JP Morgan Chase 2008 Annual Report Download - page 215

JPMorgan Chase & Co./ 2008 Annual Report 213
Note 31 – Commitments and contingencies
At December 31, 2008, JPMorgan Chase and its subsidiaries were
obligated under a number of noncancelable operating leases for
premises and equipment used primarily for banking purposes, and
for energy-related tolling service agreements. Certain leases contain
renewal options or escalation clauses providing for increased rental
payments based upon maintenance, utility and tax increases or
require the Firm to perform restoration work on leased premises. No
lease agreement imposes restrictions on the Firm’s ability to pay divi-
dends, engage in debt or equity financing transactions or enter into
further lease agreements.
The following table presents required future minimum rental pay-
ments under operating leases with noncancelable lease terms that
expire after December 31, 2008.
Year ended December 31, (in millions)
2009 $ 1,676
2010 1,672
2011 1,543
2012 1,456
2013 1,387
After 2013 9,134
Total minimum payments required(a) 16,868
Less: Sublease rentals under noncancelable subleases (2,266)
Net minimum payment required $ 14,602
(a) Lease restoration obligations are accrued in accordance with SFAS 13, and are not
reported as a required minimum lease payment.
Total rental expense was as follows.
Year ended December 31, (in millions) 2008 2007 2006
Gross rental expense $1,917 $1,380 $1,266
Sublease rental income (415) (175) (194)
Net rental expense $1,502 $1,205 $1,072
At December 31, 2008, assets were pledged to secure public
deposits and for other purposes. The significant components of the
assets pledged were as follows.
December 31, (in billions) 2008 2007
Reverse repurchase/securities borrowing
agreements $ 456.6 $ 333.7
Securities 31.0 4.5
Loans 342.3 160.4
Trading assets and other 98.0 102.2
Total assets pledged(a) $ 927.9 $ 600.8
(a) Total assets pledged do not include assets of consolidated VIEs.These assets are gen-
erally used to satisfy liabilities to third parties. See Note 17 on pages 189–198 of this
Annual Report for additional information on assets and liabilities of consolidated VIEs.
The Firm has resolved with the IRS issues related to compliance with
reporting and withholding requirements for certain accounts transferred
to The Bank of New York Mellon Corporation (“BNYM”) in connection
with the Firm’s sale to BNYM of its corporate trust business. The resolu-
tion of these issues did not have a material effect on the Firm.
The following table shows the components of the Firm’s Tier 1 and
Total capital.
December 31, (in millions) 2008 2007
Tier 1 capital
Total stockholders’ equity $166,884 $123,221
Effect of certain items in accumulated
other comprehensive income (loss)
excluded from Tier 1 capital 5,084 925
Adjusted stockholders’ equity 171,968 124,146
Minority interest(a) 17,257 15,005
Less: Goodwill 48,027 45,270
SFAS 157 DVA 2,358 882
Investments in certain subsidiaries 679 782
Nonqualifying intangible assets 2,057 3,471
Tier 1 capital 136,104 88,746
Tier 2 capital
Long-term debt and other instruments
qualifying as Tier 2 31,659 32,817
Qualifying allowance for credit losses 17,187 10,084
Adjustment for investments in certain
subsidiaries and other (230) 595
Tier 2 capital 48,616 43,496
Total qualifying capital $184,720 $132,242
(a) Primarily includes trust preferred capital debt securities of certain business trusts.