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United States
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2004 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to
 Commission file number 0-14879 BAY VIEW CAPITAL CORPORATION  Delaware
    
    94-3078031(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1840 Gateway DriveSan Mateo, California
    
    94404(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (650) 312-7300
Securities registered pursuant to Section 12(b) of the Act: Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $0.01 per share
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:None Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such requirements for the past 90 days. YES þ NO o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of registrants
knowledge, in a definitive proxy or information statement incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). YES þ NO o The aggregate market value of the voting stock held by non-affiliates of the registrant as of
June 30, 2004 was $131,940,439, based upon the price at which the common equity was last sold on
the New York Stock Exchange as of such date. There were 6,595,886 shares of Common Stock, $0.01 par value, outstanding as of February 28,
2005. DOCUMENTS INCORPORATED BY REFERENCE Part III of Form 10-K  Portions of the definitive Proxy Statement for Registrants 2005
Annual Meeting of Stockholders to be filed not later than April 30, 2005 with the Securities and
Exchange Commission are incorporated by reference in Items 10, 11, 12, 13 and 14.




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FORM 10-K  
 Part IItem 1.
    
    BusinessGeneral and Business Overview
    
    
    4Liquidating Portfolio
    
    
    5Funding Activities
    
    
    6Debt
    
    
    6Competition
    
    
    6Economic Conditions, Government Policies and Legislation
    
    
    6Supervision and Regulation
    
    
    7Employees
    
    
    8Executive Officers of the Registrant
    
    
    8Item 2.
    
    Properties
    
    
    9Item 3.
    
    Legal Proceedings
    
    
    9Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    9Part IIItem 5.
    
    Market for Registrants Common Equity and Related Stockholder Matters
    
    
    10Item 6.
    
    Selected Financial Data - Five-Year Financial Information
    
    
    11Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 8.
    
    Financial Statements and Supplementary Data
    
    
    40Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    87Item 9A.
    
    Controls and Procedures
    
    
    87Item 9B.
    
    Other Information
    
    
    89Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    90Item 11.
    
    Executive Compensation
    
    
    90Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    90Item 13.
    
    Certain Relationships and Related Transactions
    
    
    90Item 14.
    
    Principal Accountant Fees and Services
    
    
    90Part IVItem 15.
    
    Exhibits, Financial Statement Schedules and Reports on Form 8-K
    
    
    91SignaturesEXHIBIT 10.1EXHIBIT 10.1.(A)EXHIBIT 10.2EXHIBIT 10.2.(A)EXHIBIT 10.3EXHIBIT 10.3.(A)EXHIBIT 10.4EXHIBIT 10.5EXHIBIT 10.5.(A)EXHIBIT 10.5.(B)EXHIBIT 10.5.(C)EXHIBIT 10.6EXHIBIT 11EXHIBIT 12EXHIBIT 14EXHIBIT 21EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
 2




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Forward-Looking Statements This Form 10-K Annual Report of Bay View Capital Corporation (the Company, we, us, or
our) contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that describe our plans for our automobile finance company, Bay View Acceptance
Corporation (BVAC), our strategy to maximize stockholder value through use of our net operating
loss carryforwards, and the continuing disposition of assets and satisfaction of liabilities we
acquired when Bay View Bank, N.A. (the Bank) dissolved effective September 30, 2003. These
forward-looking statements are identified by use of terms and phrases such as anticipate,
believe, could, estimate, expect, intend, may, plan, predict, project, will,
and similar terms and phrases, including references to assumptions. These forward-looking
statements are necessarily based on assumptions as of the date of this Form 10-K Annual Report and
involve risks and uncertainties. Accordingly, our actual results from the ongoing operations of
BVAC and the continuing disposition of assets and satisfaction of liabilities we assumed from the
Bank may differ materially from those that we currently anticipate. A number of factors may affect our forward-looking statements regarding our ongoing operations
in the future including the following:  
    Our efforts to expand BVACs operations could be unsuccessful;
    Our ability to obtain and maintain financing to fund the ongoing operations of BVAC,
including securitizing and selling automobile installment contracts in order to repay
borrowings;
    Changes in general economic and business conditions;
    Interest rate fluctuations, including the results from our hedging activities;
    Our financial condition and liquidity, including our ability to generate future cash flows and earnings;
    Our degree of success in utilizing our net operating loss carryforwards;
    Competition;
    Our ability to control our operating expenses;
    The effect of new laws, regulations and court decisions affecting consumer finance
transactions and net operating loss carryforwards;
    The condition of the market for the sale of new and used automobiles, including pricing
options by automobile manufacturers;
    The level of chargeoffs on the contracts that BVAC purchases; and
    The outcome of pending litigation against us. Cash Distributions On March 10, 2005, we announced that we would not make a first quarter cash distribution to
stockholders. Our Board of Directors is evaluating whether an acquisition would better maximize
stockholder value. Pending the conclusion of that analysis, our Board of Directors has decided to
retain surplus cash for possible use in connection with a potential acquisition rather than
distributing such surplus to stockholders. If we determine we will not seek an acquisition or if
we are unable to locate a suitable acquisition over the next several months, our Board of Directors
would then consider the future cash distributions depending on a number of factors, including our
financial condition and results of operations and other strategic alternatives. As a result of the foregoing factors, no stockholder should place undue reliance on any
forward-looking statements. We do not undertake, and specifically disclaim, any obligation to
update any forward-looking statements and all forward-looking statements speak only as of the date
made. 3




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Part I 
 Item 1. Business 
 General and Business Overview We are a financial services company headquartered in San Mateo, California. On October 3,
2002, we adopted a Plan of Dissolution and Stockholder Liquidity (the Plan). The Plan
contemplated that we, under applicable provisions of the Delaware General Corporation Law, would:  
    dispose of all of our assets, including all of the assets of the Bank;
    pay all of our debts and liabilities and make reasonable provision for any contingent liabilities;
    distribute the remaining proceeds from our asset sales to our stockholders; and
    dissolve. As a result of the adoption of the Plan, we adopted liquidation basis accounting effective
September 30, 2002. During the fourth quarter of 2003, our Board amended the Plan to become a plan of partial
liquidation (the Amended Plan) under which we are completing the liquidation of the assets and
satisfaction of the liabilities of the Bank remaining after the Banks September 30, 2003
dissolution, distributed a major portion of the proceeds to our stockholders through a series of
cash distributions, and continue to operate BVAC, our wholly-owned automobile finance subsidiary.
When we adopted the Amended Plan, we discontinued our use of liquidation basis accounting and
re-adopted going concern basis accounting effective October 1, 2003. Among the factors considered by our Board in deciding to engage in a partial liquidation
rather than a complete liquidation were:  
    Adverse market conditions in the auto finance sector, which caused our Board to conclude
that the near-term sale of BVAC to a third party, or distribution of the stock of BVAC to
our stockholders, as contemplated by the Plan, would not be the best method of maximizing
stockholder value;
    A determination that our remaining tax net operating loss carryforwards could be more
fully utilized by continuing to operate BVAC beyond the third quarter of 2005; and
    The opportunity to obtain greater corporate and financial flexibility than we would have
if we were operating as a dissolving corporation. In accordance with the Amended Plan, we redeemed $63.5 million of our 9.76% Cumulative Capital
Securities (the Capital Securities) on December 31, 2003, and redeemed the remaining $22.0
million of these Capital Securities on June 30, 2004 and, between December 31, 2003 and December
31, 2004, distributed $311.0 million in cash to our stockholders, or $47.25 per share after
adjustments to reflect the retroactive effect of the 1-for-10 reverse stock split of our common
stock effective June 30, 2004. At
December 31, 2004, we had assets of $423.3 million, liabilities of $319.1 million and
stockholders equity of $104.2 million. Refer to Forward-Looking Statements - Cash Distributions
for comments about future cash distributions. Auto Finance BVAC is a Southern California-based auto finance company engaged in the indirect financing of
automobile purchases by individuals. Of the auto contracts BVAC purchased in 2004, 93% were
originated by manufacturer-franchised dealerships and the remaining 7% were originated by
independent dealerships; 52% were contracts on new vehicles and 48% were contracts on used
vehicles. BVAC purchases auto contracts from approximately 7,000 automobile dealers in 33 states with limited
recourse to the dealer. BVAC has historically positioned itself in the market as a premium priced lender for
well-qualified borrowers seeking extended-term financing and/or higher advance rates than those
generally offered by traditional lenders. This 4




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strategy has enabled BVAC to establish a loyal
dealership network by satisfying a unique niche within the indirect auto finance market that large
commercial banks and captive finance companies have not served well. Recently, BVAC has begun
leveraging this established reputation with its dealers to broaden its array of auto financing
programs available to prime credit quality borrowers. BVAC places a strong emphasis on borrower stability, credit quality and debt serviceability.
With Fair, Isaac & Co., or FICO, credit scores that averaged 739 in 2004, BVACs borrower base is
largely comprised of prime credit quality borrowers. BVAC currently offers financing terms to 96
months and typically finances an amount in excess of a dealers wholesale value of a vehicle.
During 2004, the term to maturity on auto contracts purchased by BVAC averaged 83 months and the
loan-to-value ratio averaged 125%. The average loan amount financed by BVAC was $29,400. Since the liquidation of the Bank, BVAC has operated as an independent finance company, rather
than a portfolio-lending unit of the Bank, purchasing auto contracts
primarily for sale or securitization,
and servicing these auto contracts. BVAC has a $350.0 million revolving warehouse credit facility
to fund its purchases of contracts, and periodically sells or
securitizes auto contracts in order to pay down the facility and
maintain available borrowing capacity. BVAC retains the servicing
obligation on the contracts that it sells or securitizes, which
provides us with a source of fee income over the life of the
contracts. At December 31, 2004, BVAC had $298.8 million
outstanding under this credit facility to purchase auto contracts. On
February 17, 2005, BVAC issued $232.1 million of auto
receivable backed notes and repaid $217.8 million of borrowings
on the credit facility. BVACs
headquarters and operations center is located in Covina, California. The operations
center manages the underwriting of contracts and supports its dealer relationships. It also houses
BVACs servicing and collections activities involving more than 28,000 accounts representing $571
million of managed contracts as of December 31, 2004. BVAC also administers lease customer
re-marketing and asset disposition activities in its operations center for the auto lease portfolio
that we assumed from the Bank and are liquidating. In 2004, BVAC completed a geographical
expansion that was initiated in late 2002, expanding into a total of 33 states from its established
presence in 17 states, primarily in the West, Midwest and Florida. In 2003, BVAC entered seven
Mid-Atlantic states including Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina,
Tennessee and Virginia. In 2004, BVAC entered nine additional states including Alabama,
Connecticut, Delaware, Kansas, Kentucky, Maine, Massachusetts, New Hampshire and Oklahoma. 
 Liquidating Portfolio As of December 31, 2004, our ongoing business consisted solely of the indirect automobile
financing conducted by BVAC. Our only other activity is the continuing liquidation of the assets
we assumed from the Bank. The following descriptions are provided to reflect the outstanding
balances of these assets at December 31, 2004. All outstanding balances at December 31, 2004 are
classified as held-for-sale. Auto Leases- Auto leases totaled $10.0 million, net of accumulated depreciation, impairment
charges and valuation allowances at December 31, 2004, and represented 2.4% of our consolidated
assets. We ceased purchasing auto leases in June 2000. The auto leases are accounted for as
operating leases and the lease assets are capitalized and depreciated to their estimated residual
value over the term of the leases. At December 31, 2003, auto leases totaled $66.7 million. Other Loans- At December 31, 2004, our other loans consisted of asset-based and franchise
loans. During 2004, sales, as well as loan payoffs and amortization, reduced our other loans to
$0.9 million at December 31, 2004 from $12.1 million at December 31, 2003. Real Estate Owned- At December 31, 2004, our real estate owned totaled $3.4 million and
consisted of foreclosed commercial properties. 5




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Funding Activities In addition to BVACs warehouse credit facility, we have one other borrowing, representing the
remaining balance of a structured financing secured by the contractual cash flows from our auto
lease portfolio. This borrowing totaled $1.9 million at December 31, 2004. 
 Debt As of December 31, 2004, we had no other outstanding debt beyond the aforementioned warehouse
credit facility and the structured financing. At December 31, 2003, we had $24.8 million of
outstanding debt represented by 9.76% Junior Subordinated Deferrable Interest Debentures (the
Junior Debentures) that we issued to Bay View Capital I, a Delaware business trust we sponsored.
The Junior Debentures supported the $22.0 million of outstanding 9.76% Capital Securities that
were issued by Bay View Capital I. Effective December 31, 2003, in accordance with the
requirements of Financial Accounting Standards Board Financial Interpretation No. 46,
Consolidation of Variable Interest Entities, as revised, we deconsolidated Bay View Capital I and
the Capital Securities. As a result of this deconsolidation, the debt reflected in our
consolidated financial statements as of December 31, 2003 reflected the Junior Debentures instead
of the Capital Securities. During the second quarter of 2004, we redeemed the remaining $22.0 million of outstanding
Capital Securities and the underlying $24.8 million of outstanding Junior Debentures. 
 Competition Automobile financing is provided by a number of competing entities, including captive finance
affiliates of automobile manufacturers, commercial banks, independent finance companies, thrifts
and credit unions. Many of BVACs competitors have greater financial resources and capitalization,
greater access to existing and newly emerging capital markets, better economies of scale and more
favorable cost of funds than BVAC does. The captive finance affiliates of the automobile
manufacturers have historically offered varying amounts of below-market financing to automobile
purchasers to increase automobile sales volume. A number of our competitors also offer automobile
purchasers and dealerships with additional forms of financing, including auto leasing and dealer
inventory floor plan financing, which BVAC does not provide. We believe that BVAC competes
primarily on the basis of the relative uniqueness of the extended term and over-advance features of
its products. Accordingly, BVAC may not be able to compete successfully against these competitors. 
 Economic Conditions, Government Policies and Legislation During periods of economic slowdown, delinquencies and losses from defaults and repossessions
may increase. Decreased demand for automobiles and, therefore, BVACs automobile financing
volumes, may also occur during periods of economic slowdown. Decreased demand for automobiles may
also depress values of used automobiles, which weakens the collateral values of BVACs auto
contracts. Depressed values of used automobiles during periods of economic slowdown may reduce the
value of repossessed and off-lease vehicles and may require greater reserves and could result in
greater losses for us. Sustained periods of increased delinquencies and losses from defaults and
repossessions could adversely affect BVACs financial position, results of operations and liquidity
by limiting its ability to enter into future securitizations or sales of its auto contracts. BVACs profitability is also dependent on the interest rate spread it earns on auto contracts,
the difference between the interest earned on its fixed rate auto contracts and the rate it pays on
its floating rate borrowings, and the price it receives for the fixed rate contracts that are
securitized or sold. BVAC monitors interest rates and utilizes derivative instruments to
economically hedge interest rate volatility, however, market interest rates are highly sensitive to
many factors that are beyond BVACs control, such as inflation, recession and unemployment and the
impact of future changes in domestic and foreign economic conditions that BVAC cannot predict. 6




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Supervision and Regulation General We are subject to regulation, supervision and licensing under various federal, state and local
statutes, ordinances and regulations, including the Sarbanes-Oxley Act of 2002, the Office of
Foreign Assets Control and the USA Patriot Act. We are required to comply with the laws of those
states in which we conduct operations. We believe that we are in compliance in all material
respects with these laws and regulations. Our common stock is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the Exchange Act). As such, we are subject to the
information, proxy solicitation, insider trading and other requirements and restrictions of the
Exchange Act. Our common stock trades on the New York Stock Exchange (NYSE) under the ticker
symbol BVC. Until the Banks dissolution, we and the Bank were subject to extensive regulation intended
primarily for the protection of depositors and the federal deposit insurance fund and not for the
benefit of our stockholders. Upon the Banks dissolution, we ceased to be a registered bank
holding company and are no longer subject to such regulation. Consumer Protection Laws Numerous federal and state consumer protection laws and related regulations impose substantial
requirements upon lenders and servicers involved in consumer finance, such as BVAC. These laws
include the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade Commission
Act, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Magnuson-Moss Warranty Act,
Board of Governors of the Federal Reserve Systems Regulations B and Z, states adaptations of the
Uniform Consumer Credit Code and of the Uniform Commercial Code, state and federal privacy laws and
state motor vehicle retail installment sales acts and other similar laws. These laws, among other
things, require us to provide certain disclosures to applicants, prohibit misleading advertising
and protect against discriminatory financing or unfair credit and collection practices. The
Truth-in-Lending Act and Regulation Z promulgated thereunder require disclosure of, among other
things, the payment schedule, the finance charge, the amount financed, the total of payments and
the annual percentage rate charged on each retail installment contract. The Equal Credit
Opportunity Act prohibits creditors from discriminating against credit applicants (including retail
installment contract obligors) on the basis of specific enumerated criteria. Creditors are also
required to make certain disclosures regarding consumer rights and advise consumers whose credit
applications are not approved. The holder in due course rules of the Federal Trade Commission
provide for the preservation of the consumers claims and defenses when a consumer obligation is
assigned to a holder. Some state laws impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors who fail to comply
with their provisions. In some cases these provisions, if violated, could affect BVACs ability to
enforce the contracts it purchases. 7




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Employees At December 31, 2004, we had a total of 125 employees on a full-time equivalent basis,
consisting of both full-time and permanent part-time employees, as follows: Bay View Acceptance Corporation
    
    
    104Bay View Capital Corporation
    
    
    21Total
    
    
    125
 Our employees are not represented by any unions or covered by any collective bargaining
agreements. We consider our relations with our employees to be satisfactory. 
 Executive Officers of the Registrant The following table sets forth certain information regarding our executive officers: YearName
    
    Age
    
    Position
    
    AppointedCharles G. Cooper
    
    
    57
    
    
    Director, President and Chief Executive Officer
    
    
    2002Prodyodth K. PK Chatterjee
    
    
    56
    
    
    President and Chief Executive Officer, Bay
View Acceptance Corporation and Executive Vice
President, Director of Retail Operations, Bay
View Capital Corporation
    
    
    2004Joseph J. Catalano
    
    
    58
    
    
    Senior Vice President, General Counsel and
Corporate Secretary
    
    
    2002John Okubo
    
    
    51
    
    
    Executive Vice President and Chief Financial
Officer
    
    
    2002Sossy Soukiassian
    
    
    41
    
    
    Senior Vice President and General Auditor
    
    
    2002
 (1) Mr. Catalano has submitted his resignation effective April 8, 2005. The business experience of each of our executive officers is as follows: Mr. Cooper has served as a Director, President and Chief Executive Officer of Bay View Capital
Corporation since October 2002. He joined us in May 2001, initially serving as Executive Vice
President and Chief Credit Officer. Previously, he served as Executive Vice President and Chief
Credit Officer at Lone Star Bank of Dallas. Prior to joining Lone Star Bank, he was Senior Vice
President of Loan Administration at Compass Bank in Dallas from 1996 to 2000. Mr. Cooper has more
than 30 years of experience in the banking industry, including 13 years experience as a bank
examiner with the FDIC. Mr. Chatterjee has served as President and Chief Executive Officer of BVAC and as Executive
Vice President and Director of Retail Operations of Bay View Capital Corporation since September
2004. Prior to joining us, he served as Executive Vice President, Head of Consumer Lending, at
AmSouth Bancorp from 1997 to 2002 and U.S. Bancorp from 1995 to 1997. Mr. Chatterjee has over 17
years of consumer lending experience and has served as a member of the Automobile Finance Committee
of the Consumer Bankers Association for more than 10 years. Mr. Catalano, Senior Vice President, became our General Counsel and Corporate Secretary in
December 2002. Mr. Catalano joined us in 1993 and served as Assistant General Counsel from 2000 to
2002. Previously, he served as Senior Vice President and Assistant General Counsel of American
Savings and Loan, Stockton California. Mr. Okubo, Executive Vice President, has served as our Chief Financial Officer since November
2002. Mr. Okubo joined us in 1996 and has held various financial management positions, including
Treasurer from June 2001 and as Controller of the Bank from 1998 to 2001. Previously, he served as
Executive Vice President and Chief Financial Officer of Home Federal Savings of San Francisco from
1993 to 1996. 8




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Ms. Soukiassian, Senior Vice President, was promoted to General Auditor in November 2002.
Previously, she served as our Director of Corporate Projects from 1998 to 2002. Prior to joining
us, she held management positions with KPMG Peat Marwick, LLP in Los Angeles from 1996 to 1998. There is no family relationship among the above officers. All executive officers serve at the
discretion of the Board of Directors. 
 Item 2. Properties At December 31, 2004, we occupied three offices including our corporate headquarters office
and had an additional two offices that we have vacated, and are subleasing, under operating lease
agreements expiring at various dates through the year 2012. In most instances, these lease
arrangements include options to renew or extend the lease at market rates. We also own leasehold
improvements, furniture and equipment at our offices, all of which are used in our business
activities. 
 Item 3. Legal Proceedings On August 29, 2003, Financial Security Assurance Inc. (FSA) filed a complaint against us and
the Bank in the United States District Court for the Southern District of New York. The complaint,
as amended, alleges breaches of representations and warranties or indemnity obligations with regard
to a number of loans that served as collateral for two securitizations involving us and/or a former
subsidiary, Bay View Franchise Mortgage Acceptance Company, that were effected in 1998 and 2000.
FSA guaranteed certain payments in connection with these securitizations. We vigorously deny any
liability to FSA and have asserted numerous defenses to each of FSAs claims. We have also filed
counterclaims against FSA. We are also a party to various other legal actions arising in the normal course of our
business. After consultation with counsel, we do not currently expect that the resolution of these legal
actions will have a material adverse effect on our consolidated financial condition, results of
operations or cash flows. 
 Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders, through the solicitation of
proxies or otherwise, during the three months ended December 31, 2004. 9




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Part II 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters Our common stock is traded on the NYSE under the stock symbol BVC. On June 24, 2004, our
stockholders approved a 1-for-10 reverse stock split of the issued and outstanding shares of our
common stock. The reverse stock split became effective on June 30, 2004. Accordingly, all shares
outstanding and per share amounts are presented on a post-reverse stock split basis for all periods
reported. At December 31, 2004, 6,593,860 shares of our common stock were outstanding, and held by
1,516 stockholders of record. During 2004, we distributed $7.25 per share in cash to our common
stockholders - $2.50 per share on June 30, 2004, $2.50 per share on September 30, 2004 and $2.25
per share on December 31, 2004. On December 31, 2003, we distributed $40.00 per share in cash to
our common stockholders. The effect of these distributions is reflected in the following tables
that set forth quarterly closing stock price activity for 2004 and 2003: 2004First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterStock price - high
    
    $
    24.00
    
    
    $
    22.40
    
    
    $
    19.75
    
    
    $
    18.00Stock price - low
    
    $
    21.30
    
    
    $
    20.00
    
    
    $
    16.15
    
    
    $
    15.31
 2003First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterStock price - high
    
    $
    58.80
    
    
    $
    58.00
    
    
    $
    61.50
    
    
    $
    62.10Stock price - low
    
    $
    53.70
    
    
    $
    54.50
    
    
    $
    57.70
    
    
    $
    21.40
 10




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Item 6. Selected Financial Data - Five-Year Financial Information At December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Going Concern Basis
    
    
    Liquidation Basis
    
    
    Going Concern Basis(Dollars in thousands)Selected Balance Sheet Information(1)Total assets
    
    $
    423,328
    
    
    $
    364,118
    
    
    $
    875,545
    
    
    $
    4,014,105
    
    
    $
    5,360,931Investment securities
    
    
    22,636
    
    
    
    28,836
    
    
    
    38,137
    
    
    
    98,980
    
    
    
    33,009Mortgage-backed securities
    
    
    
    
    
    
    5,893
    
    
    
    32,516
    
    
    
    278,891
    
    
    
    642,628Loans and leases held-for-investment, net
    
    
    252,863
    
    
    
    
    
    
    
    
    
    
    
    2,326,787
    
    
    
    2,751,794Loans and leases held-for-sale
    
    
    75,923
    
    
    
    177,948
    
    
    
    311,014
    
    
    
    40,608
    
    
    
    345,207Investment in operating lease assets, net
    
    
    10,041
    
    
    
    66,657
    
    
    
    191,005
    
    
    
    339,349
    
    
    
    479,829Intangible assets
    
    
    1,846
    
    
    
    1,846
    
    
    
    
    
    
    
    123,573
    
    
    
    134,936Deposits
    
    
    
    
    
    
    
    
    
    
    224,189
    
    
    
    3,234,927
    
    
    
    3,746,312Borrowings
    
    
    300,650
    
    
    
    179,060
    
    
    
    61,969
    
    
    
    287,168
    
    
    
    1,153,443Capital Securities (2)
    
    
    
    
    
    
    
    
    
    
    90,000
    
    
    
    90,000
    
    
    
    90,000Net assets in liquidation
    
    
    
    
    
    
    
    
    
    
    410,064
    
    
    
    
    
    
    
    Stockholders equity
    
    
    104,193
    
    
    
    155,932
    
    
    
    
    
    
    
    336,187
    
    
    
    297,849
 For the
    
    
    For the
    
    
    For the
    
    
    For theThree
    
    
    Nine
    
    
    Three
    
    
    NineFor the
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    MonthsYear Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedDecember
    
    
    December
    
    
    September
    
    
    December
    
    
    September
    
    
    For the Year Ended31,
    
    
    31,
    
    
    30,
    
    
    31,
    
    
    30,
    
    
    December 31,2004
    
    
    2003
    
    
    2003
    
    
    2002
    
    
    2002
    
    
    2001
    
    
    2000Going Concern Basis
    
    
    Liquidation Basis
    
    
    Going Concern Basis(Dollars in thousands, except per share amounts)Selected Results of Operations
Information(1)Interest income
    
    $
    22,609
    
    
    $
    4,936
    
    
    $
    17,951
    
    
    $
    17,247
    
    
    $
    145,239
    
    
    $
    302,745
    
    
    $
    460,192Interest expense
    
    
    (8,845
    )
    
    
    (3,612
    )
    
    
    (8,411
    )
    
    
    (10,001
    )
    
    
    (60,068
    )
    
    
    (180,497
    )
    
    
    (294,752
    )Net interest income
    
    
    13,764
    
    
    
    1,324
    
    
    
    9,540
    
    
    
    7,246
    
    
    
    85,171
    
    
    
    122,248
    
    
    
    165,440Provision for losses on loans and leases
    
    
    (1,612
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,700
    )
    
    
    (71,890
    )
    
    
    (62,600
    )Leasing income
    
    
    12,941
    
    
    
    6,907
    
    
    
    32,578
    
    
    
    14,639
    
    
    
    56,188
    
    
    
    92,305
    
    
    
    97,207Gain (loss) on sales of assets and liabilities, net
    

    
    (1,887
    )
    
    
    842
    
    
    
    787
    
    
    
    81
    
    
    
    18,625
    
    
    
    (10,547
    )
    
    
    (52,606
    )Other income, net
    
    
    5,985
    
    
    
    2,586
    
    
    
    3,722
    
    
    
    3,600
    
    
    
    16,752
    
    
    
    25,411
    
    
    
    32,041General and administrative expenses
    
    
    (25,211
    )
    
    
    (5,747
    )
    
    
    (26,338
    )
    
    
    (17,697
    )
    
    
    (106,101
    )
    
    
    (155,287
    )
    
    
    (158,590
    )Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,935
    )
    
    
    (9,213
    )Revaluation of franchise-related assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70,146
    )
    
    
    (101,894
    )Leasing expense
    
    
    (9,163
    )
    
    
    (5,938
    )
    
    
    (24,421
    )
    
    
    (10,854
    )
    
    
    (43,984
    )
    
    
    (86,120
    )
    
    
    (69,350
    )Real estate operations, net
    
    
    (1,255
    )
    
    
    (831
    )
    
    
    (463
    )
    
    
    (397
    )
    
    
    (1,222
    )
    
    
    (5,021
    )
    
    
    (65
    )Amortization of intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (993
    )
    
    
    (11,280
    )
    
    
    (20,766
    )Write-off of intangible assets  franchise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (192,622
    )Income (loss) before income tax expense (benefit)
    
    
    (6,438
    )
    
    
    (857
    )
    
    
    (4,595
    )
    
    
    (3,382
    )
    
    
    13,736
    
    
    
    (177,262
    )
    
    
    (373,018
    )Adjustment for liquidation basis
    
    
    
    
    
    
    
    
    
    
    (5,995
    )
    
    
    (2,761
    )
    
    
    266,510
    
    
    
    
    
    
    
    Income tax (expense) benefit
    
    
    2,526
    
    
    
    184
    
    
    
    6,252
    
    
    
    4,886
    
    
    
    (181,792
    )
    
    
    85,866
    
    
    
    55,810Dividends on Capital Securities (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,742
    )
    
    
    (7,873
    )
    
    
    (9,774
    )
    
    
    (8,989
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,920
    )
    
    
    
    
    
    
    Net income (loss) and changes in net assets in liquidation
    
    $
    (3,912
    )
    
    $
    (673
    )
    
    $
    (4,338
    )
    
    $
    (3,999
    )
    
    $
    71,661
    
    
    $
    (101,170
    )
    
    $
    (326,197
    )Earnings (loss) per diluted share (4)
    
    $
    (0.59
    )
    
    $
    (0.10
    )
    
    
    N/A
    
    
    
    N/A
    
    
    $
    11.35
    
    
    $
    (19.89
    )
    
    $
    (99.97
    )Cash distributions/Dividends declared per share (4)
    
    $
    7.25
    
    
    $
    40.00
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3.00
 At and For the Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Going Concern Basis
    
    
    Liquidation Basis
    
    
    Going Concern Basis(Dollars in thousands, except per share amounts)Selected Other Information(1)Net interest margin
    
    
    4.43
    %
    
    
    2.71
    %
    
    
    N/A
    
    
    
    3.18
    %
    
    
    3.13
    %Book value per share (4)
    
    $
    15.80
    
    
    $
    23.71
    
    
    
    N/A
    
    
    $
    53.72
    
    
    $
    91.43Nonperforming assets
    
    $
    4,742
    
    
    $
    7,133
    
    
    $
    27,268
    
    
    $
    89,817
    
    
    $
    101,173Ratio of nonperforming assets to total assets
    
    
    1.12
    %
    
    
    1.96
    %
    
    
    3.11
    %
    
    
    2.24
    %
    
    
    1.89
    %
   (1)
    
    The financial statements for the periods from September 30, 2002 through
September 30, 2003 have been prepared using liquidation basis accounting.(2)
    
    Effective December 31, 2003, the Company adopted FASB Financial
Interpretation No. 46, Consolidation of Variable Interest Entities, as revised, and
accordingly, deconsolidated Bay View Capital I. As a result, as of December 31, 2003,
the 9.76% Capital Securities of Bay View Capital I are no longer reflected on the
Companys Consolidated Statement of Financial Condition while the Companys underlying
9.76% Junior Subordinated Deferrable Interest Debentures, which were acquired by Bay View
Capital I, are reflected as borrowings of the Company.(3)
    
    Effective July 1, 2003, the Company adopted Statement of Financial
Accounting Standards No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. Year-to-date dividend expense on the
Capital Securities is now reflected in interest on borrowings. Statement No. 150 does
not allow for prior year restatements.(4)
    
    Adjusted to reflect 1-for-10 reverse stock split effective June 30, 2004. 11




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations INDEX Strategic Overview
    
    
    13Restatement
    
    
    13Liquidation of the Bank
    
    
    13Auto Finance
    
    
    13Critical Accounting Policies
    
    
    14Accounting Changes and Recent Accounting Pronouncements
    
    
    18Results of Operations
    
    
    19Going Concern Basis
    
    
    19Results of Operations  Year ended December 31, 2004
    
    
    19Results of Operations  Three Months ended December 31, 2003
    
    
    22Liquidation Basis
    
    
    24Changes in Net Assets in Liquidation  Nine Months ended September 30, 2003
    
    
    24Changes in Net Assets in Liquidation  Three Months ended December 31, 2002
    
    
    25Going Concern Basis
    
    
    26Results of Operations  Nine Months ended September 30, 2002
    
    
    26Balance Sheet Analysis
    
    
    31Cash and Cash Equivalents
    
    
    31Restricted Cash
    
    
    31Retained Interests in Securitizations
    
    
    31Auto Installment Contracts and Other Loans
    
    
    32Deposits
    
    
    35Borrowings
    
    
    35Liquidity and Capital Resources
    
    
    36Contractual Obligations
    
    
    36Stock Repurchase Program
    
    
    37Impact of Inflation and Changing Prices
    
    
    37
 12




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##### Table of Contents



Strategic Overview Bay View Capital Corporation
(the Company, we, us or our) is a financial services
company headquartered in San Mateo, California, whose primary subsidiary, Bay View Acceptance
Corporation (BVAC), is an automobile finance company engaged in indirect purchases of retail
automobile installment contracts originated by manufacturer-franchised and independent dealers in
connection with the sale of new and used automobiles. BVAC generates revenue through its
investment in auto contracts, and the subsequent securitization or sale and servicing of these auto
contracts. Restatement During the Companys year-end
audit and Sarbanes-Oxley Section 404 review, the Company
determined that it should have recognized a total of
$0.4 million of unrealized after-tax losses on
certain derivative instruments. As described in Note 21 to
the consolidated financial statements, Selected Quarterly Results of
Operations (Unaudited), at Item 8, such restatements
increased our reported net losses for the first, second, third and
fourth quarters of 2004. 
 Liquidation of the Bank On October 3, 2002, we adopted a Plan of Dissolution and Stockholder Liquidity (the Plan).
The Plan contemplated that we, under applicable provisions of the Delaware General Corporation Law,
would dispose of all of our assets, including all of the assets of Bay View Bank, N.A. (the
Bank); pay all of our debts and liabilities and make reasonable provision for any contingent
liabilities; distribute the remaining proceeds from our asset sales to our stockholders; and
dissolve. As a result of the adoption of the Plan, we adopted liquidation basis accounting
effective September 30, 2002. During the fourth quarter of 2003, our Board amended the Plan to become a plan of partial
liquidation (the Amended Plan) under which we are completing the liquidation of the assets and
the satisfaction of the liabilities of the Bank remaining after the Banks September 30, 2003
dissolution, distributed a major portion of the proceeds to our stockholders through a series of
cash distributions, and continue to operate BVAC. When we adopted the Amended Plan, we
discontinued our use of liquidation basis accounting and re-adopted going concern basis accounting
effective October 1, 2003. With the Banks dissolution on September 30, 2003, its remaining assets
and liabilities were transferred to us, as the Banks sole stockholder, and we ceased to be a bank
holding company and, along with our subsidiaries, were no longer subject to supervision,
examination and regulation by the Board of Governors of the Federal Reserve System (the FRB), the
Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. Among the factors considered by our Board in deciding to engage in a partial liquidation
rather than a complete liquidation were:  
    Adverse market conditions in the auto finance sector, which caused our Board to conclude
that the near-term sale of BVAC to a third party, or distribution of the stock of BVAC to
our stockholders, as contemplated by the Plan, would not be the best method of maximizing
stockholder value;
    A determination that our remaining tax net operating loss carryforwards could be more
fully utilized by continuing to operate BVAC beyond the third quarter of 2005; and
    The opportunity to obtain greater corporate and financial flexibility than we would have
if we were operating as a dissolving corporation. In accordance with the Amended Plan, we redeemed $63.5 million of our 9.76% Cumulative Capital
Securities (the Capital Securities) on December 31, 2003, and redeemed the remaining $22.0
million of these Capital Securities on June 30, 2004 and, between December 31, 2003 and December
31, 2004, have distributed $311.0 million in cash to our stockholders, or $47.25 per share after
the adjustments to reflect the retroactive effect of the 1-for-10 reverse stock split of our common
stock effective June 30, 2004. At
December 31, 2004, we had assets of $423.3 million,
liabilities of $319.1 million and
stockholders equity of $104.2 million. Refer to Forward-Looking Statements  Cash Distributions
for comments about future cash distributions. 
 Auto Finance BVAC is a Southern California-based auto finance company engaged in the indirect financing of
automobile purchases by individuals. Of the auto contracts BVAC purchased in 2004, 93% were
originated by manufacturer- 13




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##### Table of Contents



franchised dealerships and the remaining 7% were originated by
independent dealerships; 52% were contracts on new vehicles and 48% were contracts on used
vehicles. BVAC purchases auto contracts from approximately 7,000 automobile dealers in 33 states with limited
recourse to the dealer. BVAC has historically positioned itself in the market as a premium priced lender for
well-qualified borrowers seeking extended-term financing and/or higher advance rates than those
generally offered by traditional lenders. This strategy has enabled BVAC to establish a loyal
dealership network by satisfying a unique niche within the indirect auto finance market that large
commercial banks and captive finance companies have not served well. Recently, BVAC has begun
leveraging this established reputation with its dealers to broaden its array of auto financing
programs available to prime credit quality borrowers. BVAC places a strong emphasis on borrower stability, credit quality and debt serviceability.
With Fair, Isaac & Co., or FICO, credit scores that averaged 739 in 2004, BVACs borrower base is
largely comprised of prime credit quality borrowers. BVAC currently offers financing terms to 96
months and typically finances an amount in excess of a dealers wholesale value of a vehicle.
During 2004, the term to maturity on auto contracts purchased by BVAC averaged 83 months and the
loan-to-value ratio averaged 125%. The average loan amount financed by BVAC was $29,400. Since the liquidation of the Bank, BVAC has operated as an independent finance company, rather
than a portfolio-lending unit of the Bank, purchasing auto contracts for sale or securitization,
and servicing these auto contracts. BVAC has a $350.0 million revolving warehouse credit facility
to fund its purchases of contracts, and periodically sells or
securitizes auto contracts in order to pay down the facility and
maintain available borrowing capacity. BVAC retains the servicing
obligation on the contracts that it sells or securitizes, which
provides us with a source of fee income over the life of the
contracts. At December 31, 2004,
BVAC had $298.8 million outstanding under this credit facility
to purchase auto contracts. On February 17, 2005, BVAC issued
$232.1 million of auto receivable backed notes and repaid $217.8 million of borrowings on the
credit facility. BVACs
headquarters and operations center is located in Covina, California. The operations
center manages the underwriting of contracts and supports its dealer relationships. It also houses
BVACs servicing and collections activities involving more than 28,000 accounts representing $571
million of managed contracts as of December 31, 2004. BVAC also administers lease customer
re-marketing and asset disposition activities in its operations center for the auto lease portfolio
that we assumed from the Bank and are liquidating. In 2004, BVAC completed a geographical
expansion that was initiated in late 2002, expanding into a total of 33 states from its established
presence in 17 states, primarily in the West, Midwest and Florida. In 2003, BVAC entered seven
Mid-Atlantic states including Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina,
Tennessee and Virginia. In 2004, BVAC entered nine additional states including Alabama,
Connecticut, Delaware, Kansas, Kentucky, Maine, Massachusetts, New Hampshire and Oklahoma. 
 Critical Accounting Policies We have identified the most critical accounting policies upon which our financial status
depends. We determined the critical policies by considering accounting principles that involve the
most complex or subjective decisions or assessments. We have identified our most critical
accounting policies to be those related to loan sales and retained interests in securitizations, allowance for
credit losses, investment in operating lease assets, income taxes, and
derivative instruments. 14




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##### Table of Contents



Going Concern vs. Liquidation Basis Accounting For the period September 30, 2002 through September 30, 2003, we used liquidation basis
accounting under which assets were carried at estimated net realizable values and all estimated
future liabilities associated with carrying out the Plan were accrued. Future revenues and
expenses of an operating nature were recognized in income and expense when realized. With our adoption of the Amended Plan, we discontinued our use of liquidation basis accounting
and re-adopted going concern basis accounting, and re-established our stockholders equity
effective October 1, 2003. In connection with our re-adoption of going concern basis of
accounting, we recognized $0.7 million of pre-tax expense and $1.1 million of additions to
stockholders equity, and recorded the following adjustments:  
    Goodwill: Re-established the $1.8 million of goodwill related to our acquisition of
BVACs predecessor entity, CTL, Inc., that existed prior to our adoption of liquidation
basis accounting;
    Premium on investment in BVAC: Reversed $10.0 million of premium over the book value of
BVAC, which was recorded as deferred gain under liquidation basis accounting, and restored
the historical cost basis in our equity investment in BVAC;
    Auto contracts: Reversed unrealized gains that were recorded under liquidation basis
accounting and restored the lower of cost or market valuation;
    Mortgage-backed securities: Restored fair value accounting for these available-for-sale
securities;
    Accrued liabilities: Reversed $1.7 million of accruals related to certain severance and
occupancy costs that were recorded under liquidation basis accounting and adopted Statement
No. 146 accounting for costs associated with disposal activities; and
    Stockholders equity: Restored stockholders equity as of October 1, 2003 See Note 2 to the Consolidated Financial Statements, Summary of Significant Accounting
Policies  Liquidation Basis, under Item 8. Financial Statements and Supplementary Data for
further discussion of the significant accounting policies that were applicable, under liquidation
basis accounting, during the period September 30, 2002 through September 30, 2003. 15




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##### Table of Contents



Loan Sales and Retained Interests in Securitizations BVAC has periodically transferred a portion of its warehouse
inventory of auto contracts held-for-sale to trusts that, in
turn, issue asset-backed securities to investors. We have
structured these transactions as sales in accordance with
Statement of Financial Accounting Standards No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, and recognized a gain
on the sale of the auto contracts to the trusts 
which represents the difference between the sum of sale
proceeds, net of transaction costs, and cash deposited into a
securitization trust account in order to enhance the credit
rating of the asset-backed securities and the sum of our net
carrying value of the auto contracts and the present value of
future excess cash flow anticipated to be distributed to us by
the trust over the life of the asset-backed
securities  and an asset which is referred to as a
retained interest in the securitization. The retained interest is comprised of the cash initially
deposited into the securitization trust account and the present
value of the future excess cash flow anticipated to be
distributed to us by the trust over the life of the asset-backed
securities. These estimated future cash flows  which
are comprised of interest income received on the auto contracts
less interest paid to investors in the asset-backed securities,
credit losses and trust expenses  are initially
retained by the trust to build the trust cash account to
pre-designated levels and provide further credit enhancement.
Once the pre-designated levels of cash are attained, the trust
distributes the excess cash flow to BVAC. In recording the gain
on sale and the retained interest, we have made assumptions in
calculating the present value of the future excess cash flow
anticipated to be distributed to us by the trust over the life
of the asset-backed securities and recording the retained
interest. We designate retained interests as available-for-sale and carry
them at fair value. Our retained interests are subordinate to
investor interests in the related asset-backed securities, their
value is subject to credit and prepayment risks in the pool of
underlying auto contracts. We are not aware of an active
secondary market for our retained interests and, accordingly,
estimate the fair value of our retained interests by calculating
the present value of the future excess cash flow anticipated to
be received, using managements best estimates of key
valuation assumptions including credit losses, prepayment speeds
and discount rates commensurate with the underlying risks in the
anticipated future cash flow. The following table sets forth the significant assumptions used
in the valuation of our retained interests as of
December 31, 2004: Weighted-average discount rate
    
    
    10.0%-12.0
    %Range of
projected annual credit losses, net
    
    
    1.40%-1.53
    %Range of projected cumulative credit losses
    
    
    2.04%-2.37
    %Prepayment speed
    
    1.6 ABS
 Changes in the above assumptions due to differing actual
experience or market conditions could affect the value of our
retained interests. Allowance for Credit Losses The allowance for credit losses on auto contracts held-for-investment is established through a
provision charged to expense and maintained at a level that we believe is sufficient to cover
estimated probable losses in this loan portfolio. We consider BVACs portfolio of auto contracts
to be comprised of relatively small balance, homogeneous receivables and, accordingly, determines
its allowance for credit losses in accordance with Statement of Financial Accounting Standards No.
5, Accounting for Contingencies. The allowance for credit losses is evaluated and adjusted on a
quarterly basis. In determining the level of the allowance for credit losses, we evaluate BVACs auto contracts
held-for-investment using two methodologies. The primary methodology is based upon an analysis of
BVACs historical loss experience using a vintage analysis of its past purchases of auto
contracts from which BVAC predicts probable losses that are inherent in its portfolio of auto
contracts held-for-investment. Under this method, BVACs historical credit loss experience is
stratified by quarter and correlated with the related auto contracts that have been similarly
stratified by the number of quarters that have elapsed since date of purchase. This credit loss
data is derived from static pool information that has been internally collected on the historical
loss experience of BVACs portfolio of managed auto contracts. BVAC defines managed auto contracts
as the sum of its warehouse inventory of auto contracts receivable plus auto contracts that have
been securitized and/or sold with servicing retained by BVAC. We also use a secondary method for
evaluating the sufficiency of the allowance for credit losses. This secondary method, a roll
rate analysis,
projects the migration of quarter-end auto contracts held-for-investment from current 16




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##### Table of Contents



payment
status through 30-, 60- and 90-day delinquent status to charge-off and correlates this projection
with loss reserve factors. These methodologies incorporate quantitative as well as qualitative factors, including
historical loss experience changes in underwriting practices, changes in the credit quality of
contracts and an assessment of economic conditions. Investment in Operating Lease Assets We purchased auto leases, which are accounted for as operating leases, from March 1998 through
June 2000. These purchases were recorded as fixed assets and are being depreciated on a
straight-line basis over the respective lease terms to the estimated residual values of the leases.
This depreciation and other related expenses, including the amortization of initial direct costs
that are deferred and amortized over the lease term, are classified as noninterest expense. Lease
payments received are recorded as noninterest income. In accordance with the provisions of Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, we perform a quarterly impairment
analysis of our long-lived assets, including our auto leases. A lease is considered impaired if
its gross future undiscounted cash flows are less than the net book value of the lease. The net
book value of the lease is defined as the original capitalized cost of the vehicle, including
initial direct capitalized costs, less the cumulative amount of depreciation recorded against the
vehicle and the cumulative amount of amortization of the initial direct capitalized costs recorded
since the inception of the lease and less any impairment charges recorded-to-date on that lease. In determining gross future undiscounted cash flows, we contract with Automotive Lease Guide,
commonly referred to as ALG, to provide updated estimates of the residual value of the underlying
vehicles comprising our portfolio of auto leases at the end of their lease terms, assuming that the
vehicles are in average condition. This information is obtained from ALG on a quarterly basis. We
then estimate the probability of one of three lease payoff scenarios occurring: (i.) the vehicle
will be purchased by the lessee prior to the end of the lease term, (ii.) the vehicle will be
purchased by the lessee at the end of the lease term, either at a discount or at the full
contractual residual amount, or (iii.) the vehicle will be returned by the lessee at the end of the
lease term. These probabilities are estimated using a number of factors, including our
experience-to-date and industry experience. Using the projected ALG residual values combined with our experience-to-date relative to our
realization of projected ALG residual values, we reduce the projected ALG residual values to
reflect our experience-to-date. This experiential analysis, along with the probabilities of each of
the three disposition scenarios discussed above occurring, enables us to determine a
probability-weighted gross future undiscounted cash flow for each vehicle lease. For those leases
where the gross future undiscounted cash flows are less than net book value, the lease is
considered impaired. For those leases considered impaired, we then estimate the fair value of the lease. The fair
value is determined by calculating the present value of the future estimated cash flows again
assuming the probabilities of each of the three disposition scenarios. The present value is
calculated using current market interest rates, which are similar to the original contract lease
rates. For those impaired leases where the estimated fair value is less than the net book value,
an impairment charge is recorded for the difference. Annual depreciation expense associated with
those leases that have reduced residual values is recomputed over the remaining term of the lease. 17




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Income Taxes We file consolidated federal income tax returns in which our taxable income or loss is
combined with that of our subsidiaries. Consolidated, combined and separate company state tax
returns are filed in certain states, as applicable, including California. Each subsidiarys share
of income tax expense (benefit) is based on the amount that would be payable (receivable) if
separate returns were filed. At December 31, 2004, we had deferred tax assets of $21.2 million, consisting of net deferred
tax assets of $42.7 million less a valuation allowance of $21.5 million. This valuation allowance
was established in consideration of our
projected future net income available to realize the deferred tax assets under the Amended Plan in
years after 2004. The realization of deferred tax assets is dependent upon our ability to generate
future taxable income. Derivative
Instruments We use derivative
instruments to reduce our exposure to interest rate risk embedded in our fixed-rate auto
contracts which are funded by floating-rate financing.  Rising interest rates reduce the net
interest spread produced by our auto contracts, a primary component of our profitability, as well
as the economic value of our inventory of auto contracts.  Additionally, under the terms of our
warehouse credit facility, the indenture trustee maintains derivative instruments to provide
interest rate risk protection to our lenders.  We account for these derivative instruments in
accordance with Statement of Financial Accounting Standards No. 133,
Accounting for Derivatives
and Hedging Activities. Refer to Balance
Sheet Analysis - Borrowings, Warehouse Credit
Facility for additional comments about the derivative instruments maintained under the
terms of our warehouse credit facility. Statement No. 133 establishes accounting and reporting
standards for derivative instruments and requires that
derivative instruments (including certain derivative instruments
embedded in other contracts) be recorded in the statement of
financial condition as either an asset or liability measured at
its fair value. Statement No. 133 further dictates that the
accounting treatment for gains or losses from changes in the
derivative instruments fair value is contingent on whether
the derivative instrument qualifies as a hedge under the
standard. Risk management instruments must qualify and be
designated as hedges upon their inception and must be effective
in substantially reducing the risk arising from the asset or
liability identified as exposing the Company to risk throughout
the hedge period in order to receive hedge accounting treatment.
To qualify as hedges, among other things, risk management
instruments must be linked to specific assets or liabilities or
pools of similar assets or liabilities. If the derivative
instrument does not qualify as a hedge, the gains or losses are
reported in the consolidated statement of income when they
occur. If the derivative instrument qualifies and is designated
as a hedge under the standard, depending on the type of risk
being hedged, the gains and losses are either reported in the
consolidated statement of income, offsetting the fair value
change in the hedged item, or reported as accumulated other
comprehensive income in the equity section of the consolidated
statement of financial condition. If a hedged asset or liability
is sold or paid off before maturity of the hedging derivative,
the derivative is closed out or settled, and any net settlement
amount upon the close-out or termination of the derivative is
recognized in earnings. The standard requires that an entity
formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. Our derivative instruments outstanding at December 31, 2004 were comprised of interest rate swap
contracts and interest rate caps.  In accordance with Statement No. 133, these derivative
instruments are accounted for as assets or liabilities and recorded at fair value.  Because
these derivatives do not meet specific high correlation tests required to use hedge accounting,
changes in fair values are charged or credited to earnings. Prior to our re-adoption
of going concern basis accounting, we accounted for changes in the market value of derivative
instruments using liquidation basis accounting.  Changes in the market value of these derivative
instruments were reflected in our consolidated statements of net assets in liquidation under
pre-tax loss from operations, while offsetting changes in the market value of underlying auto
contracts were included in changes in estimated values of assets and liabilities.  Refer to
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk - Asset/Liability Management for further comments about our use of
derivative instruments. 
 Accounting Changes and Recent Accounting Pronouncements In March 2004, the FASB Emerging Issues Task Force (EITF) released Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1
provides guidance for determining whether impairment for certain debt and equity investments is
other-than-temporary and the measurement of an impaired loss. Certain disclosure requirements of
EITF 03-1 were adopted in 2003 and the Company has complied with the new disclosure requirements in
its consolidated financial statements. The recognition and measurement requirements of EITF 03-1
were initially effective for reporting periods beginning after June 15, 2004. In September 2004,
the FASB Staff issued FASB Staff Position (FSP) EITF 03-1-1 that delayed the effective date for
certain measurement and recognition guidance contained in EITF 03-1. The FSP requires that
entities continue to apply previously existing other-than-temporary guidance until a final
consensus is reached. We do not anticipate that issuance of a final consensus will materially
impact our financial condition or results of operations. In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123-R, Share-Based Payments, a revision to Statement No. 123. Statement
No. 123-R requires that a public entity measure the cost of equity based service awards based on
the grant-date fair value of the award. That cost will be recognized over the period during which
an employee is required to provide service in exchange for the award  the requisite service
period, usually the vesting period. No compensation cost is recognized for equity instruments for
which employees do not render the requisite service. A public entity will initially measure the
cost of liability based service awards based on its current fair value; the fair value of that
award will be re-measured subsequently at each reporting date through the settlement date. Changes
in fair value during the requisite service period will be recognized as compensation cost over that
period. Statement No. 123-R eliminates the alternative to use the intrinsic value method of
accounting under APB Opinion No. 25, Accounting for Stock Issued to Employees, that was provided
in Statement No. 123 as originally issued. Adoption of Statement No. 123-R is required for fiscal
periods beginning after June 15, 2005. We are evaluating Statement No. 123-R but do not expect
adoption to have a material impact on our financial condition, results of operations or cash flows. 18




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Results of Operations From September 30, 2002 through September 30, 2003, we reported our results under liquidation
basis accounting under which we reported the value of, and the changes in, net assets available for
distribution to stockholders (net assets in liquidation) instead of results from continuing
operations. As discussed above, we discontinued the use of liquidation basis accounting and
re-adopted going concern basis accounting effective October 1, 2003. Accordingly, our financial
statements as of December 31, 2004 and 2003 and for the year ended December 31, 2004 and the
quarter ended December 31, 2003 have been prepared under going concern basis accounting while
reporting periods from September 30, 2002 through September 30, 2003 have been prepared under
liquidation basis accounting. For reporting periods prior to September 30, 2002, our financial
statements are also presented on a going concern basis of accounting. Accordingly, the following
discussion of our results of operations for reporting periods for which our financial statements
have been prepared under going concern basis accounting are presented independently from the
discussion of our results of operations for which our financial statements have been prepared under
liquidation basis accounting. Under liquidation basis accounting, the Consolidated Statement of Operations and Comprehensive
Income was replaced with the Consolidated Statement of Changes in Net Assets in Liquidation. As a
result, we are providing, in Item 8. Financial Statements and Supplementary Data,  
    Consolidated Statements of Financial Condition as of December 31, 2004 and 2003,
    Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended
December 31, 2004, the three months ended December 31, 2003 and the nine months ended
September 30, 2002, and
    Consolidated Statements of Changes in Net Assets in Liquidation (Liquidation Basis) for
the nine months ended September 30, 2003 and the three months ended December 31, 2002. 
 Going Concern Basis 
 Results of Operations  Year ended December 31, 2004 Our
consolidated net loss for the year ended December 31, 2004 was
$3.9 million, or $0.59 per
diluted share. Net Interest Income Net interest income represents the difference between interest income earned on auto contracts
and other interest-earning assets and interest expense paid on borrowings and other funding
sources, and is our principal source of revenue. Net interest margin is the amount of net interest
income expressed as a percentage of average interest-earning assets. Net interest income and net interest margin for the year ended December 31, 2004 were $13.8
million and 4.41%, respectively, while our average interest earning assets, excluding auto-related
operating lease assets, totaled $312.4 million. For the year ended December 31, 2004, interest
income was $22.6 million and the average yield on interest-earning assets was 7.23%, while interest
expense on our borrowings was $8.8 million and the average cost of borrowings was 3.84%. 19




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The following table sets forth average outstanding balances of assets and liabilities,
interest income and expense, and average yields on our interest-earning assets and the average cost
of our borrowings for the year ended December 31, 2004: AVERAGE BALANCES, YIELDS AND RATESFor the Year Ended December 31, 2004Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Rate(Dollars in thousands)AssetsInterest-earning assets:Auto contracts and other loans receivable
    
    $
    251,380
    
    
    $
    19,700
    
    
    
    7.83
    %Short-term investments (1)
    
    
    33,640
    
    
    
    516
    
    
    
    1.53Retained interests in securitizations(1)
    
    
    26,622
    
    
    
    2,345
    
    
    
    8.81Mortgage-backed and other securities (1)
    
    
    742
    
    
    
    48
    
    
    
    6.47Total interest-earning assets
    
    
    312,384
    
    
    
    22,609
    
    
    
    7.23
    %Other assets
    
    
    81,554Total assets
    
    $
    393,938Liabilities and Stockholders EquityInterest-bearing liabilities:Warehouse credit facility
    
    $
    208,082
    
    
    $
    7,488
    
    
    
    3.55
    %Other borrowings
    
    
    7,693
    
    
    
    154
    
    
    
    2.00Junior Subordinated Deferrable
Interest Debentures
    
    
    12,256
    
    
    
    1,203
    
    
    
    9.77Total interest-bearing liabilities
    
    
    228,031
    
    
    
    8,845
    
    
    
    3.84
    %Other liabilities
    
    
    35,629Total liabilities
    
    
    263,660Stockholders equity
    
    
    130,278Total liabilities and stockholders equity
    
    $
    393,938Net interest income/net interest spread
    
    
    
    
    
    $
    13,764
    
    
    
    3.39
    %Net interest-earning assets
    
    $
    84,353Net interest margin(2)
    
    
    
    
    
    
    
    
    
    
    4.41
    %
   (1)
    
    Average balances and yields for securities and other investments classified
as available-for-sale are based on
historical amortized cost.(2)
    
    Net interest income divided by average interest-earning assets. Net interest margin, calculated in accordance with accounting principles generally
accepted in the United States of America (GAAP), excludes the revenue from our auto leasing
assets, but includes the associated funding costs. Because our auto leases are accounted for as
operating leases, the rental income and related expenses, including depreciation expense, are
reflected in noninterest income and noninterest expense. Provision for Losses on Installment Contracts At December 31, 2004, BVAC had $252.9 million of auto contracts designated as
held-for-investment. An allowance for credit losses on these contracts was established through the
provision for credit losses. Our provision for credit losses totaled $1.6 million for the year
ended December 31, 2004. Refer to Balance Sheet Analysis - Auto Contracts and Other Loans
Receivable  Auto Contracts for related information on BVACs allowance for credit losses on auto
contracts held-for-investment. Noninterest Income For
the year ended December 31, 2004, noninterest income was $17.0 million and included $12.9
million of leasing income, $4.3 million of loan servicing and
other loan fee income, $1.4 million
of unrealized gains on derivative instruments 20




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and $1.4 million of unrealized losses on auto contracts and other loans
carried at the lower of cost or estimated fair value. Noninterest income for 2004 also included
$1.9 million of other losses, including write-offs of premium on auto contracts held-for-sale due
to borrower pay-offs and charge-offs of defaulted auto contracts, and $1.7 million of other income.
Leasing income has declined through the year as we continue to reduce the balance of our portfolio
of auto leases. We ceased purchasing auto leases in June 2000 and, since then, the balance of our
lease portfolio has continued to decline as leases have reached their end-of-term. As discussed in additional
detail in Item 7A. Quantitative and Qualitative Disclosures About Market Risk - Asset/Liability Management,
we employ derivative instruments primarily to protect the value of BVACs fixed-rate auto
contracts from rising interest rates.  Our strategy is to protect the economic value of these
auto contracts rather than the accounting values.  We account for changes in the market value of
our derivative instruments as prescribed by Statement No. 133. Our derivative
instruments are not treated as designated hedge instruments under Statement No. 133 and are,
accordingly, carried at fair value, with changes in such fair value charged or credited to
earnings.  Our use of fair value accounting for our derivative instruments has resulted in
certain fluctuations in noninterest income.  During 2004, we recorded $1.4 million of net
unrealized gains on our derivative instruments, reflecting the increase in intermediate-term
rates that occurred during the year.  Future changes in interest rates could continue to produce
fluctuations in the fair value of our derivatives and, therefore, the level of our noninterest
income. Noninterest Expense For the year ended December 31, 2004, our noninterest expense totaled $35.6 million and
included $25.2 million of general and administrative expense, $9.2 million of leasing expense and
$1.2 million of expense from real estate owned. The following table sets forth the ratio of our
general and administrative expense to average managed assets, including auto-related securitized
assets, on an annualized basis for the year ended December 31, 2004: For the Year EndedDecember 31, 2004(Dollars in thousands)General and administrative expense
    
    $
    25,211Average managed assets, including auto-related
securitized assets
    
    $
    709,735General and administrative expenses to
average managed assets, including auto-related
securitized assets
    
    
    3.55
    %
 General and administrative expense remained at high levels in 2004 as we continued to
incur significant expenses related to the liquidation of assets and resolution of liabilities
remaining from the Banks September 30, 2003 dissolution. During 2004, we employed an average of
approximately 23 full-time equivalent employees and incurred significant legal and consulting
expenses in connection with this liquidation process. We anticipate
completing the significant, remaining aspects of the liquidation
during 2005. During 2004, we also incurred $1.0 million
of costs in connection with our implementation of the Sarbanes-Oxley Act of 2002. Our leasing expense continues to decline in line with the runoff of the balance of the
remaining portfolio. We ceased purchasing auto leases in June 2000. Because our auto leases are
accounted for as operating leases, the corresponding leased vehicles are capitalized and
depreciated to their estimated residual values over their lease terms. This depreciation expense
is included in leasing expense, along with the amortization of capitalized initial direct lease
costs and lease impairment charges. We test the residual value of our auto lease portfolio for impairment on a quarterly basis.
The percentage of leases considered impaired is a measure of the quarterly rate of decline in the
residual value of our auto lease 21




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portfolio versus our depreciation and writedown of the residual value of our auto lease
portfolio since the prior quarterly valuation. At December 31, 2004, there were no vehicles in our
auto lease portfolio that were considered impaired under Statement No. 144, compared to 2% that
were considered impaired at December 31, 2003. Higher percentages of impaired leases are
indicative of more rapidly declining resale values for used vehicles. Current rates of impairment
are not necessarily indicative of future rates of impairment. Impairment of lease residual values
is a function of a number of significant factors that could change in the near term, and adversely
affect the valuation of the auto lease portfolio. These factors were previously described under
Critical Accounting Policies - Investment in Operating Lease Assets. Two of these factors,
including ALGs projections of lease residual values and the relative probabilities of the three
alternatives for disposing of vehicles, are particularly susceptible to changes in market
conditions. As an illustration, at December 31, 2003, a $250 decline in the market value of individual
vehicles in our lease portfolio would have resulted in an additional 7% of the vehicles being
deemed impaired, and subject to an impairment charge. At December 31, 2004, however, there were no
additional vehicles that would have been determined to have been impaired if their market values
had declined by such an amount. Impairment charges could increase if the percentage of vehicles
returned to us were greater than the percentage that was projected at the year-end, because the
proceeds realized when we must dispose of vehicles at the end of lease terms are generally less
than if lessees purchase vehicles prior to the end of lease terms. Income Taxes We
recorded a tax benefit of $2.5 million for the year ended December 31, 2004. Our effective
tax rate of 39.2% differed from the federal statutory rate due primarily to the effect of state
income and franchise taxes. 
 Results of Operations  Three Months ended December 31, 2003 Our net loss for the quarter ended December 31, 2003, including net adjustments required to
re-adopt going concern basis accounting effective October 1, 2003, totaled $0.7 million, or $0.10
per diluted share, and consisted of income from ongoing operations of BVAC totaling $0.8 million
offset by a net loss of $1.5 million from our liquidating activities. As discussed under Critical Accounting Policies  Going Concern vs. Liquidation Basis
Accounting, in connection with our re-adoption of going concern basis accounting, we recognized
$0.7 million of pre-tax expense and $1.1 million of additions to stockholders equity in the
three-month period ended December 31, 2003. Net Interest Income For the quarter ended December 31, 2003, interest income was $4.9 million and the average
yield on interest-earning assets was 4.56% while interest expense on our borrowings was $3.6
million and the average cost of borrowings, largely comprised of interest on our 9.76% Junior
Subordinated Deferrable Interest Debentures (the Junior Debentures), was 11.20%. The negative
interest rate spread for the quarter, the difference between the yield on interest-earning assets
and the cost of our borrowings, was attributable to large balances of cash and cash equivalents
which were accumulated in the quarter in order to distribute $263.2 million, or $40.00 per share in
cash, to common stockholders on December 30, 2003 and redeem $63.5 million of the Capital
Securities issued by Bay View Capital I on December 31, 2003. Money market yields earned on the
cash and cash equivalent balances caused a significant decline in the overall yield of
interest-earning assets in the quarter ended December 31, 2003. Implementation of Statement of Financial Accounting Standards No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity resulted in the
reclassification of our Capital Securities from their prior classification as a mezzanine item to
liabilities as of December 31, 2003. Accordingly, dividend expense on the Capital Securities,
totaling $2.1 million and $8.8 million for the three- and twelve-months ended December 31, 2003,
respectively, has been included in interest expense on borrowings. 22




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The following table sets forth average yields on our interest-earning assets and average rates
on our interest-bearing liabilities for the period indicated. These average yields and rates are
derived by dividing interest income by the average balances of interest-earning assets and by
dividing interest expense by the average balances of interest-bearing liabilities for the period
indicated. Average balances of interest-earning assets and interest-bearing liabilities were
calculated by averaging the relevant month-end amounts for the period. AVERAGE BALANCES, YIELDS AND RATESFor the Three Months Ended December 31, 2003Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Rate(Dollars in thousands)AssetsInterest-earning assets:Auto contracts and other loans receivable
    
    $
    175,621
    
    
    $
    3,757
    
    
    
    8.48
    %Mortgage-backed securities (1)
    
    
    11,105
    
    
    
    166
    
    
    
    5.95Investments(1)
    
    
    242,863
    
    
    
    1,013
    
    
    
    1.65Total interest-earning assets
    
    
    429,589
    
    
    
    4,936
    
    
    
    4.56
    %Other assets
    
    
    29,740Total assets
    
    $
    459,329Liabilities and Stockholders EquityInterest-bearing liabilities:Borrowings (2)
    
    $
    128,781
    
    
    $
    3,612
    
    
    
    11.20
    %Total interest-bearing liabilities
    
    
    128,781
    
    
    
    3,612
    
    
    
    11.20
    %Other liabilities
    
    
    47,550Total liabilities
    
    
    176,331Stockholders equity
    
    
    282,998Total liabilities and stockholders equity
    
    $
    459,329Net interest income/net interest spread
    
    
    
    
    
    $
    1,324
    
    
    
    (6.64
    )%Net interest-earning assets
    
    $
    300,808Net interest margin(3)
    
    
    
    
    
    
    
    
    
    
    1.71
    %
   (1)
    Average balances and yields for securities and other investments classified
as available-for-sale are based on historical amortized cost.(2)
    Interest expense for borrowings excludes expenses related to our Capital
Securities.(3)
    Annualized net interest income divided by average interest-earning
assets. For the quarter ended December 31, 2003, noninterest income was $10.3 million and
included leasing income of $6.9 million, loan servicing and other fee income of $1.3 million, gains
related to recoveries of mark-to-market adjustments on franchise loans of $0.9 million and other
income of $1.2 million. Noninterest expense was $12.5 million and included leasing expenses of
$5.9 million and operating expenses of $6.6 million. Leasing Expense Leasing expense was $5.9 million for the three months ended December 31, 2003. At December
31, 2003, approximately 109 of the 5,341 vehicles in our automobile lease portfolio, or 2%, were
considered impaired under Statement No. 144. If the market values of the individual vehicles
declined by $250, an additional 7% of the leases would have been deemed to be impaired and,
therefore, potentially subject to an impairment charge. 23




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Income Taxes We recorded a tax benefit of $0.2 million for the fourth quarter of 2003. Our effective tax
rate of 55.7% differed from the federal statutory rate due primarily to nondeductible compensation
and reduced levels of state income and franchise taxes. 
 Liquidation Basis 
 Changes in Net Assets in Liquidation  Nine Months ended September 30, 2003 Our net assets in liquidation totaled $409.8 million, or $63.60 in net assets in liquidation
per outstanding diluted share at September 30, 2003 compared to $410.1 million, or $64.30 in net
assets in liquidation per outstanding diluted share at December 31, 2002. The change in net assets in liquidation for the first nine months of 2003 included a pre-tax
operating loss of $4.6 million and $6.0 million of charges for assets in liquidation partially
offset by $6.3 million of income tax benefits and $4.1 million of other changes in net assets in
liquidation, primarily proceeds from stock options and warrants exercised during the first nine
months of 2003. The net charges for changes in estimated values of assets and liabilities during the first
nine months of 2003 consisted primarily of $8.5 million of additional mark-to-market writedowns on
the auto lease portfolio. This writedown was partially offset by a $1.3 million gain associated
with the financing secured by our auto lease cash flows resulting from favorable experience with
the underlying cash flows, and a $1.0 million reduction of an accrual related to the settlement of
litigation that was negotiated during the first quarter of 2003. Implementation of Statement No. 150 resulted in the reclassification of our Capital Securities
from their prior classification as a mezzanine item to liabilities. Consequently, the dividend
expense on the Capital Securities, totaling $6.7 million during the nine-month period ended
September 30, 2003, has been included in interest expense on borrowings. Leasing expenses were $24.4 million for the first nine months of 2003. At September 30, 2003,
approximately 4,275 of the 6,665 vehicles in our automobile lease portfolio, or 64%, were
considered impaired under Statement No. 144. If the market values of the individual vehicles
declined by $250, an additional 7% of the leases would have been deemed to be impaired and,
therefore, potentially subject to an impairment charge. We recorded a tax benefit of $6.3 million for the first nine months of 2003, which was
recorded at an effective tax rate of 59.0%. The 2003 effective tax rate differed from the federal
statutory rate primarily due to reduced levels of state income and franchise taxes. 24




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##### Table of Contents



Changes in Net Assets in Liquidation  Three Months ended December 31, 2002 Our net assets in liquidation at December 31, 2002 totaled $410.1 million, or $64.30 in net
assets in liquidation per outstanding share. Changes in net assets in liquidation included a $6.1
million pre-tax loss from operations recorded during the fourth quarter of 2002 and $2.8 million of
net charges for additional liquidation valuation adjustments partially offset by a tax benefit of
$4.9 million. The loss from operations for the quarter was primarily a result of an operating loss caused by
a delay in closing the sale of our retail banking assets to U.S. Bank from October 1, 2002 to
November 1, 2002. Our liquidation of earning assets in advance of the anticipated October 1, 2002
sale date resulted in sharply lower interest revenues during October. The $2.8 million charge for
additional liquidation valuation adjustments was primarily due to a decrease in the market value of
the loan portfolio. As discussed above, on November 1, 2002, we completed the U.S. Bank transaction. U.S. Bank,
N.A. assumed the Banks retail deposits totaling $3.3 billion, its branches and service center
operations, and purchased $327.7 million of loans. On November 29, 2002, we prepaid the entire
$100.0 million of our 9.125% Subordinated Notes due 2007 at a premium of 4.563%. Additionally, on
December 9, 2002, the Bank redeemed the entire $50.0 million of its outstanding 10% Subordinated
Notes due 2009. In December of 2002, we received approval from the FRB to pay the cumulative distributions on
our Capital Securities. On December 31, 2002, we paid the cumulative deferred distributions,
interest on the deferred distributions and the current quarterly distribution. The payment totaled
$6.10 per share for the 10 quarterly distributions plus $0.715 per share in accrued interest. Leasing expenses were $10.9 million for the fourth quarter of 2002. At December 31, 2002,
approximately 4,839 of the 11,428 vehicles in our automobile lease portfolio, or 42%, were
considered impaired under Statement No. 144. If the market values of the individual vehicles
declined by $250, an additional 2% of the leases would have been deemed to be impaired and,
therefore, potentially subject to an impairment charge. We recorded a tax benefit of $4.9 million for the fourth quarter of 2002. During the fourth
quarter of 2002, we reduced our valuation allowance for deferred tax assets from $24.0 million to
$21.5 million in recognition of additional future operating income from BVAC available to absorb
existing deferred tax benefits. Our 2002 effective tax rate of 72% differed from the federal statutory rate due primarily to
state income taxes, the valuation allowance on deferred tax assets, disposition of nondeductible
goodwill and nondeductible compensation associated with the Plan. 25




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Going Concern Basis 
 Results of Operations  Nine Months ended September 30, 2002 Our net income for the first nine months of 2002, including net adjustments required to
convert from going concern basis accounting to liquidation basis accounting effective September 30,
2002, totaled $71.7 million, or $11.35 per diluted share. Excluding the liquidation adjustments,
our operating income before taxes totaled $5.9 million for the first nine months of 2002. We recorded pre-tax income totaling $266.5 million related to the mark-to-market valuation of
our assets and liabilities in connection with our adoption of liquidation basis accounting. Also
during the third quarter of 2002, we recorded $18.9 million of impairment charges, net of taxes, to
write-off goodwill related to three of our commercial lending businesses, which was not expected to
be realized upon the disposition of these businesses. As required by Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, which we adopted as of
January 1, 2002, the impairment loss was measured and recorded as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle as of January 1, 2002. Our results for the first nine months of 2002 reflected the impact of asset sales consummated
to generate the funds necessary to close the U.S. Bank transaction. Through September 30, 2002, we
completed the sale of approximately $1.0 billion of multi-family mortgage and commercial real
estate loans to Washington Mutual. Additionally, we securitized and sold approximately $450.0
million of our auto contracts, $56.5 million of franchise loans, $25.3 million of factored
receivables, $103.6 million of mortgage-backed securities and $59.0 million of other securities. Our results for the first nine months of 2002 included a charge of $13.1 million related to
the settlement of litigation with JP Morgan Chase Bank relating to a complaint filed against Bay
View Franchise Mortgage Acceptance Company, which we sold during 2001. The settlement resulted in
the disposition of approximately $12.0 million of nonperforming franchise loans from our
consolidated balance sheet. We completed the sale of our San Mateo-based factoring business, Bay View Funding, to a group
of investors led by the factoring companys management team in June 2002. Through this
transaction, we converted approximately $6.5 million of goodwill to tangible equity. Net Interest Income Our net interest income and net interest margin for the first nine months of 2002 were $85.2
million and 3.56%, respectively. Our interest-earning assets, excluding auto-related operating
lease assets, totaled $3.4 billion at September 30, 2002. Average interest-earning assets,
excluding our auto-related operating lease assets, for the first nine months of 2002 were $3.2
billion. 26




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##### Table of Contents



Average Balance Sheet The following table sets forth average yields on our interest-earning assets and average rates
on our interest-bearing liabilities for the period indicated: AVERAGE BALANCES, YIELDS AND RATESFor the Nine Months Ended September 30, 2002Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Rate(Dollars in thousands)AssetsInterest-earning assets:Loans and leases
    
    $
    2,158,992
    
    
    $
    122,208
    
    
    
    7.70
    %Mortgage-backed securities(1)
    
    
    231,499
    
    
    
    8,314
    
    
    
    4.78Investments(1)
    
    
    794,862
    
    
    
    14,717
    
    
    
    2.45Total interest-earning assets
    
    
    3,185,353
    
    
    
    145,239
    
    
    
    6.08
    %Other assets
    
    
    680,673Total assets
    
    $
    3,866,026Liabilities and Stockholders EquityInterest-bearing liabilities:Deposits
    
    $
    3,141,636
    
    
    $
    44,509
    
    
    
    1.89
    %Borrowings (2)
    
    
    270,718
    
    
    
    15,559
    
    
    
    7.67Total interest-bearing liabilities
    
    
    3,412,354
    
    
    
    60,068
    
    
    
    2.35
    %Other liabilities
    
    
    107,646Total liabilities
    
    
    3,520,000Stockholders equity
    
    
    346,026Total liabilities and stockholders equity
    
    $
    3,866,026Net interest income/net interest spread
    
    
    
    
    
    $
    85,171
    
    
    
    3.73
    %Net interest-bearing liabilities
    
    $
    (227,001
    )Net interest margin(3)
    
    
    
    
    
    
    
    
    
    
    3.56
    %
   (1)
    Average balances and yields for securities and other investments classified
as available-for-sale are based on historical amortized cost.(2)
    Interest expense for borrowings excludes expenses related to our Capital
Securities.(3)
    Annualized net interest income divided by average interest-earning
assets. 27




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##### Table of Contents



For the first nine months of 2002, interest income was $145.2 million and the average
yield on interest-earning assets was 6.08% while interest expense on our deposits was $44.5 million
and the average cost of deposits was 1.89%. The following table summarizes our deposit costs by
product for the period: For the Nine Months EndedSeptember 30, 2002Average
    
    
    AverageBalance
    
    
    Rate(Dollars in thousands)Savings
    
    $
    159,805
    
    
    
    0.58
    %Money market
    
    
    991,639
    
    
    
    1.72Checking accounts
    
    
    734,123
    
    
    
    0.84Total transaction accounts
    
    
    1,885,567
    
    
    
    1.28Retail certificates of deposit
    
    
    1,219,779
    
    
    
    2.83Brokered certificates of deposit
    
    
    36,290
    
    
    
    2.35Total deposits
    
    $
    3,141,636
    
    
    
    1.89
    %
 For the first nine months of 2002, interest expense on our borrowings was $15.6 million
and the average cost of borrowings was 7.67%. These amounts exclude the expense associated with
our Capital Securities. Provision for Losses on Loans and Leases The provision for losses on loans and leases for the first nine months of 2002 was $10.7
million. Our provision for the first nine months of 2002 reflects the impact of a $2.6 million
recovery on the sale of charged-off high loan-to-value home equity loans. With our adoption of
liquidation basis accounting, we reallocated the allowance for losses on loans and leases,
effective September 30, 2002, to a mark-to-market allowance for loans and leases. Noninterest Income For the first nine months of 2002, noninterest income was $91.6 million and included net gains
on sales of assets totaling $18.6 million. The net gains consisted of an $11.8 million gain
related to the securitization and sale of approximately $450.0 million of auto contracts, a $6.3
million gain on the sale of multi-family loans and commercial real estate to Washington Mutual and
a $1.3 million gain on the sale of mortgage-backed and other securities. These gains were
partially offset by a $0.4 million loss on the sale of Bay View Funding and a $0.4 million loss on
sales of loans and other franchise-related assets. 28




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##### Table of Contents



Noninterest Expense General and Administrative Expenses General and administrative expenses were $93.0 million for the first nine months of 2002. The
following table sets forth the ratio of general and administrative expenses to average total
assets, including auto-related securitized assets, on an annualized basis for the nine months ended
September 30, 2002: For the NineMonths EndedSeptember 30, 2002(Dollars in thousands)General and administrative expenses
    
    $
    93,001Average managed assets, including auto-related
securitized assets
    
    $
    4,073,742Annualized general and administrative expenses to
average managed assets, including auto-related
securitized assets
    
    
    3.04
    %
 Leasing Expenses Leasing expenses were $44.0 million for the first nine months of 2002. At September 30, 2002,
approximately 5,934 of the 13,631 vehicles in our automobile lease portfolio, or 44%, were
considered impaired under Statement No. 144. As an illustration of the sensitivity of these
assumptions, if the market values of the individual vehicles had declined by $250, an additional 3%
of the leases would have been deemed to be impaired and, therefore, potentially subject to an
impairment charge. Real Estate Owned Net expense related to our real estate owned was $1.0 million for the first nine months of
2002. In addition, we recorded $266,000 of provision for losses on real estate owned during the
first nine months of 2002. Amortization of Intangible Assets As of January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, which requires that certain goodwill and intangible assets
with indefinite useful lives no longer be amortized but instead be tested for impairment at least
annually. Subsequently, we only amortized identifiable assets with definite useful lives,
including core deposit intangibles and certain goodwill. Amortization expense related to these
intangible assets was $1.0 million for the first nine months of 2002. For the nine months ended September 30, 2002, we recorded $18.9 million of impairment charges,
net of taxes, for goodwill not expected to be realized upon the disposition of our asset-based
lending, factoring and commercial leasing businesses. As required by the provisions of Statement
No. 142, the impairment loss was measured and recorded as of the date of adoption and recognized as
the cumulative effect of a change in accounting principle as of January 1, 2002. Income Taxes We recorded tax expense of $181.8 million for the nine months ended September 30, 2002. We
also recorded a deferred tax benefit of $2.3 million on the cumulative effect of a change in
accounting principle, which is presented net of this tax benefit. As a result of the Plan, income
tax expense included the effect of establishing a valuation allowance of $24.0 million at September
30, 2002 on the realizability of deferred tax assets in years after 2002. The 29




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##### Table of Contents



realizability of deferred tax assets and the related valuation allowance were based on total
projected future income through the estimated completion date of our liquidation, as contemplated
by the Plan, of September 30, 2005. The effective tax rate used in computing the $181.8 million tax expense for the first nine
months of 2002 was 71.5%. This effective tax rate was higher than the federal statutory rate due
primarily to state income taxes, the valuation allowance for deferred tax assets, amortization and
disposition of nondeductible goodwill and nondeductible compensation associated with the Plan. Dividends on Capital Securities On December 21, 1998, we issued $90.0 million of 9.76% Capital Securities through Bay View
Capital I, a business trust formed to issue the securities. The Capital Securities accrued
quarterly cumulative distributions at an annual rate of 9.76% of the liquidation value of $25 per
share. Dividend expense on the Capital Securities was $7.9 million for the first nine months of
2002. 30




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##### Table of Contents



Balance Sheet Analysis Our
total assets were $423.3 million at December 31, 2004 compared to $364.1 million at
December 31, 2003. This increase in total assets was attributable to asset growth by BVAC, which
was offset, in part, by continued progress in liquidating the remaining assets of the Bank. During
the year, BVACs purchases of auto contracts produced $162.0 million of growth in our warehouse
inventory of auto contracts, net of repayments and loan sales. These purchases were largely funded
by additional borrowings on our warehouse credit facility. The liquidation of the remaining Bank
assets, including the monetization of $56.6 million of auto leases, funded our redemption of the
$22.0 million of outstanding Capital Securities and distributions of $47.8 million, or $7.25 per
share, in cash to our common stockholders during the year. 
 Cash and Cash Equivalents At December 31, 2004, our cash and cash equivalents totaled $4.4 million compared to $11.6
million at December 31, 2003. During 2004, we distributed $47.8 million of cash made available
from the liquidation of the assets of the Bank to common stockholders  $16.5 million at June 30,
2004, $16.5 million at September 30, 2004 and $14.8 million at December 31, 2004. 
 Restricted Cash We held $26.8 million and $32.2 million of restricted cash at December 31, 2004 and 2003,
respectively. Restricted cash attributable to BVACs auto finance business includes cash collateral provided to counterparties
to BVACs hedging contracts to meet margin requirements, cash collateral provided to cure
potential borrowing base deficiencies on BVACs warehouse credit
facility and cash payments received from our customers that are
in-transit to trust accounts for BVACs auto securitization
trusts. The remaining assets
from the Bank liquidation also include restricted cash that has been pledged to secure a letter of
credit, cash collateral pledged in connection with financing secured by our auto lease
portfolio contractual cash flow as well as cash collateral pledged in connection with the Companys
servicing of a multi-family loan pool and other contractual obligations. 
 Retained Interests in Securitizations The following table provides information on the balances of BVACs retained interests in its
outstanding securitizations of auto contracts as of the dates indicated: At December 31,2004
    
    
    2003(Dollars in thousands)Available-for-saleTransaction:2002-LJ-1
    
    $
    15,622
    
    
    $
    18,7442003-LJ-1
    
    
    7,014
    
    
    
    9,846Total retained interests in
securitizations
    
    $
    22,636
    
    
    $
    28,590
 During 2003 and 2002, we securitized and sold auto contracts of $193.3 million and $453.2
million, respectively. We retained interests in these securitizations with initial balances of
$9.5 million and $23.2 million for 2003 and 2002, respectively. At December 31, 2004, all retained
interests in securitizations were classified as available-for-sale and reported at fair value.
Unrealized losses of $279 thousand in these retained interests were included in our stockholders
equity, net of taxes, at December 31, 2004. There were no unrealized gains or losses included in
our stockholders equity at December 31, 2003. 31




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##### Table of Contents



Auto Installment Contracts and Other Loans The following table sets forth the composition of our auto contracts and other loans as of the
dates indicated: At December 31,2004
    
    
    2003Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of Total(Dollars in thousands)Auto installment contracts and other loans receivable:Auto installment contracts (1)Auto installment contracts held-for-sale
    
    $
    73,462
    
    
    
    22.8
    %
    
    $
    161,578
    
    
    
    93.0
    %Auto installment contracts held-for-investment
    
    
    247,219
    
    
    
    76.9
    %
    
    
    
    
    
    
    0.0
    %Total auto installment contracts
    
    
    320,681
    
    
    
    99.7
    %
    
    
    161,578
    
    
    
    93.0
    %Other loans to be liquidated:Franchise loans
    
    
    583
    
    
    
    0.2
    %
    
    
    6,428
    
    
    
    3.7
    %Asset-based loans
    
    
    319
    
    
    
    0.1
    %
    
    
    844
    
    
    
    0.5
    %Business loans
    
    
    
    
    
    
    0.0
    %
    
    
    4,802
    
    
    
    2.8
    %Total other loans to be liquidated
    
    
    902
    
    
    
    0.3
    %
    
    
    12,074
    
    
    
    7.0
    %Auto installment contracts and other loans before
premiums, discounts, and deferred fees and costs
    
    
    321,583
    
    
    
    100.0
    %
    
    
    173,652
    
    
    
    100.0
    %Premiums,
discounts, and deferred fees and costs, net
(2)(3)
    
    
    8,711
    
    
    
    
    
    
    
    4,296Allowance for credit losses on auto installment contracts
held-for-investment
    
    
    (1,508
    )
    
    
    
    
    
    
    Auto
installment contracts and other loans receivable, net
(4)
    
    $
    328,786
    
    
    
    
    
    
    $
    177,948
   (1)
    Auto contracts exclude auto-related operating lease assets.(2)
    At December 31, 2004, premiums, discounts, and deferred
fees and costs attributable to auto contracts held-for-investment
and auto contracts held-for-sale totaled $7.1 million and
$1.6 million, respectively.(3)
    At December 31, 2003, the entire amount of premiums,
discounts and deferred fees and costs were attributable to auto
contracts held-for-sale.(4)
    Includes allowances for mark-to-market valuation reserves of $1.2 million and $3.2
million at December 31, 2004 and 2003, respectively. The increase in loans receivable from December 31, 2003 to December 31, 2004 was
attributable to BVACs purchases of auto contracts partially offset by loan sales and repayments
during 2004. During 2004, we sold $24.8 million of auto contracts, $4.8 million of business loans
and $3.8 million of franchise loans, and received $112.8 million of loan repayments. With the
exception of BVACs purchases of auto contracts, we ceased all other loan production activities
during the fourth quarter of 2002. Auto Contracts At December 31, 2004, $252.9 million of BVACs auto contracts were designated as
held-for-investment in anticipation of securitizing such contracts in early 2005 in an asset-backed
bond offering that is to be structured as a financing transaction. The remaining $75.0 million of
BVACs warehouse inventory of auto contracts were designated as held-for-sale at December 31, 2004
and carried at the lower of cost or fair value. Prior to the second quarter of 2004, our entire
warehouse inventory of auto contracts had been designated as held-for-sale. During 2004, BVAC purchased $295.3 million of auto contracts compared to $279.5 million during
2003, a 5.7% increase, year-over-year. During the fourth quarter of 2004, BVAC purchased $80.7
million of contracts, a 19.7% increase over its purchases of $67.4 million of contracts in the
fourth quarter of 2003. We attribute this increase to the initial success of our efforts to
broaden BVACs market for good credit quality customers and its focus on expanding its purchases of
high quality loans. BVAC has increased its purchases of auto contracts every month since September
2004, and its December 2004 loan purchases were the highest achieved in any month in 2004. 32




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##### Table of Contents



BVACs unit purchase volume for 2004 totaled 10,043 contracts; the weighted-average contract
rate on the 2004 purchases was 7.98% and the weighted-average FICO score was 739. At December 31,
2004, BVAC was servicing 28,300 contracts representing $570.9 million of managed loans. BVACs unit purchase volume for 2003 totaled 9,762 contracts; the weighted-average contract
rate on the 2003 purchases was 8.35% and the weighted-average FICO score was 733. During 2003,
BVAC called its 1999-LJ-1 and 2000-LJ-1 automobile receivable backed notes and repurchased auto
contracts from the asset-backed bond trusts with par values of $21.8 million and $33.8 million and
average coupon rates of 12.52% and 10.25%, respectively. At December 31, 2003, BVAC was servicing
30,808 contracts representing $562.8 million of managed loans. During 2004, BVAC sold $24.8 million of auto contracts on a whole loan basis with servicing
retained. Gains of $0.1 million were realized on these sales. During 2003, BVAC securitized
and/or sold $240.5 million of auto contracts. Gains of $0.9 million were realized on these
transactions. Repayments of auto contracts totaled $110.5 million and $79.0 million during 2004
and 2003, respectively. Other Loans At December 31, 2004, the net carrying value of other loans receivable, which we are in the
process of liquidating, was $0.9 million compared to $12.1 million at December 31, 2003. These
loans are designated as held-for-sale and carried at the lower of cost or fair value. During 2004,
we sold or collected repayments of $10.9 million from our liquidating portfolio of business and
franchise loans. During 2003, we liquidated a total of $149.9 million from this portfolio. Credit Quality We define nonperforming assets as nonaccrual loans, real estate owned and other repossessed
assets. We define nonaccrual loans as those which are 90 days or more delinquent as to principal
and interest payments (unless the principal and interest are well secured and in the process of
collection) and loans less than 90 days delinquent are designated as nonperforming when we
determine that the full collection of principal and/or interest is doubtful. We do not record
interest on nonaccrual loans. We charge-off auto contracts and reverse related accrued interest
receivable when the contracts become 120 days delinquent. The following table sets forth our nonperforming assets as of the dates indicated: At December 31,2004
    
    
    2003(Dollars in thousands)Nonaccrual loansAuto installment contracts
    
    $
    61
    
    
    $
    84Franchise and asset-based loans
    
    
    902
    
    
    
    1,840Total nonaccrual loans
    
    
    963
    
    
    
    1,924Real estate owned
    
    
    3,379
    
    
    
    4,955Repossessed vehicles
    
    
    400
    
    
    
    254Nonperforming assets
    
    $
    4,742
    
    
    $
    7,133
 The decrease in total nonperforming assets at December 31, 2004, compared to December 31,
2003, was largely the result of progress made during 2004 in liquidating the commercial and
franchise loan portfolio and real estate owned portfolio. During 2004, we also wrote down the
value of our real estate owned portfolio by $875 thousand to reflect reduced property values. Our nonperforming assets included valuation allowances of $1.2 million and $1.4 million at
December 31, 2004 and 2003, respectively. The following table sets forth nonperforming asset
balances and nonperforming assets as a percentage of consolidated assets by their original loan
type: 33




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##### Table of Contents



Nonperforming Assets as a Percentage ofConsolidated Total AssetsAt December 31,2004
    
    
    2003(Dollars in thousands)Auto installment contracts
    
    $
    461
    
    
    
    0.11
    %
    
    $
    338
    
    
    
    0.09
    %Franchise loans
    
    
    3,792
    
    
    
    0.90
    
    
    
    5,757
    
    
    
    1.58Asset-based loans
    
    
    319
    
    
    
    0.07
    
    
    
    857
    
    
    
    0.24Commercial real estate
    
    
    170
    
    
    
    0.04
    
    
    
    181
    
    
    
    0.05Total
    
    $
    4,742
    
    
    
    1.12
    %
    
    $
    7,133
    
    
    
    1.96
    %
 The following table sets forth loans delinquent 60 days or more as a percentage of gross
loans by their original loan type: Loans Delinquent 60 Days or More as aPercentage of Gross LoansAt December 31,2004
    
    
    2003(Dollars in thousands)Auto installment contracts
    
    $
    406
    
    
    
    0.12
    %
    
    $
    185
    
    
    
    0.10
    %Franchise loans
    
    
    583
    
    
    
    0.18
    
    
    
    
    
    
    
    0.00Asset-based loans
    
    
    319
    
    
    
    0.10
    
    
    
    563
    
    
    
    0.32Total
    
    $
    1,308
    
    
    
    0.40
    %
    
    $
    748
    
    
    
    0.42
    %
 Allowance for Credit Losses Under going concern basis accounting, we have maintained an allowance for credit losses for
auto contracts and other loans held-for-investment. This allowance is established through a
provision charged to expense and maintained at a level that we believe is sufficient to cover
estimated probable losses in this loan portfolio. From September 30, 2002, when we adopted
liquidation basis accounting, through the first quarter of 2004, all auto contracts and other loans
receivable were designated as held-for-sale and, accordingly, a separate allowance for credit
losses was not maintained. The following table sets forth the activity in the allowance for credit
losses on loans held-for-investment as of and for the periods indicated: At and For theAt and For the
    
    
    Nine MonthsYear Ended
    
    
    EndedDecember 31,
    
    
    September 30,2004
    
    
    2002(Dollars in thousands)Balance at beginning of period
    
    $
    
    
    
    $
    49,791Transfers of loans to held-for-sale
    
    
    
    
    
    
    (10,658
    )Charge-offs
    
    
    (222
    )
    
    
    (23,771
    )Recoveries
    
    
    118
    
    
    
    2,887Net charge-offs
    
    
    (104
    )
    
    
    (20,884
    )Provision for losses on loans and leases
    
    
    1,612
    
    
    
    10,700Reallocation of allowance as mark-to-market
adjustments to loans in liquidation (1)
    
    
    
    
    
    
    (28,949
    )Balance at end of period
    
    $
    1,508
    
    
    $
    
   (1)
 34




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##### Table of Contents



Deposits On November 1, 2002, we completed the sale of the Banks retail banking assets to U.S. Bank.
U.S. Bank assumed the Banks retail deposits totaling $3.3 billion, its branches and service center
operations, and purchased $327.7 million of loans. At December 31, 2002, $224.2 million of
brokered certificates of deposit were outstanding with a weighted-average rate of 2.35%; these
deposits matured during the first quarter of 2003. The dissolution of the Bank was completed on
September 30, 2003, and the last of the Banks deposits were repaid prior to the dissolution. 
 Borrowings At December 31, 2004, our borrowings totaled $300.7 million including $298.8 million on BVACs
warehouse credit facility and $1.9 million on a financing secured by the contractual cash flows
from the auto lease portfolio. The following table sets forth our outstanding borrowings as of the
dates indicated: December 31, 2004
    
    
    December 31, 2003(Dollars in thousands)BVAC warehouse credit facility
    
    $
    298,755
    
    
    $
    138,221Financing secured by the auto lease contractual cash flows
    
    
    1,895
    
    
    
    16,0559.76% Junior Subordinated Deferrable Interest Debentures
    
    
    
    
    
    
    24,784Total
    
    $
    300,650
    
    
    $
    179,060
 Warehouse credit
facility- During the second quarter of 2004, BVAC secured a $350.0 million floating-rate,
revolving warehouse credit facility to replace a maturing $250.0 million facility originally
obtained in 2003.  The facility is jointly provided by two lenders including a commercial paper
conduit affiliated with one of the lenders (the Note Purchasers).  The facility is
for a term of 364 days and matures on June 25, 2005.  The interest rate on a portion of the
facility is indexed to asset-backed commercial paper rates; the balance of the facility is
indexed to the 1 month Libor rate.  BVAC draws on the facility to purchase and finance its
existing inventory of auto contracts.  Substantially all auto contracts retained by BVAC are
pledged as collateral for the credit facility. We believe that the credit facility will continue
to be renewed annually or that BVAC would be able to secure financing on satisfactory terms,
however, there can be no assurance that it will be able to do so.  Under the terms of the
facility, BVAC draws on the facility by transferring auto contracts to a special purpose
entity, a statutory trust, which issues notes to the Note Purchasers.  BVAC periodically
securitizes or sells auto contracts in order to pay down the line of credit and maintain
borrowing capacity. At December 31, 2004,
$298.8 million was outstanding under this facility with an all-in cost of 3.34%.  These
borrowings were secured by $314.5 million of auto contracts.  The facility contains various
performance triggers and default covenants requiring that BVAC maintain certain cumulative
credit loss, delinquency and other financial ratios.  As of December 31, 2004, all such
financial and performance ratios were within required levels. Under the terms of the
indenture, the trust enters into out-of-the-money, interest rate cap contracts, containing terms
and conditions required by the Note Purchasers, to provide protection to the Note Purchasers
from interest rate risk embedded in the fixed-rate auto contracts that have been transferred
to the trust.  BVAC incurs the cost of these interest rate caps.  The notional balance of the
amortizing caps is maintained by the trust to coincide with the outstanding balance of the
underlying auto contracts.  The interest rate caps are not designated as hedges for accounting
purposes and, accordingly, changes in the fair value of the interest rate caps are recognized
in earnings and recorded as unrealized gains or losses.  The fair value of the interest rate
caps is included in other assets. At December 31, 2004, the
interest rate caps had a fair value of $0.7 million. For the
year ended December 31, 2004, we recognized $0.7 million of
unrealized losses based on a decline in the value of the interest
rate caps. Financing secured by the contractual cash flows from the auto lease portfolio- On December
31, 2001, we completed a financing secured by the contractual cash flows from our liquidating auto
operating lease portfolio. The transaction was recorded as a secured financing and resulted in an
increase in other borrowings of $136.5 million at an initial imputed interest rate of 5.25%. With
no new purchases of auto leases since June 2000, the outstanding balance of this borrowing has
declined sharply since its inception. At December 31, 2004, the balance was $1.9 million. 9.76%
Junior Subordinated Deferrable Interest Debentures issued to Bay View Capital I -In
December 1998, we issued $90.0 million of 9.76% Capital Securities through Bay View Capital I, a
business trust formed to issue the securities. Effective July 1, 2003, we adopted Statement of
Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity,  which resulted in the reclassification of our
Capital Securities from their prior classification as a mezzanine item to liabilities. During
2003, we redeemed $68.0 million of the Capital Securities leaving an outstanding balance of $22.0
million. On June 30, 2004, we redeemed the remaining $22.0 million. Effective December 31, 2003, we adopted FASB Financial Interpretation No. 46, Consolidation
of Variable Interest Entities, as revised, and accordingly, deconsolidated Bay View Capital I
Trust. As a result, as of December 31, 2003, the Capital Securities of Bay View Capital I are no
longer reflected on our Consolidated Statement of Financial Condition while the underlying 9.76%
Junior Debentures, which were issued to Bay View Capital I, are reflected as borrowings. On June
30, 2004, we redeemed the remaining $22.0 million of the outstanding Capital Securities and the
underlying $24.8 million of Junior Debentures. 35




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##### Table of Contents



Liquidity and Capital Resources In addition to the immediate liquidity provided by cash and cash equivalents, our $350.0
million revolving warehouse credit facility allows us to purchase and warehouse auto contracts.
Our ability to securitize or sell auto contracts on a whole loan basis allows us to pay down the
warehouse facility in order to maintain available borrowing capacity to fund future purchases of
auto contracts. Repayments from warehoused auto contracts also provide liquidity. During 2004,
liquidation of the assets of the Bank remaining from its September 30, 2003 dissolution, primarily
the auto lease portfolio, also produced significant liquidity. However, the liquidation of these
assets was largely completed in 2004 and they will be a decreased source of liquidity in 2005 and
beyond. At December 31, 2004, we had $4.4 million of cash and cash equivalents, and $51.2 million of
available borrowing capacity on our revolving warehouse credit facility of which $6.8 million was
immediately available based upon BVAC-owned auto contracts eligible for pledging. On
February 17, 2005, we issued $232.1 million of auto
receivable backed notes payable through Bay
View 2005-LJ-1 Owner Trust. Proceeds from the issuance of the notes were used to repay $217.8
million of borrowings on our warehouse credit facility. The notes
have final maturities ranging between February 27, 2006 and
May 25, 2012 and contain a call provision that grants the Company
the option of calling the notes at any time after the aggregate
balance of the receivables has been reduced to 15% of the original pool
of receivables. We anticipate that prepayments will reduce the
effective life of the notes. On December 30, 2003, we distributed $263.2 million, or $40.00 per share in cash, to common
stockholders and, on December 31, 2003, redeemed $68.0 million of the outstanding 9.76% Capital
Securities. During the first half of 2004, we paid the quarterly interest due on the 9.76% Junior
Debentures and redeemed the remaining $24.8 million of these securities and the related 9.76%
Capital Securities. We also paid cash distributions of $47.8 million, or $7.25 per share, to our
common stockholders - $16.5 million, or $2.50 per share, on June 30, 2004; $16.5 million, or $2.50
per share, on September 30, 2004; and $14.8 million, or $2.25 per share, on December 31, 2004. Under the Amended Plan, we are completing the liquidation of the assets and the satisfaction
of the liabilities of the Bank remaining after its September 30, 2003 dissolution and anticipate
that this process will be substantially completed during 2005. Refer to Forward-Looking
Statements  Cash Distributions for comments about future cash distributions. Our stockholders equity was re-established upon our re-adoption of going concern basis
accounting effective October 1, 2003. Stockholders equity totaled $104.2 million and $155.9
million at December 31, 2004 and 2003, respectively. 
 Contractual Obligations Our obligations and commitments to make future payments under contracts include $298.8 million
on BVACs warehouse credit facility, $1.9 million in other borrowings, $16.8 million of payments
under various operating lease agreements and, as a result of a transaction completed subsequent to
year-end, BVACs issuance of $232.1 million of auto receivable backed notes payable issued through
an affiliate, Bay View 2005-LJ-1 Owner Trust. Refer to Balance Sheet Analysis  Borrowings for
comments about the warehouse credit facility and the other borrowings, and Liquidity and Capital
Resources for comments on the issuance of the $232.1 million of auto receivable backed notes
payable. At December 31, 2004, we occupied three offices, including our corporate headquarters office,
and had an additional two offices that have been vacated, and are subleasing, under operating lease
agreements expiring at various dates through the year 2012. In most instances, these lease
arrangements include options to renew or extend the lease at market rates. Our contractual obligations for future payments are set forth in the following table: Payments Due By PeriodTotal
    
    

Less
than 1Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More than 5Years(Dollars in thousands)Warehouse credit facility
    
    $
    298,755
    
    
    $
    298,755
    
    
    $
    
    
    
    $
    
    
    
    $
    Other borrowings
    
    
    1,895
    
    
    
    1,895
    
    
    
    
    
    
    
    
    
    
    
    Operating leases (1)
    
    
    16,834
    
    
    
    2,903
    
    
    
    5,049
    
    
    
    4,113
    
    
    
    4,769Bay View 2005-LJ-1 Automobile
Receivable Backed Notes
    
    
    232,100
    
    
    
    
    
    
    
    38,600
    
    
    
    62,600
    
    
    
    130,900Total
    
    $
    549,584
    
    
    $
    303,553
    
    
    $
    43,649
    
    
    $
    66,713
    
    
    $
    135,669
 (1) These payments do not reflect $2.3 million in sublease rental income from
existing sublease rental arrangements through the year 2008. Included in the table above are lease
payments of $15.1 million related to the Companys liquidating activities. 36




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##### Table of Contents



Stock Repurchase Program In August 1998, our Board of Directors authorized the repurchase of up to $50.0 million in
shares of our common stock, however, we have not repurchased any shares of our common stock since
1999. At December 31, 2004, we had approximately $17.6 million in remaining authorization
available for future share repurchases. 
 Impact of Inflation and Changing Prices Our consolidated financial statements presented herein have been prepared in accordance with
GAAP, which generally requires the measurement of financial position and operating results in terms
of historical dollars, without considering changes in the relative purchasing power of money over
time. Due to the fact that most assets and liabilities of a consumer finance company are monetary
in nature, interest rates have a more significant impact on a consumer finance companys
performance than do general levels of inflation. Interest rates do not necessarily move in the
same direction or magnitude as the prices of goods and services. 37




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk Asset/Liability Management Interest rate risk, the fluctuation of market interest rates, impacts the value of our
fixed-rate auto contracts. It also impacts the net interest income component of our earnings
because BVAC funds the purchase of fixed-rate auto contracts with its warehouse credit facility,
which is a floating-rate facility. The rate on the warehouse facility, a revolving purchase
facility, is tied to the one-month Libor rate as well as commercial paper rates and subject to
frequent adjustments. Fixed-rate Auto Contracts BVAC
purchases these fixed-rate auto contracts primarily for sale or for
on- or off-balance sheet securitization.
Investors in these securitization or whole loan sale transactions require a yield that is
commensurate with prevailing market interest rates. The prices offered by investors in these
transactions reflect prevailing market interest rates at the time of these transactions, which
creates interest rate risk for us during the period BVAC warehouses, or owns, these fixed-rate auto
contracts. Accordingly, our earnings are affected by changes in prevailing market interest rates.
Rising market interest rates generally reduce the value of BVACs fixed-rate auto contracts. Net Interest Income BVAC funds purchases of fixed-rate auto contracts with its floating-rate warehouse credit
facility. While BVAC owns these contracts, we earn net interest income, which is defined as the
amount by which interest income earned on the contracts exceeds the interest paid on BVACs
warehouse credit facility. Changes in prevailing market interest rates produce corresponding
changes in the cost of BVACs floating-rate warehouse credit facility thereby creating interest
rate risk. Rising market interest rates generally increase the interest expense we incur on BVACs
warehouse credit facility, thereby reducing the net interest income we earn. To protect us from interest rate risk, we may use various derivative financial instruments,
including interest rate swap contracts, to protect the market value of BVACs warehouse inventory
of auto contracts and the net interest income produced by its warehouse inventory. The market
value of these derivative instruments is designed to respond inversely to the market value of
BVACs warehouse inventory resulting from changes in prevailing market interest rates. We may
enter into these agreements as BVAC purchases auto contracts; and the agreements may be closed out
at the time the underlying auto contracts are securitized or sold. At December 31, 2004, we had outstanding swap contracts with a total notional amount of $145.0
million under which we pay a fixed interest rate of 3.16% and receive a floating interest rate of
2.37%. These contracts mature from May 2005 to May 2008. At December 31, 2004, we had an
unrealized gain of $0.4 million in our swap contracts and estimate that an increase in market
interest rates of 100 and 200 basis points would have resulted in an approximate unrealized gain of
$2.4 million and $4.6 million, respectively, while a decrease in interest rates of 100 basis points
would have resulted in an approximate unrealized loss of $2.4 million. Warehouse Credit Facility As discussed above, auto
contracts pledged to secure borrowings under BVACs warehouse credit facility bear fixed interest
rates while amounts borrowed under BVACs warehouse credit facility bear a floating interest
rate.  To provide protection to the  Note Purchasers from interest rate risk embedded in the
fixed-rate auto contracts that have been transferred to the trust, the trust enters into
out-of-the-money, interest rate cap contracts, containing the terms and conditions required
by the Note Purchasers.  Refer to Balance Sheet Analysis
 Borrowings, Warehouse Credit
Facility for additional comments about these interest rate cap contracts maintained under the
terms of our warehouse line of credit. Derivative financial
instruments involve, to varying degrees, elements of credit risk.  Credit risk is defined as the
possibility of sustaining a loss because a counterparty to a financial instrument failed to
perform in accordance with the terms of the contract.  Refer to Critical Accounting Policies,
Derivatives for comments about the accounting for our derivative instruments. 38




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##### Table of Contents



The following table provides information about the Companys interest rate-sensitive financial
instruments by expected maturity date as of December 31, 2004 (dollars in thousands): Years Ending December 31,
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Fair ValueAssets:Securities available-for-salePrincipal amounts
    
    $
    3,510
    
    
    $
    13,783
    
    
    $
    5,343
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,636Weighted-average yield
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Auto installment contracts held-for-salePrincipal amounts
    
    $
    75,021
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    75,208Weighted-average yield
    
    
    8.17
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Other loans held-for-salePrincipal amounts
    
    $
    902
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    902Weighted-average yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Auto installment contracts held-for-investmentPrincipal amounts
    
    $
    75,303
    
    
    $
    67,384
    
    
    $
    60,298
    
    
    $
    49,879
    
    
    $
    
    
    
    $
    
    
    
    $
    253,097Weighted-average yield
    
    
    8.17
    %
    
    
    8.17
    %
    
    
    8.17
    %
    
    
    8.17
    %
    
    
    0.00
    %
    
    
    0.00
    %Liabilities:Warehouse credit facilityPrincipal amounts
    
    $
    298,755
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    298,755Weighted-average interest rate
    
    
    3.68
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Borrowings - other borrowingsPrincipal amounts
    
    $
    1,895
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,895Weighted-average interest rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Interest Rate Derivatives:Interest rate swapsNotional amounts
    
    $
    20,000
    
    
    $
    75,000
    
    
    $
    35,000
    
    
    $
    15,000
    
    
    $
    
    
    
    $
    
    
    
    $
    398Average pay rate
    
    
    2.58
    %
    
    
    2.99
    %
    
    
    3.58
    %
    
    
    3.79
    %
    
    
    0.00
    %
    
    
    0.00
    %Average receive rate
    
    
    2.45
    %
    
    
    2.44
    %
    
    
    2.26
    %
    
    
    2.18
    %
    
    
    0.00
    %
    
    
    0.00
    %Interest rate capsNotional amounts
    
    $
    209,159
    
    
    $
    144,673
    
    
    $
    88,938
    
    
    $
    45,494
    
    
    $
    15,251
    
    
    $
    
    
    
    $
    698Average strike rate
    
    
    5.85
    %
    
    
    5.78
    %
    
    
    5.67
    %
    
    
    5.62
    %
    
    
    5.59
    %
    
    
    0.00
    %
 39




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##### Table of Contents



Item 8. Financial
Statements and Supplementary Data Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Financial Condition December 31, 2004
    
    
    December 31, 2003(Dollars in thousands)ASSETSCash and cash equivalents
    
    $
    4,447
    
    
    $
    11,563Restricted cash
    
    
    26,845
    
    
    
    32,240Securities available-for-sale:Retained interests in securitizations
    
    
    22,636
    
    
    
    28,590Mortgage-backed and other securities
    
    
    
    
    
    
    6,139Auto installment contracts and loans held-for-sale:Auto installment contracts
    
    
    75,021
    
    
    
    165,874Other loans
    
    
    902
    
    
    
    12,074Auto installment contracts held-for-investment, net
    
    
    252,863
    
    
    
    Investment in operating lease assets, net
    
    
    10,041
    
    
    
    66,657Real estate owned, net
    
    
    3,379
    
    
    
    4,955Premises and equipment, net
    
    
    733
    
    
    
    371Repossessed vehicles
    
    
    439
    
    
    
    438Deferred income taxes, net
    
    
    16,977
    
    
    
    21,031Goodwill
    
    
    1,846
    
    
    
    1,846Other assets
    
    
    7,199
    
    
    
    12,340Total assets
    
    $
    423,328
    
    
    $
    364,118LIABILITIES AND STOCKHOLDERS EQUITYBorrowings:Warehouse credit facility
    
    $
    298,755
    
    
    $
    138,221Other borrowings
    
    
    1,895
    
    
    
    16,055Junior Subordinated Deferrable Interest Debentures
    
    
    
    
    
    
    24,784Other liabilities
    
    
    9,629
    
    
    
    17,500Liquidation reserve
    
    
    8,856
    
    
    
    11,626Total liabilities
    
    
    319,135
    
    
    
    208,186Stockholders equity:Series preferred stock; authorized, 7,000,000 shares; outstanding, none
    
    
    
    
    
    
    Common stock ($.01 par value); authorized, 80,000,000 shares;
issued, 2004  6,597,303 shares; 2003  6,579,333 shares;
outstanding, 2004  6,593,860 shares; 2003  6,575,890 shares
    
    
    66
    
    
    
    658Additional paid-in capital
    
    
    109,578
    
    
    
    156,588Accumulated deficit
    
    
    (4,585
    )
    
    
    (673
    )Treasury stock, at cost; 2004  3,443 shares; 2003  3,443 shares
    
    
    (587
    )
    
    
    (587
    )Accumulated other comprehensive loss
    
    
    (279
    )
    
    
    (54
    )Total stockholders equity
    
    
    104,193
    
    
    
    155,932Total liabilities and stockholders equity
    
    $
    423,328
    
    
    $
    364,118
 See notes to consolidated financial statements. 40




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss For the Year
    
    
    For the ThreeEnded
    
    
    Months EndedDecember 31, 2004
    
    
    December 31, 2003Going Concern Basis(In thousands, except per share amounts)Interest income:Interest on auto installment contracts and loans
    
    $
    19,700
    
    
    $
    3,757Interest on mortgage-backed securities
    
    
    31
    
    
    
    166Interest and dividends on investment securities
    
    
    2,878
    
    
    
    1,01322,609
    
    
    
    4,936Interest expense:Interest on borrowings
    
    
    8,845
    
    
    
    3,612Net interest income
    
    
    13,764
    
    
    
    1,324Provision for credit losses
    
    
    1,612
    
    
    
    Net interest income after provision for credit losses
    
    
    12,152
    
    
    
    1,324Noninterest income:Leasing income
    
    
    12,941
    
    
    
    6,907Loan servicing income
    
    
    3,143
    
    
    
    1,132Unrealized
gains on derivative instruments, net
    
    
    1,432
    
    
    
    Unrealized losses on auto installment contracts and other loans held-for-sale
    
    
    (1,386
    )
    
    
    Loan fees and charges
    
    
    1,117
    
    
    
    213Gain (loss) on sale of assets and liabilities, net
    
    
    (1,887
    )
    
    
    842Other, net
    
    
    1,679
    
    
    
    1,24117,039
    
    
    
    10,335Noninterest expense:General and administrative:Compensation and employee benefits
    
    
    12,063
    
    
    
    2,286Occupancy and equipment
    
    
    2,445
    
    
    
    739Professional services
    
    
    5,666
    
    
    
    1,200Data processing
    
    
    1,170
    
    
    
    291Postage, telephone & travel
    
    
    1,840
    
    
    
    502Marketing
    
    
    114
    
    
    
    41Other, net
    
    
    1,913
    
    
    
    68825,211
    
    
    
    5,747Leasing expense
    
    
    9,163
    
    
    
    5,938Real estate owned operations, net
    
    
    1,255
    
    
    
    83135,629
    
    
    
    12,516Loss before income tax benefit
    
    
    (6,438
    )
    
    
    (857
    )Income tax benefit
    
    
    (2,526
    )
    
    
    (184
    )Net loss
    
    $
    (3,912
    )
    
    $
    (673
    )Basic loss per share
    
    $
    (0.59
    )
    
    $
    (0.10
    )Diluted loss per share
    
    $
    (0.59
    )
    
    $
    (0.10
    )Weighted-average basic shares outstanding
    
    
    6,585
    
    
    
    6,419Weighted-average diluted shares outstanding
    
    
    6,585
    
    
    
    6,419Net loss
    
    $
    (3,912
    )
    
    $
    (673
    )Other comprehensive loss, net of tax:Change in unrealized loss on securities available-for-sale, net of tax
benefit of $144 and $35 for the year ended December 31, 2004 and the three
months ended December 31, 2003, respectively
    
    
    (225
    )
    
    
    (54
    )Other comprehensive loss
    
    
    (225
    )
    
    
    (54
    )Comprehensive loss
    
    $
    (4,137
    )
    
    $
    (727
    )
 See notes to consolidated financial statements. 41




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Changes in Net Assets in Liquidation (Liquidation Basis) For the Nine
    
    
    For the ThreeMonths Ended
    
    
    Months EndedSeptember 30, 2003
    
    
    December 31, 2002(Dollars in thousands)Net assets in liquidation at beginning of period
    
    $
    410,064
    
    
    $
    413,675Pre-tax loss from operations
    
    
    (4,595
    )
    
    
    (6,124
    )Changes in estimated values of assets and liabilities
    
    
    (5,995
    )
    
    
    (2,761
    )Income tax benefit
    
    
    6,252
    
    
    
    4,886Net loss from operations
    
    
    (4,338
    )
    
    
    (3,999
    )Other changes in net assets in liquidation
    
    
    4,088
    
    
    
    388Net assets in liquidation at end of period
    
    $
    409,814
    
    
    $
    410,064
 See notes to consolidated financial statements. 42




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statement of Operations and Comprehensive Income For the Nine MonthsEndedSeptember 30, 2002Going Concern Basis(In thousands, exceptper share amounts)Interest income:Interest on loans and leases
    
    $
    122,208Interest on mortgage-backed securities
    
    
    8,314Interest and dividends on investment securities
    
    
    14,717145,239Interest expense:Interest on deposits
    
    
    44,509Interest on borrowings
    
    
    4,413Interest on Senior Debentures and Subordinated Notes
    
    
    11,14660,068Net interest income
    
    
    85,171Provision for losses on loans and leases
    
    
    10,700Net interest income after provision for losses on loans and leases
    
    
    74,471Noninterest income:Leasing income
    
    
    56,188Loan fees and charges
    
    
    3,571Loan servicing income
    
    
    663Account fees
    
    
    5,858Sales commissions
    
    
    5,247Gain on sale of assets and liabilities, net
    
    
    18,625Other, net
    
    
    1,41391,565Noninterest expense:General and administrative:Compensation and employee benefits
    
    
    47,704Occupancy and equipment
    
    
    13,466Professional services
    
    
    10,808Marketing
    
    
    3,875Data processing
    
    
    2,696Deposit insurance premiums and regulatory fees
    
    
    5,424Postage, telephone & travel
    
    
    4,492Other, net
    
    
    4,53693,001Other noninterest expense:Litigation settlement expense
    
    
    13,100Leasing expenses
    
    
    43,984Real estate owned operations, net
    
    
    956Provision for losses on real estate owned
    
    
    266Amortization of intangible assets
    
    
    993152,300Income from operations
    
    
    13,736Adjustment for liquidation basis
    
    
    266,510Income before income tax expense
    
    
    280,246Income tax expense
    
    
    181,792Dividends on Capital Securities
    
    
    7,873Income before cumulative effect of change in accounting principle
    
    
    90,581Cumulative effect of change in accounting principle, net of applicable taxes of $2.3 million
    
    
    (18,920
    )Net income
    
    $
    71,661
 43




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statement of Operations and Comprehensive Income (continued) For the Nine MonthsEndedSeptember 30, 2002Going Concern Basis(In thousands, exceptper share amounts)Basic earnings per share before cumulative effect of change in accounting principle
    
    $
    14.44Cumulative effect of change in accounting principle, net
    
    
    (3.01
    )Net basic earnings per share
    
    $
    11.43Diluted earnings per share before cumulative effect of change in accounting principle
    
    $
    14.35Cumulative effect of change in accounting principle, net
    
    
    (3.00
    )Net diluted earnings per share
    
    $
    11.35Weighted-average basic shares outstanding
    
    
    6,272Weighted-average diluted shares outstanding
    
    
    6,313Net income
    
    $
    71,661Other comprehensive income, net of tax
    
    
    Comprehensive income
    
    $
    71,661
 See notes to consolidated financial statements. 44




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Stockholders Equity and Net Assets in Liquidation UnrealizedGain (Loss)
    
    
    Minimum
    
    
    Debt ofRetained
    
    
    
    
    
    
    on Securities
    
    
    Pension
    
    
    EmployeeNumber of
    
    
    
    
    
    
    Additional
    
    
    Earnings
    
    
    
    
    
    
    Available-
    
    
    Liability
    
    
    Stock
    
    
    Total
    
    
    Net AssetsShares
    
    
    Common
    
    
    Paid-in
    
    
    (Accumulated
    
    
    Treasury
    
    
    for-Sale,
    
    
    Adjustment,
    
    
    Ownership
    
    
    Stockholders
    
    
    inIssued
    
    
    Stock
    
    
    Capital
    
    
    Deficit)
    
    
    Stock
    
    
    Net of Tax
    
    
    Net of Tax
    
    
    Plan
    
    
    Equity
    
    
    Liquidation(In thousands)Balance at January 1, 2002
    
    
    6,263
    
    
    $
    626
    
    
    $
    595,258
    
    
    $
    (258,047
    )
    
    $
    (808
    )
    
    $
    523
    
    
    $
    (294
    )
    
    $
    (1,071
    )
    
    $
    336,187
    
    
    $
    Exercise of stock options, including tax benefits
    
    
    12
    
    
    
    2
    
    
    
    568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    570
    
    
    
    Distribution of directors retirement plan shares
    
    
    2
    
    
    
    
    
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165
    
    
    
    Exercise of stock warrants
    
    
    5
    
    
    
    
    
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212
    
    
    
    Expense recognized on stock options with below
market strike price
    
    
    
    
    
    
    
    
    
    
    4,033
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,033
    
    
    
    Change in debt of ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,071
    
    
    
    1,071
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,661
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Liquidation adjustment on securities available-for-sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (523
    )
    
    
    
    
    
    
    
    
    
    
    (523
    )
    
    
    Liquidation adjustment on pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294
    
    
    
    
    
    
    
    294
    
    
    
    Transfer of stockholders equity to net assets in
liquidation
    
    
    
    
    
    
    (628
    )
    
    
    (600,236
    )
    
    
    186,381
    
    
    
    808
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (413,675
    )
    
    
    413,675Balance at September 30, 2002
    
    
    6,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    413,675Change in Net Assets in Liquidation from September 30,
2002 through September 30, 2003
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,861
    )Re-establish stockholders equity  October 1, 2003
    
    
    6,377
    
    
    
    638
    
    
    
    146,727
    
    
    
    
    
    
    
    (701
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,664
    
    
    
    (146,664
    )Cash distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (263,150
    )Adjustment related to re-adoption of going concern basis
accounting
    
    
    
    
    
    
    
    
    
    
    1,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,095
    
    
    
    Exercise of stock options, including tax benefits
    
    
    197
    
    
    
    20
    
    
    
    8,714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,734
    
    
    
    Exercise of stock warrants
    
    
    4
    
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    Distribution of restricted shares
    
    
    1
    
    
    
    
    
    
    
    (114
    )
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (673
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (673
    )
    
    
    Unrealized loss on securities available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    Balance at December 31, 2003
    
    
    6,579
    
    
    
    658
    
    
    
    156,588
    
    
    
    (673
    )
    
    
    (587
    )
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    155,932
    
    
    
    Exercise of stock warrants
    
    
    10
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    Distribution of directors stock-in-lieu of cash plan shares
    
    
    8
    
    
    
    1
    
    
    
    181
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    Reclassification of common stock par value to additional
paid-in-capital due to reverse stock split
    
    
    
    
    
    
    (593
    )
    
    
    593
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redemption of fractional shares
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    Cash distributions
    
    
    
    
    
    
    
    
    
    
    (47,798
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,798
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,912
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,912
    )
    
    
    Unrealized loss on securities available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225
    )
    
    
    
    
    
    
    
    
    
    
    (225
    )
    
    
    Balance at December 31, 2004
    
    
    6,597
    
    
    $
    66
    
    
    $
    109,578
    
    
    $
    (4,585
    )
    
    $
    (587
    )
    
    $
    (279
    )
    
    $
    
    
    
    $
    
    
    
    $
    104,193
    
    
    $
    
 See notes to consolidated financial statements. 45




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows For the Year Ended December 31,2004
    
    
    2003
    
    
    2002(Dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss) and certain changes in net assets in liquidation
    
    $
    (3,912
    )
    
    $
    (5,011
    )
    
    $
    67,662Adjustments to reconcile net income (loss) and certain changes in net assets in
liquidation to net cash provided by operating activities:Amortization of intangible assets
    
    
    
    
    
    
    
    
    
    
    993Net increase in auto contracts held-for-sale resulting from purchases,
net of repayments
    
    
    (39,372
    )
    
    
    (204,478
    )
    
    
    Proceeds from securitizations and/or sales of auto contracts and loans
held-for-sale
    
    
    33,823
    
    
    
    340,808
    
    
    
    Provision for credit losses
    
    
    1,612
    
    
    
    
    
    
    
    11,118Depreciation and amortization of premises and equipment
    
    
    294
    
    
    
    539
    
    
    
    3,110Depreciation and amortization of investment in operating lease assets
    
    
    8,821
    
    
    
    28,487
    
    
    
    44,452Accretion of retained interests in securitizations
    
    
    (2,345
    )
    
    
    (2,822
    )
    
    
    (1,087
    )Amortization of premiums and accretion of discount
    
    
    582
    
    
    

    (6,568
    )
    
    
    5,278Non-cash compensation expense
    
    
    
    
    
    
    
    
    
    
    4,033(Gain) loss on sale of assets and liabilities, net
    
    
    1,887
    
    
    
    (1,629
    )
    
    
    (18,706
    )Change in fair value of derivative instruments
    
    
    (1,432
    )
    
    
    1,624
    
    
    
    Unrealized loss on auto contracts and other loans held-for-sale
    
    
    1,386
    
    
    
    
    
    
    
    Decrease (increase) in restricted cash
    
    
    5,395
    
    
    
    (16,699
    )
    
    
    (15,541
    )Decrease in other assets
    
    
    5,985
    
    
    
    8,390
    
    
    
    165,812Decrease in other liabilities
    
    
    (5,731
    )
    
    
    (25,859
    )
    
    
    (11,036
    )Decrease in reserve for estimated costs during the period of liquidation
    
    
    (2,770
    )
    
    
    (28,485
    )
    
    
    (8,573
    )Adjustment for liquidation basis of accounting
    
    
    
    
    
    
    5,995
    
    
    
    (263,749
    )Adjustment to re-adopt going concern basis of accounting
    
    
    
    
    
    
    1,095
    
    
    
    Cumulative effect of change in accounting principle, net of taxes
    
    
    
    
    
    
    
    
    
    
    18,920Other, net
    
    
    1,602
    
    
    
    2,467
    
    
    
    734Net cash provided by operating activities
    
    
    5,825
    
    
    
    97,854
    
    
    
    3,420CASH FLOWS FROM INVESTING ACTIVITIESNet
(increase) decrease in auto contracts and other loans held-for-investment resulting
from purchases, net of repayments
    
    
    (151,304
    )
    
    
    
    
    
    
    11,919Decrease in investment in operating lease assets
    
    
    47,453
    
    
    
    85,475
    
    
    
    103,892Purchases of mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    (60,499
    )Purchases of investment securities
    
    
    
    
    
    
    (9,485
    )
    
    
    (78,480
    )Principal repayments on mortgage-backed securities
    
    
    590
    
    
    
    13,236
    
    
    
    138,448Principal repayments on investment securities
    
    
    7,876
    
    
    
    14,314
    
    
    
    47,413Proceeds from securitizations and/or sales of loans held-for-sale,
excluding $326.0 million net loan sale to U.S. Bank on November 1, 2002
    
    
    
    
    
    
    
    
    
    
    1,690,902Proceeds from sale of mortgage-backed securities available-for-sale
    
    
    5,632
    
    
    
    12,523
    
    
    
    181,772Proceeds from sale of investment securities available-for-sale
    
    
    
    
    
    
    2,735
    
    
    
    75,466Proceeds from retained interests in securitizations
    
    
    
    
    
    
    4,380
    
    
    
    Proceeds from sales of real estate owned
    
    
    690
    
    
    
    2,702
    
    
    
    6,684Additions to premises and equipment, net
    
    
    (650
    )
    
    
    (152
    )
    
    
    (448
    )Decrease in investment in stock of the Federal Home Loan Bank of San Francisco
    
    
    
    
    
    
    16,075
    
    
    
    8,082Decrease (increase) in investment in stock of the Federal Reserve Bank
    
    
    
    
    
    
    13,659
    
    
    
    (1,793
    )Net cash
(used in) provided by investing activities
    
    
    (89,713
    )
    
    
    155,462
    
    
    
    2,123,358
 46




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued) For the Year Ended December 31,2004
    
    
    2003
    
    
    2002(Dollars in thousands)CASH FLOWS FROM FINANCING ACTIVITIESNet increase (decrease) in deposits
    
    
    
    
    
    
    (224,189
    )
    
    
    291,545Sale of deposits and other liabilities to U.S. Bank, net of $326.0 million of
loans and $5.1 million of other assets
    
    
    
    
    
    
    
    
    
    
    (2,503,163
    )Proceeds from advances from the Federal Home Loan Bank of San Francisco
    
    
    
    
    
    
    
    
    
    
    2,490,000Repayment of advances from the Federal Home Loan Bank of San Francisco
    
    
    
    
    
    
    
    
    
    
    (2,490,000
    )Repayment of Subordinated Debt
    
    
    
    
    
    
    
    
    
    
    (154,563
    )Proceeds from warehouse credit facility borrowings
    
    
    275,484
    
    
    
    160,054
    
    
    
    Repayment of warehouse credit facility borrowings
    
    
    (114,950
    )
    
    
    (21,833
    )
    
    
    Net decrease in other borrowings
    
    
    (14,160
    )
    
    
    (44,614
    )
    
    
    (75,567
    )Redemption of Capital Securities
    
    
    (22,000
    )
    
    
    (68,000
    )
    
    
    Proceeds from issuance of common stock
    
    
    196
    
    
    
    12,225
    
    
    
    1,609Dividends paid to preferred stockholders
    
    
    
    
    
    
    
    
    
    
    (273
    )Cash distributions paid to common stockholders
    
    
    (47,798
    )
    
    
    (263,150
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    76,772
    
    
    
    (449,507
    )
    
    
    (2,440,412
    )Net decrease in cash and cash equivalents
    
    
    (7,116
    )
    
    
    (196,191
    )
    
    
    (313,634
    )Cash and cash equivalents at beginning of year
    
    
    11,563
    
    
    
    207,754
    
    
    
    521,388Cash and cash equivalents at end of year
    
    $
    4,447
    
    
    $
    11,563
    
    
    $
    207,754Cash paid during the year for:Interest
    
    $
    8,552
    
    
    $
    13,013
    
    
    $
    97,803Income taxes
    
    $
    449
    
    
    $
    13,534
    
    
    $
    1,771Supplemental non-cash investing and financing activities:Loans transferred to real estate owned
    
    $
    
    
    
    $
    6,970
    
    
    $
    387Auto contracts transferred from held-for-sale to held-for-investment
    
    $
    103,067
    
    
    $
    
    
    
    $
    Loans transferred from held-for-investment to held-for-sale
    
    $
    
    
    
    $
    
    
    
    $
    2,289,672Loans securitized and transferred to securities available-for-sale
    
    $
    
    
    
    $
    9,485
    
    
    $
    22,638
 See notes to the consolidated financial statements. 47




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##### Table of Contents



Bay View Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2004 Note 1. Basis of Presentation Bay View Capital Corporation (the Company, we, us or our) is a financial services
company headquartered in San Mateo, California. The accompanying consolidated financial statements include the accounts of the Company, a
Delaware corporation, and our wholly owned subsidiaries: Bay View Acceptance Corporation (BVAC),
a Nevada corporation, along with its subsidiaries, Bay View Receivables Corporation, a Delaware
corporation and Bay View Transaction Corporation, a Delaware corporation; and our subsidiaries, Bay
View Securitization Corporation, a Delaware corporation; Bay View Capital I, a Delaware business
trust; FMAC Insurance Services, a Delaware corporation; FMAC 2000-A Holding Company, a California
corporation; FMAC Franchise Receivables Corporation, a California corporation; Bay View Commercial
Finance Group, a California corporation; XBVBKRS, Inc., a California corporation; MoneyCare, Inc.,
a California corporation; Bay View Auxiliary Corporation, a California corporation; and Bay View
Bank, N.A. (the Bank), a national bank which was dissolved effective September 30, 2003. All
significant intercompany accounts and transactions have been eliminated. The consolidated financial statements as of December 31, 2004 and 2003 and for the year ended
December 31, 2004, the three months ended December 31, 2003 and the nine months ended September 30,
2002 have been prepared in conformity with accounting principles generally accepted in the United
States of America (GAAP), on a going concern basis. The consolidated financial statements for
the nine months ended September 30, 2003 and for the three months ended December 31, 2002 have been
prepared, in accordance with GAAP, under liquidation basis accounting. On June 30, 2004, the Company effected a 1-for-10 reverse stock split of the issued and
outstanding shares of the Companys common stock, and as a result, the number of issued shares was
reduced from 65,910,689 shares prior to the reverse stock split to 6,590,461 shares following the
reverse stock split, including an adjustment for fractional shares. The Companys issued common
stock totaled 6,597,303 shares at December 31, 2004. The reverse stock split did not impact the
par value of the common stock, which remains at $0.01 per share. Accordingly, the aggregate value
of the issued common stock on the Companys balance sheet was reduced by reclassifying the
cumulative par value of the eliminated shares of common stock to additional paid-in capital. All
shares outstanding and per share amounts are presented on a post-reverse stock split basis for all
periods reported. Plan of Dissolution and Stockholder Liquidity On October 3, 2002, a special meeting of the Companys stockholders was held to vote on the
Companys proposed plan of dissolution and stockholder liquidity (the Plan) and the sale of the
Banks retail banking assets to U.S. Bank. Both of these proposals were approved by a majority of
the common stockholders. As a result of these approvals and the close of the U.S. Bank transaction
on November 1, 2002, the Company adopted liquidation basis accounting effective September 30, 2002
in accordance with GAAP. Accordingly, assets were valued at their estimated net realizable values
and liabilities included accruals for estimated costs associated with carrying out the Plan. In
accordance with liquidation basis accounting, our stockholders equity was transferred to net
assets in liquidation. Our net assets in liquidation totaled $410.1 million at December 31, 2002
or $64.30 in net assets in liquidation per outstanding share based on 6,374,716 diluted shares in
liquidation. The Plan outlined the steps necessary to liquidate the Company, including the sale of the
Banks retail banking assets to U.S. Bank. Following the sale, the remaining assets of the Company
were to be sold in an orderly manner and the liabilities and expenses were to be paid, including
the outstanding debt of both the Company and the Bank and the Capital Securities. Once these
transactions were completed, the Company would distribute the net proceeds of the asset sales to
its stockholders. 48




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##### Table of Contents



On November 1, 2002, the Company completed the U.S. Bank transaction. At the closing of the
transaction, U.S. Bank paid the Bank the sum of: (i) a 14% deposit premium (based on the average
daily balances of deposits for the 30 calendar days ending on the business day prior to the closing
date) plus $5.0 million, or approximately $463.7 million; (ii) the principal amount of the loans
acquired of approximately $337.2 million less a loan loss reserve of approximately $2.2 million;
(iii) the net book value of real property and personal property utilized by the branches and
improvements thereto and other assets assumed of approximately $15.2 million and (iv) the face
amount of coins and currency of approximately $9.8 million. The Bank paid to U.S. Bank at the
closing an amount equal to the deposits being assumed by U.S. Bank of approximately $3.3 billion,
less the amounts payable by U.S. Bank to the Bank as described above. The Company and the Bank obtained regulatory approvals necessary for the early redemption of
their outstanding debt securities in the fourth quarter of 2002. The Companys $100.0 million of
9.125% Subordinated Notes were redeemed at the applicable price of par plus a premium of 4.563% on
November 29, 2002 and the Banks $50.0 million of 10% Subordinated Notes were redeemed at par on
December 9, 2002. After receiving the required regulatory approvals, the Company paid the accrued distributions
and interest of $24.5 million on the Capital Securities on December 31, 2002. The Company initially recorded pre-tax income totaling $266.5 million related to the
mark-to-market adjustments in its assets and liabilities in connection with its adoption of
liquidation basis accounting for the quarter ended September 30, 2002. The valuation adjustments
primarily consisted of the following:  
    $463.7 million deposit premium, which was calculated as 14% of non-brokered retail deposits based on October average
deposit levels plus $5.0 million pursuant to the agreement with U.S. Bank;
    $91.0 million reduction in goodwill related to the deposits being sold;
    $37.0 million mark-to-market reduction related to loan balances reflecting the Companys estimated net realizable value
of its remaining loan portfolios under an accelerated timeline to sell such loans pursuant to the plan of dissolution
and stockholder liquidity;
    $51.1 million in charges related to the sale of the Companys retail banking assets including $26.6 million in
severance payments, $12.7 million in investment banking and other professional fees, and $11.8 million in net accruals
for closed facilities and other contracts and settlements;
    $8.8 million in charges related to the prepayment of the Companys and the Banks Subordinated Notes including a $4.2
million write-off of issuance costs and $4.6 million in prepayment penalties;
    $4.9 million write-off of franchise loan securitization residual assets; and
    $3.7 million write-off of unamortized issuance costs on the Capital Securities in anticipation of these securities
being called in 2003. The Company recorded an additional $6.0 million and $2.8 million net pre-tax adjustments
related to mark-to-market valuation of its assets and liabilities for the first nine months of 2003
and the quarter ended December 31, 2002, respectively. The valuation adjustments were primarily
due to decreases in the market value of the auto lease and the loan portfolio. 49




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Plan of Partial Liquidation Because of changing market conditions in the auto finance sector, we believed that the
near-term sale or distribution of the stock of BVAC to stockholders was no longer the best method
of achieving maximum stockholder value. Accordingly, during the fourth quarter of 2003, the
Companys Board of Directors amended the Plan and converted it to a plan of partial liquidation
(the Amended Plan) under which the Company will complete the liquidation of the assets and
satisfaction of the liabilities it assumed from the Bank after the Banks September 30, 2003
dissolution, distribute the proceeds to its stockholders through a series of cash distributions,
and continue to operate BVAC on an ongoing basis. In accordance with the Amended Plan, the Company
distributed $40.00 per share in cash to common stockholders on December 30, 2003. The Company
intends to make further distributions of the proceeds to its stockholders through a series of cash
distributions. The decision to engage in a partial liquidation and continue to operate BVAC on an ongoing
basis, warranted the termination of our use of the liquidation basis of accounting. Effective
October 1, 2003, the Company discontinued the use of the liquidation basis of accounting and
re-adopted the going concern basis of accounting. Accordingly, the Company re-established its
stockholders equity effective October 1, 2003. For the period from September 30, 2002 through
September 30, 2003, the Company used the liquidation basis of accounting. In connection with its re-adoption of the going concern basis of accounting, we recognized
$0.7 million of pre-tax expense and $1.1 million of additions to stockholders equity, recording
the following adjustments   
    Goodwill: Re-established the $1.8 million of goodwill that existed prior to our adoption
of the liquidation basis of accounting; this goodwill related to our acquisition of BVACs
predecessor entity, California Thrift & Loan
    Premium on investment in BVAC: Reversed $10.0 million of premium over the book value of
BVAC, which was recorded as deferred gain under the liquidation basis of accounting,
restoring the historical cost basis in our equity investment in BVAC
    Installment contracts: Reversed unrealized gains which were recorded under the
liquidation basis of accounting and restored the lower of cost or market valuation
    Mortgage-backed securities: Restored Statement No. 115 available-for-sale accounting
    Accrued liabilities: Reversed $1.7 million of accruals related to certain severance and
occupancy costs which were recorded under the liquidation basis of accounting
    Stockholders equity: Restored stockholders equity as of October 1, 2003 In accordance with the Amended Plan, the Company made an initial cash distribution of $263.2
million, or $40.00 per share to its stockholders on December 30, 2003. The Company also paid cash
distributions of $2.50 per share at June 30, 2004, $2.50 per share at September 30, 2004 and $2.25
per share at December 31, 2004 for a total of $47.8 million. Note 2. Summary of Significant Accounting Policies Going Concern Basis The Companys reported financial position as of December 31, 2004 and 2003, and its results of
operations for the year ended December 31, 2004, the three-month period ended December 31, 2003 and
the nine-month period ended September 30, 2002 have been prepared on a going concern basis. The
following is a description of the significant accounting policies applicable to these financial
statements. Basis of Financial Presentation and Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and 50




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liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Material
estimates particularly susceptible to possible changes in the near term relate to the determination
of the allowance for credit losses, the investment in operating lease assets, retained interests in
securitizations and deferred tax assets. Cash and Cash Equivalents Cash and cash equivalents consist of cash and highly liquid financial instruments, with
maturities of 90 days or less at the time of purchase, that are readily convertible into cash and
are so near their maturity that they present insignificant risk of changes in value. Generally, the Companys banking depositories either pay interest on deposits or apply an
imputed interest credit to deposit balances which is used as an offset to charges for banking
services rendered. The Company has no compensating balance arrangements with banks. Restricted Cash Restricted
cash includes cash collateral provided to counterparties to BVACs hedging contracts to meet margin
requirements, cash collateral provided to cure potential borrowing base deficiencies on BVACs
warehouse credit facility, cash payments received from our customers that are
in-transit to trust accounts for BVACs auto securitization
trusts, cash collateral pledged to secure a letter of credit, and cash
collateral pledged in connection with financing secured by the Companys auto lease portfolio
cash flows as well as cash collateral pledged in connection with the Companys servicing of a
multi-family loan pool and other contractual obligations. Securities Securities are identified as either available-for-sale or held-to-maturity at purchase and
accounted for accordingly. Net unrealized gains and losses on securities available-for-sale are
excluded from earnings and reported, net of applicable income taxes, as a separate component of
stockholders equity. Gains and losses on sales of securities are recorded in earnings at the time
of sale and are determined by the difference between the net sale proceeds and the amortized cost
of the securities, using the specific identification method. Historically, unrealized losses on
securities were realized and charged against earnings when it was determined that a decline in
value which was other than temporary had occurred. Discounts and premiums on securities are amortized into interest income using a method
approximating the effective interest method over the estimated life of the security, adjusted for
actual prepayments. 51




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Loans and Leases The Company continues to purchase auto contracts through BVAC but ceased all other loan
production activities during the fourth quarter of 2002. Auto Contracts Auto contracts purchased by the Company are designated as either held-for-sale or
held-for-investment. Auto contracts held-for-sale are classified as such because the Company does not intend to
hold these contracts to maturity. Auto contracts designated as held-for-sale are recorded at cost
including premiums paid to dealers, and deferred fees and costs, and are subsequently carried at
the lower of cost or estimated fair value. Estimated fair value for these contracts is based on
prices for similar contracts in the secondary whole loan or securitization markets. Net unrealized
losses, if any, are recognized through a valuation allowance by charges to earnings. When a
contract held-for-sale is either charged-off or paid off, unamortized dealer premiums, and deferred
fees and costs are written off against noninterest income. All other auto contracts are designated as held-for-investment and are recorded at cost

including premiums paid to dealers, and deferred fees and costs. The dealer premiums, and deferred
fees and costs are capitalized at the time the loan is granted. The Company recognizes these
dealer premiums, and deferred fees and costs as yield adjustments over the life of the related
contracts using an amortization method approximating the effective interest method. When a
contract is charged-off, sold or paid off, unamortized dealer premiums, and deferred fees and costs
are written off against interest income at that time. Auto contracts transferred from the held-for-sale portfolio to the held-for-investment
portfolio are recorded at the lower of cost or estimated fair value upon transfer. Nonperforming auto contracts are defined as contracts which are 90 days or more delinquent as
to principal and interest payments unless the principal and interest are well secured and in the
process of collection. The Company charges off auto contracts and
reverses related accrued interest receivable when the contracts
become 120 days delinquent. The Company
may also designate contracts which are less than 90 days delinquent as nonperforming when the full
collection of principal and/or interest is doubtful. The Company generally recognizes interest
income on impaired contracts on a cash basis when received. Other Loans Prior to September 30, 2002, the Company originated or purchased single-family, multi-family
and commercial real estate loans, home equity loans and lines of credit, franchise loans,
asset-based loans, factoring loans and commercial leases. The Company ceased its single-family
loan origination operations in 1996. Loans and leases that were originated or purchased were
identified as either held-for-sale or held-for-investment. Loans and leases held-for-investment
were recorded at cost including premiums or discounts, deferred fees and costs and the allowance
for credit losses. Loans and leases classified as held-for-sale primarily consisted of franchise
loans. Loans and leases classified as held-for-sale were carried at the lower of cost or market on
an aggregate basis for each loan and lease 52




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type. Market value for these loans and leases was based on prices for similar loans and
leases in the secondary whole loan or securitization markets or estimates of proceeds to be
obtained through a workout and payoff. Interest on loans and leases was accrued as income to the
extent considered collectible. Loans and leases classified as held-for-investment were carried at
amortized cost and were not adjusted to the lower of cost or market because the Company had the
ability and the intent to hold these loans and leases for the foreseeable future. Generally,
interest accruals on loans and leases 90 days or more past due were discontinued. Interest income
on nonaccrual loans and leases was generally recognized on a cash basis when received. The Company charged fees for originating loans and leases at the time the loan or lease was
granted. The origination fees were recognized, net of certain direct costs where applicable, as a
yield adjustment over the life of the related loan or lease using the effective interest method or
an approximate equivalent if not materially different. Amortization of net deferred origination
fees was discontinued on nonperforming loans and leases. When a loan or lease paid off,
unamortized net deferred origination fees were included in interest income at that time. When a
loan or lease was sold, unamortized net deferred origination fees were included in the gain or loss
on the sale. Impairment of a loan occurs when, based on current information and events, it was probable
that the Company was unable to collect all amounts due according to the contractual terms of the
loan agreement. The Company considered nonperforming loans and troubled debt restructurings as
impaired loans. Nonperforming loans were defined as loans 90 days or more delinquent as to
principal and interest payments unless the principal and interest were well secured and in the
process of collection. The Company also designated loans less than 90 days delinquent as
nonperforming when the full collection of principal and/or interest was doubtful. Troubled debt
restructurings were loans which were modified based upon interest rate concessions and/or payment
concessions. Homogeneous loans were collectively evaluated on an aggregate basis for impairment.
The Company historically considered its single-family residential and home equity loans as
homogeneous loans. Impaired loans were measured based upon the present value of expected future
cash flows discounted at the loans effective interest rate or, as a practical equivalent, at the
loans observable market price or the fair value of the collateral if the loan was collateral
dependent. Impaired real estate-based loans were generally measured based on the fair value of the
collateral because they were collateral dependent. The Company generally recognized interest
income on impaired loans on a cash basis when received. Charge-offs were recorded on impaired loans through September 30, 2002 for the difference
between the valuation of the loan and the recorded investment, net of any specific allowance. In
determining charge-offs for specific loans, management evaluated the creditworthiness and financial
status of the borrower and also analyzed cash flows and current property appraisals. Allowance for Credit Losses The allowance for credit losses on auto contracts held-for-investment is established through a
provision charged to expense and maintained at a level that the Company believes is sufficient to
cover estimated probable losses in this loan portfolio. The Company considers BVACs portfolio of
auto contracts to be comprised of relatively small balance, homogeneous receivables and,
accordingly, determines its allowance for credit losses in accordance with Statement of Financial
Accounting Standards No. 5, Accounting for Contingencies. The allowance for credit losses is
evaluated and adjusted on a quarterly basis. In determining the level of the allowance for credit losses, the Company evaluates BVACs auto
contracts held-for-investment using two methodologies. The primary methodology is based upon an
analysis of BVACs historical loss experience using a vintage analysis of its past purchases of
auto contracts from which BVAC predicts probable losses that are inherent in its portfolio of auto
contracts held-for-investment. Under this method, the Companys historical credit loss experience
is stratified by quarter and correlated with the related auto contracts that have been similarly
stratified by the number of quarters that have elapsed since date of purchase. This credit loss
data is derived from static pool information that has been internally collected on the historical
loss experience of the BVACs portfolio of managed auto contracts. The Company defines managed
auto contracts as the sum of BVACs warehouse inventory of auto contracts receivable plus auto
contracts that have been securitized and/or sold with 53




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servicing retained by BVAC. The Company also uses a secondary method for evaluating the allowance
for credit losses. This secondary method, a roll rate analysis, projects the migration of
quarter-end auto contracts held-for-investment from current payment status through 30- , 60- and
90-day delinquent status to charge-off and correlates this projection with loss reserve factors. These methodologies incorporate quantitative as well as qualitative factors, including
historical loss experience, changes in underwriting practices, changes in the credit quality of
contracts and an assessment of economic conditions. Loan Sales and Retained Interests in Securitizations BVAC has periodically transferred a portion of its warehouse
inventory of auto contracts held-for-sale to trusts that, in
turn, issue asset-backed securities to investors. The Company
has structured these transactions as sales in accordance with
Statement of Financial Accounting Standards No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, and recognized a gain
on the sale of the auto contracts to the trusts 
which represents the difference between the sum of sale
proceeds, net of transaction costs, and cash deposited into a
securitization trust account in order to enhance the credit
rating of the asset-backed securities and the sum of the
Companys net carrying value of the auto contracts and the
present value of future excess cash flow anticipated to be
distributed to us by the trust over the life of the asset-backed
securities  and an asset which is referred to as a
retained interest in the securitization. The retained interest is comprised of the cash initially
deposited into the securitization trust account and the present
value of the future excess cash flow anticipated to be
distributed to the Company by the trust over the life of the
asset-backed securities. These estimated future cash
flows  which are comprised of interest income
received on the auto contracts less interest paid to investors
in the asset-backed securities, credit losses and trust
expenses  are initially retained by the trust to
build the trust cash account to pre-designated levels and
provide further credit enhancement. Once the pre-designated
levels of cash are attained, the trust distributes the excess
cash flow to BVAC. In recording the gain on sale and the
retained interest, the Company has made assumptions in
calculating the present value of the future excess cash flow
anticipated to be distributed to the Company by the trust over
the life of the asset-backed securities and recording the
retained interest. The Company designates retained interests as available-for-sale
and carries them at fair value. Retained interests are
subordinate to investor interests in the related asset-backed
securities, their value is subject to credit and prepayment
risks in the pool of underlying auto contracts. The Company is
not aware of an active secondary market for retained interests
and, accordingly, estimates the fair value of its retained
interests by calculating the present value of the future excess
cash flow anticipated to be received, using managements
best estimates of key valuation assumptions including credit
losses, prepayment speeds and discount rates commensurate with
the underlying risks in the anticipated future cash flow.
Changes in these assumptions due to differing actual experience
or market conditions could affect the value of the
Companys retained interests. During 2002, the Company wrote off the balance of its retained
interests in franchise loan securitizations totaling
$4.9 million upon its adoption of liquidation basis
accounting. There were no impairment charges related to retained
interests during 2004 and 2003. The Company recorded impairment
charges relating to retained interests of $12.6 million for
the year ended December 31, 2002. Loan Sales and Servicing Prior to adopting Statement of Financial Accounting Standards No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, the Company
recorded servicing assets, in accordance with Statement
of Financial Accounting Standards No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, for the present value of any
retained interest in a transferred asset representing servicing fees net of related costs.
Retained interests in excess of such servicing fees were recorded on a net present value basis and
classified as available-for-sale securities at fair value. There were no servicing assets at
December 31, 2004. The balance of these assets was $0.1 million at December 31, 2003. There were
no impairment charges for 2004 and 2003. Amortization of servicing assets and any related
impairments are included in noninterest income and noninterest expense, respectively, as the
associated servicing revenue is received and expenses are incurred. Gains or losses on the securitizations and/or sales of loans and leases were recorded in
earnings at the time of the transaction when control over the loans and leases was surrendered and
consideration other than beneficial interests in the loans and leases was received. 54




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Investment in Operating Lease Assets The Company purchased and/or originated auto leases characterized as operating leases from
March 1998 through June 2000. The asset was recorded as a fixed asset and depreciated on a
straight-line basis over the lease term to its estimated residual value. This depreciation and
other related expenses, including the amortization of initial direct costs that are deferred and
amortized over the lease term, are classified as noninterest expense. Lease payments received are
recorded as noninterest income. Lease asset balances were $37.3 million and $139.4 million at
December 31, 2004 and 2003, respectively. Accumulated depreciation and amortization related to the
lease assets totaled $27.3 million and $72.7 million at December 31, 2004 and 2003, respectively.
At December 31, 2004, future minimum lease payments to be received by the Company under operating
leases were $1.7 million for the year ending December 31, 2005. The Company performs a quarterly impairment analysis of its automobile operating lease
portfolio in accordance with Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which the Company adopted effective January 1,
2002. There was no financial statement impact upon adoption of Statement No. 144. A lease is
considered impaired if its gross future undiscounted cash flows are less than the net book value of
the lease. The net book value of the lease is defined as the original capitalized cost of the
automobile, including initial direct capitalized costs, less the cumulative amount of depreciation
recorded against the automobile and the cumulative amount of amortization of the initial direct
capitalized costs recorded since the inception of the lease and less any impairment charges
recorded-to-date on that lease. In determining gross future undiscounted cash flows, the Company contracts with Automotive
Lease Guide, commonly referred to as ALG, to provide estimates of the residual value of the
underlying vehicles at the end of their lease terms assuming that the vehicles are in average
condition. The Company then estimates the probability that (i.) the automobiles will be purchased
by the lessee prior to the end of the lease term, (ii.) the automobile will be purchased by the
lessee at the end of the lease term, either at a discount or at the full contractual residual
amount, or (iii.) the automobile will be returned at the end of the lease term. These
probabilities are estimated using a number of factors, including the Companys experience-to-date
and industry experience. Using the projected ALG residual values, the Companys experience-to-date relative to the
projected ALG residual values (for example, for vehicle classes where actual amounts realized were
less than what ALG had projected, the Company reduces the projected ALG residual values to equal
the Companys experience-to-date), and the probabilities of each of the three disposition scenarios
discussed above occurring, the Company determines a probability-weighted gross future undiscounted
cash flow for each automobile lease. For those leases where the gross future undiscounted cash
flows are less than net book value, the lease is considered impaired. For those leases considered impaired, the Company then estimates the fair value of the lease.
The fair value is determined by calculating the present value of the future estimated cash flows
again assuming the probabilities of each of the three disposition scenarios. The present value is
calculated using current market rates, which the Company estimates as the original contract lease
rate. An impairment charge is then recorded for the difference between the carrying value and the
estimated fair value. There were no impairment charges recorded for the year ended December 31,
2004. The Company recorded impairment charges of $8.5 million for the year ended December 31,
2003. At December 31, 2004, there were no vehicles in the Companys auto lease portfolio that were
considered impaired under Statement No. 144. At December 31, 2004 and 2003, the Company had
allowances of $6.1 million and $18.0 million, respectively,
for impairment and additional monthly
depreciation charges, net of losses, against its automobile operating lease portfolio. 55




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Real Estate Owned Real estate owned is comprised of property acquired through foreclosure and is recorded at the
lower of cost (i.e., net loan value) or fair value less estimated costs to sell, as of the date of
foreclosure. The difference upon foreclosure, if any, is charged to earnings for adverse changes
in the fair value of the property. Prior to September 2002, the difference upon foreclosure, if
any, was charged-off against the allowance for losses on loans and leases. Revenues and other
expenses associated with real estate owned are realized and reported as a component of noninterest
expense when incurred. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are computed on a straight-line basis over the estimated useful lives
for each of the various asset categories. These useful lives range from two to ten years. Intangible Assets Goodwill and other intangible assets were written off as of September 30, 2002 with the
adoption of liquidation basis accounting. The goodwill and core deposit intangibles associated
with the deposits sold to U.S. Bank were realized in anticipation of the close of that transaction.
As a result of the Companys re-adoption of going concern basis accounting as of October 1, 2003,
goodwill of $1.8 million was re-established in BVAC related to the acquisition of California Thrift
& Loan in 1996. As required by the provisions of Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets, which the Company adopted as of January 1, 2002, this
goodwill is tested for impairment annually. During 2002, the Company recorded $18.9 million in impairment charges, net of taxes, for
goodwill related to three of the Companys commercial lending businesses which was not expected to
be realized upon the disposition of these businesses. As required by the transitional provisions
of Statement No. 142, the impairment loss was measured and recorded as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle as of January 1, 2002. Prior to September 30, 2002, core deposit premiums arose from the purchase of deposits and
were amortized using an accelerated method over the estimated life of the deposit base acquired,
generally eight to ten years. The Company continually evaluated the periods of amortization to
determine whether later events and circumstances warranted revised estimates. In addition, the
market value of core deposit premiums was re-evaluated on an annual basis to assess if any
impairment existed and to determine the carrying value that was eligible to be included as a
component of regulatory capital. Goodwill was amortized to expense on a straight-line basis over periods of up to 20 years. On
a periodic basis, the Company reviewed its goodwill for events or changes in circumstances that
indicated that the estimated undiscounted future cash flows from these acquisitions was less than
the carrying amount of the goodwill. If it became probable that impairment existed, a reduction in
the carrying amount was recognized. Income Taxes The Company files consolidated federal income tax returns in which its taxable income or loss
is combined with that of its subsidiaries. Consolidated, combined and separate company state tax
returns are filed in certain states, as applicable, including California. Each subsidiarys share
of income tax expense (benefit) is based on the amount which would be payable (receivable) if
separate returns were filed. The Companys income tax provisions are based upon income taxes payable for the current period
as well as current period changes in deferred income taxes. Deferred income taxes are recognized
for the tax consequences of temporary differences by applying enacted statutory income tax rates
applicable to future years to differences 56




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between the financial statement carrying amounts and the tax basis of existing assets and
liabilities. The effect on deferred income taxes for a change in tax rates is recognized through
the provision for income taxes during the period of enactment. Liquidation Reserve The liquidation reserve represents a liability for estimated severance, costs related to
facilities closures, estimated litigation settlements and related legal costs and other costs
associated with the completion of remaining liquidating activities arising from the Companys
adoption of the Amended Plan during the fourth quarter of 2003, and its resultant re-adoption of
going concern basis accounting as of October 1, 2003. The liquidation reserve is accounted for in
accordance with Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. At December 31, 2004, the remaining balance of the liquidation reserve was $8.9 million
including accruals for severance, facilities, and litigation and other costs of $1.3 million, $6.0
million and $1.5 million, respectively. The following table sets forth balances and activity in
the liquidation reserve as of and for the periods indicated: Severance(1)
    

    
    Facilities(2)
    

    
    Litigation/Other(3)
    

   
    Total(Dollars in thousands)Balance at December 31, 2002
    
    $
    28,619
    
    
    $
    9,388
    
    
    $
    5,946
    
    
    $
    43,953Reversals
    
    
    (1,739
    )
    
    
    (658
    )
    
    
    (1,238
    )
    
    
    (3,635
    )Payments
    
    
    (24,866
    )
    
    
    (2,351
    )
    
    
    (1,475
    )
    
    
    (28,692
    )Balance at December 31, 2003
    
    $
    2,014
    
    
    $
    6,379
    
    
    $
    3,233
    
    
    $
    11,626Accruals (reversals)
    
    
    613
    
    
    
    485
    
    
    
    (1,313
    )
    
    
    (215
    )Payments
    
    
    (1,313
    )
    
    
    (861
    )
    
    
    (381
    )
    
    
    (2,555
    )Balance at December 31, 2004
    
    $
    1,314
    
    
    $
    6,003
    
    
    $
    1,539
    
    
    $
    8,856
   (1)
    
    For the year ended December 31, 2003, reversals include a $0.9 million
reduction of accrued severance cost which had
been recorded prior to October 1, 2003, under liquidation basis accounting, and a $0.8
million reduction of accrued
severance due to employee resignations which reduced severance obligations. For the year
ended December 31, 2004,
accruals (reversals) represent the cost of additional reductions-in-force which increased
severance obligations.(2)
    
    For the year ended December 31, 2003, reversals represent a reduction of accrued
facilities costs which had been recorded
prior to October 1, 2003, under liquidation basis accounting. For the year ended December
31, 2004, accruals (reversals)
represent additional abandonment cost attributable to projected delays in subleasing
vacated space.(3)
    
    For the year ended December 31, 2003, reversals represent a reduction of accrued
litigation cost due to resolution of
previously pending litigation. For the year ended December 31, 2004, accruals (reversals)
primarily reflect a reduction of
accrued litigation attributable to settlements. Derivative Instruments The Company uses derivative instruments to reduce its exposure to interest rate risk embedded
in BVACs fixed-rate auto contracts which are funded by floating-rate financing.  Rising interest
rates reduce the net interest spread produced by the auto contracts, a primary component of our
profitability, as well as the economic value of the inventory of auto contracts.  Additionally,
under the terms of BVACs warehouse credit facility, the indenture trustee maintains derivative
instruments to provide interest rate risk protection to BVACs lenders.  We account for these
derivative instruments in accordance with Statement of Financial Accounting Standards No. 133,
Accounting for Derivatives and Hedging Activities. Statement No. 133 establishes accounting and reporting standards for derivative instruments and requires
that derivative instruments (including certain derivative instruments embedded in other contracts)
be recorded in the statement of financial condition as either an asset or liability measured at its
fair value. Statement No. 133 further dictates that the accounting treatment for gains or losses
from changes in the derivative instruments fair value is contingent on whether the derivative
instrument qualifies as a hedge under the standard. Derivative instruments must qualify and
be designated as hedges upon their inception and must be effective in substantially reducing the
risk arising from the asset or liability identified as exposing the Company to risk throughout the
hedge period in order to receive hedge accounting treatment. To qualify as hedges, among other
things, derivative instruments must be linked to specific assets or liabilities or pools of
similar assets or liabilities. If the derivative instrument does not qualify as a hedge, the gains
or losses are reported in the consolidated statement of income when they occur. If the derivative
instrument qualifies and is designated as a hedge under the standard, depending on the type of risk
being hedged, the gains and losses are either reported in the consolidated statement of income,
offsetting the fair value change in the hedged item, or reported as accumulated other comprehensive
income in the equity section of the consolidated statement of financial condition. If a hedged
asset or liability is sold or paid off before maturity of the hedging derivative, the derivative is
closed out or settled, and any net settlement amount upon the close-out or termination of the
derivative is recognized in earnings. The standard requires that an entity formally document,
designate and assess the effectiveness of transactions that receive hedge accounting. The Companys derivative
instruments outstanding at December 31, 2004 were comprised of interest rate swap contracts and
interest rate caps.  In accordance with Statement No. 133, these derivative instruments are
accounted for as assets or liabilities and recorded at fair value.
Because these derivatives were not formally designated as hedges,
which is required to use hedge accounting, changes in fair
values are charged or credited to earnings. In using derivative instruments, the Company is exposed to potential losses (credit risk) in
the event of nonperformance by the counterparties to the agreements. The Company manages the
credit risk associated with derivative instruments by adhering to a strict counterparty selection
process and by establishing maximum exposure limits with individual counterparties. 57




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Stock-Based Compensation Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation
 Transition and Disclosure, amends Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation and provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based employee
compensation. It also amends required disclosures about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. Statement No. 123 established financial accounting and reporting standards for stock-based
compensation plans, including employee stock purchase plans, stock options and restricted stock.
Statement No. 123 encourages all entities to adopt a fair value method of accounting for
stock-based compensation plans, whereby compensation cost is measured at the grant date based upon
the fair value of the award and is realized as an expense over the service or vesting period.
However, Statement No. 123 also allowed an entity to continue to measure compensation cost for
these plans using the intrinsic value method of accounting prescribed by Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees. The Company accounts for stock-based awards to employees and directors using the intrinsic
value method of accounting in accordance with Accounting Principles Board Opinion (APB) No. 25.
Under the intrinsic value method, compensation cost is generally the excess, if any, of the quoted
market price of the stock at the grant or other measurement date over the exercise price. The
Company adopted the disclosure requirements of Statement No. 148 as of December 31, 2002. Compensation expense of $2.0 million was recorded in 2002 based on APB 25. There was no
compensation expense recorded under APB 25 for the year ended December 31, 2004 and the three
months ended December 31, 2003. Had compensation expense related to the Companys stock option
awards to employees and directors been determined under the fair value method prescribed under
Statement No. 123, it would have recorded an additional $2.0 million of expense in 2002. Pro forma
calculations of the net loss and loss per share are set forth in the table below for the periods
indicated: For the Year
    
    
    For the Three
    
    
    For the NineEnded
    
    
    Months Ended
    
    
    Months EndedDecember 31,
    
    
    December 31,
    
    
    September 30,2004
    
    
    2003
    
    
    2002(Dollars in thousands, except per share amounts)As reported net income (loss) in Consolidated
Statements of
Operations and Comprehensive Income (Loss)
    
    $
    (3,912
    )
    
    $
    (673
    )
    
    $
    71,661Stock-based employee compensation included in net
income (loss) as reported
    
    
    
    
    
    
    
    
    
    
    Stock-based employee compensation expense
determined under fair value method, net of taxes
    
    
    (37
    )
    
    
    
    
    
    
    (1,990
    )Pro forma net income (loss), after stock-based employee
compensation expense
    
    $
    (3,949
    )
    
    $
    (673
    )
    
    $
    69,671Net earnings (loss) per share  basic:As reported
    
    $
    (0.59
    )
    
    $
    (0.10
    )
    
    $
    11.43Pro forma
    
    $
    (0.60
    )
    
    $
    (0.10
    )
    
    $
    11.11Net earnings (loss) per share  diluted:As reported
    
    $
    (0.59
    )
    
    $
    (0.10
    )
    
    $
    11.35Pro forma
    
    $
    (0.60
    )
    
    $
    (0.10
    )
    
    $
    11.04
 58




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Earnings (Loss) Per Share From September 30, 2002 through September 30, 2003, the Company reported its results using
liquidation basis accounting, under which earnings per share information is not presented.
Accordingly, the earnings (loss) per share information set forth below is for reporting periods
where the Company used going concern basis accounting to report its results of operations. Basic earnings (loss) per share is calculated by dividing net earnings or loss for the period
by the weighted-average common shares outstanding for that period; there is no adjustment to the
number of outstanding shares for potential dilutive instruments, such as stock options. Diluted
earnings (loss) per share takes into account the potential dilutive impact of such instruments and
uses the average share price for the period in determining the number of incremental shares to add
to the weighted-average number of shares outstanding. For the year ended December 31, 2004 and the
three months ended December 31, 2003, weighted-average dilutive potential common shares of 9,389 and 39,068
respectively, related to shares issuable upon the exercise of options were not included in the
computation because they were anti-dilutive solely as a result of the
Companys net loss for the respective periods. For the year
ended December 31, 2004 and the three months ended
December 31, 2003, there were potential common shares of 84,100
and 86,730, respectively, related to shares issuable upon the
exercise of options that could potentially dilute basic earnings per
share in the future that were not included in the computation of
diluted earnings per share because to do so would have been
anti-dilutive for the respective periods. The following table illustrates the calculation of basic and diluted earnings (loss) per share
for the periods indicated: For the Year
    
    
    For the Three
    
    
    For the NineEnded
    
    
    Months Ended
    
    
    Months EndedDecember 31,
    
    
    December 31,
    
    
    September 30,2004
    
    
    2003
    
    
    2002(Amounts in thousands, except per share amounts)Income (loss) before cumulative effect of change in
accounting principle
    
    $
    (3,912
    )
    
    $
    (673
    )
    
    $
    90,581Cumulative effect of change in accounting principle,
net of taxes of $2.3 million
    
    
    
    
    
    
    
    
    
    
    (18,920
    )Net income (loss)
    
    $
    (3,912
    )
    
    $
    (673
    )
    
    $
    71,661Weighted-average basic shares outstanding
    
    
    6,585
    
    
    
    6,419
    
    
    
    6,272Add: Dilutive potential common shares
    
    
    
    
    
    
    
    
    
    
    41Weighted-average diluted shares outstanding
    
    
    6,585
    
    
    
    6,419
    
    
    
    6,313Basic earnings (loss) per share before cumulative
effect of change in accounting principle
    
    $
    (0.59
    )
    
    $
    (0.10
    )
    
    $
    14.44Cumulative effect of change in accounting
principle, net
    
    
    
    
    
    
    
    
    
    
    (3.01
    )Net basic earnings (loss) per share
    
    $
    (0.59
    )
    
    $
    (0.10
    )
    
    $
    11.43Diluted earnings (loss) per share before cumulative
effect of change in accounting principle
    
    $
    (0.59
    )
    
    $
    (0.10
    )
    
    $
    14.35Cumulative effect of change in accounting
principle, net
    
    
    
    
    
    
    
    
    
    
    (3.00
    )Net diluted earnings (loss) per share
    
    $
    (0.59
    )
    
    $
    (0.10
    )
    
    $
    11.35
 Accounting Changes and Recent Accounting Pronouncements In March 2004, the FASB Emerging Issues Task Force (EITF) released Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1
provides guidance for determining whether impairment for certain debt and equity investments is
other-than-temporary and the measurement of an impaired loss. Certain disclosure requirements of
EITF 03-1 were adopted in 2003 and the Company has complied with the new disclosure requirements in
its consolidated financial statements. The recognition and measurement requirements of EITF 03-1
were initially effective for reporting periods beginning after June 15, 2004. In September 2004,
the FASB Staff issued FASB Staff Position (FSP) EITF 03-1-1 that delayed the 59




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effective date for certain measurement and recognition guidance contained in EITF 03-1. The
FSP requires that entities continue to apply previously existing other-than-temporary guidance
until a final consensus is reached. Management does not anticipate that issuance of a final
consensus will materially impact the Companys financial condition or results of operations. In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123-R, Share-Based Payments, a revision to Statement No. 123. Statement
No. 123-R requires that a public entity measure the cost of equity based service awards based on
the grant-date fair value of the award. That cost will be recognized over the period during which
an employee is required to provide service in exchange for the award  the requisite service
period, usually the vesting period. No compensation cost is recognized for equity instruments for
which employees do not render the requisite service. A public entity will initially measure the
cost of liability based service awards based on its current fair value; the fair value of that
award will be re-measured subsequently at each reporting date through the settlement date. Changes
in fair value during the requisite service period will be recognized as compensation cost over that
period. Statement No. 123-R eliminates the alternative to use the intrinsic value method of
accounting under APB Opinion No. 25, Accounting for Stock Issued to Employees, that was provided
in Statement No. 123 as originally issued. Adoption of Statement No. 123-R is required for fiscal
periods beginning after June 15, 2005. The Company is evaluating Statement No. 123-R but does not
expect adoption to have a material impact on its financial condition, results of operations or cash
flows. Reclassifications In addition to the reclassifications discussed above, certain other reclassifications have
been made to prior year balances in order to conform to the current year presentation. Liquidation Basis The following is a description of the significant accounting policies applicable to the
Companys valuation of assets and liabilities under liquidation basis accounting for the period
September 30, 2002 through September 30, 2003. Only those policies that are different from going
concern basis are included. Basis of Financial Presentation and Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts of assets and liabilities as reported in the
consolidated statement of net assets (liquidation basis) and disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Material
estimates particularly susceptible to possible changes in the near term relate to the determination
of the mark-to-market adjustments on loans and leases, investment in operating lease assets and
deferred tax assets. Securities All securities were classified as available-for-sale and reported at net realizable value.
Valuations were determined from published information or quotes by registered securities brokers.
Securities for which quotes were not readily available were valued based on the present value of
estimated future cash flows. Adjustments to net realizable value, if any, were recorded on a
quarterly basis in earnings through the adjustment for liquidation basis. Interest on securities
continued to be accrued as income to the extent considered collectible. Loans and Leases All loans and leases were classified as held-for-sale and reported at net realizable value.
Net realizable value for these loans and leases was based on existing external bids from sales
contracts or letters of intent or prices for similar loans and leases in the secondary whole loan
or securitization markets or estimates of proceeds to be obtained through a workout and payoff.
Declines in net realizable value, if any, were recorded on a quarterly basis as a charge 60




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through the adjustment for liquidation basis. Accounting policies for interest income and
loan fee recognition, classification and accounting treatment of impaired loans, including
nonperforming loans and troubled debt restructurings were unchanged from going concern basis
accounting. Allowance for Loan and Lease Losses Under liquidation basis accounting, loans were designated as held-for-sale and carried at the
lower of cost or net realizable value. Upon adoption of the liquidation basis accounting,
effective September 30, 2002, the balance of the existing allowance for loan and lease losses was
reallocated to individual loans and leases and groups of homogeneous loans as a mark-to-market
allowance on such loans; a separate allowance for credit losses was not maintained. Real Estate Owned Real estate owned was recorded at net realizable value as of the date of foreclosure. The
difference upon foreclosure between book value and net realizable value, if any, was expensed to
adjustment for liquidation basis. Adjustments to net realizable value, if any, were recorded on a
quarterly basis as a charge through the adjustment for liquidation basis. Revenues and other
expenses associated with real estate owned were recognized and reported as a component of
noninterest expense when incurred. Premises and Equipment Premises and equipment were stated at cost less accumulated depreciation and amortization.
This is considered to approximate net realizable value in accordance with liquidation basis
accounting. Depreciation and amortization were computed on a straight-line basis over the
estimated useful lives for each of the various asset categories. These useful lives range from two
to ten years. Intangible Assets Goodwill and other intangible assets were written off as of September 30, 2002 with the
adoption of liquidation basis accounting. The goodwill and core deposit intangibles associated
with the deposits sold to U.S. Bank were realized in anticipation of the close of that transaction.
The goodwill related to the Companys commercial business units, including Asset-Based Lending,
Factored Receivables and Commercial Leasing, was written off as current estimated fair values of
those businesses were below book value based on bids from interested buyers of the businesses. Deferred Gain The deferred gain represented the estimated after-tax gain anticipated from the future sale of
the Companys auto finance business. As this transaction was not under contract or assured, the
estimated after-tax gain was not recognized, but rather was recorded as a deferred gain. Reserve for Estimated Costs during the Period of Liquidation The reserve for estimated costs during the period of liquidation includes severance payments
and costs related to facility closures, investment banking and other professional fees and
estimated litigation expense and settlements. These expense accruals were reviewed for adequacy on
a quarterly basis. Changes to the accruals, if necessary, were charged to earnings as changes in
estimated values of assets and liabilities. At December 31, 2002, the reserve for estimated costs during the period of liquidation was
$44.0 million, including accruals for severance and facilities of $29.0 million and $9.4 million,
respectively. At December 31, 2003, the balance of the liquidation reserve was $11.6 million,
including accruals for severance and facilities of $2.0 million and $6.4 million, respectively. 61




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Note 3. Restatement of Consolidated Financial Statements as of and for the Three Months ended
December 31, 2003 Subsequent to the issuance of our consolidated financial statements as of and for the three
months ended December 31, 2003, we determined that we incorrectly applied FASB Statement No. 91,
Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and
Initial Direct Costs of Leases, to our auto finance subsidiarys portfolio of auto contracts

held-for-sale for the three-month period that began October 1, 2003, when we re-adopted the going
concern basis of accounting, and ended December 31, 2003. As a result, we have restated our going
concern basis consolidated financial statements as of and for the three months ended December 31,
2003 to eliminate the recognition of amortization expense related to premiums and deferred
origination costs and fees associated with auto contracts held-for-sale. The restatement increased
total assets and net income as of and for the three months ended December 31, 2003 by $182
thousand. On June 30, 2004, we effected a 1-for-10 reverse stock split of the issued and outstanding
shares of the Companys common stock. As a result, the Companys issued common stock was reduced
from 65,910,689 shares prior to the reverse stock split to 6,590,461 shares following the reverse
stock split, including an adjustment for fractional shares. Our restated consolidated financial
statements also include adjustments to reflect this reverse stock split. Accordingly, all shares
outstanding and per share amounts are presented herein on a post-reverse stock split basis for all
periods reported. Except as set forth above, we have not updated the disclosures contained herein to reflect any
events that have occurred after the Original Filing. The following table shows the impact of the
restatement on net income and basic and diluted earnings per share for the three months ended
December 31, 2003: 62




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##### Table of Contents



As of and For theThree Months EndedDecember 31,2003(Amounts in thousands,except per share amounts)Net loss:Net loss as previously reported
    
    $
    (855
    )Net loss as restated
    
    $
    (673
    )Weighted-average basic shares outstanding
    
    
    6,419Add: Dilutive potential common shares
    
    
    Weighted-average diluted shares outstanding
    
    
    6,419Basic loss per share:Basic loss per share as previously reported
    
    $
    (0.13
    )Restatement adjustment
    
    
    0.03Basic loss per share as restated
    
    $
    (0.10
    )Diluted loss per share:Diluted loss per share as previously reported
    
    $
    (0.13
    )Restatement adjustment
    
    
    0.03Diluted loss per share as restated
    
    $
    (0.10
    )Interest income:Interest income as previously reported
    
    $
    4,636Interest income as restated
    
    $
    4,936Auto
installment contracts and loans held-for-sale:Auto
installment contracts and loans held-for-sale as previously reported
    
    $
    177,648Auto
installment contracts and loans held-for-sale as restated
    
    $
    177,948Deferred
income taxes, net:Deferred
income taxes, net as previously reported
    
    $
    21,149Deferred
income taxes, net as restated
    
    $
    21,031Total assets:Total assets as previously reported
    
    $
    363,936Total assets as restated
    
    $
    364,118
 Note 4. Regulatory Matters Effective September 30, 2003, the Company completed the dissolution of the Bank. On that
date, the Company assumed specified assets and liabilities of the Bank. As a result, the Company
ceased to be a bank holding company and, along with its subsidiaries, was no longer subject to
supervision, examination and regulation by the Board of Governors of the Federal Reserve System,
the Office of the Comptroller of the Currency or the Federal Deposit Insurance Corporation. 63




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Note 5. Retained Interests in Securitizations Retained interests in securitizations were classified as available-for-sale at December 31,
2004 and 2003. The Company did not maintain a trading portfolio during 2004 and 2003. The
following tables set forth the activity in the Companys retained interests in securitizations for
the periods indicated: For the Year Ended December 31, 2004Change inBeginning
    
    
    2004
    
    
    Cash
    
    
    
    
    
    
    Realized
    
    
    Unrealized
    
    
    EndingBalance
    
    
    Securitizations
    
    
    Received
    
    
    Accretion
    
    
    Loss
    
    
    Loss
    
    
    Balance(Dollars in thousands)2002-LJ-1
    
    $
    18,744
    
    
    $
    
    
    
    $
    (4,536
    )
    
    $
    1,563
    
    
    $
    
    
    
    $
    (149
    )
    
    $
    15,6222003-LJ-1
    
    
    9,846
    
    
    
    
    
    
    
    (3,340
    )
    
    
    782
    
    
    
    
    
    
    
    (274
    )
    
    
    7,014Totals
    
    $
    28,590
    
    
    $
    
    
    
    $
    (7,876
    )
    
    $
    2,345
    
    
    $
    
    
    
    $
    (423
    )
    
    $
    22,636
 For the Year Ended December 31, 2003Change inBeginning
    
    
    2003
    
    
    Cash
    
    
    
    
    
    
    Realized
    
    
    Unrealized
    
    
    EndingBalance
    
    
    Securitizations
    
    
    Received
    
    
    Accretion
    
    
    Gain (Loss)
    
    
    Gain (Loss)
    
    
    Balance(Dollars in thousands)1999-LG-1
    
    $
    3,711
    
    
    $
    
    
    
    $
    (3,500
    )
    
    $
    
    
    
    $
    (211
    )
    
    $
    
    
    
    $
    2000-LJ-1
    
    
    4,213
    
    
    
    
    
    
    
    (4,380
    )
    
    
    
    
    
    
    167
    
    
    
    
    
    
    
    2002-LJ-1
    
    
    23,946
    
    
    
    
    
    
    
    (7,496
    )
    
    
    2,294
    
    
    
    
    
    
    
    
    
    
    
    18,7442003-LJ-1
    
    
    
    
    
    
    9,485
    
    
    
    
    
    
    
    361
    
    
    
    
    
    
    
    
    
    
    
    9,846Totals
    
    $
    31,870
    
    
    $
    9,485
    
    
    $
    (15,376
    )
    
    $
    2,655
    
    
    $
    (44
    )
    
    $
    
    
    
    $
    28,590
 Retained interest values are subject to credit, prepayment, and interest rate risks on
the underlying auto contracts. The following table illustrates the significant assumptions
utilized in the valuation of retained interests as of the dates indicated: At December 31,2004
    
    2003Auto installment contractsWeighted-average discount rate
    
    10.0%-12.0%
    
    12.0%-12.5%Range of projected annual credit losses
    
    1.40%-1.53%
    
    1.00%Range of projected cumulative credit losses
    
    2.04%-2.37%
    
    1.71%-1.90%Prepayment speed
    
    1.6 ABS
    
    1.6 ABS
 At December 31, 2004, the fair value of the Bay View 2002-LJ-1 and 2003-LJ-1 retained
interests as a result of immediate 10% and 20% adverse changes in significant assumptions would
have decreased as follows: At December 31, 2004Bay View 2002-LJ-1and 2003-LJ-1(Dollars in thousands)Carrying amount/fair value of retained interests
    
    $
    22,636Decrease in fair value from 10% adverse change in discount rate
    
    
    403Decrease in fair value from 20% adverse change in discount rate
    
    
    797Decrease in fair value from 10% adverse change in projected
credit losses
    
    
    399Decrease in fair value from 20% adverse change in projected
credit losses
    
    
    797
 64




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##### Table of Contents



The Company securitized and sold $193.3 million and $453.2 million of auto installment
contracts during 2003 and 2002, respectively. The Company retained interests in these
securitizations with initial balances of $9.5 million and $23.2 million for 2003 and 2002,
respectively. During 2003, BVAC called its Bay View 1999-LJ-1 and 2000-LJ-1 automobile receivable
backed notes and repurchased auto contracts from the asset-backed bond trusts with par values of
$21.8 million and $33.8 million and average coupon rates of 12.52% and 10.25%, respectively. Note 6. Mortgage-backed Securities and Other Securities At December 31, 2004, the Companys entire mortgage-backed and other securities portfolio had
either matured or been sold. At December 31, 2003, the portfolio totaled $6.1 million and
consisted of $5.3 million of mortgage-backed securities issued by Fannie Mae, $0.6 million of CMOs
and $0.2 million of asset-backed securities. All mortgage-backed and other securities were
classified as available-for-sale at December 31, 2003. The weighted-average yield on
mortgage-backed securities classified as available-for-sale at December 31, 2003 was 6.21%.
Adjustable-rate mortgage-backed securities totaled $0.6 million at December 31, 2003. Proceeds from sales of mortgage-backed and asset-backed securities classified as
available-for-sale during 2004, 2003 and 2002 were $5.6 million, $15.2 million and $257.3 million,
respectively. Gains or losses we recognized on these sales were insignificant during 2004 and
2003. Gross gains of $1.1 million were realized on these sales during 2002. 65




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Note 7. Auto Installment Contracts and Other Loans The following table sets forth the Companys portfolio of auto contracts and other loans as of
the dates indicated: At December 31,2004
    
    
    2003(Dollars in thousands)Auto installment contracts and other loans receivable:Auto installment contracts held-for-sale
    
    $
    73,462
    
    
    $
    161,578Premiums,
discounts, and deferred fees and costs, net
    
    
    1,559
    
    
    
    4,296Auto
installment contracts held-for-sale, net
    
    
    75,021
    
    
    
    165,874Other loans held-for-sale:Franchise loans
    
    
    583
    
    
    
    6,428Asset-based loans
    
    
    319
    
    
    
    844Business loans
    
    
    
    
    
    
    4,802Total other loans held-for-sale
    
    
    902
    
    
    
    12,074Auto installment contracts held-for-investment
    
    
    247,219
    
    
    
    Premiums,
discounts, and deferred fees and costs, net
    
    
    7,152
    
    
    
    Allowance for credit losses
    
    
    (1,508
    )
    
    
    Auto
installment contracts held-for-investment, net
    
    
    252,863
    
    
    
    Auto installment contracts and loans receivable, net
    
    $
    328,786
    
    
    $
    177,948
 During 2004, the Company completed the sale of $33.5 million of loans and received an
additional $112.8 million of loan repayments. These loan sales and repayments, totaling $146.3
million, were comprised of $135.4 million of auto contracts, $5.5 million of franchise loans, $4.8
million of business loans and $0.6 million of asset-based loans. During 2003, the Company sold or
securitized $339.8 million of loans and received an additional $129.6 million of loan repayments.
These loan sales, securitizations and repayments totaled $469.4 million and included $319.5 million
of auto contracts, $91.5 million of asset-based loans, $33.4 million of franchise loans, $10.8
million of syndicated loans, $7.0 million of commercial real estate loans, $3.9 million of
multi-family mortgage loans and $3.3 million of business loans, factored receivables and commercial
leases. There were no loan securitizations during 2004. The Company securitized and sold
approximately $193.3 million and $453.2 million of auto contracts during 2003 and 2002,
respectively. Gains of $0.8 million and $11.8 million were recognized on the 2003 and 2002
securitizations, respectively. The Company retained servicing responsibilities and subordinated
interests in these securitizations. The Companys retained interests are subordinate to investors
interests. However, investors and the securitization trusts have no recourse to the Companys
other assets for failure of debtors to pay when due. The Company serviced participating interests in auto contracts that it securitized and/or sold
of $250.2 million at December 31, 2004 and $405.1 million at December 31, 2003. The total of impaired loans and leases, consisting entirely of nonaccrual auto contracts and
other loans, were $1.0 million and $7.1 million at December 31, 2004 and 2003, respectively.
Interest on nonaccrual auto contracts and other loans that was not recorded in income was $342
thousand for the year ended December 31, 2004, $1.6 million for 2003 and $5.9 million for 2002.
Cash interest that we recognized on these nonaccrual auto contracts and other loans was not
significant in 2004, 2003 or 2002. At December 31, 2004, we had no commitments to lend additional
funds to these borrowers. The average investment in impaired auto contracts and other loans was
$1.3 million for the year ended December 31, 2004, $11.0 million for 2003 and $63.2 million for
2002. 66




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The
following table sets forth information on delinquent loans (loans
delinquent 60 days or more) and net charge-offs on the
Companys managed loan portfolio of auto contracts, franchise
and other loans serviced by the Company: Principal Amount ofLoans Delinquent 60Loans Receivable
    
    
    Days or More
    
    
    Net Charge-offsFor the Year EndedAt December 31,
    
    
    December 31,2004
    
    
    2003
    
    
    2004
    
    
    2003
    
    
    2004
    
    
    2003(Dollars in thousands)Auto installment contracts (2) (3)
    
    $
    578,069
    
    
    $
    555,906
    
    
    $
    1,108
    
    
    $
    636
    
    
    $
    6,404
    
    
    $
    6,944Franchise loans (2)
    
    
    583
    
    
    
    6,428
    
    
    
    583
    
    
    
    755
    
    
    
    338
    
    
    
    11,608Other loans
    
    
    319
    
    
    
    5,646
    
    
    
    319
    
    
    
    563
    
    
    
    52
    
    
    
    13,103Total managed loans
    
    $
    578,971
    
    
    $
    567,980
    
    
    $
    2,010
    
    
    $
    1,954
    
    
    $
    6,794
    
    
    $
    31,655Less:Securitized and sold loans
    
    
    250,185
    
    
    
    390,032Loans receivable (1)
    
    $
    328,786
    
    
    $
    177,948
   (1)
    
    Through September 30, 2003, charge-offs and recoveries were recorded as
mark-to-market valuation adjustments in accordance
with liquidation basis accounting. Subsequent to the Companys re-adoption of going concern
basis accounting, net chargeoffs of auto contracts and
other loans held-for-sale are charged against noninterest income
while net chargeoffs of auto
contracts held-for-investment are charged
against the allowance for credit losses.(2)
    
    Includes off-balance sheet amounts associated with securitized auto contracts and
loans sold servicing-released.(3)
    
    Includes $5.2 million and $1.1 million
of net charge-offs from off-balance
sheet auto contracts and contracts held-for-sale,
respectively, for 2004; includes $6.3 million and $0.6 million
of net charge-offs from
off-balance sheet auto contracts and
contracts held-for-sale, respectively, for 2003. The following table sets forth the activity in the allowance for credit losses on auto
contracts and other loans held-for-investment as of and for the periods indicated: At and For theAt and For the
    
    
    Nine MonthsYear Ended
    
    
    EndedDecember 31,
    
    
    September 30,2004
    
    
    2002(Dollars in thousands)Balance at beginning of period
    
    $
    
    
    
    $
    49,791Transfers of loans to held-for-sale
    
    
    
    
    
    
    (10,658
    )Charge-offs
    
    
    (222
    )
    
    
    (23,771
    )Recoveries
    
    
    118
    
    
    
    2,887Net charge-offs
    
    
    (104
    )
    
    
    (20,884
    )Provision for losses on loans and leases
    
    
    1,612
    
    
    
    10,700Reallocation of allowance as mark-to-market adjustments to
individual loans and leases and groups of homogeneous loans
in liquidation
    
    
    
    
    
    
    (28,949
    )Balance at end of period
    
    $
    1,508
    
    
    $
    
 Effective September 30, 2002, the Company adopted liquidation basis accounting under
which its loans and leases were carried at their net realizable value. Accordingly, the balance of
the allowance for credit losses was reallocated as mark-to-market adjustments to individual loans and leases and groups of homogeneous loans in liquidation. On
October 1, 2003, the Company re-adopted going concern basis accounting. From October
1, 2003 to 67




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May 31, 2004, the Companys auto contracts were classified as held-for-sale and were carried at the
lower of cost or market. Beginning in the second quarter of 2004, the Company has designated a portion of its auto
contracts as held-for-investment. Accordingly, the Company has re-established an allowance for
credit losses on auto contracts held-for-investment that represents managements estimate of
inherent credit losses that have occurred as of the date of the financial statements. Note 8. Premises and Equipment The following table sets forth premises and equipment as of the dates indicated: At December 31,2004
    
    
    2003(Dollars in thousands)Leasehold improvements
    
    $
    647
    
    
    $
    487Furniture and equipment
    
    
    4,323
    
    
    
    7,7464,970
    
    
    
    8,233Less:Accumulated depreciation
and amortization
    
    
    (4,237
    )
    
    
    (7,862
    )Premises and equipment, net
    
    $
    733
    
    
    $
    371
 Depreciation and amortization expense related to premises and equipment totaled $0.3
million, $0.5 million and $3.1 million for the years ended December 31, 2004, 2003 and 2002,
respectively. Note 9. Accounting for Goodwill and Other Intangible Assets Upon re-adoption of going concern basis accounting, the Company re-established goodwill of
$1.8 million in BVAC related to its acquisition of California Thrift & Loan in 1996. As of January 1, 2002, the Company adopted Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets, which requires that certain goodwill and intangible
assets with indefinite useful lives be tested for impairment at least annually rather than
amortized. As of January 1, 2002, the Company ceased the amortization of existing goodwill. The Company completed the first and second steps of the transitional goodwill impairment test
as of June 30, 2002 and September 30, 2002, respectively. As a result, the Company recorded $18.9
million in impairment charges, net of taxes, for goodwill not expected to be realized upon the
disposition of its Asset-Based Lending, Factored Receivables and Commercial Leasing businesses. As
required by the transitional provisions of Statement No. 142, the impairment loss was measured and
recorded as of the date of adoption and recognized as the cumulative effect of a change in
accounting principle as of January 1, 2002. At December 31, 2004 and 2003, management determined
that there was no impairment of goodwill. Note 10. Deposits During 2002, U.S. Bank acquired the Banks retail deposits, totaling $3.3 billion, in
connection with the sale of the Banks retail banking assets. 68




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Note 11. Borrowings During the second quarter
of 2004, BVAC secured a $350.0 million floating-rate, revolving warehouse credit facility to
replace a maturing $250.0 million facility originally obtained in 2003.  The facility is jointly
provided by two lenders including a commercial paper conduit affiliated with one of the lenders
(the Note Purchasers).  The facility is for a term of 364 days and matures on June 25, 2005.
The interest rate on a portion of the facility is indexed to asset-backed commercial paper rates;
the balance of the facility is indexed to the 1 month Libor rate.  BVAC draws on the facility to
purchase and finance its existing inventory of auto contracts.  Substantially all auto contracts
retained by BVAC are pledged as collateral for the credit facility.  Under the terms of the
facility, BVAC draws on the facility by transferring auto contracts to a special purpose entity,
a statutory trust, which issues notes to the Note Purchasers.  BVAC periodically securitizes or
sells auto contracts in order to pay down the line of credit and maintain borrowing capacity. At December 31, 2004,
$298.8 million was outstanding under this facility with an all-in cost of 3.34%.
These borrowings were secured by $314.5 million of auto contracts.  The facility contains
various performance triggers and default covenants requiring that BVAC maintain certain
cumulative credit loss, delinquency and other financial ratios.  As of December 31, 2004, all
such financial and performance ratios were within required levels. On December 31, 2001, the Company completed a structured financing of its auto lease cash
flows and recorded $136.5 million in other borrowings. Since the Company ceased its purchases of
auto leases in June 2000, the contractual auto lease cash flows have been decreasing monthly and
are scheduled to conclude in December 2005. The transaction was treated as a sale for tax purposes
that allowed the Company to capture expiring net operating loss carryforwards and partially reverse
the related valuation allowance on deferred tax assets. At December 31, 2004, the balance of the
borrowing was $1.9 million. The effective cost of the borrowing for 2004 was 2.00%. During 2003, the Company adopted FASB Financial Interpretation No. 46, Consolidation of
Variable Interest Entities, and accordingly, deconsolidated Bay View Capital I. As a result, the
9.76% Capital Securities of Bay View Capital I were no longer reflected on the Companys
Consolidated Statement of Financial Condition while the underlying 9.76% Junior Subordinated
Deferrable Interest Debentures (the Junior Debentures), which were acquired by Bay View Capital
I, was reflected as borrowings. On June 30, 2004, the Company
redeemed the remaining $22.0 million
of Junior Debentures and recovered its $2.8 million equity
investment in Bay View Capital I through a settlement of its
liability with the Trustee. See Note 13. Note 12. Notes and Debentures On August 18, 1999, the Bank issued $50.0 million in Subordinated Notes. The Subordinated
Notes were unsecured obligations of the Bank and were subordinated in right of payment to all
existing and future senior indebtedness, as defined, of the Bank. The Subordinated Notes were to
mature on August 31, 2009, with a call provision at our option any time after August 31, 2002 at
par. The issuance had a stated coupon of 10.00%. The all-in cost of the Subordinated Notes was
10.57%. A portion of the proceeds was dividended to the Company and used to partially finance the
acquisition of Franchise Mortgage Acceptance Company. On December 9, 2002, the Bank redeemed the
entire $50.0 million of its outstanding Subordinated Notes. Interest expense on the Subordinated
Notes was $4.9 million for the year ended December 31, 2002. On August 28, 1997, the Company issued $100.0 million in Subordinated Notes registered under
the Securities Act of 1933, as amended. The Subordinated Notes were unsecured obligations of the
Company and were subordinated in right of payment to all existing and future senior indebtedness,
as defined, of the Company. The Subordinated Notes were to mature on August 15, 2007, with a call
provision effective on or after August 15, 2002 or, at any time upon a change of control or the
occurrence of certain other events, at our option, at various premiums through August 15, 2005 and
at par thereafter. The issuance had a stated coupon of 9.125% and was issued at a discount to
yield 9.225%. The all-in cost of the Subordinated Notes was 9.62%. A portion of the proceeds was
used to partially finance the acquisition of America First Eureka Holdings, Inc., which the Company
acquired in January 1998. On November 29, 2002, the Company prepaid the entire $100.0 million of
its outstanding Subordinated Notes at a premium of 4.563%. Interest expense on the Subordinated
Notes was $8.6 million for the year ended December 31, 2002. 69




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Note 13. Capital Securities On December 21, 1998, the Company issued $90.0 million in Capital Securities through Bay View
Capital I (the Trust). The Capital Securities paid quarterly cumulative cash distributions at an
annual rate of 9.76% of the liquidation value of $25 per share. The Capital Securities represented
undivided beneficial interests in the Trust. The Company owned all of the issued and outstanding
common securities of the Trust. Proceeds from the offering and from the issuance of common
securities were invested by the Trust in the Companys 9.76% Junior Debentures due December 31,
2028 with an aggregate principal amount of $92.8 million. The primary asset of the Trust was the
Junior Debentures. The Company fully and unconditionally guaranteed the obligations of the Trust
with respect to the Capital Securities to the extent provided in the Guarantee Agreement. Proceeds
were used to repay the Companys $50.0 million Senior Debentures and the balance for general
corporate purposes. The all-in cost of the Capital Securities was 9.95%. Prior to the dissolution
of the Bank, the Capital Securities had the added benefit of qualifying as Tier 1 capital for
regulatory capital purposes. In September of 2000, the Company entered into an agreement with the FRB that required the
Company to obtain their approval prior to disbursing any dividends associated with the Capital
Securities. Beginning with the third quarter of 2000, the Company began deferring distributions of
the quarterly dividends in accordance with the terms of the Capital Securities. During this
deferral period, distributions to which holders are entitled continued to accrue at an annual rate
of 9.76% of the liquidation amount of $25 per Capital Security, plus accumulated additional
distributions at the same rate, compounded quarterly, on any unpaid distributions (to the extent
permitted by law). In December of 2002, the Company received approval from the FRB to pay the cumulative
distributions on its Capital Securities. On December 31, 2002, the Company paid the cumulative
deferred distributions, interest on the deferred distributions and the current quarterly
distribution. The total amount paid per share as of December 31, 2002 was $6.10 for the 10
quarterly distributions plus $0.715 in accrued interest. Subsequent quarterly distributions
remained subject to FRB approval until the dissolution of the Bank, as of September 2003, when the
Company ceased to be a bank holding company and was no longer subject to supervision, examination
and regulation by the FRB. Dividend expense on the Capital Securities was $1.1 million, $8.8
million and $10.6 million for the years ended December 31, 2004, 2003 and 2002, respectively.
Effective July 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 150,
Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.
 Implementation of Statement No. 150 resulted in the reclassification of the Capital Securities
from their prior classification as a mezzanine item to liabilities and required the Company to
reflect the dividend expense on the Capital Securities as interest on borrowings. During the third quarter of 2003, the Company completed an offer of optional redemption of the
Capital Securities at a price of $25 per Capital Security plus accrued and unpaid
distributions through the date of redemption. Holders of the Capital Securities elected to
redeem 184,903 shares, or approximately 5.14% of the outstanding Capital Securities, under the
offer that expired on September 8, 2003. An additional $63.5 million, or approximately 74%,
of the outstanding Capital Securities was redeemed on December 31, 2003. These redemptions
reduced the outstanding Capital Securities from $90.0 million at December 31, 2002 to $22.0
million at December 31, 2003. On June 30, 2004, the Company redeemed the remaining $22.0
million of the outstanding Capital Securities. 70




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Note 14. Income Taxes The following table sets forth the Companys consolidated income tax expense (benefit) for the

periods indicated: For the Year Ended December 31, 2004Federal
    
    
    State
    
    
    Total(Dollars in thousands)Current provision
    
    $
    
    
    
    $
    2,517
    
    
    $
    2,517Deferred provision
    
    
    (5,828
    )
    
    
    785
    
    
    
    (5,043
    )Total income tax expense (benefit)
    
    $
    (5,828
    )
    
    $
    3,302
    
    
    $
    (2,526
    )
 For the Year Ended December 31, 2003(Dollars in thousands)Current provision
    
    $
    566
    
    
    $
    (7,111
    )
    
    $
    (6,545
    )Deferred provision
    
    
    (1,483
    )
    
    
    1,592
    
    
    
    109Total income tax benefit
    
    $
    (917
    )
    
    $
    (5,519
    )
    
    $
    (6,436
    )
 For the Year Ended December 31, 2002(Dollars in thousands)Current provision
    
    $
    
    
    
    $
    15,579
    
    
    $
    15,579Deferred provision
    
    
    147,926
    
    
    
    11,099
    
    
    
    159,025Total income tax expense
    
    $
    147,926
    
    
    $
    26,678
    
    
    $
    174,604
 At December 31, 2004, the Company had recorded an estimate of contingent tax liabilities
of $4.2 million. Management does not believe a material change
in this estimate will occur within the next
twelve months. If and when these contingent tax liabilities are ultimately paid, it could have a significant impact on the cash
flows or liquidity of the Company. The following table sets forth the reconciliation between the federal statutory income tax
rate and the effective income tax rate for the periods indicated. The table reflects the inclusion
of dividends on Capital Securities in the determination of income (loss) before income tax expense
(benefit): For the Year Ended December 31,2004
    
    
    2003
    
    
    2002Federal statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Amortization and disposition of nondeductible goodwill
    
    
    
    
    
    
    
    
    
    
    15.2Valuation allowance
    
    
    
    
    
    
    
    
    
    
    8.9State income, net of federal tax benefit
    
    
    4.2
    
    
    
    39.2
    
    
    
    11.0Nondeductible compensation
    
    
    
    
    
    
    (16.3
    )
    
    
    2.0Other, net
    
    
    
    
    
    
    (1.7
    )
    
    
    Effective income tax rate
    
    
    39.2
    %
    
    
    56.2
    %
    
    
    72.1
    %
 Stockholders equity or net assets in liquidation were credited with a tax benefit
associated with the exercise of stock options of $0.2 million for 2002. For the years ended
December 31, 2004 and 2003, there was no such tax benefit. Stockholders equity or net assets in
liquidation were charged a tax associated with certain adjustments recorded to convert from the
liquidation basis to going concern basis accounting, of $0.6 million for the year ended December
31, 2003. 71




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The following table sets forth the components of net deferred tax assets as of the dates
indicated: At December 31,2004
    
    
    2003(Dollars in thousands)Deferred tax assets:Net operating loss carryforwards
    
    $
    48,808
    
    
    $
    52,721Auto lease receivable financing
    
    
    743
    
    
    
    6,297Provision for losses on loans and leases
    
    
    1,065
    
    
    
    1,813Mark-to-market adjustments, net
    
    
    504
    
    
    
    6,878Other accrued expenses not deducted for tax purposes
    
    
    4,277
    
    
    
    6,124Alternative minimum tax credit carryforwards
    
    
    3,916
    
    
    
    3,917Other
    
    
    1,259
    
    
    
    671Gross deferred tax assets
    
    
    60,572
    
    
    
    78,421Valuation allowance
    
    
    21,495
    
    
    
    21,495Net deferred tax asset
    
    
    39,077
    
    
    
    56,926Deferred tax liabilities:Tax depreciation in excess of book depreciation
    
    
    (3,398
    )
    
    
    (21,757
    )Securitizations
    
    
    (14,486
    )
    
    
    (19,019
    )Real estate partnership investments
    
    
    (25
    )
    
    
    (25
    )Gross deferred tax liabilities
    
    
    (17,909
    )
    
    
    (40,801
    )Net deferred tax asset
    
    $
    21,168
    
    
    $
    16,125
 The valuation allowance on deferred tax assets, which was $21.5 million as of December
31, 2003, was unchanged as of December 31, 2004. In the determination of deferred tax assets, net
of the valuation allowance, the Company considered the projected future net income available to
absorb the realization of deferred tax assets. Under the Companys prior plan of complete
liquidation, the determination of deferred tax assets was limited to consideration of projected
future net income through September 30, 2005, which was the projected final liquidation date of the
Company. The
Company recorded an income tax benefit of $2.5 million for the year ended December 31,
2004 compared to an income tax benefit of $6.4 million for 2003 and an income tax provision of
$176.9 million for 2002. The Companys effective tax rate was 39.2% for 2004 compared to 56.2% for
2003 and 72.1% for 2002. The Companys 2004 effective rate differs from the 35.0% federal
statutory tax rate primarily due to state income and franchise taxes. For the year ended December 31, 2002, as a result of the Companys Plan, income tax expense
included the effect of establishing a valuation allowance of $21.5 million on the realizability of
deferred tax assets in years after 2002. The realizability of deferred tax assets and the related
valuation allowance were based on total projected future income through the final liquidation of
the Company. During 2002, the Company also recorded a deferred tax benefit of $2.3 million on the
cumulative effect of the change in accounting principle, which is presented net of this tax
benefit. During 2002, the Company realized approximately $138.0 million of its net deferred tax
assets primarily as a result of the Companys sale of its retail banking assets to U.S. Bank and
other asset sale transactions. At December 31, 2004, the federal net operating loss carryforwards were $127.9 million, of
which $58.4 million will expire in 2020 and $69.5 million will expire in 2023. The Company has
federal alternative minimum tax credits of $3.9 million. These credits can be carried forward
indefinitely to reduce future regular tax. Effective for the 2002 and 2003 tax years, California tax law suspended deductions for net
operating loss carryforwards. As a result, the 2002 current state tax provision has no utilization
of California net operating loss carryforwards; for 2003, the Company generated an additional
California net operating loss, and for 2004, the Company utilized California net operating loss
carryforwards. At December 31, 2004, the California net operating loss carryforwards were $41.7
million, of which $24.8 million will expire in 2012, and $16.9 million will expire in 2013. 72




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Note 15. Stock Options As of December 31, 2004, the Company had five employee stock option plans and three
non-employee director stock option plans. The employee stock option plans were as follows: the
Amended and Restated 1986 Stock Option and Incentive Plan, the Amended and Restated 1995 Stock
Option and Incentive Plan, the 1998-2000 Performance Stock Plan (the 2001 Plan), the 1999
FMAC Stock Option, Deferred Stock and Restricted Stock Plan, and the 2001 Stock Option and
Incentive Plan, which authorize the issuance of 175,943, 250,000, 40,000, 27,058 and 320,000
shares of common stock, respectively. The non-employee director stock option plans were as
follows: the Amended and Restated 1989 Non-Employee Director Stock Option and Incentive Plan, the
1998 Non-Employee Director Stock Option and Incentive Plan, and the 2001 Non-Employee Director
Stock Option Plan, which authorize the issuance of up to 55,000, 20,000, and 50,000 shares of
common stock, respectively. Excluding options for 347,700 shares granted in 2001 that were issued with exercise prices
below the then current market value, the exercise price for the purchase of shares subject to a
stock option at the date of grant generally may not be less than 100% of the market value of the
shares covered by the option on that date. Options generally vest over periods ranging from 6
months to 3 years and expire over periods ranging from 6 years to 13 years. The Companys stock
options generally cancel automatically 90 days after termination of employment and, notwithstanding
any other provisions of our stock option plans, all outstanding stock options will automatically
cancel on the final record date. All of the stock option plans define a change in control as including a sale of all or
substantially all of the Companys assets, and all of the stock option plans provide for the
automatic acceleration of the exercisability of stock options in the event of a change in control
with the exception of the 2001 Plan. The 2001 Plan provides for the acceleration of the
exercisability of stock options in such circumstances as the stock option committee of the Board of
Directors determines to be appropriate. On August 6, 2002, the stock option committee determined
that the consummation of the sale of the Banks retail banking assets constituted a change in
control for purposes of the 2001 Plan and recommended to the Board of Directors the acceleration of
the exercisability of the stock options under the 2001 Plan in order that all option holders would
be treated equally. On October 3, 2002, the Board of Directors authorized such acceleration as of
that date. Subsequently, the stock option plans were treated as variable plans based on APB 25.
As of December 31, 2002, the acceleration of the exercisability of stock options resulting from the
change in control for all other plans had an insignificant impact on the Companys financial
statements. 73




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##### Table of Contents



The following table sets forth the stock options available for grant as of December 31, 2004: Employee Stock Option
    
    
    Non-Employee Director Stockand Incentive Plans
    
    
    Option and Incentive Plans
    
    
    TotalShares reserved for issuance
    
    
    813,001
    
    
    
    125,000
    
    
    
    938,001Granted
    
    
    (1,023,989
    )
    
    
    (113,700
    )
    
    
    (1,137,689
    )Forfeited
    
    
    453,503
    
    
    
    37,500
    
    
    
    491,003Expired
    
    
    (50,569
    )
    
    
    (27,600
    )
    
    
    (78,169
    )Total available for grant
    
    
    191,946
    
    
    
    21,200
    
    
    
    213,146
 At December 31, 2004, the Company had outstanding options under the plans with expiration
dates ranging from the year 2005 through 2014, as set forth in the following table: Number of
    
    
    Exercise Price
    
    
    Weighted-AverageOption Shares
    
    
    Range
    
    
    Exercise PriceOutstanding at January 1, 2002
    
    
    627,780
    
    
    $
    45.90-344.10
    
    
    $
    92.10Granted
    
    
    3,800
    
    
    
    66.40-68.40
    
    
    
    68.20Exercised
    
    
    (35,025
    )
    
    
    45.90-54.10
    
    
    
    46.90Forfeited
    
    
    (76,445
    )
    
    
    45.90-344.10
    
    
    
    139.80Outstanding at December 31, 2002
    
    
    520,110
    
    
    
    45.90-344.10
    
    
    
    88.00Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (330,783
    )
    
    
    45.90-54.10
    
    
    
    46.40Forfeited
    
    
    (102,597
    )
    
    
    54.10-316.30
    
    
    
    152.80Outstanding at December 31, 2003
    
    
    86,730
    
    
    
    68.40-344.10
    
    
    
    169.10Granted
    
    
    50,000
    
    
    
    16.87
    
    
    
    16.87Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (52,630
    )
    
    
    70.75-344.06
    
    
    
    177.46Outstanding at December 31, 2004
    
    
    84,100
    
    
    $
    16.87-326.88
    
    
    $
    73.47Exercisable at December 31, 2002
    
    
    520,110
    
    
    $
    45.90-344.10
    
    
    $
    88.00Exercisable at December 31, 2003
    
    
    86,730
    
    
    $
    68.40-344.10
    
    
    $
    169.10Exercisable at December 31, 2004
    
    
    34,100
    
    
    $
    68.40-326.88
    
    
    $
    156.47
 74




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##### Table of Contents



The following table sets forth information about stock options outstanding at December
31, 2004: Outstanding
    
    
    ExercisableWeighted-Number of
    
    
    Average
    
    
    Weighted-
    
    
    Number of
    
    
    Weighted-Range of
    
    
    Options
    
    
    Remaining
    
    
    Average
    
    
    Options
    
    
    AverageExercise Prices
    
    
    Outstanding
    
    
    Life (in years)
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$
    16.87-16.87
    
    
    
    50,000
    
    
    
    4.68
    
    
    $
    16.87
    
    
    
    
    
    
    $
    0.0068.40-75.31
    
    
    
    8,550
    
    
    
    7.61
    
    
    
    72.08
    
    
    
    8,550
    
    
    
    72.0878.44-139.69
    
    
    
    9,850
    
    
    
    4.18
    
    
    
    116.42
    
    
    
    9,850
    
    
    
    116.42179.38-188.75
    
    
    
    8,250
    
    
    
    3.80
    
    
    
    182.04
    
    
    
    8,250
    
    
    
    182.04255.00-255.00
    
    
    
    4,000
    
    
    
    2.07
    
    
    
    255.00
    
    
    
    4,000
    
    
    
    255.00278.75-278.75
    
    
    
    300
    
    
    
    2.73
    

    
    
    278.75
    
    
    
    300
    
    
    
    278.75299.06-299.06
    
    
    
    2,000
    
    
    
    3.08
    
    
    
    299.06
    
    
    
    2,000
    
    
    
    299.06316.25-316.25
    
    
    
    350
    
    
    
    3.41
    
    
    
    316.25
    
    
    
    350
    
    
    
    316.25316.88-316.88
    
    
    
    300
    
    
    
    3.06
    
    
    
    316.88
    
    
    
    300
    
    
    
    316.88326.88-326.88
    
    
    
    500
    
    
    
    3.15
    
    
    
    326.88
    
    
    
    500
    
    
    
    326.88$
    16.87-326.88
    
    
    
    84,100
    
    
    
    4.65
    
    
    $
    73.47
    
    
    
    34,100
    
    
    $
    156.47
 Statement of Financial Accounting Standards No. 123 Pro Forma Disclosure The Company adopted Statement No. 123 effective January 1, 1996, but continues to account for
employee and director stock-based compensation plans under the intrinsic value method prescribed by
APB 25. Statement No. 123 requires that stock-based compensation to parties other than employees
and directors be accounted for under the fair value method. No compensation cost has been
recognized for the stock option awards to employees and directors in 2004, 2003 and 2002, except as
discussed above. The weighted-average fair value of options granted to employees and directors
were $11.99 and $23.10 in 2004 and 2002, respectively. There were no options granted during 2003.
See Note 2 for a pro forma calculation of net income (loss) and earnings (loss) per share had
compensation cost related to the Companys stock option awards been determined under the fair value method. The fair value of options granted was estimated as of the date of grant using the
Black-Scholes option-pricing model with the following weighted-average assumptions: For the Year Ended December 31,2004
    
    
    2003
    
    
    2002Dividend yield
    
    
    
    %
    
    
    
    %
    
    
    
    %Expected volatility of our common stock
    
    
    85
    %
    
    
    41
    %
    
    
    37
    %Expected risk-free interest rate (1)
    
    
    3.25
    %
    
    
    2.30
    %
    
    
    2.73
    %Expected life of options in years
    
    
    3.59
    
    
    
    3.59
    
    
    
    4.60
   (1)
    
    The expected risk-free interest rate was calculated using a term commensurate with the expected life of the options. 75




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##### Table of Contents



Note 16. Employee Benefit Plans On July 22, 2002, the Companys Board of Directors approved the termination, effective as of
September 30, 2002 and subject to regulatory approval, of the qualified, noncontributory defined
benefit retirement plan (the Eureka Plan) that the Company assumed in its acquisition of America
First Eureka Holdings. The Eureka Plan was in a frozen status and no additional benefits had been
accrued since January 1, 1994. In November 2003, the Company received a favorable determination
from the Internal Revenue Service to proceed with the termination. As of December 31, 2003, the
Company accrued $0.9 million related to its liabilities to the Eureka Plan and the costs associated
with the termination. As of December 31, 2003, the plan assets approximated $1.5 million. In
January 2004, and as part of the termination process, the Company purchased an annuity at a cost of
$2.4 million from a third party annuity provider to provide benefits for all remaining Eureka Plan
participants. The termination process is in compliance with the relevant regulations of the
Department of Labor. The following tables set forth the funded status of the Eureka Plan and related net periodic
benefits cost for the year prior to the termination: For the YearEndedDecember 31,2002(Dollars inthousands)Projected benefit obligation at beginning of year

    
    $
    5,201Interest cost
    
    
    359Actuarial loss
    
    
    1,440Benefits paid
    
    
    (3,148
    )Projected benefit obligation at end of year
    
    $
    3,852Plan assets at beginning of year
    
    $
    4,430Actual return on plan assets
    
    
    (292
    )Employer contribution
    
    
    2,140Benefits paid
    
    
    (3,148
    )Plan assets at end of year
    
    $
    3,130
 As ofDecember 31,2002(Dollars inthousands)Fair value of plan assets
    
    $
    3,130Projected benefit obligation
    
    
    3,852Plan assets less than projected benefit obligation
    
    
    (722
    )Unrecognized loss from past experience different than originally
assumed and from effects of changes in assumptions
    
    
    1,540Recognition of previously unrecognized loss upon termination
of the plan
    
    
    (1,540
    )Total accrued benefit liability
    
    $
    (722
    )Weighted-average discount rate
    
    
    5.00
    %Expected long-term rate of return on assets
    
    
    1.50
    %
 76




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##### Table of Contents



For the YearEndedDecember 31,2002(Dollars inthousands)Interest cost on projected benefit obligation
    
    $
    358Assumed return on plan assets
    
    
    (337
    )Net periodic pension benefit
    
    $
    21
 As of December 31, 2004, 3,443 shares of the Companys common stock were held in treasury
under the Companys non-qualified defined benefit retirement plan for non-employee members of its
Board of Directors. These shares were previously repurchased in the open market at a cost of $0.6
million to be distributed to certain non-employee members of the Companys Board of Directors. As
of December 31, 2004, the Company had $0.2 million included in other liabilities for the remaining
benefits owed to certain current and retired executive officers pursuant to a terminated
non-qualified supplemental retirement plan for executive officers and $1.0 million in other liabilities for postretirement health
care benefits owed to certain retired employees, officers and
directors pursuant to a terminated retiree health plan. Effective October 31, 2002, the Companys Board of Directors approved the termination of the
Companys Employee Stock Ownership Plan (ESOP). All participants were fully vested as of October
1, 2002. Before the termination, the Company borrowed from a financial institution and in turn
lent it to the ESOP to purchase shares of the Companys common stock in the open market. As of
December 2002, the ESOP debt was fully paid. Interest expense of the ESOP debt amounted to $7,000
for the year ended December 31, 2002. The ESOP held 36,144 shares of the Companys common stock at
December 31, 2003. During the second quarter of 2004, these shares were distributed to
participants. All fractional shares were paid in cash. Prior to the termination, the Company made
periodic contributions to the ESOP to enable the ESOP to pay principal, interest expense and
administrative costs not covered by cash dividends received by the ESOP on its unallocated shares
of the Companys common stock. The Company made cash contributions to the ESOP of $1.1 million for
the year ended December 31, 2002. All shares of common stock held by the ESOP were treated as
outstanding shares in calculating both basic and diluted earnings per share. ESOP-related
compensation expense of $0.5 million was recorded for the year ended December 31, 2002. The Company has a 401(k) thrift plan under which an employee with three or more months of
service may contribute from 2% to 15% of base salary to the plan. The amount of base salary
deferred is not subject to federal or state income taxes at the time of deferral. After one year
of service, the Company will match an employees contribution up to 100% of the first 6% of the
employees base salary, depending on the employees length of service. The Companys contribution
was $0.3 million, $0.4 million and $1.9 million for the years ended December 31, 2004, 2003 and
2002, respectively. 77




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Note 17. Derivative Instruments The
Company uses derivatives to modify interest rate characteristics of
certain assets or liabilities to hedge its exposure to interest rate fluctuations, reducing
the effects these fluctuations might have on associated cash flows or values. Derivative financial instruments involve, to varying degrees,
elements of credit risk. Credit risk is defined as the possibility of sustaining a loss because
counterparties to the financial instrument fail to perform in accordance with the terms of the
contract. As a result of the
Companys re-adoption of going concern basis accounting effective October 1, 2003 and the
use of accounting prescribed by Statement No. 133, the Companys derivative instruments are
being carried at fair value, with changes in such fair value charged or credited to earnings.
Prior to the Companys re-adoption of going concern basis accounting, it accounted for
changes in the market value of derivative instruments using liquidation basis accounting.
Accordingly, changes in the fair value of these derivative instruments were reflected in the
consolidated statements of net assets in liquidation under pre-tax loss from operations, while
offsetting changes in the market value of underlying auto contracts were included in changes in
estimated values of assets and liabilities. The Company was a party to fixed-for-floating interest rate swaps with notional principal
amounts of $145.0 million and $133.0 million at December 31, 2004 and 2003, respectively. The
interest rate swaps mature at various dates between May 2005 and May 2008. During 2004, the
Company paid a fixed interest rate of 2.51% and received a floating interest rate of 1.46%. During
2003, the Company paid a fixed interest rate of 2.29% and received a floating interest rate of
1.18%. Interest rate swaps increased interest expense by $1.8 million and $0.3 million for the
years ended December 31, 2004 and 2003, respectively. To record its interest rate swaps at their
fair value, as required by Statement No. 133, the Company recognized gains of $2.1 million during
2004 and losses of $1.6 million during 2003. As discussed in Note 11,
BVAC draws on its warehouse credit facility by transferring auto contracts to a special purpose
entity, a statutory trust, which issues notes to its two lenders including a commercial paper
conduit affiliated with one of the lenders (the Note Purchasers).  Under the terms of the
facility, the trust enters into out-of-the-money, interest rate cap contracts, containing terms
and conditions required by the Note Purchasers, to provide protection to the Note Purchasers
from interest rate risk embedded in the fixed-rate auto contracts that have been transferred to
the trust.  BVAC incurs the cost of these interest rate caps.  The notional balance of these
amortizing interest rate caps is maintained by the trust to coincide with the outstanding
balance of the underlying auto contracts.  At December 31, 2004, the notional amount of these
interest rate caps was $281.3 million.  The contracts mature between May 2008 and October 2010;
the strike rates on the contracts, which are indexed to the 1 month Libor rate, range between
5.50% and 6.25%.  At December 31, 2004, the interest rate caps had a fair value of $0.7 million.
For the year ended December 31, 2004, the Company recognized $0.7 million of unrealized losses
on interest rate caps.  The fair value of the interest rate caps is included in other assets. Note 18. Commitments and Contingencies Premises At December 31, 2004, the Company occupied three offices including its corporate headquarters
office and had an additional two offices that have been vacated, and are subleasing, under
operating lease agreements expiring at various dates through the year 2012. In most instances,
these lease arrangements include options to renew or extend the lease at market rates. The Company is a party to lease agreements for two former Bay View Franchise Mortgage
Acceptance Company offices, both of which were subleased at December 31, 2004. Rental expense was
$1.2 million for the year ended December 31, 2004, $1.2 million for 2003 and $9.1 million for 2002.
Sublease rental income totaled $18,000 for the year ended December 31, 2004, $186,000 for 2003 and
$567,000 for 2002. 78




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##### Table of Contents



Future minimum payments under noncancellable lease obligations are summarized below. These
payments have not been reduced to reflect approximately $2.3 million in sublease rental income from
existing sublease rental arrangements through the year 2008. Operating LeasePayments(Dollars in thousands)2005
    
    $
    2,9032006
    
    
    2,5072007
    
    
    2,5422008
    
    
    2,305Thereafter
    
    
    6,577$
    16,834
 Included in the table above are future minimum lease payments of $15.1 million related to
the Companys liquidating activities. At December 31, 2004, the Company had accrued $6.0 million
for future rent payments net of estimated sublease income as facilities costs as described in Note
2. Loans At December 31, 2004 and 2003, the Company had contingent liabilities of $14.5 million and
$14.4 million, respectively, related to a standby letter of credit that the Bank had provided on
bonds issued by a community housing development in Northern California. This letter of credit has
been secured by a cash deposit of a corresponding amount which is included in restricted cash. The
Company had no outstanding lending commitments at December 31, 2004 and 2003. There were no
outstanding recourse and subordination contingencies at December 31, 2004 and 2003. Litigation On August 29, 2003, Financial Security Assurance Inc. (FSA) filed a complaint against the
Company and the Bank in the United States District Court for the Southern District of New York.
The complaint, as amended, alleges breaches of representations and warranties or indemnity
obligations with regard to a number of loans that served as collateral for two securitizations
involving the Company and/or a former subsidiary, Bay View Franchise Mortgage Acceptance Company
that were effected in 1998 and 2000. FSA guaranteed certain payments in connection with these
securitizations. The Company vigorously denies any liability to FSA and has asserted numerous
defenses to each of FSAs claims. The Company has also filed counterclaims against FSA. The Company is a party to various other legal actions arising in the normal course of
business. After consultation with counsel, the Company does not currently expect that the resolution of
these legal actions will have a material adverse effect on the Companys consolidated financial
condition, results of operations or cash flows. 79




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##### Table of Contents



Note 19. Estimated Fair Value of Financial Instruments The following disclosure of the estimated fair value of financial instruments is made in
accordance with the requirements of Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments. Fair value estimates, methods and
assumptions, set forth below for the Companys financial instruments, are made solely to comply
with the requirements of Statement No. 107 and should be read in conjunction with the Companys
consolidated financial statements and related notes. The Company has determined the estimated fair value amounts by using market information and
valuation methodologies that it considers appropriate. However, considerable judgment is required
to interpret market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the
Company could realize or has
realized in a current market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts. For all of these
reasons, the aggregation of the fair values presented herein does not represent, and should not be
construed to represent, their underlying value. The following methods and assumptions have been used to estimate the fair value of each class
of financial instrument for which it was practicable to estimate the value: Cash and cash equivalents: This category includes cash and deposits due from depository
institutions and money market funds. The cash equivalents were readily convertible to known
amounts of cash or are so near their maturity that they present insignificant risk of changes in
value. For these short-term financial instruments, the carrying amount approximated fair value. Securities: The fair values of investment securities and retained interests in loan
securitizations were estimated by discounting future cash flows using a discount rate commensurate
with the risks involved. The fair value of mortgage-backed securities was based on published
market prices or quotes obtained from independent registered securities brokers. Auto contracts and other loans: The fair value of auto contracts and other loans was based on
prices for similar loans in the secondary whole loan or securitization markets with similar credit
terms and remaining maturities. Prepayment estimates were based on historical experience for
similar loans. Borrowings: Borrowings include BVACs floating rate warehouse credit facility and a structured
financing of the Companys auto lease cash flows which mature within one year of December 31, 2004.
For such borrowings, the carrying amount approximates fair value. Junior Subordinated Deferrable Interest Debentures: The carrying value of the Junior
Subordinated Deferrable Interest Debentures, which were redeemed on June 30, 2004, in connection
with the Companys redemption of the remaining Capital Securities, approximated fair value at
December 31, 2003. Interest rate swaps: The fair value of interest rate swaps is the estimated amount that the
Company would receive or pay to terminate the swap agreements at the reporting date, taking into
account current interest rates and the current creditworthiness of the swap counterparties. Interest rate caps: The fair value of interest rate caps is the estimated amount that the
Company would receive or pay to terminate the cap agreements at the reporting date, taking into
account current interest rates and the current creditworthiness of the cap counterparties. 80




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##### Table of Contents



Limitations: The fair value estimates presented herein were based on pertinent information
available to the Company as of December 31, 2004 and 2003. Although the Company is not aware of
any factors that would significantly affect the estimated fair value amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly from the amounts presented
herein. The
following table sets forth the estimated fair values of the Companys financial
instruments as of the dates indicated: At December 31,2004
    
    
    2003Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(Dollars in thousands)Financial assets:Cash, cash
equivalents and restricted cash
    
    $
    31,292
    
    
    $
    31,292
    
    
    $
    43,803
    
    
    $
    43,803Retained
interests in securitizations and other securities
    
    
    22,636
    
    
    
    22,636
    
    
    
    28,836
    
    
    
    28,836Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    5,982
    
    
    
    5,893Auto installment contracts and other loans
    
    
    328,786
    
    
    
    329,207
    
    
    
    177,948
    
    
    
    179,287Financial liabilities:Borrowings
    
    
    300,650
    
    
    
    300,650
    
    
    
    154,276
    
    
    
    154,276Junior Subordinated Deferrable Interest
Debentures
    
    
    
    
    
    
    
    
    
    
    24,784
    
    
    
    24,784Interest rate swaps  unrealized gain (loss)
    
    
    398
    
    
    
    398
    
    
    
    (1,624
    )
    
    
    (1,624
    )Interest rate caps  unrealized gain
    
    
    698
    
    
    
    698
    
    
    
    
    
    
    
    
 81




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##### Table of Contents



Note 20. Segment and Related Information The Company considers its auto finance business to be its sole line of business. Prior to the
Companys adoption of the Plan on September 30, 2002, the Company had two operating segments that
were referred to as business platforms. The platforms were determined primarily based upon the
characteristics of interest-earning assets and their respective distribution channels and reflect
the way that the Company monitored, measured and evaluated its primary business activities. The
platforms were comprised of: a Retail Platform which was comprised of single-family real estate
loans, home equity loans and lines of credit, auto contracts and leases, mortgage-backed securities
and other investments, and consumer banking products and services; and a Commercial Platform which
was comprised of multi-family and commercial real estate loans, franchise loans, franchise
asset-backed securities, asset-based loans, syndicated loans, factored receivables and commercial
leases, and business banking products and services. The Company evaluated the performance of its segments based upon contribution by platform.
Contribution by platform is defined as each platforms net interest income and noninterest income
less each platforms allocated provision for losses on loans and leases, direct general and
administrative expenses, including certain expense allocations, and other noninterest expense,
including the amortization of intangible assets. In computing net interest income by platform, the interest expense associated with the
warehouse lines, which were used primarily to fund franchise loans held-for-sale, was allocated
directly to the Commercial Platform. The interest expense associated with remaining funding
sources, including dividends associated with the 9.76% Capital Securities, was allocated to each
platform on a pro-rata basis determined by the relative amount of average interest-bearing
liabilities, excluding warehouse lines, that were required to fund the platforms interest-earning
assets. The Retail Platform incurred the direct general and administrative expenses related to
operating the Companys branch network, which served primarily to generate deposits used to fund
interest-earning assets in the Retail and Commercial Platforms. A portion of these direct general
and administrative expenses was allocated to the Commercial Platform based upon the relative amount
of average interest-bearing liabilities that were required to fund the platforms interest-earning
assets. All indirect general and administrative expenses not specifically identifiable with, or
allocable to, the Companys business platforms were included in indirect corporate overhead.
Indirect corporate overhead included expenses associated with our administrative and support
functions. Liquidation adjustments recorded during the third quarter of 2002 in connection with
the Companys adoption of liquidation basis accounting effective September 30, 2002 were not
allocated to the Companys business platforms. The following table sets forth each platforms contribution for the period indicated. The
table also sets forth the reconciliation of total contribution by platform to consolidated net
income for the period indicated. Reconciling items generally included indirect corporate overhead,
liquidation and valuation adjustments for 2002 and income taxes. 82




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##### Table of Contents



For the Nine Months Ended September 30, 2002Retail
    
    
    Commercial
    
    
    Total(Dollars in thousands)Interest income
    
    $
    69,054
    
    
    $
    76,185
    
    
    $
    145,239Interest expense
    
    
    (40,182
    )
    
    
    (19,886
    )
    
    
    (60,068
    )Provision for losses on loans and leases
    
    
    (2,106
    )
    
    
    (8,594
    )
    
    
    (10,700
    )Noninterest income
    
    
    78,775
    
    
    
    12,790
    
    
    
    91,565Direct general and administrative expenses
    
    
    (68,712
    )
    
    
    (7,813
    )
    
    
    (76,525
    )Allocation of branch network general and administrative expenses
    
    
    18,466
    
    
    
    (18,466
    )
    
    
    Litigation settlement expense
    
    
    
    
    
    
    (13,100
    )
    
    
    (13,100
    )Leasing expenses
    
    
    (43,984
    )
    
    
    
    
    
    
    (43,984
    )Real estate owned operations, net
    
    
    
    
    
    
    (956
    )
    
    
    (956
    )Provision for losses on real estate owned
    
    
    
    
    
    
    (266
    )
    
    
    (266
    )Amortization of intangible assets
    
    
    (993
    )
    
    
    
    
    
    
    (993
    )Dividends on Capital Securities
    
    
    (4,809
    )
    
    
    (3,064
    )
    
    
    (7,873
    )Contribution by platform
    
    $
    5,509
    
    
    $
    16,830
    
    
    
    22,339Indirect corporate overhead
    
    
    
    
    
    
    
    
    
    
    (16,476
    )Adjustment for liquidation basis
    
    
    
    
    
    
    
    
    
    
    266,510Income tax expense
    
    
    
    
    
    
    
    
    
    
    (181,792
    )Cumulative effect of change in accounting principle, net of taxes
    
    
    
    
    
    
    
    
    
    
    (18,920
    )Net income
    
    
    
    
    
    
    
    
    
    $
    71,661At September 30, 2002:Interest-earning assets plus operating lease assets
    
    $
    3,277,407
    
    
    $
    358,258
    
    
    $
    3,635,665Noninterest-earning assets
    
    
    
    
    
    
    
    
    
    
    260,808Total assets
    
    
    
    
    
    
    
    
    
    $
    3,896,473
 83




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##### Table of Contents



Note 21. Selected Quarterly Results of Operations (Unaudited) During the Companys year-end audit and Sarbanes-Oxley Section 404 review, the Company
determined that it should have recognized a total of $0.4 million of unrealized after-tax losses on
certain derivative instruments. As described in Note 11, BVAC maintains, through an affiliated
special purpose trust entity, a $350.0 million revolving receivables warehouse facility. Under the
terms of this facility, the special purpose trust entity maintains interest rate caps to protect
the holders of interest in the trust from interest rate risk in fixed-rate automobile installment
contracts transferred to the trust. While BVAC pays the costs associated with the required
interest rate caps, the special purpose trust entity owns the required interest rate caps and has
pledged the benefits thereof to an indenture trustee for the benefit of the secured parties of such
trust. BVAC considered the cost of the interest rate caps to be a cost of its warehouse facility,
and as such, the cost was deferred and amortized as a cost of the warehouse facility. Subsequently
it was determined that the Company should have recognized the interest rate caps as its derivative
instruments and recorded them at fair value with changes in the fair value recognized in earnings
in accordance with Statement No. 133. In light of this information, the Company adjusted the
carrying value of these interest rate caps to fair value at each of the quarter-ends in 2004 and
recognized an unrealized loss on the interest rate caps. This resulted in revised earnings for the
quarters ended March 31, June 30 and September 30, 2004. The Company intends to restate its
previously reported consolidated financial statements for the first, second and third quarters of
2004 that were previously reported in its Quarterly Reports on Form 10-Q in addition to its
consolidated financial statements for the fourth quarter of 2004 that were previously furnished in
a Current Report on Form 8-K dated January 28, 2005 (collectively, the 2004 Quarterly
Statements). The 2004 Quarterly Statements will correct the manner in which the Company accounted
for the aforementioned interest rate cap contracts. The aggregate effect of the restatements is to
increase the Companys net loss by $430 thousand, or $0.06 per share. For the Year Ended December 31, 2004First
    
    
    Second
    
    
    ThirdQuarter
    
    
    Quarter
    
    
    Quarter
    
    
Fourth(As restated)(1)
    
    
    (As restated)(1)
    
    

(As restated)(1)
    
    

QuarterGoing Concern Basis(Dollars in thousands, except per share amounts)Interest income
    
    $
    4,912
    
    
    $
    5,212
    
    
    $
    5,960
    
    
    $
    6,525Net interest income
    
    
    2,970
    
    
    
    3,049
    
    
    
    3,813
    
    
    
    3,932Provision for credit losses
    
    
    
    
    
    
    521
    
    
    
    331
    
    
    
    760Loss before income tax benefit
    
    
    (1,483
    )
    
    
    (291
    )
    
    
    (2,662
    )
    
    
    (2,002
    )Net loss
    
    
    (901
    )
    
    
    (177
    )
    
    
    (1,618
    )
    
    
    (1,216
    )Basic loss per share (1)
    
    $
    (0.14
    )
    
    $
    (0.03
    )
    
    $
    (0.25
    )
    
    $
    (0.18
    )Diluted loss per share (1)
    
    $
    (0.14
    )
    
    $
    (0.03
    )
    
    $
    (0.25
    )
    
    $
    (0.18
    )
 For the Year Ended December 31, 2003First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterLiquidation Basis
    
    
    Going Concern Basis(Dollars in thousands, except per share amounts)Interest income
    
    $
    6,473
    
    
    $
    6,286
    
    
    $
    5,192
    
    
    $
    4,936Net interest income
    
    
    3,294
    
    
    
    3,783
    
    
    
    2,463
    
    
    
    1,324Loss before income tax benefit
    
    
    (836
    )
    
    
    (1,531
    )
    
    
    (2,228
    )
    
    
    (857
    )Adjustment for liquidation basis
    
    
    (1,664
    )
    
    
    (924
    )
    
    
    (3,407
    )
    
    
    Change in net assets in
liquidation from operations
    
    
    (1,698
    )
    
    
    (1,669
    )
    
    
    (971
    )
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (673
    )Basic loss per share
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    $
    (0.10
    )Diluted loss per share
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    $
    (0.10
    )
  (1)
    Earnings per share is computed independently for each of the quarters presented. Therefore,
the sum of the quarterly earnings per share amounts may not equal the annual amount. This is
caused by rounding and the averaging effect of the number of share equivalents outstanding
throughout the year, which changes with the market price of the common stock. The following table summarizes the changes in loss before income tax benefit, net loss,
basic and diluted loss per share and total assets from amounts previously reported in the Companys
Quarterly Reports on Form 10-Q and its Current Report on Form 8-K dated January 28, 2005: Loss before
    
    
    
    
    
    
    Basic Loss
    
    
    Diluted LossTaxes
    
    
    Net Loss
    
    
    per Share
    
    
    per Share
    
    
    Total Assets(Dollars in thousands, except per share amounts)First
Quarter 2004As previously reported
    
    $
    (1,388
    )
    
    $
    (843
    )
    
    $
    (0.13
    )
    
    $
    (0.13
    )
    
    $
    368,787Adjustment
    
    
    (95
    )
    
    
    (58
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (58
    )As restated
    
    $
    (1,483
    )
    
    $
    (901
    )
    
    $
    (0.14
    )
    
    $
    (0.14
    )
    
    $
    368,729Second Quarter 2004As previously reported
    
    $
    (199
    )
    
    $
    (121
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    387,875Adjustment (1)
    
    
    (92
    )
    
    
    (56
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (114
    )As restated
    
    $
    (291
    )
    
    $
    (177
    )
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    387,761Third Quarter 2004As previously reported
    
    $
    (2,338
    )
    
    $
    (1,421
    )
    
    $
    (0.22
    )
    
    $
    (0.22
    )
    
    $
    390,724Adjustment (1)
    
    
    (324
    )
    
    
    (197
    )
    
    
    (0.03
    )
    
    
    (0.03
    )
    
    
    (311
    )As restated
    
    $
    (2,662
    )
    
    $
    (1,618
    )
    
    $
    (0.25
    )
    
    $
    (0.25
    )
    
    $
    390,413Fourth Quarter 2004As previously reported
    
    $
    (1,805
    )
    
    $
    (1,097
    )
    
    $
    (0.17
    )
    
    $
    (0.17
    )
    
    $
    423,758Adjustment (1)
    
    
    (197
    )
    
    
    (119
    )
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (430
    )As restated
    
    $
    (2,002
    )
    
    $
    (1,216
    )
    
    $
    (0.18
    )
    
    $
    (0.18
    )
    
    $
    423,328
   (1)
    
    Represents year-to-date adjustment to total assets. Note 22. Subsequent Events On February 17, 2005, the Company, through Bay View 2005-LJ-1 Owner Trust, issued $232.1
million of auto receivable backed notes payable. The issue was comprised of five classes of notes, Classes
A-1 through A-4, and Class I which is an interest only security. The notes have a weighted-average
stated coupon of 4.19% and final maturities ranging between February 27, 2006 and May 25, 2012. The notes are insured as to the
timely payment of principal and interest and they contain a call provision that grants the Company
the option of calling the notes at any time after the aggregate balance of receivables has been
reduced to 15% of the original pool of receivables. Proceeds from the issuance of the notes were
used to repay $217.8 million of borrowings on the Companys revolving warehouse credit facility. 84




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of
Bay View Capital Corporation We have audited the accompanying statement of financial condition of Bay View Capital
Corporation and subsidiaries as of December 31, 2004, and the
related consolidated statements of
operations and comprehensive loss, stockholders equity and cash flows for the year then ended.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion. In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Bay View Capital Corporation and subsidiaries at
December 31, 2004, and the consolidated results of their operations and their cash flows for the
year then ended in conformity with accounting principles generally accepted in the United States of
America. We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Bay View Capital Corporation and subsidiaries
internal control over financial reporting as of December 31, 2004, based on criteria established in
Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, and our report dated April 4, 2005 expressed an unqualified opinion on
managements assessment of, and an adverse opinion on the effective operation of, internal control
over financial reporting. /s/ Grant Thornton LLP San Francisco, California
April 4, 2005 85




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors
Bay View Capital Corporation and Subsidiaries: We have audited the accompanying consolidated statement of financial condition of Bay View Capital
Corporation and Subsidiaries (the Company) as of December 31, 2003, and the related consolidated
statements of operations and comprehensive income (loss) and of stockholders equity for the period
from October 1, 2003 to December 31, 2003 and for the period from January 1, 2002 to September 30,
2002, the consolidated statements of changes in net assets in liquidation for the period from
January 1, 2003 to September 30, 2003 and for the period from September 30, 2002 to December 31,
2002, and the consolidated statements of cash flows for the years ended December 31, 2003 and 2002.
These consolidated financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1 to the consolidated financial statements, the stockholders of the Company
approved a plan of liquidation on October 3, 2002, and the Company commenced liquidation effective
September 30, 2002. As a result, the Company changed its basis of accounting from the going
concern basis to the liquidation basis effective September 30, 2002. As further discussed in Note
1 to the consolidated financial statements, the Board of Directors of the Company approved a change
of the plan of liquidation on October 23, 2003. As a result, the Company changed its basis of
accounting from the liquidation basis to the going concern basis effective October 1, 2003. In our opinion, such consolidated financial statements present fairly, in all material respects,
(1) the financial position of the Bay View Capital Corporation and Subsidiaries at December 31,
2003, (2) the results of their operations for the period from October 1, 2003 to December 31, 2003
and for the period from January 1, 2002 to September 30, 2002, (3) the changes in their net assets
in liquidation for the period from January 1, 2003 to September 30, 2003 and for the period from
September 30, 2002 to December 31, 2002, and (4) their cash flows for the years ended December 31,
2003 and 2002, in conformity with accounting principles generally accepted in the United States of
America. As discussed in Note 2 to the consolidated financial statements, effective January 1, 2002, the
Company changed its method of accounting for previously recognized goodwill and intangible assets
to conform to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets. As discussed in Note 3 to the consolidated financial statements, the accompanying 2003 consolidated
financial statements have been restated. /s/ Deloitte Touche LLP San Francisco, California
March 12, 2004
(August 13, 2004 as to Note 3) 86




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and our Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act)) as of December 31, 2004. Our disclosure controls and procedures are
designed to ensure that information we are required to disclose in the reports we file under the
Exchange Act is recorded, processed, summarized and reported on a timely basis in accordance with
generally accepted accounting principles in the United States (GAAP) and without material
misstatement. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have
concluded that, as of December 31, 2004, because of the material weaknesses in our internal control
over financial reporting described in this Item 9A, our disclosure controls and procedures were not
effective as of December 31, 2004 in recording, processing, summarizing and reporting, on a timely
basis, information required to be disclosed by us in the reports that we file under the Exchange
Act. Managements Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over
our financial reporting as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act. Our internal control over financial reporting is a process designed under the supervision of
our Chief Executive Officer and our Chief Financial Officer to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of our financial
statements for external reporting purposes in accordance with GAAP. Under the supervision of and with the participation of our Chief Executive Officer and our
Chief Financial Officer, our management has conducted a review, evaluation and assessment of the
effectiveness of our internal control over financial reporting as of December 31, 2004, using the
criteria set forth for effective internal control over financial reporting as described in
Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). In accordance with Section 404 of the Sarbanes-Oxley Act of 2002
(Sarbanes-Oxley), our management makes the following assertions:  
    Management has implemented a process to monitor and assess both the design and operating
effectiveness of our internal control over financial reporting.  
    Because of its inherent limitations, a system of internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness as to future financial reporting periods are subject to the risk that
controls may become inadequate because of changes in conditions or that the degree of
compliance with the policies or procedures may deteriorate. A material weakness is a control deficiency, or a combination of control deficiencies, that
results in a more than remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. As of December 31, 2004, we had three
material weaknesses in our internal control over financial reporting that were communicated to us
by our independent auditors; therefore, our internal control over financial reporting was not
effective. A description of the three material weaknesses is as follows:  
    Our internal controls intended to ensure the proper accounting for derivatives (interest
rate cap contracts) maintained by a special purpose trust in connection with a $350 million
warehouse credit facility provided to the Companys wholly owned subsidiary, Bay View Acceptance Corporation (BVAC), were not
operating effectively. We determined that we should account for the derivatives in
accordance with Statement of Financial Accounting Standards 133 (SFAS 133), Accounting for
Derivatives and Hedging Activities. Under SFAS 133, we are now recognizing the value of the
derivatives as an asset and record them at fair value, with any changes in fair value
recognized in earnings. We previously accounted for the derivatives as a debt issuance cost
of BVACs warehouse credit facility, which was amortized into the results of operations.  
    The above weakness reflects that a continuing weakness exists, as reported in a Form 8-K
Current Report dated July 26, 2004, relating to insufficient qualified accounting personnel
to identify and resolve complex accounting issues on a timely basis and lack of appropriate
resources resulting in insufficient supervision and review of our financial reporting
process.  
    The Company was unable to assess the effectiveness of the internal controls of two of
BVACs third-party service organizations. The service organizations processes are an
integral part of BVACs auto installment loan process, which is part of our internal
control over financial reporting, specifically as to the existence and valuation of auto
installment contracts, interest and fee income. The control deficiency did not result in a
misstatement in our historical consolidated financial statements; however, it could result
in a misstatement of auto installment contracts, interest and fee income that would result
in a material misstatement to our annual or interim financial statements that might not be
prevented or detected in a timely manner. A report of managements assessment of the design and effectiveness of our internal control
over financial reporting is included. Grant Thornton LLP, an independent registered public
accounting firm, audited the effectiveness of our internal control over financial reporting as of
December 31, 2004 based on criteria established by COSO. The report of Grant Thornton LLP dated
April 4, 2005 is included below. 87




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Remediation Efforts Related to the Material Weakness in Internal Control over Financial Reporting At the direction and under the supervision of our Audit Committee, which held meetings on
March 30, 2005, April 4, 2005, April 5, 2005 and April 8, 2005, we are undertaking the following
actions to resolve the material weaknesses:  
    Commence an immediate and ongoing review of all loan arrangements that involve
derivative instruments;  
    Conduct a quarterly review of all accounting policies that are relevant to proposed new
or modified activities we contemplate undertaking;  
    Retain qualified independent advisors to provide guidance as it relates to complex
accounting principles and commensurately evaluate the appropriate staff size and
composition in our accounting and financial reporting areas;  
    Continue our efforts to have BVACs outside service organizations obtain SAS 70 Type II
reports; and  
    Continue to conduct frequent periodic substantive testing to verify the accuracy of
BVACs auto installment contract principal balances, interest and fee income. Our Form 8-K Current Report dated April 1, 2005 reported our loss before taxes, net loss,
basic loss per share, diluted loss per share and total assets as originally reported, the
adjustments required in accordance with SFAS 133 and our loss before taxes, net loss, basic loss
per share, diluted loss per share and total assets in accordance with GAAP. We intend to restate
our financial statements on Form 10-Q for the first, second and third quarters of 2004 and for the
fourth quarter of 2004 as reported in a Form 8-K Current Report dated January 28, 2005. Our Audit Committee has also retained KPMG LLP, our internal auditors, to assist the Audit
Committee in its oversight of the corrective actions. Changes in Internal Control over Financial Reporting Because of the material weaknesses described above in Managements Report on Internal Control
Over Financial Reporting, during 2005 we are undertaking the actions described above. There have
been no other changes to our internal control over financial reporting since October 1, 2004 that
have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting. Report of Independent Registered Public Accounting Firm on Managements Assessment of the
Effectiveness of Internal Control over Financial Reporting and the Effectiveness of Internal
Control over Financial Reporting To the Shareholders and Board of Directors of
Bay View Capital Corporation and Subsidiaries We have audited managements assessment, included in the accompanying Report of Management on
Internal Control over Financial Reporting, that Bay View Capital Corporation and subsidiaries (the
Company) did not maintain an effective internal control over financial reporting as of December 31,
2004, because of the effect of material weaknesses identified in managements assessment based on
the criteria established in Internal Control  Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management
is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting. Our responsibility is
to express an opinion on managements assessment and an opinion on the effectiveness of the
Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinions. A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America. A companys internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles generally accepted in
the United States of America, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Companys assets that could have a material effect on the consolidated financial
statements. Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. 88




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A material weakness is a control deficiency, or combination of control deficiencies, that
results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. We have identified the following material
weaknesses that have been included as material weaknesses in managements assessment:  i)
    As of December 31, 2004, the Companys internal control did not maintain
effective control over a derivative instrument. Specifically, the derivative instrument
overstated as a result of errors caused by management using an incorrect application of
accounting principles generally accepted in the United States of America and incorrectly
recorded the amount as a debt issuance cost. The Company did not have effective review
and approval controls to prevent or detect these errors on a timely basis. This control
deficiency resulted in the restatement of the Companys interim consolidated financial
statements for 2004. Additionally, this control deficiency could result in a
misstatement of the derivative instrument and the related change in fair value that
would result in a material misstatement to annual or interim financial statements that
would not be prevented or detected. Accordingly, management believes that this control
deficiency constitutes a material weakness.  ii)
    As of December 31, 2004, the Companys internal control over the financial
reporting process is not operating effectively due to insufficient qualified accounting
personnel to identify and resolve accounting issues and lack of appropriate resources
resulting in insufficient supervision and review of the financial reporting process.
Accordingly, management believes that this control deficiency constitutes a material
weakness.  iii)
    As of December 31, 2004, the Company did not maintain effective control over the
effectiveness of controls at two third-party service
organizations. The service
organizations processes are an integral part of the Companys auto installment loan
process. Such processes are considered part of the Companys internal control over
financial reporting specifically as to the existence and valuation of auto installment
loan contracts and related interest and fee income. Management was unable to assess the
effectiveness of controls over financial reporting at the service organizations.
Managements inability to obtain evidence about the effectiveness of controls over
financial reporting at the service organizations represents a control deficiency. This
control deficiency did not result in a misstatement to the Companys historical
consolidated financial statements; however, it could result in a misstatement of auto
installment loan contracts and related interest and fee income that would result in a
material misstatement to annual or interim financial statements that would not be
prevented or detected. Accordingly, management believes that this control deficiency
constitutes a material weakness. These material weaknesses were considered in determining the nature, timing, and extent of
audit tests applied in our audit of the 2004 consolidated financial statements, and this report
does not affect our report dated April 4, 2005 on those consolidated financial statements. In our opinion, managements assessment that the Company did not maintain effective internal
control over financial reporting as of December 31, 2004, is fairly stated, in all material
respects, based on criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion,
because of the effect of the material weaknesses described above on the achievement of the
objectives of the control criteria, the Company has not maintained effective internal control over
financial reporting as of December 31, 2004, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). We do not express an opinion or any other form of assurance on managements statements
included in this Item 9A, Controls and Procedures, other than those statements included under
Report of Management on Internal Control over Financial Reporting. We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statement of financial condition of Bay View
Capital Corporation and subsidiaries as of December 31, 2004, and the related consolidated
statements of operations and comprehensive loss, stockholders equity, and cash flows for the year
then ended and our report dated April 4, 2005 expressed an unqualified opinion on those
consolidated financial statements. /s/ Grant Thornton LLP San Francisco, California
April 4, 2005 Item 9B. Other Information None. 89




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Part III 
 Item 10. Directors and Executive Officers of the Registrant Information concerning our executive officers, our directors and compliance with the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act) by our
directors, executive officers and beneficial owners of 10% or greater of our equity securities is
incorporated herein by reference from our Definitive Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on May 26, 2005. The compensation report and performance graph
included in the Definitive Proxy Statement pursuant to Items 402(k) and 402(l) of Regulation S-K
are specifically not incorporated by reference herein. We have adopted a Code of Ethical Conduct that applies to our directors, executive officers,
employees and others acting on our behalf, including our principal executive officer, principal
financial and accounting officer, and any other person performing similar functions. A copy of the
Code of Ethical Conduct is filed in this Report as Exhibit 14. 
 Item 11. Executive Compensation Information concerning executive compensation is incorporated herein by reference from our
Definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on May 26,
2005. The compensation report and performance graph included in the Definitive Proxy Statement
pursuant to Items 402(k) and 402(l) of Regulation S-K are specifically not incorporated by
reference herein. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters Information concerning security ownership of certain beneficial owners and management and the
Equity Compensation Plans table are incorporated herein by reference from our Definitive Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held on May 26, 2005. 
 Item 13. Certain Relationships and Related Transactions Information concerning certain relationships and related transactions is incorporated herein
by reference from our Definitive Proxy Statement for the Annual Meeting of Stockholders scheduled
to be held on May 26, 2005. 
 Item 14. Principal Accountant Fees and Services Information concerning principal accounting fees and services is incorporated herein by
reference from our Definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to
be held on May 26, 2005. 90




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Part IV 
 Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) (1) and (2): Our Financial Statements and Supplementary Data contained in Item 8 are filed as part of this
report. All financial statement schedules have been omitted as the required information is not
applicable or has been included in our financial statements and related notes. (a) (3): Exhibits are listed in the table below. Regulation
    
    
    
    Reference to priorS-K
    
    
    
    filing or exhibitExhibit
    
    
    
    number attachedNumber
    
    Document
    
    hereto2
    
    Plan of acquisition, reorganization, arrangement, liquidation or succession
    
    None3
    
    Articles of Incorporation
    
    
    3aBylaws
    
    
    3b4
    
    Instruments defining the rights of security holders, including indentures:Articles
of Incorporation
    
    
    3aBylaws
    
    
    3bSpecimen of common stock certificate
    
    
    4a9
    
    Voting trust agreement
    
    None10
    
    Material contracts:Contribution Agreement by and between Bay View Acceptance Corporation,
as Contributor, and Bay View Receivables Corporation, as Depositor
    
    
    10.1Amendment No. 1 dated as of June 25, 2004 to Contribution Agreement
dated as of June 5, 2003
    
    
    10.1.aSale and Servicing Agreement by and among Bay View Auto Receivables
Owner Trust, as Issuer, Bay View Receivables Corporation, as Depositor,
Bay View Acceptance Corporation, as Servicer, and as Contributor and
JPMorgan Chase Bank, as Indenture Trustee and Systems & Services
Technologies, Inc., as Backup Servicer dated as of June 5, 2003
    
    
    10.2Amendment No. 1 dated as of June 25, 2004 to Sale and Servicing
Agreement, dated, as of June 5, 2003
    
    
    10.2.aCustodian Agreement among Bay View Acceptance Corporation, as
Custodian, and Bay View Auto Receivables Owner Trust, as Issuer and
JPMorgan Chase Bank, as Indenture Trustee, dated as of June 5, 2003
    
    
    10.3Amendment No. 1 dated as of June 25, 2004 to Custodian Agreement, dated
as of June 5, 2003
    
    
    10.3.aTrust Agreement between Bay View Receivables Corporation, as Depositor
and Wilmington Trust Company, as Owner Trustee, dated as of June 5, 2003
    
    
    10.4Bay View Auto Receivables Owner Trust, Issuer and JPMorgan Chase Bank
Indenture Trustee, Indenture, dated as of June 5, 2003, $250,000,000
Bay View Auto Receivables Owner Trust Automobile Receivables-Backed
Notes, Series 2003-1
    
    
    10.5Bay View Auto Receivables Owner Trust, Issuer and JPMorgan Chase Bank,
Trustee, First Supplemental Indenture, dated as of March 17, 2004 to the
Indenture dated as of June 5, 2003
    
    
    10.5.a
 91




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Regulation
    
    
    
    Reference to priorS-K
    
    
    
    filing or exhibitExhibit
    
    
    
    number attachedNumber
    
    Document
    
    heretoBay View Auto Receivables Owner Trust, Issuer and JPMorgan Chase Bank,
Trustee, Second Supplemental Indenture, dated as of June 25, 2004 to the
Indenture dated as of June 5, 2003
    
    
    10.5.bBay View Auto Receivables Owner Trust, Issuer and JPMorgan Chase Bank,
Trustee, Third Supplemental Indenture, dated as of January 31, 2005 to the
Indenture dated as of June 5, 2003
    
    
    10.5.cAmended
and Restated Note Purchase Agreement among Bay View
Acceptance Corporation, (the Contributor), Bay View Auto Receivables
Owner Trust, (the Issuer), Sheffield Receivables Corporation, (the Initial
Purchaser), UBS Real Estate Securities, Inc., (the New Purchaser) and
Barclays Bank, PLC (as a Financial Institution, as a Bank Purchaser and
as the Agent for the Financial Institutions and the Purchasers), dated
as of June 25, 2004
    
    
    10.6Employment Contract with P.K. Chatterjee
    
    
    10aSupplemental Executive Retirement Plan
    
    
    10bSenior Management Incentive Plan
    
    
    10cSenior Management Long-Term Incentive Plan
    
    
    10dAmended and Restated 1986 Stock Option and Incentive Plan
    
    
    10eAmendment No. One to the 1986 Stock Option and Incentive Plan
    
    
    10fAmendment No. One to the Amended and Restated 1995 Stock Option
and Incentive Plan
    
    
    10fAmendment No. Two to the Amended and Restated 1995 Stock Option
and Incentive Plan
    
    
    10fAmended and Restated 1989 Non-Employee Director Stock Option Plan
    
    
    10gDeferred Compensation Plan
    
    
    10hAmended and Restated 1995 Stock Option and Incentive Plan
    
    
    10i1998  2000 Stock Performance Plan
    
    
    10j1998 Non-Employee Director Stock Option and Incentive Plan
    
    
    10jSupplemental Phantom Stock Unit Plan
    
    
    10k2001 Equity Incentive Plan for Employees
    
    
    10l2001 Non-Employee Director Stock Option Plan
    
    
    10mAmendment No. One to the Stock in Lieu of Cash Compensation Plan for
Non-Employee Directors
    
    
    10nAmendment No. Three to the Amended Outside Directors Retirement Plan
    
    
    10n11
    
    Statement re computation of per share earnings
    
    
    1112
    
    Statements re computation of ratios
    
    
    1213
    
    Annual Report to security holders
    
    Not required14
    
    Code of Ethical Conduct
    
    
    1416
    
    Letter re change in certifying accountant
    
    Not required18
    
    Letter re change in accounting principles
    
    None21
    
    Subsidiaries of the Registrant
    
    
    2122
    
    Published report regarding matters submitted to vote of security holders
    
    None23
    
    Consent of Grant Thornton LLP
    
    
    23.1Consent of Deloitte & Touche LLP
    
    
    23.224
    
    Power of attorney
    
    Not required31
    
    Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14,
as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
    
    
    31.131
    
    Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14,
as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
    
    
    31.2
 92




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##### Table of Contents



Regulation
    
    
    
    Reference to priorS-K
    
    
    
    filing or exhibitExhibit
    
    
    
    number attachedNumber
    
    Document
    
    hereto32
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350,
as
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
    
    
    32.132
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. section 1350,
as
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
    
    
    32.299
    
    Additional Exhibits
    
    None
 (References to Prior Filings) 3a
    
    Filed as exhibit 3 to the Registrants Quarterly Report on Form 10-Q filed August 13, 2004
for the quarterly period ended June 30, 2004 (File No. 0-14879)3b
    
    Filed as exhibit 99.1 to the
Registrants Current Report on Form 8-K filed March 29,
2005 (File No. 001-14879)4a
    
    Filed as exhibit 4.1 to the Registrants Annual Report on Form 10-K filed March 24, 2000 for
the year ended December 31, 1999 (File No. 0-14879)10a
    
    Filed as exhibit 10.a to the Registrants Quarterly Report on Form 10-Q filed November 9,
2004 for the quarter ended September 30, 2004 (File No. 0-14879)10b-d
    
    Filed as exhibits 10.6 to 10.8, respectively, to the Registrants Annual Report on Form 10-K
filed March 30, 1993 for the year ended December 31, 1992 (File No. 0-17901)10e
    
    Filed as exhibit 4 to the Registrants Registration Statement on Form S-8 filed August 11,
1995 (File No. 33-95724)10f
    
    Filed as exhibits 10 to 10.2, respectively, to the Registrants Quarterly Report on Form 10-Q
filed November 12, 1999 for the quarterly period ended September 30, 1999 (File No. 0-14879)10g
    
    Filed as exhibit 4.4 to the Registrants Registration Statement on Form S-8 filed July 26,
1991 (File No. 33-41924)10h
    
    Filed as an exhibit to the Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended on Form 10-K/A on June 27, 1997 (File No. 0-17901)10i
    
    Filed as an exhibit to the Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended on Form 10-K/A on June 27, 1997 (File No. 0-17901)10j
    
    Filed as an appendix to the Registrants Definitive Proxy Statement on Schedule 14-A filed
April 20, 1998 (File No. 0-17901)10k
    
    Filed as exhibit 10.4 to the Registrants Annual Report on Form 10-K filed on March 24, 2000
for the year ended December 31, 1999 (File No. 0-14879)10l
    
    10n Filed as exhibit 10 to the Registrants Registration Statement on Form S-8 filed
September 27, 2001 (File No. 333-70372)10m
    
    Filed as exhibit 10 to the Registrants Registration Statement on Form S-8 filed September
27, 2001 (File No. 333-70362)10n
    
    Filed as exhibits 10.1 and 10.2, respectively, to the Registrants Annual Report on Form 10-K
filed March 19, 2003 for the year ended December 31, 2002 (File No. 0-14879)
 All of such previously filed documents are hereby incorporated herein by reference in
accordance with Item 601 of Regulation S-K. 93




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##### Table of Contents



Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. Date:April 15, 2005

    BAY VIEW CAPITAL CORPORATIONBy:
    /s/ John OkuboJohn OkuboExecutive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer) 94




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##### Table of Contents



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated. By: /s/ Robert B. Goldstein
    
    By: /s/ Charles G. CooperRobert B. Goldstein
    
    Charles G. Cooper, DirectorChairman of the Board
    
    President and Chief Executive Officer(Principal Executive Officer)Date:
April 15, 2005Date: April 15, 2005By: /s/ Roger K. Easley
    
    By: /s/ Thomas M. FosterRoger K. Easley, Director
    
    Thomas M. Foster, DirectorDate: April 15, 2005
    
    Date: April 15, 2005By: /s/ Joel E. Hyman
    
    By: /s/ John W. RoseJoel E. Hyman, Director
    
    John W. Rose, DirectorDate: April 15, 2005
    
    Date: April 15, 2005By: /s/ Frederick W. DreherFrederick W. Dreher, DirectorDate:
April 15, 2005
 95