JPM 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 financial services firm based 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. On May 1, 2023, JPMorgan Chase acquired certain assets and assumed certain liabilities of First Republic Bank (the “First Republic acquisition”) from the Federal Deposit Insurance Corporation (“FDIC”). The Firm continues to convert certain operations, and to integrate clients, products and services associated with the First Republic acquisition, to align with the Firm’s businesses and operations. Accordingly, reporting classification and internal risk rating profiles in the wholesale portfolio may change in future periods. Refer to Note 34 for additional information on the First Republic acquisition.


JPM Note 1 – Basis of presentation

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.


JPM 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.


JPM Consolidation

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.


JPM Consolidation

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.


JPM Voting interest entities

Voting interest entities are entities that have sufficient equity and provide the equity investors voting rights that enable them to make significant decisions relating to the entity’s operations. For these types of entities, the Firm’s determination of whether it has a controlling interest is primarily based on the amount of voting equity interests held. Entities in which the Firm has a controlling financial interest, through ownership of the majority of the entities’ voting equity interests, or through other contractual rights that give the Firm control, are consolidated by the Firm.


JPM Voting interest entities

Investments in companies in which the Firm has significant influence over operating and financing decisions (but does not own a majority of the voting equity interests) are accounted for (i) in accordance with the equity method of accounting, or (ii) at fair value if the fair value option was elected. These investments are generally included in other assets, with income or loss included in noninterest revenue.


JPM Voting interest entities

Certain Firm-sponsored asset management funds are structured as limited partnerships or limited liability companies. For many of these entities, the Firm is the general partner or managing member, but the non-affiliated partners or members have the ability to remove the Firm as the general partner or managing member without cause (i.e., kick-out rights), based on a simple majority vote, or the non-affiliated partners or members have rights to participate in important decisions. Accordingly, the Firm does not consolidate these voting interest entities. However, in the limited cases where the non-managing partners or members do not have substantive kick-out or participating rights, the Firm evaluates the funds as VIEs and consolidates the funds if the Firm is the general partner or managing member and has both power and a potentially significant interest.


JPM Voting interest entities

The Firm’s investment companies and asset management funds have investments in both publicly-held and privately-held entities, including investments in buyouts, growth equity and venture opportunities. These investments are accounted for under investment company guidelines and, accordingly, irrespective of the percentage of equity ownership interests held, are carried on the Consolidated balance sheets at fair value, and are recorded in other assets, with income or loss included in noninterest revenue. If consolidated, the Firm retains the accounting under such specialized investment company guidelines.


JPM Variable interest entities

VIEs are entities that, by design, either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity.


JPM Variable interest entities

The most common type of VIE is an SPE. SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. The basic SPE structure involves a company selling assets to the SPE; the SPE funds the purchase of those assets by issuing securities to investors. The legal documents that govern the transaction specify how the cash earned on the assets must be allocated to the SPE’s investors and other parties that have rights to those cash flows. SPEs are generally structured to insulate investors from claims on the SPE’s assets by creditors of other entities, including the creditors of the seller of the assets.


JPM Variable interest entities

The primary beneficiary of a VIE (i.e., the party that has a controlling financial interest) is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (2) through its interests in the VIE, the


JPM Notes to consolidated financial statements

obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.


To assess whether the Firm has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Firm considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (such as asset managers, collateral managers, servicers, or owners of call options or liquidation rights over the VIE’s assets) or have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE.


To assess whether the Firm has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Firm considers all of its economic interests, including debt and equity investments, servicing fees, and derivatives or other arrangements deemed to be variable interests in the VIE. This assessment requires that the Firm apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Firm.


The Firm performs on-going reassessments of: (1) whether entities previously evaluated under the majority voting-interest framework have become VIEs, based on certain events, and are therefore subject to the VIE consolidation framework; and (2) whether changes in the facts and circumstances regarding the Firm’s involvement with a VIE cause the Firm’s consolidation conclusion to change.


Refer to Note 14 for further discussion of Firm-sponsored VIEs.


JPM Interest income

The Firm recognizes interest income on loans, debt securities, and other debt instruments, generally on a level-yield basis, based on the underlying contractual rate. Refer to Note 7 for further information.


JPM Revenue from contracts with customers

JPMorgan Chase recognizes noninterest revenue from certain contracts with customers, in investment banking fees, deposit-related fees, asset management fees, commissions and other fees, and components of card income, when the Firm’s related performance obligations are satisfied. Refer to Note 6 for further discussion of the Firm’s revenue from contracts with customers.


JPM Principal transactions revenue

JPMorgan Chase carries a portion of its assets and liabilities at fair value. Changes in fair value are reported primarily in principal transactions revenue. Refer to Notes 2 and 3 for further discussion of fair value measurement. Refer to Note 6 for further discussion of principal transactions revenue.


JPM Use of estimates in the preparation of consolidated financial statements

The preparation of the Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expense, and disclosures of contingent assets and liabilities. Actual results could be different from these estimates.


JPM Foreign currency translation

JPMorgan Chase revalues assets, liabilities, revenue and expense denominated in non-U.S. currencies into U.S. dollars using applicable exchange rates.


JPM Foreign currency translation

Gains and losses relating to translating functional currency financial statements for U.S. reporting are included in the Consolidated statements of comprehensive income. Gains and losses relating to nonfunctional currency transactions, including non-U.S. operations where the functional currency is the U.S. dollar, are reported in the Consolidated statements of income.


JPM Offsetting assets and liabilities

U.S. GAAP permits entities to present derivative receivables and derivative payables with the same counterparty and the related cash collateral receivables and payables on a net basis on the Consolidated balance sheets when a legally enforceable master netting agreement exists. U.S. GAAP also permits securities sold and purchased under repurchase agreements and securities borrowed or loaned under securities loan agreements to be presented net when specified conditions are met, including the existence of a legally enforceable master netting agreement. The Firm has elected to net such balances where it has determined that the specified conditions are met.


JPM Offsetting assets and liabilities

The Firm uses master netting agreements to mitigate counterparty credit risk in certain transactions, including derivative contracts, resale, repurchase, securities borrowed and securities loaned agreements. A master netting agreement is a single agreement with a counterparty that permits multiple transactions governed by that agreement to be terminated or accelerated and settled through a single payment in a single currency in the event of a default (e.g., bankruptcy, failure to make a required payment or securities transfer or deliver collateral or margin when due). Upon the exercise of derivatives termination rights by the non-defaulting party (i) all transactions are terminated, (ii) all transactions are valued and the positive values of “in the money” transactions are netted against the negative values of “out of the money” transactions and (iii) the only remaining payment obligation is of one of the parties to pay the netted termination amount. Upon exercise of default rights under repurchase


JPM 172 JPMorgan Chase & Co./2023 Form 10-K

agreements and securities loan agreements in general (i) all transactions are terminated and accelerated, (ii) all values of securities or cash held or to be delivered are calculated, and all such sums are netted against each other and (iii) the only remaining payment obligation is of one of the parties to pay the netted termination amount.


Typical master netting agreements for these types of transactions also often contain a collateral/margin agreement that provides for a security interest in, or title transfer of, securities or cash collateral/margin to the party that has the right to demand margin (the “demanding party”). The collateral/margin agreement typically requires a party to transfer collateral/margin to the demanding party with a value equal to the amount of the margin deficit on a net basis across all transactions governed by the master netting agreement, less any threshold. The collateral/margin agreement grants to the demanding party, upon default by the counterparty, the right to set-off any amounts payable by the counterparty against any posted collateral or the cash equivalent of any posted collateral/margin. It also grants to the demanding party the right to liquidate collateral/margin and to apply the proceeds to an amount payable by the counterparty.


Refer to Note 5 for further discussion of the Firm’s derivative instruments. Refer to Note 11 for further discussion of the Firm’s securities financing agreements.


JPM Statements of cash flows

For JPMorgan Chase’s Consolidated statements of cash flows, cash is defined as those amounts included in cash and due from banks and deposits with banks on the Consolidated balance sheets.


JPM Derivatives and Hedging: Fair Value Hedging – Portfolio Layer Method

The adoption of this guidance expanded the ability to hedge a portfolio of fixed-rate assets to allow more types of assets to be included in the portfolio, and to allow more of the portfolio to be hedged. This guidance also clarified the types of derivatives that could be used as hedges, and the balance sheet presentation and disclosure requirements for the hedge accounting adjustments. As permitted by the guidance, the Firm elected to transfer HTM securities to AFS and designated those securities in a portfolio layer method hedge upon adoption. The adoption impact of the transfer on retained earnings was not material.


Refer to Note 5 and Note 10 for additional information.


JPM Financial Instruments – Credit Losses: Troubled Debt Restructurings (“TDRs”)

The adoption of this guidance eliminated the accounting and disclosure requirements for TDRs, including the requirement to measure the allowance using a discounted cash flow (“DCF”) methodology, and allowed the option of a non-DCF portfolio-based approach for modified loans to troubled borrowers. If a DCF methodology is still applied for these modified loans, the discount rate must be the post-modification effective interest rate, instead of the pre-modification effective interest rate.


The Firm elected to apply its non-DCF, portfolio-based allowance approach for modified loans to troubled borrowers for all portfolios except collateral-dependent loans and nonaccrual risk-rated loans which the Firm elected to continue applying a DCF methodology. Refer to Note 13 for a description of the portfolio-based allowance approach and the asset-specific allowance approach.


This guidance was adopted on January 1, 2023 under the modified retrospective method which resulted in a net decrease to the allowance for credit losses of $587 million and an increase to retained earnings of $446 million, after-tax, predominantly driven by residential real estate and credit card.


The adoption of this guidance eliminated the disclosure requirements for TDRs including the requirement to assess whether a modification is reasonably expected or involves a concession. The new guidance requires disclosure for loan modifications to borrowers experiencing financial difficulty consisting of principal forgiveness, interest rate reduction, other-than-insignificant payment delay, term extension or a combination of these modifications. The Firm has defined these types of modifications as financial difficulty modifications ("FDMs"). As a result of the elimination of the requirement to assess whether a modification is reasonably expected or involves a concession, the population of loans considered FDMs differs from those previously considered TDRs. This guidance also requires disclosure of current period gross charge-offs by vintage origination year.


Refer to Note 12 for further information.


JPM Significant accounting policies

The following table identifies JPMorgan Chase’s other significant accounting policies and the Note and page where a detailed description of each policy can be found. Fair value measurement##Note 2##page 175 Fair value option##Note 3##page 197 Derivative instruments##Note 5##page 203 Noninterest revenue and noninterest expense##Note 6##page 217 Interest income and Interest expense##Note 7##page 221 Pension and other postretirement employee benefit plans##Note 8##page 222 Employee share-based incentives##Note 9##page 225 Investment securities##Note 10##page 227 Securities financing activities##Note 11##page 232 Loans##Note 12##page 235 Allowance for credit losses##Note 13##page 255 Variable interest entities##Note 14##page 261 Goodwill, mortgage servicing rights, and other intangible assets##Note 15##page 269 Premises and equipment##Note 16##page 274 Leases##Note 18##page 275 Accounts payable & other liabilities##Note 19##page 277 Long-term debt##Note 20##page 278 Earnings per share##Note 23##page 283 Income taxes##Note 25##page 285 Off–balance sheet lending-related financial instruments, guarantees and other commitments##Note 28##page 291 Litigation##Note 30##page 298


JPM Note 2 – Fair value measurement

JPMorgan Chase carries a portion of its assets and liabilities at fair value. These assets and liabilities are predominantly carried at fair value on a recurring basis (i.e., assets and liabilities that are measured and reported at fair value on the Firm’s Consolidated balance sheets). Certain assets, liabilities and unfunded lending-related commitments are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment).


JPM Note 2 – Fair value measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on quoted market prices or inputs, where available. If prices or quotes are not available, fair value is based on valuation models and other valuation techniques that consider relevant transaction characteristics (such as maturity) and use, as inputs, observable or unobservable market parameters, including yield curves, interest rates, volatilities, prices (such as commodity, equity or debt prices), correlations, foreign exchange rates and credit curves. Fair value may also incorporate valuation adjustments.


JPM Note 2 – Fair value measurement

The level of precision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. Furthermore, while the Firm believes its valuation methods are appropriate and consistent with those of other market participants, the methods and assumptions used reflect management judgment and may vary across the Firm’s businesses and portfolios.


JPM Note 2 – Fair value measurement

The Firm uses various methodologies and assumptions in the determination of fair value. The use of different methodologies or assumptions by other market participants compared with those used by the Firm could result in the Firm deriving a different estimate of fair value at the reporting date.


JPM Valuation process

Risk-taking functions are responsible for providing fair value estimates for assets and liabilities carried on the Consolidated balance sheets at fair value. The Firm’s Valuation Control Group (“VCG”), which is part of the Firm’s Finance function and independent of the risk-taking functions, is responsible for verifying these estimates and determining any fair value adjustments that may be required to ensure that the Firm’s positions are recorded at fair value. In addition, the Firm’s Valuation Governance Forum (“VGF”), which is composed of senior finance and risk executives, is responsible for overseeing the management of risks arising from valuation activities conducted across the Firm. The Firmwide VGF is chaired by the Firmwide head of the VCG (under the direction of the Firm’s Controller), and includes sub-forums covering the CIB, CCB, CB, AWM and certain corporate functions including Treasury and CIO.


JPM Price verification process

The VCG verifies fair value estimates provided by the risk-taking functions by leveraging independently derived prices, valuation inputs and other market data, where available. Where independent prices or inputs are not available, the VCG performs additional review to ensure the reasonableness of the estimates. The additional review may include evaluating the limited market activity including client unwinds, benchmarking valuation inputs to those used for similar instruments, decomposing the valuation of structured instruments into individual components, comparing expected to actual cash flows, reviewing profit and loss trends, and reviewing trends in collateral valuation. There are also additional levels of management review for more significant or complex positions.


JPM Price verification process

The VCG determines any valuation adjustments that may be required to the estimates provided by the risk-taking functions. No adjustments to quoted prices are applied for instruments classified within level 1 of the fair value hierarchy (refer to the discussion below for further information on the fair value hierarchy). For other positions, judgment is required to assess the need for valuation adjustments to appropriately reflect liquidity considerations, unobservable parameters, and, for certain portfolios that meet specified criteria, the size of the net open risk position. The determination of such adjustments follows a consistent framework across the Firm: •Liquidity valuation adjustments are considered where an observable external price or valuation parameter exists but is of lower reliability, potentially due to lower market activity. Liquidity valuation adjustments are made based on current market conditions. Factors that may be considered in determining the liquidity adjustment include analysis of: (1) the estimated bid-offer spread for the instrument being traded; (2) alternative pricing points for similar instruments in active markets; and (3) the range of reasonable values that the price or parameter could take. •The Firm manages certain portfolios of financial instruments on the basis of net open risk exposure and, as permitted by U.S. GAAP, has elected to estimate the fair value of such portfolios on the basis of a transfer of the entire net open risk position in an orderly transaction. Where this is the case, valuation adjustments may be necessary to reflect the cost of exiting a larger-than-normal market-size net open risk position. Where applied, such adjustments are based on factors that a relevant market participant would consider in the transfer of the net open risk position, including the size of the adverse market move that is likely to occur during the period required to sufficiently reduce the net open risk position. •Uncertainty adjustments related to unobservable parameters may be made when positions are valued using prices or input parameters to valuation models that are unobservable due to a lack of market activity or


because they cannot be implied from observable market data. Such prices or parameters must be estimated and are, therefore, subject to management judgment. Adjustments are made to reflect the uncertainty inherent in the resulting valuation estimate. •Where appropriate, the Firm also applies adjustments to its estimates of fair value in order to appropriately reflect counterparty credit quality (CVA), the Firm’s own creditworthiness (DVA) and the impact of funding (FVA), using a consistent framework across the Firm. Refer to Credit and funding adjustments on page 192 of this Note for more information on such adjustments.


JPM Valuation model review and approval

If prices or quotes are not available for an instrument or a similar instrument, fair value is generally determined using valuation models that consider relevant transaction terms such as maturity and use as inputs market-based or independently sourced parameters. Where this is the case the price verification process described above is applied to the inputs in those models.


JPM Valuation model review and approval

Under the Firm’s Estimations and Model Risk Management Policy, MRGR reviews and approves new models, as well as material changes to existing models, prior to implementation in the operating environment. In certain circumstances exceptions may be granted to the Firm’s policy to allow a model to be used prior to review or approval. MRGR may also require the user to take appropriate actions to mitigate the model risk if it is to be used in the interim. These actions will depend on the model and may include, for example, limitation of trading activity.


JPM Fair value hierarchy

A three-level fair value hierarchy has been established under U.S. GAAP for disclosure of fair value measurements. The fair value hierarchy is based on the observability of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows. •Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. •Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. •Level 3 – one or more inputs to the valuation methodology are unobservable and significant to the fair value measurement.


JPM Fair value hierarchy

A financial instrument’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.


JPM 176 JPMorgan Chase & Co./2023 Form 10-K

The following table describes the valuation methodologies generally used by the Firm to measure its significant products/instruments at fair value, including the general classification of such instruments pursuant to the fair value hierarchy.


JPM Securities financing agreements

Loans and lending-related commitments — wholesale Loans carried at fair value (trading loans and non-trading loans) and associated lending-related commitments


JPM Loans — consumer

Loans carried at fair value — conforming residential mortgage loans expected to be sold


Product/instrument##Valuation methodology Derivatives##Actively traded derivatives, e.g., exchange-traded derivatives, that are valued using quoted prices. ##Derivatives that are valued using models such as the Black-Scholes option pricing model, simulation models, or a combination of models that may use observable or unobservable valuation inputs as well as considering the contractual terms. The key valuation inputs used will depend on the type of derivative and the nature of the underlying instruments and may include equity prices, commodity prices, foreign exchange rates, volatilities, correlations, CDS spreads, recovery rates and prepayment speed. ##In addition, specific inputs used for derivatives that are valued based on models with significant unobservable inputs are as follows: ##Interest rate and FX exotic derivatives specific inputs include: ##• Interest rate curve ##• Interest rate volatility ##• Interest rate spread volatility ##• Bermudan switch value ##• Interest rate correlation ##• Interest rate-FX correlation ##• Foreign exchange correlation ##Credit derivatives specific inputs include: ##• Credit correlation between the underlying debt instruments ##Equity derivatives specific inputs include: ##• Forward equity price ##• Equity volatility ##• Equity correlation ##• Equity-FX correlation ##• Equity-IR correlation ##Commodity derivatives specific inputs include: ##• Forward commodity price ##• Commodity volatility ##• Commodity correlation ##Additionally, adjustments are made to reflect counterparty credit quality (CVA) and the impact of funding (FVA). Refer to page 192 of this Note. Mortgage servicing rights##Refer to Mortgage servicing rights in Note 15. Private equity direct investments##Fair value is estimated using all available information; the range of potential inputs include: ##• Transaction prices ##• Trading multiples of comparable public companies ##• Operating performance of the underlying portfolio company ##• Adjustments as required, since comparable public companies are not identical to the company being valued, and for company-specific issues including lack of liquidity ##• Additional available inputs relevant to the investment Fund investments (e.g., mutual/collective investment funds, private equity funds, hedge funds, and real estate funds)##Net asset value ##• NAV is supported by the ability to redeem and purchase at the NAV level ##• Adjustments to the NAV as required, for restrictions on redemption (e.g., lock-up periods or withdrawal limitations) or where observable activity is limited Beneficial interests issued by consolidated VIEs##Valued using observable market information, where available. ##In the absence of observable market information, valuations are based on the fair value of the underlying assets held by the VIE.


(a)Excludes certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient.


JPM 178 JPMorgan Chase & Co./2023 Form 10-K

Product/instrument##Valuation methodology##Classification in the fair value hierarchy Structured notes (included in deposits, short-term borrowings and long-term debt)##Valuations are based on discounted cash flow analyses that consider the embedded derivative and the terms and payment structure of the note. The embedded derivative features are considered using models such as the Black-Scholes option pricing model, simulation models, or a combination of models that may use observable or unobservable valuation inputs, depending on the embedded derivative. The specific inputs used vary according to the nature of the embedded derivative features, as described in the discussion above regarding derivatives valuation. Adjustments are then made to this base valuation to reflect the Firm’s own credit risk (DVA). Refer to page 192 of this Note.##Level 2 or 3


The following table presents the assets and liabilities reported at fair value as of December 31, 2023 and 2022, by major product category and fair value hierarchy. ####Assets and liabilities measured at fair value on a recurring basis################## ##########Fair value hierarchy############ December 31, 2023 (in millions)####Level 1####Level 2######Level 3####Derivative netting adjustments(f)####Total fair value Federal funds sold and securities purchased under resale agreements##$##—##$##259,813####$##—##$##—##$##259,813 Securities borrowed####—####70,086######—####—####70,086 Trading assets:###################### Debt instruments:###################### Mortgage-backed securities:###################### U.S. GSEs and government agencies(a)####—####73,840######758####—####74,598 Residential – nonagency####—####1,921######5####—####1,926 Commercial – nonagency####—####1,362######12####—####1,374 Total mortgage-backed securities####—####77,123######775####—####77,898 U.S. Treasury, GSEs and government agencies(a)####133,997####9,998######—####—####143,995 Obligations of U.S. states and municipalities####—####5,858######10####—####5,868 Certificates of deposit, bankers’ acceptances and commercial paper####—####756######—####—####756 Non-U.S. government debt securities####24,846####55,557######179####—####80,582 Corporate debt securities####—####32,854######484####—####33,338 Loans####—####7,872######684####—####8,556 Asset-backed securities####—####2,199######6####—####2,205 Total debt instruments####158,843####192,217######2,138####—####353,198 Equity securities####107,926####679######127####—####108,732 Physical commodities(b)####2,479####3,305######7####—####5,791 Other####—####17,879######101####—####17,980 Total debt and equity instruments(c)####269,248####214,080######2,373####—####485,701 Derivative receivables:###################### Interest rate####2,815####243,578######4,298####(224,367)####26,324 Credit####—####8,644######1,010####(9,103)####551 Foreign exchange####149####204,737######889####(187,756)####18,019 Equity####—####55,167######2,522####(52,761)####4,928 Commodity####—####15,234######205####(10,397)####5,042 Total derivative receivables####2,964####527,360######8,924####(484,384)####54,864 Total trading assets(d)####272,212####741,440######11,297####(484,384)####540,565 Available-for-sale securities:###################### Mortgage-backed securities:###################### U.S. GSEs and government agencies(a)####—####85,170######—####—####85,170 Residential – nonagency####—####3,639######—####—####3,639 Commercial – nonagency####—####2,803######—####—####2,803 Total mortgage-backed securities####—####91,612######—####—####91,612 U.S. Treasury and government agencies####57,683####122######—####—####57,805 Obligations of U.S. states and municipalities####—####21,367######—####—####21,367 Non-U.S. government debt securities####13,095####8,187######—####—####21,282 Corporate debt securities####—####100######—####—####100 Asset-backed securities:###################### Collateralized loan obligations####—####6,752######—####—####6,752 Other(a)####—####2,786######—####—####2,786 Total available-for-sale securities####70,778####130,926######—####—####201,704 Loans(e)####—####35,772######3,079####—####38,851 Mortgage servicing rights####—####—######8,522####—####8,522 Other assets(d)####6,635####3,929######758####—####11,322 Total assets measured at fair value on a recurring basis##$##349,625##$##1,241,966####$##23,656##$##(484,384)##$##1,130,863 Deposits##$##—##$##76,551####$##1,833##$##—##$##78,384 Federal funds purchased and securities loaned or sold under repurchase agreements####—####169,003######—####—####169,003 Short-term borrowings####—####18,284######1,758####—####20,042 Trading liabilities:###################### Debt and equity instruments(c)####107,292####32,252######37####—####139,581 Derivative payables:###################### Interest rate####4,409####232,277######3,796####(228,586)####11,896 Credit####—####11,293######745####(10,949)####1,089 Foreign exchange####147####211,289######827####(199,643)####12,620 Equity####—####60,887######4,924####(56,443)####9,368 Commodity####—####15,894######484####(10,504)####5,874 Total derivative payables####4,556####531,640######10,776####(506,125)####40,847 Total trading liabilities####111,848####563,892######10,813####(506,125)####180,428 Accounts payable and other liabilities####3,968####1,617######52####—####5,637 Beneficial interests issued by consolidated VIEs####—####1######—####—####1 Long-term debt####—####60,198######27,726####—####87,924 Total liabilities measured at fair value on a recurring basis##$##115,816##$##889,546####$##42,182##$##(506,125)##$##541,419


JPM 180 JPMorgan Chase & Co./2023 Form 10-K

##########Fair value hierarchy############ December 31, 2022 (in millions)####Level 1####Level 2######Level 3####Derivative netting adjustments(f)####Total fair value Federal funds sold and securities purchased under resale agreements##$##—##$##311,883####$##—##$##—##$##311,883 Securities borrowed####—####70,041######—####—####70,041 Trading assets:###################### Debt instruments:###################### Mortgage-backed securities:###################### U.S. GSEs and government agencies(a)####—####68,162######759####—####68,921 Residential – nonagency####—####2,498######5####—####2,503 Commercial – nonagency####—####1,448######7####—####1,455 Total mortgage-backed securities####—####72,108######771####—####72,879 U.S. Treasury, GSEs and government agencies(a)####61,191####8,546######—####—####69,737 Obligations of U.S. states and municipalities####—####6,608######7####—####6,615 Certificates of deposit, bankers’ acceptances and commercial paper####—####2,009######—####—####2,009 Non-U.S. government debt securities####18,213####48,429######155####—####66,797 Corporate debt securities####—####25,626######463####—####26,089 Loans####—####5,744######759####—####6,503 Asset-backed securities####—####2,536######23####—####2,559 Total debt instruments####79,404####171,606######2,178####—####253,188 Equity securities####82,483####2,060######665####—####85,208 Physical commodities(b)####9,595####16,673######2####—####26,270 Other####—####18,146######64####—####18,210 Total debt and equity instruments(c)####171,482####208,485######2,909####—####382,876 Derivative receivables:###################### Interest rate####3,390####292,956######4,069####(271,996)####28,419 Credit####—####9,722######607####(9,239)####1,090 Foreign exchange####169####240,207######1,203####(218,214)####23,365 Equity####—####57,485######4,428####(52,774)####9,139 Commodity####—####24,982######375####(16,490)####8,867 Total derivative receivables####3,559####625,352######10,682####(568,713)####70,880 Total trading assets(d)####175,041####833,837######13,591####(568,713)####453,756 Available-for-sale securities:###################### Mortgage-backed securities:###################### U.S. GSEs and government agencies(a)####3####71,500######—####—####71,503 Residential – nonagency####—####4,620######—####—####4,620 Commercial – nonagency####—####1,958######—####—####1,958 Total mortgage-backed securities####3####78,078######—####—####78,081 U.S. Treasury and government agencies####92,060####—######—####—####92,060 Obligations of U.S. states and municipalities####—####6,786######—####—####6,786 Non-U.S. government debt securities####10,591####9,105######—####—####19,696 Corporate debt securities####—####118######239####—####357 Asset-backed securities:###################### Collateralized loan obligations####—####5,792######—####—####5,792 Other####—####3,085######—####—####3,085 Total available-for-sale securities####102,654####102,964######239####—####205,857 Loans(e)####—####40,661######1,418####—####42,079 Mortgage servicing rights####—####—######7,973####—####7,973 Other assets(d)####7,544####6,065######405####—####14,014 Total assets measured at fair value on a recurring basis##$##285,239##$##1,365,451####$##23,626##$##(568,713)##$##1,105,603 Deposits##$##—##$##26,458####$##2,162##$##—##$##28,620 Federal funds purchased and securities loaned or sold under repurchase agreements####—####151,999######—####—####151,999 Short-term borrowings####—####14,391######1,401####—####15,792 Trading liabilities:###################### Debt and equity instruments(c)####98,719####28,032######84####—####126,835 Derivative payables:###################### Interest rate####2,643####284,280######3,368####(274,321)####15,970 Credit####—####9,377######594####(9,217)####754 Foreign exchange####160####250,647######714####(232,665)####18,856 Equity####—####57,649######4,812####(53,657)####8,804 Commodity####—####22,748######521####(16,512)####6,757 Total derivative payables####2,803####624,701######10,009####(586,372)####51,141 Total trading liabilities####101,522####652,733######10,093####(586,372)####177,976 Accounts payable and other liabilities####5,702####1,283######53####—####7,038 Beneficial interests issued by consolidated VIEs####—####5######—####—####5 Long-term debt####—####48,189######24,092####—####72,281 Total liabilities measured at fair value on a recurring basis##$##107,224##$##895,058####$##37,801##$##(586,372)##$##453,711


(a)At December 31, 2023 and 2022, included total U.S. GSE obligations of $78.5 billion and $73.8 billion, respectively, which were mortgage-related.


(b)Physical commodities inventories are generally accounted for at the lower of cost or net realizable value. “Net realizable value” is a term defined in U.S. GAAP as not exceeding fair value less costs to sell (“transaction costs”). Transaction costs for the Firm’s physical commodities inventories are either not applicable or immaterial to the value of the inventory. Therefore, net realizable value approximates fair value for the Firm’s physical commodities inventories. When fair value hedging has been applied (or when net realizable value is below cost), the carrying value of physical commodities approximates fair value, because under fair value hedge accounting, the cost basis is adjusted for changes in fair value. Refer to Note 5 for a further discussion of the Firm’s hedge accounting relationships. To provide consistent fair value disclosure information, all physical commodities inventories have been included in each period presented.


(c)Balances reflect the reduction of securities owned (long positions) by the amount of identical securities sold but not yet purchased (short positions).


(d)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not required to be classified in the fair value hierarchy. At December 31, 2023 and 2022, the fair values of these investments, which include certain hedge funds, private equity funds, real estate and other funds, were $1.0 billion and $950 million, respectively. Included in these balances at December 31, 2023 and 2022, were trading assets of $42 million and $43 million, respectively, and other assets of $984 million and $907 million, respectively.


(e)At December 31, 2023 and 2022, included $10.2 billion and $9.7 billion, respectively, of residential first-lien mortgages, and $6.0 billion and $6.8 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 $2.9 billion and $2.4 billion, 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.


JPM Level 3 valuations

The Firm has established well-structured processes for determining fair value, including for instruments where fair value is estimated using significant unobservable inputs (level 3). Refer to pages 175–179 of this Note for further information on the Firm’s valuation process and a detailed discussion of the determination of fair value for individual financial instruments.


JPM Level 3 valuations

Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available to the Firm. For instruments valued using internally developed valuation models and other valuation techniques that use significant unobservable inputs and are therefore classified within level 3 of the fair value hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2.


JPM Level 3 valuations

In arriving at an estimate of fair value for an instrument within level 3, management must first determine the appropriate valuation model or other valuation technique to use. Second, due to the lack of observability of significant inputs, management must assess relevant empirical data in deriving valuation inputs including transaction details, yield curves, interest rates, prepayment speed, default rates, volatilities, correlations, prices (such as commodity, equity or debt prices), valuations of comparable instruments, foreign exchange rates and credit curves.


JPM Level 3 valuations

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.


JPM Level 3 valuations

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.


JPM Level 3 valuations

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 and arithmetic 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.


########Level 3 inputs(a)########## December 31, 2023################## 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)##$##1,743##Discounted cash flows####Yield##0%####72%##7% ##########Prepayment speed##3%####12%##9% ##########Conditional default rate##0%####6%##0% ##########Loss severity##0%####110%##3% Commercial mortgage-backed securities and loans(c)####1,460##Market comparables####Price##$0####$90##$80 Corporate debt securities####484##Market comparables####Price##$0####$242##$98 Loans(d)####1,335##Market comparables####Price##$0####$108##$79 Non-U.S. government debt securities####179##Market comparables####Price##$2####$109##$91 Net interest rate derivatives####495##Option pricing####Interest rate volatility##25bps####420bps##117bps ##########Interest rate spread volatility##37bps####77bps##64bps ##########Bermudan switch value##0%####54%##19% ##########Interest rate correlation##(82)%####90%##19% ##########IR-FX correlation##(35)%####60%##5% ####7##Discounted cash flows####Prepayment speed##0%####20%##5% Net credit derivatives####233##Discounted cash flows####Credit correlation##35%####70%##51% ##########Credit spread##0bps####3,617bps##384bps ##########Recovery rate##10%####90%##55% ####32##Market comparables####Price##$0####$115##$73 Net foreign exchange derivatives####128##Option pricing####IR-FX correlation##(40)%####60%##20% ####(66)##Discounted cash flows####Prepayment speed####11%####11% ##########Interest rate curve##2%####17%##7% Net equity derivatives####(2,402)##Option pricing####Forward equity price(h)##74%####148%##100% ##########Equity volatility##3%####145%##28% ##########Equity correlation##15%####100%##57% ##########Equity-FX correlation##(88)%####65%##(30)% ##########Equity-IR correlation##(19)%####20%##12% Net commodity derivatives####(279)##Option pricing####Oil commodity forward##$84 / BBL####$270 / BBL##$177 / BBL ##########Natural gas commodity forward##$2 / MMBTU####$6 / MMBTU##$4 / MMBTU ##########Commodity volatility##17%####20%##18% ##########Commodity correlation##(35)%####98%##31% MSRs####8,522##Discounted cash flows####Refer to Note 15######## Long-term debt, short-term borrowings, and deposits(e)####30,078##Option pricing####Interest rate volatility##25bps####420bps##117bps ##########Bermudan switch value##0%####54%##19% ##########Interest rate correlation##(82)%####90%##19% ##########IR-FX correlation##(35)%####60%##5% ##########Equity correlation##15%####100%##57% ##########Equity-FX correlation##(88)%####65%##(30)% ##########Equity-IR correlation##(19)%####20%##12% ####1,239##Discounted cash flows####Credit correlation##35%####70%##51% ##########Yield##5%####20%##12% ##########Loss severity##0%####100%##50% Other level 3 assets and liabilities, net(f)####920##############


(a)The categories presented in the table have been aggregated based upon the product type, which may differ from their classification on the Consolidated balance sheets. Furthermore, the inputs presented for each valuation technique in the table are, in some cases, not applicable to every instrument valued using the technique as the characteristics of the instruments can differ.


(b)Comprises U.S. GSE and government agency securities of $758 million, nonagency securities of $5 million and non-trading loans of $980 million.


(c)Comprises nonagency securities of $12 million, trading loans of $65 million and non-trading loans of $1.4 billion.


(d)Comprises trading loans of $619 million and non-trading loans of $716 million.


(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 equity securities of $671 million including $544 million in Other assets, for which quoted prices are not readily available and the fair value is generally based on internal valuation techniques such as EBITDA multiples and comparable analysis. All other level 3 assets and liabilities 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.


JPM Changes in and ranges of unobservable inputs

The following discussion provides a description of the impact on a fair value measurement of a change in each unobservable input in isolation, and the interrelationship between unobservable inputs, where relevant and significant. The impact of changes in inputs may not be independent, as a change in one unobservable input may give rise to a change in another unobservable input. Where relationships do exist between two unobservable inputs, those relationships are discussed below. Relationships may also exist between observable and unobservable inputs (for example, as observable interest rates rise, unobservable prepayment rates decline); such relationships have not been included in the discussion below. In addition, for each of the individual relationships described below, the inverse relationship would also generally apply.


The following discussion also provides a description of attributes of the underlying instruments and external market factors that affect the range of inputs used in the valuation of the Firm’s positions.


Yield – The yield of an asset is the interest rate used to discount future cash flows in a discounted cash flow calculation. An increase in the yield, in isolation, would result in a decrease in a fair value measurement.


Credit spread – The credit spread is the amount of additional annualized return over the market interest rate that a market participant would demand for taking exposure to the credit risk of an instrument. The credit spread for an instrument forms part of the discount rate used in a discounted cash flow calculation. Generally, an increase in the credit spread would result in a decrease in a fair value measurement.


The yield and the credit spread of a particular mortgage-backed security primarily reflect the risk inherent in the instrument. The yield is also impacted by the absolute level of the coupon paid by the instrument (which may not correspond directly to the level of inherent risk). Therefore, the range of yield and credit spreads reflects the range of risk inherent in various instruments owned by the Firm. The risk inherent in mortgage-backed securities is driven by the subordination of the security being valued and the characteristics of the underlying mortgages within the collateralized pool, including borrower FICO scores, LTV ratios for residential mortgages and the nature of the property and/or any tenants for commercial mortgages. For corporate debt securities, obligations of U.S. states and municipalities and other similar instruments, credit spreads reflect the credit quality of the obligor and the tenor of the obligation.


Prepayment speed – The prepayment speed is a measure of the voluntary unscheduled principal repayments of a prepayable obligation in a collateralized pool. Prepayment speeds generally decline as borrower delinquencies rise. An increase in prepayment speeds, in isolation, would result in a decrease in a fair value measurement of assets valued at a premium to par and an increase in a fair value measurement of assets valued at a discount to par.


Prepayment speeds may vary from collateral pool to collateral pool, and are driven by the type and location of the underlying borrower, and the remaining tenor of the obligation as well as the level and type (e.g., fixed or floating) of interest rate being paid by the borrower. Typically collateral pools with higher borrower credit quality have a higher prepayment rate than those with lower borrower credit quality, all other factors being equal.


Conditional default rate – The conditional default rate is a measure of the reduction in the outstanding collateral balance underlying a collateralized obligation as a result of defaults. While there is typically no direct relationship between conditional default rates and prepayment speeds, collateralized obligations for which the underlying collateral has high prepayment speeds will tend to have lower conditional default rates. An increase in conditional default rates would generally be accompanied by an increase in loss severity and an increase in credit spreads. An increase in the conditional default rate, in isolation, would result in a decrease in a fair value measurement. Conditional default rates reflect the quality of the collateral underlying a securitization and the structure of the securitization itself. Based on the types of securities owned in the Firm’s market-making portfolios, conditional default rates are most typically at the lower end of the range presented.


Loss severity – The loss severity (the inverse concept is the recovery rate) is the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding loan balance. An increase in loss severity is generally accompanied by an increase in conditional default rates. An increase in the loss severity, in isolation, would result in a decrease in a fair value measurement.


The loss severity applied in valuing a mortgage-backed security depends on factors relating to the underlying mortgages, including the LTV ratio, the nature of the lender’s lien on the property and other instrument-specific factors.


Correlation – Correlation is a measure of the relationship between the movements of two variables. Correlation is a pricing input for a derivative product where the payoff is driven by one or more underlying risks. Correlation inputs are related to the type of derivative (e.g., interest rate, credit, equity, foreign exchange and commodity) due to the nature of the underlying risks. When parameters are positively correlated, an increase in one parameter will result in an increase in the other parameter. When parameters are negatively correlated, an increase in one parameter will result in a decrease in the other parameter. An increase in correlation can result in an increase or a decrease in a fair value measurement. Given a short correlation position, an increase in correlation, in isolation, would generally result in a decrease in a fair value measurement.


The level of correlation used in the valuation of derivatives with multiple underlying risks depends on a number of factors including the nature of those risks. For example, the correlation between two credit risk exposures would be different than that between two interest rate risk exposures. Similarly, the tenor of the transaction may also impact the correlation input, as the relationship between the underlying risks may be different over different time periods. Furthermore, correlation levels are very much dependent on market conditions and could have a relatively wide range of levels within or across asset classes over time, particularly in volatile market conditions.


Volatility – Volatility is a measure of the variability in possible returns for an instrument, parameter or market index given how much the particular instrument, parameter or index changes in value over time. Volatility is a pricing input for options, including equity options, commodity options, and interest rate options. Generally, the higher the volatility of the underlying, the riskier the instrument. Given a long position in an option, an increase in volatility, in isolation, would generally result in an increase in a fair value measurement.


The level of volatility used in the valuation of a particular option-based derivative depends on a number of factors, including the nature of the risk underlying the option (e.g., the volatility of a particular equity security may be significantly different from that of a particular commodity index), the tenor of the derivative as well as the strike price of the option.


Bermudan switch value – The switch value is the difference between the overall value of a Bermudan swaption, which can be exercised at multiple points in time, and its most expensive European swaption and reflects the additional value that the multiple exercise dates provide the holder. Switch values are dependent on market conditions and can vary greatly depending on a number of factors, such as the tenor of the underlying swap as well as the strike price of the option. An increase in switch value, in isolation, would generally result in an increase in a fair value measurement.


Interest rate curve – The interest rate curve represents the relationship of interest rates over differing tenors. The interest rate curve is used to set interest rate and foreign exchange derivative cash flows and is also a pricing input used in the discounting of any derivative cash flow.


Forward price – The forward price is the price at which the buyer agrees to purchase the asset underlying a forward contract on the predetermined future delivery date, and is such that the value of the contract is zero at inception.


The forward price is used as an input in the valuation of certain derivatives and depends on a number of factors including interest rates, the current price of the underlying asset, and the expected income to be received and costs to be incurred by the seller as a result of holding that asset until the delivery date. An increase in the forward can result in an increase or a decrease in a fair value measurement.


JPM Changes in level 3 recurring fair value measurements

The following tables include a rollforward of the Consolidated balance sheets amounts (including changes in fair value) for financial instruments classified by the Firm within level 3 of the fair value hierarchy for the years ended December 31, 2023, 2022 and 2021. 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. 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.


JPM 186 JPMorgan Chase & Co./2023 Form 10-K

######################Fair value measurements using significant unobservable inputs########################## Year ended December 31, 2023 (in millions)####Fair value at January 1, 2023######Total realized/unrealized gains/(losses)######################Transfers into level 3####Transfers (out of) level 3####Fair value at Dec. 31, 2023######Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2023## ################Purchases(g)####Sales########Settlements(h)#################### Assets:(a)################################################ Federal funds sold and securities purchased under resale agreements##$##—##$##—######$##—##$##—######$##—##$##—##$##—##$##—##$##—#### Trading assets:################################################ Debt instruments:################################################ Mortgage-backed securities:################################################ U.S. GSEs and government agencies####759####4########249####(133)########(107)####—####(14)####758####1#### Residential – nonagency####5####6########—####(6)########(1)####1####—####5####1#### Commercial – nonagency####7####6########—####—########(1)####8####(8)####12####7#### Total mortgage-backed securities####771####16########249####(139)########(109)####9####(22)####775####9#### Obligations of U.S. states and municipalities####7####—########1####—########(1)####3####—####10####—#### Non-U.S. government debt securities####155####74########217####(254)########—####22####(35)####179####74#### Corporate debt securities####463####36########322####(172)########(41)####114####(238)####484####35#### Loans####759####(15)########1,027####(499)########(441)####382####(529)####684####30#### Asset-backed securities####23####—########7####(12)########(1)####5####(16)####6####—#### Total debt instruments####2,178####111########1,823####(1,076)########(593)####535####(840)####2,138####148#### Equity securities####665####(53)########164####(239)########(384)####192####(218)####127####(422)#### Physical commodities####2####—########7####—########(2)####—####—####7####—#### Other####64####(58)########141####—########(5)####1####(42)####101####(28)#### Total trading assets – debt and equity instruments####2,909####—########2,135####(1,315)########(984)####728####(1,100)####2,373####(302)####(c) Net derivative receivables:(b)################################################ Interest rate####701####556########251####(255)########654####(1,117)####(288)####502####419#### Credit####13####304########(60)####(25)########47####15####(29)####265####230#### Foreign exchange####489####31########151####(144)########(187)####144####(422)####62####(80)#### Equity####(384)####191########928####(1,931)########(1,306)####700####(600)####(2,402)####(646)#### Commodity####(146)####(59)########59####(290)########(51)####(11)####219####(279)####(144)#### Total net derivative receivables####673####1,023####(c)####1,329####(2,645)########(843)####(269)####(1,120)####(1,852)####(221)####(c) Available-for-sale securities:################################################ Corporate debt securities####239####24########—####(225)########—####—####(38)####—####—#### Total available-for-sale securities####239####24####(d)####—####(225)########—####—####(38)####—####—#### Loans####1,418####289####(c)####2,398####(120)########(1,147)####1,306####(1,065)####3,079####293####(c) Mortgage servicing rights####7,973####467####(e)####1,281####(188)########(1,011)####—####—####8,522####467####(e) Other assets####405####(36)####(c)####525####(20)########(147)####45####(14)####758####(82)####(c) ######################Fair value measurements using significant unobservable inputs########################## Year ended December 31, 2023 (in millions)####Fair value at January 1, 2023######Total realized/unrealized (gains)/losses##########################Transfers (out of) level 3####Fair value at Dec. 31, 2023######Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2023## ################Purchases####Sales####Issuances####Settlements(h)####Transfers into level 3################ Liabilities:(a)################################################ Deposits##$##2,162##$##95####(c)(f)##$##—##$##—##$##940##$##(1,043)##$##—##$##(321)##$##1,833##$##73####(c)(f) Short-term borrowings####1,401####201####(c)(f)####—####—####4,522####(4,345)####3####(24)####1,758####14####(c)(f) Trading liabilities – debt and equity instruments####84####(21)####(c)####(32)####9####—####(2)####19####(20)####37####—#### Accounts payable and other liabilities####53####(4)####(c)####(16)####24####—####—####8####(13)####52####(4)####(c) Long-term debt####24,092####3,010####(c)(f)####—####—####12,679####(11,555)####229####(729)####27,726####2,870####(c)(f)


####################Fair value measurements using significant unobservable inputs############ Year ended December 31, 2022 (in millions)####Fair value at January 1, 2022####Total realized/unrealized gains/(losses)######################## ##############Purchases(g)####Sales##########Settlements(h)####Transfers into level 3 Assets:(a)################################ Federal funds sold and securities purchased under resale agreements##$##—####$##—######$##1##$##(1)########$##(1) Trading assets:################################ Debt instruments:################################ Mortgage-backed securities:################################ U.S. GSEs and government agencies####265######31########673####(125)##########(84) Residential – nonagency####28######(1)########7####(5)##########(12) Commercial – nonagency####10######—########—####(1)##########— Total mortgage-backed securities####303######30########680####(131)##########(96) Obligations of U.S. states and municipalities####7######—########—####—##########— Non-U.S. government debt securities####81######(92)########494####(338)##########(4) Corporate debt securities####332######(30)########404####(178)##########(100) Loans####708######(51)########652####(605)##########(230) Asset-backed securities####26######5########19####(24)##########(1) Total debt instruments####1,457######(138)########2,249####(1,276)##########(431) Equity securities####662######(1,036)########473####(377)##########(2) Physical commodities####—######(1)########3####—##########— Other####160######93########37####—##########(221) Total trading assets – debt and equity instruments####2,279######(1,082)####(c)####2,762####(1,653)##########(654) Net derivative receivables:(b)################################ Interest rate####(16)######187########325####(483)##########329 Credit####74######226########17####(9)##########(271) Foreign exchange####(419)######726########215####(114)##########83 Equity####(3,626)######5,016########1,226####(2,530)##########96 Commodity####(907)######571########110####(331)##########350 Total net derivative receivables####(4,894)######6,726####(c)####1,893####(3,467)##########587 Available-for-sale securities:################################ Corporate debt securities####161######5########88####—##########(15) Total available-for-sale securities####161######5####(d)####88####—##########(15) Loans####1,933######(158)####(c)####568####(261)##########(886) Mortgage servicing rights####5,494######2,039####(e)####2,198####(822)##########(936) Other assets####306######194####(c)####50####(38)##########(103) ####################Fair value measurements using significant unobservable inputs############ Year ended December 31, 2022 (in millions)####Fair value at January 1, 2022########Total realized/unrealized (gains)/losses#################### ######Purchases############Sales####Issuances######Settlements(h)####Transfers into level 3 Liabilities:(a)################################ Deposits##$##2,317####$##(292)####(c)(f)##$##—##$##—##$##531####$##(114) Short-term borrowings####2,481######(358)####(c)(f)####—####—####3,963######(4,685) Trading liabilities – debt and equity instruments####30######(31)####(c)####(41)####77####—######— Accounts payable and other liabilities####69######(16)####(c)####(37)####42####—######— Long-term debt####24,374######(3,869)####(c)(f)####—####—####12,714######(8,876)


JPM 188 JPMorgan Chase & Co./2023 Form 10-K

######################Fair value measurements using significant unobservable inputs######## Year ended December 31, 2021 (in millions)####Fair value at January 1, 2021######Total realized/unrealized gains/(losses)#################### ################Purchases(g)####Sales##########Settlements(h) Assets:(a)############################## Federal funds sold and securities purchased under resale agreements##$##—##$##—######$##—##$##—########$##— Trading assets:############################## Debt instruments:############################## Mortgage-backed securities:############################## U.S. GSEs and government agencies####449####(28)########21####(67)##########(110) Residential – nonagency####28####—########26####(24)##########(5) Commercial – nonagency####3####5########12####(7)##########(17) Total mortgage-backed securities####480####(23)########59####(98)##########(132) Obligations of U.S. states and municipalities####8####—########—####—##########(1) Non-U.S. government debt securities####182####(14)########359####(332)##########(7) Corporate debt securities####507####(23)########404####(489)##########(4) Loans####893####2########994####(669)##########(287) Asset-backed securities####28####28########76####(99)##########(2) Total debt instruments####2,098####(30)########1,892####(1,687)##########(433) Equity securities####476####(77)########378####(168)##########— Physical commodities####—####—########—####—##########— Other####49####74########233####—##########(98) Total trading assets – debt and equity instruments####2,623####(33)####(c)####2,503####(1,855)##########(531) Net derivative receivables:(b)############################## Interest rate####258####1,789########116####(192)##########(2,011) Credit####(224)####130########6####(12)##########146 Foreign exchange####(434)####(209)########110####(110)##########222 Equity####(3,862)####(480)########1,285####(2,813)##########1,758 Commodity####(731)####(728)########145####(493)##########916 Total net derivative receivables####(4,993)####502####(c)####1,662####(3,620)##########1,031 Available-for-sale securities:############################## Corporate debt securities####—####(1)########162####—##########— Total available-for-sale securities####—####(1)####(d)####162####—##########— Loans####2,305####(87)####(c)####612####(439)##########(965) Mortgage servicing rights####3,276####98####(e)####3,022####(114)##########(788) Other assets####538####16####(c)####9####(17)##########(239) ######################Fair value measurements using significant unobservable inputs######## Year ended December 31, 2021 (in millions)####Fair value at January 1, 2021######Total realized/unrealized (gains)/losses#################### ################Purchases####Sales######Issuances####Settlements(h) Liabilities:(a)############################## Deposits##$##2,913##$##(80)####(c)(f)##$##—##$##—####$##431##$##(467) Short-term borrowings####2,420####(1,391)####(c)(f)####—####—######6,823####(5,308) Trading liabilities – debt and equity instruments####51####(8)####(c)####(101)####38######—####— Accounts payable and other liabilities####68####8####(c)####—####1######—####— Long-term debt####23,397####369####(c)(f)####—####—######13,505####(12,191)


(a)Level 3 assets at fair value as a percentage of total Firm assets at fair value (including assets measured at fair value on a nonrecurring basis) were 2% at December 31, 2023, 2022 and 2021. Level 3 liabilities at fair value as a percentage of total Firm liabilities at fair value (including liabilities measured at fair value on a nonrecurring basis) were 8% at both December 31, 2023 and December 31, 2022 and 10% at December 31, 2021.


(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)Realized gains/(losses) on AFS securities are reported in investment securities gains/(losses). Unrealized gains/(losses) are reported in OCI. Realized and unrealized gains/(losses) recorded on level 3 AFS securities were not material for the years ended December 31, 2023, 2022 and 2021.


(e)Changes in fair value for MSRs are reported in mortgage fees and related income.


(f)Realized (gains)/losses due to DVA for fair value option elected liabilities are reported in principal transactions revenue, and were not material for the years ended December 31, 2023, 2022 and 2021. Unrealized (gains)/losses are reported in OCI, and were $(158) million, $(529) million and $258 million for the years ended December 31, 2023, 2022 and 2021, respectively.


(g)Loan originations are included in purchases.


(h)Includes financial assets and liabilities that have matured, been partially or fully repaid, impacts of modifications, deconsolidations associated with beneficial interests in VIEs and other items.


JPM Consolidated balance sheets changes

The following describes significant changes to level 3 assets since December 31, 2022, 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 193 for further information on changes impacting items measured at fair value on a nonrecurring basis.


JPM For the year ended December 31, 2023

Level 3 assets were $23.7 billion at December 31, 2023, reflecting an increase of $30 million from December 31, 2022.


The increase for the year ended December 31, 2023 was driven by: •$1.7 billion increase in non-trading loans largely due to $1.1 billion of loans in CIB associated with First Republic. •$549 million increase in MSRs,


predominantly offset by: •$1.8 billion decrease in gross derivative receivables due to settlements and net transfers largely offset by gains and purchases.


Refer to Note 15 for information on MSRs.


Refer to the sections below for additional information.


JPM fair value on a recurring basis

During the year ended December 31, 2023, significant transfers from level 2 into level 3 included the following: •$951 million of gross interest rate derivative receivables as a result of a decrease in observability and an increase in the significance of unobservable inputs and $2.1 billion of gross interest rate derivative payables as a result of transition to term SOFR for certain interest rate options. •$1.5 billion of gross equity derivative receivables and $829 million of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs. •$1.3 billion of non-trading loans driven by a decrease in observability.


JPM fair value on a recurring basis

During the year ended December 31, 2023, significant transfers from level 3 into level 2 included the following: •$1.1 billion of total debt and equity instruments, partially due to trading loans, driven by an increase in observability. •$921 million of gross interest rate derivative receivables as a result of an increase in observability and a decrease in the significance of unobservable inputs. •$2.3 billion of gross equity derivative receivables and $1.7 billion of gross equity derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs. •$1.1 billion of non-trading loans as a result of an increase in observability and a decrease in the significance of unobservable inputs.


JPM fair value on a recurring basis

During the year ended December 31, 2022, significant transfers from level 2 into level 3 included the following: •$2.4 billion of total debt and equity instruments, predominantly due to equity securities of $1.1 billion driven by a decrease in observability predominantly as a result of restricted access to certain markets and trading loans of $925 million driven by a decrease in observability. •$1.6 billion of gross interest rate derivative receivables and $878 million of gross interest rate derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs. •$1.6 billion of gross equity derivative receivables and $2.3 billion of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs. •$1.1 billion of non-trading loans driven by a decrease in observability. •$793 million of long-term debt driven by a decrease in observability and an increase in the significance of unobservable inputs for structured notes.


JPM 190 JPMorgan Chase & Co./2023 Form 10-K

During the year ended December 31, 2022, significant transfers from level 3 into level 2 included the following: •$1.2 billion of total debt and equity instruments, largely due to trading loans, driven by an increase in observability. •$1.2 billion of gross interest rate derivative receivables and $807 million of gross interest rate derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs. •$2.2 billion of gross equity derivative receivables and $2.3 billion of gross equity derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs. •$831 million of non-trading loans driven by an increase in observability. •$1.0 billion of long-term debt driven by an increase in observability and a decrease in the significance of unobservable inputs for structured notes.


During the year ended December 31, 2021, significant transfers from level 2 into level 3 included the following: •$1.0 billion of total debt and equity instruments, largely due to trading loans, driven by a decrease in observability. •$1.5 billion of gross equity derivative receivables and $1.2 billion of gross equity derivative payables as a result of a decrease in observability and an increase in the significance of unobservable inputs. •$1.3 billion of non-trading loans driven by a decrease in observability.


During the year ended December 31, 2021, significant transfers from level 3 into level 2 included the following: •$1.4 billion of total debt and equity instruments, largely due to trading loans, driven by an increase in observability. •$1.9 billion of gross equity derivative receivables and $2.1 billion of gross equity derivative payables as a result of an increase in observability and a decrease in the significance of unobservable inputs. •$794 million of non-trading loans driven by an increase in observability. •$809 million of long-term debt driven by an increase in observability and a decrease in the significance of unobservable inputs for structured notes.


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.


JPM Gains and losses

The following describes significant components of total realized/unrealized gains/(losses) for instruments measured at fair value on a recurring basis for the years ended December 31, 2023, 2022 and 2021. 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 186–190 for further information on these instruments. •$1.8 billion of net gains on assets, largely driven by gains in net interest rate derivative receivables due to market movements and gains in MSRs reflecting lower prepayment speeds on higher rates. •$3.3 billion of net losses on liabilities, predominantly driven by losses in long-term debt due to market movements. •$7.7 billion of net gains on assets, predominantly driven by gains in net equity derivative receivables due to market movements and gains in MSRs reflecting lower prepayment speeds on higher rates. •$4.6 billion of net gains on liabilities, predominantly driven by a decline in the fair value of long-term debt due to market movements. •$495 million of net gains on assets, driven by gains in net interest rate derivative receivables due to market movements, partially offset by losses in net equity derivative receivables and net commodity derivative receivables due to market movements. •$1.1 billion of net gains on liabilities, driven by gains in short-term borrowings due to market movements.


JPM Gains and losses


JPM Credit and funding adjustments – derivatives

Derivatives are generally valued using models that use as their basis observable market parameters. These market parameters generally do not consider factors such as counterparty nonperformance risk, the Firm’s own credit quality, and funding costs. Therefore, it is generally necessary to make adjustments to the base estimate of fair value to reflect these factors.


CVA represents the adjustment, relative to the relevant benchmark interest rate, necessary to reflect counterparty nonperformance risk. The Firm estimates CVA using a scenario analysis to estimate the expected positive credit exposure across all of the Firm’s existing positions with each counterparty, and then estimates losses based on the probability of default and estimated recovery rate as a result of a counterparty credit event considering contractual factors designed to mitigate the Firm’s credit exposure, such as collateral and legal rights of offset. The key inputs to this methodology are (i) the probability of a default event occurring for each counterparty, as derived from observed or estimated CDS spreads; and (ii) estimated recovery rates implied by CDS spreads, adjusted to consider the differences in recovery rates as a derivative creditor relative to those reflected in CDS spreads, which generally reflect senior unsecured creditor risk.


FVA represents the adjustment to reflect the impact of funding and is recognized where there is evidence that a market participant in the principal market would incorporate it in a transfer of the instrument. The Firm’s FVA framework, applied to uncollateralized (including partially collateralized) over-the-counter (“OTC”) derivatives incorporates key inputs such as: (i) the expected funding requirements arising from the Firm’s positions with


each counterparty and collateral arrangements; and (ii) the estimated market funding cost in the principal market which, for derivative liabilities, considers the Firm’s credit risk (DVA). For collateralized derivatives, the fair value is estimated by discounting expected future cash flows at the relevant overnight indexed swap rate given the underlying collateral agreement with the counterparty, and therefore a separate FVA is not necessary.


The following table provides the impact of credit and funding adjustments on principal transactions revenue in the respective periods, excluding the effect of any associated hedging activities. The FVA presented below includes the impact of the Firm’s own credit quality on the inception value of liabilities as well as the impact of changes in the Firm’s own credit quality over time. Year ended December 31, (in millions)####2023####2022####2021 Credit and funding adjustments:############ Derivatives CVA##$##221##$##22##$##362 Derivatives FVA####114####42####47


JPM Valuation adjustments on fair value option elected liabilities

The valuation of the Firm’s liabilities for which the fair value option has been elected requires consideration of the Firm’s own credit risk. DVA on fair value option elected liabilities reflects changes (subsequent to the issuance of the liability) in the Firm’s probability of default and LGD, which are estimated based on changes in the Firm’s credit spread observed in the bond market. Realized (gains)/losses due to DVA for fair value option elected liabilities are reported in principal transactions revenue. Unrealized (gains)/losses are reported in OCI. Refer to page 190 in this Note and Note 24 for further information.


JPM 192 JPMorgan Chase & Co./2023 Form 10-K

Assets and liabilities measured at fair value on a nonrecurring basis


The following tables present the assets and liabilities held as of December 31, 2023 and 2022, for which nonrecurring fair value adjustments were recorded during the years ended December 31, 2023 and 2022, by major product category and fair value hierarchy. December 31, 2023 (in millions)########Fair value hierarchy#### ####Level 1####Level 2####Level 3 Loans##$##—##$##599##$##1,156 Other assets(a)####—####52####1,334 Total assets measured at fair value on a nonrecurring basis##$##—##$##651##$##2,490 Accounts payable and other liabilities####—####—####— Total liabilities measured at fair value on a nonrecurring basis##$##—##$##—##$##— December 31, 2022 (in millions)########Fair value hierarchy#### ####Level 1####Level 2####Level 3 Loans##$##—##$##643##$##627 Other assets####—####36####1,352 Total assets measured at fair value on a nonrecurring basis##$##—##$##679##$##1,979 Accounts payable and other liabilities####—####—####84 Total liabilities measured at fair value on a nonrecurring basis##$##—##$##—##$##84


(a) Included impairments on certain equity method investments, as well as 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 $1.3 billion in level 3 assets measured at fair value on a nonrecurring basis as of December 31, 2023, $412 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.


JPM 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 years ended December 31, 2023, 2022 and 2021, related to assets and liabilities held at those dates. December 31, (in millions)####2023####2022####2021 Loans##$##(276)##$##(55)##$##(72) Other assets(a)####(789)####(409)####344 Accounts payable and other liabilities####—####(83)####5 Total nonrecurring fair value gains/(losses)##$##(1,065)##$##(547)##$##277


JPM Nonrecurring fair value changes

(a)Included $(232) million, $(338) million and $379 million for the years ended December 31, 2023, 2022 and 2021, respectively, of net gains/(losses) as a result of the measurement alternative. The current period also included impairments on certain equity method investments.


JPM Nonrecurring fair value changes

Refer to Note 12 for further information about the measurement of collateral-dependent loans.


JPM 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 (i.e., measurement alternative), with such changes recognized in other income.


In its determination of the new carrying values upon observable price changes, the Firm may adjust the prices if deemed necessary to arrive at the Firm’s estimated fair values. Such adjustments may include adjustments to reflect the different rights and obligations of similar securities, and other adjustments that are consistent with the Firm’s valuation techniques for private equity direct investments.


The following table presents the carrying value of equity securities without readily determinable fair values held as of December 31, 2023 and 2022, that are measured under the measurement alternative and the related adjustments recorded during the periods presented for those securities with observable price changes. These securities are included in the nonrecurring fair value tables when applicable price changes are observable. As of or for the year ended December 31,######## (in millions)####2023####2022 Other assets######## Carrying value(a)##$##4,457##$##4,096 Upward carrying value changes(b)####93####488 Downward carrying value changes/impairment(c)####(325)####(826)


(a)The period-end carrying values reflect cumulative purchases and sales in addition to upward and downward carrying value changes.


(b)The cumulative upward carrying value changes between January 1, 2018 and December 31, 2023 were $1.2 billion.


(c)The cumulative downward carrying value changes/impairment between January 1, 2018 and December 31, 2023 were $(1.2) billion.


Included in other assets above is the Firm’s interest in approximately 37 million Visa Class B common shares (“Visa B shares”). These shares are subject to certain transfer restrictions and are convertible into Visa Class A common shares (“Visa A shares”) at a specified conversion rate upon final resolution of certain litigation matters involving Visa. The conversion rate of Visa B shares to Visa A shares was 1.5875 at December 31, 2023 and may be adjusted by Visa depending on developments related to the litigation matters. The outcome of those litigation matters, and the effect that the resolution of those matters may have on the conversion rate, is unknown. Accordingly, as of December 31, 2023, there is significant uncertainty regarding when the transfer restrictions on Visa B shares may be terminated and what the final conversion rate for the Visa B shares will be. As a result of these considerations, as well as differences in voting rights, Visa B shares are not considered to be similar to Visa A shares, and they continue to be held at their nominal carrying value.


In connection with prior sales of Visa B shares, the Firm has entered into derivative instruments with the purchasers of the shares under which the Firm retains the risk associated with changes in the conversion rate. Under the terms of the derivative instruments, the Firm will (a) make or receive payments based on subsequent changes in the conversion rate and (b) make periodic interest payments to the purchasers of the Visa B shares. The payments under the derivative instruments will continue as long as the Visa B shares remain subject to transfer restrictions. The derivative instruments are accounted for at fair value using a discounted cash flow methodology based upon the Firm’s estimate of the timing and magnitude of final resolution of the litigation matters. The derivative instruments are recorded in trading liabilities, and changes in fair value are recognized in other income. As of December 31, 2023, the Firm held derivative instruments associated with 23 million Visa B shares that the Firm had previously sold, which are all subject to similar terms and conditions.


On January 24, 2024, Visa filed a Current Report on Form 8-K with the SEC announcing that Visa’s stockholders approved amendments to its Certificate of Incorporation that redenominate the Visa B shares to Visa Class B-1 common shares (“Visa B-1 shares”) and authorize Visa to conduct one or more exchange offers ("the Program") which, if conducted, would have the effect of releasing transfer restrictions on a portion of Visa's B-1 shares through an exchange for Visa Class C common shares (“Visa C shares”). The Program would entitle the Firm to exchange its Visa B-1 shares, for Visa Class B-2 common shares (”Visa B-2 shares”) and Visa C shares, through an initial exchange offer if and when conducted by Visa. The Visa B-2 shares would continue to be subject to the transfer restrictions associated with the Visa B shares. The Firm is then entitled to sell the Visa C shares received after a brief lock-up period expires, and Visa is also authorized to extend offers for potential future exchanges, each enabling the release of additional Visa B shares if certain conditions are met. The timing and likelihood of any initial or future exchange offer is dependent upon actions taken by Visa and other factors that may be outside of the Firm’s control.


JPM 194 JPMorgan Chase & Co./2023 Form 10-K

Additional disclosures about the fair value of financial instruments that are not carried on the Consolidated balance sheets at fair value


U.S. GAAP requires disclosure of the estimated fair value of certain financial instruments, which are included in the following table. However, this table does not include other items, such as nonfinancial assets, intangible assets, certain financial instruments, and customer relationships. In the opinion of management, these items, in the aggregate, add significant value to JPMorgan Chase.


JPM Financial instruments for which carrying value approximates fair value

Certain financial instruments that are not carried at fair value on the Consolidated balance sheets are carried at


amounts that approximate fair value, due to their short-term nature and generally negligible credit risk. These instruments include cash and due from banks, deposits with banks, federal funds sold, securities purchased under resale agreements and securities borrowed, short-term receivables and accrued interest receivable, short-term borrowings, federal funds purchased, securities loaned and sold under repurchase agreements, accounts payable, and accrued liabilities. In addition, U.S. GAAP requires that the fair value of deposit liabilities with no stated maturity (i.e., demand, savings and certain money market deposits) be equal to their carrying value; recognition of the inherent funding value of these instruments is not permitted.


The following table presents, by fair value hierarchy classification, the carrying values and estimated fair values at December 31, 2023 and 2022, of financial assets and liabilities, excluding financial instruments that are carried at fair value on a recurring basis, and their classification within the fair value hierarchy. ############December 31, 2023####################December 31, 2022######## ############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##$##29.1##$##29.1##$##—##$##—##$##29.1##$##27.7##$##27.7##$##—##$##—##$##27.7 Deposits with banks####595.1####594.6####0.5####—####595.1####539.5####539.3####0.2####—####539.5 Accrued interest and accounts receivable####107.1####—####107.0####0.1####107.1####124.7####—####124.6####0.1####124.7 Federal funds sold and securities purchased under resale agreements####16.3####—####16.3####—####16.3####3.7####—####3.7####—####3.7 Securities borrowed####130.3####—####130.3####—####130.3####115.3####—####115.3####—####115.3 Investment securities, held-to-maturity####369.8####160.6####182.2####—####342.8####425.3####189.1####199.5####—####388.6 Loans, net of allowance for loan losses(a)####1,262.5####—####285.6####964.6####1,250.2####1,073.9####—####194.0####853.9####1,047.9 Other####76.1####—####74.9####1.4####76.3####101.2####—####99.6####1.7####101.3 Financial liabilities######################################## Deposits##$##2,322.3##$##—##$##2,322.6##$##—##$##2,322.6##$##2,311.6##$##—##$##2,311.5##$##—##$##2,311.5 Federal funds purchased and securities loaned or sold under repurchase agreements####47.5####—####47.5####—####47.5####50.6####—####50.6####—####50.6 Short-term borrowings(b)####24.7####—####24.7####—####24.7####28.2####—####28.2####—####28.2 Accounts payable and other liabilities####241.8####—####233.3####8.1####241.4####257.5####—####251.2####5.6####256.8 Beneficial interests issued by consolidated VIEs####23.0####—####23.0####—####23.0####12.6####—####12.6####—####12.6 Long-term debt(b)####303.9####—####252.2####51.3####303.5####223.6####—####216.5####2.8####219.3


(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.