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Bay View Capital Corporation Announces Fourth Quarter Earnings

SAN MATEO, California -- January 22, 2002 -- Bay View Capital Corporation (the "Company") today reported fourth quarter 2001 net income of $2.8 million, or $0.04 per diluted share, as compared to a net loss of $0.6 million, or $0.01 per diluted share, for the third quarter of 2001 and a net loss of $92.5 million, or $2.83 per diluted share, for the fourth quarter of 2000. Adjusting for the non-recurring nature of certain specific charges and excluding goodwill amortization, after-tax operating cash results for the fourth quarter of 2001 were a net gain of $3.8 million or $0.06 per diluted share.

Bay View's deposit franchise remained strong during the fourth quarter as the Company continued to reduce its total cost of deposits. Fueled by the continued increase in transaction accounts as a percentage of total deposits and the prevailing low interest rate environment, Bay View's cost of deposits decreased to 2.59% for the fourth quarter from 3.54% for the prior quarter. At December 31, 2001, the overall cost of deposits decreased to 2.29% from 3.13% at September 30, 2001. During the quarter, Bay View Bank's transaction accounts, which are lower-cost deposits as opposed to retail certificates of deposits, increased to 60.3% of total deposits from 57.7% for the prior quarter. Also during the quarter, the remaining $100.0 million of advances from the Federal Home Loan Bank of San Francisco were paid-off.

"We are pleased with the successful execution of our strategy to drive down the costs of our retail deposits and grow our transaction accounts by over $340 million during the year," said Robert B. Goldstein, President and CEO of Bay View Capital Corporation. "We recognize this could not have been accomplished without our strong foundation of loyal customers and our dedicated staff."

During the quarter, the Company sold $56 million of franchise loans further reducing Bay View's franchise loan exposure. In addition, franchise loan payoffs during the quarter were $29 million. At December 31, 2001, franchise loans totaled $174 million in unpaid principal balance, down 79% from $823 million at the beginning of the year. Net of mark-to-market valuation adjustments, the net book value of Bay View's franchise loan portfolio was $160.1 million at December 31, 2001 compared with $252.8 million at September 30, 2001.

"We are encouraged with the progress we have made in reducing our exposure to high-risk assets as part of our plan to exit non-core businesses," added Goldstein. "This remains one of our primary goals as we enter 2002 along with growing our core retail and commercial banking businesses and continuing to reduce costs."

On December 31, 2001, Bay View completed a sale of the contractual cash flows of its auto lease portfolio. The transaction was recorded as a secured financing in accordance with generally accepted accounting principles and resulted in an increase in other borrowings of approximately $136 million. The transaction was treated as a sale for tax purposes which, along with other tax planning strategies identified during the quarter and revisions of certain estimates, resulted in an additional tax benefit of $16.6 million during the quarter.

Specific charges during the quarter included $8.9 million of provision for losses on loans and leases primarily related to franchise loans, $8.7 of additional impairment charges for residual losses associated with the auto lease portfolio, $4.2 million of provision and expenses related to real estate owned, and $1.5 million related to the revaluation of franchise-related assets. Specific charges also included a $3.5 million prepayment penalty related to the pay-off of FHLB advances and $1.0 million accrual related to post-retirement health care benefits. These charges were partially offset by a $1.6 million reversal of certain restructuring accruals primarily due to closed facilities being subleased earlier than projected.

The Company's net interest income and net interest margin for the fourth quarter of 2001 were $32.2 million and 3.83%, as compared to $27.8 million and 3.17% for the prior quarter. The increase in net interest income was primarily due to higher net interest margin partially offset by lower average interest-earning asset balances. The increase in net interest margin was primarily due to lower overall cost of funds resulting from the lower cost of deposits, the lower borrowings level and the prevailing low interest rate environment. This was partially offset by lower yields on assets which were also impacted by the lower interest rate environment. The decrease in average interest-earning assets was primarily due to asset sales during the year. Normalized net interest margin, which the Company defines as net interest margin adjusted to include the net rental income from its auto leasing activities and the expenses related to its Capital Securities, was 4.01% as compared to 3.48% for the previous quarter.

Loan originations totaled $193.1 million for the quarter. Originations for the quarter included $83.3 million in auto loans, $59.9 million in multi-family mortgage loans, $25.2 million in home equity loans and $24.7 million in commercial and business loans. These originations were offset by the sale of $56 million of franchise loans during the quarter as discussed earlier, as well as loan payoffs and amortization.

Nonperforming assets, net of mark-to-market valuation adjustments, were $89.8 million at December 31, 2001 as compared to $83.2 million at September 30, 2001. The increase in nonperforming assets was primarily related to an increase in nonaccruing franchise loans. Included in nonperforming assets are $7.8 million in franchise loans that have been recently restructured and, assuming they continue to perform, will return to accruing status during the first quarter of 2002. Loans and leases delinquent 60 days or more at December 31, 2001 were $70.5 million as compared to $88.8 million at September 30, 2001. The decrease in loans and leases delinquent 60 days or more was primarily due to a decline in franchise loan delinquencies. Nonperforming assets excluding franchise-related assets were $20.2 million at December 31, 2001, as compared to $22.0 million at September 30, 2001, while non-franchise delinquencies were $22.7 million at December 31, 2001 as compared to $20.6 million at prior quarter end.

The allowance for loan and lease losses was $49.8 million or 2.10% of gross loans and leases held-for-investment. Within this allowance, $20.1 million is specifically allocated to the franchise portfolio and represents 16.82% of that portfolio. The balance of the allowance of $29.7 million, including $4.8 million of unallocated reserves, represents 1.32% of the remaining loan portfolio. In addition, within the held-for-investment portfolio of franchise loans is another $6.1 million of mark-to-market valuation adjustments on loans transferred from held-for-sale to held-for-investment which is available to absorb losses on these loans.

Excluding non-recurring specific charges of $4.7 million and $3.3 million for the fourth and third quarters, respectively, general and administrative expenses were $33.4 million for the fourth quarter of 2001 as compared to $33.8 million for the third quarter of 2001. The slight decrease in general and administrative expenses, excluding non-recurring specific charges, from the prior quarter was primarily a result of certain cost-savings realized from the Company's ongoing restructuring initiated in 2001.

Excluding net gains or losses on sales of assets, noninterest income was $27.5 million for the fourth quarter of 2001 compared to $28.0 million for the prior quarter. The slight decrease in noninterest income, excluding net gains or losses on sales of assets, from the prior quarter was primarily due to a decrease in income related to auto leases, which the Company ceased purchasing in June 2000 partially offset by an increase in loan fees and other charges.

The Company recorded a tax benefit of $26.0 million for the fourth quarter and $85.9 million for the year based on pre-tax losses. The fourth quarter benefit also included a $16.6 million benefit resulting from certain tax planning strategies identified during the quarter, including the lease cash flow sale previously discussed, and revisions of certain estimates.

As previously announced, the Company will host a conference call at 1:30 p.m. P.S.T. on January 23, 2002 to discuss its financial results. Analysts, media representatives and the public are invited to listen to this discussion by calling 1-888-469-1676 and referencing the password "BVC." An audio replay of this conference call will be available through Friday, February 22, 2002 and can be accessed by dialing 1-800-925-2059.


                         BAY VIEW CAPITAL CORPORATION


                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                 (Unaudited)


                                                  December 31,   December 31,


                                                      2001           2000


                                                    (Dollars in thousands)


    ASSETS


    Cash and cash equivalents:


        Cash and due from


         depository institutions                   $357,008        $694,934


        Short-term investments                      164,380              --


                                                    521,388         694,934


    Securities available-for-sale:


        Investment securities                        98,980          33,009


        Mortgage-backed securities                  278,891             578


    Securities held-to-maturity:


        Mortgage-backed securities                       --         535,478


    Mortgage-backed securities due from creditor         --         106,572


    Loans and leases held-for-sale                   40,608         345,207


    Loans and leases held-for-investment, net     2,326,787       2,751,794


    Investment in operating leased assets, net      339,349         479,829


    Investment in stock of the


     Federal Home Loan Bank of San Francisco         24,157          40,190


    Investment in stock


     of the Federal Reserve Bank                     11,866          19,590


    Real estate owned, net                            9,462           1,041


    Premises and equipment, net                      13,145          17,303


    Intangible assets                               123,573         134,936


    Other assets                                    225,899         200,470


    Total assets                                 $4,014,105      $5,360,931





    LIABILITIES AND STOCKHOLDERS' EQUITY


    Deposits:


        Transaction accounts                     $1,950,699      $1,608,499


        Retail certificates of deposit            1,284,228       1,872,562


        Brokered certificates of deposit                 --         265,251


                                                  3,234,927       3,746,312


    Advances from the


     Federal Home Loan Bank of San Francisco             --         804,837


    Short-term borrowings                                --         197,375


    Subordinated Notes, net                         149,632         149,567


    Other borrowings                                137,536           1,664


    Other liabilities                                65,823          73,327


    Total liabilities                             3,587,918       4,973,082





    Guaranteed Preferred Beneficial


     Interest in the Company's Junior


     Subordinated Debentures


     ("Capital Securities")                          90,000          90,000


    Stockholders' equity:


        Serial preferred stock: Authorized,


         7,000,000 shares; Outstanding, none             --              --


        Common stock ($.01 par value):


         Authorized, 80,000,000 shares;


         issued, 2001-62,627,980;


         2000-32,640,039 outstanding,


         2001-62,579,129; 2000-32,574,987               626             326


        Additional paid-in capital                  595,258         456,045


        Accumulated deficit                        (258,047)       (156,877)


        Treasury stock, at cost, 48,851 shares         (808)         (1,081)


        Accumulated other


         comprehensive income (loss):


            Unrealized gain on securities


             available-for-sale, net of tax             523              10


            Minimum pension


             liability adjustment, net of tax          (294)             --


        Debt of Employee Stock Ownership Plan        (1,071)           (574)


    Total stockholders' equity                      336,187         297,849


    Total liabilities and stockholders' equity   $4,014,105      $5,360,931





                         BAY VIEW CAPITAL CORPORATION


    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


                                 (Unaudited)





                                                 For the Three Months Ended


                                              Dec. 31,   Sept. 30,   Dec. 31,


                                                2001       2001        2000


                             (Amounts in thousands, except per share amounts)


    Interest income:


        Interest on loans and leases          $50,465     $55,156    $87,014


        Interest on


         mortgage-backed securities             3,843       4,231     15,687


        Interest and dividends


         on investment securities               4,554       5,942      9,922


                                               58,862      65,329    112,623


    Interest expense:


        Interest on deposits                   21,671      30,691     47,734


        Interest on borrowings                  1,227       3,151     23,801


        Interest on Senior Debentures


         and Subordinated Notes                 3,715       3,716      3,715


                                               26,613      37,558     75,250





    Net interest income                        32,249      27,771     37,373


    Provision for losses on loans and leases    8,900       3,257     32,100


    Net interest income (loss) after


     provision for losses on loans and leases  23,349      24,514      5,273





    Noninterest income:


        Leasing income                         21,623      22,675     24,798


        Loan fees and charges                   1,347       1,106      2,206


        Loan servicing income                     423         289      1,768


        Account fees                            2,010       2,015      1,972


        Sales commissions                       1,485       1,623      1,193


        Gain (loss) on sale


         of assets and liabilities, net          (702)      2,251    (52,125)


        Other, net                                583         283        850


                                               26,769      30,242    (19,338)


    Noninterest expense:


        General and administrative             38,137      37,027     35,714


        Restructuring expenses                 (1,279)     (1,812)    (1,269)


        Revaluation of


         franchise-related assets               1,500      (1,382)    59,409


        Leasing expenses                       24,510      16,567     19,690


        Dividend expense


         on Capital Securities                  2,912       2,287      2,287


        Real estate owned operations, net       1,833         261         17


        Provision for losses


         on real estate owned                   2,936          --         --


        Amortization of intangible assets       2,804       2,804      2,726


                                               73,353      55,752    118,574





    Loss before income tax expense            (23,235)       (996)  (132,639)


    Income tax benefit                        (26,013)       (364)   (40,176)


    Net income (loss)                          $2,778       $(632)  $(92,463)





    Basic earnings (loss) per share             $0.04      $(0.01)    $(2.83)


    Diluted earnings (loss) per share           $0.04      $(0.01)    $(2.83)





    Weighted-average


     basic shares outstanding                  62,620      62,608     32,647


    Weighted-average


     diluted shares outstanding                63,029      62,608     32,647





    Net income (loss)                          $2,778       $(632)  $(92,463)


    Other comprehensive income (loss), net of tax:


        Change in unrealized gain (loss)


         on securities available-for-sale,


         net of tax expense (benefit) of


         $(446), $1,420, and ($145) for the


         three months ended


         December 31, 2001,


         September 30, 2001,


         and December 31, 2000, respectively.    (633)      2,014       (205)


        Minimum pension liability


         adjustment, net of tax benefit


         of $207 for the three months


         ended December 31, 2001.                (294)         --         --


    Other comprehensive income (loss)            (927)      2,014       (205)


    Comprehensive income (loss)                $1,851      $1,382   $(92,668)





                         BAY VIEW CAPITAL CORPORATION


    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


                                 (Unaudited)


                                                      For the Year Ended


                                                  December 31,   December 31,


                                                      2001           2000


                             (Amounts in thousands, except per share amounts)


    Interest income:


        Interest on loans and leases               $243,163        $360,203


        Interest on mortgage-backed securities       31,695          60,923


        Interest and dividends


         on investment securities                    27,887          39,066


                                                    302,745         460,192


    Interest expense:


        Interest on deposits                        135,736         176,602


        Interest on borrowings                       29,900         103,282


        Interest on Senior Debentures


         and Subordinated Notes                      14,861          14,868


                                                    180,497         294,752


    Net interest income                             122,248         165,440


    Provision for losses on loans and leases         71,890          62,600


    Net interest income after


     provision for losses on loans and leases        50,358         102,840





    Noninterest income:


        Leasing income                               92,305          97,207


        Loan fees and charges                         5,542           8,284


        Loan servicing income                         4,077           5,804


        Account fees                                  7,947           7,863


        Sales commissions                             5,906           5,399


        Gain (loss) on sale of assets


         and liabilities, net                       (10,547)        (52,606)


        Other, net                                    1,939           4,691


                                                    107,169          76,642


    Noninterest expense:


        General and administrative                  155,287         136,718


        General and administrative


         - franchise loan production                     --          15,561


        General and administrative


         - Bankers Mutual                                --           6,311


        Restructuring expenses                        6,935           9,213


        Revaluation of franchise-related assets      70,146         101,894


        Leasing expenses                             86,120          69,350


        Dividend expense on Capital Securities        9,774           8,989


        Real estate owned operations, net             2,085              65


        Provision for losses on real estate owned     2,936              --


        Amortization of intangible assets            11,280          11,158


        Amortization of


         intangible assets - franchise                   --           9,608


        Write-off of


         intangible assets - franchise                   --         192,622


                                                    344,563         561,489


    Loss before income tax expense                 (187,036)       (382,007)


    Income tax benefit                              (85,866)        (55,810)


    Net loss                                      $(101,170)      $(326,197)





    Basic loss per share                              $(1.99)       $(10.00)


    Diluted loss per share                            $(1.99)       $(10.00)


    Weighted-average basic shares outstanding        50,873          32,634


    Weighted-average diluted shares outstanding      50,873          32,634





    Net loss                                      $(101,170)      $(326,197)


    Other comprehensive income, net of tax:


        Change in unrealized gain (loss)


         on securities available-for-sale,


         net of tax expense of $362 and


         $214 for the years ended


         December 31, 2001 and


         December 31, 2000, respectively.               513             303


        Minimum pension liability


         adjustment, net of tax benefit


         of $207 for the year ended


         December 31, 2001.                            (294)             --


    Other comprehensive income                          219             303


    Comprehensive loss                            $(100,951)      $(325,894)





                         BAY VIEW CAPITAL CORPORATION


                           SELECTED FINANCIAL DATA


                                 (Unaudited)





                                           At and For the Three Months Ended


                                              Dec. 31,  Sept. 30,   Dec. 31,


                                                2001       2001       2000


                             (Amounts in thousands, except per share amounts)





    Loans and Leases Held-for-Investment:


      Retail:


        Single-family mortgage loans         $277,288   $306,788    $383,140


        High loan-to-value home equity loans   12,238     13,455     100,573


        Other home equity loans               132,381    128,780     202,324


        Auto loans (A)                        444,607    410,529     287,020


      Total retail loans                      866,514    859,552     973,057


      Commercial:


        Multi-family mortgage loans           697,339    680,684     611,484


        Commercial mortgage loans             289,093    300,265     339,764


        Franchise loans and leases            119,464    154,837     443,622


        Asset-based loans, factoring


         loans, and commercial leases         310,070    332,653     353,362


        Business loans                         79,883     76,020      81,365


      Total commercial loans and leases     1,495,849  1,544,459   1,829,597


    Premiums and discounts and


     deferred fees and costs, net              14,215     14,463      22,878


    Gross loans and leases                  2,376,578  2,418,474   2,825,532


    Allowance for losses


     on loans and leases                     (49,791)   (49,745)    (73,738)


    Loans and leases


     held-for-investment, net              $2,326,787 $2,368,729  $2,751,794





    Other Franchise-Related Assets


      Residual interest in


       franchise loan securitizations          $4,565     $5,800     $14,394


      Franchise loan servicing asset              $--        $--     $14,069





    Credit Quality:


      Nonperforming assets - total (B)        $89,817    $83,190    $101,173


      Nonperforming assets - franchise        $69,583    $61,181     $83,631


      Nonperforming assets as a


       percentage of consolidated assets        2.24%      2.03%       1.89%





      Loans and leases delinquent


       60 days or more                        $70,523    $88,845     $83,787


      Loans and leases delinquent


       60 days or more - franchise            $47,825    $68,291     $60,503


      Loans and leases delinquent


       60 days or more as a percentage of


       gross loans and leases, including


       loans and leases held-for-sale           2.92%      3.53%       2.64%





      Allowance for losses


       on loans and leases                    $49,791    $49,745     $73,738


      Allowance for losses


       on loans and leases as


       a percentage of gross loans


       and leases held-for-investment           2.10%      2.06%       2.61%


      Allowance for losses on loans


       and leases as a percentage


       of nonperforming assets                    55%        60%         73%





    Regulatory Capital Ratios: (C)


      Bay View Bank regulatory capital ratios


        Tier 1 leverage ratio                   5.59%      5.67%       4.23%


        Tier 1 risk-based capital ratio         7.20%      7.46%       6.30%


        Total risk-based capital ratio         10.18%     10.41%       9.00%





      Bay View Capital Corporation regulatory capital ratios


        Tier 1 leverage ratio                   3.73%      4.09%       3.47%


        Tier 1 risk-based capital ratio         4.25%      4.80%       4.59%


        Total risk-based capital ratio          7.62%      8.45%       8.14%





    Per Share Data:


      Book value per share                      $5.39      $5.33       $9.14


      Tangible book value per share             $3.41      $3.31       $5.00





    Other Data:


      Transaction accounts as a


       percentage of total retail deposits      60.3%      57.7%       46.2%


      Full-time equivalent employees              895        911       1,018


      Franchise loans held-for-sale,


       net, as a percentage of


       unpaid principal balance                 83.6%      90.9%       88.7%





                         BAY VIEW CAPITAL CORPORATION


                     SELECTED FINANCIAL DATA (continued)


                                 (Unaudited)





                           For the Three Months Ended      For the Year Ended


                        Dec. 31,   Sept. 30,   Dec. 31,   Dec. 31,   Dec. 31,


                          2001       2001        2000       2001        2000


                                        (Dollars in thousands)





    Net Interest Margin (GAAP):


      Loan yield          8.00%      8.50%      9.49%       8.72%      9.12%


      Mortgage-backed


       securities yield    5.47       5.46       7.09        6.77       7.12


      Investment yield     3.21       3.89       7.65        4.72       8.11


        Interest-earning


         assets yield     6.99%      7.44%      8.88%        7.87      8.71%


      Transaction


       accounts cost       1.66       2.60       3.55        2.65       3.43


      Retail certificates


       of deposit cost     3.93       4.74       5.89        5.13       5.48


      Brokered


       certificates


       of deposit cost       --         --       7.02        7.24       6.67


        Total


         deposits cost    2.59%      3.54%      5.01%       3.88%      4.71%


      Wholesale


       borrowings cost     4.73       6.45       6.91        6.27       6.32


      Debt cost            9.93       9.93       9.94        9.93       9.94


        Total


         borrowings cost  7.83%      7.97%      7.21%       7.15%      6.62%


        Interest-bearing


         liabilities cost 2.96%      3.94%      5.63%       4.37%      5.33%


      Net spread          4.03%      3.50%      3.25%       3.50%      3.38%


      Net


       interest margin    3.83%      3.17%      2.95%       3.18%      3.13%





      Average


       interest-earning


       assets        $3,349,246 $3,490,724 $5,042,349  $3,847,780 $5,286,540


      Total average


       assets         4,049,582  4,223,210  5,862,830   4,576,436  6,268,315


      Total average


       equity           335,373    330,324    376,341     326,808    554,752





    Loan and Lease Production:


      Originations:


        Home equity


         loans and


         lines of


         credit         $25,196    $30,928    $17,413     $94,026    $71,883


        Auto loans


         and leases (D)  83,349     87,106     73,065     323,619    403,336


        Multi-family


         and commercial


         mortgage loans  59,912     89,508     23,691     245,152    168,520


        Franchise loans      --         --        775          --    299,878


        Bankers Mutual


         multi-family


         mortgage loans (E)  --         --         --          --    220,146


        Asset-based loans,


         factoring loans,


         and commercial


         leases           6,525      7,806     37,824      62,513    150,545


        Business loans   18,138     16,908     15,867      60,310     67,078


      Total


       originations    $193,120   $232,256    168,635    $785,620  1,381,386





    (A) Excludes auto-related operating lease assets reported separately from


        loans and leases totaling $339.3 million, $379.2 million and


        $479.8 million at December 31, 2001, September 30, 2001, and


        December 31, 2000, respectively.


    (B) Nonperforming assets net of mark-to-market valuation adjustments of


        $4.7 million, $7.8 million and $0.5 million at December 31, 2001,


        September 30, 2001 and December 31, 2000, respectively.


    (C) December 31, 2001 capital ratios are subject to the finalization and


        submission of the Company's December 31, 2001 regulatory reports.


    (D) Includes auto-related operating lease assets totaling $114.6 million


        for the year ended December 31, 2000.  The Company's agreement with


        Lendco Financial Services for the purchase of auto leases expired on


        June 30, 2000.


    (E) 100% of Bankers Mutual multi-family mortgage loans are originated and


        sold through seller-servicer programs administered by Fannie Mae and


        Freddie Mac.  Effective June 30, 2000, substantially all of the assets


        and liabilities of Bankers Mutual were sold.
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