After more than a year of scouting for bank acquisitions in California, Colorado, and Texas, Bay View Capital Corp. of San Mateo, Calif., finally found a deal to its liking — in upstate New York.
The company, which sold off the last of its thrift assets just two years ago, said late Wednesday that it is reentering the community banking business by buying a 60% stake in the $771 million-asset Great Lakes Bancorp Inc. in Buffalo for $67.1 million in stock.
Robert Goldstein, Bay View’s chairman, said that the board had been looking for deals for fast-growing companies in fast-growing markets of California, Colorado, and Texas but decided that asking prices were just too high.
“We didn’t want to pay three or four times book,” Mr. Goldstein said in an interview Wednesday.
The board then broadened its search and liked what it saw in the 6-year-old Great Lakes, a fast-growing thrift company in an otherwise slow-growing market. Bay View is paying the equivalent of 1.8 times book value for a stake in the parent of Greater Buffalo Savings Bank.
The thrift has nine branches and plans to add 11 more in the next 18 months. “With the capital we’d be adding, we’ll be able build it even faster,” Mr. Goldstein said.
The deal is expected to close in January. Great Lakes would be merged into Bay View, which would adopt the Great Lakes name. Greater Buffalo Savings would continue to operate under that name.
Mr. Goldstein, a noted turnaround specialist, joined Bay View in 2001. At that time it was reeling from nearly two years of heavy losses, which it attributed largely to a subsidiary that made loans to gas stations, convenience stores, and fast-food restaurants.
Bay View had planned to completely liquidate in 2002, after it sold $3 billion of deposits and the 57 branches of its money-losing thrift, Bay View Bank, to U.S. Bancorp for $429 million. It was steadily shedding the rest of its assets and had planned to sell its profitable auto finance subsidiary, Bay View Acceptance Corp., when it changed course in late 2003 to take advantage of tax credits accumulated from the dissolved thrift’s net operating losses since 1999.
Accountants told the board that Bay View still had about $100 million of net operating losses that it could carry forward from posting more than $430 million of losses for the last quarter of 1999 and all of 2000 and 2001. Under federal tax laws, that $100 million could be used as tax credits during any year Bay View makes money — essentially, it would get tax-free income until there were no more net operating losses to carry forward on its books.
As a result, Bay View kept the finance subsidiary and decided to buy a thrift; it has been looking for deals since last fall. (Mr. Goldstein said his company now plans to sell Bay View Acceptance and use the proceeds to buy more thrifts.)
Current Great Lakes shareholders would own a 40% stake in the parent company. The board would have 16 members: 13 current Great Lakes directors and three Bay View directors, including Mr. Goldstein.
Mr. Goldstein said that the deal was structured so that Bay View legally would be the surviving corporation, to keep both the tax credits and Bay View’s listing on the New York Stock Exchange.
Andrew W. Dorn Jr., Great Lakes’ president and chief executive, said that joining forces with what amounted to a shell of a former thrift was a perfect way to accelerate Great Lakes’ growth without sacrificing the thrift’s independence.
“With one fell swoop, we have new capital to accomplish a bunch of things, and we have plenty of liquidity for our shareholders by getting a stock traded on the New York Stock Exchange,” he said Thursday.
The Great Lakes board would also benefit from the addition of Mr. Goldstein and two other Bay View directors who have helped him fix and sell troubled banks over the years, Mr. Dorn said that.
