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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): AUGUST 11, 1997
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BAY VIEW CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 0-17901 94-3078031
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
1840 GATEWAY DRIVE, SAN MATEO, CALIFORNIA 94404
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 573-7300
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2121 SOUTH EL CAMINO REAL, SAN MATEO, CALIFORNIA 94403
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
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On May 8, 1997, Bay View Capital Corporation (the "Company" or "Bay View"),
a Delaware corporation and the holding company for Bay View Bank ("BVB"), Bay
View Securitization Corporation, California Thrift & Loan, Concord Growth
Corporation and Regent Financial Corporation, announced the execution of a
definitive agreement to acquired America First Eureka Holdings, Inc. ("AFEH")
and AFEH's wholly owned subsidiary, EurekaBank, A Federal Savings Bank
("EurekaBank"). The acquisition will be accounted for using the purchase method
of accounting and is expected to be completed on or about January 2, 1998.
Under the terms of the definitive agreement, America First Financial Fund
1987-A Limited Partnership (the "Partnership"), the sole shareholder of AFEH,
will receive shares of Bay View common stock valued at approximately $210
million (subject to possible adjustment) and $90 million in cash. Pursuant to
the agreement, AFEH will be merged into the Company, with the Company as the
surviving corporation, and EurekaBank will be merged into BVB, with BVB as the
surviving institution. Consummation of the transaction is subject to the
satisfaction of a number of conditions set forth in the agreement, including
approval by the Company's stockholders and the beneficial unit certificate
holders of the Partnership and the regulatory approval of the Office of Thrift
Supervision.
Attached as Exhibit 99 hereto are the consolidated financial statements of
AFEH for the three and six months ended June 30, 1997 and June 30, 1996 prepared
in accordance with Rule 3.05 of Regulation S-X of the Securities and Exchange
Commission.
Item 7. Financial Statements and Exhibits
---------------------------------
(c) Exhibits
99 Consolidated Financial Statements of AFEH
2
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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 11, 1997 By:/s/ DAVID A. HEABERLIN
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David A. Heaberlin
Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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99 Consolidated Financial Statements of AFEH
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EXHIBIT 99
AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
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CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
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June 30, 1997 December 31, 1996
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Assets
<S> <C> <C>
Cash and amounts due from depository institutions $ 25,099 $ 28,266
Federal funds sold 15,000 20,000
Securities purchased under agreements to resell 5,300 5,300
Mortgage-backed securities, net
Held to maturity 549,490 630,106
Available-for-sale 42,001 44,489
Loans receivable, net 1,477,903 1,403,483
Loans held for sale 495 370
Accrued interest receivable 12,817 12,206
Premises and equipment, net 8,592 8,888
Federal Home Loan Bank stock, at cost 19,906 21,827
Real estate held for sale or investment, net 1,328 1,328
Real estate owned, net 1,237 1,438
Deferred tax assets, net 22,373 22,643
Other assets 6,154 6,121
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Total Assets $2,187,695 $2,206,465
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Liabilities and Shareholder's Equity
Customer deposits $1,888,965 $1,840,485
Securities sold under agreements to repurchase 15,522 44,353
Other borrowings 75,181 106,998
Other liabilities and accrued expenses 17,072 22,166
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Total Liabilities 1,996,740 2,014,002
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Redeemable Preferred Stock; Series A, no par value;
100,000 shares outstanding, $10 million liquidation value
at June 30, 1997; and 200,000 shares outstanding, $20
million liquidation value at December 31, 1996 8,854 17,748
Common stock; par value $1.00; 100 shares issued and outstanding - -
Paid in capital 102,189 102,189
Retained earnings 79,912 72,526
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Total Shareholder's Equity 182,101 174,715
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Total Liabilities and Shareholder's Equity $2,187,695 $2,206,465
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
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AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
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<TABLE>
<CAPTION>
For the For the For the Six For the Six
Quarter Ended Quarter Ended Months Ended Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
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<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $27,757 $26,510 $54,519 $53,697
Interest on mortgage-backed securities 10,704 12,686 22,024 26,517
Interest and dividends on investment 569 1,167 1,404 2,371
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Total interest income 39,030 40,363 77,947 82,585
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Interest expense
Interest on deposits 21,963 20,333 43,453 40,059
Interest on borrowings 1,248 4,808 2,860 11,327
Preferred Stock accretion 508 542 1,107 1,067
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Total interest expense 23,719 25,683 47,420 52,453
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Net interest income before provision for loan losses 15,311 14,680 30,527 30,132
Provision for loan losses 250 372 502 780
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Net interest income after provision for loan losses 15,061 14,308 30,025 29,352
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Non-interest income
Deposit related fees 445 453 907 922
Loan related fees 313 387 608 712
Gain on disposition of loans, net 104 107 167 154
Other income 2,669 984 3,536 1,517
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Total non-interest income 3,531 1,931 5,218 3,305
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Non-interest expense
Compensation and benefits 5,769 5,198 11,528 10,554
Occupancy and equipment 2,037 2,089 3,941 4,314
FDIC premiums and special assessments 387 1,085 767 2,180
Professional services 767 208 1,014 530
Advertising and promotion 479 296 714 526
Provision for loss (recovery) on interest
rate exchange agreements 131 (100) (5) (569)
Other 2,151 2,054 3,945 4,113
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Total non-interest expense 11,721 10,830 21,904 21,648
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Income before income taxes 6,871 5,409 13,339 11,009
Provision for income taxes 320 - 640 -
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Net income $6,551 $5,409 $12,699 $11,009
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
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AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
For the Six Months Ended June 30, 1997
(dollars in thousands)
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<TABLE>
<CAPTION> Additional
Common Paid-in Retained
Stock Capital Earnings Total
------- ---------- -------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ -- $102,189 $72,526 $174,715
Net income -- -- 12,699 12,699
Dividends paid or accrued -- -- (5,100) (5,100)
Net unrealized loss on mortgage-backed securities
available for sale -- -- (213) (213)
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Balance at June 30, 1997 $ -- $102,189 $79,912 $182,101
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
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<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
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<S> <C> <C>
Cash flows from operating activities
Net income $ 12,699 $ 11,009
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization of:
Investments and mortgage-backed securities net premium 1,186 1,486
Loan premium 122 543
Intangibles 579 632
Proceeds from sale of loans originated and held for sale 9,069 10,241
Originations of loans held for sale (9,027) (10,668)
(Gain) loss on sale of real estate owned and held for sale or investment (1,548) 32
Gain on disposition of mortgage loans (167) (153)
Provision for loan losses 502 780
Provision for loss (recovery) on interest rate exchange agreements (5) (569)
Net provision for income taxes 640 -
(Increase) decrease in accrued interest receivable (611) 486
Decrease in accrued interest payable (1,226) (1,117)
Depreciation and amortization of premises and equipment 843 866
Increase in other assets (286) (2,227)
Decrease in other liabilities (3,858) (2,082)
Other, net (246) 378
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Total adjustments (4,033) (1,372)
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Net cash provided by operating activities 8,666 9,637
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Cash flows from investing activities
Loans originated and held for investment (193,750) (113,330)
Purchases of mortgage-backed securities - (14,547)
Purchases of real estate loans (4,760) (21,930)
Purchases of premises and equipment (586) (512)
Principal payments on mortgage-backed securities 81,704 111,480
Principal payments on loans 122,357 148,342
Proceeds from sale of Federal Home Loan Bank Stock 2,599 911
Redemption of preferred stock (10,000) -
Proceeds from sales of real estate owned and held for sale or investment 2,654 1,557
Other, net 218 189
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Net cash provided by investing activities 436 112,160
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Cash flows from financing activities
Net increase in checking and saving accounts 1,543 45,325
Proceeds from issuance of certificates of deposits 164,904 144,005
Payments for maturing or early withdrawal
of certificates of deposits (117,968) (98,268)
Net decrease in short-term repurchase agreements (28,831) (115,302)
Decrease in Federal Home Loan Bank advances (31,817) (121,032)
Dividends (5,100) (5,400)
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Net cash used by financing activities (17,269) (150,672)
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Net decrease in cash and cash equivalents (8,167) (28,875)
Cash and cash equivalents at beginning of period 53,566 70,486
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Cash and cash equivalents at end of period $ 45,399 $ 41,611
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Supplemental disclosure of cash flow information
Non cash investing and financing activities:
Additions to real estate acquired through foreclosure $ 1,114 $ 2,909
Cash paid for interest (including interest credited) $ 48,780 $ 52,658
Cash paid for alternative income and minimum
franchise taxes $ 370 $ 380
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. ORGANIZATION
America First Eureka Holdings, Inc. (the "Company") is a wholly owned
subsidiary of America First Financial Fund 1987-A Limited Partnership (the
"Partnership"), and was formed for the purpose of owning and managing one or
more acquired financial institutions. The Company acquired EurekaBank
("Eureka") on May 27, 1988 (the "Acquisition").
2. BASIS OF PRESENTATION
The consolidated financial statements of the Company include the accounts of
the Company and its wholly-owned subsidiary, Eureka and its subsidiaries.
All significant intercompany transactions have been eliminated.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (primarily consisting of normal
recurring accruals) necessary for a fair presentation of the Company's
financial condition as of June 30, 1997, and the results of its operations
for the quarters and six months ended June 30, 1997 and 1996.
3. ALLOWANCE FOR LOAN LOSSES
The Company recorded loan loss provisions of approximately $250,000 and
$502,000 for the quarter and six months ended June 30, 1997, respectively,
as compared to $372,000 and $780,000 for the same periods in 1996,
respectively. At June 30, 1997 and December 31, 1996, the allowance for loan
losses was approximately $7.2 million and $7.1 million, respectively.
Management believes that the allowance for loan losses was adequate given
the composition, credit characteristics and loss experience of the loan
portfolio.
4. INTEREST RATE EXCHANGE AGREEMENTS
Prior to 1993, the Company entered into interest rate exchange agreements to
reduce the impact of future fluctuations in interest rates on fixed rate
mortgages funded by variable rate liabilities. The floating rates to be
received by the Company under the terms of these agreements are reset
monthly, quarterly or semi-annually and are generally indexed to the FHLB
Eleventh District Cost of Funds index or the one or three month London
Interbank Offered Rate ("LIBOR").
In 1993, the sustained decline in interest rates in the general economy and
the resulting prepayment of mortgage loans associated with the interest rate
exchange agreements caused Eureka to establish a liability based on the
estimated fair value of interest rate exchange agreements that were no
longer deemed effective as hedges. During the quarter ended June 30, 1997,
Eureka recorded a provision to non-interest expense on interest rate
exchange agreements of approximately $131,000 to reflect the effect of
interest rate decreases on the market value of Eureka's related obligations.
A net recovery of approximately $5,000 was recorded for the six months ended
June 30, 1997. During the quarter and six months ended June 30, 1996, Eureka
recorded to non-interest expense recoveries on interest rate exchange
agreements of approximately $100,000 and $569,000, respectively, to reflect
the effect of interest rate increases on the market value of Eureka's
related obligations. The recorded liability for the interest rate exchange
agreements totaled approximately $609,000 and $1.2 million at June 30, 1997
and December 31, 1996, respectively. Net interest payable on interest rate
exchange agreements was $447,000 and $629,000 at June 30, 1997 and December
31, 1996, respectively, and was included in other liabilities and accrued
expenses.
For the quarter and six months ended June 30, 1997, net interest expense on
interest rate exchange agreements (after amortization of the interest rate
exchange agreement liability of $222,000 and $619,000, respectively) totaled
5
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AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
approximately $205,000 and $419,000, respectively. For the quarter and six
months ended June 30, 1996, net interest expense on interest rate exchange
agreements (after amortization of the interest rate exchange agreement
liability of $428,000 and $1.1 million, respectively) totaled approximately
$258,000 and $385,000, respectively. Net interest expense on interest rate
exchange agreements is included as an adjustment to interest income on
loans. The notional amount of interest rate exchange agreements outstanding
was $80 million and $100 million at June 30, 1997 and December 31, 1996,
respectively.
5. INCOME TAXES
The consolidated financial statement provisions for income tax for the
quarter and six months ended June 30, 1997 and 1996 relate to the Company
and its subsidiary. The Company and its subsidiary file calendar year
consolidated federal income and combined California franchise tax returns.
Deferred tax assets are initially recognized for net operating loss and tax
credit carryforwards and differences between the financial statements
carrying amount and the tax bases of assets and liabilities which will
result in future deduction amounts. A valuation allowance is established to
reduce the deferred tax assets to the level at which it is more likely than
not that the tax benefits will be recognized.
A valuation allowance is recorded if it is more likely than not that some
portion or all of the deferred tax assets will not be realized based on a
review of available evidence. The allowance is subject to ongoing adjustmets
based on changes in circumstances that affect management's assessment of the
realizability of the deferred tax assets. Adjustments to increase or
decrease the valuation allowance are charged or credited, respectively, to
income tax expense (benefit).
6. PROPOSED MERGER WITH BAY VIEW CAPITAL CORPORATION
On May 8, 1997, the Partnership announced that it had entered into a
definitive agreement with Bay View Capital Corporation with respect to a
merger of its subsidiary America First Eureka Holdings with Bay View (the
"Merger Agreement"). Under the terms of the Merger Agreement, the
Partnership will receive $90 million in cash and $210 million in Bay View
common stock (subject to a minimum of 8,076,922 shares and a maximum of
10,000,000 shares) for its interest in America First Eureka Holdings, which
owns Eureka. If the market price of Bay View common stock (based on the
average closing prices over a specified period) is less than $21.00 per
share, the Partnership has the right to terminate the Merger Agreement
unless the total value of the shares of Bay View common stock to be received
is $210 million in addition to the cash portion of $90 million. The
transaction is expected to close on December 31, 1997 or January 2, 1998,
and is subject to customary conditions, including regulatory approval and
approval by the BUC holders. Please refer to the Partnership's Form 8-K
dated May 16, 1997 for further information. The above Bay View shares to be
received by the Partnership under the terms of the Merger Agreement are
adjusted for a Bay View 100% stock dividend declared on April 14, 1997 to
Bay View stockholders of record on May 9, 1997.
In May 1997, $10 million of the preferred stock issued to the FDIC was
redeemed. The $10 million of mandatorily redeemable non-voting Series A
Preferred Stock that remains outstanding is scheduled for redemption in May
1998, but will be redeemed when the merger is completed.
Under the terms of the Assistance Agreement, and as a result of the Merger
Agreement discussed above, the Partnership expects to pay a final
participation payment to the FDIC of approximately $12.8 million from cash
received at the time of the merger. The final participation payment is in
addition to the redemption of the remaining $10 million in outstanding
Series A Preferred Stock.
6
