Bay View Cancels High-LTV Buy

Bay View Capital Corp., San Mateo, Calif., is canceling its proposed acquisition of PSB Lending Corp., the high loan-to-value originations unit of Pacific Southwest Bank, Corpus Christi, Texas.In announcing its decision to call off the deal, BVCC cited the Office of Thrift Supervision's bulletin limiting to 100% of total capital the amount of high-LTV loans a thrift may hold (covered in yesterday's MortgageWire). BVCC's subsidiary Bay View Bank and Pacific Southwest are both federally chartered thrifts. BVCC will take approximately $850,000 in special charges during the third quarter because of the cancellation. Furthermore, because of the deal cancellation and the acceleration of prepayments on mortgage-backed assets, BVCC will not meet the 1998 core consensus earnings estimate as determined by First Call. Ironically, in a separate press release issued at the same time, BVCC announced its filing to convert Bay View Bank's charter from a savings bank to a national bank and become regulated by the Office of the Comptroller of the Currency.