Replies to post #429824 on Mr Cooper Group Inc (COOP)

[Bizreader]

Forgive me bluntness, but isn't this stuff obvious by now? LOL

[scrivenerserror]

You asked about value ?
Here you go :

What Did JPM Gain in the purchase of WAMU bank and subsidiaries?

JPM had long coveted WaMu's West coast branch network, and had earlier offered $8 per common share for the entire company, an offer that would have assumed all debt and preferred stock of both WMB and WMI. It was rebuffed at the time for making a “lowball” offer; it was less than WMI common stock's market price at that time.

Through the seizure and acquisition, JPM expanded its' banking footprint into states with little Chase coverage. These include Washington, Oregon, California, and Florida. Along with $307B in assets they acquired $188B in deposits, 2239 branches, 4,932 owned and branded ATMs, and 43,198 employees.



They were also given the ability to return any branches they didn't want to the FDIC. JPM has indicated it would lay off 9200 employees and recently indicated they would cut another 2800 positions through attrition; the cuts total nearly 30% of WaMu's employees. Included in the purchase price was $1.5B of real estate or other assets (JPM's 10K, 12/31/08, p 82) and WMB's credit card business. Listed figures are as of 06/30/08 as stated in the OTS fact sheet below.

http://files.ots.treas.gov/73002.pdf


WMB's credit card business had been expanded on June 6, 2005 with the purchase of Providian Financial for $6.45B. JPM assumed both the WMB and Providian credit card subsidiaries along with all other subsidiaries of the bank. $10.6 Billion in credit card receivables were included.

http://en.wikipedia.org/wiki/Providian


JPM's Loan Portfolio

JPM stated in their conference call on 09/25/08 that the transaction would be, "Accretive immediately, 50 cents" (per share), and that it would result in a "Net cost savings (of) $1.5B, conservatively." "$176B (of) home loans (were) assumed", with "$30.7B losses projected."

http://wamucoup.com/JPM_telecon_all.wma


"Just shy of $300B of assets" were assumed, with net assets of $31B after deducting liabilities. JPM then stated they would mark down $31B related to the loans. Coincidence? JPM can use those write downs to offset $31B in profits, resulting in a significant tax savings. At a 35% tax rate, this represents a tax savings of $10.85 Billion.

When asked about loan losses if the economy were to worsen, JPM stated that even under the pessimistic assumption if the loan losses exceeded expectations, the worst they would do would be to end up flat. Why? Because the other WMB assets would still be making money. JPM stated, "This transaction's generating $12B of capital over the next 3 years.” (That is after taxes.) WMB's acquisition would result in, a "stable, predictable earnings stream" due to retail customers.


An interesting quote from the 8-K filing on 01/15/09:


-- Exhibit 99.2, EARNINGS RELEASE FINANCIAL SUPPLEMENT, FOURTH QUARTER 2008, page 4, CONSOLIDATED FINANCIAL HIGHLIGHTS, footnote b:


"JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price which resulted in negative goodwill. In accordance with SFAS 141, non-financial assets that are not held-for-sale were written down against that negative goodwill. The negative goodwill that remained after writing down non-financial assets was recognized as an extraordinary gain."

After writing down part of the negative goodwill, JPM recognized an extraordinary gain of $1.9B. Without this extraordinary gain due to Washington Mutual, JPM would have reported a loss for the quarter.

http://investor.shareholder.com/jpmorganchase/secfiling.cfm?filingID=950123-09-686




FDIC accounting report on receivership detailing assets transferred

http://wmish.com/docs/WaMuReceivershipFinancialStatements(unaudited)thru123108.pdf



JPMorgans hedge fund was amazingly unscathed by the economic turmoil. Good trading sense or is there more to it?

http://www.huffingtonpost.com/2009/03/03/jpmorgan-derivatives-5-bi_n_171312.html

[JusticeWillWin]

To determine the book value a good starting point would be the Trial Balance Sheet (WASHINGTON MUTUAL BANK CONS FKA WMBFA) Quarter 3 FY08 found/posted by Govinsider last year...

Nothing should be more up to date regarding "book value" than this piece from Q3 2008 IMO!

Be patient, it could take up to three minutes to load:

http://reorgwmi.com/documents/misc/Govinsider_Trial_Balance_Sheets.pdf

I really appreciate your DD, thanks!

[JusticeWillWin]

JPM still HAS to pay book value IMO, proof...

It is from 1985 but I think it explains exactly what the bid price of $1.88 bln. means. It was only a purchase premium! Not a purchase price, but a purchase premium. Thast's why JPM has chosen that number (year of WaMus foundation), they could also have chosen 2 bln. or 3 bln. because it didn't really matter because they knew they have/had to purchase the assets from "Schedule 3.2" separately at book value/market value and won't get all Assets (upper case!) according to the P&A, and have to pay for it!



Source (it is worth to read the whole document): https://research.stlouisfed.org/publications/review/85/06/Recent_Jun_Jul1985.pdf?q=penn-square-bank-na

JPM did NOT get everything for $1.88 bln. IMO

The FDIC had to accept the bid because it was less expensive for them in comparaison to a deposit payoff.

Did this still apply in 2008? Any opinions?