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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/