Bay View Capital Corp. has received final regulatory approval to convert from a thrift to a national bank.
The thumbs-up this week from the Federal Reserve Board caps a three-year transformation by the San Mateo, Calif., company.
The holding company of Bay View Bank has been expanding its consumer loan portfolio since 1995 and was rapidly approaching a regulatory restriction that bars federal thrifts from holding consumer loans in excess of 30% of assets.
"We were heading toward some real problems if we didn't convert," said Bay View chief executive Edward H. Sondker. "This is a very important culmination for us."
The $5.6 billion-asset institution has not made a single-family mortgage loan in two years. It has built its consumer loan portfolio considerably. On Dec. 31, Bay View held consumer loans equivalent to 26% of its assets and was expected to hit the 30% ceiling sometime this year, Mr. Sondker said.
The shift has enabled Bay View to weather the mortgage prepayment problem afflicting many thrifts.
Indeed, the company increased interest-earning assets by 42%, to $5.3 billion, during 1998.
Few West Coast thrifts consider mortgage originations a major part of their business any longer, said Mike McMahon, an analyst with Sandler O'Neill & Partners, Walnut Creek, Calif.
Only a handful of institutions, such as Golden West Financial Corp. in Oakland, Calif., devote the energy to the traditional thrift product needed to eke out gains.
"The returns are just not in originations any more," Mr. McMahon said. "With the market environment as it is, Bay View is doing what it has to."
The company this week also announced that its asset-based lending unit, Bay View Commercial Finance Group, will become a direct subsidiary of Bay View Bank. The unit is a subsidiary of the holding company.
The move would streamline the company's structure and improve overall efficiency, Mr. Sondker said.
Mr. Sondker was hired as CEO of Bay View in 1995, after investor Michael Price demanded that the company improve its earnings growth and stock price or sell. When he joined the thrift, Mr. Sondker said he would strengthen its balance sheet and bolster its retail business.
Bay View will be supervised by the Office of the Comptroller of the Currency, which gave its approval to the charter conversion in November.