JP Morgan Chase 2014 Annual Report Download - page 280

Notes to consolidated financial statements
278 JPMorgan Chase & Co./2014 Annual Report
The weighted-average contractual interest rates for total
long-term debt excluding structured notes accounted for at
fair value were 2.43% and 2.56% as of December 31,
2014 and 2013, respectively. In order to modify exposure
to interest rate and currency exchange rate movements,
JPMorgan Chase utilizes derivative instruments, primarily
interest rate and cross-currency interest rate swaps, in
conjunction with some of its debt issues. The use of these
instruments modifies the Firm’s interest expense on the
associated debt. The modified weighted-average interest
rates for total long-term debt, including the effects of
related derivative instruments, were 1.50% and 1.54% as
of December 31, 2014 and 2013, respectively.
The Parent Company has guaranteed certain long-term debt
of its subsidiaries, including both long-term debt and
structured notes sold as part of the Firm’s market-making
activities. These guarantees rank on parity with all of the
Firm’s other unsecured and unsubordinated indebtedness.
Guaranteed liabilities were $352 million and $478 million
at December 31, 2014 and 2013, respectively.
The Firm’s unsecured debt does not contain requirements
that would call for an acceleration of payments, maturities
or changes in the structure of the existing debt, provide any
limitations on future borrowings or require additional
collateral, based on unfavorable changes in the Firm’s credit
ratings, financial ratios, earnings or stock price.
Junior subordinated deferrable interest debentures held
by trusts that issued guaranteed capital debt securities
On May 8, 2013, the Firm redeemed approximately $5.0
billion, or 100% of the liquidation amount, of the following
eight series of guaranteed capital debt securities (“trust
preferred securities”): JPMorgan Chase Capital X, XI, XII,
XIV, XVI, XIX and XXIV, and BANK ONE Capital VI. Other
income for the year ended December 31, 2013, reflected a
modest loss related to the redemption of trust preferred
securities. On July 12, 2012, the Firm redeemed $9.0
billion, or 100% of the liquidation amount, of the following
nine series of trust preferred securities: JPMorgan Chase
Capital XV, XVII, XVIII, XX, XXII, XXV, XXVI, XXVII and XXVIII.
Other income for the year ended December 31, 2012,
reflected $888 million of pretax extinguishment gains
related to adjustments applied to the cost basis of the
redeemed trust preferred securities during the period they
were in a qualified hedge accounting relationship.
At December 31, 2014, the Firm had outstanding nine
wholly owned Delaware statutory business trusts (“issuer
trusts”) that had issued guaranteed capital debt securities.
The junior subordinated deferrable interest debentures
issued by the Firm to the issuer trusts, totaling $5.5 billion
and $5.4 billion at December 31, 2014 and 2013,
respectively, were reflected on the Firm’s Consolidated
balance sheets in long-term debt, and in the table on the
preceding page under the caption “Junior subordinated
debt” (i.e., trust preferred securities). The Firm also records
the common capital securities issued by the issuer trusts in
other assets in its Consolidated balance sheets at
December 31, 2014 and 2013. Beginning in 2014, the
debentures issued to the issuer trusts by the Firm, less the
common capital securities of the issuer trusts, began being
phased out from inclusion as Tier 1 capital under Basel III.
As of December 31, 2014, $2.7 billion of these debentures
qualified as Tier 1 capital, while $2.7 billion qualified as
Tier 2 capital. As of December 31, 2013, under Basel I, the
entire balance of these debentures qualified as Tier 1
capital.
The following is a summary of the outstanding trust preferred securities, including unamortized original issue discount, issued
by each trust, and the junior subordinated deferrable interest debenture issued to each trust, as of December 31, 2014.
December 31, 2014
(in millions)
Amount of trust
preferred
securities
issued by trust(a)
Principal
amount of
debenture
issued to trust(b) Issue date
Stated maturity
of trust
preferred
securities and
debentures
Earliest
redemption
date
Interest rate of
trust preferred
securities and
debentures
Interest
payment/
distribution
dates
Bank One Capital III $ 474 $ 726 2000 2030 Any time 8.75% Semiannually
Chase Capital II 482 498 1997 2027 Any time LIBOR + 0.50% Quarterly
Chase Capital III 296 305 1997 2027 Any time LIBOR + 0.55% Quarterly
Chase Capital VI 242 249 1998 2028 Any time LIBOR + 0.625% Quarterly
First Chicago NBD Capital I 249 257 1997 2027 Any time LIBOR + 0.55% Quarterly
JPMorgan Chase Capital XIII 466 480 2004 2034 Any time LIBOR + 0.95% Quarterly
JPMorgan Chase Capital XXI 836 838 2007 2037 Any time LIBOR + 0.95% Quarterly
JPMorgan Chase Capital XXIII 643 643 2007 2047 Any time LIBOR + 1.00% Quarterly
JPMorgan Chase Capital XXIX 1,500 1,500 2010 2040 2015 6.70% Quarterly
Total $ 5,188 $ 5,496
(a) Represents the amount of trust preferred securities issued to the public by each trust, including unamortized original-issue discount.
(b) Represents the principal amount of JPMorgan Chase debentures issued to each trust, including unamortized original-issue discount. The principal amount
of debentures issued to the trusts includes the impact of hedging and purchase accounting fair value adjustments that were recorded on the Firm’s
Consolidated Financial Statements.