Bay View Capital Corporation Fourth Quarter and Full Year 1996 Results.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)--Jan. 23, 1997--Bay View Capital Corporation ("Bay View" or "BVCC BVCC Blackstone Valley Chamber of Commerce (Whitinsville, Massachusetts) BVCC Buena Vista Construction Company "), the holding company for Bay View Federal Bank ("BVFB"), California Thrift thrift: see leadwort. & Loan ("CTL See control key. 1. CTL - Checkout Test language. 2. CTL - Compiler Target Language. 3. CTL - Computational Tree Logic ") and Bay View 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. Corporation ("BVSC BVSC Buena Vista Social Club BVSC Bachelor of Veterinary Science BVSC Birmingham Voluntary Service Council (Birmingham, UK) BVSC Beaver Valley Ski Club "), today reported fourth quarter 1996 net income of $4.9 million or $.72 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , an increase of $.36 per share or 100% over fourth quarter 1995 core earnings per share. Excluding nonrecurring charges Nonrecurring Charge An expense occurring only once on a company's financial statement. Notes: An extraordinary item is an example of a nonrecurring charge. Also known as "nonrecurring item". of $11.3 million after tax, core fourth quarter 1995 earnings were $2.7 million or $.36 per share. The prior year nonrecurring charges were related to performance impediments IMPEDIMENTS, contracts. Legal objections to the making of a contract. Impediments which relate to the person are those of minority, want of reason, coverture, and the like; they are sometimes called disabilities. Vide Incapacity. 2. which were eliminated to improve the Bay View's future profitability and enhance shareholder value. Current quarter earnings were favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by the continued expansion of net interest margin and lower general and administrative expenses. For the third quarter of 1996, Bay View reported core earnings of $4.6 million or $.67 per share excluding the one-time Savings Association Insurance Fund Savings Association Insurance Fund (SAIF) A government organization that replaced the Federal Savings and Loan Insurance Corporation as the provider of deposit insurance for thrift institutions. (SAIF) recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. assessment of $6.7 million after tax or $.97 per share. Including the SAIF recapitalization assessment, third quarter of 1996 was a net loss of $2.1 million or $.30 per share. Core earnings for the year ended December 31, 1996 were $17.7 million, or $2.55 per share excluding the SAIF recapitalization assessment. Including the one-time assessment, net income for 1996 was $11.0 million, or $1.58 per share. Core earnings for 1995 was $6.6 million or $.91 per share excluding the nonrecurring charges taken in the fourth quarter of 1995. Including the nonrecurring charges, fourth quarter 1995 was a net loss of $4.7 million. Edward H. Sondker, President and Chief Executive Officer said, "1996 was the best year from a core operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before standpoint in Bay View's 85-year history. Our strategic focus on wholesale balance sheet restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of BVFB, retail deposit franchise enhancement and capital 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. opportunities to enhance shareholder value has enabled Bay View to achieve its best performance so far." Tangible Cash Earnings With a continued focus on tangible cash earnings, tangible cash earnings have been calculated to exclude charges tied to the market value of the Bay View's shares related to management incentive plans and Employee Stock Ownership Plan, in addition to excluding non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. associated with the amortization of intangibles. For the fourth quarter of 1996, tangible cash earnings were $5.4 million or $.80 per share as compared to $4.3 million or $.59 per share for the same period in 1995 excluding the fourth quarter 1995 nonrecurring charges. Tangible cash earnings for the third quarter of 1996 were $5.7 million or $.83 per share excluding the SAIF recapitalization assessment. Tangible cash earnings for 1996, excluding the SAIF recapitalization assessment, were $20.4 million or $2.93 per share as compared to the $9.6 million or $1.32 per share for the prior year excluding fourth quarter 1995 nonrecurring charges. The following table shows the components of tangible cash earnings for the respective periods:
Three Months Ended Year Ended
December September December December
31,
31, 30, 31,
1996 1996 1995 1996
1995
Core earnings $ 4,868 $ 4,648 $ 2,676 $ 17,725 $
6,646
Adjustments:
Amortization of 496 342 1,589 1,746
2,758
intangibles
ESOP 56 56 51 222
203
Management - 690 - 690
-
incentive plans
Tangible cash
earnings $ 5,420 $ 5,736 $ 4,316 $ 20,383 $
9,607
Net Interest Margin Continues to Expand Consolidated net interest income for the fourth quarter of 1996 was $23.1 million as compared to fourth quarter 1995 net interest income of $14.2 million. The consolidated net interest margin for the fourth quarter of 1996 was 2.79%, up 78 basis points as compared to 2.01% for the fourth quarter of 1995 primarily due to lower cost of funds and the impact of the acquisition of CTL. The consolidated net interest income for third quarter of 1996 was $22.9 million representing a margin of 2.78%. A summary of consolidated net interest income and margins follows:
Three Months Ended
December 31, September 30, December 31,
1996 1996 1995
Net Net Net Net Net Net
Interest Interest Interest Interest Interest
Interest
Income Margin Income Margin Income
Margin
(Dollars in thousands)
BVFB $ 17,447 2.51% $ 17,120 2.45% $14,154 2.01%
CTL (post
acquisition) 6,687 5.06% 6,854 5.35% - -
BVCC(a) (1,082) N/A (1,096) N/A 20 N/A
BVCC-
Consolidated $ 23,052 2.79% $ 22,878 2.78% $ 14,174 2.01%
Year Ended
December 31, 1996 December 31, 1995
Net Net Net Net
Interest Interest Interest Interest
Income Margin Income Margin
(Dollars in thousands)
BVFB $ 67,303 2.38% $ 55,837 1.86%
CTL (post
acquisition) 16,222 5.10% - -
BVCC (a) (2,543) N/A 79 N/A
BVCC - Consolidated 80,982 2.57% 55,916 1.86%
(a) Consists primarily of interest expense on $50 million 8.42%
Senior Debentures (all-in cost 8.91% annualized) issued in May 1996
to partially finance the acquisition of CTL.
Bay View Federal Bank BVFB's fourth quarter 1996 net interest margin was 2.51%, an increase of 50 basis points as compared to net interest margin of 2.01% for the same period in 1995. The net interest margin for the third quarter of 1996 was 2.45%. The improvement in net interest margin was primarily due to lower cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. related to retail deposits. The cost of retail deposits at December 31, 1996 was 4.60%, 24 basis points below COFI COFI Cost of Funds Index COFI Council Of Forest Industries (Canada) COFI Community Organizing and Family Issues COFI Checkout and Fault Isolation COFI Coder/Decoder Filter (electrical engineering) of 4.84%. The cost of retail deposits decreased by 64 basis points as compared to December 31, 1995 and 6 basis points as compared to third quarter 1996. The decrease in the cost of retail deposits was primarily due to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. repricing Repricing To change the price of an asset. In derivatives, it sometimes refers to the exchange of options of with different strike prices. repricing of certificates of deposit and an increase in transaction accounts which are at lower rates than certificates of deposit. As of December 31, 1996, transaction accounts as a percentage of total deposits increased to 30.27% from 28.05% at September 30, 1996 and approximately 20% at year-end 1995. The following table is a summary of cost of retail deposits for BVFB versus COFI: December September December 31, 1996 30, 1996 31, 1995 Cost of retail deposits 4.60% 4.66% 5.24% COFI 4.84% 4.84% 5.12% Spread above/(below) COFI (0.24)% (0.18)% 0.12% California Thrift and Loan CTL's fourth quarter 1996 net interest margin was 5.06%, a decrease of 29 basis points from 5.35% for the third quarter of 1996. The lower net interest margin was primarily due to the impact of the sale of the equipment leasing Equipment Leasing is a financing option to lease equipment for a certain amount of time. Leasing Benefits
Bay View's management began implementing a significant restructuring of CTL's balance sheet in late 1996. The following summarizes the status of those actions as previously disclosed in a separate press release dated January 21, 1997. 1. Sale of Equipment Leasing Portfolio CTL signed a definitive agreement for the sale of its entire equipment leasing portfolio to Santa Barbara Santa Barbara (săn'tə bär`brə, –bərə), city (1990 pop. 85,571), seat of Santa Barbara co., S Calif., on the Pacific Ocean; inc. 1850. Bank & Trust for cash. The leases sold aggregated $60 million and this transaction closed on December 2, 1996. The proceeds from this transaction slightly exceeded the value established during the purchase accounting valuation process. This sale combined with other issues outlined herein enabled CTL to return $15 million of capital to Bay View for redeployment on December 31, 1996. 2. Reduction of High Cost Customer Deposits At September 30, 1996, CTL had approximately $462 million of customer deposits. Such customer deposits are primarily comprised of thrift certificates which are similar to certificates of deposit with the exception that they are callable Callable Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. at par plus accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. . When thrift certificates are purchased by customers, CTL has, as thrift certificates have been issued, reserved the right to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. the certificates at any time upon thirty days notice. Utilizing this call provision, CTL redeemed the higher cost component (higher than BVFB's incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. borrowing cost) of these deposits at face value (approximately $267 million) as of December 31, 1996. The remainder of the CTL customer deposits (which are lower cost than BVFB's incremental borrowing cost) will be sold to BVFB. An application for the approval of the sale of these deposits to BVFB will be filed with the Office of Thrift Supervision The Office of Thrift Supervision (OTS) was established as a bureau of the Treasury Department in August 1989 as part of a major Reorganization Plan of the thrift regulatory structure mandated by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (12 U.S.C.A. . The sale is anticipated to be completed during the first quarter of 1997 and will allow CTL to further return approximately $8 million of capital to Bay View. 3. Sale and Securitization of Auto Loan Portfolio CTL intends to sell a portion of its auto loan portfolio to BVSC, 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. formed for the purpose of issuing asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. through a trust. The sale of the auto loans is expected to enable CTL to return approximately $25 million of capital to Bay View. The premium arising from the sale of the auto loan portfolio has been recorded as part of the purchase accounting valuations related to the June 1996 acquisition of CTL. In conjunction with the decision 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, Management entered into certain hedges which have materially insulated in·su·late tr.v. in·su·lat·ed, in·su·lat·ing, in·su·lates 1. To cause to be in a detached or isolated position. See Synonyms at isolate. 2. the purchase accounting valuation from movements in interest rates. In November 1996, BVSC filed with the Securities and Exchange Commission ("SEC") a shelf registration statement on Form S-3 for $500 million of automobile receivable-backed securities. The shelf registration statement on Form S-3 filed by BVSC has been declared effective by the SEC. Management anticipates the issuance this month of approximately $250 million of such securities pursuant to this shelf registration. Capital Markets Insurance Corporation will provide credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing of this initial transaction. THE FOREGOING STATEMENTS ARE NEITHER AN OFFER TO SELL NOR A SOLICITATION solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual OF AN OFFER TO BUY ANY SECURITIES OR DERIVATIVE INSTRUMENTS Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. . THE OFFER WILL BE MADE ONLY BY A PROSPECTUS. Auto Loan Strategic Alliance BVFB has entered into a strategic alliance with Ultra Funding, Ltd. ("Ultra"), a Texas limited partnership, to purchase motor vehicle installment contracts installment contract n. an agreement in which payments of money, delivery of goods or performance of services are to be made in a series of payments, deliveries or performances, usually on specific dates or upon certain happenings. ("auto receivables") originated by Ultra on a flow basis. These auto receivables are serviced by CTL and are 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 together with the future production from CTL. Management expects Ultra to be a significant component (current production approximates $3 - 4 million per month) of its expanding consumer finance strategy. The actions described above are consistent with Bay View's capital strategy to increase the velocity of capital utilization, de-emphasize less profitable activities and return the capital of subsidiaries in excess of the regulatory "well capitalized" requirement to Bay View. Bay View expects to utilize the estimated $48 million of capital being returned by CTL 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 and/or repurchase additional shares. Improvement in Credit Quality Credit quality remained strong and has continued to improve as evidenced by a continuing decline in nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. and delinquencies. A summary of the trends in credit quality follows:
Nonperforming Assets
as a Percentage of Total Assets
(Dollars in December 31, December 31, December 31,
thousands) 1996 1995 1994
BVFB $ 18,929 0.63% $ 38,811 1.29% $ 50,577 1.60%
CTL (post 5,381 1.16% - - - -
acquisition)
BVCC-
Consolidated $ 24,310 0.74% $ 38,811 1.29% $ 50,577 1.60%
Loans Delinquent 60 Days or More
as a Percentage of Gross Loans
(Dollars in December 31, December 31, December 31,
thousands) 1996 1995 1994
BVFB $ 19,769 0.96% $ 20,166 0.96% $ 48,465 2.33%
CTL (post
acquisition) 3,239 0.77% - - - -
BVCC -
Consolidated $ 23,008 0.92% $ 20,166 0.96% $ 48,465 2.33%
Reserve Adequacy The provision for losses on loans for CTL for the third quarter of 1996 was $350,000, which was substantially offset by the reversal of $318,000 for losses during June 1996 against the allowance for loan losses established at acquisition. A summary of allowance for losses is as follows:
Allowance for Losses
as a Percentage of Nonperforming Assets
(Dollars in December 31, December 31, December
31,
thousands) 1996 1995 1994
BVFB $ 26,681 141% $ 30,944 80% $ 30,689
62%
CTL (post
acquisition):
Assets held for
portfolio 2,332 - - - -
-
Assets held-for-
sale 7,391 - - - -
-
Subtotal 9,723 181% - - -
-
BVCC-Consolidated $36,404 150% $ 30,944 80% $ 30,689
62%
Allowances for Losses on Loans
as a Percentage of Nonperforming Loans
(Dollars in December 31, December 31, December
31,
thousands) 1996 1995 1994
BVFB $ 26,681 190% $30,014 279% $ 29,115
80%
CTL (post
acquisition):
Assets held for
portfolio 2,332 - - - -
-
Assets held-for- - - -
-
sale 7,391 - - - -
-
Subtotal 9,723 465% - - -
-
BVCC-Consolidated $36,404 226% $30,014 279% $29,115
80%
The consolidated provision for losses on loans was $700,000 for the fourth quarter of 1996 as compared to $1.9 million for the fourth quarter of 1995. The higher provision for loan losses in the prior year period was primarily due to a higher level of nonperforming assets and provision for losses on one large loan classified as a troubled debt restructuring troubled debt restructuring See debt restructuring. due to Management's decision to accelerate the disposal of this asset. The consolidated provision for loan losses for the third quarter of 1996 was $432,000. CTL's allowance for losses on assets held-for-sale will be utilized as the auto loan portfolio is sold and securitized by BVSC. Excluding the allowance for losses on assets held-for-sale, the consolidated allowance for losses on nonperforming assets and loans at December 31, 1996 were 119% and 180%, respectively. Noninterest Income Noninterest income for the fourth quarter of 1996 was $2.0 million as compared to $2.9 million during the third quarter of 1996. Noninterest income for the fourth quarter of 1995 (which does not include CTL) was $2.0 million. The decrease in noninterest income compared to the third quarter of 1996 was primarily due to the loss on certain securities transactions of $0.5 million. During the fourth quarter of 1996, BVFB sold $31 million of mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. from its available-for-sale portfolio and recorded a loss of $245,000 due to the sale. For the full year 1996, total mortgage-backed securities sold from the available-for-sale portfolio were $55 million and aggregated a loss of $507,000. BVFB's interest rate risk profile has been favorably impacted by the sale of these securities. At December 31, 1996, the remaining balance of mortgage-backed securities available-for-sale was $84.4 million and the unrealized loss Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. was $1.25 million or 1.5%. In conjunction with the pending securitization of CTL's auto loan portfolio, during the fourth quarter of 1996, CTL entered into a short sale of treasury securities to hedge the valuations from movements in interest rates. A loss of $293,000 in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting was recorded in the fourth quarter associated with this short sale of treasury securities. General and Administrative Expenses General and administrative expenses for fourth quarter were $15.1 million and included certain special mention items which are discussed further below (see Special Mention Items). Excluding special mention items, general and administrative expenses were $14.9 million as compared to $15.3 million for the third quarter of 1996. General and administrative expenses (excluding nonrecurring charges) for the fourth quarter of 1995 were $11.5 million. The following table of general and administrative expenses and efficiency ratios excludes special mention items:
Three Months Ended
December 31, September 30, December
31,
1996 1996 1995
G&A Efficiency G&A Efficiency G&A
Efficiency
(Dollars in thousands)
Bay View
Federal Bank $ 10,264 54.10% $10,340 53.90% $ 11,377
72.26%
CTL (post
acquisition) 4,144 50.35% 4,620 52.93% -
-
BVCC 461 N/A 389 N/A 110
N/A
BVCC-
Consolidated $ 14,869 56.01% $15,349 56.68% $ 11,487
71.16%
Year Ended
December 31, 1996 December 31, 1995
G&A Efficiency G&A Efficiency
(Dollars in thousands)
Bay View
Federal Bank $ 41,634 55.90% $46,864 74.34%
CTL (post
acquisition) 10,392 52.34% - -
BVCC 1,235 N/A 582 N/A
BVCC-Consolidated $ 53,261 57.10% $47,446 73.46%
Bay View Capital Corporation and Bay View Federal Bank General and administrative expenses for Bay View were higher during the fourth quarter of 1996 due to the allocation of expenses from BVFB as a result of the transfer of certain functions to the Bay View. BVFB's general and administrative expenses for the fourth quarter of 1996 included deposit insurance premiums of $.26 for every $100 of deposits. As a result of legislation to recapitalize re·cap·i·tal·ize tr.v. re·cap·i·tal·ized, re·cap·i·tal·iz·ing, re·cap·i·tal·iz·es To change the capital structure of (a corporation). re·cap and fully fund the SAIF, premiums on SAIF-insured deposits for BVFB will be reduced for 1997 from 23 basis points to 6.48 basis points. Excluding special mention items and including the normalization In relational database management, a process that breaks down data into record groups for efficient processing. There are six stages. By the third stage (third normal form), data are identified only by the key field in their record. of deposit insurance premiums, general and administrative expenses for Bay View and BVFB combined for 1996 would have been approximately $40.4 million as compared to the previously indicated 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. threshold of less than $42 million previously announced. California Thrift and Loan General and administrative expenses decreased to $4.1 million during the fourth quarter of 1996 as compared to $4.6 million in the third quarter period. The decrease was primarily due to the elimination of general and administrative expenses relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the leasing portfolio and continued implementation of cost reduction opportunities since acquisition date. Special Mention Items Net income for the twelve months ended December 31, 1996 contained certain items which deserve special mention. The impact of these items on full year 1996 earnings was a net decrease of $52,000 or $0.01 per share. Fourth Quarter 1996 (pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern ) The net impact of the following items on fourth quarter results completely offset each other. - $1.0 million of enhanced profitability resulting from purchase accounting valuations associated with the CTL assets being held-for-sale. - $538,000 loss on sale of mortgage-backed securities and short sale of treasury securities. - $400,000 additional accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. for the termination of data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a contracts which was finalized See finalization. during the fourth quarter of 1996. - $80,000 net expense arising from the impact of the sale of the leasing portfolio partially offset by refunds of FDIC FDIC See: Federal Deposit Insurance Corporation FDIC See Federal Deposit Insurance Corporation (FDIC). insurance premiums. Third Quarter 1996 (pretax) The net impact of the following items on third quarter 1996 results was a net decrease of $72,000 after tax or $0.01 per share. - $3.2 million gain from the sale of and income received from certain 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 properties. - $1.4 million of enhanced enhanced profitability resulting from purchase accounting valuations associated with the CTL assets being held-for-sale. as compared to the initial estimate of CTL's contribution to the consolidated net income of the Company. - $2.0 million accrual for termination of data processing contracts and an additional write-down for computer hardware relating to the Company's long-term information services See Information Systems. technology agreement with BISYS Group, Inc. - $1.3 million loss accrual for lease obligations in excess of related sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. rentals resulting from unfavorable lease agreement terms. - $1.2 million expense accrual for long-term incentive plan awards. - $210,000 accrual for downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing loan operations and relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of administrative functions. Second Quarter 1996 (pretax) The net impact of the following items on second quarter 1996 results was a net decrease of approximately $89,000 after tax or $0.01 per share. - $770,000 gain from the sale of and income received from certain real estate owned properties. - $500,000 additional write-down due to the sale of the corporate office complex which closed in the third quarter of 1996. The Company had initially provided a write-down of $7.1 million on this property. - $425,000 write-down related to certain computer hardware and software. The computer-related write-down was directly related to the Company's decision to enter into a long-term information services technology agreement with BISYS Group, Inc. First Quarter 1996 (pretax) The net impact of the following items on first quarter 1996 results was a net improvement of $109,000 after tax or $0.01 per share. - $800,000 gain from the sale of and income received from certain real estate owned properties. - $350,000 write-off of core deposit intangibles and fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → due to a branch closure. - $260,000 loss resulting from the sale of approximately $24 million of mortgage-backed securities from the available-for-sale portfolio. Capital Redeployment Strategies Stock Repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. Program The Company's outstanding shares of common stock at December 31, 1996 and December 31, 1995 were 6,674,635 shares and 7,101,590 shares, respectively. The decrease in the number of outstanding shares was primarily attributable to the repurchase of 495,000 shares in 1996 partially offset by the exercise of stock options. As a result of the stock repurchases, weighted average shares outstanding (including certain common stock equivalents) used for earnings per share calculations has decreased from 7,293,492 shares for the full year 1995 to 6,784,309 shares in the fourth quarter of 1996, a decrease of approximately 7.0%. The Company's share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. during 1996 completed its previously announced intention to repurchase 800,000 shares of common stock. These shares were repurchased at an average cost of $31.97. The Company announced (see press release dated January 22, 1997) a further repurchase program of $25 million to further redeploy 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. its excess capital. This authorization should enable the Company to repurchase approximately 475,000 shares (based on most recent share price of $52.875) bringing the aggregate repurchases to approximately 1.3 million shares or 17.5% of the 7.4 million shares outstanding when the initial share repurchase program was announced. Acquisition of EXXE Data Corporation/Concord Growth Corporation The Company also announced on January 22, 1997, that it has signed a definitive agreement to acquire EXXE Data Corporation ("EXXE") and its wholly owned nationwide commercial finance subsidiary, Concord Concord, cities, United States Concord (kŏng`kərd, kŏn`kôrd'). 1 city (1990 pop. 111,348), Contra Costa co., W central Calif.; settled c.1852, inc. 1906. Growth Corporation ("CGC CGC Canine Good Citizen (AKC Dog Title) CGC Commission Géologique du Canada (Geological Survey of Canada) CGC Confédération Générale des Cadres (French labor union) "). Under the terms of the definitive agreement, holders of EXXE capital stock, warrants and options will receive an initial aggregate payment of $19.8 million at closing and will be entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to potential future payments, dependent on the future financial performance of CGC, of up to $34 million. Bay View estimates that the first full year EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. enhancement from this transaction will approximate $.14 per share or $.05 (50%+) more than the estimated $.09 per share benefit that which would be achieved from utilizing the $19.8 million to repurchase shares of Bay View common stock. The closing payment of $19.8 million constitutes approximately 9.4 times the estimated initial year net income for CGC. Cash basis EPS enhancement from this transaction, which excludes the amortization of goodwill arising from the transaction, is estimated at $.30 for the first full year of operations or more than 300% better than that which would be achieved by utilizing the $19.8 million to repurchase Bay View shares. When measured against the first full year cash basis EPS, the closing payment of $19.8 million represents approximately 6.2 times the initial year earnings estimate for CGC. Bay View expects, for the twelve months following the completion of the CGC acquisition, that the consumer and commercial finance activities will contribute approximately 20% of Bay View's consolidated profits. The acquisition of EXXE/CGC will be accounted for as a purchase and is expected to be completed during March 1997. Subject to the approval of EXXE shareholders, the purchase price is currently estimated to exceed 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 by $16.5 million which Bay View anticipates amortizing over a 15 year period. CGC is expected to be a stand-alone subsidiary of Bay View. Other Capital Strategies Bay View has previously disclosed (see press release dated January 21, 1997) that estimated capital of $48 million would be returned from CTL in connection with the sales of CTL's auto loans and the subsequent securitization of such assets by BVSC and balance sheet restructuring of CTL. Bay View has also previously disclosed that the capital returned from CTL when combined with excess capital available at BVFB and excess cash at Bay View would approximate more than $80 million. Bay View is currently contemplating the issuance of commercial paper and the issuance of subordinated notes by BVFB. The commercial paper issuance would be utilized as a funding alternative for CGC, CTL and certain BVFB assets. The subordinated notes would be utilized to expand BVFB's Tier II regulatory capital and reduce Tier I capital. Management conservatively estimates that these actions combined with 1997 earnings will enable Bay View to generate at least $40 million of additional capital for redeployment. The EXXE/CGC acquisition and the $25 million share repurchase will redeploy roughly $50 million of the $80 million currently available. Following the completion of these transactions, Bay View estimates that at least $70 million of capital remains available for redeployment during 1997. David A. Heaberlin, Executive Vice President and Chief Financial Officer of Bay View, added, "We expect to continue utilizing this capital pool to aggressively pursue accretive acquisition opportunities to expand our commercial and consumer finance platforms. We will also continue to explore the acquisition of other potential high quality niche origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real capabilities, as well as opportunities to further enhance the BVFB deposit franchise. These acquisition activities are likely to be combined with further future share repurchases." Headquartered in San Mateo, California San Mateo is a city in San Mateo County, California, in the San Francisco Bay Area. It is one of the larger suburbs on the San Francisco Peninsula, located between Burlingame to the north, Foster City to the East, and Belmont to the south. , the Company has total assets of $3.3 billion. Bay View Federal Bank operates 26 full service community banking centers throughout the San Francisco Bay Area “Bay Area” redirects here. For other uses, see Bay Area (disambiguation). The San Francisco Bay Area, colloquially known as the Bay Area or The Bay . California Thrift and Loan operates 19 offices throughout California and the western United States Noun 1. western United States - the region of the United States lying to the west of the Mississippi River West Santa Fe Trail - a trail that extends from Missouri to New Mexico; an important route for settlers moving west in the 19th century . Additional information relating to the Company's SEC filings, earnings releases, corporate news releases and analyst reports is available on the Internet. A consolidated financial summary follows:
BAY VIEW CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(Dollars in thousands December September
December
except per share amounts) 31, 30,
31,
1996 1996
1995
ASSETS
Cash and cash equivalents:
Cash and due from depository
institutions $ 22,608 $ 40,999 $
24,144
Interest-bearing deposits
and federal funds sold 84,220 37,715
18,616
106,828 78,714
42,760
Loans held-for-sale 294,949 363,306
-
Securities available-for-sale:
Mortgage-backed securities 83,154 112,769
149,778
Investment securities 13,802 1,015
8,035
Securities held-to-maturity:
Mortgage-backed securities 494,459 514,600
581,600
Investment securities 15,204 32,820
39,928
Loans receivable held
for investment,
net of allowance for losses 2,179,768 2,208,276
2,062,268
Investment in stock of the FHLB
of San Francisco 51,891 45,058
39,450
Real estate owned, net 7,387 8,497
24,476
Premises and equipment, net 6,905 9,310
16,184
Core deposit premiums 3,810 4,238
5,835
Goodwill 6,387 6,636
-
Other assets 35,718 42,936
34,182
Total assets $3,300,262 $3,428,175
$3,004,496
LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposits:
Transaction accounts $ 493,571 $ 474,180 $
387,610
Certificates of deposit 1,270,396 1,620,274
1,432,230
1,763,967 2,094,454
1,819,840
Advances from the FHLB
of San Francisco 977,750 829,056
766,790
Securities sold under agreements
to repurchase 210,640 192,632
166,738
Senior Debentures 49,406 50,000
-
Other borrowings 7,147 7,260
7,937
Other liabilities 91,290 61,078
35,214
Total liabilities 3,100,200 3,234,480
2,796,519
Stockholders' equity:
Serial preferred stock: authorized,
7,000,000 shares;
outstanding: none - -
-
Common stock ($.01 par value);
authorized, 20,000,000 shares;
outstanding: 12/31/96 - 6,674,635
shares; 9/30/96 - 6,640,242 67 66
71
shares; 12/31/95 - 7,101,590 shares
Additional paid-in capital 100,599 99,989
97,646
Retained earnings (substantially
restricted) 104,747 100,945
115,966
Unrealized loss on securities
available-for-sale (net of tax) (713) (2,667)
(683)
Debt of Employee Stock Ownership Plan (4,638) (4,638)
(5,023)
Total stockholders' equity 200,062 193,695
207,977
Total liabilities and
stockholders' equity 3,300,262 3,428,175
3,004,496
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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