BVC Bay View Cap Cp

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/

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