JP Morgan Chase 2008 Annual Report Download - page 138

Notes to consolidated financial statements
136 JPMorgan Chase & Co./ 2008 Annual Report
The computation of the purchase price and the allocation of the purchase price to the net assets acquired in the Washington Mutual transaction
– based upon their respective values as of September 25, 2008, and the resulting negative goodwill – are presented below. The allocation of
the purchase price may be modified through September 25, 2009, as more information is obtained about the fair value of assets acquired and
liabilities assumed.
(in millions)
Purchase price
Purchase price $ 1,938
Direct acquisition costs 3
Total purchase price 1,941
Net assets acquired
Washington Mutual’s net assets before fair value adjustments $ 38,766
Washington Mutual’s goodwill and other intangible assets (7,566)
Subtotal 31,200
Adjustments to reflect assets acquired at fair value:
Securities (20)
Trading assets (591)
Loans (31,018)
Allowance for loan losses 8,216
Premises and equipment 680
Accrued interest and accounts receivable (295)
Other assets 4,125
Adjustments to reflect liabilities assumed at fair value:
Deposits (683)
Other borrowed funds 68
Accounts payable and other liabilities (900)
Long-term debt 1,127
Fair value of net assets acquired 11,909
Negative goodwill before allocation to nonfinancial assets (9,968)
Negative goodwill allocated to nonfinancial assets(a) 8,062
Negative goodwill resulting from the acquisition(b) $ (1,906)
(a) The acquisition was accounted for as a purchase business combination in accordance with SFAS 141. SFAS 141 requires the assets (including identifiable intangible assets) and liabilities
(including executory contracts and other commitments) of an acquired business as of the effective date of the acquisition to be recorded at their respective fair values and consolidated with
those of JPMorgan Chase. The fair value of the net assets of Washington Mutual’s banking operations exceeded the $1.9 billion purchase price, resulting in negative goodwill. In accordance
with SFAS 141, noncurrent, nonfinancial assets not held-for-sale, such as premises and equipment and other intangibles, were written down against the negative goodwill.The negative good-
will that remained after writing down transaction related core deposit intangibles of approximately $4.9 billion and premises and equipment of approximately $3.2 billion was recognized as
an extraordinary gain of $1.9 billion.
(b) The extraordinary gain was recorded in Corporate/Private Equity.
The following condensed statement of net assets acquired reflects the value assigned to the Washington Mutual net assets as of September 25, 2008.
(in millions) September 25, 2008
Assets
Cash and due from banks $ 3,680
Deposits with banks 3,517
Federal funds sold and securities purchased under resale agreements 1,700
Trading assets 5,691
Securities 17,220
Loans (net of allowance for loan losses) 206,436
Accrued interest and accounts receivable 3,201
Mortgage servicing rights 5,874
All other assets 16,330
Total assets $ 263,649
Liabilities
Deposits $ 159,869
Federal funds purchased and securities loaned or sold under repurchase agreements 4,549
Other borrowed funds 81,622
Trading liabilities 585
Accounts payable and other liabilities 6,523
Long-term debt 6,654
Total liabilities 259,802
Washington Mutual net assets acquired $ 3,847