Bay View Announces Dramatic Reduction in CTL Goodwill Estimates, Intention to Pursue Restructure of CTL and Plan to Aggressively Redeploy Capital or Repurchase Shares.SAN MATEO San Mateo (săn mətā`ō), city (1990 pop. 85,486), San Mateo co., W Calif., on San Francisco Bay; inc. 1894. It is a commercial and retail center with some high-technology manufacturing. San Mateo, Spanish for St. , Calif.--(BUSINESS WIRE)--Oct. 15, 1996--Bay View Capital Corporation ("the Company" or "BVCC BVCC Blackstone Valley Chamber of Commerce (Whitinsville, Massachusetts) BVCC Buena Vista Construction Company "), the holding company for Bay View Federal Bank ("BVFB") and California Thrift and Loan ("CTL See control key. 1. CTL - Checkout Test language. 2. CTL - Compiler Target Language. 3. CTL - Computational Tree Logic ") announced today that the initial goodwill estimates for CTL have been dramatically reduced. Goodwill, which represents the excess of the purchase price over the fair value of the net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. acquired, was initially estimated at a conservative $18.4 million. Subsequent research and analysis has concluded that realizable asset valuations, especially related to assets being positioned for securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. or sale, are considerably higher than initially assumed. Based on the revised estimates of the fair value of net assets acquired, goodwill is currently estimated to be $7.0 million at the date of acquisition. The impact of the revised goodwill on tangible book value per share of the Company at acquisition (June 1, 1996) was $1.72 per share based on outstanding shares at September 30, 1996. Including the net change in stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. in the third quarter of 1996 and excluding the SAIF recapitalization charge, the tangible book value of the Company has improved by more than 8% to $28.55 at September 30, 1996 compared with $26.42 at June 30, 1996. Goodwill is being amortized on a straight line basis over a period of seven years. On June 14, 1996, the Company acquired CTL Credit, Inc. ("CTLI CTLI Cash Time Line Index CTLI Cybertimes of Long Island "), a Delaware corporation A Delaware corporation is a corporation chartered in the U.S. state of Delaware. Delaware is well known as a corporate haven, and thus, over 50% of US publicly-traded corporations and 58% of the Fortune 500 companies are incorporated in the state. and the holding company for CTL. Each holder of the common stock of CTLI received $18.00 in cash for each share of CTLI common stock held. Based on the 3,457,700 outstanding shares of CTLI common stock, the total consideration paid by BVCC was approximately $62 million in cash. CTLI was then liquidated, with its assets transferred to and liabilities assumed by the Company. CTL became a stand-alone subsidiary of the Company and a sister bank to BVFB. The acquisition was accounted for using the purchase accounting method effective June 1, 1996. The acquisition of CTLI was financed with existing cash and borrowings. The Company issued $50 million in Senior Debentures yielding 8.42% (all-in cost All-In Cost Shorthand for "all-included" costs, which are expressed as the interest paid or received for total costs of a financial transaction. Notes: All-in costs include the spread, commission, interest payments, and any other fees resulting from the transaction. was 8.91% annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. ) to partially finance the acquisition. The following table summarizes the revised purchase accounting valuation and related adjustments as compared to the initial estimates performed for the June 30, 1996 financial statements. -0-
Effective Date as of June 1, 1996
Purchase Accounting Allocation
Initial Revised
Estimate Adjustments Estimate
(Dollars in millions)
Cash paid $62.2 -- $62.2
Cash and cash equivalents
acquired from CTLI
(1.4) -- (1.4)
Acquisition costs 0.4 $0.6 1.0
Total purchase price 61.2 0.6 61.8
Liabilities assumed:
Deposits 456.9 -- 456.9
Debt 6.3 -- 6.3
Deferred Tax (1.5) 8.5 7.0
Other liabilities 6.8 0.1 6.9
Total purchase price and
assumed liabilities
529.7 9.2 538.9
Less fair value of acquired assets:
Cash and equivalents 0.3 -- 0.3
Securities 17.5 -- 17.5
Receivables & Contracts 481.5 20.8 502.3
Fixed assets 3.2 0.3 3.5
Real estate owned 2.2 (0.4) 1.8
Other assets 6.6 (0.1) 6.5
Cost in excess of net assets
of acquired company
$18.4 $(11.4) $7.0
See below for a summary of significant assumptions.
-0- Assumptions The significant assumptions used in the purchase accounting valuations at the date of acquisition are as follows: 1. The estimated fair value of loans held for investment was determined by discounting the applicable cash flows at the market rate as of the effective date of the acquisition. The market rate represents the corresponding yield that a willing buyer would receive as a result of the sale of similar loans issued to borrowers of similar credit risk. The applicable cash flows represent the projected loan payments, net of estimated prepayments based on historical experience and published data for similar loans. Fair values of loans held-for-sale are based on prices for similar loans in the secondary market. Management intends to securitize Securitize The practice of a company selling accounts receivables or other debts owed to it. The third party that buys the debt assumes ownership of it and the responsibility for collecting the debts, and keeps the repayments when made. the auto loan portfolio during the fourth quarter of 1996. Future production of auto loans is anticipated to be securitized securitized Of, related to, or being debt securities that are secured with assets. For example, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue's proceeds. on a quarterly basis. To facilitate the realization of these values the Company has entered into certain hedges designed to insulate these values from movements in interest rates. In addition, Management expects to explore the sale of the CTL equipment leasing Equipment Leasing is a financing option to lease equipment for a certain amount of time. Leasing Benefits
2. The adjustment to real estate owned Real Estate Owned Property owned by a lender - usually a bank - after an unsuccessful sale at a foreclosure auction. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank: the minimum bid in most represents a write-down based on an evaluation of the fair value less estimated costs to sell. 3. The adjustment to fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → represents a write-down relating to the pending sale of the building used as the corporate headquarters. 4. The adjustment to other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. represents reserves established for costs to be incurred for termination of lease obligations, data processing activities and employee automobile program. The adjustment also includes costs associated with terminations and integration of certain employee functions. 5. No adjustment has been made for valuations associated with the deposit portfolio. It is likely that these liabilities will be sold to BVFB or retired at face value as assets are sold or securitized. Redeployment re·de·ploy tr.v. re·de·ployed, re·de·ploy·ing, re·de·ploys 1. To move (military forces) from one combat zone to another. 2. of excess capital In light of these valuations, Management expects to explore the sale of the CTL lease portfolio (approximately $65 million) and the securitization of the auto loan portfolio (approximately $280 million). Management estimates that capital of $48 million associated with these assets would be returned to the Company for redeployment. This capital, combined with excess capital available at BVFB and excess cash at the Company, would approximate more than $80 million. Edward H. Sondker, President and Chief Executive Officer, said, "Our business strategy is focused on increasing the velocity of our capital utilization. The sale and/or securitization of these assets will allow the Company to recover a large portion of our invested capital while positioning the CTL to contribute to the Company's continued future earnings growth momentum through periodic securitizations of future production." David A. Heaberlin, Executive Vice President, Chief Financial Officer and Treasurer, added, "We expect to utilize this capital pool to aggressively pursue accretive acquisition Accretive Acquisition An acquisition that will increase the acquiring company's EPS. Notes: As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. opportunities. If we are unable to identify meaningful accretive acquisition opportunities within 6-12 months it is likely that these funds will be utilized to repurchase additional shares." CONTACT: Bay View Capital Corp. David A.Heaberlin, 415/312-7272 http://www.bvfs.com |
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