016 | | Within the revolving period | Converted to term loans | | | Loan delinquency(a)(b) | | | | | | | | | | | | | | Current | $ | 55,562 | | $ | 31,820 | | $ | 13,900 | | $ | 20,410 | | $ | 27,978 | | $ | 50,232 | | | $ | 7,370 | | $ | 15,792 | | | $ | 223,064 | | | $ | 239,979 | | 30–149 days past due | 9 | | 25 | | 20 | | 22 | | 29 | | 674 | | | 21 | | 245 | | | 1,045 | | | 1,910 | | 150 or more days past due | 3 | | 14 | | 10 | | 18 | | 18 | | 844 | | | 22 | | 264 | | | 1,193 | | | 1,428 | | Total retained loans | $ | 55,574 | | $ | 31,859 | | $ | 13,930 | | $ | 20,450 | | $ | 28,025 | | $ | 51,750 | | | $ | 7,413 | | $ | 16,301 | | | $ | 225,302 | | | $ | 243,317 | | % of 30+ days past due to total retained loans(c) | 0.02 | % | 0.12 | % | 0.22 | % | 0.20 | % | 0.17 | % | 2.86 | % | | 0.58 | % | 3.12 | % | | 0.98 | % | | 1.35 | % |
Approximately(a) 37% Individual delinquency classifications include mortgage loans insured by U.S. government agencies as follows: current included $36 million and $17 million; 30–149 days past due included $16 million and $20 million; and 150 or more days past due included $24 million and $26 million at December 31, 2020 and 2019, respectively.
(b)At December 31, 2020, loans under payment deferral programs offered in response to the COVID-19 pandemic which are still within their deferral period and performing according to their modified terms are generally not considered delinquent. (c)At December 31, 2020 and 2019, residential real estate loans excluded mortgage loans insured by U.S. government agencies of $40 million and $46 million, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.
Approximately 35% of the home equity portfoliototal revolving loans are senior lien loans; the remaining balance are junior lien HELOANs or HELOCs.loans. The following table provideslien position the Firm holds is considered in the Firm’s delinquency statisticsallowance for junior lien home equitycredit losses. Revolving loans and lines as ofDecember 31, 2018 and 2017. | | | | | | | | | | | | | | | | Total loans | | Total 30+ day delinquency rate | December 31, (in millions except ratios) | | 2018 | 2017 | | 2018 | 2017 | HELOCs:(a) | | | | | | | Within the revolving period(b) | | $ | 5,608 |
| $ | 6,363 |
| | 0.25 | % | 0.50 | % | Beyond the revolving period | | 11,286 |
| 13,532 |
| | 2.80 |
| 3.56 |
| HELOANs | | 1,030 |
| 1,371 |
| | 2.82 |
| 3.50 |
| Total | | $ | 17,924 |
| $ | 21,266 |
| | 2.00 | % | 2.64 | % |
(a) These HELOCs are predominantly revolvingthat have been converted to term 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 HELOCsthose that are still 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 HELOCsrevolving loans 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 provides 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 | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | Impaired loans | | | | | | | | | With an allowance | $ | 3,381 |
| $ | 4,407 |
| | $ | 1,142 |
| $ | 1,236 |
| | $ | 4,523 |
| $ | 5,643 |
| Without an allowance(a) | 1,184 |
| 1,213 |
| | 870 |
| 882 |
| | 2,054 |
| 2,095 |
| Total impaired loans(b)(c) | $ | 4,565 |
| $ | 5,620 |
| | $ | 2,012 |
| $ | 2,118 |
| | $ | 6,577 |
| $ | 7,738 |
| Allowance for loan losses related to impaired loans | $ | 88 |
| $ | 62 |
| | $ | 45 |
| $ | 111 |
| | $ | 133 |
| $ | 173 |
| Unpaid principal balance of impaired loans(d) | 6,207 |
| 7,741 |
| | 3,466 |
| 3,701 |
| | 9,673 |
| 11,442 |
| Impaired loans on nonaccrual status(e) | 1,459 |
| 1,743 |
| | 955 |
| 1,032 |
| | 2,414 |
| 2,775 |
|
| | (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, 2018, Chapter 7 residential real estate loans included approximately 13% of residential mortgages and approximately 9% of home equity that were 30 days or more past due. |
| | (b) | At December 31, 2018 and 2017, $4.1 billion and $3.8 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, are in the U.S. |
| | (d) | Represents the contractual amount of principal owed at December 31, 2018 and 2017. 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, 2018 and 2017, nonaccrual loans included $2.0 billion and $2.2 billion, respectively, of TDRs for which the borrowers were less than 90 days past due. For additional information about loans modified in a TDR that are on nonaccrual status, refer to the Loan accounting framework on pages 219-221 of this Note. |
| | | | | | | | | 226238 | | JPMorgan Chase & Co./20182020 Form 10-K |
Nonaccrual loans and other credit quality indicators
The following table presents average impairedprovides information on nonaccrual and other credit quality indicators for retained residential real estate loans. | | | | | | | | | | | | (in millions, except weighted-average data) | December 31, 2020 | December 31, 2019 | | Nonaccrual loans(a)(b)(c)(d)(e) | $ | 5,313 | | $ | 2,780 | | | 90 or more days past due and government guaranteed(f) | 33 | | 38 | | | | | | | Current estimated LTV ratios(g)(h) | | | | Greater than 125% and refreshed FICO scores: | | | | Equal to or greater than 660 | $ | 10 | | $ | 31 | | | Less than 660 | 18 | | 38 | | | 101% to 125% and refreshed FICO scores: | | | | Equal to or greater than 660 | 72 | | 134 | | | Less than 660 | 65 | | 132 | | | 80% to 100% and refreshed FICO scores: | | | | Equal to or greater than 660 | 2,365 | | 5,953 | | | Less than 660 | 435 | | 764 | | | Less than 80% and refreshed FICO scores: | | | | Equal to or greater than 660 | 208,457 | | 219,469 | | | Less than 660 | 12,072 | | 14,681 | | | No FICO/LTV available | 1,732 | | 2,052 | | | U.S. government-guaranteed | 76 | | 63 | | | Total retained loans | $ | 225,302 | | $ | 243,317 | | | | | | | Weighted average LTV ratio(g)(i) | 54 | % | 55 | % | | Weighted average FICO(h)(i) | 763 | | 758 | | | | | | | Geographic region(j) | | | | California | $ | 73,444 | | $ | 82,147 | | | New York | 32,287 | | 31,996 | | | Florida | 13,981 | | 13,668 | | | Texas | 13,773 | | 14,474 | | | Illinois | 13,130 | | 15,587 | | | Colorado | 8,235 | | 8,447 | | | Washington | 7,917 | | 8,990 | | | New Jersey | 7,227 | | 7,752 | | | Massachusetts | 5,784 | | 6,210 | | | Connecticut | 5,024 | | 4,954 | | | All other(k) | 44,500 | | 49,092 | | | Total retained loans | $ | 225,302 | | $ | 243,317 | | |
(a)Includes collateral-dependent residential real estate loans that are charged down to the lower of amortized cost or 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, 2020, approximately 7% of Chapter 7 residential real estate loans were 30 days or more past due, respectively. (b)At December 31, 2020, nonaccrual loans included $1.6 billion of PCD loans. Prior to the adoption of CECL, nonaccrual loans excluded PCI loans as the Firm recognized interest income on each pool of PCI loans as each of the pools was performing. (c)Generally, all consumer nonaccrual loans have an allowance. In accordance with regulatory guidance, certain nonaccrual loans that are considered collateral-dependent have been charged down to the lower of amortized cost or the fair value of their underlying collateral less costs to sell. If the value of the underlying collateral improves subsequent to the charge down, the related allowance may be negative. (d)Interest income on nonaccrual loans recognized on a cash basis was $161 million and $166 million for the years ended December 31, 2020 and 2019, respectively. (e)Generally excludes loans under payment deferral programs offered in response to the COVID-19 pandemic. Includes loans to customers that have exited COVID-19 payment deferral programs and are 90 or more days past due, predominantly all of which were also at least 150 days past due and therefore considered collateral-dependent. Collateral-dependent loans are charged down to the lower of amortized cost or fair value of the underlying collateral less costs to sell. (f)These balances are 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 income reportedis guaranteed at a specified reimbursement rate subject to meeting agreed-upon servicing guidelines. At December 31, 2020 and 2019, these balances included $33 million and $34 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 0 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, 2020 and 2019. (g)Represents the Firm.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. Current estimated combined LTV for junior lien home equity loans considers all available lien positions, as well as unused lines, related to the property. (h)Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis. (i)Excludes loans with no FICO and/or LTV data available. (j)The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2020. (k)At December 31, 2020 and 2019, included mortgage loans insured by U.S. government agencies of $76 million and $63 million, respectively. These amounts have been excluded from the geographic regions presented based upon the government guarantee. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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) | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | Residential mortgage | $ | 5,082 |
| $ | 5,797 |
| $ | 6,376 |
| | $ | 257 |
| $ | 287 |
| $ | 305 |
| | $ | 75 |
| $ | 75 |
| $ | 77 |
| Home equity | 2,078 |
| 2,189 |
| 2,311 |
| | 131 |
| 127 |
| 125 |
| | 84 |
| 80 |
| 80 |
| Total residential real estate – excluding PCI | $ | 7,160 |
| $ | 7,986 |
| $ | 8,687 |
| | $ | 388 |
| $ | 414 |
| $ | 430 |
| | $ | 159 |
| $ | 155 |
| $ | 157 |
|
| | | | | | | | | (a)JPMorgan Chase & Co./2020 Form 10-K | Generally, interest income on loans modified in TDRs is recognized on a cash basis until the borrower has made a minimum of six payments under the new terms, unless the loan is deemed to be collateral-dependent. | 239 |
Notes to consolidated financial statements Loan modifications Modifications of residential real estate loans, excluding PCI loans,where the Firm grants concessions to borrowers who are experiencing financial difficulty are generally accounted for and reported as TDRs. Loans with short-term or other insignificant modifications that are not considered concessions are not TDRs nor are loans for which the Firm has elected to apply the option to suspend the application of accounting guidance for TDRs as provided by the CARES Act and extended by the Consolidated Appropriations Act. The carrying value of new TDRs was $819 million, $490 million and $736 million for the years ended December 31, 2020, 2019 and 2018, respectively. 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) | 2018 |
| 2017 |
| 2016 |
| Residential mortgage | $ | 401 |
| $ | 373 |
| $ | 254 |
| Home equity | 286 |
| 321 |
| 385 |
| Total residential real estate – excluding PCI | $ | 687 |
| $ | 694 |
| $ | 639 |
|
Nature and extent of modifications The U.S. Treasury’s Making Home AffordableFirm’s proprietary modification programs as well as the Firm’s proprietary modification government programs, including U.S. GSE programs, generally provide various concessions to financially troubled borrowers including, but not limited to, interest rate reductions, term or payment extensions and deferraldelays 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 in TDRs 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.debt, loans with short-term or other insignificant modifications that are not considered concessions, and loans for which the Firm has elected to apply the option to suspend the application of accounting guidance for TDRs as provided by the CARES Act and extended by the Consolidated Appropriations Act. | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2020 | 2019 | 2018 | Number of loans approved for a trial modification | | 5,522 | | 5,872 | | 7,175 | | Number of loans permanently modified | | 6,850 | | 4,918 | | 7,853 | | Concession granted:(a) | | | | | Interest rate reduction | | 50 | % | 77 | % | 54 | % | Term or payment extension | | 49 | | 71 | | 62 | | Principal and/or interest deferred | | 14 | | 13 | | 29 | | Principal forgiveness | | 2 | | 5 | | 7 | | Other(b) | | 66 | | 63 | | 51 | |
| | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | Number of loans approved for a trial modification | 2,570 |
| 1,283 |
| 1,945 |
| | 2,316 |
| 2,321 |
| 3,760 |
| | 4,886 |
| 3,604 |
| 5,705 |
| Number of loans permanently modified | 2,907 |
| 2,628 |
| 3,338 |
| | 4,946 |
| 5,624 |
| 4,824 |
| | 7,853 |
| 8,252 |
| 8,162 |
| Concession granted:(a) | | | | | | | | | | | | Interest rate reduction | 40 | % | 63 | % | 76 | % | | 62 | % | 59 | % | 75 | % | | 54 | % | 60 | % | 76 | % | Term or payment extension | 55 |
| 72 |
| 90 |
| | 66 |
| 69 |
| 83 |
| | 62 |
| 70 |
| 86 |
| Principal and/or interest deferred | 44 |
| 15 |
| 16 |
| | 20 |
| 10 |
| 19 |
| | 29 |
| 12 |
| 18 |
| Principal forgiveness | 8 |
| 16 |
| 26 |
| | 7 |
| 13 |
| 9 |
| | 7 |
| 14 |
| 16 |
| Other(b) | 38 |
| 33 |
| 25 |
| | 58 |
| 31 |
| 6 |
| | 51 |
| 32 |
| 14 |
|
(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. Concessions offered on trial modifications are generally consistent with those granted on permanent modifications. | | (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. Concessions offered on trial modifications are generally consistent with those granted on permanent modifications. |
| | (b) | Includes variable interest rate to fixed interest rate modifications for the years ended December 31, 2018, 2017 and 2016. Also includes forbearances that meet the definition of a TDR for the year ended December 31, 2018. Forbearances suspend or reduce monthly payments for a specific period of time to address a temporary hardship. |
(b)Includes variable interest rate to fixed interest rate modifications and payment delays that meet the definition of a TDR for the years ended December 31, 2020, 2019 and 2018.
| | | | | | | | | 240 | | JPMorgan Chase & Co./20182020 Form 10-K | | 227 |
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 financial effects of permanent modifications and doesdo 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.debt, loans with short-term or other insignificant modifications that are not considered concessions, and loans for which the Firm has elected to apply the option to suspend the application of accounting guidance for TDRs as provided by the CARES Act and extended by the Consolidated Appropriations Act. | | | | | | | | | | | | Year ended December 31, (in millions, except weighted - average data) | 2020 | 2019 | 2018 | Weighted-average interest rate of loans with interest rate reductions – before TDR | 5.09 | % | 5.68 | % | 5.50 | % | Weighted-average interest rate of loans with interest rate reductions – after TDR | 3.28 | | 3.81 | | 3.60 | | Weighted-average remaining contractual term (in years) of loans with term or payment extensions – before TDR | 22 | 20 | 21 | Weighted-average remaining contractual term (in years) of loans with term or payment extensions – after TDR | 39 | 39 | 38 | Charge-offs recognized upon permanent modification | $ | 5 | | $ | 1 | | $ | 2 | | Principal deferred | 16 | | 19 | | 30 | | Principal forgiven | 5 | | 7 | | 17 | | Balance of loans that redefaulted within one year of permanent modification(a) | $ | 199 | | $ | 166 | | $ | 161 | |
(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 2 contractual payments past due. In the event that a modified loan redefaults, it will generally be liquidated through foreclosure or another similar type of liquidation transaction. Redefaults of loans modified within the last twelve months may not be representative of ultimate redefault levels. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions, except weighted-average data) | Residential mortgage | | Home equity | | Total residential real estate – excluding PCI | | | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | Weighted-average interest rate of loans with interest rate reductions – before TDR | 5.65 | % | 5.15 | % | 5.59 | % | | 5.39 | % | 4.94 | % | 4.99 | % | | 5.50 | % | 5.06 | % | 5.36 | % | Weighted-average interest rate of loans with interest rate reductions – after TDR | 3.80 |
| 2.99 |
| 2.93 |
| | 3.46 |
| 2.64 |
| 2.34 |
| | 3.60 |
| 2.83 |
| 2.70 |
| Weighted-average remaining contractual term (in years) of loans with term or payment extensions – before TDR | 24 |
| 24 |
| 24 |
| | 19 |
| 21 |
| 18 |
| | 21 |
| 23 |
| 22 |
| Weighted-average remaining contractual term (in years) of loans with term or payment extensions – after TDR | 38 |
| 38 |
| 38 |
| | 39 |
| 39 |
| 38 |
| | 38 |
| 38 |
| 38 |
| Charge-offs recognized upon permanent modification | $ | 1 |
| $ | 2 |
| $ | 4 |
| | $ | 1 |
| $ | 1 |
| $ | 1 |
| | $ | 2 |
| $ | 3 |
| $ | 5 |
| Principal deferred | 21 |
| 12 |
| 30 |
| | 9 |
| 10 |
| 23 |
| | 30 |
| 22 |
| 53 |
| Principal forgiven | 10 |
| 20 |
| 44 |
| | 7 |
| 13 |
| 7 |
| | 17 |
| 33 |
| 51 |
| Balance of loans that redefaulted within one year of permanent modification(a) | $ | 97 |
| $ | 124 |
| $ | 98 |
| | $ | 64 |
| $ | 56 |
| $ | 40 |
| | $ | 161 |
| $ | 180 |
| $ | 138 |
|
| | (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 two 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, 2018, 2020, the weighted-average estimated remaining lives of residential real estate loans excluding PCI loans, permanently modified in TDRs were 9 years for residential mortgage and 8 years for home equity. 6 years. 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, 20182020 and 2017,2019, the Firm had non-PCI residential real estate loans, excluding those insured by U.S. government agencies, with a carrying value of $653 $846 million and $787 million, $1.2 billion, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.
| | | | | | | | | 228 | | JPMorgan Chase & Co./20182020 Form 10-K |
Other consumer loans
The table below provides information for other consumer retained loan classes, including auto and business banking loans.
| | | | | | | | | | | | | | | | | | | | | | December 31, (in millions, except ratios) | Auto | | Consumer & Business Banking | | Total other consumer | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | Loan delinquency | | | | | | | | | Current | $ | 62,984 |
| $ | 65,651 |
| | $ | 26,249 |
| $ | 25,454 |
| | $ | 89,233 |
| $ | 91,105 |
| 30–119 days past due | 589 |
| 584 |
| | 252 |
| 213 |
| | 841 |
| 797 |
| 120 or more days past due | — |
| 7 |
| | 111 |
| 122 |
| | 111 |
| 129 |
| Total retained loans | $ | 63,573 |
| $ | 66,242 |
| | $ | 26,612 |
| $ | 25,789 |
| | $ | 90,185 |
| $ | 92,031 |
| % of 30+ days past due to total retained loans | 0.93 | % | 0.89 | % | | 1.36 | % | 1.30 | % | | 1.06 | % | 1.01 | % | Nonaccrual loans(a) | 128 |
| 141 |
| | 245 |
| 283 |
| | 373 |
| 424 |
| Geographic region(b) | | | | California | $ | 8,330 |
| $ | 8,445 |
| | $ | 5,520 |
| $ | 5,032 |
| | $ | 13,850 |
| $ | 13,477 |
| Texas | 6,531 |
| 7,013 |
| | 2,993 |
| 2,916 |
| | 9,524 |
| 9,929 |
| New York | 3,863 |
| 4,023 |
| | 4,381 |
| 4,195 |
| | 8,244 |
| 8,218 |
| Illinois | 3,716 |
| 3,916 |
| | 2,046 |
| 2,017 |
| | 5,762 |
| 5,933 |
| Florida | 3,256 |
| 3,350 |
| | 1,502 |
| 1,424 |
| | 4,758 |
| 4,774 |
| Arizona | 2,084 |
| 2,221 |
| | 1,491 |
| 1,383 |
| | 3,575 |
| 3,604 |
| Ohio | 1,973 |
| 2,105 |
| | 1,305 |
| 1,380 |
| | 3,278 |
| 3,485 |
| New Jersey | 1,981 |
| 2,044 |
| | 723 |
| 721 |
| | 2,704 |
| 2,765 |
| Michigan | 1,357 |
| 1,418 |
| | 1,329 |
| 1,357 |
| | 2,686 |
| 2,775 |
| Louisiana | 1,587 |
| 1,656 |
| | 860 |
| 849 |
| | 2,447 |
| 2,505 |
| All other | 28,895 |
| 30,051 |
| | 4,462 |
| 4,515 |
| | 33,357 |
| 34,566 |
| Total retained loans | $ | 63,573 |
| $ | 66,242 |
| | $ | 26,612 |
| $ | 25,789 |
| | $ | 90,185 |
| $ | 92,031 |
| Loans by risk ratings(c) | | | | | | | | | Noncriticized | $ | 15,749 |
| $ | 15,604 |
| | $ | 18,743 |
| $ | 17,938 |
| | $ | 34,492 |
| $ | 33,542 |
| Criticized performing | 273 |
| 93 |
| | 751 |
| 791 |
| | 1,024 |
| 884 |
| Criticized nonaccrual | — |
| 9 |
| | 191 |
| 213 |
| | 191 |
| 222 |
|
| | (a) | There were no loans that were 90 or more days past due and still accruing interest at December 31, 2018 and December 31, 2017. |
| | (b) | The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2018. |
| | (c) | For risk-rated business banking and auto loans, the primary credit quality indicator is the risk rating of the loan, including whether the loans are considered to be criticized and/or nonaccrual. |
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 229241 |
Notes to consolidated financial statements
Auto and other
Other consumer impaired loans and loan modifications
The following table provides information abouton delinquency, which is the Firm’s primary credit quality indicator for retained auto and other consumer impairedloans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | (in millions, except ratios) | Term Loans by origination year | | Revolving loans | | | | 2020 | | 2019 | 2018 | 2017 | 2016 | Prior to 2016 | | Within the revolving period | Converted to term loans | Total | | Total | Loan delinquency(a) | | | | | | | | | | | | | | Current | $ | 46,169 | | (b) | $ | 12,829 | | $ | 7,367 | | $ | 4,521 | | $ | 2,058 | | $ | 742 | | | $ | 2,517 | | $ | 158 | | $ | 76,361 | | | $ | 51,005 | | 30–119 days past due | 97 | | | 107 | | 77 | | 53 | | 42 | | 23 | | | 30 | | 17 | | 446 | | | 667 | | 120 or more days past due | 0 | | | 0 | | 0 | | 1 | | 0 | | 1 | | | 8 | | 8 | | 18 | | | 10 | | Total retained loans | $ | 46,266 | | | $ | 12,936 | | $ | 7,444 | | $ | 4,575 | | $ | 2,100 | | $ | 766 | | | $ | 2,555 | | $ | 183 | | $ | 76,825 | | | $ | 51,682 | | % of 30+ days past due to total retained loans | 0.21 | % | | 0.83 | % | 1.03 | % | 1.18 | % | 2.00 | % | 3.13 | % | | 1.49 | % | 13.66 | % | 0.60 | % | | 1.31 | % |
(a)At December 31, 2020, loans including risk-rated business bankingunder payment deferral programs offered in response to the COVID-19 pandemic which are still within their deferral period and performing according to their modified terms are generally not considered delinquent. (b)At December 31, 2020, included $19.2 billion of loans in Business Banking under the PPP. PPP loans are guaranteed by the SBA. Other than in certain limited circumstances, the Firm typically does not recognize charge-offs, classify as nonaccrual nor record an allowance for loan losses on these loans.
Nonaccrual and other credit quality indicators The following table provides information on nonaccrual and other credit quality indicators for retained auto and other consumer loans. | | | | | | | | | (in millions, except ratios) | Total Auto and other | December 31, 2020 | December 31, 2019 | Nonaccrual loans(a)(b)(c) | 151 | | 146 | | | | | Geographic region(d) | | | California | $ | 12,302 | | $ | 7,795 | | New York | 8,824�� | | 3,706 | | Texas | 8,235 | | 5,457 | | Florida | 4,668 | | 3,025 | | Illinois | 3,768 | | 2,443 | | New Jersey | 2,646 | | 1,798 | | Arizona | 2,465 | | 1,347 | | Ohio | 2,163 | | 1,490 | | Pennsylvania | 1,924 | | 1,721 | | Colorado | 1,910 | | 1,247 | | All other | 27,920 | | 21,653 | | Total retained loans | $ | 76,825 | | $ | 51,682 | |
(a)There were 0 loans that were 90 or more days past due and still accruing interest at December 31, 2020 and 2019. (b)All nonaccrual auto and other consumer loans generally have an allowance. Certain nonaccrual loans that are considered collateral-dependent have been placedcharged down to the lower of amortized cost or the fair value of their underlying collateral less costs to sell. If the value of the underlying collateral improves subsequent to the charge down, the related allowance may be negative. (c)Interest income on nonaccrual status,loans recognized on a cash basis was not material for the years ended December 31, 2020 and loans that have been modified in TDRs. | | | | | | | | December 31, (in millions) | 2018 |
| 2017 |
| Impaired loans | | | With an allowance | $ | 222 |
| $ | 272 |
| Without an allowance(a) | 29 |
| 26 |
| Total impaired loans(b)(c) | $ | 251 |
| $ | 298 |
| Allowance for loan losses related to impaired loans | $ | 63 |
| $ | 73 |
| Unpaid principal balance of impaired loans(d) | 355 |
| 402 |
| Impaired loans on nonaccrual status | 229 |
| 268 |
|
| | (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 $275 million, $427 million and $635 million for the years ended December 31, 2018, 2017 and 2016, respectively. The related interest income on impaired loans, including those on a cash basis, was not material for the years ended December 31, 2018, 2017 and 2016. |
| | (d) | Represents the contractual amount of principal owed at December 31, 2018 and 2017. 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 modifications2019.
(d)The geographic regions presented in this table are ordered based on the magnitude of the corresponding loan balances at December 31, 2020. 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 TDRsLoans with short-term or other insignificant modifications that are reported as impaired loans.At December 31, 2018 and 2017, other consumer loans modified in TDRs were $79 million and $102 million, respectively. not considered concessions are not TDRs. The impact of these modifications, as well as new TDRs, were not material to the Firm for the years ended December 31, 2018, 20172020, 2019 and 2016. 2018. Additional commitments to lend to borrowers whose loans have been modified in TDRs as of December 31, 20182020 and 2017 2019 were not material. TDRs on nonaccrual status were $57 million and $72 million at December 31, 2018 and 2017, respectively.
| | | | | | | | | 230242 | | JPMorgan Chase & Co./20182020 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. All of the Firm’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.
Since 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 principal 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 Firm’s residential real estate PCI loans 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, 2018, to have a remaining weighted-average life of 7 years.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 231 |
Notes to consolidated financial statements
Residential real estate – PCI loans
The table below provides information about the Firm’s consumer, excluding credit card, PCI loans.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, (in millions, except ratios) | Home equity | | Prime mortgage | | Subprime mortgage | | Option ARMs | | Total PCI | 2018 | 2017 |
| 2018 | 2017 |
| 2018 | 2017 |
| 2018 | 2017 |
| 2018 | 2017 | Carrying value(a) | $ | 8,963 |
| $ | 10,799 |
| | $ | 4,690 |
| $ | 6,479 |
| | $ | 1,945 |
| $ | 2,609 |
| | $ | 8,436 |
| $ | 10,689 |
| | $ | 24,034 |
| $ | 30,576 |
| Loan delinquency (based on unpaid principal balance) | | | | | | | | | | | | | | Current | $ | 8,624 |
| $ | 10,272 |
| | $ | 4,226 |
| $ | 5,839 |
| | $ | 2,033 |
| $ | 2,640 |
| | $ | 7,592 |
| $ | 9,662 |
| | $ | 22,475 |
| $ | 28,413 |
| 30–149 days past due | 278 |
| 356 |
| | 259 |
| 336 |
| | 286 |
| 381 |
| | 398 |
| 547 |
| | 1,221 |
| 1,620 |
| 150 or more days past due | 242 |
| 392 |
| | 223 |
| 327 |
| | 123 |
| 176 |
| | 457 |
| 689 |
| | 1,045 |
| 1,584 |
| Total loans | $ | 9,144 |
| $ | 11,020 |
| | $ | 4,708 |
| $ | 6,502 |
| | $ | 2,442 |
| $ | 3,197 |
| | $ | 8,447 |
| $ | 10,898 |
| | $ | 24,741 |
| $ | 31,617 |
| % of 30+ days past due to total loans | 5.69 | % | 6.79 | % | | 10.24 | % | 10.20 | % | | 16.75 | % | 17.42 | % | | 10.12 | % | 11.34 | % | | 9.16 | % | 10.13 | % | Current estimated LTV ratios (based on unpaid principal balance)(b)(c) | | | | | | | | | | | | | Greater than 125% and refreshed FICO scores: | | | | | | | | | | | | | | | Equal to or greater than 660 | $ | 17 |
| $ | 33 |
| | $ | 1 |
| $ | 4 |
| | $ | — |
| $ | 2 |
| | $ | 3 |
| $ | 6 |
| | $ | 21 |
| $ | 45 |
| Less than 660 | 13 |
| 21 |
| | 7 |
| 16 |
| | 9 |
| 20 |
| | 7 |
| 9 |
| | 36 |
| 66 |
| 101% to 125% and refreshed FICO scores: | | | | | | | | | | | | | | | Equal to or greater than 660 | 135 |
| 274 |
| | 6 |
| 16 |
| | 4 |
| 20 |
| | 17 |
| 43 |
| | 162 |
| 353 |
| Less than 660 | 65 |
| 132 |
| | 22 |
| 42 |
| | 35 |
| 75 |
| | 33 |
| 71 |
| | 155 |
| 320 |
| 80% to 100% and refreshed FICO scores: | | | | | | | | | | | | | | | Equal to or greater than 660 | 805 |
| 1,195 |
| | 75 |
| 221 |
| | 54 |
| 119 |
| | 119 |
| 316 |
| | 1,053 |
| 1,851 |
| Less than 660 | 388 |
| 559 |
| | 112 |
| 230 |
| | 161 |
| 309 |
| | 190 |
| 371 |
| | 851 |
| 1,469 |
| Lower than 80% and refreshed FICO scores: | | | | | | | | | | | | | | | Equal to or greater than 660 | 5,548 |
| 6,134 |
| | 2,689 |
| 3,551 |
| | 739 |
| 895 |
| | 5,111 |
| 6,113 |
| | 14,087 |
| 16,693 |
| Less than 660 | 1,908 |
| 2,095 |
| | 1,568 |
| 2,103 |
| | 1,327 |
| 1,608 |
| | 2,622 |
| 3,499 |
| | 7,425 |
| 9,305 |
| No FICO/LTV available | 265 |
| 577 |
| | 228 |
| 319 |
| | 113 |
| 149 |
| | 345 |
| 470 |
| | 951 |
| 1,515 |
| Total unpaid principal balance | $ | 9,144 |
| $ | 11,020 |
| | $ | 4,708 |
| $ | 6,502 |
| | $ | 2,442 |
| $ | 3,197 |
| | $ | 8,447 |
| $ | 10,898 |
| | $ | 24,741 |
| $ | 31,617 |
| Geographic region (based on unpaid principal balance)(d) | | | | | | | | | | | | | | California | $ | 5,420 |
| $ | 6,555 |
| | $ | 2,578 |
| $ | 3,716 |
| | $ | 593 |
| $ | 797 |
| | $ | 4,798 |
| $ | 6,225 |
| | $ | 13,389 |
| $ | 17,293 |
| Florida | 976 |
| 1,137 |
| | 332 |
| 428 |
| | 234 |
| 296 |
| | 713 |
| 878 |
| | 2,255 |
| 2,739 |
| New York | 525 |
| 607 |
| | 365 |
| 457 |
| | 268 |
| 330 |
| | 502 |
| 628 |
| | 1,660 |
| 2,022 |
| Washington | 419 |
| 532 |
| | 98 |
| 135 |
| | 44 |
| 61 |
| | 177 |
| 238 |
| | 738 |
| 966 |
| Illinois | 233 |
| 273 |
| | 154 |
| 200 |
| | 123 |
| 161 |
| | 199 |
| 249 |
| | 709 |
| 883 |
| New Jersey | 210 |
| 242 |
| | 134 |
| 178 |
| | 88 |
| 110 |
| | 258 |
| 336 |
| | 690 |
| 866 |
| Massachusetts | 65 |
| 79 |
| | 113 |
| 149 |
| | 73 |
| 98 |
| | 240 |
| 307 |
| | 491 |
| 633 |
| Maryland | 48 |
| 57 |
| | 95 |
| 129 |
| | 96 |
| 132 |
| | 178 |
| 232 |
| | 417 |
| 550 |
| Virginia | 54 |
| 66 |
| | 91 |
| 123 |
| | 37 |
| 51 |
| | 211 |
| 280 |
| | 393 |
| 520 |
| Arizona | 165 |
| 203 |
| | 69 |
| 106 |
| | 43 |
| 60 |
| | 112 |
| 156 |
| | 389 |
| 525 |
| All other | 1,029 |
| 1,269 |
| | 679 |
| 881 |
| | 843 |
| 1,101 |
| | 1,059 |
| 1,369 |
| | 3,610 |
| 4,620 |
| Total unpaid principal balance | $ | 9,144 |
| $ | 11,020 |
| | $ | 4,708 |
| $ | 6,502 |
| | $ | 2,442 |
| $ | 3,197 |
| | $ | 8,447 |
| $ | 10,898 |
| | $ | 24,741 |
| $ | 31,617 |
|
| | (a) | Carrying value includes the effect of fair value adjustments that were applied to the consumer PCI portfolio at the date of acquisition. |
| | (b) | 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. |
| | (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, 2018. |
| | | | 232 | | JPMorgan Chase & Co./2018 Form 10-K |
Approximately 26% of the PCI home equity portfolio are senior lien loans; the remaining balance are junior lien HELOANs or HELOCs. The following table provides delinquency statistics for PCI junior lien home equity loans and lines of credit based on the unpaid principal balance as of December 31, 2018 and 2017.
| | | | | | | | | | | | | | December 31, (in millions, except ratios) | | Total loans | | Total 30+ day delinquency rate | | 2018 | 2017 | | 2018 | 2017 | HELOCs:(a)(b) | | $ | 6,531 |
| $ | 7,926 |
| | 4.00 | % | 4.62 | % | HELOANs | | 280 |
| 360 |
| | 3.57 |
| 5.28 |
| Total | | $ | 6,811 |
| $ | 8,286 |
| | 3.98 | % | 4.65 | % |
| | (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) | Includes loans modified into fixed rate amortizing loans. |
The table below presents the accretable yield activity for the Firm’s PCI consumer loans for the years endedDecember 31, 2018, 2017 and 2016, and represents the Firm’s estimate of gross interest income expected to be earned over the remaining life of the PCI loan portfolios. The table excludes the cost to fund the PCI portfolios, and therefore the accretable yield does not represent net interest income expected to be earned on these portfolios.
| | | | | | | | | | | | | Year ended December 31, (in millions, except ratios) | Total PCI | 2018 |
| | 2017 |
| | 2016 |
| Beginning balance | $ | 11,159 |
| | $ | 11,768 |
| | $ | 13,491 |
| Accretion into interest income | (1,249 | ) | | (1,396 | ) | | (1,555 | ) | Changes in interest rates on variable-rate loans | (109 | ) | | 503 |
| | 260 |
| Other changes in expected cash flows(a) | (1,379 | ) | | 284 |
| | (428 | ) | Balance at December 31 | $ | 8,422 |
| | $ | 11,159 |
| | $ | 11,768 |
| Accretable yield percentage | 4.92 | % | | 4.53 | % | | 4.35 | % |
| | (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. |
Active and suspended foreclosure
At December 31, 2018 and 2017, the Firm had PCI residential real estate loans with an unpaid principal balance of $964 million and $1.3 billion, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 233 |
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 following table below provides information abouton delinquency, which is the Firm’s primary credit quality indicator for retained credit card loans. | | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | 2018 | 2017 | Net charge-offs | $ | 4,518 |
| $ | 4,123 |
| % of net charge-offs to retained loans | 3.10 | % | 2.95 | % | Loan delinquency | | | Current and less than 30 days past due and still accruing | $ | 153,746 |
| $ | 146,704 |
| 30–89 days past due and still accruing | 1,426 |
| 1,305 |
| 90 or more days past due and still accruing | 1,444 |
| 1,378 |
| Total retained credit card loans | $ | 156,616 |
| $ | 149,387 |
| Loan delinquency ratios | | | % of 30+ days past due to total retained loans | 1.83 | % | 1.80 | % | % of 90+ days past due to total retained loans | 0.92 |
| 0.92 |
| Credit card loans by geographic region(a) | | | California | $ | 23,757 |
| $ | 22,245 |
| Texas | 15,085 |
| 14,200 |
| New York | 13,601 |
| 13,021 |
| Florida | 9,770 |
| 9,138 |
| Illinois | 8,938 |
| 8,585 |
| New Jersey | 6,739 |
| 6,506 |
| Ohio | 5,094 |
| 4,997 |
| Pennsylvania | 4,996 |
| 4,883 |
| Colorado | 4,309 |
| 4,006 |
| Michigan | 3,912 |
| 3,826 |
| All other | 60,415 |
| 57,980 |
| Total retained credit card loans | $ | 156,616 |
| $ | 149,387 |
| Percentage of portfolio based on carrying value with estimated refreshed FICO scores | | | Equal to or greater than 660 | 84.2 | % | 84.0 | % | Less than 660 | 15.0 |
| 14.6 |
| No FICO available | 0.8 |
| 1.4 |
|
| | a) | The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2018. |
| | | | | | | | | | | | | | | | | |
(in millions, except ratios) | December 31, 2020 | | December 31, 2019 | Within the revolving period | Converted to term loans(b) | Total | | Total | Loan delinquency(a) | | | | | | Current and less than 30 days past due and still accruing | $ | 139,783 | | $ | 1,239 | | $ | 141,022 | | | $ | 165,767 | | 30–89 days past due and still accruing | 997 | | 94 | | 1,091 | | | 1,550 | | 90 or more days past due and still accruing | 1,277 | | 42 | | 1,319 | | | 1,607 | | Total retained loans | $ | 142,057 | | $ | 1,375 | | $ | 143,432 | | | $ | 168,924 | | Loan delinquency ratios | | | | | | % of 30+ days past due to total retained loans | 1.60 | % | 9.89 | % | 1.68 | % | | 1.87 | % | % of 90+ days past due to total retained loans | 0.90 | | 3.05 | | 0.92 | | | 0.95 | |
(a)At December 31, 2020, loans under payment deferral programs offered in response to the COVID-19 pandemic which are still within their deferral period and performing according to their modified terms are generally not considered delinquent.
(b)Represents TDRs.
Other credit quality indicators The following table provides information on other credit quality indicators for retained credit card loans. | | | | | | | | | (in millions, except ratios) | December 31, 2020 | December 31, 2019 | Geographic region(a) | | | California | $ | 20,921 | | $ | 25,783 | | Texas | 14,544 | | 16,728 | | New York | 11,919 | | 14,544 | | Florida | 9,562 | | 10,830 | | Illinois | 8,006 | | 9,579 | | New Jersey | 5,927 | | 7,165 | | Ohio | 4,673 | | 5,406 | | Pennsylvania | 4,476 | | 5,245 | | Colorado | 4,092 | | 4,763 | | Michigan | 3,553 | | 4,164 | | All other | 55,759 | | 64,717 | | Total retained loans | $ | 143,432 | | $ | 168,924 | | Percentage of portfolio based on carrying value with estimated refreshed FICO scores | | | Equal to or greater than 660 | 85.9 | % | 84.0 | % | Less than 660 | 13.9 | | 15.4 | | No FICO available | 0.2 | | 0.6 | |
(a)The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at December 31, 2020. | | | | | | | | | 234 | | JPMorgan Chase & Co./20182020 Form 10-K | | 243 |
Notes to consolidated financial statements
Credit card impaired loans and loanLoan modifications
The table below provides 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) | 2018 |
| 2017 |
| Impaired credit card loans with an allowance(a)(b)(c) | $ | 1,319 |
| $ | 1,215 |
| Allowance for loan losses related to impaired credit card loans | 440 |
| 383 |
|
| | (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) | 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) | 2018 |
| 2017 |
| 2016 |
| Average impaired credit card loans | $ | 1,260 |
| $ | 1,214 |
| $ | 1,325 |
| Interest income on impaired credit card loans | 65 |
| 59 |
| 63 |
|
Loan modifications
The Firm may offer one of a number of loan modification programs granting concessions to credit card borrowers who are experiencing financial difficulty. MostThe Firm grants concessions for most of the credit card loans have been modified under long-term programs for borrowers who are experiencing financial difficulties.programs. These modifications involve placing the customer on a fixed payment plan, generally for 60 months,, and typically include reducing the interest rate on the credit card.Substantially all modifications under the Firm’s long-term programs are considered to be TDRs. Loans with short-term or other insignificant modifications that are not considered concessions are not 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, 2018, 2017 and 2016, were $866 million, $756 million and $636 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. For all periods disclosed, new enrollments were less than 1% of total retained credit card loans. | | | | | | | | | | | | | | | Year ended December 31, (in millions, except weighted-average data) | | 2020 | 2019 | 2018 | Balance of new TDRs(a) | | $ | 818 | | $ | 961 | | $ | 866 | | Weighted-average interest rate of loans – before TDR | | 18.04 | % | 19.07 | % | 17.98 | % | Weighted-average interest rate of loans – after TDR | | 4.64 | | 4.70 | | 5.16 | | Balance of loans that redefaulted within one year of modification(b) | | $ | 110 | | $ | 148 | | $ | 116 | |
| | | | | | | | | | | | Year ended December 31, (in millions, except weighted-average data) | | 2018 | 2017 | 2016 | Weighted-average interest rate of loans – before TDR | | 17.98 | % | 16.58 | % | 15.56 | % | Weighted-average interest rate of loans – after TDR | | 5.16 |
| 4.88 |
| 4.76 |
| Loans that redefaulted within one year of modification(a)(b) | | $ | 116 |
| $ | 93 |
| $ | 74 |
|
(a)Represents the outstanding balance prior to modification. | | (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. |
| | (b) | The prior period amounts have been revised to conform with the current period presentation. |
(b)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, payment default is deemed to have occurred when the borrower misses two2 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 forDefaulted modified credit card loans was expectedremain in the modification program and continue to be 33.38%, 31.54% and 28.87% as ofDecember 31, 2018, 2017 and 2016, respectively. charged off in accordance with the Firm’s standard charge-off policy.
| | | | | | | | | 244 | | JPMorgan Chase & Co./20182020 Form 10-K | | 235 |
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., PD and LGD) may differ as they reflect internal historical experiences and assumptions. The Firm generally considers internal ratings range from “AAA/Aaa”with qualitative characteristics 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. Refer to Note 4 for further detail on industry concentrations.
| | | | | | | | | 236 | | JPMorgan Chase & Co./20182020 Form 10-K |
The table below provides information by class of receivable for the retained loans in the Wholesale portfolio segment. For additional information on industry concentrations, refer to Note 4. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | Commercial and industrial | | Real estate | | Financial institutions | | Governments & Agencies | | Other(d) | | Total retained loans | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | Loans by risk ratings | | | | | | | | | | | | | | | | | | Investment-grade | $ | 73,497 |
| $ | 68,071 |
| | $ | 100,107 |
| $ | 98,467 |
| | $ | 32,178 |
| $ | 26,791 |
| | $ | 13,984 |
| $ | 15,140 |
| | $ | 119,963 |
| $ | 103,212 |
| | $ | 339,729 |
| $ | 311,681 |
| Noninvestment- grade: | | | | | | | | | | | | | | | | | | Noncriticized | 51,720 |
| 46,558 |
| | 14,876 |
| 14,335 |
| | 15,316 |
| 13,071 |
| | 201 |
| 369 |
| | 11,478 |
| 9,988 |
| | 93,591 |
| 84,321 |
| Criticized performing | 3,738 |
| 3,983 |
| | 620 |
| 710 |
| | 150 |
| 210 |
| | 2 |
| — |
| | 182 |
| 259 |
| | 4,692 |
| 5,162 |
| Criticized nonaccrual | 851 |
| 1,357 |
| | 134 |
| 136 |
| | 4 |
| 2 |
| | — |
| — |
| | 161 |
| 239 |
| | 1,150 |
| 1,734 |
| Total noninvestment- grade | 56,309 |
| 51,898 |
| | 15,630 |
| 15,181 |
| | 15,470 |
| 13,283 |
| | 203 |
| 369 |
| | 11,821 |
| 10,486 |
| | 99,433 |
| 91,217 |
| Total retained loans | $ | 129,806 |
| $ | 119,969 |
| | $ | 115,737 |
| $ | 113,648 |
| | $ | 47,648 |
| $ | 40,074 |
| | $ | 14,187 |
| $ | 15,509 |
| | $ | 131,784 |
| $ | 113,698 |
| | $ | 439,162 |
| $ | 402,898 |
| % of total criticized exposure to total retained loans | 3.54 | % | 4.45 | % | | 0.65 | % | 0.74 | % | | 0.32 | % | 0.53 | % | | 0.01 | % | — |
| | 0.26 | % | 0.44 | % | | 1.33 | % | 1.71 | % | % of criticized nonaccrual to total retained loans | 0.66 |
| 1.13 |
| | 0.12 |
| 0.12 |
| | 0.01 |
| — |
| | — |
| — |
| | 0.12 |
| 0.21 |
| | 0.26 |
| 0.43 |
| Loans by geographic distribution(a) | | | | | | | | | | | | | | | | | | Total non-U.S. | $ | 29,572 |
| $ | 28,470 |
| | $ | 2,967 |
| $ | 3,101 |
| | $ | 18,524 |
| $ | 16,790 |
| | $ | 3,150 |
| $ | 2,906 |
| | $ | 48,433 |
| $ | 44,112 |
| | $ | 102,646 |
| $ | 95,379 |
| Total U.S. | 100,234 |
| 91,499 |
| | 112,770 |
| 110,547 |
| | 29,124 |
| 23,284 |
| | 11,037 |
| 12,603 |
| | 83,351 |
| 69,586 |
| | 336,516 |
| 307,519 |
| Total retained loans | $ | 129,806 |
| $ | 119,969 |
| | $ | 115,737 |
| $ | 113,648 |
| | $ | 47,648 |
| $ | 40,074 |
| | $ | 14,187 |
| $ | 15,509 |
| | $ | 131,784 |
| $ | 113,698 |
| | $ | 439,162 |
| $ | 402,898 |
| | | | | | | | | | | | | | | | | | | Net charge-offs/(recoveries) | $ | 165 |
| $ | 117 |
| | $ | (20 | ) | $ | (4 | ) | | $ | — |
| $ | 6 |
| | $ | — |
| $ | 5 |
| | $ | 10 |
| $ | (5 | ) | | $ | 155 |
| $ | 119 |
| % of net charge-offs/(recoveries) to end-of-period retained loans | 0.13 | % | 0.10 | % | | (0.02 | )% | — | % | | — | % | 0.01 | % | | — | % | 0.03 | % | | 0.01 | % | — |
| | 0.04 | % | 0.03 | % | | | | | | | | | | | | | | | | | | | Loan delinquency(b) | | | | | | | | | | | | | | | | | | Current and less than 30 days past due and still accruing | $ | 128,678 |
| $ | 118,288 |
| | $ | 115,533 |
| $ | 113,258 |
| | $ | 47,622 |
| $ | 40,042 |
| | $ | 14,165 |
| $ | 15,493 |
| | $ | 130,918 |
| $ | 112,559 |
| | $ | 436,916 |
| $ | 399,640 |
| 30–89 days past due and still accruing | 109 |
| 216 |
| | 67 |
| 242 |
| | 12 |
| 15 |
| | 18 |
| 12 |
| | 702 |
| 898 |
| | 908 |
| 1,383 |
| 90 or more days past due and still accruing(c) | 168 |
| 108 |
| | 3 |
| 12 |
| | 10 |
| 15 |
| | 4 |
| 4 |
| | 3 |
| 2 |
| | 188 |
| 141 |
| Criticized nonaccrual | 851 |
| 1,357 |
| | 134 |
| 136 |
| | 4 |
| 2 |
| | — |
| — |
| | 161 |
| 239 |
| | 1,150 |
| 1,734 |
| Total retained loans | $ | 129,806 |
| $ | 119,969 |
| | $ | 115,737 |
| $ | 113,648 |
| | $ | 47,648 |
| $ | 40,074 |
| | $ | 14,187 |
| $ | 15,509 |
| | $ | 131,784 |
| $ | 113,698 |
| | $ | 439,162 |
| $ | 402,898 |
|
| | (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 and individual entities (predominantly consists of Wealth Management clients within AWM and includes exposure to personal investment companies and personal and testamentary trusts), SPEs and Private education and civic organizations. For more information on SPEs, refer to Note 14. |
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 237245 |
Notes to consolidated financial statements
The following tables provide information on internal risk rating, which is the primary credit quality indicator for retained wholesale loans.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, (in millions, except ratios) | Secured by real estate | | Commercial and industrial | | Other(b) | | Total retained loans | 2020 | 2019 | | 2020 | | 2019 | | 2020 | 2019 | | 2020 | | 2019 | Loans by risk ratings | | | | | | | | | | | | | | Investment-grade | $ | 90,147 | | $ | 96,611 | | | $ | 71,917 | | (a) | $ | 80,489 | | | $ | 217,209 | | $ | 186,344 | | | $ | 379,273 | | (a) | $ | 363,444 | | Noninvestment- grade: | | | | | | | | | | | | | | Noncriticized | 26,129 | | 22,493 | | | 57,870 | | | 60,437 | | | 33,053 | | 27,591 | | | 117,052 | | | 110,521 | | Criticized performing | 3,234 | | 1,131 | | | 10,991 | | | 4,399 | | | 1,079 | | 1,126 | | | 15,304 | | | 6,656 | | Criticized nonaccrual | 483 | | 183 | | | 1,931 | | | 844 | | | 904 | | 30 | | | 3,318 | | | 1,057 | | Total noninvestment- grade | 29,846 | | 23,807 | | | 70,792 | | | 65,680 | | | 35,036 | | 28,747 | | | 135,674 | | | 118,234 | | Total retained loans | $ | 119,993 | | $ | 120,418 | | | $ | 142,709 | | | $ | 146,169 | | | $ | 252,245 | | $ | 215,091 | | | $ | 514,947 | | | $ | 481,678 | | % of investment-grade to total retained loans | 75.13 | % | 80.23 | % | | 50.39 | % | | 55.07 | % | | 86.11 | % | 86.63 | % | | 73.65 | % | | 75.45 | % | % of total criticized to total retained loans | 3.10 | | 1.09 | | | 9.05 | | | 3.59 | | | 0.79 | | 0.54 | | | 3.62 | | | 1.60 | | % of criticized nonaccrual to total retained loans | 0.40 | | 0.15 | | | 1.35 | | | 0.58 | | | 0.36 | | 0.01 | | | 0.64 | | | 0.22 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Secured by real estate | | | (in millions) | December 31, 2020 | | December 31, 2019 | Term loans by origination year | | Revolving loans | | | | | 2020 | 2019 | 2018 | 2017 | 2016 | Prior to 2016 | | Within the revolving period | Converted to term loans | | Total | | Total | Loans by risk ratings | | | | | | | | | | | | | | Investment-grade | $ | 16,560 | | $ | 19,575 | | $ | 12,192 | | $ | 11,017 | | $ | 13,439 | | $ | 16,266 | | | $ | 1,098 | | $ | 0 | | | $ | 90,147 | | | $ | 96,611 | | Noninvestment-grade | 3,327 | | 4,339 | | 4,205 | | 2,916 | | 2,575 | | 11,994 | | | 489 | | 1 | | | 29,846 | | | 23,807 | | Total retained loans | $ | 19,887 | | $ | 23,914 | | $ | 16,397 | | $ | 13,933 | | $ | 16,014 | | $ | 28,260 | | | $ | 1,587 | | $ | 1 | | | $ | 119,993 | | | $ | 120,418 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | (in millions) | December 31, 2020 | | December 31, 2019 | Term loans by origination year | | Revolving loans | | | | | 2020 | | 2019 | 2018 | 2017 | 2016 | Prior to 2016 | | Within the revolving period | Converted to term loans | | Total | | Total | Loans by risk ratings | | | | | | | | | | | | | | | Investment-grade | $ | 21,211 | | (a) | $ | 7,304 | | $ | 2,934 | | $ | 1,748 | | $ | 1,032 | | $ | 1,263 | | | $ | 36,424 | | $ | 1 | | | $ | 71,917 | | | $ | 80,489 | | Noninvestment-grade | 15,060 | | | 8,636 | | 5,131 | | 2,104 | | 497 | | 2,439 | | | 36,852 | | 73 | | | 70,792 | | | 65,680 | | Total retained loans | $ | 36,271 | | | $ | 15,940 | | $ | 8,065 | | $ | 3,852 | | $ | 1,529 | | $ | 3,702 | | | $ | 73,276 | | $ | 74 | | | $ | 142,709 | | | $ | 146,169 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other(b) | | | (in millions) | December 31, 2020 | | December 31, 2019 | Term loans by origination year | | Revolving loans | | | | | 2020 | 2019 | 2018 | 2017 | 2016 | Prior to 2016 | | Within the revolving period | Converted to term loans | | Total | | Total | Loans by risk ratings | | | | | | | | | | | | | | Investment-grade | $ | 31,389 | | $ | 10,169 | | $ | 6,994 | | $ | 6,206 | | $ | 3,553 | | $ | 12,595 | | | $ | 145,524 | | $ | 779 | | | $ | 217,209 | | | $ | 186,344 | | Noninvestment-grade | 5,009 | | 2,220 | | 1,641 | | 550 | | 146 | | 636 | | | 24,710 | | 124 | | | 35,036 | | | 28,747 | | Total retained loans | $ | 36,398 | | $ | 12,389 | | $ | 8,635 | | $ | 6,756 | | $ | 3,699 | | $ | 13,231 | | | $ | 170,234 | | $ | 903 | | | $ | 252,245 | | | $ | 215,091 | |
(a)At December 31, 2020, included $8.0 billion of loans under the PPP, of which $7.4 billion is included in commercial and industrial. PPP loans are guaranteed by the SBA and considered investment-grade. Other than in certain limited circumstances, the Firm typically does not recognize charge-offs, classify as nonaccrual nor record an allowance for loan losses on these loans. (b)Includes loans to financial institutions, states and political subdivisions, SPEs, nonprofits, personal investment companies and trusts, as well as loans to individuals and individual entities (predominantly Wealth Management clients within AWM). Refer to Note 14 for more information on SPEs.
| | | | | | | | | 246 | | JPMorgan Chase & Co./2020 Form 10-K |
The following table presents additional information on theretained loans secured by real estate class of loans within the Wholesale portfolio, for the periods indicated. Exposurewhich consists primarily of loans secured commercial loans, of which multifamily is the largest segment.wholly or substantially by a lien or liens on real property at origination. Multifamily lending financesincludes financing for acquisition, leasing and construction of apartment buildings, and includes exposure to real estate investment trusts (“REITs”).buildings. Other commercial lending largely includes financing for acquisition, leasing and construction, largely for office, retail and industrial real estate, and includes exposure to REITs.estate. Included in secured by real estate loans is $10.5 $6.4 billion and $10.8$6.3 billion as of December 31, 20182020 and 2017, 2019, respectively, of construction and development exposure consistingloans made to finance land development and on-site construction of loans originally purposed for construction and development, general purpose loans for builders, as well as loans for land subdivision and pre-development.commercial, industrial, residential, or farm buildings. | | | | | | | | | | | | | | | | | | | | | | December 31, (in millions, except ratios) | Multifamily | | Other Commercial | | Total real estate loans | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | Real estate retained loans | $ | 79,184 |
| $ | 77,597 |
| | $ | 36,553 |
| $ | 36,051 |
| | $ | 115,737 |
| $ | 113,648 |
| Criticized exposure | 388 |
| 491 |
| | 366 |
| 355 |
| | 754 |
| 846 |
| % of total criticized exposure to total real estate retained loans | 0.49 | % | 0.63 | % | | 1.00 | % | 0.98 | % | | 0.65 | % | 0.74 | % | Criticized nonaccrual | $ | 57 |
| $ | 44 |
| | $ | 77 |
| $ | 92 |
| | $ | 134 |
| $ | 136 |
| % of criticized nonaccrual loans to total real estate retained loans | 0.07 | % | 0.06 | % | | 0.21 | % | 0.26 | % | | 0.12 | % | 0.12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, (in millions, except ratios) | Multifamily | | Other Commercial | | Total retained loans secured by real estate | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 | Retained loans secured by real estate | $ | 73,078 | | $ | 73,840 | | | $ | 46,915 | | $ | 46,578 | | | $ | 119,993 | | $ | 120,418 | | Criticized | 1,144 | | 340 | | | 2,573 | | 974 | | | 3,717 | | 1,314 | | % of total criticized to total retained loans secured by real estate | 1.57 | % | 0.46 | % | | 5.48 | % | 2.09 | % | | 3.10 | % | 1.09 | % | Criticized nonaccrual | $ | 56 | | $ | 28 | | | $ | 427 | | $ | 155 | | | $ | 483 | | $ | 183 | | % of criticized nonaccrual loans to total retained loans secured by real estate | 0.08 | % | 0.04 | % | | 0.91 | % | 0.33 | % | | 0.40 | % | 0.15 | % |
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 | | Governments & Agencies | | Other | | Total retained loans | | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | | 2018 | | 2017 | | Impaired loans | | | | | | | | | | | | | | | | | | | | With an allowance | $ | 807 |
| $ | 1,170 |
| | $ | 107 |
| $ | 78 |
| | $ | 4 |
| $ | 93 |
| | $ | — |
| $ | — |
| | $ | 152 |
| $ | 168 |
| | $ | 1,070 |
| | $ | 1,509 |
| | Without an allowance(a) | 140 |
| 228 |
| | 27 |
| 60 |
| | — |
| — |
| | — |
| — |
| | 13 |
| 70 |
| | 180 |
| | 358 |
| | Total impaired loans | $ | 947 |
| $ | 1,398 |
| | $ | 134 |
| $ | 138 |
| | $ | 4 |
| $ | 93 |
| | $ | — |
| $ | — |
| | $ | 165 |
| $ | 238 |
| | $ | 1,250 |
| (c) | $ | 1,867 |
| (c) | Allowance for loan losses related to impaired loans | $ | 252 |
| $ | 404 |
| | $ | 25 |
| $ | 11 |
| | $ | 1 |
| $ | 4 |
| | $ | — |
| $ | — |
| | $ | 19 |
| $ | 42 |
| | $ | 297 |
| | $ | 461 |
| | Unpaid principal balance of impaired loans(b) | 1,043 |
| 1,604 |
| | 203 |
| 201 |
| | 4 |
| 94 |
| | — |
| — |
| | 473 |
| 255 |
| | 1,723 |
| | 2,154 |
| |
| | (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, 2018 and 2017. 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 presentsprovides additional information about retained wholesale loans, including geographic distribution, delinquency and net charge-offs. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Secured by real estate | | Commercial and industrial | | Other | | Total retained loans | December 31, (in millions) | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 | Loans by geographic distribution(a) | | | | | | | | | | | | Total U.S. | $ | 116,990 | | $ | 117,836 | | | $ | 109,273 | | $ | 111,954 | | | $ | 180,583 | | $ | 150,512 | | | $ | 406,846 | | $ | 380,302 | | Total non-U.S. | 3,003 | | 2,582 | | | 33,436 | | 34,215 | | | 71,662 | | 64,579 | | | 108,101 | | 101,376 | | Total retained loans | $ | 119,993 | | $ | 120,418 | | | $ | 142,709 | | $ | 146,169 | | | $ | 252,245 | | $ | 215,091 | |
| $ | 514,947 | | $ | 481,678 | | Loan delinquency(b) | | | | | | | | | | | | Current and less than 30 days past due and still accruing | $ | 118,894 | | $ | 120,119 | | | $ | 140,100 | | $ | 144,839 | | | $ | 249,713 | | $ | 214,641 | |
| $ | 508,707 | | $ | 479,599 | | 30–89 days past due and still accruing | 601 | | 115 | | | 658 | | 449 | | | 1,606 | | 415 | | | 2,865 | | 979 | | 90 or more days past due and still accruing(c) | 15 | | 1 | | | 20 | | 37 | | | 22 | | 5 | | | 57 | | 43 | | Criticized nonaccrual | 483 | | 183 | | | 1,931 | | 844 | | | 904 | | 30 | | | 3,318 | | 1,057 | | Total retained loans | $ | 119,993 | | $ | 120,418 | | | $ | 142,709 | | $ | 146,169 | | | $ | 252,245 | | $ | 215,091 | |
| $ | 514,947 | | $ | 481,678 | | Net charge-offs/(recoveries) | $ | 10 | | $ | 44 | | | $ | 737 | | $ | 335 | | | $ | 52 | | $ | 36 | | | $ | 799 | | $ | 415 | | % of net charge-offs/(recoveries) to end-of-period retained loans | 0.01 | % | 0.04 | % | | 0.52 | % | 0.23 | % | | 0.02 | % | 0.02 | % | | 0.16 | % | 0.09 | % |
(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. Generally excludes loans under payment deferral programs offered in response to the COVID-19 pandemic. (c)Represents loans that are considered well-collateralized and therefore still accruing interest. Nonaccrual loans The following table provides information on retained wholesale nonaccrual loans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, (in millions) | Secured by real estate | | Commercial and industrial | | | | Other | | Total retained loans | 2020 | 2019 | | 2020 | 2019 | | | | 2020 | 2019 | | 2020 | | 2019 | Nonaccrual loans(a) | | | | | | | | | | | | | | | With an allowance | $ | 351 | | $ | 169 | | | $ | 1,667 | | $ | 688 | | | | | $ | 800 | | $ | 28 | | | $ | 2,818 | | | $ | 885 | | Without an allowance(b) | 132 | | 14 | | | 264 | | 156 | | | | | 104 | | 2 | | | 500 | | | 172 | | Total nonaccrual loans(c) | $ | 483 | | $ | 183 | | | $ | 1,931 | | $ | 844 | | | | | $ | 904 | | $ | 30 | | | $ | 3,318 | | | $ | 1,057 | |
(a)Loans that were modified in response to the COVID-19 pandemic continue to be risk-rated in accordance with the Firm’s overall credit risk management framework. As of December 31, 2020, predominantly all of these loans were considered performing. (b)average impaired retainedWhen the discounted cash flows, collateral value or market price equals or exceeds the amortized cost of the loan, the loan does not require an allowance. This typically occurs when the loans have been partially charged off and/or there have been interest payments received and applied to the loan balance. (c)Interest income on nonaccrual loans recognized on a cash basis were not material for the years ended2018, 2017 December 31, 2020 and 2016.2019. | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | 2017(b) | 2016 | Commercial and industrial | $ | 1,027 |
| $ | 1,256 |
| $ | 1,480 |
| Real estate | 133 |
| 165 |
| 217 |
| Financial institutions | 57 |
| 48 |
| 13 |
| Governments & Agencies | — |
| — |
| — |
| Other | 199 |
| 241 |
| 213 |
| Total(a) | $ | 1,416 |
| $ | 1,710 |
| $ | 1,923 |
|
| | (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, 2018, 2017 and 2016. |
| | (b) | The prior period amounts have been revised to conform with the current period presentation. |
Certain loan modifications are considered to be TDRs as they provide various concessions to borrowers who are experiencing financial difficulty. AllLoans with short-term or other insignificant modifications that are not considered concessions are not TDRs nor are reportedloans for which the Firm has elected to apply the option to suspend the application of accounting guidance for TDRs as impaired loans inprovided by the tables above.CARES Act and extended by the Consolidated Appropriations Act. The carrying value of TDRs were $576was $954 million and $614$501 million as of December 31, 2020 and 2019, respectively. The carrying value of new TDRs was $734 million, $407 million and $718 million for the years ended December 31, 2020, 2019 and 2018, and 2017, respectively. The impact of these modifications, as well as new TDRs, were not material to the Firm for the years ended December 31, 2018, 20172020, 2019 and 2016.
2018.
| | | | | | | | | 238 | | JPMorgan Chase & Co./20182020 Form 10-K | | 247 |
Notes to consolidated financial statements
Note 13 – Allowance for credit losses Effective January 1, 2020, the Firm adopted the CECL accounting guidance. The adoption of this guidance established a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. This framework requires that management’s estimate reflects credit losses over the instrument’s remaining expected life and considers expected future changes in macroeconomic conditions. Refer to Note 1 for further information. JPMorgan Chase’s allowance for credit losses comprises: •the allowance for loan losses, represents management’s estimate of probable credit losses inherent inwhich covers the Firm’s retained loan portfolio, which consists ofportfolios (scored and risk-rated) and is presented separately on the two consumer portfolio segments (primarily scored) and Consolidated balance sheets, •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 allowancewhich is presented on the underlying loans.Consolidated balance sheets in accounts payable and other liabilities, and The Firm’s •policies used to determine itsthe allowance for credit losses are describedon investment securities, which covers the Firm’s HTM and AFS securities and is recognized within Investment Securities on the Consolidated balance sheets.
The income statement effect of all changes in the following paragraphs. allowance for credit losses is recognized in the provision for credit losses. Determining the appropriateness of the allowance for credit losses is complex and requires significant 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. AsSubsequent evaluations of December 31, 2018, JPMorgan Chase deemedcredit exposures, considering the macroeconomic conditions, forecasts and other factors then prevailing, may result in significant changes in the allowance for credit losses in future periods. The Firm’s policies used to be appropriatedetermine its allowance for loan losses and sufficient to absorb probable credit losses inherentits allowance for lending-related commitments are described in the 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.following paragraphs. Refer to Note 12 10 for more informationa description of the policies used to determine the allowance for credit losses on TDRs, Impairedinvestment securities.
Methodology for allowances for loan losses and lending-related commitments The allowance for loan losses and allowance for lending-related commitments represents expected credit losses over the remaining expected life of retained loans and PCI loans.lending-related commitments that are not unconditionally cancellable. The Firm does not record an allowance for future draws on unconditionally cancellable lending-related commitments (e.g., credit cards). Expected losses related to accrued interest on credit card loans and certain performing, modified loans to borrowers impacted by COVID-19 are considered in the Firm’s allowance for loan losses. However, the Firm does not record an allowance on other accrued interest receivables, due to its policy to write these receivables off no later than 90 days past due by reversing interest income. The expected life of each instrument is determined by considering its contractual term, expected prepayments, cancellation features, and certain extension and call options. The expected life of funded credit card loans is generally estimated by considering expected future payments on the credit card account, and determining how much of those amounts should be allocated to repayments of the funded loan balance (as of the balance sheet date) versus other account activity. This allocation is made using an approach that incorporates the payment application requirements of the Credit Card Accountability Responsibility and Disclosure Act of 2009, generally paying down the highest interest rate balances first. The estimate of expected credit losses includes expected recoveries of amounts previously charged off or expected to be charged off, even if such recoveries result in a negative allowance. Collective and Individual Assessments When calculating the allowance for loan losses and the allowance for lending-related commitments, the Firm assesses whether exposures share similar risk characteristics. If similar risk characteristics exist, the Firm estimates expected credit losses collectively, considering the risk associated with a particular pool and the probability that the exposures within the pool will deteriorate or default. The assessment of risk characteristics is subject to significant management judgment. Emphasizing one characteristic over another or considering additional characteristics could affect the allowance. •Relevant risk characteristics for the consumer portfolio include product type, delinquency status, current FICO scores, geographic distribution, and, for collateralized loans, current LTV ratios. Formula-based•Relevant risk characteristics for the wholesale portfolio include LOB, geography, risk rating, delinquency status, level and type of collateral, industry, credit enhancement, product type, facility purpose, tenor, and payment terms.
The majority of the Firm’s credit exposures share risk characteristics with other similar exposures, and as a result are collectively assessed for impairment (“portfolio-based component”). The portfolio-based component - Consumercovers consumer loans, performing risk-rated loans and certain lending-related commitmentscommitments. If an exposure does not share risk characteristics with other exposures, the Firm generally estimates expected credit losses on an individual basis, considering expected repayment and conditions impacting that individual exposure (“asset-specific component”). The asset-specific component covers modified PCD loans, loans modified or reasonably expected to be modified in a TDR, collateral-dependent loans, as well as, risk-rated loans that have been placed on nonaccrual status. Portfolio-based component The formula-based allowance forportfolio-based component begins with a quantitative calculation that considers the likelihood of the borrower changing delinquency status or moving from one risk rating to another. The quantitative calculation covers expected credit losses for the consumer portfolio segmentsover an instrument’s expected life and is calculatedestimated by applying statistical credit loss factors (estimated PD and loss severities) to the recorded investment balances or loan-equivalent amountsFirm’s | | | | | | | | | 248 | | JPMorgan Chase & Co./2020 Form 10-K |
estimated exposure at default. The credit loss factors incorporate the probability of poolsborrower default as well as loss severity in the event of loan exposures with similar risk characteristicsdefault. They are derived using a weighted average of five internally developed macroeconomic scenarios over an eight-quarter forecast period, followed by a loss emergence periodsingle year straight-line interpolation to arrive at an estimaterevert to long run historical information for periods beyond the eight-quarter forecast period. The five macroeconomic scenarios consist of incurreda central, relative adverse, extreme adverse, relative upside and extreme upside scenario, and are updated by the Firm’s central forecasting team. The scenarios take into consideration the Firm’s overarching economic outlook, internal perspectives from subject matter experts across the Firm, and market consensus and involve a governed process that incorporates feedback from senior management across LOBs, Corporate Finance and Risk Management. The COVID-19 pandemic has stressed many MEVs to degrees not experienced in recent history, which has created additional challenges in the use of modeled 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 characteristicsincreased the reliance on management judgment. In periods where certain MEVs are outside the range of historical experience on which the Firm’s models have been trained, the Firm makes adjustments to estimateappropriately address these economic circumstances. The Firm also considers 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 other events, such as government unemployment benefits or other stimulus programs, when determining whether adjustments are necessary.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 statisticalquantitative calculation is then adjusted to take into consideration model imprecision, externalemerging risk assessments, trends and other subjective factors and current economic events that have occurred but that are not yet reflected in the factors used to derive the statistical calculation; thesecalculation. These adjustments are accomplished in part by analyzing the historical loss experience, including during stressed periods, for each major product segment. However, it is difficult to predict whether historical loss experience is indicative of future loss levels.or model. Management applies judgment in making this adjustment, including taking into account uncertainties associated with current macroeconomicthe economic and political conditions, quality of underwriting standards, borrower behavior, andcredit concentrations or deterioration within an industry, product or portfolio, as well as other relevant internal and external factors affecting the credit quality of the portfolio. In certain instances, the interrelationships between these factors create further uncertainties. Throughout 2020, the Firm made adjustments to its quantitative calculation which placed significant weighting on its adverse scenarios, as a result of continued uncertainty related to the COVID-19 pandemic. The application of different inputs into the statisticalquantitative calculation, and the assumptions used by management to adjust the statisticalquantitative calculation, are subject to significant 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./2018 Form 10-K | | 239 |
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.commitments.
The Firm assesses the credit quality of a borrower or counterparty and assigns a 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 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, collateral-dependent loans (including those loans for which foreclosure is probable) and larger, nonaccrual risk-rated loans (primarily loans in the wholesale portfolio segment)segment are generally evaluated individually, while smaller loans (both risk-ratedscored and scored)risk-rated) are evaluated as poolsaggregated for evaluation using historical loss experiencefactors relevant for the respective class of assets.
The Firm generally measures the asset-specific allowance as the difference between the recorded investment inamortized cost of 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 reportedgenerally recognized 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-dependentFor collateral-dependent loans, are charged down to the fair value of collateral less estimated costs to sell. For anysell is used to determine the charge-off amount for declines in value (to reduce the amortized cost of these impaired loans,the loan to the fair value of collateral) or the amount of the asset-specificnegative allowance required tothat should be recorded, if any, is dependent upon the recorded investmentrecognized (for recoveries of prior charge-offs associated with improvements in the loan (including prior charge-offs), and either the expected cash flows or fair value of collateral. Refer to Note 12 for more information about charge-offs and collateral-dependent loans.collateral). The asset-specific component of the allowance for impairedloan losses for loans that have been or are expected to be 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(including forgone interest, principal forgiveness, as well as other concessions), and also the potential for redefault. For residential real estate loans modified in or expected to be 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 homehousing 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 or expected to be modified in TDRs, expected losses incorporate projected redefaultsdelinquencies and charge-offs based on the Firm’s historical experience by type of modification program. For wholesale loans modified or expected to be modified in TDRs, expected losses incorporate management’s expectation of the borrower’s ability to repay under the modified terms.
| | | | 240 | | JPMorgan Chase & Co./2018 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.factors. 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./20182020 Form 10-K | | 241249 |
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-relatinglending-related commitments, and includes a breakdown of loans and lending-related commitments by impairment methodology. Refer to Note 10 for further information on the allowance for credit losses on investment securities. The adoption of the CECL accounting guidance resulted in a change in the accounting for PCI loans, which are considered PCD loans. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied when determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information. | | | | | | | | | | | | | | | | | | (Table continued on next page) | | | | | | | | | | 2018 | | Year ended December 31, (in millions) | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | Allowance for loan losses | | | | | | | | | Beginning balance at January 1, | $ | 4,579 |
| | $ | 4,884 |
| | $ | 4,141 |
| | $ | 13,604 |
| | Gross charge-offs | 1,025 |
|
| 5,011 |
| | 313 |
| | 6,349 |
| | Gross recoveries | (842 | ) | | (493 | ) | | (158 | ) | | (1,493 | ) | | Net charge-offs | 183 |
|
| 4,518 |
| | 155 |
| | 4,856 |
| | Write-offs of PCI loans(a) | 187 |
| | — |
| | — |
| | 187 |
| | Provision for loan losses | (63 | ) | | 4,818 |
| | 130 |
| | 4,885 |
| | Other | — |
|
| — |
| | (1 | ) | | (1 | ) | | Ending balance at December 31, | $ | 4,146 |
| | $ | 5,184 |
| | $ | 4,115 |
| | $ | 13,445 |
| | | | | | | | | | | Allowance for loan losses by impairment methodology | | | | | | | | | Asset-specific(b) | $ | 196 |
| | $ | 440 |
| (c) | $ | 297 |
| | $ | 933 |
| | Formula-based | 2,162 |
| | 4,744 |
| | 3,818 |
| | 10,724 |
| | PCI | 1,788 |
| | — |
| | — |
| | 1,788 |
| | Total allowance for loan losses | $ | 4,146 |
| | $ | 5,184 |
| | $ | 4,115 |
| | $ | 13,445 |
| | | | | | | | | | | Loans by impairment methodology | | | | | | | | | Asset-specific | $ | 6,828 |
| | $ | 1,319 |
| | $ | 1,250 |
| | $ | 9,397 |
| | Formula-based | 342,775 |
| | 155,297 |
| | 437,909 |
| | 935,981 |
| | PCI | 24,034 |
| | — |
| | 3 |
| | 24,037 |
| | Total retained loans | $ | 373,637 |
| | $ | 156,616 |
| | $ | 439,162 |
| | $ | 969,415 |
| | | | | | | | | | | Impaired collateral-dependent loans | | | | | | | | | Net charge-offs | $ | 24 |
|
| $ | — |
| | $ | 21 |
| | $ | 45 |
| | Loans measured at fair value of collateral less cost to sell | 2,080 |
| | — |
| | 202 |
| | 2,282 |
| | | | | | | | | | | Allowance for lending-related commitments | | | | | | | | | Beginning balance at January 1, | $ | 33 |
| | $ | — |
| | $ | 1,035 |
| | $ | 1,068 |
| | Provision for lending-related commitments | — |
| | — |
| | (14 | ) | | (14 | ) | | Other | — |
| | — |
| | 1 |
| | 1 |
| | Ending balance at December 31, | $ | 33 |
| | $ | — |
| | $ | 1,022 |
| | $ | 1,055 |
| | | | | | | | | | | Allowance for lending-related commitments by impairment methodology | | | | | | | | | Asset-specific | $ | — |
| | $ | — |
| | $ | 99 |
| | $ | 99 |
| | Formula-based | 33 |
| | — |
| | 923 |
| | 956 |
| | Total allowance for lending-related commitments | $ | 33 |
| | $ | — |
| | $ | 1,022 |
| | $ | 1,055 |
| | | | | | | | | | | Lending-related commitments by impairment methodology | | | | | | | | | Asset-specific | $ | — |
| | $ | — |
| | $ | 469 |
| | $ | 469 |
| | Formula-based | 46,066 |
| | 605,379 |
| | 387,344 |
| | 1,038,789 |
| | Total lending-related commitments | $ | 46,066 |
| | $ | 605,379 |
| | $ | 387,813 |
| | $ | 1,039,258 |
| |
| | (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 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | (Table continued on next page) | | | | | | | | | | 2020(e) | | Year ended December 31, (in millions) | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | Allowance for loan losses | | | | | | | | | Beginning balance at January 1, | $ | 2,538 | | | $ | 5,683 | | | $ | 4,902 | | | $ | 13,123 | | | Cumulative effect of a change in accounting principle | 297 | | | 5,517 | | | (1,642) | | | 4,172 | | | Gross charge-offs | 805 | |
| 5,077 | | | 954 | | | 6,836 | | | Gross recoveries collected | (631) | | | (791) | | | (155) | | | (1,577) | | | Net charge-offs | 174 | |
| 4,286 | | | 799 | | | 5,259 | | | Write-offs of PCI loans(a) | NA | | NA | | NA | | NA | | Provision for loan losses | 974 | | | 10,886 | | | 4,431 | | | 16,291 | | | Other | 1 | |
| 0 | | | 0 | | | 1 | | | Ending balance at December 31, | $ | 3,636 | | | $ | 17,800 | | | $ | 6,892 | | | $ | 28,328 | | | | | | | | | | | | Allowance for lending-related commitments | | | | | | | | | Beginning balance at January 1, | $ | 12 | | | $ | 0 | | | $ | 1,179 | | | $ | 1,191 | | | Cumulative effect of a change in accounting principle | 133 | | | 0 | | | (35) | | | 98 | | | Provision for lending-related commitments | 42 | | | 0 | | | 1,079 | | | 1,121 | | | Other | 0 | | | 0 | | | (1) | | | (1) | | | Ending balance at December 31, | $ | 187 | | | $ | 0 | | | $ | 2,222 | | | $ | 2,409 | | | | | | | | | | | | Total allowance for credit losses | $ | 3,823 | | | $ | 17,800 | | | $ | 9,114 | | | $ | 30,737 | | | | | | | | | | | | Allowance for loan losses by impairment methodology | | | | | | | | | Asset-specific(b) | $ | (7) | | | $ | 633 | | | $ | 682 | | | $ | 1,308 | | | Portfolio-based | 3,643 | | | 17,167 | | | 6,210 | | | 27,020 | | | PCI | NA | | NA | | NA | | NA | | Total allowance for loan losses | $ | 3,636 | | | $ | 17,800 | | | $ | 6,892 | | | $ | 28,328 | | | | | | | | | | | | Loans by impairment methodology | | | | | | | | | Asset-specific(b) | $ | 16,648 | | | $ | 1,375 | | | $ | 3,606 | | | $ | 21,629 | | | Portfolio-based | 285,479 | | | 142,057 | | | 511,341 | | | 938,877 | | | PCI | NA | | NA | | NA | | NA | | Total retained loans | $ | 302,127 | | | $ | 143,432 | | | $ | 514,947 | | | $ | 960,506 | | | | | | | | | | | | Collateral-dependent loans | | | | | | | | | Net charge-offs | $ | 133 | |
| $ | 0 | | | $ | 76 | | | $ | 209 | | | Loans measured at fair value of collateral less cost to sell | 4,956 | | | 0 | | | 188 | | | 5,144 | | | | | | | | | | | | | | | | | | | | | Allowance for lending-related commitments by impairment methodology | | | | | | | | | Asset-specific | $ | 0 | | | $ | 0 | | | $ | 114 | | | $ | 114 | | | Portfolio-based | 187 | | | 0 | | | 2,108 | | | 2,295 | | | Total allowance for lending-related commitments(c) | $ | 187 | | | $ | 0 | | | $ | 2,222 | | | $ | 2,409 | | | | | | | | | | | | Lending-related commitments by impairment methodology | | | | | | | | | Asset-specific | $ | 0 | | | $ | 0 | | | $ | 577 | | | $ | 577 | | | Portfolio-based(d) | 37,783 | | | 0 | | | 426,871 | | | 464,654 | | | Total lending-related commitments | $ | 37,783 | | | $ | 0 | | | $ | 427,448 | | | $ | 465,231 | | |
| | | | | | | | | 242250 | | JPMorgan Chase & Co./20182020 Form 10-K |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (table continued from previous page) | | | | | | | | | | | | 2017 | | 2016 | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | | | | | | | | | | | | | | | | | $ | 5,198 |
| | $ | 4,034 |
| | $ | 4,544 |
| | $ | 13,776 |
| | $ | 5,806 |
| | $ | 3,434 |
| | $ | 4,315 |
| | $ | 13,555 |
| | 1,779 |
| | 4,521 |
| | 212 |
| | 6,512 |
| | 1,500 |
| | 3,799 |
| | 398 |
| | 5,697 |
| | (634 | ) | | (398 | ) | | (93 | ) | | (1,125 | ) | | (591 | ) | | (357 | ) | | (57 | ) | | (1,005 | ) | | 1,145 |
| | 4,123 |
| | 119 |
| | 5,387 |
| | 909 |
| | 3,442 |
| | 341 |
| | 4,692 |
| | 86 |
| | — |
| | — |
| | 86 |
| | 156 |
| | — |
| | — |
| | 156 |
| | 613 |
| | 4,973 |
| | (286 | ) | | 5,300 |
| | 467 |
| | 4,042 |
| | 571 |
| | 5,080 |
| | (1 | ) | | — |
| | 2 |
| | 1 |
| | (10 | ) | | — |
| | (1 | ) | | (11 | ) | | $ | 4,579 |
| | $ | 4,884 |
| | $ | 4,141 |
| | $ | 13,604 |
| | $ | 5,198 |
| | $ | 4,034 |
| | $ | 4,544 |
| | $ | 13,776 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 246 |
| | $ | 383 |
| (c) | $ | 461 |
| | $ | 1,090 |
| | $ | 308 |
| | $ | 358 |
| (c) | $ | 342 |
| | $ | 1,008 |
| | 2,108 |
| | 4,501 |
| | 3,680 |
| | 10,289 |
| | 2,579 |
| | 3,676 |
| | 4,202 |
| | 10,457 |
| | 2,225 |
| | — |
| | — |
| | 2,225 |
| | 2,311 |
| | — |
| | — |
| | 2,311 |
| | $ | 4,579 |
| | $ | 4,884 |
| | $ | 4,141 |
| | $ | 13,604 |
| | $ | 5,198 |
| | $ | 4,034 |
| | $ | 4,544 |
| | $ | 13,776 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 8,036 |
| | $ | 1,215 |
| | $ | 1,867 |
| | $ | 11,118 |
| | $ | 8,940 |
| | $ | 1,240 |
| | $ | 2,017 |
| | $ | 12,197 |
| | 333,941 |
| | 148,172 |
| | 401,028 |
| | 883,141 |
| | 319,787 |
| | 140,471 |
| | 381,770 |
| | 842,028 |
| | 30,576 |
| | — |
| | 3 |
| | 30,579 |
| | 35,679 |
| | — |
| | 3 |
| | 35,682 |
| | $ | 372,553 |
| | $ | 149,387 |
| | $ | 402,898 |
| | $ | 924,838 |
| | $ | 364,406 |
| | $ | 141,711 |
| | $ | 383,790 |
| | $ | 889,907 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 64 |
| | $ | — |
| | $ | 31 |
| | $ | 95 |
| | $ | 98 |
| | $ | — |
| | $ | 7 |
| | $ | 105 |
| | 2,133 |
| | — |
| | 233 |
| | 2,366 |
| | 2,391 |
| | — |
| | 300 |
| | 2,691 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 26 |
| | $ | — |
| | $ | 1,052 |
| | $ | 1,078 |
| | $ | 14 |
| | $ | — |
| | $ | 772 |
| | $ | 786 |
| | 7 |
| | — |
| | (17 | ) | | (10 | ) | | — |
| | — |
| | 281 |
| | 281 |
| | — |
| | — |
| | — |
| | — |
| | 12 |
| | — |
| | (1 | ) | | 11 |
| | $ | 33 |
| | $ | — |
| | $ | 1,035 |
| | $ | 1,068 |
| | $ | 26 |
| | $ | — |
| | $ | 1,052 |
| | $ | 1,078 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | — |
| | $ | — |
| | $ | 187 |
| | $ | 187 |
| | $ | — |
| | $ | — |
| | $ | 169 |
| | $ | 169 |
| | 33 |
| | — |
| | 848 |
| | 881 |
| | 26 |
| | — |
| | 883 |
| | 909 |
| | $ | 33 |
| | $ | — |
| | $ | 1,035 |
| | $ | 1,068 |
| | $ | 26 |
| | $ | — |
| | $ | 1,052 |
| | $ | 1,078 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | — |
| | $ | — |
| | $ | 731 |
| | $ | 731 |
| | $ | — |
| | $ | — |
| | $ | 506 |
| | $ | 506 |
| | 48,553 |
| | 572,831 |
| | 369,367 |
| | 990,751 |
| | 53,247 |
| | 553,891 |
| | 367,508 |
| | 974,646 |
| | $ | 48,553 |
| | $ | 572,831 |
| | $ | 370,098 |
| | $ | 991,482 |
| | $ | 53,247 |
| | $ | 553,891 |
| | $ | 368,014 |
| | $ | 975,152 |
| |
(a)Prior to the adoption of CECL, write-offs of PCI loans were recorded against the allowance for loan losses when actual losses for a pool exceeded estimated losses that were recorded as purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan was recognized when the underlying loan was removed from a pool. (b)Includes modified PCD loans and loans that have been modified or are reasonably expected to be modified in a TDR. Also includes risk-rated loans that have been placed on nonaccrual status for the wholesale portfolio segment. The asset-specific credit card allowance for loans modified, or reasonably expected to be modified, in a TDR is calculated based on the loans’ original contractual interest rates and does not consider any incremental penalty rates. (c)The allowance for lending-related commitments is reported in accounts payable and other liabilities on the Consolidated balance sheets. (d)At December 31, 2020, 2019 and 2018, lending-related commitments excluded $19.5 billion, $9.8 billion and $8.7 billion, respectively, for the consumer, excluding credit card portfolio segment; $658.5 billion, $650.7 billion and $605.4 billion, respectively, for the credit card portfolio segment; and $22.4 billion, $24.1 billion and $24.8 billion, respectively, for the wholesale portfolio segment, which were not subject to the allowance for lending-related commitments. (e)Excludes HTM securities, which had an allowance for credit losses of $78 million and a provision for credit losses of $68 million as of and for the year ended December 31, 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (table continued from previous page) | | | | | | | | | | | | 2019 | | 2018 | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | Consumer, excluding credit card | | Credit card | | Wholesale | | Total | | | | | | | | | | | | | | | | | | $ | 3,434 | | | $ | 5,184 | | | $ | 4,827 | | | $ | 13,445 | | | $ | 3,892 | | | $ | 4,884 | | | $ | 4,828 | | | $ | 13,604 | | | NA | | NA | | NA | | NA | | NA | | NA | | NA | | NA | | 902 | | | 5,436 | | | 472 | | | 6,810 | | | 977 | | | 5,011 | | | 361 | | | 6,349 | | | (536) | | | (588) | | | (57) | | | (1,181) | | | (827) | | | (493) | | | (173) | | | (1,493) | | | 366 | | | 4,848 | | | 415 | | | 5,629 | | | 150 | | | 4,518 | | | 188 | | | 4,856 | | | 151 | | | 0 | | | 0 | | | 151 | | | 187 | | | 0 | | | 0 | | | 187 | | | (378) | | | 5,348 | | | 479 | | | 5,449 | | | (121) | | | 4,818 | | | 188 | | | 4,885 | | | (1) | | | (1) | | | 11 | | | 9 | | | 0 | | | 0 | | | (1) | | | (1) | | | $ | 2,538 | | | $ | 5,683 | | | $ | 4,902 | | | $ | 13,123 | | | $ | 3,434 | | | $ | 5,184 | | | $ | 4,827 | | | $ | 13,445 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 12 | | | $ | 0 | | | $ | 1,043 | | | $ | 1,055 | | | $ | 12 | | | $ | 0 | | | $ | 1,056 | | | $ | 1,068 | | | NA | | NA | | NA | | NA | | NA | | NA | | NA | | NA | | 0 | | | 0 | | | 136 | | | 136 | | | 0 | | | 0 | | | (14) | | | (14) | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1 | | | 1 | | | $ | 12 | | | $ | 0 | | | $ | 1,179 | | | $ | 1,191 | | | $ | 12 | | | $ | 0 | | | $ | 1,043 | | | $ | 1,055 | | | | | | | | | | | | | | | | | | | $ | 2,550 | | | $ | 5,683 | | | $ | 6,081 | | | $ | 14,314 | | | $ | 3,446 | | | $ | 5,184 | | | $ | 5,870 | | | $ | 14,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 75 | | | $ | 477 | | | $ | 295 | | | $ | 847 | | | $ | 143 | | | $ | 440 | | | $ | 350 | | | $ | 933 | | | 1,476 | | | 5,206 | | | 4,607 | | | 11,289 | | | 1,503 | | | 4,744 | | | 4,477 | | | 10,724 | | | 987 | | | 0 | | | 0 | | | 987 | | | 1,788 | | | 0 | | | 0 | | | 1,788 | | | $ | 2,538 | | | $ | 5,683 | | | $ | 4,902 | | | $ | 13,123 | | | $ | 3,434 | | | $ | 5,184 | | | $ | 4,827 | | | $ | 13,445 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 5,961 | | | $ | 1,452 | | | $ | 1,123 | | | $ | 8,536 | | | $ | 6,665 | | | $ | 1,319 | | | $ | 1,459 | | | $ | 9,443 | | | 268,675 | | | 167,472 | | | 480,555 | | | 916,702 | | | 305,077 | | | 155,297 | | | 475,561 | | | 935,935 | | | 20,363 | | | 0 | | | 0 | | | 20,363 | | | 24,034 | | | 0 | | | 3 | | | 24,037 | | | $ | 294,999 | | | $ | 168,924 | | | $ | 481,678 | | | $ | 945,601 | | | $ | 335,776 | | | $ | 156,616 | | | $ | 477,023 | | | $ | 969,415 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 46 | | | $ | 0 | | | $ | 36 | | | $ | 82 | | | $ | 16 | | | $ | 0 | | | $ | 29 | | | $ | 45 | | | 2,053 | | | 0 | | | 87 | | | 2,140 | | | 2,076 | | | 0 | | | 206 | | | 2,282 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 0 | | | $ | 0 | | | $ | 102 | | | $ | 102 | | | $ | 0 | | | $ | 0 | | | $ | 99 | | | $ | 99 | | | 12 | | | 0 | | | 1,077 | | | 1,089 | | | 12 | | | 0 | | | 944 | | | 956 | | | $ | 12 | | | $ | 0 | | | $ | 1,179 | | | $ | 1,191 | | | $ | 12 | | | $ | 0 | | | $ | 1,043 | | | $ | 1,055 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 0 | | | $ | 0 | | | $ | 474 | | | $ | 474 | | | $ | 0 | | | $ | 0 | | | $ | 469 | | | $ | 469 | | | 30,417 | | | 0 | | | 392,967 | | | 423,384 | | | 26,502 | | | 0 | | | 374,996 | | | 401,498 | | | $ | 30,417 | | | $ | 0 | | | $ | 393,441 | | | $ | 423,858 | | | $ | 26,502 | | | $ | 0 | | | $ | 375,465 | | | $ | 401,967 | | |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 243251 |
Notes to consolidated financial statements Discussion of changes in the allowance during 2020 The increase in the allowance for loan losses and lending-related commitments was primarily driven by an increase in the provision for credit losses, reflecting the deterioration in and uncertainty around the future macroeconomic environment as a result of the impact of the COVID-19 pandemic. As of December 31, 2020, the Firm’s central case reflected U.S. unemployment rates of approximately 7% through the second quarter of 2021 and remaining above 5% until the second half of 2022. This compared with relatively low levels of unemployment of approximately 4% throughout 2020 and 2021 in the Firm’s January 1, 2020 central case. Further, while the Firm’s January 1, 2020 central case U.S. GDP forecast reflected a 1.7% expansion in 2020, actual U.S. GDP contracted approximately 2.5% in 2020. As of December 31, 2020, the Firm’s central case assumptions reflect a return to pre-pandemic GDP levels in the fourth quarter of 2021. Due to elevated uncertainty in the near term outlook, driven by the potential for increased infection rates and related lock downs resulting from the pandemic, as well as the prospect that government and other consumer relief measures set to expire may not be extended, the Firm has placed significant weighting on its adverse scenarios. These scenarios incorporate more punitive macroeconomic factors than the central case assumptions, resulting in weighted average U.S. unemployment rates remaining elevated throughout 2021 and 2022, ending the fourth quarter of 2022 at approximately 6%, and in U.S. GDP ending 2022 approximately 0.9% higher than fourth quarter 2019 actual pre-pandemic levels.
The Firm’s central case assumptions reflected U.S. unemployment rates and U.S. real GDP as follows: | | | | | | | | | | | | | Assumptions at January 1, 2020 | | 2Q20 | 4Q20(b) | 2Q21 | U.S. unemployment rate(a) | 3.7% | 3.8% | 4.0% | Cumulative change in U.S. real GDP from 12/31/2019 | 0.9% | 1.7% | 2.4% |
| | | | | | | | | | | | | Assumptions at December 31, 2020 | | 2Q21 | 4Q21 | 2Q22 | U.S. unemployment rate(a) | 6.8% | 5.7% | 5.1% | Cumulative change in U.S. real GDP from 12/31/2019 | (1.9)% | 0.6% | 2.0% |
(a)Reflects quarterly average of forecasted U.S. unemployment rate. (b)4Q20 actual U.S. unemployment rate (quarterly average) was 6.8%. 4Q20 actual cumulative change in U.S. real GDP from 4Q19 was (2.5%). Subsequent changes to this forecast and related estimates will be reflected in the provision for credit losses in future periods. | | | | | | | | | 252 | | JPMorgan Chase & Co./2020 Form 10-K |
Note 14 – Variable interest entities ForRefer to Note 1 on page 167 for a further description of JPMorgan Chase’s accounting policies regarding consolidation of VIEs, refer to Note 1. Page 198VIEs.
The following table summarizes the most significant types of Firm-sponsored Firm-sponsored VIEs by business segment. The Firm considers a “sponsored” VIE to include any entity where: (1) JPMorgan Chase is the primary beneficiary of the structure; (2) the VIE is used by JPMorgan Chase to securitize Firm assets; (3) the VIE issues financial instruments with the JPMorgan Chase name; or (4) the entity is a JPMorgan Chase–Chase–administered asset-backed commercial paper conduit. | | | | | | | | | | | | Line of Business | Transaction Type | Activity | 20182020 Form 10-K
page references
| CCB | Credit card securitization trusts | Securitization of originated credit card receivables | 244-245253-254 | Mortgage securitization trusts | Servicing and securitization of both originated and purchased residential mortgages | 245-247254-256 | CIB | Mortgage and other securitization trusts | Securitization of both originated and purchased residential and commercial mortgages, and other consumer loans | 245-247254-256 | Multi-seller conduits | Assist clients in accessing the financial markets in a cost-efficient manner and structures transactions to meet investor needs | 247256 | Municipal bond vehicles | Financing of municipal bond investments | 247-248256-257 |
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. •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. Refer to 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. Refer to page 249 258 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 consolidates the assets and liabilities of its sponsored credit card trusts as it is considered to be the primary beneficiary of these 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, 20182020 and 2017,2019, the Firm held undivided interests in Firm-sponsored credit card securitization trusts of $15.1$5.4 billion and $15.8$5.3 billion, respectively. The Firm maintained an average undivided interest in principal receivables owned by those trusts of approximately 37%39% and 26%50% for the years ended December 31, 20182020 and 2017. The Firm did
| | | | | | | | | 244 | | JPMorgan Chase & Co./20182020 Form 10-K | | 253 |
Notes to consolidated financial statements
not2019. The Firm did 0t retain any senior securities and retained $3.0$1.5 billion and $4.5$3.0 billion of subordinated securities in certain of its credit card securitization trusts as of December 31, 20182020 and 2017,2019, 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 contracts. In certain instances, the Firm’s only continuing involvement is servicing the loans. The Firm’s maximum loss exposure from retained and purchased interests is the carrying value of these interests. Refer to Securitization activity on page 250 259 of this Note for further information regarding the Firm’s cash flows associated with and interests retained in nonconsolidated VIEs, and pages 250-251 259-260 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) | December 31, 2020 (in millions) | Total assets held by securitization VIEs | Assets held in consolidated securitization VIEs | Assets held in nonconsolidated securitization VIEs with continuing involvement | | Trading assets | Investment securities | Other financial assets | Total interests held by JPMorgan Chase | Securitization-related(a) | | | | | | | | | Residential mortgage: | | | | | | | | | Prime/Alt-A and option ARMs | $ | 49,644 | | $ | 1,693 | | $ | 41,265 | | | $ | 574 | | $ | 724 | | $ | 0 | | $ | 1,298 | | Subprime | 12,896 | | 46 | | 12,154 | | | 9 | | 0 | | 0 | | 9 | | Commercial and other(b) | 119,732 | | 0 | | 92,351 | | | 955 | | 1,549 | | 262 | | 2,766 | | Total | $ | 182,272 | | $ | 1,739 | | $ | 145,770 | | | $ | 1,538 | | $ | 2,273 | | $ | 262 | | $ | 4,073 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Principal amount outstanding | | JPMorgan Chase interest in securitized assets in nonconsolidated VIEs(c)(d)(e) | December 31, 2019 (in millions) | Total assets held by securitization VIEs | Assets held in consolidated securitization VIEs | Assets held in nonconsolidated securitization VIEs with continuing involvement | | Trading assets | Investment securities | Other financial assets | Total interests held by JPMorgan Chase | Securitization-related(a) | | | | | | | | | Residential mortgage: | | | | | | | | | Prime/Alt-A and option ARMs | $ | 60,348 | | $ | 2,796 | | $ | 48,734 | | | $ | 535 | | $ | 625 | | $ | 0 | | $ | 1,160 | | Subprime | 14,661 | | 0 | | 13,490 | | | 7 | | 0 | | 0 | | 7 | | Commercial and other(b) | 111,903 | | 0 | | 80,878 | | | 785 | | 773 | | 241 | | 1,799 | | Total | $ | 186,912 | | $ | 2,796 | | $ | 143,102 | | | $ | 1,327 | | $ | 1,398 | | $ | 241 | | $ | 2,966 | |
(a)Excludes U.S. GSEs and government agency securitizations and re-securitizations, which are not Firm-sponsored. Refer to pages 259-260 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 real estate loans and non-mortgage-related consumer receivables purchased from third parties. | | | | | | | | | | | | | | | | | | | | | | | | | Principal amount outstanding | | JPMorgan Chase interest in securitized assets in nonconsolidated VIEs(c)(d)(e) | December 31, 2018 (in millions) | Total assets held by securitization VIEs | Assets held in consolidated securitization VIEs | Assets held in nonconsolidated securitization VIEs with continuing involvement | | Trading assets | Investment securities | Other financial assets | Total interests held by JPMorgan Chase | Securitization-related(a) | | | | | | | | | Residential mortgage: | | | | | | | | | Prime/Alt-A and option ARMs | $ | 63,350 |
| $ | 3,237 |
| $ | 50,679 |
| | $ | 623 |
| $ | 647 |
| $ | — |
| $ | 1,270 |
| Subprime | 16,729 |
| 32 |
| 15,434 |
| | 53 |
| — |
| — |
| 53 |
| Commercial and other(b) | 102,961 |
| — |
| 79,387 |
| | 783 |
| 801 |
| 210 |
| 1,794 |
| Total | $ | 183,040 |
| $ | 3,269 |
| $ | 145,500 |
| | $ | 1,459 |
| $ | 1,448 |
| $ | 210 |
| $ | 3,117 |
|
(c)Excludes the following: retained servicing (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 (refer to Note 5 for further information on derivatives); senior and subordinated securities of $105 million and $40 million, respectively, at December 31, 2020, and $106 million and $94 million, respectively, at December 31, 2019, 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, 2020 and 2019, 73% and 63%, 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 $1.3 billion and $1.1 billion of investment-grade retained interests, and $41 million and $72 million of noninvestment-grade retained interests at December 31, 2020 and 2019, respectively. The retained interests in commercial and other securitization trusts consisted of $2.0 billion and $1.2 billion of investment-grade retained interests, and $753 million and $575 million of noninvestment-grade retained interests at December 31, 2020 and 2019, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | 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 | Investment securities | Other financial assets | Total interests held by JPMorgan Chase | Securitization-related(a) | | | | | | | | | Residential mortgage: | | | | | | | | | Prime/Alt-A and option ARMs | $ | 68,874 |
| $ | 3,615 |
| $ | 52,280 |
| | $ | 410 |
| $ | 943 |
| $ | — |
| $ | 1,353 |
| Subprime | 18,984 |
| 7 |
| 17,612 |
| | 93 |
| — |
| — |
| 93 |
| Commercial and other(b) | 94,905 |
| 63 |
| 63,411 |
| | 745 |
| 1,133 |
| 157 |
| 2,035 |
| Total | $ | 182,763 |
| $ | 3,685 |
| $ | 133,303 |
| | $ | 1,248 |
| $ | 2,076 |
| $ | 157 |
| $ | 3,481 |
|
| | (a) | Excludes U.S. government agency securitizations and re-securitizations, which are not Firm-sponsored. Refer to pages 250-251 of this Note for information on the Firm’s loan sales to U.S. government agencies. |
| | (b) | Consists of securities backed by commercial loans (predominantly real estate) and non-mortgage-related consumer receivables purchased from third parties. |
| | (c) | Excludes the following: retained servicing (refer to Note 15 for a discussion of MSRs); securities retained from loan sales to U.S. government agencies; interest rate and foreign exchange derivatives primarily used to manage interest rate and foreign exchange risks of securitization entities (refer to Note 5 for further information on derivatives); senior and subordinated securities of $87 million and $28 million, respectively, at December 31, 2018, and $88 million and $48 million, respectively, at December 31, 2017, 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, 2018 and 2017, 60% and 61%, 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 $1.3 billion of investment-grade for both periods, and $16 million and $48 million of noninvestment-grade at December 31, 2018 and 2017, respectively. The retained interests in commercial and other securitizations trusts consisted of $1.2 billion and $1.6 billion of investment-grade and $623 million and $412 million of noninvestment-grade retained interests at December 31, 2018 and 2017, respectively.
|
| | | | | | | | | 254 | | JPMorgan Chase & Co./20182020 Form 10-K | | 245 |
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 Treasury and CIO or 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. Refer to the table on page 248 257 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.Refer to the table on page 248 257 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. Treasury and CIO may choose to invest in these securitizations as well. 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. Refer to the table on page 248 257 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) | 2018 | | 2017 | | 2016 | Transfers of securities to VIEs | | | | | | Firm-sponsored private-label | $ | — |
| | $ | — |
| | $ | 647 |
| Agency | 15,532 |
| | 12,617 |
| | 11,241 |
|
| | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Transfers of securities to VIEs | | | | | | U.S. GSEs and government agencies | $ | 46,123 | | | $ | 25,852 | | | $ | 15,532 | |
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 2020, 2019 and not2018, 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, 2020 and design of the trust; therefore, the Firm consolidates the re-securitization VIE if the Firm holds an interest that could potentially be significant.2019 were immaterial.
Additionally, the Firm may invest in beneficial interests of third-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.
| | | | | | | | | 246 | | JPMorgan Chase & Co./20182020 Form 10-K | | 255 |
Notes to consolidated financial statements
The following table presents information on the Firm's interests in nonconsolidated re-securitization VIEs. | | | | | | | | | | | | | Nonconsolidated re-securitization VIEs | December 31, (in millions) | 2020 | | 2019 | U.S. GSEs and government agencies | | | | Interest in VIEs | $ | 2,631 | | | $ | 2,928 | |
| | | | | | | | | | Nonconsolidated re-securitization VIEs | December 31, (in millions) | 2018 | | 2017 | Firm-sponsored private-label | | | | Assets held in VIEs with continuing involvement(a) | $ | 118 |
| | $ | 783 |
| Interest in VIEs | 10 |
| | 29 |
| Agency | | | | Interest in VIEs | 3,058 |
| | 2,250 |
|
| | (a) | Represents the principal amount and includes the notional amount of interest-only securities. |
As of December 31, 20182020 and 2017,2019, the Firm did not consolidate any U.S. GSE and government agency re-securitization VIEs or any Firm-sponsored private-label 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. Refer to page 248 257 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 $20.1 $13.5 billion and $20.4$16.3 billion of the commercial paper issued by the Firm-administeredFirm-administered multi-seller conduits at December 31, 20182020 and 2017, 2019, 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 $8.0 $12.2 billion and $8.8$8.9 billion at December 31, 20182020 and 2017, 2019, 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, refer to 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”) and (2) inverse floating-rate residual interests (“residuals”). The floaters are typically purchased by money market funds or other short-term investors and may be tendered, with requisite notice, to the TOB trust. The residuals are retained by the investor seeking to finance its municipal bond investment. TOB transactions where the residual is held by a third-party investor are typically known as customer TOB trusts, and non-customer TOB trusts are transactions where the Residual is retained by the Firm. Customer TOB trusts are sponsored by a third party; refer to page 249 on 258 of this Note for further information. The Firm serves as sponsor for all non-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 floaters for TOB trusts. The remarketing agent is responsible for establishing the periodic variable rate on the floaters, conducting the initial placement and remarketing tendered floaters. The remarketing agent may,
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 247 |
Notes to consolidated financial statements
but is not obligated to, make markets in floaters. Floaters held by the Firm were not material during 2018 2020 and 2017. 2019. 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 | | | | | | | | | 256 | | JPMorgan Chase & Co./2020 Form 10-K |
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 floaters may “put,” or tender, their floaters to the TOB trust. If the remarketing agent cannot successfully remarket the floaters to another investor, the liquidity provider either provides a loan to the TOB trust for the TOB trust’s purchase of the floaters, or it directly purchases the tendered 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.
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, 20182020 and 2017.2019. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | Liabilities | December 31, 2020 (in millions) | Trading assets | Loans | Other(b) | Total assets(c) | | Beneficial interests in VIE assets(d) | Other(e) | Total liabilities | VIE program type | | | | | | | | | Firm-sponsored credit card trusts | $ | 0 | | $ | 11,962 | | $ | 148 | | $ | 12,110 | | | $ | 4,943 | | $ | 3 | | $ | 4,946 | | Firm-administered multi-seller conduits | 2 | | 23,787 | | 188 | | 23,977 | | | 10,523 | | 33 | | 10,556 | | Municipal bond vehicles | 1,930 | | 0 | | 2 | | 1,932 | | | 1,902 | | 0 | | 1,902 | | Mortgage securitization entities(a) | 0 | | 1,694 | | 94 | | 1,788 | | | 210 | | 108 | | 318 | | Other | 2 | | 176 | | 249 | | 427 | | | 0 | | 89 | | 89 | | Total | $ | 1,934 | | $ | 37,619 | | $ | 681 | | $ | 40,234 | | | $ | 17,578 | | $ | 233 | | $ | 17,811 | | | | | | | | | | | | Assets | | Liabilities | December 31, 2019 (in millions) | Trading assets | Loans | Other(b) | Total assets(c) | | Beneficial interests in VIE assets(d) | Other(e) | Total liabilities | VIE program type | | | | | | | | | Firm-sponsored credit card trusts | $ | 0 | | $ | 14,986 | | $ | 266 | | $ | 15,252 | | | $ | 6,461 | | $ | 6 | | $ | 6,467 | | Firm-administered multi-seller conduits | 1 | | 25,183 | | 355 | | 25,539 | | | 9,223 | | 36 | | 9,259 | | Municipal bond vehicles | 1,903 | | 0 | | 4 | | 1,907 | | | 1,881 | | 3 | | 1,884 | | Mortgage securitization entities(a) | 66 | | 2,762 | | 64 | | 2,892 | | | 276 | | 130 | | 406 | | Other | 663 | | 0 | | 192 | | 855 | | | 0 | | 272 | | 272 | | Total | $ | 2,633 | | $ | 42,931 | | $ | 881 | | $ | 46,445 | | | $ | 17,841 | | $ | 447 | | $ | 18,288 | |
(a)Includes residential and commercial mortgage securitizations. (b)Includes assets classified as cash and other assets on the Consolidated balance sheets. (c)The assets of the consolidated VIEs included in the program types above are used to settle the liabilities of those entities. The assets and liabilities include third-party assets and liabilities of consolidated VIEs and exclude intercompany balances that eliminate in consolidation. (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 $5.2 billion and $6.7 billion at December 31, 2020 and 2019, respectively. Refer to Note 20 for additional information on interest-bearing long-term beneficial interests. (e)Includes liabilities classified as accounts payable and other liabilities on the Consolidated balance sheets. | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | Liabilities | December 31, 2018 (in millions) | Trading assets | Loans | Other(b) | Total assets(c) | | Beneficial interests in VIE assets(d) | Other(e) | Total liabilities | VIE program type | | | | | | | | | Firm-sponsored credit card trusts | $ | — |
| $ | 31,760 |
| $ | 491 |
| $ | 32,251 |
| | $ | 13,404 |
| $ | 12 |
| $ | 13,416 |
| Firm-administered multi-seller conduits | — |
| 24,411 |
| 300 |
| 24,711 |
| | 4,842 |
| 33 |
| 4,875 |
| Municipal bond vehicles | 1,779 |
| — |
| 4 |
| 1,783 |
| | 1,685 |
| 3 |
| 1,688 |
| Mortgage securitization entities(a) | 53 |
| 3,285 |
| 40 |
| 3,378 |
| | 308 |
| 161 |
| 469 |
| Other | 134 |
| — |
| 178 |
| 312 |
| | 2 |
| 103 |
| 105 |
| Total | $ | 1,966 |
| $ | 59,456 |
| $ | 1,013 |
| $ | 62,435 |
| | $ | 20,241 |
| $ | 312 |
| $ | 20,553 |
| | | | | | | | | | | Assets | | Liabilities | December 31, 2017 (in millions) | Trading assets | Loans | Other(b) | Total assets(c) | | Beneficial interests in VIE assets(d) | Other(e) | Total liabilities | VIE program type | | | | | | | | | Firm-sponsored credit card trusts | $ | — |
| $ | 41,923 |
| $ | 652 |
| $ | 42,575 |
| | $ | 21,278 |
| $ | 16 |
| $ | 21,294 |
| Firm-administered multi-seller conduits | — |
| 23,411 |
| 48 |
| 23,459 |
| | 3,045 |
| 28 |
| 3,073 |
| Municipal bond vehicles | 1,278 |
| — |
| 3 |
| 1,281 |
| | 1,265 |
| 2 |
| 1,267 |
| Mortgage securitization entities(a) | 66 |
| 3,661 |
| 55 |
| 3,782 |
| | 359 |
| 199 |
| 558 |
| Other | 105 |
| — |
| 1,916 |
| 2,021 |
| | 134 |
| 104 |
| 238 |
| Total | $ | 1,449 |
| $ | 68,995 |
| $ | 2,674 |
| $ | 73,118 |
| | $ | 26,081 |
| $ | 349 |
| $ | 26,430 |
|
| | (a) | Includes residential and commercial mortgage securitizations. |
| | (b) | Includes assets classified as cash and other assets on the Consolidated balance sheets. |
| | (c) | The assets of the consolidated VIEs included in the program types above are used to settle the liabilities of those entities. The assets and liabilities include third-party assets and liabilities of consolidated VIEs and exclude intercompany balances that eliminate in consolidation.
|
| | (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 $13.7 billion and $21.8 billion at December 31, 2018 and 2017, respectively. For additional information on interest-bearing long-term beneficial interests, refer to Note 19. |
| | (e) | Includes liabilities classified as accounts payable and other liabilities on the Consolidated balance sheets. |
| | | | | | | | | 248 | | JPMorgan Chase & Co./20182020 Form 10-K | | 257 |
Notes to consolidated financial statements
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, alternative energy, and other 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 $16.5 $24.9 billion and $13.4$19.1 billion, of which $4.0 $8.7 billion and $3.2$5.5 billion was unfunded at December 31, 20182020 and 2017,2019, respectively. In order to reduce the risk of loss, the Firm assesses each project and withholds varying amounts of its capital investment until the project qualifies for tax credits. Refer to Note 24 25 for further information on affordable housing tax credits.For Refer to Note 28 for more information on off-balance sheet lending-related commitments, refer to 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-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, 20182020 and 2017,2019, was $4.8$6.7 billion and $5.3$5.5 billion, respectively. The fair value of assets held by such VIEs at December 31, 20182020 and 20172019 was $7.7$10.5 billion and $9.2$8.6 billion, respectively. For Refer to Note 28 for more information on off-balance sheet lending-related commitments, refer to Note 27.commitments. Loan securitizations The Firm has securitized and sold a variety of loans, including residential mortgage, credit card, and commercial 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.
| | | | | | | | | 258 | | JPMorgan Chase & Co./20182020 Form 10-K | | 249 |
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, 2020, 2019 and 2018, 2017 and 2016, 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. | | | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 | Year ended December 31, (in millions) | Residential mortgage(f) | Commercial and other(g) | | Residential mortgage(f) | Commercial and other(g) | | Residential mortgage(f) | Commercial and other(g) | Year ended December 31, (in millions) | Residential mortgage(d) | Commercial and other(e) | | Residential mortgage(d) | Commercial and other(e) | | Residential mortgage(d) | Commercial and other(e) | Principal securitized | $ | 6,431 |
| $ | 10,159 |
| | $ | 5,532 |
| $ | 10,252 |
| | $ | 1,817 |
| $ | 8,964 |
| Principal securitized | $ | 7,103 | | $ | 6,624 | | | $ | 9,957 | | $ | 9,390 | | | $ | 6,431 | | $ | 10,159 | | All cash flows during the period:(a) | | | | | | All cash flows during the period:(a) | | Proceeds received from loan sales as financial instruments(b)(c) | $ | 6,449 |
| $ | 10,218 |
| | $ | 5,661 |
| $ | 10,340 |
| | $ | 1,831 |
| $ | 9,094 |
| Proceeds received from loan sales as financial instruments(b)(c) | $ | 7,321 | | $ | 6,865 | | | $ | 10,238 | | $ | 9,544 | | | $ | 6,449 | | $ | 10,218 | | Servicing fees collected(d) | 319 |
| 2 |
| | 338 |
| 3 |
| | 477 |
| 3 |
| | Purchases of previously transferred financial assets (or the underlying collateral)(e) | — |
| — |
| | 1 |
| — |
| | 37 |
| — |
| | Servicing fees collected | | Servicing fees collected | 211 | | 1 | | | 287 | | 2 | | | 319 | | 2 | | Cash flows received on interests | 411 |
| 301 |
| | 463 |
| 918 |
| | 482 |
| 1,441 |
| Cash flows received on interests | 801 | | 239 | | | 507 | | 237 | | | 411 | | 301 | |
| | (a) | Excludes re-securitization transactions. |
| | (b) | Predominantly includes Level 2 assets. |
| | (c) | The carrying value of the loans accounted for at fair value approximated the proceeds received upon loan sale. |
| | (d) | The prior period amounts have been revised to conform with the current period presentation. |
| | (e) | Includes cash paid by the Firm to reacquire assets from nonconsolidated entities – for example, loan repurchases due to representation and warranties and servicer “clean-up” calls. |
| | (f) | Includes prime mortgages only. Excludes certain loan securitization transactions entered into with Ginnie Mae, Fannie Mae and Freddie Mac. |
| | (g) | Includes commercial mortgage and other consumer loans. |
(a)Excludes re-securitization transactions. (b)Predominantly includes Level 2 assets. (c)The carrying value of the loans accounted for at fair value approximated the proceeds received upon loan sale. (d)Represents prime mortgages. Excludes loan securitization activity related to U.S. GSEs and government agencies. (e)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, | | 2018 | | 2017 | | 2016 | Residential mortgage retained interest: | Weighted-average life (in years) | | 7.6 |
| | 4.8 |
| | 4.5 |
| Weighted-average discount rate | | 3.6 | % | | 2.9 | % | | 4.2 | % | Commercial mortgage retained interest: | | | Weighted-average life (in years) | | 5.3 |
| | 7.1 |
| | 6.2 |
| Weighted-average discount rate | | 4.0 | % | | 4.4 | % | | 5.8 | % |
| | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | 2020 | | 2019 | | 2018 | Residential mortgage retained interest: | Weighted-average life (in years) | | 4.7 | | 4.8 | | 7.6 | Weighted-average discount rate | | 8.2 | % | | 7.4 | % | | 3.6 | % | Commercial mortgage retained interest: | | | Weighted-average life (in years) | | 6.9 | | 6.4 | | 5.3 | Weighted-average discount rate | | 3.0 | % | | 4.1 | % | | 4.0 | % |
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. Refer to Note 27 28 for additional information about the Firm’s loan salessales- and securitization-related indemnifications.Refer to Note 15 for additional information about the impact of the Firm’s sale of certain excess MSRs.
| | | | | | | | | 250 | | JPMorgan Chase & Co./20182020 Form 10-K | | 259 |
Notes to consolidated financial statements
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,guidelines. | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | 2019 | 2018 | Carrying value of loans sold | $ | 81,153 | | $ | 92,349 | | $ | 44,609 | | Proceeds received from loan sales as cash | $ | 45 | | $ | 73 | | $ | 9 | | Proceeds from loan sales as securities(a)(b) | 80,186 | | 91,422 | | 43,671 | | Total proceeds received from loan sales(c) | $ | 80,231 | | $ | 91,495 | | $ | 43,680 | | Gains/(losses) on loan sales(d)(e) | $ | 6 | | $ | 499 | | $ | (93) | |
(a)Includes securities from U.S. GSEs and other third-party-sponsored securitization entities.Ginnie Mae that are generally sold shortly after receipt or retained as part of the Firm’s investment securities portfolio. (b)Included in level 2 assets. | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | 2017 | 2016 | Carrying value of loans sold | $ | 44,609 |
| $ | 64,542 |
| $ | 52,869 |
| Proceeds received from loan sales as cash | $ | 9 |
| $ | 117 |
| $ | 592 |
| Proceeds from loans sales as securities(a) | 43,671 |
| 63,542 |
| 51,852 |
| Total proceeds received from loan sales(b) | $ | 43,680 |
| $ | 63,659 |
| $ | 52,444 |
| Gains/(losses) on loan sales(c)(d) | $ | (93 | ) | $ | 163 |
| $ | 222 |
|
(c)Excludes the value of MSRs retained upon the sale of loans. | | (a) | Predominantly includes securities from U.S. GSEs and Ginnie Mae that are generally sold shortly after receipt. |
| | (b) | Excludes the value of MSRs retained upon the sale of loans. |
| | (c) | Gains/(losses) on loan sales include the value of MSRs. |
| | (d) | The carrying value of the loans accounted for at fair value approximated the proceeds received upon loan sale. |
(d)Gains/(losses) on loan sales include the value of MSRs. (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 th ethe 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. ForRefer to Note 12 for additional information, refer to Note 12.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, 20182020 and 2017. 2019. Substantially all of these loans and real estate are insured or guaranteed by U.S. government agencies. | | | | | | | | | December 31, (in millions) | 2020 | 2019 | Loans repurchased or option to repurchase(a) | $ | 1,413 | | $ | 2,941 | | Real estate owned | 9 | | 41 | | Foreclosed government-guaranteed residential mortgage loans(b) | 64 | | 198 | |
(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. | | | | | | | | December 31, (in millions) | 2018 |
| 2017 |
| Loans repurchased or option to repurchase(a) | $ | 7,021 |
| $ | 8,629 |
| Real estate owned | 75 |
| 95 |
| Foreclosed government-guaranteed residential mortgage loans(b) | 361 |
| 527 |
|
| | (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 and delinquencies related to 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, 20182020 and 2017.2019. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Securitized assets | | 90 days past due | | Net liquidation losses | As of or for the year ended December 31, (in millions) | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 | Securitized loans | | | | | | | | | Residential mortgage: | | | | | | | | | Prime/ Alt-A & option ARMs | $ | 41,265 | | $ | 48,734 | | | $ | 4,988 | | $ | 2,449 | | | $ | 212 | | $ | 579 | | Subprime | 12,154 | | 13,490 | | | 2,406 | | 1,813 | | | 179 | | 532 | | Commercial and other | 92,351 | | 80,878 | | | 5,958 | | 187 | | | 30 | | 445 | | Total loans securitized | $ | 145,770 | | $ | 143,102 | | | $ | 13,352 | | $ | 4,449 | | | $ | 421 | | $ | 1,556 | |
| | | | | | | | | | | | | | | | | | | | | | | Securitized assets | | 90 days past due | | Net liquidation losses(a) | As of or for the year ended December 31, (in millions) | 2018 | 2017 | | 2018 | 2017 | | 2018 | 2017 | Securitized loans | | | | | | | | | Residential mortgage: | | | | | | | | | Prime/ Alt-A & option ARMs | $ | 50,679 |
| $ | 52,280 |
| | $ | 3,354 |
| $ | 4,870 |
| | $ | 610 |
| $ | 790 |
| Subprime | 15,434 |
| 17,612 |
| | 2,478 |
| 3,276 |
| | (169 | ) | 719 |
| Commercial and other | 79,387 |
| 63,411 |
| | 225 |
| 957 |
| | 280 |
| 114 |
| Total loans securitized | $ | 145,500 |
| $ | 133,303 |
| | $ | 6,057 |
| $ | 9,103 |
| | $ | 721 |
| $ | 1,623 |
|
| | (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. |
| | | | | | | | | 260 | | JPMorgan Chase & Co./20182020 Form 10-K | | 251 |
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.acquired, and can be adjusted up to one year from the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed. 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 that there may be an 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.reviewed. The following table presents goodwill attributed to the business segments. | | | | | | | | | | | | December 31, (in millions) | 2020 | 2019 | 2018 | Consumer & Community Banking(a) | $ | 31,311 | | $ | 30,133 | | $ | 30,084 | | Corporate & Investment Bank(a) | 7,913 | | 7,901 | | 7,721 | | Commercial Banking | 2,985 | | 2,982 | | 2,860 | | Asset & Wealth Management(a) | 7,039 | | 6,807 | | 6,806 | | Total goodwill | $ | 49,248 | | $ | 47,823 | | $ | 47,471 | |
| | | | | | | | | | | December 31, (in millions) | 2018 | 2017 | 2016 | Consumer & Community Banking | $ | 30,984 |
| $ | 31,013 |
| $ | 30,797 |
| Corporate & Investment Bank | 6,770 |
| 6,776 |
| 6,772 |
| Commercial Banking | 2,860 |
| 2,860 |
| 2,861 |
| Asset & Wealth Management | 6,857 |
| 6,858 |
| 6,858 |
| Total goodwill | $ | 47,471 |
| $ | 47,507 |
| $ | 47,288 |
|
(a)In 2020, goodwill of $959 million was transferred from CCB to CIB and $51 million from AWM to CCB related to business realignments. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 32 for additional information on these realignments.The following table presents changes in the carrying amount of goodwill. | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | Balance at beginning of period | $ | 47,823 | | | $ | 47,471 | | | $ | 47,507 | | Changes during the period from: | | | | | | Business combinations(a) | 1,412 | | | 349 | | | 0 | | | | | | | | Other(b) | 13 | | | 3 | | | (36) | | Balance at December 31, | $ | 49,248 | | | $ | 47,823 | | | $ | 47,471 | |
| | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | Balance at beginning of period | $ | 47,507 |
| | $ | 47,288 |
| | $ | 47,325 |
| Changes during the period from: | | | | | | Business combinations(a) | — |
| | 199 |
| | — |
| Dispositions(b) | — |
| | — |
| | (72 | ) | Other(c) | (36 | ) | | 20 |
| | 35 |
| Balance at December 31, | $ | 47,471 |
| | $ | 47,507 |
| | $ | 47,288 |
|
| | (a) | For 2017, represents CCB goodwill in connection with an acquisition. |
| | (b) | For 2016, represents AWM goodwill, which was disposed of as part of a sale. |
| | (c) | Includes foreign currency remeasurement and other adjustments. |
(a)For 2020, represents estimated goodwill associated with the acquisitions of cxLoyalty in CCB and 55ip in AWM. For 2019, represents goodwill associated with the acquisition of InstaMed. This goodwill was allocated to CIB, CB and CCB.(b)Primarily relates to foreign currency adjustments.
Goodwill impairment testing The Firm’s goodwill was not impaired at December 31, 2018, 2017,2020, 2019 and 2016.2018. Effective January 1, 2020, the Firm adopted new accounting guidance related to goodwill impairment testing. The adoption of the guidance requires recognition of an impairment loss when the estimated fair value of a reporting unit falls below its carrying value. It eliminated the requirement that an impairment loss be recognized only if the estimated implied fair value of the goodwill is below its carrying value. The goodwill impairment test is performed in two steps. In the first step,by comparing the current fair value of each reporting unit is compared with its carrying value. If the fair value is in excess of the carrying value, then the reporting unit’s goodwill is considered not to be 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 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. Ifamount by which the reporting unit’s carrying value exceeds its fair value, up to the amount of goodwill is less than its implied current fair value, then no goodwill impairment is recognized.allocated to that reporting unit. 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 andLOBs which takes into consideration a variety of factors including capital levellevels of similarly-ratedsimilarly rated peers and applicable regulatory capital requirements. Proposed line of business equityLOB capital 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.
| | | | 252 | | JPMorgan Chase & Co./2018 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 generaloverall 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 | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 261 |
Notes to consolidated financial statements execution risk that would exist at the firmwideFirmwide 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. DeclinesUnanticipated declines in business performance, increases in credit losses, increases in capital requirements, as well as deterioration in economic or market conditions, 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.
| | | | | | | | | 262 | | JPMorgan Chase & Co./20182020 Form 10-K | | 253 |
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.(e.g., 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, 20182020, 2019 and 2018. | | | | | | | | | | | | | | | | | | | | | As of or for the year ended December 31, (in millions, except where otherwise noted) | 2020 | | 2019 | | 2018 | | Fair value at beginning of period | $ | 4,699 | | | $ | 6,130 | | | $ | 6,030 | | | MSR activity: | | | | | | | Originations of MSRs | 944 | | | 1,384 | | | 931 | | | Purchase of MSRs | 248 | | | 105 | | | 315 | | | Disposition of MSRs(a) | (176) | | | (789) | | | (636) | | | Net additions/(Dispositions) | 1,016 | | | 700 | | | 610 | | | | | | | | | | Changes due to collection/realization of expected cash flows | (899) | | | (951) | | | (740) | | | | | | | | | | Changes in valuation due to inputs and assumptions: | | | | | | | Changes due to market interest rates and other(b) | (1,568) | | | (893) | | | 300 | | | Changes in valuation due to other inputs and assumptions: | | | | | | | Projected cash flows (e.g., cost to service) | (54) | | | (333) | | (e) | 15 | | | Discount rates | 199 | | | 153 | | | 24 | | | Prepayment model changes and other(c) | (117) | | | (107) | | | (109) | | | Total changes in valuation due to other inputs and assumptions | 28 | | | (287) | | | (70) | | | Total changes in valuation due to inputs and assumptions | (1,540) | | | (1,180) | | | 230 | | | Fair value at December 31, | $ | 3,276 | | | $ | 4,699 | | | $ | 6,130 | | | Change in unrealized gains/(losses) included in income related to MSRs held at December 31, | $ | (1,540) | | | $ | (1,180) | | | $ | 230 | | | Contractual service fees, late fees and other ancillary fees included in income | 1,325 | | | 1,639 | | | 1,778 | | | Third-party mortgage loans serviced at December 31, (in billions) | 448.0 | | | 522.0 | | | 521.0 | | | Servicer advances, net of an allowance for uncollectible amounts, at December 31, (in billions)(d) | 1.8 | | | 2.0 | | | 3.0 | | |
(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)2017The decrease in projected cash flows was largely related to default servicing assumption updates. and 2016. | | | | | | | | | | | | | | As of or for the year ended December 31, (in millions, except where otherwise noted) | 2018 |
| | 2017 |
| | 2016 |
| | Fair value at beginning of period | $ | 6,030 |
| | $ | 6,096 |
| | $ | 6,608 |
| | MSR activity: | | | | | | | Originations of MSRs | 931 |
| | 1,103 |
| | 679 |
| | Purchase of MSRs | 315 |
| | — |
| | — |
| | Disposition of MSRs(a) | (636 | ) | | (140 | ) | | (109 | ) | | Net additions | 610 |
| | 963 |
| | 570 |
| | | | | | | | | Changes due to collection/realization of expected cash flows | (740 | ) | | (797 | ) | | (919 | ) | | | | | | | | | Changes in valuation due to inputs and assumptions: | | | | | | | Changes due to market interest rates and other(b) | 300 |
| | (202 | ) | | (72 | ) | | Changes in valuation due to other inputs and assumptions: | | | | | | | Projected cash flows (e.g., cost to service) | 15 |
| | (102 | ) | | (35 | ) | | Discount rates | 24 |
| | (19 | ) | | 7 |
| | Prepayment model changes and other(c) | (109 | ) | | 91 |
| | (63 | ) | | Total changes in valuation due to other inputs and assumptions | (70 | ) | | (30 | ) | | (91 | ) | | Total changes in valuation due to inputs and assumptions | 230 |
| | (232 | ) | | (163 | ) | | Fair value at December 31, | $ | 6,130 |
| | $ | 6,030 |
| | $ | 6,096 |
| | Change in unrealized gains/(losses) included in income related to MSRs held at December 31, | $ | 230 |
| | $ | (232 | ) | | $ | (163 | ) | | Contractual service fees, late fees and other ancillary fees included in income | 1,778 |
| | 1,886 |
| | 2,124 |
| | Third-party mortgage loans serviced at December 31, (in billions) | 521.0 |
| | 555.0 |
| | 593.3 |
| | Servicer advances, net of an allowance for uncollectible amounts, at December 31, (in billions)(d) | 3.0 |
| | 4.0 |
| | 4.7 |
| |
| | (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. |
| | | | | | | | | 254 | | JPMorgan Chase & Co./20182020 Form 10-K | | 263 |
Notes to consolidated financial statements
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, 2018, 20172020, 2019 and 2016.2018. | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | 2020 | | 2019 | | 2018 | CCB mortgage fees and related income | | | | | | Net production revenue | $ | 2,629 | | | $ | 1,618 | | | $ | 268 | | | | | | | | Net mortgage servicing revenue: | | | | | | Operating revenue: | | | | | | Loan servicing revenue | 1,367 | | | 1,533 | | | 1,835 | | Changes in MSR asset fair value due to collection/realization of expected cash flows | (899) | | | (951) | | | (740) | | Total operating revenue | 468 | | | 582 | | | 1,095 | | Risk management: | | | | | | Changes in MSR asset fair value due to market interest rates and other(a) | (1,568) | | | (893) | | | 300 | | Other changes in MSR asset fair value due to other inputs and assumptions in model(b) | 28 | | | (287) | | | (70) | | Change in derivative fair value and other | 1,522 | | | 1,015 | | | (341) | | Total risk management | (18) | | | (165) | | | (111) | | Total net mortgage servicing revenue | 450 | | | 417 | | | 984 | | | | | | | | Total CCB mortgage fees and related income | 3,079 | | | 2,035 | | | 1,252 | | | | | | | | All other | 12 | | | 1 | | | 2 | | Mortgage fees and related income | $ | 3,091 | | | $ | 2,036 | | | $ | 1,254 | |
(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). | | | | | | | | | | | | | Year ended December 31, (in millions) | 2018 | | 2017 | | 2016 | CCB mortgage fees and related income | | | | | | Net production revenue | $ | 268 |
| | $ | 636 |
| | $ | 853 |
| | | | | | | Net mortgage servicing revenue: | | | | | |
| Operating revenue: | | | | | |
| Loan servicing revenue | 1,835 |
| | 2,014 |
| | 2,336 |
| Changes in MSR asset fair value due to collection/realization of expected cash flows | (740 | ) | | (795 | ) | | (916 | ) | Total operating revenue | 1,095 |
| | 1,219 |
| | 1,420 |
| Risk management: | | | | | |
| Changes in MSR asset fair value due to market interest rates and other(a) | 300 |
| | (202 | ) | | (72 | ) | Other changes in MSR asset fair value due to other inputs and assumptions in model(b) | (70 | ) | | (30 | ) | | (91 | ) | Change in derivative fair value and other | (341 | ) | | (10 | ) | | 380 |
| Total risk management | (111 | ) | | (242 | ) | | 217 |
| Total net mortgage servicing revenue | 984 |
| | 977 |
| | 1,637 |
| | | | | | | Total CCB mortgage fees and related income | 1,252 |
| | 1,613 |
| | 2,490 |
| | | | | | | All other | 2 |
| | 3 |
| | 1 |
| Mortgage fees and related income | $ | 1,254 |
| | $ | 1,616 |
| | $ | 2,491 |
|
| | (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, 20182020 and 2017, 2019, and outlines the sensitivities of those fair values to immediate adverse changes in those assumptions, as defined below. | | | | | | | | | | | | December 31, (in millions, except rates) | 2020 | | 2019 | Weighted-average prepayment speed assumption (constant prepayment rate) | 14.90 | % | | 11.67 | % | Impact on fair value of 10% adverse change | $ | (206) | | | $ | (200) | | Impact on fair value of 20% adverse change | (392) | | | (384) | | Weighted-average option adjusted spread(a) | 7.19 | % | | 7.93 | % | Impact on fair value of 100 basis points adverse change | $ | (134) | | | $ | (169) | | Impact on fair value of 200 basis points adverse change | (258) | | | (326) | |
| | | | | | | | | December 31, (in millions, except rates) | 2018 | | 2017 | Weighted-average prepayment speed assumption (“CPR”) | 8.78 | % | | 9.35 | % | Impact on fair value of 10% adverse change | $ | (205 | ) | | $ | (221 | ) | Impact on fair value of 20% adverse change | (397 | ) | | (427 | ) | Weighted-average option adjusted spread | 8.70 | % | | 9.04 | % | Impact on fair value of 100 basis points adverse change | $ | (235 | ) | | $ | (250 | ) | Impact on fair value of 200 basis points adverse change | (452 | ) | | (481 | ) |
CPR: Constant prepayment rate.(a)Includes the impact of operational risk and regulatory capital.
Changes in fair value based on variations 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.
| | | | | | | | | 264 | | JPMorgan Chase & Co./20182020 Form 10-K | | 255 |
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 termremainder of the leased facilitylease term, or the estimated useful life of the leased asset.improvements. 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, 20182020 and 2017, 2019, noninterest-bearing and interest-bearing deposits were as follows. | | | | | | | | | | | | | | | December 31, (in millions) | 2020 | | 2019 | | U.S. offices | | | | | Noninterest-bearing (included $9,873 and $22,637 at fair value)(a) | $ | 572,711 | | | $ | 395,667 | | | Interest-bearing (included $2,567 and $2,534 at fair value)(a) | 1,197,032 | | | 876,156 | | | Total deposits in U.S. offices | 1,769,743 | | | 1,271,823 | | | Non-U.S. offices | | | | | Noninterest-bearing (included $1,486 and $1,980 at fair value)(a) | 23,435 | | | 20,087 | | | Interest-bearing (included $558 and $1,438 at fair value)(a) | 351,079 | | | 270,521 | | | Total deposits in non-U.S. offices | 374,514 | | | 290,608 | | | Total deposits | $ | 2,144,257 | | | $ | 1,562,431 | | |
(a)Includes structured notes classified as deposits for which the fair value option has been elected. Refer to Note 3 for further discussion. | | | | | | | | | | December 31, (in millions) | 2018 |
|
| 2017 |
| | U.S. offices | | | | | Noninterest-bearing | $ | 369,505 |
| | $ | 393,645 |
| | Interest-bearing (included $19,691, and $14,947 at fair value)(a) | 831,085 |
| | 793,618 |
| | Total deposits in U.S. offices | 1,200,590 |
| | 1,187,263 |
| | Non-U.S. offices | | | | | Noninterest-bearing | 19,092 |
| | 15,576 |
| | Interest-bearing (included $3,526 and $6,374 at fair value)(a) | 250,984 |
| | 241,143 |
| | Total deposits in non-U.S. offices | 270,076 |
| | 256,719 |
| | Total deposits | $ | 1,470,666 |
| | $ | 1,443,982 |
| |
| | (a) | Includes structured notes classified as deposits for which the fair value option has been elected. For further discussion, refer to Note 3. |
At December 31, 20182020 and 2017, 2019, time deposits in denominations of $250,000 or more were as follows. | | | | | | | | | | December 31, (in millions) |
| 2018 |
|
| 2017 |
| U.S. offices |
| $ | 25,119 |
|
| $ | 30,671 |
| Non-U.S. offices |
| 41,661 |
|
| 29,049 |
| Total |
| $ | 66,780 |
|
| $ | 59,720 |
|
| | | | | | | | | | | | | | | December 31, (in millions) | | 2020 | | 2019 | U.S. offices | | $ | 33,812 | | | $ | 44,127 | | Non-U.S. offices | | 50,523 | | | 50,840 | | Total | | $ | 84,335 | | | $ | 94,967 | |
At December 31, 2018, 2020, the maturities of interest-bearing time deposits were as follows. | | | | | | | | | | | | | | | | | | | | | December 31, 2020 (in millions) | | | | | | | | U.S. | | Non-U.S. | | Total | 2021 | | $ | 44,785 | | | $ | 48,142 | | | $ | 92,927 | | 2022 | | 1,451 | | | 175 | | | 1,626 | | 2023 | | 259 | | | 7 | | | 266 | | 2024 | | 210 | | | 36 | | | 246 | | 2025 | | 197 | | | 633 | | | 830 | | After 5 years | | 451 | | | 298 | | | 749 | | Total | | $ | 47,353 | | | $ | 49,291 | | | $ | 96,644 | |
| | | | | | | | | | | | | | December 31, 2018 (in millions) | | |
| | |
| | |
| | U.S. | | Non-U.S. |
| | Total |
| 2019 | | $ | 31,757 |
| | $ | 40,259 |
| | $ | 72,016 |
| 2020 | | 6,309 |
| | 229 |
| | 6,538 |
| 2021 | | 5,235 |
| | 19 |
| | 5,254 |
| 2022 | | 2,884 |
| | 173 |
| | 3,057 |
| 2023 | | 1,719 |
| | 372 |
| | 2,091 |
| After 5 years | | 3,515 |
| | 2,023 |
| | 5,538 |
| Total | | $ | 51,419 |
| | $ | 43,075 |
| | $ | 94,494 |
|
| | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 265 |
Notes to consolidated financial statements Note 18 - Leases Firm as lessee At December 31, 2020, 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. All leases with lease terms greater than twelve months are reported as a lease liability with a corresponding right-of-use (“ROU”) asset. 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. 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) | | | | | | | | | 2020 | 2019 | | | | | | | Right-of-use assets | $ | 8,006 | | $ | 8,190 | | | | | | | | Lease liabilities | 8,508 | | 8,505 | | | | | | | | | | | | | | | | | Weighted average remaining lease term (in years) | 8.7 | 8.8 | | | | | | | Weighted average discount rate | 3.48 | % | 3.68 | % | | | | | | | | | | | | | | | | Supplemental cash flow information | | | | | | | | | Cash paid for amounts included in the measurement of lease liabilities - operating cash flows | $ | 1,626 | | $ | 1,572 | | | | | | | | Supplemental non-cash information | | | | | | | | | Right-of-use assets obtained in exchange for operating lease obligations | $ | 1,350 | | $ | 1,413 | | | | | | | | | | | | | | | | |
| | | | | | | | | Year ended December 31, (in millions) | 2020 | 2019 | Rental expense | | | Gross rental expense | $ | 2,094 | | $ | 2,057 | | Sublease rental income | (166) | | (184) | | Net rental expense | $ | 1,928 | | $ | 1,873 | |
The following table presents future payments under operating leases as of December 31, 2020: | | | | | | Year ended December 31, (in millions) | | 2021 | $ | 1,606 | | 2022 | 1,435 | | 2023 | 1,270 | | 2024 | 1,123 | | 2025 | 947 | | After 2025 | 3,602 | | Total future minimum lease payments | 9,983 | | Less: Imputed interest | (1,475) | | Total | $ | 8,508 | |
In addition to the table above, as of December 31, 2020, 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 2021 and 2023 with lease terms up to 25 years.
| | | | | | | | | 266 | | JPMorgan Chase & Co./2020 Form 10-K |
Notes to consolidated financial statements 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 subject to operating leases 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) | | 2020 | 2019 | Carrying value of assets subject to operating leases, net of accumulated depreciation | | $ | 21,155 | | $ | 23,587 | | Accumulated depreciation | | 6,388 | | 6,121 | |
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) | | 2020 | 2019 | 2018 | Operating lease income | | $ | 5,539 | | $ | 5,455 | | $ | 4,540 | | Depreciation expense | | 4,257 | | 4,157 | | 3,522 | |
The following table presents future receipts under operating leases as of December 31, 2020: | | | | | | Year ended December 31, (in millions) | | 2021 | $ | 3,686 | | 2022 | 2,084 | | 2023 | 613 | | 2024 | 52 | | 2025 | 24 | | After 2025 | 34 | | Total future minimum lease receipts | $ | 6,493 | |
| | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 267 |
Notes to consolidated financial statements Note 19 – Accounts payable and other liabilities Accounts payable and other liabilities consist of brokerage payables, which includesinclude payables to customers dealers and clearing organizations, and payables fromrelated to security purchases that did not settle;settle, as well as other accrued expenses, includingsuch as income tax payables, andoperating lease liabilities, credit card rewards liability; and all other liabilities, including obligations to return securities received as collateralliability, and litigation reserves. The following table details the components of accounts payable and other liabilities. | | | | | | | | | | | | | | | December 31, (in millions) | | 2020 | | 2019 | Brokerage payables | | $ | 140,291 | | | $ | 118,375 | | Other payables and liabilities(a) | | 92,308 | | | 92,032 | | Total accounts payable and other liabilities | | $ | 232,599 | | | $ | 210,407 | |
(a) Includes credit card rewards liability of $7.7 billion and $6.4 billion at December 31, 2020 and 2019, respectively. | | | | | | | | | | December 31, (in millions) | | 2018 |
| | 2017 |
| Brokerage payables | | $ | 114,794 |
| | $ | 102,727 |
| Other payables and liabilities(a) | | 81,916 |
| | 86,656 |
| Total accounts payable and other liabilities | | $ | 196,710 |
| | $ | 189,383 |
|
| | (a) | Includes credit card rewards liability of $5.8 billion and $4.9 billion at December 31, 2018 and 2017, respectively. |
| | | | | | | | | 256268 | | JPMorgan Chase & Co./20182020 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, 2018.2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | By remaining maturity at December 31, (in millions, except rates) | | 2020 | | 2019 | | | Under 1 year | | 1-5 years | | After 5 years | | Total | | Total | | Parent company | | | | | | | | | | | | Senior debt: | Fixed rate | $ | 9,225 | | | $ | 49,987 | | | $ | 114,296 | | | $ | 173,508 | | | $ | 161,198 | | | | Variable rate | 1,580 | | | 8,644 | | | 8,353 | | | 18,577 | | | 18,615 | | | | Interest rates(a) | 1.33-4.63% | | 0.50-4.50% | | 0.17-6.40% | | 0.17-6.40% | | 0.15-6.40% | | Subordinated debt: | Fixed rate | $ | 0 | | | $ | 5,678 | | | $ | 13,577 | | | $ | 19,255 | | | $ | 15,155 | | | | Variable rate | 0 | | | 0 | | | 9 | | | 9 | | | 9 | | | | Interest rates(a) | 0% | | 3.38-7.75% | | 2.96-8.00% | | 2.96-8.00% | | 3.38-8.00% | | | Subtotal | $ | 10,805 | | | $ | 64,309 | | | $ | 136,235 | | | $ | 211,349 | | | $ | 194,977 | | | Subsidiaries | | | | | | | | | | | | Federal Home Loan Banks advances: | Fixed rate | $ | 7 | | | $ | 45 | | | $ | 71 | | | $ | 123 | | | $ | 135 | | | | Variable rate | 3,000 | | | 11,000 | | | 0 | | | 14,000 | | | 28,500 | | | | Interest rates(a) | 0.57-0.60% | | 0.19-0.24% | | 4.66-7.73% | | 0.19-7.73% | | 1.67-8.31% | (h) | Senior debt: | Fixed rate | $ | 1,067 | | | $ | 3,157 | | | $ | 11,534 | | | $ | 15,758 | | | $ | 19,597 | | | | Variable rate | 12,055 | | | 18,448 | | | 7,608 | | | 38,111 | | | 45,861 | | | | Interest rates(a) | 0% | | 7.28% | | 1.00-1.30% | | 1.00-7.28% | | 1.00-9.43% | | Subordinated debt: | Fixed rate | $ | 0 | | | $ | 309 | | | $ | 0 | | | $ | 309 | | | $ | 305 | | | | Variable rate | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | | Interest rates(a) | 0 | % | | 8.25 | % | | 0 | % | | 8.25 | % | | 8.25 | % | | | Subtotal | $ | 16,129 | | | $ | 32,959 | | | $ | 19,213 | | | $ | 68,301 | | | $ | 94,398 | | | Junior subordinated debt: | Fixed rate | $ | 0 | | | $ | 0 | | | $ | 738 | | | $ | 738 | | | $ | 693 | | | | Variable rate | 0 | | | 0 | | | 1,297 | | | 1,297 | | | 1,430 | | | | Interest rates(a) | 0% | | 0% | | 0.71-8.75% | | 0.71-8.75% | | 2.41-8.75% | | | Subtotal | $ | 0 | | | $ | 0 | | | $ | 2,035 | | | $ | 2,035 | | | $ | 2,123 | | | Total long-term debt(b)(c)(d) | | $ | 26,934 | | | $ | 97,268 | | | $ | 157,483 | | | $ | 281,685 | | (f)(g) | $ | 291,498 | | | Long-term beneficial interests: | | | | | | | | | | | | Fixed rate | $ | 625 | | | $ | 1,744 | | | $ | 0 | | | $ | 2,369 | | | $ | 2,990 | | | | Variable rate | 1,924 | | | 650 | | | 210 | | | 2,784 | | | 3,748 | | | | Interest rates | 0.36-2.77% | | 0.00-2.39% | | 0.00-3.75% | | 0.00-3.75% | | 0.00-4.06% | | Total long-term beneficial interests(e) | | $ | 2,549 | | | $ | 2,394 | | | $ | 210 | | | $ | 5,153 | | | $ | 6,738 | | |
(a)The interest rates shown are the range of contractual rates in effect at December 31, 2020 and 2019, 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, 2020, for total long-term debt was (0.40)% to 7.28%, versus the contractual range of 0.17% to 8.75% presented in the table above. The interest rate ranges shown exclude structured notes accounted for at fair value. (b)Included long-term debt of $17.2 billion and $32.0 billion secured by assets totaling $166.4 billion and $186.1 billion at December 31, 2020 and 2019, respectively. The amount of long-term debt secured by assets does not include amounts related to hybrid instruments. (c)Included $76.8 billion and $75.7 billion of long-term debt accounted for at fair value at December 31, 2020 and 2019, respectively. (d)Included $16.1 billion and $14.0 billion of outstanding zero-coupon notes at December 31, 2020 and 2019, respectively. The aggregate principal amount of these notes at their respective maturities is $45.3 billion and $39.7 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. (e)Included on the Consolidated balance sheets in beneficial interests issued by consolidated VIEs. Also included $41 million and $36 million accounted for at fair value at December 31, 2020 and 2019, respectively. Excluded short-term commercial paper and other short-term beneficial interests of $12.4 billion and $11.1 billion at December 31, 2020 and 2019, respectively. (f)At December 31, 2020, long-term debt in the aggregate of $151.3 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. (g)The aggregate carrying values of debt that matures in each of the five years subsequent to 2020 is $26.9 billion in 2021, $18.4 billion in 2022, $32.2 billion in 2023, $29.6 billion in 2024 and $17.1 billion in 2025. (h)Prior-period amounts have been revised to conform with the current presentation. | | | | | | | | | | | | | | | | | | | | | | | By remaining maturity at December 31, (in millions, except rates) | | 2018 | | | 2017 | | Under 1 year |
| | 1-5 years |
| | After 5 years |
| | Total | | | Total | Parent company | | | | | | | | | | | | Senior debt: | Fixed rate | $ | 8,958 |
| | $ | 55,362 |
| | $ | 81,500 |
| | $ | 145,820 |
| | | $ | 141,551 |
| | Variable rate | 4,037 |
| | 14,025 |
| | 4,916 |
| | 22,978 |
| | | 26,461 |
| | Interest rates(a) | 0.17-6.30% |
| | 0.23-4.95% |
| | 0.45-6.40% |
| | 0.17-6.40% |
| | | 0.16-7.25% |
| Subordinated debt: | Fixed rate | $ | 146 |
| | $ | 1,948 |
| | $ | 12,214 |
| | $ | 14,308 |
| | | $ | 14,646 |
| | Variable rate | — |
| | — |
| | 9 |
| | 9 |
| | | 9 |
| | Interest rates(a) | 8.53 | % | | 3.38 | % | | 3.63-8.00% |
| | 3.38-8.53% |
| | | 3.38-8.53% |
| | Subtotal | $ | 13,141 |
| | $ | 71,335 |
| | $ | 98,639 |
| | $ | 183,115 |
| | | $ | 182,667 |
| Subsidiaries | | | | | | | | | | | | Federal Home Loan Banks advances: | Fixed rate | $ | 12 |
| | $ | 25 |
| | $ | 118 |
| | $ | 155 |
| | | $ | 167 |
| | Variable rate | 11,000 |
| | 29,300 |
| | 4,000 |
| | 44,300 |
| | | 60,450 |
| | Interest rates(a) | 2.58-2.95% |
| | 2.36-2.96% |
| | 2.43-2.52% |
| | 2.36-2.96% |
| | | 1.18-2.00% |
| Senior debt: | Fixed rate | $ | 1,574 |
| | $ | 6,454 |
| | $ | 8,406 |
| | $ | 16,434 |
| | | $ | 11,990 |
| | Variable rate | 6,667 |
| | 22,277 |
| | 6,657 |
| | 35,601 |
| | | 26,218 |
| | Interest rates(a) | 1.65-7.50% |
| | 2.60-7.50% |
| | 1.00-7.50% |
| | 1.00-7.50% |
| | | 0.22-7.50% |
| Subordinated debt: | Fixed rate | $ | — |
| | $ | — |
| | $ | 301 |
| | $ | 301 |
| | | $ | 313 |
| | Variable rate | — |
| | — |
| | — |
| | — |
| | | — |
| | Interest rates(a) | — | % | | — | % | | 8.25 | % | | 8.25 | % | | | 8.25 | % | | Subtotal | $ | 19,253 |
| | $ | 58,056 |
| | $ | 19,482 |
| | $ | 96,791 |
| | | $ | 99,138 |
| Junior subordinated debt: | Fixed rate | $ | — |
| | $ | — |
| | $ | 659 |
| | $ | 659 |
| | | $ | 690 |
| | Variable rate | — |
| | — |
| | 1,466 |
| | 1,466 |
| | | 1,585 |
| | Interest rates(a) | — | % | | — | % | | 3.04-8.75% |
| | 3.04-8.75% |
| | | 1.88-8.75% |
| | Subtotal | $ | — |
| | $ | — |
| | $ | 2,125 |
| | $ | 2,125 |
| | | $ | 2,275 |
| Total long-term debt(b)(c)(d) | | $ | 32,394 |
| | $ | 129,391 |
| | $ | 120,246 |
| | $ | 282,031 |
| (f)(g) | | $ | 284,080 |
| Long-term beneficial interests: | | | | | | | | | | | | Fixed rate | $ | 4,634 |
| | $ | 2,977 |
| | $ | — |
| | $ | 7,611 |
| | | $ | 13,579 |
| | Variable rate | 2,324 |
| | 3,471 |
| | 308 |
| | 6,103 |
| | | 8,192 |
| | Interest rates | 1.27-2.87% |
| | 0.00-3.01% |
| | 2.50-4.62% |
| | 0.00-4.62% |
| | | 0.00-6.54% |
| Total long-term beneficial interests(e) | | $ | 6,958 |
| | $ | 6,448 |
| | $ | 308 |
| | $ | 13,714 |
| | | $ | 21,771 |
|
| | (a) | The interest rates shown are the range of contractual rates in effect at December 31, 2018 and 2017, 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, 2018, for total long-term debt was (0.06)% to 8.88%, versus the contractual range of 0.17% to 8.75% presented in the table above. The interest rate ranges shown exclude structured notes accounted for at fair value. |
| | (b) | Included long-term debt of $47.7 billion and $63.5 billion secured by assets totaling $207.0 billion and $208.4 billion at December 31, 2018 and 2017, respectively. The amount of long-term debt secured by assets does not include amounts related to hybrid instruments. |
| | (c) | Included $54.9 billion and $47.5 billion of long-term debt accounted for at fair value at December 31, 2018 and 2017, respectively. |
| | (d) | Included $11.2 billion and $10.3 billion of outstanding zero-coupon notes at December 31, 2018 and 2017, respectively. The aggregate principal amount of these notes at their respective maturities is $37.4 billion and $33.5 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. |
| | (e) | Included on the Consolidated balance sheets in beneficial interests issued by consolidated VIEs. Also included $28 million and $45 million accounted for at fair value at December 31, 2018 and 2017, respectively. Excluded short-term commercial paper and other short-term beneficial interests of $6.5 billion and $4.3 billion at December 31, 2018 and 2017, respectively. |
| | (f) | At December 31, 2018, long-term debt in the aggregate of $138.2 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. |
| | (g) | The aggregate carrying values of debt that matures in each of the five years subsequent to 2018 is $32.4 billion in 2019, $46.7 billion in 2020, $40.0 billion in 2021, $16.3 billion in 2022 and $26.4 billion in 2023. |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 257269 |
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 3.28% 2.89% and 2.87% 3.13% as of December 31, 20182020 and 2017, 2019, 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 3.64% 1.58% and 2.56% 3.19% as of December 31, 20182020 and 2017, 2019, 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 $10.9$13.8 billion and $7.9$14.4 billion at December 31, 20182020 and 2017, 2019, 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
On September 10, 2018 the Firm’s last remaining issuer of outstanding trust preferred securities (“issuer trust”) was liquidated, resulting in $475 million of trust preferred securities and $15 million of trust common securities originally issued by the issuer trust being cancelled. The junior subordinated debentures previously held by the trust issuer were distributed pro rata to the holders of the trust preferred and trust common securities. The carrying value of the junior subordinated debt was $659 million as of December 31, 2018.
| | | | | | | | | 258270 | | JPMorgan Chase & Co./20182020 Form 10-K |
Note 2021 – Preferred stock At December 31, 20182020 and 2017, 2019, JPMorgan Chase was authorized to issue 200 million shares of preferred stock, in one or more series, with a par value of $1$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, 2020 and 2019. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Shares(a) | | Carrying value (in millions) | | Issue date | Contractual rate in effect at December 31, 2020 | Earliest redemption date(b) | Floating annualized rate of three-month LIBOR/Term SOFR plus: | Dividend declared per share(c) | | | December 31, | | December 31, | | Year ended December 31, | | | 2020 | 2019 | | 2020 | 2019 | 2020 | 2019 | 2018 | | Fixed-rate: | | | | | | | | | | | | | | | Series P | 0 | | 0 | | | $ | 0 | | $ | 0 | | | 2/5/2013 | 0 | % | 3/1/2018 | NA | $0 | $545.00 | $545.00 | | Series T | 0 | | 0 | | | 0 | | 0 | | | 1/30/2014 | 0 | | 3/1/2019 | NA | 0 | 167.50 | 670.00 | | Series W | 0 | | 0 | | | 0 | | 0 | | | 6/23/2014 | 0 | | 9/1/2019 | NA | 0 | 472.50 | 630.00 | | Series Y | 0 | | 143,000 | | | 0 | | 1,430 | | | 2/12/2015 | 0 | | 3/1/2020 | NA | 153.13 | 612.52 | 612.52 | | Series AA | 142,500 | | 142,500 | | | 1,425 | | 1,425 | | | 6/4/2015 | 6.100 | | 9/1/2020 | NA | 610.00 | 610.00 | 610.00 | | Series BB | 115,000 | | 115,000 | | | 1,150 | | 1,150 | | | 7/29/2015 | 6.150 | | 9/1/2020 | NA | 615.00 | 615.00 | 615.00 | | Series DD | 169,625 | | 169,625 | | | 1,696 | | 1,696 | | | 9/21/2018 | 5.750 | | 12/1/2023 | NA | 575.00 | 575.00 | 111.81 | (d) | Series EE | 185,000 | | 185,000 | | | 1,850 | | 1,850 | | | 1/24/2019 | 6.000 | | 3/1/2024 | NA | 600.00 | 511.67 | NA | (e) | Series GG | 90,000 | | 90,000 | | | 900 | | 900 | | | 11/7/2019 | 4.750 | | 12/1/2024 | NA | 506.67 | NA | NA | (f) | | | | | | | | | | | | | | | | Fixed-to-floating-rate: | | | | | | | | | | | | | | Series I | 293,375 | | 293,375 | | | $ | 2,934 | | $ | 2,934 | | | 4/23/2008 | LIBOR + 3.47% | 4/30/2018 | LIBOR + 3.47% | $428.03 | $593.23 | $646.38 | (g) | Series Q | 150,000 | | 150,000 | | | 1,500 | | 1,500 | | | 4/23/2013 | 5.150 | | 5/1/2023 | LIBOR + 3.25 | 515.00 | 515.00 | 515.00 | | Series R | 150,000 | | 150,000 | | | 1,500 | | 1,500 | | | 7/29/2013 | 6.000 | | 8/1/2023 | LIBOR + 3.30 | 600.00 | 600.00 | 600.00 | | Series S | 200,000 | | 200,000 | | | 2,000 | | 2,000 | | | 1/22/2014 | 6.750 | | 2/1/2024 | LIBOR + 3.78 | 675.00 | 675.00 | 675.00 | | Series U | 100,000 | | 100,000 | | | 1,000 | | 1,000 | | | 3/10/2014 | 6.125 | | 4/30/2024 | LIBOR + 3.33 | 612.50 | 612.50 | 612.50 | | Series V | 250,000 | | 250,000 | | | 2,500 | | 2,500 | | | 6/9/2014 | LIBOR + 3.32% | 7/1/2019 | LIBOR + 3.32 | 436.85 | 534.09 | 500.00 | (h) | Series X | 160,000 | | 160,000 | | | 1,600 | | 1,600 | | | 9/23/2014 | 6.100 | | 10/1/2024 | LIBOR + 3.33 | 610.00 | 610.00 | 610.00 | | Series Z | 200,000 | | 200,000 | | | 2,000 | | 2,000 | | | 4/21/2015 | LIBOR + 3.80% | 5/1/2020 | LIBOR + 3.80 | 453.52 | 530.00 | 530.00 | (i) | Series CC | 125,750 | | 125,750 | | | 1,258 | | 1,258 | | | 10/20/2017 | 4.625 | | 11/1/2022 | LIBOR + 2.58 | 462.50 | 462.50 | 462.50 | | Series FF | 225,000 | | 225,000 | | | 2,250 | | 2,250 | | | 7/31/2019 | 5.000 | | 8/1/2024 | SOFR + 3.38 | 500.00 | 251.39 | NA | (j) | Series HH | 300,000 | | 0 | | | 3,000 | | 0 | | | 1/23/2020 | 4.600 | | 2/1/2025 | SOFR + 3.125 | 470.22 | NA | NA | (k) | Series II | 150,000 | | 0 | | | 1,500 | | 0 | | | 2/24/2020 | 4.000 | | 4/1/2025 | SOFR + 2.745 | 341.11 | NA | NA | (l) | Total preferred stock | 3,006,250 | | 2,699,250 | | | $ | 30,063 | | $ | 26,993 | | | | | | | | | | |
(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 $111.81 per share were declared on December 1, 2018 and 2017.include dividends from the original issue date of September 21, 2018 through November 30, 2018. (e)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. (f)NaN dividends were declared for Series GG from the original issue date of November 7, 2019 through December 31, 2019. (g)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. (h)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. (i)Prior to May 1, 2020, the dividend rate was fixed at 5.3%. (j)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. (k)Dividends in the amount of $125.22 per share were declared on March 13, 2020 and include dividends from the original issue date of January 23, 2020 through April 30, 2020. Dividends in the amount of $115.00 per share were declared quarterly thereafter. (l)Dividends in the amount of $141.11 per share were declared on May 15, 2020 and include dividends from the original issue date of February 24, 2020 through June 30, 2020. Dividends in the amount of $100.00 per share were declared quarterly thereafter.
| | | | | | | | | | | | | | | | | | | | | | | Shares at December 31,(a) | | Carrying value (in millions) at December 31, | | Issue date | Contractual rate in effect at December 31, 2018 | Earliest redemption date | Date at which dividend rate becomes floating | Floating annual rate of three-month LIBOR plus: | Dividend declared per share(b) | | | 2018 | 2017 | | 2018 | 2017 | Fixed-rate: | | | | | | | | | | | | | | Series P | 90,000 |
| 90,000 |
| | $ | 900 |
| $ | 900 |
| | 2/5/2013 | 5.450 | % | 3/1/2018 | NA | NA | $136.25 | | Series T | 92,500 |
| 92,500 |
| | 925 |
| 925 |
| | 1/30/2014 | 6.700 |
| 3/1/2019 | NA | NA | 167.50 | | Series W | 88,000 |
| 88,000 |
| | 880 |
| 880 |
| | 6/23/2014 | 6.300 |
| 9/1/2019 | NA | NA | 157.50 | | Series Y | 143,000 |
| 143,000 |
| | 1,430 |
| 1,430 |
| | 2/12/2015 | 6.125 |
| 3/1/2020 | NA | NA | 153.13 | | Series AA | 142,500 |
| 142,500 |
| | 1,425 |
| 1,425 |
| | 6/4/2015 | 6.100 |
| 9/1/2020 | NA | NA | 152.50 | | Series BB | 115,000 |
| 115,000 |
| | 1,150 |
| 1,150 |
| | 7/29/2015 | 6.150 |
| 9/1/2020 | NA | NA | 153.75 | | Series DD | 169,625 |
| — |
| | 1,696 |
| — |
| | 9/21/2018 | 5.750 |
| 12/1/2023 | NA | NA | 111.81 | (c) | | | | | | | | | | | | | | | Fixed-to-floating-rate: | | | | | | | | | | | | | | Series I | 430,375 |
| 600,000 |
| | 4,304 |
| 6,000 |
| | 4/23/2008 | LIBOR + 3.47% |
| 4/30/2018 | 4/30/2018 | LIBOR + 3.47% | $395.00 | (d) | | | | | | | | | | | | | 147.34 | (d) | | | | | | | | | | | | | 148.45 | (d) | | | | | | | | | | | | | 153.09 | (d) | Series Q | 150,000 |
| 150,000 |
| | 1,500 |
| 1,500 |
| | 4/23/2013 | 5.150 |
| 5/1/2023 | 5/1/2023 | LIBOR + 3.25 | 257.50 | | Series R | 150,000 |
| 150,000 |
| | 1,500 |
| 1,500 |
| | 7/29/2013 | 6.000 |
| 8/1/2023 | 8/1/2023 | LIBOR + 3.30 | 300.00 | | Series S | 200,000 |
| 200,000 |
| | 2,000 |
| 2,000 |
| | 1/22/2014 | 6.750 |
| 2/1/2024 | 2/1/2024 | LIBOR + 3.78 | 337.50 | | Series U | 100,000 |
| 100,000 |
| | 1,000 |
| 1,000 |
| | 3/10/2014 | 6.125 |
| 4/30/2024 | 4/30/2024 | LIBOR + 3.33 | 306.25 | | Series V | 250,000 |
| 250,000 |
| | 2,500 |
| 2,500 |
| | 6/9/2014 | 5.000 |
| 7/1/2019 | 7/1/2019 | LIBOR + 3.32 | 250.00 | | Series X | 160,000 |
| 160,000 |
| | 1,600 |
| 1,600 |
| | 9/23/2014 | 6.100 |
| 10/1/2024 | 10/1/2024 | LIBOR + 3.33 | 305.00 | | Series Z | 200,000 |
| 200,000 |
| | 2,000 |
| 2,000 |
| | 4/21/2015 | 5.300 |
| 5/1/2020 | 5/1/2020 | LIBOR + 3.80 | 265.00 | | Series CC | 125,750 |
| 125,750 |
| | 1,258 |
| 1,258 |
| | 10/20/2017 | 4.625 |
| 11/1/2022 | 11/1/2022 | LIBOR + 2.58 | 231.25 | (c) | Total preferred stock | 2,606,750 |
| 2,606,750 |
| | $ | 26,068 |
| $ | 26,068 |
| | | | | | | | |
| | | | | | | | | (a)JPMorgan Chase & Co./2020 Form 10-K | Represented by depositary shares. | 271 |
| | (b) | Dividends on fixed-rate preferred stock are payable quarterly. Dividends on fixed-to-floating-rate preferred stock are payable semiannually while at a fixed rate, and payable quarterly after converting to a floating rate. |
| | (c) | Dividend per share is prorated based on the number of days outstanding for the period. |
| | (d) | 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. The Firm declared a dividend of $147.34, $148.45 and $153.09 per share on outstanding Series I preferred stock on June 15, 2018, September 14, 2018 and December 14, 2018, respectively. |
Notes to consolidated financial statements Each series of preferred stock has a liquidation value and redemption price per share of $10,000, plus accrued but unpaid dividends. The aggregate liquidation value was $30.5 billion at December 31, 2020. On January 24, 2019,March 1, 2020, the Firm issued $1.85redeemed all $1.43 billion of 6.00%its 6.125% non-cumulative preferred stock, Series EE, and on JanuaryY. On December 1, 2019, the Firm redeemed all $900 million of its 5.45% non-cumulative preferred stock, Series P. On October 30, 2019, the Firm announced that it will redeem all $925 million of its outstanding 6.70% non-cumulative preferred stock, Series T, on March 1, 2019.On September 21, 2018, the Firm issued $1.7 billion of 5.75% non-cumulative preferred stock, Series DD. On October 30, 2018, the Firm redeemed $1.7$1.37 billion of its fixed-to-floating rate non-cumulative perpetual preferred stock, Series I. On October 20, 2017,September 1, 2019, the Firm issued $1.3 billionredeemed all $880 million of fixed-to-floating rateits 6.30% non-cumulative preferred stock, Series CC, with an initial dividend rate of 4.625%. W. On DecemberMarch 1, 2017, 2019, the Firm redeemed all $1.3 billion$925 million of its outstanding 5.50%6.70% non-cumulative preferred stock, Series O. Quarterly dividend per share for Series O was $137.50 for the years ended December 31, 2017 and 2016.T.
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”).
| | | | | | | | | 272 | | JPMorgan Chase & Co./20182020 Form 10-K | | 259 |
Notes to consolidated financial statements
Note 2122 – Common stock At December 31, 20182020 and 2017,2019, 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(reissuances from treasury) by JPMorgan Chase during the years ended December 31, 2018, 20172020, 2019 and 20162018 were as follows. | | Year ended December 31, (in millions) | 2018 |
| 2017 |
| 2016 |
| Year ended December 31, (in millions) | 2020 | 2019 | 2018 | Total issued – balance at January 1 | 4,104.9 |
| 4,104.9 |
| 4,104.9 |
| Total issued – balance at January 1 | 4,104.9 | | 4,104.9 | | 4,104.9 | | Treasury – balance at January 1 | (679.6 | ) | (543.7 | ) | (441.4 | ) | Treasury – balance at January 1 | (1,020.9) | | (829.1) | | (679.6) | | Repurchase | (181.5 | ) | (166.6 | ) | (140.4 | ) | Repurchase | (50.0) | | (213.0) | | (181.5) | | Reissuance: | | Reissuance: | | Employee benefits and compensation plans | 21.7 |
| 24.5 |
| 26.0 |
| Employee benefits and compensation plans | 14.2 | | 20.4 | | 21.7 | | Warrant exercise | 9.4 |
| 5.4 |
| 11.1 |
| Warrant exercise | 0 | | 0 | | 9.4 | | Employee stock purchase plans | 0.9 |
| 0.8 |
| 1.0 |
| Employee stock purchase plans | 1.2 | | 0.8 | | 0.9 | | Total reissuance | 32.0 |
| 30.7 |
| 38.1 |
| Total reissuance | 15.4 | | 21.2 | | 32.0 | | Total treasury – balance at December 31 | (829.1 | ) | (679.6 | ) | (543.7 | ) | Total treasury – balance at December 31 | (1,055.5) | | (1,020.9) | | (829.1) | | Outstanding at December 31 | 3,275.8 |
| 3,425.3 |
| 3,561.2 |
| Outstanding at December 31 | 3,049.4 | | 3,084.0 | | 3,275.8 | |
There were no0 warrants to purchase shares of common stock (“Warrants”) outstanding at December 31, 2018,2020 and December 31, 2019 as any Warrants that were not exercised on or before October 29, 2018 have expired. At December 31, 2017, and 2016, respectively, On March 15, 2020, in response to the economic disruptions caused by the COVID-19 pandemic, the Firm had 15.0 million and 24.9 million Warrants outstanding. On June 28, 2018, in conjunction withtemporarily suspended repurchases of its common stock. Subsequently, the Federal Reserve’s releaseReserve directed all large banks, including the Firm, to discontinue net share repurchases through the end of its 2018 CCAR results,2020. On December 18, 2020, the Firm’sFederal Reserve announced that all large banks, including the Firm, could resume share repurchases commencing in the first quarter of 2021, subject to certain restrictions. The Firm's Board of Directors has authorized a $20.7 billionnew common equityshare repurchase program. As of December 31, 2018, $10.4 billion of authorized repurchase capacity remained under the program. This authorization includes shares repurchasedprogram for up to offset issuances under the Firm’s share-based compensation plans.$30 billion.
The following table sets forth the Firm’s repurchases of common equitystock for the years ended December 31, 2018, 20172020, 2019 and 2016.2018. There were no0 Warrants repurchased during the years ended December 31, 2018, 2017 and 2016.2018. | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2018 |
| | 2017 |
| | 2016 |
| Total number of shares of common stock repurchased | | 181.5 |
| | 166.6 |
| | 140.4 |
| Aggregate purchase price of common stock repurchases | | $ | 19,983 |
| | $ | 15,410 |
| | $ | 9,082 |
|
| | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | Total number of shares of common stock repurchased | | 50.0 | | | 213.0 | | | 181.5 | | Aggregate purchase price of common stock repurchases | | $ | 6,397 | | | $ | 24,121 | | | $ | 19,983 | | | | | | | | | | | | | | | |
The authorization to repurchase common shares is utilized at management’s discretion, and the timing of purchases and the exact amount of common shares 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 suspended by management at any time; and may be executed through open market purchases or privately negotiated transactions, or utilizing Rule 10b5-1 plans, which are written trading plans that the Firm may enter into from time to time enters 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 allowsand which allow the Firm to repurchase its equitycommon shares during periods when it wouldmay otherwise not otherwise be repurchasing common equity — forshares —for example, during internal trading “blackoutblackout 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, refer to Part II, Item 5: Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities, on page 30. As of December 31, 2018,2020, approximately 8562.1 million shares of common stock were reserved for issuance under various employee incentive, compensation, option and stock purchase plans, and directors’ compensation plans.
| | | | | | | | | 260 | | JPMorgan Chase & Co./20182020 Form 10-K | | 273 |
Notes to consolidated financial statements
Note 2223 – Earnings per share Basic earnings per share (“EPS”) is calculated using the two-class method. DilutiveUnder the two-class method, all earnings (distributed and undistributed) are allocated to common stock and participating securities. JPMorgan Chase grants RSUs 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 dividends paid to holders of the Firm’s common stock. These unvested RSUs meet the definition of participating 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. 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. JPMorgan Chase grants RSUs under its share-based compensation programs, which entitle 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. Accordingly, these RSUs are treated as a separate class of securities in computing basic EPS, and are not included as incremental shares in computing dilutive EPS; refer to Note 9 for additional information. 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, 2018, 20172020, 2019 and 2016.2018. | | | | | | | | | | | | Year ended December 31, (in millions, except per share amounts) | 2020 | 2019 | 2018 | Basic earnings per share | | | | Net income | $ | 29,131 | | $ | 36,431 | | $ | 32,474 | | Less: Preferred stock dividends | 1,583 | | 1,587 | | 1,551 | | Net income applicable to common equity | 27,548 | | 34,844 | | 30,923 | | Less: Dividends and undistributed earnings allocated to participating securities | 138 | | 202 | | 214 | | Net income applicable to common stockholders | $ | 27,410 | | $ | 34,642 | | $ | 30,709 | | | | | | Total weighted-average basic shares outstanding | 3,082.4 | | 3,221.5 | | 3,396.4 | | Net income per share | $ | 8.89 | | $ | 10.75 | | $ | 9.04 | | | | | | Diluted earnings per share | | | | Net income applicable to common stockholders | $ | 27,410 | | $ | 34,642 | | $ | 30,709 | | | | | | Total weighted-average basic shares outstanding | 3,082.4 | | 3,221.5 | | 3,396.4 | | Add: Dilutive impact of SARs and employee stock options, unvested PSUs and nondividend-earning RSUs, and warrants | 5.0 | | 8.9 | | 17.6 | | Total weighted-average diluted shares outstanding | 3,087.4 | | 3,230.4 | | 3,414.0 | | Net income per share | $ | 8.88 | | $ | 10.72 | | $ | 9.00 | |
| | | | | | | | | | | Year ended December 31, (in millions, except per share amounts) | 2018 | 2017 | 2016 | Basic earnings per share | | | | Net income | $ | 32,474 |
| $ | 24,441 |
| $ | 24,733 |
| Less: Preferred stock dividends | 1,551 |
| 1,663 |
| 1,647 |
| Net income applicable to common equity | 30,923 |
| 22,778 |
| 23,086 |
| Less: Dividends and undistributed earnings allocated to participating securities | 214 |
| 211 |
| 252 |
| Net income applicable to common stockholders | $ | 30,709 |
| $ | 22,567 |
| $ | 22,834 |
| | | | | Total weighted-average basic shares outstanding | 3,396.4 |
| 3,551.6 |
| 3,658.8 |
| Net income per share | $ | 9.04 |
| $ | 6.35 |
| $ | 6.24 |
| | | | | Diluted earnings per share | | | | Net income applicable to common stockholders | $ | 30,709 |
| $ | 22,567 |
| $ | 22,834 |
| | | | | Total weighted-average basic shares outstanding | 3,396.4 |
| 3,551.6 |
| 3,658.8 |
| Add: Employee stock options, SARs, warrants and unvested PSUs | 17.6 |
| 25.2 |
| 31.2 |
| Total weighted-average diluted shares outstanding | 3,414.0 |
| 3,576.8 |
| 3,690.0 |
| Net income per share | $ | 9.00 |
| $ | 6.31 |
| $ | 6.19 |
|
| | | | | | | | | 274 | | JPMorgan Chase & Co./20182020 Form 10-K | | 261 |
Notes to consolidated financial statements
Note 2324 – Accumulated other comprehensive income/(loss) AOCI includes the after-tax change in unrealized gains and losses on investment securities, foreign currency translation adjustments (including the impact of related derivatives), fair value changes of excluded components on fair value hedges, cash flow hedging activities, and net loss and prior service costs/(credit) related to the Firm’s defined benefit pension and OPEB plans.plans, and fair value option-elected liabilities arising from changes in the Firm’s own credit risk (DVA). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | Unrealized gains/(losses) on investment securities | | Translation adjustments, net of hedges | | Fair value hedges | Cash flow hedges | | Defined benefit pension and OPEB plans | DVA on fair value option elected liabilities | Accumulated other comprehensive income/(loss) | | Balance at December 31, 2017 | | $ | 2,164 | |
| | | $ | (470) | | | | $ | 0 | | | $ | 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net change | | 4,123 | | | | | 234 | | | | 19 | | | 2,320 | | | | | 212 | | | | (491) | | | | 6,417 | | Balance at December 31, 2020 | | $ | 8,180 | | (b) | | | $ | (473) | | | | $ | (112) | | | $ | 2,383 | | | | | $ | (1,132) | | | | $ | (860) | | | | $ | 7,986 | |
(a)Represents the adjustment to AOCI as a result of the accounting standards adopted in the first quarter of 2018. Refer to Note 1 for additional information. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | Unrealized gains/(losses) on investment securities | | Translation adjustments, net of hedges | | Fair value hedges(c) | Cash flow hedges | | Defined benefit pension and OPEB plans | DVA on fair value option elected liabilities | Accumulated other comprehensive income/(loss) | | | Balance at December 31, 2015 | | $ | 2,629 |
|
| | | $ | (162 | ) | | | NA |
| | $ | (44 | ) | | | | $ | (2,231 | ) | | | $ | — |
| | | $ | 192 |
| | Cumulative effect of change in accounting principle(a) | | — |
| | | | — |
| | | NA |
| | — |
| | | | — |
| | | 154 |
| | | 154 |
| | Net change | | (1,105 | ) | | | | (2 | ) | | | NA |
| | (56 | ) | | | | (28 | ) | | | (330 | ) | | | (1,521 | ) | | 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:(b) | | | | | | | | | | | | | | | | | | | | | | | Premium amortization on purchased callable debt securities | | 261 |
| | | | — |
| | | — |
| | — |
| | | | — |
| | | — |
| | | 261 |
| | Hedge accounting
| | 169 |
| | | | — |
| | | (54 | ) | | — |
| | | | — |
| | | — |
| | | 115 |
| | Reclassification of certain tax effects from AOCI | | 466 |
| | | | (277 | ) | | | — |
| | 16 |
| | | | (414 | ) | | | (79 | ) | | | (288 | ) | | 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 | ) |
| | (a) | Effective January 1, 2016, the Firm adopted new accounting guidance related to the recognition and measurement of financial liabilities where the fair value option has been elected. This guidance requires the portion of the total change in fair value caused by changes in the Firm’s own credit risk (DVA) to be presented separately in OCI; previously these amounts were recognized in net income. |
| | (b) | Represents the adjustment to AOCI as a result of the new accounting standards adopted in the first quarter of 2018. For additional information, refer to Note 1. |
| | (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. |
(b)Includes after-tax net unamortized unrealized gains of $3.3 billion related to AFS securities that have been transferred to HTM. Refer to Note 10 for further information.
| | | | | | | | | 262 | | JPMorgan Chase & Co./20182020 Form 10-K | | 275 |
Notes to consolidated financial statements
The following table presents the pre-tax and after-tax changes in the components of OCI. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | | 2016 | Year ended December 31, (in millions) | Pre-tax | | Tax effect | | After-tax | | Pre-tax | | Tax effect | | After-tax | | Pre-tax | | Tax effect | | After-tax | Unrealized gains/(losses) on investment securities: | | | | | | | | | | | | | | | | | | Net unrealized gains/(losses) arising during the period | $ | (2,825 | ) | | $ | 665 |
| | $ | (2,160 | ) | | $ | 944 |
| | $ | (346 | ) | | $ | 598 |
| | $ | (1,628 | ) | | $ | 611 |
| | $ | (1,017 | ) | Reclassification adjustment for realized (gains)/losses included in net income(a) | 395 |
| | (93 | ) | | 302 |
| | 66 |
| | (24 | ) | | 42 |
| | (141 | ) | | 53 |
| | (88 | ) | Net change | (2,430 | ) | | 572 |
| | (1,858 | ) | | 1,010 |
| | (370 | ) | | 640 |
| | (1,769 | ) | | 664 |
| | (1,105 | ) | Translation adjustments(b): | | | | | | | | | | | | | | | | | | Translation | (1,078 | ) | | 156 |
| | (922 | ) | | 1,313 |
| | (801 | ) | | 512 |
| | (261 | ) | | 99 |
| | (162 | ) | Hedges | 1,236 |
| | (294 | ) | | 942 |
| | (1,294 | ) | | 476 |
| | (818 | ) | | 262 |
| | (102 | ) | | 160 |
| Net change | 158 |
| | (138 | ) | | 20 |
| | 19 |
| | (325 | ) | | (306 | ) | | 1 |
| | (3 | ) | | (2 | ) | Fair value hedges, net change(c): | (140 | ) | | 33 |
| | (107 | ) | | NA |
| | NA |
| | NA |
| | NA |
| | NA |
| | NA |
| Cash flow hedges: | | | | | | | | | | | | | | | | | | Net unrealized gains/(losses) arising during the period | (245 | ) | | 58 |
| | (187 | ) | | 147 |
| | (55 | ) | | 92 |
| | (450 | ) | | 168 |
| | (282 | ) | Reclassification adjustment for realized (gains)/losses included in net income(d) | (18 | ) | | 4 |
| | (14 | ) | | 134 |
| | (50 | ) | | 84 |
| | 360 |
| | (134 | ) | | 226 |
| Net change | (263 | ) | | 62 |
| | (201 | ) | | 281 |
| | (105 | ) | | 176 |
| | (90 | ) | | 34 |
| | (56 | ) | Defined benefit pension and OPEB plans: | | | | | | | | | | | | | | | | | | Prior service credit/(cost) arising during the period | (29 | ) | | 7 |
| | (22 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Net gain/(loss) arising during the period | (558 | ) | | 102 |
| | (456 | ) | | 802 |
| | (160 | ) | | 642 |
| | (366 | ) | | 145 |
| | (221 | ) | Reclassification adjustments included in net income(e): | | | | | | | | | | | | | | | | | | Amortization of net loss | 103 |
| | (24 | ) | | 79 |
| | 250 |
| | (90 | ) | | 160 |
| | 257 |
| | (97 | ) | | 160 |
| Amortization of prior service cost/(credit) | (23 | ) | | 6 |
| | (17 | ) | | (36 | ) | | 13 |
| | (23 | ) | | (36 | ) | | 14 |
| | (22 | ) | Curtailment (gain)/loss | 21 |
| | (5 | ) | | 16 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Settlement (gain)/loss | 2 |
| | — |
| | 2 |
| | 2 |
| | (1 | ) | | 1 |
| | 4 |
| | (1 | ) | | 3 |
| Foreign exchange and other | 34 |
| | (9 | ) | | 25 |
| | (54 | ) | | 12 |
| | (42 | ) | | 77 |
| | (25 | ) | | 52 |
| Net change | (450 | ) | | 77 |
| | (373 | ) | | 964 |
| | (226 | ) | | 738 |
| | (64 | ) | | 36 |
| | (28 | ) | DVA on fair value option elected liabilities, net change: | $ | 1,364 |
| | $ | (321 | ) | | $ | 1,043 |
| | $ | (303 | ) | | $ | 111 |
| | $ | (192 | ) | | $ | (529 | ) | | $ | 199 |
| | $ | (330 | ) | Total other comprehensive income/(loss) | $ | (1,761 | ) | | $ | 285 |
| | $ | (1,476 | ) | | $ | 1,971 |
| | $ | (915 | ) | | $ | 1,056 |
| | $ | (2,451 | ) | | $ | 930 |
| | $ | (1,521 | ) |
| | (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. 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 predominantly recorded in noninterest revenue, net interest income and compensation expense in the Consolidated statements of income. |
| | (e) | The pre-tax amount is reported in other expense in the Consolidated statements of income. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | Year ended December 31, (in millions) | Pre-tax | | Tax effect | | After-tax | | Pre-tax | | Tax effect | | After-tax | | Pre-tax | | Tax effect | | After-tax | Unrealized gains/(losses) on investment securities: | | | | | | | | | | | | | | | | | | Net unrealized gains/(losses) arising during the period | $ | 6,228 | | | $ | (1,495) | | | $ | 4,733 | | | $ | 4,025 | | | $ | (974) | | | $ | 3,051 | | | $ | (2,825) | | | $ | 665 | | | $ | (2,160) | | Reclassification adjustment for realized (gains)/losses included in net income(a) | (802) | | | 192 | | | (610) | | | (258) | | | 62 | | | (196) | | | 395 | | | (93) | | | 302 | | Net change | 5,426 | | | (1,303) | | | 4,123 | | | 3,767 | | | (912) | | | 2,855 | | | (2,430) | | | 572 | | | (1,858) | | Translation adjustments(b): | | | | | | | | | | | | | | | | | | Translation | 1,407 | | | (103) | | | 1,304 | | | (49) | | | 33 | | | (16) | | | (1,078) | | | 156 | | | (922) | | Hedges | (1,411) | | | 341 | | | (1,070) | | | 46 | | | (10) | | | 36 | | | 1,236 | | | (294) | | | 942 | | Net change | (4) | | | 238 | | | 234 | | | (3) | | | 23 | | | 20 | | | 158 | | | (138) | | | 20 | | Fair value hedges, net change(c): | 25 | | | (6) | | | 19 | | | 39 | | | (9) | | | 30 | | | (140) | | | 33 | | | (107) | | Cash flow hedges: | | | | | | | | | | | | | | | | | | Net unrealized gains/(losses) arising during the period | 3,623 | | | (870) | | | 2,753 | | | 122 | | | (28) | | | 94 | | | (245) | | | 58 | | | (187) | | Reclassification adjustment for realized (gains)/losses included in net income(d) | (570) | | | 137 | | | (433) | | | 103 | | | (25) | | | 78 | | | (18) | | | 4 | | | (14) | | Net change | 3,053 | | | (733) | | | 2,320 | | | 225 | | | (53) | | | 172 | | | (263) | | | 62 | | | (201) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Defined benefit pension and OPEB plans, net change: | 214 | | | (2) | | | 212 | | | 1,157 | | | (193) | | | 964 | | | (450) | | | 77 | | | (373) | | DVA on fair value option elected liabilities, net change: | $ | (648) | | | $ | 157 | | | $ | (491) | | | $ | (1,264) | | | $ | 299 | | | $ | (965) | | | $ | 1,364 | | | $ | (321) | | | $ | 1,043 | | Total other comprehensive income/(loss) | $ | 8,066 | | | $ | (1,649) | | | $ | 6,417 | | | $ | 3,921 | | | $ | (845) | | | $ | 3,076 | | | $ | (1,761) | | | $ | 285 | | | $ | (1,476) | |
(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. During the year ended December 31, 2020, the Firm reclassified a net pre-tax gain of $6 million to other income related to the liquidation of legal entities, $3 million related to net investment hedge gains and $3 million related to cumulative translation adjustments. During 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, which related to the 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. (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.
| | | | | | | | | 276 | | JPMorgan Chase & Co./20182020 Form 10-K | | 263 |
Notes to consolidated financial statements
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, 2018, 2017 and 2016, is presented in the following table.rate.
| | | | | | | | | | | | Effective tax rate | | | | | | | | Year ended December 31, | | 2018 | | 2017 | | 2016 | | Statutory U.S. federal tax rate | | 21.0 | % | | 35.0 | % | | 35.0 | % | | Increase/(decrease) in tax rate resulting from: | | | | | | | | U.S. state and local income taxes, net of U.S. federal income tax benefit | | 4.0 |
| | 2.2 |
| | 2.4 |
| | Tax-exempt income | | (1.5 | ) | | (3.3 | ) | | (3.1 | ) | | Non-U.S. subsidiary earnings | | 0.6 |
| | (3.1 | ) | (a) | (1.7 | ) | (a) | Business tax credits | | (3.5 | ) | | (4.2 | ) | | (3.9 | ) | | Impact of the TCJA | | (0.7 | ) | | 5.4 |
| | — |
| | Other, net | | 0.4 |
| | (0.1 | ) | | (0.3 | ) | | Effective tax rate | | 20.3 | % | | 31.9 | % | | 28.4 | % | |
| | (a) | Predominantly includes earnings of U.K. subsidiaries that were deemed to be reinvested indefinitely through December 31, 2017. |
Impact of the TCJA
2018 | | | | | | | | | | | | | | | | | | | | | | | | Effective tax rate | | | | | | | | Year ended December 31, | | 2020 | | 2019 | | 2018 | | Statutory U.S. federal tax rate | | 21.0 | % | | 21.0 | % | | 21.0 | % | | Increase/(decrease) in tax rate resulting from: | | | | | | | | U.S. state and local income taxes, net of U.S. federal income tax benefit | | 2.5 | | | 3.5 | | | 4.0 | | | Tax-exempt income | | (1.6) | | | (1.4) | | | (1.5) | | | Non-U.S. earnings | | 1.4 | | | 1.8 | | | 0.6 | | | Business tax credits | | (6.3) | | | (4.4) | | | (3.5) | | | Tax audit resolutions | | 0 | | | (2.3) | | | (0.1) | | | Impact of the TCJA(a) | | 0 | | | 0 | | | (0.7) | | | Other, net | | 0.7 | | | 0 | | | 0.5 | | | Effective tax rate | | 17.7 | % | | 18.2 | % | | 20.3 | % | |
The Firm’s (a)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 fromRepresents 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 recordedearnings under SEC Staff Accounting Bulletin No. 118 (“SAB 118”) and the accounting under SAB 118 is complete.
2017
The Firm’s effective tax rate increasedwhich was completed in 2017 driven by a2018. $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.
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. SAB 118 did not apply to these adjustments.
| | | | 264 | | JPMorgan Chase & Co./2018 Form 10-K |
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, 2018, 2017, and 2016.income. | | | | | | | | | | | | | | Income tax expense/(benefit) | Year ended December 31, (in millions) | | 2018 |
| | 2017 |
| | 2016 |
| Current income tax expense/(benefit) | | | | | | | U.S. federal | | $ | 2,854 |
| | $ | 5,718 |
| | $ | 2,488 |
| Non-U.S. | | 2,077 |
| | 2,400 |
| | 1,760 |
| U.S. state and local | | 1,638 |
| | 1,029 |
| | 904 |
| Total current income tax expense/(benefit) | | 6,569 |
| | 9,147 |
| | 5,152 |
| Deferred income tax expense/(benefit) | | | | | | | U.S. federal | | 1,359 |
| | 2,174 |
| | 4,364 |
| Non-U.S. | | (93 | ) | | (144 | ) | | (73 | ) | U.S. state and local | | 455 |
| | 282 |
| | 360 |
| Total deferred income tax expense/(benefit) | | 1,721 |
| | 2,312 |
| | 4,651 |
| Total income tax expense | | $ | 8,290 |
| | $ | 11,459 |
| | $ | 9,803 |
|
| | | | | | | | | | | | | | | | | | | | | Income tax expense/(benefit) | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | Current income tax expense/(benefit) | | | | | | | U.S. federal | | $ | 5,759 | | | $ | 3,284 | | | $ | 2,854 | | Non-U.S. | | 2,705 | | | 2,103 | | | 2,077 | | U.S. state and local | | 1,793 | | | 1,778 | | | 1,638 | | Total current income tax expense/(benefit) | | 10,257 | | | 7,165 | | | 6,569 | | Deferred income tax expense/(benefit) | | | | | | | U.S. federal | | (3,184) | | | 709 | | | 1,359 | | Non-U.S. | | (126) | | | 20 | | | (93) | | U.S. state and local | | (671) | | | 220 | | | 455 | | Total deferred income tax expense/(benefit) | | (3,981) | | | 949 | | | 1,721 | | Total income tax expense | | $ | 6,276 | | | $ | 8,114 | | | $ | 8,290 | |
Total income tax expense includes $54$72 million, $252 million$1.1 billion and $55$54 million of tax benefits recorded in 2020, 2019, and 2018, 2017, and 2016, 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 $827 million and $862 million in 2020 and 2019, respectively, and an increase of $172 million in 2018, a decrease of $915 million in 2017, and an increase of $925 million in 2016.2018. Results from Non-U.S. earnings The following table presents the U.S. and non-U.S. components of income before income tax expense. | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | U.S. | | $ | 26,904 | | | $ | 36,670 | | | $ | 33,052 | | Non-U.S.(a) | | 8,503 | | | 7,875 | | | 7,712 | | Income before income tax expense | | $ | 35,407 | | | $ | 44,545 | | | $ | 40,764 | |
(a)For purposes of this table, non-U.S. income is defined as income generated from operations located outside the U.S. The Firm will recognize any U.S. income tax expense forit may incur on global intangible low tax income as income tax expense in the years endedperiod in which the tax is incurred. December 31, 2018, 2017 and 2016.
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2018 |
| | 2017 |
| | 2016 |
| U.S. | | $ | 33,052 |
| | $ | 27,103 |
| | $ | 26,651 |
| Non-U.S.(a) | | 7,712 |
| | 8,797 |
| | 7,885 |
| Income before income tax expense | | $ | 40,764 |
| | $ | 35,900 |
| | $ | 34,536 |
|
| | | | | | | | | (a)JPMorgan Chase & Co./2020 Form 10-K | For purposes of this table, non-U.S. income is defined as income generated from operations located outside the U.S. | 277 |
Notes to consolidated financial statements 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 is no longer maintaining 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.
Affordable housing tax credits The Firm recognized $1.5 billion $1.7 billion and $1.7 billion of tax credits and other tax benefits associated with investments in affordable housing projects within income tax expense for each of the three years 2018, 2017 ended 2020, 2019 and 2016, respectively.2018. The amount of amortization of such investments reported in income tax expense was $1.2 billion, $1.7$1.1 billion and $1.2 billion, respectively. The carrying value of these investments, which are reported in other assets on the Firm’s Consolidated balance sheets, was $7.9 $9.7 billion and $7.8$8.6 billion at December 31, 20182020 and 2017, 2019, 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 $2.3 $3.8 billion and $2.4$2.8 billion at December 31, 20182020 and 2017, 2019, respectively.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 265 |
Notes to consolidated financial statements
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, 2018 and 2017.table. | | December 31, (in millions) | | 2018 |
| | 2017 |
| December 31, (in millions) | | 2020 | | 2019 | Deferred tax assets | | | | | Deferred tax assets | | Allowance for loan losses | | $ | 3,433 |
| | $ | 3,395 |
| Allowance for loan losses | | $ | 7,270 | | | $ | 3,400 | | Employee benefits | | 1,129 |
| | 688 |
| Employee benefits | | 1,104 | | | 1,039 | | Accrued expenses and other | | 2,701 |
| | 3,528 |
| Accrued expenses and other | | 3,332 | | | 2,767 | | Non-U.S. operations | | 629 |
| | 327 |
| Non-U.S. operations | | 849 | | | 949 | | Tax attribute carryforwards | | 163 |
| | 219 |
| Tax attribute carryforwards | | 757 | | | 605 | | Gross deferred tax assets | | 8,055 |
| | 8,157 |
| Gross deferred tax assets | | 13,312 | | | 8,760 | | Valuation allowance | | (89 | ) | | (46 | ) | Valuation allowance | | (560) | | | (557) | | Deferred tax assets, net of valuation allowance | | $ | 7,966 |
| | $ | 8,111 |
| Deferred tax assets, net of valuation allowance | | $ | 12,752 | | | $ | 8,203 | | Deferred tax liabilities | | | | | Deferred tax liabilities | | Depreciation and amortization | | $ | 2,533 |
| | $ | 2,299 |
| Depreciation and amortization | | $ | 3,329 | | | $ | 2,852 | | Mortgage servicing rights, net of hedges | | 2,586 |
| | 2,757 |
| Mortgage servicing rights, net of hedges | | 2,184 | | | 2,354 | | Leasing transactions | | 4,719 |
| | 3,483 |
| Leasing transactions | | 5,124 | | | 5,598 | | Non-U.S. operations | | — |
| | 200 |
| | Other, net | | 3,713 |
| | 3,502 |
| Other, net | | 6,025 | | | 4,683 | | Gross deferred tax liabilities | | 13,551 |
| | 12,241 |
| Gross deferred tax liabilities | | 16,662 | | | 15,487 | | Net deferred tax (liabilities)/assets | | $ | (5,585 | ) | | $ | (4,130 | ) | Net deferred tax (liabilities)/assets | | $ | (3,910) | | | $ | (7,284) | |
JPMorgan Chase has recorded deferred tax assets of $163$757 million at December 31, 2018,2020, in connection with U.S. federal and non-U.S. net operating loss (“NOL”)NOL carryforwards, FTC carryforwards, and state and local capital loss carryforwards. At December 31, 2018,2020, total U.S. federal NOL carryforwards were approximately $423$799 million, non-U.S. NOL carryforwards were approximately $120$139 million, andFTC carryforwards were $444 million, state and local capital loss carryforwards were $1.3 billion.$1.1 billion, and other federal tax attributes were $393 million. If not utilized, a portion of the U.S. federal NOL carryforwards and other U.S. federal tax attributes will expire between 2022 and 2037 whereas others have an unlimited carryforward period. Similarly, certain non-U.S. NOL carryforwards will expire between 2026 and 2036 whereas others have an unlimited carryforward period. The FTC carryforwards will expire between 2029 and 2030, and the state and local capital loss carryforwards will expire between 20202021 and 2022. Certain non-U.S. NOL carryforwards will expire between 2028 and 2034 whereas others have an unlimited carryforward period. The valuation allowance at December 31, 2018,2020, 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, 2018, 20172020, 2019 and 2016,2018, JPMorgan Chase’s unrecognized tax benefits, excluding related interest expense and penalties, were $4.3 billion, $4.0 billion and $4.9 billion, $4.7respectively, of which $3.1 billion, $2.8 billion and $3.5 billion, respectively, of which$3.8 billion, $3.5 billion and $2.6 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 $0.9 billion. approximately $300 million. 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, 2018, 2017 and 2016.benefits. | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2018 |
| | 2017 |
| | 2016 |
| Balance at January 1, | | $ | 4,747 |
| | $ | 3,450 |
| | $ | 3,497 |
| Increases based on tax positions related to the current period | | 980 |
| | 1,355 |
| | 262 |
| Increases based on tax positions related to prior periods | | 649 |
| | 626 |
| | 583 |
| Decreases based on tax positions related to prior periods | | (1,249 | ) | | (350 | ) | | (785 | ) | Decreases related to cash settlements with taxing authorities | | (266 | ) | | (334 | ) | | (56 | ) | Decreases related to a lapse of applicable statute of limitations | | — |
| | — |
| | (51 | ) | Balance at December 31, | | $ | 4,861 |
| | $ | 4,747 |
| | $ | 3,450 |
|
| | | | | | | | | | | | | | | | | | | | | | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | Balance at January 1, | | $ | 4,024 | | | $ | 4,861 | | | $ | 4,747 | | Increases based on tax positions related to the current period | | 685 | | | 871 | | | 980 | | Increases based on tax positions related to prior periods | | 362 | | | 10 | | | 649 | | Decreases based on tax positions related to prior periods | | (705) | | | (706) | | | (1,249) | | Decreases related to cash settlements with taxing authorities | | (116) | | | (1,012) | | | (266) | | | | | | | | | Balance at December 31, | | $ | 4,250 | | | $ | 4,024 | | | $ | 4,861 | |
After-tax interest expense/(benefit) and penalties related to income tax liabilities recognized in income tax expense were $147 million, $(52) million and $192 million $102 millionin 2020, 2019 and $86 million in 2018, 2017 and 2016, respectively. At December 31, 20182020 and 2017, 2019, in addition to the liability for unrecognized tax benefits, the Firm had accrued $887 $966 million and $639$817 million, respectively, for income tax-related interest and penalties.
| | | | | | | | | 266278 | | JPMorgan Chase & Co./20182020 Form 10-K |
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, 2018.2020. | | | | | | | | | | | | | | | December 31, 2018 | | | Periods under examination | | Status | JPMorgan Chase – U.S. | | 20062009 – 20102013 | | Field examination of amended returns | JPMorgan Chase – U.S. | | 2011 – 2013 | | Field Examination | JPMorgan Chase – U.S. | | 2014 - 2016 | | Field Examination | JPMorgan Chase – New York State | | 2012 - 2014 | | Field Examination | JPMorgan Chase – New York City | | 2012 - 2014 | | Field Examination | JPMorgan Chase – California | | 2011 – 2012 | | Field Examination | JPMorgan Chase – U.K. | | 2006 – 20162018 | | Field examination of certain select entities |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 267279 |
Notes to consolidated financial statements
Note 2526 – Restricted cash, other 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, 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 subsidiaries. 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 the respective regulatory requirements, the Firm’s broker-dealers (principallybroker-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. Upon the adoption of the restricted cash guidance in the first quarter of 2018, restricted and unrestricted cash are reported together on the Consolidated balance sheets and Consolidated statements of cash flows. The following table presents the components of the Firm’s restricted cash:
| | | | | | | | | December 31, (in billions) | 2020 | 2019 | Cash reserves – Federal Reserve Banks(a) | $ | 0 | | $ | 26.6 | | Segregated for the benefit of securities and cleared derivative customers | 19.3 | | 16.0 | | Cash reserves at non-U.S. central banks and held for other general purposes | 5.1 | | 3.9 | | Total restricted cash(b) | $ | 24.4 | | $ | 46.5 | |
(a)Effective March 26, 2020, the Federal Reserve eliminated reserve requirements for depository institutions (b)Comprises $22.7 billion and $45.3 billionin deposits with banks, and $1.7 billion and $1.2 billion in cash and due from banks on the Consolidated balance sheets as of December 31, 2020 and 2019, respectively. | | | | | | | | December 31, (in billions) | 2018 | 2017 | Cash reserves – Federal Reserve Banks | $ | 22.1 |
| $ | 25.7 |
| Segregated for the benefit of securities and futures brokerage customers | 14.6 |
| 16.8 |
| Cash reserves at non-U.S. central banks and held for other general purposes | 4.1 |
| 3.3 |
| Total restricted cash(a) | $ | 40.8 |
| $ | 45.8 |
|
| | (a) | Comprises $39.6 billion and $44.8 billion in deposits with banks, and $1.2 billion and $1.0 billion in cash and due from banks on the Consolidated balance sheets as of December 31, 2018 and 2017, respectively. |
Also, as of December 31, 20182020 and 2017,2019, the Firm had the following other restricted assets: | | • | •Cash and securities pledged with clearing organizations for the benefit of customers of $37.2 billion and $24.7 billion, respectively. •pledged with clearing organizations for the benefit of customers of $20.6 billion and $18.0 billion, respectively. |
Securities with a fair value of $9.7$1.3 billion and $3.5$8.8 billion, respectively, were also restricted in 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 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 the Parent Company’s management or Board of Directors. At January 1, 2019,2021, the Parent Company’s banking subsidiaries could pay, in the aggregate, approximately $10 $13 billion in dividends to their respective bank holding companies without the prior approval of their relevant banking regulators. The capacity to pay dividends in 2019 2021 will be supplemented by the banking subsidiaries’ earnings during the year.
| | | | | | | | | 268280 | | JPMorgan Chase & Co./20182020 Form 10-K |
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 principal IDI includingsubsidiary, 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”). CertainFor each of the requirementsrisk-based capital ratios, the capital adequacy of Basel III were subjectthe Firm and JPMorgan Chase Bank, N.A. is evaluated against the lower of the Standardized or Advanced approaches compared to phase-in periods that began on January 1, 2014 and continued through the end of 2018 (“transitional period”).their respective minimum capital ratios.
The three components of regulatory capital under the Basel III rules are as illustrated below: Under the risk-based capital and leverage-basedcapitalguidelines of the Federal Reserve, JPMorgan Chase is required to maintain minimum ratios for CET1 capital, Tier 1 capital, Total capital, Tier 1 leverage and the SLR. Failure to meet these minimum requirements could cause the Federal Reserve to take action. IDI subsidiaries are also subject to these capital requirements established by their respective primary regulators. The following table presents the minimum and well-capitalized ratios to which the Firm and its IDI subsidiaries were subject as of December 31, 2018.2020 and 2019. | | | | | | | | | | | | | | | | | | | | | | Standardized Minimum capital ratios | Advanced Minimum capital ratios | Well-capitalized ratios | | BHC(a)(b)(c) | IDI(c)(d) | BHC(a)(c) | IDI(c)(d) | BHC(e) | IDI(f) | Capital ratios | | | | | | | CET1 capital | 11.3 | % | 7.0 | % | 10.5 | % | 7.0 | % | NA | 6.5 | % | Tier 1 capital | 12.8 | | 8.5 | | 12.0 | | 8.5 | | 6.0 | | 8.0 | | Total capital | 14.8 | | 10.5 | | 14.0 | | 10.5 | | 10.0 | | 10.0 | | Tier 1 leverage | 4.0 | | 4.0 | | 4.0 | | 4.0 | | NA | 5.0 | | SLR | NA | NA | 5.0 | | 6.0 | | NA | 6.0 | |
| | | | | | | | | | | Minimum capital ratios | Well-capitalized ratios | | BHC(a)(e)(f) | IDI(b)(e)(f) | BHC(c) | IDI(d) | Capital ratios | | | | | CET1 | 9.0 | % | 6.375 | % | — | % | 6.5 | % | Tier 1 | 10.5 |
| 7.875 |
| 6.0 |
| 8.0 |
| Total | 12.5 |
| 9.875 |
| 10.0 |
| 10.0 |
| Tier 1 leverage | 4.0 |
| 4.00 |
| 5.0 |
| 5.0 |
| SLR | 5.0 |
| 6.00 |
| — |
| 6.0 |
|
Note: The table above is as defined by the regulations issued by the Federal Reserve, OCC and FDIC and to which the Firm and its IDI subsidiaries are subject. (a)Represents the minimum capital ratios applicable to the Firm. The CET1, Tier 1 and Total capital minimum capital ratios each include a respective minimum requirement plus a GSIB surcharge of 3.5% as calculated under Method 2; plus a 3.3% SCB for Basel III Standardized ratios and a fixed 2.5% capital conservation buffer for Basel III Advanced ratios. The countercyclical buffer is currently set to 0% by the federal banking agencies. | | (a) | (b)For the period ended December 31, 2019, the CET1, Tier 1, Total, Tier 1 leverage and SLR minimum capital ratios under Basel III Standardized applicable to the Firm were 10.5%, 12.0%, 14.0%, 4.0%, and 5.0%, respectively. (c)Represents minimum SLR requirement of 3.0%, as well as supplementary leverage buffer requirements of 2.0% and 3.0% for BHC and IDI, respectively. (d)Represents requirements for JPMorgan Chase’s IDI subsidiaries. The CET1, Tier 1 and Total capital minimum capital ratios include a fixed capital conservation buffer requirement of 2.5% that is applicable to the IDI subsidiaries. The IDI subsidiaries are not subject to the GSIB surcharge. (e)Represents requirements for bank holding companies pursuant to regulations issued by the Federal Reserve. (f)Represents requirements for IDI subsidiaries pursuant to regulations issued under the FDIC Improvement Act.
Current Expected Credit Losses Effective January 1, 2020, the Firm adopted the Financial Instruments – Credit Losses guidance under U.S. GAAP. As permitted under the U.S. capital rules issued by the federal banking agencies in 2019, the Firm initially elected to phase-in the January 1, 2020 (“day 1”) CECL adoption impact to retained earnings of $2.7 billion to CET1 capital, at 25% per year in each of 2020 to 2023. As part of their response to the impact of the COVID-19 pandemic, on March 31, 2020, the federal banking agencies issued an interim final rule (issued as final on August 26, 2020) that provided the option to delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period. The final rule provides a uniform approach for estimating the effects of CECL compared to the legacy incurred loss model during the first two years of the transition period (the “day 2” transition amount), whereby the Firm may exclude from CET1 capital 25% of the change in the Transitional minimum capital ratios applicable to the Firm under Basel III at December 31, 2018. At December 31, 2018, the CET1 minimum capital ratio includes 1.875% resulting from the phase in of the Firm’s 2.5% capital conservation buffer, and 2.625% resulting from the phase in of the Firm’s 3.5% GSIB surcharge. |
| | (b) | Represents requirements for JPMorgan Chase’s IDI subsidiaries. The CET1 minimum capital ratio includes 1.875% resulting from the phase in of the 2.5% capital conservation buffer 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, 2017 the CET1, Tier 1, Total and Tier 1 leverage minimum capital ratios applicable to the Firm were 7.5%, 9.0%, 11.0% and 4.0% and the CET1, Tier 1, Total and Tier 1 leverage minimum capital ratios applicable to the Firm’s IDI subsidiaries were 5.75%, 7.25%, 9.25% 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.
|
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 269281 |
Notes to consolidated financial statements
allowance for credit losses (excluding allowances on PCDloans). The cumulative day 2 transition amount as at December 31, 2021 that is not recognized in CET1 capital, as well as the $2.7 billion day 1 impact, will be phased into CET1 capital at 25% per year beginning January 1, 2022. The Firm has elected to apply the CECL capital transition provisions, and accordingly, for the year ended December 31, 2020, the capital metrics of the Firm exclude $5.7 billion, which is the $2.7 billion day 1 impact to retained earnings and 25% of the $12.2 billion increase in the allowance for credit losses (excluding allowances on PCD loans). The impacts of the CECL capital transition provisions have also been incorporated into Tier 2 capital, adjusted average assets, and total leverage exposure. Refer to Note 1 for further information on the CECL accounting guidance. The following tables present the risk-based and leverage-based capital metrics for JPMorgan Chase and its significant IDI subsidiariesJPMorgan Chase Bank, N.A. under both the Basel III Standardized and Basel III Advanced Approaches. As of December 31, 20182020, the capital metrics are presented applying the CECL capital transition provisions. As of December 31, 2020 and 2017, 2019, 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, 2020 (in millions, except ratios) | Basel III Standardized | | Basel III Advanced | JPMorgan Chase & Co.(c) | JPMorgan Chase Bank, N.A.(c) | | JPMorgan Chase & Co.(c) | JPMorgan Chase Bank, N.A.(c) | Risk-based capital metrics: | | | | | | CET1 capital | $ | 205,078 | | $ | 234,235 | | | $ | 205,078 | | $ | 234,235 | | Tier 1 capital | 234,844 | | 234,237 | | | 234,844 | | 234,237 | | Total capital | 269,923 | | 252,045 | | | 257,228 | | 239,673 | | Risk-weighted assets | 1,560,609 | | 1,492,138 | | | 1,484,431 | | 1,343,185 | | CET1 capital ratio | 13.1 | % | 15.7 | % | | 13.8 | % | 17.4 | % | Tier 1 capital ratio | 15.0 | | 15.7 | | | 15.8 | | 17.4 | | Total capital ratio | 17.3 | | 16.9 | | | 17.3 | | 17.8 | | Leverage-based capital metrics: | | | | | | Adjusted average assets(a) | $ | 3,353,319 | | $ | 2,970,285 | | | $ | 3,353,319 | | $ | 2,970,285 | | Tier 1 leverage ratio | 7.0 | % | 7.9 | % | | 7.0 | % | 7.9 | % | Total leverage exposure(b) | NA | NA | | $ | 3,401,542 | | $ | 3,688,797 | | SLR(b) | NA | NA | | 6.9 | % | 6.3 | % |
| | | | | | | | | | | | | | | | | | December 31, 2019 (in millions, except ratios) | Basel III Standardized | | Basel III Advanced | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | Risk-based capital metrics: | | | | | | CET1 capital | $ | 187,753 | | $ | 206,848 | | | $ | 187,753 | | $ | 206,848 | | Tier 1 capital | 214,432 | | 206,851 | | | 214,432 | | 206,851 | | Total capital | 242,589 | | 224,390 | | | 232,112 | | 214,091 | | | | | | | | | | | | | | Risk-weighted assets | 1,515,869 | | 1,457,689 | | | 1,397,878 | | 1,269,991 | | CET1 capital ratio | 12.4 | % | 14.2 | % | | 13.4 | % | 16.3 | % | Tier 1 capital ratio | 14.1 | | 14.2 | | | 15.3 | | 16.3 | | Total capital ratio | 16.0 | | 15.4 | | | 16.6 | | 16.9 | | Leverage-based capital metrics: | | | | | | Adjusted average assets(a) | $ | 2,730,239 | | $ | 2,353,432 | | | $ | 2,730,239 | | $ | 2,353,432 | | | | | | | | Tier 1 leverage ratio | 7.9 | % | 8.8 | % | | 7.9 | % | 8.8 | % | Total leverage exposure | NA | NA | | $ | 3,423,431 | | $ | 3,044,509 | | SLR | NA | NA | | 6.3 | % | 6.8 | % | | | | | | | | | | | | |
(a)Adjusted average assets, for purposes of calculating the 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)As of December 31, 2020, JPMorgan Chase’s total leverage exposure for purposes of calculating the SLR, excludes on-balance sheet amounts of U.S. Treasury securities and deposits at Federal Reserve Banks, as provided by the interim final rule issued by the Federal Reserve on April 1, 2020. On June 1, 2020, the Federal Reserve, OCC and FDIC issued an interim final rule that provides IDI subsidiaries with an option to apply this temporary exclusion subject to certain restrictions. As of December 31, 2020, JPMorgan Chase Bank, N.A. has not elected to apply this exclusion. (c)As of December 31, 2020, the capital metrics for the Firm reflect the exclusion of assets purchased from money market mutual fund clients pursuant to nonrecourse advances provided under the MMLF. Additionally, loans originated under the PPP for the Firm and JPMorgan Chase Bank, N.A. receive a zero percent risk weight. | | | | | | | | | | | | | | | | | | | | | December 31, 2018 (in millions, except ratios) | Basel III Standardized Transitional | | Basel III Advanced Transitional | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | Chase Bank USA, N.A. | | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | Chase Bank USA, N.A. | Regulatory capital | | | | | | | | CET1 capital | $ | 183,474 |
| $ | 187,259 |
| $ | 23,696 |
| | $ | 183,474 |
| $ | 187,259 |
| $ | 23,696 |
| Tier 1 capital | 209,093 |
| 187,259 |
| 23,696 |
| | 209,093 |
| 187,259 |
| 23,696 |
| Total capital | 237,511 |
| 198,494 |
| 28,628 |
| | 227,435 |
| 192,250 |
| 27,196 |
| | | | | | | | | Assets | | | | | | | | Risk-weighted | 1,528,916 |
| 1,348,230 |
| 112,513 |
| | 1,421,205 |
| 1,205,539 |
| 174,469 |
| Adjusted average(a) | 2,589,887 |
| 2,189,293 |
| 118,036 |
| | 2,589,887 |
| 2,189,293 |
| 118,036 |
| | | | | | | | | Capital ratios(b) | | | | | | | | CET1 | 12.0 | % | 13.9 | % | 21.1 | % | | 12.9 | % | 15.5 | % | 13.6 | % | Tier 1 | 13.7 |
| 13.9 |
| 21.1 |
| | 14.7 |
| 15.5 |
| 13.6 |
| Total | 15.5 |
| 14.7 |
| 25.4 |
| | 16.0 |
| 15.9 |
| 15.6 |
| Tier 1 leverage(c) | 8.1 |
| 8.6 |
| 20.1 |
| | 8.1 |
| 8.6 |
| 20.1 |
|
| | | | | | | | | | | | | | | | | | | | | | | December 31, 2017 (in millions, except ratios) | Basel III Standardized Transitional | | Basel III Advanced Transitional | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | | Chase Bank USA, N.A. | | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | | Chase Bank USA, N.A. | Regulatory capital | | | | | | | | | | CET1 capital | $ | 183,300 |
| $ | 184,375 |
| | $ | 21,600 |
| | $ | 183,300 |
| $ | 184,375 |
| | $ | 21,600 |
| Tier 1 capital | 208,644 |
| 184,375 |
| | 21,600 |
| | 208,644 |
| 184,375 |
| | 21,600 |
| Total capital | 238,395 |
| 195,839 |
| | 27,691 |
| | 227,933 |
| 189,510 |
| (d) | 26,250 |
| | | | | | | | | | | Assets | | | | | | | | | | Risk-weighted | 1,499,506 |
| 1,338,970 |
| (d) | 113,108 |
| | 1,435,825 |
| 1,241,916 |
| (d) | 190,523 |
| Adjusted average(a) | 2,514,270 |
| 2,116,031 |
| | 126,517 |
| | 2,514,270 |
| 2,116,031 |
| | 126,517 |
| | | | | | | | | | | Capital ratios(b) | | | | | | | | | | CET1 | 12.2 | % | 13.8 | % | | 19.1 | % | | 12.8 | % | 14.8 | % | (d) | 11.3 | % | Tier 1 | 13.9 |
| 13.8 |
| | 19.1 |
| | 14.5 |
| 14.8 |
| (d) | 11.3 |
| Total | 15.9 |
| 14.6 |
| (d) | 24.5 |
| | 15.9 |
| 15.3 |
| (d) | 13.8 |
| Tier 1 leverage(c) | 8.3 |
| 8.7 |
| | 17.1 |
| | 8.3 |
| 8.7 |
| | 17.1 |
|
| | (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 its IDI subsidiaries 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) | The prior period amounts have been revised to conform with the current period presentation.
|
| | | | | | | | | | | | | | | | | | | | | December 31, 2018 | | December 31, 2017 | | Basel III Advanced Fully Phased-In | Basel III Advanced Transitional | (in millions, except ratios) | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | Chase Bank USA, N.A. | | JPMorgan Chase & Co. | JPMorgan Chase Bank, N.A. | Chase Bank USA, N.A. | Total leverage exposure(a) | 3,269,988 |
| $ | 2,813,396 |
| $ | 177,328 |
| | $ | 3,204,463 |
| $ | 2,775,041 |
| $ | 182,803 |
| SLR(a) | 6.4 | % | 6.7 | % | 13.4 | % | | 6.5 | % | 6.6 | % | 11.8 | % |
| | (a) | Effective January 1, 2018, the SLR was fully phased-in under Basel III. The December 31, 2017 amounts were calculated under the Basel III Transitional rules. |
| | | | | | | | | 270282 | | JPMorgan Chase & Co./20182020 Form 10-K |
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 address the financing needs of its customers and clients. The contractual amount of these financial instruments represents the maximum possible credit risk to the Firm should the customer or client draw upon the commitment or the Firm be required to fulfill its obligation under the guarantee, and should the customer or client subsequently fail to perform according to the terms of the contract. Most of these commitments and guarantees arehave historically been refinanced, extended, cancelled, or expireexpired 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 probableexpected credit losses inherent in wholesale and certain consumer lending-commitments,lending-related commitments, an allowance for credit losses on lending-related commitments is maintained.Refer to Note 13 for further information regarding the allowance for credit losses on lending-related commitments.commitments, including the impact of the Firm’s adoption of CECL accounting guidance on January 1, 2020. 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, 20182020 and 2017. 2019. 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.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 271283 |
Notes to consolidated financial statements
In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied in determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off–balance sheet lending-related financial instruments, guarantees and other commitments | | | Contractual amount | | Carrying value(j) | | 2020 | | 2019 | | 2020 | 2019 | By remaining maturity at December 31, (in millions) | Expires in 1 year or less | Expires after 1 year through 3 years | Expires after 3 years through 5 years | Expires after 5 years | Total | | Total | | | | Lending-related | | | | | | | | | | | Consumer, excluding credit card: | | | | | | | | | | | Residential Real Estate(a) | $ | 26,788 | | $ | 1,597 | | $ | 3,962 | | $ | 13,700 | | $ | 46,047 | | | $ | 30,217 | | | 148 | | 12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Auto and other | 10,471 | | 1 | | 8 | | 792 | | 11,272 | | | 9,952 | | | 0 | | 0 | | | | | | | | | | | | | Total consumer, excluding credit card | 37,259 | | 1,598 | | 3,970 | | 14,492 | | 57,319 | | | 40,169 | | | 148 | | 12 | | Credit card(b) | 658,506 | | 0 | | 0 | | 0 | | 658,506 | | | 650,720 | | | 0 | | 0 | | Total consumer(b)(c) | 695,765 | | 1,598 | | 3,970 | | 14,492 | | 715,825 | | | 690,889 | | | 148 | | 12 | | Wholesale: | | | | | | | | | | | Other unfunded commitments to extend credit(d)(e) | 96,490 | | 174,335 | | 128,736 | | 16,267 | | 415,828 | | | 380,307 | | | 2,148 | | 952 | | Standby letters of credit and other financial guarantees(d) | 17,478 | | 7,986 | | 4,051 | | 1,467 | | 30,982 | | | 34,242 | | | 443 | | 618 | | Other letters of credit(d) | 2,982 | | 45 | | 26 | | 0 | | 3,053 | | | 2,961 | | | 14 | | 4 | | Total wholesale(c) | 116,950 | | 182,366 | | 132,813 | | 17,734 | | 449,863 | | | 417,510 | | | 2,605 | | 1,574 | | Total lending-related | $ | 812,715 | | $ | 183,964 | | $ | 136,783 | | $ | 32,226 | | $ | 1,165,688 | | | $ | 1,108,399 | | | $ | 2,753 | | $ | 1,586 | | Other guarantees and commitments | | | | | | | | | | | Securities lending indemnification agreements and guarantees(f) | $ | 250,418 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 250,418 | | | $ | 204,827 | | | $ | 0 | | $ | 0 | | Derivatives qualifying as guarantees | 2,489 | | 541 | | 12,182 | | 39,203 | | 54,415 | | | 53,089 | | | 322 | | 159 | | Unsettled resale and securities borrowed agreements | 95,084 | | 1,764 | | 0 | | 0 | | 96,848 | | | 117,951 | | | 2 | | 0 | | Unsettled repurchase and securities loaned agreements | 104,289 | | 612 | | 0 | | 0 | | 104,901 | | | 73,351 | | | (1) | | 0 | | Loan sale and securitization-related indemnifications: | | | | | | | | | | | Mortgage repurchase liability | NA | NA | NA | NA | NA | | NA | | 84 | | 59 | | Loans sold with recourse | NA | NA | NA | NA | 889 | | | 944 | | | 23 | | 27 | | Exchange & clearing house guarantees and commitments(g) | 142,003 | | 0 | | 0 | | 0 | | 142,003 | | | 206,432 | | | 0 | | 0 | | Other guarantees and commitments (e)(h) | 2,457 | | 574 | | 758 | | 2,541 | | 6,330 | | | 6,334 | | (i) | 52 | | (66) | |
(a)Includes certain commitments to purchase loans from correspondents. (b)Also includes commercial card lending-related commitments primarily in CB and CIB. (c)Predominantly all consumer and wholesale lending-related commitments are in the U.S. (d)At December 31, 2020 and 2019, reflected the contractual amount net of risk participations totaling $72 million and $76 million, respectively, for other unfunded commitments to extend credit; $8.5 billion and $9.8 billion, respectively, for standby letters of credit and other financial guarantees; and $357 million and $546 million, respectively, for other letters of credit. In regulatory filings with the Federal Reserve these commitments are shown gross of risk participations. (e)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans, which resulted in a corresponding reclassification of commitments from Other guarantees and commitments to Wholesale other unfunded commitments to extend credit. Prior-period amounts have been revised to conform with the current presentation. (f)At December 31, 2020 and 2019, collateral held by the Firm in support of securities lending indemnification agreements was $264.3 billion and $216.2 billion, respectively. Securities lending collateral primarily consists of cash, G7 government securities, and securities issued by U.S. GSEs and government agencies. (g)At December 31, 2020 and 2019, 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. (h)At December 31, 2020 and 2019, primarily includes letters of credit hedged by derivative transactions and managed on a market risk basis, and unfunded commitments related to certain tax-oriented equity investments. (i)Prior-period amounts have been revised to conform with the current presentation. (j)For lending-related products, the carrying value represents the allowance for lending-related commitments and the guarantee liability; for derivative-related products, and lending-related commitments for which the fair value option was elected, the carrying value represents the fair value. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off–balance sheet lending-related financial instruments, guarantees and other commitments | | | Contractual amount | | Carrying value(i) | | 2018 | | 2017 | | 2018 | 2017 | By remaining maturity at December 31, (in millions) | Expires in 1 year or less | Expires after 1 year through 3 years | Expires after 3 years through 5 years | Expires after 5 years | Total | | Total | | | | Lending-related | | | | | | | | | | | Consumer, excluding credit card: | | | | | | | | | | | Home equity | $ | 796 |
| $ | 1,095 |
| $ | 1,813 |
| $ | 17,197 |
| $ | 20,901 |
| | $ | 20,360 |
| | $ | 12 |
| $ | 12 |
| Residential mortgage(a) | 5,469 |
| — |
| — |
| 12 |
| 5,481 |
| | 5,736 |
| | — |
| — |
| Auto | 6,954 |
| 878 |
| 78 |
| 101 |
| 8,011 |
| | 9,255 |
| | 2 |
| 2 |
| Consumer & Business Banking | 10,580 |
| 566 |
| 102 |
| 425 |
| 11,673 |
| | 13,202 |
| | 19 |
| 19 |
| Total consumer, excluding credit card | 23,799 |
| 2,539 |
| 1,993 |
| 17,735 |
| 46,066 |
| | 48,553 |
| | 33 |
| 33 |
| Credit card | 605,379 |
| — |
| — |
| — |
| 605,379 |
| | 572,831 |
| | — |
| — |
| Total consumer(b) | 629,178 |
| 2,539 |
| 1,993 |
| 17,735 |
| 651,445 |
| | 621,384 |
| | 33 |
| 33 |
| Wholesale: | | | | | | | | | | | Other unfunded commitments to extend credit(c) | 62,384 |
| 123,751 |
| 154,177 |
| 11,178 |
| 351,490 |
| | 331,160 |
| | 852 |
| 840 |
| Standby letters of credit and other financial guarantees(c) | 14,408 |
| 11,462 |
| 5,248 |
| 2,380 |
| 33,498 |
| | 35,226 |
| | 521 |
| 636 |
| Other letters of credit(c) | 2,608 |
| 177 |
| 40 |
| — |
| 2,825 |
| | 3,712 |
| | 3 |
| 3 |
| Total wholesale(d) | 79,400 |
| 135,390 |
| 159,465 |
| 13,558 |
| 387,813 |
| | 370,098 |
| | 1,376 |
| 1,479 |
| Total lending-related | $ | 708,578 |
| $ | 137,929 |
| $ | 161,458 |
| $ | 31,293 |
| $ | 1,039,258 |
| | $ | 991,482 |
| | $ | 1,409 |
| $ | 1,512 |
| Other guarantees and commitments | | | | | | | | | | | Securities lending indemnification agreements and guarantees(e) | $ | 186,077 |
| $ | — |
| $ | — |
| $ | — |
| $ | 186,077 |
| | $ | 179,490 |
| | $ | — |
| $ | — |
| Derivatives qualifying as guarantees | 2,099 |
| 299 |
| 12,614 |
| 40,259 |
| 55,271 |
| | 57,174 |
| | 367 |
| 304 |
| Unsettled resale and securities borrowed agreements | 102,008 |
| — |
| — |
| — |
| 102,008 |
| | 76,859 |
| | — |
| — |
| Unsettled repurchase and securities loaned agreements | 57,732 |
| — |
| — |
| — |
| 57,732 |
| | 44,205 |
| | — |
| — |
| Loan sale and securitization-related indemnifications: | | | | | | | | | | | Mortgage repurchase liability | NA |
| NA |
| NA |
| NA |
| NA |
| | NA |
| | 89 |
| 111 |
| Loans sold with recourse | NA |
| NA |
| NA |
| NA |
| 1,019 |
| | 1,169 |
| | 30 |
| 38 |
| Exchange & clearing house guarantees and commitments(f)(g) | 58,960 |
| — |
| — |
| — |
| 58,960 |
| | 13,871 |
| | — |
| — |
| Other guarantees and commitments (g)(h) | 3,874 |
| 542 |
| 299 |
| 3,468 |
| 8,183 |
| | 8,206 |
| | (73 | ) | (76 | ) |
| | (a) | Includes certain commitments to purchase loans from correspondents. |
| | (b) | Predominantly all consumer lending-related commitments are in the U.S. |
| | (c) | At December 31, 2018 and 2017, reflected the contractual amount net of risk participations totaling $282 million and $334 million, respectively, for other unfunded commitments to extend credit; $10.4 billion and $10.4 billion, respectively, for standby letters of credit and other financial guarantees; and $385 million and $405 million, respectively, for other letters of credit. In regulatory filings with the Federal Reserve these commitments are shown gross of risk participations. |
| | (d) | Predominantly all wholesale lending-related commitments are in the U.S. |
| | (e) | At December 31, 2018 and 2017, collateral held by the Firm in support of securities lending indemnification agreements was $195.6 billion and $188.7 billion, respectively. Securities lending collateral primarily consists of cash and securities issued by governments that are members of G7 and U.S. government agencies. |
| | (f) | At December 31, 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. At December 31, 2017 includes commitments and guarantees associated with the Firm’s membership in certain clearing houses. |
| | (g) | Certain guarantees and commitments associated with the Firm’s membership in clearing houses previously disclosed in “other guarantees and commitments” are now disclosed in “Exchange and clearing house guarantees and commitments”. Prior period amounts have been revised to conform with the current period presentation. |
| | (h) | At December 31, 2018 and 2017, primarily includes letters of credit hedged by derivative transactions and managed on a market risk basis, and unfunded commitments related to institutional lending. Additionally, includes unfunded commitments predominantly related to certain tax-oriented equity investments. |
| | (i) | 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. |
| | | | | | | | | 272284 | | JPMorgan Chase & Co./20182020 Form 10-K |
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 in part 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 extended to its clients (i.e. cash borrowers); these facilities contractually limit the Firm’s intra-day credit risk to the facility amountand must be repaid by the end of the day. As of December 31, 2017, the secured clearance advance facility maximum outstanding commitment amount was$1.5 billion. As of December 31, 2018 the Firm no longer offers such arrangements to its clients.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 arrangements to be guarantees under U.S. GAAP: standby letters of credit and other financial guarantees, securities lending indemnifications, certain indemnificat ionindemnification agreements included within third-party contractual arrangements, certain derivative 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 non-contingent obligation assumed (e.g., the amount of consideration received or the net present value of the premium receivable). For certain types of guarantees,these obligations, 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. ForThe lending-related contingent obligation is recognized based on expected credit losses in addition to, and separate from, any non-contingent obligation. Non-lending-related contingent obligations are recognized when the liability becomes probable and reasonably estimable. These obligations are not recognized if the estimated amount is less than the carrying amount of any non-contingent liability recognized at inception (adjusted for any amortization). Examples of non-lending-related contingent obligations include indemnifications provided in sales agreements, where 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 contractual amount and carrying value of guarantees and indemnifications are included in the table on page 272. 284. 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 following table summarizes the contractual amount and carrying value of standby letters of credit and other financial guarantees and other letters of credit arrangements as of December 31, 20182020 and 2017.2019. Standby letters of credit, other financial guarantees and other letters of credit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | 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 | Investment-grade(a) | | $ | 22,850 | | | | $ | 2,263 | | | | $ | 26,880 | | | | $ | 2,137 | | Noninvestment-grade(a) | | 8,132 | | | | 790 | | | | 7,362 | | | | 824 | | Total contractual amount | | $ | 30,982 | | | | $ | 3,053 | | | | $ | 34,242 | | | | $ | 2,961 | | Allowance for lending-related commitments | | $ | 80 | | | | $ | 14 | | | | $ | 216 | | | | $ | 4 | | Guarantee liability | | 363 | | | | 0 | | | | 402 | | | | 0 | | Total carrying value | | $ | 443 | | | | $ | 14 | | | | $ | 618 | | | | $ | 4 | | Commitments with collateral | | $ | 17,238 | | | | $ | 498 | | | | $ | 17,853 | | | | $ | 728 | |
(a)The ratings scale is based on the Firm’s internal risk ratings. Refer to Note 12 for further information on internal risk ratings. | | | | | | | | | | | | | | | | | | | | | | 2018 | | 2017 | 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 | Investment-grade(a) | | $ | 26,420 |
| | | $ | 2,079 |
| | | $ | 28,492 |
| | | $ | 2,646 |
| Noninvestment-grade(a) | | 7,078 |
| | | 746 |
| | | 6,734 |
| | | 1,066 |
| Total contractual amount | | $ | 33,498 |
| | | $ | 2,825 |
| | | $ | 35,226 |
| | | $ | 3,712 |
| Allowance for lending-related commitments | | $ | 167 |
| | | $ | 3 |
| | | $ | 192 |
| | | $ | 3 |
| Guarantee liability | | 354 |
| | | — |
| | | 444 |
| | | — |
| Total carrying value | | $ | 521 |
| | | $ | 3 |
| | | $ | 636 |
| | | $ | 3 |
| Commitments with collateral | | $ | 17,400 |
| | | $ | 583 |
| | | $ | 17,421 |
| | | $ | 878 |
|
| | (a) | The ratings scale is based on the Firm’s internal ratings which generally correspond to ratings as defined by S&P and Moody’s. |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 273285 |
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, 20182020 and 2017.2019. | | | | | | | | | (in millions) | December 31, 2018 |
| | December 31, 2017 |
| Notional amounts | | | | Derivative guarantees | $ | 55,271 |
| | $ | 57,174 |
| Stable value contracts with contractually limited exposure | 28,637 |
| | 29,104 |
| Maximum exposure of stable value contracts with contractually limited exposure | 2,963 |
| | 3,053 |
| | | | | Fair value | | | | Derivative payables | 367 |
| | 304 |
| Derivative receivables | — |
| | — |
|
| | | | | | | | | | | | (in millions) | December 31, 2020 | | December 31, 2019 | | | | | Notional amounts | | | | Derivative guarantees | $ | 54,415 | | | $ | 53,089 | | Stable value contracts with contractually limited exposure | 27,752 | | | 28,877 | | Maximum exposure of stable value contracts with contractually limited exposure | 2,803 | | | 2,967 | | | | | | Fair value | | | | Derivative payables | 322 | | | 159 | | | | | |
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, refer to Note 5.derivatives. Unsettled securities financing agreements In the normal course of business, the Firm enters into resale and securities borrowed agreements. At settlement, these commitments result in the Firm advancing cash to and receiving securities collateral from the counterparty. The Firm also enters into repurchase and securities loaned 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 have regular-way settlement terms. ForRefer to Note 11 for a further discussion of securities financing agreements, refer to Note 11.agreements. 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 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 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.
| | | | 274 | | JPMorgan Chase & Co./2018 Form 10-K |
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, refer to 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 | | | | | | | | | 286 | | JPMorgan Chase & Co./2020 Form 10-K |
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, 20182020 and 2017, 2019, the unpaid principal balance of loans sold with recourse totaled $1.0 billion $889 million and $1.2 billion, $944 million, 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 $30 $23 million and $38$27 million at December 31, 20182020 and 2017, 2019, 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 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. CardMerchant 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 collateral. However, in the unlikely event that: (1) a merchant ceases operations and is unable to deliver products, services or a refund; (2)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 $30 million, $28 million, and $85 million on $1,366.1 billion, $1,191.7 billion, and $1,063.4 billion of aggregate volume processed for the years ended December 31, 2018, 2017 and 2016, 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 onthat covers the Consolidated balance sheets.payment or performance risk to the Firm related to charge-backs. The carrying value of the valuation allowance was $23 $12 million and $7$11 million at December 31, 20182020 and 2017, respectively, which2019, respectively.
For the Firm believes, based on historical experienceyears ended December 31, 2020, 2019 and the collateral held by2018, Merchant Services processed an aggregate volume of $144 million$1,597.3 billion, $1,511.5 billion, and $141 million at December 31, 2018 and 2017, respectively, is representative of the payment or performance risk to the Firm related to charge-backs.$1,366.1 billion, respectively. Clearing Services – Client Credit Risk The Firm provides clearing services for clients by entering into securities purchases and sales and derivative contracts 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
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 275 |
Notes to consolidated financial statements
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. 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, referStatements.
| | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 287 |
Notes to Note 5.consolidated financial 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 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 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. In 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 272,284, 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
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 qualityhigh-quality securities collateral that the clients place with the clearing househouse; 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 272. For284. Refer to Note 11 for additional information on credit risk mitigation practices on resale agreements and the types of collateral pledged under repurchase agreements, refer to Note 11.agreements. Guarantees of subsidiaries In the normal course of business, the Parent Company may 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 and consolidated finance subsidiary. All securities issued by JPMFC are fully and unconditionally guaranteed by the Parent Company.Company and no other subsidiary of the parent company guarantees these securities. These guarantees, which rank on a parity with the Firm’s unsecured and unsubordinated indebtedness, are not included in the table on page 272284 of this Note. For additional information, referRefer to Note 19.20 for additional information.
| | | | | | | | | 276288 | | JPMorgan Chase & Co./20182020 Form 10-K |
Note 28 – Commitments, pledged assets and
collateral
Lease commitments
AtDecember 31, 2018, 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 afterDecember 31, 2018.
| | | | | Year ended December 31, (in millions) | | 2019 | 1,561 |
| 2020 | 1,520 |
| 2021 | 1,320 |
| 2022 | 1,138 |
| 2023 | 973 |
| After 2023 | 4,480 |
| Total minimum payments required | 10,992 |
| Less: Sublease rentals under noncancelable subleases | (825 | ) | Net minimum payments required | $ | 10,167 |
|
Total rental expense was as follows.
| | | | | | | | | | | | | | Year ended December 31, (in millions) | | | | | | | | 2018 | | 2017 | | 2016 | Gross rental expense | | $ | 1,881 |
| | $ | 1,853 |
| | $ | 1,860 |
| Sublease rental income | | (239 | ) | | (251 | ) | | (241 | ) | Net rental expense | | $ | 1,642 |
| | $ | 1,602 |
| | $ | 1,619 |
|
Note 29 – Pledged assets and collateral 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, pledgedthe Firm pledges assets are used for other purposes, including to collateralize repurchase and other securities financing agreements, to cover short sales and to collateralize derivative contracts and deposits. deposits. Certain of these pledged assets may be sold or repledged or otherwise used by the secured parties and are parenthetically identified on the Consolidated balance sheets as assets pledged. The following table presents the Firm’s pledged assets. | | | | | | | | | | December 31, (in billions) | | 2018 | | 2017 | Assets that may be sold or repledged or otherwise used by secured parties | | $ | 104.0 |
| | $ | 135.8 |
| Assets that may not be sold or repledged or otherwise used by secured parties | | 83.7 |
| | 68.1 |
| Assets pledged at Federal Reserve banks and FHLBs | | 475.3 |
| | 493.7 |
| Total assets pledged | | $ | 663.0 |
| | $ | 697.6 |
|
| | | | | | | | | | | | | | | December 31, (in billions) | | 2020 | | 2019 | Assets that may be sold or repledged or otherwise used by secured parties | | $ | 166.6 | | | $ | 125.2 | | Assets that may not be sold or repledged or otherwise used by secured parties | | 113.9 | | | 80.2 | | Assets pledged at Federal Reserve banks and FHLBs | | 455.3 | | | 478.9 | | Total pledged assets | | $ | 735.8 | | | $ | 684.3 | |
Total pledged assets pledged do not include assets of consolidated VIEs; these assets are used to settle the liabilities of those entities. Refer 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, referactivities. Refer to Note 11. For 20 for additional information on the Firm’s long-term debt, refer to Note 19. debt. The significant components of the Firm’s pledged assets were as follows. | | | | | | | | | | | | | | | December 31, (in billions) | | 2020 | | 2019 | Investment securities | | $ | 80.2 | | | $ | 35.9 | | Loans | | 420.5 | | | 460.4 | | Trading assets and other | | 235.1 | | | 188.0 | | Total pledged assets | | $ | 735.8 | | | $ | 684.3 | |
| | | | | | | | | | December 31, (in billions) |
| 2018 |
| 2017 | Investment securities |
| $ | 59.5 |
|
| $ | 86.2 |
| Loans |
| 440.1 |
|
| 437.7 |
| Trading assets and other |
| 163.4 |
|
| 173.7 |
| Total assets pledged |
| $ | 663.0 |
|
| $ | 697.6 |
|
CollateralCollateral
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, prime brokerage-related held-for-investment customer margin loansreceivables and derivative contracts.Collateral is generally used under repurchase and other securities financing agreements, to cover short sales, and to collateralize derivative contracts and deposits. The following table presents the fair value of collateral accepted. | | | | | | | | | | December 31, (in billions) |
| 2018 |
| 2017 | Collateral permitted to be sold or repledged, delivered, or otherwise used |
| $ | 1,245.3 |
|
| $ | 968.8 |
| Collateral sold, repledged, delivered or otherwise used |
| 998.3 |
|
| 771.0 |
|
| | | | | | | | | | | | | | | | | | December 31, (in billions) | | 2020 | | 2019 | Collateral permitted to be sold or repledged, delivered, or otherwise used | | $ | 1,451.7 | | | $ | 1,282.5 | | | Collateral sold, repledged, delivered or otherwise used | | 1,038.9 | | | 1,000.5 | | (a) |
Certain prior period amounts for both(a)Includes collateral and pledged assets (includingrepledged to the corresponding pledged assets parenthetical disclosure for trading assets and other assets onFederal Reserve under the Consolidated balance sheets) have been revised to conform with the current period presentation.Federal Reserve’s open market operations.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 277289 |
Notes to consolidated financial statements
Note 2930 – Litigation Contingencies As of December 31, 2018,2020, 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 $1.5 billion at December 31, 2018.2020. 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: •the number, variety and varying stages of the proceedings, including the fact that many are in preliminary stages, •the existence in many such proceedings of multiple defendants, including the Firm, whose share of liability (if any) has yet to be determined, •the numerous yet-unresolved issues in many of the proceedings, including issues regarding class certification and the scope of many of the 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. American Depositary Receipts Pre-Release Inquiry.Advisory and Other Activities. In December 2018,November 2020, JPMorgan Chase Bank, N.A. reachedentered into a settlementresolution with the U.S. SecuritiesOffice of the Comptroller of the Currency (“OCC”) regarding historical deficiencies in internal controls and Exchange Commission regarding its inquiryinternal audit for certain fiduciary activities. In connection with the resolution, JPMorgan Chase Bank, N.A. paid a $250 million Civil Money Penalty. The OCC found that JPMorgan Chase Bank, N.A. has remediated the deficiencies that led to the penalty.
Amrapali. India’s Enforcement Directorate (“ED”) is investigating JPMorgan India Private Limited in connection with investments made in 2010 and 2012 by 2 offshore funds formerly managed by JPMorgan Chase entities into activityresidential housing projects developed by the Amrapali Group (“Amrapali”). In 2017, numerous creditors filed civil claims against Amrapali including petitions brought by home buyers relating to pre-released American Depositary Receipts.delays in delivering or failure to deliver residential units. The home buyers’ petitions have been overseen by the Supreme Court of India since 2017 pursuant to its jurisdiction over public interest litigation. In July 2019, the Supreme Court of India issued an order making preliminary findings that Amrapali and other parties, including unspecified JPMorgan Chase entities and the offshore funds that had invested in the projects, violated certain currency control and money laundering provisions, and ordering the ED to conduct a further inquiry under India’s Prevention of Money Laundering Act (“PMLA”) and Foreign Exchange Management Act (“FEMA”). In May 2020, the Enforcement Directorate issued a provisional attachment order as part of the criminal PMLA proceedings freezing approximately $25 million held by JPMorgan India Private Limited. In June 2020, the funds were transferred to an account held by the Supreme Court of India. A separate civil proceeding relating to alleged FEMA violations is ongoing. The Firm is responding to and cooperating with the investigation. 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 | | | | | | | | | 290 | | JPMorgan Chase & Co./2020 Form 10-K |
notice that the payments may be fraudulent. JPMorgan Chase Bank, N.A. applied for summary judgment and was unsuccessful. The claim is ongoing and a trial has been scheduled to commence in February 2022. 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 resolveAmong those matters. Inresolutions, 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 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 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. Separately, in February 2017A South Africa Competition Commission matter is the remaining FX-related governmental inquiry, and is currently pending before 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.Tribunal. The Firm is also one of a number of foreign exchange dealers named as defendants in a class action filed inIn 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”), 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-based actions. The Court granted final approval of that settlement agreement in August 2018.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 (the “opt-out action”).
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The District Court has dismissed one2018. A number of these actions remain pending. Further, putative class actions have been filed against the ERISAFirm and a number of other foreign exchange dealers on behalf of certain consumers who purchased foreign currencies at allegedly inflated rates and purported indirect purchasers of FX instruments; these actions and the United States Court of Appeals for the Second Circuit affirmed that dismissal in July 2018. The second ERISA action was voluntarily dismissed with prejudice in November 2018. The indirect purchaser action, the consumer action and the opt-out actionalso remain pending in the District Court.
General Motors Litigation. JPMorgan Chase Bank, N.A. participated in, In 2020, the Court approved a settlement by the Firm and was the Administrative Agent on behalf11 other defendants of a syndicateclass action filed by purported indirect purchasers for a total of lenders on, a $1.5 billion syndicated Term Loan facility (“Term Loan”) for General Motors Corporation (“GM”).$10 million. 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 itsaddition, some FX-related 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 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 thereafter continued 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 addition, certain Term Loan lenders filed cross-claims in the Bankruptcy Court against JPMorgan Chase Bank, N.A. seeking indemnification and asserting various claims. In January 2019, the parties reached an agreement in principle to fully resolve the litigation, including the cross-claims filed against the Firm. The agreement is subject to definitive documentation and court approval, and is not expected to have any material impact on the Firm. The Bankruptcy Court has stayed all deadlines in the action to allow the parties to finalize the settlement agreement for submission to the Bankruptcy Court.Australia.
Interchange Litigation. GA grouproups of merchants and retail associations filed a series of class action complaints alleging that Visa and 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, a temporary reduction of credit card interchange, and modifications to certain credit card network rules. In December 2013, the District Court granted final approval of the settlement. A number of merchants appealed the settlement 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 was remanded to the United States District Court for the Eastern District of New York for further proceedings consistent with the appellate decision.
The original class action was divided into two2 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, and the plaintiffs filed a motion seeking preliminary approval of the modified settlement. Thisagreement. Pursuant to this settlement, provides for the defendants to contributecollectively contributed an additional $900 million to the approximately $5.3 billion currentlypreviously held in escrow from the original settlement. In JanuaryDecember 2019, the amended agreement was preliminarily approved by the District Court,Court. Certain merchants appealed the District Court’s approval order, and formal noticethose appeals are pending. Based on the percentage of merchants that opted out of the amended class settlement, will proceed$700 million has been returned to the defendants from the settlement escrow in accordance with the District Court’s order. $600 million of the additional amount will be funded from the litigation escrow account established under the Visa defendants’ Retrospective Responsibility Plan, and $300 million will be paid by Mastercard and certain banks in accordance with an agreement among themselves regarding their respective shares. In June 2018, Visa deposited an additional $600 million into its litigation escrow account, which in turn led to a corresponding change in the conversion rate of Visa Class B to Class A shares. Of the Mastercard-related portion, the Firm’s share is approximately $36 million.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, as well as against the Firm and other banks, and some of those actions are proceeding.remain pending. 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 statevarious governmental agencies and entities including the U.S. Commodity Futures Trading Commission 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 Rate (“EURIBOR”). The Firm continues to cooperate with these investigations to the extent that they are ongoing. ComCo’sSwiss Competition 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
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Notes to consolidated financial statements
with the European General 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 related to benchmarks, filedincluding U.S. dollar LIBOR during the period that it was administered by the BBA and, in various United States District Courts, including twoa separate consolidated putative class actions relating to U.S. dollar LIBORaction, 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 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 | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 291 |
Notes to consolidated financial statements changes in these rates and assert a variety of claims including antitrust claims seeking treble damages. These matters are in various stages of litigation. The Firm has agreed to settle putative class actions related to exchange-traded Eurodollar futures contracts, Swiss franc LIBOR, EURIBOR, the Singapore Interbank Offered Rate, the Singapore Swap Offer Rate and the Australian Bank Bill Swap Reference Rate. Those settlements are all subject to further documentation and court approval.
In actions related to U.S. dollar LIBOR during the period that it was administered by the BBA, the Firm has resolved certain of these actions, and others are in various stages of litigation. 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 February 2018, as to those actions which the Firm has not agreed to settle, theThe District Court (i) granted class certification with respect to certainof antitrust claims related to bonds and interest rate swaps sold directly by the defendants (ii)and denied class certification with respect to state common law claims broughtmotions filed by other plaintiffs. In the holders of those bonds and swaps and (iii) denied class certification with respect to theconsolidated putative class action related to LIBOR-based loans heldthe time period that U.S. dollar LIBOR was administered by plaintiff lending institutions.ICE Benchmark Administration, the District Court granted defendants’ motion to dismiss plaintiffs’ complaint, and the plaintiffs have appealed. The Firm’s settlements of putative class actions related to Swiss franc LIBOR, the Singapore Interbank Offered Rate and the Singapore Swap Offer Rate (“SIBOR”), and the Australian Bank Bill Swap Reference Rate, and one of the putative class actions related to U.S. dollar LIBOR 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. Municipal Derivatives Litigation. Several civilIn addition to the actions were commenced againstpending or consolidated in the Firm relating to certain Jefferson County, Alabama (the “County”) warrant underwritings and swap transactions. The actions generally allegedSouthern District of New York, in August 2020, a group of individual plaintiffs filed a lawsuit asserting antitrust claims in the United States District Court for the Northern District of California, alleging that the Firm made paymentsand other defendants were engaged in an unlawful agreement to certain third parties in exchangeset LIBOR and conspired to monopolize the market for being chosen to underwrite more than $3.0 billion in warrants issued by the CountyLIBOR-based consumer loans and to act as the counterparty for certain swaps executed by the County.credit cards. The County subsequently filed for bankruptcycomplaint seeks injunctive relief and in November 2013, the Bankruptcy Court confirmed a Plan of Adjustment pursuant to which the above-described actions against the Firm were releasedmonetary damages.
Metals and dismissed with prejudice. Certain sewer rate payers filed an appeal challenging the confirmation of the Plan of Adjustment, and that appeal was dismissed by the United States Court of Appeals for the Eleventh Circuit. The appellants have filed a petition seeking review by the Supreme Court of the United States.
Precious MetalsU.S. Treasuries Investigations and Litigation.Litigation and Related Inquiries. Various authorities, includingThe Firm previously reported that it and/or certain of its subsidiaries had entered into resolutions with the U.S. Department of Justice’s Criminal Division, are conductingJustice (“DOJ”), the U.S. Commodity Futures Trading Commission (“CFTC”) and the U.S. Securities and Exchange Commission (“SEC”), which, collectively, resolved those agencies’ respective investigations relating to historical trading practices by former employees in the precious metals and U.S. treasuries markets and related conduct. conduct from 2008 to 2016.
The Firm is respondingentered into a Deferred Prosecution Agreement (“DPA”) with the DOJ in which it agreed to the filing of a criminal information charging JPMorgan Chase & Co. with 2 counts of wire fraud and cooperatingagreed, along with these investigations. JPMorgan Chase Bank, N.A. and J.P. Morgan Securities LLC, to certain terms and obligations as set forth therein. Under the terms of the DPA, the criminal information will be dismissed after three years, provided that JPMorgan Chase & Co., JPMorgan Chase Bank, N.A. and J.P. Morgan Securities LLC fully comply with all of their obligations. Across the 3 resolutions with the DOJ, CFTC and SEC, JPMorgan Chase & Co., JPMorgan Chase Bank, N.A. and J.P. Morgan Securities LLC agreed to pay a total monetary amount of approximately $920 million. A portion of the total monetary amount includes victim compensation payments. Several putative class action complaints have been filed in the United States District Court for the Southern District of New York against the Firm and certain current and former employees, alleging a precious metals futures and 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 Court consolidated these putative class actions in February 2019, and the consolidated action is stayed through May 2021. In addition, several putative class actions have been filed in the United States District Courts for the Northern District of Illinois and Southern District of New York against the Firm, isalleging manipulation of U.S. Treasury futures and options, and bringing claims under the Commodity Exchange Act. Some of the complaints also allege unjust enrichment. The actions in the Northern District of Illinois have been transferred to the Southern District of New York. The Court consolidated these putative class actions in October 2020 and set a defendant indeadline of February 2021 for the filing of a consolidated complaint. NaN putative class action complaints have also been filed under the Securities Exchange Act of 1934 in the United States District Court for the SouthernEastern District of New York against the Firm and certain individual defendants on behalf of shareholders who acquired shares during the putative class period alleging monopolization of silver futures in violationthat certain SEC filings of the Sherman Act.Firm were materially false or misleading in that they did not disclose certain information relating to the above-referenced investigations. Plaintiffs have filed a stipulation seeking consolidation of the actions and the appointment of co-lead plaintiffs and counsel, which is pending 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 Court of Cassation, France’s highest court, ruled in September 2018 that a mise en examen is a prerequisite for an | | | | | | | | | 292 | | JPMorgan Chase & Co./2020 Form 10-K |
ordonnance de renvoi and remanded the case to the Court of Appeal to consider JPMorgan Chase Bank, N.A.’s application forin January 2020 ordered the annulment of the ordonnance de renvoireferring JPMorgan Chase Bank, N.A. to the French tribunal correctionnel. AnyThe Court of Appeal found in January 2021 that it had no power to take further actionsaction against JPMorgan Chase following the Court of Cassation’s ruling. At the opening of a trial of the managers of Wendel in January 2021, the tribunal correctionnel directed the criminal proceedings are stayedauthorities to clarify whether a further investigation should be opened against JPMorgan Chase, pending which the outcome of that application.trial was postponed. 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.
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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, upwardsupward or downward, as appropriate, based on management’s best judgment after consultation with counsel. During the year ended December 31, 2018, theThe Firm’s legal expense was $1.1 billion, $239 million and $72 million and for the years ended December 31, 20172020, 2019 and 2016, it was a benefit of $(35) million and $(317) million,2018, 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 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.
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Notes to consolidated financial statements
Note 3031 – International operations The following table presents income 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(c) | | Expense(d) | | Income before income tax expense | | Net income | | Total assets | | 2020 | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 16,566 | | | $ | 10,987 | | | $ | 5,579 | | | $ | 3,868 | | | $ | 530,687 | | (e) | Asia-Pacific | | 9,289 | | | 5,558 | | | 3,731 | | | 2,630 | | | 252,553 | | | Latin America/Caribbean | | 2,740 | | | 1,590 | | | 1,150 | | | 837 | | | 61,980 | | | Total international | | 28,595 | | | 18,135 | | | 10,460 | | | 7,335 | | | 845,220 | | | North America(a) | | 90,948 | | | 66,001 | | | 24,947 | | | 21,796 | | | 2,540,851 | | | Total | | $ | 119,543 | | | $ | 84,136 | | | $ | 35,407 | | | $ | 29,131 | | | $ | 3,386,071 | | | 2019(b) | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 15,887 | | | $ | 9,860 | | | $ | 6,027 | | | $ | 4,158 | | | $ | 391,369 | | (e) | Asia-Pacific | | 7,254 | | | 5,060 | | | 2,194 | | | 1,467 | | | 183,023 | | | Latin America/Caribbean | | 2,405 | | | 1,561 | | | 844 | | | 609 | | | 47,820 | | | Total international | | 25,546 | | | 16,481 | | | 9,065 | | | 6,234 | | | 622,212 | | | North America(a) | | 89,853 | | | 54,373 | | | 35,480 | | | 30,197 | | | 2,065,167 | | | Total | | $ | 115,399 | | | $ | 70,854 | | | $ | 44,545 | | | $ | 36,431 | | | $ | 2,687,379 | | | 2018(b) | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 16,459 | | | $ | 10,032 | | | $ | 6,427 | | | $ | 4,569 | | | $ | 424,935 | | (e) | Asia-Pacific | | 6,991 | | | 4,884 | | | 2,107 | | | 1,481 | | | 171,547 | | | Latin America/Caribbean | | 2,365 | | | 1,301 | | | 1,064 | | | 744 | | | 43,871 | | | Total international | | 25,815 | | | 16,217 | | | 9,598 | | | 6,794 | | | 640,353 | | | North America(a) | | 82,968 | | | 51,802 | | | 31,166 | | | 25,680 | | | 1,982,179 | | | Total | | $ | 108,783 | | | $ | 68,019 | | | $ | 40,764 | | | $ | 32,474 | | | $ | 2,622,532 | | |
| | | | | | | | | | | | | | | | | | | | | | | As of or for the year ended December 31, (in millions) | | Revenue(b)(c) | | Expense(c)(d) | | Income before income tax expense | | Net income | | Total assets |
| | 2018 | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 16,181 |
| | $ | 9,953 |
| | $ | 6,228 |
| | $ | 4,444 |
| | $ | 423,835 |
| (e) | Asia/Pacific | | 7,119 |
| | 4,866 |
| | 2,253 |
| | 1,593 |
| | 171,242 |
| | Latin America/Caribbean | | 2,435 |
| | 1,413 |
| | 1,022 |
| | 718 |
| | 46,560 |
| | Total international | | 25,735 |
| | 16,232 |
| | 9,503 |
| | 6,755 |
| | 641,637 |
| | North America(a) | | 83,294 |
| | 52,033 |
| | 31,261 |
| | 25,719 |
| | 1,980,895 |
| | Total | | $ | 109,029 |
| | $ | 68,265 |
| | $ | 40,764 |
| | $ | 32,474 |
| | $ | 2,622,532 |
| | 2017 | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 15,120 |
| | $ | 9,347 |
| | $ | 5,773 |
| | $ | 4,007 |
| | $ | 407,145 |
| (e) | Asia/Pacific | | 6,028 |
| | 4,500 |
| | 1,528 |
| | 852 |
| | 163,718 |
| | Latin America/Caribbean | | 1,994 |
| | 1,523 |
| | 471 |
| | 299 |
| | 44,569 |
| | Total international | | 23,142 |
| | 15,370 |
| | 7,772 |
| | 5,158 |
| | 615,432 |
| | North America(a) | | 77,563 |
| | 49,435 |
| | 28,128 |
| | 19,283 |
| | 1,918,168 |
| | Total | | $ | 100,705 |
| | $ | 64,805 |
| | $ | 35,900 |
| | $ | 24,441 |
| | $ | 2,533,600 |
| | 2016 | | | | | | | | | | | | Europe/Middle East/Africa | | $ | 14,418 |
| | $ | 9,126 |
| | $ | 5,292 |
| | $ | 3,783 |
| | $ | 394,134 |
| (e) | Asia/Pacific | | 6,313 |
| | 4,414 |
| | 1,899 |
| | 1,212 |
| | 156,946 |
| | Latin America/Caribbean | | 1,959 |
| | 1,632 |
| | 327 |
| | 208 |
| | 42,971 |
| | Total international | | 22,690 |
| | 15,172 |
| | 7,518 |
| | 5,203 |
| | 594,051 |
| | North America(a) | | 73,879 |
| | 46,861 |
| | 27,018 |
| | 19,530 |
| | 1,896,921 |
| | Total | | $ | 96,569 |
| | $ | 62,033 |
| | $ | 34,536 |
| | $ | 24,733 |
| | $ | 2,490,972 |
| |
(a)Substantially reflects the U.S. | | (a) | Substantially reflects the U.S. |
| | (b) | Revenue is composed of net interest income and noninterest revenue. |
| | (c) | Effective January 1, 2018, the Firm adopted the revenue recognition guidance. The revenue recognition guidance was applied retrospectively and, accordingly, prior period amounts were revised. For additional information, refer to Note 1. |
| | (d) | Expense is composed of noninterest expense and the provision for credit losses. |
| | (e) | Total assets for the U.K. were approximately $296 billion, $309 billion, and $310 billion at December 31, 2018, 2017 and 2016, respectively. |
(b)Prior-period amounts have been revised to conform with the current presentation.
(c)Revenue is composed of net interest income and noninterest revenue. (d)Expense is composed of noninterest expense and the provision for credit losses. (e)Total assets for the U.K. were approximately $353 billion, $309 billion and $299 billion at December 31, 2020, 2019 and 2018, respectively. | | | | | | | | | 282294 | | JPMorgan Chase & Co./20182020 Form 10-K |
Note 3132 – Business segments The Firm is managed on a line of businessan LOB basis. There are four4 major reportable business segments – Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking and Asset & Wealth Management. In addition, there is a Corporate segment. Thesegment.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 the Firm’s Operating Committee. Segment results are presented on a managed basis. For a further discussion concerning JPMorgan Chase’s business segments, referRefer 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, digital (including onlinemobile and mobile)online) and telephone banking. CCB is organized into Consumer & Business Banking (including Consumer Banking/ChaseBanking, J.P. Morgan 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, payments 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, merchants, 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,Wholesale Payments, which provides transactionpayments services consisting of cash managementenabling clients to manage payments and liquidity solutions.receipts globally, and cross-border financing. Markets & InvestorSecurities Services isincludes Markets, a global market- maker inmarket-maker across products, including cash securities and derivative instruments, andwhich 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,wholesale payments, investment banking and asset management to meet its clients’ domesticproducts across 3 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 and midsized companies, 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 $2.7$3.7 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
Asset Management Offers multi-asset investment management solutions across most major asset classes including equities, fixed income, alternatives and money market funds. AWM also offers multi-asset investment management,funds to institutional and retail investors providing solutions for a broad range of clients’ investment needs. For Wealth Management clients, AWM also provides Provides retirement products and services, brokerage, and banking services includingcustody, trusts and estates, loans, mortgages, deposits and deposits. investment management to high net worth clients. The majority of AWM’s client assets are in actively managed portfolios. Corporate The Corporate segment consists of Treasury and Chief Investment Office and Other Corporate, which includes corporate staff functions and expense that is centrally managed. Treasury and CIO is predominantly responsible for measuring, monitoring, reporting and managing the Firm’s liquidity, funding, capital, structural interest rate and foreign exchange risks. The major Other Corporate functions include Real Estate, Technology, Legal, Corporate Finance, Human Resources, Internal Audit, Risk Management, Compliance, Control Management, Corporate Responsibility and various Other Corporate groups.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 283295 |
Notes to consolidated financial statements
Segment results The following table provides a summary of the Firm’s segment results as of or for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, 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 for the Firm (and each of the reportable business segments) on an 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. 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 lines of business. LOBs.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 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. On at least an annual basis, theThe assumptions and methodologies used into allocate capital allocation are periodically assessed and as a result, the capital allocated to linesthe LOBs may change from time to time. Business segment changes In the fourth quarter of 2020, the Firm transferred certain assets, liabilities, revenue, expense and headcount associated with certain wealth management clients from AWM to the J.P. Morgan Wealth Management business may change.unit within CCB. Prior-period amounts have been revised to conform with the current presentation, including the transfer of approximately 1,650 technology and support staff during the second and third quarters of 2020. Ultra-high-net-worth and certain high-net-worth client relationships remained in AWM.
In the first quarter of 2020, the Firm began reporting a Wholesale Payments business unit within CIB following a realignment of the Firm’s wholesale payments businesses. The Wholesale Payments business comprises:
•Merchant Services, which was realigned from CCB to CIB •Treasury Services and Trade Finance in CIB. Trade Finance was previously reported in Lending in CIB. In connection with the alignment of Wholesale Payments, the assets, liabilities and headcount associated with the Merchant Services business were realigned to CIB from CCB, and the revenue and expenses of the Merchant Services business are reported across CCB, CIB and CB based primarily on client relationships. In the fourth quarter of 2020, payment processing-only clients along with the associated revenue and expenses were realigned to CIB’s Wholesale Payments business from CCB and CB. Payment processing-only clients are those that only use payment services offered by Merchant Services, and in general do not currently utilize other services offered by the Firm. Prior-period amounts have been revised to reflect this realignment and revised allocation methodology. Effective January 1, 2018, the Firm adopted several new accounting standards. Certain of the new accounting standards were applied retrospectively and, accordingly, prior period amounts were revised. For additional information, refer to Note 1.
Net income in 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.
Segment results and reconciliation(a) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Table continued on next page) | | | | | | | | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | | Consumer & Community Banking(b) | | Corporate & Investment Bank | | Commercial Banking | | Asset & Wealth Management | | 2020 | 2019 | 2018 | | 2020 | 2019 | 2018 | | 2020 | 2019 | 2018 | | 2020 | 2019 | 2018 | Noninterest revenue | | $ | 17,740 | | $ | 17,796 | | $ | 15,338 | | | $ | 35,120 | | $ | 30,060 | | $ | 27,854 | | | $ | 3,067 | | $ | 2,710 | | $ | 2,620 | | | $ | 10,822 | | $ | 10,236 | | $ | 10,052 | | Net interest income | | 33,528 | | 37,337 | | 35,933 | | | 14,164 | | 9,205 | | 9,528 | | | 6,246 | | 6,554 | | 6,716 | | | 3,418 | | 3,355 | | 3,375 | | Total net revenue | | 51,268 | | 55,133 | | 51,271 | | | 49,284 | | 39,265 | | 37,382 | | | 9,313 | | 9,264 | | 9,336 | | | 14,240 | | 13,591 | | 13,427 | | Provision for credit losses | | 12,312 | | 4,954 | | 4,754 | | | 2,726 | | 277 | | (60) | | | 2,113 | | 296 | | 129 | | | 263 | | 59 | | 52 | | Noninterest expense | | 27,990 | | 28,276 | | 27,168 | | | 23,538 | | 22,444 | | 21,876 | | | 3,798 | | 3,735 | | 3,627 | | | 9,957 | | 9,747 | | 9,575 | | Income/(loss) before income tax expense/(benefit) | | 10,966 | | 21,903 | | 19,349 | | | 23,020 | | 16,544 | | 15,566 | | | 3,402 | | 5,233 | | 5,580 | | | 4,020 | | 3,785 | | 3,800 | | Income tax expense/(benefit) | | 2,749 | | 5,362 | | 4,642 | | | 5,926 | | 4,590 | | 3,767 | | | 824 | | 1,275 | | 1,316 | | | 1,028 | | 918 | | 855 | | Net income/(loss) | | $ | 8,217 | | $ | 16,541 | | $ | 14,707 | | | $ | 17,094 | | $ | 11,954 | | $ | 11,799 | | | $ | 2,578 | | $ | 3,958 | | $ | 4,264 | | | $ | 2,992 | | $ | 2,867 | | $ | 2,945 | | Average equity | | $ | 52,000 | | $ | 52,000 | | $ | 51,000 | | | $ | 80,000 | | $ | 80,000 | | $ | 70,000 | | | $ | 22,000 | | $ | 22,000 | | $ | 20,000 | | | $ | 10,500 | | $ | 10,500 | | $ | 9,000 | | Total assets | | 496,705 | | 541,367 | | 560,177 | | | 1,097,219 | | 914,705 | | 909,292 | | | 228,932 | | 220,514 | | 220,229 | | | 203,384 | | 173,175 | | 161,047 | | Return on equity | | 15 | % | 31 | % | 28 | % | | 20 | % | 14 | % | 16 | % | | 11 | % | 17 | % | 20 | % | | 28 | % | 26 | % | 32 | % | Overhead ratio | | 55 | | 51 | | 53 | | | 48 | | 57 | | 59 | | | 41 | | 40 | | 39 | | | 70 | | 72 | | 71 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (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 | | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | | 2018 | 2017 | 2016 | Noninterest revenue | | $ | 16,260 |
| $ | 14,710 |
| $ | 15,255 |
| | $ | 26,968 |
| $ | 24,539 |
| $ | 24,449 |
| | $ | 2,343 |
| $ | 2,522 |
| $ | 2,320 |
| | $ | 10,539 |
| $ | 10,456 |
| $ | 9,789 |
| Net interest income | | 35,819 |
| 31,775 |
| 29,660 |
| | 9,480 |
| 10,118 |
| 10,891 |
| | 6,716 |
| 6,083 |
| 5,133 |
| | 3,537 |
| 3,379 |
| 3,033 |
| Total net revenue | | 52,079 |
| 46,485 |
| 44,915 |
| | 36,448 |
| 34,657 |
| 35,340 |
| | 9,059 |
| 8,605 |
| 7,453 |
| | 14,076 |
| 13,835 |
| 12,822 |
| Provision for credit losses | | 4,753 |
| 5,572 |
| 4,494 |
| | (60 | ) | (45 | ) | 563 |
| | 129 |
| (276 | ) | 282 |
| | 53 |
| 39 |
| 26 |
| Noninterest expense | | 27,835 |
| 26,062 |
| 24,905 |
| | 20,918 |
| 19,407 |
| 19,116 |
| | 3,386 |
| 3,327 |
| 2,934 |
| | 10,353 |
| 10,218 |
| 9,255 |
| Income/(loss) before income tax expense/(benefit) | | 19,491 |
| 14,851 |
| 15,516 |
| | 15,590 |
| 15,295 |
| 15,661 |
| | 5,544 |
| 5,554 |
| 4,237 |
| | 3,670 |
| 3,578 |
| 3,541 |
| Income tax expense/(benefit) | | 4,639 |
| 5,456 |
| 5,802 |
| | 3,817 |
| 4,482 |
| 4,846 |
| | 1,307 |
| 2,015 |
| 1,580 |
| | 817 |
| 1,241 |
| 1,290 |
| Net income/(loss) | | $ | 14,852 |
| $ | 9,395 |
| $ | 9,714 |
| | $ | 11,773 |
| $ | 10,813 |
| $ | 10,815 |
| | $ | 4,237 |
| $ | 3,539 |
| $ | 2,657 |
| | $ | 2,853 |
| $ | 2,337 |
| $ | 2,251 |
| Average equity | | $ | 51,000 |
| $ | 51,000 |
| $ | 51,000 |
| | $ | 70,000 |
| $ | 70,000 |
| $ | 64,000 |
| | $ | 20,000 |
| $ | 20,000 |
| $ | 16,000 |
| | $ | 9,000 |
| $ | 9,000 |
| $ | 9,000 |
| Total assets | | 557,441 |
| 552,601 |
| 535,310 |
| | 903,051 |
| 826,384 |
| 803,511 |
| | 220,229 |
| 221,228 |
| 214,341 |
| | 170,024 |
| 151,909 |
| 138,384 |
| Return on equity | | 28 | % | 17 | % | 18 | % | | 16 | % | 14 | % | 16 | % | | 20 | % | 17 | % | 16 | % | | 31 | % | 25 | % | 24 | % | Overhead ratio | | 53 |
| 56 |
| 55 |
| | 57 |
| 56 |
| 54 |
| | 37 |
| 39 |
| 39 |
| | 74 |
| 74 |
| 72 |
|
| | | | | | | | | 284296 | | JPMorgan Chase & Co./20182020 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 | | 2018 | 2017 | 2016 | | 2018 | 2017 | | 2016 | | 2018 | 2017 | 2016 | Noninterest revenue | | $ | (263 | ) | $ | 1,085 |
| $ | 938 |
| | $ | (1,877 | ) | $ | (2,704 | ) | (b) | $ | (2,265 | ) | | $ | 53,970 |
| $ | 50,608 |
| $ | 50,486 |
| Net interest income | | 135 |
| 55 |
| (1,425 | ) | | (628 | ) | (1,313 | ) | | (1,209 | ) | | 55,059 |
| 50,097 |
| 46,083 |
| Total net revenue | | (128 | ) | 1,140 |
| (487 | ) | | (2,505 | ) | (4,017 | ) | | (3,474 | ) | | 109,029 |
| 100,705 |
| 96,569 |
| Provision for credit losses | | (4 | ) | — |
| (4 | ) | | — |
| — |
| | — |
| | 4,871 |
| 5,290 |
| 5,361 |
| Noninterest expense | | 902 |
| 501 |
| 462 |
| | — |
| — |
| | — |
| | 63,394 |
| 59,515 |
| 56,672 |
| Income/(loss) before income tax expense/(benefit) | | (1,026 | ) | 639 |
| (945 | ) | | (2,505 | ) | (4,017 | ) | | (3,474 | ) | | 40,764 |
| 35,900 |
| 34,536 |
| Income tax expense/(benefit) | | 215 |
| 2,282 |
| (241 | ) | | (2,505 | ) | (4,017 | ) | (b) | (3,474 | ) | | 8,290 |
| 11,459 |
| 9,803 |
| Net income/(loss) | | $ | (1,241 | ) | $ | (1,643 | ) | $ | (704 | ) | | $ | — |
| $ | — |
| | $ | — |
| | $ | 32,474 |
| $ | 24,441 |
| $ | 24,733 |
| Average equity | | $ | 79,222 |
| $ | 80,350 |
| $ | 84,631 |
| | $ | — |
| $ | — |
| | $ | — |
| | $ | 229,222 |
| $ | 230,350 |
| $ | 224,631 |
| Total assets | | 771,787 |
| 781,478 |
| 799,426 |
| | NA |
| NA |
| | NA |
| | 2,622,532 |
| 2,533,600 |
| 2,490,972 |
| Return on equity | | NM |
| NM |
| NM |
| | NM |
| NM |
| | NM |
| | 13 | % | 10 | % | 10 | % | Overhead ratio | | NM |
| NM |
| NM |
| | NM |
| NM |
| | NM |
| | 58 |
| 59 |
| 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | | | As of or for the year ended December 31, (in millions, except ratios) | | Corporate | | Reconciling Items(a) | | Total(b) | | 2020 | 2019 | 2018 | | 2020 | 2019 | | 2018 | | 2020 | 2019 | 2018 | Noninterest revenue | | $ | 1,199 | | $ | (114) | | $ | (263) | | | $ | (2,968) | | $ | (2,534) | | | $ | (1,877) | | | $ | 64,980 | | $ | 58,154 | | $ | 53,724 | | Net interest income | | (2,375) | | 1,325 | | 135 | | | (418) | | (531) | | | (628) | | | 54,563 | | 57,245 | | 55,059 | | Total net revenue | | (1,176) | | 1,211 | | (128) | | | (3,386) | | (3,065) | | | (2,505) | | | 119,543 | | 115,399 | | 108,783 | | Provision for credit losses | | 66 | | (1) | | (4) | | | 0 | | 0 | | | 0 | | | 17,480 | | 5,585 | | 4,871 | | Noninterest expense | | 1,373 | | 1,067 | | 902 | | | 0 | | 0 | | | 0 | | | 66,656 | | 65,269 | | 63,148 | | Income/(loss) before income tax expense/(benefit) | | (2,615) | | 145 | | (1,026) | | | (3,386) | | (3,065) | | | (2,505) | | | 35,407 | | 44,545 | | 40,764 | | Income tax expense/(benefit) | | (865) | | (966) | | 215 | | | (3,386) | | (3,065) | | | (2,505) | | | 6,276 | | 8,114 | | 8,290 | | Net income/(loss) | | $ | (1,750) | | $ | 1,111 | | $ | (1,241) | | | $ | 0 | | $ | 0 | | | $ | 0 | | | $ | 29,131 | | $ | 36,431 | | $ | 32,474 | | Average equity | | $ | 72,365 | | $ | 68,407 | | $ | 79,222 | | | $ | 0 | | $ | 0 | | | $ | 0 | | | $ | 236,865 | | $ | 232,907 | | $ | 229,222 | | Total assets | | 1,359,831 | | 837,618 | | 771,787 | | | NA | NA | | NA | | 3,386,071 | | 2,687,379 | | 2,622,532 | | Return on equity | | NM | NM | NM | | NM | NM | | NM | | 12 | % | 15 | % | 13 | % | Overhead ratio | | NM | NM | NM | | NM | NM | | NM | | 56 | | 57 | | 58 | |
(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)In the second quarter of 2020, the Firm reclassified certain spend-based credit card reward costs from marketing expense to be a reduction of card income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation. | | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 285297 |
Notes to consolidated financial statements
Note 3233 – Parent Company The following tables present Parent Company-only financial statements. Effective January 1, 2018, | | | | | | | | | | | | | | | | | | | | | Statements of income and comprehensive income | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | Income | | | | | | | Dividends from subsidiaries and affiliates: | | | | | | | Bank and bank holding company | | $ | 6,000 | | | $ | 26,000 | | | $ | 32,501 | | Non-bank(a) | | 0 | | | 0 | | | 2 | | Interest income from subsidiaries | | 63 | | | 223 | | | 216 | | | | | | | | | Other income from subsidiaries: | | | | | | | Bank and bank holding company | | 2,019 | | | 2,738 | | | 515 | | Non-bank | | (569) | | | 197 | | | (444) | | Other income | | 205 | | | (1,731) | | | 888 | | Total income | | 7,718 | | | 27,427 | | | 33,678 | | Expense | | | | | | | Interest expense/(income) to subsidiaries and affiliates(a) | | (8,830) | | | (5,303) | | | 2,291 | | Other interest expense | | 14,150 | | | 13,246 | | | 4,581 | | Noninterest expense | | 2,222 | | | 1,992 | | | 1,793 | | Total expense | | 7,542 | | | 9,935 | | | 8,665 | | Income before income tax benefit and undistributed net income of subsidiaries | | 176 | | | 17,492 | | | 25,013 | | Income tax benefit | | 1,324 | | | 2,033 | | | 1,838 | | Equity in undistributed net income of subsidiaries | | 27,631 | | | 16,906 | | | 5,623 | | Net income | | $ | 29,131 | | | $ | 36,431 | | | $ | 32,474 | | Other comprehensive income, net | | 6,417 | | | 3,076 | | | (1,476) | | Comprehensive income | | $ | 35,548 | | | $ | 39,507 | | | $ | 30,998 | |
| | | | | | | | | | | | | | | Balance sheets | | | | | December 31, (in millions) | | 2020 | | 2019 | Assets | | | | | Cash and due from banks | | $ | 54 | | | $ | 32 | | Deposits with banking subsidiaries | | 6,811 | | | 5,309 | | Trading assets | | 1,775 | | | 3,011 | | | | | | | | | | | | Advances to, and receivables from, subsidiaries: | | | | | Bank and bank holding company | | 27 | | | 2,358 | | Non-bank | | 86 | | | 84 | | Investments (at equity) in subsidiaries and affiliates: | | | | | Bank and bank holding company | | 508,602 | | | 471,207 | | Non-bank | | 1,011 | | | 1,044 | | Other assets | | 10,058 | | | 10,699 | | Total assets | | $ | 528,424 | | | $ | 493,744 | | Liabilities and stockholders’ equity | | | | | Borrowings from, and payables to, subsidiaries and affiliates(a) | | $ | 25,150 | | | $ | 23,410 | | Short-term borrowings | | 924 | | | 2,616 | | Other liabilities | | 9,612 | | | 9,288 | | Long-term debt(b)(c) | | 213,384 | | | 197,100 | | Total liabilities(c) | | 249,070 | | | 232,414 | | Total stockholders’ equity | | 279,354 | | | 261,330 | | Total liabilities and stockholders’ equity | | $ | 528,424 | | | $ | 493,744 | |
| | | | | | | | | | | | | | | | | | | | | Statements of cash flows | | | Year ended December 31, (in millions) | | 2020 | | 2019 | | 2018 | Operating activities | | | | | | | Net income | | $ | 29,131 | | | $ | 36,431 | | | $ | 32,474 | | Less: Net income of subsidiaries and affiliates(a) | | 33,631 | | | 42,906 | | | 38,125 | | Parent company net loss | | (4,500) | | | (6,475) | | | (5,651) | | Cash dividends from subsidiaries and affiliates(a) | | 6,000 | | | 26,000 | | | 32,501 | | Other operating adjustments | | 15,357 | | | 9,862 | | | (4,400) | | Net cash provided by/(used in) operating activities | | 16,857 | | | 29,387 | | | 22,450 | | Investing activities | | | | | | | Net change in: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Advances to and investments in subsidiaries and affiliates, net | | (2,663) | | | (6) | | (e) | 8,036 | | All other investing activities, net | | 24 | | | 71 | | | 63 | | Net cash provided by/(used in) investing activities | | (2,639) | | | 65 | | | 8,099 | | Financing activities | | | | | | | Net change in: | | | | | | | Borrowings from subsidiaries and affiliates(a) | | 1,425 | | | 2,941 | | | (2,273) | | Short-term borrowings | | (20) | | | (56) | | | (678) | | Proceeds from long-term borrowings | | 37,312 | | | 25,569 | | | 25,845 | | Payments of long-term borrowings | | (34,194) | | | (21,226) | | | (21,956) | | Proceeds from issuance of preferred stock | | 4,500 | | | 5,000 | | | 1,696 | | Redemption of preferred stock | | (1,430) | | | (4,075) | | | (1,696) | | Treasury stock repurchased | | (6,517) | | | (24,001) | | | (19,983) | | Dividends paid | | (12,690) | | | (12,343) | | | (10,109) | | All other financing activities, net | | (1,080) | | | (1,290) | | | (1,526) | | Net cash used in financing activities | | (12,694) | | | (29,481) | | | (30,680) | | Net decrease in cash and due from banks and deposits with banking subsidiaries | | 1,524 | | | (29) | | | (131) | | Cash and due from banks and deposits with banking subsidiaries at the beginning of the year | | 5,341 | | | 5,370 | | | 5,501 | | Cash and due from banks and deposits with banking subsidiaries at the end of the year | | $ | 6,865 | | | $ | 5,341 | | | $ | 5,370 | | Cash interest paid | | $ | 5,445 | | | $ | 7,957 | | | $ | 6,911 | | Cash income taxes paid, net(d) | | 5,366 | | | 3,910 | | | 1,782 | |
(a)Affiliates include trusts that issued guaranteed capital debt securities (“issuer trusts”). (b)At December 31, 2020, long-term debt that contractually matures in 2021 through 2025 totaled $10.8 billion, $10.0 billion, $19.1 billion, $21.8 billion, and $13.5 billion, respectively. (c)Refer to Notes 20 and 28 for information regarding the Parent Company’s guarantees of its subsidiaries’ obligations. (d)Represents payments, net of refunds, made by the Parent Company adopted several new accounting standards. Certainto various taxing authorities and includes taxes paid on behalf of certain of its subsidiaries that are subsequently reimbursed. The reimbursements were $8.3 billion, $6.4 billion, and $1.2 billion for the years ended December 31, 2020, 2019, and 2018, respectively. (e)As a result of the new accounting standards were applied retrospectivelymerger of Chase Bank USA, N.A. with and accordingly, prior period amounts were revised. For additional information, referinto JPMorgan Chase Bank, N.A., JPMorgan Chase Bank, N.A. distributed $13.5 billion to Note 1.the Parent company as a return of capital, which the Parent company contributed to the IHC. | | | | | | | | | | | | | | Statements of income and comprehensive income(a) | Year ended December 31, (in millions) | | 2018 |
| | 2017 |
| | 2016 |
| Income | | | | | | | Dividends from subsidiaries and affiliates: | | | | | | | Bank and bank holding company | | $ | 32,501 |
| | $ | 13,000 |
| | $ | 10,000 |
| Non-bank(b) | | 2 |
| | 540 |
| | 3,873 |
| Interest income from subsidiaries | | 216 |
| | 72 |
| | 794 |
| Other interest income | | — |
| | 41 |
| | 207 |
| Other income from subsidiaries: | | | | | | | Bank and bank holding company | | 515 |
| | 1,553 |
| | 852 |
| Non-bank | | (444 | ) | | (88 | ) | | 1,165 |
| Other income | | 888 |
| | (623 | ) | | (846 | ) | Total income | | 33,678 |
| | 14,495 |
| | 16,045 |
| Expense | | | | | | | Interest expense to subsidiaries and affiliates(b) | | 2,291 |
| | 400 |
| | 105 |
| Other interest expense | | 4,581 |
| | 5,202 |
| | 4,413 |
| Noninterest expense | | 1,793 |
| | (1,897 | ) | | 1,643 |
| Total expense | | 8,665 |
| | 3,705 |
| | 6,161 |
| Income before income tax benefit and undistributed net income of subsidiaries | | 25,013 |
| | 10,790 |
| | 9,884 |
| Income tax benefit | | 1,838 |
| | 1,007 |
| | 876 |
| Equity in undistributed net income of subsidiaries | | 5,623 |
| | 12,644 |
| | 13,973 |
| Net income | | $ | 32,474 |
| | $ | 24,441 |
| | $ | 24,733 |
| Other comprehensive income, net | | (1,476 | ) | | 1,056 |
| | (1,521 | ) | Comprehensive income | | $ | 30,998 |
| | $ | 25,497 |
| | $ | 23,212 |
|
| | | | | | | | | | Balance sheets(a) | | | | | December 31, (in millions) | | 2018 |
| | 2017 |
| Assets | | | | | Cash and due from banks | | $ | 55 |
| | $ | 163 |
| Deposits with banking subsidiaries | | 5,315 |
| | 5,338 |
| Trading assets | | 3,304 |
| | 4,773 |
| Advances to, and receivables from, subsidiaries: | | | | | Bank and bank holding company | | 3,334 |
| | 2,106 |
| Non-bank | | 74 |
| | 82 |
| Investments (at equity) in subsidiaries and affiliates: | | | | | Bank and bank holding company | | 449,628 |
| | 451,713 |
| Non-bank(b) | | 1,077 |
| | 422 |
| Other assets | | 10,478 |
| | 10,426 |
| Total assets | | $ | 473,265 |
| | $ | 475,023 |
| Liabilities and stockholders’ equity | | | | | Borrowings from, and payables to, subsidiaries and affiliates(b) | | $ | 20,017 |
| | $ | 23,426 |
| Short-term borrowings | | 2,672 |
| | 3,350 |
| Other liabilities | | 8,821 |
| | 8,302 |
| Long-term debt(c)(d) | | 185,240 |
| | 184,252 |
| Total liabilities(d) | | 216,750 |
| | 219,330 |
| Total stockholders’ equity | | 256,515 |
| | 255,693 |
| Total liabilities and stockholders’ equity | | $ | 473,265 |
| | $ | 475,023 |
|
| | | | | | | | | | | | | | Statements of cash flows(a) | | | Year ended December 31, (in millions) | | 2018 |
| | 2017 |
| | 2016 |
| Operating activities | | | | | | | Net income | | $ | 32,474 |
| | $ | 24,441 |
| | $ | 24,733 |
| Less: Net income of subsidiaries and affiliates(b) | | 38,125 |
| | 26,185 |
| | 27,846 |
| Parent company net loss | | (5,651 | ) | | (1,744 | ) | | (3,113 | ) | Cash dividends from subsidiaries and affiliates(b) | | 32,501 |
| | 13,540 |
| | 13,873 |
| Other operating adjustments | | (4,400 | ) | | 4,635 |
| | (18,166 | ) | Net cash provided by/(used in) operating activities | | 22,450 |
| | 16,431 |
| | (7,406 | ) | Investing activities | | | | | | | Net change in: | | | | | | | Proceeds from paydowns and maturities from available-for-sale securities Securities | | — |
| | — |
| | 353 |
| Other changes in loans, net | | — |
| | 78 |
| | 1,793 |
| Advances to and investments in subsidiaries and affiliates, net | | 8,036 |
| | (280 | ) | | (51,967 | ) | All other investing activities, net | | 63 |
| | 49 |
| | 114 |
| Net cash provided by/(used in) investing activities | | 8,099 |
| | (153 | ) | | (49,707 | ) | Financing activities | | | | | | | Net change in: | | | | | | | Borrowings from subsidiaries and affiliates(b) | | (2,273 | ) | | 13,862 |
| | 2,957 |
| Short-term borrowings | | (678 | ) | | (481 | ) | | 109 |
| Proceeds from long-term borrowings | | 25,845 |
| | 25,855 |
| | 41,498 |
| Payments of long-term borrowings | | (21,956 | ) | | (29,812 | ) | | (29,298 | ) | Proceeds from issuance of preferred stock | | 1,696 |
| | 1,258 |
| | — |
| Redemption of preferred stock | | (1,696 | ) | | (1,258 | ) | | — |
| Treasury stock repurchased | | (19,983 | ) | | (15,410 | ) | | (9,082 | ) | Dividends paid | | (10,109 | ) | | (8,993 | ) | | (8,476 | ) | All other financing activities, net | | (1,526 | ) | | (1,361 | ) | | (905 | ) | Net cash used in financing activities | | (30,680 | ) | | (16,340 | ) | | (3,197 | ) | Net decrease in cash and due from banks and deposits with banking subsidiaries | | (131 | ) | | (62 | ) | | (60,310 | ) | Cash and due from banks and deposits with banking subsidiaries at the beginning of the year | | 5,501 |
| | 5,563 |
| | 65,873 |
| Cash and due from banks and deposits with banking subsidiaries at the end of the year | | $ | 5,370 |
| | $ | 5,501 |
| | $ | 5,563 |
| Cash interest paid | | $ | 6,911 |
| | $ | 5,426 |
| | $ | 4,550 |
| Cash income taxes paid, net(e) | | 1,782 |
| | 1,775 |
| | 1,053 |
|
| | (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, refer to Note 19. |
| | (c) | At December 31, 2018, long-term debt that contractually matures in 2019 through 2023 totaled 13.1 billion, $22.1 billion, $20.3 billion, $12.8 billion, and $16.2 billion, respectively. |
| | (d) | For information regarding the Parent Company’s guarantees of its subsidiaries’ obligations, refer to Notes 19 and 27. |
| | (e) | Represents payments, net of refunds, made by the Parent Company to various taxing authorities and includes taxes paid on behalf of certain of its subsidiaries that are subsequently reimbursed. The reimbursements were $1.2 billion, $4.1 billion, and $3.0 billion for the years ended December 31, 2018, 2017, and 2016, respectively. |
| | | | | | | | | 286298 | | JPMorgan Chase & Co./20182020 Form 10-K |
Supplementary information
Selected quarterly financial data (unaudited) | | As of or for the period ended | 2018 | | 2017 | | As of or for the period ended | 2020 | | 2019 | | (in millions, except per share, ratio, headcount data and where otherwise noted) | 4th quarter | 3rd quarter | 2nd quarter | 1st quarter | | 4th quarter | | 3rd quarter | 2nd quarter | 1st quarter | | (in millions, except per share, ratio, headcount data and where otherwise noted) | 4th quarter | 3rd quarter | 2nd quarter | 1st quarter | | 4th quarter | | 3rd quarter | 2nd quarter | 1st quarter | | Selected income statement data | | | | | | | Selected income statement data | | Total net revenue | $ | 26,109 |
| $ | 27,260 |
| $ | 27,753 |
| $ | 27,907 |
| | $ | 24,457 |
| | $ | 25,578 |
| $ | 25,731 |
| $ | 24,939 |
| | | Total noninterest expense | 15,720 |
| 15,623 |
| 15,971 |
| 16,080 |
| | 14,895 |
| | 14,570 |
| 14,767 |
| 15,283 |
| | | Pre-provision profit | 10,389 |
| 11,637 |
| 11,782 |
| 11,827 |
| | 9,562 |
| | 11,008 |
| 10,964 |
| 9,656 |
| | | Total net revenue(a) | | Total net revenue(a) | $ | 29,224 | | $ | 29,147 | | $ | 32,980 | | $ | 28,192 | | | $ | 28,285 | | | $ | 29,291 | | $ | 28,747 | | $ | 29,076 | | | Total noninterest expense(a) | | Total noninterest expense(a) | 16,048 | | 16,875 | | 16,942 | | 16,791 | | | 16,293 | | | 16,372 | | 16,256 | | 16,348 | | | Pre-provision profit(b) | | Pre-provision profit(b) | 13,176 | | 12,272 | | 16,038 | | 11,401 | | | 11,992 | | | 12,919 | | 12,491 | | 12,728 | | | Provision for credit losses | 1,548 |
| 948 |
| 1,210 |
| 1,165 |
| | 1,308 |
| | 1,452 |
| 1,215 |
| 1,315 |
| | Provision for credit losses | (1,889) | | 611 | | 10,473 | | 8,285 | | | 1,427 | | | 1,514 | | 1,149 | | 1,495 | | | Income before income tax expense | 8,841 |
| 10,689 |
| 10,572 |
| 10,662 |
| | 8,254 |
| | 9,556 |
| 9,749 |
| 8,341 |
| | Income before income tax expense | 15,065 | | 11,661 | | 5,565 | | 3,116 | | | 10,565 | | | 11,405 | | 11,342 | | 11,233 | | | Income tax expense | 1,775 |
| 2,309 |
| 2,256 |
| 1,950 |
| | 4,022 |
| | 2,824 |
| 2,720 |
| 1,893 |
| | Income tax expense | 2,929 | | 2,218 | | 878 | | 251 | | | 2,045 | | | 2,325 | | 1,690 | | 2,054 | | | Net income | $ | 7,066 |
| $ | 8,380 |
| $ | 8,316 |
| $ | 8,712 |
| | $ | 4,232 |
| (g) | $ | 6,732 |
| $ | 7,029 |
| $ | 6,448 |
| | Net income | $ | 12,136 | | $ | 9,443 | | $ | 4,687 | | $ | 2,865 | | | $ | 8,520 | | | $ | 9,080 | | $ | 9,652 | | $ | 9,179 | | | Earnings per share data | | | | | | | Earnings per share data | | Net income: Basic | $ | 1.99 |
| $ | 2.35 |
| $ | 2.31 |
| $ | 2.38 |
| | $ | 1.08 |
| | $ | 1.77 |
| $ | 1.83 |
| $ | 1.66 |
| | Net income: Basic | $ | 3.80 | | $ | 2.93 | | $ | 1.39 | | $ | 0.79 | | | $ | 2.58 | | | $ | 2.69 | | $ | 2.83 | | $ | 2.65 | | | Diluted | 1.98 |
| 2.34 |
| 2.29 |
| 2.37 |
| | 1.07 |
| | 1.76 |
| 1.82 |
| 1.65 |
| | Diluted | 3.79 | | 2.92 | | 1.38 | | 0.78 | | | 2.57 | | | 2.68 | | 2.82 | | 2.65 | | | Average shares: Basic | 3,335.8 |
| 3,376.1 |
| 3,415.2 |
| 3,458.3 |
| | 3,489.7 |
| | 3,534.7 |
| 3,574.1 |
| 3,601.7 |
| | Average shares: Basic | 3,079.7 | | 3,077.8 | | 3,076.3 | | 3,095.8 | | | 3,140.7 | | | 3,198.5 | | 3,250.6 | | 3,298.0 | | | Diluted | 3,347.3 |
| 3,394.3 |
| 3,434.7 |
| 3,479.5 |
| | 3,512.2 |
| | 3,559.6 |
| 3,599.0 |
| 3,630.4 |
| | Diluted | 3,085.1 | | 3,082.8 | | 3,081.0 | | 3,100.7 | | | 3,148.5 | | | 3,207.2 | | 3,259.7 | | 3,308.2 | | | Market and per common share data | | | | | | | Market and per common share data | | Market capitalization | $ | 319,780 |
| $ | 375,239 |
| $ | 350,204 |
| $ | 374,423 |
| | $ | 366,301 |
| | $ | 331,393 |
| $ | 321,633 |
| $ | 312,078 |
| | Market capitalization | $ | 387,492 | | $ | 293,451 | | $ | 286,658 | | $ | 274,323 | | | $ | 429,913 | | | $ | 369,133 | | $ | 357,479 | | $ | 328,387 | | | Common shares at period-end | 3,275.8 |
| 3,325.4 |
| 3,360.9 |
| 3,404.8 |
| | 3,425.3 |
| | 3,469.7 |
| 3,519.0 |
| 3,552.8 |
| | Common shares at period-end | 3,049.4 | | 3,048.2 | | 3,047.6 | | 3,047.0 | | | 3,084.0 | | | 3,136.5 | | 3,197.5 | | 3,244.0 | | | Book value per share | 70.35 |
| 69.52 |
| 68.85 |
| 67.59 |
| | 67.04 |
| | 66.95 |
| 66.05 |
| 64.68 |
| | Book value per share | 81.75 | | 79.08 | | 76.91 | | 75.88 | | | 75.98 | | | 75.24 | | 73.88 | | 71.78 | | | TBVPS(a) | 56.33 |
| 55.68 |
| 55.14 |
| 54.05 |
| | 53.56 |
| | 54.03 |
| 53.29 |
| 52.04 |
| | | TBVPS(b) | | TBVPS(b) | 66.11 | | 63.93 | | 61.76 | | 60.71 | | | 60.98 | | | 60.48 | | 59.52 | | 57.62 | | | Cash dividends declared per share | 0.80 |
| 0.80 |
| 0.56 |
| 0.56 |
| | 0.56 |
| | 0.56 |
| 0.50 |
| 0.50 |
| | Cash dividends declared per share | 0.90 | | 0.90 | | 0.90 | | 0.90 | | | 0.90 | | | 0.90 | | 0.80 | | 0.80 | | | Selected ratios and metrics | | | | | | | Selected ratios and metrics | | ROE(b) | 12 | % | 14 | % | 14 | % | 15 | % | | 7 | % | | 11 | % | 12 | % | 11 | % | | | ROTCE(a)(b) | 14 |
| 17 |
| 17 |
| 19 |
| | 8 |
| | 13 |
| 14 |
| 13 |
| | | ROE(c) | | ROE(c) | 19 | % | 15 | % | 7 | % | 4 | % | | 14 | % | | 15 | % | 16 | % | 16 | % | | ROTCE(b)(c) | | ROTCE(b)(c) | 24 | | 19 | | 9 | | 5 | | | 17 | | | 18 | | 20 | | 19 | | | ROA(b) | 1.06 |
| 1.28 |
| 1.28 |
| 1.37 |
| | 0.66 |
| | 1.04 |
| 1.10 |
| 1.03 |
| | ROA(b) | 1.42 | | 1.14 | | 0.58 | | 0.40 | | | 1.22 | | | 1.30 | | 1.41 | | 1.39 | | | Overhead ratio | 60 |
| 57 |
| 58 |
| 58 |
| | 61 |
| | 57 |
| 57 |
| 61 |
| | Overhead ratio | 55 | | 58 | | 51 | | 60 | | | 58 | | | 56 | | 57 | | 56 | | | Loans-to-deposits ratio | 67 |
| 65 |
| 65 |
| 63 |
| | 64 |
| | 63 |
| 63 |
| 63 |
| | | LCR (average)(c) | 113 |
| 115 |
| 115 |
| 115 |
| | 119 |
| | 120 |
| 115 |
| N/A |
| | | Loans-to-deposits ratio(d) | | Loans-to-deposits ratio(d) | 47 | | 49 | | 52 | | 57 | | | 64 | | | 64 | | 65 | | 66 | | | Firm LCR (average) | | Firm LCR (average) | 110 | | 114 | | 117 | | 114 | | | 116 | | | 115 | | 113 | | 111 | | | JPMorgan Chase Bank, N.A. LCR (average) | | JPMorgan Chase Bank, N.A. LCR (average) | 160 | | 157 | | 140 | | 117 | | | 116 | | | 112 | | 112 | | 109 | | | CET1 capital ratio(d)(e) | 12.0 |
| 12.0 |
| 12.0 |
| 11.8 |
| | 12.2 |
| | 12.5 |
| 12.5 |
| 12.4 |
| | 13.1 | | 13.1 | | 12.4 | | 11.5 | | | 12.4 | | | 12.3 | | 12.2 | | 12.1 | | | Tier 1 capital ratio(d)(e) | 13.7 |
| 13.6 |
| 13.6 |
| 13.5 |
| | 13.9 |
| | 14.1 |
| 14.2 |
| 14.1 |
| | 15.0 | | 15.0 | | 14.3 | | 13.3 | | | 14.1 | | | 14.1 | | 14.0 | | 13.8 | | | Total capital ratio(d)(e) | 15.5 |
| 15.4 |
| 15.5 |
| 15.3 |
| | 15.9 |
| | 16.1 |
| 16.0 |
| 15.6 |
| | 17.3 | | 17.3 | | 16.7 | | 15.5 | | | 16.0 | | | 15.9 | | 15.8 | | 15.7 | | | Tier 1 leverage ratio(d)(e) | 8.1 |
| 8.2 |
| 8.2 |
| 8.2 |
| | 8.3 |
| | 8.4 |
| 8.5 |
| 8.4 |
| | 7.0 | | 7.0 | | 6.9 | | 7.5 | | | 7.9 | | | 7.9 | | 8.0 | | 8.1 | | | SLR(e) | 6.4 |
| 6.5 |
| 6.5 |
| 6.5 |
| | 6.5 |
| | 6.6 |
| 6.7 |
| 6.6 |
| | SLR(e) | 6.9 | | 7.0 | | 6.8 | | 6.0 | | | 6.3 | | | 6.3 | | 6.4 | | 6.4 | | | Selected balance sheet data (period-end) | Selected balance sheet data (period-end) | | | | | | | Selected balance sheet data (period-end) | | Trading assets(d) | $ | 413,714 |
| $ | 419,827 |
| $ | 418,799 |
| $ | 412,282 |
| | $ | 381,844 |
| | $ | 420,418 |
| $ | 407,064 |
| $ | 402,513 |
| | $ | 503,126 | | $ | 505,822 | | $ | 491,716 | | $ | 510,923 | | | $ | 369,687 | | | $ | 457,274 | | $ | 485,567 | | $ | 495,021 | | | Investment Securities | 261,828 |
| 231,398 |
| 233,015 |
| 238,188 |
| | $ | 249,958 |
| | 263,288 |
| 263,458 |
| 281,850 |
| | Investment Securities | 589,999 | | 531,136 | | 558,791 | | 471,144 | | | 398,239 | | | 394,251 | | 307,264 | | 267,365 | | | Loans(d) | 984,554 |
| 954,318 |
| 948,414 |
| 934,424 |
| | $ | 930,697 |
| | 913,761 |
| 908,767 |
| 895,974 |
| | 1,012,853 | | 989,740 | | 1,009,382 | | 1,049,610 | | | 997,620 | | | 980,019 | | 990,775 | | 990,515 | | | Core loans | 931,856 |
| 899,006 |
| 889,433 |
| 870,536 |
| | 863,683 |
| | 843,432 |
| 834,935 |
| 812,119 |
| | | Average core loans | 907,271 |
| 894,279 |
| 877,640 |
| 861,089 |
| | 850,166 |
| | 837,522 |
| 824,583 |
| 805,382 |
| | | Total assets | 2,622,532 |
| 2,615,183 |
| 2,590,050 |
| 2,609,785 |
| | 2,533,600 |
| | 2,563,074 |
| 2,563,174 |
| 2,546,290 |
| | Total assets | 3,386,071 | | 3,246,076 | | 3,213,616 | | 3,139,431 | | | 2,687,379 | | | 2,764,661 | | 2,727,379 | | 2,737,188 | | | Deposits | 1,470,666 |
| 1,458,762 |
| 1,452,122 |
| 1,486,961 |
| | 1,443,982 |
| | 1,439,027 |
| 1,439,473 |
| 1,422,999 |
| | Deposits | 2,144,257 | | 2,001,416 | | 1,931,029 | | 1,836,009 | | | 1,562,431 | | | 1,525,261 | | 1,524,361 | | 1,493,441 | | | Long-term debt | 282,031 |
| 270,124 |
| 273,114 |
| 274,449 |
| | 284,080 |
| | 288,582 |
| 292,973 |
| 289,492 |
| | Long-term debt | 281,685 | | 279,175 | | 317,003 | | 299,344 | | | 291,498 | | | 296,472 | | 288,869 | | 290,893 | | | Common stockholders’ equity | 230,447 |
| 231,192 |
| 231,390 |
| 230,133 |
| | 229,625 |
| | 232,314 |
| 232,415 |
| 229,795 |
| | Common stockholders’ equity | 249,291 | | 241,050 | | 234,403 | | 231,199 | | | 234,337 | | | 235,985 | | 236,222 | | 232,844 | | | Total stockholders’ equity | 256,515 |
| 258,956 |
| 257,458 |
| 256,201 |
| | 255,693 |
| | 258,382 |
| 258,483 |
| 255,863 |
| | Total stockholders’ equity | 279,354 | | 271,113 | | 264,466 | | 261,262 | | | 261,330 | | | 264,348 | | 263,215 | | 259,837 | | | Headcount | 256,105 |
| 255,313 |
| 252,942 |
| 253,707 |
| | 252,539 |
| | 251,503 |
| 249,257 |
| 246,345 |
| | Headcount | 255,351 | | 256,358 | | 256,710 | | 256,720 | | | 256,981 | | | 257,444 | | 254,983 | | 255,998 | | | Credit quality metrics | | | | | | | Credit quality metrics | | Allowance for credit losses | $ | 14,500 |
| $ | 14,225 |
| $ | 14,367 |
| $ | 14,482 |
| | $ | 14,672 |
| | $ | 14,648 |
| $ | 14,480 |
| $ | 14,490 |
| | | Allowance for loan losses and lending- related commitments | | Allowance for loan losses and lending- related commitments | $ | 30,737 | | $ | 33,637 | | $ | 34,301 | | $ | 25,391 | | | $ | 14,314 | | | $ | 14,400 | | $ | 14,295 | | $ | 14,591 | | | Allowance for loan losses to total retained loans | 1.39 | % | 1.39 | % | 1.41 | % | 1.44 | % | | 1.47 | % | | 1.49 | % | 1.49 | % | 1.52 | % | | Allowance for loan losses to total retained loans | 2.95 | % | 3.26 | % | 3.27 | % | 2.32 | % | | 1.39 | % | | 1.42 | % | 1.39 | % | 1.43 | % | | Allowance for loan losses to retained loans excluding purchased credit-impaired loans(f) | 1.23 |
| 1.23 |
| 1.22 |
| 1.25 |
| | 1.27 |
| | 1.29 |
| 1.28 |
| 1.31 |
| | | Nonperforming assets | $ | 5,190 |
| $ | 5,034 |
| $ | 5,767 |
| $ | 6,364 |
| | $ | 6,426 |
| | $ | 6,154 |
| $ | 6,432 |
| $ | 6,826 |
| | | Nonperforming assets(d) | | Nonperforming assets(d) | $ | 10,906 | | $ | 11,462 | | $ | 9,715 | | $ | 7,062 | | | $ | 5,054 | | | $ | 5,993 | | $ | 5,260 | | $ | 5,616 | | | Net charge-offs | 1,236 |
| 1,033 |
| 1,252 |
| 1,335 |
| | 1,264 |
| | 1,265 |
| 1,204 |
| 1,654 |
| (h) | Net charge-offs | 1,050 | | 1,180 | | 1,560 | | 1,469 | | | 1,494 | | | 1,371 | | 1,403 | | 1,361 | | | Net charge-off rate | 0.52 | % | 0.43 | % | 0.54 | % | 0.59 | % | | 0.55 | % | | 0.56 | % | 0.54 | % | 0.76 | % | (h) | Net charge-off rate | 0.44 | % | 0.49 | % | 0.64 | % | 0.62 | % | | 0.63 | % | | 0.58 | % | 0.60 | % | 0.58 | % | |
Effective January 1, 2018,2020, the Firm adopted several newthe Financial Instruments – Credit Losses (“CECL”) accounting standards. Certainguidance. Refer to Note 1 for further information. (a)In the second quarter of 2020, the Firm reclassified certain spend-based credit card reward costs from marketing expense to be a reduction of card income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation. (b)Pre-provision profit, TBVPS and ROTCE are each non-GAAP financial measures. Tangible common equity (“TCE”) is also a non-GAAP financial measure. Refer to Explanation and Reconciliation of the new accounting standards were applied retrospectivelyFirm’s Use of Non-GAAP Financial Measures on pages 62–64 for a further discussion of these measures. (c)Quarterly ratios are based on annualized amounts. (d)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and accordingly, prior periodother assets. Prior-period amounts were revised. Forhave been revised to conform with the current presentation. (e)The capital metrics reflect the relief provided by the Federal Reserve Board in response to the COVID-19 pandemic, including the CECL capital transition provisions that became effective in the first quarter of 2020. The SLR reflects the temporary exclusions of U.S. Treasury securities and deposits at Federal Reserve Banks that became effective in the second quarter of 2020. Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 52-53 and Capital Risk Management on pages 91-101 for additional information, refer to Note 1.information. | | (a) | TBVPS and ROTCE are non-GAAP financial measures. For further discussion of these measures, refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures and Key Performance Measures on pages 57-59. |
| | (b) | Quarterly ratios are based upon annualized amounts. |
| | (c) | The percentage represents the Firm’s reported average LCR per the U.S. LCR public disclosure requirements, which became effective April 1, 2017. |
| | (d) | Ratios presented are calculated under the Basel III Transitional rules and for the capital ratios represent the lower of the Standardized or Advanced approach. As of December 31, 2018, and September 30, 2018, the Firm’s capital ratios were equivalent whether calculated on a transitional or fully phased-in basis. Refer to Capital Risk Management on pages 85-94 for additional information on Basel III. |
| | (e) | Effective January 1, 2018, the SLR was fully phased-in under Basel III. The SLR is defined as Tier 1 capital divided by the Firm’s total leverage exposure. Ratios prior to March 31, 2018 were |
calculated under the Basel III Transitional rules.
| | (f) | Excludes the impact of residential real estate PCI loans, a non-GAAP financial measure. For further discussion of these measures, 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 120–122. |
| | (g) | 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, refer to Note 24. |
| | (h) | Excluding net charge-offs 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%. |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 287299 |
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 20162018 through 2018.2020. Income computed on a taxable-equivalent basis is the income reported in the Consolidated 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%, 37% in 2020, 2019 and 38% in 2018, 2017 and 2016, respectively.2018. | | | | | | | | | | | | | | | | | | | | | (Table continued on next page) | | | | | | | (Unaudited) | 2020 | Year ended December 31, (Taxable-equivalent interest and rates; in millions, except rates) | Average balance | | Interest(h) | | Rate | Assets | | | | | | | Deposits with banks | $ | 444,058 | | | $ | 749 | | | 0.17 | % | | Federal funds sold and securities purchased under resale agreements | 275,926 | | | 2,436 | | | 0.88 | | | Securities borrowed | 143,472 | | | (302) | | | (0.21) | | (j) | Trading assets – debt instruments(a) | 322,936 | | | 7,869 | | | 2.44 | | | Taxable securities | 476,650 | | | 7,843 | | | 1.65 | | | Non-taxable securities(b) | 33,287 | | | 1,437 | | | 4.32 | | | Total investment securities | 509,937 | | | 9,280 | | | 1.82 | | (k) | Loans(a) | 1,004,597 | | | 43,886 | | (i) | 4.37 | | | All other interest-earning assets(a)(c) | 78,784 | | | 1,023 | | | 1.30 | | | Total interest-earning assets | 2,779,710 | | | 64,941 | | | 2.34 | | | Allowance for loan losses | (25,775) | | | | | | | Cash and due from banks | 22,241 | | | | | | | Trading assets – equity and other instruments(a) | 118,055 | | | | | | | Trading assets – derivative receivables | 76,572 | | | | | | | Goodwill, MSRs and other intangible assets | 51,934 | | | | | | | All other noninterest-earning assets(a) | 180,411 | | | | | | | Total assets | $ | 3,203,148 | | | | | | | Liabilities | | | | | | | Interest-bearing deposits | $ | 1,389,224 | | | $ | 2,357 | | | 0.17 | % | | Federal funds purchased and securities loaned or sold under repurchase agreements | 255,421 | | | 1,058 | | | 0.41 | | | Short-term borrowings(d) | 38,853 | | | 372 | | | 0.96 | | | Trading liabilities – debt and all other interest-bearing liabilities(e)(f) | 205,255 | | | 195 | | | 0.10 | | (j) | Beneficial interests issued by consolidated VIEs | 19,216 | | | 214 | | | 1.12 | | | Long-term debt | 254,400 | | | 5,764 | | | 2.27 | | | Total interest-bearing liabilities | 2,162,369 | | | 9,960 | | | 0.46 | | | Noninterest-bearing deposits | 517,527 | | | | | | | Trading liabilities – equity and other instruments(f) | 32,628 | | | | | | | Trading liabilities – derivative payables | 61,593 | | | | | | | All other liabilities, including the allowance for lending-related commitments | 162,267 | | | | | | | Total liabilities | 2,936,384 | | | | | | | Stockholders’ equity | | | | | | | Preferred stock | 29,899 | | | | | | | Common stockholders’ equity | 236,865 | | | | | | | Total stockholders’ equity | 266,764 | | (g) | | | | | Total liabilities and stockholders’ equity | $ | 3,203,148 | | | | | | | Interest rate spread | | | | | 1.88 | % | | Net interest income and net yield on interest-earning assets | | | $ | 54,981 | | | 1.98 | | |
| | | | | | | | | | | | | (Table continued on next page) | | | | | | | (Unaudited) | 2018 | Year ended December 31, (Taxable-equivalent interest and rates; in millions, except rates) | Average balance | | Interest(g) | | Average rate | Assets | | | | | | | Deposits with banks | $ | 405,514 |
| | $ | 5,907 |
| | 1.46 | % | | Federal funds sold and securities purchased under resale agreements | 217,150 |
| | 3,819 |
| | 1.76 |
| | Securities borrowed | 115,082 |
| | 728 |
|
| 0.63 |
| | Trading assets – debt instruments | 261,051 |
| | 8,763 |
| | 3.36 |
| | Taxable securities | 194,232 |
| | 5,653 |
| | 2.91 |
| | Non-taxable securities(a) | 42,456 |
| | 1,987 |
| | 4.68 |
| | Total investment securities | 236,688 |
| | 7,640 |
| | 3.23 |
| (i) | Loans | 944,885 |
| | 47,796 |
| (h) | 5.06 |
| | All other interest-earning assets(b) | 48,818 |
| | 3,417 |
| | 7.00 |
| | Total interest-earning assets | 2,229,188 |
| | 78,070 |
| | 3.50 |
| | Allowance for loan losses | (13,269 | ) | | | | | | Cash and due from banks | 21,694 |
| | | | | | Trading assets – equity instruments | 101,872 |
| | | | | | Trading assets – derivative receivables | 60,734 |
| | | | | | Goodwill, MSRs and other intangible assets | 54,669 |
| | | | | | Other assets | 154,010 |
| | | | | | Total assets | $ | 2,608,898 |
| | | | | | Liabilities | | | | | | | Interest-bearing deposits | $ | 1,060,605 |
| | $ | 5,973 |
| | 0.56 | % | | Federal funds purchased and securities loaned or sold under repurchase agreements | 189,282 |
| | 3,066 |
| | 1.62 |
| | Short-term borrowings(c) | 63,523 |
| | 1,144 |
| | 1.80 |
| | Trading liabilities – debt and all other interest-bearing liabilities(d)(e) | 178,161 |
| | 3,729 |
| | 2.09 |
| | Beneficial interests issued by consolidated VIEs | 21,079 |
| | 493 |
| | 2.34 |
| | Long-term debt | 276,414 |
| | 7,978 |
| | 2.89 |
| | Total interest-bearing liabilities | 1,789,064 |
| | 22,383 |
| | 1.25 |
| | Noninterest-bearing deposits | 395,856 |
| | | | | | Trading liabilities – equity instruments(e) | 34,295 |
| | | | | | Trading liabilities – derivative payables | 43,075 |
| | | | | | All other liabilities, including the allowance for lending-related commitments | 91,137 |
| | | | | | Total liabilities | 2,353,427 |
| | | | | | Stockholders’ equity | | | | | | | Preferred stock | 26,249 |
| | | | | | Common stockholders’ equity | 229,222 |
| | | | | | Total stockholders’ equity | 255,471 |
| (f) | | | | | Total liabilities and stockholders’ equity | $ | 2,608,898 |
| | | | | | Interest rate spread | | | | | 2.25 | % | | Net interest income and net yield on interest-earning assets | | | $ | 55,687 |
| | 2.50 |
| |
Effective January 1, 2018,(a)In the third quarter of 2020, the Firm adopted several new accounting standards. Certain ofreclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the new accounting standards were applied retrospectivelycurrent presentation.
(b)Represents securities that are tax-exempt for U.S. federal income tax purposes. (c)Includes brokerage-related held-for-investment customer receivables, which are classified in accrued interest and accordingly, prior period amounts were revised. For additional information, refer to Note 1. | | (a) | Represents securities that are tax-exempt for U.S. federal income tax purposes. |
| | (b) | Includes held-for-investment margin loans, which are classified in accrued interest and accounts receivable, and all other interest-earning assets, which are classified in other assets on the Consolidated balance sheets. |
| | (c) | Includes commercial paper. |
| | (d) | Other interest-bearing liabilities include brokerage customer payables. |
| | (e) | The combined balance of trading liabilities – debt and equity instruments were $107.0 billion, $90.7 billion and $92.8 billion for the years ended December 31, 2018, 2017 and 2016, respectively. |
| | (f) | The ratio of average stockholders’ equity to average assets was 9.8% for 2018, 10.0% for 2017, and 10.2% for 2016. The return on average stockholders’ equity, based on net income, was 12.7% for 2018, 9.5% for 2017, and 9.9% for 2016. |
| | (g) | Interest includes the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable. |
| | (h) | Fees and commissions on loans included in loan interest amounted to $1.2 billion in 2018, $1.0 billion in 2017, and $808 million in 2016. |
| | (i) | The annualized rate for securities based on amortized cost was 3.25% in 2018, 3.13% in 2017, and 2.99% in 2016, and does not give effect to changes in fair value that are reflected in AOCI. |
| | (j) | 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 and all other interest-bearing liabilities. |
accounts receivable, and all other interest-earning assets, which are classified in other assets on the Consolidated Balance Sheets.
(d)Includes commercial paper. | | | | 288 | | JPMorgan Chase & Co./2018 Form 10-K |
(e)All other interest-bearing liabilities include brokerage-related customer payables.
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, refer to Note 12.accrued.
| | | | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | | | 2017 | | 2016 | | Average balance | | Interest(g) | | Average rate | | Average balance | | Interest(g) | | Average rate | | | | | | | | | | | | | | | $ | 439,663 |
| | $ | 4,238 |
| | 0.96 | % | | | $ | 393,599 |
| | $ | 1,879 |
| | 0.48 | % | | 191,820 |
| | 2,327 |
| | 1.21 |
| | | 205,367 |
| | 2,265 |
| | 1.10 |
| | 95,324 |
| | (37 | ) | (j) | (0.04 | ) | | | 102,964 |
| | (332 | ) | (j) | (0.32 | ) | | 237,206 |
| | 7,714 |
| | 3.25 |
| | | 215,565 |
| | 7,373 |
| | 3.42 |
| | 223,592 |
| | 5,534 |
| | 2.48 |
| | | 235,211 |
| | 5,538 |
| | 2.35 |
| | 45,086 |
| | 2,769 |
| | 6.14 |
| | | 44,176 |
| | 2,662 |
| | 6.03 |
| | 268,678 |
| | 8,303 |
| | 3.09 |
| (i) | | 279,387 |
| | 8,200 |
| | 2.94 |
| (i) | 906,397 |
| | 41,296 |
| (h) | 4.56 |
| | | 866,378 |
| | 36,866 |
| (h) | 4.26 |
| | 41,504 |
| | 1,844 |
| | 4.44 |
| | | 38,344 |
| | 859 |
| | 2.24 |
| | 2,180,592 |
| | 65,685 |
| | 3.01 |
| | | 2,101,604 |
| | 57,110 |
| | 2.72 |
| | (13,453 | ) | | | | | | | (13,965 | ) | | | | | | 20,432 |
| | | | | | | 18,705 |
| | | | | | 115,913 |
| | | | | | | 95,528 |
| | | | | | 59,588 |
| | | | | | | 70,897 |
| | | | | | 53,999 |
| | | | | | | 53,752 |
| | | | | | 138,991 |
| | | | | | | 135,098 |
| | | | | | $ | 2,556,062 |
| | | | | | | $ | 2,461,619 |
| | | | | | | | | | | | | | | | | | | $ | 1,013,221 |
| | $ | 2,857 |
| | 0.28 | % | | | $ | 925,270 |
| | $ | 1,356 |
| | 0.15 | % | | 187,386 |
| | 1,611 |
| | 0.86 |
| | | 178,720 |
| | 1,089 |
| | 0.61 |
| | 46,532 |
| | 481 |
| | 1.03 |
| | | 36,140 |
| | 203 |
| | 0.56 |
| | 171,814 |
| | 2,070 |
| | 1.21 |
| | | 177,765 |
| | 1,102 |
| | 0.62 |
| | 32,457 |
| | 503 |
| | 1.55 |
| | | 40,180 |
| | 504 |
| | 1.25 |
| | 291,489 |
| | 6,753 |
| | 2.32 |
| | | 295,573 |
| | 5,564 |
| | 1.88 |
| | 1,742,899 |
| | 14,275 |
| | 0.82 |
| | | 1,653,648 |
| | 9,818 |
| | 0.59 |
| | 404,165 |
| | | | | | | 402,698 |
| | | | | | 21,022 |
| | | | | | | 20,737 |
| | | | | | 44,122 |
| | | | | | | 55,927 |
| | | | | | 87,292 |
| | | | | | | 77,910 |
| | | | | | 2,299,500 |
| | | | | | | 2,210,920 |
| | | | | | | | | | | | | | | | | | | 26,212 |
| | | | | | | 26,068 |
| | | | | | 230,350 |
| | | | | | | 224,631 |
| | | | | | 256,562 |
| (f) | | | | | | 250,699 |
| (f) | | | | | $ | 2,556,062 |
| | | | | | | $ | 2,461,619 |
| | | | | | | | | | 2.19 | % | | | | | | | 2.13 | % | | | | $ | 51,410 |
| | 2.36 |
| | | | | $ | 47,292 |
| | 2.25 |
| |
| | | | | | | | | 300 | | JPMorgan Chase & Co./20182020 Form 10-K | | 289 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | | | 2019 | | 2018 | | Average balance | | Interest(h) | | Rate | | Average balance | | Interest(h) | | Rate | | | | | | | | | | | | | | | $ | 280,004 | | | $ | 3,887 | | | 1.39 | % | | | $ | 405,514 | | | $ | 5,907 | | | 1.46 | % | | 275,429 | | | 6,146 | | | 2.23 | | | | 217,150 | | | 3,819 | | | 1.76 | | | 131,291 | | | 1,574 | | | 1.20 | | | | 115,082 | | | 913 | | | 0.79 | | | 294,958 | | | 9,189 | | | 3.12 | | | | 208,266 | | | 7,206 | | | 3.46 | | | 284,127 | | | 7,962 | | | 2.80 | | | | 194,232 | | | 5,653 | | | 2.91 | | | 35,748 | | | 1,655 | | | 4.63 | | | | 42,456 | | | 1,987 | | | 4.68 | | | 319,875 | | | 9,617 | | | 3.01 | | (k) | | 236,688 | | | 7,640 | | | 3.23 | | (k) | 989,943 | | | 52,012 | | (i) | 5.25 | | | | 977,406 | | | 49,208 | | (i) | 5.03 | | | 53,779 | | | 2,146 | | | 3.99 | | | | 52,551 | | | 2,035 | | | 3.87 | | | 2,345,279 | | | 84,571 | | | 3.61 | | | | 2,212,657 | | | 76,728 | | | 3.47 | | | (13,331) | | | | | | | | (13,269) | | | | | | | 20,645 | | | | | | | | 21,694 | | | | | | | 114,323 | | | | | | | | 118,152 | | | | | | | 53,786 | | | | | | | | 60,734 | | | | | | | 53,683 | | | | | | | | 54,669 | | | | | | | 167,456 | | | | | | | | 154,261 | | | | | | | $ | 2,741,841 | | | | | | | | $ | 2,608,898 | | | | | | | | | | | | | | | | | | | | $ | 1,115,848 | | | $ | 8,957 | | | 0.80 | % | | | $ | 1,045,037 | | | $ | 5,973 | | | 0.57 | % | | 227,994 | | | 4,630 | | | 2.03 | | | | 189,282 | | | 3,066 | | | 1.62 | | | 52,426 | | | 1,248 | | | 2.38 | | | | 54,993 | | | 1,144 | | | 2.08 | | | 182,105 | | | 2,585 | | | 1.42 | | | | 177,788 | | | 2,387 | | | 1.34 | | | 22,501 | | | 568 | | | 2.52 | | | | 21,079 | | | 493 | | | 2.34 | | | 247,968 | | | 8,807 | | | 3.55 | | | | 243,246 | | | 7,978 | | | 3.28 | | | 1,848,842 | | | 26,795 | | | 1.45 | | | | 1,731,425 | | | 21,041 | | | 1.22 | | | 407,219 | | | | | | | | 411,424 | | | | | | | 31,085 | | | | | | | | 34,667 | | | | | | | 42,560 | | | | | | | | 43,075 | | | | | | | 151,717 | | | | | | | | 132,836 | | | | | | | 2,481,423 | | | | | | | | 2,353,427 | | | | | | | | | | | | | | | | | | | | 27,511 | | | | | | | | 26,249 | | | | | | | 232,907 | | | | | | | | 229,222 | | | | | | | 260,418 | | (g) | | | | | | 255,471 | | (g) | | | | | $ | 2,741,841 | | | | | | | | $ | 2,608,898 | | | | | | | | | | | 2.16 | % | | | | | | | 2.25 | % | | | | $ | 57,776 | | | 2.46 | | | | | | $ | 55,687 | | | 2.52 | | |
(f) The combined balance of trading liabilities – debt and equity instruments was $106.5 billion, $101.0 billion and $107.0 billion for the years ended December 31, 2020, 2019 and 2018, respectively. (g) The ratio of average stockholders’ equity to average assets was 8.3%, 9.5% and 9.8% for the years ended December 31, 2020, 2019 and 2018, respectively. The return on average stockholders’ equity, based on net income, was 10.9%, 14.0% and 12.7% for the years ended December 31, 2020, 2019 and 2018, 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 $1.0 billion for the year ended December 31, 2020, and $1.2 billion each for the years ended December 31, 2019 and 2018. (j) Negative interest income and yield are related to the impact of current interest rates combined with the fees paid on client-driven securities borrowed balances. The negative interest expense related to prime brokerage customer payables is recognized in interest expense and reported within trading liabilities - debt and all other interest-bearing liabilities. (k) The annualized rate for securities based on amortized cost was 1.85%, 3.05% and 3.25% for the years ended December 31, 2020, 2019 and 2018, respectively, and does not give effect to changes in fair value that are reflected in AOCI.
| | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 301 |
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 20162018 through 2018.2020. 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) | | | | | | 2020 | (Unaudited) Year ended December 31, (Taxable-equivalent interest and rates; in millions, except rates) | Average balance | Interest | | Rate | Interest-earning assets | | | | | Deposits with banks: | | | | | U.S. | $ | 294,669 | | $ | 768 | | | 0.26 | % | Non-U.S. | 149,389 | | (19) | | | (0.01) | | Federal funds sold and securities purchased under resale agreements: | | | | | U.S. | 141,409 | | 1,341 | | | 0.95 | | Non-U.S. | 134,517 | | 1,095 | | | 0.81 | | Securities borrowed:(a) | | | | | U.S. | 100,026 | | (305) | | | (0.30) | | Non-U.S. | 43,446 | | 3 | | | 0.01 | | Trading assets – debt instruments: (b) | | | | | U.S. | 216,025 | | 5,056 | | | 2.34 | | Non-U.S. | 106,911 | | 2,813 | | | 2.63 | | Investment securities: | | | | | U.S. | 475,832 | | 8,703 | | | 1.83 | | Non-U.S. | 34,105 | | 577 | | | 1.69 | | Loans:(b) | | | | | U.S. | 909,850 | | 41,708 | | | 4.58 | | Non-U.S. | 94,747 | | 2,178 | | | 2.30 | | All other interest-earning assets, predominantly U.S.(b) | 78,784 | | 1,023 | | | 1.30 | | Total interest-earning assets | 2,779,710 | | 64,941 | | | 2.34 | | Interest-bearing liabilities | | | | | Interest-bearing deposits: | | | | | U.S. | 1,068,857 | | 2,288 | | | 0.21 | | Non-U.S. | 320,367 | | 69 | | | 0.02 | | Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | U.S. | 204,958 | | 863 | | | 0.42 | | Non-U.S. | 50,463 | | 195 | | | 0.39 | | Trading liabilities – debt, short-term and all other interest-bearing liabilities:(a)(c) | | | | | U.S. | 151,120 | | (30) | | | (0.02) | | Non-U.S. | 92,988 | | 597 | | | 0.64 | | Beneficial interests issued by consolidated VIEs, predominantly U.S. | 19,216 | | 214 | | | 1.12 | | Long-term debt: | | | | | U.S. | 247,623 | | 5,704 | | | 2.30 | | Non-U.S. | 6,777 | | 60 | | | 0.89 | | Intercompany funding: | | | | | U.S. | (46,327) | | (1,254) | | | — | | Non-U.S. | 46,327 | | 1,254 | | | — | | Total interest-bearing liabilities | 2,162,369 | | 9,960 | | | 0.46 | | Noninterest-bearing liabilities(d) | 617,341 | | | | | Total investable funds | $ | 2,779,710 | | $ | 9,960 | | | 0.36 | % | Net interest income and net yield: | | $ | 54,981 | | | 1.98 | % | U.S. | | 49,242 | | | 2.25 | | Non-U.S. | | 5,739 | | | 0.97 | | Percentage of total assets and liabilities attributable to non-U.S. operations: | | | | | Assets | | | | 23.5 | | Liabilities | | | | 20.9 | |
(a)Negative interest income and yield are related to the impact of current interest rates combined with the fees paid on client-driven securities borrowed balances. The negative interest expense related to prime brokerage customer payables is recognized in interest expense and reported within trading liabilities - debt and all other interest-bearing liabilities. | | | | | | | | | | | (Table continued on next page) | | | | | | 2018 | (Unaudited) Year ended December 31, (Taxable-equivalent interest and rates; in millions, except rates) | Average balance | Interest | | Average rate | Interest-earning assets | | | | | Deposits with banks: | | | | | U.S. | $ | 305,117 |
| $ | 5,703 |
| | 1.87 | % | Non-U.S. | 100,397 |
| 204 |
| | 0.20 |
| Federal funds sold and securities purchased under resale agreements: | | | | | U.S. | 102,144 |
| 2,427 |
| | 2.38 |
| Non-U.S. | 115,006 |
| 1,392 |
| | 1.21 |
| Securities borrowed: | | | | | U.S. | 77,027 |
| 640 |
| | 0.83 |
| Non-U.S. | 38,055 |
| 88 |
| | 0.23 |
| Trading assets – debt instruments: | | | | | U.S. | 141,134 |
| 5,068 |
| | 3.59 |
| Non-U.S. | 119,917 |
| 3,695 |
| | 3.08 |
| Investment securities: | | | | | U.S. | 200,883 |
| 6,943 |
| | 3.46 |
| Non-U.S. | 35,805 |
| 697 |
| | 1.95 |
| Loans: | | | | | U.S. | 864,149 |
| 45,395 |
| | 5.25 |
| Non-U.S. | 80,736 |
| 2,401 |
| | 2.97 |
| All other interest-earning assets, predominantly U.S. | 48,818 |
| 3,417 |
| | 7.00 |
| Total interest-earning assets | 2,229,188 |
| 78,070 |
| | 3.50 |
| Interest-bearing liabilities | | | | | Interest-bearing deposits: | | | | | U.S. | 816,305 |
| 4,562 |
| | 0.56 |
| Non-U.S. | 244,300 |
| 1,411 |
| | 0.58 |
| Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | U.S. | 117,754 |
| 2,562 |
| | 2.18 |
| Non-U.S. | 71,528 |
| 504 |
| | 0.70 |
| Trading liabilities – debt, short-term and all other interest-bearing liabilities:(a) | | | | | U.S. | 150,694 |
| 3,389 |
| | 2.25 |
| Non-U.S. | 90,990 |
| 1,484 |
| | 1.63 |
| Beneficial interests issued by consolidated VIEs, predominantly U.S. | 21,079 |
| 493 |
| | 2.34 |
| Long-term debt: | | | | | U.S. | 256,220 |
| 7,954 |
| | 3.10 |
| Non-U.S. | 20,194 |
| 24 |
| | 0.12 |
| Intercompany funding: | | | | | U.S. | (51,933 | ) | (746 | ) | | — |
| Non-U.S. | 51,933 |
| 746 |
| | — |
| Total interest-bearing liabilities | 1,789,064 |
| 22,383 |
| | 1.25 |
| Noninterest-bearing liabilities(b) | 440,124 |
| | | | Total investable funds | $ | 2,229,188 |
| $ | 22,383 |
| | 1.00 | % | Net interest income and net yield: | | $ | 55,687 |
| | 2.50 | % | U.S. | | 50,236 |
| | 2.91 |
| Non-U.S. | | 5,451 |
| | 1.09 |
| Percentage of total assets and liabilities attributable to non-U.S. operations: | | | | | Assets | | | | 24.7 |
| Liabilities | | | | 22.3 |
|
Effective January 1, 2018,(b)In the third quarter of 2020, the Firm adopted several new accounting standards. Certainreclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation.
(c)Includes commercial paper. (d)Represents the amount of the new accounting standards were applied retrospectively and, accordingly, prior period amounts were revised. For additional information, refer to Note 1. | | (a) | Includes commercial paper. |
| | (b) | 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 all other interest-bearing liabilities. |
noninterest-bearing liabilities funding interest-earning assets.
| | | | | | | | | 290302 | | JPMorgan Chase & Co./20182020 Form 10-K |
For further information, referRefer to the “Net interest income” discussion in Consolidated Results of Operations on pages 48–51.54-56 for further information.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | 2019 | | 2018 | | Average balance | Interest | | Rate | | | Average balance | Interest | | Rate | | | | | | | | | | | | | | | | | | | | | | | | $ | 165,066 | | $ | 3,588 | | | 2.17 | % | | | $ | 305,117 | | $ | 5,703 | | | 1.87 | % | | 114,938 | | 299 | | | 0.26 | | | | 100,397 | | 204 | | | 0.20 | | | | | | | | | | | | | | 150,205 | | 4,068 | | | 2.71 | | | | 102,144 | | 2,427 | | | 2.38 | | | 125,224 | | 2,078 | | | 1.66 | | | | 115,006 | | 1,392 | | | 1.21 | | | | | | | | | | | | | | 92,625 | | 1,423 | | | 1.54 | | | | 77,027 | | 825 | | | 1.07 | | | 38,666 | | 151 | | | 0.39 | | | | 38,055 | | 88 | | | 0.23 | | | | | | | | | | | | | | 200,811 | | 6,157 | | | 3.07 | | | | 121,967 | | 4,229 | | | 3.47 | | | 94,147 | | 3,032 | | | 3.22 | | | | 86,299 | | 2,977 | | | 3.45 | | | | | | | | | | | | | | 287,961 | | 8,963 | | | 3.11 | | | | 200,883 | | 6,943 | | | 3.46 | | | 31,914 | | 654 | | | 2.05 | | | | 35,805 | | 697 | | | 1.95 | | | | | | | | | | | | | | 898,570 | | 49,058 | | | 5.46 | | | | 882,314 | | 46,227 | | | 5.24 | | | 91,373 | | 2,954 | | | 3.23 | | | | 95,092 | | 2,981 | | | 3.13 | | | 53,779 | | 2,146 | | | 3.99 | | | | 52,551 | | 2,035 | | | 3.87 | | | 2,345,279 | | 84,571 | | | 3.61 | | | | 2,212,657 | | 76,728 | | | 3.47 | | | | | | | | | | | | | | | | | | | | | | | | | 850,493 | | 6,896 | | | 0.81 | | | | 802,786 | | 4,562 | | | 0.57 | | | 265,355 | | 2,061 | | | 0.78 | | | | 242,251 | | 1,411 | | | 0.58 | | | | | | | | | | | | | | 164,284 | | 3,989 | | | 2.43 | | | | 117,754 | | 2,562 | | | 2.18 | | | 63,710 | | 641 | | | 1.01 | | | | 71,528 | | 504 | | | 0.70 | | | | | | | | | | | | | | 147,247 | | 2,574 | | | 1.75 | | | | 147,512 | | 2,225 | | | 1.51 | | | 87,284 | | 1,259 | | | 1.44 | | | | 85,269 | | 1,306 | | | 1.53 | | | 22,501 | | 568 | | | 2.52 | | | | 21,079 | | 493 | | | 2.34 | | | | | | | | | | | | | | 241,914 | | 8,766 | | | 3.62 | | | | 239,718 | | 7,954 | | | 3.32 | | | 6,054 | | 41 | | | 0.68 | | | | 3,528 | | 24 | | | 0.68 | | | | | | | | | | | | | | (42,947) | | (1,414) | | | — | | | | (51,933) | | (746) | | | — | | | 42,947 | | 1,414 | | | — | | | | 51,933 | | 746 | | | — | | | 1,848,842 | | 26,795 | | | 1.45 | | | | 1,731,425 | | 21,041 | | | 1.22 | | | 496,437 | | | | | | | 481,232 | | | | | | $ | 2,345,279 | | $ | 26,795 | | | 1.14 | % | | | $ | 2,212,657 | | $ | 21,041 | | | 0.95 | % | | | $ | 57,776 | | | 2.46 | % | | | | $ | 55,687 | | | 2.52 | % | | | 52,217 | | | 2.86 | | | | | 50,236 | | | 2.95 | | | | 5,559 | | | 1.07 | | | | | 5,451 | | | 1.05 | | | | | | | | | | | | | | | | | 24.5 | | | | | | | 24.7 | | | | | | 22.1 | | | | | | | 22.3 | | |
| | | | | | | | | | | | | | | | | | | | | | (Table continued from previous page) | | | | | | | | | 2017 | | 2016 | | Average balance | Interest | | Average rate | | | Average balance | Interest | | Average rate | | | | | | | | | | | | | | | | | | | | | | | | $ | 366,814 |
| $ | 4,093 |
| | 1.12 | % | | | $ | 329,498 |
| $ | 1,707 |
| | 0.52 | % | | 72,849 |
| 145 |
| | 0.20 |
| | | 64,101 |
| 172 |
| | 0.27 |
| | | | | | | | | | | | | 90,879 |
| 1,360 |
| | 1.50 |
| | | 112,901 |
| 1,166 |
| | 1.03 |
| | 100,941 |
| 967 |
| | 0.96 |
| | | 92,466 |
| 1,099 |
| | 1.19 |
| | | | | | | | | | | | | 68,110 |
| (66 | ) | (c) | (0.10 | ) | | | 73,297 |
| (341 | ) | (c) | (0.46 | ) | | 27,214 |
| 29 |
| | 0.11 |
| | | 29,667 |
| 9 |
| | 0.03 |
| | |
| | | | | | | | | | | 128,293 |
| 4,186 |
| | 3.26 |
| | | 116,211 |
| 3,825 |
| | 3.29 |
| | 108,913 |
| 3,528 |
| | 3.24 |
| | | 99,354 |
| 3,548 |
| | 3.57 |
| | | | | | | | | | | | | 223,140 |
| 7,490 |
| | 3.36 |
| | | 216,726 |
| 6,971 |
| | 3.22 |
| | 45,538 |
| 813 |
| | 1.79 |
| | | 62,661 |
| 1,229 |
| | 1.97 |
| | | | | | | | | | | | | 832,608 |
| 39,439 |
| | 4.74 |
| | | 788,213 |
| 35,110 |
| | 4.45 |
| | 73,789 |
| 1,857 |
| | 2.52 |
| | | 78,165 |
| 1,756 |
| | 2.25 |
| | 41,504 |
| 1,844 |
| | 4.44 |
| | | 38,344 |
| 859 |
| | 2.24 |
| | 2,180,592 |
| 65,685 |
| | 3.01 |
| | | 2,101,604 |
| 57,110 |
| | 2.72 |
| | |
| | | | | | | | | | | |
| | | | | | | | | | | 776,049 |
| 2,223 |
| | 0.29 |
| | | 703,738 |
| 1,029 |
| | 0.15 |
| | 237,172 |
| 634 |
| | 0.27 |
| | | 221,532 |
| 327 |
| | 0.15 |
| | | | | | | | | | | | | 115,574 |
| 1,349 |
| | 1.17 |
| | | 121,945 |
| 773 |
| | 0.63 |
| | 71,812 |
| 262 |
| | 0.37 |
| | | 56,775 |
| 316 |
| | 0.56 |
| | |
| | | | | | | | | | | 138,470 |
| 1,271 |
| | 0.92 |
| | | 133,788 |
| 86 |
| | 0.06 |
| | 79,876 |
| 1,280 |
| | 1.60 |
| | | 80,117 |
| 1,219 |
| | 1.52 |
| | 32,457 |
| 503 |
| | 1.55 |
| | | 40,180 |
| 504 |
| | 1.25 |
| | | | | | | | | | | | | 276,750 |
| 6,745 |
| | 2.44 |
| | | 283,169 |
| 5,533 |
| | 1.95 |
| | 14,739 |
| 8 |
| | 0.05 |
| | | 12,404 |
| 31 |
| | 0.25 |
| | |
| | | | | | | | | | | (2,874 | ) | (25 | ) | | — |
| | | (20,405 | ) | 10 |
| | — |
| | 2,874 |
| 25 |
| | — |
| | | 20,405 |
| (10 | ) | | — |
| | 1,742,899 |
| 14,275 |
| | 0.82 |
| | | 1,653,648 |
| 9,818 |
| | 0.59 |
| | 437,693 |
| | | | | | 447,956 |
| | | | | $ | 2,180,592 |
| $ | 14,275 |
| | 0.65 | % | | | $ | 2,101,604 |
| $ | 9,818 |
| | 0.47 | % | | | $ | 51,410 |
| | 2.36 | % | | | | $ | 47,292 |
| | 2.25 | % | | | 46,059 |
| | 2.68 |
| | | | 40,705 |
| | 2.49 |
| | | 5,351 |
| | 1.15 |
| | | | 6,587 |
| | 1.42 |
| | | | | | | | | | | | | | | | 22.5 |
| | | | | | 23.1 |
| | | | | 21.1 |
| | | | | | 20.7 |
| |
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 291303 |
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 (refer to pages 288–292300–304 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. | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 versus 2017 | | 2017 versus 2016 | (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 | Interest-earning assets | | | | | | | | | | | | Deposits with banks: | | | | | | | | | | | | U.S. | $ | (1,141 | ) | | $ | 2,751 |
| | $ | 1,610 |
| | $ | 409 |
| | $ | 1,977 |
| | $ | 2,386 |
| Non-U.S. | 59 |
| | — |
| | 59 |
| | 18 |
| | (45 | ) | | (27 | ) | Federal funds sold and securities purchased under resale agreements: | | | | | | | | |
| | | U.S. | 267 |
| | 800 |
| | 1,067 |
| | (337 | ) | | 531 |
| | 194 |
| Non-U.S. | 173 |
| | 252 |
| | 425 |
| | 81 |
| | (213 | ) | | (132 | ) | Securities borrowed: | | | | | | | | |
| | | U.S. | 73 |
| | 633 |
| | 706 |
| | 11 |
| | 264 |
| | 275 |
| Non-U.S. | 26 |
| | 33 |
| | 59 |
| | (4 | ) | | 24 |
| | 20 |
| Trading assets – debt instruments: | | | | | | | | |
| | | U.S. | 459 |
| | 423 |
| | 882 |
| | 396 |
| | (35 | ) | | 361 |
| Non-U.S. | 341 |
| | (174 | ) | | 167 |
| | 308 |
| | (328 | ) | | (20 | ) | Investment securities: | | | | | | | | |
| | | U.S. | (770 | ) | | 223 |
| | (547 | ) | | 216 |
| | 303 |
| | 519 |
| Non-U.S. | (189 | ) | | 73 |
| | (116 | ) | | (303 | ) | | (113 | ) | | (416 | ) | Loans: | | | | | | | | |
| | | U.S. | 1,710 |
| | 4,246 |
| | 5,956 |
| | 2,043 |
| | 2,286 |
| | 4,329 |
| Non-U.S. | 212 |
| | 332 |
| | 544 |
| | (110 | ) | | 211 |
| | 101 |
| All other interest-earning assets, predominantly U.S. | 510 |
| | 1,063 |
| | 1,573 |
| | 141 |
| | 844 |
| | 985 |
| Change in interest income | 1,730 |
| | 10,655 |
| | 12,385 |
| | 2,869 |
| | 5,706 |
| | 8,575 |
| Interest-bearing liabilities | | | | | | | | | | | | Interest-bearing deposits: | | | | | | | | | | | | U.S. | 244 |
| | 2,095 |
| | 2,339 |
| | 209 |
| | 985 |
| | 1,194 |
| Non-U.S. | 42 |
| | 735 |
| | 777 |
| | 41 |
| | 266 |
| | 307 |
| Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | | |
| |
| | | U.S. | 46 |
| | 1,167 |
| | 1,213 |
| | (83 | ) | | 659 |
| | 576 |
| Non-U.S. | 5 |
| | 237 |
| | 242 |
| | 54 |
| | (108 | ) | | (54 | ) | Trading liabilities – debt, short-term and all other interest-bearing liabilities: (a) | | | | | | |
| |
| | | U.S. | 276 |
| | 1,842 |
| | 2,118 |
| | 45 |
| | 1,140 |
| | 1,185 |
| Non-U.S. | 180 |
| | 24 |
| | 204 |
| | (3 | ) | | 64 |
| | 61 |
| Beneficial interests issued by consolidated VIEs, predominantly U.S. | (266 | ) | | 256 |
| | (10 | ) | | (122 | ) | | 121 |
| | (1 | ) | Long-term debt: | | | | | | |
|
| |
|
| |
|
| U.S. | (618 | ) | | 1,827 |
| | 1,209 |
| | (176 | ) | | 1,388 |
| | 1,212 |
| Non-U.S. | 6 |
| | 10 |
| | 16 |
| | 2 |
| | (25 | ) | | (23 | ) | Intercompany funding: | | | | | | | | | | | | U.S. | (704 | ) | | (17 | ) | | (721 | ) | | 151 |
| | (186 | ) | | (35 | ) | Non-U.S. | 704 |
| | 17 |
| | 721 |
| | (151 | ) | | 186 |
| | 35 |
| Change in interest expense | (85 | ) | | 8,193 |
| | 8,108 |
| | (33 | ) | | 4,490 |
| | 4,457 |
| Change in net interest income | $ | 1,815 |
| | $ | 2,462 |
| | $ | 4,277 |
| | $ | 2,902 |
| | $ | 1,216 |
| | $ | 4,118 |
|
Effective January 1, 2018, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 versus 2019 | | 2019 versus 2018 | (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 | Interest-earning assets | | | | | | | | | | | | Deposits with banks: | | | | | | | | | | | | U.S. | $ | 333 | | | $ | (3,153) | | | $ | (2,820) | | | $ | (3,030) | | | $ | 915 | | | $ | (2,115) | | Non-U.S. | (8) | | | (310) | | | (318) | | | 35 | | | 60 | | | 95 | | Federal funds sold and securities purchased under resale agreements: | | | | | | | | | | | | U.S. | (83) | | | (2,644) | | | (2,727) | | | 1,304 | | | 337 | | | 1,641 | | Non-U.S. | 81 | | | (1,064) | | | (983) | | | 168 | | | 518 | | | 686 | | Securities borrowed:(a) | | | | | | | | | | | | U.S. | (24) | | | (1,704) | | | (1,728) | | | 236 | | | 362 | | | 598 | | Non-U.S. | (1) | | | (147) | | | (148) | | | 2 | | | 61 | | | 63 | | Trading assets – debt instruments:(b) | | | | | | | | | | | | U.S. | 365 | | | (1,466) | | | (1,101) | | | 2,416 | | | (488) | | | 1,928 | | Non-U.S. | 336 | | | (555) | | | (219) | | | 253 | | | (198) | | | 55 | | Investment securities: | | | | | | | | | | | | U.S. | 3,426 | | | (3,686) | | | (260) | | | 2,723 | | | (703) | | | 2,020 | | Non-U.S. | 38 | | | (115) | | | (77) | | | (79) | | | 36 | | | (43) | | Loans:(b) | | | | | | | | | | | | U.S. | 557 | | | (7,907) | | | (7,350) | | | 890 | | | 1,941 | | | 2,831 | | Non-U.S. | 74 | | | (850) | | | (776) | | | (122) | | | 95 | | | (27) | | All other interest-earning assets, predominantly U.S.(b) | 324 | | | (1,447) | | | (1,123) | | | 48 | | | 63 | | | 111 | | Change in interest income | 5,418 | | | (25,048) | | | (19,630) | | | 4,844 | | | 2,999 | | | 7,843 | | Interest-bearing liabilities | | | | | | | | | | | | Interest-bearing deposits: | | | | | | | | | | | | U.S. | 495 | | | (5,103) | | | (4,608) | | | 407 | | | 1,927 | | | 2,334 | | Non-U.S. | 25 | | | (2,017) | | | (1,992) | | | 165 | | | 485 | | | 650 | | Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | | | | | | | | U.S. | 176 | | | (3,302) | | | (3,126) | | | 1,133 | | | 294 | | | 1,427 | | Non-U.S. | (51) | | | (395) | | | (446) | | | (85) | | | 222 | | | 137 | | Trading liabilities – debt, short-term and all other interest-bearing liabilities: (a)(c) | | | | | | | | | | | | U.S. | 2 | | | (2,606) | | | (2,604) | | | (5) | | | 354 | | | 349 | | Non-U.S. | 36 | | | (698) | | | (662) | | | 30 | | | (77) | | | (47) | | Beneficial interests issued by consolidated VIEs, predominantly U.S. | (37) | | | (317) | | | (354) | | | 37 | | | 38 | | | 75 | | Long-term debt: | | | | | | | | | | | | U.S. | 131 | | | (3,193) | | | (3,062) | | | 93 | | | 719 | | | 812 | | Non-U.S. | 6 | | | 13 | | | 19 | | | 17 | | | — | | | 17 | | Intercompany funding: | | | | | | | | | | | | U.S. | (89) | | | 249 | | | 160 | | | 293 | | | (961) | | | (668) | | Non-U.S. | 89 | | | (249) | | | (160) | | | (293) | | | 961 | | | 668 | | Change in interest expense | 783 | | | (17,618) | | | (16,835) | | | 1,792 | | | 3,962 | | | 5,754 | | Change in net interest income | $ | 4,635 | | | $ | (7,430) | | | $ | (2,795) | | | $ | 3,052 | | | $ | (963) | | | $ | 2,089 | |
(a)Negative interest income and yield are related to the impact of current interest rates combined with the fees paid on client-driven securities borrowed balances. The negative interest expense related to prime brokerage customer payables is recognized in interest expense and reported within trading liabilities - debt and all other interest-bearing liabilities. (b)In the third quarter of 2020, the Firm adopted several new accounting standards. Certain ofreclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the new accounting standards were applied retrospectively and, accordingly, prior period amounts were revised. For additional information, refer to Note 1.current presentation. | | (a) | Includes commercial paper. |
(c)Includes commercial paper.
| | | | | | | | | 292304 | | JPMorgan Chase & Co./20182020 Form 10-K |
Glossary of Terms and Acronyms
20182020 Form 10-K: Annual report on Form 10-K for year ended December 31, 2018,2020, filed with the U.S. Securities and Exchange Commission.
ABS: Asset-backed securities AFS: Available-for-sale ALCO: Asset Liability Committee AWM:Amortized cost: Asset & Wealth ManagementAmount at which a financing receivable or investment is originated or acquired, adjusted for accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, charge-offs, foreign exchange, and fair value hedge accounting adjustments. For AFS securities, amortized cost is also reduced by any impairment losses recognized in earnings. Amortized cost is not reduced by the allowance for credit losses, except where explicitly presented net.
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. AWM: Asset & Wealth Management 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 capital 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 bysubstantially through the underlyingoperation or sale of the collateral rather than by cash flows fromwhen the borrower’s operations, income or other resources.borrower is experiencing financial difficulty, including when foreclosure is deemed probable based on borrower delinquency. 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. Core loans: Represents loans considered central to the Firm’s ongoing businesses; core loans excludes 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 one party (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 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. | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 305 |
Glossary of Terms and Acronyms
Criticized: Criticized loans, lending-related commitments and derivative receivables that are classified as special mention, substandard and doubtful categories for regulatory purposes and are generally consistent with a rating of CC
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 293 |
Glossary of Terms and Acronyms
C+/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 adjustment 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. Dodd-Frank Act: Wall Street Reform and Consumer Protection Act DRPC: Board of Directors’ Risk Policy Committee
DVA: Debit valuation adjustment EC: European Commission Eligible HQLA: Eligible high-quality liquid assets, for purposes of calculating the LCR, is the amount of unencumbered HQLA that satisfy certain operational considerations as defined in the LCR rule. 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. Expense categories: •Volume- and revenue-related expenses generally correlate with changes in the related business/transaction volume or revenue. Examples of volume- and revenue-related expenses include commissions and incentive compensation, depreciation expense related to operating lease assets, and brokerage expense related to equities trading transaction volume. •Investments include expenses associated with supporting medium- to longer-term strategic plans of the Firm. Examples of investments include initiatives in technology (including related compensation), marketing, and compensation for new bankers and client advisors. •Structural expenses are those associated with the day-today cost of running the bank and are expenses not covered by the above two categories. Examples of structural expenses include employee salaries and benefits, as well as noncompensation costs such as real estate and all other expenses. 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 FFELP: Federal Family Education Loan Program
FFIEC: Federal Financial Institutions Examination Council FHA: Federal Housing Administration FHLB: Federal Home Loan Bank FICC: The Fixed 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. FINRA: Financial Industry Regulatory Authority 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. FRBB: Federal Reserve Bank of Boston FRBNY: Federal Reserve Bank of New York 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 | | | | | | | | | 306 | | JPMorgan Chase & Co./2020 Form 10-K |
Glossary of Terms and Acronyms
FTE: Fully taxable equivalent FVA: Funding valuation adjustment FX: Foreign exchange 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 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.
| | | | 294 | | JPMorgan Chase & Co./2018 Form 10-K |
Glossary of Terms and Acronyms
Households: A household is a collection of individuals or entities aggregated together by name, address, tax identifier and phone number. HQLA: “High-quality liquid assets”High quality consist of cash and certain high-quality liquid assetssecurities as defined in the LCR rule. HTM: Held-to-maturity 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
|
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., resi dentialresidential 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. 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 financial measure at the segment level, because it believes this provides information to enable investors to understand the underlying operational performance and 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). | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 307 |
Glossary of Terms and Acronyms
MBS: Mortgage-backed securities MD&A: Management’s discussion and analysis 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
Merchant Services: isa business that primarily processes transactions for merchants.offers merchants payment processing capabilities, fraud and risk management, data and analytics, and other payments services. Through Merchant Services, merchants of all sizes can accept payments via credit and debit cards and payments in multiple currencies. MMDA:MEV: Macroeconomic variable
MMLF: Money Market Deposit AccountsMutual Fund Liquidity Facility Moody’s: Moody’s Investor Services Mortgage origination channels:
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 295 |
Glossary of Terms and Acronyms
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. 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
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 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 generally tied to sales transactions. •Partner payments: Payments to co-brand credit card partners based on the cost of loyalty program rewards earned by cardholders on credit card transactions. 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,provided; changes in the fair value of MSRs andMSRs; the impact of risk management activities associated with MSRs.MSRs; and gains 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 | | | | | | | | | 308 | | JPMorgan Chase & Co./2020 Form 10-K |
Glossary of Terms and Acronyms
intent to sell;sell, and the impact of risk management activities associated with the mortgage pipeline and warehouse loans; and changes in the fair value of any residual interests held from mortgage securitizations.loans. Net production revenue also includes gains and losses on sales of mortgage loans,and lower of cost or fair value adjustments on mortgage loans held-for-sale (excluding certain repurchased loans insured by U.S. government agencies), and changes in the fair value on mortgage loans originated with the intent to sell andof financial instruments measured at fair value under the fair value option, as well as losses recognized as incurred related to repurchases of previously sold loans.option. Net revenue rate: Represents Credit Card Services net revenue (annualized) expressed as a percentage of average loans for the period. Net interchange income includes the following components:
| | • | Interchange income: Fees earned by credit and debit card issuers on sales transactions.
|
| | • | Rewards 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.
|
Net yield on interest-earning assets: The average rate for interest-earning assets less the average rate paid for all sources of funds. NFA: National Futures Association NM: Not meaningful NOL: Net operating loss Nonaccrual loans: Loans for which interest income is not recognized on an
| | | | 296 | | JPMorgan Chase & Co./2018 Form 10-K |
Glossary of Terms and Acronyms
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. 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) 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 PCD: “Purchased credit deteriorated” assets represent acquired financial assets that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Firm. PCI: “Purchased credit-impaired” loansrepresentsrepresented certain loans that were acquired and deemed to be credit-impaired on the acquisition date in accordance with thedate. The superseded FASB guidance of the FASB. The guidance allowsallowed purchasers to aggregate credit-impaired loans acquired in the s amesame fiscal quarter into one or more pools, provided that the loans havehad common risk characteristics(e.g.characteristics (e.g., product type, LTV ratios, FICO scores, past due status, geographic location). A pool iswas then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.
PD: Probability of default PDCF: Primary Dealer Credit Facility PPP: Paycheck Protection Program PPPL Facility: Paycheck Protection Program Lending Facility 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 including: •the bid-offer spread, which is the difference between the price at which a market participant is willing and able to | | | | | | | | | JPMorgan Chase & Co./2020 Form 10-K | | 309 |
Glossary of Terms and Acronyms
sell an instrument to the Firmis willing to buy a financial or other instrument and the price at which another market participant is willing and able to buy it from the Firm, and vice versa; and •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 instruments and other instruments (includingcommodities transactions, including those accounted for under the fair value option)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) certain to: •derivatives designated in qualifying hedge accounting relationships, (primarilyprimarily fair value hedges of commodity and foreign exchange risk), (b) certain risk; •derivatives used for specific risk management purposes, primarily to mitigate credit risk, and foreign exchange risk and commodity risk, and (c) other derivatives.risk. PSU(s):PSUs: Performance share units
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.
| | | | JPMorgan Chase & Co./2018 Form 10-K | | 297 |
Glossary of Terms and Acronyms
Receivables from customers: These receivables are reported within accrued interest and accounts receivable on the Firm’s Consolidated balance sheets.Primarily represents held-for-investment 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. 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 into consideration 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 approaches 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 SCB: Stress Capital Buffer Scored portfolio:portfolios: The scored portfolioConsumer loan portfolios that predominantly includesinclude residential real estate loans, credit card loans, auto loans to individuals and certain auto andsmall 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.loans. 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. Shelf securities: Securities registered with the SEC under a shelf registration statement that have not been issued, offered or sold. These securities are not included in league tables until they have actually been issued. Single-name: Single reference-entities | | | | | | | | | 310 | | JPMorgan Chase & Co./2020 Form 10-K |
Glossary of Terms and Acronyms
SLR: Supplementary leverage ratio SMBS: Stripped mortgage-backed securities SOFR: 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. Structured notes: Structured notes are financial instruments whose 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. 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. Loans with short-term and other insignificant modifications that are not considered concessions are not TDRs. TLAC: Total Loss Absorbing Capacityloss-absorbing capacity U.K.: United Kingdom Unaudited: Financial statements and information that have not been su
| | | | 298 | | JPMorgan Chase & Co./2018 Form 10-K |
Glossary of Terms and Acronyms
bjectedsubjected 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.loans.
| | | | | | | | | JPMorgan Chase & Co./20182020 Form 10-K | | 299311 |
Investment securities portfolio
ForRefer to Note 10 for information regarding the investment securities portfolio as of December 31, 20182020 and 2017,2019, and for the years ended December 31, 20182020 and 2017, refer to Note 10.2019.
| | | | | | | | | | | | | 2018 | (Unaudited) December 31, (in millions) | Amortized cost | | Fair value | Available-for-sale securities | | | | Mortgage-backed securities: U.S. GSEs and government agencies | $ | 69,026 | | | $ | 68,646 | | U.S. Treasury and government agencies | 55,771 | | | 56,059 | | All other AFS securities | 103,972 | | | 105,689 | | Total available-for-sale securities | $ | 228,769 | | | $ | 230,394 | | | | | | Held-to-maturity securities | | | | Mortgage-backed securities: U.S. GSEs and government agencies | 26,610 | | | 26,544 | | All other HTM securities | 4,824 | | | 4,914 | | Total held-to-maturity securities | $ | 31,434 | | | $ | 31,458 | | Total investment securities | $ | 260,203 | | | $ | 261,852 | |
| | | | | | | | | | 2016 | (Unaudited) December 31, (in millions) | Amortized cost | | Fair value | Available-for-sale securities | | | | Mortgage-backed securities: U.S Government agencies | $ | 63,367 |
| | $ | 64,005 |
| U.S. Treasury and government agencies | 44,822 |
| | 44,101 |
| All other AFS securities | 128,241 |
| | 130,785 |
| Total available-for-sale securities | $ | 236,430 |
| | $ | 238,891 |
| | | | | Held-to-maturity securities | | | | Mortgage-backed securities: U.S Government agencies | 29,910 |
| | 30,511 |
| All other HTM securities | 20,258 |
| | 20,378 |
| Total held-to-maturity securities | $ | 50,168 |
| | $ | 50,889 |
| Total investment securities | $ | 286,598 |
| | $ | 289,780 |
|
Effective January 1, 2020, the Firm adopted the CECL accounting guidance. The adoption resulted in a change in the accounting for PCI loans, which are considered PCD loans under CECL. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied when determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information.
Additionally, in the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans. Prior-period amounts have been revised to conform with the current presentation. The table below presents loans by portfolio segment and loan class that are presented in CreditNote 12. | | | | | | | | | | | | | | | | | | (Unaudited) December 31, (in millions) | 2020 | 2019 | 2018 | 2017 | 2016 | U.S. consumer, excluding credit card loans | | | | | | Residential real estate | $ | 241,578 | | $ | 266,135 | | $ | 296,677 | | $ | 291,054 | | $ | 281,774 | | Auto and other | 76,825 | | 51,682 | | 52,324 | | 55,296 | | 63,380 | | Total U.S. consumer, excluding credit card loans | 318,403 | | 317,817 | | 349,001 | | 346,350 | | 345,154 | | Non-U.S. consumer, excluding credit card loans | | | | | | Residential real estate | 176 | | — | | — | | 836 | | 1,976 | | Auto and other | — | | — | | — | | — | | — | | Total Non-U.S. consumer, excluding credit card loans | 176 | | — | | — | | 836 | | 1,976 | | Total consumer, excluding credit card loans | | | | | | Residential real estate | 241,754 | | 266,135 | | 296,677 | | 291,890 | | 283,750 | | Auto and other | 76,825 | | 51,682 | | 52,324 | | 55,296 | | 63,380 | | Total consumer, excluding credit card loans | 318,579 | | 317,817 | | 349,001 | | 347,186 | | 347,130 | | Credit card Loans | | | | | | U.S. credit card loans | 144,103 | | 168,787 | | 156,312 | | 149,107 | | 141,447 | | Non-U.S. credit card loans | 113 | | 137 | | 320 | | 404 | | 369 | | Total credit card loans | 144,216 | | 168,924 | | 156,632 | | 149,511 | | 141,816 | | Total consumer loans | 462,795 | | 486,741 | | 505,633 | | 496,697 | | 488,946 | | U.S. wholesale loans | | | | | | Secured by real estate | 124,887 | | 126,735 | | 121,169 | | 120,078 | | 112,134 | | Commercial and industrial | 112,911 | | 115,389 | | 138,374 | | 115,537 | | 110,555 | | Other | 185,945 | | 154,633 | | 136,609 | | 120,608 | | 111,509 | | Total U.S. wholesale loans | 423,743 | | 396,757 | | 396,152 | | 356,223 | | 334,198 | | Non-U.S. wholesale loans | | | | | | Secured by real estate | 3,090 | | 2,837 | | 2,709 | | 2,625 | | 2,905 | | Commercial and industrial | 44,076 | | 38,214 | | 37,035 | | 36,438 | | 35,673 | | Other | 79,149 | | 73,071 | | 74,231 | | 67,446 | | 61,109 | | Total non-U.S. wholesale loans | 126,315 | | 114,122 | | 113,975 | | 106,509 | | 99,687 | | Total wholesale loans | | | | | | Secured by real estate | 127,977 | | 129,572 | | 123,878 | | 122,703 | | 115,039 | | Commercial and industrial | 156,987 | | 153,603 | | 175,409 | | 151,975 | | 146,228 | | Other | 265,094 | | 227,704 | | 210,840 | | 188,054 | | 172,618 | | Total wholesale loans | 550,058 | | 510,879 | | 510,127 | | 462,732 | | 433,885 | | Total loans(a) | $ | 1,012,853 | | $ | 997,620 | | $ | 1,015,760 | | $ | 959,429 | | $ | 922,831 | | Memo: | | | | | | Loans held-for-sale | $ | 7,873 | | $ | 7,064 | | $ | 11,988 | | $ | 3,351 | | $ | 2,628 | | Loans at fair value | 44,474 | | 44,955 | | 34,357 | | 31,240 | | 30,296 | | Total loans held-for-sale and loans at fair value | $ | 52,347 | | $ | 52,019 | | $ | 46,345 | | $ | 34,591 | | $ | 32,924 | |
(a)Loans (other than those for which the fair value option has been elected) are presented net of unamortized discounts and Investment Risk Management on page 105, pages 106–111premiums and page 112,net deferred loan fees or costs. These amounts were not material as of December 31, 2020, 2019, 2018, 2017 and in Note 12, at the periods indicated. | | | | | | | | | | | | | | | | | (Unaudited) December 31, (in millions) | 2018 |
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| U.S. consumer, excluding credit card loans | | | | | | Residential mortgage | $ | 246,244 |
| $ | 236,157 |
| $ | 215,178 |
| $ | 192,714 |
| $ | 139,973 |
| Home equity | 37,303 |
| 44,249 |
| 51,965 |
| 60,548 |
| 69,837 |
| Auto | 63,573 |
| 66,242 |
| 65,814 |
| 60,255 |
| 54,536 |
| Other | 26,612 |
| 26,033 |
| 31,687 |
| 31,304 |
| 31,028 |
| Total U.S. consumer, excluding credit card loans | 373,732 |
| 372,681 |
| 364,644 |
| 344,821 |
| 295,374 |
| Credit card Loans | | | | | | U.S. credit card loans | 156,312 |
| 149,107 |
| 141,447 |
| 131,132 |
| 129,067 |
| Non-U.S. credit card loans | 320 |
| 404 |
| 369 |
| 331 |
| 1,981 |
| Total credit card loans | 156,632 |
| 149,511 |
| 141,816 |
| 131,463 |
| 131,048 |
| Total consumer loans | 530,364 |
| 522,192 |
| 506,460 |
| 476,284 |
| 426,422 |
| U.S. wholesale loans | | | | | | Commercial and industrial | 111,208 |
| 93,522 |
| 91,393 |
| 83,739 |
| 78,664 |
| Real estate | 115,401 |
| 112,562 |
| 104,268 |
| 90,836 |
| 77,022 |
| Financial institutions | 29,165 |
| 23,819 |
| 20,499 |
| 12,708 |
| 13,743 |
| Governments & Agencies | 11,037 |
| 12,603 |
| 12,655 |
| 9,838 |
| 7,574 |
| Other | 83,386 |
| 69,602 |
| 66,363 |
| 67,925 |
| 49,838 |
| Total U.S. wholesale loans | 350,197 |
| 312,108 |
| 295,178 |
| 265,046 |
| 226,841 |
| Non-U.S. wholesale loans | | | | | | Commercial and industrial | 30,450 |
| 29,233 |
| 31,340 |
| 30,385 |
| 34,782 |
| Real estate | 3,397 |
| 3,302 |
| 3,975 |
| 4,577 |
| 2,224 |
| Financial institutions | 18,563 |
| 16,845 |
| 15,196 |
| 17,188 |
| 21,099 |
| Governments & Agencies | 3,150 |
| 2,906 |
| 3,726 |
| 1,788 |
| 1,122 |
| Other | 48,433 |
| 44,111 |
| 38,890 |
| 42,031 |
| 44,846 |
| Total non-U.S. wholesale loans | 103,993 |
| 96,397 |
| 93,127 |
| 95,969 |
| 104,073 |
| Total wholesale loans | | | | | | Commercial and industrial | 141,658 |
| 122,755 |
| 122,733 |
| 114,124 |
| 113,446 |
| Real estate | 118,798 |
| 115,864 |
| 108,243 |
| 95,413 |
| 79,246 |
| Financial institutions | 47,728 |
| 40,664 |
| 35,695 |
| 29,896 |
| 34,842 |
| Governments & Agencies | 14,187 |
| 15,509 |
| 16,381 |
| 11,626 |
| 8,696 |
| Other | 131,819 |
| 113,713 |
| 105,253 |
| 109,956 |
| 94,684 |
| Total wholesale loans | 454,190 |
| 408,505 |
| 388,305 |
| 361,015 |
| 330,914 |
| Total loans(a) | $ | 984,554 |
| $ | 930,697 |
| $ | 894,765 |
| $ | 837,299 |
| $ | 757,336 |
| Memo: | | | | | | Loans held-for-sale | $ | 11,988 |
| $ | 3,351 |
| $ | 2,628 |
| $ | 1,646 |
| $ | 7,217 |
| Loans at fair value | 3,151 |
| 2,508 |
| 2,230 |
| 2,861 |
| 2,611 |
| Total loans held-for-sale and loans at fair value | $ | 15,139 |
| $ | 5,859 |
| $ | 4,858 |
| $ | 4,507 |
| $ | 9,828 |
|
| | (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, 2018, 2017, 2016, 2015 and 2014. |
2016.
Maturities and sensitivity to changes in interest rates The table below sets forth at December 31, 2018, 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 112–119 and Note 12. The table does not include the impact of derivative instruments. | | | | | | | | | | | | | | | | | | | | | | | | | | | (Unaudited) December 31, 2020 (in millions) | Within 1 year (a) | | 1-5 years | | After 5 years | | Total | | U.S. | | | | | | | | | Secured by real estate | $ | 4,847 | | | $ | 25,575 | | | $ | 94,465 | | | $ | 124,887 | | | Commercial and industrial | 35,318 | | | 72,084 | | | 5,509 | | | 112,911 | | | Other | 81,462 | | | 73,964 | | | 30,519 | | | 185,945 | | | Total U.S. | 121,627 | | | 171,623 | | | 130,493 | | | 423,743 | | | Non-U.S. | | | | | | | | | Secured by real estate | 907 | | | 1,797 | | | 386 | | | 3,090 | | | Commercial and industrial | 13,307 | | | 26,460 | | | 4,309 | | | 44,076 | | | Other | 55,249 | | | 20,142 | | | 3,758 | | | 79,149 | | | Total non-U.S. | 69,463 | | | 48,399 | | | 8,453 | | | 126,315 | | | Total wholesale loans | $ | 191,090 | | | $ | 220,022 | | | $ | 138,946 | | | $ | 550,058 | | | Loans at fixed interest rates | | | $ | 36,693 | | | $ | 31,548 | | | | | Loans at variable interest rates | | | 183,329 | | | 107,398 | | | | | Total wholesale loans | | | $ | 220,022 | | | $ | 138,946 | | | | |
(a)Includes demand loans and overdrafts. | | | | | | | | | | | | | | | | | (Unaudited) December 31, 2018 (in millions) | Within 1 year (a) | | 1-5 years | | After 5 years | | Total | U.S. | | | | | | | | Commercial and industrial | $ | 31,145 |
| | $ | 69,357 |
| | $ | 10,706 |
| | $ | 111,208 |
| Real estate | 10,440 |
| | 23,554 |
| | 81,407 |
| | 115,401 |
| Financial institutions | 15,190 |
| | 13,639 |
| | 336 |
| | 29,165 |
| Governments & Agencies | 1,498 |
| | 3,308 |
| | 6,231 |
| | 11,037 |
| Other | 28,066 |
| | 52,722 |
| | 2,598 |
| | 83,386 |
| Total U.S. | 86,339 |
| | 162,580 |
| | 101,278 |
| | 350,197 |
| Non-U.S. | | | | | | | | Commercial and industrial | 11,636 |
| | 16,390 |
| | 2,424 |
| | 30,450 |
| Real estate | 1,073 |
| | 2,261 |
| | 63 |
| | 3,397 |
| Financial institutions | 12,879 |
| | 5,653 |
| | 31 |
| | 18,563 |
| Governments & Agencies | 497 |
| | 1,843 |
| | 810 |
| | 3,150 |
| Other | 35,423 |
| | 12,040 |
| | 970 |
| | 48,433 |
| Total non-U.S. | 61,508 |
| | 38,187 |
| | 4,298 |
| | 103,993 |
| Total wholesale loans | $ | 147,847 |
| | $ | 200,767 |
| | $ | 105,576 |
| | $ | 454,190 |
| Loans at fixed interest rates | | | $ | 14,221 |
| | $ | 11,335 |
| | | Loans at variable interest rates | | | 186,546 |
| | 94,241 |
| | | Total wholesale loans | | | $ | 200,767 |
| | $ | 105,576 |
| | |
| | (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 Note 12. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Unaudited) December 31, (in millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Nonperforming assets | | | | | | | | | | | U.S. nonaccrual loans: | | | | | | | | | | | Consumer, excluding credit card loans | $ | 6,467 | | | $ | 3,366 | | | $ | 3,853 | | | $ | 4,463 | | | $ | 4,662 | | | Credit card loans | NA | | NA | | NA | | NA | | NA | | Total U.S. nonaccrual consumer loans | 6,467 | | | 3,366 | | | 3,853 | | | 4,463 | | | 4,662 | | | Wholesale: | | | | | | | | | | | Secured by real estate | 966 | | | 267 | | | 483 | | | 251 | | | 253 | | | Commercial and industrial | 1,249 | | | 759 | | | 700 | | | 887 | | | 1,487 | | | Other | 897 | | | 33 | | | 35 | | | 126 | | | 127 | | | Total U.S. wholesale nonaccrual loans | 3,112 | | | 1,059 | | | 1,218 | | | 1,264 | | | 1,867 | | | Total U.S. nonaccrual loans | 9,579 | | | 4,425 | | | 5,071 | | | 5,727 | | | 6,529 | | | Non-U.S. nonaccrual loans: | | | | | | | | | | | Consumer, excluding credit card loans | — | | | — | | | — | | | — | | | — | | | Credit card loans | NA | | NA | | NA | | NA | | NA | | Total non-U.S. nonaccrual consumer loans | — | | | — | | | — | | | — | | | — | | | Wholesale: | | | | | | | | | | | Secured by real estate | 18 | | | — | | | 67 | | | 81 | | | 35 | | | Commercial and industrial | 856 | | | 209 | | | 395 | | | 807 | | | 459 | | | Other | 120 | | | 3 | | | 9 | | | 21 | | | 79 | | | Total non-U.S. wholesale nonaccrual loans | 994 | | | 212 | | | 471 | | | 909 | | | 573 | | | Total non-U.S. nonaccrual loans | 994 | | | 212 | | | 471 | | | 909 | | | 573 | | | Total nonaccrual loans | 10,573 | | | 4,637 | | | 5,542 | | | 6,636 | | | 7,102 | | | Derivative receivables | 56 | | | 30 | | | 60 | | | 130 | | | 223 | | | Assets acquired in loan satisfactions | 277 | | | 387 | | | 299 | | | 353 | | | 429 | | | Nonperforming assets | $ | 10,906 | | | $ | 5,054 | | | $ | 5,901 | | | $ | 7,119 | | | $ | 7,754 | | | Memo: | | | | | | | | | | | Loans held-for-sale | $ | 284 | | | $ | 7 | | | $ | — | | | $ | — | | | $ | 162 | | | Loans at fair value | 1,507 | | | 647 | | | 931 | | | 693 | | | 219 | | | Total loans held-for-sale and loans at fair value | $ | 1,791 | | | $ | 654 | | | $ | 931 | | | $ | 693 | | | $ | 381 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Unaudited) December 31, (in millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Contractually past-due loans(a) | | | | | | | | | | | U.S. loans: | | | | | | | | | | | Consumer, excluding credit card loans(b) | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | Credit card loans | 1,317 | | | 1,605 | | | 1,442 | | | 1,378 | | | 1,143 | | | Total U.S. consumer loans | 1,317 | | | 1,605 | | | 1,442 | | | 1,378 | | | 1,143 | | | Wholesale: | | | | | | | | | | | Secured by real estate | 15 | | | 1 | | | 11 | | | 10 | | | 9 | | | Commercial and industrial | 20 | | | 36 | | | 166 | | | 67 | | | 90 | | | Other | 19 | | | 5 | | | 7 | | | 62 | | | 24 | | | Total U.S. wholesale loans | 54 | | | 42 | | | 184 | | | 139 | | | 123 | | | Total U.S. loans | 1,371 | | | 1,647 | | | 1,626 | | | 1,517 | | | 1,266 | | | Non-U.S. loans: | | | | | | | | | | | Consumer, excluding credit card loans | — | | | — | | | — | | | — | | | — | | | Credit card loans | 2 | | | 2 | | | 3 | | | 1 | | | 2 | | | Total non-U.S. consumer loans | 2 | | | 2 | | | 3 | | | 1 | | | 2 | | | Wholesale: | | | | | | | | | | | Secured by real estate | — | | | — | | | — | | | — | | | — | | | Commercial and industrial | — | | | 1 | | | 2 | | | 1 | | | 9 | | | Other | 3 | | | — | | | 2 | | | 1 | | | — | | | Total non-U.S. wholesale loans | 3 | | | 1 | | | 4 | | | 2 | | | 9 | | | Total non-U.S. loans | 5 | | | 3 | | | 7 | | | 3 | | | 11 | | | Total contractually past due loans | $ | 1,376 | | | $ | 1,650 | | | $ | 1,633 | | | $ | 1,520 | | | $ | 1,277 | | |
(a)Represents accruing loans past-due 90 days or more as to principal and interest, which are not characterized as nonaccrual loans. Prior to the adoption of CECL, excluded PCI loans which were accounted for on a pool basis. Since each pool was 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, was not meaningful. The Firm recognized interest income on each pool of loans as each of the pools was performing. (b)At December 31, 2020, 2019, 2018, 2017 and 2016, excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $364 million, $193 million, $1.6 billion, $2.7 billion and $2.7 billion, respectively. At December 31, 2016, student loans insured by U.S. government agencies under the Federal Family Education Loan Program of $263 million were also excluded prior to sale of the student loan portfolio in 2017. These amounts have been excluded from nonaccrual loans based upon the government guarantee. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Unaudited) December 31, (in millions) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | | Accruing restructured loans(a) | | | | | | | | | | | | U.S.: | | | | | | | | | | | | Consumer, excluding credit card loans | $ | 3,007 | | | $ | 3,600 | | | $ | 4,171 | | | $ | 4,972 | | | $ | 5,528 | | | | Credit card loans(b) | 1,375 | | | 1,452 | | | 1,319 | | | 1,215 | | | 1,240 | | | | Total U.S. consumer loans | 4,382 | | | 5,052 | | | 5,490 | | | 6,187 | | | 6,768 | | | | Wholesale: | | | | | | | | | | | | Secured by real estate | 16 | | | 14 | | | 9 | | | 6 | | | 18 | | | | Commercial and industrial | 202 | | | 34 | | | 59 | | | 129 | | | 64 | | | | Other | 61 | | | 2 | | | 4 | | | 2 | | | — | | | | Total U.S. wholesale loans | 279 | | | 50 | | | 72 | | | 137 | | | 82 | | | | Total U.S. | 4,661 | | | 5,102 | | | 5,562 | | | 6,324 | | | 6,850 | | | | Non-U.S.: | | | | | | | | | | | | Consumer, excluding credit card loans | — | | | — | | | — | | | — | | | — | | | | Credit card loans(b) | — | | | — | | | — | | | — | | | — | | | | Total non-U.S. consumer loans | — | | | — | | | — | | | — | | | — | | | | Wholesale: | | | | | | | | | | | | Secured by real estate | — | | | 30 | | | — | | | — | | | — | | | | Commercial and industrial | 75 | | | 2 | | | 45 | | | 21 | | | 17 | | | | Other | 4 | | | 3 | | | — | | | — | | | — | | | | Total non-U.S. wholesale loans | 79 | | | 35 | | | 45 | | | 21 | | | 17 | | | | Total non-U.S. | 79 | | | 35 | | | 45 | | | 21 | | | 17 | | | | Total accruing restructured notes | $ | 4,740 | | | $ | 5,137 | | | $ | 5,607 | | | $ | 6,345 | | | $ | 6,867 | | | |
(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. Refer to Credit and Investment Risk Management on page 105, page 107pages 110–134, and page 112, at the periods indicated. | | | | | | | | | | | | | | | | | | | | | (Unaudited) December 31, (in millions) | 2018 | | 2017 | | 2016 | | 2015 | | 2014 | Nonperforming assets | | | | | | | | | | U.S. nonaccrual loans: | | | | | | | | | | Consumer, excluding credit card loans | $ | 3,461 |
| | $ | 4,209 |
| | $ | 4,820 |
| | $ | 5,413 |
| | $ | 6,509 |
| Credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| Total U.S. nonaccrual consumer loans | 3,461 |
| | 4,209 |
| | 4,820 |
| | 5,413 |
| | 6,509 |
| Wholesale: | | | | | | | | | | Commercial and industrial | 624 |
| | 703 |
| | 1,145 |
| | 315 |
| | 184 |
| Real estate | 212 |
| | 95 |
| | 148 |
| | 175 |
| | 237 |
| Financial institutions | 4 |
| | 2 |
| | 4 |
| | 4 |
| | 12 |
| Governments & Agencies | — |
| | — |
| | — |
| | — |
| | — |
| Other | 89 |
| | 137 |
| | 198 |
| | 86 |
| | 59 |
| Total U.S. wholesale nonaccrual loans | 929 |
| | 937 |
| | 1,495 |
| | 580 |
| | 492 |
| Total U.S. nonaccrual loans | 4,390 |
| | 5,146 |
| | 6,315 |
| | 5,993 |
| | 7,001 |
| Non-U.S. nonaccrual loans: | | | | | | | | | | Consumer, excluding credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| Credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| Total non-U.S. nonaccrual consumer loans | — |
| | — |
| | — |
| | — |
| | — |
| Wholesale: | | | | | | | | | | Commercial and industrial | 358 |
| | 654 |
| | 454 |
| | 314 |
| | 21 |
| Real estate | 12 |
| | 41 |
| | 52 |
| | 63 |
| | 23 |
| Financial institutions | — |
| | — |
| | 5 |
| | 6 |
| | 7 |
| Governments & Agencies | — |
| | — |
| | — |
| | — |
| | — |
| Other | 71 |
| | 102 |
| | 57 |
| | 53 |
| | 81 |
| Total non-U.S. wholesale nonaccrual loans | 441 |
| | 797 |
| | 568 |
| | 436 |
| | 132 |
| Total non-U.S. nonaccrual loans | 441 |
| | 797 |
| | 568 |
| | 436 |
| | 132 |
| Total nonaccrual loans | 4,831 |
| | 5,943 |
| | 6,883 |
| | 6,429 |
| | 7,133 |
| Derivative receivables | 60 |
| | 130 |
| | 223 |
| | 204 |
| | 275 |
| Assets acquired in loan satisfactions | 299 |
| | 353 |
| | 429 |
| | 401 |
| | 559 |
| Nonperforming assets | $ | 5,190 |
| | $ | 6,426 |
| | $ | 7,535 |
| | $ | 7,034 |
| | $ | 7,967 |
| Memo: | | | | | | | | | | Loans held-for-sale | $ | — |
| | $ | — |
| | $ | 162 |
| | $ | 101 |
| | $ | 95 |
| Loans at fair value | 220 |
| | — |
| | — |
| | 25 |
| | 21 |
| Total loans held-for-sale and loans at fair value | $ | 220 |
| | $ | — |
| | $ | 162 |
| | $ | 126 |
| | $ | 116 |
|
| | | | | | | | | | | | | | | | | | | | | | (Unaudited) December 31, (in millions) | 2018 | | 2017 | | 2016 | | 2015 | | 2014 | | Contractually past-due loans(a) | | | | | | | | | | | U.S. loans: | | | | | | | | | | | Consumer, excluding credit card loans(b) | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | Credit card loans | 1,442 |
| | 1,378 |
| | 1,143 |
| | 944 |
| | 893 |
| | Total U.S. consumer loans | 1,442 |
| | 1,378 |
| | 1,143 |
| | 944 |
| | 893 |
| | Wholesale: | | | | | | | | | | | Commercial and industrial | 167 |
| | 107 |
| | 86 |
| | 6 |
| | 14 |
| | Real estate | 3 |
| | 12 |
| | 2 |
| | 15 |
| | 33 |
| | Financial institutions | 8 |
| | 14 |
| | 12 |
| | 1 |
| | — |
| | Governments & Agencies | 4 |
| | 4 |
| | 4 |
| | 6 |
| | — |
| | Other | 2 |
| | 2 |
| | 19 |
| | 28 |
| | 26 |
| | Total U.S. wholesale loans | 184 |
| | 139 |
| | 123 |
| | 56 |
| | 73 |
| | Total U.S. loans | 1,626 |
| | 1,517 |
| | 1,266 |
| | 1,000 |
| | 966 |
| | Non-U.S. loans: | | | | | | | | | | | Consumer, excluding credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| | Credit card loans | 3 |
| | 1 |
| | 2 |
| | — |
| | 2 |
| | Total non-U.S. consumer loans | 3 |
| | 1 |
| | 2 |
| | — |
| | 2 |
| | Wholesale: | | | | | | | | | | | Commercial and industrial | 1 |
| | 1 |
| | — |
| | 1 |
| | — |
| | Real estate | — |
| | — |
| | — |
| | — |
| | — |
| | Financial institutions | 2 |
| | 1 |
| | 9 |
| | 10 |
| | — |
| | Governments & Agencies | — |
| | — |
| | — |
| | — |
| | — |
| | Other | 1 |
| | — |
| | — |
| | — |
| | 3 |
| | Total non-U.S. wholesale loans | 4 |
| | 2 |
| | 9 |
| | 11 |
| | 3 |
| | Total non-U.S. loans | 7 |
| | 3 |
| | 11 |
| | 11 |
| | 5 |
| | Total contractually past due loans | $ | 1,633 |
| | $ | 1,520 |
| | $ | 1,277 |
| | $ | 1,011 |
| | $ | 971 |
| |
| | (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 accountedNote 12 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, 2018, 2017, 2016, 2015 and 2014, excluded loans 90 or more days past due and still accruing as follows: (1) mortgage loans insured by U.S. government agencies of $1.6 billion, $2.7 billion, $2.7 billion, $2.8 billion and $3.4 billion, respectively; and (2) student loans insured by U.S. government agencies under the FFELP of $0 million, $0 million, $263 million, $290 million and $367 million, respectively. These amounts have been excluded from the nonaccrual loans based upon the government guarantee. |
| | | | | | | | | | | | | | | | | | | | | (Unaudited) December 31, (in millions) | 2018 | | 2017 | | 2016 | | 2015 | | 2014 | Accruing restructured loans(a) | | | | | | | | | | U.S.: | | | | | | | | | | Consumer, excluding credit card loans | $ | 4,185 |
| | $ | 4,993 |
| | $ | 5,561 |
| | $ | 5,980 |
| | $ | 7,814 |
| Credit card loans(b) | 1,319 |
| | 1,215 |
| | 1,240 |
| | 1,465 |
| | 2,029 |
| Total U.S. consumer loans | 5,504 |
| | 6,208 |
| | 6,801 |
| | 7,445 |
| | 9,843 |
| Wholesale: | | | | | | | | | | Commercial and industrial | 50 |
| | 32 |
| | 34 |
| | 12 |
| | 10 |
| Real estate | 3 |
| | 5 |
| | 11 |
| | 28 |
| | 31 |
| Financial institutions | — |
| | 79 |
| | — |
| | — |
| | — |
| Other | 5 |
| | — |
| | 4 |
| | — |
| | 1 |
| Total U.S. wholesale loans | 58 |
| | 116 |
| | 49 |
| | 40 |
| | 42 |
| Total U.S. | 5,562 |
| | 6,324 |
| | 6,850 |
| | 7,485 |
| | 9,885 |
| Non-U.S.: | | | | | | | | | | Consumer, excluding credit card loans | — |
| | — |
| | — |
| | — |
| | — |
| Credit card loans(b) | — |
| | — |
| | — |
| | — |
| | — |
| Total non-U.S. consumer loans | — |
| | — |
| | — |
| | — |
| | — |
| Wholesale: | | | | | | | | | | Commercial and industrial | 45 |
| | 10 |
| | 17 |
| | — |
| | — |
| Real estate | — |
| | — |
| | — |
| | — |
| | — |
| Financial institutions | — |
| | 11 |
| | — |
| | — |
| | — |
| Other | — |
| | — |
| | — |
| | — |
| | — |
| Total non-U.S. wholesale loans | 45 |
| | 21 |
| | 17 |
| | — |
| | — |
| Total non-U.S. | 45 |
| | 21 |
| | 17 |
| | — |
| | — |
| Total accruing restructured notes | $ | 5,607 |
| | $ | 6,345 |
| | $ | 6,867 |
| | $ | 7,485 |
| | $ | 9,885 |
|
| | (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. |
For a discussion of nonaccrual loans, past-due loan accounting policies, and accruing restructured loans refer to Credit and Investment Risk Management on pages 102-123, and Note 12.
loans.
Impact of nonaccrual loans and accruing restructured loans on interest income The negative impact on interest income from nonaccrual loans represents the difference between the amount of interest income that would have been recorded on such nonaccrual loans according to their original contractual terms had they been performing and the amount of interest that actually was recognized on a cash basis. The negative impact on interest income from accruing restructured loans represents the difference between the amount of interest income that would have been recorded on such loans according to their original contractual terms and the amount of interest that actually was recognized under the modified terms. The following table sets forth this data for the years specified. The change in forgone interest income from 20162018 through 20182020 was primarily driven by the change in the levels of nonaccrual loans. | | | | | | | | | | | (Unaudited) Year ended December 31, (in millions) | 2018 | 2017 | 2016 | Nonaccrual loans | | | | U.S.: | | | | Consumer, excluding credit card: | | | | Gross amount of interest that would have been recorded at the original terms | $ | 318 |
| $ | 367 |
| $ | 464 |
| Interest that was recognized in income | (187 | ) | (175 | ) | (207 | ) | Total U.S. consumer, excluding credit card | 131 |
| 192 |
| 257 |
| Credit card: | | | | Gross amount of interest that would have been recorded at the original terms | — |
| — |
| — |
| Interest that was recognized in income | — |
| — |
| — |
| Total U.S. credit card | — |
| — |
| — |
| Total U.S. consumer | 131 |
| 192 |
| 257 |
| Wholesale: | | | | Gross amount of interest that would have been recorded at the original terms | 51 |
| 46 |
| 56 |
| Interest that was recognized in income | (16 | ) | (30 | ) | (5 | ) | Total U.S. wholesale | 35 |
| 16 |
| 51 |
| Negative impact — U.S. | 166 |
| 208 |
| 308 |
| 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 | 13 |
| 24 |
| 25 |
| Interest that was recognized in income | (3 | ) | (12 | ) | (2 | ) | Total non-U.S. wholesale | 10 |
| 12 |
| 23 |
| Negative impact — non-U.S. | 10 |
| 12 |
| 23 |
| Total negative impact on interest income | $ | 176 |
| $ | 220 |
| $ | 331 |
|
| | | | | | | | | | | | (Unaudited) Year ended December 31, (in millions) | 2020 | 2019 | 2018 | Nonaccrual loans | | | | U.S.: | | | | Consumer, excluding credit card: | | | | Gross amount of interest that would have been recorded at the original terms | $ | 330 | | $ | 242 | | $ | 296 | | Interest that was recognized in income | (174) | | (160) | | (171) | | Total U.S. consumer, excluding credit card | 156 | | 82 | | 125 | | Credit card: | | | | Gross amount of interest that would have been recorded at the original terms | NA | NA | NA | Interest that was recognized in income | NA | NA | NA | Total U.S. credit card | NA | NA | NA | Total U.S. consumer | 156 | | 82 | | 125 | | Wholesale: | | | | Gross amount of interest that would have been recorded at the original terms | 104 | | 77 | | 73 | | Interest that was recognized in income | (60) | | (40) | | (32) | | Total U.S. wholesale | 44 | | 37 | | 41 | | Negative impact — U.S. | 200 | | 119 | | 166 | | 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 | NA | NA | NA | Interest that was recognized in income | NA | NA | NA | Total non-U.S. credit card | NA | NA | NA | Total non-U.S. consumer | — | | — | | — | | Wholesale: | | | | Gross amount of interest that would have been recorded at the original terms | 59 | | 12 | | 13 | | Interest that was recognized in income | (23) | | (5) | | (3) | | Total non-U.S. wholesale | 36 | | 7 | | 10 | | Negative impact — non-U.S. | 36 | | 7 | | 10 | | Total negative impact on interest income | $ | 236 | | $ | 126 | | $ | 176 | |
| | | | | | | | | | | | (Unaudited) Year ended December 31, (in millions) | 2020 | 2019 | 2018 | Accruing restructured loans | | | | U.S.: | | | | Consumer, excluding credit card: | | | | Gross amount of interest that would have been recorded at the original terms | $ | 241 | | $ | 279 | | $ | 326 | | Interest that was recognized in income | (151) | | (192) | | (215) | | Total U.S. consumer, excluding credit card | 90 | | 87 | | 111 | | Credit card: | | | | Gross amount of interest that would have been recorded at the original terms | 255 | | 265 | | 227 | | Interest that was recognized in income | (69) | | (72) | | (65) | | Total U.S. credit card | 186 | | 193 | | 162 | | Total U.S. consumer | 276 | | 280 | | 273 | | Wholesale: | | | | Gross amount of interest that would have been recorded at the original terms | 3 | | 5 | | 7 | | Interest that was recognized in income | (2) | | (3) | | (6) | | Total U.S. wholesale | 1 | | 2 | | 1 | | Negative impact — U.S. | 277 | | 282 | | 274 | | 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 | $ | 277 | | $ | 282 | | $ | 274 | |
| | | | | | | | | | | (Unaudited) Year ended December 31, (in millions) | 2018 | 2017 | 2016 | Accruing restructured loans | | | | U.S.: | | | | Consumer, excluding credit card: | | | | Gross amount of interest that would have been recorded at the original terms | $ | 329 |
| $ | 401 |
| $ | 451 |
| Interest that was recognized in income | (217 | ) | (245 | ) | (256 | ) | Total U.S. consumer, excluding credit card | 112 |
| 156 |
| 195 |
| Credit card: | | | | Gross amount of interest that would have been recorded at the original terms | 227 |
| 202 |
| 207 |
| Interest that was recognized in income | (65 | ) | (59 | ) | (63 | ) | Total U.S. credit card | 162 |
| 143 |
| 144 |
| Total U.S. consumer | 274 |
| 299 |
| 339 |
| Wholesale: | | | | Gross amount of interest that would have been recorded at the original terms | 4 |
| 13 |
| 2 |
| Interest that was recognized in income | (4 | ) | (13 | ) | (2 | ) | Total U.S. wholesale | — |
| — |
| — |
| Negative impact — U.S. | 274 |
| 299 |
| 339 |
| 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 | $ | 274 |
| $ | 299 |
| $ | 339 |
|
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’sChase’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 tends to be a function of timing rather than representing a consistent trend. For a further discussion of JPMorgan Chase’s country risk exposure, refermarket flows. Refer to Country Risk Management on pages 132–133.143-144 for a further discussion of JPMorgan Chase’s country risk exposure.
The following table lists all countries in which JPMorgan Chase’sChase’s cross-border outstandings exceed 0.75% of consolidated assets as of the dates specified. | | | | | | | | | | | | | | | | | | | | | | | | | | | Cross-border outstandings exceeding 0.75% of total assets | (Unaudited) (in millions) | December 31, | Governments | Banks | Other(a) | Net local country assets | Total cross-border outstandings(b) | Commitments(c) | Total exposure | Germany | 2020 | $ | 6,165 | | $ | 842 | | $ | 23,614 | | $ | 55,882 | | $ | 86,503 | | $ | 73,712 | | $ | 160,215 | | | 2019 | 9,757 | | 4,175 | | 8,709 | | 12,143 | | 34,784 | | 54,817 | | 89,601 | | | 2018 | 12,793 | | 7,769 | | 15,393 | | 30,054 | | 66,009 | | 67,973 | | 133,982 | | Cayman Islands | 2020 | $ | 22 | | $ | 329 | | $ | 123,644 | | $ | 32 | | $ | 124,027 | | $ | 85,830 | | $ | 209,857 | | | 2019 | 15 | | 367 | | 89,124 | | — | | 89,506 | | 114,398 | | 203,904 | | | 2018 | 1 | | 308 | | 105,857 | | 20 | | 106,186 | | 45,073 | | 151,259 | | Japan | 2020 | $ | 61 | | $ | 11,263 | | $ | 3,739 | | $ | 55,200 | | $ | 70,263 | | $ | 31,360 | | $ | 101,623 | | | 2019 | 191 | | 4,863 | | 3,495 | | 45,654 | | 54,203 | | 42,049 | | 96,252 | | | 2018 | 282 | | 9,803 | | 4,167 | | 41,948 | | 56,200 | | 51,901 | | 108,101 | | France | 2020 | $ | 10,580 | | $ | 7,019 | | $ | 19,686 | | $ | 2,476 | | $ | 39,761 | | $ | 114,307 | | $ | 154,068 | | | 2019 | 9,445 | | 5,294 | | 12,746 | | 2,697 | | 30,182 | | 107,178 | | 137,360 | | | 2018 | 12,556 | | 3,499 | | 21,571 | | 2,771 | | 40,397 | | 105,845 | | 146,242 | | Italy | 2020 | $ | 10,645 | | $ | 4,169 | | $ | 5,174 | | $ | 1,052 | | $ | 21,040 | | $ | 49,832 | | $ | 70,872 | | | 2019 | 10,567 | | 2,192 | | 6,095 | | 881 | | 19,735 | | 49,456 | | 69,191 | | | 2018 | 9,401 | | 4,098 | | 5,145 | | 1,375 | | 20,019 | | 61,326 | | 81,345 | | Ireland | 2020 | $ | 125 | | $ | 301 | | $ | 15,679 | | $ | — | | $ | 16,105 | | $ | 6,460 | | $ | 22,565 | | | 2019 | 381 | | 319 | | 18,061 | | — | | 18,761 | | 9,520 | | 28,281 | | | 2018 | 185 | | 45 | | 19,439 | | — | | 19,669 | | 5,585 | | 25,254 | | China: Mainland | 2020 | $ | 2,295 | | $ | 8,439 | | $ | 14,924 | | $ | 2,633 | | $ | 28,291 | | $ | 8,827 | | $ | 37,118 | | | 2019 | 179 | | 5,168 | | 7,207 | | 1,382 | | 13,936 | | 11,111 | | 25,047 | | | 2018 | 980 | | 6,728 | | 5,318 | | 1,617 | | 14,643 | | 14,435 | | 29,078 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a)Consists primarily of non-banking financial institutions. (b)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. | | | | | | | | | | | | | | | | | | | | | | | | Cross-border outstandings exceeding 0.75% of total assets | (Unaudited) (in millions) | December 31, | Governments | Banks | Other(a) | Net local country assets | Total cross-border outstandings(b) | Commitments(c) | Total exposure(d) | Germany | 2018 | $ | 12,793 |
| $ | 7,769 |
| $ | 15,393 |
| $ | 29,577 |
| $ | 65,532 |
| $ | 67,973 |
| $ | 133,505 |
| | 2017 | 17,751 |
| 5,357 |
| 12,320 |
| 20,117 |
| 55,545 |
| 65,333 |
| 120,878 |
| | 2016 | 22,332 |
| 2,118 |
| 14,310 |
| 25,269 |
| 64,029 |
| 74,099 |
| 138,128 |
| Cayman Islands | 2018 | $ | 1 |
| $ | 308 |
| $ | 105,857 |
| $ | 20 |
| $ | 106,186 |
| $ | 45,073 |
| $ | 151,259 |
| | 2017 | 5 |
| 462 |
| 61,268 |
| 58 |
| 61,793 |
| 12,361 |
| 74,154 |
| | 2016 | 18 |
| 107 |
| 74,810 |
| 84 |
| 75,019 |
| 10,805 |
| 85,824 |
| Japan | 2018 | $ | 282 |
| $ | 9,803 |
| $ | 4,167 |
| $ | 40,247 |
| $ | 54,499 |
| $ | 51,901 |
| $ | 106,400 |
| | 2017 | 1,082 |
| 17,159 |
| 12,239 |
| 25,229 |
| 55,709 |
| 52,928 |
| 108,637 |
| | 2016 | 865 |
| 16,522 |
| 5,209 |
| 48,505 |
| 71,101 |
| 52,553 |
| 123,654 |
| France | 2018 | $ | 12,556 |
| $ | 3,499 |
| $ | 21,571 |
| $ | 2,771 |
| $ | 40,397 |
| $ | 105,845 |
| $ | 146,242 |
| | 2017 | 12,975 |
| 7,083 |
| 15,329 |
| 2,471 |
| 37,858 |
| 83,572 |
| 121,430 |
| | 2016 | 10,871 |
| 4,076 |
| 26,195 |
| 3,723 |
| 44,865 |
| 89,780 |
| 134,645 |
| Italy | 2018 | $ | 9,401 |
| $ | 4,098 |
| $ | 5,145 |
| $ | 1,375 |
| $ | 20,019 |
| $ | 61,326 |
| $ | 81,345 |
| | 2017 | 11,516 |
| 4,524 |
| 4,499 |
| 611 |
| 21,150 |
| 61,005 |
| 82,155 |
| | 2016 | 12,290 |
| 4,760 |
| 4,487 |
| 848 |
| 22,385 |
| 63,647 |
| 86,032 |
| Ireland | 2018 | $ | 185 |
| $ | 45 |
| $ | 19,439 |
| $ | — |
| $ | 19,669 |
| $ | 5,585 |
| $ | 25,254 |
| | 2017 | 630 |
| 318 |
| 19,630 |
| — |
| 20,578 |
| 5,728 |
| 26,306 |
| | 2016 | 148 |
| 664 |
| 18,916 |
| — |
| 19,728 |
| 5,467 |
| 25,195 |
|
| | (a) | Consists primarily of non-banking financial institutions. |
| | (b) | 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) | 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. |
| | (d) | The prior period amounts have been revised to conform with the current period presentation. |
(c)Commitments include outstanding letters of credit, undrawn commitments to extend credit, and the gross notional value of credit derivatives where JPMorgan Chase is a protection seller.
The adoption of the CECL accounting guidance resulted in a change in the accounting for PCI loans, which are considered PCD loans. In conjunction with the adoption of CECL, the Firm reclassified risk-rated loans and lending-related commitments from the consumer, excluding credit card portfolio segment to the wholesale portfolio segment, to align with the methodology applied when determining the allowance. Prior-period amounts have been revised to conform with the current presentation. Refer to Note 1 for further information.
The following tables 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, referRefer to Allowance for credit losses on pages 120–122,132-133, and Note 13.13 for a further discussion. | | Allowance for loan losses | | Allowance for loan losses | | (Unaudited) Year ended December 31, (in millions) | 2018 | 2017 | 2016 | 2015 | 2014 | (Unaudited) Year ended December 31, (in millions) | 2020 | 2019 | 2018 | 2017 | 2016 | Balance at beginning of year | $ | 13,604 |
| $ | 13,776 |
| $ | 13,555 |
| $ | 14,185 |
| $ | 16,264 |
| Balance at beginning of year | $ | 13,123 | | $ | 13,445 | | $ | 13,604 | | $ | 13,776 | | $ | 13,555 | | Cumulative effect of a change in accounting principle | | Cumulative effect of a change in accounting principle | 4,172 | | NA | U.S. charge-offs | | U.S. charge-offs | | U.S. consumer, excluding credit card | 1,025 |
| 1,779 |
| 1,500 |
| 1,658 |
| 2,132 |
| U.S. consumer, excluding credit card | 805 | | 902 | | 977 | | 1,727 | | 1,434 | | U.S. credit card | 5,011 |
| 4,521 |
| 3,799 |
| 3,475 |
| 3,682 |
| U.S. credit card | 5,077 | | 5,436 | | 5,011 | | 4,521 | | 3,799 | | Total U.S. consumer charge-offs | 6,036 |
| 6,300 |
| 5,299 |
| 5,133 |
| 5,814 |
| Total U.S. consumer charge-offs | 5,882 | | 6,338 | | 5,988 | | 6,248 | | 5,233 | | U.S. wholesale: | | U.S. wholesale: | | Commercial and industrial | 161 |
| 87 |
| 240 |
| 63 |
| 44 |
| | Real estate | 3 |
| 3 |
| 7 |
| 6 |
| 14 |
| | Financial institutions | — |
| — |
| — |
| 5 |
| 14 |
| | Governments & Agencies | — |
| 5 |
| — |
| — |
| 25 |
| | Secured by real estate | | Secured by real estate | 16 | | 53 | | 28 | | 36 | | 43 | | Commercial and Industrial | | Commercial and Industrial | 530 | | 282 | | 160 | | 102 | | 267 | | Other | 97 |
| 19 |
| 13 |
| 6 |
| 22 |
| Other | 72 | | 27 | | 121 | | 28 | | 16 | | Total U.S. wholesale charge-offs | 261 |
| 114 |
| 260 |
| 80 |
| 119 |
| Total U.S. wholesale charge-offs | 618 | | 362 | | 309 | | 166 | | 326 | | Total U.S. charge-offs | 6,297 |
| 6,414 |
| 5,559 |
| 5,213 |
| 5,933 |
| Total U.S. charge-offs | 6,500 | | 6,700 | | 6,297 | | 6,414 | | 5,559 | | Non-U.S. charge-offs | | Non-U.S. charge-offs | | Non-U.S. consumer, excluding credit card | — |
| — |
| — |
| — |
| — |
| Non-U.S. consumer, excluding credit card | — | | — | | — | | — | | — | | Non-U.S. credit card | — |
| — |
| — |
| 13 |
| 149 |
| Non-U.S. credit card | — | | — | | — | | — | | — | | Total non-U.S. consumer charge-offs | — |
| — |
| — |
| 13 |
| 149 |
| Total non-U.S. consumer charge-offs | — | | — | | — | | — | | — | | Non-U.S. wholesale: | | Non-U.S. wholesale: | | Commercial and industrial | 51 |
| 89 |
| 134 |
| 5 |
| 27 |
| | Real estate | — |
| — |
| 1 |
| — |
| 4 |
| | Financial institutions | — |
| 7 |
| 1 |
| — |
| — |
| | Governments & Agencies | — |
| — |
| — |
| — |
| — |
| | Secured by real estate | | Secured by real estate | — | | 1 | | 1 | | 2 | | — | | Commercial and Industrial | | Commercial and Industrial | 315 | | 78 | | 51 | | 90 | | 135 | | Other | 1 |
| 2 |
| 2 |
| 10 |
| 1 |
| Other | 21 | | 31 | | — | | 6 | | 3 | | Total non-U.S. wholesale charge-offs | 52 |
| 98 |
| 138 |
| 15 |
| 32 |
| Total non-U.S. wholesale charge-offs | 336 | | 110 | | 52 | | 98 | | 138 | | Total non-U.S. charge-offs | 52 |
| 98 |
| 138 |
| 28 |
| 181 |
| Total non-U.S. charge-offs | 336 | | 110 | | 52 | | 98 | | 138 | | Total charge-offs | 6,349 |
| 6,512 |
| 5,697 |
| 5,241 |
| 6,114 |
| Total charge-offs | 6,836 | | 6,810 | | 6,349 | | 6,512 | | 5,697 | | U.S. recoveries | | U.S. recoveries | | U.S. consumer, excluding credit card | (842 | ) | (634 | ) | (591 | ) | (704 | ) | (814 | ) | U.S. consumer, excluding credit card | (631) | | (536) | | (827) | | (612) | | (570) | | U.S. credit card | (493 | ) | (398 | ) | (357 | ) | (364 | ) | (383 | ) | U.S. credit card | (791) | | (588) | | (493) | | (398) | | (357) | | Total U.S. consumer recoveries | (1,335 | ) | (1,032 | ) | (948 | ) | (1,068 | ) | (1,197 | ) | Total U.S. consumer recoveries | (1,422) | | (1,124) | | (1,320) | | (1,010) | | (927) | | U.S. wholesale: | | U.S. wholesale: | | Commercial and industrial | (45 | ) | (55 | ) | (10 | ) | (32 | ) | (49 | ) | | Real estate | (23 | ) | (6 | ) | (15 | ) | (20 | ) | (27 | ) | | Financial institutions | — |
| — |
| (3 | ) | (8 | ) | (12 | ) | | Governments & Agencies | — |
| — |
| (1 | ) | (8 | ) | — |
| | Secured by real estate | | Secured by real estate | (5) | | (10) | | (11) | | (16) | | (29) | | Commercial and Industrial | | Commercial and Industrial | (97) | | (21) | | (78) | | (65) | | (15) | | Other | (44 | ) | (15 | ) | (3 | ) | (3 | ) | (36 | ) | Other | (22) | | (18) | | (38) | | (17) | | (9) | | Total U.S. wholesale recoveries | (112 | ) | (76 | ) | (32 | ) | (71 | ) | (124 | ) | Total U.S. wholesale recoveries | (124) | | (49) | | (127) | | (98) | | (53) | | Total U.S. recoveries | (1,447 | ) | (1,108 | ) | (980 | ) | (1,139 | ) | (1,321 | ) | Total U.S. recoveries | (1,546) | | (1,173) | | (1,447) | | (1,108) | | (980) | | Non-U.S. recoveries | | Non-U.S. recoveries | | Non-U.S. consumer, excluding credit card | — |
| — |
| — |
| — |
| — |
| Non-U.S. consumer, excluding credit card | — | | — | | — | | — | | — | | Non-U.S. credit card | — |
| — |
| — |
| (2 | ) | (19 | ) | Non-U.S. credit card | — | | — | | — | | — | | — | | Total non-U.S. consumer recoveries | — |
| — |
| — |
| (2 | ) | (19 | ) | Total non-U.S. consumer recoveries | — | | — | | — | | — | | — | | Non-U.S. wholesale: | | Non-U.S. wholesale: | | Commercial and industrial | (2 | ) | (4 | ) | (18 | ) | (10 | ) | — |
| | Real estate | — |
| (1 | ) | — |
| — |
| — |
| | Financial institutions | — |
| (1 | ) | — |
| (2 | ) | (14 | ) | | Governments & Agencies | — |
| — |
| — |
| — |
| — |
| | Secured by real estate | | Secured by real estate | — | | — | | — | | (1) | | — | | Commercial and Industrial | | Commercial and Industrial | (12) | | (4) | | (45) | | (2) | | (9) | | Other | (44 | ) | (11 | ) | (7 | ) | (2 | ) | (1 | ) | Other | (19) | | (4) | | (1) | | (14) | | (16) | | Total non-U.S. wholesale recoveries | (46 | ) | (17 | ) | (25 | ) | (14 | ) | (15 | ) | Total non-U.S. wholesale recoveries | (31) | | (8) | | (46) | | (17) | | (25) | | Total non-U.S. recoveries | (46 | ) | (17 | ) | (25 | ) | (16 | ) | (34 | ) | Total non-U.S. recoveries | (31) | | (8) | | (46) | | (17) | | (25) | | Total recoveries | (1,493 | ) | (1,125 | ) | (1,005 | ) | (1,155 | ) | (1,355 | ) | Total recoveries | (1,577) | | (1,181) | | (1,493) | | (1,125) | | (1,005) | | Net charge-offs | 4,856 |
| 5,387 |
| 4,692 |
| 4,086 |
| 4,759 |
| Net charge-offs | 5,259 | | 5,629 | | 4,856 | | 5,387 | | 4,692 | | Write-offs of PCI loans(a) | 187 |
| 86 |
| 156 |
| 208 |
| 533 |
| Write-offs of PCI loans(a) | NA | 151 | | 187 | | 86 | | 156 | | Provision for loan losses | 4,885 |
| 5,300 |
| 5,080 |
| 3,663 |
| 3,224 |
| Provision for loan losses | 16,291 | | 5,449 | | 4,885 | | 5,300 | | 5,080 | | Other | (1 | ) | 1 |
| (11 | ) | 1 |
| (11 | ) | Other | 1 | | 9 | | (1) | | 1 | | (11) | | Balance at year-end | $ | 13,445 |
| $ | 13,604 |
| $ | 13,776 |
| $ | 13,555 |
| $ | 14,185 |
| Balance at year-end | $ | 28,328 | | $ | 13,123 | | $ | 13,445 | | $ | 13,604 | | $ | 13,776 | |
| | (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. |
(a)Prior to the adoption of CECL, write-offs of PCI loans were recorded against the allowance for loan losses when actual losses for a pool exceeded estimated losses that were recorded as purchase accounting adjustments at the time of acquisition. A write-off of a PCI loan was recognized when the underlying loan was removed from a pool.
Summary of loan and lending-related commitments loss experience
Allowance for lending-related commitments | | | | | | | | | | | | | | | | | | (Unaudited) Year ended December 31, (in millions) | 2020 | 2019 | 2018 | 2017 | 2016 | Balance at beginning of year | $ | 1,191 | | $ | 1,055 | | $ | 1,068 | | $ | 1,078 | | $ | 786 | | Cumulative effect of a change in accounting principles | 98 | | NA | NA | NA | NA | Provision for lending-related commitments | 1,121 | | 136 | | (14) | | (10) | | 281 | | Other | (1) | | — | | 1 | | — | | 11 | | Balance at year-end | $ | 2,409 | | $ | 1,191 | | $ | 1,055 | | $ | 1,068 | | $ | 1,078 | |
| | | | | | | | | | | | | | | | | (Unaudited) Year ended December 31, (in millions) | 2018 | 2017 | 2016 | 2015 | 2014 | Balance at beginning of year | $ | 1,068 |
| $ | 1,078 |
| $ | 786 |
| $ | 622 |
| $ | 705 |
| Provision for lending-related commitments | (14 | ) | (10 | ) | 281 |
| 164 |
| (85 | ) | Other | 1 |
| — |
| 11 |
| — |
| 2 |
| Balance at year-end | $ | 1,055 |
| $ | 1,068 |
| $ | 1,078 |
| $ | 786 |
| $ | 622 |
|
| | | | | | | | | | | | | | | | | | Loan loss analysis | | | | | | (Unaudited) As of or for the year ended December 31, (in millions, except ratios) | 2020 | 2019 | 2018 | 2017 | 2016 | Balances | | | | | | Loans – average(a) | $ | 1,004,597 | | $ | 989,943 | | $ | 977,406 | | $ | 936,618 | | $ | 892,954 | | Loans – year-end(a) | 1,012,853 | | 997,620 | | 1,015,760 | | 959,429 | | 922,831 | | Net charge-offs | 5,259 | | 5,629 | | 4,856 | | 5,387 | | 4,692 | | Allowance for loan losses: | | | | | | U.S. | $ | 27,343 | | $ | 12,303 | | $ | 12,692 | | $ | 12,552 | | $ | 12,738 | | Non-U.S. | 985 | | 820 | | 753 | | 1,052 | | 1,038 | | Total allowance for loan losses | $ | 28,328 | | $ | 13,123 | | $ | 13,445 | | $ | 13,604 | | $ | 13,776 | | Nonaccrual loans(a) | $ | 10,573 | | $ | 4,637 | | $ | 5,542 | | $ | 6,636 | | $ | 7,102 | | Ratios | | | | | | Net charge-offs to: | | | | | | Loans retained – average | 0.55 | % | 0.60 | % | 0.52 | % | 0.60 | % | 0.54 | % | Allowance for loan losses | 18.56 | | 42.89 | | 36.12 | | 39.60 | | 34.06 | | Allowance for loan losses to: | | | | | | Loans retained – year-end(b) | 2.95 | | 1.39 | | 1.39 | | 1.47 | | 1.55 | | Nonaccrual loans retained | 323 | | 329 | | 292 | | 229 | | 205 | |
(a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans. Prior-period amounts have been revised to conform with the current presentation.
(b)For factors which influenced management's judgment in determining the amount of the additions to the allowance, refer to Critical Accounting Estimates Used by the Firm on pages 152-155 and Note 13. Refer to Provision for credit losses on page 55 for a more detailed discussion of the 2019 through 2020 provision for credit losses. | | | | | | | | | | | | | | | | | Loan loss analysis | | | | | | (Unaudited) As of or for the year ended December 31, (in millions, except ratios) | 2018 | 2017 | 2016 | 2015 | 2014 | Balances | | | | | | Loans – average | $ | 944,885 |
| $ | 906,397 |
| $ | 866,378 |
| $ | 787,318 |
| $ | 739,175 |
| Loans – year-end | 984,554 |
| 930,697 |
| 894,765 |
| 837,299 |
| 757,336 |
| Net charge-offs | 4,856 |
| 5,387 |
| 4,692 |
| 4,086 |
| 4,759 |
| Allowance for loan losses: | | | | | | U.S. | $ | 12,692 |
| $ | 12,552 |
| $ | 12,738 |
| $ | 12,704 |
| $ | 13,472 |
| Non-U.S. | 753 |
| 1,052 |
| 1,038 |
| 851 |
| 713 |
| Total allowance for loan losses | $ | 13,445 |
| $ | 13,604 |
| $ | 13,776 |
| $ | 13,555 |
| $ | 14,185 |
| Nonaccrual loans | $ | 4,831 |
| $ | 5,943 |
| $ | 6,883 |
| $ | 6,429 |
| $ | 7,133 |
| Ratios | | | | | | Net charge-offs to: | | | | | | Loans retained – average | 0.52 | % | 0.60 | % | 0.54 | % | 0.52 | % | 0.65 | % | Allowance for loan losses | 36.12 |
| 39.60 |
| 34.06 |
| 30.14 |
| 33.55 |
| Allowance for loan losses to: | | | | | | Loans retained – year-end(a) | 1.39 |
| 1.47 |
| 1.55 |
| 1.63 |
| 1.90 |
| Nonaccrual loans retained | 292 |
| 229 |
| 205 |
| 215 |
| 202 |
|
| | (a) | The allowance for loan losses as a percentage of retained loans declined from 2014 to 2018, due to improvement in credit quality of the consumer and wholesale credit portfolios. For a more detailed discussion of the 2016 through 2018 provision for credit losses, refer to Provision for credit losses on page 122.
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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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Unaudited) Year ended December 31, | Average balances | | Average interest rates | (in millions, except interest rates) | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | U.S. offices | | | | | | | | | | | | Noninterest-bearing | $ | 495,722 | | | $ | 386,116 | | | $ | 391,325 | | | NA | | NA | | NA | Interest-bearing | | | | | | | | | | | | Demand(a) | 269,888 | | | 195,350 | | | 177,403 | | | 0.25 | % | | 1.42 | % | | 1.09 | % | Savings(b) | 739,916 | | | 602,728 | | | 585,885 | | | 0.13 | | | 0.46 | | | 0.32 | | Time | 59,053 | | | 52,415 | | | 39,498 | | | 1.10 | | | 2.56 | | | 1.94 | | Total interest-bearing deposits | 1,068,857 | | | 850,493 | | | 802,786 | | | 0.21 | | | 0.81 | | | 0.57 | | Total deposits in U.S. offices | 1,564,579 | | | 1,236,609 | | | 1,194,111 | | | 0.15 | | | 0.56 | | | 0.38 | | Non-U.S. offices | | | | | | | | | | | | Noninterest-bearing | 21,805 | | | 21,103 | | | 20,099 | | | NA | | NA | | NA | Interest-bearing | | | | | | | | | | | | Demand | 267,545 | | | 217,979 | | | 210,978 | | | — | | | 0.59 | | | 0.45 | | Savings | — | | | — | | | — | | | NM | | NM | | NM | Time | 52,822 | | | 47,376 | | | 31,273 | | | 0.13 | | | 1.64 | | | 1.48 | | Total interest-bearing deposits | 320,367 | | | 265,355 | | | 242,251 | | | 0.02 | | | 0.78 | | | 0.58 | | Total deposits in non-U.S. offices | 342,172 | | | 286,458 | | | 262,350 | | | 0.02 | | | 0.72 | | | 0.54 | | Total deposits | $ | 1,906,751 | | | $ | 1,523,067 | | | $ | 1,456,461 | | | 0.12 | % | | 0.59 | % | | 0.41 | % |
| | | | | | | | | | | | | | | | | | | | | | (Unaudited) Year ended December 31, | Average balances | | Average interest rates | (in millions, except interest rates) | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 | U.S. offices | | | | | | | | | | | | Noninterest-bearing | $ | 377,806 |
| | $ | 387,424 |
| | $ | 386,528 |
| | — | % | | — | % | | — | % | Interest-bearing | | | | | | | | | | | | Demand(a) | 177,403 |
| | 162,985 |
| | 128,046 |
| | 1.09 |
| | 0.50 |
| | 0.18 |
| Savings(b) | 585,885 |
| | 559,654 |
| | 515,982 |
| | 0.32 |
| | 0.15 |
| | 0.09 |
| Time | 53,017 |
| | 53,410 |
| | 59,710 |
| | 1.44 |
| | 1.02 |
| | 0.59 |
| Total interest-bearing deposits | 816,305 |
| | 776,049 |
| | 703,738 |
| | 0.56 |
| | 0.29 |
| | 0.15 |
| Total deposits in U.S. offices | 1,194,111 |
| | 1,163,473 |
| | 1,090,266 |
| | 0.38 |
| | 0.19 |
| | 0.09 |
| Non-U.S. offices | | | | | | | | | | | | Noninterest-bearing | 18,050 |
| | 16,741 |
| | 16,170 |
| | — |
| | — |
| | — |
| Interest-bearing | | | | | | | | | | | | Demand | 210,978 |
| | 213,733 |
| | 198,919 |
| | 0.45 |
| | 0.18 |
| | 0.10 |
| Savings | — |
| | — |
| | — |
| | NM |
| | NM |
| | NM |
| Time | 33,322 |
| | 23,439 |
| | 22,613 |
| | 1.39 |
| | 1.08 |
| | 0.56 |
| Total interest-bearing deposits | 244,300 |
| | 237,172 |
| | 221,532 |
| | 0.58 |
| | 0.27 |
| | 0.15 |
| Total deposits in non-U.S. offices | 262,350 |
| | 253,913 |
| | 237,702 |
| | 0.54 |
| | 0.25 |
| | 0.14 |
| Total deposits | $ | 1,456,461 |
| | $ | 1,417,386 |
| | $ | 1,327,968 |
| | 0.41 | % | | 0.20 | % | | 0.10 | % |
(a)Includes Negotiable Order of Withdrawal (“NOW”) accounts, and certain trust accounts. | | (a) | Includes Negotiable Order of Withdrawal (“NOW”) accounts, and certain trust accounts. |
| | (b) | Includes Money Market Deposit Accounts (“MMDAs”). |
(b)Includes Money Market Deposit Accounts (“MMDAs”).
At December 31, 2018,2020, other U.S. time deposits in denominations of $100,000 or more totaled $15.5$21.8 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Unaudited) By remaining maturity at December 31, 2020 (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) | $ | 9,551 | | | | $ | 5,080 | | | $ | 2,108 | | | $ | 800 | | | $ | 17,539 | |
| | | | | | | | | | | | | | | | | | | | | (Unaudited) By remaining maturity at December 31, 2018 (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) | $ | 6,274 |
| | $ | 3,265 |
| | $ | 3,166 |
| | $ | 6,740 |
| | $ | 19,445 |
|
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. | | | | | | | | | | | | | | | | | | (Unaudited) As of or for the year ended December 31, (in millions, except rates) | 2020 | | 2019 | | 2018 | Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | | Balance at year-end | $ | 215,209 | | | $ | 183,675 | | | $ | 182,320 | | Average daily balance during the year | 255,421 | | | 227,994 | | | 189,282 | | Maximum month-end balance | 298,464 | | | 251,829 | | | 201,340 | | Weighted-average rate at December 31 | 0.04 | % | | 1.77 | % | | 2.18 | % | Weighted-average rate during the year | 0.41 | | | 2.03 | | | 1.62 | | | | | | | | Commercial paper: | | | | | | Balance at year-end | $ | 12,031 | | | $ | 14,754 | | | $ | 30,059 | | Average daily balance during the year | 12,129 | | | 22,977 | | | 27,834 | | Maximum month-end balance | 14,582 | | | 30,007 | | | 30,470 | | Weighted-average rate at December 31 | 0.26 | % | | 2.16 | % | | 2.71 | % | Weighted-average rate during the year | 1.12 | | | 2.66 | | | 2.27 | | | | | | | | Other borrowed funds:(a) | | | | | | Balance at year-end | $ | 97,393 | | | $ | 73,312 | | | $ | 101,513 | | Average daily balance during the year | 106,887 | | | 106,348 | | | 108,436 | | Maximum month-end balance | 122,860 | | | 128,488 | | | 125,544 | | Weighted-average rate at December 31 | 1.00 | % | | 1.85 | % | | 2.23 | % | Weighted-average rate during the year | 1.29 | | | 2.05 | | | 2.06 | | | | | | | | Short-term beneficial interests:(b) | | | | | | Commercial paper and other borrowed funds: | | | | | | Balance at year-end | $ | 12,425 | | | $ | 11,103 | | | $ | 6,527 | | Average daily balance during the year | 13,441 | | | 12,511 | | | 4,756 | | Maximum month-end balance | 14,793 | | | 16,016 | | | 6,527 | | Weighted-average rate at December 31 | 0.21 | % | | 1.92 | % | | 2.53 | % | Weighted-average rate during the year | 0.71 | | | 2.39 | | | 2.10 | |
| | | | | | | | | | | | | (Unaudited) As of or for the year ended December 31, (in millions, except rates) | 2018 | | 2017 | | 2016 | Federal funds purchased and securities loaned or sold under repurchase agreements: | | | | | | Balance at year-end | $ | 182,320 |
| | $ | 158,916 |
| | $ | 165,666 |
| Average daily balance during the year | 189,282 |
| | 187,386 |
| | 178,720 |
| Maximum month-end balance | 201,340 |
| | 205,286 |
| | 207,211 |
| Weighted-average rate at December 31 | 2.18 | % | | 1.03 | % | | 0.50 | % | Weighted-average rate during the year | 1.62 |
| | 0.86 |
| | 0.61 |
| | | | | | | Commercial paper: | | | | | | Balance at year-end | $ | 30,059 |
| | $ | 24,186 |
| | $ | 11,738 |
| Average daily balance during the year | 27,834 |
| | 19,920 |
| | 15,001 |
| Maximum month-end balance | 30,470 |
| | 24,934 |
| | 19,083 |
| Weighted-average rate at December 31 | 2.71 | % | | 1.59 | % | | 1.13 | % | Weighted-average rate during the year | 2.27 |
| | 1.39 |
| | 0.90 |
| | | | | | | Other borrowed funds:(a) | | | | | | Balance at year-end | $ | 101,513 |
| | $ | 87,652 |
| | $ | 89,154 |
| Average daily balance during the year | 108,436 |
| | 96,331 |
| | 93,252 |
| Maximum month-end balance | 125,544 |
| | 107,157 |
| | 102,310 |
| Weighted-average rate at December 31 | 2.23 | % | | 2.09 | % | | 1.79 | % | Weighted-average rate during the year | 2.06 |
| | 1.98 |
| | 1.93 |
| | | | | | | Short-term beneficial interests:(b) | | | | | | Commercial paper and other borrowed funds: | | | | | | Balance at year-end | $ | 6,527 |
| | $ | 4,310 |
| | $ | 5,688 |
| Average daily balance during the year | 4,756 |
| | 5,327 |
| | 8,296 |
| Maximum month-end balance | 6,527 |
| | 7,573 |
| | 10,494 |
| Weighted-average rate at December 31 | 2.53 | % | | 1.50 | % | | 0.83 | % | Weighted-average rate during the year | 2.10 |
| | 1.07 |
| | 0.67 |
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(a)Includes interest-bearing securities sold but not yet purchased of $64.2 billion, $47.1 billion and $62.3 billion at December 31, 2020, 2019 and 2018, respectively. | | (a) | Includes interest-bearing securities sold but not yet purchased of $62.3 billion, $60.0 billion and $66.4 billion at December 31, 2018, 2017 and 2016, respectively. |
| | (b) | Included on the Consolidated balance sheets in beneficial interests issued by consolidated VIEs. |
(b)Included on the Consolidated balance sheets in beneficial interests issued by consolidated VIEs. Federal funds purchased represent overnight funds. Securities loaned or sold under repurchase agreements generally mature between one and ninety days. Commercial paper generally is issued in amounts not less than $100,000, and with maturities of 270 days or less. Other borrowed funds consist of demand notes, term federal funds purchased, and various other borrowings that generally have maturities of one year or less.
Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned, thereunto duly authorized. | | | | | | | JPMorgan Chase & Co. (Registrant)
| | By: /s/ JAMES DIMON | | (James Dimon Chairman and Chief Executive Officer)
| | February 26, 201923, 2021 |
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) | | | | | | | | | | | | 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/ STEPHEN B. BURKE | | Director | | | | (Stephen B. Burke) | | | | | | | | | | | | /s/ TODD A. COMBS | | Director | | | | (Todd A. Combs) | | | | | | | | | | | | /s/ JAMES S. CROWN | | Director | | February 26, 201923, 2021 | | (James S. Crown) | | | | | | | | | | | | /s/ TIMOTHY P. FLYNN | | Director | | | | (Timothy P. Flynn) | | | | | | | | | | | | /s/ MELLODY HOBSON | | Director | | | | (Mellody Hobson) | | | | | | | | | | | | /s/ LABAN P. JACKSON, JR. | | Director | | | (Laban P. Jackson, Jr.) | | | | | | | | | | /s/ MICHAEL A. NEAL | | Director | | | | (Michael A. Neal) | | | | | | | | | | | | /s/ LEE R. RAYMONDPHEBE N. NOVAKOVIC | | Director | | | | (Lee R. Raymond)Phebe N. Novakovic) | | | | | | | | | | | | /s/ WILLIAM C. WELDONVIRGINIA M. ROMETTY | | Director | | | | (William C. Weldon)(Virginia M. Rometty) | | | | | | | | | | | | /s/ MARIANNE LAKEJENNIFER PIEPSZAK | | Executive Vice President and Chief Financial Officer | | | | (Jennifer Piepszak) | | (Principal Financial Officer) | | | | (Marianne Lake) | | | | | | | | | | | /s/ NICOLE GILES | | Managing Director and Firmwide Controller | | | | (Nicole Giles) | | (Principal Accounting Officer) | | | (Nicole Giles) | | | |
|