Bay View Capital Corporation Announces Partial Liquidation
Strategy, Dissolution of Bay View Bank and Third Quarter Results
SAN MATEO, Calif., Oct. 28 /PRNewswire-FirstCall/ -- Bay View
Capital Corporation (the "Company") today announced that its Board
of Directors has approved a process of partial liquidation under
which the Company anticipates it will make an initial cash
distribution in the fourth quarter as previously indicated, but
will continue to operate its automobile finance subsidiary, Bay
View Acceptance Corporation ("BVAC"), on an ongoing basis. In
October 2002, the Company's stockholders authorized a Plan of
Dissolution and Stockholder Liquidity. Under that Plan, the Board
of Directors was authorized to determine the most efficient means
of liquidation, and the timing of the process. The Company
originally contemplated that it would sell all of its assets, pay
all of its liabilities and then distribute the proceeds, including
the stock of BVAC, to the Company's stockholders. In the year that
has elapsed since the adoption of the Plan, the Company has sold
substantially all of its assets with the exception of its auto
lease portfolio and BVAC. Because of changing market conditions in
the auto sector, as discussed below, the Company believes that the
near-term sale or distribution of the stock of BVAC to stockholders
is not the best method of achieving maximum stockholder value. "We
have decided that undertaking a plan of partial instead of complete
liquidation will serve the best interests of our stockholders for a
number of reasons," stated Robert B. Goldstein, the Chairman of the
Company's Board, "First, we believe we can maximize the value of
BVAC by continuing to operate it on an ongoing basis, and not
selling or distributing it when the automobile finance industry is
performing below historical levels; second, we will be able to more
fully utilize the benefits of our remaining net operating loss
carryforwards by continuing to operate BVAC beyond the third
quarter of 2005; and finally, we will enjoy significantly greater
corporate and financial flexibility if we are not limited to
operating as a dissolving corporation." The Company currently
anticipates distributing $5.45 per share in cash to stockholders as
previously indicated, including a year-end distribution of
approximately $4.00 per share and then a series of six quarterly
distributions beginning in June 2004. The Company believes that its
adoption of a partial liquidation strategy will not have a material
impact on the after-tax value of the distributions to most
stockholders; however, investors should consult with their tax
advisors to determine their individual tax situations. Dissolution
of Bay View Bank Bay View Bank, N.A. (the "Bank"), completed its
previously announced Plan of Dissolution and Liquidation on
September 30, 2003. Under the Plan, the Bank satisfied or
discharged all of its known and currently due and payable
liabilities and transferred its remaining assets and liabilities to
the Company, the Bank's sole stockholder. The Company received
final regulatory approval of the Bank's dissolution from the Office
of the Comptroller of the Currency on October 27, 2003. Third
Quarter Results The Company reported net assets in liquidation of
$409.8 million, or $6.36 in net assets in liquidation per
outstanding share at September 30, 2003 compared to $409.9 million,
or $6.37 in net assets in liquidation per outstanding share at June
30, 2003. On September 30, 2002, the Company adopted liquidation
basis accounting as a result of its stockholders' approval of a
plan of dissolution and stockholder liquidity. Since that date, the
Company has reported the value of, and the changes in, net assets
available for distribution to stockholders ("net assets in
liquidation") under the liquidation basis of accounting instead of
results from continuing operations in accordance with accounting
principles generally accepted in the United States of America. The
change in net assets in liquidation during the quarter included a
pre- tax operating loss of $2.2 million and $3.4 million of charges
for assets in liquidation partially offset by $4.7 million of
income tax benefit. The $3.4 million of charges was largely
attributable to a $3.7 million impairment in the auto lease
portfolio as the residual value of the portfolio declined due to
weakness in used car values. At September 30, 2003, the Company's
total assets were $555 million compared to $593 million at June 30,
2003 and $876 million at December 31, 2002. At September 30, 2003,
cash and cash equivalents totaled $208.3 million. Total
nonperforming assets, net of mark-to-market valuation adjustments,
declined to $11.5 million at September 30, 2003 from $19.8 million
at June 30, 2003. Franchise-related nonperforming assets declined
to $8.5 million at September 30, 2003 from $15.9 million at June
30, 2003. Total loans and leases delinquent 60 days or more at
September 30, 2003 declined to $1.5 million from $2.8 million at
June 30, 2003. Delinquent franchise-related loans declined to $1.1
million at September 30, 2003 from $1.9 million at June 30, 2003.
During the quarter, the Company completed an offer of optional
redemption of its Capital Securities (NYSE:BVS) at a price of
$25.00 per Capital Security plus accrued and unpaid distributions
through the date of redemption. Holders of the Capital Securities
elected to redeem 184,903 shares, or approximately 5.14% of the
outstanding Capital Securities, under the offer that expired on
September 8, 2003. The Company intends to call all of the remaining
Capital Securities on December 31, 2003. Liquidating Portfolio
During the quarter, the Company completed the sale of approximately
$2.1 million of loans and received $13.1 million of loan repayments
in its liquidating loan portfolio. These loan sales and repayments,
totaling $15.2 million were comprised of $8.0 million of franchise
loans, $6.1 million of asset-based loans and $1.1 million of other
loans. At September 30, 2003, the net carrying value of the
Company's remaining investment in loans to be liquidated was
reduced to $34.0 million from $49.2 million at June 30, 2003. BVAC
BVAC purchased $66.9 million of auto installment contracts on new
and used vehicles during the third quarter of 2003, compared to
$73.6 million for the second quarter. Third quarter purchases
consisted of 2,316 contracts with weighted average contract rates
of 8.12% and weighted average FICO scores of 734. At September 30,
2003, BVAC was servicing 32,000 contracts representing $573 million
compared to 33,700 contracts representing $590 million at June 30,
2003. During the quarter, BVAC called its 2000-LJ-1 automobile
receivable backed notes and repurchased auto installment contracts
with a par value of $33.8 million and an average coupon rate of
10.25%. Third quarter purchases continued to run below
expectations. Incentive financing from auto manufacturers,
including zero percent financing out to a term of 72 months,
continues to be widely available on new vehicles. These products
have encroached on BVAC's traditional market in extended term
contracts, which appeal to monthly payment-oriented buyers of new
vehicles. Incentive financing has also drawn a segment of BVAC's
used vehicle buyers / borrowers into new vehicle purchases. BVAC
has chosen to remain focused on credit quality and has reduced its
purchases of installment contracts from certain independent
dealers. As a result, the quality and performance of the BVAC loan
portfolio has remained sound. However, this focus on credit quality
and the encroachment mentioned above have resulted in reduced loan
production in recent quarters. This loss of production has
diminished the near-term liquidation value of BVAC and, as a
result, the Company reduced its after-tax premium on BVAC from
$12.8 million to $4.0 million during the quarter. As discussed in a
previous earnings release, BVAC has substantially reduced its
operating expenses while enhancing marketing procedures. As the
economy recovers and these marketing strategies are fully
implemented, we anticipate BVAC's loan production will recover
commensurately. Looking forward to 2004, BVAC has expanded its
relationships with multi-store auto dealerships and anticipates
increasing loan production from these relationships. Expansion into
new states, which was de-emphasized during the restructuring
period, has also been reactivated and is anticipated to increase
production in 2004. BVAC securitized and sold approximately $193
million of automobile installment contracts during the third
quarter. A gain of $0.8 million was realized on the transaction.
Additionally, BVAC received $20.4 million of auto installment
contract repayments during the quarter. As discussed above, the
Company adopted liquidation basis accounting effective September
30, 2002. Accordingly, the Company's consolidated financial
statements for periods subsequent to September 30, 2002 have been
prepared under the liquidation basis of accounting including the
replacement of a Consolidated Statement of Operations and
Comprehensive Income with a Consolidated Statement of Changes in
Net Assets in Liquidation. For reporting periods prior to September
30, 2002, the Company's consolidated financial statements are
presented on a going concern basis of accounting. The Company is
providing herein a (1) Consolidated Statements of Net Assets
(Liquidation Basis) as of September 30, 2003 and December 31, 2002,
(2) Consolidated Statements of Changes in Net Assets in Liquidation
(Liquidation Basis) for the three months ended September 30, 2003
and June 30, 2003 and the nine months ended September 30, 2003 and
(3) Consolidated Statements of Operations and Comprehensive Income
(Loss) for the three- and nine-month periods ended September 30,
2002 (Liquidation Basis) and the three months ended June 30, 2002
(Going Concern Basis). The Company will host a conference call at
2:00 p.m. PST on October 29, 2003 to discuss its financial results.
Analysts, media representatives and the public are invited to
listen to this discussion by calling 1-888-793-6954 and referencing
the password "BVC." An audio replay of this conference call will be
available through Friday, November 28, 2003 and can be accessed by
dialing 1-800-937-5157. Bay View Capital Corporation is a financial
services company headquartered in San Mateo, California and is
listed on the NYSE: BVC. For more information, visit our website at
http://www.bayviewcapital.com/. Forward-Looking Statements All
statements contained in this release that are not historic facts
are based on current expectations. Such statements are
forward-looking statements (as defined in the Private Securities
Litigation Reform Act of 1995) in nature and involve a number of
risks and uncertainties. Although the Company currently believes
that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the results contemplated
by the forward-looking statements will be realized. For information
regarding factors that could cause the results contemplated by the
forward-looking statements to differ from expectations, such as the
inability to achieve the financial goals of our plan of partial
liquidation, including any financial goals related to both
contemplated and consummated asset sales, including the operation
of the auto business and the inability to use net operating loss
carryforwards that the Company currently has, please refer to the
Company's Reports on Forms 10-K and 10-Q filed with the Securities
and Exchange Commission. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the
inclusion of such statements should not be regarded as a
representation by the Company or any other person. The Company
disclaims any obligation to update such factors or to publicly
announce the results of any revisions to any of the forward-looking
statements included herein to reflect future events or
developments. Bay View Capital Corporation Consolidated Statements
of Net Assets (Liquidation Basis) Sept. 30, 2003 (Unaudited) Dec.
31, 2002 (Dollars in thousands) ASSETS Cash and cash equivalents:
Cash and due from depository institutions $60,204 $71,611
Short-term investments 148,119 151,684 208,323 223,295 Securities
available-for-sale: Investment securities 34,515 38,137
Mortgage-backed securities 12,300 32,516 Loans and leases
held-for-sale 156,671 311,014 Investment in operating lease assets,
net 86,312 191,005 Investment in stock of the Federal Home Loan
Bank of San Francisco 505 16,075 Investment in stock of the Federal
Reserve Bank -- 13,659 Real estate owned, net 6,480 2,402 Premises
and equipment, net 532 1,327 Repossessed vehicles 345 502 Income
taxes, net 17,298 -- Other assets 31,258 45,613 Total assets
$554,539 $875,545 LIABILITIES Deposits: Brokered certificates of
deposit -- 224,189 -- 224,189 Other borrowings 23,751 61,969
Guaranteed Preferred Beneficial Interest in the Company's Junior
Subordinated Debentures ("Capital Securities") 85,542 90,000 Income
taxes, net -- 8,646 Other liabilities 21,299 36,724 Reserve for
estimated costs during the period of liquidation 14,133 43,953
Total liabilities 144,725 465,481 Net assets in liquidation
$409,814 $410,064 Bay View Capital Corporation Consolidated
Statements of Changes in Net Assets in Liquidation (Liquidation
Basis) (Unaudited) For the Three For the Nine Months Ended Months
Ended Sept. 30, June 30, Sept. 30, 2003 2003 2003 (Dollars in
thousands) Net assets in liquidation at beginning of period
$409,864 $410,964 $410,064 Pre-tax loss from operations (2,228)
(1,531) (4,595) Changes in estimated values of assets and
liabilities (3,407) (924) (5,995) Income tax benefit 4,664 786
6,252 Change in net loss from operations (971) (1,669) (4,338)
Other changes in net assets in liquidation (A) 921 569 4,088 Net
assets in liquidation at end of period $409,814 $409,864 $409,814
(A) Primarily represents proceeds from stock options and warrants
exercised as well as valuation adjustments to the Company's
outstanding stock options. Bay View Capital Corporation
Consolidated Statements of Operations and Comprehensive Income
(Loss) (Unaudited) For the Three For the Nine Months Ended Months
Ended Sept. 30, June 30, Sept. 30, 2002 2002 2002 Going Liquidation
Concern Liquidation Basis Basis Basis (Amounts in thousands, except
per share amounts) Interest income: Interest on loans and leases
$30,174 $45,563 $122,208 Interest on mortgage-backed securities
1,749 3,014 8,314 Interest and dividends on investment securities
7,140 3,906 14,717 39,063 52,483 145,239 Interest expense: Interest
on deposits 15,978 13,529 44,509 Interest on borrowings 789 1,792
4,413 Interest on Subordinated Notes 3,716 3,715 11,146 20,483
19,036 60,068 Net interest income 18,580 33,447 85,171 Provision
for losses on loans and leases 2,200 3,600 10,700 Net interest
income after provision for losses on loans and leases 16,380 29,847
74,471 Noninterest income: Leasing income 16,886 18,953 56,188 Loan
fees and charges 1,085 1,193 3,571 Loan servicing income 250 208
663 Account fees 1,939 1,983 5,858 Sales commissions 1,463 1,944
5,247 Gain on sale of assets and liabilities, net 18,090 203 18,625
Other, net 270 916 1,413 39,983 25,400 91,565 Noninterest expense:
General and administrative 31,673 30,536 93,001 Litigation
settlement expense -- 13,100 13,100 Leasing expenses 12,911 16,066
43,984 Real estate owned operations, net 88 328 956 Provision for
losses on real estate owned 62 -- 266 Amortization of intangible
assets 331 331 993 45,065 60,361 152,300 Income (loss) from
operations 11,298 (5,114) 13,736 Adjustment for liquidation basis
266,510 -- 266,510 Income (loss) before income tax expense
(benefit) 277,808 (5,114) 280,246 Income tax expense (benefit)
187,385 (3,658) 181,792 Dividends on Capital Securities 2,674 2,626
7,873 Income (loss) before cumulative effect of change in
accounting principle 87,749 (4,082) 90,581 Cumulative effect of
change in accounting principle, net of applicable taxes of $2.3
million -- -- (18,920) Net income (loss) $87,749 $(4,082) $71,661
Bay View Capital Corporation Consolidated Statements of Operations
and Comprehensive Income (Loss) (Unaudited) For the Three For the
Nine Months Ended Months Ended Sept. 30, June 30, Sept. 30, 2002
2002 2002 Going Liquidation Concern Liquidation Basis Basis Basis
(Amounts in thousands, except per share amounts) Basic earnings
(loss) per share before cumulative effect of change in accounting
principle $1.40 $(0.07) $1.44 Cumulative effect of change in
accounting principle, net -- -- (0.30) Net basic earnings (loss)
per share $1.40 $(0.07) $1.14 Diluted earnings (loss) per share
before cumulative effect of change in accounting principle $1.39
$(0.07) $1.43 Cumulative effect of change in accounting principle,
net -- -- (0.30) Net diluted earnings (loss) per share $1.39
$(0.07) $1.13 Weighted-average basic shares outstanding 62,777
62,715 62,724 Weighted-average diluted shares outstanding 62,963
62,715 63,135 Net income (loss) $87,749 $(4,082) $71,661 Other
comprehensive income (loss), net of tax: Change in unrealized gain
on securities available-for-sale, net of tax expense of $219 for
the three months ended June 30, 2002 -- 302 -- Other comprehensive
income (loss) -- 302 -- Comprehensive income (loss) $87,749
$(3,780) $71,661 BAY VIEW CAPITAL CORPORATION SELECTED FINANCIAL
DATA (Unaudited) For the Three For the Nine Months Ended Months
Ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, 2003 2003
2002 2003 2002 Liquidation Basis Liquidation Basis (Amounts in
thousands) Selected Changes in Net Assets in Liquidation/Results of
Operations Information: Net interest income (A) $2,463 $3,783
$18,580 $9,540 $85,171 Provision for losses on loans and leases --
-- (2,200) -- (10,700) Leasing income 8,805 10,862 16,886 32,578
56,188 Gain on sale of assets and liabilities, net 819 203 18,090
787 18,625 Other income, net 134 1,330 5,007 3,722 16,752 General
and administrative expenses (7,336) (9,542) (31,673) (26,338)
(93,001) Litigation expense -- -- -- -- (13,100) Leasing expense
(7,009) (7,958) (12,911) (24,421) (43,984) Other expense (104)
(209) (481) (463) (2,215) Pre-tax income (loss) from operations
(2,228) (1,531) 11,298 (4,595) 13,736 Adjustment for liquidation
basis -- -- 266,510 -- 266,510 Changes in estimated liquidation
values of assets and liabilities (3,407) (924) -- (5,995) -- Income
tax (expense) benefit 4,664 786 (187,385) 6,252 (181,792) Dividends
on Capital Securities -- -- (2,674) -- (7,873) Cumulative effect of
change in accounting principle, net of taxes of $2.3 million -- --
-- -- (18,920) Other changes in net assets in liquidation 921 569
-- 4,088 -- Change in net assets in liquidation $(50) $(1,100) --
$(250) -- Net income $87,749 $71,661 At At At Sept. 30, June 30,
Sept. 30, 2003 2003 2002 Liquidation Basis (Amounts in thousands,
except per share amounts) Loans and Leases: Retail: Auto
installment contracts (B) $122,715 $216,724 $84,938 Single-family
mortgage loans -- -- 148,329 Other home equity loans and lines of
credit -- -- 151,742 High loan-to-value home equity loans and lines
of credit -- -- 7,178 Total retail loans 122,715 216,724 392,187
Commercial: Multi-family mortgage loans -- 9 3,563 Commercial
mortgage loans 2,642 2,675 51,527 Franchise loans 23,998 31,827
59,433 Asset-based loans, syndicated loans, factored receivables
and commercial leases 2,434 8,829 185,714 Business loans 4,882
5,865 56,970 Total commercial loans and leases 33,956 49,205
357,207 Loans and leases receivable (C) (D) $156,671 $265,929
$749,394 Credit Quality: Nonperforming assets - total (E) $11,494
$19,822 $40,125 Nonperforming assets - franchise $8,467 $15,901
$23,218 Nonperforming assets as a percentage of consolidated assets
2.07% 3.34% 1.03% Loans and leases delinquent 60 days or more
$1,549 $2,828 $31,905 Loans and leases delinquent 60 days or more -
franchise $1,106 $1,853 $16,253 Loans and leases delinquent 60 days
or more as a percentage of loans and leases 1.00% 1.06% 4.26% BAY
VIEW CAPITAL CORPORATION SELECTED FINANCIAL DATA (continued)
(Unaudited) At At At Sept. 30, June 30, Sept. 30, 2003 2003 2002
Going Liquidation Liquidation Concern Basis Basis Basis (Amounts in
thousands, except per share amounts) Per Share Data: Net assets in
liquidation per diluted share outstanding $6.36 $6.37 $6.50 Other
Data: Full-time equivalent employees 149 197 800 (A) Effective July
1, 2003, the Company adopted Statement of Financial Accounting
Standards No. 150, "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity." Year-to-date
dividend expense on the Capital Securities is now reflected in
interest on borrowings. Statement No. 150 does not allow for prior
year restatements. (B) Excludes auto-related operating lease assets
reported separately from loans and leases totaling $86.3 million,
$117.7 million, and $228.5 million at September 30, 2003, June 30,
2003 and September 30, 2002, respectively. (C) All loans and leases
are classified as held-for-sale. (D) Includes mark-to-market
valuation reserves of $11.7 million, $16.6 million and $70.6
million at September 30, 2003, June 30, 2003 and September 30,
2002, respectively. (E) Nonperforming assets include mark-to-market
valuation reserves of $4.1 million, $7.4 million and $16.6 million
at September 30, 2003, June 30, 2003 and September 30, 2002,
respectively. BAY VIEW ACCEPTANCE CORPORATION At At At Sept. 30,
June 30, Dec. 31, 2003 2003 2002 (Amounts in thousands) Selected
Statement of Net Assets (Liquidation Basis) Information: Cash and
cash equivalents $12,322 $43,099 $1,366 Retained interest in auto
loan securitization 29,855 23,836 23,946 Installment contracts
122,715 216,723 142,357 Other assets 4,136 3,489 4,187 Total assets
$169,028 $287,147 $171,856 Advances from parent $99,136 $205,835
$103,541 Warehouse line -- 13,137 -- Other liabilities 10,335 9,009
10,106 Total liabilities 109,471 227,981 113,647 Net assets in
liquidation $59,557 $59,166 $58,209 For the Three For the Nine
Months Ended Months Ended Sept. 30, June 30, Sept. 30, 2003 2003
2003 (Amounts in thousands) Selected Changes in Net Assets in
Liquidation Information: Net interest income $2,001 $3,174 $8,033
Other income, net 760 1,086 3,113 General and administrative
expenses (2,949) (3,754) (9,550) Pre-tax income from operations
(188) 506 1,596 Changes in estimated liquidation values of assets
and liabilities 859 (47) 719 Income tax (expense) benefit 483 (193)
(204) Changes in net assets in liquidation $1,154 $266 $2,111
Selected Production Information: Installment contracts purchased
$66,878 $73,594 $212,107 Weighted average contract rate 8.12% 8.50%
8.44% Average FICO credit score 734 730 732 BAY VIEW ACCEPTANCE
CORPORATION (continued) At At At Sept. 30, June 30, Dec. 31, 2003
2003 2002 (Amounts in thousands) Managed Assets: Total managed
contracts $573,114 $590,417 $646,856 Total number of contracts
32,000 33,700 37,800 Contracts delinquent 30 days or more as a
percentage of managed assets 0.40% 0.39% 0.49% Other Data:
Full-time equivalent employees 105 141 135 For the Three For the
Nine Months Ended Months Ended Sept. 30, June 30, Sept. 30, 2003
2003 2003 Net chargeoffs on managed assets for period $1,543 $1,787
$5,062 Net chargeoffs as a percentage of average managed assets
(annualized) 1.06% 1.20% 1.13% DATASOURCE: Bay View Capital
Corporation CONTACT: John Okubo of Bay View Capital Corporation,
+1-650-294-7778 Web site: http://www.bayviewcapital.com/
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