Management’s discussion and analysis ALLOWANCE FOR CREDIT LOSSES Effective January 1, 2020, the Firm adopted the CECL accounting guidance. The adoption of this guidance established a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. This framework requires that management’s estimate reflects credit losses over the instrument’s remaining expected life and considers expected future changes in macroeconomic conditions. Refer to Note 1 for further information. The Firm’s allowance for credit losses comprises: The allowance for credit losses increased compared with December 31, 2019, primarily reflecting the deterioration and uncertainty in the macroeconomic environment, in particular in the first half of 2020, as a result of the impact of the COVID-19 pandemic, consisting of: prospect that government and other consumer relief measures set to expire may not be extended, the Firm has placed significant weighting on its adverse scenarios. These scenarios incorporate more punitive macroeconomic factors than the central case assumptions, resulting in weighted average U.S. unemployment rates remaining elevated throughout 2021 and 2022, ending the fourth quarter of 2022 at approximately 6%, and in U.S. GDP ending 2022 approximately 0.9% higher than fourth quarter 2019 actual pre-pandemic levels. The Firm’s central case assumptions reflected U.S. unemployment rates and U.S. real GDP as follows: Subsequent changes to this forecast and related estimates will be reflected in the provision for credit losses in future periods.  Refer to Note 13 and Note 10 for a description of the policies, methodologies and judgments used to determine the Firm’s allowances for credit losses on loans, lending-related commitments, and investment securities. Refer to Critical Accounting Estimates Used by the Firm on pages 152- 155 for further information on the allowance for credit losses and related management judgments. Refer to Consumer Credit Portfolio on pages 114-120, Wholesale Credit Portfolio on pages 121-131 and Note 12 for additional information on the consumer and wholesale credit portfolios. The adoption of CECL on January 1, 2020, resulted in a $4.3 billion addition to the allowance for credit losses. The increase in the allowance for loan losses and lending-related commitments was primarily driven by an increase in the provision for credit losses, reflecting the deterioration in and uncertainty around the future macroeconomic environment as a result of the impact of the COVID-19 pandemic. As of December 31, 2020, the Firm’s central case reflected U.S. unemployment rates of approximately 7% through the second quarter of 2021 and remaining above 5% until the second half of 2022. This compared with relatively low levels of unemployment of approximately 4% throughout 2020 and 2021 in the Firm’s January 1, 2020 central case. Further, while the Firm’s January 1, 2020 central case U.S. GDP forecast reflected a 1.7% expansion in 2020, actual U.S. GDP contracted approximately 2.5% in 2020. As of December 31, 2020, the Firm’s central case assumptions reflect a return to pre-pandemic GDP levels in the fourth quarter of 2021. Due to elevated uncertainty in the near term outlook, driven by the potential for increased infection rates and related lock downs resulting from the pandemic, as well as the JPMorgan Chase & Co./2020 Form 10-K 132 • the allowance for loan losses, which covers the Firm’s retained loan portfolios (scored and risk-rated) and is presented separately on the Consolidated balance sheets, • the allowance for lending-related commitments, which is presented on the Consolidated balance sheets in accounts payable and other liabilities, and • the allowance for credit losses on investment securities, which covers the Firm’s HTM and AFS securities and is recognized within Investment Securities on the Consolidated balance sheets. • a net $7.4 billion addition in consumer, predominantly in the credit card portfolio, and • a net $4.7 billion addition in wholesale, across the LOBs, impacting multiple industries. (a) Reflects quarterly average of forecasted U.S. unemployment rate. (b) 4Q20 actual U.S. unemployment rate (quarterly average) was 6.8%. 4Q20 actual cumulative change in U.S. real GDP from 4Q19 was (2.5%). Assumptions at January 1, 2020 2Q20 4Q20 2Q21 U.S. unemployment rate 3.7 % 3.8 % 4.0 % Cumulative change in U.S. real GDP from 12/31/2019 0.9 % 1.7 % 2.4 % Assumptions at December 31, 2020 2Q21 4Q21 2Q22 U.S. unemployment rate 6.8 % 5.7 % 5.1 % Cumulative change in U.S. real GDP from 12/31/2019 (1.9)% 0.6 % 2.0 % (b) (a) (a) Discussion of changes in the allowance during 2020