<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 14, 1996
Bay View Capital Corporation
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-17901 94-3078031
--------------------------------------------------------------------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) No.)
2121 South El Camino Real, San Mateo, California 94403
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 573-7300
- -------------------------------------------------------------------
N/A
- -------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
The purpose of this amendment on Form 8-K/A to the Current Report on Form
8-K (the "8-K") of Bay View Capital Corporation (the "Company") is to provide
the pro forma financial information required by Form 8-K which, at the time of
the filing of the 8-K, was impracticable for the Company to have provided.
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On June 14, 1996, Bay View Capital Corporation (the "Company" or "Bay
View"), a Delaware corporation and the holding company for Bay View Federal
Bank, completed the acquisition of CTL Credit, Inc. ("CTLI"), a Delaware
corporation and the holding company for California Thrift and Loan ("CTL"), a
California industrial loan company. The acquisition is being accounted for
using the purchase accounting method and the consolidated net income of the
Company for the six months ended June 30, 1996 includes the estimated impact of
the acquisition for the entire month of June 1996. The acquisition was effected
through the merger of BV Sub Corp., a Delaware corporation and non-operating
wholly-owned subsidiary of Bay View, with and into CTLI, with CTLI being the
surviving corporation and becoming a wholly-owned subsidiary of Bay View (the
"Merger"). CTLI was then liquidated, with its assets transferred to and
liabilities assumed by Bay View. CTL became a stand-alone subsidiary of Bay
View and a sister bank to Bay View Federal Bank. The Merger was consummated
pursuant to an Agreement and Plan of Merger, dated as of February 5, 1996, by
and among Bay View, BV Sub Corp., CTLI and CTL. Each holder of the common stock
of CTLI, par value $.01 per share ("CTLI Common Stock") received $18.00 in cash
for each share of CTLI Common Stock held. Based on the 3,457,700 outstanding
shares of CTLI Common Stock, the total consideration paid by Bay View was
approximately $62 million in cash. Bay View financed the acquisition of CTLI
with existing cash and borrowings.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
<TABLE>
<CAPTION>
<S> <C>
Index to Financial Statements Page No.
------------------------------------------------------------
Audited Consolidated Financial Statements of
CTLI and Subsidiary
Independent Auditors' Report F-1
Consolidated Balance Sheets as of
December 31, 1995 and 1994 F-3
Consolidated Statements of Income for the
years ended December 31, 1995 and 1994 and
for the period from May 1, 1993 to
December 31, 1993, and Combined Statements of
Income for the period from January 1, 1993 to
April 30, 1993 F-4
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Consolidated Statements of Changes in
Stockholders' Equity for the years
ended December 31, 1995 and 1994 and for
the period from May 1, 1993 to
December 31, 1993, and Combined Statements
of Changes in Stockholders' Equity for the
period from January 1, 1993 to April 30, 1993 F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1995 and 1994
and for the period from May 1, 1993
to December 31, 1993, and Combined
Statements of Cash Flows for the period
from January 1, 1993 to April 30, 1993 F-6
Notes to Consolidated and Combined Financial
Statements F-7
Unaudited Consolidated Financial Statements
of CTLI and Subsidiary
Consolidated Balance Sheets as of March 31,
1996 and December 31, 1995 F-29
Consolidated Statements of Income for the
Three Months Ended March 31, 1996 and 1995 F-30
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 F-31
Notes to Unaudited Consolidated Financial
Statements F-32
</TABLE>
(b) Pro forma financial information.
The unaudited pro forma financial information has been prepared to
comply with Regulation S-X of the Securities and Exchange Commission in
connection with the filing of the Form 8-K for the Company to report the
completion on June 14, 1996 of Bay View's acquisition of CTLI. Pursuant to
the Merger Agreement, each holder of the common stock of CTLI received
$18.00 in cash for each share of CTLI common stock held. Each holder of an
option to purchase shares of CTLI common stock received cash in an amount
equal to the difference between $18.00 and the per share exercise price of
the common stock option.
The unaudited consolidated statements of financial condition as of
June 30, 1996 were included in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1996 (the "Company 10-Q"). The
unaudited pro forma condensed combined statements of operations for the six
months ended June 30, 1996 and 1995 and for the year ended December 31,
1995 are based on the historical consolidated statements of operations of
the Company and CTLI giving effect to the accounting for the acquisition of
CTLI using the purchase method of accounting and assumes the acquisition
occurred as of January 1, 1995. The pro forma condensed combined statements
of operations should be read in conjunction with the historical
consolidated financial statements and the accompanying notes contained in
the Company 10-Q (which includes the results of operations of CTL for June
1996 only) and the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and the historical consolidated financial
statements and the accompanying notes contained in CTLI's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995. The historical
consolidated statement of operations for CTLI used in the condensed
combined statements of operations for the six months ended June 30, 1996
was based on the consolidated results of CTLI for the five months ended May
31, 1996.
The pro forma adjustments are based on certain assumptions and
preliminary estimates of fair value of the assets acquired and liabilities
assumed. The unaudited pro forma condensed combined statements of
operations and earnings per share do not include any expected cost savings
or the benefits of related synergies for CTL as a result of the
acquisition. The unaudited pro forma condensed consolidated statements of
operations are presented for illustrative purposes only and are not
necessarily indicative of the operating results that would have occurred
had the acquisition been consummated at the beginning of the periods
presented, nor are they necessarily indicative of future operating results.
3
<PAGE>
CONDENSED COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in thousands except per share amounts) Company CTLI Adjustments Combined
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income:
Interest on loans receivable $ 85,328 $ 23,233 $ --- $ 108,561
Interest on mortgage-backed securities 21,963 --- --- 21,963
Interest and dividends on investments 3,212 491 (755) 2,948
- -----------------------------------------------------------------------------------------------------------------------------------
110,503 23,724 (755) 133,472
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on customer deposits 47,711 10,228 --- 57,939
Interest on borrowings 27,741 120 965 28,826
- -----------------------------------------------------------------------------------------------------------------------------------
75,452 10,348 965 86,765
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 35,051 13,376 (1,720) 46,707
Provision for losses on loans and securities 1,418 2,430 --- 3,848
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for losses 33,633 10,946 (1,720) 42,859
- -----------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Loan fees and charges 2,031 1,014 --- 3,045
Loss on sale of assets (262) --- --- (262)
Rental income from premises 403 --- --- 403
Other income 2,160 202 --- 2,362
- -----------------------------------------------------------------------------------------------------------------------------------
4,332 1,216 --- 5,548
- -----------------------------------------------------------------------------------------------------------------------------------
Noninterest expense:
General and administrative expenses 23,043 8,406 (386) 31,063
Real estate owned operations, net (1,662) 164 --- (1,498)
Recovery of losses on real estate (123) --- --- (123)
Writedown of fixed assets 925 --- --- 925
Amortization and writedown of intangible assets 1,404 --- 1,095 2,499
- -----------------------------------------------------------------------------------------------------------------------------------
23,587 8,570 709 32,866
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income tax expense 14,378 3,592 (2,429) 15,541
Income tax expense 6,169 1,494 (567) 7,096
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 8,209 $ 2,098 $ (1,862) $ 8,445
===================================================================================================================================
Primary earnings per share $ 1.16 $ 1.20
===================================================================================================================================
Average shares outstanding (including common stock
equivalents) 7,049,499 7,049,499
===================================================================================================================================
</TABLE>
See accompanying Notes to Condensed Combined Financial Statements.
4
<PAGE>
CONDENSED COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in thousands except per share amounts) Company CTLI Adjustments Combined
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans receivable $ 74,806 $ 27,226 $ --- $ 102,032
Interest on mortgage-backed securities 29,608 --- --- 29,608
Interest and dividends on investments 3,332 589 (906) 3,015
- -----------------------------------------------------------------------------------------------------------------------------------
107,746 27,815 (906) 134,655
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on customer deposits 44,366 11,917 --- 56,283
Interest on borrowings 35,384 170 1,158 36,712
- -----------------------------------------------------------------------------------------------------------------------------------
79,750 12,087 1,158 92,995
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 27,996 15,728 (2,064) 41,660
Provision for losses on loans and securities 1,800 2,340 --- 4,140
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for losses 26,196 13,388 (2,064) 37,520
- -----------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Loan fees and charges 2,094 1,266 --- 3,360
Loss on sale of assets (2,196) --- --- (2,196)
Rental income from premises 389 --- --- 389
Other income 2,106 200 --- 2,306
- -----------------------------------------------------------------------------------------------------------------------------------
2,393 1,466 --- 3,859
- -----------------------------------------------------------------------------------------------------------------------------------
Noninterest expense:
General and administrative expenses 25,199 11,102 (553) 35,748
Real estate owned operations, net (610) 96 --- (514)
Recovery of losses on real estate (236) --- --- (236)
Amortization of intangible 1,210 --- 1,314 2,524
- -----------------------------------------------------------------------------------------------------------------------------------
25,563 11,198 761 37,522
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income tax expense 3,026 3,656 (2,825) 3,857
Income tax expense 1,332 1,521 (642) 2,211
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,694 $ 2,135 $ (2,183) $ 1,646
===================================================================================================================================
Primary earnings per share $ 0.23 $ 0.23
===================================================================================================================================
Average shares outstanding (including common stock
equivalents) 7,279,837 7,279,837
===================================================================================================================================
</TABLE>
See accompanying Notes to Condensed Combined Financial Statements.
5
<PAGE>
CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
(Dollars in thousands except per share amounts) Company CTLI Adjustments Combined
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income:
Interest on loans receivable $ 155,853 $ 55,443 $ --- $ 211,296
Interest on mortgage-backed securities 54,236 --- --- 54,236
Interest and dividends on investments 6,374 1,155 (1,812) 5,717
- -----------------------------------------------------------------------------------------------------------------------------------
216,463 56,598 (1,812) 271,249
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on customer deposits 93,398 24,835 --- 118,233
Interest on borrowings 67,149 235 2,316 69,700
- -----------------------------------------------------------------------------------------------------------------------------------
160,547 25,070 2,316 187,933
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 55,916 31,528 (4,128) 83,316
Provision for losses on loans and securities 4,600 4,832 --- 9,432
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for losses 51,316 26,696 (4,128) 73,884
- -----------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Loan fees and charges 3,691 2,615 --- 6,306
Loss on sale of assets (2,194) --- --- (2,194)
Rental income from premises 781 --- --- 781
Other income 4,180 292 --- 4,472
- -----------------------------------------------------------------------------------------------------------------------------------
6,458 2,907 --- 9,365
- -----------------------------------------------------------------------------------------------------------------------------------
Noninterest expense:
General and administrative expenses 49,916 21,024 (1,108) 69,832
Real estate owned operations, net (1,081) 145 --- (936)
Recovery of losses on real estate 749 --- --- 749
Writedown of fixed assets 7,100 --- --- 7,100
Amortization and writedown of intangibles 3,944 --- 2,628 6,572
- -----------------------------------------------------------------------------------------------------------------------------------
60,628 21,169 1,520 83,317
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income tax expense (benefit) (2,854) 8,434 (5,648) (68)
Income tax expense (benefit) (708) 3,509 (1,284) 1,517
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinay items (2,146) 4,925 (4,364) (1,585)
Extraordinary items, net of tax (2,544) --- --- (2,544)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (4,690) $ 4,925 $ (4,364) $ (4,129)
===================================================================================================================================
Primary earnings per share
Income (loss) before extraordinary items $ (0.29) $ (0.22)
Extraordinary items (0.35) (0.35)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (0.64) $ (0.57)
===================================================================================================================================
Average number of shares outstanding 7,293,492 7,293,492
===================================================================================================================================
</TABLE>
See accompanying Notes to Condensed Combined Financial Statements.
6
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
June 30, 1996
Note 1. Pro Forma Adjustments
The Company acquired CTLI, the holding company for CTL. CTLI was then
liquidated, with its assets transferred to and liabilities assumed by the
Company. CTL became a stand-alone subsidiary of the Company and a sister-
bank to BVFB. The acquisition is being accounted for using the purchase
accounting method. The acquisition of CTLI was financed with dollars of
existing cash of $36.2 million and borrowings of $26 million from the
issuance of Senior Debentures.
The following adjustments, which exclude any expected cost savings or the
benefits of related synergies including the evaluation of alternative
sources of fundings for CTL, were made to the unaudited pro forma condensed
combined financial statements:
(a) Interest and dividends on investments
This adjustment represents the opportunity cost of cash reserves of $36.2
million used to partially finance the acquisition of CTLI. These funds were
assumed to be invested at overnight funds rate of 5%.
(b) Interest on borrowings
This adjustment represents the cost of $26 million in Senior Debentures
yielding 8.42%. The all-in cost was 8.91% on an annualized basis.
(c) General and administrative expenses
This adjustment represents the cost savings resulting from the liquidation
of CTLI. The adjustment is based on the historical general and
administrative expenses of CTLI for the respective periods.
(d) Amortization of intangibles
The acquisition of CTL is being accounted for using the purchase accounting
method. The Company has not finalized the purchase accounting valuations
and expects to finalize the adjustments by the end of third quarter 1996.
The acquisition cost has been pushed down to CTL and the preliminary
estimate of the excess of the purchase price over the fair value of net
assets acquired at June 1, 1996 of $18,417,000 was recognized as goodwill.
Goodwill is amortized on a straight-line basis over a period of
approximately seven years. This amortization period will be subject to
review following the completion of purchase accounting valuation
adjustments.
Note 2. Earnings (Loss) per Share
The earnings per share computation for the six months ended June 30, 1996
and 1995 was determined by dividing net income for each period by the
number of common shares outstanding including common stock equivalents of
the Company. The loss per share for 1995 was calculated using the weighted
average number of common shares outstanding. The Company has not separately
reported fully diluted earnings per share as it is not materially different
from primary earnings per share.
(c) Exhibits.
2 Agreement and Plan of Merger, dated as of February 5, 1996, by and
among Bay View, BV Sub Corp., CTLI and California Thrift & Loan
(incorporated by reference to Exhibit 2(b) to CTLI's Current Report on
Form 8-K filed with the Securities and Exchange Commission on February
8, 1996 (Commission File No. 1-470)).
99 Press Release of Bay View, dated June 19, 1996.
7
<PAGE>
[LOGO OF KPMG PEAT MARWICK LLP
APPEARS HERE]
725 South Figueroa Street
Los Angeles, CA 90017
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CTL Credit, Inc.:
We have audited the accompanying consolidated balance sheets of CTL Credit, Inc.
and subsidiary (Successor) as of December 31, 1995 and 1994 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the years then ended, and for the period from May 1, 1993 to December
31, 1993 (Successor period), and the related combined statements of income,
changes in stockholder's equity and cash flows of California Thrift & Loan and
Cal Fed Credit, Inc. and subsidiary (wholly owned subsidiaries of California
Federal Bank, F.S.B.) (Predecessor) for the period from January 1, 1993 to April
30, 1993 (Predecessor period). These consolidated and combined financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these consolidated and combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned Successor consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of CTL Credit, Inc. and subsidiary as of December 31, 1995
and 1994 and the consolidated results of their operations and their cash flows
for the Successor periods in conformity with generally accepted accounting
principles. Further, in our opinion, the aforementioned Predecessor statements
of income, changes in stockholder's equity and cash flows present fairly, in all
material respects, the results of operations and cash flows for the Predecessor
period in conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, effective May
1, 1993, CTL Credit, Inc. acquired all of the outstanding stock of California
Thrift & Loan in a business combination accounted for as a purchase. As a result
of the acquisition, the consolidated financial information for the periods
subsequent to the acquisition is presented on a different basis of accounting
than that for the periods before the acquisition and, therefore, is not
comparable.
[LOGO APPEARS HERE]
F-1
<PAGE>
As discussed in notes 1 and 4 to the consolidated financial statements, CTL
Credit, Inc. changed its method of accounting for impairment of loans receivable
to adopt the provisions of the Financial Accounting Standards Board's (FASB)
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures," on
January 1, 1995. As discussed in notes 1 and 3 to the consolidated financial
statements, CTL Credit, Inc. changed its method of accounting for investments to
adopt the provisions of the FASB's SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as of December 31, 1993.
/s/ KPMG Peat Marwick LLP
January 19, 1996, except as to note 14 to
the consolidated financial statements,
which is as of February 5, 1996.
F-2
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1995 and 1994
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Assets 1995 1994
-------- --------
<S> <C> <C>
Cash $ 4,120 908
Interest-bearing deposit at FHLB -- 1,250
-------- --------
Total cash and cash equivalents 4,120 2,158
-------- --------
Securities held-to-maturity (fair value $17,795 at
December 31, 1995 and $17,675 at December 31, 1994) 17,757 17,747
Securities available-for-sale, at fair value -- 999
FHLB stock 1,507 2,686
Receivables and contracts 503,270 497,115
Deductions:
Unearned finance charges and loan fees 28,599 35,033
Allowance for doubtful receivables 8,371 8,318
-------- --------
Net receivables and contracts 466,300 453,764
-------- --------
Accrued interest receivable 2,308 1,825
Goodwill 353 381
Premises and equipment, net 4,692 4,991
Real estate owned 2,488 846
Other assets acquired in settlement of receivables 536 529
Other assets 734 979
</TABLE>
-------- --------
Total assets $ 500,795 486,905
======== ========
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1995 1994
-------- --------
<S> <C> <C>
Thrift investment certificates payable:
Full-paid investment certificates $ 440,516 417,546
Installment investment certificates 1,144 1,459
-------- --------
441,660 419,005
Short-term borrowings 1,500 15,200
Due to bank 5,904 5,325
Accounts payable and accrued expenses 3,843 3,620
Federal and state taxes payable 256 1,067
Security deposits 203 222
Unearned insurance commissions 135 166
-------- --------
Total liabilities 453,501 444,605
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value. Authorized
7,250,000 shares; none outstanding -- --
Common stock, $.01 par value. Authorized 12,750,000
shares; issued and outstanding 3,456,200 shares in
1995 and 3,450,000 shares in 1994 35 35
Additional paid-in capital 34,444 34,375
Retained earnings 12,815 7,890
-------- --------
Total stockholders' equity 47,294 42,300
-------- --------
Total liabilities and stockholders' equity $500,795 486,905
======== ========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-3
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Consolidated and Combined Statements of Income
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Successor Predecessor
---------------------------------------- --------------------
Period from Period from
May 1, 1993 January 1, 1993
Year ended Year ended to to
December 31, December 31, December 31, April 30,
1995 1994 1993 1993
------------- ------------ ------------ --------------------
<S> <C> <C> <C> <C>
Interest income:
Interest, discounts and finance charges earned:
Motor vehicle loans $ 30,775 26,362 15,578 13,479
Real estate loans 12,620 11,577 7,615 4,436
Commercial equipment leases 7,866 7,192 5,001 2,394
Direct loans 1,169 1,167 863 412
Other installment contracts 3,013 2,437 1,126 415
Automobile leases -- -- 6 7
Interest on cash equivalents 92 25 48 23
Interest on investment securities 1,063 822 359 154
------------- ------------ ------------ --------------------
Total interest income 56,598 49,582 30,596 21,320
------------- ------------ ------------ --------------------
Interest expense:
Thrift investment certificates 24,835 18,730 11,138 6,966
Notes payable to affiliate -- -- -- 1,274
Short-term borrowings 235 498 66 --
------------- ------------ ------------ --------------------
Total interest expense 25,070 19,228 11,204 8,240
------------- ------------ ------------ --------------------
Net interest income before provision for doubtful
receivables 31,528 30,354 19,392 13,080
Provision for doubtful receivables 4,832 3,725 3,727 2,451
------------- ------------ ------------ --------------------
Net interest income after provision for doubtful
receivables 26,696 26,629 15,665 10,629
------------- ------------ ------------ --------------------
Other operating income:
Servicing income 727 1,380 1,457 --
Delinquency charges 1,035 970 707 421
Other fees and charges 622 855 602 259
Insurance commissions 61 230 388 84
Gain on lease residuals 231 368 242 145
Other income 231 325 213 12
------------- ------------ ------------ --------------------
2,907 4,128 3,609 921
------------- ------------ ------------ --------------------
Operating expenses:
Salaries and employee benefits 12,172 12,229 7,613 3,931
Office expenses 1,518 1,563 1,093 524
Occupancy 1,435 1,322 883 414
Data processing 1,003 1,119 740 381
Depreciation and amortization 1,002 1,021 671 337
Travel and promotion 866 998 636 238
FDIC deposit insurance premium 500 902 631 296
Tax, license and insurance 666 811 584 250
Professional services 606 553 313 182
Collection expense 150 150 104 168
Net real estate owned operating costs 145 594 229 --
Other 1,106 1,114 642 389
------------- ------------ ------------ --------------------
21,169 22,376 14,139 7,110
------------- ------------ ------------ --------------------
Income before income taxes 8,434 8,381 5,135 4,440
Income taxes 3,509 3,496 2,130 1,615
------------- ------------ ------------ --------------------
Net income $ 4,925 4,885 3,005 2,825
============= ============ ============ ====================
Net income per share $ 1.43 1.42 .87
============= ============ ============
Weighted average number of shares 3,452,483 3,450,000 3,400,000
============= ============ ============
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-4
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Statements of Changes in Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Predecessor
-----------------------------------------------------------------------------
Additional Total
paid-in Retained stockholder's
Common stock capital earnings equity
----------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992 $ 4,025 7,483 21,545 33,053
Net income for period from January 1,
1993 to April 30, 1993 -- -- 2,825 2,825
----------- -------------- -------------- -----------------
Balance, April 30, 1993 $ 4,025 7,483 24,370 35,878
=========== ============== ============== =================
</TABLE>
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Successor
------------------------------------------------------------------------------
Additional Total
paid-in Retained stockholders'
Common stock capital earnings equity
------------ -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Balance, May 1, 1993 $ -- -- -- --
Issuance of common stock 35 34,375 -- 34,410
Net income for period from May 1, 1993
to December 31, 1993 -- -- 3,005 3,005
----------- -------------- -------------- -----------------
Balance, December 31, 1993 35 34,375 3,005 37,415
Net income, 1994 -- -- 4,885 4,885
----------- -------------- -------------- -----------------
Balance, December 31, 1994 35 34,375 7,890 42,300
Net income, 1995 -- -- 4,925 4,925
Exercise of stock options -- 69 -- 69
----------- -------------- -------------- -----------------
Balance, December 31, 1995 $ 35 34,444 12,815 47,294
=========== ============== ============== =================
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-5
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Consolidated and Combined Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Successor Predecessor
---------------------------------------- --------------------
Period from Period from
May 1, 1993 January 1, 1993
Year ended Year ended to to
December 31, December 31, December 31, April 30,
1995 1994 1993 1993
------------- ------------ ------------ --------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,925 4,885 3,005 2,825
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for doubtful receivables 4,832 3,725 3,727 2,451
Depreciation and amortization 1,002 1,021 671 337
Loss (gain) on sales of premises and equipment (21) (13) (17) 47
Loss on sale of real estate owned 37 441 9 --
(Increase) decrease in other assets 313 (2,358) 776 (1,211)
Gain on sale of receivables (74) (67) (195) --
Decrease (increase) in accrued interest receivable (483) (258) 6 19
Increase (decrease) in Federal and state taxes payable (811) (595) 4,305 (225)
Increase (decrease) in accounts payable 709 1,701 (483) (167)
Decrease in security deposits (19) (86) (133) (194)
(Increase) decrease in unearned insurance commissions (31) 16 1 (31)
------------- ------------ ------------ --------------------
Net cash provided by operating activities 10,379 8,412 11,672 3,851
------------- ------------ ------------ --------------------
Cash flows from investing activities:
Purchase of California Thrift & Loan stock, net of
cash acquired of $3,532,000 -- -- (27,224) --
Net increase in receivables and contracts (12,013) (39,837) (38,026) (9,164)
Purchase of receivables (10,713) (19,148) -- (2,723)
Proceeds from sales of receivables 1,512 3,571 5,017 --
Proceeds from sales of premises and equipment 200 138 58 51
Proceeds from sales of real estate owned 2,341 5,232 3,383 266
Payments of senior liens on real estate owned (486) (442) (882) (19)
Net decrease (increase) in other assets acquired in
settlement of receivables (7) 122 49 603
Purchase of securities available for sale -- (4,839) -- --
Purchase of securities held for investment (17,150) (25,161) (26,701) (15,762)
Proceeds from maturities of securities held-to-maturity 18,200 19,992 10,759 14,846
Proceeds from maturities of securities available-for-sale 1,000 5,000 -- --
Proceeds from sales of securities held-to-maturity -- -- 14,941 --
Proceeds from sales of securities available-for-sale -- 3,894 -- --
Purchases of premises and equipment (904) (980) (769) (473)
------------- ------------ ------------ --------------------
Net cash used in investing activities (18,020) (52,458) (59,395) (12,375)
------------- ------------ ------------ --------------------
Cash flows from financing activities:
Net increase in thrift investment certificates 22,655 28,554 10,438 18,736
Decrease in payable to affiliate -- -- -- (7,500)
Increase (decrease) in short-term borrowings and
cash due bank (13,121) 12,525 8,000 --
Proceeds from sale of common stock 69 -- 34,410 --
------------- ------------ ------------ --------------------
Net cash provided by financing activities 9,603 41,079 52,848 11,236
------------- ------------ ------------ --------------------
Increase (decrease) in cash 1,962 (2,967) 5,125 2,712
Cash and cash equivalents at beginning of period 2,158 5,125 -- 2,505
------------- ------------ ------------ --------------------
Cash and cash equivalents at end of period $ 4,120 2,158 5,125 5,217
============= ============ ============ ====================
</TABLE>
See accompanying notes to consolidated and combined financial statements.
F-6
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements
December 31, 1995 and 1994
(1) Summary of Significant Accounting Policies
Basis of Presentation and Description of Business
The accompanying consolidated financial statements represent the financial
position and results of operations of CTL Credit, Inc. and includes its
wholly owned subsidiary, California Thrift & Loan (CalThrift and
collectively, CTLI or the Company). CTLI was formed to raise capital
through an initial public offering and with the proceeds to purchase all of
the common stock of CalThrift from its previous parent, California Federal
Bank, F.S.B. (CalFed Bank). CTLI completed its initial public offering
effective April 30, 1993, selling 3,000,000 common shares at $11 per share.
On June 4, 1993, an additional 450,000 common shares were sold at $11 per
share. The Company used substantially all of the net proceeds of the
offering to purchase and increase the capital of CalThrift, which is
presently the only operating subsidiary of CTLI. The Successor financial
statements reflect the consolidated operations of CTLI and CalThrift.
Through April 30, 1993, CalThrift was a wholly owned subsidiary of XCF
Acceptance Corporation, a wholly owned subsidiary of CalFed Bank. Through
the same period, CalThrift managed the operations of CalFed Credit Inc.
(CFC), a wholly owned subsidiary of CalFed Bank, and CalFed Credit of Texas
Inc., a wholly owned subsidiary of CFC, which were engaged in the business
of real estate lending in California and consumer financial and commercial
equipment leasing outside of California. Since CTLI acquired the loan
production capability of CFC along with CalThrift, the Predecessor
financial statements reflect the historical combined operations of
CalThrift and CFC, which is hereinafter referred to as the Predecessor
Company.
CalThrift issues interest-bearing thrift investment certificates to
investors which are redeemable at maturity at the option of the investors,
although a 30-day notice of withdrawal may be required. The California
Industrial Loan Law contains provisions governing the amount of thrift
investment certificates that may be issued, the amount of funds that may be
borrowed and the types of loans that may be made. The Federal Deposit
Insurance Corporation (FDIC) provides deposit insurance coverage for
CalThrift.
In addition, under a separate servicing agreement, CalThrift currently
services approximately $15.9 million in automobile receivables for CFC at
December 31, 1995. This serviced automobile loan portfolio is not being
replaced and will run off within two years.
All material intercompany balances and transactions have been eliminated in
consolidation.
F-7
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Nature of Operations
The Company underwrites and purchases high-yield consumer loans (primarily
motor vehicle loans), residential real estate loans and commercial
equipment leases. While the Company's receivables are purchased in Arizona,
California, Colorado, Illinois, Nevada, New Mexico, Oregon and Texas,
underwriting is performed in its California, Illinois and Texas offices.
All servicing is done in its California offices. The Company finances its
portfolio of receivables and contracts primarily with FDIC-insured
deposits. The Company does not offer traditional banking services such as
checking accounts and ATMs.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash equivalents
include cash and interest-bearing deposits with the Federal Home Loan
Bank of San Francisco with a maturity at date of purchase of three months
or less.
Securities
Securities at December 31, 1995 consist of U.S. Treasury securities. In
accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," the
Company classifies its securities in one of two categories: held-to-
maturity or available-for-sale. Held-to-maturity securities are those in
which the Company has the ability and intent to hold the security until
maturity. All other securities are classified as available-for-sale. At
December 31, 1995, all securities were classified as held-to-maturity.
Held-to-maturity securities are recorded at amortized cost, adjusted for
the amortization or accretion of premiums or discounts. Available-for-sale
securities are recorded at fair value. Unrealized holding gains and losses,
net of the related tax effect, on available-for-sale securities are
excluded from income and are reported as a separate component of
stockholders' equity until realized. Transfers of securities between
categories are recorded at fair value at the date of transfer. The
unrealized holding gains or losses included in the separate component of
equity for securities transferred from available-for-sale to held-to-
maturity are maintained and amortized into income over the remaining life
of the security as an adjustment to the yield in a manner consistent with
the amortization or accretion of premium or discount on the associated
security.
A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than temporary is
charged to income resulting in the establishment of a new cost basis for
the security.
F-8
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Premiums and discounts are amortized or accreted over the life of the
related held-to-maturity security as an adjustment to yield using the
interest method. Realized gains and losses for securities classified as
available-for-sale are included in income and are derived using the
specific-identification method for determining the cost of securities sold.
Receivables and Contracts
Receivables and contracts are generally recorded at the contractual amounts
owed by the borrowers. The unearned interest on receivables and contracts
is presented in the accompanying consolidated balance sheets as unearned
finance charges and is amortized to interest income using the interest
method over the remaining period to contractual maturity.
The Company adopted the provisions of SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosure," on January 1, 1995. The adoption of SFAS No. 114 as amended by
SFAS No. 118, did not have a material impact on the operations of the
Company.
For the Company, loans collectively reviewed for impairment include all
motor vehicle loans, other installment contracts, direct loans, and real
estate loans and equipment leases under $250,000 and $100,000,
respectively. The Company's impaired loans within the scope of SFAS No. 114
include real estate loans and commercial loans over $250,000 and $100,000,
respectively.
Management, considering current information and events regarding the
borrowers' ability to repay their obligations, considers a loan to be
impaired when it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the loan agreement. When
a loan is considered to be impaired, the amount of the impairment is
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, the fair value of the
underlying collateral for collateral dependent loans or an observable
market price if available. Impairment losses are included in the allowance
for loan losses through a charge to the provision for loan losses. Cash
receipts on impaired loans receivable are applied to reduce the principal
amount of such loans until the principal has been recovered and are
recognized as interest income, thereafter. Prior periods have not been
restated.
Interest income on loans is recorded on an accrual basis in accordance with
the terms of the receivables. A loan is generally placed on nonaccrual
status and accrued interest is ceased when the loan becomes 90 days or more
past due. The Company's nonperforming receivables consist of receivables on
which the Company has ceased the accrual of interest. For motor vehicle
loans, commercial equipment leases, other installment contracts and direct
loans, the interest accrued but not received is reversed against income at
time of charge-off, which is once the loan becomes 150 days past due. For
real estate loans, interest accrued but not received is reversed against
income once the Company acquires the underlying collateral in satisfaction
of the receivable. Consistent with the Company's policy for loans
delinquent 90 days or more, the accrual of interest is ceased on impaired
loans once they become delinquent 90 days. Cash receipts on impaired loans
are applied to interest income or accrued interest as received when the
principal portion of the loan is deemed fully collectible by management.
F-9
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Allowance for Doubtful Receivables
The allowance for doubtful receivables is maintained at an amount
management deems adequate to cover estimated losses, based upon
consideration of actual loss experience for loans during the past several
years by loan type, delinquency statistics, and projected economic
conditions and other trends. Increases to the allowance for doubtful
receivables are charged to the provision for doubtful receivables.
Receivables deemed by management to be uncollectible are charged to the
allowance for doubtful receivables. Recoveries of receivables previously
charged off are credited to the allowance for doubtful receivables.
Real Estate Owned and Other Assets Acquired in Settlement of Receivables
Real estate owned and other assets acquired in settlement of receivables
are obtained when the assets collateralizing a receivable are foreclosed or
otherwise acquired by the Company in satisfaction of the receivable. Real
estate owned and other assets acquired in settlement of receivables are
recorded at the fair value of the related assets. The fair value of the
real estate received is based upon a current appraisal adjusted for
estimated holding and selling costs. Losses resulting from periodic
valuation of real estate owned are charged against operating expenses and
recorded in a valuation allowance in the period in which they are
identified. Net cash payments are expensed as incurred. The fair value of
the other assets received (primarily repossessed automobiles) is based upon
an in-house appraisal adjusted for estimated selling costs.
Insurance Commissions
The Company receives commissions for placing insurance for customers. The
commissions generally relate to life, accident and health, property,
collision and comprehensive insurance. Commissions are recorded as deferred
income when policies are written and amortized to income over the life of
the policy.
Depreciation and Amortization
Depreciation of furniture, fixtures and vehicles is provided for by use of
the straight-line method over the estimated useful lives of individual
assets, which range from 4 to 10 years. Leasehold improvements are
amortized over the terms of the related leases or the estimated useful
lives of improvements, whichever is less. Buildings are amortized over 50
years using the straight-line method.
Income Taxes
Income taxes are recorded in accordance with SFAS No. 109, "Accounting for
Income Taxes." Under the asset and liability method of SFAS 109, deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. Under SFAS No. 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
F-10
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Postretirement Benefit Plans
The Company provides limited postretirement medical benefits for two
retired employees. Effective January 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," which established new
accounting principles for the cost of retiree health care and other
postretirement benefits. Prior to 1993, the Company recognized these
benefits on the pay-as-you-go method (i.e., cash basis). As discussed in
note 9, the cumulative effect of the change in method of accounting for
postretirement benefits is immaterial.
Supplemental Cash Flow Information
Supplemental disclosure of cash flow information is as follows
(in thousands):
<TABLE>
<CAPTION>
Successor Predecessor
-------------------------------------- -----------
Period Period
from from
May 1, January 1,
Year ended Year ended 1993 to 1993 to
December 31, December 31, December 31, April 30,
1995 1994 1993 1993
------------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Cash paid (received)
during the period for:
Interest $25,934 18,468 11,660 8,022
Income taxes 4,320 4,091 525 2,052
Settlement of income taxes
with former parent -- -- (2,644) --
============= ============= ========== ===========
Noncash investing activity:
Transfer of securities
from the investment
portfolio to the
available-for-sale
portfolio $ -- -- 4,939 --
Real estate loans
transferred to real
estate owned 4,517 4,483 3,255 870
Senior liens assumed 621 603 794 366
============= ============= ========== ===========
</TABLE>
F-11
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Fair Value of Financial Instruments
Financial instruments are defined under SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments," as cash, evidence of an ownership in
an equity, or a contract that conveys or imposes on an entity the
contractual right or obligation to either receive or deliver cash or
another financial instrument. A significant portion of the Company's assets
and liabilities are financial instruments as defined under SFAS No. 107.
The following summary presents a description of the methodologies and
assumptions used to estimate the fair value of the Company's financial
instruments. Much of the information used to determine fair value is highly
subjective. When applicable, readily available market information has been
utilized. However, for a significant portion of the Company's financial
instruments, active markets do not exist. Therefore, considerable judgments
were required in estimating fair value for certain items. The subjective
factors include, among other things, the estimated timing and amount of
cash flows, risk characteristics, credit quality and interest rates, all of
which are subject to change. Since the fair value is estimated as of
December 31, 1995 and 1994, the amounts that will actually be realized or
paid at settlement or maturity of the instruments could be significantly
different.
The estimated fair values of the Company's financial instruments at
December 31, 1995 and 1994 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
---------------------- ----------------------
Book value Fair value Book value Fair value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 4,120 4,120 2,158 2,158
Securities held-to-maturity 17,757 17,795 17,747 17,675
Securities available-for-sale -- -- 999 999
Receivables and contracts 466,300 478,664 453,764 458,149
Liabilities:
Thrift investment certificates 441,660 444,525 419,005 412,481
Short-term borrowings 1,500 1,500 15,200 15,200
Due to bank 5,904 5,904 5,325 5,325
========== ========== ========== ==========
</TABLE>
Receivables and contracts are net of unearned charges and loan fees.
Cash and Cash Equivalents
The book value of cash and cash equivalents approximates the fair value
of such assets because of the short maturity of such investments.
Securities
The Company has utilized market quotes for similar or identical
securities in an actively traded market.
F-12
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Receivables and Contracts
The fair value of receivables and contracts was determined by a discounted
cash flow analysis based on a combination of the Company's current lending
rates and discount rates that management believes would have been obtained
had management elected to sell the entire loan portfolio on December 31,
1995 and 1994 for performing loans and rates adjusted for management's
assessment of credit risk for nonperforming loans over the effective
remaining maturity of the loans.
Thrift Investment Certificates
The fair value of thrift investment certificates was determined as follows:
(i) for passbook accounts, money market accounts and other deposits
immediately withdrawable, fair value was determined to approximate the
amount payable on demand and (ii) for fixed maturity deposits, the fair
value was estimated by discounting expected cash flows by the current
offering rates of term deposits with similar maturities. In accordance with
SFAS No. 107, no par value has been assigned to the Company's long-term
relationships with its deposit customers (core deposit intangible) since it
is not a financial instrument as defined under SFAS No. 107.
Short-Term Borrowings
As the Company's short-term borrowings bear interest at a variable rate
and/or mature within approximately six months, the fair value was
determined to approximate the book value.
Due to Bank
The book value of cash due to bank approximates the fair value given the
short maturity of the liability.
Net Income per Share Information
The weighted average number of shares is based on 3,400,000 common shares
outstanding at May 1, 1993 plus the weighted average increases in common
shares outstanding for the respective periods, taking into consideration
any dilutive effect of common stock equivalents.
(2) Acquisition of California Thrift & Loan
On April 30, 1993, all of the issued and outstanding stock of CalThrift, a
wholly owned subsidiary of CalFed Bank, was acquired by CTLI for a cash
purchase price of approximately $30,756,000.
F-13
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
The purchase was accounted for under the purchase method of accounting, and
accordingly, all assets and liabilities were adjusted to and recorded at
their estimated fair values as of the date of acquisition. Summarized below
are the amounts of the unamortized premiums or discounts at December 31,
1995 (dollars in thousands):
<TABLE>
<CAPTION>
Remaining
premiums or
discounts
-----------
<S> <C>
Assets:
Receivables and contracts, net of allowance $ 796
Other assets 24
----------
Total assets $ 820
==========
Liabilities - thrift investment certificates payable $ 938
----------
Total liabilities $ 938
==========
</TABLE>
The net premiums on loans and thrift investment certificates are being
amortized using the interest method over the estimated lives of the
portfolios. The premium in other assets represents purchased servicing
rights on the CFC automobile receivables and is being amortized over the
expected repayment patterns of the underlying receivables. For the years
ended December 31, 1995 and 1994, and the period from May 1, 1993 to
December 31, 1993, net amortization of the premiums and discounts was
$37,000, $45,000 and $36,000, respectively. The excess purchase price over
the fair value of net assets acquired is being amortized using the
straight-line method over 15 years. For the years ended
December 31, 1995 and 1994, and the period from May 1, 1993 to
December 31, 1993, $28,000, $29,000, and $18,000, respectively, were
amortized.
F-14
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
(3) Securities
As discussed in note 1, the Company records investment securities in
accordance with Statement 115. The Company's securities consist of U.S.
Treasury bills due within one year or less with the amortized cost, gross
unrealized gains, gross unrealized losses and fair value for
held-to-maturity and available-for-sale securities at December 31, 1995
and 1994 as follows (dollars in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Fair
December 31, 1995 cost gains losses value
- -------------------------- ----------- ------------ ------------ -------
<S> <C> <C> <C> <C>
Held-to-maturity - U.S.
Treasury bills $ 17,757 38 -- 17,795
=========== ============ ============ ======
December 31, 1994
- --------------------------
Held-to-maturity - U.S.
Treasury bills $ 17,747 -- 72 17,675
Available-for-sale - U.S.
Treasury bills 999 -- -- 999
=========== ============ ============ ======
</TABLE>
Gross realized gains and losses on securities available-for-sale for the
years ended December 31, 1995 and 1994, and the period from May 1, 1993 to
December 31, 1993 were $0 and $0, $0 and $27,000, and $1,000 and $1,000,
respectively. There were no gross realized gains or losses for the period
from January 1, 1993 to April 30, 1993.
(4) Receivables, Contracts and Allowance for Doubtful Receivables
Receivables and contracts, net of unearned finance charges and loan fees,
are comprised of the following as of December 31 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Motor vehicle loans $ 266,106 261,325
Real estate loans 110,566 109,474
Commercial equipment leases 70,233 62,921
Other installment contracts 19,608 20,627
Direct loans 8,158 7,735
-------------- --------------
474,671 462,082
Allowance for doubtful receivables 8,371 8,318
-------------- --------------
$ 466,300 453,764
============== ==============
</TABLE>
A substantial portion of the Company's lending activity is with borrowers
located in the state of California. In addition, the Company currently
finances motor vehicle loans primarily for new and used automobiles sold
by new car dealerships in the states of Arizona, California,
F-15
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Colorado, Illinois, New Mexico, Nevada, Oregon and Texas. The motor vehicle
loans made by the Company range from 36 to 84 months. Included in other
installment contracts are contracts for larger consumer items such as
organs, jacuzzis, pianos, spas and other home enhancements with terms of up
to 84 months. The Company's direct loans include loans secured by personal
property and unsecured loans.
The Company offers a fixed rate, term loan and home equity line of credit
secured by real estate located in California. The majority of these
loans are secured by first and second trust deeds on residential real
estate. The Company has purchased a portion of its real estate loan
portfolio from mortgage bankers, loan brokers and personal property
brokers.
The Company primarily purchases from brokers and lessors, two commercial
equipment leasing products including a "full payout lease" where the lessee
can buy the asset for $1 at the end of the lease and a "10% put lease"
where the lessee at the Company's option must purchase the equipment for
10% of its original cost at the end of the lease period.
Receivables past due 90 days or more and on nonaccrual totaled
approximately $3,027,000 and $3,189,000 at December 31, 1995 and 1994,
respectively. The amounts of contractual interest, interest recognized
and interest foregone are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Successor Predecessor
-------------------------------------- -----------
Period Period
from from
May 1, January 1
Year ended Year ended 1993 to 1993 to
December 31, December 31, December 31, April 30,
1995 1994 1993 1993
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Contractual interest $ 245 167 295 183
Interest recognized (122) (104) (182) (61)
------------ ---------- ------------ ---------
Interest foregone $ 123 63 113 122
============ ========== ============ =========
</TABLE>
The Company adopted the provisions of SFAS No. 114, as amended by
SFAS No. 118, effective January 1, 1995. Prior periods have not been
restated. All commercial equipment leases and real estate loans in excess
of $100,000 and $250,000, respectively, have been evaluated for
collectibility under the provisions of these statements. Commercial
equipment leases and real estate loans of less than $100,000 and $250,000,
respectively, are considered to be a homogeneous population and, along with
consumer loans, are evaluated in the aggregate.
The recorded investment in individually evaluated loans receivable for
which an impairment has been recognized and the related allowance for
losses at December 31, 1995 was $406,000 and $50,000, respectively. There
was no recorded investment in loans receivable for which an impairment has
been recognized and for which no specific allowance has been recorded at
December 31, 1995. The average recorded investment in individually
evaluated impaired loans receivable during 1995 was $356,000. Interest
income recognized on impaired loans receivable during 1995 was $47,000.
While all nonaccrual loans are considered impaired, $2,621,000 represent
loans which have been collectively evaluated for impairment at
December 31, 1995.
F-16
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
On December 31, 1990, the Company sold equipment lease receivables for
$6,228,000 to an outside party resulting in a gain of approximately
$66,000. In January 1993, the Company exercised an option to repurchase
approximately $2,600,000 of receivables for $2,723,000. The premium is
being amortized over the remaining life of the receivables.
During 1994, the Company purchased California real estate-secured loans for
a purchase price in the sum of principal of $18,742,000 and a premium of
$406,000. The seller retained the servicing rights to the loans. During
1995, the Company purchased California real estate-secured loans for a
purchase price in the sum of principal of $10,713,000 and a premium of
$304,000. The seller retained the servicing rights to the loans. The
premiums are being amortized over the remaining lives of the loans using
the interest method.
Transactions in the allowance for doubtful receivables were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Successor Predecessor
-------------------------------------- -----------
Period Period
from from
May 1, January 1
Year ended Year ended 1993 to 1993 to
December 31, December 31, December 31, April 30,
1995 1994 1993 1993
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Balance, beginning of
period $ 8,318 7,938 7,783 10,270
Provision for doubtful
receivables 4,832 3,725 3,727 2,451
Receivables charged off (6,027) (4,681) (4,376) (3,606)
Recoveries on accounts
charged off 1,248 1,336 804 518
------------ ---------- ------------ ---------
Net charge-offs (4,779) (3,345) (3,572) (3,088)
------------ ---------- ------------ ---------
Balance, end of period $ 8,371 8,318 7,938 9,633
============ ========== ============ =========
</TABLE>
(5) Premises, Equipment and Leasehold Improvements
Premises, equipment and leasehold improvements and the related
accumulated depreciation and amortization are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31
----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Furniture, fixtures and equipment $ 2,547 2,643
Building 2,188 2,188
Leasehold improvements 770 760
Land 390 390
---------- ----------
5,895 5,981
Less accumulated depreciation
and amortization 1,203 990
---------- ----------
$ 4,692 4,991
========== ==========
</TABLE>
F-17
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Total depreciation and amortization expense during the years ended
December 31, 1995 and 1994, the period from May 1, 1993 to December 31,
1993, and the period from January 1, 1993 to April 30, 1993 were $974,000,
$992,000, $653,000 and $337,000, respectively.
(6) Thrift Investment Certificates Payable
The Company obtains thrift investment certificates (deposits) primarily
through a network of branches located in California. Deposits obtained
by the Company are insured by the Bank Insurance Fund (BIF) of the FDIC
up to a maximum of $100,000 for each depositor.
Non-California deposits and brokered deposits are accepted at the Santa
Barbara branch.
A summary of deposit balances and weighted average rates at the dates
indicated follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------------ -------------------------
Balance Rate Balance Rate
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Employee passbook rate $ 1,144 5.09% $ 1,459 5.14%
Market rate 16,324 4.09 23,431 4.15
Certificate accounts:
2.00% to 3.99% -- -- 801 3.33
4.00% to 5.99% 50,464 5.54 193,672 4.55
6.00% to 7.99% 276,085 6.16 103,847 6.53
--------- ---------
Total certificate
accounts 326,549 6.06 298,320 5.24
--------- ---------
Brokered deposits 48,443 5.76 46,446 5.03
IRA - Keogh 49,200 5.97 49,349 5.38
--------- ---------
$ 441,660 5.94 $419,005 5.17
=========== ======== ========== ========
</TABLE>
Thrift Investment Certificate accounts greater than $100,000 totaled
$78,698,000 and $75,789,000 at December 31, 1995 and 1994, respectively.
Accrued interest payable on deposits at December 31, 1995 and 1994 was
$1,293,000 and $864,000, respectively, which is included in accounts
payable and accrued expenses in the accompanying consolidated balance
sheets.
F-18
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
Deposit maturities are summarized as follows at the dates indicated
(dollars in thousands):
<TABLE>
<CAPTION>
December 31
---------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Maturing in one year $ 250,763 216,302
Maturing in two years 121,666 129,305
Maturing in three years 38,096 48,453
Maturing in four years 12,106 20,846
Maturing in five years 19,029 4,099
---------- ----------
$ 441,660 419,005
========== ==========
</TABLE>
A summary of interest expense by deposit type is summarized in the table
below for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
Successor Predecessor
-------------------------------------- -----------
Period Period
from from
May 1, January 1,
Year ended Year ended 1993 to 1993 to
December 31, December 31, December 31, April 30,
1995 1994 1993 1993
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Employee passbook $ 62 69 42 23
Market rate 795 872 540 306
Certificates under $100,000 16,667 11,544 5,603 3,735
Certificates over $100,000 1,356 2,239 2,763 1,421
Brokered deposits 3,139 1,769 828 554
IRA - Keogh 2,816 2,237 1,362 927
------------ ---------- ------------ ---------
$ 24,835 18,730 11,138 6,966
============ ========== ============ =========
</TABLE>
(7) Short-Term Borrowings
At December 31, 1995, the Company had available a $16,000,000 revolving
line of credit with the Federal Home Loan Bank of San Francisco which is
secured by certain real estate receivables and FHLB stock. There was
$1,500,000 outstanding at December 31, 1995, due within 30 days which bears
interest at 6.41%.
At December 31, 1995, the Company had available a $20,000,000 revolving
line of credit with a commercial bank which bears interest at the bank's
reference rate (8.75% at December 31, 1995). The Company's consumer
receivables are the collateral for this line of credit. No amounts were
outstanding at December 31, 1995 under this line.
F-19
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
(8) Income Taxes
The provision for income taxes for the following periods consists of
(dollars in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1995
------------------------------------------------
Current Deferred Total
------------- -------------- -------
<S> <C> <C> <C>
Federal $ 2,734 (175) 2,559
State 1,020 (70) 950
------------- -------------- -------
$ 3,754 (245) 3,509
============= ============== =======
Year ended December 31, 1994
------------------------------------------------
Current Deferred Total
------------- -------------- -------
Federal $ 2,807 (256) 2,551
State 935 10 945
------------- -------------- -------
$ 3,742 (246) 3,496
============= ============== =======
Period from May 1, 1993 to December 31, 1993
------------------------------------------------
Current Deferred Total
------------- -------------- -------
Federal $ 564 992 1,556
State 147 427 574
------------- -------------- -------
$ 711 1,419 2,130
============= ============== =======
Period from January 1, 1993 to April 30, 1993
------------------------------------------------
Current Deferred Total
------------- -------------- -------
Federal $ 374 817 1,191
State 343 81 424
------------- -------------- -------
$ 717 898 1,615
============= ============== =======
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
Year ended Year ended Period from May 1, 1993 to
December 31, 1995 December 31, 1994 December 31, 1993
----------------------------------- ----------------------------- ---------------------------------
Percentage of Percentage of Percentage of
Amount pretax earnings Amount pretax earnings Amount pretax earnings
-------------- ----------------- ---------- ----------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" income
taxes $ 2,952 35.0% $ 2,933 35.0% $ 1,797 35.0%
Increase in tax resulting
from:
State income taxes, net of
Federal income tax benefit 618 7.3 614 7.4 374 7.3
Goodwill 10 .1 9 .1 7 .1
Other, net (71) (.8) (60) (.8) (48) (.9)
-------------- ----------------- ---------- ----------------- ------------- -------------------
$ 3,509 41.6% $ 3,496 41.7% $ 2,130 41.5%
============== ================= ========== ================= ============= ===================
</TABLE>
<TABLE>
<CAPTION>
Period from January 1, 1993 to
April 30, 1993
----------------------------------------
Percentage
of pretax
Amount earnings
----------------- --------------------
<S> <C> <C>
Computed "expected" income taxes $ 1,554 35.0%
Increase in tax resulting
from:
State income taxes, net of
Federal income tax benefit 276 6.2
Goodwill -- --
Other, net (215) (4.8)
----------------- --------------------
$ 1,615 36.4%
================= ====================
</TABLE>
The following table shows the components of current and deferred tax asset
(liability) recorded in the consolidated balance sheets at December 31, 1995
and 1994 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current $ 278 (288)
Deferred (534) (779)
-------- --------
$ (256) (1,067)
======== ========
</TABLE>
F-21
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Deferred tax assets:
Real estate owned $ 62 62
Accrued interest reserve 68 68
Retirement plan 92 115
Depreciation 58 70
State income taxes, net of Federal income
tax benefit 383 424
Mark to market adjustment 3,539 3,539
Other 79 29
------ ------
Total gross deferred tax assets 4,281 4,307
Valuation allowance -- --
------ ------
4,281 4,307
------ ------
Deferred tax liabilities:
Bad debt deductions 1,987 1,680
Prepaid expenses 145 204
FHLB income 104 61
Amortization of market discount 2,460 3,005
Real estate owned 119 136
------ ------
Total gross deferred tax liabilities 4,815 5,086
------ ------
Net deferred tax liability $ 534 779
====== ======
</TABLE>
No valuation allowance for gross deferred tax assets was necessary at
December 31, 1995 or 1994, as management believes such assets are more
likely than not to be realized.
(9) Employee Retirement Benefit Plans
The Predecessor Company's employees participated in the parent's employee
benefit retirement plans. No contributions were made to these plans
during the period from January 1, 1993 to April 30, 1993.
The Company's employees participate in the California Thrift & Loan 401(k)
Plan which became effective on June 1, 1993. During the years ended
December 31, 1995 and 1994, and the period from May 1, 1993 to December 31,
1993, the Company contributed $271,000, $370,000 and $146,000,
respectively, toward this plan.
F-22
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
The Company has provided limited postretirement medical benefits for two
retired employees. As discussed in note 1, the Predecessor Company adopted
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions" (Statement 106), as of
January 1, 1993. Management has decided to amortize the transition
obligation required by Statement 106 over a 20-year period using the
straight-line method. The effect of adopting Statement 106 is immaterial to
the Company's net income or stockholders' equity for the years ended
December 31, 1995 and 1994.
The Company has a Supplemental Executive Retirement Plan (SERP) which is a
nonqualified, noncontributory pension plan. The SERP is a defined benefit
plan under which the Company pays benefits to certain officers of the
Company designated by the Board of Directors equal to (i) the greater of
the amount required by Age Discrimination Employment Act (ADEA) Section
12(c), and Equal Employment Opportunity Commission (EEOC) regulations or
interpretations, to satisfy the minimum benefit requirement (currently
$44,000) under that statute or (ii) the amount required under California
Government Code Section 12942(c) (currently $27,000). Such benefits are
reduced by the annuitized value of the matching contribution and Company
voluntary contribution accounts in the 401(k) plan. The calculation and
terms of the benefit are determined as of the date the participating
employee reaches 65 years of age and the Board of Directors causes the
mandatory retirement of the participating employee. There is no benefit in
the case of termination.
The following table sets forth the SERP's funded status and liabilities
accrued in the Company's consolidated balance sheet as of December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested accumulated benefits $ -- --
Nonvested benefits (316,640) (280,277)
---------- ----------
Total accumulated benefits $ (316,640) (280,277)
========== ==========
Projected benefit obligation for service rendered $ (316,640) (280,277)
Plan assets at fair value -- --
---------- ----------
Projected benefit obligation in
excess of Plan assets (316,640) (280,277)
Items not yet recognized in earnings:
Unrecognized prior service cost 209,268 228,292
Unrecognized net asset obligation -- --
---------- ----------
Accrued pension cost $ (107,372) (51,985)
========== ==========
</TABLE>
F-23
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net periodic pension cost includes the following
components:
Service cost - benefits earned
during the period $ 16,744 15,649
Interest cost on projected benefit obligation 19,619 17,312
Actual return on plan assets -- --
Net amortization and deferral 19,024 19,024
---------- ----------
Net periodic pension cost $ 55,387 51,985
========== ==========
</TABLE>
A weighted average discount rate of 7% was used in determining the
actuarial present value of the projected benefit obligation for 1995.
The expected long-term rate of return on assets was 7% for 1995.
Pursuant to the Agreement and Plan of Merger referred to in note 14, at the
earlier of the employees' termination, or January 3, 1997, any amount
accrued under the SERP would be used to purchase an annuity contract on
behalf of the participant.
(10) Stock Options
The Company has a 1993 Employee Stock Incentive Plan (Employee Plan) and a
Stock Option Plan for Non-Employee Directors (Directors Plan) which provide
for the issuance of up to 420,000 shares of the Company's authorized but
unissued common stock. The Employee Plan authorizes the issuance to full-
time salaried officers and employees of awards consisting of (i) shares of
common stock, (ii) an option, warrant, convertible security or stock
appreciation right with an exercise or conversion privilege at a price
related to the common stock or (iii) any other security or benefit with a
value derived from the value of the common stock not to exceed 360,000
shares of common stock. A committee of the Board of Directors (Board)
determine all of the terms and conditions of each award granted under the
Employee Plan.
The Directors Plan provides for issuance of up to 60,000 (amended in 1994)
options to purchase common stock to nonemployee directors. Each nonemployee
director shall automatically be granted at (i) the date of their election
to the Board and (ii) upon the fifth anniversary of such election an option
to purchase 5,000 shares of common stock at the fair market value at the
close of business on the date preceding the grant date. The option shall
vest and become exercisable only if the nonemployee director continues to
serve until the one-year anniversary of the grant date.
F-24
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
The following is a summary of transactions under the stock option plans
described above:
<TABLE>
<CAPTION>
Employee Plan Directors Plan
------------------------ -------------------------
Number of Range of Number of Range of
shares option prices shares option prices
--------- ------------- --------- --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 291,500 $ 11.75 15,000 $11.00 - 11.25
Granted 27,500 8.50 - 10.85 5,000 12.00
--------- ---------
Balance, December 31, 1994 319,000 8.50 - 11.75 20,000 11.00 - 12.00
Exercised 1,200 11.75 5,000 11.00
--------- ============= --------- ==============
Balance, December 31, 1995 317,800 15,000
========= =========
</TABLE>
At December 31, 1995, 113,700 and 15,000 options were exercisable under the
Employee and Directors Plans, respectively, with 101,000 and 40,000 shares
available for future grants. Pursuant to the Agreement and Plan of Merger
referred to in note 14, at the date of acquisition, all options under the
1993 Employee Plan and Directors Plan would vest and would be converted
into the right to receive as consideration for cash, the difference between
the share price and option price for each share underlying the option.
Subsequently, both stock option plans would be terminated.
(11) Commitments and Contingencies
The Company occupies its administrative and branch office premises under
lease arrangements. At December 31, 1995, the Company was obligated
under various noncancelable operating leases for the minimum rental
commitments as shown below:
<TABLE>
<S> <C>
1996 $ 977,783
1997 818,450
1998 616,704
1999 411,964
2000 133,922
Thereafter 84,084
--------------
$ 3,042,907
==============
</TABLE>
F-25
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
It is expected that, in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum lease commitments will not be less than the
amounts shown. The Company recorded rent of approximately $1,200,000,
$1,022,000, $637,000 and $308,000 for the years ended December 31, 1995 and
1994, the period from May 1, 1993 to December 31, 1993, and the period from
January 1, 1993 to April 30, 1993.
The Company is involved in litigation arising in the normal course of
business. It is the opinion of management, based on the opinion of
counsel, that the disposition of such actions will not materially affect
the Company.
(12) Regulatory Matters
CalThrift is required to have minimum Tier 1 and total capital ratios of
4% and 8%, respectively, at December 31, 1995. CalThrift's actual
ratios at December 31, 1995 were in excess of these minimum requirements.
CalThrift is subject to various restrictions on its ability to pay cash
dividends. Certain limitations are imposed by the California Industrial
Loan Law. Additional restrictions are imposed by the FDIC. The FDIC has
advised insured institutions that the payment of cash dividends in excess
of current earnings from operations is inappropriate.
(13) Parent Company Only Condensed Financial Statements
The following condensed financial information represents the balance sheet
of CTL Credit, Inc., parent company only, as of December 31, 1995, 1994 and
1993 and the related statements of income and cash flows for the years
ended December 31, 1995 and 1994 and the period from May 1, 1993 to
December 31, 1993 (dollars in thousands):
<TABLE>
<CAPTION>
Condensed Balance Sheets 1995 1994 1993
- -------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Assets:
Cash $ 3,884 484 272
Investment in California Thrift & Loan 43,354 41,508 36,823
Other assets 237 323 324
-------- -------- --------
Total assets $ 47,475 42,315 37,419
========= ======== ========
Liabilities and stockholders' equity:
Liabilities $ 181 15 4
Common stock, $.01 par value 35 35 35
Additional paid-in capital 34,444 34,375 34,375
Retained earnings 12,815 7,890 3,005
-------- -------- --------
Total liabilities and
stockholders' equity $ 47,475 42,315 37,419
========= ======== ========
</TABLE>
F-26
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
<TABLE>
<CAPTION>
Period from
Year ended December 31 May 1, 1993 to
----------------------- December 31,
Condensed Statements of Income 1995 1994 1993
- -------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Dividend income from California
Thrift & Loan $ 3,720 690 900
Other income 12 7 --
Operating expenses 1,108 844 445
--------- -------- --------
Income (loss) before income
taxes and equity
in undistributed net income
of California
Thrift & Loan 2,624 (147) 455
Income (tax) benefit 454 348 (194)
--------- -------- --------
Income before equity in
undistributed net
income of California
Thrift & Loan 3,078 201 261
Equity in undistributed net income of
California Thrift & Loan 1,847 4,684 2,744
--------- -------- --------
Net income $ 4,925 4,885 3,005
========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Period from
Year ended December 31 May 1, 1993 to
----------------------- December 31,
Condensed Statements of Cash Flows 1995 1994 1993
- -------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,925 4,885 3,005
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in undistributed income
of California Thrift & Loan (1,847) (4,684) (2,744)
Other -- -- 85
--------- -------- --------
Net cash provided by
operating activities 3,078 201 346
--------- -------- --------
</TABLE>
F-27
<PAGE>
CTL CREDIT, INC.
AND SUBSIDIARY
Notes to Consolidated and Combined Financial Statements, Continued
<TABLE>
<CAPTION>
Period from
Year ended December 31 May 1, 1993 to
Condensed Statements of Cash Flows, ----------------------- December 31,
Continued 1995 1994 1993
- -------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Cash flows from investing activities:
Purchase of California
Thrift & Loan stock $ -- -- (30,756)
Capital contributed to California
Thrift & Loan -- -- (3,700)
Other 253 11 (28)
--------- -------- --------
Net cash provided by
(used in) investing
activities 253 11 (34,484)
--------- -------- --------
Cash flows from financing activities:
Proceeds from sale of common stock -- -- 34,410
Proceeds from exercise of
stock options 69 -- --
--------- -------- --------
Net cash provided by
financing activities 69 -- 34,410
--------- -------- --------
Net increase in cash and
cash equivalents 3,400 212 272
Cash and cash equivalents at
beginning of year 484 272 --
--------- -------- --------
Cash and cash equivalents at
end of year $ 3,884 484 272
========= ======== ========
</TABLE>
(14) Subsequent Event
On February 5, 1996, the Company entered into an Agreement and Plan of
Merger (the Agreement) with Bay View Capital Corporation (BVCC) and its
subsidiary, Bay View Sub Corp. Subject to the satisfaction or waiver of
certain conditions, including governmental approvals and the approval of
the Company's stockholders, the Agreement contemplates that Bay View Sub
Corp. will be merged with and into the Company, and the Company will become
a wholly owned subsidiary of BVCC. The Agreement provides that the
Company's stockholders will receive $18 per share, without interest, for
each share of the Company's common stock owned by them at the effective
time of the transaction, for an aggregate consideration of approximately
$64.2 million in cash. The transaction is expected to close on
approximately June 30, 1996. The Company has set May 17, 1996 as the date
for a special meeting of stockholders to vote on the Agreement, and will be
sending a proxy statement to all stockholders as of the record date for the
meeting. The Company has postponed its 1996 annual meeting in view of the
pending transaction contemplated by the Agreement. The Agreement includes
typical covenants prohibiting the Company from making material changes in
its operations without the prior approval of BVCC.
F-28
<PAGE>
<TABLE>
<CAPTION>
CTL CREDIT, INC.
Consolidated Balance Sheets (Unaudited)
Dollars in thousands March 31, 1996 December 31, 1995
- ----------------------------------- ---------------------- --------------------
<S> <C> <C>
Cash and cash equivalents $ 662 $ 4,120
Investment securities (market value $21,412 at
March 31, 1996 and $17,795 at December 31, 1995) 21,428 17,757
FHLB stock 1,856 1,507
Receivables and contracts 508,545 503,270
Deductions:
Unearned finance charges and loan fees 26,689 28,599
Allowance for doubtful receivables 8,421 8,371
--------------------- ------------------
Net receivables and contracts 473,435 466,300
--------------------- ------------------
Accrued interest receivable 2,315 2,308
Goodwill 346 353
Premises and equipment, net 4,581 4,692
Real estate owned 2,128 2,488
Other assets acquired in settlement of receivables 649 536
Other assets 581 734
--------------------- ------------------
Total assets $ 507,981 $ 500,795
===================== ==================
Thrift certificates payable $ 449,517 $ 441,660
Short-term borrowings 1,500 1,500
Due to bank 4,440 5,904
Accounts payable and accrued expenses 2,898 3,843
Federal and state taxes payable 820 256
Other liabilities 316 338
--------------------- -----------------
Total liabilities 459,491 453,501
--------------------- -----------------
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 1,000,000
shares; none outstanding - -
Common stock, $.01 par value. Authorized 7,000,000
shares; issued and outstanding 3,456,700
shares in 1996 and 3,456,200 in 1995 35 35
Additional paid-in capital 34,450 34,444
Retained earnings 14,005 12,815
--------------------- -----------------
Total stockholders' equity 48,490 47,294
--------------------- -----------------
Total liabilities and stockholders' equity $ 507,981 $ 500,795
===================== =================
</TABLE>
See accompanying notes to unaudited financial statements
F-29
<PAGE>
<TABLE>
<CAPTION>
CTL CREDIT, INC.
Consolidated Statements of
Income (Unaudited)
Three months ended Three months ended
Dollars in thousands March 31, 1996 March 31, 1995
- --------------------------------- --------------------- ---------------------
<S> <C> <C>
Interest income $ 13,849 $ 13,728
Interest expense 5,789 5,803
--------------------- ---------------------
Net interest income before
provision for doubtful receivables 8,060 7,925
Provision for doubtful receivables 1,477 1,107
--------------------- ---------------------
Net interest income after
provision for doubtful receivables 6,583 6,818
--------------------- ---------------------
Other operating income:
Servicing income 102 234
Other income 533 515
--------------------- ---------------------
Total other operating income 635 749
--------------------- ---------------------
Operating expenses:
Salaries and employee benefits 3,017 3,319
Other operating expenses 2,164 2,514
--------------------- ---------------------
Total operating expense 5,181 5,833
--------------------- ---------------------
Income before income taxes 2,037 1,734
Provision for income taxes 847 722
--------------------- ---------------------
Net income $ 1,190 $ 1,012
===================== =====================
Net income per share $ 0.34 $ 0.29
===================== =====================
Weighted average number of shares 3,456,475 3,450,000
===================== =====================
</TABLE>
See accompanying notes to unaudited financial statements
F-30
<PAGE>
<TABLE>
<CAPTION>
CTL CREDIT, INC.
Consolidated Statements of Cash Flows (Unaudited)
Three months ended Three months ended
Dollars in thousands March 31, 1996 March 31, 1995
- ----------------------------------- --------------------- ---------------------
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 1,190 $ 1,012
Adjustments to reconcile
net income to net cash provided
by operating activities:
Provision for doubtful
receivables 1,477 1,107
Depreciation and amortization 220 259
Loss on sale or write-down of
real estate owned 159 20
Other - -
Net increase in other assets (133) (5)
Net increase (decrease) in
other liabilities (896) 366
Increase in federal and state
income taxes payable 564 380
--------------------- --------------------
Net cash provided by operating
activities 2,581 3,139
--------------------- --------------------
Cash flows from investing
activities:
Net increase in receivables
and contracts (8,977) (9,988)
Investment securities purchased (12,284) (5,122)
Proceeds from maturities of
investment securities 8,900 5,200
Proceeds from sale of securities
held for sale - 1,000
Purchase of FHLB stock (349) (38)
Proceeds from sale of real 566 373
estate owned
Payments of senior liens on real
estate owned (72) (14)
Other increase (222) (371)
--------------------- --------------------
Net cash used in investing
activities: (12,438) (8,960)
--------------------- --------------------
Cash flows from financing activities:
Net increase in thrift
certificates payable 7,857 27,975
Decrease in short-term
borrowings and due bank (1,464) (15,644)
Sales of Common Stock 6 -
--------------------- --------------------
Net cash provided by
financing activities 6,399 12,331
--------------------- --------------------
Increase (decrease) in cash (3,458) 6,510
Cash at beginning of period 4,120 2,158
--------------------- --------------------
Cash at end of period $ 662 $ 8,668
===================== ====================
</TABLE>
See accompanying notes to unaudited financial statements
F-31
<PAGE>
CTL CREDIT, INC.
Notes to Consolidated Financial Statements (Unaudited)
(1) Acquisition of California Thrift & Loan
On April 30, 1993, all of the issued and outstanding stock of CalThrift, a
wholly owned subsidiary of CalFed Bank, was acquired by CTLI for a cash purchase
price of approximately $30,756,000. The purchase price was accounted for under
the purchase method of accounting, and accordingly, assets and liabilities were
adjusted to and recorded at their estimated fair values as of the date of
acquisition.
Summarized below are the assets and liabilities recorded at fair values
at the date of acquisition:
<TABLE>
<CAPTION>
Value of assets Premiums or
acquired and discounts at date of
Dollars in thousands liabilities assumed acquisition
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 3,532 $ -
Investment securities 15,830 4
Receivables and contracts,
net of allowance 381,077 7,792
Premises and equipment 5,054 -
Federal and state
taxes receivable 2,643 -
Excess purchase price
over fair value of net
assets acquired 428 -
Other assets 5,615 433
---------------------------------------------
Total assets $414,179 $8,229
=============================================
Liabilities:
Thrift certificates
payable $380,019 $8,229
Other liabilities 3,404 -
---------------------------------------------
Total liabilities $383,423 $8,229
=============================================
Purchase price and other
acquisition costs $ 30,756
======================
</TABLE>
2) Financial Statement Presentation and Consolidation
The consolidated financial statements include, after intercompany
eliminations, all subsidiary accounts. All adjustments which, in the
opinion of management, are necessary for a fair presentation have been
reflected. These unaudited consolidated financial statements should
be read in conjunction with the audited consolidated financial statements
included in the Company's annual report on Form 10-K for the year ended
December 31, 1995.
F-32
<PAGE>
3) Supplemental Cash Flow Information
During the three month period ended March 31, 1996, the Company paid
$284,000 in income taxes and $7,301,000 in interest expense. During the three
month period ended March 31, 1995, the Company paid $342,000 in income taxes and
$5,850,000 in interest expense.
4) Receivables, Contracts and the Allowance for Doubtful Receivables
Receivables and contracts, net of unearned finance charges and unearned loan
fees, are comprised of the following:
<TABLE>
<CAPTION>
Dollars in thousands March 31, 1996 December 31, 1995
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
<S> <C> <C>
Motor vehicle loans $ 276,679 $ 266,106
Real estate loans 111,272 110,566
Commercial equipment leases 67,592 70,233
Other installment loans 18,381 19,608
Direct loans 7,932 8,158
------------------------------------
Total receivables and contracts $ 481,856 $ 474,671
====================================
</TABLE>
Transactions in the allowance for doubtful receivables were as follows:
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1996 March 31, 1995
(Unaudited) (Unaudited)
Dollars in thousands
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of
period 8,371 8,318
Provision for doubtful receivables 1,477 1,107
Receivables charged off 1,698 1,409
Recoveries on accounts charged off 271 219
---------------------------------
Net charge-offs 1,427 1,190
---------------------------------
Balance, end of period $ 8,421 $ 8,235
=================================
</TABLE>
F-33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAY VIEW CAPITAL CORPORATION
Date: August 23, 1996 By: /s/ David A. Heaberlin
--------------------------- -------------------------
David A. Heaberlin
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2 Agreement and Plan of Merger, dated
as of February 5, 1996, by and among
Bay View, BV Sub Corp., CTLI and
California Thrift & Loan
(incorporated by reference to
Exhibit 2(b) to CTLI's Current
Report on Form 8-K filed with the
Securities and Exchange Commission
on February 8, 1996 (Commission File
No. 1-470))
99 Press release of Bay View, dated
June 19, 1996*
</TABLE>
- ---------
* Previously Filed.
