Bay View (NYSE:BVC)
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Bay View Capital Corporation Announces Second Quarter Results and
Earnings Restatements
SAN MATEO, Calif., July 21 /PRNewswire-FirstCall/ -- Bay View Capital
Corporation (NYSE:BVC) (the "Company") today reported a second quarter 2004 net
loss of $121 thousand, or $0.02 per diluted share, compared to a first quarter
2004 net loss of $843 thousand, or $0.13 per diluted share. During the period
September 30, 2002 through September 30, 2003, the Company reported its results
of operations under the liquidation basis of accounting under which the Company
did not report earnings and earnings per share. As previously announced, on
June 30, 2004, as of 5:00 p.m., EDT, the Company effected a 1-for-10 reverse
stock split. As a result, the Company's issued common stock was reduced from
65,910,689 shares prior to the reverse split to 6,590,461 shares following the
reverse split, including an adjustment for fractional shares. Accordingly,
shares outstanding and per share amounts are presented on a post-split basis
for all periods reported.
The Company initiated a review, in the second quarter, of its policy for
recording loan origination costs on auto contracts held for sale and determined
that the expense related to those origination costs was overstated in the
fourth quarter of 2003 and the first quarter of 2004. As a result, the Company
restated its fourth quarter 2003 and first quarter 2004 financial statements to
reflect the reduced expense in those periods as described in detail below.
Second quarter results improved, compared to the prior quarter, primarily due
to increased interest income, unrealized gains in the Company's interest rate
swap portfolio and decreased general and administrative expenses. Total assets
grew to $387.9 million at June 30, 2004 compared to $364.1 million at December
31, 2003, reflecting $86.3 million of growth in auto contracts, which was
partially offset by $39.6 million of payoffs of auto leases.
On June 30, 2004, the Company redeemed the remaining $22.0 million of the 9.76%
Cumulative Capital Securities (the "Capital Securities") issued by Bay View
Capital I Trust at a price equal to 100% of the $25.00 par value of each
Capital Security plus the quarterly dividend on the Capital Securities totaling
$0.61 per Capital Security. The Company also paid a cash distribution of $16.5
million, or $0.25 per share, to common stockholders on June 30, 2004 prior to
the reverse split.
At June 30, 2004, income tax assets included deferred tax assets of
approximately $16.3 million, consisting of net deferred tax assets of $37.8
million less a valuation allowance of $21.5 million.
Bay View Acceptance Corporation
Bay View Acceptance Corporation ("BVAC"), the Company's indirect auto finance
company, acquires auto installment contracts from approximately 7,000
manufacturer-franchised and independent auto dealers in 25 states and has
positioned itself in the market as a premium priced lender for well-qualified
borrowers seeking extended financing terms and larger advances than those
generally offered by traditional lenders. The Company believes this strategy
has enabled BVAC to establish a loyal dealership network by satisfying a unique
niche within this market segment that is not dominated by large commercial
banks and captive finance companies.
BVAC's second quarter 2004 net income was $1.5 million compared to first
quarter 2004 net income of $654 thousand. The increased earnings were
attributable to increased net interest income, resulting from an increase in
the average balance of the warehouse inventory, and decreased general and
administrative expenses.
During the second quarter of 2004, BVAC purchased $75.9 million of auto
contracts compared to $69.3 million for the first quarter -- representing a 9%
quarter-over-quarter increase in production. Second quarter purchased contract
rates averaged 7.86% and FICO scores averaged 734; compared to first quarter
purchased contract rates which averaged 7.90% and FICO scores which averaged
734. At June 30, 2004, BVAC was servicing 29,057 installment contracts
representing $561.6 million compared to 29,824 installment contracts
representing $560.4 million at March 31, 2004.
Net chargeoffs on managed contracts declined to 1.21% of average managed assets
for the second quarter from 1.23% for the prior quarter. Total contracts
delinquent 30 days or more as a percentage of managed contracts were 0.31% at
June 30, 2004 compared to 0.41% at March 31, 2004.
BVAC sold $10.2 million and $15.6 million of auto contracts on a "whole loan"
basis during the second quarter and the first half of 2004, respectively.
Repayments of $27.3 million and $50.1 million were received during the second
quarter and the first half of 2004, respectively.
During the second quarter, BVAC secured a $350.0 million warehouse credit
facility to replace its existing $250.0 million credit facility. The $100.0
million increase in borrowing capacity will provide BVAC with additional
liquidity, greater flexibility to manage its warehouse inventory and allow BVAC
to maintain additional auto contracts in its warehouse inventory and increase
net interest income.
BVAC anticipates securitizing a portion of its warehoused auto contracts in an
asset-backed bond offering in the fourth quarter of 2004 or the first quarter
of 2005. Its previous securitizations were structured as sales transactions;
however, many banks and finance companies have recently elected to structure
such transactions as financings that preclude the use of "gain-on-sale"
accounting. BVAC anticipates structuring its future securitizations as
financings that will not qualify for "gain-on-sale" accounting. As a result of
this decision, and in anticipation of securitizing auto contracts and marketing
an asset-backed bond offering in the next two to three quarters, BVAC
transferred $102.5 million of auto contracts from its held-for-sale portfolio
to its held-for-investment portfolio during the second quarter.
Bay View Bank Liquidation
The Company continues to dispose of the assets and satisfy the liabilities
remaining from its assumption of the assets and liabilities of its former
subsidiary, Bay View Bank, N.A. Since December 31, 2003, $65.7 million of
these assets have been liquidated and $47.1 million of these liabilities have
been satisfied. At June 30, 2004, remaining assets to be liquidated, including
restricted cash, auto leases, commercial loans and foreclosed real estate,
represented approximately $87.9 million compared to $153.6 million at December
31, 2003. With the redemption of the remaining Capital Securities at the end
of the second quarter, remaining liabilities, including a $6.1 million
financing secured by cash flow from remaining auto leases, have been reduced to
$11.9 million at June 30, 2004.
Nonperforming assets in liquidation, net of mark-to-market valuation
allowances, declined to $5.7 million at June 30, 2004 from $6.8 million at
December 31, 2003. The decrease in nonperforming assets was primarily due to a
decline in nonaccruing asset-based loans, and the sale of real estate owned and
other repossessed assets. Total loans to be liquidated that were delinquent 60
days or more were $1.4 million at June 30, 2004 compared to $563 thousand at
December 31, 2003.
Other
The Company is announcing that it is restating its fourth quarter 2003 and
first quarter 2004 results of operations to reflect additional earnings. The
restatement resulted from a review of the Company's application of FASB
Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Initial Direct Costs of Leases, to BVAC's
portfolio of auto contracts held for sale. This restatement covers the
previously reported periods since the Company re-adopted the going concern
basis of accounting on October 1, 2003. The effect of the restatement is to
increase net income for the quarter ended December 31, 2003 by $182 thousand,
or $0.03 per diluted share, and to increase net income for the first quarter of
2004 by $244 thousand, or $0.04 per diluted share. Results of operations for
the six months ended June 30, 2004 reflect the restatement of first quarter
2004 net income. The restatement does not affect, and there will be no impact
on, or change in, the Company's reported statements of cash flows. The Company
will amend its Form 10-Q for the quarter ended March 31, 2004 and its Form 10-K
for the year ended December 31, 2003 to reflect the changes described above.
During the fourth quarter of 2003, the Company's Board of Directors amended the
Plan of Dissolution and Stockholder Liquidity (the "Plan"), which the Company
adopted in October 2002, to become a plan of partial liquidation. As a result,
the Company discontinued its use of the liquidation basis of accounting and
re-adopted the going concern basis of accounting effective October 1, 2003.
Accordingly, the Company is providing the following financial statements
herein:
Financial Condition: Consolidated Statements of Financial Condition as
of June 30, 2004 and December 31, 2003
Results of Operations/Change in Net Assets: Consolidated Statements of
Operations and Comprehensive Loss for the three- and six-month periods
ended June 30, 2004 and the three-month period ended March 31, 2004 and a
Consolidated Statement of Changes in Net Assets in Liquidation
(Liquidation Basis) for the three- and six-month periods ended
June 30, 2003.
The Company will host a conference call at 2:00 p.m. PDT on July 21, 2004 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, August 20, 2004 and can be accessed by dialing
800-293-4240.
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 the Company's 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 both the
Company's plan of partial liquidation, including any financial goals related to
contemplated asset resolution; and the Company's plan for the continuing
operation of the auto business, including 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 forward-looking statements
or to announce publicly 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 Financial Condition
(Unaudited)
December 31,
June 30, 2003
2004 Restated
Going Concern Basis
(Dollars in thousands)
ASSETS
Cash and cash equivalents:
Cash and due from depository institutions $5,829 $11,434
Short-term investments 10 129
5,839 11,563
Restricted cash 37,114 32,240
Securities available-for-sale:
Retained interests in securitizations 26,718 28,590
Mortgage-backed and other securities 201 6,139
Loans held-for-sale:
Installment contracts 149,637 165,874
Other loans 5,312 12,074
Installment contracts held-for-investment, net 102,502 --
Investment in operating lease assets, net 27,041 66,657
Real estate owned, net 4,254 4,955
Premises and equipment, net 460 371
Repossessed vehicles 395 438
Income taxes, net 15,687 21,031
Goodwill 1,846 1,846
Other assets 10,869 12,340
Total assets $387,875 $364,118
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings:
Warehouse credit facility $220,941 $138,221
Other borrowings 6,136 16,055
Junior Subordinated Deferrable
Interest Debentures -- 24,784
Other liabilities 11,246 17,500
Liquidation reserve 10,290 11,626
Total liabilities 248,613 208,186
Stockholders' equity:
Common stock ($.01 par value);
authorized, 80,000,000 shares;
issued, 2004 - 6,590,461 shares;
2003 - 6,579,333 shares;
outstanding, 2004 - 6,579,383 shares;
2003 - 6,575,890 shares 66 658
Additional paid-in capital 141,073 156,588
Accumulated deficit (1,638) (673)
Treasury stock, at cost;
2004 - 11,078 shares; 2003 - 3,443 shares (755) (587)
Accumulated other comprehensive gain (loss) 516 (54)
Total stockholders' equity 139,262 155,932
Total liabilities and stockholders' equity $387,875 $364,118
Bay View Capital Corporation
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
For the For the
Three Months Six Months
Ended Ended
March 31,
June 30, 2004 June 30,
2004 Restated 2004
(Dollars in thousands, except per share amounts)
Interest income:
Interest on loans and leases $4,508 $4,155 $8,663
Interest on mortgage-backed securities 2 29 31
Interest and dividends
on investment securities 702 728 1,430
5,212 4,912 10,124
Interest expense:
Interest on borrowings 2,163 1,942 4,105
2,163 1,942 4,105
Net interest income 3,049 2,970 6,019
Provision for losses
on installment contracts 521 -- 521
Net interest income after
provision for losses
on installment contracts 2,528 2,970 5,498
Noninterest income:
Leasing income 3,596 5,228 8,824
Loan fees and charges 224 500 724
Loan servicing income 852 947 1,799
Gain (loss) on sale
of assets and liabilities, net 260 (305) (45)
Other, net 1,324 771 2,095
6,256 7,141 13,397
Noninterest expense:
General and administrative 6,146 6,541 12,687
Leasing expenses 2,848 4,667 7,515
Real estate owned operations, net (11) 291 280
8,983 11,499 20,482
Loss before income tax benefit (199) (1,388) (1,587)
Income tax benefit (78) (545) (623)
Net loss $(121) $(843) $(964)
Basic loss per share $(0.02) $(0.13) $(0.15)
Diluted loss per share $(0.02) $(0.13) $(0.15)
Weighted-average basic shares outstanding 6,586 6,578 6,579
Weighted-average diluted shares outstanding 6,586 6,578 6,579
Net loss $(121) $(843) $(964)
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss)
on securities available-for-sale,
net of tax expense (benefit) of
($24), $389 and $364 for the
three months ended June 30, 2004
and March 31, 2004 and the six months
ended June 30, 2004, respectively (38) 608 570
Other comprehensive income (loss) (38) 608 570
Comprehensive loss $(159) $(235) $(394)
Bay View Capital Corporation
Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation
Basis)
(Unaudited)
For the Three For the Six
Months Ended Months Ended
June 30, 2003 June 30, 2003
(Dollars in thousands)
Net assets in liquidation
at beginning of period $410,964 $410,064
Pre-tax income from operations 720 2,135
Changes in estimated values
of assets and liabilities (924) (2,588)
Income tax benefit 786 1,588
Net income from operations 582 1,135
Dividends on Capital Securities (2,251) (4,502)
Other changes in
net assets in liquidation (A) 569 3,167
Net assets in liquidation at end of period $409,864 $409,864
(A) Primarily represents proceeds from stock options and warrants exercised.
BAY VIEW CAPITAL CORPORATION
SELECTED FINANCIAL DATA
(Unaudited)
For the For the
Six Six
For the Three Months Months
Months Ended Ended Ended
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
Restated
Liqui- Going Liqui-
dation Concern dation
Going Concern Basis Basis Basis Basis
(Dollars in thousands)
Selected Results of
Operations/Changes in
Net Assets in
Liquidation Information:
Net interest income (A) $3,049 $2,970 $3,783 $6,019 $7,077
Provision for losses on
installment contracts (521) -- -- (521) --
Leasing income 3,596 5,228 10,862 8,824 23,773
Gain (loss) on sale
of assets and
liabilities, net 260 (305) (85) (45) (32)
Other income, net 2,400 2,218 1,618 4,618 3,588
General and
administrative expenses (6,146) (6,541) (9,542) (12,687) (19,002)
Leasing expense (2,848) (4,667) (7,958) (7,515) (17,412)
Other expense 11 (291) (209) (280) (359)
Pre-tax loss
from operations (199) (1,388) (1,531) (1,587) (2,367)
Changes in estimated
liquidation values
of assets and liabilities -- -- (924) -- (2,588)
Income tax benefit 78 545 786 623 1,588
Other changes in
net assets in liquidation -- -- 569 -- 3,167
Change in net assets
in liquidation -- -- $(1,100) -- $(200)
Net loss $(121) $(843) $(964)
At At At
June 30, March 31, June 30,
2004 2004 2003
Restated
Going Concern Liquidation
Basis Basis
(Dollars in thousands)
Loans and Leases Receivable:
Auto installment contracts (B) $252,139 $207,630 $216,724
Other loans and leases:
Multi-family mortgage loans -- -- 9
Commercial mortgage loans -- -- 2,675
Franchise loans 4,856 6,314 31,827
Asset-based loans, syndicated
loans, factored receivables
and commercial leases 456 503 8,829
Business loans -- -- 5,865
Total other loans and leases 5,312 6,817 49,205
Loans and leases receivable (C) $257,451 $214,447 $265,929
Credit Quality (Liquidating Portfolio):
Nonperforming assets - total (D) $5,672 $5,719 $19,721
Nonperforming assets - franchise $5,045 $5,045 $15,901
Loans and leases delinquent
60 days or more $1,418 $435 $2,716
Loans and leases delinquent
60 days or more - franchise $961 $-- $1,853
Per Share Data:
Book value per share (E) $21.17 $23.67 N/A
Net assets in liquidation
per diluted share outstanding (E) N/A N/A $63.70
Other Data:
Full-time equivalent employees,
including BVAC 128 134 197
(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"
and, accordingly, dividend expense on the Capital Securities has
been reflected in interest on borrowings.
(B) Excludes auto-related operating lease assets reported separately
from loans and leases totaling $27.0 million, $45.1 million, and
$117.7 million at June 30, 2004, March 31, 2004 and June 30, 2003,
respectively.
(C) Includes allowances for mark-to-market valuation reserves and credit
losses of $2.2 million, $0.9 million and $16.6 million at
June 30, 2004, March 31, 2004 and June 30, 2003, respectively.
(D) Nonperforming assets include mark-to-market valuation reserves of
$0.8 million, $0.8 million and $7.4 million at June 30, 2004,
March 31, 2004 and June 30, 2003, respectively.
(E) Book value per share and net assets in liquidation per diluted share
outstanding are presented on a post-reverse stock split basis.
BAY VIEW ACCEPTANCE CORPORATION
At At At
June 30, March 31, June 30,
2004 2004 2003
Restated
Going Concern Basis
(Dollars in thousands)
Selected Balance Sheet Information:
Cash and cash equivalents $5,345 $(642) $42,185
Restricted cash 8,440 9,025 914
Retained interest in
auto loan securitization 26,718 29,040 23,836
Installment contracts held-for-sale 149,637 207,630 216,723
Installment contracts
held-for-investment, net 102,502 -- --
Other assets 7,265 6,522 5,335
Total assets $299,907 $251,575 $288,993
Advances from parent $2,764 $22,771 $207,681
Warehouse line 220,941 155,158 13,137
Other liabilities 12,915 11,898 9,009
Total liabilities 236,620 189,827 229,827
Stockholder's equity 63,287 61,748 59,166
Total liabilities
and stockholder's equity $299,907 $251,575 $288,993
BAY VIEW ACCEPTANCE CORPORATION (Continued)
For the For the
Six Six
For the Three Months Months
Months Ended Ended Ended
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
Restated
Going Concern Basis
(Dollars in thousands)
Selected Results of
Operations Information:
Interest on
auto contracts $4,394 $3,913 $3,372 $8,307 $6,188
Interest on
investment securities 652 666 892 1,318 1,642
Interest expense
on borrowings (1,688) (1,319) (1,090) (3,007) (1,798)
Net interest income 3,358 3,260 3,174 6,618 6,032
Provision for losses
on installment contracts (521) -- -- (521) --
Loan fees and charges 191 215 221 406 465
Loan servicing income 821 939 817 1,760 1,790
Gain (loss)
on sale of assets, net 252 (212) -- 40 --
Other income, net 1,254 (183) 48 1,071 98
Unrealized loss on auto
contracts held-for-sale -- -- (47) -- (140)
General and
administrative expenses (2,746) (2,910) (3,754) (5,656) (6,601)
Income before
income tax expense 2,609 1,109 459 3,718 1,644
Income tax expense (1,070) (455) (193) (1,525) (687)
Net income $1,539 $654 $266 $2,193 $957
Selected Production Information:
Dollar value of
contracts purchased $75,874 $69,337 $73,593 $145,184 $145,229
Number of
contracts purchased 2,501 2,289 2,621 4,790 5,154
Average balance of
contracts purchased $30.3 $30.2 $28.1 $30.3 $28.2
Weighted-average
contract rate 7.86% 7.90% 8.50% 7.88% 8.60%
Average FICO credit score 734 734 732 734 730
Selected Warehouse Inventory Information:
Weighted-average
contract rate 8.32% 8.40% 8.46% 8.36% 8.49%
Selected Credit Quality Information:
Net chargeoffs on
managed contracts
for period $1,690 $1,739 $1,781 $3,429 $3,765
Net chargeoffs as a
percentage of
average managed
contracts (annualized) 1.21% 1.23% 1.19% 1.22% 1.23%
Contracts delinquent
30 days or more as a
percentage of managed
contracts (as of
period-end) 0.31% 0.41% 0.39% 0.31% 0.39%
Average
Managed Contracts $559,982 $566,371 $596,953 $563,151 $612,405
At At At
June 30, March 31, June 30,
2004 2004 2003
(Dollars in thousands)
Managed Assets:
Total managed contracts $561,585 $560,389 $590,417
Total number of contracts 29,057 29,824 33,742
Other Data:
Full-time equivalent employees 99 101 133
DATASOURCE: Bay View Capital Corporation
CONTACT: John Okubo of Bay View Capital Corporation, +1-650-294-7778
Web site: http://www.bayviewcapital.com/