<PAGE>
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): January 2, 1998
-----------------
BAY VIEW CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-17901 94-3078031
- --------------------------------------------------------------------------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
1840 Gateway Drive, San Mateo, California 94404
- --------------------------------------------------------------------------------
(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>
Item 2. Acquisition or Disposition of Assets.
------------------------------------
On January 2, 1998, Bay View Capital Corporation ("Bay View"), a Delaware
corporation and the holding company for Bay View Bank, issued the press release
included as Exhibit 99.1 to this Report and incorporated by reference herein
announcing the completion of Bay View's acquisition of America First Eureka
Holdings, Inc., and its wholly owned subsidiary, EurekaBank, a Federal Savings
Bank ("EurekaBank"). EurekaBank will initially operate under its own name. The
Company anticipates that by May 31, 1998, the systems and products of EurekaBank
will be fully integrated at which time all of the EurekaBank branches will
convert to Bay View Bank branches ("Subsidiary Merger"). The Merger was
consummated pursuant to an Agreement and Plan of Merger, dated as of May 8,
1997, by and among Bay View, America First Eureka Holdings, Inc., America First
Financial Fund 1987-A Limited Partnership and America First Capital Associates
Limited Partnership Five (the "Merger Agreement"). A copy of the Merger
Agreement was included as Exhibit 2 to Bay View's Current Report on Form 8-K,
filed with the Securities and Exchange Commission on May 12, 1997, and is
incorporated by reference herein.
Following the Merger, the assets and liabilities of America First Eureka
Holdings, Inc. were assumed by Bay View and following the Subsidiary Merger, the
assets and liabilities of EurekaBank will be assumed by Bay View Bank.
Pursuant to the Merger Agreement Bay View paid $90 million in cash and
issued 8,076,923 shares of Bay View common stock to America First Financial Fund
1987-A Limited Partnership, the sole shareholder of America First Eureka
Holdings, Inc.
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Business Acquired
(i) The audited consolidated financial statements, and notes
thereto, of America First Eureka Holdings, Inc. as of December
31, 1996 and 1995, and for the years ended December 31, 1996,
1995 and 1994 are contained in Exhibit 99 to the Current Report
on Form 8-K of Bay View dated June 23, 1997, which report is
incorporated by reference herein.
(ii) The following financial statements for America First Eureka
Holdings, Inc. as of September 30, 1997 and for the nine months
ended September 30, 1997 and 1996 are included herein
as Exhibit 99.2:
Condensed Consolidated Balance Sheets
(Unaudited)
Condensed Consolidated Statements of
Operations (Unaudited)
Condensed Consolidated Statements of
Shareholder's Equity (Unaudited)
Condensed Consolidated Statements of Cash
Flows (Unaudited)
Notes to Unaudited Consolidated Financial Statements
(b) Pro forma Financial Information.
The following unaudited pro forma condensed combined financial
information as of September 30, 1997 and for the nine months ended
September 30, 1997 and the year ended December 31, 1996 are set forth
in Exhibit 99.3 included herein:
Pro Forma Condensed Combined Statement of Financial
Condition at September 30, 1997 (Unaudited)
Pro Forma Condensed Combined Statement of Operations
for the nine months ended September 30,
1997 (Unaudited)
Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 1996 (Unaudited)
Notes to Unaudited Pro Forma Condensed Combined
Financial Information
(c) Exhibits.
2. Agreement and Plan of Merger, dated as of May 8, 1997, by and
among Bay View, America First Eureka Holdings, Inc., America First
Financial Fund 1987-A Limited Partnership and America First Capital
Associates Limited Partnership Five (incorporated by reference as
2
<PAGE>
Exhibit 2 to Bay View's Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 12, 1997).
99.1 Press release of Bay View, dated January 2, 1998.
99.2 America First Eureka Holdings, Inc. and Subsidiary financial
statements listed in Item 7(a)(ii).
99.3 Unaudited Pro Forma Financial Data listed in Item 7(b).
3
<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: January 20, 1998 By: /s/David A. Heaberlin
-----------------------------
David A. Heaberlin
Executive Vice President and
Chief Financial Officer
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
2 Agreement and Plan of Merger, dated as of May 8, 1997, by
and among Bay View, America First Eureka Holdings, Inc.,
America First Financial Fund 1987-A Limited Partnership and
America First Capital Associates Limited Partnership
Five(incorporated by reference to Exhibit 2 to Bay View's
Report on Form 8-K filed with the Securities and Exchange
Commission on May 12, 1997).
99.1 Press release of Bay View, dated January 2, 1998.
99.2 America First Eureka Holdings, Inc. and Subsidiary financial
statements listed in Item 7(a)(ii).
99.3 Unaudited Pro Forma Financial Data listed in Item 7(b).
</TABLE>
<PAGE>
Exhibit 99.1
Bay View Capital Corporation News Release
NASDAQ SYMBOL: BVCC
Web Site: http://www.bvcc.com
Contact: David A. Heaberlin
(650) 312-7272
FOR IMMEDIATE RELEASE
January 2, 1998
BAY VIEW CAPITAL CORPORATION COMPLETES ITS ACQUISITION OF
AMERICA FIRST EUREKA HOLDINGS, INC. AND EUREKABANK
San Mateo, California - Bay View Capital Corporation ("the Company") today
announced the completion of its acquisition of America First Eureka Holdings,
Inc. ("AFEH") and its wholly owned subsidiary, EurekaBank. Pursuant to the
Merger Agreement, the Company today delivered $90 million in cash and 8,076,923
shares of the Company's common stock to America First Financial Fund 1987-A
Limited Partnership ("AFFF"), the sole shareholder of AFEH.
The number of shares issued was based on the average value of the Company's
stock for the 20 full trading days ending on the fifth business day prior to the
merger closing date, not to exceed $26.00 per share. Based on the average value
of $34.3031 during this period, the number of shares was determined by dividing
the $210 million stock portion of the purchase price by $26.00 per share.
Edward H. Sondker, the Company's President and Chief Executive Officer
stated, "This is a significant milestone for our Company, now the largest
deposit franchise of any financial institution operating exclusively in the Bay
Area. We welcome our many new customers, employees and shareholders and promise
to remain committed to enhancing shareholder value."
EurekaBank Integration
The Company also announced that EurekaBank will initially operate under its
own name. The Company anticipates that by May 31, 1998, the systems and products
of EurekaBank and Bay View Bank will be fully integrated at which time all
EurekaBank branches will convert to Bay View Bank branches.
Goodwill Generated From Merger
Based on the closing share price of the Company's common stock on December
31, 1997 of $36.25 per share, this transaction is valued at approximately $383
million. The Company originally estimated and disclosed that the goodwill
generated from this merger, accounted for under the purchase method of
accounting, would approximate $112 million. The Company also disclosed that no
additional goodwill would be created to the extent the average
6
<PAGE>
value of the Company's stock exceeded $26.00 per share. The Company is currently
in the process of evaluating the fair value of the assets acquired and
liabilities assumed today to determine the final goodwill amount.
AFFF Distribution
AFFF will make a liquidating distribution of all of the Company's stock and
cash held by AFFF to the general and limited partners of AFFF in accordance with
their interest in AFFF. Beneficial Unit Certificate ("BUC") holders of record on
January 2, 1998 will receive cash in the amount of $11.3553 and 1.137915 shares
of Bay View Capital Corporation common stock for each BUC. The distribution will
occur on or about January 5, 1998. BUC holders will receive cash in lieu of any
fractional shares of Bay View Capital Corporation common stock that they would
otherwise receive in the distribution. The shares of Bay View Capital
Corporation common stock issued in conjunction with the transaction will trade
on a when-issued basis effective today under the NASDAQ symbol BVCCV until the
shares have been distributed.
As disclosed in the proxy material, there will be a $2.1 million reserve
maintained by AFFF for partnership wind-up expenses. After January 2, 1998, the
BUCs will cease trading on NASDAQ. AFFF, however, will not be liquidated until
sometime later in the first quarter of 1998. At that time, after all the final
expenses have been accounted for, there will be a final distribution of cash
made to all BUC holders. While it is impossible to determine the exact amount
of the cash distribution at this time, the current estimate of this final
distribution is approximately $0.15 per BUC.
Bay View Capital Corporation is a diversified financial services holding
company for Bay View Bank, including EurekaBank, Bay View Credit (formerly
California Thrift & Loan), Ultra Funding, Inc. and Concord Growth Corporation.
7
<PAGE>
Exhibit 99.2
AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Assets
Cash and amounts due from depository institutions $ 39,249 $ 28,266
Federal funds sold 24,900 20,000
Securities purchased under agreements to resell 35,600 5,300
Mortgage-backed securities, net
Held to maturity 506,779 630,106
Available-for-sale 41,285 44,489
Loans receivable, net 1,524,335 1,403,483
Loans held for sale 1,551 370
Accrued interest receivable 12,822 12,206
Premises and equipment, net 8,394 8,888
Federal Home Loan Bank stock, at cost 20,236 21,827
Real estate held for sale or investment, net 1,328 1,328
Real estate owned, net 1,958 1,438
Deferred tax assets, net 22,053 22,643
Other assets 7,167 6,121
---------- ----------
Total Assets $2,247,657 $2,206,465
---------- ----------
Liabilities and Shareholder's Equity
Customer deposits $1,965,961 $1,840,485
Securities sold under agreements to repurchase - 44,353
Other borrowings 68,481 106,998
Other liabilities and accrued expenses 18,502 22,166
---------- ----------
Total Liabilities 2,052,944 2,014,002
---------- ----------
Redeemable Preferred Stock; Series A, no par value;
100,000 shares outstanding, $10 million liquidation value
at September 30, 1997; and 200,000 shares outstanding, $20
million liquidation value at December 31, 1996 9,153 17,748
Common stock; par value $1.00; 100 shares issued
and outstanding - -
Paid in capital 101,181 102,189
Retained earnings 84,379 72,526
---------- ----------
Total Shareholder's Equity 185,560 174,715
---------- ----------
Total Liabilities and Shareholder's Equity $2,247,657 $2,206,465
---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the Nine For the For the Nine
Quarter Ended Months Ended Quarter Ended Months Ended
Sept. 30, 1997 Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 28,772 $ 83,291 $ 26,539 $ 80,237
Interest on mortgage-backed securities 10,093 32,117 12,108 38,625
Interest and dividends on investment 894 2,298 1,111 3,481
-------------- -------------- -------------- --------------
Total interest income 39,759 117,706 39,758 122,343
-------------- -------------- -------------- --------------
Interest expense
Interest on deposits 22,921 66,375 20,835 60,894
Interest on borrowings 1,068 3,928 3,488 14,815
Preferred Stock accretion 299 1,405 560 1,627
-------------- -------------- -------------- --------------
Total interest expense 24,288 71,708 24,883 77,336
-------------- -------------- -------------- --------------
Net interest income before provision for loan losses 15,471 45,998 14,875 45,007
Provision for loan losses 250 752 71 852
-------------- -------------- -------------- --------------
Net interest income after provision for loan losses 15,221 45,246 14,804 44,155
-------------- -------------- -------------- --------------
Non-interest income
Deposit related fees 493 1,400 471 1,393
Loan related fees 298 906 326 1,038
Gain on disposition of loans, net 67 234 56 210
Other income 1,554 5,090 855 2,372
-------------- -------------- -------------- --------------
Total non-interest income 2,412 7,630 1,708 5,013
-------------- -------------- -------------- --------------
Non-interest expense
Compensation and benefits 6,680 18,207 5,299 15,852
Occupancy and equipment 2,002 5,943 2,018 6,331
FDIC premiums and special assessments 384 1,152 12,123 14,303
Professional services 441 1,455 301 831
Advertising and promotion 169 883 235 761
Provision for loss (recovery) on interest
rate exchange agreements 22 17 147 (422)
Other 2,306 6,251 1,892 6,005
-------------- -------------- -------------- --------------
Total non-interest expense 12,004 33,908 22,015 43,661
-------------- -------------- -------------- --------------
Income before income taxes 5,629 18,968 (5,503) 5,507
Provision for income taxes 320 960 - -
-------------- -------------- -------------- --------------
Net income $ 5,309 $ 18,008 $ (5,503) $ 5,507
-------------- -------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
For the Nine Months Ended September 30, 1997
(dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31, 1996 $174,715
Net income 18,008
Dividends paid or accrued (7,500)
Net unrealized gain on mortgage-backed securities available for sale 337
--------
Balance at September 30, 1997 $185,560
--------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 18,008 $ 5,507
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization of:
Investments and mortgage-backed securities net premium 1,567 2,002
Loan premium 60 699
Intangibles 869 923
Proceeds from sale of loans originated and held for sale 12,739 13,710
Originations of loans held for sale (13,686) (13,996)
Gain on sale of real estate owned and held for sale or investment (1,571) (22)
Gain on disposition of mortgage loans (234) (210)
Provision for loan losses 752 852
Provision for loss (recovery) on interest rate exchange agreements 17 (422)
Net provision for income taxes 960 -
Increase in accrued interest receivable (616) 408
Decrease in accrued interest payable (1,316) (2,581)
Depreciation and amortization of premises and equipment 1,261 1,280
Decrease (increase) in other assets (2,106) (2,976)
Decrease in other liabilities (2,365) 10,345
Other, net (483) 1,819
----------- -----------
Total adjustments (4,152) 11,831
----------- -----------
Net cash provided by operating activities 13,856 17,338
----------- -----------
Cash flows from investing activities
Loans originated and held for investment (326,327) (169,027)
Purchases of mortgage-backed securities - (14,547)
Purchases of real estate loans (7,438) (23,341)
Purchases of premises and equipment (817) (903)
Principal payments on mortgage-backed securities 125,302 154,023
Principal payments on loans 210,248 210,068
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 1,535 3,134
Proceeds from sale of real estate held for sale 1,335 (19)
Other, net 785 326
----------- -----------
Net cash provided by investing activities (2,778) 160,625
----------- -----------
Cash flows from financing activities
Net increase in checking and saving accounts 82,123 75,842
Proceeds from issuance of certificates of deposits 226,103 192,836
Payments for maturing on early withdrawal
of certificates of deposits (182,751) (166,177)
Net decrease in short-term repurchase agreements (44,353) (47,255)
Decrease in Federal Home Loan Bank advances (38,517) (250,953)
Dividends (7,500) (8,100)
Net cash used by financing activities 35,105 (203,807)
----------- -----------
Net decrease in cash and cash equivalents 46,183 (25,844)
----------- -----------
Cash and cash equivalents at beginning of period 53,566 70,486
----------- -----------
Cash and cash equivalents at end of period $ 99,749 $ 44,642
----------- -----------
Supplemental disclosure of cash flow information
Non cash investing and financing activities:
Additions to real estate acquired through foreclosure $ 2,037 $ 4,242
Cash paid for interest (including interest credited) $ 73,023 $ 80,135
Cash paid for alternative income and minimum
franchise taxes $ 370 $ 545
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 1997, and the results of its
operations for the quarters and nine months ended September 30, 1997 and
1996.
3. ALLOWANCE FOR LOAN LOSSES
The Company recorded loan loss provisions of approximately $250,000 and
$752,000 for the quarter and nine months ended September 30, 1997,
respectively, as compared to $71,000 and $852,000 for the same periods in
1996, respectively. At September 30, 1997 and December 31, 1996, the
allowance for loan losses was approximately $7.4 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
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 September 30, 1997,
Eureka recorded a provision to non-interest expense on interest rate exchange
agreements of approximately $22,000 to reflect the effect of interest rate
decreases on the market value of Eureka's related obligations. A net
provision of approximately $17,000 was recorded for the nine months ended
September 30, 1997. During the quarter and nine months ended September 30,
1996, Eureka recorded to non-interest expense provisions (recoveries) on
interest rate exchange agreements of approximately $147,000 and ($422,000),
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 $379,000 and $1.2
million at September 30, 1997 and December 31 1996, respectively. Net
interest payable on interest rate exchange agreements was $395,000 and
$629,000 at September 30, 1997 and December 31, 1996, respectively, and was
included in other liabilities and accrued expenses.
For the quarter and nine months ended September 30, 1997, net interest
expense on interest rate exchange agreements
5
<PAGE>
AMERICA FIRST EUREKA HOLDINGS, INC. AND SUBSIDIARY
(after amortization of the interest rate exchange agreement liability of
$253,000 and $872,000, respectively) totaled approximately $130,000 and
$550,000, respectively. For the quarter and nine months ended September 30,
1996, net interest expense on interest rate exchange agreements (after
amortization of the interest rate exchange agreement liability of $351,000
and $1.4 million, respectively) totaled approximately $238,000 and $622,000,
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 $55 million and $100
million at September 30, 1997 and December 31, 1996, respectively.
5. INCOME TAXES
The consolidated financial statement provisions for income tax for the
quarters and nine months ended September 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 adjustments
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. 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"). This transaction was completed on January 2, 1998.
Pursuant to the Merger Agreement, Bay View Capital Corporation paid $90
million in cash and 8,076,923 shares of its common stock to the Partnership,
the sole shareholder of the Company. 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 in mandatorily redeemable non-voting Series A
Preferred Stock which remains outstanding would have been redeemed in May
1998, but were redeemed in conjunction with the acquisition.
Under the terms of the Assistance Agreement, and as a result of the Merger
Agreement discussed above, the Partnership paid a final participation payment
to the FDIC of approximately $11.5 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
<PAGE>
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Financial Information
is based on the historical financial statements of Bay View and America First
Eureka Holdings, Inc. ("Eureka Holdings") and has been prepared to illustrate
the effect of the Merger and the issuance of the $100 million in subordinated
notes ("Notes").
The following unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1997 is based on the historical consolidated statements of
financial condition of Bay View and Eureka Holdings giving effect to the
accounting for the Merger using the purchase method of accounting and assuming
the Merger and the issuance of the Notes as of the Balance Sheet date.
The unaudited Pro Forma Condensed Combined Statements of Operations for the
year ended December 31, 1996 and for the nine months ended September 30, 1997
are based on the historical consolidated statements of operations of Bay View
and Eureka Holdings for the respective periods, giving effect to the accounting
for the Merger using the purchase method of accounting and assuming the Merger
and the issuance of the Notes both occurred as of January 1, 1996.
The unaudited Pro Forma Condensed Combined Balance Sheet and Statements of
Operations should be read in conjunction with the historical Consolidated
Financial Statements and the accompanying notes contained in the Bay View Third
Quarter Form 10-Q and the 1996 Bay View Form 10-K, and the audited consolidated
financial statements as of December 31, 1996 and 1995 and for the three year
period ending December 31, 1996 of Eureka Holdings included in Bay View's
Current Report on Form 8-K dated June 23, 1997, and the unaudited consolidated
financial statements for the three and nine-month periods ended September 30,
1997 and 1996 included herein as Exhibit 99.2.
As noted above, the Merger will be accounted for using the purchase method
of accounting. Accordingly, the pro forma adjustments are based upon certain
assumptions and preliminary estimates regarding the amount of goodwill (which
represents the excess of the acquisition costs over the fair value of assets
acquired and liabilities assumed) from the Merger and the period over which such
goodwill will be amortized. The amount of goodwill to be recorded as of the
Merger date is expected to be approximately $98 million and represents the
preliminary estimate of the excess of the acquisition costs over the fair value
of assets acquired and liabilities assumed based on information available as of
this date. No assurance can be given that the final goodwill will not be more or
less than the estimated amount reflected in the pro forma financial statements
or that the period over which such goodwill is amortized will not differ from
the period used in the accompanying pro forma financial statements.
The Unaudited Pro Forma Condensed Combined Financial Information does not
purport to be indicative of the actual results of operations or financial
condition that would have been achieved had the Merger in fact occurred on the
dates indicated, nor does it purport to be indicative of the results of
operations or financial condition that may be achieved in the future.
1
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
BAY VIEW CAPITAL CORPORATION AND AMERICA FIRST EUREKA HOLDINGS, INC.
AT SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Eureka Pro Forma Pro Forma
Bay View Holdings Adjustments Combined Notes
<S> <C> <C> <C> <C> <C>
Assets
Cash and Cash Equivalents $ 88,646 $ 99,749 $ (99,153) $ 89,242 (1)
Loans Held for Sale -- 1,551 -- 1,551
Securities Available for Sale
Investment Securities 4,909 -- -- 4,909
Mortgage-backed Securities 76,019 41,285 -- 117,304
Securities Held to Maturity
Investment Securities 15,352 -- -- 15,352
Mortgage-backed Securities 437,146 506,779 -- 943,925
Loans Receivable, Net 2,382,332 1,524,335 -- 3,906,667
Investment in Stock of the FHLB of San Francisco 60,927 20,236 -- 81,163
Real Estate Owned, Net 7,510 1,958 -- 9,468
Premises and Equipment, Net 13,746 8,394 -- 22,140
Intangible Assets 30,315 1,983 113,294 145,592 (2)
Other Assets 45,305 41,387 59,271 145,963 (3)
----------- ----------- ----------- -----------
Total Assets $ 3,162,207 $ 2,247,657 $ 73,412 $ 5,483,276
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
Customer Deposits $ 1,624,062 $ 1,965,961 $ -- $ 3,590,013
Advances from the FHLB of San Francisco 1,024,780 68,481 -- 1,093,261
Securities Sold Under Agreements to Repurchase 138,612 -- -- 138,612
Subordinated Notes, Net 99,355 -- -- 99,355
Senior Debentures 50,000 -- -- 50,000
Other Borrowings 6,345 -- -- 6,345
Other Liabilities 35,089 18,502 58,125 111,716 (4)
----------- ----------- ----------- -----------
Total Liabilities 2,978,233 2,052,944 58,125 5,089,302
Redeemable preferred stock -- 9,153 (9,153) -- (4)
Stockholders' Equity 183,974 185,560 24,440 393,974 (5)
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 3,162,207 $ 2,247,657 $ 73,412 $ 5,483,276
=========== =========== =========== ===========
</TABLE>
See "Notes to Unaudited Pro Forma Condensed Combined Financial Information."
2
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
BAY VIEW CAPITAL CORPORATION AND AMERICA FIRST EUREKA HOLDINGS, INC.
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Eureka Pro Forma Pro Forma
Bay View Holdings Adjustments Combined Note
<S> <C> <C> <C> <C> <C>
Interest Income:
Interest on Loans Receivable 145,744 83,291 -- 229,035
Interest on Mortgage-Backed Securities 26,453 32,117 -- 58,570
Interest and Dividends on Investments 7,122 2,298 -- 9,420
------- ------- ------- -------
179,319 117,706 -- 297,025
Interest Expense:
Interest on Customer Deposits 56,723 66,375 -- 123,098
Interest on Senior Debentures and Subordinated Notes 4,206 -- 6,413 10,619 (6)
Interest on Borrowings and Other Interest Expense 53,199 5,333 -- 58,532
------- ------- ------- -------
114,128 71,708 6,413 192,249
Net interest income 65,191 45,998 (6,413) 104,776
Provision for Losses on Loans 1,828 752 -- 2,580
------- ------- ------- -------
Net interest Income after Provision for Losses on Loans 63,363 45,246 (6,413) 102,196
Noninterest Income:
Loan Fees and Charges 4,617 2,306 -- 6,923
Gain on Sale of Loans and Securities 925 234 -- 1,159
Other 4,364 5,090 -- 9,454
------- ------- ------- -------
9,906 7,630 -- 17,536
Noninterest Expense:
General and Administrative 49,438 33,038 -- 82,476 (7)
Real Estate Owned (638) -- -- (638)
Amortization of Intangibles 2,675 870 5,056 8,601 (8)
------- ------- ------- -------
51,475 33,908 5,056 90,439
Income Before Income Tax Expense 21,794 18,968 (11,469) 29,293
Income Tax Expense 8,964 960 3,502 13,426 (9)
------- ------- ------- -------
Net Income 12,830 18,008 (14,971) 15,867 (10)
======= ======= ======= =======
Primary Earnings Per Share 0.96 0.74 (10)
Average Shares Outstanding (including Common Stock 13,355 21,432 (11)
Equivalents)
</TABLE>
See "Notes to Unaudited Pro Forma Condensed Combined Financial Information."
3
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
BAY VIEW CAPITAL CORPORATION AND AMERICA FIRST EUREKA HOLDINGS, INC.
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Eureka Pro Forma Pro Forma
Bay View Holdings Adjustments Combined Note
<S> <C> <C> <C> <C> <C>
Interest Income:
Interest on Loans Receivable 192,443 107,157 -- 299,600
Interest on Mortgage-Backed Securities 42,081 50,161 -- 92,242
Interest and Dividends on Investments 7,231 4,565 -- 11,796
------- ------- ------- -------
241,755 161,883 -- 403,638
Interest Expense:
Interest on Customer Deposits 100,225 81,982 -- 182,207
Interest on Senior Debentures 2,623 -- 9,620 12,243 (6)
Interest on Borrowings and Other Interest Expense 57,925 19,689 -- 77,614
------- ------- ------- -------
160,773 101,671 9,620 272,064
Net interest income 80,982 60,212 (9,620) 131,574
Provision for Losses on Loans 1,898 965 -- 2,863
------- ------- ------- -------
Net interest Income after Provision for Losses on Loans 79,084 59,247 (9,620) 128,711
Noninterest Income:
Loan Fees and Charges 4,930 1,379 -- 6,309
Gain on Sale of Loans and Securities (1,453) 307 -- (1,146)
Other 5,087 6,715 -- 11,802
------- ------- ------- -------
8,564 8,401 -- 16,965
Noninterest Expense:
General and Administrative 58,955 44,318 -- 103,273 (7)
SAIF Recapitalization Assessment 11,750 11,000 -- 22,750
Real Estate Owned (4,909) 270 -- (4,639)
Amortization of Intangibles 2,606 1,213 6,302 10,121 (8)
------- ------- ------- -------
68,402 56,801 6,302 131,505
Income Before Income Tax Expense 19,246 10,847 (15,922) 14,171
Income Tax Expense 8,277 (20,871) 21,241 8,647 (9)
------- ------- ------- -------
Net Income 10,969 31,718 (37,161) 5,524 (10)
======= ======= ======= =======
Primary Earnings Per Share 0.79 0.25 (10)
Average Shares Outstanding (including Common Stock 13,900 21,977 (11)
Equivalents)
</TABLE>
See "Notes to Unaudited Pro Forma Condensed Combined Financial Information."
4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. This adjustment reflects (i) the redemption of $9.2 million of the
preferred stock of EurekaBank held by the FDIC and (ii) the $90 million payment
for the Total Cash Consideration.
2. This adjustment represents the preliminary estimate of the excess of
acquisition cost over the estimated fair value of net assets acquired (i.e.
goodwill) net of the Eureka Holdings pre-acquisition goodwill written-off as of
September 30, 1997. Goodwill is preliminarily assumed to be amortized on a
straight-line basis over a period of 20 years. Management has estimated that the
goodwill to be recorded as of the Merger date will be approximately $98 million.
The actual goodwill arising from the Merger will be based on the fair values of
the assets and liabilities on the date the Merger is consummated and may be more
or less than the estimated amount reflected herein, which represents the
preliminary estimate available as of this date. This adjustment also represents
the allocation of $12 million of the purchase price to the core deposit
intangibles which are expected to be amortized over 10 years.
3. This adjustment represent deferred taxes arising from the tax loss
carryforwards of Eureka Holdings, tax receivable related to expense accruals
described in Note 4 below, and deferred taxes related to core deposit
intangibles. As of September 30, 1997, Eureka Holdings maintained a valuation
allowance for deferred tax assets. The pro forma adjustment for deferred tax
assets is based on a revaluation of the expected realizability of the estimated
benefits from tax loss carryforwards based on the operating results of the
combined companies resulting from the Merger.
4. This adjustment represents direct acquisition costs and accruals for
certain estimated expenses associated with branch closings, amounts for
settlement of obligations under existing contracts and severance pay for
involuntary terminations in connection with the Merger and redemption of the
preferred stock of EurekaBank held by the FDIC.
5. This adjustment represents the issuance of $210 million of Bay View
Common Stock to the Partnership offset by the elimination of Eureka Holdings'
equity for consolidation purposes.
6. This adjustment represents the interest expense on the Notes (all-in
cost is approximately 9.62% per annum).
7. No adjustments have been made to general and administrative expenses
for expected annualized cost savings which Bay View believes will be derived
primarily from the elimination of duplicative administrative functions and
consolidation of loan servicing functions and the cessation of EurekaBank's
residential loan origination activities. However, there can be no assurance that
any such cost savings will in fact be realized.
8. This adjustment reflects the preliminary estimate goodwill assumed to
be amortized on a straight-line basis over a period of 20 years offset in part
by the reversal of the amortization of pre-acquisition Eureka Holdings goodwill.
This adjustment also includes the amortization of core deposit intangibles. See
Note 2 above.
9. This adjustment represents the reversal of tax benefits recognized by
Eureka Holdings associated with tax loss carryforwards partially offset by tax
benefit related to the interest expense on the Notes.
10. The net income and earnings per share amounts reflected herein do not
purport to be indicative of actual results that would have been achieved had the
Merger and the issuance of the Notes in fact occurred on the dates indicated nor
do they purport to be indicative of results of operations that may be achieved
in the future. The historical and pro forma net income and earnings per share
amounts include the impact of a charge relating to a one-time SAIF
recapitalization assessment for both Bay View Bank and EurekaBank (for the year
ended December 31, 1996, $22.7 million pretax; for the nine months ended
September 30, 1997, none). In addition, no adjustments have been made to general
and administrative expenses for expected cost savings as described in Note 7
above.
5
<PAGE>
11. The number of shares of Bay View Common Stock to be issued to the
Partnership is calculated based on the Total Stock Consideration of $210 million
divided by the stock price of $26.00 per share.
6
