JPMorgan Chase - 10-Q quarterly report FY2020 Q2

JPMorgan Chase - 10-Q quarterly report FY2020 Q2

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934



For the quarterly period ended	Commission file
June 30, 2020	number	1-5805

JPMorgan Chase & Co.

(Exact name of registrant as specified in its charter)



Delaware		13-2624428
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

383 Madison Avenue,
New York,	New York	10179
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 270-6000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	JPM	The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.10% Non-Cumulative Preferred Stock, Series AA	JPM PR G	The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.15% Non-Cumulative Preferred Stock, Series BB	JPM PR H	The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 5.75% Non-Cumulative Preferred Stock, Series DD	JPM PR D	The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 6.00% Non-Cumulative Preferred Stock, Series EE	JPM PR C	The New York Stock Exchange
Depositary Shares, each representing a one-four hundredth interest in a share of 4.75% Non-Cumulative Preferred Stock, Series GG	JPM PR J	The New York Stock Exchange
Alerian MLP Index ETNs due May 24, 2024	AMJ	NYSE Arca, Inc.
Guarantee of Callable Step-Up Fixed Rate Notes due April 26, 2028 of JPMorgan Chase Financial Company LLC	JPM/28	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Number of shares of common stock outstanding as of June 30, 2020: 3,047,604,487

FORM 10-Q

TABLE OF CONTENTS



Part I – Financial information		Page
Item 1.	Financial Statements.
	Consolidated Financial Statements – JPMorgan Chase & Co.:
	Consolidated statements of income (unaudited) for the three and six months ended June 30, 2020 and 2019	93
	Consolidated statements of comprehensive income (unaudited) for the three and six months ended June 30, 2020 and 2019	94
	Consolidated balance sheets (unaudited) at June 30, 2020 and December 31, 2019	95
	Consolidated statements of changes in stockholders’ equity (unaudited) for the three and six months ended June 30, 2020 and 2019	96
	Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2020 and 2019	97
	Notes to Consolidated Financial Statements (unaudited)	98
	Report of Independent Registered Public Accounting Firm	188
	Consolidated Average Balance Sheets, Interest and Rates (unaudited) for the three months ended June 30, 2020 and 2019	189
	Glossary of Terms and Acronyms and Line of Business Metrics	191
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Consolidated Financial Highlights	3
	Introduction	4
	Executive Overview	5
	Consolidated Results of Operations	13
	Consolidated Balance Sheets and Cash Flows Analysis	18
	Off-Balance Sheet Arrangements	21
	Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures	22
	Business Segment Results	24
	Firmwide Risk Management	48
	Capital Risk Management	49
	Liquidity Risk Management	55
	Consumer Credit Portfolio	62
	Wholesale Credit Portfolio	67
	Investment Portfolio Risk Management	79
	Market Risk Management	80
	Country Risk Management	85
	Operational Risk Management	86
	Estimations and Model Risk Management	87
	Critical Accounting Estimates Used by the Firm	88
	Accounting and Reporting Developments	91
	Forward-Looking Statements	92
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	200
Item 4.	Controls and Procedures.	200
Part II – Other information
Item 1.	Legal Proceedings.	200
Item 1A.	Risk Factors.	200
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	201
Item 3.	Defaults Upon Senior Securities.	201
Item 4.	Mine Safety Disclosures.	201
Item 5.	Other Information.	201
Item 6.	Exhibits.	202

JPMorgan Chase & Co.

Consolidated financial highlights (unaudited)



As of or for the period ended, (in millions, except per share, ratio, headcount data and where otherwise noted)																Six months ended June 30,
	2Q20			1Q20			4Q19			3Q19			2Q19			2020			2019
Selected income statement data
Total net revenue^(a)	$	32,980		$	28,192		$	28,285		$	29,291		$	28,747		$	61,172		$	57,823
Total noninterest expense^(a)	16,942			16,791			16,293			16,372			16,256			33,733			32,604
Pre-provision profit^(b)	16,038			11,401			11,992			12,919			12,491			27,439			25,219
Provision for credit losses	10,473			8,285			1,427			1,514			1,149			18,758			2,644
Income before income tax expense	5,565			3,116			10,565			11,405			11,342			8,681			22,575
Income tax expense	878			251			2,045			2,325			1,690			1,129			3,744
Net income	$	4,687		$	2,865		$	8,520		$	9,080		$	9,652		$	7,552		$	18,831

Earnings per share data
Net income: Basic	$	1.39		$	0.79		$	2.58		$	2.69		$	2.83		$	2.17		$	5.48
Diluted	1.38			0.78			2.57			2.68			2.82			2.17			5.46
Average shares: Basic	3,076.3			3,095.8			3,140.7			3,198.5			3,250.6			3,086.1			3,274.3
Diluted	3,081.0			3,100.7			3,148.5			3,207.2			3,259.7			3,090.8			3,283.9

Market and per common share data
Market capitalization	286,658			274,323			429,913			369,133			357,479			286,658			357,479
Common shares at period-end	3,047.6			3,047.0			3,084.0			3,136.5			3,197.5			3,047.6			3,197.5
Book value per share	76.91			75.88			75.98			75.24			73.88			76.91			73.88
Tangible book value per share (“TBVPS”)^(b)	61.76			60.71			60.98			60.48			59.52			61.76			59.52
Cash dividends declared per share	0.90			0.90			0.90			0.90			0.80			1.80			1.60

Selected ratios and metrics
Return on common equity (“ROE”)^(c)	7		%	4		%	14		%	15		%	16		%	6		%	16		%
Return on tangible common equity (“ROTCE”)^(b)(c)	9			5			17			18			20			7			20
Return on assets^(b)	0.58			0.40			1.22			1.30			1.41			0.50			1.40
Overhead ratio	51			60			58			56			57			55			56
Loans-to-deposits ratio	51			55			61			62			63			51			63
Liquidity coverage ratio (“LCR”) (average)	117			114			116			115			113			117			113
Common equity Tier 1 (“CET1”) capital ratio^(d)	12.4			11.5			12.4			12.3			12.2			12.4			12.2
Tier 1 capital ratio^(d)	14.3			13.3			14.1			14.1			14.0			14.3			14.0
Total capital ratio^(d)	16.7			15.5			16.0			15.9			15.8			16.7			15.8
Tier 1 leverage ratio^(d)	6.9			7.5			7.9			7.9			8.0			6.9			8.0
Supplementary leverage ratio (“SLR”)^(d)	6.8			6.0			6.3			6.3			6.4			6.8			6.4

Selected balance sheet data (period-end)
Trading assets	$	526,042		$	548,580		$	411,103		$	495,875		$	523,373		$	526,042		$	523,373
Investment securities, net of allowance for credit losses	558,791			471,144			398,239			394,251			307,264			558,791			307,264
Loans	978,518			1,015,375			959,769			945,218			956,889			978,518			956,889
Total assets	3,213,115			3,139,431			2,687,379			2,764,661			2,727,379			3,213,115			2,727,379
Deposits	1,931,029			1,836,009			1,562,431			1,525,261			1,524,361			1,931,029			1,524,361
Long-term debt	317,003			299,344			291,498			296,472			288,869			317,003			288,869
Common stockholders’ equity	234,403			231,199			234,337			235,985			236,222			234,403			236,222
Total stockholders’ equity	264,466			261,262			261,330			264,348			263,215			264,466			263,215
Headcount	256,710			256,720			256,981			257,444			254,983			256,710			254,983

Credit quality metrics
Allowances for loan losses and lending-related commitments	$	34,301		$	25,391		$	14,314		$	14,400		$	14,295		$	34,301		$	14,295
Allowance for loan losses to total retained loans	3.32		%	2.32		%	1.39		%	1.42		%	1.39		%	3.32		%	1.39		%
Nonperforming assets	$	8,440		$	6,421		$	4,497		$	5,343		$	5,260		$	8,440		$	5,260
Net charge-offs	1,560			1,469			1,494			1,371			1,403			3,029			2,764
Net charge-off rate	0.64		%	0.62		%	0.63		%	0.58		%	0.60		%	0.63		%	0.59		%

Effective January 1, 2020, the Firm adopted the Financial Instruments – Credit Losses (“CECL”) accounting guidance. 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 Firm’s Use of Non-GAAP Financial Measures on pages 22-23 for a further discussion of these measures.


(c)	Quarterly ratios are based upon annualized amounts.

(d)

Reflects 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. As of June 30, 2020, the SLR reflects the temporary exclusions of U.S. Treasury securities and deposits at Federal Reserve Banks. Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 11-12 and Capital Risk Management on pages 49-54 of this Form 10-Q for additional information. Refer to Capital Risk Management on pages 85-92 of JPMorgan Chase’s 2019 Form 10-K for additional information on the Firm’s capital metrics.



INTRODUCTION

The following is Management’s discussion and analysis of the financial condition and results of operations (“MD&A”) of JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”) for the second quarter of 2020.

This Quarterly Report on Form 10-Q for the second quarter of 2020 (“Form 10-Q”) should be read together with JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). Refer to the Glossary of terms and acronyms and line of business (“LOB”) metrics on pages 191-199 for definitions of terms and acronyms used throughout this Form 10-Q.

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase’s management, speak only as of the date of this Form 10-Q and are subject to significant risks and uncertainties. For a discussion of certain of those risks and uncertainties and the factors that could cause JPMorgan Chase’s actual results to differ materially because of those risks and uncertainties, refer to Forward-looking Statements on page 92 of this Form 10-Q, Part II, Item 1A, Risk Factors on pages 200-201 of this Form 10-Q and Part I, Item 1A, Risk factors, on pages 6-28 of the 2019 Form 10-K.

JPMorgan Chase & Co. (NYSE: JPM), a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States of America (“U.S.”), with operations worldwide; JPMorgan Chase had $3.2 trillion in assets and $264.5 billion in stockholders’ equity as of June 30, 2020. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S. and many of the world’s most prominent corporate, institutional and government clients.

JPMorgan Chase’s principal bank subsidiary is JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank N.A.”), a national banking association with U.S. branches in 38 states and Washington, D.C. as of June 30, 2020. JPMorgan Chase’s principal non-bank subsidiary is J.P. Morgan Securities LLC (“J.P. Morgan Securities”), a U.S. broker-dealer. The bank and non-bank subsidiaries of JPMorgan Chase operate nationally as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. The Firm’s principal operating subsidiary outside the U.S. is J.P. Morgan Securities plc, a U.K.-based subsidiary of JPMorgan Chase Bank, N.A.

For management reporting purposes, the Firm’s activities are organized into four major reportable business segments, as well as a Corporate segment. The Firm’s consumer business segment is Consumer & Community Banking (“CCB”). The Firm’s wholesale business segments are Corporate & Investment Bank (“CIB”), Commercial Banking (“CB”), and Asset & Wealth Management (“AWM”). For a description of the Firm’s business segments and the products and services they provide to their respective

client bases, refer to Note 26 of this Form 10-Q and Note 32 of JPMorgan Chase’s 2019 Form 10-K.

The Firm's website is www.jpmorganchase.com. JPMorgan Chase makes available on its website, free of charge, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after it electronically files or furnishes such material to the U.S. Securities and Exchange Commission (the “SEC”) at www.sec.gov. JPMorgan Chase also makes additional information about the Firm available on the Investor Relations section of its website at https://www.jpmorganchase.com/corporate/investor-relations/investor-relations.htm.



EXECUTIVE OVERVIEW

This executive overview of the MD&A highlights selected information and does not contain all of the information that is important to readers of this Form 10-Q. For a complete description of the trends and uncertainties, as well as the risks and critical accounting estimates affecting the Firm and its various LOBs, this Form 10-Q and the 2019 Form 10-K should be read together and in their entirety.

Effective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information.



Financial performance of JPMorgan Chase
(unaudited) As of or for the period ended, (in millions, except per share data and ratios)	Three months ended June 30,								Six months ended June 30,
	2020			2019			Change		2020			2019			Change
Selected income statement data
Total net revenue^(a)	$	32,980		$	28,747		15	%	$	61,172		$	57,823		6	%
Total noninterest expense^(a)	16,942			16,256			4		33,733			32,604			3
Pre-provision profit	16,038			12,491			28		27,439			25,219			9
Provision for credit losses	10,473			1,149			NM		18,758			2,644			NM
Net income	4,687			9,652			(51	)	7,552			18,831			(60	)
Diluted earnings per share	$	1.38		$	2.82		(51	)	$	2.17		$	5.46		(60	)
Selected ratios and metrics
Return on common equity	7		%	16		%			6		%	16		%
Return on tangible common equity	9			20					7			20
Book value per share	$	76.91		$	73.88		4		$	76.91		$	73.88		4
Tangible book value per share	61.76			59.52			4		61.76			59.52			4
Capital ratios^(b)
CET1	12.4		%	12.2		%			12.4		%	12.2		%
Tier 1 capital	14.3			14.0					14.3			14.0
Total capital	16.7			15.8					16.7			15.8


(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)

Reflects 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. Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 11-12 and Capital Risk Management on pages 49-54 of this Form 10-Q for additional information. Refer to Capital Risk Management on pages 85-92 of JPMorgan Chase’s 2019 Form 10-K for additional information on the Firm’s capital metrics.

Comparisons noted in the sections below are for the second quarter of 2020 versus the second quarter of 2019, unless otherwise specified.

Firmwide overview

JPMorgan Chase reported net income of $4.7 billion for the second quarter of 2020, or $1.38 per share, on net revenue of $33.0 billion. The Firm reported ROE of 7% and ROTCE of 9%. The Firm recorded a number of significant items in the second quarter of 2020, including an addition to the allowance for credit losses of $8.9 billion, $678 million of markups on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio in CIB and CB, and a $510 million gain in Credit Adjustments & Other in CIB driven by funding spread tightening on derivatives.


•	Net income was down 51%, driven by an increase in the provision for credit losses across the Firm.

•

Total net revenue increased 15%. Noninterest revenue was $19.1 billion, up 33%, largely driven by higher CIB Markets revenue and Investment Banking fees. The increase in revenue also included $678 million of markups on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio in CIB and CB, and a $510 million gain in Credit Adjustments & Other in CIB driven by funding spread tightening on derivatives. Net interest income was $13.9 billion, down 4%, with the impact of lower rates predominantly offset by higher net interest income in CIB Markets and balance sheet growth.


•	Noninterest expense was $16.9 billion, up 4%, predominantly driven by revenue-related expense, primarily compensation, partially offset by lower marketing expense in Card as a result of lower travel-related benefits and lower investments in marketing campaigns, as well as lower structural expense.

•

The provision for credit losses was $10.5 billion, up $9.3 billion from the prior year, driven by additions to the allowance for credit losses, reflecting further deterioration and increased uncertainty in the macroeconomic outlook as a result of the impact of the COVID-19 pandemic. The addition in the wholesale allowance was $4.6 billion across multiple industry sectors, and the addition in the consumer allowance was $4.4 billion, largely in Card.

•

The total allowance for credit losses was $34.3 billion at June 30, 2020, and the Firm had a loan loss coverage ratio of 3.32%, compared with 1.39% in the prior year, driven by the additions to allowance for credit losses and the adoption of CECL. The Firm’s nonperforming assets totaled $8.4 billion at June 30, 2020, an increase from $5.3 billion in the prior year. The increase was driven by downgrades in the wholesale portfolio across multiple industries on client credit deterioration, and the inclusion of purchased credit deteriorated loans in the mortgage portfolio, which are subject to nonaccrual loan treatment following the adoption of CECL.


•	Firmwide average loans of $1.0 trillion were up 4%, largely reflecting drawdowns on committed revolving credit facilities in March and higher loan balances in AWM, as well as loans originated under the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”). The loan growth was partially offset by lower loan balances in Home Lending and Card.


•	Firmwide average deposits of $1.9 trillion were up 25%, reflecting significant inflows across the Firm, primarily driven by the COVID-19 pandemic, as customers and clients looked to remain liquid as a result of market conditions.

Selected capital-related metrics


•	The Firm’s CET1 capital was $191 billion, and the Standardized and Advanced CET1 ratios were 12.4% and 13.2%, respectively.


•	The Firm’s SLR was 6.8%. As of June 30, 2020, the SLR reflects the temporary exclusions of U.S. Treasury securities and deposits at Federal Reserve Banks, as required by the Federal Reserve’s interim final rule issued on April 1, 2020. The Firm’s SLR excluding the temporary relief was 5.7%.


•	The Firm grew TBVPS, ending the second quarter of 2020 at $61.76, up 4% versus the prior year.

ROTCE and TBVPS are non-GAAP financial measures. Refer to Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 22-23 for a further discussion of each of these measures.

Business segment highlights

Selected business metrics for each of the Firm’s four LOBs are presented below for the second quarter of 2020.



CCB ROE (2)%		• Average deposits up 20%; client investment assets up 9% • Average loans down 7%; credit card sales volume down 23% • Provision for credit losses of $5.8 billion, predominantly driven by an addition to the allowance for credit losses of $4.6 billion
CIB ROE 27%		• #1 ranking for Global Investment Banking fees with 9.8% wallet share year-to-date • Total Markets revenue of $9.7 billion, up 79%, with Fixed Income Markets up 99% and Equity Markets up 38% • Provision for credit losses of $2.0 billion, predominantly driven by an addition to the allowance for credit losses of $1.8 billion
CB ROE (14)%		• Gross Investment Banking revenue of $851 million, up 44% • Average loans up 13%; average deposits up 41% • Provision for credit losses of $2.4 billion driven by an addition to the allowance for credit losses
AWM ROE 24%		• Assets under management (AUM) of $2.5 trillion, up 15% • Average loans up 12%; average deposits up 20% • Provision for credit losses of $223 million, driven by an addition to the allowance for credit losses

Refer to the Business Segment Results on pages 24-47 for a detailed discussion of results by business segment.

Credit provided and capital raised

JPMorgan Chase continues to support consumers, businesses and communities around the globe. The Firm provided new and renewed credit and raised capital for wholesale and consumer clients during the first six months of 2020, consisting of:



$1.2 trillion		Total credit provided and capital raised (including loans and commitments)^(a)

	$107 billion	Credit for consumers

	$11 billion	Credit for U.S. small businesses

	$404 billion	Credit for corporations

	$651 billion	Capital raised for corporate clients and non-U.S. government entities

	$53 billion	Credit and capital raised for nonprofit and U.S. government entities^(b)

$28 billion		Loans under the Small Business Administration’s Paycheck Protection Program


(a)	Excludes loans under the SBA’s PPP.


(b)	Includes states, municipalities, hospitals and universities.

Recent events

On June 29, 2020, JPMorgan Chase announced that it had completed the 2020 Comprehensive Capital Analysis and Review (“CCAR”) stress test process. The Firm’s indicative Stress Capital Buffer (“SCB”) requirement is 3.3% and the Federal Reserve Board will provide the Firm with its final SCB requirement by August 31, 2020. The Firm’s Board of Directors currently intends to maintain the quarterly common stock dividend of $0.90 per share for the third quarter of 2020. Additionally, in June 2020, the Federal Reserve directed all large bank holding companies, including the Firm, to discontinue net share repurchases, at least through the end of the third quarter of 2020.

2020 outlook

These current expectations are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase’s management, speak only as of the date of this Form 10-Q, and are subject to significant risks and uncertainties. Refer to Forward-Looking Statements on page 92 and Risk Factors on page 200 of this Form 10-Q and pages 6–28 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of certain of those risks and uncertainties and the other factors that could cause JPMorgan Chase’s actual results to differ materially because of those risks and uncertainties. There is no assurance that actual results in the full year of 2020 will be in line with the outlook set forth below, and the Firm does not undertake to update any forward-looking statements.

JPMorgan Chase’s current outlook for the remainder of 2020 should be viewed against the backdrop of the global and U.S. economies, the COVID-19 pandemic, financial markets activity, the geopolitical environment, the competitive environment, client and customer activity levels, and regulatory and legislative developments in the U.S. and other countries where the Firm does business. Each of these factors will affect the performance of the Firm and its LOBs. The Firm will continue to make appropriate adjustments to its businesses and operations in response to ongoing developments in the business, economic, regulatory and legal environments in which it operates. The outlook information contained in this Form 10-Q supersedes all outlook information furnished by the Firm in its periodic reports filed with the SEC prior to the date of this Form 10-Q.

Firmwide


•	Management expects full-year 2020 net interest income, on a managed basis, to be approximately $56 billion, market dependent.


•	Management expects adjusted expense for the full-year 2020 to be approximately $65 billion.

Business Developments

COVID-19 Pandemic

In the first quarter of 2020, in response to the COVID-19 pandemic, the Firm invoked resiliency plans to allow its businesses to remain operational, utilizing disaster recovery sites and implementing alternative work arrangements globally, including work from home.

The Firm also implemented strategies and procedures designed to help it respond to increased market volatility, client demand for credit and liquidity, distress in certain industries/sectors and the ongoing impacts to consumers and businesses.

In the second quarter, the Firm continued its focus on responding to the COVID-19 pandemic, including developing plans to return employees to the office. The Firm continues to actively monitor the dynamic health and safety situations at local and regional levels, and plans remain flexible to adapt as these situations evolve.

Supporting clients and customers

The Firm has continued to support its clients and customers during the challenging conditions caused by the COVID-19 pandemic, including by providing liquidity. Since March, the Firm has extended more than $350 billion of new and renewed credit to its clients and customers, of which approximately $300 billion was in the wholesale businesses.

The Firm is participating in a number of U.S government facilities and programs including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”). At June 30, 2020, the Firm had approximately $28 billion of loans under the PPP. Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 11-12 for more information on U.S. Government facilities and programs.

In addition, in March 2020 the Firm began providing payment deferrals on loans and auto leases, refunded fees, and modified covenants for clients and customers.

•

In the consumer portfolio segment, through June 30, 2020, the Firm has provided customer assistance to over 2 million accounts, including refunding over $83 million in fees and granting payment deferrals on over $79 billion of loans and leases, of which $42 billion was for third-party mortgage loans serviced. As of June 30, 2020 the Firm had approximately $28 billion of retained loans that were still under payment deferral.


•	In the wholesale portfolio segment, through June 30, 2020, the Firm has provided client assistance to approximately 12,000 clients, primarily risk-rated clients in CCB. The majority of the client assistance was payment deferrals on approximately $23 billion of loans. As of June 30, 2020, there were approximately $17 billion of retained loans that were still under payment deferral.

Refer to Credit Portfolio on pages 60-61 for additional information on assistance granted to customers and clients. Refer to Consumer Credit portfolio on pages 62-66 and Wholesale Credit Portfolio on pages 67-76 for additional information on retained loans that were still under payment deferral as of June 30, 2020.

Approximately three-quarters of the Firm’s branch network is operational, and ATMs remain accessible. The Firm also continues to provide a wide range of banking services accessible to clients and customers online.

Protecting and supporting employees

In addition to widespread work from home arrangements, the Firm has taken actions to protect and support its employees. These actions include providing increased safety measures for those employees whose job functions require them to continue to be onsite, a special payment for certain eligible employees and expanded healthcare resources.

Supporting communities

Since March, the Firm has committed $250 million to help address humanitarian needs and long-term economic challenges posed by the COVID-19 pandemic on the communities in which the Firm operates. This includes a $200 million commitment to be deployed over time to support underserved small businesses and nonprofits and $50 million in grants to help vulnerable communities impacted by the pandemic.

Departure of the U.K. from the EU

The Firm continues to execute on its Firmwide Brexit Implementation program and remains focused on the following key areas to ensure continuation of service to its EU clients: regulatory and legal entity readiness; client readiness; and business and operational readiness. The Firm’s Brexit-related planning in the second half of 2020 will focus on the possibility that the U.K. will complete its departure from the EU without having agreed the terms of their future relationship, which is commonly referred to as “hard Brexit,” as the July 1, 2020 deadline for the U.K. to request an extension of the transition period has passed. This will require completion of the relocation of certain front office roles from the U.K. to EU locations, and finalization of the migration of EU clients and certain positions to EU entities by the end of 2020. The COVID-19 pandemic has added incremental risk to the Firm’s Brexit Implementation program due to the potential impact on its ability to execute changes such as relocation of employees given travel restrictions, or the ability of clients to be operationally ready to the extent that they have diverted resources during 2020 to address the effects of the pandemic.

Interbank Offered Rate (“IBOR”) transition

On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update providing optional expedients and exceptions for applying generally accepted accounting principles to contracts and hedge relationships affected by reference rate reform. This update provides for various elective options, referred to as “practical expedients,” that are intended to simplify the operational impact of applying U.S. GAAP to certain transactions. The Firm expects to apply certain of these practical expedients relating to the IBOR transition in the second half of 2020. Refer to Accounting and Reporting Developments on page 91 for additional information. The Firm continues to monitor the transition relief being considered by the International Accounting Standards Board (“IASB”) and U.S. Treasury Department regarding accounting and tax implications of reference rate reform.

The Firm also continues to develop and implement plans to appropriately mitigate the risks associated with IBOR discontinuation. Refer to Business Developments on page 47 of the 2019 Form 10-K for a discussion of the Firm’s initiatives to address the expected discontinuation of the London Interbank Offered Rate (“LIBOR”) and other IBORs.

Regulatory Developments Relating to the COVID-19 Pandemic

Since March 2020, the U.S. government as well as central banks and banking authorities around the world have taken and continue to take actions to help individuals, households and businesses that have been adversely affected by the economic disruption caused by the COVID-19 pandemic. The CARES Act, which was signed into law on March 27, 2020, provides, among other things, funding to support loan facilities to assist consumers and businesses. Set forth below is a summary as of the date of this Form 10-Q of U.S. government actions currently impacting the Firm and U.S. government programs in which the Firm is participating to support individuals, businesses, and the broader economy. The Firm will continue to assess ongoing developments in government actions in response to the COVID-19 pandemic.

U.S. government actions

Eligible retained income definition. On March 17, 2020, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (“Federal Reserve”), and the Federal Deposit Insurance Corporation (“FDIC”), collectively the “federal banking agencies,” issued an interim final rule that revised the definition of “eligible retained income” in the regulatory capital rules that apply to all U.S. banking organizations. On March 23, 2020, the Federal Reserve issued an interim final rule that revised the definition of “eligible retained income” for purposes of the total loss-absorbing capacity (“TLAC”) buffer requirements that apply to global systemically important banking organizations. The revised definition of eligible retained income makes any automatic limitations on payout distributions that could apply under the agencies’ capital rules or TLAC rule take effect on a more graduated basis in the event that a banking organization’s capital, leverage and TLAC ratios were to decline below regulatory requirements (including buffers). The March 17, 2020 interim final rule was issued, in conjunction with an interagency statement encouraging banking organizations to use their capital and liquidity buffers, to further support banking organizations’ abilities to lend to households and businesses affected by the COVID-19 pandemic.

Reserve requirements. On March 26, 2020, the Federal Reserve reduced reserve requirement ratios to zero percent, effectively eliminating the reserve requirement for all depository institutions, an action that freed up liquidity in the banking system to support lending to households and businesses.

Refer to Liquidity Risk Management on pages 55-59 and Note 21 for additional information on the reduction to the reserve requirement.

Regulatory Capital - Current Expected Credit Losses (“CECL”) transition delay. On March 31, 2020, the federal banking agencies issued an interim final rule that provided banking organizations with 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”). The Firm elected to apply the CECL capital transition provisions.

Refer to Capital Risk Management on pages 49-54 and Note 22 on pages 176-177 for additional information on the CECL capital transition provisions and the impact to the Firm’s capital metrics.

Supplementary leverage ratio (“SLR”) temporary revision. On April 1, 2020, the Federal Reserve issued an interim final rule that requires, on a temporary basis, the calculation of total leverage exposure for purposes of calculating the SLR for bank holding companies, to exclude the on-balance sheet amounts of U.S. Treasury securities and deposits at Federal Reserve Banks. These exclusions became effective April 1, 2020, and will remain in effect through March 31, 2021.

Refer to Capital Risk Management on pages 49-54 and Note 22 for additional information on the Firm’s SLR.

Loan modifications. On April 7, 2020, the federal banking agencies along with the National Credit Union Administration, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators, issued an interagency statement revising a March 22, 2020 interagency statement on loan modifications and the reporting for financial institutions working with customers affected by the COVID-19 pandemic (the “IA Statement”). The IA Statement reconfirmed that efforts to work with borrowers where the loans are prudently underwritten, and not considered past due or carried on nonaccrual status, should not result in the loans automatically being considered modified in a troubled debt restructuring (“TDR”) for accounting and financial reporting purposes, or for purposes of their respective risk-based capital rules, which would otherwise require financial institutions subject to the capital rules to hold more capital. The IA Statement also clarified the interaction between its previous guidance and Section 4013 of the CARES Act, which provides certain financial institutions with the option to suspend the application of accounting guidance for TDRs for a limited period of time for loan modifications made to address the effects of the COVID-19 pandemic.

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 as:


•	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 as provided under section 4013 of the CARES Act.

To the extent that certain modifications do not meet any of the above criteria, the Firm accounts for them as TDRs. Refer to Credit Portfolio on pages 60-61 and Note 12 for

additional information on the Firm’s loan modification activities.

U.S. government facilities and programs. Beginning in March 2020, the Federal Reserve announced a suite of facilities using its emergency lending powers under section 13(3) of the Federal Reserve Act to support the flow of credit to individuals, households and businesses adversely affected by the COVID-19 pandemic and to support the broader economy. These facilities include the Money Market Mutual Fund Liquidity Facility (“MMLF”), Main Street Lending Facilities, Primary Dealer Credit Facility (“PDCF”), Commercial Paper Funding Facility (“CPFF”), Secondary Market Corporate Credit Facility (“SMCCF”) and Term Asset-Backed Securities Loan Facility (“TALF”). In addition, beginning April 3, 2020, the PPP, established by the CARES Act and administered by the SBA, authorized eligible lenders to provide nonrecourse loans to eligible borrowers until August 8, 2020 to provide an incentive for these businesses to keep their workers on their payroll. The Firm has participated and is participating in certain of these facilities and programs, as needed, to assist its clients and customers or to support the broader economy.

Refer to Capital Risk Management on pages 49-54, Liquidity Risk Management on pages 55-59, Note 22 and Note 24 for additional information on the Firm’s participation in the MMLF. Refer to Liquidity Risk Management on pages 55-59 for additional information on the Firm’s participation in the PDCF. Refer to Business Developments on pages 9-10, Capital Risk Management on pages 49-54, Credit Portfolio on pages 60-61 and Note 22 for additional information on the Firm’s participation in the PPP.



CONSOLIDATED RESULTS OF OPERATIONS

This section provides a comparative discussion of JPMorgan Chase’s Consolidated Results of Operations on a reported basis for the three and six months ended June 30, 2020 and 2019, unless otherwise specified. Factors that relate primarily to a single business segment are discussed in more detail within that business segment. Refer to pages 88-90 of this Form 10-Q and pages 136–138 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the Critical Accounting Estimates Used by the Firm that affect the Consolidated Results of Operations.



Revenue
	Three months ended June 30,						Six months ended June 30,
(in millions)	2020		2019		Change		2020		2019		Change
Investment banking fees	$	2,850	$	1,851	54	%	$	4,716	$	3,691	28	%
Principal transactions	7,621		3,714		105		10,558		7,790		36
Lending- and deposit-related fees^(a)	1,431		1,624		(12	)	3,137		3,183		(1	)
Asset management, administration and commissions^(a)	4,266		4,264		—		8,806		8,301		6
Investment securities gains	26		44		(41	)	259		57		354
Mortgage fees and related income	917		279		229		1,237		675		83
Card income^(b)	974		1,281		(24	)	1,969		2,508		(21	)
Other income^(c)	1,042		1,292		(19	)	2,198		2,767		(21	)
Noninterest revenue	19,127		14,349		33		32,880		28,972		13
Net interest income	13,853		14,398		(4	)	28,292		28,851		(2	)
Total net revenue	$	32,980	$	28,747	15	%	$	61,172	$	57,823	6	%

(a) 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.

(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.

(c) Included operating lease income of $1.4 billion and $1.3 billion for the three months ended June 30, 2020 and 2019, respectively and $2.8 billion and$2.6 billion for the six months ended June 30, 2020 and 2019, respectively.

Quarterly results

Investment banking fees increased, driven by CIB, reflecting:


•	higher debt underwriting fees due to increased industry-wide fees and wallet share gains in both investment-grade and high-yield bonds


•	higher equity underwriting fees due to increased industry-wide fees and wallet share gains, primarily in follow-on offerings and convertible securities markets


–	the increased activity in debt and equity underwriting reflected clients seeking access to liquidity as a result of the COVID-19 pandemic


•	higher advisory fees driven by a few large completed transactions.

Refer to CIB segment results on pages 31-37 and Note 6 for additional information.

Principal transactions revenue increased and included two significant items, both of which represent reversals of a portion of the losses that were recognized in the first quarter of 2020:


•	$678 million of markups on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio in CIB and CB, compared with $896 million of markdowns in the first quarter of 2020, and


•	a $510 million gain in Credit Adjustments & Other in CIB driven by funding spread tightening on derivatives, compared with a $951 million loss in the first quarter of 2020.

Excluding these two items, principal transactions revenue increased in CIB driven by strong client activity in Fixed Income Markets primarily in Rates, Currencies & Emerging Markets, and Credit; and in Equity Markets related to derivatives and Cash Equities. The prior year included a gain from the initial public offering (“IPO”) of Tradeweb.

The increase in principal transactions revenue also reflected net gains on certain legacy private equity investments in Corporate, compared with net losses in the prior year.

Principal transactions revenue in CIB may in certain cases have offsets across other revenue lines, including net interest income. The Firm assesses its CIB Markets business performance on a total revenue basis.

Refer to CIB, CB and Corporate segment results on pages 31-37, pages 38-41 and page 46, and Note 6 for additional information.

Lending- and deposit-related fees decreased due to lower deposit-related fees in CCB, reflecting lower transaction activity and the impact of fee refunds related to the COVID-19 pandemic, partially offset by higher cash management fees in CIB and CB. Refer to CCB segment results on pages 26-30, CIB on pages 31-37 and CB on pages 38-41, respectively, and Note 6 for additional information.

For information on asset management, administration and commissions revenue, refer to CCB, CIB and AWM segment results on pages 26-30, pages 31-37 and pages 42-45, respectively, and Note 6.

Refer to Corporate segment results on page 46 and Note 10 for information on investment securities gains.

Mortgage fees and related income increased due to:


•	higher net mortgage production revenue reflecting higher production margins, partially offset by the absence of gains on loan sales in the prior year in Home Lending, and


•	higher net mortgage servicing revenue reflecting higher MSR risk management results due to the absence of losses resulting from updates to model inputs in the prior year partially offset by lower operating revenue reflecting a lower level of third-party loans serviced.

Refer to CCB segment results on pages 26-30, Note 6 and 15 for further information.

Card income decreased due to lower net interchange income reflecting lower card sales volumes that began in March as a result of the COVID-19 pandemic, partially offset by higher annual fees and lower acquisition costs.

Refer to CCB, CIB and CB segment results on pages 26-30, pages 31-37 and pages 38-41, as well as and Note 6 for further information.

Other income decreased, reflecting:


•	higher costs associated with using forward contracts to hedge certain non-U.S. dollar-denominated net investment exposures in Treasury and CIO,


•	increased amortization on higher levels of alternative energy investments in CIB. The increased amortization was more than offset by lower income tax expense from the associated tax credits


•	lower market-driven results on certain investments in Corporate

partially offset by


•	higher operating lease income from growth in auto operating lease volume in CCB

Refer to Note 17 for further information.

Net interest income decreased due to the impact of lower rates, predominantly offset by higher net interest income in CIB Markets and balance sheet growth.

The Firm’s average interest-earning assets were $2.8 trillion, up $481 billion, and the yield was 2.31%, down 142 bps, primarily due to lower rates. The net yield on these assets, on an FTE basis, was 1.99%, a decrease of 50 bps. The net yield excluding CIB Markets was 2.27%, down 108 bps.

Net yield excluding CIB Markets is a non-GAAP financial measure. Refer to the Consolidated average balance sheets, interest and rates schedule on pages 189–190 for further details; and the Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages 22-23 for a further discussion of Net interest yield excluding CIB markets.

Year-to-date results

Investment banking fees increased, driven by CIB, reflecting:


•	higher debt underwriting fees due to increased industry-wide fees and wallet share gains in investment-grade bonds, and for high-yield bonds, after the markets stabilized in the second quarter of 2020


•	higher equity underwriting fees due to increased industry-wide fees and wallet share gains, primarily in follow-on offerings and convertible securities markets


–	the increased activity in debt and equity underwriting reflected clients seeking access to liquidity as a result of the COVID-19 pandemic

partially offset by


•	lower advisory fees driven by a lower number of completed transactions.

Principal transactions revenue increased despite the year-to-date results of the two significant items noted below:


•	a $441 million net loss in CIB’s Credit Adjustments & Other predominantly driven by losses on certain components of fair value option elected liabilities, as well as the impact of funding spread widening on derivatives, and


•	$218 million of net markdowns on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio in CIB and CB.

Excluding these two items, principal transactions revenue increased in CIB, driven by strong client activity in Fixed Income Markets primarily in Rates, Currencies & Emerging Markets, and Credit; and in Equity Markets related to derivatives and Cash Equities.

Lending- and deposit-related fees was relatively flat as the lower deposit-related fees in CCB, reflecting lower transaction activity and the impact of fee refunds related to the COVID-19 pandemic, was offset by higher cash management fees in CIB and CB.

Asset management, administration and commissions revenue increased driven by:


•	higher brokerage commissions in CIB and AWM on higher client-driven volume, and


•	higher asset management fees in AWM as a result of inflows into liquidity products, and in CCB related to a higher level of investment assets,

partially offset by


•	lower volume of annuity sales in CCB.

Investment securities gains in both periods reflected the impact of repositioning the investment securities portfolio.

Mortgage fees and related income increased due to:


•	higher net mortgage production revenue reflecting higher mortgage production volumes and margins, partially offset by the absence of gains on loan sales in the prior year in Home Lending, and


•	higher net mortgage servicing revenue reflecting higher MSR risk management results due to the absence of losses resulting from updates to model inputs in the prior year, predominantly offset by lower operating revenue reflecting a lower level of third-party loans serviced and faster prepayment speeds on lower rates.

Card income decreased due to lower net interchange income reflecting lower card sales volumes that began in March as a result of the COVID-19 pandemic, partially offset by higher annual fees.

Other income decreased reflecting:


•	net losses on certain equity investments in CIB, compared with net gains in the prior year


•	net valuation losses on certain investments in AWM, compared with gains in the prior year


•	increased amortization on higher levels of alternative energy investments in CIB. The increased amortization is

more than offset by lower income tax expense from the associated tax credits, and


•	higher costs associated with using forward contracts to hedge certain non-U.S. dollar-denominated net investment exposures in Treasury and CIO,

partially offset by


•	higher operating lease income from growth in auto operating lease volume in CCB

Net interest income decreased due to the impact of lower rates, predominantly offset by higher net interest income in CIB Markets and balance sheet growth.

The Firm’s average interest-earning assets were $2.6 trillion, up $324 billion, and the yield was 2.70%, down 106 bps, primarily due to lower rates. The net yield on these assets, on an FTE basis, was 2.17%, a decrease of 36 bps. The net yield excluding CIB Markets was 2.61%, down 78 bps.



Provision for credit losses
	Three months ended June 30,						Six months ended June 30,
(in millions)	2020		2019			Change	2020		2019			Change
Consumer, excluding credit card	$	1,591	$	(366	)	NM	$	2,210	$	(246	)	NM
Credit card	4,028		1,440			180	9,091		2,642			244
Total consumer	5,619		1,074			423	11,301		2,396			372
Wholesale	4,850		75			NM	7,444		248			NM
Investment securities	4		NA			NM	13		NA			NM
Total provision for credit losses	$	10,473	$	1,149		NM	$	18,758	$	2,644		NM

Effective January 1, 2020, the Firm adopted the CECL accounting guidance. 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.

Quarterly results

The provision for credit losses increased driven by the further deterioration and increased uncertainty in the macroeconomic environment as a result of the impact of the COVID-19 pandemic in wholesale and consumer.

The increase in wholesale reflects a net addition of $4.6 billion to the allowance for credit losses across the LOBs impacting multiple industry sectors.

The increase in consumer was driven by:


•	additions of $4.4 billion to the allowance for credit losses, consisting of $2.9 billion for Card, $900 million for Home Lending, $285 million for Auto, and $272 million for CBB,

partially offset by


•	lower net charge-offs in Card reflecting higher recoveries.

The prior year included a $234 million net reduction in the allowance for credit losses.

Refer to CCB segment results on pages 26-30, CIB on pages 31-37, CB on pages 38-41, AWM on pages 42-45, the Allowance for Credit Losses on pages 77-78, and Note 13 for additional information on the credit portfolio and the allowance for credit losses.

Year-to-date results

The provision for credit losses increased driven by the deterioration and uncertainty in the macroeconomic environment as a result of the impact of the COVID-19 pandemic in consumer and wholesale.

The increase in consumer was driven by:


•	additions of $8.7 billion to the allowance for credit losses, consisting of $6.6 billion for Card, $1.2 billion for Home Lending, $520 million for Auto, and $352 million for CBB,

partially offset by


•	lower net charge-offs reflecting higher recoveries in Home Lending on a loan sale in the first quarter of 2020, and in Card, largely offset by higher charge-offs in Card on loan growth in the prior year.

The prior year included a $221 million net reduction in the allowance for credit losses.

The increase in wholesale reflects a net addition of $7.0 billion to the allowance for credit losses across the LOBs impacting multiple industry sectors.



Noninterest expense
	Three months ended June 30,						Six months ended June 30,
(in millions)	2020		2019		Change		2020		2019		Change
Compensation expense	$	9,509	$	8,547	11	%	$	18,404	$	17,484	5	%
Noncompensation expense:
Occupancy	1,080		1,060		2		2,146		2,128		1
Technology, communications and equipment	2,590		2,378		9		5,168		4,742		9
Professional and outside services	1,999		2,212		(10	)	4,027		4,251		(5	)
Marketing^(a)	481		777		(38	)	1,281		1,609		(20	)
Other expense^(b)(c)	1,283		1,282		—		2,707		2,390		13
Total noncompensation expense	7,433		7,709		(4	)	15,329		15,120		1
Total noninterest expense	$	16,942	$	16,256	4	%	$	33,733	$	32,604	3	%


(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)	Included Firmwide legal expense/(benefit) of $118 million and $69 million for the three months ended June 30, 2020 and 2019, respectively, and $315 million and $(12) million for the six months ended June 30, 2020 and 2019, respectively.


(c)	Included FDIC-related expense of $218 million and $121 million for the three months ended June 30, 2020 and 2019, respectively, and $317 million and $264 million for the six months ended June 30, 2020 and 2019, respectively.

Quarterly results

Compensation expense increased driven by higher revenue-related expense in CIB.

Noncompensation expense decreased as a result of:


•	lower marketing expense in Card as a result of lower travel-related benefits and investments in marketing campaigns


•	lower structural expense, including lower travel and entertainment across the businesses, as well as lower payment processing costs,

partially offset by


•	higher volume-related expense, including depreciation from growth in auto lease assets in CCB, and brokerage expense in CIB


•	higher investments in the businesses, including technology.

Year-to-date results

Compensation expense increased driven by higher revenue-related expense in CIB, partially offset by lower structural compensation expense in Corporate.

Noncompensation expense increased as a result of:


•	higher legal expense primarily in CIB and Corporate


•	higher volume-related expense, including depreciation from growth in auto lease assets in CCB, and brokerage expense in CIB


•	higher investments in the businesses, including technology,

partially offset by


•	lower marketing expense in Card as a result of lower travel-related benefits and investments in marketing campaigns


•	lower structural expense, including lower travel and entertainment across the businesses, as well as lower payment processing costs.



Income tax expense
	Three months ended June 30,								Six months ended June 30,
(in millions)	2020			2019			Change		2020			2019			Change
Income before income tax expense	$	5,565		$	11,342		(51	)%	$	8,681		$	22,575		(62	)%
Income tax expense	878			1,690			(48	)	1,129			3,744			(70	)
Effective tax rate	15.8		%	14.9		%			13.0		%	16.6		%

Quarterly results

The effective tax rate increased as the reduction in income tax expense due to the impact of changes in the level and mix of income and expenses subject to U.S. federal, and state and local taxes was more than offset by the absence of the $768 million of tax benefits recorded in the prior year related to the resolution of certain tax audits.

Year-to-date results

The effective tax rate decreased driven by changes in the level and mix of income and expenses subject to U.S. federal, and state and local taxes, as well as the more significant effect of certain tax benefits on a lower level of pre-tax income. The decrease was partially offset by the recognition of $874 million of tax benefits recorded in the prior year related to the resolution of certain tax audits.



CONSOLIDATED BALANCE SHEETS AND CASH FLOWS ANALYSIS

Effective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information.

Consolidated balance sheets analysis

The following is a discussion of the significant changes between June 30, 2020, and December 31, 2019.



Selected Consolidated balance sheets data
(in millions)	June 30, 2020			December 31, 2019			Change
Assets
Cash and due from banks	$	20,544		$	21,704		(5	)%
Deposits with banks	473,185			241,927			96
Federal funds sold and securities purchased under resale agreements	256,980			249,157			3
Securities borrowed	142,704			139,758			2
Trading assets	526,042			411,103			28
Available-for-sale securities	485,883			350,699			39
Held-to-maturity securities, net of allowance for credit losses	72,908			47,540			53
Investment securities, net of allowance for credit losses	558,791			398,239			40
Loans	978,518			959,769			2
Allowance for loan losses	(32,092		)	(13,123		)	145
Loans, net of allowance for loan losses	946,426			946,646			—
Accrued interest and accounts receivable	72,260			72,861			(1	)
Premises and equipment	26,301			25,813			2
Goodwill, MSRs and other intangible assets	51,669			53,341			(3	)
Other assets	138,213			126,830			9
Total assets	$	3,213,115		$	2,687,379		20	%

Cash and due from banks and deposits with banks increased primarily as a result of significant deposit inflows, which also funded asset growth across the Firm, including in investment securities. Deposits with banks reflect the Firm’s placements of its excess cash with various central banks, including the Federal Reserve Banks.

Refer to Liquidity Risk Management on pages 55-59 and Note 11 for information on federal funds sold and securities purchased under resale agreements.

Trading assets increased compared with lower levels at year-end predominantly due to client-driven market-making activities in debt instruments in Fixed Income Markets, as well as higher derivative receivables in CIB as a result of market movements.

Refer to Notes 2 and 5 for additional information.

Investment securities increased, reflecting net purchases of U.S. Treasuries and U.S. GSE and government agency MBS in the available-for-sale (“AFS”) portfolio, driven by interest rate risk management activities and cash deployment, partially offset by a non-cash transfer of $26 billion of U.S. GSE and government agency MBS from the AFS to the held-to-maturity (“HTM”) portfolio, resulting in a comparable increase in HTM.

Refer to Corporate segment results on page 46, Investment Portfolio Risk Management on page 79, and Notes 2 and 10 for additional information on Investment securities.

Loans increased, reflecting:


•	the outstanding loans from the March drawdown activity on committed revolving credit facilities in CIB and CB, as a result of the COVID-19 pandemic, and the impact of the PPP loans in CBB and CB,

partially offset by


•	lower loans in Card due to the decline in sales volume that began in March as a result of the COVID-19 pandemic, as well as the impact of seasonality; and lower loans in Home Lending primarily due to net repayments.

The allowance for loan losses increased primarily reflecting the deterioration and uncertainty in the macroeconomic environment as a result of the impact of the COVID-19 pandemic, consisting of:


•	a $8.6 billion addition in consumer, predominantly in the credit card and residential real estate portfolios


•	a net $6.2 billion addition in wholesale, across the LOBs impacting multiple industry sectors, and


•	a net $4.2 billion addition as a result of the adoption of CECL.

There were also additions to the allowance for lending-related commitments, which is included in other liabilities on the consolidated balance sheets, of $920 million related to the impact of the COVID-19 pandemic, and $98 million related to the adoption of CECL, resulting in total additions to the allowance for credit losses of $15.7 billion and $4.3 billion, respectively, as of June 30, 2020.

Refer to Credit and Investment Risk Management on pages 60-79, and Notes 1, 2, 3, 12 and 13 for a more detailed discussion of loans and the allowance for loan losses.

Goodwill, MSRs and other intangibles decreased reflecting lower MSRs as a result of faster prepayment speeds on lower rates and the realization of expected cash flows, partially offset by net additions to the MSRs. Refer to Note 15 for additional information.

Other assets increased reflecting higher cash collateral placed with central counterparties, and the Firm’s participation in the Federal Reserve Bank of Boston’s (“FRBB”) MMLF. The assets purchased from money market mutual fund clients related to the MMLF were funded by nonrecourse advances from the FRBB, which are recorded in short-term borrowings. Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 11-12 and Liquidity Risk Management on pages 55-59 for additional information.



Selected Consolidated balance sheets data (continued)
(in millions)	June 30, 2020		December 31, 2019		Change
Liabilities
Deposits	$	1,931,029	$	1,562,431	24	%
Federal funds purchased and securities loaned or sold under repurchase agreements	235,647		183,675		28
Short-term borrowings	48,014		40,920		17
Trading liabilities	165,212		119,277		39
Accounts payable and other liabilities	230,916		210,407		10
Beneficial interests issued by consolidated variable interest entities (“VIEs”)	20,828		17,841		17
Long-term debt	317,003		291,498		9
Total liabilities	2,948,649		2,426,049		22
Stockholders’ equity	264,466		261,330		1
Total liabilities and stockholders’ equity	$	3,213,115	$	2,687,379	20	%

Deposits increased reflecting significant inflows across the LOBs primarily driven by the COVID-19 pandemic, as customers and clients looked to remain liquid as a result of market conditions.


•	In the wholesale businesses, the inflows principally occurred in March, and in general were maintained through the second quarter.


•	In CCB, the increase was driven by the continued growth in both existing and new accounts, as well as COVID-19 related factors, such as the government stimulus for consumers and small businesses, lower consumer spending, and delays in tax payments.

Refer to Liquidity Risk Management on pages 55-59 and Notes 2 and 16 for additional information.

Federal funds purchased and securities loaned or sold under repurchase agreements increased reflecting:


•	in CIB, a net increase related to client-driven market-making activities, and higher secured financing of trading assets, partially offset by a decline in the Firm's participation in the Federal Reserve's open market operations, and


•	in Treasury and CIO, higher secured financing of AFS investment securities. Refer to Liquidity Risk Management on pages 55-59 and Note 11 for additional information.

Short-term borrowings increased driven by the Firm’s participation in the FRBB’s MMLF, as well as a change in mix of funding sources in CIB activities from securities sold under repurchase agreements in CIB. The nonrecourse advances from the FRBB funded the assets purchased from money market mutual fund clients related to the MMLF, which are recorded in other assets.

Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 11-12 and Liquidity Risk Management on pages 55-59 for additional information.

Trading liabilities increased in CIB as a result of client-driven market-making activities, which resulted in higher levels of short positions in debt instruments in Fixed Income Markets, as well as higher derivative payables as a result of market movements. Refer to Notes 2 and 5 for additional information.

Accounts payable and other liabilities increased reflecting higher client payables related to client-driven activities in CIB.

Beneficial interests issued by consolidated VIEs increased reflecting higher levels of Firm-administered multi-seller conduit commercial paper held by third parties.

Refer to Off-Balance Sheet Arrangements on page 21 and Notes 14 and 23 for further information on Firm-sponsored VIEs and loan securitization trusts.

Long-term debt increased as a result of higher FHLB net advances, net issuance of senior and subordinated debt, and higher fair value hedge accounting adjustments related to lower interest rates. Refer to Liquidity Risk Management on pages 55-59 for additional information on the Firm’s long-term debt activities.

Stockholders’ equity increased reflecting the net impact of capital actions, net income, the adoption of CECL and an increase in accumulated other comprehensive income (“AOCI”). The increase in AOCI was driven by net unrealized gains on AFS securities, and higher valuation of interest rate cash flow hedges. Refer to page 96 for information on changes in stockholders’ equity and Capital actions on page 53.

Consolidated cash flows analysis

The following is a discussion of cash flow activities during the six months ended June 30, 2020 and 2019.



(in millions)	Six months ended June 30,
(in millions)	2020			2019
Net cash provided by/(used in)
Operating activities	$	(37,032	)	$	(94,734	)
Investing activities	(183,617		)	27,424
Financing activities	451,436			56,469
Effect of exchange rate changes on cash	(689		)	86
Net increase/(decrease) in cash and due from banks and deposits with banks	$	230,098		$	(10,755	)

Operating activities


•	In 2020, cash used resulted from higher trading assets and other assets, largely offset by higher trading liabilities and accounts payable and other liabilities.


•	In 2019, cash used primarily resulted from higher trading assets-debt and equity instruments and securities borrowed, partially offset by increased trading liabilities and accounts payable and other liabilities, and net proceeds from loans held-for-sale.

Investing activities


•	In 2020, cash used was driven by net purchases of investment securities and net loan originations.


•	In 2019, cash provided resulted from a decrease in securities purchased under resale agreements, and net proceeds from sales of loans held-for-investment, partially offset by net purchases of investment securities.

Financing activities


•	In 2020, cash provided was due to higher deposits, an increase in federal funds purchased and securities loaned or sold under repurchase agreements, and net proceeds from long-term borrowings.


•	In 2019, cash provided resulted from higher securities loaned or sold under repurchase agreements and higher deposits.

•

For both periods, cash was used for repurchases of common stock and cash dividends on common and preferred stock. On March 15, 2020, in response to the COVID-19 pandemic, the Firm temporarily suspended repurchases of its common equity. Additionally, in June 2020, the Federal Reserve directed all large bank holding companies, including the Firm, to discontinue net share repurchases, at least through the end of the third quarter of 2020.

* * *

Refer to Consolidated Balance Sheets Analysis on pages 18-19, Capital Risk Management on pages 49-54, and Liquidity Risk Management on pages 55-59 of this Form 10-Q, and pages 93–98 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of the activities affecting the Firm’s cash flows.



OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of business, the Firm enters into various off-balance sheet arrangements and contractual obligations that may require future cash payments. Certain obligations are recognized on-balance sheet, while others are disclosed as off-balance sheet under accounting principles generally accepted in the U.S. (“U.S. GAAP”).

Special-purpose entities

The Firm has several types of off–balance sheet arrangements, including through nonconsolidated special-purpose entities (“SPEs”), which are a type of VIE, and through lending-related financial instruments (e.g., commitments and guarantees).

The Firm holds capital, as appropriate, against all SPE-related transactions and related exposures, such as derivative contracts and lending-related commitments and guarantees.

The Firm has no commitments to issue its own stock to support any SPE transaction, and its policies require that transactions with SPEs be conducted at arm’s length and reflect market pricing.

The table below provides an index of where in this Form 10-Q a discussion of the Firm’s various off-balance sheet arrangements can be found. Refer to Note 1 for additional information about the Firm’s consolidation policies.



Type of off-balance sheet arrangement	Location of disclosure	Page references
Special-purpose entities: variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEs	Refer to Note 14	162-167
Off-balance sheet lending-related financial instruments, guarantees, and other commitments	Refer to Note 23	178-181

EXPLANATION AND RECONCILIATION OF THE FIRM’S USE OF NON-GAAP FINANCIAL MEASURES

The Firm prepares its Consolidated Financial Statements in accordance with U.S. GAAP and this presentation is referred to as “reported” basis; these financial statements appear on pages 93-97.

In addition to analyzing the Firm’s results on a reported basis, the Firm also reviews and uses certain non-GAAP financial measures at the Firmwide and segment level. These non-GAAP measures include:


•	Firmwide “managed” basis results, including the overhead ratio, which include certain reclassifications to present total net revenue from investments that receive tax credits and tax-exempt securities on a basis comparable to taxable investments and securities (“FTE” basis)


•	Pre-provision profit, which represents total net revenue less noninterest expense


•	Net interest income and net yield excluding CIB’s Markets businesses


•	Tangible common equity (“TCE”), ROTCE, and TBVPS


•	Allowance for loan losses to period-end loans retained, excluding trade finance and conduits.

Refer to Explanation and Reconciliation of the Firm’s Use Of Non-GAAP Financial Measures and Key Performance Measures on pages 57–59 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of management’s use of non-GAAP financial measures.

The following summary tables provide a reconciliation from the Firm’s reported U.S. GAAP results to managed basis.



	Three months ended June 30,
	2020								2019
(in millions, except ratios)	Reported			Fully taxable-equivalent adjustments^(b)		Managed basis			Reported			Fully taxable-equivalent adjustments^(b)		Managed basis
Other income	$	1,042		$	730	$	1,772		$	1,292		$	596	$	1,888
Total noninterest revenue^(a)	19,127			730		19,857			14,349			596		14,945
Net interest income	13,853			107		13,960			14,398			138		14,536
Total net revenue	32,980			837		33,817			28,747			734		29,481
Total noninterest expense^(a)	16,942			NA		16,942			16,256			NA		16,256
Pre-provision profit	16,038			837		16,875			12,491			734		13,225
Provision for credit losses	10,473			NA		10,473			1,149			NA		1,149
Income before income tax expense	5,565			837		6,402			11,342			734		12,076
Income tax expense	878			837		1,715			1,690			734		2,424
Net income	$	4,687		NA		$	4,687		$	9,652		NA		$	9,652

Overhead ratio	51		%	NM		50		%	57		%	NM		55		%

	Six months ended June 30,
	2020								2019
(in millions, except ratios)	Reported			Fully taxable-equivalent adjustments^(b)		Managed basis			Reported			Fully taxable-equivalent adjustments^(b)		Managed basis
Other income	$	2,198		$	1,438	$	3,636		$	2,767		$	1,181	$	3,948
Total noninterest revenue^(a)	32,880			1,438		34,318			28,972			1,181		30,153
Net interest income	28,292			217		28,509			28,851			281		29,132
Total net revenue	61,172			1,655		62,827			57,823			1,462		59,285
Total noninterest expense^(a)	33,733			NA		33,733			32,604			NA		32,604
Pre-provision profit	27,439			1,655		29,094			25,219			1,462		26,681
Provision for credit losses	18,758			NA		18,758			2,644			NA		2,644
Income before income tax expense	8,681			1,655		10,336			22,575			1,462		24,037
Income tax expense	1,129			$	1,655	2,784			3,744			1,462		5,206
Net Income	$	7,552		NA		$	7,552		$	18,831		NA		$	18,831

Overhead ratio	55		%	NM		54		%	56		%	NM		55		%


(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)	Predominantly recognized in CIB, CB and Corporate.

The following table provides information on net interest income and net yield excluding CIB’s Markets businesses.



(in millions, except rates)	Three months ended June 30,								Six months ended June 30,
(in millions, except rates)	2020			2019			Change		2020			2019			Change
Net interest income – reported	$	13,853		$	14,398		(4)%		$	28,292		$	28,851		(2)%
Fully taxable-equivalent adjustments	107			138			(22)		217			281			(23)
Net interest income – managed basis^(a)	$	13,960		$	14,536		(4)		$	28,509		$	29,132		(2	)
Less: CIB Markets net interest income^(b)	2,536			624			306		4,132			1,248			231
Net interest income excluding CIB Markets^(a)	$	11,424		$	13,912		(18)		$	24,377		$	27,884		(13	)

Average interest-earning assets	$	2,819,855		$	2,339,094		21		$	2,642,794		$	2,319,105		14
Less: Average CIB Markets interest-earning assets^(b)	795,677			673,480			18		765,856			661,397			16
Average interest-earning assets excluding CIB Markets	$	2,024,178		$	1,665,614		22	%	$	1,876,938		$	1,657,708		13	%
Net yield on average interest-earning assets – managed basis	1.99		%	2.49		%			2.17		%	2.53		%
Net yield on average CIB Markets interest-earning assets^(b)	1.28			0.37					1.08			0.38
Net yield on average interest-earning assets excluding CIB Markets	2.27		%	3.35		%			2.61		%	3.39		%


(a)	Interest includes the effect of related hedges. Taxable-equivalent amounts are used where applicable.


(b)	Refer to page 36 for further information on CIB’s Markets businesses.

The following summary table provides a reconciliation from the Firm’s common stockholders’ equity to TCE.



	Period-end				Average
(in millions, except per share and ratio data)	Jun 30, 2020		Dec 31, 2019		Three months ended June 30,						Six months ended June 30,
(in millions, except per share and ratio data)	Jun 30, 2020		Dec 31, 2019		2020			2019			2020			2019
Common stockholders’ equity	$	234,403	$	234,337	$	234,408		$	233,026		$	234,469		$	231,547
Less: Goodwill	47,811		47,823		47,805			47,472			47,808			47,474
Less: Other intangible assets	778		819		791			741			802			741
Add: Certain deferred tax liabilities^(a)	2,397		2,381		2,393			2,304			2,388			2,296
Tangible common equity	$	188,211	$	188,076	$	188,205		$	187,117		$	188,247		$	185,628

Return on tangible common equity	NA		NA		9		%	20		%	7		%	20		%
Tangible book value per share	$	61.76	$	60.98	NA			NA			N/A			N/A


(a)	Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable intangibles created in nontaxable transactions, which are netted against goodwill and other intangibles when calculating TCE.



BUSINESS SEGMENT RESULTS

The Firm is managed on an LOB basis. There are four major reportable business segments – Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking and Asset & Wealth Management. In addition, there is a Corporate segment.

The business segments are determined based on the products and services provided, or the type of customer served, and they reflect the manner in which financial information is currently evaluated by the Firm’s Operating Committee. Segment results are presented on a managed basis. Refer to Explanation and Reconciliation of the Firm’s use of Non-GAAP Financial Measures on pages 22-23 for a definition of managed basis.

Description of business segment reporting methodology

Results of the business segments are intended to present each segment as if it were a stand-alone business. The management reporting process that derives business segment results includes the allocation of certain income and expense items. The Firm periodically assesses the assumptions, methodologies and reporting classifications used for segment reporting, and further refinements may be implemented in future periods. The Firm’s LOBs also provide various business metrics which are utilized by the Firm and its investors and analysts in assessing performance.

Revenue sharing

When business segments join efforts to sell products and services to the Firm’s clients, the participating business segments may agree to share revenue from those transactions. Revenue and expense are generally recognized in the segment responsible for the related product or service, with allocations to the other segment(s)

involved in the transaction. The segment results reflect these revenue-sharing agreements.

Business segment capital allocation

The amount of capital assigned to each business is referred to as equity. Periodically, the assumptions and methodologies used to allocate capital are assessed and as a result, the capital allocated to the LOBs may change. Refer to Line of business equity on page 90 of JPMorgan Chase’s 2019 Form 10-K for additional information on business segment capital allocation.

Refer to Business Segment Results – Description of business segment reporting methodology on pages 60–61 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of those methodologies.

Business segment changes

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 is reported across CCB, CIB and CB based primarily on client relationships. Prior periods have been revised to reflect this realignment and revised allocation methodology.

JPMorgan Chase

Consumer Businesses

Wholesale Businesses

Consumer & Community Banking

Corporate & Investment Bank

Commercial Banking

Asset & Wealth Management

Consumer &
Business Banking

Home Lending

Card & Auto

Banking

Markets &
Securities Services

• Middle Market Banking

• Asset Management

• Consumer Banking/Chase Wealth Management

• Business Banking

• Home Lending Production

• Home Lending Servicing

• Real Estate Portfolios

• Credit Card

• Auto

• Investment Banking

• Wholesale Payments

• Lending

• Fixed Income Markets

• Corporate Client Banking

• Wealth Management

• Equity Markets

• Securities Services

• Credit Adjustments & Other

• Commercial Real Estate Banking

Segment results – managed basis

The following tables summarize the Firm’s results by segment for the periods indicated.



Three months ended June 30,	Consumer & Community Banking^(a)								Corporate & Investment Bank							Commercial Banking
(in millions, except ratios)	2020			2019			Change		2020			2019			Change	2020			2019			Change
Total net revenue	$	12,217		$	13,484		(9	)%	$	16,352		$	9,831		66	$	2,392		$	2,285		5	%
Total noninterest expense	6,626			6,836			(3	)	6,764			5,661			19	899			931			(3	)
Pre-provision profit/(loss)	5,591			6,648			(16	)	9,588			4,170			130	1,493			1,354			10
Provision for credit losses	5,828			1,120			420		1,987			—			NM	2,431			29			NM
Net income/(loss)	(176		)	4,157			NM		5,464			2,946			85	(691		)	1,002			NM
Return on equity (“ROE”)	(2		)%	31		%			27		%	14		%		(14		)%	17		%



Three months ended June 30,	Asset & Wealth Management								Corporate								Total^(a)
(in millions, except ratios)	2020			2019			Change		2020			2019			Change		2020			2019			Change
Total net revenue	$	3,610		$	3,559		1	%	$	(754	)	$	322		NM		$	33,817		$	29,481		15	%
Total noninterest expense	2,506			2,596			(3	)	147			232			(37	)	16,942			16,256			4
Pre-provision profit/(loss)	1,104			963			15		(901		)	90			NM		16,875			13,225			28
Provision for credit losses	223			2			NM		4			(2		)	NM		10,473			1,149			NM
Net income/(loss)	658			719			(8	)	(568		)	828			NM		4,687			9,652			(51	)
ROE	24		%	27		%			NM			NM					7		%	16		%



Six months ended June 30,	Consumer & Community Banking^(a)								Corporate & Investment Bank							Commercial Banking
(in millions, except ratios)	2020			2019			Change		2020			2019			Change	2020			2019			Change
Total net revenue	$	25,329		$	26,927		(6	)%	$	26,300		$	19,865		32	$	4,570		$	4,698		(3	)%
Total noninterest expense	13,728			13,759			—		12,660			11,290			12	1,887			1,869			1
Pre-provision profit/(loss)	11,601			13,168			(12	)	13,640			8,575			59	2,683			2,829			(5	)
Provision for credit losses	11,600			2,434			377		3,388			87			NM	3,441			119			NM
Net income/(loss)	15			8,104			(100	)	7,452			6,206			20	(544		)	2,062			NM
ROE	(1		)%	31		%			18		%	15		%		(6		)%	18		%



Six months ended June 30,	Asset & Wealth Management								Corporate							Total^(a)
(in millions, except ratios)	2020			2019			Change		2020			2019		Change		2020			2019			Change
Total net revenue	$	7,216		$	7,048		2	%	$	(588	)	$	747	NM		$	62,827		$	59,285		6	%
Total noninterest expense	5,165			5,243			(1	)	293			443		(34	)	33,733			32,604			3
Pre-provision profit/(loss)	2,051			1,805			14		(881		)	304		NM		29,094			26,681			9
Provision for credit losses	317			4			NM		12			—		NM		18,758			2,644			NM
Net income/(loss)	1,322			1,380			(4	)	(693		)	1,079		NM		7,552			18,831			(60	)
ROE	24		%	26		%			NM			NM				6		%	16		%


(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.

The following sections provide a comparative discussion of the Firm’s results by segment as of or for the three and six months ended June 30, 2020 versus the corresponding periods in the prior year, unless otherwise specified.



CONSUMER & COMMUNITY BANKING

Consumer & Community Banking offers services to consumers and businesses through bank branches, ATMs, digital (including mobile and online) and telephone banking. CCB is organized into Consumer & Business Banking (including Consumer Banking/Chase Wealth Management and Business Banking), Home Lending (including Home Lending Production, Home Lending Servicing and Real Estate Portfolios) and Card & Auto. Consumer & Business Banking offers deposit and investment products and services to consumers, and lending, deposit, and cash management and payment solutions to small businesses. Home Lending includes mortgage origination and servicing activities, as well as portfolios consisting of residential mortgages and home equity loans. Card & Auto issues credit cards to consumers and small businesses and originates and services auto loans and leases.

Refer to Line of Business Metrics on page 197 for a further discussion of the business profile of CCB.



Selected income statement data
	Three months ended June 30,								Six months ended June 30,
(in millions, except ratios)	2020			2019			Change		2020			2019			Change
Revenue
Lending- and deposit-related fees^(a)	$	617		$	971		(36	)%	$	1,589		$	1,880		(15	)%
Asset management, administration and commissions^(a)	536			620			(14	)	1,121			1,201			(7	)
Mortgage fees and related income	917			279			229		1,237			675			83
Card income^(b)	733			913			(20	)	1,442			1,775			(19	)
All other income	1,313			1,321			(1	)	2,686			2,611			3
Noninterest revenue	4,116			4,104			—		8,075			8,142			(1	)
Net interest income	8,101			9,380			(14	)	17,254			18,785			(8	)
Total net revenue	12,217			13,484			(9	)	25,329			26,927			(6	)

Provision for credit losses	5,828			1,120			420		11,600			2,434			377

Noninterest expense
Compensation expense	2,557			2,531			1		5,154			5,097			1
Noncompensation expense^(b)(c)	4,069			4,305			(5	)	8,574			8,662			(1	)
Total noninterest expense	6,626			6,836			(3	)	13,728			13,759			—
Income/(loss) before income tax expense/(benefit)	(237		)	5,528			NM		1			10,734			(100	)
Income tax expense/(benefit)	(61		)	1,371			NM		(14		)	2,630			NM
Net income/(loss)	$	(176	)	$	4,157		NM		$	15		$	8,104		(100	)

Revenue by line of business
Consumer & Business Banking	$	5,107		$	6,897		(26	)	$	11,198		$	13,558		(17	)
Home Lending	1,687			1,118			51		2,848			2,464			16
Card & Auto^(b)	5,423			5,469			(1	)	11,283			10,905			3

Mortgage fees and related income details:
Net production revenue	742			353			110		1,061			553			92
Net mortgage servicing revenue^(d)	175			(74		)	NM		176			122			44
Mortgage fees and related income	$	917		$	279		229	%	$	1,237		$	675		83	%

Financial ratios
Return on equity	(2		)%	31		%			(1		)%	31		%
Overhead ratio	54			51					54			51


(a)	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.


(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.


(c)	Included depreciation expense on leased assets of $1.1 billion and $957 million for the three months ended June 30, 2020 and 2019, respectively, and $2.2 billion and $1.9 billion for six months ended June 30, 2020 and 2019, respectively.


(d)	Included MSR risk management results of $79 million and $(244) million for the three months ended June 30, 2020 and 2019, respectively, and $(11) million and $(253) million for six months ended June 30, 2020 and 2019, respectively.

Quarterly results

Net loss was $176 million, compared with net income of $4.2 billion in the prior year, predominantly driven by an increase in the provision for credit losses.

Net revenue was $12.2 billion, a decrease of 9%.

Net interest income was $8.1 billion, down 14%, driven by:


•	the impact of deposit margin compression in CBB and lower loans in Card,

partially offset by


•	growth in deposits in CBB and loan margin expansion in Card.

Noninterest revenue was $4.1 billion, flat compared to the prior year, reflecting:


•	higher net mortgage production revenue reflecting higher production margins, partially offset by the absence of gains on loan sales in the prior year, and


•	higher net mortgage servicing revenue reflecting higher MSR risk management results due to the absence of losses resulting from updates to model inputs in the prior year partially offset by lower operating revenue reflecting a lower level of third-party loans serviced,

offset by


•	lower deposit-related fees due to lower transaction activity and the impact of fee refunds related to the COVID-19 pandemic,


•	lower card income due to lower net interchange income reflecting lower card sales volumes that began in March as a result of the COVID-19 pandemic, partially offset by higher annual fees and lower acquisition costs, and


•	lower volume of annuity sales.

Refer to Note 15 for further information regarding changes in the value of the MSR asset and related hedges, and mortgage fees and related income.

Noninterest expense was $6.6 billion, down 3%, driven by lower marketing expense on lower travel-related benefits and lower investments in marketing campaigns, as well as lower structural expense, including lower payment processing costs.

The provision for credit losses was $5.8 billion, an increase of $4.7 billion from the prior year, driven by:


•	additions to the allowance for credit losses as a result of the impact of the COVID-19 pandemic, consisting of: $2.9 billion for Card, $900 million for Home Lending, $490 million for CBB, and $310 million for Auto,

partially offset by


•	lower net charge-offs in Card reflecting higher recoveries.

The prior year included a $200 million net reduction in the allowance for credit losses.

Refer to Credit and Investment Risk Management on pages 60-79 and Allowance for Credit Losses on pages 77-78 for further discussions of the credit portfolios and the allowance for credit losses.

Year-to-date results

Net income was $15 million, compared to $8.1 billion in the prior year, predominantly driven by an increase in the provision for credit losses.

Net revenue was $25.3 billion, a decrease of 6%.

Net interest income was $17.3 billion, down 8%, driven by:


•	the impact of deposit margin compression in CBB, and lower loans in Home Lending predominantly due to prior year loan sales,

partially offset by


•	growth in deposits in CBB, and loan margin expansion in Card.

Noninterest revenue was $8.1 billion, relatively flat, driven by:


•	lower card income due to lower net interchange income reflecting lower card sales volumes that began in March as a result of the COVID-19 pandemic, partially offset by higher annual fees,


•	lower deposit-related fees due to lower transaction activity and the impact of fee refunds related to the COVID-19 pandemic, and


•	lower volume of annuity sales,

offset by


•	higher net mortgage production revenue reflecting higher mortgage production volumes and margins, partially offset by the absence of gains on loan sales in the prior year,


•	higher auto lease volume, and


•	higher net mortgage servicing revenue reflecting higher MSR risk management results due to the absence of losses resulting from updates to model inputs in the prior year, predominantly offset by lower operating revenue reflecting a lower level of third-party loans serviced and faster prepayment speeds on lower rates.

Noninterest expense was $13.7 billion, flat compared to the prior year, reflecting:


•	lower structural expenses, including lower payment processing costs, and


•	lower marketing expenses on lower travel-related benefits and investments in marketing campaigns,

offset by


•	higher volume- and revenue-related expense, including depreciation on auto lease assets, and investments in the business.

The provision for credit losses was $11.6 billion, an increase of $9.2 billion from the prior year, driven by:


•	additions to the allowance for credit losses as a result of the impact of the COVID-19 pandemic, consisting of: $6.6 billion for Card, $1.2 billion for Home Lending, $649 million for CBB, and $560 million for Auto,

partially offset by


•	lower net charge-offs reflecting higher recoveries in Home Lending on a loan sale in the first quarter of 2020, and in Card, largely offset by higher charge-offs in Card on loan growth in the prior year.

The prior year included a $200 million net reduction in the allowance for credit losses.



Selected metrics
	As of or for the three months ended June 30,							As of or for the six months ended June 30,
(in millions, except headcount)	2020			2019		Change		2020			2019		Change
Selected balance sheet data (period-end)
Total assets	$	492,251		$	536,758	(8	)%	$	492,251		$	536,758	(8	)%
Loans:
Consumer & Business Banking	46,910		^(b)	26,616		76		46,910		^(b)	26,616		76
Home Lending	188,576			219,533		(14	)	188,576			219,533		(14	)
Card	141,656			157,576		(10	)	141,656			157,576		(10	)
Auto	59,287			62,073		(4	)	59,287			62,073		(4	)
Total loans	436,429			465,798		(6	)	436,429			465,798		(6	)
Deposits	876,991			695,096		26		876,991			695,096		26
Equity	52,000			52,000		—		52,000			52,000		—
Selected balance sheet data (average)
Total assets	$	498,140		$	534,612	(7	)	$	507,676		$	540,296	(6	)
Loans:
Consumer & Business Banking	41,198			26,570		55		34,230			26,529		29
Home Lending	192,716			224,685		(14	)	195,379			231,778		(16	)
Card	142,377			153,746		(7	)	152,518			152,447		—
Auto	60,306			62,236		(3	)	60,599			62,498		(3	)
Total loans	436,597			467,237		(7	)	442,726			473,252		(6	)
Deposits	831,996			690,892		20		782,822			685,980		14
Equity	52,000			52,000		—		52,000			52,000		—

Headcount^(a)	122,089			123,580		(1	)%	122,089			123,580		(1	)%

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, including a decrease to period-end assets and headcount of $13.9 billion and 4,152, respectively, as of June 30, 2019.


(a)	During the second quarter of 2020, certain technology and support functions, comprising approximately 850 staff, were transferred from AWM to CCB as part of the ongoing reorganization of the U.S. Wealth Management business.


(b)	At June 30, 2020, included $19.9 billion of loans in Business Banking under the PPP. Refer to Credit Portfolio on pages 60-61 for a further discussion of the PPP.



Selected metrics
	As of or for the three months ended June 30,									As of or for the six months ended June 30,
(in millions, except ratio data)	2020				2019			Change		2020				2019			Change
Credit data and quality statistics
Nonaccrual loans^(a)(b)	$	4,407		^(e)	$	3,142		40	%	$	4,407		^(e)	$	3,142		40	%

Net charge-offs/(recoveries)
Consumer & Business Banking	60				66			(9	)	134				125			7
Home Lending	(5		)		(28		)	82		(127		)		(33		)	(285	)
Card	1,178				1,240			(5	)	2,491				2,442			2
Auto	45				42			7		93				100			(7	)
Total net charge-offs/(recoveries)	$	1,278			$	1,320		(3	)	$	2,591			$	2,634		(2	)

Net charge-off/(recovery) rate
Consumer & Business Banking	0.59		%	^(f)	1.00		%			0.79		%	^(f)	0.95		%
Home Lending	(0.01		)		(0.05		)			(0.13		)		(0.03		)
Card	3.33				3.24					3.28				3.23
Auto	0.30				0.27					0.31				0.32
Total net charge-off/(recovery) rate	1.18		%		1.14		%			1.18				1.13

30+ day delinquency rate
Home Lending^(c)(d)	1.30		%	^(g)	1.55		%			1.30		%	^(g)	1.55		%
Card	1.71			^(g)	1.71					1.71			^(g)	1.71
Auto	0.54			^(g)	0.82					0.54			^(g)	0.82

90+ day delinquency rate — Card	0.93		%	^(g)	0.87		%			0.93			^(g)	0.87

Allowance for loan losses
Consumer & Business Banking	$	1,370			$	796		72		$	1,370			$	796		72
Home Lending	2,957				2,302			28		2,957				2,302			28
Card	17,800				5,383			231		17,800				5,383			231
Auto	1,044				465			125		1,044				465			125
Total allowance for loan losses	$	23,171			$	8,946		159	%	$	23,171			$	8,946		159	%

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 purchased credit deteriorated (“PCD”) loans under CECL. Refer to Note 1 for further information.


(a)	At June 30, 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.


(b)	At June 30, 2020 and 2019, nonaccrual loans excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $561 million and $1.8 billion, respectively. These amounts have been excluded based upon the government guarantee.


(c)	At June 30, 2020, the 30+ day delinquency rates included PCD loans. The rate prior to January 1, 2020 was revised to include the impact of PCI loans.


(d)	At June 30, 2020 and 2019, excluded mortgage loans insured by U.S. government agencies of $826 million and $2.9 billion, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.


(e)	Generally excludes loans that were under payment deferral programs offered in response to the COVID-19 pandemic. Refer to Consumer Credit Portfolio on pages 62-66 for further information on consumer payment assistance activity.


(f)	At June 30, 2020, included $19.9 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 60-61 for a further discussion of the PPP.

(g)

At June 30, 2020, the principal balance of loans in Home Lending, Card and Auto under payment deferral programs offered in response to the COVID-19 pandemic were $18.2 billion, $4.4 billion and $12.3 billion, respectively. Loans that are performing according to their modified terms are generally not considered delinquent. Refer to Consumer Credit Portfolio on pages 62-66 for further information on consumer payment assistance activity.



Selected metrics
	As of or for the three months ended June 30,									As of or for the six months ended June 30,
(in billions, except ratios and where otherwise noted)	2020				2019			Change		2020				2019			Change
Business Metrics
Number of branches	4,923				4,970			(1	)%	4,923				4,970			(1	)%
Active digital customers (in thousands)^(a)	54,471				51,032			7		54,471				51,032			7
Active mobile customers (in thousands)^(b)	39,024				35,392			10		39,024				35,392			10
Debit and credit card sales volume	$	237.6			$	281.5		(16	)	$	503.6			$	536.6		(6	)

Consumer & Business Banking
Average deposits	$	813.2			$	676.7		20		$	766.0			$	672.6		14
Deposit margin	1.52		%		2.60		%			1.77		%		2.61		%
Business banking origination volume	$	23.0		^(f)	$	1.7		NM		$	24.5		^(f)	$	3.2		NM
Client investment assets	356.1				328.1			9		356.1				328.1			9

Home Lending
Mortgage origination volume by channel
Retail	$	18.0			$	12.5		44		$	32.1			$	20.4		57
Correspondent	6.2				12.0			(48	)	20.2				19.1			6
Total mortgage origination volume^(c)	$	24.2			$	24.5		(1	)	$	52.3			$	39.5		32

Total loans serviced (period-end)	$	683.7			$	780.1		(12	)	$	683.7			$	780.1		(12	)
Third-party mortgage loans serviced (period-end)	482.4				526.6			(8	)	482.4				526.6			(8	)
MSR carrying value (period-end)	3.1				5.1			(39	)	3.1				5.1			(39	)
Ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end)	0.64		%		0.97		%			0.64		%		0.97		%

MSR revenue multiple^(d)	2.29		x		2.69		x			2.21		x		2.77		x

Credit Card
Credit card sales volume, excluding Commercial Card	$	148.5			$	192.5		(23	)	$	327.6			$	365.0		(10	)
Net revenue rate^(e)	11.02		%		10.31		%			10.76		%		10.43		%

Auto
Loan and lease origination volume	$	7.7			$	8.5		(9	)	$	16.0			$	16.4		(2	)
Average auto operating lease assets	22.6				21.3			6	%	22.8				21.1			8	%


(a)	Users of all web and/or mobile platforms who have logged in within the past 90 days.


(b)	Users of all mobile platforms who have logged in within the past 90 days.


(c)	Firmwide mortgage origination volume was $28.3 billion and $26.3 billion for the three months ended June 30, 2020 and 2019, respectively and $60.2 billion and $42.7 billion for the six months ended June 30, 2020 and 2019, respectively.


(d)	Represents the ratio of MSR carrying value (period-end) to third-party mortgage loans serviced (period-end) divided by the ratio of annualized loan servicing-related revenue to third-party mortgage loans serviced (average).


(e)	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.


(f)	Included $21.5 billion of origination volume under the PPP for the three and six months ended June 30, 2020. Refer to Credit Portfolio on pages 60-61 for a further discussion of the PPP.



CORPORATE & INVESTMENT BANK

The Corporate & Investment Bank, which consists of Banking and Markets & Securities 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 Wholesale Payments, which provides payments services enabling clients to manage payments and receipts globally, and cross-border financing. Markets & Securities Services includes Markets, a global market-maker in cash securities and derivative instruments, which also offers sophisticated risk management solutions, prime brokerage, and research. Markets & Securities 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.

Refer to Line of Business Metrics on page 197 for a further discussion of the business profile of CIB.



Selected income statement data
	Three months ended June 30,								Six months ended June 30,
(in millions, except ratios)	2020			2019			Change		2020			2019			Change
Revenue
Investment banking fees	$	2,847		$	1,846		54	%	$	4,754		$	3,690		29	%
Principal transactions	7,400			3,885			90		10,588			8,049			32
Lending- and deposit-related fees^(a)	500			412			21		950			808			18
Asset management, administration and commissions^(a)	1,146			1,112			3		2,407			2,179			10
All other income	380			405			(6	)	415			770			(46	)
Noninterest revenue	12,273			7,660			60		19,114			15,496			23
Net interest income	4,079			2,171			88		7,186			4,369			64
Total net revenue^(b)	16,352			9,831			66		26,300			19,865			32

Provision for credit losses	1,987			—			NM		3,388			87			NM

Noninterest expense
Compensation expense	3,997			2,839			41		7,003			5,930			18
Noncompensation expense	2,767			2,822			(2	)	5,657			5,360			6
Total noninterest expense	6,764			5,661			19		12,660			11,290			12
Income before income tax expense	7,601			4,170			82		10,252			8,488			21
Income tax expense	2,137			1,224			75		2,800			2,282			23
Net income	$	5,464		$	2,946		85	%	$	7,452		$	6,206		20	%
Financial ratios
Return on equity	27		%	14		%			18		%	15		%
Overhead ratio	41			58					48			57
Compensation expense as percentage of total net revenue	24			29					27			30


(a)	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.

(b)

Includes tax-equivalent adjustments, predominantly due to income tax credits related to alternative energy investments; income tax credits and amortization of the cost of investments in affordable housing projects; and tax-exempt income from municipal bonds of $686 million and $547 million for the three months ended June 30, 2020 and 2019, respectively, and $1.4 billion and $1.1 billion for the six months ended June 30, 2020 and 2019, respectively.



Selected income statement data
	Three months ended June 30,							Six months ended June 30,
(in millions)	2020		2019			Change		2020			2019		Change
Revenue by business
Investment Banking	$	3,401	$	1,776		91	%	$	4,287		$	3,521	22	%
Wholesale Payments	1,356		1,402			(3	)	2,715			2,817		(4	)
Lending	270		260			4		620			518		20
Total Banking	5,027		3,438			46		7,622			6,856		11
Fixed Income Markets	7,338		3,690			99		12,331			7,415		66
Equity Markets	2,380		1,728			38		4,617			3,469		33
Securities Services	1,097		1,045			5		2,171			2,059		5
Credit Adjustments & Other^(a)	510		(70		)	NM		(441		)	66		NM
Total Markets & Securities Services	11,325		6,393			77		18,678			13,009		44
Total net revenue	$	16,352	$	9,831		66	%	$	26,300		$	19,865	32	%

(a)

Includes credit valuation adjustments (“CVA”) managed centrally within CIB and funding valuation adjustments (“FVA”) on derivatives and certain components of fair value option elected liabilities, which are primarily reported in principal transactions revenue. Results are presented net of associated hedging activities and net of CVA and FVA amounts allocated to Fixed Income Markets and Equity Markets.

Quarterly results

Net income was $5.5 billion, up 85%, with record revenue more than offsetting higher noninterest expense and an increase in the provision for credit losses.

Net revenue was $16.4 billion, up 66%.

Banking revenue was $5.0 billion, up 46%.

•

Investment Banking revenue was $3.4 billion, up 91%, driven by higher Investment Banking fees, up 54%, reflecting higher fees across products, as well as $659 million of markups on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio as a result of improved market conditions. The Firm maintained its #1 ranking for Global Investment Banking fees, according to Dealogic.


–	Debt underwriting fees were $1.3 billion, up 55%, driven by increased industry-wide fees and wallet share gains in both investment-grade and high-yield bonds.


–	Equity underwriting fees were $977 million, up 93%, driven by both increased industry-wide fees and wallet share gains primarily in follow-on offerings and convertible securities markets.


–	The increased activity in debt and equity underwriting reflected clients seeking access to liquidity as a result of the COVID-19 pandemic.


–	Advisory fees were $602 million, up 15%, driven by a few large completed transactions.


•	Wholesale Payments revenue was $1.4 billion, down 3%, driven by a reporting re-classification for certain expenses which are now reported as a reduction of revenue in Merchant Services. In addition, the impact of higher deposit balances was predominantly offset by deposit margin compression.


•	Lending revenue was $270 million, up 4%, with higher net interest income on higher loan balances, as well as

higher fees, offset by fair value losses on hedges of accrual loans.

Markets & Securities Services revenue was $11.3 billion, up 77%. Markets revenue was $9.7 billion, up 79%.


•	Fixed Income Markets revenue was $7.3 billion, up 99%, or up 120% excluding a gain from the IPO of Tradeweb in the prior year, driven by strong performance across products, primarily in Rates, Currencies & Emerging Markets, and Credit.


•	Equity Markets revenue was $2.4 billion, up 38%, predominantly driven by strong client activity in derivatives and Cash Equities.


•	Securities Services revenue was $1.1 billion, up 5%, predominantly driven by deposit balance and fee growth partially offset by deposit margin compression.


•	Credit Adjustments & Other was a gain of $510 million, driven by funding spread tightening on derivatives.

Noninterest expense was $6.8 billion, up 19%, driven by higher revenue-related compensation expense.

The provision for credit losses was $2.0 billion, predominantly driven by net additions to the allowance for credit losses as a result of the impact of the COVID-19 pandemic across multiple industry sectors.

Year-to-date results

Net income was $7.5 billion, up 20%, with revenue more than offsetting higher noninterest expense and an increase in the provision for credit losses.

Net revenue was $26.3 billion, up 32%.

Banking revenue was $7.6 billion, up 11%.


•	Investment Banking revenue was $4.3 billion, up 22%, driven by higher Investment Banking fees, up 29%, reflecting higher debt and equity underwriting fees, partially offset by lower advisory fees, as well as $161 million of net markdowns on held-for-sale positions,

including unfunded commitments, in the bridge financing portfolio. The Firm maintained its #1 ranking for Global Investment Banking fees, according to Dealogic.


–	Debt underwriting fees were $2.3 billion, up 34%, driven by increased industry-wide fees and wallet share gains in investment-grade bonds, and for high-yield bonds, after the markets stabilized in the second quarter of 2020.


–	Equity underwriting fees were $1.3 billion, up 70%, driven by both increased industry-wide fees and wallet share gains primarily in follow-on offerings and convertible securities markets.


–	The increased activity in debt and equity underwriting reflected clients seeking access to liquidity as a result of the COVID-19 pandemic.


–	Advisory fees of $1.1 billion were down 5%, driven by lower number of completed transactions.


•	Wholesale payments revenue was $2.7 billion, down 4%, driven by a reporting re-classification for certain expenses which are now reported as a reduction of revenue in Merchant Services. In addition, the impact of higher balances and fee growth was predominantly offset by deposit margin compression.


•	Lending revenue was $620 million, up 20%, driven by higher net interest income on higher loan balances, as well as higher fees.

Markets & Securities Services revenue was $18.7 billion, up 44%. Markets revenue was $16.9 billion, up 56%.


•	Fixed Income Markets revenue was $12.3 billion, up 66%, driven by strong client activity across products primarily in Rates, Currencies & Emerging Markets, and Credit.


•	Equity Markets revenue was $4.6 billion, up 33%, driven by strong client activity in derivatives and Cash Equities.


•	Securities Services revenue was $2.2 billion, up 5%, predominantly driven by deposit balance and fee growth partially offset by deposit margin compression.


•	Credit Adjustments & Other was a net loss of $441 million, predominantly driven by losses on certain components of fair value option elected liabilities, as well as the impact of funding spread widening on derivatives

Noninterest expense was $12.7 billion, up 12%, predominantly driven by higher revenue-related compensation expense.

The provision for credit losses was $3.4 billion, compared with $87 million in the prior year. The increase was predominantly driven by net additions to the allowance for credit losses as a result of the impact of the COVID-19 pandemic across multiple industry sectors.

Refer to Credit and Investment Risk Management on pages 60-79 and Allowance for Credit Losses on pages 77-78 for further discussions of the credit portfolios and the allowance for credit losses.



Selected metrics
	As of or for the three months ended June 30,						As of or for the six months ended June 30,
(in millions, except headcount)	2020		2019		Change		2020		2019		Change
Selected balance sheet data (period-end)
Assets	$	1,080,761	$	976,430	11	%	$	1,080,761	$	976,430	11	%
Loans:
Loans retained^(a)	140,770		123,074		14		140,770		123,074		14
Loans held-for-sale and loans at fair value	10,241		6,838		50		10,241		6,838		50
Total loans	151,011		129,912		16		151,011		129,912		16
Equity	80,000		80,000		—		80,000		80,000		—
Selected balance sheet data (average)
Assets	$	1,167,807	$	1,000,517	17		$	1,125,314	$	984,165	14
Trading assets-debt and equity instruments	450,507		421,775		7		438,911		401,656		9
Trading assets-derivative receivables	76,710		48,815		57		65,922		49,707		33
Loans:
Loans retained^(a)	$	154,038	$	124,194	24		$	141,438	$	125,585	13
Loans held-for-sale and loans at fair value	8,399		7,763		8		9,108		8,186		11
Total loans	$	162,437	$	131,957	23		$	150,546	$	133,771	13
Equity	80,000		80,000		—		80,000		80,000		—
Headcount	60,950		59,111		3	%	60,950		59,111		3	%

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, including an increase to period-end assets and headcount of $13.9 billion and 4,152, respectively, as of June 30, 2019.


(a)	Loans retained includes credit portfolio loans, loans held by consolidated Firm-administered multi-seller conduits, trade finance loans, other held-for-investment loans and overdrafts.



Selected metrics
	As of or for the three months ended June 30,								As of or for the six months ended June 30,
(in millions, except ratios)	2020			2019			Change		2020			2019			Change
Credit data and quality statistics
Net charge-offs/(recoveries)	$	204		$	72		183	%	$	259		$	102		154	%
Nonperforming assets:
Nonaccrual loans:
Nonaccrual loans retained^(a)	$	1,195		$	569		110	%	$	1,195		$	569		110
Nonaccrual loansheld-for-sale and loans at fair value	250			370			(32	)	250			370			(32	)
Total nonaccrual loans	1,445			939			54		1,445			939			54
Derivative receivables	108			39			177		108			39			177
Assets acquired in loan satisfactions	35			58			(40	)	35			58			(40	)
Total nonperforming assets	$	1,588		$	1,036		53		$	1,588		$	1,036		53
Allowance for credit losses:
Allowance for loan losses	$	3,440		$	1,131		204		$	3,440		$	1,131		204
Allowance for lending-related commitments	1,233			807			53		1,233			807			53
Total allowance for credit losses	$	4,673		$	1,938		141	%	$	4,673		$	1,938		141	%
Net charge-off/(recovery) rate^(b)	0.53		%	0.23		%			0.37		%	0.16		%
Allowance for loan losses to period-end loans retained	2.44			0.92					2.44			0.92
Allowance for loan losses to period-end loans retained, excluding trade finance and conduits^(c)	3.27			1.27					3.27			1.27
Allowance for loan losses to nonaccrual loans retained^(a)	288			199					288			199
Nonaccrual loans to total period-end loans	0.96		%	0.72		%			0.96		%	0.72		%


(a)	Allowance for loan losses of $340 million and $147 million were held against these nonaccrual loans at June 30, 2020 and 2019, respectively.


(b)	Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.


(c)	Management uses allowance for loan losses to period-end loans retained, excluding trade finance and conduits, a non-GAAP financial measure, to provide a more meaningful assessment of CIB’s allowance coverage ratio.



Investment banking fees
	Three months ended June 30,					Six months ended June 30,
(in millions)	2020		2019		Change	2020		2019		Change
Advisory	$	602	$	525	15	$	1,105	$	1,169	(5	)%
Equity underwriting	977		505		93	1,308		770		70
Debt underwriting^(a)	1,268		816		55	2,341		1,751		34
Total investment banking fees	$	2,847	$	1,846	54	$	4,754	$	3,690	29	%


(a)	Represents long-term debt and loan syndications.



League table results – wallet share
	Three months ended June 30,						Six months ended June 30,						Full-year 2019
	2020			2019			2020			2019			Full-year 2019
	Rank		Share	Rank		Share	Rank		Share	Rank		Share	Rank		Share
Based on fees^(a)
M&A^(b)
Global	#	1	10.6	#	2	8.8	#	2	9.2	#	2	9.3	#	2	9.0	%
U.S.	4		8.8	2		8.8	2		8.8	2		9.5	2		9.3
Equity and equity-related^(c)
Global	2		11.8	2		9.6	2		10.9	2		9.3	1		9.3
U.S.	2		13.2	2		11.4	2		12.9	2		11.7	2		13.2
Long-term debt^(d)
Global	1		10.0	1		7.4	1		9.5	1		7.6	1		7.8
U.S.	1		13.4	1		11.4	1		12.9	1		11.6	1		12.0
Loan syndications
Global	1		8.7	1		9.0	1		9.9	1		11.1	1		10.1
U.S.	3		9.2	2		10.2	1		9.8	1		13.4	1		12.5
Global investment banking fees^(e)	#	1	10.6	#	1	8.6	#	1	9.8	#	1	9.1	#	1	8.9	%


(a)	Source: Dealogic as of July 1, 2020. Reflects the ranking of revenue wallet and market share.


(b)	Global M&A excludes any withdrawn transactions. U.S. M&A revenue wallet represents wallet from client parents based in the U.S.


(c)	Global equity and equity-related ranking includes rights offerings and Chinese A-Shares.


(d)	Long-term debt rankings include investment-grade, high-yield, supranationals, sovereigns, agencies, covered bonds, ABS and mortgage-backed securities (“MBS”); and exclude money market, short-term debt, and U.S. municipal securities.


(e)	Global investment banking fees exclude money market, short-term debt and shelf deals.

Markets revenue

The following table summarizes select income statement data for the Markets businesses. Markets includes both Fixed Income Markets and Equity Markets. Markets revenue comprises principal transactions, fees, commissions and other income, as well as net interest income. The Firm assesses its Markets business performance on a total revenue basis, as offsets may occur across revenue line items. For example, securities that generate net interest income may be risk-managed by derivatives that are

recorded in principal transactions revenue. Refer to Notes 6 and 7 for a description of the composition of these income statement line items. Refer to Markets revenue on page 69 of JPMorgan Chase’s 2019 Form 10-K for further information.

For the periods presented below, the predominant source of principal transactions revenue was the amount recognized upon executing new transactions.



	Three months ended June 30,							Three months ended June 30,
	2020							2019
(in millions)	Fixed Income Markets		Equity Markets			Total Markets		Fixed Income Markets		Equity Markets			Total Markets
Principal transactions	$	4,651	$	1,737		$	6,388	$	2,431	$	1,608		$	4,039
Lending- and deposit-related fees	48		2			50		49		2			51
Asset management, administration and commissions	93		497			590		97		453			550
All other income	176		(22		)	154		173		(19		)	154
Noninterest revenue	4,968		2,214			7,182		2,750		2,044			4,794
Net interest income	2,370		166			2,536		940		(316		)	624
Total net revenue	$	7,338	$	2,380		$	9,718	$	3,690	$	1,728		$	5,418

	Six months ended June 30,							Six months ended June 30,
	2020							2019
(in millions)	Fixed Income Markets		Equity Markets			Total Markets		Fixed Income Markets		Equity Markets			Total Markets
Principal transactions	$	7,794	$	3,460		$	11,254	$	4,913	$	3,165		$	8,078
Lending- and deposit-related fees	95		4			99		98		4			102
Asset management, administration and commissions	204		1,105			1,309		200		887			1,087
All other income	177		(23		)	154		392		(23		)	369
Noninterest revenue	8,270		4,546			12,816		5,603		4,033			9,636
Net interest income	4,061		71			4,132		1,812		(564		)	1,248
Total net revenue	$	12,331	$	4,617		$	16,948	$	7,415	$	3,469		$	10,884

CIB Markets had one loss day in the second quarter of 2020 and three loss days for the six months ended June 30, 2020. Loss days represent the number of days for which CIB Markets, which consists of Fixed Income Markets and Equity Markets, posted losses to total net revenue. The loss days determined under this measure differ from the measure used to determine backtesting gains and losses. Daily backtesting gains and losses include positions in the Firm’s Risk Management value-at-risk (“VaR”) measure and exclude select components of total net revenue, which may more than offset backtesting gains or losses on a particular day. For more information on daily backtesting gains and losses, refer to the VaR discussion on pages 80-82



Selected metrics
	As of or for the three months ended June 30,						As of or for the six months ended June 30,
(in millions, except where otherwise noted)	2020		2019		Change		2020		2019		Change
Assets under custody (“AUC”) by asset class (period-end) (in billions):
Fixed Income	$	15,023	$	13,056	15	%	$	15,023	$	13,056	15	%
Equity	9,288		9,352		(1	)	9,288		9,352		(1	)
Other^(a)	3,136		3,042		3		3,136		3,042		3
Total AUC	$	27,447	$	25,450	8		$	27,447	$	25,450	8
Merchant processing volume (in billions)^(b)	$	371.9	$	371.6	—		$	746.7	$	728.1	3
Client deposits and other third-party liabilities (average)^(c)	$	607,902	$	458,237	33	%	$	561,183	$	451,185	24	%


(a)	Consists of mutual funds, unit investment trusts, currencies, annuities, insurance contracts, options and other contracts.


(b)	Represents total merchant processing volume across CIB, CCB and CB.


(c)	Client deposits and other third-party liabilities pertain to the Wholesale Payments and Securities Services businesses.



International metrics
	As of or for the three months ended June 30,						As of or for the six months ended June 30,
(in millions, except where otherwise noted)	2020		2019^(c)		Change		2020		2019^(c)		Change
Total net revenue^(a)
Europe/Middle East/Africa	$	4,976	$	2,898	72	%	$	7,566	$	6,078	24	%
Asia-Pacific	2,196		1,276		72		3,972		2,683		48
Latin America/Caribbean	587		379		55		1,094		785		39
Total international net revenue	7,759		4,553		70		12,632		9,546		32
North America	8,593		5,278		63		13,668		10,319		32
Total net revenue	$	16,352	$	9,831	66		$	26,300	$	19,865	32

Loans retained (period-end)^(a)
Europe/Middle East/Africa	$	28,973	$	27,843	4		$	28,973	$	27,843	4
Asia-Pacific	13,644		15,302		(11	)	13,644		15,302		(11	)
Latin America/Caribbean	8,190		7,090		16		8,190		7,090		16
Total international loans	50,807		50,235		1		50,807		50,235		1
North America	89,963		72,839		24		89,963		72,839		24
Total loans retained	$	140,770	$	123,074	14		$	140,770	$	123,074	14

Client deposits and other third-party liabilities (average)^(b)
Europe/Middle East/Africa	$	216,211	$	175,189	23		$	203,594	$	169,694	20
Asia-Pacific	125,839		86,889		45		114,816		85,990		34
Latin America/Caribbean	36,339		28,860		26		33,598		28,175		19
Total international	$	378,389	$	290,938	30		$	352,008	$	283,859	24
North America	229,513		167,299		37		209,175		167,326		25
Total client deposits and other third-party liabilities	$	607,902	$	458,237	33		$	561,183	$	451,185	24

AUC (period-end)^(b) (in billions)
North America	$	17,734	$	15,875	12		$	17,734	$	15,875	12
All other regions	9,713		9,575		1		9,713		9,575		1
Total AUC	$	27,447	$	25,450	8	%	$	27,447	$	25,450	8	%


(a)	Total net revenue and loans retained (excluding loans held-for-sale and loans at fair value) are based on the location of the trading desk, booking location, or domicile of the client, as applicable.


(b)	Client deposits and other third-party liabilities pertaining to the Wholesale Payments and Securities Services businesses, and AUC, are based on the domicile of the client.


(c)	Prior-period amounts have been revised to conform with the current presentation.



COMMERCIAL BANKING

Commercial Banking provides comprehensive financial solutions, including lending, wholesale payments, investment banking and asset management products across three primary client segments: Middle Market Banking, Corporate Client Banking and 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.

Refer to Line of Business Metrics on page 198 for a discussion of the business profile of CB.



Selected income statement data
	Three months ended June 30,							Six months ended June 30,
(in millions)	2020			2019		Change		2020			2019		Change
Revenue
Lending- and deposit-related fees^(a)	$	297		$	224	33	%	$	558		$	457	22	%
All other income^(a)	518			399		30		878			899		(2	)
Noninterest revenue	815			623		31		1,436			1,356		6
Net interest income	1,577			1,662		(5	)	3,134			3,342		(6	)
Total net revenue^(b)	2,392			2,285		5		4,570			4,698		(3	)

Provision for credit losses	2,431			29		NM		3,441			119		NM

Noninterest expense
Compensation expense	430			438		(2	)	902			887		2
Noncompensation expense	469			493		(5	)	985			982		—
Total noninterest expense	899			931		(3	)	1,887			1,869		1

Income/(loss) before income tax expense/(benefit)	(938		)	1,325		NM		(758		)	2,710		NM
Income tax expense/(benefit)	(247		)	323		NM		(214		)	648		NM
Net income/(loss)	$	(691	)	$	1,002	NM		$	(544	)	$	2,062	NM

In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB and the revenue and expense of the business is reported across CCB, CIB and CB based primarily on client relationship. In conjunction with this realignment, treasury services product revenue has been renamed wholesale payments. Prior-period revenue and expense amounts have been revised to conform with the current presentation.


(a)	In the first quarter of 2020, the Firm reclassified certain fees from asset management, administration and commissions (which are included in all other income) to lending- and deposit-related fees. Prior-period amounts have been revised to conform with the current presentation.

(b)

Total net revenue included tax-equivalent adjustments from income tax credits related to equity investments in designated community development entities and in entities established for rehabilitation of historic properties, as well as tax-exempt income related to municipal financing activities of $80 million and $100 million for the three months ended June 30, 2020 and 2019, respectively, and $161 million and $194 million for the six months ended June 30, 2020 and 2019, respectively.

Quarterly results

Net loss was $691 million, driven by an increase in the provision for credit losses.

Net revenue was $2.4 billion, up 5%. Net interest income was $1.6 billion, down 5%, driven by lower deposit margin, largely offset by higher deposit and loan balances. Noninterest revenue was $815 million, up 31%, driven by a gain on a strategic investment, higher deposit related fees, and investment banking revenue, partially offset by lower card income predominantly due to lower volumes as a result of the COVID-19 pandemic.

Noninterest expense was $899 million, down 3%, driven by lower structural expense.

The provision for credit losses was $2.4 billion, compared with $29 million in the prior year. The increase was driven by net additions to the allowance for credit losses as a result of the impact of the COVID-19 pandemic across multiple industry sectors.

Year-to-date results

Net loss was $544 million, driven by an increase in the provision for credit losses.

Net revenue was $4.6 billion, down 3%. Net interest income was $3.1 billion, down 6%, driven by lower deposit margin largely offset by higher deposit and loan balances. Noninterest revenue was $1.4 billion, up 6%, driven by higher deposit related fees and a gain on a strategic investment, largely offset by lower card income primarily

due to lower volumes as a result of the COVID-19 pandemic and a $57 million mark down of a held-for-sale position.

Noninterest expense was $1.9 billion, relatively flat, driven by investments in the business largely offset by lower structural expense.

The provision for credit losses was $3.4 billion, compared with $119 million in the prior year. The increase was driven by net additions to the allowance for credit losses as a result of the impact of the COVID-19 pandemic across multiple industry sectors.

Refer to Credit and Investment Risk Management on pages 60-79 and Allowance for Credit Losses on pages 77-78 for further discussions of the credit portfolios and the allowance for credit losses.

CB product revenue consists of the following:

Lending includes a variety of financing alternatives, which are primarily provided on a secured basis; collateral includes receivables, inventory, equipment, real estate or other assets. Products include term loans, revolving lines of credit, bridge financing, asset-based structures, leases, and standby letters of credit.

Wholesale payments includes revenue from a broad range of products and services that enable CB clients to manage payments and receipts, as well as invest and manage funds.

Investment banking includes revenue from a range of products providing CB clients with sophisticated capital-raising alternatives, as well as balance sheet and risk management tools through advisory, equity underwriting, and loan syndications. Revenue from Fixed Income and Equity Markets products used by CB clients is also included.

Other product revenue primarily includes tax-equivalent adjustments generated from Community Development Banking activities and certain income derived from principal transactions.



Selected income statement data (continued)
	Three months ended June 30,								Six months ended June 30,
(in millions, except ratios)	2020			2019			Change		2020			2019			Change
Revenue by product
Lending	$	1,127		$	1,012		11	%	$	2,081		$	2,024		3	%
Wholesale payments	917			1,063			(14	)	1,908			2,167			(12	)
Investment banking^(a)	256			193			33		491			482			2
Other	92			17			441		90			25			260
Total Commercial Banking net revenue	$	2,392		$	2,285		5		$	4,570		$	4,698		(3	)

Investment banking revenue, gross^(b)	$	851		$	592		44		$	1,537		$	1,410		9

Revenue by client segments
Middle Market Banking	$	866		$	961		(10	)	$	1,812		$	1,935		(6	)
Corporate Client Banking	859			744			15		1,540			1,595			(3	)
Commercial Real Estate Banking	566			538			5		1,107			1,085			2
Other	101			42			140		111			83			34
Total Commercial Banking net revenue	$	2,392		$	2,285		5	%	$	4,570		$	4,698		(3	)%

Financial ratios
Return on equity	(14		)%	17		%			(6		)%	18		%
Overhead ratio	38			41					41			40


(a)	Includes CB’s share of revenue from investment banking products sold to CB clients through the CIB.


(b)	Refer to Business Segment Results on page 24 for discussion of revenue sharing.



Selected metrics
	As of or for the three months ended June 30,							As of or for the six months ended June 30,
(in millions, except headcount)	2020			2019		Change		2020			2019		Change
Selected balance sheet data (period-end)
Total assets	$	234,934		$	220,712	6	%	$	234,934		$	220,712	6	%
Loans:
Loans retained	223,192			208,323		7		223,192			208,323		7
Loans held-for-sale and loans at fair value	917			1,284		(29	)	917			1,284		(29	)
Total loans	$	224,109		$	209,607	7		$	224,109		$	209,607	7
Equity	22,000			22,000		—		22,000			22,000		—

Period-end loans by client segment
Middle Market Banking	$	64,211	^(a)	$	56,346	14		$	64,211	^(a)	$	56,346	14
Corporate Client Banking	56,182			51,500		9		56,182			51,500		9
Commercial Real Estate Banking	103,117			100,751		2		103,117			100,751		2
Other	599			1,010		(41	)	599			1,010		(41	)
Total Commercial Banking loans	$	224,109	^(a)	$	209,607	7		$	224,109	^(a)	$	209,607	7

Selected balance sheet data (average)
Total assets	$	247,512		$	218,760	13		$	236,792		$	218,530	8
Loans:
Loans retained	233,044			206,771		13		221,516			205,623		8
Loans held-for-sale and loans at fair value	502			701		(28	)	1,167			1,165		—
Total loans	$	233,546		$	207,472	13		$	222,683		$	206,788	8

Average loans by client segment
Middle Market Banking	$	66,279		$	57,155	16		$	61,162		$	56,940	7
Corporate Client Banking	63,308			48,656		30		58,170			48,400		20
Commercial Real Estate Banking	103,516			100,671		3		102,521			100,469		2
Other	443			990		(55	)	830			979		(15	)
Total Commercial Banking loans	$	233,546		$	207,472	13		$	222,683		$	206,788	8

Client deposits and other third-party liabilities	$	236,968		$	168,247	41		$	212,888		$	167,756	27
Equity	22,000			22,000		—		22,000			22,000		—

Headcount	11,802			11,248		5	%	11,802			11,248		5	%


(a)	At June 30, 2020, total loans included $6.5 billion of loans under the PPP, of which $6.3 billion were in Middle Market Banking. Refer to Credit Portfolio on pages 60-61 for a further discussion of the PPP.



Selected metrics (continued)
	As of or for the three months ended June 30,								As of or for the six months ended June 30,
(in millions, except ratios)	2020			2019			Change		2020			2019			Change
Credit data and quality statistics
Net charge-offs/(recoveries)	$	79		$	15		427	%	$	179		$	26		NM
Nonperforming assets
Nonaccrual loans:
Nonaccrual loans retained^(a)	$	1,377		$	614		124	%	$	1,377		$	614		124	%
Nonaccrual loans held-for-sale and loans at fair value	—			—			—		—			—			—
Total nonaccrual loans	$	1,377		$	614		124		$	1,377		$	614		124
Assets acquired in loan satisfactions	24			20			20		24			20			20
Total nonperforming assets	$	1,401		$	634		121		$	1,401		$	634		121
Allowance for credit losses:
Allowance for loan losses	$	4,830		$	2,756		75		$	4,830		$	2,756		75
Allowance for lending-related commitments	707			274			158		707			274			158
Total allowance for credit losses	$	5,537		$	3,030		83	%	$	5,537		$	3,030		83	%
Net charge-off/(recovery) rate^(b)	0.14		%	0.03		%			0.16		%	0.03		%
Allowance for loan losses to period-end loans retained	2.16			1.32					2.16			1.32
Allowance for loan losses to nonaccrual loans retained^(a)	351			449					351			449
Nonaccrual loans to period-end total loans	0.61			0.29					0.61			0.29


(a)	Allowance for loan losses of $287 million and $125 million was held against nonaccrual loans retained at June 30, 2020 and 2019, respectively.


(b)	Loans held-for-sale and loans at fair value were excluded when calculating the net charge-off/(recovery) rate.



ASSET & WEALTH MANAGEMENT

Refer to pages 74–76 of JPMorgan Chase’s 2019 Form 10-K and Line of Business Metrics on pages 198-199 for a discussion of the business profile of AWM.



Selected income statement data
(in millions, except ratios)	Three months ended June 30,								Six months ended June 30,
	2020			2019			Change		2020			2019			Change
Revenue
Asset management, administration and commissions	$	2,589		$	2,568		1	%	$	5,295		$	4,984		6	%
All other income	131			115			14		134			292			(54	)
Noninterest revenue	2,720			2,683			1		5,429			5,276			3
Net interest income	890			876			2		1,787			1,772			1
Total net revenue	3,610			3,559			1		7,216			7,048			2

Provision for credit losses	223			2			NM		317			4			NM

Noninterest expense
Compensation expense	1,315			1,406			(6	)	2,726			2,868			(5	)
Noncompensation expense	1,191			1,190			—		2,439			2,375			3
Total noninterest expense	2,506			2,596			(3	)	5,165			5,243			(1	)

Income before income tax expense	881			961			(8	)	1,734			1,801			(4	)
Income tax expense	223			242			(8	)	412			421			(2	)
Net income	$	658		$	719		(8	)	$	1,322		$	1,380		(4	)

Revenue by line of business
Asset Management	$	1,780		$	1,785		—		$	3,520		$	3,546		(1	)
Wealth Management	1,830			1,774			3		3,696			3,502			6
Total net revenue	$	3,610		$	3,559		1	%	$	7,216		$	7,048		2	%

Financial ratios
Return on equity	24		%	27		%			24		%	26		%
Overhead ratio	69			73					72			74
Pre-tax margin ratio:
Asset Management	30			25					26			24
Wealth Management	19			29					22			27
Asset & Wealth Management	24			27					24			26

Quarterly results

Net income was $658 million, down 8%.

Net revenue was $3.6 billion, up 1%. Net interest income was $890 million, up 2%, reflecting higher deposit and loan balances, offset by deposit margin compression. Noninterest revenue was $2.7 billion, up 1%, as a result of increased brokerage commissions on higher client-driven volume partially offset by lower asset management fees as a shift in the mix toward lower yield products was predominantly offset by strong net inflows into liquidity products over the past year.

Revenue from Asset Management of $1.8 billion, was flat versus the prior year.

Revenue from Wealth Management was $1.8 billion, up 3%, driven by higher deposit and loan balances, as well as increased brokerage commissions on higher client-driven volume, largely offset by deposit margin compression.

Noninterest expense of $2.5 billion was down 3%, as lower structural as well as volume-and revenue-related expense, were partially offset by higher investments.

The provision for credit losses was $223 million, driven by additions to the allowance for credit losses predominantly as a result of the impact of the COVID-19 pandemic.

Refer to Credit and Investment Risk Management on pages 60-79 and Allowance for Credit Losses on pages 77-78 for further discussions of the credit portfolios and the allowance for credit losses.

Year-to-date results

Net income was $1.3 billion, a decrease of 4%.

Net revenue was $7.2 billion, an increase of 2%. Net interest income was $1.8 billion, up 1%, reflecting higher deposit and loan balances, offset by deposit margin compression. Noninterest revenue was $5.4 billion, up 3%, driven by increased brokerage commissions on higher client-driven volume, and higher asset management fees as a result of net inflows into liquidity products partially offset by net valuation losses on certain investments, compared with gains in the prior year.

Revenue from Asset Management was $3.5 billion, down 1%, driven by net valuation losses on certain investments, compared with gains in the prior year, predominantly offset by higher asset management fees as a result of net inflows into liquidity products.

Revenue from Wealth Management was $3.7 billion, up 6%, largely driven by higher deposit and loan balances as well as increased brokerage commissions on higher client-driven volume, largely offset by deposit margin compression.

Noninterest expense was $5.2 billion, a decrease of 1%, as lower structural as well as volume-and revenue-related expense, were largely offset by higher investments.

The provision for credit losses was $317 million, driven by additions to the allowance for credit losses predominantly as a result of the impact of the COVID-19 pandemic.



Selected metrics
	As of or for the three months ended June 30,								As of or for the six months ended June 30,
(in millions, except ranking data, headcount and ratios)	2020			2019			Change		2020			2019			Change
% of JPM mutual fund assets rated as 4- or 5-star^(a)	54		%	63		%			54		%	63		%
% of JPM mutual fund assets ranked in 1^st or 2^nd quartile:^(b)
1 year	54			78					54			78
3 years	69			75					69			75
5 years	72			82					72			82

Selected balance sheet data (period-end)^(c)
Total assets	$	183,189		$	172,149		6	%	$	183,189		$	172,149		6	%
Loans	165,299			149,877			10		165,299			149,877			10
Deposits	169,537			136,225			24		169,537			136,225			24
Equity	10,500			10,500			—		10,500			10,500			—

Selected balance sheet data (average)^(c)
Total assets	$	182,318		$	167,544		9		$	182,817		$	167,452		9
Loans	163,440			146,494			12		162,631			145,953			11
Deposits	168,573			140,317			20		159,602			139,282			15
Equity	10,500			10,500			—		10,500			10,500			—

Headcount^(d)	22,949			23,683			(3	)	22,949			23,683			(3	)

Number of Wealth Management client advisors	2,869			2,735			5		2,869			2,735			5

Credit data and quality statistics^(c)
Net charge-offs/(recoveries)	$	(2	)	$	(3	)	33		$	—		$	1		NM
Nonaccrual loans	775			127			NM		775			127			NM
Allowance for credit losses:
Allowance for loan losses	$	648		$	331		96		$	648		$	331		96
Allowance for lending-related commitments	28			17			65		28			17			65
Total allowance for credit losses	$	676		$	348		94	%	$	676		$	348		94	%
Net charge-off rate	—			(0.01		)%			—			—
Allowance for loan losses to period-end loans	0.39			0.22					0.39			0.22
Allowance for loan losses to nonaccrual loans	84			261					84			261
Nonaccrual loans to period-end loans	0.47			0.08					0.47			0.08


(a)	Represents the Nomura “star rating” for Japan domiciled funds and Morningstar for all other domiciled funds. Includes only Asset Management retail open-ended mutual funds that have a rating. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds.


(b)	Quartile ranking sourced from Lipper, Morningstar, Nomura and Fund Doctor based on country of domicile. Includes only Asset Management retail open-ended mutual funds that are ranked by the aforementioned sources. Excludes money market funds, Undiscovered Managers Fund, and Brazil domiciled funds.


(c)	Loans, deposits and related credit data and quality statistics relate to the Wealth Management business.


(d)	During the second quarter of 2020, certain technology and support functions, comprising approximately 850 staff, were transferred from AWM to CCB as part of the ongoing reorganization of the U.S. Wealth Management business.

Client assets

Client assets of $3.4 trillion and assets under management of $2.5 trillion were up 12% and 15%, respectively, driven by cumulative net inflows into liquidity and long term products as well as higher market levels.



Client assets
	As of June 30,
(in billions)	2020		2019		Change
Assets by asset class
Liquidity	$	707	$	481	47	%
Fixed income	629		543		16
Equity	457		441		4
Multi-asset and alternatives	718		713		1
Total assets under management	2,511		2,178		15
Custody/brokerage/administration/deposits	859		820		5
Total client assets	$	3,370	$	2,998	12

Memo:
Alternatives client assets ^(a)	$	188	$	177	6

Assets by client segment
Private Banking	$	677	$	617	10
Institutional	1,218		991		23
Retail	616		570		8
Total assets under management	$	2,511	$	2,178	15

Private Banking	$	1,500	$	1,410	6
Institutional	1,249		1,013		23
Retail	621		575		8
Total client assets	$	3,370	$	2,998	12	%


(a)	Represents assets under management, as well as client balances in brokerage accounts



Client assets (continued)
	Three months ended June 30,					Six months ended June 30,
(in billions)	2020		2019			2020			2019
Assets under management rollforward
Beginning balance	$	2,239	$	2,096		$	2,364		$	1,987
Net asset flows:
Liquidity	95		4			170			(1		)
Fixed income	17		37			18			56
Equity	11		(1		)	10			(7		)
Multi-asset and alternatives	1		—			(1		)	(3		)
Market/performance/other impacts	148		42			(50		)	146
Ending balance, June 30	$	2,511	$	2,178		$	2,511		$	2,178

Client assets rollforward
Beginning balance	$	3,002	$	2,897		$	3,226		$	2,733
Net asset flows	138		52			223			61
Market/performance/other impacts	230		49			(79		)	204
Ending balance, June 30	$	3,370	$	2,998		$	3,370		$	2,998



International metrics
	Three months ended June 30,					Six months ended June 30,
(in millions)	2020		2019		Change	2020		2019		Change
Total net revenue ^(a)
Europe/Middle East/Africa	$	719	$	714	1	$	1,342	$	1,409	(5	)%
Asia-Pacific	378		376		1	778		740		5
Latin America/Caribbean	198		179		11	386		361		7
Total international net revenue	1,295		1,269		2	2,506		2,510		—
North America	2,315		2,290		1	4,710		4,538		4
Total net revenue^(a)	$	3,610	$	3,559	1	$	7,216	$	7,048	2	%


(a)	Regional revenue is based on the domicile of the client.



	As of June 30,						As of June 30,
(in billions)	2020		2019		Change		2020		2019		Change
Assets under management
Europe/Middle East/Africa	$	446	$	392	14	%	$	446	$	392	14	%
Asia-Pacific	205		183		12		205		183		12
Latin America/Caribbean	64		56		14		64		56		14
Total international assets under management	715		631		13		715		631		13
North America	1,796		1,547		16		1,796		1,547		16
Total assets under management	$	2,511	$	2,178	15		$	2,511	$	2,178	15

Client assets
Europe/Middle East/Africa	$	537	$	478	12		$	537	$	478	12
Asia-Pacific	286		257		11		286		257		11
Latin America/Caribbean	148		136		9		148		136		9
Total international client assets	971		871		11		971		871		11
North America	2,399		2,127		13		2,399		2,127		13
Total client assets	$	3,370	$	2,998	12	%	$	3,370	$	2,998	12	%



CORPORATE

Refer to pages 77–78 of JPMorgan Chase’s 2019 Form 10-K for a discussion of Corporate.



Selected income statement and balance sheet data
	As of or for the three months ended June 30,								As of or for the six months ended June 30,
(in millions, except headcount)	2020			2019			Change		2020			2019			Change
Revenue
Principal transactions	$	(2	)	$	(175	)	99	%	$	(115	)	$	(237	)	51	%
Investment securities gains	26			44			(41	)%	259			57			354	%
All other income	(91		)	6			NM		120			63			90
Noninterest revenue	(67		)	(125		)	46	%	264			(117		)	NM
Net interest income	(687		)	447			NM		(852		)	864			NM
Total net revenue^(a)	(754		)	322			NM		(588		)	747			NM

Provision for credit losses	4			(2		)	NM		12			—			NM

Noninterest expense^(b)	147			232			(37	)%	293			443			(34	)
Income/(loss) before income tax expense/(benefit)	(905		)	92			NM		(893		)	304			NM
Income tax expense/(benefit)	(337		)	(736		)	54		(200		)	(775		)	74	%
Net income/(loss)	$	(568	)	$	828		NM		$	(693	)	$	1,079		NM
Total net revenue
Treasury and CIO	$	(671	)	$	618		NM		$	(502	)	$	1,129		NM
Other Corporate	(83		)	(296		)	72		(86		)	(382		)	77
Total net revenue	$	(754	)	$	322		NM		$	(588	)	$	747		NM
Net income/(loss)
Treasury and CIO	$	(550	)	$	462		NM		$	(467	)	$	796		NM
Other Corporate	(18		)	366			NM		(226		)	283			NM
Total net income/(loss)	$	(568	)	$	828		NM		$	(693	)	$	1,079		NM
Total assets (period-end)	$	1,221,980		$	821,330		49		$	1,221,980		$	821,330		49
Loans (period-end)	1,670			1,695			(1	)	1,670			1,695			(1	)
Headcount	38,920			37,361			4	%	38,920			37,361			4	%


(a)	Included tax-equivalent adjustments, driven by tax-exempt income from municipal bonds, of $63 million and $81 million for the three months ended June 30, 2020 and 2019, respectively, and $124 million and $167 million for the six months ended June 30, 2020 and 2019, respectively.


(b)	Included a net legal benefit of $(12) million and $(67) million for the three months ended June 30, 2020 and 2019, respectively, and $(32) million and $(157) million for the six months ended June 30, 2020 and 2019, respectively.

Quarterly results

Net loss was $568 million compared with net income of $828 million in the prior year.

Net revenue was a loss of $754 million, down $1.1 billion, driven by lower net interest income on lower rates. The current quarter also included small net gains on certain legacy private equity investments compared to losses in the prior year.

Noninterest expense of $147 million was down $85 million due to lower structural expense, partially offset by a lower net legal benefit compared to the prior year.

The current period income tax benefit was predominantly driven by the change in the level and mix of income and expenses subject to U.S. federal, and state and local taxes. The prior period included tax benefits of $742 million related to the resolution of certain tax audits.

Year-to-date results

Net loss was $693 million compared with net income of $1.1 billion in the prior year.

Net revenue was a loss of $588 million, compared with $747 million in the prior year. The decrease was driven by lower net interest income on lower rates, partially offset by higher noninterest revenue primarily due to higher net investment securities gains reflecting the impact of repositioning the investment securities portfolio.

Noninterest expense of $293 million was down $150 million due to lower structural expense, partially offset by a lower net legal benefit compared to the prior year.

The current period income tax benefit was driven by the change in the level and mix of income and expenses subject to U.S. federal, and state and local taxes as well as other tax adjustments, partially offset by the impact of the Firm’s estimated full-year expected tax rate relative to the level of year-to-date pretax income. The prior period included tax benefits of $825 million related to the resolution of certain tax audits.

Treasury and CIO overview

At June 30, 2020, the average credit rating of the Treasury and CIO investment securities comprising the portfolio in the table below was AA+ (based upon external ratings where available and, where not available, based primarily upon internal risk ratings). Refer to Note 10 for further information on the Firm’s investment securities portfolio and internal risk ratings.

Refer to Liquidity Risk Management on pages 55-59 for further information on liquidity and funding risk. Refer to Market Risk Management on pages 80-84 for information on interest rate, foreign exchange and other risks.



Selected income statement and balance sheet data
	As of or for the three months ended June 30,						As of or for the six months ended June 30,
(in millions)	2020		2019		Change		2020		2019		Change
Investment securities gains	$	26	$	44	(41	)%	$	259	$	57	354
Available-for-sale securities (average)	$	426,470	$	248,612	72	%	$	399,712	$	237,669	68
Held-to-maturity securities (average)	71,713		30,929		132		59,193		31,005		91
Investment securities portfolio (average)	$	498,183	$	279,541	78		$	458,905	$	268,674	71
Available-for-sale securities (period-end)	$	483,752	$	274,533	76		$	483,752	$	274,533	76
Held-to-maturity securities, net of allowance for credit losses (period-end)^(a)(b)	72,908		30,907		136		72,908		30,907		136
Investment securities portfolio, net of allowance for credit losses (period-end)^(a)	$	556,660	$	305,440	82	%	$	556,660	$	305,440	82


(a)	At June 30, 2020, the allowance for credit losses on HTM securities was $23 million.


(b)	During the first quarter of 2020, the Firm transferred $26.1 billion of U.S. GSE and government agency MBS from AFS to HTM for capital management purposes.

Refer to Note 10 for further information.



FIRMWIDE RISK MANAGEMENT

Risk is an inherent part of JPMorgan Chase’s business activities. When the Firm extends a consumer or wholesale loan, advises customers and clients on their investment decisions, makes markets in securities, or offers other products or services, the Firm takes on some degree of risk. The Firm’s overall objective is to manage its businesses, and the associated risks, in a manner that balances serving the interests of its clients, customers and investors and protects the safety and soundness of the Firm.

The Firm believes that effective risk management requires, among other things:


•	Acceptance of responsibility, including identification and escalation of risk issues, by all individuals within the Firm;


•	Ownership of risk identification, assessment, data and management within each of the LOBs and Corporate; and


•	Firmwide structures for risk governance.

The Firm strives for continual improvement in its efforts to enhance controls, ongoing employee training and development, talent retention, and other measures. The Firm follows a disciplined and balanced compensation framework with strong internal governance and independent oversight by the Board of Directors (the “Board”). The impact of risk and control issues is carefully considered in the Firm’s performance evaluation and incentive compensation processes.

Risk governance and oversight framework

The Firm’s risk management governance and oversight framework involves understanding drivers of risks, types of risks, and impacts of risks.

Refer to pages 79-83 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of Firmwide risk management governance and oversight.

Risk governance and oversight functions

The following sections of this Form 10-Q and the 2019 Form 10-K discuss the risk governance and oversight functions in place to manage the risks inherent in the Firm’s business activities.



Risk governance and oversight functions	Form 10-Q page reference	Form 10-K page reference
Strategic risk		84
Capital risk	49–54	85–92
Liquidity risk	55–59	93–98
Reputation risk		99
Consumer credit risk	62-66	103–107
Wholesale credit risk	67-76	108–115
Investment portfolio risk	79	118
Market risk	80-84	119–126
Country risk	85	127–128
Operational risk	86	129–135
Compliance risk		132
Conduct risk		133
Legal risk		134
Estimations and Model risk	87	135



CAPITAL RISK MANAGEMENT

Capital risk is the risk the Firm has an insufficient level or composition of capital to support the Firm’s business activities and associated risks during normal economic environments and under stressed conditions.

Refer to pages 85–92 of JPMorgan Chase’s 2019 Form

10-K, Note 22 of this Form 10-Q and the Firm’s Pillar 3 Regulatory Capital Disclosures reports, which are available on the Firm’s website, for further discussion of the Firm’s Capital Risk Management, including capital planning and stress testing.

COVID-19 Pandemic

The Firm has been impacted by recent market events as a result of the COVID-19 pandemic, but remains well-capitalized. However, the continuation or further deterioration of the current macroeconomic environment could result in impacts to the Firm’s capital and leverage position.

Basel III Overview

The capital rules under Basel III establish minimum capital ratios and overall capital adequacy standards for large and internationally active U.S. bank holding companies (“BHC”) and banks, including the Firm and its insured depository institution (“IDI”) subsidiaries, including JPMorgan Chase Bank, N.A. The minimum amount of regulatory capital that must be held by BHCs and banks is determined by calculating risk-weighted assets (“RWA”), which are on-balance sheet assets and off-balance sheet exposures, weighted according to risk. Two comprehensive approaches are prescribed for calculating RWA: a standardized approach (“Basel III Standardized”), and an advanced approach (“Basel III Advanced”). For each of the risk-based capital ratios, the capital adequacy of the Firm is evaluated against the lower of the Standardized or Advanced approaches.

The Firm’s Basel III Standardized-risk-based ratios are currently more binding than the Basel III Advanced-risk-based ratios.

Basel III also includes a requirement for Advanced Approach banking organizations, including the Firm, to calculate the SLR. Refer to SLR on page 90 of JPMorgan Chase’s 2019 Form 10-K for additional information.

Key Regulatory Developments

Current Expected Credit Losses. As disclosed in the Firm’s 2019 Form 10-K, 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 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”).

The interim 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 allowance for credit losses (excluding allowances on PCD loans). 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 period ended June 30, 2020, the capital metrics of the Firm exclude $6.5 billion, which is the $2.7 billion day 1 impact to retained earnings and 25% of the $15.7 billion increase in the allowance for credit losses (excluding allowances on PCD loans).

The impacts of the CECL capital transition provisions on Tier 2 capital, adjusted average assets, and total leverage exposure have also been incorporated into the Firm’s capital metrics. Refer to Note 1 for further information on the CECL accounting guidance.

Money Market Mutual Fund Liquidity Facility. On March 18, 2020, the Federal Reserve established the MMLF facility, authorized through September 30, 2020, to enhance the liquidity and functioning of money markets. On July 28, 2020, the Federal Reserve announced that it was extending the MMLF through December 31, 2020. Under the MMLF, the FRBB makes nonrecourse advances to participating financial institutions to purchase certain types of assets from eligible money market mutual fund clients. These assets, which are reflected in other assets on the Firm’s Consolidated balance sheets, are pledged to the FRBB as collateral. On March 23, 2020, the federal banking agencies issued an interim final rule to neutralize the effects of purchasing assets through the program on risk-based and leverage-based capital ratios. As of June 30, 2020, the Firm excluded assets purchased from money market mutual fund clients pursuant to nonrecourse advances provided under the MMLF in the amount of $3.8 billion from its RWA and $7.8 billion from adjusted average assets and total leverage exposure.

Supplementary leverage ratio temporary revision. On April 1, 2020, the Federal Reserve issued an interim final rule that requires, on a temporary basis, the calculation of total leverage exposure for purposes of calculating the SLR for bank holding companies, to exclude the on-balance sheet amounts of U.S. Treasury securities and deposits at Federal Reserve Banks. These exclusions became effective April 1, 2020, and will remain in effect through March 31, 2021.

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 June 30, 2020, JPMorgan Chase Bank, N.A. has not elected to apply this exclusion.

Paycheck Protection Program. On April 13, 2020, the federal banking agencies issued an interim final rule to neutralize the regulatory capital effects of participating in the PPP on risk-based capital ratios by applying a zero percent risk weight to loans originated under the program. As of June 30, 2020, the Firm had approximately $28 billion of loans under the program.

The interim rule also provides that if the PPP loan is pledged as collateral for a non-recourse loan under the Federal Reserve’s Paycheck Protection Program Lending (“PPPL”) Facility, the PPP loans can be excluded from leverage-based capital ratios. As of June 30, 2020, the Firm had not participated in the PPPL Facility.

Refer to Regulatory Developments Relating to the COVID-19 Pandemic on pages 11-12 for additional information on

regulatory actions and significant financing programs that the U.S. government and regulators have introduced to address the effects of the COVID-19 pandemic.

Stress Capital Buffer. On March 4, 2020, the Federal Reserve issued the final rule introducing the SCB framework for the Basel III Standardized approach that is designed to more closely integrate the results of the quantitative assessment in the annual CCAR with the ongoing minimum capital requirements for BHCs under the U.S. Basel III rules. The final rule replaces the static 2.5% CET1 capital conservation buffer in the Standardized approach with a dynamic institution-specific SCB. The final rule does not apply to the Advanced approach capital requirements. The SCB requirement for BHCs will be effective on October 1 of each year and is expected to remain in effect until September 30 of the following year.

The following tables present the Firm’s risk-based and leverage-based capital metrics under both the Basel III Standardized and Advanced Approaches. Refer to Capital Risk Management on pages 85–92 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of these capital metrics.



	June 30, 2020^(c)(d)						December 31, 2019
(in millions, except ratios)	Standardized			Advanced			Standardized			Advanced			Minimum capital ratios^(e)
Risk-based capital metrics:
CET1 capital	$	190,867		$	190,867		$	187,753		$	187,753
Tier 1 capital	220,674			220,674			214,432			214,432
Total capital	256,667			244,112			242,589			232,112
Risk-weighted assets	1,541,365			1,450,587			1,515,869			1,397,878
CET1 capital ratio	12.4		%	13.2		%	12.4		%	13.4		%	10.5	%
Tier 1 capital ratio	14.3			15.2			14.1			15.3			12.0
Total capital ratio	16.7			16.8			16.0			16.6			14.0
Leverage-based capital metrics:
Adjusted average assets^(a)	$	3,176,729		$	3,176,729		$	2,730,239		$	2,730,239
Tier 1 leverage ratio	6.9		%	6.9		%	7.9		%	7.9		%	4.0	%
Total leverage exposure^(b)	NA			$	3,228,424		NA			$	3,423,431
SLR^(b)	NA			6.8		%	NA			6.3		%	5.0	%


(a)	Adjusted average assets, for purposes of calculating the leverage ratios, 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 June 30, 2020, total leverage exposure for purposes of calculating the SLR excludes 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.


(c)	As of June 30, 2020, the capital metrics reflect the CECL capital transition provisions.


(d)	As of June 30, 2020, the capital metrics 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 receive a zero percent risk weight.


(e)	Represents minimum requirements and regulatory buffers applicable to the Firm. Refer to Note 22 for additional information.

Capital components

The following table presents reconciliations of total stockholders’ equity to Basel III CET1 capital, Tier 1 capital and Total capital as of June 30, 2020 and December 31, 2019.



(in millions)	June 30, 2020			December 31, 2019
Total stockholders’ equity	$	264,466		$	261,330
Less: Preferred stock	30,063			26,993
Common stockholders’ equity	234,403			234,337
Add:
Certain deferred tax liabilities^(a)	2,397			2,381
Less:
Goodwill	47,811			47,823
Other intangible assets	778			819
Other CET1 capital adjustments^(b)	(2,656		)	323
Standardized/Advanced CET1 capital	190,867			187,753
Preferred stock	30,063			26,993
Less: Other Tier 1 adjustments	256			314
Standardized/Advanced Tier 1 capital	$	220,674		$	214,432
Long-term debt and other instruments qualifying as Tier 2 capital	$	17,894		$	13,733
Qualifying allowance for credit losses^(c)	18,006			14,314
Other	93			110
Standardized Tier 2 capital	$	35,993		$	28,157
Standardized Total capital	$	256,667		$	242,589
Adjustment in qualifying allowance for credit losses for Advanced Tier 2 capital^(d)	(12,555		)	(10,477		)
Advanced Tier 2 capital	$	23,438		$	17,680
Advanced Total capital	$	244,112		$	232,112


(a)	Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable intangibles created in nontaxable transactions, which are netted against goodwill and other intangibles when calculating CET1 capital.


(b)	As of June 30, 2020, the impact of the CECL capital transition provision was an increase in CET1 capital of $6.5 billion.


(c)	Represents the allowance for credit losses eligible for inclusion in Tier 2 capital up to 1.25% of credit risk RWA, including the impact of the CECL capital transition provision with any excess deducted from RWA.


(d)	Represents an adjustment to qualifying allowance for credit losses for the excess of eligible credit reserves over expected credit losses up to 0.6% of credit risk RWA, including the impact of the CECL capital transition provision with any excess deducted from RWA.

Capital rollforward

The following table presents the changes in Basel III CET1 capital, Tier 1 capital and Tier 2 capital for the six months ended June 30, 2020.



Six months ended June 30, (in millions)	2020
Standardized/Advanced CET1 capital at December 31, 2019	$	187,753
Net income applicable to common equity	6,730
Dividends declared on common stock	(5,559		)
Net purchase of treasury stock	(5,288		)
Changes in additional paid-in capital	(397		)
Changes related to AOCI	7,220
Adjustment related to AOCI^(a)	(3,415		)
Changes related to other CET1 capital adjustments^(b)	3,823
Change in Standardized/Advanced CET1 capital	3,114
Standardized/Advanced CET1 capital at June 30, 2020	$	190,867

Standardized/Advanced Tier 1 capital at December 31, 2019	$	214,432
Change in CET1 capital^(b)	3,114
Net issuance of noncumulative perpetual preferred stock	3,070
Other	58
Change in Standardized/Advanced Tier 1 capital	6,242
Standardized/Advanced Tier 1 capital at June 30, 2020	$	220,674

Standardized Tier 2 capital at December 31, 2019	$	28,157
Change in long-term debt and other instruments qualifying as Tier 2	4,162
Change in qualifying allowance for credit losses^(b)	3,692
Other	(18		)
Change in Standardized Tier 2 capital	7,836
Standardized Tier 2 capital at June 30, 2020	$	35,993
Standardized Total capital at June 30, 2020	$	256,667

Advanced Tier 2 capital at December 31, 2019	$	17,680
Change in long-term debt and other instruments qualifying as Tier 2	4,162
Change in qualifying allowance for credit losses^(b)	1,614
Other	(18		)
Change in Advanced Tier 2 capital	5,758
Advanced Tier 2 capital at June 30, 2020	$	23,438
Advanced Total capital at June 30, 2020	$	244,112


(a)	Includes cash flow hedges and DVA related to structured notes recorded in AOCI.


(b)	Includes the impact of the CECL capital transition provisions.

RWA rollforward

The following table presents changes in the components of RWA under Basel III Standardized and Advanced approaches for the six months ended June 30, 2020. The amounts in the rollforward categories are estimates, based on the predominant driver of the change.



	Standardized									Advanced
Six months ended June 30, 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)	300			(15,200		)	(14,900		)	(6,300		)	(15,200		)	—			(21,500		)
Portfolio runoff^(b)	(2,500		)	—			(2,500		)	(2,200		)	—			—			(2,200		)
Movement in portfolio levels^(c)	(5,799		)	48,695			42,896			31,270			48,872			(3,733		)	76,409
Changes in RWA	(7,999		)	33,495			25,496			22,770			33,672			(3,733		)	52,709
June 30, 2020	$	1,432,221		$	109,144		$	1,541,365		$	955,718		$	109,324		$	385,545		$	1,450,587


(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; 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

Refer to Supplementary Leverage Ratio on pages 87-88 of JPMorgan Chase’s 2019 Form 10-K for additional information.

The following table presents the components of the Firm’s SLR.



(in millions, except ratio)	June 30, 2020			December 31, 2019
Tier 1 capital	$	220,674		$	214,432
Total average assets	3,229,268			2,777,270
Less: Regulatory capital adjustments^(a)	52,539			47,031
Total adjusted average assets^(b)	3,176,729			2,730,239
Add: Off-balance sheet exposures^(c)	670,606			693,192
Less: Exclusion for U.S Treasuries and Federal Reserve Bank deposits	618,911			—
Total leverage exposure	$	3,228,424		$	3,423,431
SLR	6.8		%	6.3		%

(a)

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. As of June 30, 2020, includes adjustments for the CECL capital transition provisions and the exclusion of 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.


(c)	Off-balance sheet exposures are calculated as the average of the three month-end spot balances during the reporting quarter.

Refer to Note 22 for JPMorgan Chase Bank, N.A.’s SLR ratios.

Line of business equity

Each business segment is allocated capital by taking into consideration a variety of factors including capital levels of similarly rated peers and applicable regulatory capital requirements. Refer to line of business equity on page 90 of JPMorgan Chase’s 2019 Form 10-K for additional information on capital allocation.

The following table presents the capital allocated to each business segment:



(in billions)	June 30, 2020		December 31, 2019
Consumer & Community Banking	$	52.0	$	52.0
Corporate & Investment Bank	80.0		80.0
Commercial Banking	22.0		22.0
Asset & Wealth Management	10.5		10.5
Corporate	69.9		69.8
Total common stockholders’ equity	$	234.4	$	234.3

Planning and stress testing

Comprehensive Capital Analysis and Review

On June 29, 2020, the Firm announced that it had completed the 2020 CCAR stress test process. The Firm’s indicative SCB requirement is 3.3% and the Federal Reserve will provide the Firm with its final SCB requirement by August 31, 2020. The SCB requirement will become effective on October 1, 2020 and will remain in effect until September 30, 2021. The SCB will be integrated into the Firm’s ongoing Standardized risk-based capital requirements, increasing the minimum CET1 capital ratio to 11.3% (up from 10.5%).

The Federal Reserve has determined that changes in financial markets or the macroeconomic outlook due to the COVID-19 pandemic could have a material effect on a firm’s risk profile and financial condition and therefore is requiring all large bank holding companies, including the Firm, to update and resubmit their capital plans later this year.

Refer to Key Regulatory Developments on pages 49-50 of this Form 10-Q and capital planning and stress testing on pages 85-86 of JPMorgan Chase’s 2019 Form 10-K for additional information.

Capital actions

Preferred stock

Preferred stock dividends declared were $401 million and $822 million for the three and six months ended June 30, 2020.

During the three months ended June 30, 2020, the Firm did not issue or redeem any preferred stock. Refer to Note 18 of this Form 10-Q and Note 21 of JPMorgan Chase’s 2019 Form 10-K for additional information on the Firm’s preferred stock, including the issuance and redemption of preferred stock during the three months ended March 31, 2020.

Common stock dividends

The Firm’s quarterly common stock dividend is currently $0.90 per share. The Firm intends to maintain the quarterly common stock dividend for the third quarter of 2020 subject to the approval of the Board of Directors.

Common equity

On March 15, 2020, in response to the COVID-19 pandemic, the Firm temporarily suspended repurchases of its common equity. In June 2020, the Federal Reserve directed all large bank holding companies, including the Firm, to discontinue net share repurchases, at least through the end of the third quarter of 2020.

The following table sets forth the Firm’s repurchases of common equity for the three and six months ended June 30, 2020 and 2019.



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Total number of shares of common stock repurchased	—		47.5		50.0		97.0
Aggregate purchase price of common stock repurchases	$	—	$	5,210	$	6,397	$	10,301

Refer to Part II, Item 2: Unregistered Sales of Equity Securities and Use of Proceeds and Part II, Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities on page 201 of this Form 10-Q and page 30 of JPMorgan Chase’s 2019 Form 10-K, respectively, for additional information regarding repurchases of the Firm’s equity securities.

Other capital requirements

Total Loss-Absorbing Capacity (“TLAC”)

The Federal Reserve’s TLAC rule requires the U.S. global systemically important bank (“GSIB”) top-tier holding companies, including the Firm, to maintain minimum levels of external TLAC and eligible long-term debt (“eligible LTD”).

Refer to other capital requirements on page 91 of JPMorgan Chase’s 2019 Form 10-K for additional information on TLAC.

The following table presents the TLAC and external long-term debt minimum requirements including applicable regulatory buffers, as of June 30, 2020 and December 31, 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

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 applying the impact of the CECL capital transition provisions as of June 30, 2020.



	June 30, 2020						December 31, 2019
(in billions, except ratio)	Eligible external TLAC			Eligible LTD			Eligible external TLAC			Eligible LTD
Total eligible TLAC & LTD	$	407.1		$	179.6		$	386.4		$	161.8
% of RWA	26.4		%	11.7		%	25.5		%	10.7		%
Surplus/(shortfall)	$	52.5		$	33.2		$	37.7		$	17.8

% of total leverage exposure	12.6		%	5.6		%	11.3		%	4.7		%
Surplus/(shortfall)	$	100.4		$	34.3		$	61.2		$	7.8

Refer to Part I, Item 1A: Risk Factors on pages 6–28 of JPMorgan Chase’s 2019 Form 10-K for information on the financial consequences to holders of the Firm’s debt and equity securities in a resolution scenario.

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 subject to the Rules of the Commodity Futures Trading Commission (“CFTC”).

Refer to Capital risk management on pages 85–92 of JPMorgan Chase’s 2019 Form 10-K for a discussion on J.P. Morgan Securities’ capital requirements.

The following table presents J.P. Morgan Securities’ net capital:


(a)	Net capital reflects the exclusion of assets purchased from money market mutual fund clients pursuant to nonrecourse advances provided under the MMLF.

J.P. Morgan Securities plc

J.P. Morgan Securities plc is a wholly-owned subsidiary of JPMorgan Chase Bank, N.A. and has authority to engage in banking, investment banking and broker-dealer activities. J.P. Morgan Securities plc is jointly regulated by the U.K. Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”).

Refer to Capital risk management on pages 85–92 of JPMorgan Chase’s 2019 Form 10-K for a further discussion on J.P. Morgan Securities plc.

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 June 30, 2020, J.P. Morgan Securities plc was compliant with the requirements of the MREL rule. Refer to Supervision and Regulation on pages 1–6 of JPMorgan Chase’s 2019 Form 10-K for additional information on MREL.

The following table presents J.P. Morgan Securities plc’s capital metrics:



June 30, 2020
(in millions, except ratios)	Estimated			Minimum ratios
Total capital	$	55,188
CET1 ratio	17.6		%	4.5	%
Total capital ratio	22.5		%	8.0	%



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. Refer to pages 93–98 of JPMorgan Chase’s 2019 Form 10-K and the Firm’s U.S. LCR Disclosure reports, which are available on the Firm’s website for a further discussion of the Firm’s Liquidity Risk Management.

LCR and HQLA

The LCR rule requires that the Firm maintain an amount of unencumbered High Quality Liquid Assets (“HQLA”) that is sufficient to meet its estimated total net cash outflows over a prospective 30 calendar-day period of significant stress. Under the LCR rule, the amount of HQLA held by JPMorgan Chase Bank, N.A. that is in excess of its stand-alone 100% minimum LCR requirement, and that is not transferable to non-bank affiliates, must be excluded from the Firm’s reported HQLA. The LCR is required to be a minimum of 100%. Refer to page 94 of JPMorgan Chase’s 2019 Form 10-K and the Firm’s U.S. LCR Disclosure reports for additional information on HQLA and net cash outflows.

The following table summarizes the Firm’s average LCR for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019 based on the Firm’s interpretation of the finalized LCR framework.



	Three months ended
Average amount (in millions)	June 30, 2020			March 31, 2020			June 30, 2019
HQLA
Eligible cash^(a)	$	426,053		$	205,027		$	219,838
Eligible securities^(b)(c)	225,135			343,124			317,439
Total HQLA^(d)	$	651,188		$	548,151		$	537,277
Net cash outflows	$	556,395		$	482,372		$	477,442
LCR	117		%	114		%	113		%
Net excess HQLA^(d)	$	94,793		$	65,779		$	59,835


(a)	Represents cash on deposit at central banks, primarily the Federal Reserve Banks.


(b)	Predominantly U.S. Treasuries, U.S. GSE and government agency MBS, and sovereign bonds net of applicable haircuts under the LCR rule.


(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. that are not transferable to non-bank affiliates.

The Firm’s average LCR increased during the three months ended June 30, 2020, compared with the three-month period ended March 31, 2020, largely due to long-term debt issuances and a benefit from the return of funding to the Parent Company from JPMorgan Chase Bank, N.A. as a result of the bank’s strong liquidity position. Liquidity in JPMorgan Chase Bank, N.A. increased during the quarter primarily due to deposits net of loan growth. Deposits increased in the second quarter as a result of market conditions driven by the COVID-19 pandemic. Additionally, effective March 26, 2020, the Federal Reserve, in response

to the COVID-19 pandemic, reduced reserve requirements to zero percent, which increased JPMorgan Chase Bank, N.A.’s average HQLA by approximately $25 billion in the second quarter. However, these increases in excess liquidity in JPMorgan Chase Bank, N.A. are excluded from the Firm’s reported LCR under the LCR rule. Refer to Note 21 for additional information.

The Firm's average LCR increased during the three months ended June 30, 2020, compared with the prior year period, primarily due to an increase in the average amount of reportable HQLA as a result of increased cash from unsecured long-term debt issuances.

The Firm’s average LCR fluctuates from period to period, due to changes in its HQLA and estimated net cash outflows as a result of ongoing business activity.

Other liquidity sources

In addition to the assets reported in the Firm’s HQLA above, the Firm had unencumbered marketable securities, such as equity securities and fixed income debt securities, that the Firm believes would be available to raise liquidity. This includes securities included as part of the excess HQLA at JPMorgan Chase Bank, N.A. that are not transferable to non-bank affiliates, as described above. The fair value of these securities was approximately $606 billion and $315 billion as of June 30, 2020 and December 31, 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 HQLA at JPMorgan Chase Bank, N.A. which was primarily a result of increased deposits as noted above.

The Firm also had available borrowing capacity at FHLBs and the discount window at the Federal Reserve Bank as a result of collateral pledged by the Firm to such banks of approximately $281 billion and $322 billion as of June 30, 2020 and December 31, 2019, respectively. This borrowing capacity excludes the benefit of cash and securities reported in the Firm’s HQLA or other unencumbered securities that are currently pledged at the Federal Reserve Bank discount window and other central banks. Available borrowing capacity decreased from December 31, 2019 primarily due to lower credit card receivable balances and lower collateral values due to a decline in their fair value, both driven by the COVID-19 pandemic. Although available, the Firm does not view this borrowing capacity at the Federal Reserve Bank discount window and the other central banks as a primary source of liquidity.

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 stable deposits, secured and unsecured funding in the capital markets 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

unsecured long-term debt, or from borrowings from the Parent Company or the Intermediate Holding Company (“IHC”). 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.

Deposits

The table below summarizes, by the LOBs and Corporate, the deposit balances as of June 30, 2020, and December 31, 2019, and the average deposit balances for the three and six months ended June 30, 2020 and 2019, respectively.



	June 30, 2020		December 31, 2019			Three months ended June 30,				Six months ended June 30,
Deposits						Average				Average
(in millions)						2020		2019		2020		2019
Consumer & Community Banking	$	876,991	$	718,354	^(a)	$	831,996	$	690,892	$	782,822	$	685,980
Corporate & Investment Bank	643,133		511,905		^(a)	652,464		512,098		607,345		502,280
Commercial Banking	240,440		184,115			236,753		168,194		212,718		167,688
Asset & Wealth Management	169,537		147,804			168,573		140,317		159,602		139,282
Corporate	928		253			731		793		864		878
Total Firm	$	1,931,029	$	1,562,431		$	1,890,517	$	1,512,294	$	1,763,351	$	1,496,108


(a)	In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB as part of the Firm’s Wholesale Payments business. The prior- period amounts were revised to conform with the current presentation.

Deposits provide a stable source of funding and reduce 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 June 30, 2020 and December 31, 2019.



(in billions except ratios)	June 30, 2020			December 31, 2019
Deposits	$	1,931.0		$	1,562.4
Deposits as a % of total liabilities	65		%	64		%
Loans	$	978.5		$	959.8
Loans-to-deposits ratio	51		%	61		%

The Firm believes that average deposit balances are generally more representative of deposit trends than period-end deposit balances, over time. However, during periods of market disruption those trends could be affected.

Average deposits increased for the three and six months ended June 30, 2020, reflecting significant inflows across the LOBs primarily driven by the COVID-19 pandemic, as customers and clients looked to remain liquid as a result of market conditions. In the wholesale businesses, the inflows principally occurred in March, and in general were maintained through the second quarter. In CCB, the increase was driven by the continued growth in both existing and new accounts, as well as COVID-19 related factors, such as the government stimulus for consumers and small businesses, lower consumer spending and delays in tax payments.

Refer to the discussion of the Firm’s Business Segment Results and the Consolidated Balance Sheets Analysis on pages 24-47 and pages 18-19, respectively, for further information on deposit and liability balance trends.

The following table summarizes short-term and long-term funding, excluding deposits, as of June 30, 2020, and December 31, 2019, and average balances for the three and six months ended June 30, 2020 and 2019, respectively. Refer to the Consolidated Balance Sheets Analysis on pages 18-19 and Note 11 for additional information.



	June 30, 2020		December 31, 2019		Three months ended June 30,				Six months ended June 30,
Sources of funds (excluding deposits)					Average				Average
(in millions)					2020		2019		2020		2019
Commercial paper	$	13,988	$	14,754	$	14,032	$	26,030	$	14,003	$	27,373
Other borrowed funds	8,447		7,544		8,613		11,818		8,853		11,037
Total short-term unsecured funding	$	22,435	$	22,298	$	22,645	$	37,848	$	22,856	$	38,410
Securities sold under agreements to repurchase^(a)	$	229,320	$	175,709	$	268,281	$	218,057	$	251,338	$	207,812
Securities loaned^(a)	4,246		5,983		5,950		8,090		6,649		9,428
Other borrowed funds^(b)	25,579		18,622		28,206		27,840		23,983		31,690
Obligations of Firm-administered multi-seller conduits^(c)	$	12,666	$	9,223	$	12,428	$	13,356	$	11,163	$	10,387
Total short-term secured funding	$	271,811	$	209,537	$	314,865	$	267,343	$	293,133	$	259,317

Senior notes	$	180,532	$	166,185	$	177,972	$	167,376	$	171,857	$	165,176
Subordinated debt	22,320		17,591		20,934		17,056		19,545		16,890
Structured notes^(d)	73,833		74,724		71,561		62,284		72,205		59,853
Total long-term unsecured funding	$	276,685	$	258,500	$	270,467	$	246,716	$	263,607	$	241,919

Credit card securitization^(c)	$	5,789	$	6,461	$	5,907	$	11,671	$	6,039	$	12,535
FHLB advances	36,129		28,635		36,130		34,541		31,629		39,227
Other long-term secured funding^(e)	4,189		4,363		4,233		4,680		4,320		4,785
Total long-term secured funding	$	46,107	$	39,459	$	46,270	$	50,892	$	41,988	$	56,547

Preferred stock^(f)	$	30,063	$	26,993	$	30,063	$	26,993	$	29,734	$	27,059
Common stockholders’ equity^(f)	$	234,403	$	234,337	$	234,408	$	233,026	$	234,469	$	231,547


(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 49-54 and Consolidated statements of changes in stockholders’ equity on page 96 of this Form 10-Q, and Note 21 and Note 22 of JPMorgan Chase’s 2019 Form 10-K for additional information on preferred stock and common stockholders’ equity.

Short-term funding

The Firm’s sources of short-term secured funding primarily consist of securities loaned or sold under agreements to repurchase. These instruments are secured predominantly by high-quality securities collateral, including government-issued debt and U.S. GSE and government agency MBS. Securities sold under agreements to repurchase increased at June 30, 2020, compared with December 31, 2019, reflecting in CIB, a net increase related to client-driven market-making activities, and higher secured financing of trading assets, partially offset by a decline in the Firm's participation in the Federal Reserve's open market operations, and in Treasury and CIO, higher secured financing of AFS investment securities.

The balances associated with securities loaned or sold under agreements to repurchase fluctuate over time due to customers’ investment and financing activities, the Firm’s demand for 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 June 30, 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 49-54 for additional information on the MMLF.

The PDCF was established by the Federal Reserve on March 20, 2020, to allow primary dealers to support smooth market functioning by facilitating the availability of credit to businesses and households. 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. On July 28, 2020, the Federal Reserve announced that it was extending through December 31, 2020 the PDCF, which was previously scheduled to expire on or around September 30, 2020. 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 also continues to participate in the Federal Reserve’s open market operations.

The Firm’s sources of short-term unsecured funding primarily consist of issuance of wholesale commercial paper. The decrease in commercial paper at June 30, 2020, from December 31, 2019 and for the average three and six months ended June 30, 2020 compared to the prior year period, was due to lower net issuance primarily for short-term liquidity management.

Long-term funding and issuance

Long-term funding provides additional sources of stable funding and liquidity for the Firm. The Firm’s long-term funding plan is driven primarily by expected client activity, liquidity considerations, and regulatory requirements, including TLAC. Long-term funding objectives include maintaining diversification, maximizing market access and optimizing funding costs. The Firm evaluates various funding markets, tenors and currencies in creating its optimal long-term funding plan.

The significant majority of the Firm’s long-term unsecured funding is issued by the Parent Company to provide 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 three and six months ended June 30, 2020 and 2019. Refer to Liquidity Risk Management on pages 93–98 and Note 20 of JPMorgan Chase’s 2019 Form 10-K for additional information on the IHC and long-term debt.



Long-term unsecured funding
	Three months ended June 30,				Six months ended June 30,				Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019		2020		2019		2020		2019
(Notional in millions)	Parent Company								Subsidiaries
Issuance
Senior notes issued in the U.S. market	$	13,500	$	4,000	$	18,750	$	8,250	$	—	$	—	$	—	$	1,750
Senior notes issued in non-U.S. markets	—		—		1,355		2,248		—		—		—		—
Total senior notes	13,500		4,000		20,105		10,498		—		—		—		1,750
Subordinated debt	3,000		—		3,000		—		—		—		—		—
Structured notes^(a)	2,526		631		5,308		1,816		3,862		9,016		13,114		15,132
Total long-term unsecured funding – issuance	$	19,026	$	4,631	$	28,413	$	12,314	$	3,862	$	9,016	$	13,114	$	16,882

Maturities/redemptions
Senior notes	$	2,618	$	4,157	$	8,084	$	7,907	$	3,572	$	1	$	7,637	$	1,816
Subordinated debt	—		—		—		146		—		—		—		—
Structured notes	1,309		331		2,834		959		5,355		4,327		14,737		8,160
Total long-term unsecured funding – maturities/redemptions	$	3,927	$	4,488	$	10,918	$	9,012	$	8,927	$	4,328	$	22,374	$	9,976


(a)	Includes certain TLAC-eligible long-term unsecured debt issued by the Parent Company.

The Firm can also raise secured long-term funding through securitization of consumer credit card loans and FHLB advances. The following table summarizes the securitization issuance and FHLB advances and their respective maturities or redemptions for the three and six months ended June 30, 2020 and 2019, respectively.



Long-term secured funding
	Three months ended June 30,								Six months ended June 30,
	Issuance				Maturities/Redemptions				Issuance				Maturities/Redemptions
(in millions)	2020		2019		2020		2019		2020		2019		2020		2019
Credit card securitization	$	—	$	—	$	774	$	4,125	$	1,000	$	—	$	1,674	$	4,125
FHLB advances	—		—		2		12,804		15,000		—		7,505		14,805
Other long-term secured funding^(a)	89		18		229		207		323		53		434		453
Total long-term secured funding	$	89	$	18	$	1,005	$	17,136	$	16,323	$	53	$	9,613	$	19,383


(a)	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. Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for further description of the client-driven loan securitizations.

Credit ratings

The cost and availability of financing are influenced by credit ratings. Reductions in these ratings could have an adverse effect on the Firm’s access to liquidity sources, increase the cost of funds, trigger additional collateral or funding requirements and decrease the number of investors and counterparties willing to lend to the Firm. The nature and magnitude of the impact of ratings downgrades depends on numerous contractual and behavioral factors, which the Firm believes are incorporated in its liquidity risk and stress testing metrics. The Firm believes that it maintains sufficient liquidity to withstand a potential decrease in funding capacity due to ratings downgrades.

Additionally, the Firm’s funding requirements for VIEs and other third-party commitments may be adversely affected by a decline in credit ratings. Refer to SPEs on page 21, and liquidity risk and credit-related contingent features in Note 5 for additional information on the impact of a credit ratings downgrade on the funding requirements for VIEs, and on derivatives and collateral agreements.

The credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries as of June 30, 2020 were as follows:



	JPMorgan Chase & Co.			JPMorgan Chase Bank, N.A.			J.P. Morgan Securities LLC J.P. Morgan Securities plc
June 30, 2020	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+	Negative	AA	F1+	Negative	AA	F1+	Negative

(a) On April 18, 2020, Fitch affirmed the credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries but revised the outlook on the credit ratings from stable to negative given expectations that credit fundamentals will deteriorate as a result of the COVID-19 pandemic.

Refer to page 98 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the factors that could affect credit ratings of the Parent Company and the Firm’s principal bank and non-bank subsidiaries.



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. Refer to pages 60-78 for a further discussion of Credit Risk.

Refer to page 79 for a further discussion of Investment Portfolio Risk. Refer to Credit and Investment Risk Management on pages 100–118 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of the Firm’s Credit and Investment Risk Management framework.



CREDIT PORTFOLIO

Credit risk is the risk associated with the default or change in credit profile of a client, counterparty or customer.

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.


•	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 as provided under section 4013 of the CARES 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 9-10 for more information on customer and client assistance granted. Refer to Notes 12 and 13 for further information on the Firm’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 nonaccrual status. Refer to Consumer Credit Portfolio on pages 62-66 and Wholesale Credit Portfolio on pages 67-76 for information on loan modifications as of June 30, 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; refer to Notes 2 and 3 for further information regarding these loans. Refer to Notes 12, 23, and 5 for additional information on the Firm’s loans, lending-related commitments and derivative receivables, including the Firm’s accounting policies.

Refer to Note 10 for information regarding the credit risk inherent in the Firm’s investment securities portfolio; and refer to Note 11 for information regarding the credit risk inherent in the securities financing portfolio. Refer to Consumer Credit Portfolio on pages 62-66 and Note 12 for further discussions of the consumer credit environment and consumer loans. Refer to Wholesale Credit Portfolio on pages 67-76 and Note 12 for further discussions of the wholesale credit environment and wholesale loans.



Total credit portfolio
	Credit exposure						Nonperforming^(d)(e)
(in millions)	Jun 30, 2020			Dec 31, 2019			Jun 30, 2020		Dec 31, 2019
Loans retained	$	965,448		$	945,601		$	7,669	$	3,983
Loans held-for-sale	7,147			7,064			245		7
Loans at fair value	5,923			7,104			130		90
Total loans–reported	978,518			959,769			8,044		4,080
Derivative receivables	74,846			49,766			108		30
Receivables from customers and other^(a)	22,403			33,706			—		—
Total credit-related assets	1,075,767			1,043,241			8,152		4,110
Assets acquired in loan satisfactions
Real estate owned	NA			NA			284		344
Other	NA			NA			4		43
Total assets acquired in loan satisfactions	NA			NA			288		387
Lending-related commitments	1,124,677			1,104,199			762		474
Total credit portfolio	$	2,200,444		$	2,147,440		$	9,202	$	4,971
Credit derivatives used in credit portfolio management activities^(b)	$	(16,542	)	$	(18,030	)	$	—	$	—
Liquid securities and other cash collateral held against derivatives^(c)	(21,501		)	(16,009		)	NA		NA



(in millions, except ratios)	Three months ended June 30,						Six months ended June 30,
(in millions, except ratios)	2020			2019			2020			2019
Net charge-offs	$	1,560		$	1,403		$	3,029		$	2,764
Average retained loans	986,804			945,209			967,719			950,852
Net charge-off rates	0.64		%	0.60		%	0.63		%	0.59		%


(a)	Receivables from customers and other primarily represents brokerage-related held-for-investment customer receivables.


(b)	Represents the net notional amount of protection purchased and sold through credit derivatives used to manage both performing and nonperforming wholesale credit exposures; these derivatives do not qualify for hedge accounting under U.S. GAAP. Refer to Credit derivatives on page 76 and Note 5 for additional information.


(c)	Includes collateral related to derivative instruments where appropriate legal opinions have not been either sought or obtained with respect to master netting agreements.

(d)

At June 30, 2020, and December 31, 2019, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $561 million and $961 million, respectively, and real estate owned (“REO”) insured by U.S. government agencies of $13 million and $41 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”).


(e)	At June 30, 2020, nonperforming loans included $1.3 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, provides the Firm with delegated authority to process and originate PPP loans until August 8, 2020. When certain criteria are met, PPP loans are subject to forgiveness and the Firm will receive payment of the forgiveness amount from the SBA. The term for PPP loans issued before June 5, 2020 is two years (with an option to extend to five years) and five years for those originated on or after June 5, 2020. PPP loan terms 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.

At June 30, 2020, the Firm had approximately $28 billion of loans under the PPP, of which $20 billion and $8 billion are in Consumer and Wholesale, respectively. The impact on interest income related to PPP loans was not material for the three months ended June 30, 2020.



CONSUMER CREDIT PORTFOLIO

The Firm’s retained consumer portfolio consists primarily of residential real estate loans, credit card loans, scored auto 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. Refer to Note 12 for further information on consumer loans, as well as the Firm’s nonaccrual and charge-off accounting policies. Refer to Note 23 for further information on lending-related commitments.

Continued weakness in the macroeconomic environment driven by the impacts of the COVID-19 pandemic, resulted in an additional increase in the allowance for credit losses. The continuation or worsening of the effects of the COVID-19 pandemic on the macroeconomic environment and the extent to which customer assistance and government stimulus efforts are effective could result in further impacts to credit quality metrics, including delinquencies, nonaccrual loans and charge-offs.

The following table presents consumer credit-related information with respect to the scored credit portfolios held in CCB, AWM and Corporate.



Consumer credit portfolio
									Three months ended June 30,											Six months ended June 30,
(in millions, except ratios)	Credit exposure				Nonaccrual loans^(h)(i)(j)				Net charge-offs/(recoveries)						Net charge-off/(recovery) rate^(k)					Net charge-offs/(recoveries)						Net charge-off/(recovery) rate^(k)
	Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019		2020			2019			2020			2019		2020			2019			2020			2019
Consumer, excluding credit card
Residential real estate^(a)	$	235,381	$	243,317	$	4,106	$	2,780	$	(5	)	$	(29	)	(0.01	)%		(0.04	)%	$	(125	)	$	(31	)	(0.10	)%		(0.02	)%
Auto and other^(b)(c)(d)	71,624		51,682		140		146		88			97			0.54		^(d)	0.75		202			206			0.70		^(d)	0.80
Total loans – retained	307,005		294,999		4,246		2,926		83			68			0.11			0.09		77			175			0.05			0.11
Loans held-for-sale	1,912		3,002		—		2		NA			NA			NA			NA		NA			NA			NA			NA
Total consumer, excluding credit card loans	308,917		298,001		4,246		2,928		83			68			0.11			0.09		77			175			0.05			0.11
Lending-related commitments^(e)	45,348		40,169
Total consumer exposure, excluding credit card	354,265		338,170
Credit card
Loans retained^(f)	141,656		168,924		—		—		1,178			1,240			3.33			3.24		2,491			2,442			3.28			3.23
Loans held-for-sale	—		—		—		—		NA			NA			NA			NA		NA			NA			NA			NA
Total credit card loans	141,656		168,924		—		—		1,178			1,240			3.33			3.24		2,491			2,442			3.28			3.23
Lending-related commitments^(e)(g)	673,836		650,720
Total credit card exposure^(g)	815,492		819,644
Total consumer credit portfolio^(g)	$	1,169,757	$	1,157,814	$	4,246	$	2,928	$	1,261		$	1,308		1.14	%		1.11	%	$	2,568		$	2,617		1.14	%		1.10	%


(a)	Includes scored mortgage and home equity loans held in CCB and AWM, and scored mortgage loans held in Corporate.


(b)	At June 30, 2020 and December 31, 2019, excluded operating lease assets of $22.2 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 17 for further information.


(c)	Includes scored auto and business banking loans and overdrafts.


(d)	At June 30, 2020, included $19.9 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 60-61 for a further discussion of the PPP.

(e)

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 23 for further information.


(f)	Includes billed interest and fees.


(g)	Also includes commercial card lending-related commitments primarily in CB and CIB.

(h)

At June 30, 2020 and December 31, 2019, nonaccrual loans excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $561 million and $961 million, respectively. These amounts have been excluded from nonaccrual loans based upon the government guarantee. In addition, the Firm’s policy is generally to exempt credit card loans from being placed on nonaccrual status, as permitted by regulatory guidance issued by the FFIEC.


(i)	At June 30, 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.


(j)	Generally excludes loans that were under payment deferral programs offered in response to the COVID-19 pandemic.


(k)	Average consumer loans held-for-sale were $1.9 billion and $1.2 billion for the three months ended June 30, 2020 and 2019, respectively, and were $2.2 billion and $1.2 billion for the six months ended June 30, 2020 and 2019, respectively. These amounts were excluded when calculating net charge-off/(recovery) rates.

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.

Predominantly all accounts that requested payment assistance were less than 30 days past due at the time of enrollment. Although borrowers are not required to make payments while still under payment deferral, on approximately 50% of accounts with payment assistance offered, borrowers have made at least one payment between March 2020 and June 30, 2020. 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.

The following table presents information related to the $28 billion unpaid principal balance of retained loans still under payment deferral as of June 30, 2020.



As of June 30, 2020 (in millions, except ratios)	Loan balance^(a)		Percent of loan class balance^(b)		Type of modifications
Residential real estate	$	20,548	8.7	%	Rolling three month deferral up to one year; final work-out is determined at the end of the deferral period; Generally deferred payments are required to be paid at the end of the loan term
Auto and other	3,357		4.6		• Auto: Three month deferral with automatic maturity extension • Business Banking: Three month deferral with automatic deferment to either maturity (loan) or one year forward (line)
Credit card	4,384		3.1		Three month minimum payment waiver with potential one month extensions totaling six months; Interest continues to accrue during the deferral period and is added to the principal balance
Total consumer	$	28,289	6.3	%

(a)

Excludes $7.5 billion of loans which were previously under payment deferral, with predominantly all returning to their original loan terms prior to June 30, 2020. Also excludes risk-rated business banking and auto dealer loans held in CCB and auto operating lease assets that were still under payment deferral as of June 30, 2020. Auto operating lease asset payment assistance consists of a 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.


(b)	Represents the unpaid principal balance of retained loans which were still under payment deferral as of June 30, 2020, divided by the total unpaid principal balance of the respective loan classes retained loans as of June 30, 2020.

Consumer, excluding credit card

Portfolio analysis

Loan balances increased from December 31, 2019 due to PPP loan originations in Business Banking, partially offset by lower residential real estate loans, reflecting paydowns and loan sales.

Residential real estate: The residential real estate portfolio, including loans held-for-sale, predominantly consists of prime mortgage loans and home equity lines of credit. The portfolio decreased from December 31, 2019 driven by paydowns and loan sales in Home Lending, largely offset by originations of prime mortgage loans that have been retained on the balance sheet. Net recoveries for the three months ended June 30, 2020 were lower when compared with the same period in the prior year as the current quarter included losses associated with the purchased credit deteriorated portfolio as a result of the adoption of CECL. Net recoveries for the six months ended June 30, 2020 were higher when compared with the same period in the prior year as the current year benefited from a recovery on a loan sale.

The carrying value of home equity lines of credit outstanding was $26.5 billion at June 30, 2020. This amount included $9.9 billion of HELOCs that have recast from interest-only to fully amortizing payments or have been modified and $8.7 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.

At June 30, 2020, and December 31, 2019, the carrying value of interest-only residential mortgage loans was $23.2 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 in AWM. Performance of this portfolio for the three and six months ended June 30, 2020 was in line with the performance of the broader residential mortgage portfolio for the same period.

The following table provides a summary of the Firm’s residential mortgage portfolio insured and/or guaranteed by U.S. government agencies, including loans held-for-sale. The Firm 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)	June 30, 2020		December 31, 2019
Current	$	692	$	1,280
30-89 days past due	265		695
90 or more days past due	561		961
Total government guaranteed loans	$	1,518	$	2,936

Geographic composition and current estimated loan-to-value ratio of residential real estate loans

Refer to Note 12 for information on the geographic composition and current estimated LTVs of the Firm’s residential real estate loans.

Modified residential real estate loans

The following table presents information relating to modified retained residential real estate loans for which concessions have been granted to borrowers experiencing financial difficulty, 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. Refer to Note 12 for further information on modifications for the three and six months ended June 30, 2020 and 2019.



(in millions)	June 30, 2020		December 31, 2019
Retained loans^(a)	$	16,350	$	5,926
PCI loans	NA		12,372		^(d)
Nonaccrual retained loans^(b)(c)	$	3,412	$	2,332

(a)

At June 30, 2020, and December 31, 2019, $5 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 14 for additional information about sales of loans in securitization transactions with Ginnie Mae.


(b)	At June 30, 2020, and December 31, 2019, nonaccrual loans included $2.4 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 June 30, 2020, nonaccrual loans included $1.0 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 $21.5 billion in Business Banking of which $19.9 billion remained outstanding on June 30, 2020, partially offset by paydowns and charge-offs or liquidation of delinquent loans. The scored auto portfolio net charge-off rates were 0.39% and 0.36% for the three months ended June 30, 2020 and 2019, respectively, and 0.40% and 0.43% for the six months ended June 30, 2020 and 2019, respectively.

Nonperforming assets

The following table presents information as of June 30, 2020, and December 31, 2019, about consumer, excluding credit card, nonperforming assets.



Nonperforming assets^(a)
(in millions)	June 30, 2020		December 31, 2019
Nonaccrual loans
Residential real estate^(b)	$	4,106	$	2,782
Auto and other	140		146
Total nonaccrual loans	4,246		2,928
Assets acquired in loan satisfactions
Real estate owned	185		208
Other	4		24
Total assets acquired in loan satisfactions	189		232
Total nonperforming assets	$	4,435	$	3,160


(a)	At June 30, 2020, and December 31, 2019, nonperforming assets excluded mortgage loans 90 or more days past due and insured by U.S. government agencies of $561 million and $961 million, respectively, and REO insured by U.S. government agencies of $13 million and $41 million, respectively. These amounts have been excluded based upon the government guarantee.


(b)	At June 30, 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.

Nonaccrual loans

The following table presents changes in consumer, excluding credit card, nonaccrual loans for the six months ended June 30, 2020 and 2019.



Nonaccrual loan activity
Six months ended June 30, (in millions)	2020		2019
Beginning balance	$	2,928	$	3,244

Additions:
PCD loans, upon adoption of CECL	708		NA
Other additions	1,655		975
Total additions	2,363		975

Reductions:
Principal payments and other^(a)	369		431
Charge-offs	220		189
Returned to performing status	356		393
Foreclosures and other liquidations	100		129
Total reductions	1,045		1,142

Net changes	1,318		(167		)
Ending balance	$	4,246	$	3,077


(a)	Other reductions includes loan sales.

Active and suspended foreclosure: Refer to Note 12 for information on loans that were in the process of active or suspended foreclosure.

Refer to Note 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)	June 30, 2020			December 31, 2019
Loan delinquency^(a)
Current	$	17,522		$	18,571
30-149 days past due	693			970
150 or more days past due	568			822
Total PCD loans	$	18,783		$	20,363

% of 30+ days past due to total retained PCD loans	6.71		%	8.80		%
Nonaccrual loans	$	1,283		NA



(in millions, except ratios)	Three months ended June 30, 2020			Six months ended June 30, 2020
Net charge-offs	$	27		$	33
Net charge-off rate	0.57		%	0.34		%


(a)	At June 30, 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.

Credit card

Total credit card loans decreased from December 31, 2019 reflecting a decline in sales volume beginning in March as a result of the COVID-19 pandemic and the impact of seasonality. The June 30, 2020 30+ and 90+ day delinquency rates of 1.71% and 0.93%, respectively, decreased compared to the December 31, 2019 30+ and 90+ day delinquency rates of 1.87% and 0.95%, respectively. The delinquency rate was positively impacted by loans in payment deferral programs, as these loans are generally not considered delinquent if they are performing according to their modified terms. Net charge-offs decreased for the three months ended June 30, 2020 compared with the same period in the prior year due to higher recoveries. However, net charge-offs increased for the six months ended June 30, 2020 when compared with the same period in the prior year due to loan growth in the prior year largely offset by higher recoveries.

Consistent with the Firm’s policy, all credit card loans typically remain on accrual status until charged off. However, the Firm’s allowance 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

Refer to Note 12 for information on the geographic and FICO composition of the Firm’s credit card loans.

Modifications of credit card loans

At June 30, 2020 the Firm had $1.4 billion of credit card loans outstanding that have been modified in TDRs, 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.



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 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 70-74 for further information.

The Firm’s wholesale credit portfolio includes exposure held in CIB, CB, AWM and Corporate, as well as risk-rated business banking and auto dealer exposures held in CCB for which the wholesale methodology is applied when determining the allowance for credit losses.

The macroeconomic environment, driven by the impacts of the COVID-19 pandemic, has resulted in broad-based deterioration and an increase in the allowance for credit losses. In the six months ended June 30, 2020, the investment-grade percentage of the portfolio decreased from 74% to 72%, and criticized exposure increased $24.3 billion from $15.1 billion to $39.4 billion. The increase in criticized exposure was largely driven by downgrades in Consumer & Retail and Oil & Gas. 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.

Retained loans increased by $35.1 billion in the six months ended June 30, 2020, driven by the CIB and CB, predominantly to commercial and industrial clients. The $35.1 billion increase reflects the outstanding loans from the March drawdown activity on committed revolving credit facilities, as a result of the COVID-19 pandemic, and the impact of loans under the PPP.



Wholesale credit portfolio
	Credit exposure						Nonperforming^(c)
(in millions)	Jun 30, 2020			Dec 31, 2019			Jun 30, 2020		Dec 31, 2019
Loans retained	$	516,787		$	481,678		$	3,423	$	1,057
Loans held-for-sale	5,235			4,062			245		5
Loans at fair value	5,923			7,104			130		90
Loans – reported	527,945			492,844			3,798		1,152
Derivative receivables	74,846			49,766			108		30
Receivables from customers and other^(a)	22,403			33,706			—		—
Total wholesale credit-related assets	625,194			576,316			3,906		1,182
Assets acquired in loan satisfactions
Real estate owned	NA			NA			99		136
Other	NA			NA			—		19
Total assets acquired in loan satisfactions	NA			NA			99		155
Lending-related commitments	405,493			413,310			762		474
Total wholesale credit portfolio	$	1,030,687		$	989,626		$	4,767	$	1,811
Credit derivatives used in credit portfolio management activities^(b)	$	(16,542	)	$	(18,030	)	$	—	$	—
Liquid securities and other cash collateral held against derivatives	(21,501		)	(16,009		)	NA		NA


(a)	Receivables from customers and other include $22.4 billion and $33.7 billion of brokerage-related held-for-investment customer receivables at June 30, 2020, and December 31, 2019, respectively, to clients 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. Refer to Credit derivatives on page 76 and Note 5 for additional information.


(c)	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 June 30, 2020, predominantly all of these loans were considered performing.

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 June 30, 2020, the Firm had approximately $17 billion of retained loans still under payment deferral, almost all short-term, and included $8.8 billion in Automotive in the table below that the Firm proactively offered to performing auto dealer clients where the deferral period ended on June 30, 2020, and the majority of the clients returned to their original loan terms. 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.



As of June 30, 2020 (in millions, except ratios)
Industry	Loan balance^(a)		Percent of total industry loan balance^(b)		IG percentage of loan balance in payment deferral
Automotive	$	8,827	46	%	72	%
Real Estate	5,211		4		64
Individuals and Individual Entities	809		1		9
Consumer & Retail	690		1		4
Industrials	335		1		10
Healthcare	300		1		16
All other industries	603		—		55
Total	$	16,775	3	%	61	%


(a)	Excludes $6.5 billion of loans which were previously under payment deferral, with the majority returning to their original loan terms prior to June 30, 2020.


(b)	Represents the balance of the retained loans which were still under payment deferral as of June 30, 2020, divided by the respective industry total retained loans balance as of June 30, 2020.

In addition, the Firm granted assistance in the form of covenant modifications. These types of assistance, both payment deferrals and covenant modifications, have not resulted in an increase in TDRs, either because the modifications were insignificant or they qualified for the option to suspend the application of accounting guidance for TDRs as provided under section 4013 of the CARES Act. These loans continue to be risk-rated in accordance with the Firm’s overall credit risk management framework. As of June 30, 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 June 30, 2020, and December 31, 2019. The Firm considers internal ratings equivalent to BBB-/Baa3 or higher as investment grade. Refer to Note 12 for further information on internal risk ratings.



	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
June 30, 2020 (in millions, except ratios)
Loans retained	$	156,249		$	235,233		$	125,305		$	516,787		$	371,819		$	144,968		$	516,787		72	%
Derivative receivables										74,846									74,846
Less: Liquid securities and other cash collateral held against derivatives										(21,501		)							(21,501		)
Total derivative receivables, net of all collateral	10,718			14,756			27,871			53,345			37,148			16,197			53,345			70
Lending-related commitments	106,972			285,017			13,504			405,493			293,070			112,423			405,493			72
Subtotal	273,939			535,006			166,680			975,625			702,037			273,588			975,625			72
Loans held-for-sale and loans at fair value^(a)										11,158									11,158
Receivables from customers and other										22,403									22,403
Total exposure – net of liquid securities and other cash collateral held against derivatives										$	1,009,186								$	1,009,186
Credit derivatives used in credit portfolio management activities^(b)(c)	$	(134	)	$	(13,714	)	$	(2,694	)	$	(16,542	)	$	(14,035	)	$	(2,507	)	$	(16,542	)	85	%



	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, 2019 (in millions, except ratios)
Loans retained	$	141,620		$	218,323		$	121,735		$	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										(16,009		)							(16,009		)
Total derivative receivables, net of all collateral	6,561			6,960			20,236			33,757			26,966			6,791			33,757			80
Lending-related commitments	83,821			316,328			13,161			413,310			294,317			118,993			413,310			71
Subtotal	232,002			541,611			155,132			928,745			684,727			244,018			928,745			74
Loans held-for-sale and loans at fair value^(a)										11,166									11,166
Receivables from customers and other										33,706									33,706
Total exposure – net of liquid securities and other cash collateral held against derivatives										$	973,617								$	973,617
Credit derivatives used in credit portfolio management activities^(b)(c)	$	(4,912	)	$	(10,031	)	$	(3,087	)	$	(18,030	)	$	(16,276	)	$	(1,754	)	$	(18,030	)	90	%


(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 the remaining contractual maturity. Derivative contracts that are in a receivable position at June 30, 2020, may become payable prior to maturity based on their cash flow profile or changes in market conditions.

Wholesale credit exposure – industry exposures

The Firm focuses on the management and diversification of its industry exposures, and pays particular attention to industries with actual or potential credit concerns. Exposures deemed criticized align with the U.S. banking regulators’ definition of criticized exposures, which consist of the special mention, substandard and doubtful categories.

The total criticized component of the portfolio, excluding loans held-for-sale and loans at fair value, was $39.4 billion at June 30, 2020, compared with $15.1 billion at December 31, 2019, with increases largely driven by downgrades in Consumer & Retail and Oil & Gas due to impacts from the COVID-19 pandemic.

Below are summaries of the Firm’s exposures as of June 30, 2020, and December 31, 2019. The industry of risk category is generally based on the client or counterparty’s primary business activity.



Wholesale credit exposure – industries^(a)
											Selected metrics
											30 days or more past due and accruing loans ^(g)		Net charge-offs/ (recoveries)			Credit derivative hedges^(h)			Liquid securities and other cash collateral held against derivative receivables
					Noninvestment-grade
As of or for the six months ended	Credit exposure^(f)		Investment- grade		Noncriticized		Criticized performing		Criticized nonperforming
June 30, 2020
(in millions)
Real Estate	$	148,656	$	118,177	$	28,031	$	2,220	$	228	$	89	$	9		$	(668	)	$	(3	)
Consumer & Retail	110,160		53,944		43,793		11,793		630		146		40			(628		)	(12		)
Individuals and Individual Entities^(b)	109,563		96,134		12,474		269		686		961		(1		)	—			(1,388		)
Industrials	66,179		39,328		24,135		2,453		263		196		31			(817		)	(62		)
Healthcare	60,471		45,882		12,816		1,537		236		19		96			(394		)	(209		)
Technology, Media & Telecommunications	60,461		33,658		22,994		3,606		203		11		46			(870		)	(38		)
Asset Managers	60,270		52,285		7,806		165		14		10		—			—			(5,637		)
Banks & Finance Cos	49,970		34,862		14,365		675		68		44		13			(1,855		)	(2,868		)
Oil & Gas	43,035		21,204		15,136		5,583		1,112		1		197			(374		)	—
Automotive	38,294		23,882		11,232		3,176		4		10		—			(475		)	—
State & Municipal Govt^(c)	36,824		36,316		506		—		2		7		—			—			(107		)
Utilities	32,078		24,144		7,555		319		60		—		4			(441		)	(13		)
Transportation	18,089		8,246		8,599		961		283		18		10			(240		)	(34		)
Chemicals & Plastics	17,172		11,388		5,196		561		27		7		—			(44		)	—
Central Govt	16,385		16,056		329		—		—		—		—			(8,509		)	(3,323		)
Metals & Mining	15,790		6,652		8,146		913		79		6		10			(145		)	(7		)
Insurance	14,804		10,995		3,762		44		3		12		—			(36		)	(2,717		)
Securities Firms	8,233		6,175		2,045		1		12		—		12			(49		)	(3,437		)
Financial Markets Infrastructure	7,724		7,438		286		—		—		—		—			—			(33		)
All other^(d)	82,968		74,328		7,428		829		383		105		(6		)	(997		)	(1,613		)
Subtotal	$	997,126	$	721,094	$	236,634	$	35,105	$	4,293	$	1,642	$	461		$	(16,542	)	$	(21,501	)
Loans held-for-sale and loans at fair value	11,158
Receivables from customers and other	22,403
Total^(e)	$	1,030,687



(continued from previous page)
											Selected metrics
											30 days or more past due and accruing loans		Net charge-offs/ (recoveries)			Credit derivative hedges^(h)			Liquid securities and other cash collateral held against derivative receivables
					Noninvestment-grade
As of or for the year ended	Credit exposure^(f)		Investment- grade		Noncriticized		Criticized performing		Criticized nonperforming
December 31, 2019
(in millions)
Real Estate	$	150,805	$	121,607	$	27,683	$	1,457	$	58	$	104	$	13		$	(100	)	$	—
Consumer & Retail	106,986		58,704		45,806		2,261		215		118		124			(235		)	(11		)
Individuals and Individual Entities^(b)	105,018		93,172		11,617		192		37		388		33			—			(641		)
Industrials	62,483		39,434		21,673		1,157		219		172		48			(746		)	(9		)
Healthcare	50,824		36,988		12,544		1,141		151		108		14			(405		)	(145		)
Technology, Media & Telecommunications	60,033		35,878		21,066		2,953		136		27		27			(658		)	(17		)
Asset Managers	51,856		45,249		6,588		6		13		18		—			—			(4,785		)
Banks & Finance Cos	50,786		34,941		15,031		808		6		—		—			(834		)	(2,112		)
Oil & Gas	41,641		22,244		17,823		995		579		—		98			(429		)	(10		)
Automotive	35,118		24,255		10,246		615		2		8		1			(194		)	—
State & Municipal Govt^(c)	30,095		29,586		509		—		—		33		7			—			(46		)
Utilities	34,843		22,213		12,316		301		13		2		39			(414		)	(50		)
Transportation	14,497		8,734		5,336		353		74		30		8			(37		)	(37		)
Chemicals & Plastics	17,499		12,033		5,243		221		2		5		—			(10		)	(13		)
Central Govt	14,865		14,524		341		—		—		—		—			(9,018		)	(1,963		)
Metals & Mining	15,586		7,095		7,789		661		41		2		(1		)	(33		)	(6		)
Insurance	12,348		9,458		2,867		19		4		3		—			(36		)	(1,998		)
Securities Firms	7,344		5,973		1,344		27		—		—		—			(48		)	(3,201		)
Financial Markets Infrastructure	4,121		3,969		152		—		—		—		—			—			(6		)
All other^(d)	78,006		73,453		4,130		412		11		4		4			(4,833		)	(959		)
Subtotal	$	944,754	$	699,510	$	230,104	$	13,579	$	1,561	$	1,022	$	415		$	(18,030	)	$	(16,009	)
Loans held-for-sale and loans at fair value	11,166
Receivables from customers and other	33,706
Total^(e)	$	989,626


(a)	The industry rankings presented in the table as of December 31, 2019, are based on the industry rankings of the corresponding exposures at June 30, 2020, not actual rankings of such exposures at December 31, 2019.


(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 June 30, 2020, and December 31, 2019, noted above, the Firm held: $7.5 billion and $6.5 billion, respectively, of trading assets; $30.4 billion and $29.8 billion, respectively, of AFS securities; and $4.8 billion at both periods 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 90% and 10%, respectively, at both June 30, 2020, and December 31, 2019.


(e)	Excludes cash placed with banks of $484.2 billion and $254.0 billion, at June 30, 2020, and December 31, 2019, 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)	Generally excludes loans that were under payment deferral programs offered in response to the COVID-19 pandemic.


(h)	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.

Presented below is additional detail on certain of the Firm’s largest industry exposures and/or certain industries which present potential heightened credit concerns.

Real Estate

Real Estate exposure was $148.7 billion as of June 30, 2020, of which $87.1 billion is multifamily lending as shown in the table below. During the six months ended June 30, 2020 the investment-grade portion of the portfolio decreased from 81% to 79%, while the drawn percentage increased from 78% to 82%, both driven by the impacts of the COVID-19 pandemic.



	June 30, 2020
(in millions, except ratios)	Loans and Lending-related Commitments		Derivative Receivables		Credit exposure		% Investment-grade		% Drawn^(d)
Multifamily^(a)	$	86,854	$	229	$	87,083	88	%	92	%
Office	16,731		616		17,347		80		72
Retail	11,316		218		11,534		63		70
Other Income Producing Properties^(b)	10,454		423		10,877		74		67
Industrial	8,991		68		9,059		72		75
Lodging	3,525		9		3,534		17		67
Services and Non Income Producing	9,204		18		9,222		51		53
Total Real Estate Exposure^(c)	147,075		1,581		148,656		79		82

	December 31, 2019
(in millions, except ratios)	Loans and Lending-related Commitments		Derivative Receivables		Credit exposure		% Investment- grade		% Drawn^(d)
Multifamily^(a)	$	86,380	$	58	$	86,438	91	%	92	%
Office	15,647		231		15,878		80		70
Retail	11,321		87		11,408		83		69
Other Income Producing Properties^(b)	14,372		181		14,553		48		45
Industrial	8,842		24		8,866		74		75
Lodging	3,702		19		3,721		51		38
Services and Non Income Producing	9,922		19		9,941		57		47
Total Real Estate Exposure	150,186		619		150,805		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 75% investment-grade.


(d)	Represents drawn exposure as a percentage of credit exposure.

Consumer & Retail

Consumer & Retail exposure was $110.2 billion as of June 30, 2020, and predominantly includes Retail, Food and Beverage, and Business and Consumer Services as shown in the table below. During the six months ended June 30, 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 49%


•	the drawn percentage of this portfolio increased from 35% to 43%


•	criticized exposure increased by $9.9 billion from $2.5 billion to $12.4 billion



	June 30, 2020
(in millions, except ratios)	Loans and Lending-related Commitments		Derivative Receivables		Credit exposure		% Investment-grade		% Drawn^(d)
Retail^(a)	$	30,847	$	631	$	31,478	48	%	46	%
Food and Beverage	26,987		794		27,781		60		39
Business and Consumer Services	24,934		631		25,565		51		48
Consumer Hard Goods	13,160		173		13,333		56		42
Leisure^(b)	11,700		303		12,003		13		39
Total Consumer & Retail^(c)	107,628		2,532		110,160		49		43

	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 June 30, 2020 approximately 90% 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 $43.0 billion as of June 30, 2020, including $21.0 billion of Exploration & Production and Oil field Services as shown in the table below. During the six months ended June 30, 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 49%


•	the drawn percentage of this portfolio increased from 31% to 33%


•	criticized exposure increased by $5.1 billion from $1.6 billion to $6.7 billion



	June 30, 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	$	20,683	$	290	$	20,973	33	%	42	%
Other Oil & Gas^(a)	21,356		706		22,062		65		24
Total Oil & Gas^(b)	42,039		996		43,035		49		33

	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 $13.9 billion and $15.7 billion at June 30, 2020 and December 31, 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.

Loans

In its wholesale businesses, the Firm provides loans to a variety of clients, ranging from large corporate and institutional clients to high-net-worth individuals. Refer to Note 12 for a further discussion on loans, including information about delinquencies, loan modifications and other credit quality indicators.

The following table presents the change in the nonaccrual loan portfolio for the six months ended June 30, 2020 and 2019. The increase in nonaccrual loans during the six months ended June 30, 2020 was driven by downgrades across multiple industries on client credit deterioration.



Wholesale nonaccrual loan activity
Six months ended June 30, (in millions)	2020		2019
Beginning balance	$	1,152	$	1,587
Additions	3,754		1,307
Reductions:
Paydowns and other	402		814
Gross charge-offs	484		163
Returned to performing status	184		67
Sales	38		57
Total reductions	1,108		1,101
Net changes	2,646		206
Ending balance	$	3,798	$	1,793

The following table presents net charge-offs/recoveries, which are defined as gross charge-offs less recoveries, for the three and six months ended June 30, 2020 and 2019. The amounts in the table below do not include gains or losses from sales of nonaccrual loans.



Wholesale net charge-offs/(recoveries)
(in millions, except ratios)	Three months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019
Loans – reported
Average loans retained	$	540,248		$	472,049		$	516,032		$	471,999
Gross charge-offs	310			112			491			176
Gross recoveries collected	(11		)	(17		)	(30		)	(29		)
Net charge-offs/(recoveries)	299			95			461			147
Net charge-off/(recovery) rate	0.22		%	0.08		%	0.18		%	0.06		%

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 fulfills 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 have historically been refinanced, extended, cancelled, or expired without being drawn upon or a default occurring. As a result, the Firm does not believe that the total contractual amount of these wholesale lending-related commitments is representative of the Firm’s expected future credit exposure or funding requirements. Refer to Note 23 for further information on wholesale lending-related commitments.

Receivables from Customers

Receivables from customers primarily represent held-for-investment margin loans to brokerage clients in CIB and AWM that are collateralized by assets maintained in the clients’ brokerage accounts (e.g., cash on deposit, liquid and readily marketable debt or equity securities), as such generally no allowance for credit losses is held against these receivables. To manage its credit risk the Firm establishes margin requirements and monitors the required margin levels on an ongoing basis, and requires clients to deposit additional cash or other collateral, or to reduce positions, when appropriate. These receivables are reported within accrued interest and accounts receivable on the Firm’s Consolidated balance sheets.

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. Refer to Note 5 for a further discussion of derivative contracts.

The following table summarizes the net derivative receivables for the periods presented.



Derivative receivables
(in millions)	June 30, 2020			December 31, 2019
Total, net of cash collateral	74,846			49,766
Liquid securities and other cash collateral held against derivative receivables^(a)	(21,501		)	(16,009		)
Total, net of collateral	$	53,345		$	33,757


(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 $74.8 billion and $49.8 billion at June 30, 2020, and December 31, 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 cash collateral held by the Firm. However, in management’s view, the appropriate measure of current credit risk should also take into consideration additional liquid securities (primarily U.S. government and agency securities and other Group of Seven nations (“G7”) government securities) and other cash collateral held by the Firm aggregating $21.5 billion and $16.0 billion at June 30, 2020, and December 31, 2019, respectively, that may be used as security when the fair value of the client’s exposure is in the Firm’s favor.

The Firm also holds additional collateral (primarily cash, G7 government securities, other liquid government 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. Refer to Note 5 for additional information on the Firm’s use of collateral agreements.

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 Firm considers internal ratings equivalent to BBB-/Baa3 or higher as investment grade. Refer to Note 12 for further information on internal risk ratings.



Ratings profile of derivative receivables
Internal rating equivalent	June 30, 2020				December 31, 2019
(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	$	12,158	23	%	$	8,347	25	%
A+/A1 to A-/A3	6,503		12		5,471		16
BBB+/Baa1 to BBB-/Baa3	18,487		35		13,148		39
BB+/Ba1 to B-/B3	12,850		24		6,225		18
CCC+/Caa1 and below	3,347		6		566		2
Total	$	53,345	100	%	$	33,757	100	%

As previously noted, the Firm uses collateral agreements to mitigate counterparty credit risk. The percentage of the Firm’s over-the-counter derivative contracts 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 87% and 90% at June 30, 2020, and December 31, 2019, respectively.

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.

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 lending-related commitments) and derivatives counterparty exposure in the Firm’s wholesale businesses (collectively, “credit portfolio management” activities). Information on credit portfolio management activities is provided in the table below.



Credit derivatives used in credit portfolio management activities
	Notional amount of protection purchased and sold^(a)
(in millions)	June 30, 2020		December 31, 2019
Credit derivatives used to manage:
Loans and lending-related commitments	$	5,064	$	2,047
Derivative receivables	11,478		15,983
Credit derivatives used in credit portfolio management activities	$	16,542	$	18,030


(a)	Amounts are presented net, considering the Firm’s net protection purchased or sold with respect to each underlying reference entity or index.

Refer to Credit derivatives in Note 5 of this Form 10-Q and Note 5 of JPMorgan Chase’s 2019 Form 10-K for further information on credit derivatives and derivatives used in credit portfolio management activities.



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 loan portfolios (scored and risk-rated) and is presented separately on the balance sheet,


•	the allowance for lending-related commitments, which is presented on the balance sheet 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 balance sheet.

Refer to Note 13 and Note 10 for a description of the policies, methodologies and judgments used to determine the Firm’s allowances for credit losses on loans, lending-related commitments, and investment securities.

The allowance for credit losses increased compared with December 31, 2019, primarily reflecting the deterioration and uncertainty in the macroeconomic environment as a result of the impact of the COVID-19 pandemic, consisting of:


•	a $8.7 billion addition in consumer, predominantly in the credit card and residential real estate portfolios


•	a net $7.0 billion addition in wholesale, across the LOBs impacting multiple industry sectors, and


•	a net $4.3 billion addition as a result of the adoption of CECL.

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. In the first quarter of 2020, management’s macroeconomic forecast included a decline in the U.S. real GDP of approximately 25% and an increase in the U.S. unemployment rate to above 10%, both in the second quarter, followed by a solid recovery in the second half of 2020. In the second quarter of 2020, based on the increased uncertainty around the duration and depth of the downturn and speed of economic recovery, the Firm’s central case reflected a more protracted downturn with a slower recovery of U.S. real GDP.

In the first and second quarters of 2020, the Firm’s central case assumptions reflected forecasted U.S. unemployment rates and cumulative changes in U.S. real GDP as follows:



	2020		2021
	4Q		2Q		4Q
Central case assumptions

U.S. unemployment rate^(a)
1Q 2020	6.6	%	5.5	%	4.6	%
2Q 2020	10.9		9.0		7.7

U.S. real GDP - cumulative change from December 31, 2019
1Q 2020	(5.4	)	(2.3	)	0.3
2Q 2020	(6.2	)	(4.0	)	(3.0	)


(a)	Reflects quarterly average of forecasted reported U.S. unemployment rate.

In the second quarter of 2020, the Firm placed significant weighting on its adverse scenarios, which incorporate more punitive macroeconomic factors than the central case assumptions above, resulting in weighted average U.S. unemployment rates remaining in double digits through the first half of 2021.

Subsequent changes to this forecast and related estimates will be reflected in the provision for credit losses in future periods.

Refer to Critical Accounting Estimates Used by the Firm on pages 88-90 for further information on the allowance for credit losses and related management judgments.

Refer to Consumer Credit Portfolio on pages 62-66, Wholesale Credit Portfolio on pages 67-76 and Note 12 for additional information on the consumer and wholesale credit portfolios.

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
Six months ended June 30,	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	425			2,863			491			3,779			445			2,725			176			3,346
Gross recoveries collected	(348		)	(372		)	(30		)	(750		)	(270		)	(283		)	(29		)	(582		)
Net charge-offs	77			2,491			461			3,029			175			2,442			147			2,764
Write-offs of PCI loans^(a)	NA			NA			NA			NA			89			—			—			89
Provision for loan losses	2,115			9,091			6,619			17,825			(246		)	2,642			173			2,569
Other	(1		)	—			2			1			—			(1		)	6			5
Ending balance at June 30,	$	4,872		$	17,800		$	9,420		$	32,092		$	2,924		$	5,383		$	4,859		$	13,166

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	95			—			825			920			—			—			75			75
Other	1			—			(1		)	—			—			—			(1		)	(1		)
Ending balance at June 30,	$	241		$	—		$	1,968		$	2,209		$	12		$	—		$	1,117		$	1,129

Impairment methodology
Asset-specific^(b)	$	263		$	642		$	757		$	1,662		$	87		$	472		$	346		$	905
Portfolio-based	4,609			17,158			8,663			30,430			1,538			4,911			4,513			10,962
PCI	NA			NA			NA			NA			1,299			—			—			1,299
Total allowance for loan losses	$	4,872		$	17,800		$	9,420		$	32,092		$	2,924		$	5,383		$	4,859		$	13,166

Impairment methodology
Asset-specific	$	—		$	—		$	115		$	115		$	—		$	—		$	136		$	136
Portfolio-based	241			—			1,853			2,094			12			—			981			993
Total allowance for lending-related commitments	$	241		$	—		$	1,968		$	2,209		$	12		$	—		$	1,117		$	1,129

Total allowance for credit losses	$	5,113		$	17,800		$	11,388		$	34,301		$	2,936		$	5,383		$	5,976		$	14,295

Memo:
Retained loans, end of period	$	307,005		$	141,656		$	516,787		$	965,448		$	314,675		$	157,568		$	475,485		$	947,728
Retained loans, average	299,169			152,518			516,032			967,719			326,418			152,435			471,999			950,852
Credit ratios
Allowance for loan losses to retained loans	1.59		%	12.57		%	1.82		%	3.32		%	0.93		%	3.42		%	1.02		%	1.39		%
Allowance for loan losses to retained nonaccrual loans^(c)	115			NM			275			418			96			NM			341			295
Allowance for loan losses to retained nonaccrual loans excluding credit card	115			NM			275			186			96			NM			341			174
Net charge-off rates	0.05			3.28			0.18			0.63			0.11			3.23			0.06			0.59


(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 $23 million and a provision for credit losses of $13 million as of and for the six months ended June 30, 2020.



INVESTMENT PORTFOLIO RISK MANAGEMENT

Investment portfolio risk is the risk associated with the loss of principal or a reduction in expected returns on investments arising from the investment securities portfolio or from principal investments. The investment securities portfolio is predominantly held by Treasury and CIO in connection with the Firm’s balance sheet or asset-liability management objectives. Principal investments are predominantly privately-held financial instruments and are managed in the LOBs and Corporate. Investments are typically intended to be held over extended periods and, accordingly, the Firm has no expectation for short-term realized gains with respect to these investments.

Investment securities risk

Investment securities risk includes the exposure associated with a default in the payment of principal and interest. This risk is mitigated given that the investment securities portfolio held by Treasury and CIO is predominantly invested in high-quality securities. At June 30, 2020, the Treasury and CIO investment securities portfolio, net of allowance for credit losses, was $556.7 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 risk ratings). Refer to Corporate segment results on page 46 and Note 10 for further information on the investment securities portfolio and internal risk ratings. Refer to Market Risk Management on pages 80-84 for further information on the market risk inherent in the portfolio. Refer to Liquidity Risk Management on pages 55-59 for further information on related liquidity risk.

Principal investment risk

Principal investments are typically private non-traded financial instruments representing ownership or other forms of junior capital and span multiple asset classes. These investments are made by dedicated investing businesses or as part of a broader business strategy. In general, new principal investments include tax-oriented investments, as well as investments made to enhance or accelerate LOB and Corporate strategic business initiatives. The Firm’s principal investments are managed by the LOBs and Corporate and are reflected within their respective financial results. The carrying values of the principal investment portfolios 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 impairments, write-downs, or other negative impacts.

As of June 30, 2020 and December 31, 2019, the aggregate carrying values of the principal investment portfolios were $24.5 billion and $24.2 billion, respectively, which included tax-oriented investments (e.g., affordable housing and alternative energy investments) of $18.5 billion and $18.2 billion respectively, and private equity, various debt and equity instruments, and real assets of $6.0 billion at the end of both periods.

Refer to page 118 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the Firm’s Investment Portfolio Risk Management governance and oversight.



MARKET RISK MANAGEMENT

Market risk is the risk associated with the effect of changes in market factors such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term. Refer to Market Risk Management on pages 119–126 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the Firm’s Market Risk Management organization, market risk measurement, risk monitoring and control, and predominant business activities that give rise to market risk.

COVID-19 Pandemic

Market Risk Management is actively monitoring the impact 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 may be 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 during the COVID-19 pandemic. For additional discussion on model uncertainty refer to Estimations and Model Risk Management on page 87.

Market Risk Management periodically reviews the 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.

Value-at-risk

JPMorgan Chase utilizes value-at-risk (“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 calculating Risk Management VaR and Regulatory VaR.

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. For risk management purposes, the Firm believes this methodology provides a daily measure of risk that is closely aligned to risk management decisions made by the LOBs and Corporate and, along with other market risk measures, provides the appropriate information needed to respond to risk events. 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.

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. Refer to Estimations and Model Risk Management on page 135 of JPMorgan Chase’s 2019 Form 10-K for information regarding model reviews and approvals.

Refer to page 121 of JPMorgan Chase’s 2019 Form 10-K for further information regarding VaR, including the inherent limitations, and the key differences between Risk Management VaR and Regulatory VaR. 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) 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 Other risk measures on pages 124-126 of JPMorgan Chase’s 2019 Form 10-K for further information regarding nonstatistical market risk measures used by the Firm.

The table below shows the results of the Firm’s Risk Management VaR measure using a 95% confidence level. VaR can vary significantly as positions change, market volatility fluctuates, and diversification benefits change.



Total VaR
	Three months ended
	June 30, 2020										March 31, 2020										June 30, 2019
(in millions)	Avg.				Min			Max			Avg.				Min			Max			Avg.				Min			Max
CIB trading VaR by risk type
Fixed income	$	129			$	109		$	155		$	60			$	30		$	156		$	39			$	33		$	45
Foreign exchange	9				7			13			7				4			11			7				5			12
Equities	27				22			35			20				13			41			25				14			31
Commodities and other	32				21			44			10				7			24			9				7			10
Diversification benefit to CIB trading VaR	(69		)	^(a)	NM		^(b)	NM		^(b)	(40		)	^(a)	NM		^(b)	NM		^(b)	(36		)	^(a)	NM		^(b)	NM		^(b)
CIB trading VaR	128				104			158			57				27			160			44				34			55
Credit portfolio VaR	22				18			28			9				3			25			5				4			7
Diversification benefit to CIB VaR	(23		)	^(a)	NM		^(b)	NM		^(b)	(8		)	^(a)	NM		^(b)	NM		^(b)	(5		)	^(a)	NM		^(b)	NM		^(b)
CIB VaR	127				101			157			58				27			162			44				35			55

CCB VaR	5				2			12			7				3			11			4				2			7
Corporate and other LOB VaR	15				11			18			11				9			14			10				9			10
Diversification benefit to other VaR	(4		)	^(a)	NM		^(b)	NM		^(b)	(5		)	^(a)	NM		^(b)	NM		^(b)	(5		)	^(a)	NM		^(b)	NM		^(b)
Other VaR	16				13			18			13				10			16			9				8			11
Diversification benefit to CIB and other VaR	(13		)	^(a)	NM		^(b)	NM		^(b)	(12		)	^(a)	NM		^(b)	NM		^(b)	(7		)	^(a)	NM		^(b)	NM		^(b)
Total VaR	$	130			$	106		$	163		$	59			$	27		$	164		$	46			$	36		$	57


(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.

Generally, average VaR across the risk types and LOBs was higher due to increased volatility, which occurred at the end of the first quarter as a result of the COVID-19 pandemic and has been incorporated into average VaR results for the entirety of the second quarter of 2020.

Results

Average total VaR increased by $71 million and $84 million for the three months ended June 30, 2020 when compared with the quarter ended March 31, 2020 and June 30, 2019, respectively. This increase was driven by the substantial increase in volatility in the one-year historical look-back period as a result of the COVID-19 pandemic. The most significant impacts were reflected in the fixed income and commodities risk types.

Effective January 1, 2020, the Firm refined the scope of VaR to 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. In the absence of this refinement, the average Total VaR and each of the components would have been different by the amounts reported in the following table:



(in millions)	Amount by which reported VaR would have been different for the three months ended June 30, 2020
CIB fixed income VaR		$	(11	)
CIB trading VaR		(11		)
CIB VaR		(8		)
Total VaR		(8		)

VaR backtesting

The Firm performs daily VaR model backtesting, which compares the daily Risk Management VaR results with the daily gains and losses that are utilized for VaR backtesting purposes. The gains and losses in 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 execution of new transactions (i.e., intraday client-driven trading and intraday risk management activities), fees, commissions, certain valuation adjustments and net interest income. These excluded components of total net revenue may more than offset backtesting gains and losses on a particular day. The definition of backtesting gains and losses above is consistent with the requirements for backtesting under Basel III capital rules.

The following chart compares Firmwide daily backtesting gains and losses with the Firm’s Risk Management VaR for the 12 months ended June 30, 2020. The results in the chart below differ from the results of backtesting disclosed in the Market Risk section of the Firm’s Basel III Pillar 3 Regulatory Capital Disclosures reports, which are based on Regulatory VaR applied to the Firm’s covered positions.

For the 12 months ended June 30, 2020, the Firm posted backtesting gains on 142 of the 260 days, and observed 16 VaR backtesting exceptions, which was higher than the statistically expected number of backtesting exceptions due to recent market volatility being materially higher than the levels realized in the historical data used for the VaR calculation. For the three months ended June 30, 2020, the Firm posted backtesting gains on 38 of the 65 days, and observed two VaR backtesting exceptions as higher volatility became fully embedded in the look-back period 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 the CIB Markets revenue results, 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 results, refer to page 36 .

Daily Risk Management VaR Backtesting Results

12 months ended June 30, 2020

Backtesting Gains and Losses

Risk Management VaR (1-day, 95% Confidence level)



Third Quarter 2019	Fourth Quarter 2019	First Quarter 2020	Second Quarter 2020

Earnings-at-risk

The effect of interest rate exposure on the Firm’s reported net income is 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 as well as from the investment securities portfolio. Refer to the table on page 120 of JPMorgan Chase’s 2019 Form 10-K for a summary by LOB and Corporate, identifying positions included in earnings-at-risk.

One way the Firm evaluates 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, which includes net interest income and certain interest rate sensitive fees. The baseline uses market interest rates and in 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). These simulations primarily include retained loans, deposits, deposits with banks, investment securities, long term debt and any related interest rate hedges, and exclude other positions in risk management VaR and other sensitivity-based measures as described on page 120 of JPMorgan Chase’s 2019 Form 10-K.

Earnings-at-risk scenarios estimate the potential change to 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; and a flatter yield curve involving increasing short-term rates and holding long-term rates constant. These scenarios consider many different factors, including:


•	The impact on exposures as a result of instantaneous changes in interest rates from baseline rates.

•

Forecasted balance sheet, as well as modeled prepayment and reinvestment behavior, but do not include assumptions about actions that could be taken by the Firm in response to any such instantaneous rate changes. Mortgage prepayment assumptions are based on the interest rates used in the scenarios compared with underlying contractual rates, the time since origination, and other factors which are updated periodically based on historical experience.


•	The pricing sensitivity of deposits, using normalized deposit betas which represent the amount by which deposit rates paid could change upon a given change in market interest rates over the cycle. The deposit rates paid in these scenarios may differ from actual deposit rates paid, particularly for retail deposits, due to repricing lags and other factors.

The Firm’s earnings-at-risk scenarios are periodically evaluated and enhanced in response to changes in the composition of the Firm’s balance sheet, changes in market conditions, improvements in the Firm’s simulation and other factors. While a relevant measure of the Firm’s interest rate exposure, the earnings at risk analysis does not represent a forecast of the Firm’s net interest income (Refer to 2020 Outlook on page 8 for additional information).

The Firm’s U.S. dollar sensitivities are presented in the table below.



(in billions)	June 30, 2020		December 31, 2019
Parallel shift:
+100 bps shift in rates	$	3.7	$	0.3
Steeper yield curve:
+100 bps shift in long-term rates	1.7		1.2
Flatter yield curve:
+100 bps shift in short-term rates	2.0		(0.9		)

The change in the Firm’s U.S. dollar sensitivities as of June 30, 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.

The Firm’s sensitivity to rates is primarily a result of assets repricing at a faster pace than deposits.

Based upon current and implied market rates as of June 30, 2020, scenarios reflecting lower rates could result in negative interest rates. The U.S. has never experienced an interest rate environment where the Federal Reserve has a negative interest rate policy. In a negative rate environment, the modeling assumptions used for certain assets and liabilities require additional management judgment.

The Firm’s non-U.S. dollar sensitivities are presented in the table below.



(in billions)	June 30, 2020		December 31, 2019
Parallel shift:
+100 bps shift in rates	$	0.7	$	0.5
Flatter yield curve:
+100 bps shift in short-term rates	0.7		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 June 30, 2020 and December 31, 2019.

Other sensitivity-based measures

The Firm quantifies the market risk of certain non-traded debt and equity and funding activities by assessing the potential impact on net revenue, other comprehensive income (“OCI”) and noninterest expense due to changes in relevant market variables. Refer to the table Predominant business activities that give rise to market risk on page 120 of JPMorgan Chase’s 2019 Form 10-K for additional information on the positions captured in other sensitivity-based measures.

The table below represents the potential impact to net revenue, OCI or noninterest 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 net 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 June 30, 2020 and December 31, 2019, as the movement in market parameters across maturities may vary and are not intended to imply management’s expectation of future changes in these sensitivities.



Gain/(loss) (in millions)			June 30, 2020			December 31, 2019
Activity	Description	Sensitivity measure	June 30, 2020			December 31, 2019

Non-traded 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	$	(60	)	$	(68	)
Other investments	Consists of privately held equity and other investments held at fair value^(b)	10% decline in market value	(181		)	(192		)

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	1			15
Derivatives – funding spread risk	Impact of changes in the spread related to derivatives FVA^(b)	1 basis point parallel increase in spread	(6		)	(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	32			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	2			(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	(2		)	2


(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 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.



COUNTRY RISK MANAGEMENT

The Firm, through its LOBs 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.

Refer to pages 127–128 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of the Firm’s country risk management.

COVID-19 Pandemic

Country Risk Management continues to monitor the impact of the COVID-19 pandemic on countries to which the Firm has exposure, leveraging tailored analysis and existing stress testing, exposure reporting and controls.

Risk Reporting

The following table presents the Firm’s top 20 exposures by country (excluding the U.S.) as of June 30, 2020 and their comparative exposures as of December 31, 2019. The selection of countries represents the Firm’s largest total exposures by country, based on the Firm’s internal country risk management approach, and does not represent the Firm’s view of any actual or potentially adverse credit conditions. Country exposures may fluctuate from period to period due to client activity and market flows.

The overall increase in top 20 exposures was predominantly driven by client activity and demand for liquidity, relative to the period ending December 31, 2019. This resulted in an increase in cash placements primarily with the central banks of Germany, the United Kingdom and Australia.



Top 20 country exposures (excluding the U.S.)^(a)
(in billions)	June 30, 2020								December 31, 2019^(e)
	Lending and deposits^(b)		Trading and investing^(c)		Other^(d)		Total exposure		Total exposure
Germany	$	72.4	$	7.5	$	0.9	$	80.8	$	51.6
United Kingdom	46.8		10.3		1.6		58.7		42.4
Japan	34.1		6.6		0.3		41.0		43.8
France	12.0		11.0		3.8		26.8		18.1
China	9.6		10.6		1.0		21.2		19.2
Australia	13.1		6.0		0.6		19.7		11.7
Switzerland	10.0		0.7		3.8		14.5		18.3
Canada	11.7		1.2		0.2		13.1		13.2
Luxembourg	10.3		0.7		—		11.0		12.9
Netherlands	5.2		0.1		4.9		10.2		9.0
Italy	4.8		5.1		0.1		10.0		6.8
India	4.0		5.1		0.9		10.0		11.3
Brazil	4.3		4.7		—		9.0		7.2
Singapore	4.7		2.2		1.8		8.7		6.8
South Korea	3.7		3.5		0.4		7.6		6.4
Saudi Arabia	5.3		0.9		—		6.2		5.2
Spain	3.2		1.5		0.1		4.8		5.8
Mexico	3.7		0.8		—		4.5		4.7
Hong Kong SAR	1.9		1.6		1.0		4.5		5.1
Malaysia	1.7		1.1		1.5		4.3		3.4


(a)	Country exposures presented in the table reflect 89% and 88% of total firmwide non-U.S. exposure, where exposure is attributed to a specific country, at June 30, 2020, and December 31, 2019, respectively.

(b)

Lending and deposits includes loans and accrued interest receivable (net of eligible collateral and the allowance for loan losses), deposits with banks (including central banks), acceptances, other monetary assets, issued letters of credit net of participations, and unused commitments to extend credit. Excludes intra-day and operating exposures, such as those from settlement and clearing activities.


(c)	Includes market-making inventory, AFS securities, and counterparty exposure on derivative and securities financings net of eligible collateral and hedging. 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.


(d)	Predominantly includes physical commodity inventory.


(e)	The country rankings presented in the table as of December 31, 2019, are based on the country rankings of the corresponding exposures at June 30, 2020, not actual rankings of such exposures at December 31, 2019.



OPERATIONAL RISK MANAGEMENT

Operational risk is the risk associated with an adverse outcome resulting from inadequate or failed internal processes or systems; human factors; or external events impacting the Firm’s processes or systems; it includes compliance, conduct, legal, and estimations and model risk. Operational risk is inherent in the Firm’s activities and can manifest itself in various ways, including fraudulent acts, business interruptions, cybersecurity attacks, inappropriate employee behavior, failure to comply with applicable laws and regulations or failure of vendors to perform in accordance with their agreements. Operational Risk Management attempts to manage 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. Refer to Operational Risk Management on pages 129-131 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the Firm’s Operational Risk Management.

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. Refer to Compliance Risk Management on page 132, Conduct Risk Management on page 133, Legal Risk Management on page 134 and Estimations and Model Risk Management on page 135 of JPMorgan Chase’s 2019 Form 10-K for more information. Details on other select examples of operational risks are provided below.

Business and Technology Resiliency Risk

Business disruptions can occur due to forces beyond the Firm’s control such as severe weather, power or telecommunications loss, accidents, failure of a third party to provide expected services, cyberattack, flooding, transit strikes, terrorism, health emergencies, the spread of infectious diseases or pandemics. The Firmwide 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, while prioritizing the health and safety

of employees and customers. The program includes 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 Firmwide resiliency program has played an integral role in maintaining the Firm’s business operations during and after various events.

COVID-19 Pandemic

The Firm’s Technology and Cybersecurity operations continue to monitor the Firm’s systems 24 hours a day, seven days a week including responding to threat activity using COVID-19 themes in phishing and other social engineering campaigns.

The Technology function is actively supporting the Firm’s response to the impacts of the COVID-19 pandemic, including the Firm’s expanded use of remote collaboration tools and platforms. Technology diligently monitors the operational performance of the Firm’s infrastructure to support increased market volumes as a result of the COVID-19 pandemic.

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, measurement of risk, sizing the allowance for credit losses, assessing regulatory capital requirements, conducting stress testing, and making business decisions.

While 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 calibrated, as the Firm has experienced during the COVID-19 pandemic. This uncertainty may necessitate a greater degree of judgment and analytics to inform adjustments to model outputs than in typical periods.

Refer to Critical Accounting Estimates Used by the Firm on pages 88-90 and Note 2 of this Form 10-Q, and Estimations and Model Risk Management section on page 135 of JPMorgan Chase’s 2019 Form 10-K for a summary of model-based valuations and other valuation techniques.



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

The Firm’s allowance for credit losses represents management’s estimate of expected credit losses over the remaining expected life of the Firm’s financial assets measured at amortized cost, certain off-balance sheet lending-related commitments and investment securities. The allowance for credit losses comprises:


•	The allowance for loan losses, which covers the Firm’s retained loan portfolios (scored and risk-rated),


•	The allowance for lending-related commitments, and


•	The allowance for credit losses on investment securities, which covers the Firm’s HTM and AFS securities.

The allowance for credit losses involves significant judgment on a number of matters 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 judgments 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 estimating the Firm’s allowance for credit losses relates to the macroeconomic forecasts used to estimate credit losses over 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 being driven primarily by a subset of less than twenty variables. The specific variables that have the greatest effect on the 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 the Firm’s assumptions and forecasts of economic conditions could significantly affect its estimate of expected credit losses in the portfolio at the balance sheet date or lead to significant changes in the estimate from one reporting period to the next.

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 consumer and wholesale lending portfolios. Significant judgment is required to estimate the severity and duration of the current 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 the 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 extent of the mitigation impact remains uncertain.

It is difficult to estimate how potential changes in any 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 the 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 others.

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 in estimating the allowances for loan losses and lending-related commitments. The central and relative adverse scenarios each included a full suite of MEVs, but differed in the levels, paths and peaks/troughs of those variables over the eight-quarter forecast period.

For example, compared to the Firm’s central scenario described on page 77 and in Note 13, the Firm’s relative adverse scenario assumes a significantly elevated U.S. unemployment rate through the first half of 2021, averaging 3.6% higher over the eight-quarter forecast, with a peak difference of nearly 7% in the fourth quarter of 2020; lower U.S. real GDP with a slower recovery, remaining nearly 4% lower at the end of the eight-quarter

forecast, with a peak difference of nearly 5.5% in the first quarter of 2021; and an 11% further deterioration in the national HPI with a trough in the first quarter of 2022.

This analysis is not intended to estimate expected 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 June 30, 2020, and accordingly, the existing allowance already reflects credit losses beyond those estimated under the central scenario


•	the changes in the MEVs are not intended to imply management’s expectation of the extent or nature of future deterioration in MEVs


•	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 which use scenarios outside of historical experience


•	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.

To demonstrate the sensitivity of credit loss estimates to macroeconomic forecasts as of June 30, 2020, the Firm compared the modeled estimates under its relative adverse scenario to its central scenario. 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 these lending exposures, the difference between these two scenarios would result in the following:


•	An increase of approximately $2 billion for residential real estate loans and lending-related commitments


•	An increase of approximately $4 billion for credit card loans


•	An increase of approximately $7 billion for wholesale loans and lending-related commitments

This analysis relates only to the modeled credit loss estimates and is 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 June 30, 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, structured note products and certain securities financing agreements. Certain assets and liabilities are measured at fair value on a nonrecurring basis, including certain mortgage, home equity and other 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. Refer to Note 2 for further information.



June 30, 2020 (in billions, except ratios)	Total assets at fair value		Total level 3 assets
Federal funds sold and securities purchased under resale agreements	$	244.0	$	—
Securities borrowed	42.5		—
Trading assets:
Trading–debt and equity instruments	$	451.2	$	4.9
Derivative receivables^(a)	74.8		8.6
Total trading assets	526.0		13.5
AFS securities	485.9		—
Loans	5.9		0.3
MSRs	3.1		3.1
Other	298.3		0.5
Total assets measured at fair value on a recurring basis	1,319.2		17.4
Total assets measured at fair value on a nonrecurring basis	3.0		1.2
Total assets measured at fair value	$	1,322.2	$	18.6
Total Firm assets	$	3,213.1
Level 3 assets as a percentage of total Firm assets^(a)			0.6		%
Level 3 assets as a percentage of total Firm assets at fair value^(a)			1.4		%

(a)

For purposes of the table above, the derivative receivables total reflects the impact of netting adjustments; however, the $8.6 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

Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available to the Firm. For instruments valued using internally developed valuation models and other valuation techniques that use significant unobservable inputs and are

therefore classified within level 3 of the valuation hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2.

In arriving at an estimate of fair value for an instrument within level 3, management must first determine the appropriate valuation technique to use. Second, the lack of observability of certain significant inputs requires management to assess all relevant empirical data in deriving valuation inputs including, for example, transaction details, yield curves, interest rates, prepayment rates, default rates, volatilities, correlations, equity or debt prices, valuations of comparable instruments, foreign exchange rates and credit curves. Refer to Note 2 for a further discussion of the valuation of level 3 instruments, including unobservable inputs 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. In 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.

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. Refer 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.

Goodwill impairment

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. Refer to Goodwill impairment on page 137 of JPMorgan Chase’s 2019 Form 10-K for a description of the significant valuation judgments associated with goodwill impairment.

Refer to Note 15 for additional information on goodwill, including the goodwill impairment assessment as of June 30, 2020.

Credit card rewards liability

The credit card rewards liability was $7.1 billion and $6.4 billion at June 30, 2020 and December 31, 2019, respectively, and is recorded in accounts payable and other liabilities on the Consolidated balance sheets. Refer to pages 137-138 of JPMorgan Chase’s 2019 Form 10-K for a description of the significant assumptions and judgments associated with the Firm’s credit card rewards liability.

Income taxes

Refer to Income taxes on page 138 of JPMorgan Chase’s 2019 Form 10-K for a description of the significant assumptions, judgments and interpretations associated with the accounting for income taxes.

Litigation reserves

Refer to Note 25 of this Form 10-Q, and Note 30 of JPMorgan Chase’s 2019 Form 10-K for a description of the significant estimates and judgments associated with establishing litigation reserves.



ACCOUNTING AND REPORTING DEVELOPMENTS



Financial Accounting Standards Board (“FASB”) Standards Adopted since January 1, 2020

Standard	Summary of guidance	Effects on financial statements

Financial Instruments – Credit Losses (“CECL”) Issued June 2016	• Establishes 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. • 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, with a corresponding increase in the amortized cost of the related loans. • Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral-dependent assets). • Amends existing impairment guidance for AFS securities to incorporate an allowance, which will allow for reversals of 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.	• Adopted January 1, 2020. • Refer to Note 1 for further information.
Goodwill Issued January 2017	• Requires recognition of an impairment loss when the estimated fair value of a reporting unit falls below its carrying value. • Eliminates the requirement that an impairment loss be recognized only if the estimated implied fair value of the goodwill is below its carrying value.	• Adopted January 1, 2020. • No impact upon adoption as the guidance is to be applied prospectively. • Refer to Note 15 for further information.
Reference Rate Reform Issued March 2020	• Provides optional expedients and exceptions to current accounting guidance when financial instruments, hedging 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 hedging 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.	• Issued and effective March 12, 2020. • The Firm expects to apply certain of the practical expedients related to contract modifications and hedge accounting relationships in the second half of 2020 and does not expect a material impact to the Consolidated Financial Statements.



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 Form 10-Q 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;


•	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 and environmental and sustainability 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, 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 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 outbreaks of hostilities, or the effects of climate change, and the Firm’s ability to deal effectively with disruptions caused by the foregoing;


•	Ability of the Firm to maintain the security of its financial, accounting, technology, data processing and other operational systems and facilities;


•	Ability of the Firm to withstand disruptions that may be caused by any failure of its operational systems or those of third parties;


•	Ability of the Firm to effectively defend itself against cyberattacks and other attempts by unauthorized parties to access information of the Firm or its customers or to disrupt the Firm’s systems; and


•	The other risks and uncertainties detailed in Part II,

Item 1A: Risk Factors in this form 10-Q and Part I, Item 1A: Risk Factors in JPMorgan Chase’s 2019 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 Form 10-Ks, Quarterly Reports on Form 10-Qs, or Current Reports on Form 8-K.

JPMorgan Chase & Co.

Consolidated statements of income (unaudited)



	Three months ended June 30,				Six months ended June 30,
(in millions, except per share data)	2020		2019		2020		2019
Revenue
Investment banking fees	$	2,850	$	1,851	$	4,716	$	3,691
Principal transactions	7,621		3,714		10,558		7,790
Lending- and deposit-related fees^(a)	1,431		1,624		3,137		3,183
Asset management, administration and commissions^(a)	4,266		4,264		8,806		8,301
Investment securities gains	26		44		259		57
Mortgage fees and related income	917		279		1,237		675
Card income^(b)	974		1,281		1,969		2,508
Other income	1,042		1,292		2,198		2,767
Noninterest revenue	19,127		14,349		32,880		28,972
Interest income	16,112		21,603		35,273		42,992
Interest expense	2,259		7,205		6,981		14,141
Net interest income	13,853		14,398		28,292		28,851
Total net revenue	32,980		28,747		61,172		57,823

Provision for credit losses	10,473		1,149		18,758		2,644

Noninterest expense
Compensation expense	9,509		8,547		18,404		17,484
Occupancy expense	1,080		1,060		2,146		2,128
Technology, communications and equipment expense	2,590		2,378		5,168		4,742
Professional and outside services	1,999		2,212		4,027		4,251
Marketing^(b)	481		777		1,281		1,609
Other expense	1,283		1,282		2,707		2,390
Total noninterest expense	16,942		16,256		33,733		32,604
Income before income tax expense	5,565		11,342		8,681		22,575
Income tax expense	878		1,690		1,129		3,744
Net income	$	4,687	$	9,652	$	7,552	$	18,831
Net income applicable to common stockholders	$	4,265	$	9,192	$	6,698	$	17,945
Net income per common share data
Basic earnings per share	$	1.39	$	2.83	$	2.17	$	5.48
Diluted earnings per share	1.38		2.82		2.17		5.46

Weighted-average basic shares	3,076.3		3,250.6		3,086.1		3,274.3
Weighted-average diluted shares	3,081.0		3,259.7		3,090.8		3,283.9


(a)	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.


(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.

The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.

JPMorgan Chase & Co.

Consolidated statements of comprehensive income (unaudited)



	Three months ended June 30,					Six months ended June 30,
(in millions)	2020			2019		2020			2019
Net income	$	4,687		$	9,652	$	7,552		$	18,831
Other comprehensive income/(loss), after–tax
Unrealized gains/(losses) on investment securities	2,744			1,093		3,863			2,507
Translation adjustments, net of hedges	142			99		(188		)	75
Fair value hedges	16			86		104			88
Cash flow hedges	234			97		2,699			235
Defined benefit pension and OPEB plans	(7		)	41		26			77
DVA on fair value option elected liabilities	(1,758		)	256		716			(361		)
Total other comprehensive income/(loss), after–tax	1,371			1,672		7,220			2,621
Comprehensive income	$	6,058		$	11,324	$	14,772		$	21,452

The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.

JPMorgan Chase & Co.

Consolidated balance sheets (unaudited)



(in millions, except share data)	June 30, 2020			December 31, 2019
Assets
Cash and due from banks	$	20,544		$	21,704
Deposits with banks	473,185			241,927
Federal funds sold and securities purchased under resale agreements (included $243,953 and $14,561 at fair value)	256,980			249,157
Securities borrowed (included $42,525 and $6,237 at fair value)	142,704			139,758
Trading assets (included assets pledged of $158,131 and $111,522)	526,042			411,103
Available-for-sale securities (amortized cost of $476,383 and $345,306; included assets pledged of $28,475 and $10,325)	485,883			350,699
Held-to-maturity securities (net of allowance for credit losses of $23)	72,908			47,540
Investment securities, net of allowance for credit losses	558,791			398,239
Loans (included $5,923 and $7,104 at fair value)	978,518			959,769
Allowance for loan losses	(32,092		)	(13,123		)
Loans, net of allowance for loan losses	946,426			946,646
Accrued interest and accounts receivable	72,260			72,861
Premises and equipment	26,301			25,813
Goodwill, MSRs and other intangible assets	51,669			53,341
Other assets (included $12,528 and $9,111 at fair value and assets pledged of $3,124 and $3,349)	138,213			126,830
Total assets^(a)	$	3,213,115		$	2,687,379
Liabilities
Deposits (included $21,512 and $28,589 at fair value)	$	1,931,029		$	1,562,431
Federal funds purchased and securities loaned or sold under repurchase agreements (included $189,341 and $549 at fair value)	235,647			183,675
Short-term borrowings (included $19,934 and $5,920 at fair value)	48,014			40,920
Trading liabilities	165,212			119,277
Accounts payable and other liabilities (included $3,318 and $3,728 at fair value)	230,916			210,407
Beneficial interests issued by consolidated VIEs (included $40 and $36 at fair value)	20,828			17,841
Long-term debt (included $74,758 and $75,745 at fair value)	317,003			291,498
Total liabilities^(a)	2,948,649			2,426,049
Commitments and contingencies (refer to Notes 23, 24 and 25)
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	88,125			88,522
Retained earnings	221,732			223,211
Accumulated other comprehensive income/(loss)	8,789			1,569
Shares held in restricted stock units (“RSU”) Trust, at cost (236,476 and 472,953 shares)	(11		)	(21		)
Treasury stock, at cost (1,057,329,408 and 1,020,912,567 shares)	(88,337		)	(83,049		)
Total stockholders’ equity	264,466			261,330
Total liabilities and stockholders’ equity	$	3,213,115		$	2,687,379

Effective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information.

(a) The following table presents information on assets and liabilities related to VIEs that are consolidated by the Firm at June 30, 2020, and December 31, 2019. The assets of the consolidated VIEs are used to settle the liabilities of those entities. The holders of the beneficial interests generally 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.



(in millions)	June 30, 2020		December 31, 2019
Assets
Trading assets	$	2,265	$	2,633
Loans	38,384		42,931
All other assets	1,569		881
Total assets	$	42,218	$	46,445
Liabilities
Beneficial interests issued by consolidated VIEs	$	20,828	$	17,841
All other liabilities	243		447
Total liabilities	$	21,071	$	18,288

The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.

JPMorgan Chase & Co.

Consolidated statements of changes in stockholders’ equity (unaudited)



	Three months ended June 30,						Six months ended June 30,
(in millions, except per share data)	2020			2019			2020			2019
Preferred stock
Balance at the beginning of the period	$	30,063		$	26,993		$	26,993		$	26,068
Issuance	—			—			4,500			1,850
Redemption	—			—			(1,430		)	(925		)
Balance at June 30	30,063			26,993			30,063			26,993

Common stock
Balance at the beginning and end of the period	4,105			4,105			4,105			4,105

Additional paid-in capital
Balance at the beginning of the period	87,857			88,170			88,522			89,162
Shares issued and commitments to issue common stock for employee shared-based compensation awards, and related tax effects	268			189			(392		)	(760		)
Other	—			—			(5		)	(43		)
Balance at June 30	88,125			88,359			88,125			88,359

Retained earnings
Balance at the beginning of the period	220,226			205,437			223,211			199,202
Cumulative effect of changes in accounting principle	—			—			(2,650		)	62
Net income	4,687			9,652			7,552			18,831
Dividends declared:
Preferred stock	(401		)	(404		)	(822		)	(778		)
Common stock ($0.90 and $0.80 per share and $1.80 and $1.60 per share, respectively)	(2,780		)	(2,592		)	(5,559		)	(5,224		)
Balance at June 30	221,732			212,093			221,732			212,093

Accumulated other comprehensive income/(loss)
Balance at the beginning of the period	7,418			(558		)	1,569			(1,507		)
Other comprehensive income/(loss), after-tax	1,371			1,672			7,220			2,621
Balance at June 30	8,789			1,114			8,789			1,114

Shares held in RSU Trust, at cost
Balance at the beginning of the period	(21		)	(21		)	(21		)	(21		)
Liquidation of RSU Trust	10			—			10			—
Balance at June 30	(11		)	(21		)	(11		)	(21		)

Treasury stock, at cost
Balance at the beginning of the period	(88,386		)	(64,289		)	(83,049		)	(60,494		)
Repurchase	—			(5,210		)	(6,397		)	(10,301		)
Reissuance	49			71			1,109			1,367
Balance at June 30	(88,337		)	(69,428		)	(88,337		)	(69,428		)

Total stockholders’ equity	$	264,466		$	263,215		$	264,466		$	263,215

Effective January 1, 2020, the Firm adopted the CECL accounting guidance. Refer to Note 1 for further information.

The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.

JPMorgan Chase & Co.

Consolidated statements of cash flows (unaudited)



	Six months ended June 30,
(in millions)	2020			2019
Operating activities
Net income	$	7,552		$	18,831
Adjustments to reconcile net income to net cash used in operating activities:
Provision for credit losses	18,758			2,644
Depreciation and amortization	4,346			4,084
Deferred tax (benefit)/expense	(4,846		)	(42		)
Other	1,197			1,164
Originations and purchases of loans held-for-sale	(29,412		)	(35,908		)
Proceeds from sales, securitizations and paydowns of loans held-for-sale	27,811			44,995
Net change in:
Trading assets	(126,476		)	(111,562		)
Securities borrowed	(2,777		)	(18,586		)
Accrued interest and accounts receivable	374			(15,416		)
Other assets	(24,157		)	(10,146		)
Trading liabilities	69,341			12,765
Accounts payable and other liabilities	18,940			8,790
Other operating adjustments	2,317			3,653
Net cash (used in) operating activities	(37,032		)	(94,734		)
Investing activities
Net change in:
Federal funds sold and securities purchased under resale agreements	(7,580		)	53,757
Held-to-maturity securities:
Proceeds from paydowns and maturities	5,632			1,315
Purchases	(5,014		)	(818		)
Available-for-sale securities:
Proceeds from paydowns and maturities	27,070			30,547
Proceeds from sales	65,975			35,983
Purchases	(242,608		)	(106,085		)
Proceeds from sales and securitizations of loans held-for-investment	12,185			31,291
Other changes in loans, net	(33,372		)	(16,903		)
Net purchases of assets pursuant to nonrecourse advances provided by the FRBB under the MMLF	(3,787		)	—
All other investing activities, net	(2,118		)	(1,663		)
Net cash provided by/(used in) investing activities	(183,617		)	27,424
Financing activities
Net change in:
Deposits	382,784			62,795
Federal funds purchased and securities loaned or sold under repurchase agreements	51,894			19,343
Short-term borrowings	7,992			(9,907		)
Beneficial interests issued by consolidated VIEs	3,619			9,346
Proceeds from long-term borrowings	57,744			29,159
Payments of long-term borrowings	(42,944		)	(38,384		)
Proceeds from issuance of preferred stock	4,500			1,850
Redemption of preferred stock	(1,430		)	(925		)
Treasury stock repurchased	(6,517		)	(10,301		)
Dividends paid	(6,342		)	(6,081		)
All other financing activities, net	136			(426		)
Net cash provided by financing activities	451,436			56,469
Effect of exchange rate changes on cash and due from banks and deposits with banks	(689		)	86
Net increase/(decrease) in cash and due from banks and deposits with banks	230,098			(10,755		)
Cash and due from banks and deposits with banks at the beginning of the period	263,631			278,793
Cash and due from banks and deposits with banks at the end of the period	$	493,729		$	268,038
Cash interest paid	$	9,239		$	13,794
Cash income taxes paid, net	3,844			2,892

The Notes to Consolidated Financial Statements (unaudited) are an integral part of these statements.

Refer to the Glossary of Terms and Acronyms on pages 191-199 for definitions of terms and acronyms used throughout the Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 businesses, commercial banking, financial transaction processing and asset management. Refer to Note 26 for a further discussion of the Firm’s business 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.

The unaudited Consolidated Financial Statements prepared in conformity with U.S. GAAP require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expense, and the disclosures of contingent assets and liabilities. Actual results could be different from these estimates. In the opinion of management, all normal, recurring adjustments have been included such that this interim financial information is fairly stated.

These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements, and related notes thereto, included in JPMorgan Chase’s 2019 Form 10-K.

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.

Refer to Notes 1 and 14 of JPMorgan Chase’s 2019 Form 10-K for a further description of JPMorgan Chase’s accounting policies regarding consolidation.

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 financing activities to be presented on a net basis 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. Refer to Note 1 of JPMorgan Chase’s 2019 Form 10-K for further information on offsetting assets and liabilities.

Accounting standard adopted January 1, 2020

Financial Instruments – Credit Losses (“CECL”)

The adoption of this guidance established a single allowance framework for all financial assets 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 13 for further information.

The following table presents the impacts to the allowance for credit losses and retained earnings upon adoption of this guidance on January 1, 2020:



(in billions)	December 31, 2019		CECL adoption impact			January 1, 2020
Allowance for credit losses
Consumer, excluding credit card^(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 option for certain securities financing agreements. The difference between their carrying amount and fair value 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 amended the previous other-than-temporary impairment (“OTTI”) model for AFS securities to incorporate an allowance. Refer to Note 10 for further information.

Credit quality disclosures

As a result of the adoption of this guidance, the Firm expanded credit quality disclosures for financial assets measured at amortized cost particularly within the retained loan portfolios. Refer to Note 12 for further information.

PCD loans

The adoption resulted in a change in the accounting for PCI loans, which are considered purchased credit deteriorated (“PCD”) loans under CECL. Upon adoption, the Firm recognized the nonaccretable difference on PCD loans in the allowance, which resulted in a corresponding increase to loans. PCD loans are subject to the Firm’s nonaccrual and charge-off policies and are now reported in the consumer, excluding credit card portfolio’s residential real estate loan class. Refer to Note 12 for further information.

Changes in credit portfolio segments and classes

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 portoflio 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. 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. 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 disclosed in the Firm’s 2019 Form 10-K, 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 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 22 for further information.

Note 2 – Fair value measurement

Refer to Note 2 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the Firm’s valuation methodologies for assets, liabilities and lending-related commitments measured at fair value and the fair value hierarchy.

100

The following table presents the assets and liabilities reported at fair value as of June 30, 2020, and December 31, 2019, by major product category and fair value hierarchy.



Assets and liabilities measured at fair value on a recurring basis
	Fair value hierarchy						Derivative netting adjustments^(f)

June 30, 2020 (in millions)	Level 1		Level 2		Level 3					Total fair value
Federal funds sold and securities purchased under resale agreements	$	—	$	243,953	$	—	$	—		$	243,953
Securities borrowed	—		42,525		—		—			42,525
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government agencies^(a)	—		68,115		469		—			68,584
Residential – nonagency	—		2,314		23		—			2,337
Commercial – nonagency	—		1,477		2		—			1,479
Total mortgage-backed securities	—		71,906		494		—			72,400
U.S. Treasury, GSEs and government agencies^(a)	117,168		11,886		—		—			129,054
Obligations of U.S. states and municipalities	—		7,484		8		—			7,492
Certificates of deposit, bankers’ acceptances and commercial paper	—		2,058		—		—			2,058
Non-U.S. government debt securities	32,563		34,972		167		—			67,702
Corporate debt securities	—		20,792		946		—			21,738
Loans^(b)	—		38,060		2,678		—			40,738
Asset-backed securities	—		2,375		39		—			2,414
Total debt instruments	149,731		189,533		4,332		—			343,596
Equity securities	85,042		81		191		—			85,314
Physical commodities^(c)	5,094		3,680		—		—			8,774
Other	—		13,088		379		—			13,467
Total debt and equity instruments^(d)	239,867		206,382		4,902		—			451,151
Derivative receivables:
Interest rate	2,210		404,569		2,213		(371,964		)	37,028
Credit	—		14,153		780		(13,762		)	1,171
Foreign exchange	158		162,834		803		(151,220		)	12,575
Equity	—		63,304		4,628		(53,075		)	14,857
Commodity	—		25,405		213		(16,403		)	9,215
Total derivative receivables	2,368		670,265		8,637		(606,424		)	74,846
Total trading assets^(e)	242,235		876,647		13,539		(606,424		)	525,997
Available-for-sale securities:
Mortgage-backed securities:
U.S. GSEs and government agencies^(a)	5		152,301		—		—			152,306
Residential – nonagency	—		18,269		—		—			18,269
Commercial – nonagency	—		6,805		—		—			6,805
Total mortgage-backed securities	5		177,375		—		—			177,380
U.S. Treasury and government agencies	214,462		—		—		—			214,462
Obligations of U.S. states and municipalities	—		30,426		—		—			30,426
Certificates of deposit	—		—		—		—			—
Non-U.S. government debt securities	13,743		10,317		—		—			24,060
Corporate debt securities	—		674		—		—			674
Asset-backed securities:
Collateralized loan obligations	—		30,798		—		—			30,798
Other	—		8,083		—		—			8,083
Total available-for-sale securities	228,210		257,673		—		—			485,883
Loans	—		5,662		261		—			5,923
Mortgage servicing rights	—		—		3,080		—			3,080
Other assets^(e)	6,969		4,361		541		—			11,871
Total assets measured at fair value on a recurring basis	$	477,414	$	1,430,821	$	17,421	$	(606,424	)	$	1,319,232
Deposits	$	—	$	18,295	$	3,217	$	—		$	21,512
Federal funds purchased and securities loaned or sold under repurchase agreements	—		189,341		—		—			189,341
Short-term borrowings	—		17,629		2,305		—			19,934
Trading liabilities:
Debt and equity instruments^(d)	84,681		22,995		59		—			107,735
Derivative payables:
Interest rate	2,052		365,150		2,317		(356,749		)	12,770
Credit	—		15,009		917		(13,846		)	2,080
Foreign exchange	140		175,118		1,398		(160,479		)	16,177
Equity	—		62,046		6,664		(52,748		)	15,962
Commodity	—		26,637		510		(16,659		)	10,488
Total derivative payables	2,192		643,960		11,806		(600,481		)	57,477
Total trading liabilities	86,873		666,955		11,865		(600,481		)	165,212
Accounts payable and other liabilities	2,648		579		91		—			3,318
Beneficial interests issued by consolidated VIEs	—		40		—		—			40
Long-term debt	—		52,030		22,728		—			74,758
Total liabilities measured at fair value on a recurring basis	$	89,521	$	944,869	$	40,206	$	(600,481	)	$	474,115

101



	Fair value hierarchy						Derivative netting adjustments^(f)

December 31, 2019 (in millions)	Level 1		Level 2		Level 3					Total fair value
Federal funds sold and securities purchased under resale agreements	$	—	$	14,561	$	—	$	—		$	14,561
Securities borrowed	—		6,237		—		—			6,237
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government agencies^(a)	—		44,510		797		—			45,307
Residential – nonagency	—		1,977		23		—			2,000
Commercial – nonagency	—		1,486		4		—			1,490
Total mortgage-backed securities	—		47,973		824		—			48,797
U.S. Treasury, GSEs and government agencies^(a)	78,289		10,295		—		—			88,584
Obligations of U.S. states and municipalities	—		6,468		10		—			6,478
Certificates of deposit, bankers’ acceptances and commercial paper	—		252		—		—			252
Non-U.S. government debt securities	26,600		27,169		155		—			53,924
Corporate debt securities	—		17,956		558		—			18,514
Loans^(b)	—		47,047		1,382		—			48,429
Asset-backed securities	—		2,593		37		—			2,630
Total debt instruments	104,889		159,753		2,966		—			267,608
Equity securities	71,890		244		196		—			72,330
Physical commodities^(c)	3,638		3,579		—		—			7,217
Other	—		13,896		232		—			14,128
Total debt and equity instruments^(d)	180,417		177,472		3,394		—			361,283
Derivative receivables:
Interest rate	721		311,173		1,400		(285,873		)	27,421
Credit	—		14,252		624		(14,175		)	701
Foreign exchange	117		137,938		432		(129,482		)	9,005
Equity	—		43,642		2,085		(39,250		)	6,477
Commodity	—		17,058		184		(11,080		)	6,162
Total derivative receivables	838		524,063		4,725		(479,860		)	49,766
Total trading assets^(e)	181,255		701,535		8,119		(479,860		)	411,049
Available-for-sale securities:
Mortgage-backed securities:
U.S. GSEs and government agencies^(a)	—		110,117		—		—			110,117
Residential – nonagency	—		12,989		1		—			12,990
Commercial – nonagency	—		5,188		—		—			5,188
Total mortgage-backed securities	—		128,294		1		—			128,295
U.S. Treasury and government agencies	139,436		—		—		—			139,436
Obligations of U.S. states and municipalities	—		29,810		—		—			29,810
Certificates of deposit	—		77		—		—			77
Non-U.S. government debt securities	12,966		8,821		—		—			21,787
Corporate debt securities	—		845		—		—			845
Asset-backed securities:
Collateralized loan obligations	—		24,991		—		—			24,991
Other	—		5,458		—		—			5,458
Total available-for-sale securities	152,402		198,296		1		—			350,699
Loans	—		7,104		—		—			7,104
Mortgage servicing rights	—		—		4,699		—			4,699
Other assets^(e)	7,305		452		724		—			8,481
Total assets measured at fair value on a recurring basis	$	340,962	$	928,185	$	13,543	$	(479,860	)	$	802,830
Deposits	$	—	$	25,229	$	3,360	$	—		$	28,589
Federal funds purchased and securities loaned or sold under repurchase agreements	—		549		—		—			549
Short-term borrowings	—		4,246		1,674		—			5,920
Trading liabilities:
Debt and equity instruments^(d)	59,047		16,481		41		—			75,569
Derivative payables:
Interest rate	795		276,746		1,732		(270,670		)	8,603
Credit	—		14,358		763		(13,469		)	1,652
Foreign exchange	109		143,960		1,039		(131,950		)	13,158
Equity	—		47,261		5,480		(40,204		)	12,537
Commodity	—		19,685		200		(12,127		)	7,758
Total derivative payables	904		502,010		9,214		(468,420		)	43,708
Total trading liabilities	59,951		518,491		9,255		(468,420		)	119,277
Accounts payable and other liabilities	3,231		452		45		—			3,728
Beneficial interests issued by consolidated VIEs	—		36		—		—			36
Long-term debt	—		52,406		23,339		—			75,745
Total liabilities measured at fair value on a recurring basis	$	63,182	$	601,409	$	37,673	$	(468,420	)	$	233,844


(a)	At June 30, 2020, and December 31, 2019, included total U.S. GSE obligations of $153.3 billion and $104.5 billion, respectively, which were mortgage-related.

(b)

At June 30, 2020, and December 31, 2019, included within trading loans were $14.3 billion and $19.8 billion, respectively, of residential first-lien mortgages, and $2.0 billion and $3.4 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 $7.1 billion and $13.6 billion, respectively.

(c)

Physical commodities inventories are generally accounted for at the lower of cost or net realizable value. “Net realizable value” is a term defined in U.S. GAAP as not exceeding fair value less costs to sell (“transaction costs”). Transaction costs for the Firm’s physical commodities inventories are either not applicable or immaterial to the value of the inventory. Therefore, net realizable value approximates fair value for the Firm’s physical commodities

102

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 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.


(d)	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 June 30, 2020, and December 31, 2019, the fair values of these investments, which include certain hedge funds, private equity funds, real estate and other funds, were $702 million and $684 million, respectively. Included in these balances at June 30, 2020, and December 31, 2019, were trading assets of $45 million and $54 million, respectively, and other assets of $657 million and $630 million, respectively.


(f)	As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists. The level 3 balances would be reduced if netting were applied, including the netting benefit associated with cash collateral.

Level 3 valuations

Refer to Note 2 of JPMorgan Chase’s 2019 Form 10-K for further information on the Firm’s valuation process and a detailed discussion of the determination of fair value for individual financial instruments.

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 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 arithmetic average values 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.

103



Level 3 inputs^(a)
June 30, 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)	$	1,035		Discounted cash flows	Yield	(9)%	–	25%		5%
Residential mortgage-backed securities and loans^(b)					Prepayment speed	0%	–	44%		12%
					Conditional default rate	0%	–	30%		12%
					Loss severity	0%	–	110%		7%
Commercial mortgage-backed securities and loans^(c)	538			Market comparables	Price	$0	–	$101		$85
Obligations of U.S. states and municipalities	8			Market comparables	Price	$80	–	$100		$97
Corporate debt securities	946			Market comparables	Price	$3	–	$119		$69
Loans^(d)	160			Discounted cash flows	Yield	5%	–	30%		8%
	1,700			Market comparables	Price	$6	–	$104		$76
Asset-backed securities	39			Market comparables	Price	$1	–	$79		$49
Net interest rate derivatives	(139		)	Option pricing	Interest rate volatility	7%	–	121%		24%
					Interest rate spread volatility	20bps	–	30bps		25bps
					Interest rate correlation	(65)%	–	94%		43%
					IR-FX correlation	(50)%	–	35%		0%
	35			Discounted cash flows	Prepayment speed	3%	–	30%		10%
Net credit derivatives	(175		)	Discounted cash flows	Credit correlation	29%	–	64%		44%
					Credit spread	7bps	–	1,443bps		481bps
					Recovery rate	3%	–	70%		47%
					Conditional default rate	2%	–	66%		24%
					Loss severity	100%				100%
	38			Market comparables	Price	$1	–	$115		$71
Net foreign exchange derivatives	(441		)	Option pricing	IR-FX correlation	(58)%	–	70%		12%
	(154		)	Discounted cash flows	Prepayment speed	9%				9%
Net equity derivatives	(2,036		)	Option pricing	Forward equity price^(h)	64%	–	103%		98%
					Equity volatility	4%	–	123%		36%
					Equity correlation	25%	–	100%		79%
					Equity-FX correlation	(77)%	–	55%		(17)%
					Equity-IR correlation	20%	–	35%		28%
Net commodity derivatives	(297		)	Option pricing	Forward industrial metal price	$ 1,209 / MT	–	$ 16,649 / MT		$ 6,670 / MT
					Forward power price	$ 13 / MWH	–	$ 80 / MWH		$ 25 / MWH
					Commodity volatility	4%	–	112%		27%
					Commodity correlation	(45)%	–	95%		30%
MSRs	3,080			Discounted cash flows	Refer to Note 15
Other assets	412			Discounted cash flows	Credit spread	45bps				45bps
					Yield	12%				12%
	508			Market comparables	Price	$30	–	$122		$40
Long-term debt, short-term borrowings, and deposits^(e)	28,250			Option pricing	Interest rate volatility	7%	–	121%		24%
					Interest rate correlation	(65)%	–	94%		43%
					IR-FX correlation	(50)%	–	35%		0%
					Equity correlation	25%	–	100%		79%
					Equity-FX correlation	(77)%	–	55%		(17)%
					Equity-IR correlation	20%	–	35%		28%
Other level 3 assets and liabilities, net^(f)	208


(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. GSEs and government agency securities of $469 million, nonagency securities of $23 million and trading loans of $543 million.


(c)	Comprises nonagency securities of $2 million, trading loans of $275 million and non-trading loans of $261 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.


(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.

104

Changes in and ranges of unobservable inputs

Refer to Note 2 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the impact on fair value of changes in unobservable inputs and the relationships between unobservable inputs as well as 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.

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 three and six months ended June 30, 2020 and 2019. 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.

105



	Fair value measurements using significant unobservable inputs
Three months ended June 30, 2020 (in millions)	Fair value at April 1, 2020			Total realized/unrealized gains/(losses)															Transfers into level 3^(h)			Transfers (out of) level 3^(h)			Fair value at June 30, 2020				Change in unrealized gains/(losses) related to financial instruments held at June 30, 2020
								Purchases^(f)			Sales					Settlements^(g)
Assets:^(a)
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government agencies	$	519		$	(10	)		$	5		$	(5	)			$	(40	)	$	—		$	—			$	469		$	(8	)
Residential – nonagency	24			—				2			(2		)			(1		)	—			—				23			—
Commercial – nonagency	3			—				—			—					—			—			(1		)		2			—
Total mortgage-backed securities	546			(10		)		7			(7		)			(41		)	—			(1		)		494			(8		)
Obligations of U.S. states and municipalities	9			—				—			—					(1		)	—			—				8			—
Non-U.S. government debt securities	175			16				49			(68		)			(5		)	—			—				167			14
Corporate debt securities	953			—				69			(56		)			(9		)	65			(76		)		946			3
Loans	3,354			(50		)		167			(98		)			(464		)	517			(748		)		2,678			(47		)
Asset-backed securities	52			(5		)		1			—					(2		)	—			(7		)		39			1
Total debt instruments	5,089			(49		)		293			(229		)			(522		)	582			(832		)		4,332			(37		)
Equity securities	213			(65		)		14			(1		)			—			73			(43		)		191			(44		)
Other	221			165				1			—					(9		)	2			(1		)		379			184
Total trading assets – debt and equity instruments	5,523			51			^(c)	308			(230		)			(531		)	657			(876		)		4,902			103			^(c)
Net derivative receivables:^(b)
Interest rate	(136		)	753				21			(17		)			(622		)	(180		)	77				(104		)	447
Credit	(111		)	(46		)		30			(6		)			16			11			(31		)		(137		)	(41		)
Foreign exchange	(927		)	182				1			(5		)			123			8			23				(595		)	(249		)
Equity	(826		)	(1,036		)		530			(541		)			(54		)	99			(208		)		(2,036		)	(1,215		)
Commodity	(425		)	140				7			(13		)			9			2			(17		)		(297		)	179
Total net derivative receivables	(2,425		)	(7		)	^(c)	589			(582		)			(528		)	(60		)	(156		)		(3,169		)	(879		)	^(c)
Available-for-sale securities:
Mortgage-backed securities	—			—				—			—					—			—			—				—			—
Total available-for-sale securities	—			—				—			—					—			—			—				—			—
Loans	283			(26		)	^(c)	—			—					—			4			—				261			(27		)	^(c)
Mortgage servicing rights	3,267			(111		)	^(d)	169			2					(247		)	—			—				3,080			(111		)	^(d)
Other assets	416			50			^(c)	35			—					—			40			—				541			50			^(c)

	Fair value measurements using significant unobservable inputs
Three months ended June 30, 2020 (in millions)	Fair value at April 1, 2020			Total realized/unrealized (gains)/losses															Transfers into level 3^(h)			Transfers (out of) level 3^(h)			Fair value at June 30, 2020				Change in unrealized (gains)/losses related to financial instruments held at June 30, 2020
								Purchases			Sales			Issuances		Settlements^(g)
Liabilities:^(a)
Deposits	$	3,179		$	194		^(c)(e)	$	—		$	—		$	80	$	(256	)	$	261		$	(241	)		$	3,217		$	160		^(c)(e)
Short-term borrowings	2,039			98			^(c)(e)	—			—			925		(747		)	12			(22		)		2,305			85			^(c)(e)
Trading liabilities – debt and equity instruments	61			—				(1		)	—			—		(5		)	7			(3		)		59			—
Accounts payable and other liabilities	15			4			^(c)	—			32			—		—			40			—				91			3			^(c)
Beneficial interests issued by consolidated VIEs	—			—				—			—			—		—			—			—				—			—
Long-term debt	20,141			2,705			^(c)(e)	—			—			1,600		(1,809		)	608			(517		)		22,728			2,194			^(c)(e)

106



	Fair value measurements using significant unobservable inputs
Three months ended June 30, 2019 (in millions)	Fair value at April 1, 2019			Total realized/unrealized gains/(losses)															Transfers into level 3^(h)			Transfers (out of) level 3^(h)			Fair value at June 30, 2019				Change in unrealized gains/(losses) related to financial instruments held at June 30, 2019
								Purchases^(f)			Sales					Settlements^(g)
Assets:^(a)
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government agencies	$	412		$	(25	)		$	318		$	(68	)			$	(20	)	$	—		$	—			$	617		$	(24	)
Residential – nonagency	85			1				11			(14		)			(19		)	—			(22		)		42			—
Commercial – nonagency	17			—				4			—					(12		)	—			—				9			(1		)
Total mortgage-backed securities	514			(24		)		333			(82		)			(51		)	—			(22		)		668			(25		)
Obligations of U.S. states and municipalities	623			1				57			(1		)			—			—			—				680			—
Non-U.S. government debt securities	170			—				117			(103		)			—			9			(3		)		190			—
Corporate debt securities	568			7				61			(62		)			(53		)	51			(10		)		562			22
Loans	1,741			56				385			(216		)			(156		)	139			(171		)		1,778			68
Asset-backed securities	119			2				2			(58		)			(30		)	—			(2		)		33			2
Total debt instruments	3,735			42				955			(522		)			(290		)	199			(208		)		3,911			67
Equity securities	202			(12		)		8			(3		)			—			21			(69		)		147			(12		)
Other	304			20				3			—					(15		)	—			(1		)		311			35
Total trading assets – debt and equity instruments	4,241			50			^(c)	966			(525		)			(305		)	220			(278		)		4,369			90			^(c)
Net derivative receivables:^(b)
Interest rate	(147		)	(341		)		28			(60		)			(57		)	(6		)	39				(544		)	(459		)
Credit	(115		)	(127		)		13			(1		)			4			1			(7		)		(232		)	(139		)
Foreign exchange	(356		)	58				10			(8		)			114			(17		)	6				(193		)	82
Equity	(2,066		)	(21		)		34			(158		)			(284		)	(148		)	83				(2,560		)	(91		)
Commodity	(665		)	(171		)		7			(83		)			21			(17		)	—				(908		)	(151		)
Total net derivative receivables	(3,349		)	(602		)	^(c)	92			(310		)			(202		)	(187		)	121				(4,437		)	(758		)	^(c)
Available-for-sale securities:
Mortgage-backed securities	—			—				—			—					—			—			—				—			—
Total available-for-sale securities	—			—				—			—					—			—			—				—			—
Loans	123			1			^(c)	—			—					(119		)	—			—				5			—
Mortgage servicing rights	5,957			(826		)	^(d)	426			(217		)			(247		)	—			—				5,093			(826		)	^(d)
Other assets	841			(89		)	^(c)	142			(8		)			(26		)	1			—				861			(92		)	^(c)

	Fair value measurements using significant unobservable inputs
Three months ended June 30, 2019 (in millions)	Fair value at April 1, 2019			Total realized/unrealized (gains)/losses															Transfers into level 3^(h)			Transfers (out of) level 3^(h)			Fair value at June 30, 2019				Change in unrealized (gains)/losses related to financial instruments held at June 30, 2019
								Purchases			Sales			Issuances		Settlements^(g)
Liabilities:^(a)
Deposits	$	4,528		$	89		^(c)(e)	$	—		$	—		$	92	$	(292	)	$	—		$	(351	)		$	4,066		$	104		^(c)(e)
Short-term borrowings	1,502			72			^(c)(e)	—			—			1,037		(624		)	67			(2		)		2,052			28			^(c)(e)
Trading liabilities – debt and equity instruments	52			—				(5		)	5			—		—			4			(11		)		45			—
Accounts payable and other liabilities	15			(1		)	^(c)	(3		)	80			—		—			1			—				92			(1		)	^(c)
Beneficial interests issued by consolidated VIEs	—			—				—			—			—		—			—			—				—			—
Long-term debt	21,655			455			^(c)(e)	—			—			2,648		(2,729		)	200			(366		)		21,863			621			^(c)(e)

107



	Fair value measurements using significant unobservable inputs
Six months ended June 30, 2020 (in millions)	Fair value at Jan 1, 2020			Total realized/unrealized gains/(losses)															Transfers into level 3^(h)			Transfers (out of) level 3^(h)			Fair value at June 30, 2020				Change in unrealized gains/(losses) related to financial instruments held at June 30, 2020
								Purchases^(f)			Sales					Settlements^(g)
Assets:^(a)
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government agencies	$	797		$	(149	)		$	24		$	(121	)			$	(82	)	$	—		$	—			$	469		$	(139	)
Residential – nonagency	23			(1		)		4			(2		)			(1		)	—			—				23			2
Commercial – nonagency	4			—				1			—					(1		)	1			(3		)		2			4
Total mortgage-backed securities	824			(150		)		29			(123		)			(84		)	1			(3		)		494			(133		)
Obligations of U.S. states and municipalities	10			—				—			(1		)			(1		)	—			—				8			—
Non-U.S. government debt securities	155			4				139			(125		)			(5		)	—			(1		)		167			(6		)
Corporate debt securities	558			(55		)		361			(98		)			(9		)	292			(103		)		946			(11		)
Loans	1,382			(211		)		866			(260		)			(517		)	2,305			(887		)		2,678			(174		)
Asset-backed securities	37			(7		)		37			(15		)			(3		)	—			(10		)		39			—
Total debt instruments	2,966			(419		)		1,432			(622		)			(619		)	2,598			(1,004		)		4,332			(324		)
Equity securities	196			(103		)		24			(5		)			—			155			(76		)		191			(79		)
Other	232			164				10			(5		)			(21		)	2			(3		)		379			184
Total trading assets – debt and equity instruments	3,394			(358		)	^(c)	1,466			(632		)			(640		)	2,755			(1,083		)		4,902			(219		)	^(c)
Net derivative receivables:^(b)
Interest rate	(332		)	1,395				87			(67		)			(863		)	(352		)	28				(104		)	286
Credit	(139		)	62				48			(134		)			(17		)	71			(28		)		(137		)	28
Foreign exchange	(607		)	(157		)		39			(9		)			109			8			22				(595		)	(118		)
Equity	(3,395		)	2,001				589			(1,089		)			529			(557		)	(114		)		(2,036		)	2,619
Commodity	(16		)	(263		)		11			(28		)			18			(4		)	(15		)		(297		)	(276		)
Total net derivative receivables	(4,489		)	3,038			^(c)	774			(1,327		)			(224		)	(834		)	(107		)		(3,169		)	2,539			^(c)
Available-for-sale securities:
Mortgage-backed securities	1			—				—			—					(1		)	—			—				—			—
Total available-for-sale securities	1			—				—			—					(1		)	—			—				—			—
Loans	—			(37		)	^(c)	—			—					—			298			—				261			(37		)	^(c)
Mortgage servicing rights	4,699			(1,493		)	^(d)	442			(73		)			(495		)	—			—				3,080			(1,493		)	^(d)
Other assets	724			(32		)	^(c)	37			(28		)			(200		)	40			—				541			(34		)	^(c)

	Fair value measurements using significant unobservable inputs
Six months ended June 30, 2020 (in millions)	Fair value at Jan 1, 2020			Total realized/unrealized (gains)/losses															Transfers into level 3^(h)			Transfers (out of) level 3^(h)			Fair value at June 30, 2020				Change in unrealized (gains)/losses related to financial instruments held at June 30, 2020
								Purchases			Sales			Issuances		Settlements^(g)
Liabilities:^(a)
Deposits	$	3,360		$	45		^(c)(e)	$	—		$	—		$	466	$	(428	)	$	265		$	(491	)		$	3,217		$	58		^(c)(e)
Short-term borrowings	1,674			(247		)	^(c)(e)	—			—			2,540		(1,676		)	52			(38		)		2,305			(37		)	^(c)(e)
Trading liabilities – debt and equity instruments	41			3			^(c)	(76		)	7			—		(5		)	93			(4		)		59			2			^(c)
Accounts payable and other liabilities	45			(4		)	^(c)	(23		)	33			—		—			40			—				91			(4		)	^(c)
Beneficial interests issued by consolidated VIEs	—			—				—			—			—		—			—			—				—			—
Long-term debt	23,339			(1,405		)	^(c)(e)	—			—			6,207		(5,358		)	978			(1,033		)		22,728			(476		)	^(c)(e)

108



	Fair value measurements using significant unobservable inputs
Six months ended June 30, 2019 (in millions)	Fair value at Jan 1, 2019			Total realized/unrealized gains/(losses)																	Transfers into level 3^(h)			Transfers (out of) level 3^(h)			Fair value at June 30, 2019				Change in unrealized gains/(losses) related to financial instruments held at June 30, 2019
								Purchases^(f)			Sales						Settlements^(g)
Assets:^(a)
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. GSEs and government agencies	$	549		$	(40	)		$	323		$	(168	)				$	(38	)		$	1		$	(10	)		$	617		$	(37	)
Residential – nonagency	64			25				81			(83		)				(20		)		15			(40		)		42			—
Commercial – nonagency	11			2				16			(19		)				(14		)		15			(2		)		9			—
Total mortgage-backed securities	624			(13		)		420			(270		)				(72		)		31			(52		)		668			(37		)
Obligations of U.S. states and municipalities	689			14				58			(75		)				(6		)		—			—				680			15
Non-U.S. government debt securities	155			(1		)		188			(157		)				—				11			(6		)		190			2
Corporate debt securities	334			29				284			(69		)				(53		)		79			(42		)		562			35
Loans	1,706			139				457			(334		)				(276		)		298			(212		)		1,778			128
Asset-backed securities	127			—				19			(79		)				(37		)		20			(17		)		33			—
Total debt instruments	3,635			168				1,426			(984		)				(444		)		439			(329		)		3,911			143
Equity securities	232			(14		)		23			(82		)				(22		)		96			(86		)		147			(11		)
Other	301			24				15			(1		)				(26		)		1			(3		)		311			45
Total trading assets – debt and equity instruments	4,168			178			^(c)	1,464			(1,067		)				(492		)		536			(418		)		4,369			177			^(c)
Net derivative receivables:^(b)
Interest rate	(38		)	(663		)		47			(87		)	⁽ⁱ⁾			121			⁽ⁱ⁾	12			64				(544		)	(725		)
Credit	(107		)	(144		)		13			(2		)				10				4			(6		)		(232		)	(155		)
Foreign exchange	(297		)	(187		)		11			(17		)				295				(25		)	27				(193		)	(144		)
Equity	(2,225		)	710				161			(455		)				(685		)		(215		)	149				(2,560		)	(134		)
Commodity	(1,129		)	362				10			(171		)				45				(16		)	(9		)		(908		)	485
Total net derivative receivables	(3,796		)	78			^(c)	242			(732		)				(214		)		(240		)	225				(4,437		)	(673		)	^(c)
Available-for-sale securities:
Mortgage-backed securities	1			—				—			—						(1		)		—			—				—			—
Total available-for-sale securities	1			—				—			—						(1		)		—			—				—			—
Loans	122			4			^(c)	—			—						(121		)		—			—				5			5			^(c)
Mortgage servicing rights	6,130			(1,125		)	^(d)	862			(328		)				(446		)		—			—				5,093			(1,125		)	^(d)
Other assets	927			(96		)	^(c)	151			(88		)				(27		)		1			(7		)		861			(98		)	^(c)

	Fair value measurements using significant unobservable inputs
Six months ended June 30, 2019 (in millions)	Fair value at Jan 1, 2019			Total realized/unrealized (gains)/losses																	Transfers into level 3^(h)			Transfers (out of) level 3^(h)			Fair value at June 30, 2019				Change in unrealized (gains)/losses related to financial instruments held at June 30, 2019
								Purchases			Sales				Issuances		Settlements^(g)
Liabilities:^(a)
Deposits	$	4,169		$	241		^(c)(e)	$	—		$	—			$	427	$	(316	)		$	—		$	(455	)		$	4,066		$	246		^(c)(e)
Short-term borrowings	1,523			118			^(c)(e)	—			—				1,688		(1,225		)		68			(120		)		2,052			115			^(c)(e)
Trading liabilities – debt and equity instruments	50			—				(7		)	16				—		—				7			(21		)		45			1			^(c)
Accounts payable and other liabilities	10			(1		)	^(c)	(8		)	90				—		—				1			—				92			(1		)	^(c)
Beneficial interests issued by consolidated VIEs	1			(1		)	^(c)	—			—				—		—				—			—				—			—
Long-term debt	19,418			1,728			^(c)(e)	—			—				4,699		(3,917		)		473			(538		)		21,863			2,039			^(c)(e)

(a)

Level 3 assets as a percentage of total Firm assets accounted for at fair value (including assets measured at fair value on a nonrecurring basis) were 1% and 2% at June 30, 2020 and December 31, 2019, 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 8% and 16%, at June 30, 2020 and December 31, 2019, respectively.

109


(b)	All level 3 derivatives are presented on a net basis, irrespective of the 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)	Changes in fair value for MSRs are reported in mortgage fees and related income.

(e)

Realized (gains)/losses due to DVA for fair value option elected liabilities are reported in principal transactions revenue, and were not material for the three and six months ended June 30, 2020 and 2019, respectively. Unrealized (gains)/losses are reported in OCI, and they were $940 million and $(5) million for the three months ended June 30, 2020 and 2019, respectively and $(199) million and $170 million for the six months ended June 30, 2020 and 2019


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

Level 3 analysis

Consolidated balance sheets changes

Level 3 assets, including assets measured at fair value on a nonrecurring basis, were 0.6% of total Firm assets at June 30, 2020. The following describes significant changes to level 3 assets since December 31, 2019, for those items measured at fair value on a recurring basis. Refer to Assets and liabilities measured at fair value on a nonrecurring basis on page 112 for further information on changes impacting items measured at fair value on a nonrecurring basis.

Three and six months ended June 30, 2020

Level 3 assets were $17.4 billion at June 30, 2020, reflecting a decrease of $1.7 billion from March 31, 2020 and an increase of $3.9 billion from December 31, 2019.

The decrease for the three months ended June 30, 2020 was driven by:


•	$676 million decrease in trading loans due to settlements.


•	$507 million decrease in gross equity derivative receivables due to settlements.

The increase for the six months ended June 30, 2020 was driven by:


•	$1.3 billion increase in trading loans due to transfers


•	$813 million increase in gross interest rate derivative receivables and $2.5 billion increase in gross equity derivative receivables due to gains net of settlements,

partially offset by


•	$1.6 billion decrease in MSRs due to losses.

Refer to the sections below for additional information.

Transfers between levels for instruments carried at fair value on a recurring basis

For the three months ended June 30, 2020, significant transfers from level 2 into level 3 included the following:


•	$657 million of total debt and equity instruments, predominantly trading loans, driven by a decrease in observability.


•	$802 million of gross equity derivative receivables and $703 million of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs.


•	$608 million of long-term debt driven by a decrease in observability and an increase in the significance of unobservable inputs for certain structured notes.

For the six months ended June 30, 2020, significant transfers from level 2 into level 3 included the following:


•	$2.8 billion of total debt and equity instruments, predominantly trading loans, driven by a decrease in observability.


•	$1.8 billion of gross equity derivative receivables, $776 million of gross interest rate derivative payables and $2.4 billion of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs.


•	$978 million of long-term debt driven by a decrease in observability and an increase in the significance of unobservable inputs for certain structured notes.

For the three and six months ended June 30, 2020, significant transfers from level 3 into level 2 included the following:


•	$876 million and $1.1 billion, respectively, of total debt and equity instruments, predominantly trading loans, driven by an increase in observability.


•	$854 million and $1.1 billion, respectively, of gross equity derivative receivables and $646 million and $965 million, respectively, of gross equity derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs.


•	$517 million and $1.0 billion, respectively, of long-term debt driven by an increase in observability and a decrease in the significance of unobservable inputs for certain structured notes.

For the three and six months ended June 30, 2019, there were no significant transfers from level 2 into level 3 or from level 3 into level 2.

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.

110

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 periods indicated. These amounts exclude any effects of the Firm’s risk management activities where the financial instruments are 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 105-111 for further information on these instruments.

Three months ended June 30, 2020


•	$43 million of net losses on assets, primarily driven by market movements in net derivative receivables.


•	$3.0 billion of net losses on liabilities, predominantly driven by market movements in long-term debt.

Three months ended June 30, 2019


•	$1.5 billion of net losses on assets, driven by derivative receivables due to market movements and MSRs reflecting updates to model inputs and faster prepayment speeds on lower rates.


•	$615 million of net losses on liabilities, largely due to market movements in long-term debt.

Six months ended June 30, 2020


•	$1.1 billion of net gains on assets, driven by gains in net interest rate derivative receivables and net equity 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.


•	$1.6 billion of net gains on liabilities, predominantly driven by market movements in long-term debt.

Six months ended June 30, 2019


•	$1.0 billion of net losses on assets, predominantly driven by MSRs reflecting updates to model inputs and faster prepayment speeds on lower rates.


•	$2.1 billion of net losses on liabilities, predominantly driven by market movements in long-term debt.

Credit and funding adjustments — derivatives

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.



	Three months ended June 30,					Six months ended June 30,
(in millions)	2020		2019			2020			2019
Credit and funding adjustments:
Derivatives CVA	$	207	$	(44	)	$	(718	)	$	16
Derivatives FVA	676		(89		)	(345		)	63

Refer to Note 2 of JPMorgan Chase’s 2019 Form 10-K for further information about both credit and funding adjustments, as well as information about valuation adjustments on fair value option elected liabilities.

111

Assets and liabilities measured at fair value on a nonrecurring basis

The following tables present the assets and liabilities held as of June 30, 2020 and 2019, respectively, for which nonrecurring fair value adjustments were recorded during the six months ended June 30, 2020 and 2019, respectively, by major product category and fair value hierarchy.



	Fair value hierarchy								Total fair value
June 30, 2020 (in millions)	Level 1		Level 2			Level 3			Total fair value
Loans	$	—	$	1,793	^(c)	$	823	^(d)	$	2,616
Other assets^(a)	—		4			392			396
Total assets measured at fair value on a nonrecurring basis	$	—	$	1,797		$	1,215		$	3,012
Accounts payable and other liabilities^(b)	—		—			95			95
Total liabilities measured at fair value on a nonrecurring basis	$	—	$	—		$	95		$	95



	Fair value hierarchy							Total fair value
June 30, 2019 (in millions)	Level 1		Level 2			Level 3		Total fair value
Loans	$	—	$	1,716	^(e)	$	141	$	1,857
Other assets	—		13			713		726
Total assets measured at fair value on a nonrecurring basis	$	—	$	1,729		$	854	$	2,583

(a)

Primarily includes equity securities without readily determinable fair values that were adjusted based on observable price changes in orderly transactions from an identical or similar investment of the same issuer (measurement alternative). Of the $392 million in level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2020, $209 million related to equity 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)	Represents at June 30, 2020 the net markdowns associated with $3.4 billion of held-for-sale positions related to unfunded commitments in the bridge financing portfolio. There were no liabilities measured at fair value on a nonrecurring basis at June 30, 2019.


(c)	Primarily includes certain mortgage loans that were reclassified to held-for-sale.

(d)

Of the $823 million in level 3 assets measured at fair value on a nonrecurring basis as of June 30, 2020, $372 million related to residential real estate loans carried at the net realizable value of the underlying collateral (e.g., collateral-dependent 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 15% to 46% with a weighted average of 28%.


(e)	Prior-period amounts have been revised to conform with the current presentation.

Nonrecurring fair value changes

The following table presents the total change in value of assets and liabilities for which fair value adjustments have been recognized for the three and six months ended June 30, 2020 and 2019, related to assets and liabilities held at those dates.



	Three months ended June 30,								Six months ended June 30,
(in millions)	2020				2019				2020				2019
Loans	$	(39	)	^(b)	$	(79	)	^(d)	$	(303	)	^(b)	$	(100	)	^(d)
Other assets^(a)	(39		)		13				(206		)		90
Accounts payable and other liabilities	465			^(c)	—				(95		)	^(c)	—
Total nonrecurring fair value gains/(losses)	$	387			$	(66	)		$	(604	)		$	(10	)


(a)	Included $(4) million and $16 million for the three months ended June 30, 2020 and 2019, respectively and $(158) million and $95 million for the six months ended June 30, 2020 and 2019, respectively, of net (losses)/gains as a result of the measurement alternative.


(b)	Includes the impact of certain mortgage loans that were reclassified to held-for-sale.


(c)	Represents marks on held-for-sale positions related to unfunded commitments in the bridge financing portfolio.


(d)	Prior-period amounts have been revised to conform with the current presentation.

Refer to Note 12 for further information about the measurement of collateral-dependent loans.

112

Equity securities without readily determinable fair values

The Firm measures certain equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer, with such changes recognized in other income.

In its determination of the new carrying values upon observable price changes, the Firm may adjust the prices if deemed necessary to arrive at the Firm’s estimated fair values. Such adjustments may include adjustments to reflect the different rights and obligations of similar securities, and other adjustments that are consistent with the Firm’s valuation techniques for private equity direct investments.

The following table presents the carrying value of equity securities without readily determinable fair values still held as of June 30, 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.



	Three months ended						Six months ended
	June 30						June 30
As of or for the period ended,
(in millions)	2020			2019			2020			2019
Other assets
Carrying value^(a)	$	2,620		$	1,704		$	2,620		$	1,704
Upward carrying value changes^(b)	4			52			13			136
Downward carrying value changes/impairment^(c)	(9		)	(36		)	(171		)	(42		)


(a)	The carrying value as of December 31, 2019 was $2.4 billion.


(b)	The cumulative upward carrying value changes between January 1, 2018 and June 30, 2020 were $541 million.


(c)	The cumulative downward carrying value changes/impairment between January 1, 2018 and June 30, 2020 were $(368) million.

Included in other assets above is the Firm’s interest in approximately 40 million Visa Class B shares, recorded at a nominal carrying value. These shares are subject to certain transfer restrictions currently and will be convertible into Visa Class A shares upon final resolution of certain litigation matters involving Visa. The conversion rate of Visa Class B shares into Visa Class A shares is 1.6228 at June 30, 2020, and may be adjusted by Visa depending on developments related to the litigation matters.

113

Additional disclosures about the fair value of financial instruments that are not carried on the Consolidated balance sheets at fair value

The following table presents by fair value hierarchy classification the carrying values and estimated fair values at June 30, 2020, and December 31, 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.



	June 30, 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	$	20.5	$	20.5	$	—	$	—	$	20.5	$	21.7	$	21.7	$	—	$	—	$	21.7
Deposits with banks	473.2		473.2		—		—		473.2		241.9		241.9		—		—		241.9
Accrued interest and accounts receivable	71.4		—		71.4		—		71.4		71.3		—		71.2		0.1		71.3
Federal funds sold and securities purchased under resale agreements	13.0		—		13.0		—		13.0		234.6		—		234.6		—		234.6
Securities borrowed	100.2		—		100.2		—		100.2		133.5		—		133.5		—		133.5
Investment securities, held-to-maturity	72.9		—		76.1		—		76.1		47.5		0.1		48.8		—		48.9
Loans, net of allowance for loan losses^(a)	940.5		—		215.9		752.5		968.4		939.5		—		214.1		734.9		949.0
Other	69.5		—		68.3		1.3		69.6		61.3		—		60.6		0.8		61.4
Financial liabilities
Deposits	$	1,909.5	$	—	$	1,909.7	$	—	$	1,909.7	$	1,533.8	$	—	$	1,534.1	$	—	$	1,534.1
Federal funds purchased and securities loaned or sold under repurchase agreements	46.3		—		46.3		—		46.3		183.1		—		183.1		—		183.1
Short-term borrowings	28.1		—		28.1		—		28.1		35.0		—		35.0		—		35.0
Accounts payable and other liabilities	188.8		—		184.7		3.8		188.5		164.0		0.1		160.0		3.5		163.6
Beneficial interests issued by consolidated VIEs	20.8		—		20.9		—		20.9		17.8		—		17.9		—		17.9
Long-term debt	242.2		—		239.8		3.4		243.2		215.5		—		218.3		3.5		221.8

(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. 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 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.

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 and the estimated fair value of these wholesale lending-related commitments were as follows for the periods indicated.



	June 30, 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)		Level 1		Level 2		Level 3		Total estimated fair value
Wholesale lending-related commitments	$	2.1	$	—	$	—	$	2.4	$	2.4	$	1.2	$	—	$	—	$	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 and net markdowns associated with held-for-sale positions related to unfunded commitments in the bridge financing portfolio.

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. Refer to page 156 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of the valuation of lending-related commitments.

114

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 that 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 to better 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


•	Owned beneficial interests in securitized financial assets that contain embedded credit derivatives, which would otherwise be required to be separately accounted for as a derivative instrument


•	Structured notes, which are predominantly financial instruments that contain embedded derivatives, that are issued as part of client-driven activities


•	Certain long-term beneficial interests issued by CIB’s consolidated securitization trusts where the underlying assets are carried at fair value

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 three and six months ended June 30, 2020 and 2019, 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.



	Three months ended June 30,
	2020										2019
(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)
Federal funds sold and securities purchased under resale agreements	$	(299	)	$	—			$	(299	)	$	22		$	—		$	22
Securities borrowed	(58		)	—				(58		)	43			—			43
Trading assets:
Debt and equity instruments, excluding loans	1,209			—				1,209			204			—			204
Loans reported as trading assets:
Changes in instrument-specific credit risk	413			38			^(c)	451			199			2		^(c)	201
Other changes in fair value	(22		)	754			^(c)	732			120			328		^(c)	448
Loans:
Changes in instrument-specific credit risk	(42		)	—				(42		)	(13		)	—			(13		)
Other changes in fair value	4			—				4			1			—			1
Other assets	28			25			^(d)	53			2			3		^(d)	5
Deposits^(a)	(362		)	—				(362		)	(696		)	—			(696		)
Federal funds purchased and securities loaned or sold under repurchase agreements	181			—				181			(15		)	—			(15		)
Short-term borrowings^(a)	(631		)	—				(631		)	(70		)	—			(70		)
Trading liabilities	—			—				—			2			—			2
Other liabilities	(11		)	—				(11		)	(4		)	—			(4		)
Long-term debt^(a)(b)	(3,581		)	(2		)	^(c)	(3,583		)	(1,770		)	—			(1,770		)

115



	Six months ended June 30,
	2020										2019
(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)
Federal funds sold and securities purchased under resale agreements	$	244		$	—			$	244		$	33		$	—		$	33
Securities borrowed	168			—				168			80			—			80
Trading assets:
Debt and equity instruments, excluding loans	(1,229		)	(1		)	^(c)	(1,230		)	1,558			—			1,558
Loans reported as trading assets:
Changes in instrument-specific credit risk	(176		)	15			^(c)	(161		)	447			5		^(c)	452
Other changes in fair value	253			1,495			^(c)	1,748			200			565		^(c)	765
Loans:
Changes in instrument-specific credit risk	(46		)	—				(46		)	(8		)	—			(8		)
Other changes in fair value	23			—				23			1			—			1
Other assets	89			8			^(d)	97			3			3		^(d)	6
Deposits^(a)	(465		)	—				(465		)	(1,192		)	—			(1,192		)
Federal funds purchased and securities loaned or sold under repurchase agreements	(78		)	—				(78		)	(20		)	—			(20		)
Short-term borrowings^(a)	1,089			—				1,089			(774		)	—			(774		)
Trading liabilities	—			—				—			5			—			5
Other liabilities	(46		)	—				(46		)	(8		)	—			(8		)
Long-term debt^(a)(b)	600			3			^(c)	603			(4,606		)	—			(4,606		)

(a)

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, 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 $21 million and $19 million for the three and six months ended June 30, 2020, respectively. The amounts were not material for the three and six months ended June 30, 2019.


(b)	Long-term debt measured at fair value predominantly relates to structured notes. Although the risk associated with the structured notes is actively managed, the gains/(losses) reported in this table do not include the income statement impact of the risk management instruments used to manage such risk.


(c)	Reported in mortgage fees and related income.


(d)	Reported in other income.


(e)	Changes in fair value exclude contractual interest, which is included in interest income and interest expense for all instruments other than hybrid financial instruments. Refer to Note 7 for further information regarding interest income and interest expense.

116

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 of June 30, 2020, and December 31, 2019, for loans, long-term debt and long-term beneficial interests for which the fair value option has been elected.



	June 30, 2020								December 31, 2019
(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	$	4,566		$	1,931	$	(2,635	)	$	3,717		$	1,111	$	(2,606	)
Loans	282			225		(57		)	178			139		(39		)
Subtotal	4,848			2,156		(2,692		)	3,895			1,250		(2,645		)
All other performing loans
Loans reported as trading assets	40,481			38,807		(1,674		)	48,570			47,318		(1,252		)
Loans	5,788			5,698		(90		)	7,046			6,965		(81		)
Total loans	$	51,117		$	46,661	$	(4,456	)	$	59,511		$	55,533	$	(3,978	)
Long-term debt
Principal-protected debt	$	41,280	^(c)	$	40,717	$	(563	)	$	40,124	^(c)	$	39,246	$	(878	)
Nonprincipal-protected debt^(b)	NA			34,041		NA			NA			36,499		NA
Total long-term debt	NA			$	74,758	NA			NA			$	75,745	NA
Long-term beneficial interests
Nonprincipal-protected debt^(b)	NA			$	40	NA			NA			$	36	NA
Total long-term beneficial interests	NA			$	40	NA			NA			$	36	NA


(a)	There were no performing loans that were ninety days or more past due as of June 30, 2020, and December 31, 2019, respectively.

(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.

At June 30, 2020, and December 31, 2019, the contractual amount of lending-related commitments for which the fair value option was elected was $12.1 billion and $8.6 billion, respectively, with a corresponding fair value of $(121) million and $(120) million, respectively. Refer to Note 28 of JPMorgan Chase’s 2019 Form 10-K, and Note 23 of this Form 10-Q for further information regarding off-balance sheet lending-related financial instruments. Prior-period amounts have been revised to conform with the current presentation.

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.



	June 30, 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	$	37,317	$	286	$	10,190	$	47,793	$	35,470	$	34	$	16,692	$	52,196
Credit	5,119		494		—		5,613		5,715		875		—		6,590
Foreign exchange	3,929		121		4		4,054		3,862		48		5		3,915
Equity	27,416		4,984		7,508		39,908		29,294		4,852		8,177		42,323
Commodity	417		24		1,500		1,941		472		32		1,454		1,958
Total structured notes	$	74,198	$	5,909	$	19,202	$	99,309	$	74,813	$	5,841	$	26,328	$	106,982

117

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 under the Firm’s agreements. Senior management is significantly involved in the credit approval and review process, and risk levels are adjusted as needed to reflect the Firm’s risk appetite.

In the Firm’s consumer 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. Refer to Note 12 for additional information on the geographic composition of the Firm’s consumer loan portfolios. In the wholesale portfolio, credit risk concentrations are evaluated primarily by industry and monitored regularly on both an aggregate portfolio level and on an individual client or counterparty basis.

The Firm’s wholesale exposure is managed through loan syndications and participations, loan sales, securitizations, credit derivatives, master netting agreements, collateral and other risk-reduction techniques. Refer to Note 12 for additional information on loans.

The Firm does not believe that its exposure to any particular loan product or industry segment (e.g., real estate), or its exposure to residential real estate loans with high LTV ratios, results in a significant concentration of credit risk.

Terms of loan products and collateral coverage are included in the Firm’s assessment when extending credit and establishing its allowance for loan losses.

118

The table below presents both on–balance sheet and off–balance sheet consumer and wholesale-related credit exposure by the Firm’s three credit portfolio segments as of June 30, 2020, and December 31, 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.



	June 30, 2020									December 31, 2019
	Credit exposure^(h)		On-balance sheet					Off-balance sheet^(j)		Credit exposure^(h)		On-balance sheet				Off-balance sheet^(j)
(in millions)			Loans			Derivatives						Loans		Derivatives
Consumer, excluding credit card	$	354,265	$	308,917	⁽ⁱ⁾	$	—	$	45,348	$	338,170	$	298,001	$	—	$	40,169
Credit card^(a)	815,492		141,656			—		673,836		819,644		168,924		—		650,720
Total consumer-related^(a)	1,169,757		450,573			—		719,184		1,157,814		466,925		—		690,889
Wholesale-related^(b)
Real Estate	148,656		122,202			1,581		24,873		150,805		117,709		619		32,477
Consumer & Retail	110,160		47,705			2,532		59,923		106,986		36,985		1,424		68,577
Individuals and Individual Entities^(c)	109,563		96,890			1,762		10,911		105,018		94,616		694		9,708
Industrials	66,179		26,058			1,752		38,369		62,483		22,063		878		39,542
Healthcare	60,471		21,028			3,298		36,145		50,824		17,607		2,078		31,139
Technology, Media & Telecommunications	60,461		17,637			3,791		39,033		60,033		15,322		2,766		41,945
Asset Managers	60,270		26,911			9,186		24,173		51,856		24,008		7,160		20,688
Banks & Finance Cos	49,970		26,985			6,870		16,115		50,786		31,191		5,165		14,430
Oil & Gas	43,035		14,141			996		27,898		41,641		13,101		852		27,688
Automotive	38,294		19,085			1,691		17,518		35,118		18,844		368		15,906
State & Municipal Govt^(d)	36,824		16,830			2,597		17,397		30,095		13,271		2,000		14,824
Utilities	32,078		5,858			3,242		22,978		34,843		5,157		2,573		27,113
Transportation	18,089		8,892			1,847		7,350		14,497		5,253		715		8,529
Chemicals & Plastics	17,172		5,129			752		11,291		17,499		4,864		459		12,176
Central Govt	16,385		2,985			12,233		1,167		14,865		2,840		10,477		1,548
Metals & Mining	15,790		5,874			757		9,159		15,586		5,364		402		9,820
Insurance	14,804		1,808			3,193		9,803		12,348		1,356		2,282		8,710
Securities Firms	8,233		531			4,863		2,839		7,344		757		4,507		2,080
Financial Markets Infrastructure	7,724		110			5,860		1,754		4,121		13		2,482		1,626
All other^(e)	82,968		50,128			6,043		26,797		78,006		51,357		1,865		24,784
Subtotal	997,126		516,787			74,846		405,493		944,754		481,678		49,766		413,310
Loans held-for-sale and loans at fair value	11,158		11,158			—		—		11,166		11,166		—		—
Receivables from customers and other^(f)	22,403		—			—		—		33,706		—		—		—
Total wholesale-related	1,030,687		527,945			74,846		405,493		989,626		492,844		49,766		413,310
Total exposure^(g)(h)	$	2,200,444	$	978,518		$	74,846	$	1,124,677	$	2,147,440	$	959,769	$	49,766	$	1,104,199


(a)	Also includes commercial card lending-related commitments primarily in CB and CIB.


(b)	The industry rankings presented in the table as of December 31, 2019, are based on the industry rankings of the corresponding exposures at June 30, 2020, not actual rankings of such exposures at December 31, 2019.


(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)


(e)	All other includes: SPEs and Private education and civic organizations, representing approximately 90% and 10%, respectively, at both June 30, 2020, and December 31, 2019. Refer to Note 14 for more information on exposures to SPEs.

(f)


(g)	Excludes cash placed with banks of $484.2 billion and $254.0 billion, at June 30, 2020, and December 31, 2019, respectively, which is predominantly placed with various central banks, primarily Federal Reserve Banks.


(h)	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.


(i)	At June 30, 2020, included $19.9 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 government guaranteed loans.


(j)	Represents lending-related financial instruments.

119

Note 5 – Derivative instruments

JPMorgan Chase makes markets in derivatives for clients and also uses derivatives to hedge or manage its own risk exposures. Refer to Note 5 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of the Firm’s use of and accounting policies regarding derivative instruments.

The Firm’s disclosures are based on the accounting treatment and purpose of these derivatives. A limited number of the Firm’s derivatives are designated in hedge

accounting relationships and are disclosed according to the type of hedge (fair value hedge, cash flow hedge, or net investment hedge). Derivatives not designated in hedge accounting relationships include certain derivatives that are used to manage risks associated with specified assets and liabilities (“specified risk management” positions) as well as derivatives used in the Firm’s market-making businesses or for other purposes.

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	10-Q page reference
Manage specifically identified risk exposures in qualifying hedge accounting relationships:
• Interest rate	Hedge fixed rate assets and liabilities	Fair value hedge	Corporate	126-127
• Interest rate	Hedge floating-rate assets and liabilities	Cash flow hedge	Corporate	128
• Foreign exchange	Hedge foreign currency-denominated assets and liabilities	Fair value hedge	Corporate	126-127
• Foreign exchange	Hedge foreign currency-denominated forecasted revenue and expense	Cash flow hedge	Corporate	128
• Foreign exchange	Hedge the value of the Firm’s investments in non-U.S. dollar functional currency entities	Net investment hedge	Corporate	129
• Commodity	Hedge commodity inventory	Fair value hedge	CIB	126-127
Manage specifically identified risk exposures not designated in qualifying hedge accounting relationships:
• Interest rate	Manage the risk associated with mortgage commitments, warehouse loans and MSRs	Specified risk management	CCB	129
• Credit	Manage the credit risk associated with wholesale lending exposures	Specified risk management	CIB	129
• Interest rate and foreign exchange	Manage the risk associated with certain other specified assets and liabilities	Specified risk management	Corporate	129
Market-making derivatives and other activities:
• Various	Market-making and related risk management	Market-making and other	CIB	129
• Various	Other derivatives	Market-making and other	CIB, AWM, Corporate	129

120

Notional amount of derivative contracts

The following table summarizes the notional amount of derivative contracts outstanding as of June 30, 2020, and December 31, 2019.



	Notional amounts^(b)
(in billions)	June 30, 2020		December 31, 2019
Interest rate contracts
Swaps	$	23,899	$	21,228
Futures and forwards	5,338		3,152
Written options	3,633		3,938
Purchased options	4,033		4,361
Total interest rate contracts	36,903		32,679
Credit derivatives^(a)	1,250		1,242
Foreign exchange contracts
Cross-currency swaps	3,730		3,604
Spot, futures and forwards	7,201		5,577
Written options	750		700
Purchased options	752		718
Total foreign exchange contracts	12,433		10,599
Equity contracts
Swaps	349		406
Futures and forwards	122		142
Written options	675		646
Purchased options	633		611
Total equity contracts	1,779		1,805
Commodity contracts
Swaps	133		147
Spot, futures and forwards	212		211
Written options	154		135
Purchased options	141		124
Total commodity contracts	640		617
Total derivative notional amounts	$	53,005	$	46,942


(a)	Refer to the Credit derivatives discussion on page 130 for more information on volumes and types of credit derivative contracts.


(b)	Represents the sum of gross long and gross short third-party notional derivative contracts.

While the notional amounts disclosed above give an indication of the volume of the Firm’s derivatives activity, the notional amounts significantly exceed, in the Firm’s view, the possible losses that could arise from such transactions. For most derivative contracts, the notional amount is not exchanged; it is simply a reference amount used to calculate payments.

121

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 of June 30, 2020, and December 31, 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
June 30, 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	$	408,225	$	767	$	408,992	$	37,028	$	369,518	$	1	$	369,519	$	12,770
Credit	14,933		—		14,933		1,171		15,926		—		15,926		2,080
Foreign exchange	162,460		1,335		163,795		12,575		176,032		624		176,656		16,177
Equity	67,932		—		67,932		14,857		68,710		—		68,710		15,962
Commodity	24,771		847		25,618		9,215		26,045		1,102		27,147		10,488
Total fair value of trading assets and liabilities	$	678,321	$	2,949	$	681,270	$	74,846	$	656,231	$	1,727	$	657,958	$	57,477

	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		—		14,876		701		15,121		—		15,121		1,652
Foreign exchange	138,179		308		138,487		9,005		144,125		983		145,108		13,158
Equity	45,727		—		45,727		6,477		52,741		—		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.

122

Derivatives netting

The following tables present, as of June 30, 2020, and December 31, 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.



	June 30, 2020									December 31, 2019
(in millions)	Gross derivative receivables		Amounts netted on the Consolidated balance sheets			Net derivative receivables				Gross derivative receivables		Amounts netted on the Consolidated balance sheets			Net derivative receivables
U.S. GAAP nettable derivative receivables
Interest rate contracts:
Over-the-counter (“OTC”)	$	387,069	$	(356,834	)	$	30,235			$	299,205	$	(276,255	)	$	22,950
OTC–cleared	14,434		(14,315		)	119				9,442		(9,360		)	82
Exchange-traded^(a)	875		(815		)	60				347		(258		)	89
Total interest rate contracts	402,378		(371,964		)	30,414				308,994		(285,873		)	23,121
Credit contracts:
OTC	11,598		(10,840		)	758				10,743		(10,317		)	426
OTC–cleared	2,946		(2,922		)	24				3,864		(3,858		)	6
Total credit contracts	14,544		(13,762		)	782				14,607		(14,175		)	432
Foreign exchange contracts:
OTC	160,126		(150,502		)	9,624				136,252		(129,324		)	6,928
OTC–cleared	736		(715		)	21				185		(152		)	33
Exchange-traded^(a)	24		(3		)	21				10		(6		)	4
Total foreign exchange contracts	160,886		(151,220		)	9,666				136,447		(129,482		)	6,965
Equity contracts:
OTC	26,510		(24,792		)	1,718				23,106		(20,820		)	2,286
Exchange-traded^(a)	31,829		(28,283		)	3,546				19,654		(18,430		)	1,224
Total equity contracts	58,339		(53,075		)	5,264				42,760		(39,250		)	3,510
Commodity contracts:
OTC	12,803		(9,066		)	3,737				7,093		(5,149		)	1,944
OTC–cleared	35		(35		)	—				28		(28		)	—
Exchange-traded^(a)	7,544		(7,302		)	242				6,154		(5,903		)	251
Total commodity contracts	20,382		(16,403		)	3,979				13,275		(11,080		)	2,195
Derivative receivables with appropriate legal opinion	656,529		(606,424		)	50,105			^(d)	516,083		(479,860		)	36,223			^(d)
Derivative receivables where an appropriate legal opinion has not been either sought or obtained	24,741					24,741				13,543					13,543
Total derivative receivables recognized on the Consolidated balance sheets	$	681,270				$	74,846			$	529,626				$	49,766
Collateral not nettable on the Consolidated balance sheets^(b)(c)						(18,711		)							(14,226		)
Net amounts						$	56,135								$	35,540

123



	June 30, 2020									December 31, 2019
(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	$	352,062	$	(341,400	)	$	10,662			$	267,311	$	(260,229	)	$	7,082
OTC–cleared	14,945		(14,645		)	300				10,217		(10,138		)	79
Exchange-traded^(a)	721		(704		)	17				365		(303		)	62
Total interest rate contracts	367,728		(356,749		)	10,979				277,893		(270,670		)	7,223
Credit contracts:
OTC	12,657		(11,068		)	1,589				11,570		(10,080		)	1,490
OTC–cleared	2,780		(2,778		)	2				3,390		(3,389		)	1
Total credit contracts	15,437		(13,846		)	1,591				14,960		(13,469		)	1,491
Foreign exchange contracts:
OTC	172,678		(159,750		)	12,928				142,360		(131,792		)	10,568
OTC–cleared	736		(726		)	10				186		(152		)	34
Exchange-traded^(a)	22		(3		)	19				12		(6		)	6
Total foreign exchange contracts	173,436		(160,479		)	12,957				142,558		(131,950		)	10,608
Equity contracts:
OTC	30,160		(24,481		)	5,679				27,594		(21,778		)	5,816
Exchange-traded^(a)	30,605		(28,267		)	2,338				20,216		(18,426		)	1,790
Total equity contracts	60,765		(52,748		)	8,017				47,810		(40,204		)	7,606
Commodity contracts:
OTC	13,899		(9,185		)	4,714				8,714		(6,235		)	2,479
OTC–cleared	44		(44		)	—				30		(30		)	—
Exchange-traded^(a)	7,486		(7,430		)	56				6,012		(5,862		)	150
Total commodity contracts	21,429		(16,659		)	4,770				14,756		(12,127		)	2,629
Derivative payables with appropriate legal opinion	638,795		(600,481		)	38,314			^(d)	497,977		(468,420		)	29,557			^(d)
Derivative payables where an appropriate legal opinion has not been either sought or obtained	19,163					19,163				14,151					14,151
Total derivative payables recognized on the Consolidated balance sheets	$	657,958				$	57,477			$	512,128				$	43,708
Collateral not nettable on the Consolidated balance sheets^(b)(c)						(12,607		)							(7,896		)
Net amounts						$	44,870								$	35,812


(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 $80.7 billion and $65.9 billion at June 30, 2020, and December 31, 2019, respectively. Net derivatives payable included cash collateral netted of $74.7 billion and $54.4 billion at June 30, 2020, and December 31, 2019, respectively. Derivative cash collateral relates to OTC and OTC-cleared derivative instruments.

124

Liquidity risk and credit-related contingent features

Refer to Note 5 of JPMorgan Chase’s 2019 Form 10-K for a more detailed discussion of liquidity risk and credit-related contingent features related to the Firm’s 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 June 30, 2020, and December 31, 2019.



OTC and OTC-cleared derivative payables containing downgrade triggers
(in millions)	June 30, 2020			December 31, 2019
Aggregate fair value of net derivative payables		$	27,255		$	14,819
Collateral posted		26,527			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, N.A., at June 30, 2020, and December 31, 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
	June 30, 2020				December 31, 2019
(in millions)	Single-notch downgrade		Two-notch downgrade		Single-notch downgrade		Two-notch downgrade
Amount of additional collateral to be posted upon downgrade^(a)	$	191	$	1,295	$	189	$	1,467
Amount required to settle contracts with termination triggers upon downgrade^(b)	182		2,273		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.

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 was not material at June 30, 2020 and December 31, 2019.

125

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 three and six months ended June 30, 2020 and 2019, 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
Three months ended June 30, 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)	$	464		$	(288	)	$	176	$	—		$	205	$	—
Foreign exchange^(c)	(304		)	338			34		(121		)	34		21
Commodity^(d)	(1,730		)	1,771			41		—			44		—
Total	$	(1,570	)	$	1,821		$	251	$	(121	)	$	283	$	21



	Gains/(losses) recorded in income								Income statement impact of excluded components^(e)					OCI impact
Three months ended June 30, 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)	$	1,762		$	(1,556	)	$	206	$	—		$	196	$	—
Foreign exchange^(c)	426			(301		)	125		(229		)	125		112
Commodity^(d)	(154		)	175			21		—			17		—
Total	$	2,034		$	(1,682	)	$	352	$	(229	)	$	338	$	112



	Gains/(losses) recorded in income								Income statement impact of excluded components^(e)					OCI impact
Six months ended June 30, 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)	$	4,551		$	(4,076	)	$	475	$	—		$	419	$	—
Foreign exchange^(c)	272			(150		)	122		(300		)	122		136
Commodity^(d)	(202		)	289			87		—			93		—
Total	$	4,621		$	(3,937	)	$	684	$	(300	)	$	634	$	136



	Gains/(losses) recorded in income								Income statement impact of excluded components^(e)					OCI impact
Six months ended June 30, 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)	$	3,226		$	(2,849	)	$	377	$	—		$	368	$	—
Foreign exchange^(c)	136			108			244		(451		)	244		115
Commodity^(d)	(442		)	469			27		—			18		—
Total	$	2,920		$	(2,272	)	$	648	$	(451	)	$	630	$	115


(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)

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.

126

As of June 30, 2020 and December 31, 2019, the following amounts were recorded on the Consolidated balance sheets related to certain cumulative fair value hedge basis adjustments that are expected to reverse through the income statement in future periods as an adjustment to yield.



	Carrying amount of the hedged items^(a)(b)			Cumulative amount of fair value hedging adjustments included in the carrying amount of hedged items:
June 30, 2020 (in millions)	Carrying amount of the hedged items^(a)(b)			Active hedging relationships		Discontinued hedging relationships^(d)(e)			Total
Assets
Investment securities - AFS	$	144,081	^(c)	$	7,478	$	246		$	7,724
Liabilities
Long-term debt	$	185,123		$	14,771	$	3,809		$	18,580
Beneficial interests issued by consolidated VIEs	1,595			—		(4		)	(4		)

	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)	Carrying amount of the hedged items^(a)(b)			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			—		(8		)	(8		)

(a)

Excludes physical commodities with a carrying value of $8.2 billion and $6.5 billion at June 30, 2020 and December 31, 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 June 30, 2020 and December 31, 2019, the carrying amount excluded for AFS securities is $19.2 billion and $14.9 billion, respectively, and for long-term debt is $7.8 billion and $2.8 billion, respectively.


(c)	Carrying amount represents the amortized cost.


(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.

127

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 three and six months ended June 30, 2020 and 2019, respectively. The Firm includes the gain/(loss) 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)
Three months ended June 30, 2020 (in millions)	Amounts reclassified from AOCI to income			Amounts recorded in OCI			Total change in OCI for period
Contract type
Interest rate^(a)	$	127		$	412		$	285
Foreign exchange^(b)	(34		)	(10		)	24
Total	$	93		$	402		$	309

	Derivatives gains/(losses) recorded in income and other comprehensive income/(loss)
Three months ended June 30, 2019 (in millions)	Amounts reclassified from AOCI to income			Amounts recorded in OCI			Total change in OCI for period
Contract type
Interest rate^(a)	$	2		$	155		$	153
Foreign exchange^(b)	(28		)	(54		)	(26		)
Total	$	(26	)	$	101		$	127

	Derivatives gains/(losses) recorded in income and other comprehensive income/(loss)
Six months ended June 30, 2020 (in millions)	Amounts reclassified from AOCI to income			Amounts recorded in OCI			Total change in OCI for period
Contract type
Interest rate^(a)	$	118		$	3,873		$	3,755
Foreign exchange^(b)	(17		)	(220		)	(203		)
Total	$	101		$	3,653		$	3,552

	Derivatives gains/(losses) recorded in income and other comprehensive income/(loss)
Six months ended June 30, 2019 (in millions)	Amounts reclassified from AOCI to income			Amounts recorded in OCI			Total change in OCI for period
Contract type
Interest rate^(a)	$	4		$	211		$	207
Foreign exchange^(b)	(69		)	31			100
Total	$	(65	)	$	242		$	307


(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.

The Firm did not experience any forecasted transactions that failed to occur for the three and six months ended June 30, 2020 and 2019.

Over the next 12 months, the Firm expects that approximately $498 million (after-tax) of net gains recorded in AOCI at June 30, 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 ten years, corresponding to the timing of the originally hedged forecasted cash flows.

For open cash flow hedges, the maximum length of time over which forecasted transactions are hedged is approximately seven years. The Firm’s longer-dated forecasted transactions relate to core lending and borrowing activities.

128

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 three and six months ended June 30, 2020 and 2019.



	Gains/(losses) recorded in income and other comprehensive income/(loss)
	2020							2019
Three months ended June 30, (in millions)	Amounts recorded in income^(a)(b)				Amounts recorded in OCI			Amounts recorded in income^(a)(b)			Amounts recorded in OCI
Foreign exchange derivatives		$	(81	)	$	(413	)		$	27	$	(123	)

	Gains/(losses) recorded in income and other comprehensive income/(loss)
	2020							2019
Six months ended June 30, (in millions)	Amounts recorded in income^(a)(b)				Amounts recorded in OCI			Amounts recorded in income^(a)(b)			Amounts recorded in OCI
Foreign exchange derivatives		$	(71	)	$	1,176			$	48	$	(161	)


(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)	Excludes amounts reclassified from AOCI to income on the sale or liquidation of hedged entities. The Firm reclassified pre-tax (losses) of $(8) million and net pre-tax gains of $5 million to other income related to the liquidation of certain legal entities during the three and six months ended June 30, 2020 and 2019, respectively. Refer to Note 20 for further information.

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 mortgage commitments, warehouse loans, MSRs, wholesale lending exposures, and foreign currency-denominated assets and liabilities.



	Derivatives gains/(losses) recorded in income
	Three months ended June 30,						Six months ended June 30,
(in millions)	2020			2019			2020			2019
Contract type
Interest rate^(a)	$	644		$	657		$	1,936		$	949
Credit^(b)	(100		)	(2		)	(39		)	(12		)
Foreign exchange^(c)	(28		)	(75		)	78			(25		)
Total	$	516		$	580		$	1,975		$	912


(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.

(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.

129

Credit derivatives

Refer to Note 5 of JPMorgan Chase’s 2019 Form 10-K for a more detailed discussion of credit derivatives. The following tables present a summary of the notional amounts of credit derivatives and credit-related notes the Firm sold and purchased as of June 30, 2020 and December 31, 2019. 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
June 30, 2020 (in millions)	Protection sold			Protection purchased with identical underlyings^(b)			Net protection (sold)/purchased^(c)		Other protection purchased^(d)
Credit derivatives
Credit default swaps	$	(576,962	)		$	596,882	$	19,920	$	4,515
Other credit derivatives^(a)	(28,069		)		35,496		7,427		8,522
Total credit derivatives	(605,031		)		632,378		27,347		13,037
Credit-related notes	—				—		—		9,228
Total	$	(605,031	)		$	632,378	$	27,347	$	22,265

	Maximum payout/Notional amount
December 31, 2019 (in millions)	Protection sold			Protection purchased with identical underlyings^(b)			Net protection (sold)/purchased^(c)		Other protection purchased^(d)
Credit derivatives
Credit default swaps	$	(562,338	)		$	571,892	$	9,554	$	3,936
Other credit derivatives^(a)	(44,929		)		52,007		7,078		7,364
Total credit derivatives	(607,267		)		623,899		16,632		11,300
Credit-related notes	—				—		—		9,606
Total	$	(607,267	)		$	623,899	$	16,632	$	20,906


(a)	Other credit derivatives predominantly consist of credit swap options and total return swaps.


(b)	Represents the total notional amount of protection purchased where the underlying reference instrument is identical to the reference instrument on protection sold; the notional amount of protection purchased for each individual identical underlying reference instrument may be greater or lower than the notional amount of protection sold.


(c)	Does not take into account the fair value of the reference obligation at the time of settlement, which would generally reduce the amount the seller of protection pays to the buyer of protection in determining settlement value.


(d)	Represents protection purchased by the Firm on referenced instruments (single-name, portfolio or index) where the Firm has not sold any protection on the identical reference instrument.

The following tables summarize the notional amounts by the ratings, maturity profile, and total fair value, of credit derivatives and credit-related notes as of June 30, 2020, and December 31, 2019, where JPMorgan Chase is 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
June 30, 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	$	(94,891	)	$	(320,604	)	$	(37,397	)	$	(452,892	)	$	3,970	$	(2,297	)	$	1,673
Noninvestment-grade	(37,051		)	(106,115		)	(8,973		)	(152,139		)	2,346		(4,950		)	(2,604		)
Total	$	(131,942	)	$	(426,719	)	$	(46,370	)	$	(605,031	)	$	6,316	$	(7,247	)	$	(931	)



December 31, 2019 (in millions)	<1 year			1–5 years			>5 years			Total notional amount			Fair value of receivables^(b)		Fair value of payables^(b)			Net fair value
Risk rating of reference entity
Investment-grade	$	(114,460	)	$	(311,407	)	$	(42,129	)	$	(467,996	)	$	6,153	$	(911	)	$	5,242
Noninvestment-grade	(41,661		)	(87,769		)	(9,841		)	(139,271		)	4,281		(2,882		)	1,399
Total	$	(156,121	)	$	(399,176	)	$	(51,970	)	$	(607,267	)	$	10,434	$	(3,793	)	$	6,641


(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.

130

Note 6 – Noninterest revenue and noninterest expense

Noninterest revenue

Refer to Note 6 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the components of and accounting policies for the Firm’s noninterest revenue.

Investment banking fees

The following table presents the components of investment banking fees.



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Underwriting
Equity	$	974	$	515	$	1,301	$	776
Debt	1,279		820		2,323		1,765
Total underwriting	2,253		1,335		3,624		2,541
Advisory	597		516		1,092		1,150
Total investment banking fees	$	2,850	$	1,851	$	4,716	$	3,691

Principal transactions

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 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 LOB.



	Three months ended June 30,							Six months ended June 30,
(in millions)	2020			2019				2020			2019
Trading revenue by instrument type
Interest rate^(a)	$	1,519		$	463		^(d)	$	1,971		$	1,262		^(d)
Credit^(b)	1,953		^(c)	474			^(d)	1,251		^(c)	1,093			^(d)
Foreign exchange	1,425			737			^(d)	2,892			1,625			^(d)
Equity	2,058			1,914			^(d)	3,406			3,275			^(d)
Commodity	591			229			^(d)	1,028			612			^(d)
Total trading revenue	7,546			3,817				10,548			7,867
Private equity gains/(losses)	75			(103		)		10			(77		)
Principal transactions	$	7,621		$	3,714			$	10,558		$	7,790


(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)	Includes marks on held-for-sale positions, including unfunded commitments, in the bridge financing portfolio.


(d)	Prior-period amounts were revised to conform with the current presentation.

Lending- and deposit-related fees

The following table presents the components of lending- and deposit-related fees.



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Lending-related fees	$	288	$	285	$	579	$	575
Deposit-related fees^(a)	1,143		1,339		2,558		2,608
Total lending- and deposit-related fees	$	1,431	$	1,624	$	3,137	$	3,183


(a)	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.

Asset management, administration and commissions

The following table presents the components of asset management, administration and commissions.



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Asset management fees
Investment management fees^(a)	$	2,717	$	2,698	$	5,502	$	5,275
All other asset management fees^(b)	75		78		168		147
Total asset management fees	2,792		2,776		5,670		5,422

Total administration fees^(c)	546		544		1,100		1,079

Commissions and other fees
Brokerage commissions^(d)	715		641		1,579		1,227
All other commissions and fees^(e)	213		303		457		573
Total commissions and fees	928		944		2,036		1,800
Total asset management, administration and commissions	$	4,266	$	4,264	$	8,806	$	8,301


(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.


(c)	Predominantly includes fees for custody, securities lending, funds services and securities clearance.


(d)	Represents commissions earned when the Firm acts as a broker, by facilitating its clients’ purchases and sales of securities and other financial instruments.


(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.

131

Card income

The following table presents the components of card income:



	Three months ended June 30,						Six months ended June 30,
(in millions)	2020			2019			2020			2019
Interchange and merchant processing income	$	3,940		$	5,184		$	8,722		$	9,905
Rewards costs and partner payments^(a)	(2,816		)	(3,695		)	(6,398		)	(6,978		)
Other card income^(b)	(150		)	(208		)	(355		)	(419		)
Total card income	$	974		$	1,281		$	1,969		$	2,508


(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)	Predominantly represents the amortization of account origination costs and annual fees.

Refer to Note 15 Goodwill and MSRs for information on mortgage fees and related income.

Refer to Note 17 for information on operating lease income included within other income.

Noninterest expense

Other expense

Other expense on the Firm’s Consolidated statements of income included the following:



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Legal expense/(benefit)	$	118	$	69	$	315	$	(12	)
FDIC-related expense	218		121		317		264

Note 7 – Interest income and Interest expense

Refer to Note 7 of JPMorgan Chase’s 2019 Form 10-K for a description of JPMorgan Chase’s accounting policies regarding interest income and interest expense.

The following table presents the components of interest income and interest expense.



	Three months ended June 30,					Six months ended June 30,
(in millions)	2020			2019		2020			2019
Interest income
Loans^(a)	$	10,622		$	12,726	$	22,554		$	25,606
Taxable securities	2,154			1,875		4,387			3,580
Non-taxable securities^(b)	307			340		607			703
Total investment securities^(a)	2,461			2,215		4,994			4,283
Trading assets - debt instruments	2,355			2,915		4,816			5,684
Federal funds sold and securities purchased under resale agreements	601			1,676		1,696			3,323
Securities borrowed^(c)	(175		)	467		(23		)	864
Deposits with banks	70			1,132		639			2,302
All other interest-earning assets^(d)	178			472		597			930
Total interest income	16,112			21,603		35,273			42,992
Interest expense
Interest-bearing deposits	349			2,413		1,924			4,601
Federal funds purchased and securities loaned or sold under repurchase agreements	131			1,226		918			2,336
Short-term borrowings^(e)	124			363		275			790
Trading liabilities – debt and all other interest-bearing liabilities^(c)(f)	(43		)	762		329			1,481
Long-term debt	1,639			2,266		3,386			4,608
Beneficial interest issued by consolidated VIEs	59			175		149			325
Total interest expense	2,259			7,205		6,981			14,141
Net interest income	13,853			14,398		28,292			28,851
Provision for credit losses	10,473			1,149		18,758			2,644
Net interest income after provision for credit losses	$	3,380		$	13,249	$	9,534		$	26,207


(a)	Includes the amortization/accretion of unearned income (e.g., purchase premiums/discounts, net deferred fees/costs, etc.).


(b)	Represents securities which are tax-exempt for U.S. federal income tax purposes.


(c)	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.


(d)	Includes interest earned on prime 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.


(e)	Includes commercial paper.


(f)	Other interest-bearing liabilities includes interest expense on prime brokerage-related customer payables.

132

Note 8 – Pension and other postretirement employee benefit plans

Refer to Note 8 of JPMorgan Chase’s 2019 Form 10-K for a discussion of JPMorgan Chase’s pension and OPEB plans.

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.



(in millions)	Three months ended June 30,												Six months ended June 30,
	2020			2019			2020			2019			2020			2019			2020			2019
	Pension plans						OPEB plans						Pension plans						OPEB plans
Components of net periodic benefit cost
Benefits earned during the period	$	8		$	89		$	—		$	—		$	16		$	178		$	—		$	—
Interest cost on benefit obligations	121			149			5			6			240			299			10			12
Expected return on plan assets	(192		)	(229		)	(28		)	(28		)	(383		)	(459		)	(55		)	(56		)
Amortization:
Net (gain)/loss	3			41			—			—			7			83			—			—
Prior service (credit)/cost	1			1			—			—			2			2			—			—
Net periodic defined benefit cost	(59		)	51			(23		)	(22		)	(118		)	103			(45		)	(44		)
Other defined benefit pension plans^(a)	10			7			NA			NA			19			13			NA			NA
Total defined benefit plans	(49		)	58			(23		)	(22		)	(99		)	116			(45		)	(44		)
Total defined contribution plans	321			243			NA			NA			620			463			NA			NA
Total pension and OPEB cost included in noninterest expense	$	272		$	301		$	(23	)	$	(22	)	$	521		$	579		$	(45	)	$	(44	)


(a)	Includes various defined benefit pension plans which are individually immaterial.

The following table presents the fair values of plan assets for the U.S. defined benefit pension and OPEB plans and for the material non-U.S. defined benefit pension plans.



(in billions)	June 30, 2020		December 31, 2019
Fair value of plan assets
Defined benefit pension plans	$	20.6	$	20.4
OPEB plans	3.0		3.0

There are no expected contributions to the U.S. defined benefit pension plan for 2020.

133

Note 9 – Employee share-based incentives

Refer to Note 9 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the accounting policies and other information relating to employee share-based incentives.

The Firm recognized the following noncash compensation expense related to its various employee share-based incentive plans in its Consolidated statements of income.



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Cost of prior grants of RSUs, performance share units (“PSUs”) and employee stock options that are amortized over their applicable vesting periods	$	276	$	278	$	610	$	617
Accrual of estimated costs of share-based awards to be granted in future periods including those to full-career eligible employees	526		292		836		606
Total noncash compensation expense related to employee share-based incentive plans	$	802	$	570	$	1,446	$	1,223

In the first quarter of 2020, in connection with its annual incentive grant for the 2019 performance year, the Firm granted 15 million RSUs and 496 thousand PSUs with weighted-average grant date fair values of $135.64 per RSU and $135.30 per PSU.

134

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. Refer to Note 10 of JPMorgan Chase’s 2019 Form 10-K for additional information regarding the investment securities portfolio.

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 the first quarter of 2020, the Firm transferred $26.1 billion of U.S. GSE and government agency MBS from AFS to HTM for capital management purposes. These securities were transferred at fair value in a non-cash transaction. AOCI included pretax unrealized gains of $1.0 billion on the securities at the date of transfer.

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



	June 30, 2020								December 31, 2019
(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)	$	147,398	$	5,074	$	166	$	152,306	$	107,811	$	2,395	$	89	$	110,117
Residential:
U.S.	12,721		458		34		13,145		10,223		233		6		10,450
Non-U.S.	5,100		55		31		5,124		2,477		64		1		2,540
Commercial	6,712		186		93		6,805		5,137		64		13		5,188
Total mortgage-backed securities	171,931		5,773		324		177,380		125,648		2,756		109		128,295
U.S. Treasury and government agencies	212,345		2,701		584		214,462		139,162		449		175		139,436
Obligations of U.S. states and municipalities	28,353		2,083		10		30,426		27,693		2,118		1		29,810
Certificates of deposit	—		—		—		—		77		—		—		77
Non-U.S. government debt securities	23,634		433		7		24,060		21,427		377		17		21,787
Corporate debt securities	671		9		6		674		823		22		—		845
Asset-backed securities:
Collateralized loan obligations	31,369		19		590		30,798		25,038		9		56		24,991
Other	8,080		67		64		8,083		5,438		40		20		5,458
Total available-for-sale securities^(b)	476,383		11,085		1,585		485,883		345,306		5,771		378		350,699
Held-to-maturity securities^(c)
Mortgage-backed securities:
U.S. GSEs and government agencies^(a)	62,811		2,836		14		65,633		36,523		1,165		62		37,626
Commercial	572		25		—		604		—		—		—		—
Total mortgage-backed securities	63,383		2,861		14		66,237		36,523		1,165		62		37,626
U.S. Treasury and government agencies	51		2		—		53		51		—		1		50
Obligations of U.S. states and municipalities	4,839		387		—		5,241		4,797		299		—		5,096
Asset-backed securities:
Collateralized loan obligations	4,635		—		60		4,576		6,169		—		—		6,169
Total held-to-maturity securities, net of allowance for credit losses^(d)	72,908		3,250		74		76,107		47,540		1,464		63		48,941
Total investment securities, net of allowance for credit losses^(d)	$	549,291	$	14,335	$	1,659	$	561,990	$	392,846	$	7,235	$	441	$	399,640

(a)

Includes AFS U.S. GSE obligations with fair values of $98.3 billion and $78.5 billion, and HTM U.S. GSE obligations with amortized cost of $53.8 billion and $31.6 billion, at June 30, 2020, and December 31, 2019, respectively. As of June 30, 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 $97.7 billion and $102.0 billion, and $50.9 billion and $52.7 billion, respectively.


(b)	There was no allowance for credit losses on AFS securities at June 30, 2020.


(c)	The Firm purchased $4.8 billion and $5.0 billion of HTM securities for the three and six months ended June 30, 2020, respectively, and $818 million for both the three and six months ended June 30, 2019.


(d)	HTM securities measured at amortized cost are reported net of allowance for credit losses of $23 million at June 30, 2020.


(e)	Excludes $2.2 billion and $1.9 billion of accrued interest receivables at June 30, 2020 and December 31, 2019, respectively. The Firm did not reverse through interest income any accrued interest receivables for the three and six months ended June 30, 2020 and 2019.

135

At June 30, 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 are used to identify the credit quality of securities and differentiate risk within the portfolio. The Firm’s internal risk ratings generally 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, however the quantitative characteristics (e.g., probability of default (“PD”) and loss given default (“LGD”)) may differ as they reflect internal historical experiences and assumptions. Risk ratings are assigned at acquisition, are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary over the life of the investment for updated information affecting the issuer’s ability to fulfill its obligations.

AFS securities impairment

The following tables present the fair value and gross unrealized losses by aging category for AFS securities at June 30, 2020 and December 31, 2019. The tables exclude U.S. Treasury and government agency securities and U.S. GSE and government agency MBS with unrealized losses of $750 million and $264 million, at June 30, 2020 and December 31, 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
June 30, 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.	$	2,570	$	28	$	259	$	6	$	2,829	$	34
Non-U.S.	3,764		28		261		3		4,025		31
Commercial	1,950		61		177		32		2,127		93
Total mortgage-backed securities	8,284		117		697		41		8,981		158
Obligations of U.S. states and municipalities	410		10		—		—		410		10
Certificates of deposit	—		—		—		—		—		—
Non-U.S. government debt securities	3,183		4		808		3		3,991		7
Corporate debt securities	390		6		—		—		390		6
Asset-backed securities:
Collateralized loan obligations	24,866		456		5,003		134		29,869		590
Other	1,471		23		925		41		2,396		64
Total available-for-sale securities with gross unrealized losses	$	38,604	$	616	$	7,433	$	219	$	46,037	$	835



	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		—		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		—		—		186		1
Certificates of deposit	77		—		—		—		77		—
Non-U.S. government debt securities	3,970		13		1,406		4		5,376		17
Corporate debt securities	—		—		—		—		—		—
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

136

As 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 (excluding accrued interest receivable).

The Firm recognizes impairment 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. In these circumstances the impairment loss recognized in earnings is equal to the full difference between the amortized cost (excluding accrued interest receivable and net of allowance if applicable) and the fair value of the securities.

For impaired debt securities that the Firm has the intent and ability to hold, the securities are evaluated to determine if a credit loss exists. If it is determined that a credit loss exists, 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 not due to credit losses is recorded in OCI.

Factors considered in evaluating credit 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.

When assessing securities issued in a securitization for 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.

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 evaluates impairment for credit losses when there is an adverse change in expected cash flows.

Unrealized losses on AFS securities increased during the period ended June 30, 2020 as credit spreads widened during the first quarter amid volatile financial markets in connection with the COVID-19 pandemic and tightened in the second quarter. The increase was largely related to collateralized loan obligations which had gross unrealized losses of $590 million as of June 30, 2020 compared to $2.0 billion as of March 31, 2020. Approximately 99% of these collateralized loan obligations are rated “AAA”, and the average credit enhancement was 37%. Credit enhancement in collateralized loan obligations is primarily in the form of overcollateralization, which is the excess of the par amount of collateral over the par amount of securities. Management assessed the projected collateral performance and the structural protections of these securities including underlying loan defaults and loss severity to determine if a credit loss exists. Based on this assessment, the Firm believes the unrealized losses on collateralized loan obligations are not due to credit losses.

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 or June 30, 2020.

137

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 June 30, 2020, all HTM securities were rated investment grade and were current and accruing, with approximately 95% rated AAA.

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 (excluding accrued interest receivable). 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 is calculated as the difference between the amortized cost (excluding accrued interest receivable) 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 $23 million as of June 30, 2020, reflecting $4 million and $13 million recognized in the provision for credit losses for the three and six months ended June 30, 2020, respectively.

Selected impacts of investment securities on the Consolidated statements of income



	Three months ended June 30,						Six months ended June 30,
(in millions)	2020			2019			2020			2019
Realized gains	$	624		$	115		$	1,719		$	376
Realized losses	(598		)	(71		)	(1,460		)	(319		)
Net investment securities gains	$	26		$	44		$	259		$	57

Provision for credit losses	$	4		NA			13			NA

The Firm did not intend to sell any impaired AFS securities in the periods presented.

138

Contractual maturities and yields

The following table presents the amortized cost and estimated fair value at June 30, 2020, of JPMorgan Chase’s investment securities portfolio by contractual maturity.



By remaining maturity June 30, 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	$	2		$	386		$	12,793		$	158,750		$	171,931
Fair value	2			399			13,130			163,849			177,380
Average yield^(a)	2.16		%	2.03		%	1.89		%	3.06		%	2.97		%
U.S. Treasury and government agencies
Amortized cost	$	42,482		$	112,121		$	45,140		$	12,602		$	212,345
Fair value	42,514			113,598			46,326			12,024			214,462
Average yield^(a)	0.29		%	0.71		%	0.96		%	0.54		%	0.67		%
Obligations of U.S. states and municipalities
Amortized cost	$	74		$	231		$	1,132		$	26,916		$	28,353
Fair value	74			241			1,212			28,899			30,426
Average yield^(a)	3.63		%	4.47		%	4.84		%	4.58		%	4.59		%
Non-U.S. government debt securities
Amortized cost	$	8,268		$	10,518		$	4,547		$	301		$	23,634
Fair value	8,293			10,778			4,667			322			24,060
Average yield^(a)	1.48		%	1.48		%	1.01		%	1.67		%	1.39		%
Corporate debt securities
Amortized cost	$	131		$	303		$	237		$	—		$	671
Fair value	131			303			240			—			674
Average yield^(a)	3.85		%	2.89		%	3.00		%	—		%	3.11		%
Asset-backed securities
Amortized cost	$	146		$	3,629		$	14,167		$	21,507		$	39,449
Fair value	146			3,647			13,956			21,132			38,881
Average yield^(a)	1.05		%	2.23		%	2.19		%	1.87		%	2.01		%
Total available-for-sale securities
Amortized cost	$	51,103		$	127,188		$	78,016		$	220,076		$	476,383
Fair value	51,160			128,966			79,531			226,226			485,883
Average yield^(a)	0.50		%	0.83		%	1.40		%	2.99		%	1.89		%
Held-to-maturity securities
Mortgage-backed securities
Amortized cost	$	—		$	—		$	6,234		$	57,157		$	63,391
Fair value	—			—			6,931			59,306			66,237
Average yield^(a)	—		%	—		%	2.92		%	2.93		%	2.92		%
U.S. Treasury and government agencies
Amortized cost	$	—		$	51		$	—		$	—		$	51
Fair value	—			53			—			—			53
Average yield^(a)	—		%	1.44		%	—		%	—		%	1.44		%
Obligations of U.S. states and municipalities
Amortized cost	$	—		$	36		$	201		$	4,617		$	4,854
Fair value	—			37			218			4,986			5,241
Average yield^(a)	—		%	3.65		%	3.81		%	3.94		%	3.94		%
Asset-backed securities
Amortized cost	$	—		$	—		$	4,635		$	—		$	4,635
Fair value	—			—			4,576			—			4,576
Average yield^(a)	—		%	—		%	2.24		%	—		%	2.24		%
Total held-to-maturity securities
Amortized cost	$	—		$	87		$	11,070		$	61,774		$	72,931
Fair value	—			90			11,725			64,292			76,107
Average yield^(a)	—		%	2.35		%	2.65		%	3.00		%	2.95		%

(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.

(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 4 years for agency residential MBS, 3 years for agency residential collateralized mortgage obligations and 3 years for nonagency residential collateralized mortgage obligations.

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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 obligations and to deploy the Firm’s excess cash.

Securities financing agreements are treated as collateralized financings on the Firm’s Consolidated balance sheets. Where appropriate under applicable accounting guidance, securities financing agreements with the same counterparty are reported on a net basis. Refer to Note 1 for further discussion of the offsetting of assets and 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. Refer to Note 3 for further information regarding the fair value 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 June 30, 2020 and December 31, 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 U.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. Refer to Note 24 for further information regarding assets pledged and collateral received in securities financing agreements.

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The table below summarizes the gross and net amounts of the Firm’s securities financing agreements as of June 30, 2020 and December 31, 2019. When the Firm has obtained an appropriate legal opinion with respect to a 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 counterparty 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 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.



	June 30, 2020
(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	$	604,876	$	(347,896	)	$	256,980	$	(241,154	)		$	15,826
Securities borrowed	165,490		(22,786		)	142,704		(102,470		)		40,234
Liabilities
Securities sold under repurchase agreements	$	577,216	$	(347,896	)	$	229,320	$	(214,124	)		$	15,196
Securities loaned and other^(a)	30,291		(22,786		)	7,505		(7,003		)		502



	December 31, 2019
(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	$	(233,818	)		$	15,328
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 $3.3 billion and $3.7 billion at June 30, 2020 and December 31, 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 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.

(c)

Includes securities financing agreements that provide collateral rights, but where an appropriate legal opinion with respect to the master netting agreement has not been either sought or obtained. At June 30, 2020 and December 31, 2019, included $11.3 billion and $11.0 billion, respectively, of securities purchased under resale agreements; $37.2 billion and $31.9 billion, respectively, of securities borrowed; $13.9 billion and $22.7 billion, respectively, of securities sold under repurchase agreements; and $33 million and $7 million, respectively, of securities loaned and other.

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The tables below present as of June 30, 2020, and December 31, 2019 the types of financial assets pledged in securities financing agreements and the remaining contractual maturity of the securities financing agreements.



	Gross liability balance
	June 30, 2020				December 31, 2019
(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	$	58,171	$	—	$	34,119	$	—
Residential - nonagency	588		—		1,239		—
Commercial - nonagency	1,273		—		1,612		—
U.S. Treasury, GSEs and government agencies	320,996		93		334,398		29
Obligations of U.S. states and municipalities	1,650		—		1,181		—
Non-U.S. government debt	156,353		2,337		145,548		1,528
Corporate debt securities	21,359		1,092		13,826		1,580
Asset-backed securities	981		—		1,794		—
Equity securities	15,845		26,769		21,455		33,512
Total	$	577,216	$	30,291	$	555,172	$	36,649



	Remaining contractual maturity of the agreements
	Overnight and continuous						Greater than 90 days
June 30, 2020 (in millions)	Overnight and continuous		Up to 30 days		30 – 90 days		Greater than 90 days		Total
Total securities sold under repurchase agreements	$	233,743	$	215,316	$	60,712	$	67,445	$	577,216
Total securities loaned and other	28,407		26		531		1,327		30,291



	Remaining contractual maturity of the agreements
	Overnight and continuous								Greater than 90 days
December 31, 2019 (in millions)	Overnight and continuous		Up to 30 days			30 – 90 days			Greater than 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


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

Transfers not qualifying for sale accounting

At June 30, 2020, and December 31, 2019, the Firm held $662 million and $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.

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Note 12 – Loans

Loan accounting framework

The accounting for a loan depends on management’s strategy for the loan. The Firm accounts for loans based on the following categories:


•	Originated or purchased loans held-for-investment (i.e., “retained”)


•	Loans held-for-sale


•	Loans at fair value

Effective 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:

Loans held-for-investment

Originated or purchased loans held-for-investment 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.

Interest income

Interest income on performing loans held-for-investment 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. 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.

Allowance for loan losses

The allowance for loan losses represents the estimated expected credit losses 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 amortized 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 are generally charged off or charged down to 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, unmodified credit card loans and scored business banking loans are generally charged off no later than 180 days past due. Scored auto and modified credit card loans are charged off no later than 120 days past due.

Certain consumer loans are 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.

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•	Loans to borrowers who have experienced an event that suggests a loss is either known or highly certain are subject to accelerated charge-off standards (e.g., residential real estate and auto loans are charged off within 60 days of receiving notification of a bankruptcy filing).


•	Auto loans upon repossession of the automobile.

Other than in certain limited circumstances, the Firm typically does not recognize charge-offs on the government-guaranteed portion of loans.

Wholesale loans are charged off when it is highly certain that a loss has been 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 estimated net realizable value, the determination of the fair value of the collateral depends on the type of collateral (e.g., securities, real estate). In cases where the collateral is in the form of liquid securities, the fair value is based on quoted market prices or broker quotes. For illiquid securities or other financial assets, the fair value of the collateral is generally estimated using a discounted cash flow model.

For residential real estate loans, collateral values are based upon external valuation sources. When it becomes likely that a borrower is either unable or unwilling to pay, the Firm 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 every twelve 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 every six to twelve 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

Loans 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.

Because these loans are recognized at the lower of cost or fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans. However, loans held-for-sale are subject to the nonaccrual policies described above.

Loans at fair value

Loans used in a market-making strategy or risk managed on a fair value basis are measured at fair value, with changes in fair value recorded in noninterest revenue.

Interest income on these loans is accrued and recognized based on the contractual rate of interest. Changes in fair value are recognized in noninterest revenue. Loan origination fees are recognized upfront in noninterest revenue. Loan origination costs are recognized in the associated expense category as incurred.

Because these loans are recognized at fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans. However, loans at fair value are subject to the nonaccrual policies described above.

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.

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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 amortized cost on the date of transfer. These loans are subsequently assessed for impairment based on the Firm’s allowance methodology. Refer to Note 13 for a further discussion of the methodologies used in establishing the Firm’s allowance for loan losses.

Loan modifications

The Firm seeks to modify certain loans in conjunction with its loss mitigation activities. Through the modification, JPMorgan Chase grants one or more concessions to a borrower who is experiencing financial difficulty in order to minimize the Firm’s economic loss and avoid foreclosure or repossession of the collateral, and to ultimately maximize payments received by the Firm from the borrower. The concessions granted vary by program and by borrower-specific characteristics, and may include interest rate reductions, term extensions, payment delays, principal forgiveness, or the acceptance of equity or other assets in lieu of payments. Such modifications are accounted for and reported as TDRs. Loans with short-term and other insignificant modifications that are not considered concessions are not 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 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.

Loans modified in TDRs are generally 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 throughout its remaining life, regardless of whether the loan is performing and has been returned to accrual status. Refer to Note 13 for further

discussion of the methodology used to estimate the Firm’s asset-specific allowance.


•	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 under section 4013 of the CARES 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.

Foreclosed property

The Firm acquires property from borrowers through loan restructurings, workouts, and foreclosures. Property acquired may include real property (e.g., residential real estate, land, and buildings) and commercial and personal property (e.g., automobiles, aircraft, railcars, and ships).

The Firm recognizes foreclosed property upon receiving assets in satisfaction of a loan (e.g., by taking legal title or physical possession). For loans collateralized by real property, the Firm generally recognizes the asset received at foreclosure sale or upon the execution of a deed in lieu of foreclosure transaction with the borrower. Foreclosed assets are reported in other assets on the Consolidated balance sheets and initially recognized at fair value less 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.

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Loan portfolio

The Firm’s loan portfolio is divided into three portfolio segments, which are the same segments used by the Firm to determine the allowance for loan losses: Consumer, excluding credit card; Credit card; and Wholesale. Within each portfolio segment the Firm monitors and assesses the credit risk in the following classes of loans, based on the risk characteristics of each loan class.

In conjunction with the adoption of CECL, the Firm revised its classes of loans. 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	Credit card	Wholesale^(c)
• Residential real estate^(a) • Auto and other^(b)	• Credit card loans	• Secured by real estate • Commercial and industrial • Other^(d)


(a)	Includes scored mortgage and home equity loans held in CCB and AWM, and scored mortgage loans held in Corporate.


(b)	Includes scored auto and business banking loans and overdrafts.


(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.


(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 of JPMorgan Chase’s 2019 Form 10-K for more information on SPEs.

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The following tables summarize the Firm’s loan balances by portfolio segment.



June 30, 2020	Consumer, excluding credit card		Credit card		Wholesale		Total^(a)
(in millions)	Consumer, excluding credit card		Credit card		Wholesale		Total^(a)
Retained	$	307,005	$	141,656	$	516,787	$	965,448	^(b)
Held-for-sale	1,912		—		5,235		7,147
At fair value	—		—		5,923		5,923
Total	$	308,917	$	141,656	$	527,945	$	978,518

December 31, 2019	Consumer, excluding credit card		Credit card		Wholesale		Total^(a)
(in millions)	Consumer, excluding credit card		Credit card		Wholesale		Total^(a)
Retained	$	294,999	$	168,924	$	481,678	$	945,601	^(b)
Held-for-sale	3,002		—		4,062		7,064
At fair value	—		—		7,104		7,104
Total	$	298,001	$	168,924	$	492,844	$	959,769


(a)	Excludes $2.9 billion of accrued interest receivables at both June 30, 2020, and December 31, 2019. The Firm wrote off accrued interest receivables of $34 million and $11 million for the three months ended June 30, 2020 and 2019, respectively, and $48 million and $23 million for the six months ended June 30, 2020 and 2019, respectively.


(b)	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 June 30, 2020, and December 31, 2019.

The following table provides information about the carrying value of retained loans purchased, sold and reclassified to held-for-sale during the periods indicated. Loans that were reclassified to held-for-sale and sold in a subsequent period are excluded from the sales line of this table.



	2020									2019
Three months ended June 30, (in millions)	Consumer, excluding credit card			Credit card		Wholesale		Total		Consumer, excluding credit card			Credit card		Wholesale		Total
Purchases	$	228	^(b)(c)	$	—	$	242	$	470	$	234	^(b)(c)	$	—	$	359	$	593
Sales	24			—		3,549		3,573		6,851			—		5,405		12,256
Retained loans reclassified to held-for-sale^(a)	679			—		282		961		948			—		924		1,872

	2020									2019
Six months ended June 30, (in millions)	Consumer, excluding credit card			Credit card		Wholesale		Total		Consumer, excluding credit card			Credit card		Wholesale		Total
Purchases	$	1,400	^(b)(c)	$	—	$	628	$	2,028	$	785	^(b)(c)	$	—	$	588	$	1,373
Sales	348			—		9,001		9,349		15,509			—		10,850		26,359
Retained loans reclassified to held-for-sale^(a)	827			—		751		1,578		5,061			—		1,425		6,486


(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 three months ended June 30, 2020 and 2019. 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.


(c)	Excludes purchases of retained loans sourced through the correspondent origination channel and underwritten in accordance with the Firm’s standards. Such purchases were $3.8 billion and $4.3 billion for the three months ended June 30, 2020 and 2019, respectively, and $7.4 billion and $7.5 billion for the six months ended June 30, 2020 and 2019, respectively.

Gains and losses on sales of loans

Net 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 noninterest revenue were $725 million and ($188) million for the three and six months ended June 30, 2020, respectively, of which $42 million and ($100) million, respectively, were related to loans. Gains and losses on sales of loans were not material for the three and six months ended June 30, 2019. 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.

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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 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 millions)	June 30, 2020		December 31, 2019
Residential real estate	$	235,381	$	243,317
Auto and other^(a)	71,624		51,682
Total retained loans	$	307,005	$	294,999


(a)	At June 30, 2020, included $19.9 billion of loans in Business Banking under the PPP.

Delinquency rates are the primary credit quality indicator for consumer loans. Loans that are more than 30 days past due provide an early warning of borrowers who may be experiencing financial difficulties and/or who may be unable or unwilling to repay the loan. As the loan continues to age, it becomes more clear whether the borrower is likely either unable or unwilling to pay. In the case of residential real estate loans, late-stage delinquencies (greater than 150 days past due) are a strong indicator of loans that will ultimately result in a foreclosure or similar liquidation transaction. In addition to delinquency rates, other credit quality indicators for consumer loans vary based on the class of loan, as follows:

•

For residential real estate loans, 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 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.

148

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)	June 30, 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			Total			Total
Loan delinquency^(a)(b)
Current	$	23,657		$	39,483		$	18,433		$	27,209		$	36,404		$	61,747		$	7,870		$	17,919		$	232,722		$	239,979
30–149 days past due	9			17			25			37			46			996			11			390			1,531			1,910
150 or more days past due	—			1			9			12			6			836			12			252			1,128			1,428
Total retained loans	$	23,666		$	39,501		$	18,467		$	27,258		$	36,456		$	63,579		$	7,893		$	18,561		$	235,381		$	243,317
% of 30+ days past due to total retained loans^(c)	0.04		%	0.05		%	0.18		%	0.18		%	0.14		%	2.82		%	0.29		%	3.46		%	1.11		%	1.35		%


(a)	Individual delinquency classifications include mortgage loans insured by U.S. government agencies as follows: current included $9 million and $17 million; 30–149 days past due included $15 million and $20 million; and 150 or more days past due included $24 million and $26 million at June 30, 2020, and December 31, 2019, respectively.


(b)	At June 30, 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 June 30, 2020, and December 31, 2019, residential real estate loans excluded mortgage loans insured by U.S. government agencies of $39 million and $46 million, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.

Approximately 34% of the total revolving loans are senior lien loans; the remaining balance are junior lien loans. The lien position the Firm holds is considered in the Firm’s allowance for credit losses. Revolving loans that have been converted to term loans have higher delinquency rates than those 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 options available for revolving loans within the revolving period.

149

Nonaccrual loans and other credit quality indicators

The following table provides information on nonaccrual and other credit quality indicators for retained residential real estate loans.



(in millions, except weighted-average data)	June 30, 2020			December 31, 2019
Nonaccrual loans^(a)(b)(c)(d)	$	4,106		$	2,780
90 or more days past due and government guaranteed^(e)	32			38

Current estimated LTV ratios^(f)(g)
Greater than 125% and refreshed FICO scores:
Equal to or greater than 660	$	19		$	31
Less than 660	26			38
101% to 125% and refreshed FICO scores:
Equal to or greater than 660	134			134
Less than 660	115			132
80% to 100% and refreshed FICO scores:
Equal to or greater than 660	5,175			5,953
Less than 660	698			764
Less than 80% and refreshed FICO scores:
Equal to or greater than 660	213,412			219,469
Less than 660	13,869			14,681
No FICO/LTV available	1,885			2,052
U.S. government-guaranteed	48			63
Total retained loans	$	235,381		$	243,317

Weighted average LTV ratio^(f)(h)	55		%	55		%
Weighted average FICO^(g)(h)	761			758

Geographic region⁽ⁱ⁾
California	$	78,422		$	82,147
New York	31,944			31,996
Illinois	14,473			15,587
Texas	14,289			14,474
Florida	13,788			13,668
Washington	8,592			8,990
Colorado	8,307			8,447
New Jersey	7,547			7,752
Massachusetts	5,942			6,210
Arizona	5,037			5,171
All other^(j)	47,040			48,875
Total retained loans	$	235,381		$	243,317

(a)

Includes collateral-dependent residential real estate loans that are charged off to the fair value of the underlying collateral less cost 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 June 30, 2020, approximately 7% of Chapter 7 residential real estate loans were 30 days or more past due, respectively.


(b)	At June 30, 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.


(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 off to the fair value of their underlying collateral less costs to sell. If the value of the underlying collateral has subsequently improved, the related allowance may be negative.


(d)	The related interest income on nonaccrual loans recorded on a cash basis was $37 million and $42 million and $80 million and $84 million for the three and six months ended June 30, 2020 and 2019, respectively.

(e)

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 is guaranteed at a specified reimbursement rate subject to meeting agreed-upon servicing guidelines. At June 30, 2020, and December 31, 2019, these balances included $32 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 no loans that were not guaranteed by U.S. government agencies that are 90 or more days past due and still accruing interest at June 30, 2020, and December 31, 2019.

(f)

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. Current estimated combined LTV for junior lien home equity loans considers all available lien positions, as well as unused lines, related to the property.


(g)	Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis.


(h)	Excludes loans with no FICO and/or LTV data available.


(i)	The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at June 30, 2020.


(j)	At June 30, 2020, and December 31, 2019, included mortgage loans insured by U.S. government agencies of $48 million and $63 million, respectively. These amounts have been excluded from the geographic regions presented based upon the government guarantee.

150

Loan modifications

Modifications of residential real estate 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. The carrying value of new TDRs was $196 million and $124 million for the three months ended June 30, 2020 and 2019, respectively, and $338 million and $274 million for the six months ended June 30, 2020 and 2019, respectively. There were no additional commitments to lend to borrowers whose residential real estate loans have been modified in TDRs.

Nature and extent of modifications

The Firm’s proprietary modification programs as well as 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 delays 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 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 and loans with short-term or other insignificant modifications that are not considered concessions.



	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Number of loans approved for a trial modification	849		1,283		2,845		3,225
Number of loans permanently modified	2,104		1,244		3,585		2,794
Concession granted:^(a)
Interest rate reduction	41	%	68	%	56	%	73	%
Term or payment extension	45		80		60		74
Principal and/or interest deferred	6		16		8		14
Principal forgiveness	2		4		3		5
Other^(b)	72		54		65		57


(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 and payment delays that meet the definition of a TDR for the three and six months ended June 30, 2020 and 2019.

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 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 do 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.



(in millions, except weighted-average data)	Three months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019
Weighted-average interest rate of loans with interest rate reductions – before TDR	5.00		%	5.76		%	5.13		%	5.86		%
Weighted-average interest rate of loans with interest rate reductions – after TDR	3.36			4.14			3.42			4.06
Weighted-average remaining contractual term (in years) of loans with term or payment extensions – before TDR	21			19			21			20
Weighted-average remaining contractual term (in years) of loans with term or payment extensions – after TDR	39			39			39			39
Charge-offs recognized upon permanent modification	$	2		$	1		$	2		$	1
Principal deferred	4			7			9			11
Principal forgiven	1			2			3			4
Balance of loans that redefaulted within one year of permanent modification^(a)	$	38		$	39		$	108		$	87

(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 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.

151

At June 30, 2020, the weighted-average estimated remaining lives of residential real estate loans permanently modified in TDRs were 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 June 30, 2020, and December 31, 2019, the Firm had residential real estate loans, excluding those insured by U.S. government agencies, with a carrying value of $987 million and $1.2 billion, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.

Auto and other

The following table provides information on delinquency, which is the primary credit quality indicator for retained auto and other consumer loans.



	June 30, 2020																												December 31, 2019
(in millions, except ratios)	Term Loans by origination year																			Revolving loans
(in millions, except ratios)	2020				2019			2018			2017			2016			Prior to 2016			Within the revolving period			Converted to term loans			Total			Total
Loan delinquency^(a)
Current	$	31,068		^(b)	$	16,012		$	9,744		$	6,516		$	3,438		$	1,540		$	2,776		$	186		$	71,280		$	51,005
30–119 days past due	46				84			64			41			37			26			16			7			321			667
120 or more days past due	—				1			2			1			1			1			10			7			23			10
Total retained loans	$	31,114			$	16,097		$	9,810		$	6,558		$	3,476		$	1,567		$	2,802		$	200		$	71,624		$	51,682
% of 30+ days past due to total retained loans	0.15		%		0.53		%	0.67		%	0.64		%	1.09		%	1.72		%	0.93		%	7.00		%	0.48		%	1.31		%


(a)	At June 30, 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)	At June 30, 2020, included $19.9 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 government guaranteed 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
	Jun 30, 2020		Dec 31, 2019
Nonaccrual loans^(a)(b)(c)	140		146

Geographic region^(d)
California	$	11,563	$	7,795
New York	8,658		3,706
Texas	7,639		5,457
Florida	4,295		3,025
Illinois	3,711		2,443
New Jersey	2,529		1,798
Arizona	2,312		1,347
Ohio	2,094		1,490
Colorado	1,750		1,247
Michigan	1,728		892
All other	25,345		22,482
Total retained loans	$	71,624	$	51,682


(a)	There were no loans that were 90 or more days past due and still accruing interest at June 30, 2020, and December 31, 2019.


(b)	All nonaccrual auto and other consumer loans generally have an allowance.


(c)	Interest income on nonaccrual loans recognized on a cash basis was not material for the three and six months ended June 30, 2020 and 2019.


(d)	The geographic regions presented in this table are ordered based on the magnitude of the corresponding loan balances at June 30, 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. Loans with short-term or other insignificant modifications that are not considered concessions are not TDRs.

The impact of these modifications, as well as new TDRs, were not material to the Firm for the three and six months ended June 30, 2020 and 2019. Additional commitments to lend to borrowers whose loans have been modified in TDRs as of June 30, 2020 and December 31, 2019 were not material.

152

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 provides information on delinquency, which is the primary credit quality indicator for retained credit card loans.



(in millions, except ratios)	June 30, 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	$	137,953		$	1,285		$	139,238		$	165,767
30–89 days past due and still accruing	1,004			91			1,095			1,550
90 or more days past due and still accruing	1,277			46			1,323			1,607
Total retained loans	$	140,234		$	1,422		$	141,656		$	168,924
Loan delinquency ratios
% of 30+ days past due to total retained loans	1.63		%	9.63		%	1.71		%	1.87		%
% of 90+ days past due to total retained loans	0.91			3.23			0.93			0.95


(a)	At June 30, 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)	June 30, 2020			December 31, 2019
Geographic region^(a)
California	$	20,756		$	25,783
Texas	14,280			16,728
New York	11,907			14,544
Florida	9,389			10,830
Illinois	7,954			9,579
New Jersey	5,835			7,165
Ohio	4,615			5,406
Pennsylvania	4,420			5,245
Colorado	4,015			4,763
Michigan	3,546			4,164
All other	54,939			64,717
Total retained loans	$	141,656		$	168,924
Percentage of portfolio based on carrying value with estimated refreshed FICO scores
Equal to or greater than 660	83.3		%	84.0		%
Less than 660	16.0			15.4
No FICO available	0.7			0.6


(a)	The geographic regions presented in the table are ordered based on the magnitude of the corresponding loan balances at June 30, 2020.

153

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. The Firm grants concessions for most of the credit card loans under long-term 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.

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.



(in millions, except weighted-average data)	Three months ended June 30,						Six months ended June 30,
(in millions, except weighted-average data)	2020			2019			2020			2019
Balance of new TDRs^(a)	$	151		$	226		$	428		$	475
Weighted-average interest rate of loans – before TDR	17.93		%	19.38		%	18.50		%	19.25		%
Weighted-average interest rate of loans – after TDR	5.16			4.71			4.42			4.88
Balance of loans that redefaulted within one year of modification^(b)	$	25		$	32		$	61		$	66


(a)	Represents the outstanding balance prior to modification.


(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 two consecutive contractual payments. Defaulted modified credit card loans remain in the modification program and continue to be charged off in accordance with the Firm’s standard charge-off policy.

154

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 internal risk ratings generally 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, however the quantitative characteristics (e.g., PD and LGD) may differ as they reflect internal historical experiences and assumptions. The Firm considers internal ratings equivalent to BBB-/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 and criticized, 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 PD 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.

155

The following tables provide information on internal risk rating, which is the primary credit quality indicator for retained wholesale loans.



	Secured by real estate						Commercial and industrial							Other^(b)						Total retained loans
(in millions, except ratios)	Jun 30, 2020			Dec 31, 2019			Jun 30, 2020				Dec 31, 2019			Jun 30, 2020			Dec 31, 2019			Jun 30, 2020				Dec 31, 2019
Loans by risk ratings
Investment-grade	$	94,986		$	96,611		$	81,008		^(a)	$	80,489		$	195,825		$	186,344		$	371,819		^(a)	$	363,444
Noninvestment-grade:
Noncriticized	25,451			22,493			70,827				60,437			29,019			27,591			125,297				110,521
Criticized performing	1,763			1,131			13,274				4,399			1,211			1,126			16,248				6,656
Criticized nonaccrual	436			183			2,016				844			971			30			3,423				1,057
Total noninvestment- grade	27,650			23,807			86,117				65,680			$	31,201		28,747			144,968				118,234
Total retained loans	$	122,636		$	120,418		$	167,125			$	146,169		$	227,026		$	215,091		$	516,787			$	481,678
% of investment-grade to total retained loans	77.45		%	80.23		%	48.47		%		55.07		%	86.26		%	86.63		%	71.95		%		75.45		%
% of total criticized to total retained loans	1.79			1.09			9.15				3.59			0.96			0.54			3.81				1.60
% of criticized nonaccrual to total retained loans	0.36			0.15			1.21				0.58			0.43			0.01			0.66				0.22



	Secured by real estate
(in millions)	June 30, 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	$	10,876	$	20,927	$	13,665	$	13,091	$	15,492	$	19,724	$	1,211	$	—	$	94,986	$	96,611
Noninvestment-grade	1,155		3,539		4,096		2,971		2,859		12,349		680		1		27,650		23,807
Total retained loans	$	12,031	$	24,466	$	17,761	$	16,062	$	18,351	$	32,073	$	1,891	$	1	$	122,636	$	120,418



	Commercial and industrial
(in millions)	June 30, 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	$	19,971	^(a)	$	8,997	$	4,152	$	2,993	$	1,216	$	1,376	$	42,302	$	1	$	81,008	$	80,489
Noninvestment-grade	8,837			11,245		6,978		3,277		965		3,081		51,620		114		86,117		65,680
Total retained loans	$	28,808		$	20,242	$	11,130	$	6,270	$	2,181	$	4,457	$	93,922	$	115	$	167,125	$	146,169



	Other^(b)
(in millions)	June 30, 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	$	20,953	$	13,365	$	9,021	$	6,928	$	4,239	$	15,143	$	125,880	$	296	$	195,825	$	186,344
Noninvestment-grade	5,462		2,848		2,455		475		194		893		18,626		248		31,201		28,747
Total retained loans	$	26,415	$	16,213	$	11,476	$	7,403	$	4,433	$	16,036	$	144,506	$	544	$	227,026	$	215,091


(a)	At June 30, 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. 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 government guaranteed 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 of JPMorgan Chase’s 2019 Form 10-K for more information on SPEs.

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The following table presents additional information on retained loans secured by real estate, which consists of loans secured wholly or substantially by a lien or liens on real property at origination.



(in millions, except ratios)	Multifamily						Other commercial						Total retained loans secured by real estate
(in millions, except ratios)	Jun 30, 2020			Dec 31, 2019			Jun 30, 2020			Dec 31, 2019			Jun 30, 2020			Dec 31, 2019
Retained loans secured by real estate	$	75,074		$	73,840		$	47,562		$	46,578		$	122,636		$	120,418
Criticized	570			340			1,629			974			2,199			1,314
% of total criticized to total retained loans secured by real estate	0.76		%	0.46		%	3.43		%	2.09		%	1.79		%	1.09		%
Criticized nonaccrual	$	52		$	28		$	384		$	155		$	436		$	183
% of criticized nonaccrual loans to total retained loans secured by real estate	0.07		%	0.04		%	0.81		%	0.33		%	0.36		%	0.15		%

Geographic distribution and delinquency

The following table provides information on the geographic distribution and delinquency for retained wholesale loans.



	Secured by real estate				Commercial and industrial				Other				Total retained loans
(in millions, except ratios)	Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019
Loans by geographic distribution^(a)
Total U.S.	$	120,016	$	117,836	$	127,251	$	111,954	$	164,931	$	150,512	$	412,198	$	380,302
Total non-U.S.	2,620		2,582		39,874		34,215		62,095		64,579		104,589		101,376
Total retained loans	$	122,636	$	120,418	$	167,125	$	146,169	$	227,026	$	215,091	$	516,787	$	481,678
Loan delinquency^(b)
Current and less than 30 days past due and still accruing	$	122,038	$	120,119	$	164,503	$	144,839	$	225,181	$	214,641	$	511,722	$	479,599
30–89 days past due and still accruing	140		115		559		449		807		415		1,506		979
90 or more days past due and still accruing^(c)	22		1		47		37		67		5		136		43
Criticized nonaccrual	436		183		2,016		844		971		30		3,423		1,057
Total retained loans	$	122,636	$	120,418	$	167,125	$	146,169	$	227,026	$	215,091	$	516,787	$	481,678


(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 that were 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.



(in millions)	Secured by real estate				Commercial and industrial				Other				Total retained loans
(in millions)	Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019
Nonaccrual loans^(a)
With an allowance	$	348	$	169	$	1,842	$	688	$	871	$	28	$	3,061	$	885
Without an allowance^(b)	88		14		174		156		100		2		362		172
Total nonaccrual loans^(c)	$	436	$	183	$	2,016	$	844	$	971	$	30	$	3,423	$	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 June 30, 2020, predominantly all of these loans were considered performing.


(b)	When 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 three and six months ended June 30, 2020 and 2019.

Loan modifications

Certain loan modifications are considered to be TDRs as they provide various concessions to borrowers who are experiencing financial difficulty. Loans with short-term or other insignificant modifications that are not considered concessions are not TDRs. The impact of these modifications, as well as new TDRs, were not material to the Firm for the three and six months ended June 30, 2020 and 2019.

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Note 13 – Allowance for credit losses

JPMorgan Chase’s allowance for credit losses comprises:


•	the allowance for loan losses, which covers the Firm’s retained loan portfolios (scored and risk-rated) and is presented separately on the balance sheet,


•	the allowance for lending-related commitments, which is presented on the balance sheet 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 balance sheet.

The income statement effect of all changes in the 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. At least quarterly, the allowance for credit losses is reviewed by the CRO, the CFO and the Controller of the Firm. Subsequent evaluations of credit 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 determine its allowance for loan losses and its allowance for lending-related commitments are described in the following paragraphs. Refer to Note 10 for a description of the policies used to determine the allowance for credit losses on investment 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 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 included 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 them 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 judgement. 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.


•	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 covers consumer loans, performing risk-rated loans and certain lending-related commitments.

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 portfolio-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 over an instrument’s expected life and is estimated by applying credit loss factors to the Firm’s estimated exposure at default. The credit loss factors incorporate the probability of borrower default as well as loss severity in the event of default. They are derived using a weighted average of five internally developed macroeconomic scenarios over an eight-quarter forecast period, followed by a single year straight-line interpolation to revert to long run historical information for periods beyond the eight-quarter forecast period. The five

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macroeconomic scenarios consist of a 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 creates additional challenges in the use of modeled credit loss estimates and increases the reliance on management judgment. During the second quarter, certain MEVs were well outside the range of historical experience on which the Firm’s models had been calibrated and therefore adjustments were required to appropriately address these economic circumstances. For example, while forecasted U.S. employment rates in certain of the Firm’s scenarios are higher than historical experience, such rates are developed on a reported basis and do not reflect the significant mitigating impact of current government unemployment benefits and other stimulus programs. Consequently, management considered such mitigating impact to arrive at an effective unemployment rate, which informed modeled credit loss estimates, particularly in the consumer portfolio. In addition, for the wholesale portfolio, management used the historical relationship between credit spreads and portfolio default rates to inform the adjustment of the Firm’s modeled loss estimates.

The quantitative calculation is further adjusted to take into consideration model imprecision, emerging risk assessments, trends and other subjective factors that are not yet reflected in the calculation. These adjustments are accomplished in part by analyzing the historical loss experience, including during stressed periods, for each major product or model. Management applies judgement in making this adjustment, including taking into account uncertainties associated with the economic and political conditions, quality of underwriting standards, borrower behavior, credit 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.

In the second quarter of 2020, these qualitative adjustments also consider additional weight placed on the relative and extreme adverse scenarios, as a result of increased uncertainty related to the COVID-19 pandemic.

The application of different inputs into the quantitative calculation, and the assumptions used by management to adjust the quantitative 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 loan losses and the allowance for lending-related commitments.

Asset-specific component

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 in the wholesale portfolio segment are generally evaluated individually, while smaller loans (both scored and risk-rated) are aggregated for evaluation using factors relevant for the respective class of assets.

The Firm generally measures the asset-specific allowance as the difference between the amortized 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 generally recognized as an adjustment to the allowance for loan losses. For collateral-dependent loans, the fair value of collateral less estimated costs to sell is used to determine the charge-off amount for declines in value (to reduce the amortized cost of the loan to the fair value of collateral) or the amount of negative allowance that should be recognized (for recoveries of prior charge-offs associated with improvements in the fair value of collateral).

The asset-specific component of the allowance for loan losses that have been or are expected to be modified in TDRs incorporates the effect of the modification on the loan’s expected cash flows (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 housing 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 delinquencies 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.

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. All of these estimates and assumptions require significant management judgment and certain assumptions are highly subjective.

159

Allowance for credit losses and related information

The table below summarizes information about the allowances for loan losses and lending-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.



	2020^(e)												2019
Six months ended June 30, (in millions)	Consumer, excluding credit card			Credit card			Wholesale			Total			Consumer, excluding credit card			Credit card			Wholesale			Total
Allowance for loan losses
Beginning balance at January 1,	$	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	425			2,863			491			3,779			445			2,725			176			3,346
Gross recoveries collected	(348		)	(372		)	(30		)	(750		)	(270		)	(283		)	(29		)	(582		)
Net charge-offs	77			2,491			461			3,029			175			2,442			147			2,764
Write-offs of PCI loans^(a)	NA			NA			NA			NA			89			—			—			89
Provision for loan losses	2,115			9,091			6,619			17,825			(246		)	2,642			173			2,569
Other	(1		)	—			2			1			—			(1		)	6			5
Ending balance at June 30,	$	4,872		$	17,800		$	9,420		$	32,092		$	2,924		$	5,383		$	4,859		$	13,166

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	95			—			825			920			—			—			75			75
Other	1			—			(1		)	—			—			—			(1		)	(1		)
Ending balance at June 30,	$	241		$	—		$	1,968		$	2,209		$	12		$	—		$	1,117		$	1,129

Total allowance for credit losses	$	5,113		$	17,800		$	11,388		$	34,301		$	2,936		$	5,383		$	5,976		$	14,295

Allowance for loan losses by impairment methodology
Asset-specific^(b)	$	263		$	642		$	757		$	1,662		$	87		$	472		$	346		$	905
Portfolio-based	4,609			17,158			8,663			30,430			1,538			4,911			4,513			10,962
PCI	NA			NA			NA			NA			1,299			—			—			1,299
Total allowance for loan losses	$	4,872		$	17,800		$	9,420		$	32,092		$	2,924		$	5,383		$	4,859		$	13,166

Loans by impairment methodology
Asset-specific^(b)	$	16,749		$	1,422		$	3,849		$	22,020		$	6,374		$	1,388		$	1,483		$	9,245
Portfolio-based	290,256			140,234			512,938			943,428			286,059			156,180			474,002			916,241
PCI	NA			NA			NA			NA			22,242			—			—			22,242
Total retained loans	$	307,005		$	141,656		$	516,787		$	965,448		$	314,675		$	157,568		$	475,485		$	947,728

Collateral-dependent loans
Net charge-offs	$	56		$	—		$	22		$	78		$	14		$	—		$	13		$	27
Loans measured at fair value of collateral less cost to sell	3,505			—			166			3,671			2,093			—			88			2,181

Allowance for lending-related commitments by impairment methodology
Asset-specific	$	—		$	—		$	115		$	115		$	—		$	—		$	136		$	136
Portfolio-based	241			—			1,853			2,094			12			—			981			993
Total allowance for lending-related commitments^(c)	$	241		$	—		$	1,968		$	2,209		$	12		$	—		$	1,117		$	1,129

Lending-related commitments by impairment methodology
Asset-specific	$	—		$	—		$	762		$	762		$	—		$	—		$	465		$	465
Portfolio-based^(d)	35,417			—			404,731			440,148			30,827			—			403,302			434,129
Total lending-related commitments	$	35,417		$	—		$	405,493		$	440,910		$	30,827		$	—		$	403,767		$	434,594

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(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 June 30, 2020 and 2019, lending-related commitments excluded $9.9 billion and $9.3 billion, respectively, for the consumer, excluding credit card portfolio segment; and $673.8 billion and $634.0 billion, respectively, for the credit card 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 $23 million and a provision for credit losses of $13 million as of and for the six months ended June 30, 2020.

Discussion of current period changes

In the first and second quarters of 2020, the Firm’s central case assumptions reflected forecasted U.S. unemployment rates and cumulative changes in U.S. real GDP as follows:



	2020		2021
	4Q		2Q		4Q
Central case assumptions

U.S. unemployment rate^(a)
1Q 2020	6.6	%	5.5	%	4.6	%
2Q 2020	10.9		9.0		7.7

U.S. real GDP - cumulative change from December 31, 2019
1Q 2020	(5.4	)	(2.3	)	0.3
2Q 2020	(6.2	)	(4.0	)	(3.0	)


(a)	Reflects quarterly average of forecasted reported U.S. unemployment rate.

Subsequent changes to this forecast and related estimates will be reflected in the provision for credit losses in future periods.

161

Note 14 – Variable interest entities

Refer to Note 1 of JPMorgan Chase’s 2019 Form 10-K for a further description of JPMorgan Chase’s accounting policies regarding consolidation of VIEs.

The following table summarizes the most significant types of Firm-sponsored VIEs by business segment.



Line of Business	Transaction Type	Activity	Form 10-Q page reference
CCB	Credit card securitization trusts	Securitization of originated credit card receivables	162
	Mortgage securitization trusts	Servicing and securitization of both originated and purchased residential mortgages	162-164
CIB	Mortgage and other securitization trusts	Securitization of both originated and purchased residential and commercial mortgages, and other consumer loans	162-164
	Multi-seller conduits	Assist clients in accessing the financial markets in a cost-efficient manner and structures transactions to meet investor needs	164
	Municipal bond vehicles	Financing of municipal bond investments	164

The Firm also invests in and provides financing and other services to VIEs sponsored by third parties. Refer to pages 165–166 of this Note for more information on the VIEs sponsored by third parties.

Significant Firm-sponsored VIEs

Credit card securitizations

Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for a more detailed discussion of JPMorgan Chase’s involvement with credit card securitizations.

As a result of the Firm’s continuing involvement, the Firm is considered to be the primary beneficiary of its Firm-sponsored credit card securitization trust, the Chase Issuance Trust. Refer to the table on page 165 of this Note for further information on consolidated VIE assets and liabilities.

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 as the respective business involved, the Firm may act as the servicer of the loans and/or retain certain beneficial interests in the securitization trusts.

Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for a detailed discussion of the Firm’s involvement with Firm-sponsored mortgage and other securitization trusts, as well as the accounting treatment relating to such trusts.

162

The following table presents the total unpaid principal amount of assets held in 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 166 of this Note for further information regarding the Firm’s cash flows associated with and interests retained in nonconsolidated VIEs, and pages 166-167 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)
June 30, 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	$	55,813	$	2,359	$	44,492	$	597	$	1,031	$	—	$	1,628
Subprime	13,817		49		12,859		9		—		—		9
Commercial and other^(b)	114,006		—		94,321		918		1,952		279		3,149
Total	$	183,636	$	2,408	$	151,672	$	1,524	$	2,983	$	279	$	4,786



	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	$	—	$	1,160
Subprime	14,661		—		13,490		7		—		—		7
Commercial and other^(b)	111,903		—		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 166-167 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.

(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 $201 million and $16 million, respectively, at June 30, 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 June 30, 2020, and December 31, 2019, 76% 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 $1.6 billion and $1.1 billion of investment-grade retained interests, and $62 million and $72 million of noninvestment-grade retained interests at June 30, 2020, and December 31, 2019, respectively. The retained interests in commercial and other securitization trusts consisted of $2.5 billion and $1.2 billion of investment-grade retained interests, and $650 million and $575 million of noninvestment-grade retained interests at June 30, 2020, and December 31, 2019, respectively.

163

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. Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for a more detailed description of the Firm’s involvement with residential mortgage securitizations. Refer to the table on page 165 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. Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for a more detailed description of the Firm’s involvement with commercial mortgage and other consumer securitizations. Refer to the table on page 165 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

Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for a more detailed description of JPMorgan Chase’s participation in certain re-securitization transactions.

The following table presents the principal amount of securities transferred to re-securitization VIEs.



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Transfers of securities to VIEs
U.S. GSEs and government agencies	$	12,505	$	2,564	$	15,222	$	7,067

The Firm did not transfer any private label securities to re-securitization VIEs during the three and six months ended June 30, 2020 and 2019, respectively, and retained interests in any such Firm-sponsored VIEs as of June 30, 2020 and December 31, 2019 were immaterial.

The following table presents information on nonconsolidated re-securitization VIEs.



	Nonconsolidated re-securitization VIEs
(in millions)	June 30, 2020		December 31, 2019
U.S. GSEs and government agencies
Interest in VIEs	$	4,189	$	2,928

As of June 30, 2020, and December 31, 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

Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for a more detailed description of JPMorgan Chase’s principal involvement with Firm-administered multi-seller conduits.

In the normal course of business, JPMorgan Chase makes markets in and invests in commercial paper issued by the Firm-administered multi-seller conduits. The Firm held $11.5 billion and $16.3 billion of the commercial paper issued by the Firm-administered multi-seller conduits at June 30, 2020, and December 31, 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-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 $8.6 billion and $8.9 billion at June 30, 2020, and December 31, 2019, respectively, and are reported as off-balance sheet lending-related commitments in other unfunded commitments to extend credit. Refer to Note 23 for more information on off-balance sheet lending-related 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. TOB transactions are known as customer TOB trusts and non-customer TOB trusts. Customer TOB trusts are sponsored by a third party, refer to pages 165-166 of this Note for further information.

The Firm serves as sponsor for all non-customer TOB transactions. Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for a more detailed description of JPMorgan Chase’s Municipal bond vehicles.

164

Consolidated VIE assets and liabilities

The following table presents information on assets and liabilities related to VIEs consolidated by the Firm as of June 30, 2020, and December 31, 2019.



	Assets								Liabilities
June 30, 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	$	—	$	12,208	$	859	$	13,067	$	5,790	$	3	$	5,793
Firm-administered multi-seller conduits	—		23,868		331		24,199		12,666		30		12,696
Municipal bond vehicles	2,206		—		3		2,209		2,126		1		2,127
Mortgage securitization entities^(a)	57		2,308		97		2,462		245		118		363
Other	2		—		279		281		1		91		92
Total	$	2,265	$	38,384	$	1,569	$	42,218	$	20,828	$	243	$	21,071

	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	$	—	$	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		—		4		1,907		1,881		3		1,884
Mortgage securitization entities^(a)	66		2,762		64		2,892		276		130		406
Other	663		—		192		855		—		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. Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for conduits program-wide credit enhancements. Included in beneficial interests in VIE assets are long-term beneficial interests of $6.0 billion and $6.7 billion at June 30, 2020, and December 31, 2019, respectively.


(e)	Includes liabilities classified as accounts payable and other liabilities on the Consolidated balance sheets.

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 own and operate affordable housing, 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 $21.0 billion and $19.1 billion, of which $6.1 billion and $5.5 billion was unfunded at June 30, 2020 and December 31, 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 25 of JPMorgan Chase’s 2019 Form 10-K for further information on affordable housing tax credits. Refer to Note 23 of this Form 10-Q for more information on off-balance sheet lending-related commitments.

165

Customer municipal bond vehicles (TOB trusts)

The Firm may provide various services to customer TOB trusts, including remarketing agent, liquidity or tender option provider. In certain customer 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 customer 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 customer TOB trusts at June 30, 2020 and December 31, 2019 was $6.1 billion and $5.5 billion, respectively. The fair value of assets held by such VIEs at June 30, 2020 and December 31, 2019, was $9.7 billion and $8.6 billion, respectively. Refer to Note 23 for more information on off-balance sheet lending-related commitments.

Loan securitizations

The Firm has securitized and sold a variety of loans, including residential mortgage, credit card, and commercial mortgage. Refer to Note 14 of JPMorgan Chase’s 2019 Form 10-K for a further description of the Firm’s accounting policies regarding securitizations.

Securitization activity

The following table provides information related to the Firm’s securitization activities for the three and six months ended June 30, 2020 and 2019, related to assets held in Firm-sponsored securitization entities that were not consolidated by the Firm, and where sale accounting was achieved at the time of the securitization.



	Three months ended June 30,								Six months ended June 30,
	2020				2019				2020				2019
(in millions)	Residential mortgage^(d)		Commercial and other^(e)		Residential mortgage^(d)		Commercial and other^(e)		Residential mortgage^(d)		Commercial and other^(e)		Residential mortgage^(d)		Commercial and other^(e)
Principal securitized	$	534	$	861	$	2,125	$	1,974	$	3,598	$	4,049	$	3,907	$	2,738
All cash flows during the period:^(a)
Proceeds received from loan sales as financial instruments^(b)(c)	$	554	$	912	$	2,188	$	2,041	$	3,690	$	4,185	$	4,010	$	2,823
Servicing fees collected	49		—		73		1		111		—		150		1
Cash flows received on interests	214		31		114		98		331		60		199		149


(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)	Includes prime mortgages only. Excludes loan securitization activity related to U.S. GSEs and government agencies.


(e)	Includes commercial mortgage and other consumer loans.

Loans and excess MSRs sold to U.S. government-sponsored

enterprises and loans in securitization transactions pursuant to

Ginnie Mae guidelines

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. 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 23 of this Form 10-Q, and Note 28 of JPMorgan Chase’s 2019 Form 10-K for additional information about the Firm’s loan sales- and securitization-related indemnifications. Refer to Note 15 for additional information about the impact of the Firm’s sale of certain excess MSRs.

166

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.



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Carrying value of loans sold	$	17,447	$	23,138	$	42,382	$	38,317
Proceeds received from loan sales as cash	13		2		22		70
Proceeds from loan sales as securities^(a)(b)	17,274		22,823		41,937		37,660
Total proceeds received from loan sales^(c)	$	17,287	$	22,825	$	41,959	$	37,730
Gains/(losses) on loan sales^(d)(e)	$	2	$	104	$	6	$	153


(a)	Includes securities from U.S. GSEs and 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.


(c)	Excludes the value of MSRs retained upon the sale of loans.


(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 23, the Firm also has the option to repurchase delinquent loans that it services for

Ginnie Mae loan pools, as well as for other U.S. government agencies under certain arrangements. The Firm typically elects to repurchase delinquent loans from Ginnie Mae loan pools as it continues to service them and/or manage the foreclosure process in accordance with the applicable requirements, and such loans continue to be insured or guaranteed. When the Firm’s repurchase option becomes exercisable, such loans must be reported on the Consolidated balance sheets as a loan with a corresponding liability. Refer to Note 12 for additional information.

The following table presents loans the Firm repurchased or had an option to repurchase, real estate owned, and foreclosed government-guaranteed residential mortgage loans recognized on the Firm’s Consolidated balance sheets as of June 30, 2020 and December 31, 2019. Substantially all of these loans and real estate are insured or guaranteed by U.S. government agencies.


(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 private-label securitization entities, in which the Firm has continuing involvement as of June 30, 2020, and December 31, 2019.



									Net liquidation losses
	Securitized assets				90 days past due				Three months ended June 30,				Six months ended June 30,
(in millions)	Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019		2020		2019		2020		2019
Securitized loans
Residential mortgage:
Prime / Alt-A & option ARMs	$	44,492	$	48,734	$	2,725	$	2,449	$	76	$	171	$	175	$	328
Subprime	12,859		13,490		1,766		1,813		49		167		135		311
Commercial and other	94,321		80,878		401		187		1		24		11		165
Total loans securitized	$	151,672	$	143,102	$	4,892	$	4,449	$	126	$	362	$	321	$	804

167

Note 15 – Goodwill and Mortgage servicing rights

Refer to Note 15 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the accounting policies related to goodwill and mortgage servicing rights.

Goodwill

The following table presents goodwill attributed to the business segments.



(in millions)	June 30, 2020		December 31, 2019
Consumer & Community Banking^(a)	$	30,082	$	30,082
Corporate & Investment Bank^(a)	7,889		7,901
Commercial Banking	2,985		2,982
Asset & Wealth Management	6,855		6,858
Total goodwill	$	47,811	$	47,823


(a)	In the first quarter of 2020, the Merchant Services business was realigned from CCB to CIB, including the associated Goodwill of $959 million. Prior-period amounts have been revised to conform with the current presentation.

The following table presents changes in the carrying amount of goodwill.



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020			2019
Balance at beginning of period	$	47,800	$	47,474	$	47,823		$	47,471
Changes during the period from:
Other^(a)	11		3		(12		)	6
Balance at June 30,	$	47,811	$	47,477	$	47,811		$	47,477


(a)	Primarily relates to foreign currency adjustments.

Goodwill impairment testing

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. Refer to Note 15 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of the primary method used to estimate the fair value of the reporting units and the assumptions used in the goodwill impairment test.

Goodwill 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.

Unanticipated 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 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.

As of June 30, 2020, the Firm reviewed current economic conditions, including the potential impacts of the COVID-19 pandemic on business performance, estimated market cost of equity, and also reviewed actuals and projections of business performance for all its reporting units. The Firm has concluded that the goodwill allocated to its reporting units was not impaired as of June 30, 2020, or December 31, 2019, nor was goodwill written off due to impairment during the six months ended June 30, 2020 or 2019.

168

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. Refer to Notes 2 and 15 of JPMorgan Chase’s 2019 Form 10-K for a further description of the MSR asset, interest rate risk management, and the valuation of MSRs.

The following table summarizes MSR activity for the three and six months ended June 30, 2020 and 2019.



	As of or for the three months ended June 30,							As of or for the six months ended June 30,
(in millions, except where otherwise noted)	2020			2019				2020			2019
Fair value at beginning of period	$	3,267		$	5,957			$	4,699		$	6,130
MSR activity:
Originations of MSRs	164			424				435			756
Purchase of MSRs	5			2				7			106
Disposition of MSRs^(a)	2			(217		)		(73		)	(328		)
Net additions/(dispositions)	171			209				369			534

Changes due to collection/realization of expected cash flows	(247		)	(247		)		(495		)	(446		)

Changes in valuation due to inputs and assumptions:
Changes due to market interest rates and other^(b)	(144		)	(540		)		(1,514		)	(841		)
Changes in valuation due to other inputs and assumptions:
Projected cash flows (e.g., cost to service)	3			(350		)	^(e)	2			(350		)	^(e)
Discount rates	—			153				—			153
Prepayment model changes and other^(c)	30			(89		)		19			(87		)
Total changes in valuation due to other inputs and assumptions	33			(286		)		21			(284		)
Total changes in valuation due to inputs and assumptions	(111		)	(826		)		(1,493		)	(1,125		)
Fair value at June 30	$	3,080		$	5,093			$	3,080		$	5,093

Changes in unrealized gains/(losses) included in income related to MSRs held at June 30	$	(111	)	$	(826	)		$	(1,493	)	$	(1,125	)
Contractual service fees, late fees and other ancillary fees included in income	329			437				693			857
Third-party mortgage loans serviced at June 30 (in billions)	483			527				483			527
Servicer advances, net of an allowance for uncollectible amounts, at June 30 (in billions)^(d)	1.7			2.2				1.7			2.2


(a)	Includes excess MSRs transferred to agency-sponsored trusts in exchange for stripped mortgage backed securities (“SMBS”). In each transaction, a portion of the SMBS was acquired by third parties at the transaction date; the Firm acquired the remaining balance of those SMBS as trading securities.


(b)	Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments.


(c)	Represents changes in prepayments other than those attributable to changes in market interest rates.

(d)

Represents amounts the Firm pays as the servicer (e.g., scheduled principal and interest, taxes and insurance), which will generally be reimbursed within a short period of time after the advance from future cash flows from the trust or the underlying loans. The Firm’s credit risk associated with these servicer advances is minimal because reimbursement of the advances is typically senior to all cash payments to investors. In addition, the Firm maintains the right to stop payment to investors if the collateral is insufficient to cover the advance. However, certain of these servicer advances may not be recoverable if they were not made in accordance with applicable rules and agreements.


(e)	The decrease in projected cash flows was largely related to default servicing assumption updates.

169

The following table presents the components of mortgage fees and related income (including the impact of MSR risk management activities) for the three and six months ended June 30, 2020 and 2019.



	Three months ended June 30,						Six months ended June 30,
(in millions)	2020			2019			2020			2019
Net production revenue	$	742		$	353		$	1,061		$	553

Net mortgage servicing revenue:
Operating revenue:
Loan servicing revenue	343			417			682			821
Changes in MSR asset fair value due to collection/realization of expected cash flows	(247		)	(247		)	(495		)	(446		)
Total operating revenue	96			170			187			375
Risk management:
Changes in MSR asset fair value due to market interest rates and other^(a)	(144		)	(540		)	(1,514		)	(841		)
Other changes in MSR asset fair value due to other inputs and assumptions in model^(b)	33			(286		)	21			(284		)
Changes in derivative fair value and other	190			582			1,482			872
Total risk management	79			(244		)	(11		)	(253		)
Total net mortgage servicing revenue	175			(74		)	176			122
Mortgage fees and related income	$	917		$	279		$	1,237		$	675


(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 June 30, 2020, and December 31, 2019, and outlines hypothetical sensitivities of those fair values to immediate adverse changes in those assumptions, as defined below.



(in millions, except rates)	Jun 30, 2020			Dec 31, 2019
Weighted-average prepayment speed assumption (constant prepayment rate)	19.08		%	11.67		%
Impact on fair value of 10% adverse change	$	(207	)	$	(200	)
Impact on fair value of 20% adverse change	(391		)	(384		)
Weighted-average option adjusted spread^(a)	9.10		%	7.93		%
Impact on fair value of a 100 basis point adverse change	$	(100	)	$	(169	)
Impact on fair value of a 200 basis point adverse change	(193		)	(326		)


(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.

170

Note 16 – Deposits

Refer to Note 17 of JPMorgan Chase’s 2019 Form 10-K for further information on deposits.

At June 30, 2020, and December 31, 2019, noninterest-bearing and interest-bearing deposits were as follows.



(in millions)	June 30, 2020		December 31, 2019
U.S. offices
Noninterest-bearing (included $15,512 and $22,637 at fair value)^(a)	$	529,729	$	395,667
Interest-bearing (included $2,808 and $2,534 at fair value)^(a)	1,061,093		876,156
Total deposits in U.S. offices	1,590,822		1,271,823
Non-U.S. offices
Noninterest-bearing (included $1,673 and $1,980 at fair value)^(a)	22,752		20,087
Interest-bearing (included $1,519 and $1,438 at fair value)^(a)	317,455		270,521
Total deposits in non-U.S. offices	340,207		290,608
Total deposits	$	1,931,029	$	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 information.

Note 17 – Leases

Refer to Note 18 of JPMorgan Chase’s 2019 Form 10-K for a further discussion on leases.

Firm as lessee

At June 30, 2020, JPMorgan Chase and its subsidiaries were obligated under a number of noncancellable leases, predominantly operating leases for premises and equipment used primarily for business purposes.

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 following table provides information related to the Firm’s operating leases:



(in millions)	June 30, 2020		December 31, 2019
Right-of-use assets	$	8,166	$	8,190
Lease liabilities	8,426		8,505

The Firm’s net rental expense was $475 million and $464 million for the three months ended June 30, 2020 and 2019, and $949 million and $932 million for the six months ended June 30, 2020 and 2019.

Firm as lessor

The Firm’s lease financings are generally operating leases and are included in other assets on the Firm’s Consolidated balance sheets.

The following table presents the Firm’s operating lease income, included within other income, and the related depreciation expense, included within technology, communications and equipment expense, on the Consolidated statements of income:



	Three months ended June 30,				Six months ended June 30,
(in millions)	2020		2019		2020		2019
Operating lease income	$	1,413	$	1,327	$	2,810	$	2,643
Depreciation expense	1,084		988		2,224		1,985

171

Note 18 - Preferred stock

Refer to Note 21 of JPMorgan Chase’s 2019 Form 10-K for a further discussion on preferred stock.

The following is a summary of JPMorgan Chase’s non-cumulative preferred stock outstanding as of June 30, 2020 and December 31, 2019, and the quarterly dividend declarations for the three and six months ended June 30, 2020 and 2019.



	Shares		Carrying value (in millions)					Contractual rate in effect at June 30, 2020		Earliest redemption date	Floating annualized rate of three-month LIBOR/Term SOFR plus:	Dividend declared per share
	June 30, 2020	December 31, 2019	June 30, 2020		December 31, 2019		Issue date					Three months ended June 30,		Six months ended June 30,
	June 30, 2020	December 31, 2019	June 30, 2020		December 31, 2019		Issue date					2020	2019	2020	2019
Fixed-rate:
Series P	—	—	$	—	$	—	2/5/2013	—	%	3/1/2018	NA	$—	$136.25	$—	$272.50
Series T	—	—	—		—		1/30/2014	—		3/1/2019	NA	—	—	—	167.50
Series W	—	—	—		—		6/23/2014	—		9/1/2019	NA	—	157.50	—	315.00
Series Y	—	143,000	—		1,430		2/12/2015	—		3/1/2020	NA	—	153.13	153.13	306.26
Series AA	142,500	142,500	1,425		1,425		6/4/2015	6.100		9/1/2020	NA	152.50	152.50	305.00	305.00
Series BB	115,000	115,000	1,150		1,150		7/29/2015	6.150		9/1/2020	NA	153.75	153.75	307.50	307.50
Series DD	169,625	169,625	1,696		1,696		9/21/2018	5.750		12/1/2023	NA	143.75	143.75	287.50	287.50
Series EE	185,000	185,000	1,850		1,850		1/24/2019	6.000		3/1/2024	NA	150.00	211.67	300.00	211.67
Series GG	90,000	90,000	900		900		11/7/2019	4.750		12/1/2024	NA	118.75	NA	269.17	NA
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%	$106.93	$153.00	$239.37	$308.51
Series Q	150,000	150,000	1,500		1,500		4/23/2013	5.150		5/1/2023	LIBOR + 3.25	128.75	128.75	257.50	257.50
Series R	150,000	150,000	1,500		1,500		7/29/2013	6.000		8/1/2023	LIBOR + 3.30	150.00	150.00	300.00	300.00
Series S	200,000	200,000	2,000		2,000		1/22/2014	6.750		2/1/2024	LIBOR + 3.78	168.75	168.75	337.50	337.50
Series U	100,000	100,000	1,000		1,000		3/10/2014	6.125		4/30/2024	LIBOR + 3.33	153.13	153.13	306.25	306.25
Series V	250,000	250,000	2,500		2,500		6/9/2014	LIBOR + 3.32		7/1/2019	LIBOR + 3.32	120.16	125.00	250.89	250.00	^(a)
Series X	160,000	160,000	1,600		1,600		9/23/2014	6.100		10/1/2024	LIBOR + 3.33	152.50	152.50	305.00	305.00
Series Z	200,000	200,000	2,000		2,000		4/21/2015	LIBOR + 3.80		5/1/2020	LIBOR + 3.80	117.15	132.50	249.65	265.00	^(b)
Series CC	125,750	125,750	1,258		1,258		10/20/2017	4.625		11/1/2022	LIBOR + 2.58	115.63	115.63	231.25	231.25
Series FF	225,000	225,000	2,250		2,250		7/31/2019	5.000		8/1/2024	SOFR + 3.38	125.00	NA	250.00	NA
Series HH	300,000	—	3,000		—		1/23/2020	4.600		2/1/2025	SOFR + 3.125	115.00	NA	240.22	NA
Series II	150,000	—	1,500		—		2/24/2020	4.000		4/1/2025	SOFR + 2.745	141.11	NA	141.11	NA	^(c)
Total preferred stock	3,006,250	2,699,250	$	30,063	$	26,993


(a)	Prior to July 1, 2019, the dividend rate was fixed at 5%.


(b)	Prior to May 1, 2020, the dividend rate was fixed at 5.3%.


(c)	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.

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 June 30, 2020.

Redemptions

On March 1, 2020, the Firm redeemed all $1.43 billion of its 6.125% preferred stock, Series Y.

On December 1, 2019, the Firm redeemed all $900 million of its 5.45% preferred stock, Series P.

On October 30, 2019, the Firm redeemed $1.37 billion of its fixed-to-floating rate perpetual preferred stock, Series I.

On September 1, 2019, the Firm redeemed all $880 million of its 6.30% preferred stock, Series W.

On March 1, 2019, the Firm redeemed all $925 million of its 6.70% preferred stock, Series T.

172

Note 19 – Earnings per share

Refer to Note 23 of JPMorgan Chase’s 2019 Form 10-K for a discussion of the computation of basic and diluted earnings per share (“EPS”). The following table presents the calculation of basic and diluted EPS for the three and six months ended June 30, 2020 and 2019.



(in millions, except per share amounts)	Three months ended June 30,				Six months ended June 30,
(in millions, except per share amounts)	2020		2019		2020		2019
Basic earnings per share
Net income	$	4,687	$	9,652	$	7,552	$	18,831
Less: Preferred stock dividends	401		404		822		778
Net income applicable to common equity	4,286		9,248		6,730		18,053
Less: Dividends and undistributed earnings allocated to participating securities	21		56		32		108
Net income applicable to common stockholders	$	4,265	$	9,192	$	6,698	$	17,945

Total weighted-average basic shares outstanding	3,076.3		3,250.6		3,086.1		3,274.3
Net income per share	$	1.39	$	2.83	$	2.17	$	5.48

Diluted earnings per share
Net income applicable to common stockholders	$	4,265	$	9,192	$	6,698	$	17,945
Total weighted-average basic shares outstanding	3,076.3		3,250.6		3,086.1		3,274.3
Add: Dilutive impact of SARs and employee stock options, unvested PSUs and nondividend-earning RSUs	4.7		9.1		4.7		9.6
Total weighted-average diluted shares outstanding	3,081.0		3,259.7		3,090.8		3,283.9
Net income per share	$	1.38	$	2.82	$	2.17	$	5.46

173

Note 20 – 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, net loss and prior service costs/(credit) related to the Firm’s defined benefit pension and OPEB plans, and fair value option-elected liabilities arising from changes in the Firm’s own credit risk (DVA).



As of or for the three months ended June 30, 2020 (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)
	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 April 1, 2020		$	5,176			$	(1,037	)	$	(43	)		$	2,528			$	(1,311	)		$	2,105			$	7,418
Net change		2,744				142			16				234				(7		)		(1,758		)		1,371
Balance at June 30, 2020		$	7,920	^(a)		$	(895	)	$	(27	)		$	2,762			$	(1,318	)		$	347			$	8,789

As of or for the three months ended June 30, 2019 (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)
	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 April 1, 2019		$	2,616			$	(751	)	(159		)		$	29			$	(2,272	)		$	(21	)		$	(558	)
Net change		1,093				99			86				97				41				256				1,672
Balance at June 30, 2019		$	3,709			$	(652	)	$	(73	)		$	126			$	(2,231	)		$	235			$	1,114

As of or for the six months ended June 30, 2020 (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)
	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 January 1, 2020		$	4,057			$	(707	)	$	(131	)		$	63			$	(1,344	)		$	(369	)		$	1,569
Net change		3,863				(188		)	104				2,699				26				716				7,220
Balance at June 30, 2020		$	7,920	^(a)		$	(895	)	$	(27	)		$	2,762			$	(1,318	)		$	347			$	8,789

As of or for the six months ended June 30, 2019 (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)
	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 January 1, 2019		$	1,202			$	(727	)	$	(161	)		$	(109	)		$	(2,308	)		$	596			$	(1,507	)
Net change		2,507				75			88				235				77				(361		)		2,621
Balance at June 30, 2019		$	3,709			$	(652	)	$	(73	)		$	126			$	(2,231	)		$	235			$	1,114


(a)	Includes after-tax net unamortized unrealized gains of $703 million related to AFS securities that have been transferred to HTM.

174

The following table presents the pre-tax and after-tax changes in the components of OCI.



	2020									2019
Three months ended June 30, (in millions)	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	$	3,642		$	(878	)	$	2,764		$	1,491		$	(365	)	$	1,126
Reclassification adjustment for realized (gains)/losses included in net income^(a)	(26		)	6			(20		)	(44		)	11			(33		)
Net change	3,616			(872		)	2,744			1,447			(354		)	1,093
Translation adjustments^(b):
Translation	405			46			451			123			72			195
Hedges	(405		)	96			(309		)	(128		)	32			(96		)
Net change	—			142			142			(5		)	104			99
Fair value hedges, net change^(c):	21			(5		)	16			112			(26		)	86
Cash flow hedges:
Net unrealized gains/(losses) arising during the period	402			(97		)	305			101			(24		)	77
Reclassification adjustment for realized (gains)/losses included in net income^(d)	(93		)	22			(71		)	26			(6		)	20
Net change	309			(75		)	234			127			(30		)	97
Defined benefit pension and OPEB plans:
Net gain/(loss) arising during the period	—			—			—			(1		)	—			(1		)
Reclassification adjustments included in net income^(e):
Amortization of net loss	3			(1		)	2			41			(7		)	34
Amortization of prior service cost/(credit)	1			(2		)	(1		)	1			(1		)	—
Foreign exchange and other	(8		)	—			(8		)	9			(1		)	8
Net change	(4		)	(3		)	(7		)	50			(9		)	41
DVA on fair value option elected liabilities, net change:	(2,314		)	556			(1,758		)	338			(82		)	256
Total other comprehensive income/(loss)	$	1,628		$	(257	)	$	1,371		$	2,069		$	(397	)	$	1,672

	2020									2019
Six months ended June 30, (in millions)	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	$	5,351		$	(1,291	)	$	4,060		$	3,366		$	(816	)	$	2,550
Reclassification adjustment for realized (gains)/losses included in net income^(a)	(259		)	62			(197		)	(57		)	14			(43		)
Net change	5,092			(1,229		)	3,863			3,309			(802		)	2,507
Translation adjustments^(b):
Translation	(1,187		)	101			(1,086		)	164			36			200
Hedges	1,184			(286		)	898			(166		)	41			(125		)
Net change	(3		)	(185		)	(188		)	(2		)	77			75
Fair value hedges, net change^(c):	136			(32		)	104			115			(27		)	88
Cash flow hedges:
Net unrealized gains/(losses) arising during the period	3,653			(877		)	2,776			242			(57		)	185
Reclassification adjustment for realized (gains)/losses included in net income^(d)	(101		)	24			(77		)	65			(15		)	50
Net change	3,552			(853		)	2,699			307			(72		)	235
Defined benefit pension and OPEB plans:
Net gain/(loss) arising during the period	9			(2		)	7			2			(2		)	—
Reclassification adjustments included in net income^(e):
Amortization of net loss	7			(2		)	5			83			(16		)	67
Amortization of prior service cost/(credit)	2			(2		)	—			2			(1		)	1
Foreign exchange and other	23			(9		)	14			1			8			9
Net change	41			(15		)	26			88			(11		)	77
DVA on fair value option elected liabilities, net change:	$	941		$	(225	)	$	716		$	(469	)	$	108		$	(361	)
Total other comprehensive income/(loss)	$	9,759		$	(2,539	)	$	7,220		$	3,348		$	(727	)	$	2,621


(a)	The pre-tax amount is reported in Investment securities gains 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. The amounts were not material for the three and six months ended June 30, 2020. During the three and six months ended June 30, 2019, the Firm reclassified net pre-tax gains of $6 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 $5 million related to net investment hedge gains and $2 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.


(e)	The pre-tax amount is reported in other expense in the Consolidated statements of income.

175

Note 21 – Restricted cash and other restricted

assets

Refer to Note 26 of JPMorgan Chase’s 2019 Form 10-K for a detailed discussion of the Firm’s 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 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-dealer activities are subject to certain restrictions on cash and other assets.

The following table presents the components of the Firm’s restricted cash:



(in billions)	June 30, 2020		December 31, 2019
Cash reserves – Federal Reserve Banks^(a)	$	—	$	26.6
Segregated for the benefit of securities and cleared derivative customers	20.5		16.0
Cash reserves at non-U.S. central banks and held for other general purposes	4.7		3.9
Total restricted cash^(b)	$	25.2	$	46.5


(a)	Effective March 26, 2020, the Federal Reserve temporarily eliminated reserve requirements for depository institutions.


(b)	Comprises $23.9 billion and $45.3 billion in deposits with banks, and $1.3 billion and $1.2 billion in cash and due from banks on the Consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively.

Also, as of June 30, 2020 and December 31, 2019, the Firm had the following other restricted assets:


•	Cash and securities pledged with clearing organizations for the benefit of customers of $35.7 billion and $24.7 billion, respectively.


•	Securities with a fair value of $5.7 billion and $8.8 billion, respectively, were also restricted in relation to customer activity.

Note 22 – Regulatory capital

Refer to Note 27 of JPMorgan Chase’s 2019 Form 10-K for a detailed discussion on regulatory capital.

The Federal Reserve establishes capital requirements, including well-capitalized standards, for the consolidated financial holding company. The Office of the Comptroller of the Currency (“OCC”) establishes similar minimum capital requirements and standards for the Firm’s principal IDI subsidiary, JPMorgan Chase Bank, N.A.

Under the risk-based capital and leverage-based guidelines 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 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 June 30, 2020 and December 31, 2019.



	Minimum capital ratios		Well-capitalized ratios
	BHC^(a)(e)	IDI^(b)(e)	BHC^(c)	IDI^(d)
Capital ratios
CET1 capital	10.5	7.0	N/A	6.5	%
Tier 1 capital	12.0	8.5	6.0	8.0
Total capital	14.0	10.5	10.0	10.0
Tier 1 leverage	4.0	4.0	N/A	5.0
SLR	5.0	6.0	N/A	6.0

Note: The table above is as defined by the regulations issued by the Federal Reserve, OCC and FDIC and to which the Firm and its IDI subsidiaries are subject.


(a)	Represents the minimum capital ratios applicable to the Firm under Basel III. The CET1, Tier 1 and Total capital minimum capital ratios include a capital conservation buffer requirement of 2.5% and GSIB surcharge of 3.5% as calculated under Method 2.


(b)	Represents requirements for JPMorgan Chase’s IDI subsidiaries. The CET1, Tier 1 and Total capital minimum capital ratios include a capital conservation buffer requirement of 2.5% that is applicable to the IDI subsidiaries. The IDI subsidiaries are not subject to the GSIB surcharge.


(c)	Represents requirements for bank holding companies pursuant to regulations issued by the Federal Reserve.


(d)	Represents requirements for IDI subsidiaries pursuant to regulations issued under the FDIC Improvement Act.


(e)	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.

Current Expected Credit Losses

The interim final rule provides a uniform approach for estimating the effects of CECL compared to the legacy

176

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 allowance for credit losses (excluding allowances on PCD loans). 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 period ended June 30, 2020, the capital metrics of the Firm

exclude $6.5 billion, which is the $2.7 billion day 1 impact to retained earnings and 25% of the $15.7 billion increase in the allowance for credit losses (excluding allowances on PCD loans).

The following tables present the risk-based and leverage-based capital metrics for JPMorgan Chase and JPMorgan Chase Bank, N.A. under both the Basel III Standardized and Basel III Advanced Approaches. As of June 30, 2020, the capital metrics are presented applying the CECL capital transition provisions. As of June 30, 2020 and December 31, 2019, JPMorgan Chase and JPMorgan Chase Bank, N.A. were well-capitalized and met all capital requirements to which each was subject.



June 30, 2020 (in millions, except ratios)	Basel III Standardized						Basel III Advanced
	JPMorgan Chase & Co.^(d)			JPMorgan Chase Bank, N.A.^(d)			JPMorgan Chase & Co.^(d)			JPMorgan Chase Bank, N.A.^(d)
Risk-based capital metrics:^(a)
CET1 capital	$	190,867		$	217,100		$	190,867		$	217,100
Tier 1 capital	220,674			217,107			220,674			217,107
Total capital	256,667			234,631			244,112			222,473
Risk-weighted assets	1,541,365			1,458,534			1,450,587			1,310,057
CET1 capital ratio	12.4		%	14.9		%	13.2		%	16.6		%
Tier 1 capital ratio	14.3			14.9			15.2			16.6
Total capital ratio	16.7			16.1			16.8			17.0
Leverage-based capital metrics:
Adjusted average assets^(b)	$	3,176,729		$	2,757,510		$	3,176,729		$	2,757,510
Tier 1 leverage ratio	6.9		%	7.9		%	6.9		%	7.9		%
Total leverage exposure^(c)	NA			NA			$	3,228,424		$	3,418,625
SLR^(c)	NA			NA			6.8		%	6.4		%



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:^(a)
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^(b)	$	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)	The capital adequacy of the Firm and JPMorgan Chase Bank, N.A. is evaluated against the lower of the two ratios as calculated under Basel III approaches (Standardized or Advanced).


(b)	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.

(c)

As of June 30, 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 June 30, 2020, JPMorgan Chase Bank, N.A. has not elected to apply this exclusion.


(d)	As of June 30, 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, in the Firm and JPMorgan Chase Bank, N.A. receive a zero percent risk weight.

177

Note 23 – 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 have historically been refinanced, extended, cancelled, or expired 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. Refer to Note 28 of JPMorgan Chase’s 2019 Form 10-K for a further discussion of lending-related commitments and guarantees, and the Firm’s related accounting policies.

To provide for expected credit losses in wholesale and certain consumer 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, including the impact of the Firm’s adoption of the 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 June 30, 2020, and December 31, 2019. The amounts in the table below for credit card, home equity and certain scored business banking 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 and certain scored business banking 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.

178



Off–balance sheet lending-related financial instruments, guarantees and other commitments
	Contractual amount													Carrying value⁽ⁱ⁾
	June 30, 2020										Dec 31, 2019			Jun 30, 2020			Dec 31, 2019
By remaining maturity (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)	$	15,055	$	1,310	$	3,173	$	15,864	$	35,402	$	30,217		$	241		$	12
Auto and other	9,146		1		27		772		9,946		9,952			—			—
Total consumer, excluding credit card	24,201		1,311		3,200		16,636		45,348		40,169			241			12
Credit card^(b)	673,836		—		—		—		673,836		650,720			—			—
Total consumer^(b)(c)	698,037		1,311		3,200		16,636		719,184		690,889			241			12
Wholesale:
Other unfunded commitments to extend credit^(d)	88,390		138,354		132,361		11,879		370,984		376,107			1,920			959
Standby letters of credit and other financial guarantees^(d)	16,116		10,173		4,028		1,625		31,942		34,242			482			618
Other letters of credit^(d)	2,466		82		19		—		2,567		2,961			17			4
Total wholesale^(c)	106,972		148,609		136,408		13,504		405,493		413,310			2,419			1,581
Total lending-related	$	805,009	$	149,920	$	139,608	$	30,140	$	1,124,677	$	1,104,199		$	2,660		$	1,593
Other guarantees and commitments
Securities lending indemnification agreements and guarantees^(e)	$	218,273	$	—	$	—	$	—	$	218,273	$	204,827		$	—		$	—
Derivatives qualifying as guarantees	859		62		11,469		40,354		52,744		53,089			388			159
Unsettled resale and securities borrowed agreements	148,288		1,234		—		—		149,522		117,951			4			—
Unsettled repurchase and securities loaned agreements	112,424		562		—		—		112,986		73,351			(1		)	—
Loan sale and securitization-related indemnifications:
Mortgage repurchase liability	NA		NA		NA		NA		NA		NA			85			59
Loans sold with recourse	NA		NA		NA		NA		904		944			24			27
Exchange & clearing house guarantees and commitments^(f)	97,750		—		—		—		97,750		206,432			—			—
Other guarantees and commitments^(g)	5,640		3,716		286		3,201		12,843		10,534		^(h)	(81		)	(73		)


(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 June 30, 2020, and December 31, 2019, reflected the contractual amount net of risk participations totaling $66 million and $76 million, respectively, for other unfunded commitments to extend credit; $9.0 billion and $9.8 billion, respectively, for standby letters of credit and other financial guarantees; and $290 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)	At June 30, 2020, and December 31, 2019, collateral held by the Firm in support of securities lending indemnification agreements was $229.6 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.


(f)	At June 30, 2020, and December 31, 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.


(g)	At June 30, 2020, and December 31, 2019, 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.


(h)	Prior-period amounts have been revised to conform with the current presentation.

(i)

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. At June 30, 2020, includes net markdowns on held-for-sale positions related to unfunded commitments in the bridge financing portfolio.

179

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.

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 June 30, 2020, and December 31, 2019.

Standby letters of credit, other financial guarantees and other letters of credit



	June 30, 2020				December 31, 2019
(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)	$	23,952	$	1,837	$	26,880	$	2,137
Noninvestment-grade^(a)	7,990		730		7,362		824
Total contractual amount	$	31,942	$	2,567	$	34,242	$	2,961

Allowance for lending-related commitments	$	126	$	17	$	216	$	4
Guarantee liability	356		—		402		—
Total carrying value	$	482	$	17	$	618	$	4

Commitments with collateral	$	17,194	$	411	$	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.

Derivatives qualifying as guarantees

The Firm transacts in certain derivative contracts that have the characteristics of a guarantee under U.S. GAAP. Refer to Note 28 of JPMorgan Chase’s 2019 Form 10-K for further information on these derivatives.

The following table summarizes the derivatives qualifying as guarantees as of June 30, 2020, and December 31, 2019.



(in millions)	June 30, 2020		December 31, 2019
Notional amounts
Derivative guarantees	$	52,744	$	53,089
Stable value contracts with contractually limited exposure	28,874		28,877
Maximum exposure of stable value contracts with contractually limited exposure	2,970		2,967

Fair value
Derivative payables	388		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. Refer to Note 5 for a further discussion of credit derivatives.

Merchant charge-backs

Under the rules of payment networks, the Firm, in its role as a merchant acquirer, retains a contingent liability for disputed processed credit and debit card transactions that result in a charge-back to the merchant. If a dispute is resolved in the cardholder’s favor, Merchant Services will (through the cardholder’s issuing bank) credit or refund the amount to the cardholder 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 cardholder. Merchant Services mitigates this risk by withholding future settlements, retaining cash reserve accounts or obtaining other collateral. In addition, Merchant Services recognizes a valuation allowance that covers the payment or performance risk to the Firm related to charge-backs. The carrying value of the valuation allowance was $20 million and $11 million at June 30, 2020 and December 31, 2019, respectively.

180

Loan sales- and securitization-related indemnifications

In connection with the Firm’s mortgage loan sale and securitization activities with 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. Refer to Note 28 of JPMorgan Chase’s 2019 Form 10-K for additional information.

The liability related to repurchase demands associated with private label securitizations is separately evaluated by the Firm in establishing its litigation reserves. Refer to Note 25 of this Form 10-Q and Note 30 of JPMorgan Chase’s 2019 Form 10-K for additional information regarding litigation.

June 30, 2020

(in millions)

Actual^(a)

Net Capital


(a)	Includes assets pledged to the Federal Reserve under the MMLF and the Federal Reserve’s open market operations.


(a)	Includes collateral repledged to the Federal Reserve under the Federal Reserve’s open market operations.


•	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.



Segment results and reconciliation^(a)
As of or for the three months ended June 30, (in millions, except ratios)	Consumer & Community Banking^(b)						Corporate & Investment Bank						Commercial Banking						Asset & Wealth Management
	2020			2019			2020			2019			2020			2019			2020			2019
Noninterest revenue	$	4,116		$	4,104		$	12,273		$	7,660		$	815		$	623		$	2,720		$	2,683
Net interest income	8,101			9,380			4,079			2,171			1,577			1,662			890			876
Total net revenue	12,217			13,484			16,352			9,831			2,392			2,285			3,610			3,559
Provision for credit losses	5,828			1,120			1,987			—			2,431			29			223			2
Noninterest expense	6,626			6,836			6,764			5,661			899			931			2,506			2,596
Income/(loss) before income tax expense/(benefit)	(237		)	5,528			7,601			4,170			(938		)	1,325			881			961
Income tax expense/(benefit)	(61		)	1,371			2,137			1,224			(247		)	323			223			242
Net income/(loss)	$	(176	)	$	4,157		$	5,464		$	2,946		$	(691	)	$	1,002		$	658		$	719
Average equity	$	52,000		$	52,000		$	80,000		$	80,000		$	22,000		$	22,000		$	10,500		$	10,500
Total assets	492,251			536,758			1,080,761			976,430			234,934			220,712			183,189			172,149
ROE	(2		)%	31		%	27		%	14		%	(14		)%	17		%	24		%	27		%
Overhead ratio	54			51			41			58			38			41			69			73



As of or for the three months ended June 30, (in millions, except ratios)	Corporate						Reconciling Items^(a)						Total^(b)
	2020			2019			2020			2019			2020			2019
Noninterest revenue	$	(67	)	$	(125	)	$	(730	)	$	(596	)	$	19,127		$	14,349
Net interest income	(687		)	447			(107		)	(138		)	13,853			14,398
Total net revenue	(754		)	322			(837		)	(734		)	32,980			28,747
Provision for credit losses	4			(2		)	—			—			10,473			1,149
Noninterest expense	147			232			—			—			16,942			16,256
Income/(loss) before income tax expense/(benefit)	(905		)	92			(837		)	(734		)	5,565			11,342
Income tax expense/(benefit)	(337		)	(736		)	(837		)	(734		)	878			1,690
Net income/(loss)	$	(568	)	$	828		$	—		$	—		$	4,687		$	9,652
Average equity	$	69,908		$	68,526		$	—		$	—		$	234,408		$	233,026
Total assets	1,221,980			821,330			NA			NA			3,213,115			2,727,379
ROE	NM			NM			NM			NM			7		%	16		%
Overhead ratio	NM			NM			NM			NM			51			57


(a)	Segment managed results reflect revenue on an 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.



Segment results and reconciliation^(a)
As of or for the six months ended June 30, (in millions, except ratios)	Consumer & Community Banking^(b)						Corporate & Investment Bank						Commercial Banking						Asset & Wealth Management
	2020			2019			2020			2019			2020			2019			2020			2019
Noninterest revenue	$	8,075		$	8,142		$	19,114		$	15,496		$	1,436		$	1,356		$	5,429		$	5,276
Net interest income	17,254			18,785			7,186			4,369			3,134			3,342			1,787			1,772
Total net revenue	25,329			26,927			26,300			19,865			4,570			4,698			7,216			7,048
Provision for credit losses	11,600			2,434			3,388			87			3,441			119			317			4
Noninterest expense	13,728			13,759			12,660			11,290			1,887			1,869			5,165			5,243
Income/(loss) before income tax expense/(benefit)	1			10,734			10,252			8,488			(758		)	2,710			1,734			1,801
Income tax expense/(benefit)	(14		)	2,630			2,800			2,282			(214		)	648			412			421
Net income/(loss)	$	15		$	8,104		$	7,452		$	6,206		$	(544	)	$	2,062		$	1,322		$	1,380
Average equity	$	52,000		$	52,000		$	80,000		$	80,000		$	22,000		$	22,000		$	10,500		$	10,500
Total assets	492,251			536,758			1,080,761			976,430			234,934			220,712			183,189			172,149
Return on equity	(1		)%	31		%	18		%	15		%	(6		)%	18		%	24		%	26		%
Overhead ratio	54			51			48			57			41			40			72			74



JPMorgan Chase & Co.
Consolidated average balance sheets, interest and rates (unaudited)
(Taxable-equivalent interest and rates; in millions, except rates)

	Three months ended June 30, 2020									Three months ended June 30, 2019
	Average balance			Interest^(f)			Rate (annualized)			Average balance			Interest^(f)		Rate (annualized)
Assets
Deposits with banks	$	477,895		$	70		0.06	%		$	289,838		$	1,132	1.57
Federal funds sold and securities purchased under resale agreements	244,306			601			0.99			288,781			1,676		2.33
Securities borrowed	141,328			(175		)	(0.50	)	^(g)	126,157			467		1.48
Trading assets – debt instruments	380,442			2,363			2.50			351,716			2,927		3.34
Taxable securities	466,324			2,154			1.86			244,814			1,875		3.07
Nontaxable securities^(a)	33,930			373			4.42			36,418			422		4.65
Total investment securities	500,254			2,527			2.03		^(h)	281,232			2,297		3.28	^(h)
Loans	997,558			10,655			4.30			954,854			12,770		5.36
All other interest-earning assets^(b)	78,072			178			0.92			46,516			472		4.07
Total interest-earning assets	2,819,855			16,219			2.31			2,339,094			21,741		3.73
Allowance for loan losses	(23,287		)							(13,428		)
Cash and due from banks	22,169									20,651
Trading assets – equity and other instruments	99,115									120,545
Trading assets – derivative receivables	79,298									52,659
Goodwill, MSRs and other intangible assets	51,785									54,144
All other noninterest-earning assets	180,333									165,390
Total assets	$	3,229,268								$	2,739,055
Liabilities
Interest-bearing deposits	$	1,375,213		$	349		0.10	%		$	1,104,051		$	2,413	0.88
Federal funds purchased and securities loaned or sold under repurchase agreements	276,815			131			0.19			227,313			1,226		2.16
Short-term borrowings^(c)	45,297			124			1.11			58,262			363		2.49
Trading liabilities – debt and all other interest-bearing liabilities^(d)(e)	207,322			(43		)	(0.08	)	^(g)	191,655			762		1.60
Beneficial interests issued by consolidated VIEs	20,331			59			1.15			26,713			175		2.63
Long-term debt	269,336			1,639			2.45			246,053			2,266		3.69
Total interest-bearing liabilities	2,194,314			2,259			0.41			1,854,047			7,205		1.56
Noninterest-bearing deposits	515,304									408,243
Trading liabilities – equity and other instruments^(e)	33,797									30,170
Trading liabilities – derivative payables	63,178									40,233
All other liabilities, including the allowance for lending-related commitments	158,204									146,343
Total liabilities	2,964,797									2,479,036
Stockholders’ equity
Preferred stock	30,063									26,993
Common stockholders’ equity	234,408									233,026
Total stockholders’ equity	264,471									260,019
Total liabilities and stockholders’ equity	$	3,229,268								$	2,739,055
Interest rate spread							1.90	%							2.17
Net interest income and net yield on interest-earning assets				$	13,960		1.99						$	14,536	2.49


(b)	Includes prime 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.


(d)	All other interest-bearing liabilities include prime brokerage-related customer payables.


(e)	The combined balance of trading liabilities – debt and equity instruments was $108.9 billion and $111.0 billion for the three months ended June 30, 2020 and 2019, respectively.


(f)	Interest includes the effect of certain related hedging derivatives. Taxable-equivalent amounts are used where applicable.


(g)	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.


(h)	The annualized rate for securities based on amortized cost was 2.07% and 3.32% for the three months ended June 30, 2020 and 2019, respectively, and does not give effect to changes in fair value that are reflected in AOCI.


•	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-to-day 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.


•	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 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.


•	Treasury Services: offers a broad range of products and services that enable clients to manage payments and receipts, as well as invest and manage funds. Products include U.S. dollar and multi-currency clearing, automated clearing house, lockbox, disbursement and reconciliation services, check deposits, and currency-related services;


•	Merchant Services: primarily processes transactions for merchants; and


•	Trade Finance: which includes loans tied directly to goods crossing borders, export/import loans, commercial letters of credit, standby letters of credit, and supply chain finance.


•	significant disruption and volatility in the financial markets


•	closures of many businesses, leading to loss of revenues and increased unemployment, and


•	the institution of social distancing and sheltering-in-place requirements in the U.S. and other countries.


•	significantly reduced demand for products and services from JPMorgan Chase’s clients and customers