BVC Bay View Cap Cp

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

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