December 1, 2000

Greater Bay Bancorp Completes Acquisition of The Matsco Companies

PALO ALTO, Calif., / -- Greater Bay Bancorp (Nasdaq: GBBK), a $4.3 billion ($4.7 billion on a pro forma basis) in assets financial services holding company, announced today that it has completed the acquisition of The Matsco Companies Inc. Matsco, with approximately $200 million in assets and headquartered in Emeryville, California, specializes in financial services for the dental and veterinary markets. Greater Bay Bancorp paid the Matsco shareholders $6.5 million in cash upon the closing and will pay up to an additional $6.0 million (on a present value basis) in an earn-out arrangement over a 5 year period.

Greater Bay Bancorp anticipates the transaction to be 2% accredited to 2001 earnings, after goodwill amortization and excluding one-time nonrecurring transaction-related expenses. Greater Bay Bancorp has not included any anticipated revenue enhancements that may be realized from the acquisition. On a pro forma basis as if the acquisition had closed on September 30, 2000, the combined company would have had total assets of approximately $4.7 billion, which includes the recently completed mergers with Bank of Santa Clara and Bank of Petaluma.

David L. Kalkbrenner, President and Chief Executive Officer of Greater Bay Bancorp, commented, "We are very pleased to welcome Matsco to the Greater Bay Bancorp family. Matsco's experienced management team and dedicated employees bring to Greater Bay Bancorp a niche financial services business focused on the professional health care market with a proven track record. Matsco's equipment leasing and commercial finance capabilities provide Greater Bay Bancorp with the ability to expand our service offerings to current clients, as well as the opportunity to offer other credit and deposit services to Matsco's existing clients."

Matthew Shipman, President and Chief Executive Officer of Matsco who will continue to lead Matsco as part of Greater Bay Bancorp, said, "The Matsco team is very pleased to join the Greater Bay Bancorp family. We see significant cross-selling opportunities which we believe will benefit the entire combined company as well as our valued clients."

Matsco offers a complete range of finance products and services to meet the needs of dentists and veterinarians throughout their professional career. The Company is endorsed exclusively by the American Dental Association (ADA) and California Dental Association (CDA). The principal financial products offered by Matsco include practice start-up financing, practice expansion financing, practice acquisition financing, working capital and financing for retirement planning. These products are structured as either equipment leases or loans.

Greater Bay Bancorp through its ten subsidiary banks, Bank of Petaluma, Bank of Santa Clara, Bay Area Bank, Bay Bank of Commerce, Coast Commercial Bank, Cupertino National Bank, Golden Gate Bank, Mid-Peninsula Bank, Mt. Diablo National Bank, and Peninsula Bank of Commerce, along with its operating divisions serves clients throughout Silicon Valley, San Francisco, the San Francisco Peninsula, the East Bay Region, the North Bay Region and the Coastal Region.

Safe Harbor

Certain matters discussed in this press release constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements relate to the Company's current expectations regarding future operating results, growth in loans, deposits and assets, continued success of its Super Community Banking strategy and the strength of the local economy. These forward looking statements are subject to certain risks and uncertainties that could cause the actual results, performance or achievements to differ materially from those expressed, suggested or implied by the forward looking statements. These risks and uncertainties include, but are not limited to: (1) the impact of changes in interest rates, a decline in economic conditions at the international, national and local levels and increased competition among financial service providers on the Company's results of operations, the Company's ability to continue its internal growth at historical rates, the Company's ability to maintain its net interest spread, and the quality of the Company's earning assets; (2) any difficulties that may be encountered in integrating recently acquired businesses and in realizing operating efficiencies; (3) government regulation; (4) the risks relating to the Company's warrant positions; and (5) the other risks set forth in the Company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 1999.

For investor information on Greater Bay Bancorp at no charge, call our automated shareholder information line at 1-800-PRO-INFO (1-800-776-4636) and enter code GBBK. For international access, dial 1-201-432-6555.

SOURCE Greater Bay Bancorp
CO: Greater Bay Bancorp; The Matsco Companies Inc.
ST: California

GE Capital Exits Auto Finance Business in U.S
By Rachel Layne, Bloomberg
GE Auto Finance, a unit of General Electric Capital, will stop selling new loans and leases in the U.S. and cut 400 positions in February, GE Capital Spokesman John Oliver said.

The company won't take a charge and will look for jobs within and outside of General Electric for the employees whose positions are eliminated, Oliver said. The cuts are mostly in suburban Chicago, where 1,150 employees work at the unit in Barrington, Illinois, he said. GE Auto Finance, which currently has about half a million leases and loans in the U.S., decided that auto companies are better suited in the U.S. for the business. "Five years out it did not represent the kind of attractiveness we require," Oliver said. By contrast, business in Europe and Asia is "robust" for the auto finance unit, he said. The unit will stop selling new loans and leases immediately in the U.S. only. Its overseas business is unaffected.

Kit,

Just a short note to thank you for a number of calls I've received recently from both individuals looking for opportunities and from firms looking to fill positions. I hope I can return the favor. Hope you had a nice Thanksgiving,

Hal

Hal T. Horowitz
Account Executive
Search West
340 North Westlake Blvd., Suite 200
Westlake Village, CA 91336
Phone: 805-496-6811 ext. 231
Fax: 805-496-9431
Pager: 818-494-6875
hal.horowitz@searchwest.com
www.searchwest.com

"It is my mission to collaborate with my clients in order to further their success by identifying professionals of uncommon ability to whom my clients might not otherwise have access and who will make a valuable contribution to my clients' goals."

SLOWING ECONOMY

Why the squeeze, after years of robust economic growth and easy credit? Simply put, many see the U.S. as headed into the downward phase of the economic cycle. The U.S. economy grew at just a 2.4% annual rate in the third quarter - less than half the second quarter's pace - and capital spending, PC sales and auto sales all are coming under pressure. Any sign of slowing makes lenders less confident of borrowers' future earnings, and therefore ability to repay. They start to deny credit or demand bigger compensation for taking the chance of extending it.
Moreover, lenders are discovering that during the long boom years they gave money to lots of companies that, in retrospect, shouldn't have been funded nearly so richly. The lending was indeed lush: In June, total borrowing by non financial U.S. companies stood at $4.6 trillion, up 61% from five years before, Moody's says. Now, more debt is going bad. The junk-bond default rate is above 5%, the highest in nearly a decade. And 3.3% of syndicated loans were considered troubled as of the end of March this year, up from 1.3% two years earlier, according to bank regulators latest Shared National Credit survey.
Frothy financing deals done in 1997 and 1998 - for over leveraged "roll up" companies on acquisition sprees, and telecom companies with no earnings - have turned around to bite investors. Chapter 11 bankruptcy-law filings this year include firms such as AmeriServe Food Distribution Inc., whose $1.5 billion in debt was more than nine times its annual cash flow. Rattling investors further: Some of the year's biggest Chapter 11 filers have been companies that had investment-grade credit ratings, such as grocer Pathmark Stores Inc. and Laidlaw Inc., a transportation company.
How tight credit has become is a matter of debate. Peter Gleysteen, who runs syndicated lending at Chase Manhattan Corp., says the U.S. isn't in a credit crunch. But, using Darwinian terms, he adds that "as the economy loses some of its momentum, it's not surprising that if there's less oxygen in the atmosphere, some companies with smaller lung capacities will gasp for breath and some won't survive. It's the nature of our free-market economy."
At Morgan Stanley Dean Witter & Co., corporate-bond strategist Steven A. Zamsky agrees it is "premature to say we are in the middle of a full-blown credit crunch" but adds that "that description would be a fair representation of what is already happening in parts of the market."
Today, in theory at least, a dispersal of credit risk reduces the danger to the economy. A decade ago, U.S. banks had weaker balance sheets, and risky lending was much more concentrated. Regional banks in New England that lent heavily in the booming real-estate markets of the 1980s were battered when property prices collapsed at the end of the decade. Banks weren't merely unwilling to lend, but often unable to.
Now, big syndicated loans are often shared by dozens of banks and institutional investors. And individuals have indirectly become huge lenders to corporations through mutual funds, which invest in corporate bonds, syndicated loans, commercial paper and asset-backed securities.
Yet some contend that this shift of lending from the banks to debt-securities markets magnifies the danger. Banks have relationships with the borrowers, but bondholders don't, and they tend to act quickly and all on the same information. That's what happened in August 1998, when Russia defaulted on part of its debt and lenders suddenly didn't want to own anything but super safe Treasurys.
These days, mainstream borrowers are finding their creditors wary once more. Consider Hollywood Entertainment. Throughout two years when the company was unprofitable, the credit spigot flowed freely. Lately, results have been improving. Revenue at the Portland, Ore.-based retailer rose 15% in its fiscal third quarter ended Nov. 2 to $306 million, and it recorded a profit of two cents a share.

But that was below analysts expectations. And Hollywood's total debt of $595 million had started looking worrisome to its lenders. So Hollywood's money-raising options all grew bleaker at once. Bankers turned stingy. Bonds would have to carry such a high interest rate that selling them would choke off Hollywood's cash flow. And selling more stock wouldn't do because the shares had fallen steeply. Seeing this, the rating agencies downgraded Hollywood's credit, making it even harder to raise cash.

So far in the fourth quarter, Moody's has been lowering the credit ratings of 3.9 corporate borrowers for every one it raises, the worst ratio since the fourth quarter of 1990. Tighter capital markets, says Moody's Senior Vice President Dan Gates, are reason enough to re-evaluate any company that relies on debt to fuel growth plans. "Diminished access to funding has become a big factor" in rating creditworthiness, he says.

For Hollywood, it is a "vicious cycle," says Mr. Martin, the chief financial officer. "We will pull through it. But this adds some challenges."
Two Worlds
A sharp line has been drawn between the corporate haves and have-nots. Companies that have strong credit ratings or are in sectors currently in favor can still get plenty of money. At oil-driller Swift Energy Co., Chief Financial Officer Alton Heckaman gets a constant stream of cold calls from bankers and investment bankers offering to arrange financing. "From a standpoint of credit, we've actually seen quite an improvement in our sector over the past nine to 12 months," he says.
And the commercial-paper market, which supplies short-term credit to corporations with the highest credit ratings, grew 17.2% year-over-year through October, says John Lonski, chief economist at Moody's. "We're not seeing a contraction in the availability of credit that appears to be hampering business activity in a broad-based manner," Mr. Lonski says. Financing for small businesses also has been readily available through the end of October, according to a survey by the National Federation of Independent Businesses.
But even the strongest companies are finding it costlier to raise capital. When Citigroup Inc. issued $3 billion of 10-year bonds in early October, it offered investors 1.47 percentage points more interest yield than comparable Treasury notes. Thursday, the company sold $1.25 billion more of the same bonds but had to pay about 1.89 percentage points over Treasurys, a huge increase for bonds with a strong single-A-plus credit rating.
So the "risk premium" that investors demand for holding even blue-chip corporate bonds has risen sharply. The 5,000 corporate bonds in Salomon Smith Barney's Broad Investment Grade Index are trading at 1.9 percentage points over Treasurys, compared with 1.2 percentage points in January. Though the declining supply of Treasurys caused part of that increase - by pushing Treasurys' prices up and yields down - in the past two to three months much of the rise "could be ascribed to true fundamental credit risk," says Dennis M. Adler, the high-grade corporate-bond strategist at Salomon Smith Barney.

Bush Aides Scramble For Transition

By KAREN GULLO
by The Associated Press

Associated Press

McLEAN, Va. (AP) - Staffers carried in folding tables. Volunteers filed in by the dozens to drop off resumes. The mailman made his first delivery - four letters. A local eatery dropped off coupons for discounts on pizza lunches.

George W. Bush's new transition office in suburban McLean, Va., was a buzz of activity Thursday, its first official day of business. While Bush met with running mate and transition czar Dick Cheney and former Gen. Colin Powell in Texas to talk over the business of forming a new government, staffers scurried like mad in McLean to get the 2,100 square-foot office up and running and make good on Bush's declaration, ``We're open for business.''

``Everything's in the process of being set up,'' said Juleanna Glover Weiss, deputy press aide for the Bush-Cheney transition effort, pointing to an empty room that will serve as a filing center for the press. A couple of old couches left over from the previous tenant occupied part of an adjoining room.

Normally, the president-elect gets the key to a federally-financed transition office in Washington shortly after election day. A space is all ready downtown, equipped with computers phone and other equipment.

But the General Services Administration, the federal government's landlord, has decided not to let anyone move in until the legal wrangling over the contested president election is sorted out. And it has not released $5.3 million in transition funding.

So the Bush camp decided to open its own transition office in McLean - Cheney's McLean residence is just a few minutes drive - and finance the operation with private donations.

Sen. George Voinovich, R-Ohio, who heads two subcommittees with jurisdiction over the General Services Administration, asked the GSA on Thursday to reconsider and release transition funds to Bush.

``My own experiences as a veteran of four transitions have taught me that it takes a great deal of time and resources to bring the many pieces of a transition together,'' Voinovich said in a letter to GSA Administrator David J. Barram. ``Unfortunately, the next president of the United States already has lost over three of the ten weeks available for transition.''

The Bush-Cheney camp says computers, phones, office furniture and other equipment will trickle in over the next few days. For now, the office, located in a nondescript 2-story brick building that used to house a dot com company, is half empty. Staffers are camped out with laptop computers and phones - long distance service was hooked up late Wednesday afternoon - on the first floor

By midday about 25 staffers had signed in and over 50 volunteers had stopped in looking to work. A basket full of resumes sat in the makeshift reception area, where security guards where just pulling up a desk next to the door.

The building is already wired for high speed communications, but more communications equipment is needed to accommodate television networks, which will feed live reports from a briefing room, now just a large empty space on the office's second floor. Communications specialists huddled in front of a giant board with protruding red wires talking about ``T-1s'' and other networking needs.

Weiss said the McLean location wasn't just chosen to accommodate Cheney, who is recovering from a mild heart attack. ``The real estate market is really tight in D.C.,'' she said, adding that the McLean building's high-tech wiring was a draw.

She declined to reveal the cost of leasing the space, but said the Bush-Cheney transition team is being charged market prices.

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