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FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION
PLEASE CONTACT:
July 12, 2000
BYL BANCORP
ROBERT UCCIFERRI, PRESIDENT
AND CHIEF EXECUTIVE OFFICER, OR
BARRY MOORE, EVP/CFO, OR
BYL BANK GROUP
GARY STRACHN, SENIOR VP/CFO,
(714) 685-1317
PRESS RELEASE
BYL BANCORP ANNOUNCES FORMATION OF SMALL BUSINESS LENDING JOINT
VENTURE WITH CNL COMMERCIAL FUNDING, LP AND BYL BANK GROUP'S ENTERING
INTO AN ADMINISTRATIVE ACTION WITH THE FDIC
Orange, CA - BYL Bancorp ("BYL") (NASDAQ National Market "BOYL"), the holding
company for BYL Bank Group ("BYL Bank") announced today the execution of an
agreement (the "JV Agreement") with CNL Commercial Funding, LP ("CFL") to
jointly form CNL Commercial Finance, LLC ("CCF" or the "Joint Venture") with BYL
holding a 25% ownership interest in the Joint Venture and CFL owning initially a
75% interest. The Joint Venture has been formed to acquire BYL Bank's small
business commercial loan origination, servicing and securitization operations
(the "Loan Programs") and to subsequently operate and expand the Loan Programs
throughout California and other regions in the United States.
James M. Seneff, Jr. is chairman and CEO of the General Partner of CNL
Commercial Funding, LP and is the CEO and Founder of CNL Financial Group, Inc.,
one of the nation's largest, privately held real estate and financial services
group of companies. CNL and its affiliates own and/or manage an asset base of
over $4.0 billion, representing more than 2,700 properties in 48 states. CNL's
corporate headquarters is located in downtown Orlando, Florida and it employs
more than 500 people.
Currently, BYL Bank's Loan Programs operation originates, sells and in the past
has securitized loans guaranteed by the U.S. Small Business Administration
("SBA") made to small businesses (the "SBA Loans") and non-guaranteed small
business loans (the "SBL Loans") through BYL Bank's SBA Division. With the
assistance of BYL Bank, the Joint Venture has begun the application process to
receive all necessary licenses and approvals for the operation of the SBA
portion of its business.
To facilitate the formation of CCF, BYL will transfer to the Joint Venture in a
two step transaction certain subordinated retained interests in BYL Bank's
1999-1 securitization of a pool of SBL Loans as well as substantially all of the
SBA Division's personnel and assets subject to all necessary regulatory
approvals. In return, BYL Bank will receive from the Joint Venture cash at least
equal to the book value of the residual interests and assets transferred.
The Joint Venture will have a total of $10 million in capital consisting of the
initial investment by CFL of $7.5 million for its 75% interest and $2.5 million
by BYL for its 25% interest. After obtaining all necessary regulatory approvals,
BYL's investment will be funded by a $2.5 million
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non-recourse note to CCF secured solely by its 25% interest in CCF. It is
anticipated that the transaction will close in the fourth quarter of 2000.
In order to facilitate the operation of the Joint Venture, CCF has received a
commitment from First Union Securities, Inc. to provide a commercial paper
warehousing facility for the Joint Venture's loan originations prior to their
securitization or sale. Additionally, upon commencement of its operations,
the Joint Venture will have received a commitment from a substantial
financial intermediary to provide both a subordinated debt facility to CCF
and a commitment to purchase certain subordinated tranches of all asset
securitizations of CCF through December 31, 2002.
As provided in the Joint Venture operating agreement, CFL will have the option
to purchase all of BYL's interest in the Joint Venture for fair value in the
event of: (i) any banking or regulatory decisions arising from BYL's ownership
interest which would significantly impair the Joint Venture's profitability; or
(ii) BYL's inability or unwillingness to meet any capital call by the Joint
Venture; or (iii) BYL not being in agreement with major decisions of the Joint
Venture; or (iv) BYL suffering negative economic consequences as a result of
BYL's ownership receiving regulatory criticism.
Robert Ucciferri, President and Chief Executive Officer of BYL, stated "We are
very proud of the outstanding origination capabilities which we have developed
over the years in our SBA Division. Unfortunately, the current market
environment coupled with recent actions taken by our regulators have made it
clear that the full economic potential of this Division cannot be realized
operating this group as a part of the Bank. As a result we are delighted to have
been able to successfully negotiate a joint venture with extremely credible
financial partners who bring both substantial financial backing and
securitization expertise to the venture. We are confident that, given current
regulatory policies, the financial benefits which will accrue to BYL from this
unique joint venture operation will far exceed what we would otherwise be able
to generate were we to continue to operate this division within the Bank."
James M. Seneff, Jr., Chairman and Chief Executive Officer of CNL Financial
Group, Inc. stated "We are delighted to bring together BYL's proven high quality
loan origination capabilities with our financial resources and capital markets
expertise. CNL Financial Group's proven focus on building fundamental economic
value in our businesses should fully complement the joint venture's operations
and allow the venture to maximize the economic potential of the core business
established by BYL."
In a related matter, BYL announced that BYL Bank had entered into an
administrative action with the FDIC arising principally from the securitization
activities previously undertaken by the Bank's SBA Division in order to maximize
the economic potential to BYL of the SBA Division's substantial loan origination
capabilities. Following the conclusion of the regular FDIC examination in
November 1999 and for the purpose of cooperating with the FDIC without admitting
or denying any allegations, the Bank entered into a Section 8(b) Order (the
"Order") with the FDIC which became effective on July 10, 2000.
Among other items, the Order requires the Bank to: (i) retain qualified
management; (ii) have and maintain certain Tier I and Total Risk-Based Capital
ratios; (iii) eliminate from its books, for regulatory reporting purposes only,
certain assets classified as loss substantially all of which related to the
asset securitizations of the SBA Division; (iv) adequately value the Bank's book
value for its retained interests related to asset securitizations; (v) adopt and
implement certain other policies relating to profitability, liquidity, funds
management and interest rate risk sensitivity; and (vi) revise certain reports
to the FDIC.
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PRESS RELEASE - July 12, 2000
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Additionally, the Federal Reserve Board ("FRB") completed an examination of
BYL as of December 31, 1999. Based upon the report of this examination,
management of BYL believes that BYL may enter into a memorandum of
understanding with the FRB. The formation of the CCF Joint Venture thereby
transferring the current activities of the SBA Division to the Joint Venture
along with the purchase by the Joint Venture at BYL's current book value of
the residual interests retained by the Bank from the 1999-1 asset
securitization, effectively addresses the principal requirements of the
Order. Additionally, management believes that it has taken or is undertaking
appropriate actions to adequately address each of the other requirements of
the Order.
"Fortunately, we recognized the economic and operational advantages of having
our SBA Division operate as an independent venture rather than as a department
of the Bank far in advance of the FDIC actions", stated Mr. Ucciferri. "Even
more fortunate was our having found an ideally well-qualified partner for such a
joint venture operation in the CNL Commercial Funding, LP. Not only does the
Joint Venture immediately address the principal requirements of the Order, but
more importantly, we believe that the economic returns to the Bank from the
Joint Venture will far exceed even the historical financial contribution of this
outstanding loan origination operation. We are confident that we have
effectively addressed or are addressing each requirement of the Order and that
the Order will not have a material impact upon the ongoing financial performance
of BYL", Mr. Ucciferri concluded.
BYL Bancorp is a California corporation headquartered in Orange, California
whose principal operating subsidiary is BYL Bank Group ("BYL"). BYL's primary
market area is Orange and Riverside Counties, California in which it operates
seven full-service banking centers and two divisional loan origination offices.
Additionally, BYL has mortgage loan origination offices in Colorado, Indiana,
Florida, Kansas, Northern California, Nevada, Utah and Washington state. BYL's
specialized loan origination divisions, Mortgage and SBA, operate under the name
of Bank of Yorba Linda, a division of BYL Bank Group. BYL specializes in
originating and selling residential real estate loans, commercial real estate
loans and SBA guaranteed loans. The shares of common stock of BYL Bancorp trade
on the NASDAQ National Market System under the symbol "BOYL".
This release may contain forward-looking statements that are subject to risks
and uncertainties that could cause actual results to differ materially from
those indicated. For a discussion of factors which could cause results to
differ, please see the Company's publicly available Securities and Exchange
Commission filings including its reports Forms on 10-K and 10-Q. Additional
information summarizing segment operations for BYL Bank Group is available upon
request. Contact Carole Biniasz, VP/Cashier at (714) 685-1395 or write to BYL
Bancorp, 1875 N. Tustin Street, Orange, California 92865.
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