JP Morgan Chase 2015 Annual Report Download - page 233

JPMorgan Chase & Co./2015 Annual Report 223
Note 8 – Interest income and Interest expense
Interest income and interest expense are recorded in the
Consolidated statements of income and classified based on
the nature of the underlying asset or liability. Interest
income and interest expense includes the current-period
interest accruals for financial instruments measured at fair
value, except for financial instruments containing
embedded derivatives that would be separately accounted
for in accordance with U.S. GAAP absent the fair value
option election; for those instruments, all changes in fair
value, including any interest elements, are reported in
principal transactions revenue. For financial instruments
that are not measured at fair value, the related interest is
included within interest income or interest expense, as
applicable.
Details of interest income and interest expense were as
follows.
Year ended December 31,
(in millions) 2015 2014 2013
Interest Income
Loans $ 33,134 $ 32,218 $ 33,489
Taxable securities 6,550 7,617 6,916
Non taxable securities(a) 1,706 1,423 896
Total securities 8,256 9,040 7,812
Trading assets 6,621 7,312 8,099
Federal funds sold and securities
purchased under resale
agreements 1,592 1,642 1,940
Securities borrowed(b) (532) (501) (127)
Deposits with banks 1,250 1,157 918
Other assets(c) 652 663 538
Total interest income $ 50,973 $ 51,531 $ 52,669
Interest expense
Interest bearing deposits $ 1,252 $ 1,633 $ 2,067
Federal funds purchased and
securities loaned or sold under
repurchase agreements 609 604 582
Commercial paper 110 134 112
Trading liabilities - debt, short-
term and other liabilities 622 712 1,104
Long-term debt 4,435 4,409 5,007
Beneficial interest issued by
consolidated VIEs 435 405 478
Total interest expense $ 7,463 $ 7,897 $ 9,350
Net interest income $ 43,510 $ 43,634 $ 43,319
Provision for credit losses 3,827 3,139 225
Net interest income after
provision for credit losses $ 39,683 $ 40,495 $ 43,094
(a) Represents securities which are tax exempt for U.S. federal income tax
purposes.
(b) Negative interest income for the years ended December 31, 2015,
2014 and 2013, is a result of increased client-driven demand for
certain securities combined with the impact of low interest rates; this
is matched book activity and the negative interest expense on the
corresponding securities loaned is recognized in interest expense.
(c) Largely margin loans.
(d) Includes brokerage customer payables.
Note 9 – Pension and other postretirement
employee benefit plans
The Firm has various defined benefit pension plans and
other postretirement employee benefit (“OPEB”) plans that
provide benefits to its employees. These plans are discussed
below.
Defined benefit pension plans
The Firm has a qualified noncontributory U.S. defined
benefit pension plan that provides benefits to substantially
all U.S. employees. The U.S. plan employs a cash balance
formula in the form of pay and interest credits to determine
the benefits to be provided at retirement, based on years of
service and eligible compensation (generally base salary/
regular pay and variable incentive compensation capped at
$100,000 annually). Employees begin to accrue plan
benefits after completing one year of service, and benefits
generally vest after three years of service. The Firm also
offers benefits through defined benefit pension plans to
qualifying employees in certain non-U.S. locations based on
factors such as eligible compensation, age and/or years of
service.
It is the Firm’s policy to fund the pension plans in amounts
sufficient to meet the requirements under applicable laws.
The Firm does not anticipate at this time any contribution to
the U.S. defined benefit pension plan in 2016. The 2016
contributions to the non-U.S. defined benefit pension plans
are expected to be $47 million of which $31 million are
contractually required.
JPMorgan Chase also has a number of defined benefit
pension plans that are not subject to Title IV of the
Employee Retirement Income Security Act. The most
significant of these plans is the Excess Retirement Plan,
pursuant to which certain employees previously earned pay
credits on compensation amounts above the maximum
stipulated by law under a qualified plan; no further pay
credits are allocated under this plan. The Excess Retirement
Plan had an unfunded projected benefit obligation (“PBO”)
in the amount of $237 million and $257 million, at
December 31, 2015 and 2014, respectively.
Defined contribution plans
JPMorgan Chase currently provides two qualified defined
contribution plans in the U.S. and other similar
arrangements in certain non-U.S. locations, all of which are
administered in accordance with applicable local laws and
regulations. The most significant of these plans is the
JPMorgan Chase 401(k) Savings Plan (the “401(k) Savings
Plan”), which covers substantially all U.S. employees.
Employees can contribute to the 401(k) Savings Plan on a
pretax and/or Roth 401(k) after-tax basis. The JPMorgan
Chase Common Stock Fund, which is an investment option
under the 401(k) Savings Plan, is a nonleveraged employee
stock ownership plan.
The Firm matches eligible employee contributions up to 5%
of eligible compensation (generally base salary/regular pay
and variable incentive compensation) on an annual basis.